Annual Report 2015 Annual Report 2015

Introduction Identifying Data Governing Bodies Report from the Chairman

Financial Data Financial Report of the Year Distribution of Net Surplus Comments to the Financial Statements

Legal Documentation Audit Report Consolidated Financial Statements Notes to the Financial Statements Consolidated Management Report

Other Information Social Welfare Fund Employees, Branch and Regional Offices

Annual Report 2015

Introduction Introduction Index Annual Report 2015 Introduction

Identifying data

Name: Caja Rural de Navarra (S. Coop. de Crédito) Registered offices: Plaza de los Fueros, 1. 31003 PAMPLONA Telephone: 948 16 81 00 Telex: 37764 CUNA E Fax: 948 24 45 57 / 948 24 08 67 Tax Identification No.: F / 31 - 021611 Caja Calificada. (legal status allowing the credit co-operative to administer government lending) Registered with the Bank of Spain: No. 3008 Registered with the Labour Ministry, General Register of Credit Co-operatives: No. 344 / s.º M. T. 2,163. Registered with the Mercantile Registry of Navarra: No. 6790, Volume 11, page 175, sheet NA183. Included in the Credit Co-operatives Guarantee Deposit Fund: Member of Banco Cooperativo Español. Member of the Spanish Association of Credit Co-Operatives Idnex Annual Report 2015 Introduction

Governing Bodies Board of Directors Chairman: D. Ignacio Terés Los Arcos Vice-Chairman: D. José Ángel Ezcurra Ibarrola Secretary: D. Luis Miguel Serrano Cornago Board Members: D. Jesús Andrés Mauleón Arana D. José María Arizaleta Nieva D. Pedro Jesús Irisarri Valencia D. Pedro María Echarte Seviné D. Isidro Bazterrica Mutuberria D. Francisco Javier Artajo Carlos D. Melchor Miranda Azcona D. Pedro María Beorlegui Egea D. José Javier López Morrrás D. Roberto Zabaleta Ciriza D. Alberto Arrondo Lahera

Executive Committee Chairman: D. Ignacio Terés Los Arcos Vice-Chairman: D. José Ángel Ezcurra Ibarrola Secretary: D. Luis Miguel Serrano Cornago Board Members: D. Pedro María Echarte Seviné Board Members: D. José María Arizaleta Nieva

Chief Executive Officer D. Ignacio Arrieta del Valle Idnex Annual Report 2015 Introduction

Report from the Chairman

Tensions in international financial markets rose somewhat during 2015, pushing up price volatility in equities and in sovereign and corporate debt. Factors stoking global uncertainty included the widening disparity between monetary policy at the world’s main central banks, economic weakness in some countries and regions, especially emerging markets, the slump in commodity prices, Greece’s negotiations with the euro zone and various geopolitical tensions. The global financial system, however, could still count on current high levels of liquidity and confidence in the power of central banks and monetary authorities to keep their economies on track. Six years after the world economy emerged from the broadest and deepest recession since the war, the return to robust and synchronised expansion remains in doubt. Revisions to the IMF’s World Economic Outlook (WEO) highlighted the challenges facing all countries. Economic forecasts were twice downgraded over the year and by October the IMF was expecting global growth of 3.1% in 2015, two-tenths lower than its previous forecast, and 3.6% in 2016. Falling volumes of global commerce hit emerging economies hardest, with Latin America reporting negative growth in 2015 and China’s growth slowing though still high (+6.8%). In the euro zone, growth expectations were better than in recent years at 1.6%, but still far from brilliant. The balance of global growth continued to tip toward developed economies as emerging economies intensified their decline in 2015, led by a weaker China, the collapse of commodity prices begun in 2014 and prospects of tighter monetary policy in the USA. The European Central Bank (ECB) repeatedly took the lead in the single currency area. It kept benchmark interest rates at 0.05% preferring to use non- conventional measures to sustain the expansionary tone of monetary policy in response to weakened economic growth and deflationary risks in Europe. In January, it announced a quantitative easing (QE) programme to buy EUR 60 billion of sovereign assets on secondary markets over 19 months. Then, at its December meeting it extended the programme by six months until March 2017, expanded it to include regional and municipal debt and further cut the already negative rates paid on bank deposits at the ECB, to -0.30% from -0.20%. The Federal Reserve meanwhile, after reiterating repeatedly during the year that it would only be increasing US policy rates very gradually, took the plunge and raised its benchmark rate to a range of 0.25% to 0.50% at the final meeting of the year on 16 December 2015. Idnex Annual Report 2015 Introduction

The ECB’s intervention left the euro area debt markets in an exceptional position, where negative interest rates on public debt became the new normal. More than half the zone’s 19 member states were able to issue negative-rate debt with maturities of up to two years. However, although favourable financing conditions persisted, such low rates and the abovementioned sources of uncertainty kept fixed-income markets in a state of high sensitivity, with repeated bouts of intense volatility and instability throughout 2015. The world’s advanced economies have not yet felt all the benefits of falling commodity prices. The initial impact tends to be negative, as investment is cut back and uncertainty reigns about the economy. But, with time, the positive effects come through. A prolonged period of low commodity prices will help keep monetary policy loose, good news for advanced economies which have yet to shake off the hangover from recession and which, as they now count for less than half of the world economy, have lacked the firepower to offset falls in world growth. That said, they did modestly accelerate growth, a gradual trend that is likely to intensify in 2016. Spain stood out for its macro-economic figures. GDP growth of 3.2% in 2015 was the fastest of the major developed economies. Favourable tailwinds in the form of low interest rates, a weak euro, cheaper energy and no inflation combined with the impact of recent structural reforms, domestic demand for consumption and investment, exports and the paying down of private sector debt. Nevertheless, serious imbalances and threats persist. These include massive unemployment, the public sector deficit and the rise in public sector debt, as well as political uncertainties. Idnex Annual Report 2015

Financial Data Financial Data Index Annual Report 2015 Financial Data

Financial Report of the Year Consolidated balance sheet at 31/12/15 and 31/12/14

CHANGE 31/12/2015 31/12/2014 Thousands % of euro CONSOLIDATED STATEMENT OF FINANCIAL POSITION ASSETS 1. CASH AND BALANCES WTIH CENTRAL BANKS 39,330 36,224 3,106 8.57% 2. FINANCIAL INSTRUMENTS HELD FOR TRADING 17,276 29,095 -11,819 -40.62% 2.4. Equity instruments 1,382 367 1,015 276.57% 2.5. Trading derivatives 15,894 28,728 -12,834 -44.67% Memorandum items: Loaned or advanced as collateral 0 0 0 - 3. OTHER FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS 0 0 0 - 3.1. Loans and advances to credit institutions 0 0 0 - Memorandum items: Loaned or advanced as collateral 0 0 0 - 4. AVAILABLE-FOR-SALE FINANCIAL ASSETS 2,565,575 2,006,278 559,297 27.88% 4.1. Debt securities 2,429,875 1,901,045 528,830 27.82% 4.2. Equity instruments 135,700 105,233 30,467 28.95% Memorandum items: Loaned or advanced as collateral 220,102 121,926 98,176 80.52% 5. LOANS AND ADVANCES 6,630,099 7,031,492 -401,393 -5.71% 5.1. Loans and advances to credit institutions 251,557 888,635 -637,078 -71.69% 5.2. Loans and advances to customers 6,370,430 6,131,845 238,585 3.89% 5.3. Debt securities 8,112 11,012 -2,900 -26.33% Memorandum items: Loaned or advanced as collateral 436,076 570,768 -134,692 -23.60% 6. HELD-TO-MATURITY INVESTMENTS 94,385 44,940 49,445 110.02% Memorandum items: Loaned or advanced as collateral 0 0 0 - 7. ADJUSTMENTS TO FINANCIAL ASSETS DUE TO MACRO- HEDGING 0 0 0 - 8. HEDGING DERIVATIVES 0 16 -16 - 9. NON-CURRENT ASSETS HELF FOR SALE 97,730 89,504 8,226 9.19% 10. EQUITY INVESTMENTS 43,080 45,423 -2,343 -5.16% 10.1. Associates 43,080 45,423 -2,343 -5.16% 10.2. Jointly-controlled entities 0 0 0 - 11. PENSION-LINKED INSURANCE CONTRACTS 0 0 0 - 12. REINSURANCE ASSETS 0 0 0 - 13. PROPERTY AND EQUIPMENT 184,661 184,896 -235 -0.13% 13.1. Property and equipment 179,579 179,463 116 0.06% 13.1.1. For own use 179,408 179,291 117 0.07% 13.1.2. Leased out under operating lease 0 0 0 - 13.1.3. Assigned to social projects 171 172 -1 -0.58% 13.2. Investment property 5,082 5,433 -351 -6.46% Memorandum items: Acquired under finance leases 1,513 663 850 128.21% 14. INTANGIBLE ASSETS 13,297 13,565 -268 -1.98% 14.1. Goodwill 8,297 8,565 -268 -3.13% 14.2. Other intangible assets 5,000 5,000 0 0.00% 15. TAX ASSETS 53,229 63,054 -9,825 -15.58% 15.1. Current 3,944 6,347 -2,403 -37.86% 15.2. Deferred 49,285 56,707 -7,422 -13.09% 16. OTHER ASSETS 121,485 108,058 13,427 12.43% 16.1. Inventories 86,879 75,986 10,893 14.34% 16.2. Other 34,606 32,072 2,534 7.90% TOTAL ASSETS 9,860,147 9,652,545 207,602 2.15% Index Annual Report 2015 Financial Data

CHANGE 31/12/2015 31/12/2014 Thousands % of euro L I A B I L I T I E S 1. FINANCIAL INSTRUMENTS HELD FOR TRADING 601 3,178 -2,577 -81.09% 1.5. Trading derivatives 601 3,178 -2,577 -81.09% 2. OTHER FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS 0 0 0 - 3. FINANCIAL LIABILITIES AT AMORTIZED COST 8,764,695 8,620,057 144,638 1.68% 3.1 Deposits from central banks 0 0 0 - 3.2. Deposits from credit institutions 1,109,239 1,737,539 -628,300 -36.16% 3.3. Customer deposits 6,480,414 6,133,759 346,655 5.65% 3.4. Debt securities 1,086,337 645,298 441,039 68.35% 3.5. Subordinated liabilities 0 0 0 - 3.6. Other financial liabilities 88,705 103,461 -14,756 -14.26% 4. ADJUSTMENTS TO FINANCIAL LIABILITIES DUE TO MACRO-HEDGING 0 0 0 - 5. HEDGING DERIVATIVES 31 170 -139 -81.76% 6. LIABILITIES ASSOCIATED WITH NON-CURRENT ASSETS HELD FOR SALE 0 0 0 - 7. INSURANCE LIABILITIES 0 0 0 - 8. PROVISIONS 18,119 9,639 8,480 87.98% 8.1. Provisions for pensions and similar obligations 860 807 53 6.57% 8.2. Provisions for taxes and other legal contingencies 0 0 0 - 8.3. Provisions for contingent exposures and commitments 17,259 8,832 8,427 95.41% 8.4. Other provisions 0 0 0 - 9. TAX LIABILITIES 23,963 37,311 -13,348 -35.77% 9.1. Current 2,299 3,273 -974 -29.76% 9.2. Deferred 21,664 34,038 -12,374 -36.35% 10. SOCIAL WELFARE FUND 11,559 8,346 3,213 38.50% 11. OTHER LIABILITIES 77,478 92,292 -14,814 -16.05% 12. SHARES REDEEMABLE ON DEMAND 0 0 0 - TOTAL LIABILITIES 8,896,446 8,770,993 125,453 1.43% EQUITY 1. CAPITAL AND RESERVES 885,803 808,848 76,955 9.51% 1.1. Share capital 163,920 151,602 12,318 8.13% 1.1.1. Issued capital 163,920 151,602 12,318 8.13% 1.1.2. Less: Uncalled capital 0 0 0 - 1.2. Share premium 0 0 0 - 1.3. Reserves 658,124 607,307 50,817 8.37% 1.3.1. Retained earnings (losses) 657,727 604,928 52,799 8.73% 1.3.2. Reserves of companies accounted for using the equity method 397 2,379 -1,982 -83.31% 1.4. Other equity instruments 0 0 0 - 1.5. Less: Treasury shares 0 0 0 - 1.6. Profit attributable to owners of the parent 66,086 52,709 13,377 25.38% 1.7. Less: Dividends and remuneration -2,327 -2,770 443 -15.99% 2. VALUATION ADJUSTMENTS 77,697 72,510 5,187 7.15% 2.1. Available-for-sale financial assets 77,697 72,510 5,187 7.15% 3. NON-CONTROLLING INTERESTS 201 194 7 3.61% 3.1. Valuation adjustments 0 0 0 - 3.2. Other 201 194 7 3.61% TOTAL EQUITY 963,701 881,552 82,149 9.32% TOTAL EQUITY AND LIABILITIES 9,860,147 9,652,545 207,602 2.15% MEMORANDUM ITEMS 1. CONTINGENT EXPOSURES 817,819 641,986 175,833 27.39% 2. CONTINGENT COMMITMENTS 1,052,005 979,827 72,178 7.37%

Index Annual Report 2015 Financial Data

CHANGE Thousands 31/12/2015 31/12/2014 of euro % CONSOLIDATED INCOME STATEMENT 1. Interest and similar income 209,223 246,265 -37,042 -15.04% 2. Interest and similar expense 63,073 105,004 -41,931 -39.93% 3. Remuneration paid to holders of shares redeemable on demand 0 0 0 - A) NET INTEREST INCOME 146,150 141,261 4,889 3.46% 4. Income from equity instruments 5,567 3,407 2,160 63.40% 5. Profit (loss) of companies accounted for using the equity method 57 59 -2 -3.39% 6. Fee and commission income 62,000 65,620 -3,620 -5.52% 7. Fee and commission expense 3,602 5,196 -1,594 -30.68% 8. Gains (losses) on financial assets and liabilities (net) 4,952 8,910 -3,958 -44.42% 8.1. Financial instruments held for trading 1,625 2,533 -908 -35.85% 8.2. Other financial instruments at fair value through profit or loss 0 0 0 - 8.3. Financial instruments not measured at fair value through profit or loss 3,149 6,372 -3,223 -50.58% 8.4. Other 178 5 173 3,460.00% 9. Translation differences (net) 939 728 211 28.98% 10. Other operating income 260,905 203,334 57,571 28.31% 10.1. Insurance and reinsurance premiums written 0 0 0 - 10.2. Sales and income from the provision of non-financial services 256,320 199,398 56,922 28.55% 10.3. Other operating income 4,585 3,936 649 16.49% 11. Other operating expenses 210,655 165,505 45,150 27.28% 11.1. Insurance and reinsurance contract costs 0 0 0 - 11.2. Change in inventories -213 878 -1,091 -124.26% 11.3. Other operating expenses 210,868 164,627 46,241 28.09% B) GROSS INCOME 266,313 252,618 13,695 5.42% 12. Administrative expenses 126,796 113,127 13,669 12.08% 12.1. Personnel expenses 64,001 58,444 5,557 9.51% 12.2. Other general administrative expenses 62,795 54,683 8,112 14.83% 13. Depreciation and amortization 12,448 11,066 1,382 12.49% 14. Provisions (net) 7,963 -1,405 9,368 -666.76% 15. Impairment losses on financial assets (net) 36,625 65,430 -28,805 -44.02% 15.1. Loans and advances 35,893 64,583 -28,690 -44.42% 15.2. Other financial instruments not measured at fair value through profit or loss 732 847 -115 -13.58% C) INCOME FROM OPERATING ACTIVITIES 82,481 64,400 18,081 28.08% 16. Impairment losses on other assets (net) 1,453 269 1,184 440.15% 16.1. Goodwill and other intangible assets 548 468 80 17.09% 16.2. Other assets 905 -199 1,104 -554.77% 17. Gains (losses) on the derecognition of assets not classified as non-current assets held for sale 20 -3,044 3,064 -100.66% 18. Negative difference in business combinations 0 5,040 -5,040 -100.00% 19. Gains (losses) on non-current assets held for sale not classified as discontinued operations -203 -3,834 3,631 -94.71% D) PROFIT BEFORE TAX 80,845 62,293 18,552 29.78% 20. Income tax 8,093 4,257 3,836 90.11% 21. Mandatory allocation to welfare projects and funds 6,661 5,327 1,334 25.04% E) PROFIT (LOSS) FOR THE YEAR FROM CONTINUING OPERATIONS 66,091 52,709 13,382 25.39% 22. Profit (loss) from discontinued operations(net) 0 0 0 - F) CONSOLIDATED PROFIT FOR THE YEAR 66,091 52,709 13,382 25.39% F 1) Profit attributable to owners of the parent 66,086 52,709 13,377 25.38% F 2) Profit (loss) attributable to non-controlling interests 5 0 5 - Index Annual Report 2015 Financial Data

PROPOSED APPROPRIATION OF NET SURPLUS

Thousand euro Profit (loss) before mandatory allocation to the Social 68,935 Interest to be paid to members on capital contributions 2,327 TOTAL AVAILABLE FOR APPROPRIATION 66,608 APPROPRIATION OF SURPLUS Allocations to the Social Welfare Fund (1) 6,661 Allocations to the Mandatory Reserve Fund 59,947 TOTAL DISTRIBUTED 66,608

(1): Recognised in the income statement as a mandatory allocation

NOTE: The profits or losses of consolidated subsidiaries will be appropriated as agreed at their respective General Shareholders’ Meetings. Index Annual Report 2015 Financial Data

Comments to the Financial Statements

Index AnnualInforme Report Anual 2015 Legal Documentation

Legal Documentation Legal Documentation Index Index Annual Report 2015 Legal Documentation Index Annual Report 2015 Legal Documentation Index Annual Report 2015 Legal Documentation

2015 CONSOLIDATED FINANCIAL STATEMENTS AND MANAGEMENT REPORT Index Annual Report 2015 Legal Documentation

CAJA RURAL DE NAVARRA, SOCIEDAD COOPERATIVA DE CRÉDITO AND SUBSIDIARIES

Consolidated financial statements prepared by the Governing Board of CAJA RURAL DE NAVARRA, SOCIEDAD COOPERATIVA DE CRÉDITO at the Board meeting held on 31 March 2016 Index Annual Report 2015 Legal Documentation

Consolidated statement of financial position CAJA RURAL DE NAVARRA, SOCIEDAD COOPERATIVA DE CRÉDITO AND SUBSIDIARIES Index Annual Report 2015 Legal Documentation

CAJA RURAL DE NAVARRA, SOCIEDAD COOPERATIVA DE CRÉDITO AND SUBSIDIARIES Consolidated statement of financial position at 31 December 2015

Thousands of euros ASSETS Note 2015 2014 (*)

Cash and balances with central banks 7 39,330 36,224 Financial instruments held for trading 8 17,276 29,095 Loans and advances to credit institutions - - Loans and advances to customers - - Debt securities - - Equity instruments 1,382 367 Trading derivatives 15,894 28,728 Memorandum items: Loaned or advanced as collateral - - Other financial assets at fair value through profit or loss - - Loans and advances to credit institutions - - Loans and advances to customers - - Debt securities - - Equity instruments - - Memorandum items: Loaned or advanced as collateral - - Available-for-sale financial assets 9 2,565,575 2,006,278 Debt securities 2,429,875 1,901,045 Equity instruments 135,700 105,233 Memorandum items: Loaned or advanced as collateral 220,102 121,926 Loans and advances 10 6,630,099 7,031,492 Loans and advances to credit institutions 251,557 888,635 Loans and advances to customers 6,370,430 6,131,845 Debt securities 8,112 11,012 Memorandum items: Loaned or advanced as collateral 436,076 570,768 Held-to-maturity investments 11 94,385 44,940 Memorandum items: Loaned or advanced as collateral - - Adjustments to financial assets due to macro-hedging - - Hedging derivatives 12 - 16 Non-current assets held for sale 13 97,730 89,504 Equity investments 14 43,080 45,423 Associates 43,080 45,423 Jointly-controlled entities - - Pension-linked insurance contracts - - Reinsurance assets - - Property and equipment 15 184,661 184,896 Property and equipment 179,579 179,463 For own use 179,408 179,291 Leased out under operating lease - - Assigned to social projects 171 172 Investment property 5,082 5,433 Memorandum items: Acquired under finance leases 1,513 663 Intangible assets 15 13,297 13,565 Goodwill 8,297 8,565 Other intangible assets 5,000 5,000 Tax assets 53,229 63,054 Current 3,944 6,347 Deferred 23 49,285 56,707 Other assets 16 121,485 108,058 Inventories 86,879 75,986 Other 34,606 32,072

TOTAL ASSETS 9,860,147 9,652,545

(*) Presented for comparison purposes only. Index Annual Report 2015 Legal Documentation

CAJA RURAL DE NAVARRA, SOCIEDAD COOPERATIVA DE CRÉDITO AND SUBSIDIARIES Consolidated statement of financial position at 31 December 2015

Thousands of euros L I A B I L I T I E S Note 2015 2014 (*)

Financial instruments held for trading 8 601 3,178 Deposits from central banks - - Deposits from credit institutions - - Customer deposits - - Debt securities - - Trading derivatives 601 3,178 Short securities positions - - Other financial liabilities - - Other financial liabilities at fair value through profit or loss - - Deposits from central banks - - Deposits from credit institutions - - Customer deposits - - Debt securities - - Subordinated liabilities - - Other financial liabilities - - Financial liabilities at amortized cost 17 8,764,695 8,620,057 Deposits from central banks - - Deposits from credit institutions 1,109,239 1,737,539 Customer deposits 6,480,414 6,133,759 Debt securities 1,086,337 645,298 Subordinated liabilities - - Other financial liabilities 88,705 103,461 Adjustments to financial liabilities due to macro-hedging - - Hedging derivatives 12 31 170 Liabilities associated with non-current assets held for sale - - Insurance liabilities - - Provisions 18,119 9,639 Provisions for pensions and similar obligations (Note 2.t) 860 807 Provisions for taxes and other legal contingencies - - Provisions for contingent exposures and commitments 18 17,259 8,832 Other provisions - - Tax liabilities 23,963 37,311 Current 2,299 3,273 Deferred 23 21,664 34,038 Social Welfare Fund 22 11,559 8,346 Other liabilities 16 77,478 92,292 Shares redeemable on demand - -

TOTAL LIABILITIES 8,896,446 8,770,993

(*) Presented for comparison purposes only. Index Annual Report 2015 Legal Documentation

CAJA RURAL DE NAVARRA, SOCIEDAD COOPERATIVA DE CRÉDITO AND SUBSIDIARIES Consolidated statement of financial position at 31 December 2015

Thousands of euros Note 2015 2014 (*)

EQUITY

Shareholders’ equity 885,803 808,848 Share capital 20 163,920 151,602 Issued capital 163,920 151,602 Less: Uncalled capital - - Share premium - - Reserves 21 658,124 607,307 Retained earnings (losses) 657,727 604,928 Reserves of companies accounted for using the equity method 397 2,379 Other equity instruments - - Hybrid financial instruments - - Other equity instruments - - Less: Treasury shares - - Profit attributable to owners of the parent 66,086 52,709 Less: Dividends and remuneration 20 (2,327) (2,770) Valuation adjustments 19 77,697 72,510 Available-for-sale financial assets 77,697 72,510 Cash flow hedges - - Hedges of net investments in foreign operations - - Translation differences - - Non-current assets held for sale - - Companies accounted for using the equity method - - Other valuation adjustments - - Non-controlling interests 201 194 Valuation adjustments - - Other 201 194

TOTAL EQUITY 963,701 881,552

TOTAL EQUITY AND LIABILITIES 9,860,147 9,652,545

MEMORANDUM ITEMS Contingent exposures 24 817,819 641,986 Contingent commitments 24 1,052,005 979,827

(*) Presented for comparison purposes only. Index Annual Report 2015 Legal Documentation

Consolidated Income Statement CAJA RURAL DE NAVARRA, SOCIEDAD COOPERATIVA DE CRÉDITO AND SUBSIDIARIES Index Annual Report 2015 Legal Documentation

CAJA RURAL DE NAVARRA, SOCIEDAD COOPERATIVA DE CRÉDITO AND SUBSIDIARIES Consolidated Income Statement for the year ended 31 December 2015

Thousands of euros Note 2015 2014 (*)

Interest and similar income 26 209,223 246,265 Interest and similar expense 27 (63,073) (105,004) Remuneration paid to holders of shares redeemable on demand - -

NET INTEREST INCOME 146,150 141,261 Income from equity instruments 28 5,567 3,407 Profit (loss) of companies accounted for using the equity method 57 59 Fee and commission income 29 62,000 65,620 Fee and commission expense 30 (3,602) (5,196) Gains (losses) on financial assets and liabilities (net) 31 4,952 8,910 Financial instruments held for trading 1,625 2,533 Other financial instruments at fair value through profit or loss - - Financial instruments not measured at fair value through profit or loss 3,149 6,372 Other 178 5 Translation differences (net) 939 728 Other operating income 260,905 203,334 Insurance and reinsurance premiums written - - Sales and income from the provision of non-financial services 256,320 199,398 Other operating income 4,585 3,936 Other operating expenses (210,655) (165,505) Insurance and reinsurance contract costs - - Change in inventories 213 (878) Other operating expenses (210,868) (164,627)

GROSS INCOME 266,313 252,618 Administrative expenses (126,796) (113,127) Personnel expenses 32 (64,001) (58,444) Other general administrative expenses 33 (62,795) (54,683) Depreciation and amortization 15 (12,448) (11,066) Provisions (net) 34 (7,963) 1,405 Impairment losses on financial assets (net) 35 (36,625) (65,430) Loans and advances (35,893) (64,583) Other financial instruments not measured at fair value through profit or loss (732) (847)

INCOME FROM OPERATING ACTIVITIES 82,481 64,400 Impairment losses on other assets (net) 36 (1,453) (269) Goodwill and other intangible assets (548) (468) Other assets (905) 199 Gains (losses) on the derecognition of assets not classified as non-current assets held for sale 15 20 (3,044) Negative difference in business combinations 15 - 5,040 Gains (losses) on non-current assets held for sale not classified as discontinued operations (203) (3,834)

PROFIT BEFORE TAX 80,845 62,293 Income tax 23 (8,093) (4,257) Mandatory allocation to welfare projects and funds 4 (6,661) (5,327)

PROFIT (LOSS) FOR THE YEAR FROM CONTINUING OPERATIONS 66,091 52,709 Profit (loss) from discontinued operations(net) - -

CONSOLIDATED PROFIT FOR THE YEAR 66,091 52,709 Profit attributable to owners of the parent 66,086 52,709 Profit (loss) attributable to non-controlling interests 5 -

(*) Presented for comparison purposes only. Index Annual Report 2015 Legal Documentation

Consolidated statement of changes in equity CAJA RURAL DE NAVARRA, SOCIEDAD COOPERATIVA DE CRÉDITO AND SUBSIDIARIES Index Annual Report 2015 Legal Documentation

CAJA RURAL DE NAVARRA, SOCIEDAD COOPERATIVA DE CRÉDITO AND SUBSIDIARIES I) Consolidated Statement of Recognized Income and Expense for the year ended 31 December 2015

Thousands of euros Note 2015 2014 (*)

CONSOLIDATED PROFIT FOR THE YEAR 66,091 52,709 OTHER RECOGNIZED INCOME AND EXPENSE 5,187 37,661 Items that will not be reclassified to income - - Remeasurements on defined benefit pension plans - - Non-current assets held for sale - - Companies accounted for using the equity method - - Income tax on items that will not be reclassified to income - - Items that may be reclassified to income 5,187 37,661 Available-for-sale financial assets 5,062 50,558 Measurement gains (losses), net 19 7,895 56,677 Amounts transferred to the consolidated income statement (2,833) (6,119) Other reclassifications - - Cash flow hedges - - Measurement gains (losses), net - - Amounts transferred to the consolidated income statement - - Amounts transferred to the initial carrying amount of hedged items - - Other reclassifications - - Hedges of net investments in foreign operations - - Measurement gains (losses), net - - Amounts transferred to the consolidated income statement - - Other reclassifications - - Translation differences - - Measurement gains (losses), net - - Amounts transferred to the consolidated income statement - - Other reclassifications - - Non-current assets held for sale - - Gains (losses) on measurement - - Amounts transferred to the consolidated income statement - - Other reclassifications - - Other recognized income and expense - - Income tax 19 125 (12,897)

TOTAL RECOGNIZED INCOME AND EXPENSE 71,278 90,370 Attributable to equity holders of the parent 71,273 90,370 Attributable to non-controlling interests 5 -

(*) Presented for comparison purposes only. Index Annual Report 2015 Legal Documentation

CAJA RURAL DE NAVARRA, SOCIEDAD COOPERATIVA DE CRÉDITO AND SUBSIDIARIES II) Consolidated comprehensive statement of changes in equity for the year ended 31 December 2014

EQUITY ATTRIBUTABLE TO THE PARENT COMPANY CAPITAL AND RESERVES RESERVES

and NON- TOTAL shares parent Retained Retained Reserves of INTERESTS companies companies instruments VALUATION VALUATION Other equity Less: Treasury Share capital TOTAL EQUITY remuneration ADJUSTMENTS AND RESERVES Less: Dividends CONTROLLING CONTROLLING TOTAL CAPITAL Share premium the equity method equity the earnings (losses) to owners of the Profit attributable attributable Profit 2014 (*) accounted for using

Closing balance at 31 December 2013 142,696 - 578,988 1,524 - - 30,216 (2,551) 750,873 34,849 785,722 (1) 785,721 Adjustments for changes in accounting policies ------Adjustments to correct errors ------Adjusted opening balance 142,696 - 578,988 1,524 - - 30,216 (2,551) 750,873 34,849 785,722 (1) 785,721 Total recognized income and expense ------52,709 - 52,709 37,661 90,370 - 90,370 Other changes to equity 8,906 - 25,940 855 - - (30,216) (219) 5,266 - 5,266 195 5,461 Capital increases 9,746 ------9,746 - 9,746 - 9,746 Capital reductions (840) ------(840) - (840) - (840) Conversion of financial liabilities to equity ------Income from other equity instruments ------Reclassification of financial liabilities as other equity instruments ------Reclassification of other equity instruments as - financial liabilities ------Payments to members ------(2,770) (2,770) - (2,770) - (2,770)

Transactions in own equity instruments (net) ------Transfers between equity items - - 28,569 (904) - - (30,216) 2,551 - - - - - Increases (reductions) in equity in connection with business combinations - - (2,056) 2,056 ------195 195 Discretional allocation to the Education and Development Fund ------Share-based payments ------

Other increases (reductions) in equity - - (573) (297) - - - - (870) - (870) - (870) Closing balance at 31 December 2014 151,602 - 604,928 2,379 - - 52,709 (2,770) 808,848 72,510 881,358 194 881,552

(*) Presented for comparison purposes only. Index Annual Report 2015 Legal Documentation

CAJA RURAL DE NAVARRA, SOCIEDAD COOPERATIVA DE CRÉDITO AND SUBSIDIARIES II) Consolidated comprehensive statement of changes in equity for the year ended 31 December 2014

EQUITY ATTRIBUTABLE TO THE PARENT COMPANY CAPITAL AND RESERVES RESERVES

Other increases (reductions) in equity - - (573) (297) - - - - (870) - (870) - (870) Closing balance at 31 December 2014 151,602 - 604,928 2,379 - - 52,709 (2,770) 808,848 72,510 881,358 194 881,552

(*) Presented for comparison purposes only. Index Annual Report 2015 Legal Documentation

Consolidated cash flow statement CAJA RURAL DE NAVARRA, SOCIEDAD COOPERATIVA DE CRÉDITO AND SUBSIDIARIES Index Annual Report 2015 Legal Documentation

CAJA RURAL DE NAVARRA, SOCIEDAD COOPERATIVA DE CRÉDITO AND SUBSIDIARIES Consolidated cash flow statement for the year ended 31 December 2015 Thousands of euros 2015 2014 (*)

A) CASH FLOW FROM OPERATING ACTIVITIES 4,296 22,057 Profit for the year 66,091 52,709 Adjustments to obtain cash flows from operating activities 76,538 90,413 Depreciation and amortization 12,448 11,066 Other adjustments 64,090 79,347 Net increase (decrease) in operating assets (190,501) (54,889) Financial instruments held for trading 11,819 (3,029) Other financial assets at fair value through profit or loss - - Available-for-sale financial assets (559,560) (235,298) Loans and advances 365,500 253,887 Other operating expenses (8,260) (70,449) Net increase (decrease) in operating liabilities 52,020 (66,258) Financial instruments held for trading (2,577) (716) Other financial liabilities at fair value through profit or loss - - Financial liabilities at amortized cost 80,618 (139,189) Other operating expenses (26,021) 73,647 Company income tax receipts (payments) 148 82

B) CASH FLOWS FROM INVESTING ACTIVITIES (11,181) (27,471) Payments (-) (54,547) (51,282) Property and equipment (15,634) (11,484) Intangible assets - - Equity investments (663) (1,007) Other business units - - Non-current assets held for sale and related liabilities (38,250) (31,542) Held-to-maturity investments - - Other payments related to investing activities - (7,249) Receipts (+) 43,366 23,811 Property and equipment 3,433 2,076 Intangible assets - - Equity investments 300 39 Other business units - - Non-current assets held for sale and related liabilities 25,271 14,466 Held-to-maturity investments 14,362 7,230 Other receipts related to investing activities - -

C) CASH FLOWS FROM FINANCING ACTIVITIES 9,991 6,136 Payments (-) (2,684) (3,610) Dividends (2,327) (2,770) Subordinated liabilities - - Cancellation of own equity instruments (357) (840) Acquisition of own equity instruments - - Other payments related to financing activities - - Receipts (+) 12,675 9,746 Subordinated liabilities - - Issue of equity instruments 12,675 9,746 Disposal of equity instruments - - Other receipts relating to financing activities - - Subordinated liabilities - -

D) EFFECT OF EXCHANGE RATE FLUCTUATIONS - -

E) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (A+B+C+D) 3,106 722

F) CASH AND CASH EQUIVALENTS AT START OF YEAR 36,224 35,502 G) CASH AND CASH EQUIVALENTS AT END OF YEAR 39,330 36,224

MEMORANDUM ITEMS CASH AND CASH EQUIVALENTS AT END OF YEAR Cash 39,330 36,224 Cash equivalents in central banks - - Other financial assets - - Less: Bank overdrafts repayable on demand - - Total cash and cash equivalents at end of year 39,330 36,224 (*) Presented for comparison purposes only. Index Annual Report 2015 Legal Documentation

NOTES TO THE FINANCIAL STATEMENTS Index Annual Report 2015 Legal Documentation

1. Introduction, basis of presentation, consolidation principles and other information

a) Introduction

Caja Rural de Navarra, Sociedad Cooperativa de Crédito (hereinafter the Cooperative Bank or the Parent Company) is a cooperative credit institution whose principal activity, pursuant to its articles of association, is to collect funds from the general public through deposits, loans, financial assets sold under repurchase agreements, and other similar transactions involving a repayment obligation, and to use the funds thus obtained to offer, on its own account, loans, credit facilities and other similar transactions that meet the financial needs of both members and third parties. Its articles of association were approved by the General Directorate for the Treasury and Financial Policy of the Ministry for the Economy and Finance on 24 January 1994. The Cooperative Bank began operating on 23 January 1946. Its activities are governed by Act 13/1989, of 26 May, on Cooperative Credit Institutions, the Cooperative Credit Institution Regulations set out in Royal Decree 84/1993, of 22 January, and Act 27/1999, of 16 July, on Cooperatives. The Cooperative Bank may engage in all kinds of lending, deposit and service activities in which other credit institutions are permitted to engage, prioritising the financial needs of its members in the exercise of such activities. As established in its articles of association, the Cooperative Bank operates on a nationwide basis. At 31 December 2015, it had a network of 246 offices, two more than at 31 December 2014, 141 of them located in Navarre (unchanged from 31 December 2014) and the rest in neighbouring regions. Through this network the Cooperative Bank is able to perform all types of operation typical of and/or specific to institutions of its kind. As a cooperative credit institution, the Cooperative Bank is subject to certain legal regulations that establish, inter alia, the following requirements: • That a minimum percentage of capital is deposited with the Bank of Spain so as to ensure coverage of the minimum reserve requirement, which at 31 December 2015 and 2014 was 1% of eligible liabilities (Note 7). • That appropriations to the Mandatory Reserve Fund and to the Social Welfare Fund are made when distributing the net surplus for the year (Notes 21 and 22). Index Annual Report 2015 Legal Documentation

• That a minimum level of capital and reserves must be maintained (Notes 1.h and 21). • That annual contributions are made to the Deposit Guarantee Fund for Credit Institutions and the Spanish National Resolution Fund to provide creditors with a further guarantee in addition to that provided by the Cooperative Bank’s equity (Note 1.i). • That at least 50% of the Cooperative Bank’s total capital and reserves is used to extend credit (loans, credit lines, discounts) to members of the Cooperative Bank and/or members of associated cooperative credit institutions. The Cooperative Bank is the Parent Company of a group of companies whose activities it controls either directly or indirectly and that are engaged in various different activities and, together with the Parent Company, make up the Caja Rural de Navarra Group (hereinafter the Group). Consequently, in addition to its own separate annual financial statements, Caja Rural de Navarra is required to prepare consolidated annual financial statements for the Group. The separate financial statements of the Group’s Parent Company, Caja Rural de Navarra, Sociedad Cooperativa de Crédito, are prepared according to Spanish GAAP as defined in Bank of Spain Circular 4/2004, as amended, and other financial reporting regulations applicable to the Cooperative Bank. The Parent Company recognizes its investments in subsidiaries, associates and joint ventures at cost as prescribed by Circular 4/2004 and permitted by IAS 27. The financial statements of Caja Rural de Navarra, Sociedad Cooperativa de Crédito at 31 December 2015 and 2014 are annexed to these notes. At 31 December 2015, the assets, equity and profit for the year of the Parent Company made up 99%, 98% and 94%, respectively, of the equivalent Group items (compared to 99%, 98% and 96% at 31 December 2014).

b) Basis of presentation of the annual financial statements

The consolidated annual financial statements of the Group have been prepared on the basis of the accounting records of the companies making up the Group in accordance with the International Financial Reporting Standards adopted by the European Union (IFRS-EU) so as to give a true and fair view of the equity, financial position and results of the Group at 31 December 2015, and of the changes in its equity and its consolidated cash flows in the year then ended. The accounting principles and measurement bases applied are detailed in Note 2. In addition, the Bank of Spain has published Circular 4/2004, superseding its earlier Circular 4/1991, the purpose of which, as set out in the introduction Index Annual Report 2015 Legal Documentation

thereto, is to adapt the accounting system applied by credit institutions to the new accounting framework resulting from adoption of the IFRS. This Circular applies to the separate annual financial statements of all credit institutions. These consolidated financial statements have been prepared in accordance with the IFRS-EU and taking into account the provisions of Circular 4/2004 and subsequent amendments thereto, which are aligned both with International Financial Reporting Standards and with the Spanish accounting framework and will be subject to adjustment as this global framework evolves over time. Since Circular 4/2004 was first implemented a number of changes have been made to both Spanish law and IFRS which affect accounting standards. As a result, the Bank of Spain found it necessary to amend Circular 4/2004 and issue further Circulars which adapted Spanish standards to changes made in IFRS and European Central Bank disclosure requirements, disclosures required on the mortgage market, exposure to the construction and property development sectors, refinancing and restructuring transactions, Spain’s national classification of economic activities (CNAE) and an estimate of asset impairment. The consolidated financial statements have been prepared on the basis of the accounting records maintained by the Parent Company and by the other companies making up the Group. However, since the accounting principles and measurement criteria applied in the preparation of the Group’s consolidated annual financial statements for 2015 may differ from those used by certain entities included in the Group, the adjustments and reclassifications necessary to harmonize these principles and criteria across the Group and to bring them in line with IFRS-EU have been made in the process of consolidation. The consolidated financial statements are presented in thousands of euro, except where otherwise stated. These consolidated annual financial statements have been prepared by the Governing Board of Caja Rural de Navarra and are pending approval by its members, who have the power to make amendments hereto, at the forthcoming Annual General Meeting. However, the Cooperative Bank’s directors believes that the financial statements will be approved without material modification. The consolidated annual financial statements for 2014 were approved at the Cooperative Bank’s Annual General Meeting held on 8 May 2015. Index Annual Report 2015 Legal Documentation

c) Accounting principles and measurement bases

These consolidated annual financial statements have been prepared in accordance with the generally accepted accounting principles described in Note 2 “Accounting policies and measurement bases”. All mandatory accounting principles and measurement bases with a significant effect on the consolidated financial statements were applied.

d) Consolidation principles

The Group is defined in accordance with IFRS-EU. All subsidiaries, joint ventures and associates are investees.

I . Subsidiaries

Investees are considered to be “subsidiaries” when the Group exercises control over them, defined as when it has exposure, or rights, to variable returns from its involvement with the investee and can use its power over the investee to affect its returns. Control is deemed to exist only when the following all apply: - Power: An investor has power over an investee when it has existing rights that give it the ability to direct the relevant activities, i.e. the activities that significantly affect the investee’s returns. - Returns: An investor is exposed, or has rights to, variable returns from its involvement in the investee when the returns it derives from its involvement have the potential to vary as a result of the investee’s performance. The returns can be positive, negative or both. - Relationship between power and returns: To control an investee an investor must not only have power over the investee and exposure or rights to variable returns from its involvement with the investee but must also have the ability to use this power to affect its returns from its involvement with the investee. When assessing control, the Group also takes into consideration any relevant facts or circumstances, such as those described in the implementation guidance for the standards (e.g., whether the Group directly or indirectly owns more than 50% of the voting rights). The annual financial statements of subsidiaries are fully consolidated with those of the Cooperative Bank. Accordingly, all material balances deriving from transactions between fully consolidated companies have been eliminated on consolidation. Third-party interests in: Index Annual Report 2015 Legal Documentation

- The Group’s capital are recognized as “Non-controlling interests” in the consolidated statement of financial position. - Profit for the year are recognized in “Profit (loss) attributable to non-controlling interests” in the consolidated income statement. The results of subsidiaries acquired by the Group in the course of the year are included in the consolidated income statement from the date of acquisition to the year-end only. Likewise, the results of subsidiaries disposed of by the Group in the course of the year are included in the consolidated income statement from the start of the year to the date of disposal only. Inter-company transactions - the balances, income and expenses arising from transactions between Group entities are eliminated on consolidation. Also eliminated are gains or losses generated by intragroup transactions which are recognized as assets. The accounting policies applied by subsidiaries have been amended where necessary to ensure uniform policies are applied Group-wide. Business combinations are booked according to the acquisition method. The consideration transferred to acquire a subsidiary is measured as the fair value of the assets transferred, any liabilities assumed to the prior owners of the acquiree and any equity interests in the acquiree issued by the Group. It includes the fair value of any assets or liabilities resulting from any contingent consideration. The identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are initially measured at fair value at the acquisition date. In each business combination, the Group can choose to measure any non-controlling interest in the acquiree either at fair value or at its proportionate share of the identifiable net assets of the acquiree. Acquisition costs are recognized as expenses for the year they are incurred. If the business combination takes place in stages, at the final acquisition date the Group remeasures any previously held interest in the acquiree’s net assets at fair value through profit or loss. Any contingent consideration to be transferred by the Group is measured at fair value at the acquisition date. Subsequent changes to the fair value of a contingent consideration treated as an asset or liability are recognized in accordance with IAS 39 either under income or as a change in equity. Contingent liabilities classed as equity are not remeasured and are recognized in equity when eventually settled. Goodwill is initially measured as the total consideration paid plus the fair value of the non-controlling interests less the net amount of identifiable assets acquired and liabilities assumed. If this consideration turns out to be less than the fair Index Annual Report 2015 Legal Documentation

value of net assets of the subsidiary acquired, the difference is recognized in income. The details of fully consolidated subsidiaries at 31 December 2015 and 2014 were as follows:

Thousands of euros % ownership interest Acquisition cost 2015 2014 2015 2014 Subsidiaries Informes y Gestiones Navarra, S.A. 100.00% 100.00% 1,860 1,860 Harivasa 2000, S.A. 100.00% 100.00% 2,366 2,366 Harinera de Tardienta, S.A. 100.00% 100.00% 11,780 11,780 Harantico, S.L. 100.00% 100.00% 6,763 6,763 Harinera del Mar Siglo XXI , S.L. 100.00% 100.00% 21,989 21,989 Promoción Estable del Norte, S.A. 100.00% 100.00% 139,474 139,474 Industrial Tonelera Navarra, S.A. 100.00% 100.00% 1,820 1,820 Tonnellerie de l’Adour, SAS 90.00% 90.00% 1,710 1,710 Seresgerna, S.A. (*) 100.00% 100.00% - - Residencia Torre de Monreal, S.L. (*) 100.00% 100.00% - - Solera Asistencial, S.L. 100.00% 100.00% 7,760 7,760 Bouquet Brands, S.A. 100.00% 100.00% 3,350 3,350 Preventia Sport , S.L. 100.00% 100.00% 443 443 The Spanish Food & Drinks Company GMBH 100.00% 100.00% 25 25 Eólica La Calera, S.L. 75.00% 75.00% 6 6 (*) Indirect ownership interest via Solera Asistencial, S.L.

The activities and registered offices of Group companies included in the scope of consolidation at 31 December 2015 are listed below:

Company Head office Line of business Informes y Gestiones Navarra, S.A. Pamplona Document preparation and processing Harivasa 2000, S.A. Noain (Navarre) Manufacture and sale of flour Harinera de Tardienta, S.A. Tardienta (Huesca) Manufacture and sale of flour Harantico, S.L. Pontevedra Manufacture and sale of flour Harinera del Mar Siglo XXI , S.L. Valencia Manufacture and sale of flour Promoción Estable del Norte, S.A. Pamplona Real estate development Industrial Tonelera Navarra, S.A. Monteagudo (Navarre) Manufacture and sale of barrels and casks Tonnellerie de l’Adour, SAS France Manufacture and sale of barrels and casks Seresgerna, S.A. Pamplona Development and operation of senior care centres Residencia Torre de Monreal, S.L. Tudela (Navarre) Development and operation of senior care centres Solera Asistencial, S.L. Pamplona Development and operation of senior care centres Bouquet Brands, S.A. Pamplona Distribution of agri-foodstuffs Preventia Sport , S.L. Pamplona Medical sports services The Spanish Food & Drinks Company GMBH Germany Distribution of agri-foodstuffs Eólica La Calera, S.L. Soria Generation and sale of wind energy

Index Annual Report 2015 Legal Documentation

II. Changes in ownership interests in subsidiaries without change of controll

Transactions with non-controlling interests that do not result in a loss of control are treated as equity transactions, i.e. transactions between owners of the company acting as such. The difference between the fair value of consideration paid and the proportional amount acquired of the carrying amount of the subsidiary’s net assets is recognized in equity. Gains or losses on disposal of non- controlling interests are also recognized in equity.

III. Disposal of subsidiaries

When the Group ceases to control a subsidiary any remaining equity interest is remeasured at fair value at the date that control was lost and any change is recognized as a change in the carrying amount through profit or loss. This fair value is the initial carrying amount used thereafter to recognize the remaining equity interest as an associate, joint venture or financial asset. In addition, any “Valuation adjustments” previously recognized in respect of the subsidiary’s equity are treated as though the Group had directly sold the assets or liabilities concerned. This can mean that amounts previously recognized in equity are reclassified to income.

IV. Joint ventures (Jointly controlled entities)

A joint venture is a contractual arrangement whereby two or more entities (“venturers”) undertake an economic activity that is subject to their joint control, joint control being defined as the contractually agreed sharing of the power to direct the financial or operating activities of an entity, or other economic activity, so as to obtain benefits from its operations, where decisions about the relevant activities require the unanimous consent of the venturers. Also classified as “Joint ventures” are equity interests in entities that are not subsidiaries but are jointly controlled by two or more entities unrelated to each other, one of these being the Group. At 31 December 2015 and 2014 there were no equity interests classified as “Joint ventures”. Index Annual Report 2015 Legal Documentation

V. Associates

Associates are investee companies over which the Group has the capacity to exercise significant influence. Significant influence usually, but not always, takes the form of an equity interest held either directly or indirectly through one or more other investees, which gives the Group 20% or more of the votes in the investee company. In consolidating associates the Group followed the equity method as defined in IAS 28. Accordingly, investments in associates were measured at the proportional amount of the Group’s interest in their capital adjusted for dividends paid and other eliminations. Profit or loss from transactions with an associate are eliminated in proportion to the Group’s interest. If losses made by an associate result in it having negative equity it is carried in the Group’s consolidated statement of financial position at zero value unless the Group has an obligation to support it financially. For information on associates at 31 December 2015 and 2014 see Note 14. The accounting principles and standards and measurement criteria used to prepare the Group’s 2015 and 2014 financial statements may differ from those used by certain subsidiaries, jointly controlled entities and associates that fall within its scope. However, any such discrepancies have been eliminated by making the material adjustments and reclassifications required in the process of consolidation.

e) Changes in scope of consolidation

There were no material changes in Caja Rural de Navarra Group’s scope of consolidation during 2015. We explain below the changes in the Group’s consolidation scope during 2014: - On 11 July 2014, the Parent Company acquired the remaining 50% of Harinera del Mar Siglo XXI, S.L., giving it 100% of the equity (Notes 14 and 15). The company makes and sells flour. Following this business combination in stages the company is now fully consolidated by the Group. - On 11 July 2014, the Parent Company also acquired the remaining 50% of Harántico, S.L., XXI, S.L., giving it 100% of the equity (Notes 14 and 15). The company makes and sells flour. Following this business combination in stages the company is now fully consolidated by the Group. Index Annual Report 2015 Legal Documentation

f) Accounting estimates and assumptions used

In the preparation of the Group’s 2015 consolidated financial statements, certain estimates were made by its senior executives, and subsequently ratified by its directors, in order to quantify certain of the assets, liabilities, revenues, expenses and commitments reported herein. These estimates related basically to the following: • Impairment losses on certain financial instruments. (Notes 2.g, 9, 10 and 18) • The actuarial assumptions used in calculating liabilities and commitments for post-employment benefits. (Note 2.t) • The useful lives of items of property and equipment. (Note 2.i) • The fair value of certain financial assets not listed on official secondary markets. (Note 6.d) • The cost and expected change in provisions and contingent liabilities (Note 2.m) • The assumptions used to calculate the fair value of “Loans and advances” and “Financial liabilities at amortized cost” (Note 6.d) • Estimation of Income Tax and recovery of deferred tax assets (Note 23) • Measurement of goodwill and assignment of prices in business combinations (Note 15) To determine the value of certain property assets at the year-end, the Group also used valuations made by independent appraisers. These valuations were based on estimates of future cash flows, expected returns and other variables, which should be taken into consideration when interpreting the accompanying consolidated financial statements. The estimates and assumptions used are based on past experience and whatever other factors are considered most relevant at the present time, and are reviewed regularly. If as a consequence of these reviews or future events these estimates were to change, the effect thereof would be recognized in consolidated income for the present year and subsequent periods.

g) Comparative information

Comparative figures for 2014 are presented alongside the accounting information for the year ended 31 December 2015 according to IFRS-EU criteria. Figures for 2014 are presented for comparative purposes only and do not form part of the Group’s 2015 consolidated financial statements. Index Annual Report 2015 Legal Documentation

h) Equity

The Basel Committee on Banking Supervision is leading the harmonization of international financial regulation. In 1988, the Committee issued the Basel I accords, creating an initial regulatory system for credit institutions which set a minimum capital ratio of 8% of all risk-weighted assets. This was followed in 2004 by Basel II which made the mechanisms for estimating risks more sensitive and introduced two new pillars: self-assessment of capital and risks by each institution (Pillar II) and market discipline (Pillar III). In December 2010, the Committee approved a third set of regulations (Basel III) which tightened capital adequacy requirements, requiring capital to be made up of better- quality instruments, and sought to impose a consistent standardized approach between firms and across countries. The new capital accord improves the transparency and comparability of capital ratios. It also incorporates new prudential tools to monitor liquidity and leverage. The European Union has transposed the Basel III accords into its legal framework, allowing a phased-in adoption process which must be completed by 1 January 2019. The relevant measures are: Directive 2013/36/EU (CRD-IV) of the European Parliament and of the Council, of 26 June 2013. on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms; and Regulation (EU) No 575/2013 (the Capital Requirements Regulation or CRR) of the European Parliament and of the Council, of 26 June 2013, on prudential requirements for credit institutions and investment firms, effective from January 1, 2014. Spanish law was adapted to incorporate the changes to international standards by Act 10/2014, of 26 June, for the management, supervision and solvency of credit institutions, continuing the transposition begun by Royal Decree 14/2013, of 29 November and Bank of Spain Circular 2/2014 which set out the regulatory options for capital requirements during the transition period. The minimum capital requirements laid down by the current regulations (Pillar I) are based on the Cooperative Bank’s exposure to credit, exchange rate, investment, market and operational risks. The Cooperative Bank must also observe limits on concentration risks. Royal Decree 84/2015, of 13 February, completed the regulatory implementation of Act 10/2014, of 26 June, for the management, supervision and solvency of credit institutions, combining in a single revised text all the regulations governing management and discipline of credit institutions issued to date at the time of publication. Also, during 2015 new standards were published to complement the CRR, regulating matters such as equity, liquidity, Pillar I risks and capital requirements. Index Annual Report 2015 Legal Documentation

On 2 February 2016, the Bank of Spain issued Circular 2/2016, which basically completes, for credit institutions, the transposition of EU Directive 2013/36 into Spanish law. It also picks up one of the options left up to competent national authorities under Regulation (EU) No 575/2013, in addition to those already taken up by the Bank of Spain in Circular 2/2014. The new circular also transposes certain provisions of Directive 2011/89/EU of the European Parliament and Council, of 16 November 2011, amending Directives 98/78/EC, 2002/87/EC, 2006/48/EC and 2009/138/EC, as regards supplementary oversight of financial entities in a financial conglomerate. Major provisions of this directive had already been transposed in amendments made by Act 10/2014 and Royal Decree 84/2015 to Act 5/2005, of 22 April, on oversight of financial conglomerates and amending other financial sector laws, as implemented by Royal Decree 1332/2005. The abovementioned circular came into force on the day following its publication in the Spanish State Bulletin: 10 February 2016. Under the requirements of the CRR, credit institutions must at all times comply with a total capital ratio of 8%. However, regulators have powers under the new regulatory system to require firms to hold additional capital over and above this. The Cooperative Bank received a Bank of Spain communication on its decision regarding minimum prudential requirements. This stated that Caja Rural de Navarra must maintain a common equity tier 1 (CET 1) ratio of 9.5% of its phased-in regulatory capital. The requirement includes both the Pillar 1 minimum and the Pillar 2 requirement, including the capital conservation buffer. The Group’s approach to capital management thus complies in its definitions of concepts with the new solvency standards describe above (Note 21).

i) National Resolution Fund and Deposit Guarantee Fund

National Resolution Fund

Act 11/2015, of 18 June, and its implementing regulations in Royal Decree 1012/2015, of 6 November, transpose Directive 2014/59/EU, of 15 May, into Spanish law. The regulation establishes a new resolution framework for credit institutions and investment services companies and forms part of the newly created Single Resolution Mechanism created by EU Regulation No. 806/2014, of 15 July. The Act defines the creation of Spain’s National Resolution Fund, whose financial resources must attain 1% of guaranteed deposits by 31 December 2024, funded by contributions from credit institutions and investment services companies established in Spain. Index Annual Report 2015 Legal Documentation

In 2015, the costs of contributions to the fund were EUR 1,802 thousand, including the fee levied to cover the fund’s administration costs.

Deposit Guarantee Fund

The Parent Company is a member of the Credit Institution Deposit Guarantee Fund. Royal Decree 2606/1996, of 20 December, as amended by Royal Decree 1012/2015, of 6 November, empowers the management committee of the Deposit Guarantee Fund to determine the annual contributions of institutions belonging to the Credit Institution Deposit Guarantee Fund. In 2015, the management committee set the contribution at 1.6 per thousand of the guaranteed deposit base calculated at 31 December 2015 and 2 per thousand of the guaranteed 5% of securities and other financial instruments at the same date. The expense for the ordinary contributions described above accrues, in accordance with IFRIC 21, as soon as the payment obligation is triggered i.e. at 31 December each year. On 30 July 2012, the management committee of the Deposit Guarantee Fund decided to levy a one-off supplementary contribution on fund members, to be paid by each institution in ten equal annual instalments. For the Parent Company, this amounted to EUR 12,276 thousand (ten annual instalments of EUR 1,228 thousand each). These instalments will be deducted from any ordinary annual contribution for which the Parent Company may be liable up to the total amount of the ordinary contribution. On 31 December 2015, the Parent Company recorded a commitment of EUR 7,839 thousand (compared to EUR 8,833 thousand at 31 December 2014), under “Loans and advances to customers – Other financial assets” on the asset side of the consolidated balance sheet (Note 10) and under “Financial liabilities at amortized cost – Other financial liabilities” (Note 17) on the liabilities side. Royal Decree 6/2013 introduced a one-time surcharge to strengthen the capital of the Deposit Guarantee Fund for Credit Institutions. This meant that the annual contribution required from members by Article 3 of Royal Decree 2606/1996, of 20 December, on Deposit Guarantee Funds for Credit Institutions, was raised, for one time only, by an additional 3 per thousand of deposits at 31 December 2012. This surcharge is payable in two tranches: Index Annual Report 2015 Legal Documentation

a) One, consisting of two-fifths of the total, within 20 working days of 31 December 2013. b) A second, consisting of the remaining three-fifths, from 1 January 2014 to be paid according to a payment schedule of up to 7 years to be determined by the Fund’s management committee. As required by IFRIC 21, this tranche was deemed to accrue on the date the Royal Decree came into force (22 March 2013) since the contributions are unrelated to the future activity of the Parent Company and are therefore recognized in their totality as a liability on that date, irrespective of when they are actually paid. On 17 December 2014, the management committee of the Deposit Guarantee Fund for Credit Institutions determined that the second tranche should be paid in two equal instalments on 30 June 2015 and 30 June 2016. In 2015, total expenses in respect of Fund contributions were EUR 7,997 thousand (EUR 11,787 thousand in 2014), recognized under “Other operating expenses” in the consolidated income statement.

j) Environmental impact

Because of the activities in which it is engaged, the Group has no liabilities, costs, assets, provisions or contingencies of an environmental nature that could be material relative to its equity, financial position and results. Accordingly, no breakdowns of specific environmental information have been included in these notes to the financial statements.

k) Post-balance sheet events

No events having material effects on the Group occurred between 31 December 2015 and the date of preparation of these consolidated financial statements. Index Annual Report 2015 Legal Documentation

2. Accounting policies and measurement bases

The accounting policies and rules and measurement bases applied in preparing these consolidated financial statements were as follows:

a) Going concern principle.

In the preparation of the consolidated financial statements, it has been assumed that the Group will remain in business for the foreseeable future. Accordingly, the accounting policies applied were not intended to establish the Group’s net asset value for the purpose of transferring all or part of the resulting amount in the event of its liquidation.

b) Accruals principle

Except, as appropriate, with regard to the consolidated cash flow statement, these consolidated financial statements have been drawn up in the basis of the actual flow of goods and services, irrespective of the dates of payment or collection.

c) Other general principles

LThe consolidated financial statements have been drawn up using the historical cost method, albeit modified by the restatement of certain items of property and equipment on 1 January 2004, as detailed in Note 2.i), and by the fair value measurement of financial instruments held for trading, other financial assets at fair value through profit or loss, available-for-sale financial assets and other financial assets and liabilities (including derivatives).

d) Classification and measurement of financial instruments

I. Definitions A “financial instrument” is any contract that gives rise to a financial asset at one entity and a financial liability or equity instrument at another. An “equity instrument” is any contract that evidences a residual interest in the entity’s assets after deducting all its liabilities. A “financial derivative” is a financial instrument that derives its value from the value of an observable market variable (interest rate, exchange rate, price of Index Annual Report 2015 Legal Documentation

a financial instrument or market index) and any changes in this value, requires little initial investment relative to other financial instruments that respond in a similar manner to changes in market conditions, and is generally settled at a future date. “Hybrid financial instruments” are contracts that create for their issuer both a financial liability and an equity instrument (for example, bonds convertible into equity instruments of the issuer). The following transactions are not treated as financial instruments for accounting purposes: - Equity investments in associates (Note 14). - The rights and obligations deriving from employee benefits schemes (Note 2.t).

• Equity instruments

Members’ capital contributions to cooperative entities are treated as equity instruments and recognized in equity if the entity has an unconditional right to refuse redemption or redemption is prohibited by regulations or the articles of association. If the redemption prohibition is partial, the redeemable amount above the specified prohibition level is recognized in a specific line ofthe consolidated statement of financial position termed “Shares redeemable on demand”. Contributions in respect of which the Group has a remuneration obligation, albeit one conditional upon the cooperative entity generating a profit, are treated as financial liabilities. Remuneration paid on capital contributions is recognized in finance expense for the year when it corresponds to contributions treated as financial liabilities but recognized directly in equity in all other cases. Issues, redemptions and compensation received or paid on own equity instruments are recognized directly in the Group’s consolidated equity, without any changes in the value of instruments of this type being recognized in the financial statements. In addition, the costs incurred in transactions of this type are deducted directly from equity, net of any related tax effect. Remuneration, changes in carrying amount, and gains or losses associated with the repurchase or refinancing of financial liabilities are recognized in income. Costs incurred in the issue of financial liabilities are also recognized in income, applying the effective interest rate method. Remuneration paid on shares redeemable on demand and classified as expenses is in all cases recognized in a separate entry. Index Annual Report 2015 Legal Documentation

• Hybrid financial instruments

Caja Rural de Navarra issues hybrid financial instruments that include a non- derivative host contract together with a derivative, known as an embedded derivative. These embedded derivatives are separated from the host contract and treated independently for accounting purposes, provided that the economic characteristics and risks of the embedded derivative are not closely related to the economic characteristics and risks of the non-derivative host contract, that a separate instrument with the same characteristics as the embedded derivative would meet the definition of derivative, and that the hybrid contract is not measured at fair value through profit or loss. The initial value of embedded derivatives that are options when separated from the host contract is obtained on the basis of their specific individual characteristics, while those that are not options are assigned zero initial value. When the Group cannot reliably measure the fair value of an embedded derivative, it estimates its value as the difference between the fair value of the embedded contract and the host contract, provided both values can be deemed reliable. If this is also not possible, the Group does not separate the hybrid contract and treats the hybrid financial instrument as a whole for accounting purposes, recognizing it in “Financial assets at fair value through profit or loss”. The non-derivative host contract is treated separately for accounting purposes.

• Derivatives

Financial derivatives are instruments which, in addition to giving rise to a profit or loss, may, in certain conditions, allow for all or part of the credit and/ or market risks associated with balances and transactions to be offset, using interest rates, certain indices, the prices of certain securities, the cross exchange rates of various currencies or other similar benchmarks as underlying elements. The Group uses financial derivatives traded on organized markets or traded bilaterally with the counterparty over the counter (OTC). Financial derivatives are used to trade with customers who request them, to manage risks on the Group’s own positions (hedging derivatives) or to profit from changes in their prices. Financial derivatives that cannot be accounted for as hedging operations are considered to be derivatives held for trading. The conditions that must be satisfied for hedge accounting to be applied are as follows: i) The financial derivative must hedge against the risk of changes in the value of assets and liabilities due to fluctuations in interest rates and/or exchange Index Annual Report 2015 Legal Documentation

rates (fair value hedges), the risk of changes in the estimated cash flows generated by financial assets and liabilities, commitments and transactions deemed to be highly probable (cash-flow hedges) or the risk on the net investment in a foreign operation (hedge of net investments in foreign operations). ii) The financial derivative should effectively eliminate some risk inherent to the item or position being hedged for the entire scheduled term of the hedge. It must therefore be effective prospectively, effective at the time the hedge is contracted under normal conditions and effective retrospectively, and there must be sufficient evidence that the hedge will remain effective for the entire life of the hedged item or position. To guarantee that hedges are effective prospectively and retrospectively, the Group uses the corresponding effectiveness tests, which demonstrate that the change in the fair value of the hedging instrument is closely correlated to the change in the fair value of the hedged item. Under current legislation, a hedge is assumed to be effective when the cumulative change in the fair value of the hedging instrument is between 80% and 125% of the cumulative change in the fair value of the hedged item. If a derivative that initially passed the effectiveness test subsequently ceased to satisfy the requirements, from this point onwards it would be classified for accounting purposes as a derivative held for trading and the rules for termination of hedges would be applied. iii) Adequate documentary evidence must be kept to show that the financial derivative was contracted specifically to serve as a hedge for certain specific balances and transactions and to demonstrate the method in which the effectiveness of the hedge was intended to be achieved and measured, provided that this method is consistent with the manner in which the Group manages its own risks. Hedges may be applied to individual items or balances or to portfolios of financial assets and liabilities. In the latter case, the set of financial assets or liabilities being hedged must share the same type of risk. This is deemed to be the case whenever the individual items hedged show a similar sensitivity to changes in the hedged risk. Index Annual Report 2015 Legal Documentation

II. Classification of financial assets for measurement purposes

In general terms, financial assets are classified for measurement purposes into one of the following categories: • Financial assets at fair value through profit or loss. This financial asset portfolio consists of two sub-categories: o Financial instruments held for trading: this subcategory includes financial assets that are acquired with a view to generating short-terms gains on fluctuations in their price or that form part of a portfolio of financial instruments identified and managed jointly in respect of which there is evidence of recent action to obtain short-term gains. Derivatives not designated as accounting hedges are also included in the held-for-trading portfolio. Other financial assets at fair value through profit or loss: this subcategory includes hybrid financial assets not held for trading that are measured entirely at fair value and financial assets not held for trading that are managed jointly with financial liabilities and derivatives for the purpose of significantly reducing overall exposure to interest rate risk. • Held-to-maturity investments This category includes debt securities with fixed maturities and fixed or determinable cash flows that the Group’s management has, on acquisition or at any time thereafter, the positive intention and financial capacity to hold to maturity.

• Available-for-sale financial assets These include debt securities not considered as “Loans and advances”, “Held -to -maturity investments” or “Financial assets at fair value through profit or loss” and equity instruments issued by subsidiaries, associates or joint ventures that have not been classified as “Financial assets at fair value through profit or loss”. • Loans and advances IThis category includes debt securities where, although there is no active market and fair value measurement is not required, the cash flows generated are of a determined or determinable amount and the full amount paid out by the Group will be recovered, except in the event of issuer insolvency. Accordingly, unlisted debt securities, financing extended to third parties in the course of the Group’s normal lending activities and debts contracted by buyers of goods and users of the services the Group provides are recognized in this item. Index Annual Report 2015 Legal Documentation

III. Classification of financial assets for presentation purposes In the accompanying consolidated statement of financial position, financial assets are presented in the various categories into which they are grouped for management and measurement purposes (see section II above), unless they must be recognized as “Non-current assets held for sale” or correspond to “Cash and balances with central banks”, “Hedging derivatives” and “Equity investments”, in which case they are shown separately. Financial assets are broken down, according to type of instrument, into the following consolidated statement of financial position items: • Cash and balances with central banks: cash balances and demand deposits with the Bank of Spain and other central banks. • Loans and advances to credit institutions: credit facilities of any nature granted to credit institutions. • Loans and advances to customers: balances outstanding on all credit facilities and loans granted by the Group, except for marketable securities, money market deposits, finance lease receivables and loans and advances to credit institutions. • Debt securities: bonds and other securities that create or recognize a debt for their issuer, that accrue interest, either implicitly or explicitly, at a contractually- established rate and are represented either by physical instruments or by book entries, irrespective of their issuer. • Other equity instruments: financial instruments issued by other entities, including shares and non-voting stock, that have the substance of equity instruments for the issuer, unless they are treated as investments in subsidiaries, joint ventures or associates. Shares and units in investment funds are included in this item. • Trading derivatives: fair value in favour of the Group of derivatives that do not form part of accounting hedges. • Other financial assets: other balances receivable by the Group in respect of transactions that do not have the substance of a loan (cheques drawn on credit institutions, balances pending collection from clearing houses and settlement agencies in respect of transactions on securities exchanges and other organized markets, cash advanced as collateral, capital calls, and fees and commissions receivable for financial guarantees, pending collection, inter alia). • Hedging derivatives: fair value in favour of the Group of derivatives designated as hedging securities in accounting hedges. Index Annual Report 2015 Legal Documentation

IV. Classification of financial liabilities for measurement purposes

Financial liabilities are classified for measurement purposes into one of the following categories: • Financial liabilities at fair value through profit or loss. o Financial instruments held for trading: includes financial liabilities issued with the intention of repurchasing them in the near future or contracted with a view to generating short-term gains on fluctuations in their price, financial derivatives not considered accounting hedges and financial liabilities arising from the outright sale of financial assets acquired under reverse repurchase agreements or borrowed (“short positions”). o Other financial liabilities at fair value through profit or loss: includes all hybrid financial liabilities not held for trading that have to be measured entirely at fair value. At 31 December 2015 and 2014 the Group had no liabilities in this category. • Financial liabilities at amortized cost. Financial liabilities not included in any of the aforementioned categories and that arise in the course of banks’ ordinary deposit-taking activities, irrespective of type of instrument and residual term to maturity.

V. Classification of financial liabilities for presentation purposes

In the accompanying consolidated statement of financial position, financial liabilities are presented in the various categories into which they are grouped for management and measurement purposes (see section II above), unless they must be recognized as “Liabilities associated with non-current assets held for sale” or correspond to “Hedging derivatives” or “Shares redeemable on demand” in which case they must be shown separately. Financial liabilities are included, according to the type of instrument, in one of the following items: • Deposits from central banks and credit institutions: deposits of any nature, including loans and money market deposits received from the Bank of Spain and other central banks, as well as loans and money market deposits received from credit institutions. • Customer deposits: all repayable balances received in cash by the Group, other than those represented by marketable securities, money market deposits and subordinated liabilities. Index Annual Report 2015 Legal Documentation

• Debt securities: bonds and other bearer debt securities and promissory notes, including cash or treasury bonds, covered bonds, debentures, commercial bills and similar instruments, except for those classified as subordinated liabilities.

VI. Reclassifications between portfolios of financial instruments

Reclassifications between portfolios of financial instruments are made only in the following circumstances: i) Except where exceptional circumstances as described in point iv) below apply, financial instruments classified as at fair value through profit orloss cannot be reclassified either inside or outside this category of financial instruments once acquired, issued or assumed. ii) If, due to a change in the Cooperative Bank’s intention or capability, a financial asset ceases to be classified as held to maturity, it is reclassified to “Available-for-sale financial assets”. All financial instruments classified as held to maturity must be treated in the same way in such situations, unless the reclassification takes place in circumstances permitted under applicable regulations (sales very close to the maturity date or after collecting virtually all the principal of the financial asset, etc). No sales not permitted under the regulations applicable to financial assets classified as held to maturity were made in 2015 and 2014. iii) Following a change in the Cooperative Bank’s intention or capability or at the end of the two-year penalty period established in the regulations applicable to situations where financial assets classified as held to maturity are sold, debt securities classified as available-for-sale may be reclassified as held to maturity. In this case, the fair value of these financial instruments on the date of transfer becomes their new amortized cost and the difference between this amount and their redemption value is recognized in income applying the effective interest rate method over the instrument’s residual term to maturity. iv) A financial asset other than a financial derivative may be classified outside financial instruments held for trading and available-for-sale financial assets if no longer held for the purpose of selling or repurchasing it in the near term, provided that one of the following circumstances applies: a) In rare and exceptional circumstances, except where the assets in question could have been classified in “Loans and advances”. For such purposes, rare and exceptional circumstances mean those arising as a result of a specific event that is unusual and highly unlikely to recur in the foreseeable future. Index Annual Report 2015 Legal Documentation

b) If the Cooperative Bank has the intention and capability to hold the financial asset for the foreseeable future or until maturity, provided that upon initial recognition the asset would have met the definition of loans and advances. Where these circumstances exist, the asset is reclassified at its fair value on the date of reclassification, without reversing any gain or loss, and its fair value becomes its new amortized cost. Assets that are reclassified in this way cannot under any circumstances be further reclassified as financial instruments held for trading. In 2015 and 2014, no financial instruments were reclassified between the Group’s different portfolios.

e) Measurement and recognition of gains and losses on financial asset and liabilities

As a general rule, financial instruments are initially recognized at their fair value, which, barring evidence to the contrary, will be acquisition cost. They are subsequently re-measured at each reporting date in accordance with the following criteria:

I. Measurement of financial assets

Financial assets are measured at “fair value”, except for loans and advances, held-to-maturity investments, equity instruments whose fair value cannot be reliably determined, and financial derivatives that have such equity instruments as their underlying and are settled by delivery of the same, without deducting any transaction costs that may be incurred upon their sale or other form of disposal. The fair value of a financial instrument on a given date is the amount at which the asset could be exchanged between knowledgeable, willing parties in an arms’ length transaction. The most objective and common reference for the fair value of a financial instrument is the price that would be paid for it on an organized, transparent and deep market (“quoted price” or “market price”). Where there is no market price for a given financial instrument, or its market price is considered unrepresentative, fair value is estimated on the basis of the price established in recent transactions involving similar instruments or, in the absence thereof, of valuation techniques broadly accepted in the international financial community, taking into account the specific features of the instrument to be measured and, particularly, the various types of risk associated with it. Index Annual Report 2015 Legal Documentation

Notwithstanding the foregoing, the inherent limitations of existing valuation techniques and any inaccuracies in the assumptions these techniques require may be such that the fair value resulting from such estimates does not exactly coincide with the price at which the assets or liabilities could be bought or sold on the measurement date. Loans and advances and held-to-maturity investments are measured at amortized cost using the effective interest rate method. Amortized cost means the cost of acquisition of a financial asset or liability, plus or minus, as applicable, principal repayments and accumulated amortization or depreciation (as reflected in the income statement) of the difference between initial cost and redemption value on maturity. The effective interest rate is the discount rate that exactly matches the initial amount of a financial instrument to the cash flows it is expected to generate over its residual term, based on contractual terms and conditions but without taking losses due to future credit risk into consideration. For fixed-income financial instruments, the effective interest rate is the interest rate contractually established at the time of acquisition plus, where applicable, any fees and commissions that, given their nature, are comparable to an interest rate. In the case of floating-rate financial instruments, the effective interest rate is the prevailing rate of return applicable until the date of the next interest rate revision. Equity securities whose fair value cannot be determined in a sufficiently objective manner and financial derivatives that have those securities as their underlying and are settled by delivery of those securities are measured at acquisition cost adjusted, where appropriate, by any impairment losses that they may have suffered. The fair value of standard financial derivatives held for trading is taken to be their daily trading price. If, for exceptional reasons, no trading price can be established for a particular date, they are measured using methods similar to those applied for OTC derivatives. The fair value of derivatives not traded on organized markets is taken to be the sum of the future cash flows generated by the instrument, discounted to the measurement date (“present value” or “theoretical closing price”) using methods broadly accepted on the financial markets: net present value (NPV), option pricing models, etc. Financial assets designated as hedged items or hedging instruments are measured as established in Note 2.e.IV. Index Annual Report 2015 Legal Documentation

II. Measurement of financial liabilities

Financial liabilities are generally measured at amortized cost, as defined above, except when included under “Financial liabilities held for trading” or “Financial liabilities at fair value through profit or loss”, in which case they are measured at fair value.

III. Recognition of gains and losses

Gains and losses on financial instruments are recognized on the basis of the portfolio in which they are classified, in line with the following criteria: • For financial instruments at fair value through profit or loss, changes in fair value are recognized directly in the consolidated income statement, distinguishing, in the case of instruments that are not derivatives, between the portion attributable to income accrued on the instrument, which is recognized as interest or dividends as applicable, and the rest of the change in fair value, which is recognized in “Gains (losses) on financial assets and liabilities”. Income generated by financial instruments included in this category is calculated using the effective interest method.

• For financial instruments at amortized cost, changes in fair value are recognized when the financial instrument is derecognized and, in the case of financial assets, when the asset becomes impaired. Income generated by financial instruments included in this category is calculated using the effective interest method.

• The following criteria are applied to available-for-sale financial assets: (i) Interest accrued is calculated using the effective interest rate method and, where applicable, dividends earned taken to consolidated income; (ii) Impairment losses are recognized as described in Note 2.g); (iii) Translation differences are taken directly to consolidated income when they correspond to cash assets and recognized temporarily in equity as “Valuation adjustments” until they are derecognized, at which point the differences are taken to income, when they correspond to non-cash items; (iv) Other valuation adjustments are recognized directly in equity until they are derecognized.

IV. Hedging transactions

The Group presents and measures individual hedges (distinguishing between hedged items and hedging instruments) on the basis of their classification and according to the following criteria: Index Annual Report 2015 Legal Documentation

• Fair value hedges: hedge exposure to changes in fair value. In fair value hedges, the gain or loss arising upon measurement of both the hedging instruments and the hedged items, in the latter case due to changes in value attributable to the hedged risk, are recognized directly in the consolidated income statement. Cash flow hedges: hedge exposure to changes in cash flows attributable to a specific risk relating to an asset or liability or a forecast transaction. The gain or loss arising upon measurement of hedging instruments qualifying as effective is recognized temporarily under equity as “Valuation adjustments” at the lower of the following amounts: the gain or loss accumulated on the hedging instrument since the start of the hedge or the accumulated change in the present value of the expected future cash flows of the hedged item since the start of the hedge. At 31 December 2015 and 2014 the Group had no hedges of this kind. The gains or losses accumulated on each hedge are transferred to consolidated income in the periods in which the hedged items affect income, unless the hedge corresponds to a forecast transaction that results in recognition of a non-financial asset or liability, in which case it is included in the cost of this asset or liability. In order for derivative transactions to be treated as hedging transactions, they must be adequately documented and must be guaranteed to be highly effective in offsetting the hedged risk. The Group uses financial derivatives (swaps and options) traded on bilateral markets (OTC). These transactions are used to hedge the interest rate risk on certain fixed-rate customer deposits and the market risk on customer deposits remunerated at a rate indexed to the performance of shares, baskets or stock market indexes. To ensure maximum effectiveness, the Group only enters into hedging transactions when the principle terms and conditions of the hedging transaction match those of the hedged item exactly. Derivatives embedded in other financial instruments or in host contracts are recognized separately as derivatives when their risks and other features are not closely related to those of the host contracts and when the host contracts are not classified as “Other financial assets or liabilities at fair value through profit or loss” or as “Financial instruments held for trading”. All financial derivatives that do not qualify for hedge accounting are treated for accounting purposes as “Trading derivatives”. Index Annual Report 2015 Legal Documentation

f) Transfers and derecognition of financial assets and liabilities

The accounting treatment of transfers of financial assets depends on the degree to which the associated risks and rewards are transferred to third parties. The following cases can be distinguished: I. If substantially all the risks and rewards are transferred, the transferred financial asset is derecognized and any right or obligation retained or created in the transfer recognized separately. II. If substantially all the risks and rewards associated with the transferred financial asset are retained, the transferred financial asset is not derecognized and continues to be measured by the same criteria used before the transfer. Nonetheless, in these cases the following items are recognized: • An associated financial liability for an amount equal to the payment received, which is subsequently measured at amortized cost. • Both the income generated by the transferred (but not derecognized) financial asset and the expense generated by the new financial liability. III. If substantially all the risks and rewards associated with the financial asset transferred are neither transferred nor retained, the following distinction is made: • If the seller does not retain control of the transferred financial asset: the asset is derecognized and any right or obligation retained or created as a result of the transfer is recognized separately. • If the seller retains control of the transferred financial asset, the asset continues to be recognized on the reporting date at an amount equivalent to its exposure to potential changes in value and a financial liability associated with the transferred asset is recognized. The net amount of the transferred asset and associated liability will be the amortized cost of the rights and obligations retained, if the transferred asset is measured at amortized cost, or the fair value of the rights and obligation retained, if the transferred asset is measured at fair value. At 31 December 2015 and 2014, the Group had assets transferred prior to 1 January 2004 for amounts of EUR 24,893 thousand and EUR 39,245 thousand, respectively, which, in accordance with prevailing legislation, were derecognized from the consolidated statement of financial position. Index Annual Report 2015 Legal Documentation

g) Impairment of financial assets

The carrying amount of a financial asset is adjusted by the Group via a charge against income when there is objective evidence that an impairment loss has occurred.

Debt instruments

Objective evidence of impairment in debt instruments (loans and debt securities) is deemed to exist when events have occurred since their initial recognition that have a negative impact on their future cash flows. Objective evidence of impairment is determined individually for significant debt securities and individually and collectively for groups of securities that are not individually significant. In the case of debt instruments measured at amortized cost, the amount of the impairment loss is equivalent to the difference between the carrying amount and the present value of estimated future cash flows, although the Group takes the market price of quoted securities as a substitute for the present value of future cash flows, provided this price is sufficiently reliable. The amount of the impairment loss is recognized in income, with a balancing entry made to correct the value of the assets. When the likelihood of recovering the loss is considered remote, this amount is derecognized. Impairment losses on “Available-for-sale financial assets” are equal to the positive difference between acquisition cost (net of any principal repayments) and fair value less any impairment loss previously recognized in the consolidated income statement. Where there is objective evidence that the decline in fair value is due to impairment, the unrealized losses recognized in “Valuation Adjustments” under “Equity” are taken directly to income. Subsequent recoveries of impairment losses on debt instruments are recognized in income in the period in which the recovery takes place. The recognition of interest accruals is suspended in respect of debt instruments classified by the Group as impaired and instruments for which impairment losses have been assessed collectively because they have payments more than three months past due. The Group also treats as impaired assets (doubtful debt) any debt instruments and contingent exposures and commitments for which there is objective evidence of impairment, essentially in the form of arrears, defaults, refinancing and data indicating that the future cash flows agreed may not be recovered Index Annual Report 2015 Legal Documentation

in full or, in the case of equity instruments, that their carrying amount may not be recovered in full. When the likelihood of recovering a recognized impairment is considered remote, the amount of the impairment (default) is derecognized, without prejudice to any actions that may be taken to seek collection of the amount receivable. The present value of expected future cash flows is calculated by discounting flows at the effective interest rate of the transaction (if contracted at a fixed rate) or at the effective interest rate of the transaction on the discount date (if contracted at a floating rate). In determining expected future cash flows, the Group takes account of guarantees, risk rates and the circumstances in which collections are expected to be made. A debt security is impaired due to insolvency when there is evidence of deterioration in the obligor’s ability to pay (client risk) or an incidence of country risk, the latter being understood as the risk affecting debtors resident in a given country due to circumstances specific to that country other than normal commercial risk. To determine impairment losses on these assets, the Group assesses the potential losses as follows: • Individually, for all significant debt instruments and all debt instruments that, though not significant individually, cannot be subcategorised into portfolios of instruments by virtue of having similar characteristics in terms of age of past-due amounts, type of guarantee or collateral, sector of activity, geographical region, etc. • Collectively, for all debt instruments not identified individually in portfolios of instruments with similar characteristics based on counterparty, transaction status, type of collateral or guarantee and age of past-due amounts. For each risk group, the Group establishes the minimum impairment losses (identified losses) that should be recognized in the consolidated annual financial statements according to a default calendar based on past experience within the Group and sector. • In addition to these identified losses, the Group recognizes a global impairment allowance for losses on debt instruments not identified as impaired (standard risk). This corresponds to the statistical loss pending allocation to specific transactions and is based on historical loss experience and other circumstances known at the date of the financial statements. Because the Group does not have sufficient statistical information on its historical impairment loss experience, it has used the parameters established Index Annual Report 2015 Legal Documentation

by the Bank of Spain based on its own experience and information it has on the sector. These data are updated regularly to reflect changing conditions in the sector and the economy as a whole. Thus, underlying impairment losses incurred are determined by applying percentage impairment rates to debt instruments not measured at fair value through profit or loss and to contingent exposures classified as standard risk. These percentages vary according to the risk category to which the instruments has been assigned (risk-free, low risk, medium-low, medium-high and high). In the case of debt securities recognized as “Available-for-sale financial assets”, the Group deems them to be impaired if any payment of principal or interest is more than 90 days past due or if their credit rating has been downgraded.

Equity instruments

Objective evidence that equity instruments are impaired is deemed to exist when, as a result of a loss event or combination of events occurring subsequent to their initial recognition, their carrying amount can no longer be recovered in full. Impairment losses on equity instruments measured at fair value and recognized in “Available-for-sale financial assets” are calculated as the difference between acquisition cost and fair value less previously recognized impairment losses. Unrealized losses recognized directly in equity in “Valuation adjustments” are taken to consolidated income when it is determined that the decline in fair value is due to impairment. If all or part of the impairment loss is subsequently recovered, the corresponding amount is recognized in equity in “Valuation adjustments”. Impairment losses on equity instruments measured at cost and recognized in “Available-for-sale financial assets” are calculated as the difference between their carrying amount and the present value of the expected future cash flows discounted at the market rate of return for similar securities. The amount of the impairment is determined with reference to the equity of the investee, excluding “Valuation adjustments” due to cash flow hedges and adjusted for unrealized capital gains existing on the measurement date. These losses are recognized in consolidated income by directly reducing the carrying amount of the equity instruments. The loss can only be subsequently recovered in the event of sale. The Group deems that evidence of impairment exists on equity instruments carried as “Available-for-sale financial assets” if they have recorded capital losses for an uninterrupted period of 18 months and at the time of the observation the loss is more than 40%. Index Annual Report 2015 Legal Documentation

h) Financial guarantees Financial guarantees are defined as contracts whereby the Group undertakes to pay specific amounts on behalf of a third party if the latter fails to do so. The main types of contracts included in this category, which are recognized in the memorandum accounts at the end of the consolidated statement of financial position, are financial and technical guarantees, irrevocable documentary credits issued or confirmed by the Group, insurance policies and credit derivatives in which the Group acts as the seller of protection. When the Group issues contracts of this kind, they are recognized in the “Accruals” line under liabilities in the consolidated statement of financial position at fair value and also, at the same time, in the “Other financial assets” line of “Loans and advances” at the present value of the cash flows pending receipt using, for both entries, a discount rate similar to that applied to credits with a similar term and risk extended to the same counterparty by the Group. Subsequent to issuance, contracts of this type are recognized by recording the differences in consolidated income as finance income or fee and commission income, according to whether they correspond to “Other financial assets” or “Accruals”, respectively. Financial guarantees are classified on the basis of the default risk assigned to the customer or transaction and, where applicable, an estimate made of the provisions required to cover the credit risk (Note 18). The credit risk is determined by applying criteria similar to those used to quantify impairment losses on financial assets classified as “Loans and advances” (Note 2.g).

i) Property and equipment

Property and equipment for own use are presented at acquisition price, discounted pursuant to certain legal regulations and re-measured in accordance with the provisions of the new accounting standards, less the related accumulated depreciation and any impairment losses. Property and equipment is grouped into the following items: property and equipment for own use, investment property, other assets leased out under operating leases and property and equipment assigned to the Social Welfare Fund. In the case of certain assets for own use where there are no restrictions on disposal, the Group has taken as the cost of acquisition at the transition date to IFRS-EU (1 January 2004) the market value of these items obtained in appraisals performed by independent experts (Note 15). All items of property and equipment are depreciated on a straight-line basis according to the estimated years of useful life shown below. The land on which Index Annual Report 2015 Legal Documentation

buildings and other structures are constructed has an indefinite life and is not therefore depreciated. Annual provisions for the depreciation of property, plant and equipment are recognized with a balancing entry in the consolidated income statement and are calculated using the following percentage depreciation rates, determined on the basis of the average estimated years of useful life of the related assets: Annual percentage Buildings for own use 4% Furniture and fixtures 15-20% Computer hardware (*) (*) Decreasing digit method (based on three or four years, depending on the items).

The depreciation periods and methods used for each item of property and equipment are reviewed by the Group as a minimum at the end of each reporting period. Upkeep and maintenance expenses that do not improve the productivity or extend the useful life of the respective assets are charged directly to the consolidated income statement when incurred. At each closing date, the Group reviews whether there are internal or external indications that the net value of its property and equipment items exceed their recoverable amount. If so, it writes down the carrying amount accordingly and reduces future depreciation charges to match the new carrying amount and the remaining useful life, where this has been re-estimated. Any such reduction to the carrying amount of property and equipment for own use is charged to “Impairment losses on financial assets (net) – Other assets” in the consolidated income statement. Similarly, where there are indications that property or equipment has recovered previously impaired value, the Group reverses the prior period impairment loss, through a credit to “Impairment losses on financial assets (net) – Other assets” in the consolidated income statement and adjusts future depreciation charges accordingly. Reversals can never increase the carrying amount of an asset above its initial pre-impairment value. Property and equipment are retired from the consolidated statement of financial position when they are disposed of, including if assigned under finance leases, or when they are permanently withdrawn from use and no future economic benefits are expected to be obtained from their disposal, assignment or abandonment. The difference between the sale price and carrying amount is recognized in the consolidated income statement for the period in which the asset is derecognized. Index Annual Report 2015 Legal Documentation

j) Leasing

I. Finance leases

Finance leases are leases that transfer to the lessee substantially all the risks and rewards of ownership of the leased asset. Finance lease contracts are recognized as follows: When the Group acts as lessor of an asset, the sum of the present value of the lease payments receivable from the lessee plus the guaranteed residual value - which is generally the exercise price of the lessee’s call option at the end of the lease term - is recognized under “Loans and Receivables” in the consolidated statement of financial position. The accounting criteria applied to impairment losses and balance sheet derecognition are the same as those applied to other financial assets (Notes 2.f. and 2.g). When the Group acts as lessee, the cost of the leased assets is recognized in the statement of financial position according to the type of asset leased and a liability for the same amount simultaneously recognized. This amount is determined as the lower of the fair value of the leased asset and the present value of all amounts payable to the lessor plus, where relevant, the exercise price of the call option. These assets are depreciated on the same basis as property and equipment for own use. In both cases, the finance income and finance expense generated by the lease contracts are credited or debited to consolidated income, as applicable, such that the return on the assets remains constant over the life of the lease.

II. Operating leases Under operating leases, the lessor retains substantially all the risks and rewards of ownership of the leased asset and therefore continues to recognize ownership thereof. When the Group acts as lessor, it presents the acquisition cost of the leased assets under “Property and equipment” in the consolidated statement of financial position. These assets are depreciated on the same basis as other similar property, plant and equipment for own use and income from the lease contracts is recognized in consolidated income on a straight-line basis. When the Group acts as lessee, lease expenses, including any incentives granted by the lessor, are taken to the consolidated income statement on a straight-line basis. Index Annual Report 2015 Legal Documentation

k) Intangible assets

Intangible assets are non-monetary assets that are without physical substance. They are deemed to be identifiable when they are separable from other assets - i.e. they can be individually disposed of, let or transferred - or when they arise from contractual or other legal rights. An intangible asset is recognized when, besides satisfying the above definition, the Group considers it probable that the economic benefits arising from the asset will be realized and its cost can be measured reliably. Intangible assets are initially recognized at cost of acquisition or production and subsequently measured at cost less any accrued amortization or impairment loss. Goodwill corresponds to payments made by the Group in anticipation of future economic benefits deriving from assets of an acquired entity that cannot be individually and separately identified and recognized. It is recognized only when acquired for consideration in a business combination. Positive differences between the acquisition cost of interests in the capital and the corresponding carrying amounts of the assets acquired, adjusted on the date of first consolidation, are recognized as follows: i) If the excess can be assigned to specific assets or liabilities of the companies acquired, it is added to the value of assets whose market value is higher than the carrying amount stated in the consolidated statement of financial positions of the companies acquired, or subtracted from the value of liabilities whose market value is lower than the carrying amount. The accounting treatment is similar to that of the corresponding Group assets or liabilities, respectively. ii) Where differences can be assigned to specific intangible assets, they are explicitly recognized in the consolidated statement of financial position provided their fair value at the acquisition date can be measured reliably. iii) The remaining amount is recognized as goodwill, which is allocated to one or more specific cash-generating units. Negative differences between the acquisition cost of interests in the capital of associates and the corresponding carrying amounts of the assets acquired, adjusted on the date of first consolidation, are recognized as follows: i) If the difference can be assigned to specific assets or liabilities of the companies acquired, it is added to the value of liabilities whose market value is higher than the carrying amount stated in the consolidated statement of financial positions of the companies acquired, or subtracted from the value Index Annual Report 2015 Legal Documentation

of assets whose market value is lower than the carrying amount, where the accounting treatment is similar to that of the Group’s equivalent liabilities or assets, respectively. ii) Unassignable amounts are recognized in the consolidated income statement for the year when the acquisition took place. The remaining intangible assets are divided into two groups: those with an indefinite useful life when, based on analysis of all relevant factors, there is no foreseeable limit to the period when they are expected to generate net cash flows to the Group, and those with a finite useful life. Intangible assets with an indefinite useful life are not amortized. At each reporting date, the Group reviews their remaining useful life to determine whether it can still be considered indefinite and, if not, makes the corresponding accounting changes. Intangible assets with a finite useful life are amortized over that life using similar criteria to the depreciation of property and equipment. The Group also recognizes any impairment loss to the carrying amount of these assets, with a balancing entry in the consolidated income statement. The criteria for recognising impairment losses in these assets and any recoveries of previously recognized impairment are similar to those used for property and equipment.

l) Inventories

Inventories include, inter alia, land and other property held by the Group for sale as part of its real estate development activities and any other assets, other than financial instruments, that are held for sale in the ordinary course ofits business and are in the process of production, construction or development. Inventories are carried at the lower of cost or net realisable value, the latter being defined as their estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs of sale. The cost of inventory items that are not tradable in the normal course of business and the cost of goods and services produced and reserved for specific projects are determined individually for each case. The cost of other inventories is determined using the first-in, first-out method (FIFO). Both reductions and subsequent recoveries in the net realisable value of inventories are recognized in income for the year in which they occur. In the event of their sale, the carrying amount of inventories is derecognized from the consolidated statement of financial position and recycled to the consolidated income statement as an expense under “Other operating Index Annual Report 2015 Legal Documentation

expenses – Change in inventories” for the same period in which the revenue from their sale is recognized under “Other operating income - Sales and income from the provision of non-financial services”.

m) Other provisions and contingencies

The Group makes a distinction between provisions and contingent exposures and establishes provisions for the estimated amount necessary to cover present obligations arising as a consequence of past events that are clearly specified as to their nature but uncertain as to their amount and time of settlement, when it is probable that an outflow of funds including economic benefits will be required to extinguish them. Such obligations may arise for the following reasons: i) A legal or contractual requirement. ii) An implicit or tacit obligation, arising from a valid expectation created by the Group in respect of third parties that it will assume certain kinds of responsibilities. Such expectations arise when the Group publicly accepts responsibilities, and derive from past performance or business policies in the public domain. iii) Near certain changes in the regulations on certain issues. In particular, draft legislation with which the Group will be required to comply. Contingent exposures are possible obligations of the Group that arise out of past events which are contingent upon the occurrence or non-occurrence of one or more future events over which the Group does not have control. Contingent exposures include present obligations of the Group where an outflow of funds including economic benefits is unlikely to be required to settle them or, in extremely rare cases, where the amount of the obligation cannot be measured reliably. Provisions and contingent exposures are classified as probable when they are more likely to occur than not, possible when they are less likely to occur than not, and remote when their occurrence is extremely rare. The Group includes in the consolidated financial statements all significant provisions and contingent exposures in respect of which the probability of the obligation having to be met is greater than the probability of its not having to be met. Contingent exposures classified as possible are not recognized in the consolidated financial statements but are reported, unless the likelihood of an outflow of funds including economic benefits being required is considered remote. Index Annual Report 2015 Legal Documentation

Provisions are quantified on the basis of the best available information on the consequences of the event at their origin and are estimated at the close of each accounting period. They are used to cover the specific obligations for which they were recognized and are reversed in full or in part when such obligations cease to exist or are reduced. Provisions for contingent exposures and commitments include the amount of the provisions established to cover contingent exposures - defined as transactions where the Group guarantees the obligations of a third party as a result of financial guarantees granted or contracts of another kind - and contingent commitments - defined as irrevocable commitments that could give rise to the recognition of a financial asset - and the amount of other provisions established by the Group.

Ongoing lawsuits and/or claims

At 31 December 2015 and 2014 a number of lawsuits and claims had been filed against the Group as a result of the normal conduct of its business. Both the Cooperative Bank’s legal advisors and its directors are of the view that the outcome of these proceedings and claims will have no significant effect beyond that provisioned in the accompanying consolidated financial statements closed at 31 December 2015 and 2014.

n) Non-current assets held for sale

The Group recognizes as “Non-current assets held for sale” those non-current assets (assets whose realization or recovery is expected to occur more than one year from the reporting date) and disposal groups (groups of assets, together with the liabilities directly related to them, that are earmarked for disposal in a single transaction or as part of a unit or group of units) whose carrying amount is expected to be recovered through their sale, since the asset is in optimum conditions for sale and the sale is highly likely to take place. Non-current assets held for sale are generally measured at the lower of fair value less costs to sell and carrying amount at the date of classification in this category. Real estate assets foreclosed or received in settlement of debt, irrespective of the legal form used, are initially recognized at the lower of the carrying amount of the corresponding financial assets, i.e. at their amortized cost, taking into account the estimated impairment (which must be a minimum of 10%) and the market appraisal value of the asset received in its current state of repair, less Index Annual Report 2015 Legal Documentation

estimated costs to sell (which shall be no less than 10% of the appraisal value in the asset’s current state). All costs of the foreclosure process are recognized immediately in the consolidated income statement for the year the foreclosure took place. Registration fees and taxes paid may be added to the value initially recognized provided that their addition does not raise this amount above the appraisal value less estimated costs to sell referred to in the previous paragraph. The Group also includes foreclosed assets received in settlement of debt in this category since its intention is to sell them as quickly as possible (within one year). These assets are carried at the lower of fair value and carrying amount. Non-current assets held for sale are not depreciated or amortized as long as they continue to be included in this category. When they remain on the consolidated statement of financial position for longer than the period initially envisaged for their sale, they are tested for impairment so that any loss sustained since acquisition may be recognized. Impairment losses on these assets, understood as initial or subsequent reductions in their carrying amount to their fair value (less costs to sell), are recognized in consolidated income. Any subsequent recovery in their value up to an amount equal to the impairment loss previously recorded is also recognized in income. In those cases where the Group finances the sale of non-current assets to the purchaser, gains or losses arising upon realization of the assets are recognized in consolidated income in the reporting year in which the sale is realized, unless the buyer is a related party or doubts exist as to the recovery of the financed amounts, in which case the gain is accrued over the period in which the collections are made.

o) Foreign currency transactions

I. Functional currency

The Group’s functional currency is the euro. Consequently, all non-euro balances and transactions are considered foreign currency balances and transactions.

II. Translation criteria for foreign currency balances

Balances receivable and payable in foreign currency are translated to euro at the spot rate on initial recognition. The following translation criteria are subsequently applied: Index Annual Report 2015 Legal Documentation

-- Cash items denominated in foreign currency are translated to their functional currencies using the official average Spanish spot rate at the close of the year. - Non-cash items measured at historical cost are translated at the exchange rate applying on the date of acquisition. - Non-cash items recognized at fair value are translated at the exchange rate applying on the date of fair value measurement. - Income and expenses are translated at the exchange rate applying on the transaction date or using the average exchange rate for the period for all transactions performed in that period. - Equity items are translated at historical exchange rates.

III. Recognition of translation differences

Translation differences arising on the translation of foreign currency balances are generally recognized in income, except for differences arising on non-cash items. At 31 December 2015, the value of assets and liabilities denominated in foreign currencies was EUR 43,917 thousand and EUR 46,759 thousand, respectively (compared with EUR 34,727 thousand and EUR 33,746 thousand at 31 December 2014).

p) Recognition of income and expense

As a general rule, income is recognized at the fair value of the consideration received or to be received, less trade and other discounts. Where the cash inflows are deferred, fair value is determined by discounting the future cash flows. The recognition of any revenue item in consolidated income or consolidated equity is subject to fulfilment of the following prerequisites: • The amount can be reliably estimated. • It is probable that the Cooperative Bank will receive the economic benefits of the transaction. • The information must be verifiable. The main criteria applied by the Group for the recognition of income and expense are described below. Index Annual Report 2015 Legal Documentation

I. Interest and similar income and expense

As a general rule, interest and similar income and expense items are recognized according to their accrual periods, using the effective interest rate method. Dividends received from other companies are recognized in income at the time the Group becomes entitled to receive them.

II. Comisiones, honorarios y conceptos asimilados

Income and expense arising from fees, commissions and similar charges are recognized in income according to various criteria, depending on their type. The main fee and commission items are: - Fees related to financial assets and liabilities at fair value through profit and loss, which are recognized when paid. - Fees originating from transactions or services that continue over an extended period, which are recognized over the life of the transaction or service. - Fees relating to a service rendered in a single act, which are recognized when the single act is carried out. The Group classifies fees and commissions received or paid as follows:

Finance fees and commissions

Fees of this type, which form an integral part of the effective return or cost of a finance transaction, are collected or paid in advance and generally recognized in income over the expected term of the finance, net of direct costs, as an adjustment to the cost incurred or effective revenue generated on the transaction.

Non-finance fees and commissions

Fees of this type arise when services are rendered by the Group and are recognized in income over the period in which the service is rendered or, if relating to a service rendered in a single act, when the single act is carried out.

III. Non-finance income and expense

These are recognized for accounting purposes on an accrual basis. Index Annual Report 2015 Legal Documentation

q) Swaps of property and equipment and intangible assets

When property and equipment and intangible assets are the subject of swaps, the Group measures the assets received at their fair value plus, if applicable, any cash considerations delivered in exchange, unless clearer evidence of the fair value of the asset received exists. When it is not possible to measure fair value reliably, the assets received are recognized at the carrying amount of the assets delivered plus, if applicable, any cash considerations delivered in exchange. Losses on asset swaps are recognized directly in the consolidated income statement, while gains are only recognized if the swap is of a commercial nature and the fair values of the swapped assets can be reliably measured.

r) Social Welfare Fund

The Group recognizes mandatory allocations to the Education and Development Fund under liabilities and as an expense for the year. Voluntary contributions are recognized as a distribution of earnings. Applications of this fund are normally credited to cash and banks, unless the amount of the related welfare project corresponds to the Group’s own activities, in which case the Education and Development Fund is reduced and a revenue item is simultaneously recognized in the consolidated income statement.

s) Off-balance sheet customer funds

The Group recognizes funds deposited by third parties for investment in investment funds, pension funds and endowment policies at their fair value in memorandum accounts, making a distinction between funds managed by Group companies and funds marketed by the Cooperative Bank but managed by non-Group third parties. The memorandum accounts also include the fair value or, if no reliable fair value estimate is available, cost value of assets acquired by the Group on behalf of third parties as well as debt securities, equity instruments, derivatives and other financial instruments held in custody, under guarantee or on commission at the Group on behalf of those responsible for the same. The fees charged for these services are recognized in the consolidated income statement as “Fee and commission income”. Index Annual Report 2015 Legal Documentation

t) Personnel expenses and post-employment benefits

Short-term benefits Short-term employee benefits are measured, without discounting, at the amount payable for services received and generally recognized as personnel expenses for the year plus an accrued liability of an amount equal to the difference between the total expense and the amount already settled.

Pension commitments The only Group company that has significant pension commitments to its employees is the Parent Company. In accordance with the current collective wage agreement, Caja Rural de Navarra is obliged to supplement the state social security system benefits accruing to widows and orphans of employees who die while employed by the Group. It must also pay a seniority bonus to employees who leave the Parent Company due to retirement or serious full and permanent disability after twenty or more years’ service. The amount of this bonus is established in the collective agreement. Caja Rural de Navarra has covered all the aforementioned commitments through various policies contracted with the insurance company Vidacaixa Seguros y Reaseguros, S.A.. Liabilities recognized under the defined benefit plans are measured as the current value of the obligation at the reporting date less the fair value of plan assets. Obligations under defined benefit plans are calculated annually by independent actuaries using the projected unit credit method assuming the earliest possible retirement age. “Plan assets” are those assets associated with a specific defined benefit obligation which will be used directly to settle these commitments and which meet the following conditions: • They are owned by a legally separate third party that is not related to the Group. • They can be used only to pay or finance commitments with employees. • They can be returned to the Parent Company only if all employee benefit commitments have been settled or if they are to be used to reimburse the Parent Company for employee benefits already paid. • They are not non-transferable securities issued by the Parent Company. Index Annual Report 2015 Legal Documentation

At 31 December 2015, the defined benefit obligation was in deficit as the fair value of plan assets was less than the present actuarial value of the contracted obligations. This deficit was recognized in accordance with Regulation 35 of Bank of Spain Circular 4/2004 as a provision for defined benefit pension plans under “Provisions – Provisions for pensions and similar obligations” on the consolidated statement of financial position at 31 December 2015. Bank of Spain Circular 5/2013, issued 30 October, requires post-employment benefits to be reported as follows: i) On the income statement: employee current service costs and past service costs that were not recognized in the year accrued, net interest on provisions (assets), and the gain or loss on settlement. ii) On the statement of changes in equity: revaluations of provisions (assets), impact of actuarial gains and losses, any returns on plan assets that were not included in net interest on provisions (assets), and changes in the present value of plan assets as a result of changes in the present value of cash-flows available to the entity which are not included in net interest on provisions (assets). Amounts recognized in the statement of changes in equity will not be reclassified to the income statement in future years. iii) Until 31 December 2012, the Parent Company’s policy on amortizing actuarial gains and/or losses on post-employment obligations was to recognize them directly in the income statement as accrued. Actuarial gains and/or losses arise from changes in actuarial assumptions or differences between the assumptions made and actual outcome. Defined benefit plans are therefore reported in the income statement as follows: a) Current service cost as personnel expenses. b) Net interest on provisions as interest and similar expenses. c) Net interest on assets as interest and similar income. d) Past service cost as (net) allocations to provisions. The most significant actuarial assumptions applied are as follows:

Actuarial assumption 2015 2014

Interest rate 2.25% 2.50% Expected return on plan assets 2.25% 2.50% Mortality tables PERM/F2000P PERM/F2000P Incapacity tables N/A N/A Annual cumulative salary increase 2.00% 2.00% Index Annual Report 2015 Legal Documentation

The discount rate applied to plan commitments is based on the duration of the commitment, 23.3 years for post-employment obligations at a rate of 2.25%, and the benchmark curve is based on the yield paid by high-rated (AA) corporate bonds denominated in euros (Source: Iboxx AA at 31 December 2015). The percentage sensitivity of the defined benefit obligation to changes in the main assumptions for 2015 is as follows:

Change in Increase Decrease assumption

Discount rate 50 bp (7.26%) 8.12% Annual salary growth rate 50 bp 7.86% (7.08%)

The sensitivity analysis above assumes a change in the assumptions shown while all other factors remain constant. The amounts recognized in the Parent Company’s financial statements for pensions and similar obligations are as follows:

Assets/liabilities on statement of financial position 2015 2014 Post-employment obligations (2,450) (2,218) Fair value of plan assets 1,590 1,411 Net asset (provision) recognized on statement of financial position (Note 18) (860) (807)

Expenses charged to the income statement for defined benefit obligations to employees are as follows:

Charged (credited) directly to income 2015 2014 Personnel expenses: - Current service cost 133 104 - Allocation to provisions - - Net interest and similar expense 11 24 Total expenses charged 144 128

Index Annual Report 2015 Legal Documentation

The table below reconciles the amounts reported as present value of defined benefit obligations at the start and end of 2015 and 2014:

Thousands of euros

Balance at 31 December 2013 1,015 Current service cost 104 Interest expense 67 Remeasurements 1,103 Benefits paid (71) Effect of curtailments/settlements - Balance at 31 December 2014 2,218 Current service cost 133 Interest expense 58 Remeasurements 59 Benefits paid (18) Effect of curtailments/settlements - Balance at 31 December 2015 2,450

The table below reconciles the amounts reported as fair value of defined benefit plan assets at the start and end of 2015 and 2014:

Thousands of euros

Fair value at 31 December 2013 1,015 Expected return on plan assets 42 Remeasurements 339 Contributions by Parent Company 86 Benefits paid (71) Effect of curtailments/settlements - Fair value at 31 December 2014 1,411 Expected return on plan assets 36 Remeasurements 57 Contributions by Parent Company 104 Benefits paid (18) Effect of curtailments/settlements - Fair value at 31 December 2015 1,590 Index Annual Report 2015 Legal Documentation

The breakdown of the main asset classes in the defined benefit plan (as % of total plan assets) is as follows:

2015 2014

Equities - - Debt instruments - - Property - - Insurance policies 100% 100% Other assets - - Total 100% 100%

The Cooperative Bank expects to contribute EUR 162 thousand to defined post- employment benefit plans in respect of 2015. The estimate of the corresponding payments expected from defined post- employment benefit plans over the next 10 years is as follows (in thousands of euro): 2016 2017 2018 2019 2020 2021-2025 Probably post-employment benefits 127 60 117 160 88 568

Termination benefits

Termination benefits are recognized as a provision for pension funds and similar obligations and as personnel expenses only when it can be demonstrated that the Group has committed to terminating the employment of an employee or group of employees before the normal retirement date or to paying termination benefits to employees as incentives in a voluntary redundancy offer.

u) Income tax

The income tax expense for the year is recognized in the consolidated income statement except when it results from a transaction recognized directly in equity, in which case the income tax effect is also recognized in equity. The amount of the income tax expense corresponds to the tax payable on taxable profit for the year, adjusted for changes arising in the year dueto temporary differences, tax relief, tax credits and tax loss carryforwards. Deferred tax assets and liabilities include the aforesaid temporary differences, which are the amounts expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities and their related tax bases. Index Annual Report 2015 Legal Documentation

Deferred tax assets, tax relief, tax credits and tax loss carryforwards are only recognized if it is considered likely that the Group will have sufficient future taxable profits against which they can be offset. Deferred tax liabilities are always recognized, except those arising upon the initial recognition of goodwill or the deferred tax liabilities associated with investments in subsidiaries, associates and jointly-controlled entities, provided that the investor is able to control the timing of the reversal of the temporary difference and, in addition, that it is probable that the difference will not reverse in the foreseeable future. Notwithstanding the above, deferred tax assets and liabilities are not recognized in connection with the initial recognition of an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither accounting profit nor taxable profit. Deferred tax assets and liabilities are reviewed on each reporting date to determine whether they remain valid and any necessary corrections made. Income and expenses recognized directly in equity are accounted for as temporary differences. Income tax payable by the Parent Company in respect of 2015 and 2014 is governed by the Navarre Regional Law 24/1996 of 30 December on Company income tax, as amended. On 30 December 2015, Navarre Regional Law 23/2015, of 28 December, was published in the Navarre Official Bulletin, amending various taxes and other levies, taking effect the next day and applying to all tax periods starting as from 1 January 2016. The new law amends the previous Navarre Regional Law 24/1996, of 30 December, on Company income tax, as amended, used to determine company income tax in respect of 2015. The new Navarre Regional Law 23/2015 of 28 December, raised the Company income tax rate for cooperative credit institutions from 23% to 25% for all tax periods beginning on or after 1 January 2016. Deferred tax assets and liabilities in the consolidated financial statements for the year ending 31 December 2015 were therefore adjusted to take account of the amounts now expected to be recoverable or payable, respectively. The change in recoverable deferred taxes was credited as income of EUR 525 thousand under Income tax for 2015 (Note 23). Index Annual Report 2015 Legal Documentation

v) Consolidated statement of recognized income and expense and consolidated statement of changes in equity

These statements from part of the consolidated financial statements and show all changes in equity occurring in the reporting period. The main features of the information presented in each part of the statement are outlined below.

Consolidated statement of recognized income and expense

This statement shows the income and expense generated by the Group as a result of its activities in the reporting period, distinguishing between items of income and expense that are recognized in profit and loss for the year and items of income and expense that, as required under current regulations, are recognized directly in equity. This financial statement therefore presents: • Consolidated profit for the year • The net income or expense temporarily recognized in equity as valuation adjustments. • The net income or expense definitively recognized in equity. • The income tax accrued for the items indicated in the two preceding points. • The total recognized income and expense, calculated as the sum of the above. Changes in income and expense recognized in equity as valuation adjustments can be broken down into: • Measurement gains (losses): reflecting the amount of income, net of expenses arising in the year, recognized directly in consolidated equity. Amounts recognized in this line in the course of the year are maintained in this item, even if recycled to income in the same year, at the initial value of other assets and liabilities or else are reclassified to another item. • Amounts transferred to the consolidated income statement: reflecting the amount of measurement gains or losses recognized previously in consolidated equity, including in the same year, that is recognized in the consolidated income statement. • Amounts transferred to the initial carrying amount of hedged items: reflecting the amount of measurement gains or losses recognized previously in consolidated equity, including in the same year, that is recognized in the initial carrying amount of the assets or liabilities as a result of cash flow hedges. Index Annual Report 2015 Legal Documentation

• Other reclassifications:consisting of transfers between valuation adjustment items made in the year in accordance with the criteria established in prevailing regulations. The balance of these items is presented gross, with the corresponding tax effect recognized in “Income tax”, except, as indicated above, in the case of valuation adjustments in respect of companies accounted for by the equity method.

Consolidated statement of changes in equity

This statement shows all changes in equity, including those resulting from changes in accounting policies and the correction of errors. The statement therefore provides a reconciliation between the carrying amount of each item of consolidated equity at the beginning and end of the period, grouping movements by type under the following headings: • Adjustments due to changes in accounting criteria and the correction of errors: reflecting changes in equity resulting from retrospective adjustments to financial statement balances because of changes in accounting principles or to correct errors. • Income and expense recognized in the period: representing the aggregate value of all the aforementioned items recognized in the statement of recognized income and expense. • Other changes in equity: representing the remaining items recognized in equity, including capital increases or decreases, distribution of earnings, treasury share transactions, equity-based payments, transfers between equity items, and any other increase or decrease in equity.

w) Consolidated cash flow statement

The consolidated cash flow statement uses a number of specific concepts, which are defined as follows: i) Cash flows are inflows and outflows of cash and cash equivalents, that is, investments that are short-term, highly liquid and subject to a low risk of changes in value. ii) Operating activities are the Group’s typical activities and other activities that cannot be classified as investing or financing and interest paid by financing received, even if it relates to financial liabilities classified as financing activities. Index Annual Report 2015 Legal Documentation

iii) Investing activities are those relating to the acquisition, sale or disposal by other means of long-term assets and other investments not included in cash and equivalents, such as property and equipment, intangible assets, equity investments, non-current assets and associated liabilities held for sale, equity instruments classified as available for sale that are strategic investments and financial assets included in the portfolio held to maturity. iv) Financing activities are activities that result in changes in the size and composition of the consolidated equity and liabilities that are not included under operating activities. The Group treats the balances included under “Cash and balances with central banks” in the consolidated statement of financial position as cash and cash equivalents.

x) Business combinations Business combinations are defined as transactions through which two or more entities or economic units are merged into a single entity or group of companies. When the business combination results in the creation of a new entity that issues shares to the owners of two or more entities that have merged. one or other of the two original entities is deemed to be the acquirer and the transaction is treated in the same way as if one entity had acquired the other. Business combinations are booked by the acquisition method. The consideration transferred to acquire another company is measured as the fair value of the assets transferred, any liabilities to the previous owners that the Group takes on and any equity interests in the acquiree issued by the Cooperative Bank. Consideration also includes the fair value of any assets or liabilities resulting from any contingent consideration agreement. The identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are initially measured at fair value at the acquisition date. In each business combination, the Cooperative Bank can choose to recognize any non-controlling interest in the acquiree either at fair value or at its proportionate share of the identifiable net assets of the acquiree. Acquisition costs are recognized as expenses for the year they are incurred. Any contingent consideration to be transferred by the Cooperative Bank is measured at fair value at the acquisition date. Subsequent changes to the fair value of a contingent consideration treated as an asset or liability are recognized in accordance with IAS 39 either under income or as a change in equity. Contingent consideration classed as Group equity is not remeasured and is recognized in equity when eventually settled. Index Annual Report 2015 Legal Documentation

Goodwill is initially measured as the total consideration paid plus the fair value of the non-controlling interests less the net amount of identifiable assets acquired and liabilities assumed. If this consideration turns out to be less than the fair value of net assets of the subsidiary acquired, the difference is recognized in profit or loss. During a one-year “measurement period” from the date of the business combination the acquirer can adjust the provisional amounts recognized as it completes the estimates required to prepare the first consolidated financial statements following the combination.

y) Goodwill

Positive differences between the acquisition cost of business combinations and the percentage interest acquired in the net fair value of the assets and contingent liabilities of the acquirees are recognized as goodwill on the consolidated balance sheet. Goodwill therefore corresponds to payments made by the Group in anticipation of future economic benefits deriving from assets of an acquired entity that cannot be individually and separately identified and recognized. It is recognized only when acquired for consideration as a result of a business combination. This goodwill is never amortized but at each reporting date it is tested for any impairment that would reduce its fair value below its recognized net cost and, if so, it is written down with the resulting loss being recognized in the consolidated income statement. Goodwill impairment tests are based on measurements that principally use the discounted distributed profits method, which takes account of the following parameters: o Key business assumptions. These assumptions are the basis for forecasting future cash flows used in the valuation. For financial businesses the variables projected may include: lending volumes, non-performing loans, customer deposits and interest rates in a projected economic environment and capital requirement. o Estimates of macro-economic and other financial variables. o Forecast period. The forecast term/period is usually 5 years. Beyond this, profits and yields are assumed to run at a constant level. Economic projections at the time of the valuation are used to make forecasts over this period. o Discount rate. The present value of future dividends, used to derive value in use, is calculated at a discount rate based on the entity’s cost of equity (Ke) to a market participant. It is determined using the capital asset pricing model (CAPM) method: “Ke = Rf +b * (Rm– Rf) + a; where Ke = rate of return Index Annual Report 2015 Legal Documentation

demanded by the shareholder, b = the company’s systemic risk factor, Rm = market rate of return, Rf = risk-free rate and a = an additional premium to take account of future contingencies”. o A growth rate used to extrapolate cash flows beyond the period covered by the most recent forecasts. This is based on long-term estimates of key economic and business variables, taking into account at all times the state of financial markets. The estimated perpetual growth rate is 1%. Impairment losses recognized for goodwill are not reversed in subsequent periods. Index Annual Report 2015 Legal Documentation

3. Changes and errors in accounting principles and estimates

I. Changes in accounting principles

Changes in accounting principles, whether resulting from a change in an accounting standard affecting a particular transaction or event or a decision of the Governing Board of the Cooperative Bank or the Board of Directors of a Group company, for duly disclosed reasons, are applied retrospectively, except where: • It would be impractical to determine the effects of a given change on the comparative information for a prior year. In this case the new accounting principle is applied as from the earliest prior year for which retrospective application is practical. Sometimes it may be impractical to determine the cumulative impact at the start of the current financial year of the application of a new accounting principle to all prior years. In this case the new accounting principle is applied prospectively starting from the earliest practical date. • The measure or accounting standard that amends or creates the principle sets a start date for its application. Certain accounting standards applied to the Group in 2015 underwent changes from those applied in the prior year. The most significant of these changes are detailed below. i) Standards, amendments and interpretations mandatory for financial years starting on or after 1 January 2015

- IFRIC 21 “Levies” On 13 June 2014, the European Commission issued Regulation 634/2014 adopting Interpretation 21 of the International Financial Reporting Interpretations Committee on “Levies” (IFRIC 21). The interpretation deals with the financial treatment of levies imposed by public authorities other than income tax and fines and penalties for breaches of law. The main issue addressed is timing: when an entity should recognize a liability for the obligation to pay a levy that comes within the scope of IAS 37. The interpretation also clarifies the accounting treatment of a liability for a levy payment whose timing and amount are certain. Its article 2 states that entities should apply IFRIC 21 “Levies” as from their first financial year beginning on or after 17 June 2014. However, the Group exercised the early adoption option and applied the interpretation in its 2014 financial statements. Index Annual Report 2015 Legal Documentation

- IFRS Annual Improvements cycle 2011-2013

In December 2013, the IASB published its Annual improvements to IFRS for its 2011- 2013 cycle. Most of the amendments made under these Annual improvements cycles apply to years beginning on or after 1 January 2015, with early adoption permitted. The principal amendments relate to: • IFRS 3 “Business combinations”: Scope exceptions for joint ventures. • IFRS 13 “Fair value measurement”: Scope of the “portfolio exception” in IFRS 13. • IAS 40 “Investment property”: Interrelationship of IAS 40 and IFRS 3 when classifying property as investment property or owner-occupied property. The new amendments are not expected to have a material impact on the Group’s consolidated financial statements.

ii) Standards, amendments and interpretations not yet in force with an early adoption option for financial years starting on or after 1 January 2015

At the date of signature of these consolidated financial statements the IASB and IFRS Interpretations Committee had published the following standards, amendments and interpretations for which application is mandatory from 2016 and which the Group has not adopted early:

- IFRS Annual Improvements cycle 2010-2012 In December 2013, the IASB published its Annual improvements to IFRS for its 2010- 2012 cycle. Most of the amendments made under these Annual improvements cycles apply to years beginning on or after 1 February 2015, with early adoption permitted. The principal amendments relate to: • IFRS 2 “Share-based payments”: Definition of “vesting conditions”. The “Effective date” section of IFRS 2 is unchanged from the IASB standard, which reads: “An entity shall prospectively apply that amendment to share-based payment transactions for which the grant date is on or after 1 July 2014” • IFRS 3 “Business combinations”: Accounting for a contingent consideration in a business combination. The “Effective date” section of IFRS 3 is unchanged from the IASB standard, which reads: “An entity shall prospectively apply that amendment to business combinations for which the acquisition date is on or after 1 July 2014” • IFRS 8 “Operating segments”: Disclosures of the aggregation of operating segments and reconciliation of the total of reportable assets assigned to segments with the entity’s assets. Index Annual Report 2015 Legal Documentation

• IAS 16 “Property, plant and equipment” and IAS 38 “Intangible assets”: Proportionate restatement of accumulated depreciation and amortization when using the revaluation model. • IAS 24 “Related party disclosures”: Management entities providing key management personnel services treated as a related party. The new amendments are not expected to have a material impact on the Group’s consolidated financial statements.

- IAS 19 (amendment) “Defined benefit plans: employee contributions”

IAS 19 (amended 2011) distinguishes between employee contributions linked to service and others unrelated to service. The current amendment further distinguishes between contributions linked to service solely in the year they are made and those related to service over more than one year. The amendment allows that contributions linked to service but independent of its duration may be recognized as a reduction in the service cost in the period in which the related service is rendered. In contrast, contributions linked to service that do depend on its duration, must be attributed to periods of service using the same attribution method as used for the gross benefit. This amendment is effective for all financial years beginning from 1 February 2015 and applied retrospectively. Earlier adoption is permitted. The new amendments are not expected to have a material impact on the Group’s consolidated financial statements.

- IAS 16 (Amendment) and IAS 41 (Amendment) “Agriculture: Bearer plants”

Under this amendment, bearer plants, such as fruit trees, must be accounted for in the same way as property and equipment, unlike all other biological assets. As a result, the amendments bring these plants within the scope of IAS 16 rather than IAS 41. The produce of these plants will continue to be accounted for under IAS 41. These amendments will apply to financial years beginning on or after 1 January 2016. Early adoption is permitted. Most of these amendments will apply retrospectively, although entities already reporting under IFRS which measure their bearer plants at fair value less costs to sell can opt to use fair value their attributed cost for the first year in which the amendments apply. The new amendments are not expected to have a material impact on the Group’s consolidated financial statements. Index Annual Report 2015 Legal Documentation

- IFRS 11 (Amendment) “Accounting for acquisitions of interests in joint operations”

The amendment requires that when an investor acquires an interest in a joint operation that constitutes a business it must apply the principles on business combinations. Specifically, it must measure identifiable assets and liabilities at fair value, recognize acquisition-related costs as expenses, recognize deferred tax and recognize any excess consideration paid as goodwill. All other principles of accounting for a business combination apply except where they conflict with IFRS 11. This standard will apply prospectively to financial years starting on or after 1 January 2016. Early adoption is permitted. The new amendments are not expected to have a material impact on the Group’s consolidated financial statements.

- IAS 16 (Amendment) and IAS 38 (Amendment) “Clarification of acceptable methods of depreciation and amortization”:

This amendment clarifies that the use of revenue-based methods to calculate the depreciation of an asset is not appropriate because revenue generated by an activity that includes the use of an asset generally reflects factors other than the consumption of the economic benefits embodied in the asset. The IASB also clarified that revenue is generally presumed to be an inappropriate basis for measuring the consumption of the economic benefits embodied in an intangible asset. This amendment will be effective for all financial years beginning from 1 January 2016 and applied prospectively. Early adoption is permitted. The new amendments are not expected to have a material impact on the Group’s consolidated financial statements.

- Annual improvements process 2012-2014:

This cycle of amendments affects IFRS 5, IFRS 7, IAS 19 and IAS 34 and will apply to financial years starting on or after 1 January 2016. The principal amendments relate to: • IFRS 5, “Non-current assets held for sale and discontinued operations”: Changes in disposal methods. • IFRS 7, “Financial instruments: Disclosures”: Continuing involvement in the context of service contracts. Index Annual Report 2015 Legal Documentation

• IAS 19, “Employee benefits”: Clarification of which bonds to use when establishing the discount rate for post-employment benefits. • IAS 34, “Interim financial reporting”: Disclosure of information elsewhere in the interim financial report. The new amendments are not expected to have a material impact on the Group’s consolidated financial statements.

- IAS 1 (Amendment) “Disclosure initiative”

The amendments to IAS 1 encourage companies to use their professional judgement in deciding what information should be disclosed in the financial statements. The amendments clarify that materiality considerations apply to the whole of the financial statements and that financial information should not be obscured by the inclusion of immaterial information. They further clarify that entities should use their professional judgement in determining where and in what order information should be presented in the financial statements. Application of amendments to IAS 1 is mandatory for financial years beginning on or after 1 January 2016. The new amendments are not expected to have a material impact on the Group’s consolidated financial statements.

- IAS 27 (Amendment) “Equity method in separate financial statements”

IAS 27 is amended to restore the option of using the equity method to account for investments in subsidiaries, joint ventures and associates in an entity’s separate financial statements. The definition of separate financial statements has also been clarified. An entity that opts to switch to the equity method must apply the amendments to prior years starting on or after 1 January 2016 in accordance with IAS 8 “Accounting policies, changes in accounting estimates and errors”. Early adoption is permitted. The new amendments are not expected to have a material impact on the Group’s consolidated financial statements.

iii) Standards, amendments and interpretations of existing standards that cannot be adopted early or are not yet adopted by the European Union At the date of preparation of these consolidated financial statements the IASB and IFRS Interpretations Committee had published the following standards, amendments and interpretations which have not yet been adopted by the European Union: Index Annual Report 2015 Legal Documentation

- IFRS 14 “Regulatory deferral accounts”

This is an interim standard on the accounting treatment of certain amounts that arise in activities where pricing is regulated. It applies only to entities adopting IFRS 1 for the first time. It allows these first-time adopters to continue to recognize amounts related to price regulation under their previous accounting policies. However, to facilitate comparability with entities already applying IFRS which do not recognize these amounts, the standard requires that the effect of such price regulation should be presented separately from other items. Entities already reporting under IFRS cannot adopt this standard. This standard is effective from 1 January 2016, but early adoption is permitted. The standard is not expected to have a material impact on the Group’s consolidated financial statements.

- IFRS 15 “Revenue from contracts with customers”

In May 2014, the IASB and FASB jointly issued a converged standard on the recognition of revenue from contracts with customers. Under the converged standard, revenues are recognized when control over the good or service sold passes to the customer, in other words, when the customer can both direct its use and obtain the benefits of the good or service. This IFRS includes new guidance on determining whether revenue should be recognized over time or at a specific point in time. IFRS 15 sets broad disclosure requirements for revenue recognized and expected to be recognized in future as a result of existing contracts. It also requires quantitative and qualitative disclosures on significant judgements made by the management in determining the revenues recognized as well as any changes in these judgements. IFRS 15 will apply to financial years beginning on or after 1 January 2018. Early adoption is permitted. The Group is analysing the impact that the new standard may have on the Group’s consolidated financial statements if adopted by the EU.

- IFRS 9 “Financial instruments”

IFRS 9 addresses the classification, measurement and recognition of financial assets and financial liabilities. The final version of IFRS 9 was issued in July 2014 and replaces the guidance in IAS 39 on classification and measurement of financial instruments. IFRS 9 maintains but simplifies the mixed measurement model and defines three main categories for the way financial assets can be measured: amortized cost, fair value through profit and loss and fair value through other comprehensive income. Instruments are classified in one or other category based Index Annual Report 2015 Legal Documentation

on the business model of the entity and the characteristics of the contractual cash flows arising from the financial asset. Investment in equity instruments are measured at fair value through profit and loss with an irrevocable option on initial recognition to present changes in fair value in OCI, without recycling, if the instrument is not held for trading. If the equity instrument is held for trading, changes in fair value are recognized in profit or loss. For financial liabilities, the rules on classification and measurement are unchanged, except that changes in own credit risk attaching to liabilities carried at fair value through profit or loss are recognized in other comprehensive income. IFRS 9 also creates a new model for impairment, the “expected loss” model. This replaces IAS 39’s “incurred loss” model and will mean that losses are recognized earlier than they would have been under IAS 39. IFRS 9 also eases the qualifying requirements for a hedge to be deemed effective. Under IAS 39 a hedge had to be highly effective both prospectively and retrospectively. IFRS 9 replaces this line, requiring instead that there is an economic relationship between the hedged item and the hedging instrument and that the hedge ratio is the same as that actually used in the entity’s risk management. Contemporaneous documentation is still required but is different to that previously prepared under IAS 39. Finally, a broad range of disclosures are required, including a reconciliation between initial and final amounts of the provision for expected credit loss, assumptions and data, and a reconciliation of the transition from the original classification categories under IAS 39 to the new IFRS 9 categories. IFRS 9 applies to financial years beginning on or after 1 January 2018. Early adoption is permitted. It will be applied retrospectively but there is no requirement to restate comparative figures. If an entity opts to early adopt IFRS 9 it must apply all requirements at the same time. Entities that apply the standard before 1 February 2015 retain an option to phase it in. The Group is analysing the impact that the new standard may have on the Group’s consolidated financial statements if adopted by the EU.

- IFRS 10 (Amendment) and IAS 28 (Amendment) “Sales or contributions of assets between an investor and its associate/joint venture”

These amendments clarify the accounting treatment of sales and contributions of assets between an investor and its associates or joint ventures which will depend on whether the non-monetary assets sold or contributed constitute a business. If the non-monetary assets constitute a business the investor recognizes the gain or loss in full. If the assets fail to meet the definition of a business, the investor only recognizes the gain or loss in light of the interest attributable to the other equity holders. These amendments will only apply when an investor sells Index Annual Report 2015 Legal Documentation

or contributes assets to its associate or joint venture. The amendments to IFRS 10 and IAS 28 were to be applied prospectively to financial years beginning on or after 1 January 2016. However, at end-2015, the IASB decided to postpone the effective date (setting no new date) and produce a broader scope amendment that would simplify the treatment of such transactions and other aspects of accounting for associates and joint ventures. The Group is analysing the impact that the amendment may have on the Group’s consolidated financial statements if adopted by the EU.

- IFRS 10 (amendment), IFRS 12 (amendment) and IAS 28 (amendment) “Investment entities: Applying the consolidation exception”

The amendments clarify three aspects of the requirement for investment entities to measure subsidiaries at fair value rather than consolidating them. The proposed amendments: • Confirm that the exemption from presenting consolidated financial statements also applies to subsidiaries of investment entities that are themselves parent companies; • Clarify when a parent investment company should consolidate a subsidiary providing services that relate to the parent’s investment activities rather than measuring it at fair value; and • Simplify the use of equity method reporting for non-investment entities with stakes in associates that are investment entities. These amendments apply to financial years beginning on or after 1 January 2016. Early adoption is permitted. The Group is analysing the impact that the amendment may have on the Group’s consolidated financial statements if adopted by the EU.

- IFRS 16 “Leases”

In January 2016, the IASB published a new standard on leases replacing the former IAS 17 “Leases” following a joint project with the FASB. The IASB and FASB came to similar conclusions in many areas, including the definition of a lease, the general requirement to disclose leases on the statement of financial position and the measurement of lease liabilities. The two boards also agreed to leave the accounting treatment by the lessor substantially unchanged from the previous standard. Differences, however, remain between the IASB and FASB on how lease costs should be reported on the income statement and cash flow statement. Index Annual Report 2015 Legal Documentation

Under IASB-IFRS, application of IFRS 16 is mandatory from 1 January 2019. Early adoption is permitted but only if the reporting company also applies IFRS 15 “Revenue from contracts with customers”. IFRS 16 has yet to be adopted by the EU. The Group is analysing the impact that the new standard may have on the Group’s consolidated financial statements if adopted by the EU.

- IAS 12 (Amendment) “Recognition of Deferred Tax Assets for Unrealised Losses” The amendment clarifies how to account for deferred tax assets related to investments in debt instruments measured at fair value. Unrealised losses on debt instruments measured at fair value and measured at cost for tax purposes give rise to a deductible temporary difference. Estimates of probable future taxable profits may include recovery of an entity’s assets above their carrying amount where this is supported by the evidence. This may be the case, for instance, when an entity expects to hold a fixed-income instrument and collect the contractual cash flows. The amendment applies to financial years beginning on or after 1 January 2017. Early adoption is permitted. As a general rule, it should be applied retrospectively. However, on first-time adoption of the amendment entities can recognize any change in assets and liabilities for the comparative period charged to the opening balance of the retained earnings reserve. The Group is analysing the impact that the amendment may have on the Group’s consolidated financial statements if adopted by the EU.

- IAS 7 (Amendment) “Disclosure initiative – Amendments to IAS 7” This narrow-scope amendment includes a requirement to provide additional details in the financial statements that enable users to evaluate changes in liabilities arising from financing activities. Entities must disclose the following changes in such liabilities: i) changes from financing cash flows; ii) changes from taking or losing control of subsidiaries or other businesses; (iii) the effect of changes in foreign exchange rates; (iv) changes in fair value; and (v) other changes. The amendment applies to financial years beginning on or after 1 January 2017. Early adoption is permitted. On first-time adoption, entities are not required to provide comparative information on preceding periods. The Group is analysing the impact that the amendment may have on the Group’s consolidated financial statements if adopted by the EU. Index Annual Report 2015 Legal Documentation

II. Errors and changes in accounting estimates

Accounting errors

Errors made in preparing the consolidated financial statements for prior years are omissions or misstatements caused by a failure to use, or misuse of, reliable financial information that was available when the consolidated financial statements for those periods were authorised for issue and which the Parent Company could reasonably be expected to use in preparing the consolidated financial statements. Prior period errors are corrected retrospectively in the first consolidated financial statements prepared after their discovery, so that they read as if the error had not occurred. This means: • restating the amounts of all affected items in the consolidated financial statements, including notes, for publication as comparative information for the year the error occurred and any subsequent years and, if applicable, • restating the opening balances of assets, liabilities and equity for the earliest year presented as comparative information if the error occurred before this date. When it is impractical to establish the effects of a prior year error on each specific year, initial balances are restated for the earliest years where it is practical to do so. Where it is impractical to determine the cumulative effect, at the start of the current year, of an error on all prior years, comparative information should correct the error prospectively starting at the earliest possible year that it is possible to do so. Prior year errors that affect consolidated equity are corrected in the year they are discovered through the corresponding consolidated equity item. In no circumstances can errors from prior year periods be corrected through the consolidated income statement of the year in which they are discovered unless they are immaterial or it is impractical to determine the effect of the error as indicated in the paragraph above.

Changes in accounting estimates

A change in an accounting estimate is an adjustment of the carrying amount of an asset or a liability, or the amount of the periodic consumption of an asset, that results from the assessment of the present status of, and expected future benefits and obligations associated with, the corresponding assets and liabilities. Index Annual Report 2015 Legal Documentation

Changes in accounting estimates result from new information or new developments and, accordingly, are not corrections of errors. Changes are recognized prospectively in the consolidated income statement for the year or for the current and future years affected by the change. There were no corrections of material prior period errors in 2015 and 2014, nor were there any material changes in accounting estimates that had an effect in those years or are expected to have an effect in future periods. Index Annual Report 2015 Legal Documentation

4. Appropriation of earnings

The appropriation of the Parent Company’s net profit for 2015 that the Parent Company’s Governing Board will propose to members for approval at the Annual General Meeting, together with the appropriation for 2014 approved at the General Meeting held on 8 May 2015, is as follows:

Thousands of euro 2015 2014 Profit (loss) for the year before mandatory allocation to the Education and Development Fund and after Income Tax 68,935 56,042 To dividends and remuneration (2,327) (2,770)

Total retained earnings or surplus available 66,608 53,272

To the Mandatory Reserve Fund 59,947 47,945 To the Education and Development Fund 6,661 5,327

Total appropriated 66,608 53,272

The profits or losses of consolidated subsidiaries will be appropriated as agreed at their respective General Shareholders’ Meetings. Index Annual Report 2015 Legal Documentation

5. Remuneration and other benefits paid to key management personnel

The Parent Company considers certain members of the Management Committee, as well as the members of its Governing Board, to be key management personnel.

Remuneration paid to members of the Governing Board

Members of the Parent Company’s Governing Board receive no remuneration for the work they perform as board members, except for per diem allowances and other expenses. The table below sets out the gross remuneration received by members of the Parent Company’s Governing Board in 2015 and 2014: Thousands of euro Board members 2015 2014

Ignacio Terés Los Arcos 18 5 José Luis Barriendo Antoñanzas 9 24 José María Arizaleta Nieva 5 4 Luis Miguel Serrano Cornago 5 4 José Angel Ezcurra Ibarrola 4 4 Melchor Miranda Azcona 3 2 Isidro Bazterrica Mutuberría 2 2 José Javier López Morrás 2 2 Pedro María Beorlegui Egea 2 2 Francisco Javier Artajo Carlos 2 1 Jesús Andrés Mauleón Arana 2 2 Roberto Zabaleta Ciriza 2 2 Alberto Arrondo Lahera 2 - Pedro María Echarte Sevine 2 - Pedro Jesús Irisarri Valencia 2 - José Luis Sarabia Moreno 1 1 Pedro Buldain Zozaya 1 2

Total 64 57

The Parent Company has no pension commitments in respect of any current or former member of its Governing Board.

Credit facilities Any credit facilities extended to members of the Parent Company’s Governing Board at 31 December 2015 and 2014 are detailed in Note 38. Index Annual Report 2015 Legal Documentation

Remuneration paid to senior executives

Ordinary remuneration accrued by the Parent Company’s senior executives in 2015 and 2014 totalled EUR 1,101 thousand and EUR 1,044 thousand, respectively. This amount was shared among eight persons, including the Managing Director and other members of the Management Committee. The Parent Company has no additional commitments with any member of senior management beyond their entitlements as employees of the Cooperative Bank (Note 2.t). Index Annual Report 2015 Legal Documentation

6. Risk management

a) Credit risk Credit risk is the possibility of losses being incurred as a result of non-fulfilment of contractual obligations on the part of the Group’s counterparties, the Cooperative Bank being the Group company most exposed to this risk. In the case of repayable finance extended to third parties (in the form of credit facilities, loans, deposits, securities and other instruments), credit risk is a consequence of non-recovery of principal, interest and other items in the amount, within the deadlines and pursuant to the other terms and conditions set out in the credit agreements. Off-balance sheet risk arises when counterparties fail to fulfil their obligations in respect of third parties and the Group is required to assume these obligations itself by virtue of its contractual undertaking. Credit risk is the most significant risk to which the Group is exposed inthe execution of its banking activities and is defined as the risk of a counterparty being unable to repay the amounts it owes in full. The Group’s credit risk management policies are thus defined and structured based on objective, professional criteria while also being designed to allow maximum flexibility in final customer decisions. Management of credit risk in the Cooperative Bank is an integrated, streamlined process that is initiated as soon as a customer applies for a loan through the branch network and ends when the funds lent out have been repaid in full. In addition, there are different basic criteria for accepting any credit risk and minimum documentation required under regulations in force, all of which relate to the key issues of liquidity, security, profitability and collateral business. With a view to establishing more flexible and specialized procedures for examining and analysing customer credit applications, the Cooperative Bank has set up dedicated units for each segment or type of credit facility that, due to their specific characteristics, is or should be processed in a particular way. In this way, we are able to provide a highly professional but flexible service to customers while at the same time ensuring the precision in decision-making that allows us to build a credit portfolio of the highest quality. Credit risk management encompasses three key areas:

Money markets

Credit risk on money market positions is limited as wherever possible the Cooperative Bank uses the services of Banco Cooperativo Español, the bank providing centralized services to the cooperative credit institutions making up the Caja Rural Group. Index Annual Report 2015 Legal Documentation

Debt instruments

The breakdown of these instruments by rating, in order of the highest rating awarded by any of the rating agencies shown below, at 31 December 2015 and 2014 is as follows:

Credit rating 2015 2014 S&P´s Moody´s Fitch DBRS 1 3.56% 3.53% AAA to AA- Aaa to Aa3 AAA to AA- AAA to AAL 2 74.01% 86.10% A+ to A- A1 to A3 A+ to A- AH to AL 3 18.15% 9.03% BBB+ to BBB- Baa1 to Baa3 BBB+ to BBB- BBBH to BBBL 4 3.55% 0.60% BB+ to BB- Ba1 to Ba3 BB+ to BB- BBH to BBL 5 0.41% 0.56% B+ to B- B1 to B3 B+ to B- BH to BL 6 0.15% 0.18% Lower than B- Lower than B3 Lower than B- Lower than BL Unrated 0.17% 0.00% 100.00% 100.00%

Loans and advances

Caja Rural de Navarra’s risk management procedure is initiated as soon as a customer applies for a loan and ends when the funds lent have been repaid in full. When granting loans and credit facilities, the Cooperative Bank places great importance on case-by-case analyses that take account of the type of applicant (individual, company, agricultural sector, etc.), the type of facility (current loan, consumer credit, investment, trade discounting, etc.), the applicant’s repayment capacity, and the guarantees provided (personal, mortgage, collateral, etc.). Before the Cooperative Bank can perform this analysis, certain information must be collected, essentially from three sources: • Customers • External sources (RAI, the Bank of Spain Register of Defaults, other registers, etc.) • Internal records on existing Bank customers (average balances, payment history, etc.). Once approved and arranged, all loans and credit facilities are subject to ongoing monitoring, which may take either of the following forms: in the case of high-risk customers (either individually or as part of an economic group), the Cooperative Bank monitors financial position, any increases in system debt, payment history, etc.; for all other customers, all transactions that result in payment incidents are monitored. Index Annual Report 2015 Legal Documentation

In addition to monitoring individual customers and customer groups, the Group monitors its investment portfolio by product, by interest rate and by decision- making centre, with a view to identifying potential changes in portfolio returns and the manner in which credit facilities are being granted (amounts, rates, charges, etc.) such that decisions affecting the investment policy to be adopted at any given time can be taken as quickly as possible. The following table gives a breakdown of credit risk exposure at the close of 2015 and 2014:

Thousands of euro 2015 2014 Loans and advances to customers 6,370,430 6,131,845 Loans and advances to credit institutions 251,557 888,635 Debt securities 2,532,372 1,956,997 Derivatives 15,894 28,744 Contingent exposures 817,819 641,986

Total risk 9,988,072 9,648,207

Credit lines drawable by third parties 872,437 807,801

Total exposure 10,860,509 10,456,008

The distribution of credit risk by risk category is as follows:

Thousands of euro 2015 2014 No perceivable risk 3,315,657 3,195,715 Low risk 2,682,129 2,656,808 Low-medium risk 1,326,301 1,323,822 Medium risk 2,234,323 2,018,513 Medium-high risk 385,001 402,146 High risk 44,661 51,203

Total risk 9,988,072 9,648,207 Index Annual Report 2015 Legal Documentation

The breakdown of the amortized cost of credit risks benefiting from guarantees and credit enhancements in addition to the personal guarantee of the debtor at 31 December 2015 and 2014 is as follows:

2015 2014 Thousands of % of total Thousands of % of total euro risk euro risk Loans secured by mortgages on finished homes where the outstanding loan is less than 80% of the appraisal value 2,602,002 26.11% 2,521,806 26.22% Of which: Personal loans 2,528,411 25.37% 2,450,270 25.47% Transactions with other mortgage guarantees 1,182,376 11.86% 1,195,177 12.42% Of which: Personal loans 822,927 8.26% 875,740 9.10% Loans secured by other collateral (pledge of cash or securities) 35,796 0.36% 39,741 0.41% Loans secured by public entities, credit institutions or mutual guarantee schemes 88,659 0.89% 87,441 0.91% Loans secured by other individuals or entities 642,149 6.44% 620,430 6.45%

Information on the distribution of “Loans and advances to customers” by sector, region, NPL ratio, provisions and risk concentration is provided below. Sector 2015 2014 Farming and cattle-raising 2.93% 3. Industry and construction 20.62% 20.45% Services 17.99% 17.26% Personal and other 58.46% 58.90%

Region 2015 2014 Navarre 54.41% 56.60% Guipuzcoa 17.61% 17.26% La Rioja 9.18% 9.22% Alava 7.01% 6.74% Vizcaya 11.79% 10.18%

Impaired assets and impairment adjustments 2015 2014 Total impaired assets 226,123 281,840 Total loans and advances to customers. gross (before 6,626,878 6,400,536 valuation adjustments) NPL ratio 3.41% 4.40% Total valuation adjustments for impairment of financial assets 256,766 267,945 NPL coverage 113.55% 95.07% Coverage of total loans and advances to customers 3.87% 4.19% Index Annual Report 2015 Legal Documentation

Concentration risk

The EU Capital Requirements Regulation, as amended, sets restrictions on large exposures, defined as those with a value of at least 10% of eligible capital. No exposure to a single client or group can exceed 25% of eligible capital, except exposures which are subject to an excess capital charge if they exceed the large exposure limits. The Parent Company applies these limits via its risk policy, which sets counterparty exposure limits that comply with the regulatory requirements and establishes excess control procedures. At 31 December 2015, six groups exceeded 10% of capital and were therefore considered “large exposures”. Total exposure to these groups was EUR 694,555 thousand, equivalent to 76.01% of capital. At 31 December 2014, four groups exceeded 10% of capital and were therefore considered “large exposures”. Total exposure to these groups was EUR 394,277 thousand, equivalent to 46.99% of capital. The table below gives a breakdown of “Loans and advances to customers” by type of counterparty at 31 December 2015 and 2014, showing the amounts covered by each of the main types of guarantee and, for secured loans, the carrying amount of the loan as a percentage of latest appraised or measured value of the collateral (loan to value). Index Annual Report 2015 Legal Documentation

Secured loans: loan to value Total Of which: Between Between Between (carrying Of which: Other real Up to 40% and 60% and 80% and 31/12/2015 amount) mortgages collateral 40% 60% 80% 100% Above 100%

Government bodies 112,907 4,575 231 3,499 - 1,076 231 - Other financial institutions 4,519 980 137 473 458 173 - 12 Non-financial companies and self- employed 2,646,535 972,257 62,491 291,302 270,136 203,639 93,185 176,488 – Construction and real estate development (a) 295,175 282,715 1,421 56,355 49,247 65,386 21,612 91,537 – Civil engineering 120,891 41,574 3,220 13,261 18,217 6,956 3,885 2,476 – Other 2,230,469 647,968 57,850 221,686 202,672 131,297 67,688 82,475 Large corporates 284,423 20,564 13,986 12,152 3,904 7,144 4,111 7,240 SMEs and self-employed 1,946,046 627,404 43,864 209,534 198,768 124,153 63,577 75,235 Other home loans and NPISHs 3,705,666 3,426,826 24,134 594,695 881,264 1,161,943 590,036 223,022 – Housing 3,325,501 3,250,934 16,529 535,986 825,985 1,129,024 568,596 207,871 – Consumption 48,176 9,853 1,019 5,051 2,286 1,027 1,965 544 – Other 331,989 166,039 6,586 53,658 52,993 31,892 19,475 14,607 SUBTOTAL 6,469,627 4,404,638 86,993 889,969 1,151,858 1,366,831 683,452 399,522 Less: Corrections for impairment of assets not attributable to specific loans (99,197) TOTAL 6,370,430 MEMORANDUM ITEMS Refinancing, refinanced and restructured loans 97,712 87,197 - 29,567 20,169 16,822 6,306 14,333

Secured loans: loan to value Total Of which: Between Between Between (carrying Of which: Other real Up to 40% and 60% and 80% and 31/12/2014 amount) mortgages collateral 40% 60% 80% 100% Above 100%

Government bodies 108,379 6,745 242 4,755 837 1,153 242 - Other financial institutions 4,055 1,181 143 400 732 49 131 12 Non-financial companies and self- employed 2,474,093 993,493 43,082 406,021 252,484 198,624 89,459 89,987 – Construction and real estate development (a) 290,065 275,998 2,625 179,889 33,644 42,721 13,227 9,142 – Civil engineering 116,605 34,369 5,724 8,174 14,313 6,730 7,748 3,128 – Other 2,067,423 683,126 34,733 217,958 204,527 149,173 68,484 77,717 Large corporates 231,383 19,454 82 6,686 2,548 8,873 - 1,429 SMEs and self-employed 1,836,040 663,672 34,651 211,272 201,979 140,300 68,484 76,288 Other home loans and NPISHs 3,623,065 3,373,378 25,030 564,751 821,915 1,159,471 610,737 241,534 – Housing 3,287,748 3,209,940 17,319 506,206 769,271 1,126,971 596,032 228,779 – Consumption 42,756 9,099 686 4,311 3,043 729 1,048 654 – Other 292,561 154,339 7,025 54,234 49,601 31,771 13,657 12,101 SUBTOTAL 6,209,592 4,374,797 68,497 975,927 1,075,968 1,359,297 700,569 331,533 Less: Corrections for impairment of assets not attributable to specific loans (77,747) TOTAL 6,131,845 MEMORANDUM ITEMS Refinancing, refinanced and restructured loans 140,032 112,565 2,315 49,241 24,154 22,704 7,766 11,015

(a) Includes all activities related to construction and real-estate development, including land bank financing. Index Annual Report 2015 Legal Documentation

The table below gives the concentration of risk by geographical location, broken down by type of counterparty and showing the carrying amount of each exposure at 31 December 2015 and 2014:

Total (carrying amount) 31/12/2015 (a) Spain Rest of EU Americas Rest of World

Credit institutions 934,178 899,818 11,552 998 21,810 Government bodies 2,149,766 2,108,694 41,072 - - – Central government 1,767,055 1,725,983 41,072 - - – Other 382,711 382,711 - - - Other financial institutions 384,132 366,874 16,723 - 535 Non-financial companies and self-employed 3,050,452 3,017,529 25,678 6,271 974 – Construction and real estate development 378,160 378,160 - - - – Civil engineering 194,120 194,120 - - - – Other 2,478,172 2,445,249 25,678 6,271 974 Large corporates 372,378 368,663 3,715 - - SMEs and self-employed 2,105,794 2,076,586 21,963 6,271 974 Other home loans and NPISHs 3,750,085 3,744,832 2,536 551 2,167 – Housing 3,325,499 3,322,012 2,402 403 683 – Consumption 48,179 48,173 5 - 1 – Other 376,407 374,647 129 148 1,483 SUBTOTAL 10,268,613 10,137,747 97,561 7,820 25,486 Less: Corrections for impairment of assets not attributable to specific loans (100,379) TOTAL 10,168,234

REGIONAL GOVERNMENTS Total (carrying 31/12/2015 amount) Basque Spain (a) Navarre Madrid country La Rioja Other

Credit institutions 899,818 1,001 448,649 92,974 - 357,194 Government bodies 2,108,694 114,717 57,354 49,012 23,677 1,863,934 – Central government 1,725,983 - - - - 1,725,983 – Other 382,711 114,717 57,354 49,012 23,677 137,951 Other financial institutions 366,874 822 271,540 94,469 35 8 Non-financial companies and self- employed 3,017,529 1,248,734 461,723 899,771 241,518 165,783 – Construction and real estate development 378,160 249,325 17,214 92,001 19,620 - – Civil engineering 194,120 92,049 34,235 56,205 9,783 1,848 – Other 2,445,249 907,360 410,274 751,565 212,115 163,935 Large corporates 368,663 66,196 108,475 134,051 19,381 40,560 SMEs and self-employed 2,076,586 841,164 301,799 617,514 192,734 123,375 Other home loans and NPISHs 3,744,832 2,027,266 15,116 1,382,124 278,509 41,817 – Housing 3,322,012 1,757,368 9,916 1,279,902 236,865 37,961 – Consumption 48,173 30,500 129 13,395 3,588 561 – Other 374,647 239,398 5,071 88,827 38,056 3,295 TOTAL 10,137,747 3,392,540 1,254,382 2,518,350 543,739 2,428,736 Index Annual Report 2015 Legal Documentation

Total (carrying amount) 31/12/2014 (a) Spain Rest of EU Americas Rest of World

Credit institutions 1,446,643 1,440,294 6,349 - - Government bodies 1,656,146 1,656,146 - - - – Central government 1,331,814 1,331,814 - - - – Other 324,332 324,332 - - - Other financial institutions 185,148 166,333 18,269 - 546 Non-financial companies and self-employed 2,704,758 2,677,616 23,506 2,890 746 – Construction and real estate development 321,909 321,909 - - - – Civil engineering 124,326 124,326 - - - – Other 2,258,523 2,231,381 23,506 2,890 746 Large corporates 265,315 265,135 180 - - SMEs and self-employed 1,993,208 1,966,246 23,326 2,890 746 Other home loans and NPISHs 3,884,864 3,878,090 1,452 892 4,430 – Housing 3,505,463 3,501,962 1,350 881 1,270 – Consumption 45,587 45,581 5 1 - – Other 333,814 330,547 97 10 3,160 SUBTOTAL 9,877,559 9,818,479 49,576 3,782 5,722 Less: Corrections for impairment of assets not attributable to specific loans (78,329) TOTAL 9,799,230

REGIONAL GOVERNMENTS Total (carrying 31/12/2014 amount) Basque Spain (a) Navarre Madrid country La Rioja Other

Credit institutions 1,440,294 1,000 1,076,504 72,532 - 290,258 Government bodies 1,656,146 124,741 49,604 48,869 18,316 1,414,616 – Central government 1,331,814 - - - - 1,331,814 – Other 324,332 124,741 49,604 48,869 18,316 82,802 Other financial institutions 166,333 753 163,558 1,980 42 - Non-financial companies and self- employed 2,677,616 1,345,842 74,702 834,204 246,929 175,939 – Construction and real estate development 321,909 198,338 6,546 91,290 25,735 - – Civil engineering 124,326 83,814 739 33,578 6,103 92 – Other 2,231,381 1,063,690 67,417 709,336 215,091 175,847 Large corporates 265,135 81,158 24,510 112,190 20,690 26,587 SMEs and self-employed 1,966,246 982,532 42,907 597,146 194,401 149,260 Other home loans and NPISHs 3,878,090 2,129,146 14,198 1,396,637 292,447 45,662 – Housing 3,501,962 1,891,217 9,338 1,304,414 255,028 41,965 – Consumption 45,581 30,230 49 11,199 3,420 683 – Other 330,547 207,699 4,811 81,024 33,999 3,014 TOTAL 9,818,479 3,601,482 1,378,566 2,354,222 557,734 1,926,475

(a) The definition of risk includes the following balance sheet items: loans and advances to credit institutions, loans and advances to customers, debt securities, equity instruments, trading derivatives, hedging derivatives, equity investments and contingent exposures. The geographical breakdown of risk is based on the country or autonomous region of residence of the borrowers, securities issued or counterparties for the derivatives or contingent exposure. Index Annual Report 2015 Legal Documentation

Refinancing

The aim of any refinancing process is to reach an agreement satisfactory to both parties, which allows the customer to cancel its debts with the Group, meet all its other commitments and, where applicable, remain in business. To achieve this may require more than a financial restructuring. It may involve a restructuring of business operations and strategy to ensure the firm’s viability. The basic principles that will be followed when agreeing such transactions are as follows: • Viability of the loan is fundamental. If there is no prospect of viability for the loan and/or customer then there can be no refinancing. If there is no viability the Cooperative Bank must realize its collateral (foreclosure) or negotiate the taking of assets in lieu of payment to avoid a rise in costs. • Collateral improvement. No refinancing should lead to a reduction in collateral. All arrangements should tend to increase the collateral already held by the Group. • Try to reduce the size of the loan. As a rule, the Group’s risk to its customer, should not increase unless the increase in collateral reduces the risk to below its previous level. • Allow for possible problems in the event of insolvency. When dealing with companies, it is essential to be aware of the law on accepting guarantees and the circumstances in which they may be cancelled. • Improve the Group’s position. The aim of these transactions must always be to improve the Group’s position relative to the debtor and other creditors. • Medium/long-term vision. It is essential to seek comprehensive solutions for customers in the medium/long term. • Approval by central services. These transactions must all be approved by central services. The Group may consider a transaction is viable, i.e. the customer should be able to pay, if the following requirements are met:

- Individuals • For transactions with monthly repayments, these must be no more than 50% of recurrent monthly income. • A transaction based on the sale of assets can be considered viable provided there has been no prior refinancing based on the same grounds. • Inclusion of guarantors that could on their own either settle the debt or contribute to its repayment. Index Annual Report 2015 Legal Documentation

- Legal entities • A credible viability/repayment plan must be submitted. This will be individually analysed and assessed by the Group. A plan based on the sale of assets can be considered viable provided there has been no prior refinancing based on the same grounds. • Inclusion of guarantors that could on their own either settle the debt or contribute to its repayment. The Group carries out regular monitoring of those transactions classified as normal as well as those classified as doubtful or substandard risks. Transactions classified as doubtful or substandard risks may be reclassified into another category if the Group’s analysis shows that the borrowers ability to pay has improved and it has been meeting its contractual obligations over a sufficiently long period. In general, transactions can be reclassified as normal when they meet the following requirements: • The borrower has met all commitments for at least one year since the refinancing or restructuring was signed (six months for loans with monthly repayments and a mortgage on the borrower’s principal home). • When the principal in the transaction has been paid down by at least 10% from its level at the time of refinancing/restructuring. In accordance with the changes brought in by Circular 6/2012 of 28 September, which defined criteria for classifying transactions as refinancing, refinanced or restructured loans, and with the Group’s own policies and the Bank of Spain’s published recommendations, the table below gives a breakdown, at 31 December 2015 and 2014, of the refinancing, refinanced and restructured loans made by the Cooperative Bank: Index Annual Report 2015 Legal Documentation

STANDARD SUBSTANDARD DOUBTFUL

Full real-estate Other real No real Full real-estate Other real No real Full real-estate Other real No real TOTAL mortgage collateral collateral mortgage collateral collateral mortgage collateral collateral

Specific Specific Specific provisions provisions

31/12/2015 No. transactions Gross value No. transactions Gross value No. transactions Gross value No. transactions Gross value No. transactions Gross value No. transactions Gross value No. transactions Gross value No. transactions Gross value No. transactions Gross value No. transactions Gross value Specific provisions 1. Government bodies ------2. Other legal entities and self- employed 92 28,876 10 5,634 31 4,707 5 5,785 5 2,792 8 518 1,600 60 23,151 22 9,051 20 11,677 30,150 253 92,191 31,750 Of which: Loans for construction and real estate development 26 15,983 5 3,489 1 871 2 5,413 1 457 - - 1,116 29 15,124 10 5,677 3 4,805 18,087 77 51,819 19,203 3. Other individuals 224 24,000 33 6,527 83 1,665 4 539 - - 1 13 83 28 2,677 21 5,452 22 839 4,358 416 41,712 4,441 4. Total 316 52,876 43 12,161 114 6,372 9 6,324 5 2,792 9 531 1,683 88 25,828 43 14,503 42 12,516 34,508 669 133,903 36,191

STANDARD SUBSTANDARD DOUBTFUL

Full real- Full real-

Full real-estate Other real No real estate Other real No real estate Other real No real TOTAL mortgage collateral collateral mortgage collateral collateral mortgage collateral collateral

Specific provisions Specific provisions Specific 31/12/2014 No. transactions Gross value No. transactions Gross value No. transactions Gross value No. transactions Gross value No. transactions Gross value No. transactions Gross value No. transactions Gross value No. transactions Gross value No. transactions Gross value No. transactions Gross value Specific provisions 1. Government bodies ------2. Other legal entities and self-employed 108 49,715 15 9,383 31 18,860 12 14,024 4 3,737 5 836 6,204 60 25,793 27 16,189 19 12,906 40,028 281 151,443 46,232 Of which: Loans for construction and real estate development 39 32,931 7 5,843 1 872 10 13,194 1 2,557 - - 5,773 36 17,348 14 14,048 3 6,032 29,768 111 92,825 35,541 3. Other individuals 192 22,359 21 4,829 45 1,614 4 551 1 63 1 15 91 24 7,199 15 1,912 19 863 4,493 322 39,405 4,584 4. Total 300 72,074 36 14,212 76 20,474 16 14,575 5 3,800 6 851 6,295 84 32,992 42 18,101 38 13,769 44,521 603 190,848 50,816

Policies, methods and procedures regarding responsible consumer lending and transparency and protection of banking services customers

Caja Rural de Navarra has established risk policies compliant with Act 2/2011, of 4 March, on the sustainable economy, with Ministerial Order EHA/2899/2011, of 28 October, on transparency in banking services and with Bank of Spain Circular 5/2012, of 27 June, on transparency of banking services and responsible lending. These policies are contained in the “Lending Policy Handbook” approved when first published by the Governing Board and whose latest version was approved by the Governing Board at their meeting on 28 November 2014. The Handbook includes the following policies: - Rigorous analysis of the customer’s ability to repay, i.e. an appropriate ratio of income to obligations. - Documentary verification of the information provided by the customer and of his/her solvency. - Appropriate independent appraisal of real collateral. Index Annual Report 2015 Legal Documentation

Caja Rural de Navarra has also taken the following measures to ensure transparency and protection of banking services customers: - Posting its current charges in branches and websites (including interest rates, fees and expenses) for the different financial products. - Each year, customers are sent a personal letter detailing the interest, fees and expenses charged in the previous year for the products they had contracted.

b) Market risk

The Group is exposed to market risk due to its banking activities. However, given that the Cooperative Bank engages in only a limited level of market trading activity, the main controls it applies for market risk take the form of various limits on market activity including limits on fixed income and equity exposures, monthly stop-losses and a global annual stop-loss. The Cooperative Bank also applies concentration limits on exposures to securities and economic sectors, as well as on positions in foreign currency. In addition, to measure the risks assumed on certain portfolios, the Cooperative Bank also performs VaR (Value at Risk) analyses and analyses of portfolio sensitivity to interest rate fluctuations. b.1.) Interest rate risk Interest rate risk is managed by the Assets and Liabilities Committee (ALC), which meets regularly to systematically analyse exposure to this risk and to plan and manage the balance sheet. The ALC sets guideline risk policies to be applied on an ongoing basis, so that the Group can maximize its finance income and optimize its balance sheet financing. Interest rate risk in the whole balance sheet is measured by calculating interest gaps and performing duration analyses and simulations. For these purposes, the Cooperative Bank has the support and assistance of the Asset and Liabilities Department of Banco Cooperativo Español, which draws up regular reports on interest rate risk. The Cooperative Bank’s statement of financial position has a high level of immunity to interest rate fluctuations. At 31 December 2015, it was estimated that a 200 basis point decline in interest rates would increase net interest income by 1.51% (at 31 December 2014 the impact of such a movement was estimated to be a 1.14% increase in net interest income). The table below details the Group’s exposure to interest rate risk, grouping the carrying amount of financial assets by the interest rate review date or by the maturity date in the case of fixed-rate transactions. The table uses contractual Index Annual Report 2015 Legal Documentation

interest rate review dates in the case of floating-rate transactions. For fixed- rate transactions, it uses contractual maturity dates. In the case of traditional banking liabilities, such as current or savings accounts, these have been classified according to the balance and the remuneration of each account: balances of up to EUR 90,000 at interest rates of less than or equal to 0.5% are classified in the “Between 2 and 3 years” tranche; balances of up to EUR 90,000 with interest rates of over 0.5% are classified in other tranches up to 1 year, in line with the said interest rate; and lastly, balances of over EUR 90,000 are considered more sensitive and are classified in the shortest tranches based on the Cooperative Bank’s experience, with more than 50% in the “Less than 1 month” tranche.

Thousands of euro Less than 1 to 3 3 months 1 to 2 2 to 3 3 to 4 4 to 5 More than 2015 1 month months to 1 year years years years years 5 years Total Assets

Loans and advances to credit institutions 223,408 - 6,149 22,000 - - - - 251,557 Loans and advances to customers 743,998 1,328,953 3,054,429 338,432 119,076 75,388 360,654 349,500 6,370,430 Debt securities 44,508 153,134 213,994 215,458 1,096,784 132,100 19,133 657,261 2,532,372 Total 1,011,914 1,482,087 3,274,572 575,890 1,215,860 207,488 379,787 1,006,761 9,154,359

Liabilities

Deposits from credit institutions 316,555 28,342 94,252 2,714 658,932 1,132 5,901 1,411 1,109,239 Customer deposits 1,057,374 744,058 2,426,676 215,865 75,107 10,369 1,950,965 - 6,480,414 Debt securities 20,977 - 15,360 - 500,000 - - 550,000 1,086,337 Total 1,394,906 772,400 2,536,288 218,579 1,234,039 11,501 1,956,866 551,411 8,675,990

Gap (382,992) 709,687 738,284 357,311 (18,179) 195,987 (1,577,079) 455,350 478,369 Cumulative gap (382,992) 326,695 1,064,979 1,422,290 1,404,111 1,600,098 23,019 478,369 478,369

Thousands of euro Less than 1 to 3 3 months 1 to 2 2 to 3 3 to 4 4 to 5 More than 2014 1 month months to 1 year years years years years 5 years Total Assets

Loans and advances to credit institutions 801,782 - 80,000 - - - - 6,853 888,635 Loans and advances to customers 867,857 1,505,512 3,427,733 225,068 32,465 23,096 7,824 42,290 6,131,845 Debt securities 206,296 122,084 622,754 78,822 95,878 672,505 80,253 78,405 1,956,997 Total 1,875,935 1,627,596 4,130,487 303,890 128,343 695,601 88,077 127,548 8,977,477

Liabilities

Deposits from credit institutions 1,315,749 56,620 136,800 4,442 2,542 206,257 924 14,205 1,737,539 Customer deposits 937,566 823,096 2,459,705 292,602 57,172 7,558 1,556,060 - 6,133,759 Debt securities 56,344 12,583 26,371 - - 500,000 - 50,000 645,298 Total 2,309,659 892,299 2,622,876 297,044 59,714 713,815 1,556,984 64,205 8,516,596

Gap (433,724) 735,297 1,507,611 6,846 68,629 (18,214) (1,468,907) 63,343 460,881 Cumulative gap (433,724) 301,573 1,809,184 1,816,030 1,884,659 1,866,445 397,538 460,881 460,881

b.2.) Price risk This is defined as the risk arising as a result of changes in market prices caused either by factors specific to the instrument or by factors affecting all instruments traded on the market. The Group uses the VaR method to manage its portfolios of “Other equity instruments”, using data series of one year, calculated with a 99% confidence level, and a time horizon of one day. Using these assumptions, the “Other Index Annual Report 2015 Legal Documentation

equity securities” portfolio would have a one-day VaR of EUR 499 thousand at 31 December 2015 (EUR 499 thousand at 31 December 2014). Since most of the portfolio of listed equities is classified as available-for-sale, the greatest impact would be on equity. b.3.) Exchange rate risk The Group had no significant exposure to exchange rate risk on the date of these consolidated annual financial statements.

c) Liquidity risk

This risk reflects the potential difficulties the Group could experience in raising or accessing liquid assets in sufficient quantity and value to cover its payment obligations at any given time. At Caja Rural de Navarra, as a credit institution focused on retail banking, this risk derives mainly from the existence of a very significant volume of liabilities (customer deposits) payable on demand, but for which the timing of repayment is not certain. However, past experience demonstrates that the behaviour of this category of liabilities tends to be very stable over time. Caja Rural de Navarra monitors the performance of those lines of the statement of financial position that affect its liquidity on an ongoing basis, keeping within certain limits and using dedicated tools to predict potential fluctuations that may require action to sustain short-, medium- and long-term liquidity. These controls are carried out by the ALC. A breakdown of financial securities by residual term to maturity at 31 December 2015 and 2014 is given below. The maturity dates used are those in the contractual terms and conditions. The same criteria as in the section on interest rate risk were applied to group customer demand deposits, current accounts and savings by tranche. Index Annual Report 2015 Legal Documentation

Thousands of euro Less than 1 1 to 3 3 months 1 to 5 More than 2015 Demand month months to 1 year years 5 years Total Assets

Loans and advances to credit institutions 95,344 128,064 - 6,149 22,000 - 251,557 Loans and advances to customers - 244,674 225,071 592,307 1,931,286 3,377,092 6,370,430 Debt securities - 22,601 64,090 216,202 1,496,041 733,438 2,532,372 Total 95,344 395,339 289,161 814,658 3,449,327 4,110,530 9,154,359

Liabilities

Deposits from credit institutions - 229,353 9,454 54,857 801,031 14,544 1,109,239 Customer deposits - 988,392 689,211 2,413,901 2,332,350 56,560 6,480,414 Debt securities - 20,977 - 15,360 500,000 550,000 1,086,337 Total - 1,238,722 698,665 2,484,118 3,633,381 621,104 8,675,990

(1,669,460 Gap 95,344 (843,383) (409,504) ) (184,054) 3,489,426 478,369 Cumulative gap 95,344 (748,039) (1,157,543) (2,827,003) (3,011,057) 478,369 478,369

Thousands of euro Less than 1 1 to 3 3 months 1 to 5 More than 2014 Demand month months to 1 year years 5 years Total Assets

Loans and advances to credit institutions 73,527 716,343 - 80,000 11,912 6,853 888,635 Loans and advances to customers - 299,774 223,599 561,044 1,692,280 3,355,148 6,131,845 Debt securities - 25,500 71,025 609,361 951,816 299,295 1,956,997 Total 73,527 1,041,617 294,624 1,250,405 2,656,008 3,661,296 8,977,477

Liabilities

Deposits from credit institutions - 605,893 614,635 83,534 389,122 44,355 1,737,539 Customer deposits - 844,249 769,605 2,434,423 1,992,796 92,686 6,133,759 Debt securities - 56,344 12,583 26,371 500,000 50,000 645,298 Total - 1,506,486 1,396,823 2,544,328 2,881,918 187,041 8,516,596

Gap 73,527 (464,869) (1,102,199) (1,293,923) (225,910) 3,474,255 460,881 Cumulative gap 73,527 (391,342) (1,493,541) (2,787,464) (3,013,374) 460,881 460,881

As the table shows, the Group has a short-term liquidity gap, as is normal in retail banking, although as mentioned above historical data reveal a high degree of stability in its deposits. Despite the foregoing, given the current market situation, the Group has enhanced the system of alerts and procedures that enable it to identify unusual movements in deposits.

d) Fair value of financial instruments

This risk corresponds to changes occurring in the fair value of financial instruments, as defined in Notes 2.e.I and 2.e.II. As described in Note 2.e., except for financial instruments classified as “Loans and advances” or “Held-to-maturity investments” and equity instruments whose fair value cannot be reliably measured or derivative securities with such equity Index Annual Report 2015 Legal Documentation

instruments as their underlying, the Group’s financial assets are recognized in the consolidated statement of financial position at their fair value. Likewise, except for financial liabilities designated as “Financial liabilities at amortized cost”, all the Group’s financial liabilities are recognized in the consolidated statement of financial position at their fair value. In addition, certain items recognized in “Loans and advances” and “Financial liabilities at amortized cost” could be related to fair value hedges (Note 2.e.IV), their value having been adjusted by an amount equivalent to the changes in fair value resulting from the hedged risk, mainly interest rate risk. The table below shows the fair values, at the close of 2015 and 2014, of the financial assets and liabilities indicated below grouped according tothe different measurement methods used by the Group to determine fair value:

Thousands of euro 2015 Total Fair Fair value hierarchy Balance value Level 1 Level 2 Level 3

Cash and balances with central banks 39,330 39,330 - - 39,330 Financial instruments held for trading 17,276 17,276 1,382 15,894 - Other assets at fair value through profit or loss - - - - - Available-for-sale financial assets 2,565,575 2,552,568 2,442,197 7,130 103,241 Loans and advances 6,630,099 7,366,455 - 7,366,455 - Held-to-maturity investments 94,385 91,448 - 91,448 - Hedging derivatives - - - - -

Total financial assets 9,346,665 10,067,077 2,443,579 7,480,927 142,571

Financial instruments held for trading 601 601 - 601 - Financial liabilities at amortized cost 8,764,695 8,757,642 - 8,610,534 147,108 Hedging derivatives 31 31 - 31 -

Total financial liabilities 8,765,327 8,758,274 - 8,611,166 147,108

2014 Total Fair Fair value hierarchy Balance value Level 1 Level 2 Level 3

Cash and balances with central banks 36,224 36,224 - - 36,224 Financial instruments held for trading 29,095 29,095 367 28,728 - Other assets at fair value through profit or loss - - - - - Available-for-sale financial assets 2,006,278 1,993,681 1,912,688 9,840 71,153 Loans and advances 7,031,492 8,169,684 - 8,136,807 32,877 Held-to-maturity investments 44,940 43,852 - 43,852 - Hedging derivatives 16 16 - 16 -

Total financial assets 9,148,045 10,272,552 1,913,055 8,219,243 140,254

Financial instruments held for trading 3,178 3,178 - 3,178 - Financial liabilities at amortized cost 8,620,057 8,803,844 - 8,644,869 158,975 Hedging derivatives 170 170 - 170 -

Total financial liabilities 8,623,405 8,807,192 - 8,648,217 158,975 Index Annual Report 2015 Legal Documentation

The following criteria were used to determine fair values: • Level 1: the prices quoted in active markets for these financial instruments. • Level 2: the prices quoted in active markets for similar instruments or other valuation techniques in which all significant inputs are based on directly or indirectly observable market data. • Level 3: valuation techniques in which some of the significant inputs are not based on observable market data. The particular valuation techniques used and the assumptions made for determining fair values are as follows: • Cash and balances with central banks: The fair value of these assets is considered equal to their carrying amount since they are either redeemable on demand or payable in the near term. • Debt securities: For government bonds and certain fixed-income securities issued by credit institutions, the price quoted on active markets is used (Level 1). For some fixed-income securities, measurement methods based on discounting cash flows have been applied, using the yield curves and market spreads of similar instruments (Level 2). For all other debt securities, prices calculated by accredited external appraisers are used (Level 3). • Equity instruments: The price quoted on active markets has been used (Level 1). For some venture capital funds and investments in foreign financial institutions fair value has been calculated using valuation techniques in which all the significant inputs are based on market data (Level 2). All other instruments not included in Level 1 and Level 2 have been valued at their acquisition cost net of any impairment identified (Level 3). In addition, at 31 December 2015 and 2014 the Group held unlisted equity instruments classified as available for sale which were recognized at historical cost, for amounts of EUR 13,333 thousand and EUR 13,810 thousand, respectively, and are therefore excluded from the above table (Note 9). • Loans and advances to customers: Fair value has been estimated by discounting future cash flows based on the yield curve at the close of each year, using a discount factor corresponding to the residual term between the date of analysis and the date of revision or redemption. Likewise, the level of credit risk provisions for the credit risk portfolio has been quantified in accordance with the accounting standard applicable and is considered sufficient to cover the credit risk in question. However, in an economic and financial crisis of the kind we are currently experiencing, and given that there is no market for these financial assets, the amount at which such assets might be exchanged between interested parties could be lower than the net asset value recognized since the potential buyer may wish to discount not only Index Annual Report 2015 Legal Documentation

losses incurred and already recognized in accordance with applicable accounting standards but also the losses that it is estimated might occur in future in the event of a prolongation of the current unusually lengthy and severe economic downturn. • Financial liabilities at amortized cost: Fair value has been estimated by discounting future cash flows based on the yield curve at the close of each year, using a discount factor corresponding to the residual term between the date of analysis and the date of revision or maturity. In the case of demand deposits, there are assumed to be no significant differences between fair value and carrying amount since the vast majority of such accounts are benchmarked to a floating interest rate and/or, if not benchmarked, have a term to maturity of less than one year. Differences between the fair value and carrying amount of financial instruments may exist for the following reasons: • In the case of fixed-income instruments, fair value changes according to movements in market interest rates. The longer the instrument’s residual term to maturity, the greater the change in fair value. • In the case of instruments bearing interest at a floating rate, fair value may differ from carrying amount if the spread on the benchmark interest rate has changed since the instrument was issued. Assuming spreads remain stable, fair value is equal to carrying amount only on repricing dates. On all other dates, flows that are already certain are subject to interest rate risk.

e) Transparency of information on loans for construction and real estate development, home loans, assets received in settlement of debts and finance requirements and strategies

In accordance with the Bank of Spain’s transparency guidelines on loans for construction and real estate development, home loans and assets received in settlement of debt and assessment of market financing needs and with Bank of Spain Circular 5/2011, of 30 November, the Group reports as follows: Index Annual Report 2015 Legal Documentation

Information on loans for construction and real estate development

The value of loans for construction and real estate development and associated coverage at 31 December 2015 and 2014 was as follows:

2015 Excess over Valuation adjustments for value of impairment of financial Gross value collateral assets. Specific provisions Loans for construction and real estate development (Spanish business) 333,419 240,545 42,382 Of which doubtful 54,525 21,047 39,924 Of which substandard: 12,813 2,859 2,458 Memorandum items: Defaulted assets 59,536 Carrying Memorandum items: amount - Total loans and advances to customers, excluding public sector (Spanish businesses) 6,257,523 - Total assets (all businesses) 9,860,147 - Total generic provisions (all businesses) 102,738

2014 Excess over Valuation adjustments for value of impairment of financial Gross value collateral assets Specific provisions Loans for construction and real estate development (Spanish business) 359,089 54,087 71,000 Of which doubtful 81,863 23,971 63,633 Of which substandard: 24,079 4,128 7,367 Memorandum items: Defaulted assets 47,670 Carrying Memorandum items: amount - Total loans and advances to customers, excluding public sector (Spanish businesses) 6,023,466 - Total assets (all businesses) 9,652,545 - Total generic provisions (all businesses) 80,342

Index Annual Report 2015 Legal Documentation

The table below shows disclosures of finance for construction, real estate development and home loans at 31 December 2015 and 2014:

Loans for construction and real estate development. Gross value 2015 2014

Unsecured 18,121 19,711 Secured by mortgages 315,298 339,378 Finished buildings 148,974 168,561 Homes 131,241 151,740 Other 17,733 16,821 Buildings under construction 107,930 94,965 Homes 107,930 94,965 Other - - Land 58,394 75,852 Developed land 58,169 75,622 Other land 225 230 Total 333,419 359,089

Information on home loans

The breakdown of home loans at 31 December 2015 and 2014, is as follows:

2015 2014 Of which Of which Gross value doubtful Gross value doubtful

Home loans 3,174,193 31,424 3,139,395 37,524 Unsecured 46,519 156 43,623 609 Secured by mortgages 3,127,674 31,268 3,095,772 36,915 Index Annual Report 2015 Legal Documentation

At 31 December 2015 and 2014 the breakdown of home loans secured by mortgages according to the percentage loan to latest available value is as follows:

Loan to value 2015 Between Between Between 40% and 60% and 80% and Above 100 Up to 40% 60% 80% 100% % Total

Gross value 477,260 779,747 1,091,423 554,928 224,316 3,127,674 Of which doubtful 2,124 2,628 6,767 6,027 13,722 31,268

Loan to value 2014 Between Between Between 40% and 60% and 80% and Above 100 Up to 40% 60% 80% 100% % Total

Gross value 456,551 730,610 1,086,501 581,643 240,467 3,095,772 Of which doubtful 3,163 2,284 5,390 8,114 17,964 36,915

Index Annual Report 2015 Legal Documentation

Information on assets acquired in settlement of debt

The detail of assets acquired in settlement of debt at 31 December 2015 and 2014 is as follows:

Thousands of euro

2015 2014 Of which: Of which: Valuation Valuation adjustments adjustments for for impairment impairment Carrying of financial Carrying of financial amount assets amount assets 1. Real estate assets acquired under loans granted to construction and real estate development companies 61,460 9,155 61,858 8,147 1.1. Finished buildings 24,768 2,557 23,944 1,391 1.1.1. Homes 19,373 1,629 17,324 1,047 1.1.2. Other 5,395 928 6,620 344 1.2. Buildings under construction 6,986 605 9,092 767 1.2.1. Homes 6,986 605 9,092 767 1.2.2. Other - - - - 1.3. Land 29,706 5,993 28,822 5,989 1.3.1. Developed land 13,897 3,443 16,034 4,082 1.3.2. Other land 15,809 2,550 12,788 1,907 2. Real estate assets originating from loans to individuals to fund home purchases 15,762 1,515 14,336 792 3. Other real estate assets received in settlement of debt 18,852 1,642 12,457 1,078 4. Equity instruments, shareholdings and loans to non- consolidated companies holding such assets - - - - Total 96,074 12,312 88,651 10,017

Policies for managing problematic assets

As part of its general risk management policy, Caja Rural de Navarra has specific processes for dealing with assets from the construction and real estate development sector, which has been particularly hard hit by the current crisis. These processes aim to sustain, wherever possible and without impairing the recovery of contracted risks, the business continuity and viability of companies and other customers, mitigating the risks to which the Group is exposed. This means seeking alternatives that allow projects to be completed and sold, analysing where risks can be renegotiated if the customer’s credit position improves, with a view to keeping the debtor in business. The process considers the Cooperative Bank’s track record with the debtor, their manifest ability to pay and potential improvements to the customer’s expected loss, looking to increase loan collateral without increasing risk exposure to the customer. Index Annual Report 2015 Legal Documentation

The Group also supports developers once developments have been completed, working in partnership to manage and speed up sales. If the above approach fails or is insufficient, other alternatives are analysed, such as taking assets in lieu of payment or buying assets and, as a last resort, legal proceedings to foreclose the buildings. All assets taken onto the Group’s balance sheet are managed with a view to their disposal or lease. For this purpose, the Group has operating companies that specialize in the sale or leasing of real estate assets. The Group has the resources to develop these strategies and coordinate the work of the subsidiaries and branch network. In accordance with Act 8/2012, at 31 December 2015 and 2014 the Group held, among other assets, all the real estate assets acquired as a result of its financing of construction and real estate development operations in Promoción Estable del Norte, S.A.. The breakdown and percentage interest in each asset are given in Note 1.e). The cumulative volume of assets transferred to Promoción Estable del Norte, S.A. at 31 December 2015 and 2014 was EUR 59,872 thousand and EUR 69,679 thousand and the net carrying amount of the company at these two dates was EUR 36,436 thousand and EUR 45,457 thousand, respectively. At 31 December 2015 the balance of capital or member contributions transferred by the Parent Company to the Promoción Estable del Norte, S.A. was EUR 139,474 thousand (EUR 139,474 thousand at 31 December 2014), against a revaluation for impairment of EUR 68,317 thousand (EUR 65,967 thousand at 31 December 2014).

Assessment of market financing needs

Caja Rural de Navarra has historically adhered to a liquidity management policy under which wholesale financing that involves future repayment commitments is not included in the calculation of its net liquidity. This means that the Group’s liquidity assumptions do not include the issue of securities on wholesale markets that entail future repayment commitments as sources of funding that can be used to grow loans and advances. Notwithstanding the foregoing, the Group has concluded a number of issues on the market for the following purposes: - To increase available liquidity; - To gain experience of different forms of financing in different markets and instruments; Index Annual Report 2015 Legal Documentation

- To generate collateral discountable at the European Central Bank and/or useable as security for repurchase transactions with clearing houses. Overall, the Group foresees no need for wholesale financing given its repayment schedule and the current level of available liquidity. In addition, Caja Rural de Navarra has various contingency plans for obtaining liquidity. These include a sizeable stock of assets discountable at the European Central Bank and the availability of unused credit lines under the Caja Rural Group’s treasury agreement with Banco Cooperativo Español. In the medium to long term the Group will maintain the same policy of not using market financing to grow its lending business, while at the same time maintaining the aforementioned contingency plans. Index Annual Report 2015 Legal Documentation

7. Cash and balances with central banks

The detail of this line of the statement of financial position at 31 December 2015 and 2014 is as follows:

Thousands of Euros 2015 2014 Cash 39,330 36,224 Bank of Spain - - Valuation adjustments - - 39,330 36,224

The Cooperative Bank complies with the minimum reserve requirement pursuant to the provisions of Article 10 of Regulation (EC) 1745/2003 of the European Central Bank, of 12 September 2003, regulating the maintenance of minimum reserves held indirectly through an intermediary (Note 10). For purposes of preparation of the consolidated cash flow statement, the Group treated the balance of this line of the consolidated statement of financial position as “cash and cash equivalents”. Index Annual Report 2015 Legal Documentation

8. Financial instruments held for trading

The breakdown of this line of the statement of financial position at 31 December 2015 and 2014 by type of counterparty and type of instrument is as follows:

Thousands of euro Assets Liabilities 2015 2014 2015 2014 By counterparty Credit institutions 16,039 28,728 - 705 Other resident sectors 1,237 236 601 2,473 Other non-resident sectors - 131 - - Total 17,276 29,095 601 3,178 By type of instrument Debt securities - - - - Deposits from credit institutions - - - - Equity instruments 1,382 367 - - Trading derivatives 15,894 28,728 601 3,178 Total 17,276 29,095 601 3,178

The fair value of items included in “Financial instruments held for trading” was calculated using valuation techniques based on market data.

Financial instruments held for trading. Equity instruments

The breakdown of this line of the consolidated statement of financial position at 31 December 2015 and 2014 is as follows:

Thousands of euro 2015 2014 Shares in credit institutions 145 - Shares in Spanish companies 1,237 236 Shares in foreign companies - 131 Total 1,382 367

All securities classified as “Equity instruments” at 31 December 2015 and 2014 were shares listed for trading on official markets. Index Annual Report 2015 Legal Documentation

Financial instruments held for trading. Trading derivatives

At 31 December 2015 and 2014 this item mainly consisted of financial swaps related to securitization transactions carried out by the Group, and transactions contracted to hedge the market risk associated with customer structured deposits incorporating an embedded derivative. Details of the notional and fair values of the financial derivatives recognized as “Trading derivatives”, classified by type of market, counterparty, residual term to maturity and type of risk, are as follows:

Thousands of euro Notional value Fair value Fair value Memorandum accounts Assets Liabilities 2015 2014 2015 2014 2015 2014 By type of market Bilateral (OTC) markets 647,384 736,370 15,894 28,728 601 3,178 TOTAL 647,384 736,370 15,894 28,728 601 3,178

By type of product Swaps 464,566 555,820 15,283 25,542 - - Options 182,818 180,550 611 3,186 601 3,178 TOTAL 647,384 736,370 15,894 28,728 601 3,178

By counterparty Resident credit institutions 555,984 646,104 15,894 28,039 - 705 Other resident sectors 91,400 90,266 - 689 601 2,473 TOTAL 647,384 736,370 15,894 28,728 601 3,178

By residual term to maturity Less than 1 year 62,698 81,510 153 906 153 705 1 to 5 years 120,120 99,040 458 2,280 448 2,473 More than 5 years 464,566 555,820 15,283 25,542 - - TOTAL 647,384 736,370 15,894 28,728 601 3,178

By type of risk Interest rate risk 464,566 555,820 15,283 25,542 - - Equity risk 182,818 180,550 611 3,186 601 3,178 TOTAL 647,384 736,370 15,894 28,728 601 3,178

The notional and/or contractual value of the formal derivative contracts does not represent the real risk assumed by the Group as the net position is obtained by offsetting and/or grouping together these financial instruments. Index Annual Report 2015 Legal Documentation

9. Available-for-sale financial assets

The breakdown of this line in the consolidated statement of financial position by region, type of counterparty and type of instrument, is as follows:

Thousands of euro 2015 2014 By counterparty Spanish public sector 1,890,730 1,540,163 Non-resident government bodies 41,072 - Credit institutions 294,593 324,696 Other resident sectors 320,988 124,737 Other non-resident sectors 18,192 16,682 Total 2,565,575 2,006,278 By type of instrument Debt securities 2,429,875 1,901,045 Spanish government debt 1,890,730 1,540,163 Non-resident government bodies 41,072 - Issued by credit institutions 222,990 277,090 Other Spanish fixed-income securities 260,713 73,727 Other non-resident fixed-income securities 14,370 10,065 Equity instruments 135,700 105,233 Shares in credit institutions 71,603 47,606 Shares in Spanish companies 60,275 50,828 Shares in foreign companies 165 178 Units and shares in investment funds 3,657 6,621 Total 2,565,575 2,006,278

The average annual interest rate for debt securities included in “Available-for- sale financial assets” in 2015 was 1.72% (2.37% in 2014), while interest accrued in 2015 on these financial assets was EUR 38,584 thousand (EUR 45,139 thousand in 2014). At 31 December 2015 and 2014, securities from this portfolio had been sold or transferred raising finance of EUR 208,857 thousand and EUR 116,076 thousand, respectively, (Note 17). A breakdown by residual term to maturity of debt securities recognized in this line at 31 December 2015 and 2014 is given in Note 6. Index Annual Report 2015 Legal Documentation

At the close of 2015 and 2014, the breakdown of “Equity instruments” according to the listing status of the securities included in the entry and the percentage accounted for by each category was as follows:

2015 2014 Thousands of Thousands of euro % of total euro % of total

Listed for trading 19,522 14.39% 21,221 20.17% Not listed for trading 116,178 85.61% 84,012 79.83%

135,700 100.00% 105,233 100.00%

The Group has recognized the following investments measured at fair value under “Equity instruments – Not listed for trading”: Thousands of euro Fair value 2015 2014 Company Banco Cooperativo Español, S.A. (*) 65,154 40,805 Seguros Generales Rural, S.A. de Seguros y Reaseguros (*) 34,348 26,848 Espiga Capital Inversión, Sociedad de Capital Riesgo 940 1,234 Espiga Capital Inversión II, Sociedad de Capital Riesgo de Régimen Simplificado, S.A. 204 - DZ Bank A.G. 1,329 1,315 Abanca Corporación Bancaria, S.A. 326 - Unicaja Banco, S.A. 544 - Total 102,845 70,202

(*) Due to agreements between existing shareholders, the Group has valued its ownership interest in these companies on the basis of its share in their shareholders’ equity at 31 December 2015 and 2014. On 12 June 2015, Banco Cooperativo Español, S.A. paid a scrip dividend of EUR 34 million as a capital increase charged against its voluntary reserves in respect of net profit for 2014. The Parent Company subscribed for the entire allocation of shares proportional to its equity stake, totalling EUR 3,585 thousand. The dividend is recognized as income under “Income from equity instruments” in the consolidated income statement in accordance with standards 17 and 22 of Bank of Spain Circular 4/2004 (Note 28). Also, during 2015 and 2014, the Cooperative Bank acquired shares in Banco Cooperativo Español, S.A. totalling EUR 18,688 thousand and EUR 1,933 thousand, respectively. Also, during 2015 and 2014, the Parent Company subscribed for shares in Seguros Generales Rural, S.A. de Seguros y Reaseguros for a total amount of EUR 6,286 thousand and EUR 1,147 thousand, respectively. Index Annual Report 2015 Legal Documentation

In 2014, venture capital firm Espiga Capital Inversión, SCR, returned capital to its shareholders, of which the Parent Company received EUR 2,757 thousand. The Group has recognized the following investments in this portfolio at cost since their fair value could not be reliably determined:

Thousands of euro Carrying amount Company 2015 2014

Rural Servicios Informáticos, S.C. 4,630 3,260 Lazora, S.A. 1,858 2,000 Minicentrales Canal de las Bardenas A.I.E. 180 180 Mondragón Navarra, S.P.E., S.A. 401 401 Start-Up Capital Navarra, S.A. 100 100 Idifarma Desarrollo Farmaceútico, S.L. 310 310 3P Biopharmaceuticals, S.L. 374 374 Espiga Capital Inversión II, Sociedad de Capital Riesgo de Régimen Simplificado, S.A. - 750 Caja Rural de Jaén, S.C.C. 648 495 Caja de Crédito y Ahorro Cooperativo, S.C.C. - 409 Caja Rural de Burgos, Fuentepelayo, Segovia y Castelldans, S.C.C. 1,482 1,482 Caja Rural de Extremadura, S.C.C. 1,844 1,844 Abanca Corporación Bancaria, S.A. - 671 Other 1,506 1,534

13,333 13,810

The breakdown of the “Valuation adjustments” shown under equity at 31 December 2015 and 2014 resulting from changes in the fair value of the assets in this portfolio is as follows:

Thousands of euro 2015 2014

Debt securities 48,402 53,431 Equity instruments 29,600 19,472

78,002 72,903

“Valuation adjustments” on the statement of financial position at 31 December 2015 and 2014 also includes losses on some fixed-income instruments, net of tax, of EUR 305 thousand and EUR 393 thousand, respectively. The instruments were transferred to “Loans and advances – Debt securities”, but the pre-transfer adjustment will continue to be reported until they mature or are derecognized. Movements recognized in “Valuation adjustments” corresponding to securities classified in “Available-for-sale financial assets” are detailed in Note 19. Index Annual Report 2015 Legal Documentation

Available-for-sale financial assets. Overdue and impaired assets

• Debt securities At 31 December 2015 the Group had assets classified as available for sale that had been individually identified as impaired due to the associated credit risk in a gross amount of EUR 4,000 thousand, compared with EUR 7,060 thousand at 31 December 2014. Details of the valuation adjustments recognized by the Group at the 2015 and 2014 accounts close due to the impairment of debt securities included in “Available-for-sale financial assets” are as follows:

Thousands of euro 2015 2014

Opening balance 1,935 1,648

Net impairment losses charged against income for the year (Note 35) 394 287 Determined individually - - Determined collectively 394 287

Application of balances (1,228) -

Closing balance 1,101 1,935 Determined individually 400 1,628 Determined collectively 701 307

• Equity instruments In 2015 and 2014, the Group recorded impairment losses on equity instruments of EUR 125 thousand and EUR 406 thousand, respectively, (Note 35), and therefore adjusted the value of the portfolio accordingly, charged against income. Index Annual Report 2015 Legal Documentation

10. Loans and advances

The breakdown of this asset item in the consolidated statement of financial position by nature of the related financial instrument is as follows:

Thousands of euro 2015 2014 Loans and advances to credit institutions 251,420 888,047 Loans and advances to customers 6,626,878 6,400,536 Debt securities 8,165 11,072 Total 6,886,463 7,299,655 Valuation adjustments (256,364) (268,163) Valuation adjustments for impairment of financial assets (256,819) (268,005) Other valuation adjustments 455 (158) Total 6,630,099 7,031,492

Loans and advances. Loans and advances to credit institutions

The breakdown of this line of the consolidated statement of financial position by type of credit facility and the region in which the borrower is resident is as follows:

Thousands of euro 2015 2014 By type Term deposits 144,911 799,994 Reverse repurchase agreements - - Other accounts 100,108 78,992 Other financial assets 6,401 9,061 Total 251,420 888,047 Valuation adjustments 137 588 Total 251,557 888,635 Por área geográficaBy region Spain 251,420 888,047 Other countries - - Ajustes por valoraciónValuation adjustments 137 588 Total 251,557 888,635 Por monedasBy currency Euro 229,980 867,698 US dollar 13,320 12,694 RestoOther 8,257 8,243 Total 251,557 888,635

In accordance with Article 10 of European Central Bank Regulation (EC) 1745/2003 of 12 September 2003, concerning the application of minimum reserves, the Parent Company uses the services of Banco Cooperativo Español, S.A. to indirectly maintain its minimum reserves through an intermediary. This is done by placing a deposit with the Banco Cooperativo Español, S.A. for indirect Index Annual Report 2015 Legal Documentation

compliance with the minimum reserves rate, which is recognized under “Term accounts”. At 31 December 2015 the balance of the deposit was EUR 59,850 thousand, compared with EUR 53,229 thousand at 31 December 2014. Banco Cooperativo Español, S.A. and the rural credit cooperatives and cooperative credit institutions that constitute its membership have concluded agreements whereby members assign funds to Banco Cooperativo Español, S.A. for exclusive investment in the interbank and money markets, with members assuming joint liability for any losses that may be incurred as a result of such investments. The liability assumed by the Cooperative Bank under these agreements amounted to EUR 373,939 thousand and EUR 167,050 thousand at 31 December 2015 and 2014, respectively, and is recognized in “Other contingent exposures” in the memorandum accounts (Note 24). A breakdown of these liabilities by residual term to maturity in 2015 and 2014 is given in Note 6. The average annual interest rate applied to deposits with credit institutions in 2015 was 0.52% (0.96% in 2014). Interest accrued on the financial assets included in this portfolio in 2015 totalled EUR 4,891 thousand compared with EUR 13,350 thousand in 2014 (Note 26). Index Annual Report 2015 Legal Documentation

Loans and advances. Loans and advances to customers

The breakdown of this item in the consolidated statement of financial position by type and status of facility, borrower sector, region in which the borrower is resident and type of interest rate applied is as follows:

Thousands of euro 2015 2014 By loan type and status Commercial credit 395.769 393.363 Secured loans 4.003.486 3.962.380 Other term loans 1.741.256 1.521.440 Finance leases 117.230 88.603 Repayable on demand and other 72.425 74.024 Other financial assets 70.589 78.886 Doubtful assets 226.123 281.840

Total 6.626.878 6.400.536

Valuation adjustments (256.448) (268.691) Total 6.370.430 6.131.845 By borrower sector Government bodies 112.907 108.379 Other resident sectors 6.233.163 5.996.445 Non-resident sectors 24.360 27.021

Total 6.370.430 6.131.845 By interest rate type Floating 5.926.102 5.846.257 Fixed 700.776 554.279 Total 6.626.878 6.400.536 Valuation adjustments (256.448) (268.691) Total 6.370.430 6.131.845

The average annual interest rate applied to the financial instruments included in this item in 2015 was 2.58% (2.93% in 2014); Interest accrued on these financial assets in 2015 was EUR 163,950 thousand compared with EUR 181,615 thousand in 2014 (Note 26). The carrying amount shown in the above table, ignoring the portion corresponding to “Other valuation adjustments”, represents the Group’s maximum credit risk exposure from these financial instruments. A breakdown by residual term to maturity is given in Note 6. Bank of Spain Circular 4/2004, as amended, in paragraph F) of its First Transitional Provision, exempts from its derecognition requirements all financial assets and liabilities that were derecognized before 1 January 2004 (Note 2.f). Index Annual Report 2015 Legal Documentation

In respect of derecognitions that took place after 1 January 2004, as the conditions governing the asset transfers meant that the Cooperative Bank retained material risks and benefits from the securitized assets (basically credit risk on the transactions transferred), these assets have not been derecognized from the statement of financial position. Also, in compliance with the standard, a financial liability has been initially recognized for an amount equal tothe payment received and is carried at amortized cost. These transactions therefore remain on the consolidated statement of financial position, in amounts of EUR 436,076 thousand and EUR 570,768 thousand at 31 December 2015 and 2014, respectively. In addition, liabilities of EUR 40,819 thousand and EUR 56,457 thousand were recognized in “Financial liabilities at amortized cost – Customer deposits” in the statements of financial position at 31 December 2015 and 2014, respectively (Note 17). The difference between the liability balances and the carrying amounts of the assets transferred in the securitizations reflects securitization fund assets initially retained or subsequently recovered by the Group which are presented in the aforementioned liability account after netting. The Group transferred assets to the following securitization funds: Rural Hipotecario IV, Rural Hipotecario V, Rural Hipotecario VI, Rural Hipotecario VII, Rural Hipotecario VIII, Rural Hipotecario IX, Rural Hipotecario X, Rural Hipotecario XI, Rural Hipotecario XII, Rural Hipotecario XVII and Ruralpyme II, all managed by Europea de Titulización S.A., S.G.F.T. In addition, the Group had subordinated loans in the amount of EUR 35,611 thousand outstanding with the aforementioned securitization funds at 31 December 2015 (EUR 37,144 thousand at 31 December 2014). The detail of the valuation adjustments made in relation to transactions classified as “Loans and advances to customers” is as follows:

Thousands of euro Valuation adjustments 2015 2014

Valuation adjustments for impairment of financial assets (256,766) (267,945) Accrued interest 11,250 12,200 Fees and commissions (10,932) (12,946)

(256,448) (268,691) Index Annual Report 2015 Legal Documentation

Loans and advances to customers. Valuation adjustments for impairment of financial assets

Details of the movements in 2015 and 2014 in “Valuation adjustments for impairment of financial assets” forming part of the balance of the “Loans and advances to customers” line are as follows:

Thousands of euro 2015 2014 Opening balance 267,945 268,831 Impairment losses for the year charged to income: 66,543 75,624 Determined individually 45,092 7,529 Determined collectively 21,451 68,095 Reversals credited to income (30,746) (13,570) Net impairment loss 35,797 62,054 Transferred to defaulted loans (33,624) (40,962) Transferred to Valuation adjustments for impairment of Non- current assets held for sale (Note 13) - (49) Other movements (13,351) (21,929) Closing balance 256,766 267,945 Determined individually 157,568 190,198 Determined collectively 99,198 77,747

The breakdown of “Impairment losses – Loans and advances – Loans and advances to customers “ recognized in the consolidated income statement at 31 December 2015 and 2014 is as follows: Thousands of euro 2015 2014

Net impairment in the period 35,796 62,054 Suspense items recovered (2,505) (2,285) Assets directly derecognized 2,498 4,656 Other items 111 114

Total (Note 35) 35,900 64,539

The impairment losses recognized at 31 December 2015 and 2014 cover the minimum provisions required by the Bank of Spain, taking account of the status and circumstances of the transactions and borrowers. Index Annual Report 2015 Legal Documentation

Loans and advances. Debt securities

The breakdown by counterparty of this line of the consolidated statement of financial position is as follows:

Thousands of euro 2015 2014 Counterparty Spanish public sector - - Non-resident government bodies - - Credit institutions 1,305 1,305 Other resident sectors 4,218 5,389 Other non-resident sectors 2,642 4,378 Total 8,165 11,072 Valuation adjustments for impairment of financial assets (53) (60) Total 8,112 11,012

The average annual interest rate for “Debt securities” included in “Loans and advances” in 2015 was –0.51% (2.78% in 2014), while interest accrued in 2015 on these financial assets came to –EUR 50 thousand (EUR 3,440 thousand in 2014). A breakdown by residual term to maturity of debt securities recognized in this line at 31 December 2015 and 2014 is given in Note 6. Details of the valuation adjustments for asset impairment recognized by the Group at the close of 2015 and 2014 on “Debt securities” included under “Loans and other receivables” are as follows:

Thousands of euro 2015 2014

Opening balance 60 16

Impairment losses charged against income for the year (Note 35) (7) 44 Determined individually - - Determined collectively (7) 44 Application of balances - - Closing balance 53 60 Determined individually - - Determined collectively 53 60

Index Annual Report 2015 Legal Documentation

Impaired and overdue assets

Details of financial assets classified as “Loans and advances” and considered impaired due to credit risk at 31 December 2015 and 2014 and of those assets that, although not considered impaired, had a past-due balance at that date, broken down by time elapsed since the oldest-dated amount outstanding in each transaction fell due, are given in the following table: • Impaired assets Thousands of euro 2015 2014 Transactions originally considered as “without perceivable risk” 7,254 4,004 Transactions subject to standard treatment 97,005 102,103 Less than 6 months 21,724 15,017 6 to 9 months 5,385 5,440 9 to 12 months 6,106 5,976 More than 12 months 63,790 75,670 Loans secured by property 121,277 175,065 Finished homes that are the borrower’s usual place of residence 38,253 46,378 Less than 6 months 8,442 11,968 6 to 9 months 2,825 4,890 9 to 12 months 2,242 3,810 More than 12 months 24,744 25,710 Working farms and finished offices, workshops and multi-purpose 31,580 42,281 industrial buildings Less than 6 months 6,220 4,376 6 to 9 months 501 5,480 9 to 12 months 2,032 975 More than 12 months 22,827 31,450 Finished homes (other) 14,585 23,608 Less than 6 months 1,033 6,144 6 to 9 months 1,612 2,661 9 to 12 months 585 922 More than 12 months 11,355 13,881 Plots of land, sites and other real estate assets 36,859 62,798 Less than 6 months 4,057 12,270 6 to 9 months 2,810 813 9 to 12 months 3,104 2,761 More than 12 months 26,888 46,954 Partially secured by collateral 587 668 Total 226,123 281,840

Accumulated finance income from impaired financial assets not recognized in income at 31 December 2015 and 2014 amounted to EUR 6,662 thousand and EUR 7,281 thousand, respectively. Index Annual Report 2015 Legal Documentation

• Assets with overdue balances but not considered impaired Thousands of euro 2015 2014 Less than 1 month 2,834 6,933 1 to 2 months 930 1,642 2 to 3 months 1,347 1,867 5,111 10,442

Details of the movements in impaired financial assets derecognized because the likelihood of their recovery was considered remote but where the Group is still seeking to recover the amounts receivable are as follows: Thousands of euro 2015 2014 Opening balance 141,748 106,028 Additions 50,979 53,477 Charged to valuation adjustments for impairment of financial assets 33,624 40,962 Charged directly to income 2,498 4,656 Receivables past-due but not collected 14,857 7,859 Other items - - Recoveries (2,505) (2,285) Collected in cash (2,505) (2,285) Definitively derecognized (23,850) (15,472) Due to write-offs (22,970) (15,472) Due to debt restructuring - - For other reasons (880) - Closing balance 166,372 141,748

Index Annual Report 2015 Legal Documentation

11. Held-to-maturity investments

The breakdown of this line of the consolidated statement of financial position by type of transaction is as follows: Thousands of euro 2015 2014 Counterparty Credit institutions - - Resident government bodies - - Non-resident government bodies - - Other resident sectors 94,813 45,155 Total 94,813 45,155 Valuation adjustments for impairment of (428) (215) financial assets Total 94,385 44,940

The average annual interest rate on the financial securities included in the “Held-to-maturity investments” portfolio during 2015 stood at 3.15% (5.07% in 2014) and accrued interest in 2015 on the financial assets included in this portfolio came to EUR 1,340 thousand (EUR 2,482 thousand in 2014). None of the securities classified in this portfolio had been sold, transferred or assigned at 31 December 2015 and 2014. A breakdown by residual term to maturity of the items making up the balance of this line of the consolidated statement of financial position is given in Note 6. Where measurable, the fair values of “Held-to-maturity investments” at 31 December 2015 and 2014 are reported in Note 6.d. Details of the valuation adjustments for impairment of “Held-to-maturity investments” recognized by the Group at the close of 2015 and 2014 are as follows:

Thousands of euro 2015 2014

Opening balance 215 61

Impairment losses charged against income for the year (Note 35) 213 154 Determined individually - - Determined collectively 213 154

Closing balance 428 215 Determined individually - - Determined collectively 428 215 Index Annual Report 2015 Legal Documentation

12. Hedging derivatives (assets and liabilities)

Derivatives designated as hedging instruments are recognized at fair value, as detailed in Note 2.e.IV. The breakdown of hedging derivatives by type of hedge at 31 December 2015 and 2014 is as follows:

Thousands of euro Assets Liabilities 2015 2014 2015 2014 Micro-hedging Fair value hedges - 16 31 170 Cash flow hedges - - - -

- 16 31 170

The breakdown of the notional and fair values of the financial derivatives recognized as “Trading derivatives” by type of market, type of product, counterparty, residual term to maturity and type of risk is as follows:

Thousands of euro Notional value Fair value Fair value Memorandum accounts Assets Liabilities 2015 2014 2015 2014 2015 2014 By type of market Bilateral (OTC) markets 91,418 90,284 - 16 31 170 TOTAL 91,418 90,284 - 16 31 170

By type of product Swaps 91,418 90,284 - 16 31 170 TOTAL 91,418 90,284 - 16 31 170

By counterparty Resident credit institutions 91,418 90,284 - 16 31 170 Other resident sectors ------TOTAL 91,418 90,284 - 16 31 170

By residual term to maturity Less than 1 year 31,349 40,755 - 16 - 133 1 to 5 years 60,069 49,529 - - 31 37 More than 5 years ------TOTAL 91,418 90,284 - 16 31 170

By type of risk Interest rate risk 91,418 90,284 - 16 31 170 Equity risk ------TOTAL 91,418 90,284 - 16 31 170 Index Annual Report 2015 Legal Documentation

The following financial swaps have been contracted (listed with their hedged items): • Interest rate swap, to hedge customer deposits bearing interest at a fixed rate. • Equity swap, to hedge customer deposits bearing interest at a rate indexed to the price of securities or market indices. At 31 December 2015, the Group recognized net profit of EUR 685 thousand as a result of changes in the fair value of hedging transactions (compared with a net profit of EUR 764 thousand in 2014). With regard to the hedged items, in 2015 a net loss of EUR 507 thousand attributable to the hedged risk was recognized compared with a net loss of EUR 759 thousand in 2014 (Note 31). The notional and/or contractual value of the formal derivative contracts does not represent the real risk assumed by the Group as the net position is obtained by offsetting and/or grouping together these financial instruments. Index Annual Report 2015 Legal Documentation

13. Non-current assets held for sale

The breakdown of this line of the consolidated statement of financial position at 31 December 2015 and 2014 is as follows: 2015 2014

Property and equipment 97.730 89,504 Investment property 1.690 703 Foreclosed property and equipment 129.887 121,709 Valuation adjustments for impairment of financial assets (33.847) (32,908)

97.730 89,504

Movements in “Investment property” and “Foreclosed property and equipment” included in “Non-current assets held for sale” in 2015 and 2014 were as follows:

Thousands of euro Investment Foreclosed property property and equipment

Cost - Balance at 31 December 2013 491 108,588 Additions 400 31,149 Retirements and writedowns - (18,028) Transfers - - Balance at 31 December 2014 891 121,709 Additions 25 31,071 Retirements and writedowns (25) (21,918) Transfers 975 (975) Balance at 31 December 2015 1,866 129,887

Accumulated depreciation- Balance at 31 December 2013 181 - Provisions 7 - Retirements and writedowns - - Transfers - - Balance at 31 December 2014 188 - Provisions 13 - Retirements and writedowns (25) - Transfers - - Balance at 31 December 2015 176 -

Property and equipment, net - Balance at 31 December 2014 703 121,709 Balance at 31 December 2015 1,690 129,887 Index Annual Report 2015 Legal Documentation

Movements in “Valuation adjustments for impairment of financial assets” included in “Non-current assets held for sale” in 2015 and 2014 were as follows: 2015 2014

Opening balance 32.908 32,632 Net additions charged against income 2.165 1,165 Reversals or sales (1.226) (889) Transfers --

Closing balance 33.847 32,908 Index Annual Report 2015 Legal Documentation

14. Equity investments

The detail of the Parent Company’s equity investments at 31 December 2015 and 2014, by company, is as follows:

Thousands of euro % ownership interest Acquisition cost Net carrying amount 2015 2014 2015 2014 2015 2014 Associates Bodegas Príncipe de Viana, S.L. 50.00% 50.00% 11,015 11,015 12,417 12,238 Omegageo, S.L. (*) 50.00% 50.00% 1,092 1,092 725 2,548 Reivalsa Gestión, S.L 50.00% 50.00% 50 50 950 804 Renovables de la Ribera, S.L. 50.00% 50.00% 250 250 237 238 Bosqalia, S.L. 48.40% 48.40% 1,452 1,452 883 1,205 Errotabidea, S.L. 46.01% 46.01% 8,431 8,431 9,230 8,847 Servicios Empresariales Agroindustriales, S.A. 33.33% 33.33% 30 30 70 81 Rioja Vega, S.A. 25.07% 25.07% 4,491 4,491 2,436 2,445 Zagin Group, S.L. (**) 25.00% 25.00% 2,031 2,031 - 1,541 Investi Navarra In Est, S.L. 25.00% 25.00% 5,000 5,000 - - Rural de Energías Aragonesas, S.A. 25.00% 25.00% 475 475 449 455 Harantico, S.L. 24.90% 24.90% - - 25 25 Compañía Eólica de Tierras Altas, S.A. 23.75% 23.75% 3,184 3,184 7,913 7,856 Haribericas XXI, S.L. 20.00% 20.00% 876 876 (3,127) (1,521) Zeleny, Información y Mercado, S.L. - 20.00% - 300 - 24 Iparlat, S.A. 21.54% 19.72% 4,836 4,173 10,872 8,637

Total 43,213 42,850 43,080 45,423

(*) At 31 December 2014, this item included implied goodwill of EUR 248 thousand (*) At 31 December 2014, this item included implied goodwill of EUR 300 thousand The carrying amount of equity investments at 31 December 2014, included EUR 548 thousand of goodwill allocated to Omegageo, S.L. (EUR 248 thousand) and Zagin Group, S.L. (EUR 300 thousand). In 2015, this goodwill was recognized as impaired in the consolidated income statement at 31 December 2015 under “Impairment losses on other assets (net)” (Note 36). Index Annual Report 2015 Legal Documentation

The activities, registered offices and key performance indicators of companies accounted for by the equity method at 31 December 2015 are as follows:

Thousands of euro Company Head office Line of business Total Equity Earnings assets Renovables de la Ribera, S.L. Pamplona Construction and operation of wind 476 474 (2) farms Bodegas Príncipe de Viana, S.L. Pamplona Production and sale of wine 45,663 29,538 484 Omegageo, S.L. Pamplona Civil engineering and building projects 2,185 1,492 192 Reivalsa Gestión, S.L Vitoria Provision of administrative services to 10,263 1,901 386 (Alava) public sector bodies Bosqalia, S.L. Pamplona Forestry 5,281 1,824 (665) Errotabidea, S.L. Pamplona Development and management of 51,155 23,348 948 rent-controlled housing Servicios Empresariales Agroindustriales, S.A. Pamplona Management of cooperative services 661 252 (42) Rioja Vega, S.A. Viana Production and sale of wine 15,666 9,780 (10) (Navarre) Zagin Group, S.L. Ainzoain Real estate development 11,981 5,121 (179) (Navarre) Investi Navarra In Est, S.L. Pamplona Real estate development 11,684 - - Rural de Energías Aragonesas, S.A. Zaragoza Generation and sale of renewable 1,820 1,795 (18) energy Compañía Eólica de Tierras Altas, S.A. Soria Construction and operation of wind 37,952 33,321 452 farms Haribericas XXI, S.L. Pamplona Manufacture and sale of flour 45,664 (2,483) (1,751) Iparlat, S.A. Urnieta Production of dairy products 150,303 54,249 6,125 (Guipuzcoa)

The activities, registered offices and key performance indicators of companies accounted for by the equity method at 31 December 2014 are as follows:

Thousands of euro Company Head office Line of business Total Equity Earning assets s Renovables de la Ribera, S.L. Pamplona Construction and operation of wind farms 482 475 (7) Bodegas Príncipe de Viana, S.L. Pamplona Production and sale of wine 46.308 29.091 525 Omegageo, S.L. Pamplona Civil engineering and building projects 5.556 4.597 (724) Reivalsa Gestión, S.L Vitoria Provision of administrative services to 11.764 1.608 437 (Alava) public sector bodies Bosqalia, S.L. Pamplona Forestry 5.989 2.490 8 Errotabidea, S.L. Pamplona Development and management of rent- 53.057 22.991 669 controlled housing Servicios Empresariales Agroindustriales, S.A. Pamplona Management of cooperative services 682 242 (83) Rioja Vega, S.A. Viana Production and sale of wine 15.800 9.784 (194) (Navarre) Zagin Group, S.L. Ainzoain Real estate development 11.983 5.300 (163) (Navarre) Investi Navarra In Est, S.L. Pamplona Real estate development 11.684 - - Rural de Energías Aragonesas, S.A. Zaragoza Generation and sale of renewable energy 1.841 1.815 (20) Compañía Eólica de Tierras Altas, S.A. Soria Construction and operation of wind farms 44.766 33.077 (231) Haribericas XXI, S.L. Pamplona Manufacture and sale of flour 47.602 2.344 (1.918) Zeleny, Información y Mercado, S.L. Pamplona Intermediation in cereal marketing 178 121 - Iparlat, S.A. Urnieta Production of dairy products 141.422 50.390 6.611 (Guipuzcoa)

The total assets, equity and earnings figures shown in the above table are those of the individual companies, prepared in accordance with the accounting principles applied by each one, before standardization and harmonization adjustments for the purposes of consolidation into the financial statements of Caja Rural de Navarra and subsidiaries. Index Annual Report 2015 Legal Documentation

At the close of 2015 and 2014, all balances included under “Equity investments” corresponded to securities not listed for trading on official markets. Movements in this line of the consolidated statement of financial position in 2015 and 2014 were as follows:

Thousands of euro

Balance at 31 December 2013 56,957

Additions 184 Profit (loss) of companies accounted for using the equity method 59 Retirements (863) Impairment of implied goodwill (468) Transfers (10,446)

Balance at 31 December 2014 45,423

Additions 663 Profit (loss) of companies accounted for using the equity method 57 Retirements (2,515) Impairment of implied goodwill (548) Transfers -

Balance at 31 December 2015 43,080

In accordance with the policy set out in 2.g) at 31 December 2015 and 2014 no impairment losses were recorded against investments in these companies. Harantico, S.L. and Harinera del Mar Siglo XXI, S.L., which were associates at 31 December 2013, were taken over by the Parent Company in 2014 and fully consolidated. As a result, a negative EUR 2,056 thousand of losses generated until the date of the takeover were transferred from “Reserves (losses) of companies accounted for using the equity method” to “Retained earnings (losses)”. EUR 12,502 thousand was also transferred corresponding to the cost of previous investment prior to the takeover. At 31 December 2013 and until the two companies were brought into 100% ownership in 2014, the Parent Company’s investment in the companies totalled EUR 12,502 thousand. The Parent Company paid EUR 3,761 thousand for 50% of the other partner’s stake in Harantico, S.L. and EUR 3,488 thousand for 50% of the partner’s stake in Harinera del Mar Siglo XXI, S.L. Index Annual Report 2015 Legal Documentation

15. Property and equipment, intangible assets and business combinations

Property and equipmentl

Movements in “Property and equipment” line of the consolidated statement of financial position in 2015 and 2014 were as follows:

Thousands of euro

Property and equipment Assigned to Investment For own use social projects property Total Cost - Balance at 31 December 2013 284,819 416 8,415 293,650 Additions 11,084 - 400 11,484 Retirements and writedowns (2,168) - (77) (2,245) Additions/(retirements) in business combinations 49,030 - (400) 48,630 Transfers - - - - Balance at 31 December 2014 342,765 416 8,338 351,519 Additions 12,898 - 14 12,912 Retirements and writedowns (6,127) - (89) (6,216) Transfers - - - - Balance at 31 December 2015 349,536 416 8,263 358,215

Accumulated depreciation- Balance at 31 December 2013 140,054 242 847 141,143 Provisions 10,694 2 372 11,068 Retirements and writedowns (176) - - (176) Additions/(retirements) in business combinations 12,902 - - 12,902 Balance at 31 December 2014 163,474 244 1,219 164,937 Provisions 12,082 1 365 12,448 Retirements and writedowns (5,428) - (89) (5,517) Balance at 31 December 2015 170,128 245 1,495 171,868

Valuation adjustments for impairment - Balance at 31 December 2013 2,390 - 1,686 4,076 (Note 36). - - - - Transfers (2,390) - - (2,390) Balance at 31 December 2014 - - 1,686 1,686 (Note 36). - - - - Transfers - - - - Balance at 31 December 2015 - - 1,686 1,686

Property and equipment, net - Balance at 31 December 2014 179,291 172 5,433 184,896 Balance at 31 December 2015 179,408 171 5,082 184,661

At 31 December 2015 and 2014, property and equipment acquired under lease finance agreements totalled EUR 1,513 thousand and EUR 663 thousand, respectively. Index Annual Report 2015 Legal Documentation

At 31 December 2015 and 2014 the Group had no property and equipment that was temporarily out of service or had been withdrawn from active use. At 31 December 2015 and 2014 the Group had no significant outright sale undertakings relating to property and equipment. In 2014, additions totalled EUR 49,030 thousand for property and equipment acquired in the Harantico, S.L., and Harinera del Mar Siglo XXI, S.L. business combinations. Fully depreciated property and equipment still in use within the Group at 31 December 2015 and 2014 was worth a total of EUR 103,854 thousand and EUR 100,048 thousand, respectively. In accordance with Bank of Spain Circular 4/2004, the Group re-measured certain unrestricted items included in “Buildings for own use” on 1 January 2004 (Note 2.i). The Group carries out regular appraisals of its main buildings to identify potential impairment. Based on the latest available appraisals, the Directors consider that the fair values of the Cooperative Bank’s property and equipment do not differ significantly from their carrying amounts.

Intangible assets

Goodwill

Goodwill at 31 December 2015 totalled EUR 8,297 thousand, all from Harantico, S.L.. This compares to EUR 8,565 thousand at 31 December 2014, composed of EUR 8,297 thousand from Harántico, S.L. subsidiaries and EUR 268 thousand from Bouquet Brands. In 2014, EUR 468 thousand of goodwill from the subsidiary Bouquet Brands, S.A. was recognized as impaired and charged against “Impairment losses on other assets (net) – Goodwill and other intangible assets” on the consolidated income statement following a capital increase that generated an additional EUR 200 thousand of goodwill. The Parent Company had a 50% direct holding in Harantico, S.L. until 11 July 2014, when it acquired the remaining 50% taking full control. The subsidiary makes and sells flours. Based on the estimates and forecasts available to the Parent Company’s Directors, the financial forecasts of the company justify the goodwill acquired during the takeover. The cash generating unit (“CGU”) that was assigned the goodwill generated in the business combination leading to the acquisition of Harantico, S.L. assets (Note 2.x) is regularly tested for impairment, including the portion of goodwill in Index Annual Report 2015 Legal Documentation

its carrying amount. This test is carried out at least annually or whenever there are indications of impairment. The fair value of the CGU and the fair value assigned to its assets and liabilities are based on estimates and assumptions that the Group management considers most appropriate in the circumstances. However, changes in the valuation assumptions used could change the result of impairment tests. Three key assumptions used in calculating the impairment test sensitively affect the recoverable value: • Estimates of cash flow projections by Group Management, based on the latest available budgets for the next 5 years. The key variables input to the financial forecasts were: the change in the contribution margin (affected by forecast business volumes and interest rates) and the development of other income statement items. • The sustainable perpetual growth rate extrapolating cash flows beyond the fifth year (2020) to cover the period beyond budget positions or forecasts. The Group used a sustainable perpetual growth rate of 1.5% based on inflation projections. • The discount rate for future cash flows, which is taken to be the CGU’s assigned cost of capital and comprises a risk free rate plus a premium reflecting the risk inherent to the business being valued (6.54% at 31 December 2015 and 6.85% at 31 December 2014). In determining its assumptions Group Management relied on its projections and past experience. The values arrived at are consistent with external sources of information. The present value of distributable cash flows used to derive value in use is based on Harantico, S.L.’s cost of equity (Ke) to a market participant. They were determined using the CAPM (Capital Asset Pricing Model) or discounted cash flow valuations. In addition, a sensitivity analysis was carried out looking at the key variables in the valuation, which found no evidence of impairment at 31 December 2015 and 2014. The two assumptions that carry greatest weight and whose volatility could weigh most in determining the present value of cash flows beyond the fifth year are the discount rate and the growth rate. If the discount rate applied to discounted cash flows were to be 5% higher than the management’s estimates, the Group would still have no need to write down the carrying amount of its goodwill. Nor would it have to reduce goodwill if the sustainable perpetual growth rate applied to discounted cash flows were to be 5% lower than the management’s estimates. In making the assumptions used to determine the CGU’s EBITDA, the base for calculating free cash flow, the most conservative scenario was used so that Index Annual Report 2015 Legal Documentation

negative distortions to this line are unlikely. Nevertheless, simulations using other growth rates and 5% increases or decreases in EBITDA, show no risk of impairment in 2015 or 2014.

Intangible assets

Until 11 July 2014, the Parent Company directly owned 50% of the share capital in Harinera del Mar Siglo XXL, S.L.. At that date the Parent Company acquired the 50% additional stake through a business combination giving them 100% of the share capital. The subsidiary makes and sells flours. In the course of this business combination the Group acquired EUR 5,000 thousand of intangible assets. These corresponded to the rights and commercial relationships in various parts of the country that had previously been contributed to Harinera del Mar Siglo XXI, S.L. in a 2008 capital increase by the shareholders from whom the Parent Company acquired the additional 50% in the takeover. At end-2015 the Group carried out impairment tests on both these intangible assets acquired in the Harinera del Mar Siglo XXI takeover and the company’s business by estimating its recoverable amount. The valuation methodology used to test for impairment was the same as for the Harántico, S.L. goodwill, with a discount rate of 6.54% (6.85% at 31 December 2014) and a sustainable growth rate of 1.5%. The Group valued the whole recoverable amount of the company, including the rights and commercial relations that made up the EUR 5,000 thousand intangible assets, using the abovementioned method based on the best estimates and forecasts available to the Parent Company’s Directors at the time. A sensitivity analysis was carried out looking at the key variables in the valuation, which found no evidence of impairment at 31 December 2015 and 2014. The two assumptions that carry greatest weight and whose volatility could weigh most in determining the present value of cash flows beyond the fifth year are the discount rate and the growth rate. If the discount rate applied to discounted cash flows were to be 5% higher than the management’s estimates, the Group would still have no need to reduce the carrying amount of its goodwill. Nor would it have to reduce goodwill if the sustainable perpetual growth rate applied to discounted cash flows were to be 5% lower than the management’s estimates. In making the assumptions used to determine the CGU’s EBITDA, the base for calculating free cash flow, the most conservative scenario was used so that negative distortions to this line are unlikely. Nevertheless, simulations using Index Annual Report 2015 Legal Documentation

other growth rates and 5% increases or decreases in EBITDA, show no risk of impairment in 2015 or 2014.

Effect of business combinations

At the date of the Harantico, S.L. and Harinera del Mar Siglo XXI, S.L. business combinations, the equity instruments held by the Parent Company in the two companies prior to its takeover were restated to their fair value at the acquisition date, resulting in the recognition of impairment losses of EUR 290 thousand and EUR 2,956 thousand, respectively. These losses were recognized in the 2014 consolidated income statement under “Gains (losses) on the derecognition of assets not classified as non-current assets held for sale”. A EUR 5,040 thousand gain from a bargain purchase was also recognized in respect of the Harinera del Mar Siglo XXI, S.L. acquisition on the acquisition date, reflecting the difference between the consideration paid in the takeover and the fair value of the identifiable assets acquired and liabilities assumed. This gain was recognized in the 2014 consolidated income statement under “Negative difference in business combinations”. Index Annual Report 2015 Legal Documentation

16. Other assets/liabilities

The breakdown of these asset and liability items in the accompanying consolidated statement of financial position at the close of 2015 and 2014 is as follows:

Thousands of euro 2015 2014 Assets:

Inventories relating to non-financial activities 86,879 75,986 Of which: Real estate business 18,880 20,810 Agricultural business 61,465 51,125 Other 6,534 4,051 Transactions in transit 29,536 28,142 Accruals 307 649 Other items 4,763 3,281

121,485 108,058 Liabilities:

Transactions in transit 23,413 21,454 Accruals 27,885 34,781 Other items 26,180 36,057

77,478 92,292 Index Annual Report 2015 Legal Documentation

17. Financial liabilities at amortized cost

The breakdown of this balance sheet item at 31 December 2015 and 2014 is as follows:

Thousands of euro 2015 2014

Deposits from credit institutions 1,109,239 1,737,539 Customer deposits 6,480,414 6,133,759 Debt securities 1,086,337 645,298 Other financial liabilities 88,705 103,461

Total 8,764,695 8,620,057

Deposits from credit institutions

The breakdown of this consolidated statement of financial position item by type of deposit and currency of denomination is as follows: Thousands of euro 2015 2014 Type of deposit Term deposits 900,060 1,607,905 Repurchase agreements (Note 9) 208,857 116,076 Other accounts 330 - Valuation adjustments (8) 13,558 Total 1,109,239 1,737,539 Currency Euro 1,109,239 1,737,539 Total 1,109,239 1,737,539

At 31 December 2015 “Term deposits” included six deposits from Banco Cooperativo Español, S.A. totalling EUR 678,575 thousand in cash from European Central Bank’s monetary policy operations. These deposits mature between 2016 and 2018 and pay interest of between 0.06% and 0.16%. At 31 December 2014, there were seven deposits totalling EUR 1,151,725 thousand, paying interest rates between 0.06% and 0.16% and maturing between 2015 and 2018. A breakdown of this item by residual term to maturity is given in Note 6. “Term deposits” at 31 December 2014 includes loans made by Banco Cooperativo Español, S.A. (“BCE”) for covered bond issues taken up by cooperative credit institutions belonging to Caja Rural Group. These were underwritten by the Spanish government in accordance with Ministry for the Economy and Finance Order EHA/3364/2008, of 21 November, implementing Index Annual Report 2015 Legal Documentation

Article 1 of Royal Decree 7/2008, of 13 October, on urgent economic measures related to the plan for coordinated action among euro-zone member states. As allowed by the Ministerial Order, the Cooperative Bank, along with other rural credit cooperatives that had shares in BCE and BCE itself, decided to use one of the options available under the government guarantee provisions, by forming a Grouping of Credit Institutions to issue the fixed income securities which were then backed by the government. The Cooperative Bank agreed that the BCE should make loans for the same amounts and on the same financial terms as the corresponding fixed-income issues. It was also agreed that the Cooperative Bank would meet the costs of issue and the government guarantee in proportion to its share under the terms of the Ministerial Order. The size and financial terms of the loans linked to these issues are as follows:

Nominal Nominal Redemption 31/12/2015 31/12/2014 Issue date date Interest rate Loan III BCE guaranteed issue - 141,061 22/01/2010 22/01/2015 4.242% - 141,061

During 2015, the loan related with issue III was redeemed. Part of the cash raised by these financing operations, to a nominal value of EUR 5,000 thousand, remained invested in securities from the covered bond issue itself at 31 December 2014 and were recognized under “Available-for-sale financial assets” at that date. The Cooperative Bank also jointly guaranteed BCE, for as long as the government-backed issue remained outstanding, against any losses BCE might suffer on interbank loans to rural credit cooperatives belonging to the Grouping or on the issue of state-backed fixed-income securities. These sums were taken on by the Cooperative Bank in the same proportion as the guaranteed issues up to a maximum amount of the guarantee recorded in the memorandum accounts of EUR 43,061 thousand at 31 December 2014. “Term deposits” also included EUR 123,634 thousand at 31 December 2015 corresponding to funds from the Official Credit Institute relating to brokerage loans (EUR 236,428 thousand at 31 December 2014). The average interest rate of these securities was 0.26% in 2015 (0.81% in 2014) and the accrued interest in 2015 on the financial liabilities included in this portfolio came to EUR 6,743 thousand (EUR 22,299 thousand in 2014) (Note 27). Index Annual Report 2015 Legal Documentation

Customer deposits

The breakdown of customer deposits by type of deposit, sector of activity, type of interest rate and currency of denomination is as follows:

Thousands of euro 2015 2014 Type of deposit Demand deposits 3,003,208 2,448,206 Term deposits 3,469,265 3,665,738 Reverse repurchase agreements - - Valuation adjustments 7,941 19,815 Total 6,480,414 6,133,759 Sector of activity Spanish public sector 166,751 151,835 Other resident sectors 6,290,070 5,964,239 Non-resident sectors 23,593 17,685 Total 6,480,414 6,133,759 Type of interest rate Floating 293,835 308,333 Fixed 6,186,579 5,825,426 Total 6,480,414 6,133,759 Currency Euro 6,454,384 6,112,830 US dollar 17,784 12,717 Other currencies 8,246 8,212 Total 6,480,414 6,133,759

The average interest rate of these securities was 0.58% in 2015 (1.09% in 2014) and the accrued interest in 2015 on financial liabilities included in this portfolio came to EUR 36,595 thousand (EUR 64,833 thousand in 2014). (Note 27). Pursuant to prevailing legislation, “Term deposits” include the liability corresponding to the securitization transactions mentioned in Note 10, amounting to EUR 40,819 thousand at 31 December 2015 (EUR 56,457 thousand at 31 December 2014). A breakdown of this item by residual term to maturity is given in Note 6.

Debt securities

In this line of the statement of financial position, the Group recognizes the value of bonds and other bearer debt securities and promissory notes that are not subordinated liabilities. This line also includes the portion of compound financial instruments that is treated as a financial liability. Index Annual Report 2015 Legal Documentation

The breakdown of this item in the consolidated statement of financial position, by type of financial liability, is as follows:

Thousands of euro 2015 2014

Promissory notes and other bills 30,316 87,689 Bonds and debentures 1,045,010 548,120 outstanding Valuation adjustments 11,011 9,489

Total 1,086,337 645,298

“Promissory notes and other bills” recognizes the amount corresponding to issues of promissory notes for which the issue prospectus has been filed with the Official Registry of the Spanish National Securities Market Commission (CNMV). The balance outstanding at 31 December 2015 corresponds to the thirteenth issue of Caja Rural de Navarra promissory notes, registered with the CNMV on 22 January 2015, while the balance outstanding at 31 December 2014 corresponded to the twelfth issue of Caja Rural de Navarra promissory notes, registered with the CNMV on 23 January 2014. The maximum balances outstanding for the two issues were, respectively, EUR 200,000 thousand (extendible to EUR 400,000 thousand) and EUR 300,000 thousand (extendible to EUR 600,000 thousand). On 26 January 2016, the Caja Rural de Navarra’s twelfth Issue of Commercial Papers has been registered in the C.N.M.V., with a maximum issue amount of 100,000 thousand euros, extendible to 200,000 thousand euros. Promissory notes are issued at a discount, their cash value being determined at the time of issuance of each note based on the interest rate and maturity date agreed in the terms of issue. The nominal unit amount of the thirteenth issue at 31 December 2015 is EUR 100,000 and the contract term can range from four to three hundred and sixty-four days. The details of the “Mortgage covered bonds” item are as follows:

Redemption Issue 31/12/2015 31/12/2014 Issue date date Effective interest rate Issue I - Mortgage covered bonds 498,120 498,120 11/06/2013 11/06/2018 2.957% Issue III - Mortgage covered bonds 50,000 50,000 07/02/2014 07/02/2029 3.67% Issue V - Mortgage covered bonds 496,890 - 16/03/2015 16/03/2022 0.591% 1,045,010 548,120

At 31 December 2015 the Cooperative Bank also held two other issues (II and IV) of mortgage covered bonds. These were retained in their entirety on its books and a debit balance of EUR 600,000 thousand recorded for this item of Index Annual Report 2015 Legal Documentation

the consolidated statement of financial position (EUR 914,271 thousand at 31 December 2014), as required by regulations on the derecognition of financial assets and liabilities (Note 2.f). As Caja Rural de Navarra is an issuer of mortgage covered bonds, in accordance with Article 21 of Royal Decree 716/2009, of 24 April, and Bank of Spain Circular 7/2010, of 30 November, Note 39 to the consolidated financial statements gives information on the special accounting register that must by kept by institutions issuing covered bonds and mortgage bonds. The promissory notes and covered bonds issued have been admitted for trading on the AIAF fixed-income market. The average interest rate of these securities was 1.97% in 2015 (2.83% in 2014) and the accrued interest in 2015 on the financial liabilities included in this portfolio came to EUR 19,681 thousand (EUR 17,814 thousand in 2014) (Note 27).

Other financial liabilities

All financial liabilities recognized in this line are classified as “Financial liabilities at amortized cost” and measured accordingly. The balance includes any payment obligations having the substance of a financial liability that are not included in other items. The breakdown of other financial liabilities by type of instrument is as follows:

Thousands of euro 2015 2014 Payment obligations 14,914 16,382 Tax revenue collection accounts 16,121 19,104 Payable for purchases and non-financial services 51,613 60,168 Other items 6,057 7,807

Total 88,705 103,461

“Payment obligations” at 31 December 2015 and 2014 includes the commitment to the Deposit Guarantee Fund, explained in Note 1.i). Index Annual Report 2015 Legal Documentation

18. Provisions

The balance recognized under “ Provisions for contingent exposures and commitments” and “Other provisions” of the consolidated statement of financial position at the close of 2015 and 2014 and movements in those years were as follows:

Miles de eurosThousands of euro Provisions for contingent Other provisions exposures and commitments Balance at 31 December 2013 10,489 - Additions charged against income 2,992 178 Reversals credited to income (4,575) - Net addition (Note 34) (1,583) 178 Application of balances - (178) Other movements (74) - Balance at 31 December 2014 8,832 - Additions charged against income 9,350 - Reversals credited to income (1,387) - Net addition (Note 34) 7,963 - Application of balances - - Other movements 464 - Balance at 31 December 2015 17,259 -

Note 2.t) to the consolidated financial statements shows the detail of movements in “Provisions for pensions and similar obligations” during 2015 and 2014. Index Annual Report 2015 Legal Documentation

19. Valuation adjustments

Available-for-sale financial assets

This heading reflects the net effect of changes in the fair value of assets classified as available-for-sale that, pursuant to Note 9 above, would normally be classified as part of the Group’s equity. These changes are recognized in the consolidated income statement when the assets giving rise to them are sold or written down as impaired. Changes in the balance of the “Valuation adjustments” line under equity reflecting transactions involving securities classified as “Available-for-sale financial assets” and “Loans and advances - Debt securities” and changes in the fair value of these assets were as follows:

Thousands of euro

Debt securities Equity instruments Total 2015 2014 2015 2014 2015 2014

Opening balance 53,038 18,984 19,472 15,865 72,510 34,849

Measurement gains (losses) (4,385) 52,674 12,280 4,003 7,895 56,677 Amounts transferred to the consolidated income statement (2,203) (7,269) (630) 1,150 (2,833) (6,119) Income tax 1,647 (11,351) (1,522) (1,546) 125 (12,897)

Closing balance 48,097 53,038 29,600 19,472 77,697 72,510 Index Annual Report 2015 Legal Documentation

20. Share capital

Capital contributions made to the Parent Company by members in 2015 and 2014, and changes in capital occurring in those years, are shown in the table below.

Thousands of euro Balance at 31 December 2013 142,696 Subscriptions 9,746 Redemptions (840) Balance at 31 December 2014 151,602 Subscriptions 12,675 Redemptions (357) Balance at 31 December 2015 163,920

Pursuant to prevailing legislation and the Parent’s articles of association, the minimum contribution for individuals is EUR 60.11, while the minimum contribution for legal entities is EUR 120.22. Contributions at 31 December 2015 and 2014 were represented by 2,727,000 and 2,522,076 fully paid-up registered shares, respectively, each with a nominal value of EUR 60.11 each. The Parent Company satisfies its minimum capital requirement of EUR 4,808,096.83, established pursuant to the provisions of the enacting regulations of Act 13/1989, of 26 May, on Cooperative Credit Institutions. The remuneration that may be paid on both types of capital contributions is limited to no more than six percentage points above the legal interest prevailing in the reporting period. The rate of remuneration for contributions is determined at the Parent Company’s General Meeting each year, where members authorise the Governing Board to set the rate of remuneration and the payment schedule. In 2015 and 2014 remuneration paid to cooperative members in respect of contributions made came to EUR 2,327 thousand and EUR 2,770 thousand, respectively. In accordance with prevailing regulations, the sum of mandatory and voluntary contributions must not exceed 2.5% of share capital in the case of individuals and 20% in the case of legal entities. Legal entities that are not cooperative entities cannot hold more than 50% of capital. None of the aforementioned limits had been exceeded at 31 December 2015 and 2014. Index Annual Report 2015 Legal Documentation

21. Reserves

Definition

The balance recognized in the consolidated statement of financial position under “Shareholder’s equity - Reserves” comprises the net amount of Retained earnings (profit or loss) recognized in income in prior years and appropriated to equity, as well as the reserves of companies accounted for by the equity method.

Breakdown

The detail of this item and movements in 2015 and 2014 are as follows:

Thousands of euro

Reserves of Mandatory companies Reserve Other accounted for Total Fund reserves using the equity method

Balance at 1 January 2014 550,693 28,295 1,524 580,512 Appropriation of prior year’s profit 26,410 - - 26,410 Increase/(reduction) in reserves connected to business combinations - (2,056) 2,056 - Other movements - 1,586 (1,201) 385 Balances at 31 December 2014 577,103 27,825 2,379 607,307 Appropriation of prior year’s profit 47,945 - - 47,945 Other movements 193 4,661 (1,982) 2,872 Balances at 31 December 2015 625,241 32,486 397 658,124

Mandatory Reserve Fund

The aim of the Mandatory Reserve Fund is to strengthen and guarantee the Cooperative Bank’s solvency. In accordance with Act 13/1989, of 26 May 1989, on Cooperative Credit Institutions, the Mandatory Reserve Fund is established and maintained by allocating at least 20% of earnings for each year, net of prior years’ accumulated losses, if any. Any gains generated on the disposal of property and equipment or obtained from sources unrelated to the Cooperative Bank’s specific objectives must also be assigned to this Fund, unless the Group recognizes an overall loss for the year. The Parent Company’s articles of association establish that 90% of profit for the year must be allocated to the Mandatory Reserve Fund. Index Annual Report 2015 Legal Documentation

Other reserves and reserves of companies accounted for using the equity method

The breakdown by company of “Other reserves” and “Reserves of companies accounted for using the equity method” at 31 December 2015 and 2014 is as follows:

Thousands of euro

Reserves of companies Other reserves accounted for using the equity method 2015 2014 2015 2014 Parent institution, after consolidation adjustments 64,444 53,325 - - Informes y Gestiones Navarra, S.A. 378 329 - - Harivasa 2000, S.A. 9,342 8,713 - - Harinera de Tardienta, S.A. (2,842) (2,903) - - Promoción Estable del Norte, S.A. (36,812) (30,984) - - Industrial Tonelera Navarra, S.A. 1,888 1,420 - - Seresgerna, S.A. 2,666 2,511 - - Residencia Torre de Monreal, S.L. (580) (667) - - Solera Asistencial, S.L. (59) (54) - - Bouquet Brands, S.A. (2,745) (1,808) - - Preventia Sport, S.L. (286) (117) - - The Spanish Food & Drinks Company GMBH (252) (175) - - Eólica La Calera, S.L. (8) (8) - - Harantico, S.L. 1,190 897 - - Harinera del Mar Siglo XXI, S.L. (3,838) (2,654) - - Bodegas Príncipe de Viana, S.L. - - 1,221 1,008 Bosqalia, S.L. - - (247) (251) Renovables de la Ribera, S.L. - - (12) (9) Omegageo, S.L. - - (215) 1,819 Servicios Empresariales Agroindustriales, S.A. - - 40 51 Rioja Vega, S.A. - - (2,046) (1,997) Errotabidea, S.L. - - 317 179 Reivalsa Gestión, S.L. - - 707 535 Zagin Group, S.L. - - (406) (365) Investi Navarra In Est, S.L. - - (5,000) (5,000) Rural de Energías Aragonesas, S.A. - - (22) (16) Compañía Eólica de Tierras Altas, S.A. - - 4,622 4,726 Haribericas XXI, S.L. - - (3,128) (1,438) Zeleny, Información y Mercado, S.L. - - - 15 Iparlat, S.A. - - 4,566 3,122 TotalesTotal 32,486 27,825 397 2,379 Index Annual Report 2015 Legal Documentation

Shareholders’ equity and capital management

In managing its capital the Parent Company has followed the conceptual definitions set out in the solvency regulations described in the CRD-IV and CRR (Note 1.h). The strategic objectives set by the Parent Company’s Management Committee in relation to capital management are as follows: • To comply with applicable regulations on minimum capital requirements at all times, in both its separate and consolidated financial statements. • To pursue maximum efficiency in capital management, such that, together with other risk and return variables, capital consumption is considered a key variable in the analyses of investment decisions taken by the Cooperative Bank. To achieve these objectives the Parent Company applies a range of capital management policies and processes, whose main elements are: • The Parent Company is responsible for monitoring, control and analysis of the degree of compliance with capital adequacy regulations. • In its strategic and commercial planning the Parent Company considers as a key factor in its decisions the impact that they will have on the Cooperative Bank’s eligible capital base and the relationship between capital consumption, profitability and risk. Index Annual Report 2015 Legal Documentation

The detail of its eligible capital base and minimum requirements at 31 December 2015 and 2014 is as follows:

Thousands of euro 2015 2014

Common equity tier 1 capital ratio (CET1) (I) 866,998 792,083 Eligible capital 163,920 151,602 Eligible reserves 642,095 592,536 Qualifying profit 59,947 47,945 Cumulative OCI 77,697 72,510 Deductions (76,661) (72,510)

Additional tier 1 capital (II) - -

Tier 2 capital (III) 46,697 47,009 Complementary credit risk allowances and provisions 50,286 47,009 Deductions (3,589) -

Total eligible capital (I) + (II) +(III) 913,695 839,092

Total minimum capital requirement (436,087) (407,078)

Surplus (*) 477,608 432,014

Risk-weighted assets 5,451,089 5,088,474

Capital ratios Common equity tier 1 ratio (minimum 4.5%) (*) 15.91% 15.57% Tier 1 ratio (minimum 6%) 15.91% 15.57% Capital ratio (minimum 8%) 16.76% 16.49%

(*) In line with the communication received by the Cooperative Bank from Bank of Spain (Note 1.h), as part of its supervisory review and evaluation process (SERP) the Cooperative Bank must maintain a CET1 ratio of 9.5%, measured against regulatory phased-in capital. The surplus calculated on this minimal requirement was EUR 349,145 thousand at 31 December 2015. In addition to the guarantee that its shareholders’ equity provides to creditors, the Parent Company is required, pursuant to prevailing regulations, to make annual contributions to the Deposit Guarantee Fund for Credit Institutions and the National Resolution Fund. The purpose of these funds is to guarantee deposits pursuant to the terms established in specific regulations (Note 1.i). Index Annual Report 2015 Legal Documentation

22.Social Welfare Fund

In accordance with Act 13/1998 on Cooperative Credit Institutions, Act 27/1999 on Cooperatives and the Parent Company’s articles of association, the Education and Development Fund must consist of at least 10% of free cash flow, to be used for activities that fulfil one of the following purposes: a) Training and education of the members and employees of Caja Rural in the principles and values of the cooperative movement or in specific material relating to its corporate or labour-related activity and other cooperative activities. b) Promoting the cooperative model and fostering relationships between cooperative entities. c) Cultural, business and welfare initiatives serving the local area or community in general, initiatives that enhance quality of life, promote community development and/or protect the environment. The basic guidelines for application of the Education and Development Fund are agreed by members at the General Meeting. In pursuit of the Fund’s objectives, the Group may work in conjunction with other companies and entities, in such cases providing either full or partial funding. The Education and Development Fund can be neither encumbered nor garnished and allocations to the Fund must be recognized in the consolidated statement of financial position separately from all other items, pursuant to the provisions of the regulations governing the activities of credit institutions. The definitive allocation to the Education and Development Fund is approved by the Parent Company’s Governing Board. Once approved, the Fund is managed by the Marketing Department. In 2015 and 2014, the Education and Development Fund was used, in accordance with the basic guidelines agreed by members at the General Meeting, for the following activities:

Thousands of euro 2015 2014

Consultancy, training and promotion of the cooperative business model 1,577 1,495 Teaching and research 1,035 971 Sports aid 144 132 Charity work 120 116 Cultural, recreational and other activities 118 105 Economic and social development 453 516 3,447 3,335

Index Annual Report 2015 Legal Documentation

The balance of property and equipment assigned to the Education and Development Fund at 31 December 2015 and 2014 was EUR 171 thousand and EUR 172 thousand, respectively. (Note 15). The breakdown by item of the balances assigned to the Parent Company’s Education and Development Fund at 31 December 2015 and 2014 is as follows:

Thousands of euro 2015 2014 Application of Education and Development Fund Maintenance costs incurred in the year 3,448 3,286 Applied to property and equipment (171) (172) Applied to other investments (2) (1) TOTAL 3,275 3,113

Amount committed 3,456 3,214 Amount not committed 6,661 6,803 Amount committed for investments 4,717 1,442 TOTAL 14,834 11,459

Education and Development Fund (Social Welfare Fund) 11,559 8,346 Index Annual Report 2015 Legal Documentation

23.Tax position

On 3 March 2015, the Hacienda Foral de Navarra (Navarre regional tax authority) launched two general inspections, one looking at the Parent Company’s income tax for tax years 2010, 2011 and 2012 and one looking at VAT for 2011 and 2012. On 27 July 2015, the inspection reports were received, which the Cooperative Bank did not contest. Payments to settle the resulting adjustments were recognized, respectively, as charges under “Other general administrative expenses - Contributions and taxes” of EUR 2,011 thousand (Note 33) and “Income tax” of EUR 1,910 thousand. All taxes to which the Parent Company is subject are open to inspection in respect of the last four years, except Income Tax (2013 and later) and VAT (2013 and later). In accordance with tax law, declared taxable income cannot be considered definitive until it has been inspected by the tax authorities or four years has elapsed since the return was filed. Because the tax regulations relating to the activities of financial institutions can be interpreted in different manners, certain contingent tax liabilities for the years open to inspection could exist. Although it is not possible to objectively quantify the tax obligations that could arise as a result of future tax inspections, the Governing Board is of the opinion that the possibility of significant liabilities arising in this respect is remote, and that any such liabilities would in any case be without material impact on the financial position of the Group and, thus, the consolidated annual financial statements.

Reconciliation between accounting and taxable profit

The breakdown of the balance of “Income tax” shown in the consolidated income statement of Caja Rural de Navarra for 2015 and 2014 is as follows:

Thousands of euro 2015 2014 Income tax expense accrued in the year 5,313 3,536 Tax rate adjustments to previous years 335 - Tax inspection reports (2010-2012) 1,910 Positive adjustments to Company income tax (Note 2.u) (525) - Adjustments to income tax (2013-2014) 444 - Tax expense to subsidiaries 616 714 Other taxes on income - 7 TOTAL 8,093 4,257

Under Navarre Regional Law 24/1996, of 30 December, on Company Income Tax, the Parent Company is subject to a 23% tax rate for the tax year started Index Annual Report 2015 Legal Documentation

1 January 2015 (25% for cooperative earnings and 30% for extra-cooperative earnings, for the tax year beginning 1 January 2014) (Note 2.u). Certain deductions for double taxation, reinvestment and training expenses may be applied to these rates. Because tax legislation permits different treatments for certain transactions, accounting profit differs from taxable profit. The Parent Company and its subsidiaries do not file consolidated tax returns as the subsidiaries are public limited companies and cannot therefore be included in the same tax return as the parent, since it is a cooperative entity. However, the reconciliation between the Cooperative Bank’s accounting profit and taxable profit for 2015 and 2014 is included below:

Thousands of euro 2015 2014 Increases Decreases Total Increases Decreases Total Consolidated profit before accrued tax and after mandatory allocation to the Education and Development Fund 76,419 59,585 Permanent differences 349 (38,979) (38,630) 40 (32,004) (31,964) Adjusted accounting profit 37,789 27,621 Temporary differences - Arising in the year 14,700 - 14,700 30,126 (1,847) 28,279 - Arising in prior years 685 (77) 608 595 (112) 483 Taxable profit for the year 53,097 56,383

In 2015 and 2014, the permanent differences reflect falls in taxable income, mainly due to mandatory contributions to the Mandatory Reserve Fund (Note 21) and the Social Welfare Fund (Note 22) and to interest on capital contributions (Note 4). Applying the Parent Company’s effective income tax rate for 2015 to adjusted accounting profit and taxable profit, the amounts of income tax expense accrued and repayable for the year were EUR 7,477 thousand and EUR 3,536 thousand, respectively. Independently from the income tax expense recognized in the consolidated income statement, the Group recognized in the statement of financial position taxes as tax assets and liabilities in respect of “Valuation adjustments” and “Available-for-sale financial assets”, up to the moment of their sale, totalling EUR 480 thousand and EUR 16,032 thousand, respectively, at 31 December 2015 (compared with EUR 26,024 thousand of liabilities only at 31 December 2014). Index Annual Report 2015 Legal Documentation

Tax assets and liabilities

The balance of “Current tax assets” and “Current tax liabilities” shown in the consolidated statement of financial position includes the assets and liabilities corresponding to various taxes applicable to the Group, including VAT, withholdings at source and income tax payments on account, and the provision for Company income tax relating to profit for each year (Note 2.u.). The difference between the tax expense accrued and the tax expense payable is the result of the deferred tax assets and liabilities arising due to temporary differences. The deferred taxes recognized in the statements of financial position closed at 31 December 2015 and 2014 arose from the following sources:

Thousands of euro

2015 2014 Deferred tax assets arising from: Allocations to pension funds 170 156 Deductions pending application 8,043 12,963 Unallowable loan loss provisions 10,782 7,500 Reversal of origination fees 31 47 Tax loss carryforwards of the Parent Company 24,493 30,726 Available-for-sale equity instruments 480 - Deferred tax of subsidiaries 5,094 5,124 Other items 192 191 Total 49,285 56,707 Deferred tax liabilities arising from: Available-for-sale debt securities 16,032 17,679 Available-for-sale equity instruments - 8,345 Re-measurement of property 3,737 4,301 Arising from business combination (Note 21) - 140 Allocations to equity investments 462 708 Accelerated depreciation and amortization 211 1,153 Deferred tax of subsidiaries 1,222 1,712 Total 21,664 34,038

Index Annual Report 2015 Legal Documentation

At 31 December 2015 and 2014, the breakdown of income tax deductions and credits attributable to the Parent Company and pending application in future years is as follows:

Thousands of euro Deadline for Year generated application 2015 2014

Limited deductions against tax expense 2010-2015 2020-2025 8,043 579 Unlimited deductions against tax expense 2007-2015 2017-2025 - 12,384 Tax loss carryforwards 2012 2027 24,493 30,726 32,536 43,689

Unlimited deductions against tax expense are mainly those generated by reinvestment of the proceeds of security sales. Deferred tax assets arising from tax loss carryforwards and deductions awaiting offsetting are recognized when it is probable that a taxable profit against which they can be applied will be realized in the next 10 years. At 31 December 2015, the directors of the Parent Company considered it reasonable to recognize deferred tax assets of EUR 24,493 thousand in respect of tax loss carryforwards and EUR 8,043 thousand in respect of unused deductions as they expect these amounts to be offset against taxable income generated by the Parent Company in future years in accordance with the Strategic Plan. Index Annual Report 2015 Legal Documentation

24. Contingent exposures and commitments

Contingent exposures

At the close of 2015 and 2014, the breakdown of contingent exposures, defined as those amounts the Group will have to pay on behalf of third parties if the parties originally liable default, is as follows:

Thousands of euro 2015 2014 Financial guarantees 65,843 47,760 Guarantees and other sureties 368,592 372,650 Irrevocable documentary credits 9,445 11,465 Other contingent exposures (Notes 10 and 17) 373,939 210,111 Total 817,819 641,986

A significant proportion of these contingent exposures will mature without the Group being required to make any payment. Accordingly, the total balance of these commitments cannot be considered a real future need to provide funding or liquidity to third parties. “Other contingent exposures” includes EUR 43,061 thousand at 31 December 2014, for the guarantee given to Banco Cooperativo Español, S.A., in respect of bond issues underwritten by the Spanish government and against which the Cooperative Bank received loans for the same amount from Banco Cooperativo Español, S.A. (Note 17). The same item also includes EUR 373,939 thousand and EUR 167,050 thousand at 31 December 2015 and 2014, respectively, for the guarantee provided by the Cooperative Bank to cover transactions by Banco Cooperativo Español, S.A. on the interbank market (Note 10). Income from guarantee instruments is recognized under “Fee and commission income” in the consolidated income statement and is calculated by applying the rate established in the related contract to the nominal amount of the guarantee. Index Annual Report 2015 Legal Documentation

Contingent commitments

The breakdown of contingent commitments at 31 December 2015 and 2014 is as follows:

Thousands of euro 2015 2014 Drawable by third parties 872,437 807,801 Regular way purchase contracts for financial instruments 198 - Subscribed but unpaid capital 553 590 Other contingent commitments 178,817 171,436

1,052,005 979,827

This includes irrevocable commitments to provide financing in accordance with certain previously stipulated conditions and deadlines. The breakdown by counterparty of amounts drawable by third parties in 2015 and 2014 was as follows:

Thousands of euro 2015 2014

Credit institutions 35 - Government bodies 81,947 38,022 Other resident sectors Credit cards 227,447 247,328 Demand accounts 305,803 291,920 Other 256,555 229,924 Non-resident 650 607 Total 872,437 807,801

Index Annual Report 2015 Legal Documentation

25. Off-balance sheet customer funds

The breakdown of funds from customers managed by the Group off the balance sheet at the close of 2015 and 2014 is as follows:

Thousands of euro 2015 2014

Companies and investment funds 1,159,560 981,346 Pension funds and endowment policies 592,472 553,039 Total 1,752,032 1,534,385

The Group does not manage assets under management or financial mandates directly. Its activities are limited to marketing and the mandates are then entrusted to Banco Cooperativo Español, S.A., which signs the portfolio administration and management contract with the Group’s customers and is therefore the party liable in their respect. The breakdown of the net fee and commission income generated by the aforementioned activities in 2015 and 2014, which are included in “Fees and commissions for marketing non-banking products” (Note 29), is as follows:

Thousands of euro 2015 2014

Investment companies and funds 9,220 6,558 Pension funds and endowment policies 4,507 4,630

13,727 11,188

The Group also provides securities administration and custody services to its customers. Commitments held by the Group in this regard at 31 December 2015 and 2014 came to EUR 497,110 thousand and EUR 575,450 thousand, respectively. Index Annual Report 2015 Legal Documentation

26. Interest and similar income

“Interest and similar income” includes the interest accrued in the year on all financial assets with an implicit or explicit return, calculated by applying the effective interest method, irrespective of whether they are measured at fair value. Interest is recognized gross, without deducting any tax withheld at source. The breakdown by source of interest and similar income accrued in 2015 and 2014 is as follows:

Thousands of euro

2015 2014

Deposits at central banks - - Loans and advances to credit institutions (Note 10) 4,891 13,350 Loans and advances to customers (Note 10) 163,950 181,615 Debt securities (Notes 9, 10 and 11) 39,874 51,061 Other interest 508 239

Total 209,223 246,265

Index Annual Report 2015 Legal Documentation

27. Interest and similar expense

“Interest and similar expense” includes interest accrued in the year on all financial liabilities with an implicit or explicit return, calculated by applying the effective interest method, irrespective of whether they are measured at fair value. The breakdown by source of interest and similar expenses accrued in 2015 and 2014 is as follows:

Thousands of euro 2015 2014

Deposits at central banks - - Loans and advances to credit institutions (Note 17) 6,743 22,299 Customer deposits (Note 17) 36,595 64,833 Debt securities (Note 17) 19,681 17,814 Other interest 54 58

Total 63,073 105,004

Index Annual Report 2015 Legal Documentation

28. Income from equity instruments “Income from equity instruments” corresponds to dividends and other remuneration on equity instruments paid from the profits of investees after the date of acquisition of the interest. The breakdown of this line of the consolidated income statement is as follows:

Thousands of euro

2015 2014

Investments in associates - - Other equity instruments 5,567 3,407 Total 5,567 3,407

Index Annual Report 2015 Legal Documentation

29. Fee and commission income

“Fee and commission income” reflects the sum of all fees and commissions accrued in favour of the Group in the year, except those that form an integral part of the effective interest rate on financial instruments. The breakdown of this line of the consolidated income statement is as follows:

Thousands of euro

2015 2014 Contingent exposures 7,524 7,879 Contingent commitments 1,629 1,606 Currency exchange 350 347 Collection and payment services 21,376 24,290 Securities services 2,782 2,370 Sale of non-banking products 23,378 22,135 Other fees and commissions 4,961 6,993 Total 62,000 65,620

Index Annual Report 2015 Legal Documentation

30. Fee and commission expense

“Fee and commission expense” reflects the sum of all fees and commissions accrued to the charge of the Group in the year, except those that form an integral part of the effective interest rate on financial instruments. The breakdown of this line of the consolidated income statement is as follows:

Thousands of euro

2015 2014 Fees and commissions assigned to other entities and 3,261 4,804 correspondents Fees and commissions paid on securities transactions 304 297 Other fees and commissions 37 95 Total 3,602 5,196

Index Annual Report 2015 Legal Documentation

31. Gains (losses) on financial assets and liabilities

“Gains (losses) on financial assets and liabilities” reflects the amount of valuation adjustments on financial instruments, except those attributable to interest accrued as a result of application of the effective interest method and corrections to asset values recognized in income, and the gains or losses realized on their sale or purchase. The breakdown of the balance of this item, by type of instrument and accounting classification, is as follows:

Thousands of euro 2015 2014

Financial instruments held for trading 1,625 2,533 Other financial instruments through profit and loss - - Available-for-sale financial assets 2,833 6,119 Loans and advances 316 233 Financial liabilities at amortized cost (Note 17) - - Accounting hedges not included in interest (Note 12) 178 5 Other - 20 Total 4,952 8,910

Index Annual Report 2015 Legal Documentation

32. Personnel expenses

“Personnel expenses” reflects all remuneration accruing to personnel on the payroll, whether permanent or temporary, irrespective of their position or activity, in the course of the year. It includes the current service cost of pension plans and breaks down as follows:

Thousands of euro 2015 2014 Wages and salaries 36,421 35,600 Social security contributions 9,905 8,864 Transfers to defined benefits plans (Note 2.t) 31 147 Other personnel expenses 708 395 Personnel expenses of subsidiaries 16,936 13,438 Total 64,001 58,444

The breakdown by professional category and gender of the Group’s average headcount is as follows:

2015 2014 Men Women Men Women Senior managers 221 50 219 53 Executives 124 144 119 127 Administrative staff 148 228 147 234 Messengers 3 - 3 - Staff of subsidiaries 230 292 237 250 Total 726 714 725 664 Index Annual Report 2015 Legal Documentation

33. Other general administrative expenses

The breakdown of this line of the consolidated income statement is as follows:

Thousands of euro 2015 2014

Property and equipment 4,146 4,381 Computer hardware and software 9,983 10,244 Communications 2,188 2,234 Advertising and marketing 3,148 3,725 Legal 5,963 4,308 Staff travel and agency costs 1,242 1,203 Security guards and cash transportation 951 999 Subcontracted administrative services 1,125 853 Contributions and taxes 4,529 1,206 Other general expenses 1,443 1,173 Other expenses of subsidiaries 28,077 24,357 Total 62,795 54,683

Fees paid for the audit of the Cooperative Bank’s consolidated financial statements and the annual financial statements of its subsidiaries amounted to EUR 131 thousand and EUR 112 thousand in 2015 and 2014, respectively. The auditors also received additional fees for the provision of non-audit services of EUR 12 thousand and EUR 15 thousand in 2015 and 2014, respectively. Index Annual Report 2015 Legal Documentation

34. Allocations to provisions

The detail of this line of consolidated income statement is as follows:

Thousands of euro 2015 2014

Provisions for contingent liabilities and commitments (Note 18) 7,963 (1,583) Net allocation to other provisions (Note 18) - 178 Total 7,963 (1,405)

Index Annual Report 2015 Legal Documentation

35. Impairment losses on financial assets (net)

The detail of this line of consolidated income statement is as follows:

Thousands of euro 2015 2014 Net impairment charge - Loans and advances - Loans and advances to customers (Note 10) 35,900 64,539 Net impairment charge - Loans and advances - Debt securities (Note 10) (7) 44 Total loans and advances 35,893 64,583

Net impairment charge - Available-for-sale financial assets - Debt securities (Note 9) 394 287 Net impairment charge - Available-for-sale financial assets - Equity instruments (Note 9) 125 406 Net impairment charge - Held-to-maturity investments (Note 11) 213 154 Total other financial instruments not measured at fair value through profit or loss 732 847 Total 36,625 65,430

Index Annual Report 2015 Legal Documentation

36. Impairment losses on other assets (net)

The detail of this line of consolidated income statement is as follows:

Thousands of euro 2015 2014 Net impairment charge - Property and equipment for own use (Note 15) - - Net impairment charge - Goodwill (Note 15) 548 468 Net impairment charge - Investment property (Note 15) - - Net impairment charge - Inventories and other 905 (199) Total 1,453 269 Index Annual Report 2015 Legal Documentation

37. Contribution to consolidated profit (loss) for the year attributable to owners of the parent

The breakdown of the contributions to consolidated profit made by consolidated companies is as follows:

Thousands of euro 2015 2014

Parent Company (after consolidation adjustments) 64,883 58,249 Subsidiaries (after consolidation adjustments) 1,146 (5,599) Associates 57 59

66,086 52,709

Index Annual Report 2015 Legal Documentation

38. Related parties

In addition to the information set forth in Note 5 in relation to remuneration received, details of the balances included in the consolidated statement of financial position at 31 December 2015 and 2014 and in the consolidated income statements for 2015 and 2014 that arise from transactions with related parties are as follows:

Associates Governing Board Other related and senior parties (*) management 2015 2014 2015 2014 2015 2014 Assets

Loans and advances to 54,382 54,096 801 528 6,013 650 customers Liabilities

Customer deposits 11,035 13,262 1,318 902 6,795 2,041 Other

Contingent exposures 1,623 1,395 - - 406 - Commitments 5,888 7,695 51 192 4,004 - Income

Interest and similar income and fee/commission income 1,007 1,552 21 19 147 16 Interest and similar expense 43 99 7 10 31 26 Income from equity investments 1,757 1,268 - - - -

(*) “Other related parties” includes direct family members and companies related to members of the Governing Board and senior management team in accordance with the provisions of Circular 4/2004 as amended. All transactions with related parties were performed at arm’s length. Index Annual Report 2015 Legal Documentation

39.Information to be kept by mortgage bond market issuers and the special accounting register

As stated in Note 17, the Parent Company is an issuer of mortgage covered bonds (cédulas hipotecarias). It therefore includes below the information from the special accounting register required by Article 21 of Royal Decree 716/2009, of 24 April, in accordance with Bank of Spain Circular 7/2010, to credit institutions, regulating certain aspects of the mortgage market. The information is broken down as required by Bank of Spain Circular 5/2011, of 30 November. Also, in accordance with Royal Decree 716/2009, of 24 April, developing aspects of Act 2/1981, of 25 March, on regulation of the mortgage bond market and other rules governing the mortgage and financial system, the Governing Board states that, at 31 December 2015 and 2014, the Group had in place a set of policies and procedures to guarantee compliance with the rules governing the mortgage bond market and takes responsibility for their fulfilment. These policies and procedures include the following points: • The criteria for accepting risk are based on the borrower’s ability to pay, estimated using internal scoring and rating models. • The main mitigants considered are the mortgage collateral, particularly LTV (loan to value ratio), and the guarantors. • The models, based on the data input and historical performance of several variables, are able to estimate the probability of default and assign an initial credit rating to the application. Each transaction is rated on a scale from lower to higher risk and assigned a probability of default (PD). • The models consider different variables quantifying revenue and income, assets and debt, past payment behaviour, number of other products with the Cooperative Bank and personal factors relating to the borrower as well as certain features of the risk. • Specifically, the current models consider the following variables: personal characteristics, default history, ability to obtain revenue and income, debt, net assets, number of other products with the institution, features of the transaction itself and the collateral or guarantees backing the loan (mitigants). There are also procedures to check information in the system against input data, especially income, assets, mortgage collateral based on the appraisal value of the property, the purpose of the loan, general data on the customer and the customer’s behavioural history. The value of real estate assets to be pledged as mortgage collateral against risky loans is determined using appraisals that are: Index Annual Report 2015 Legal Documentation

• carried out by appraisers registered with the Bank of Spain’s Official Appraisal Registry • compliant with Ministerial Order ECO/805/2003, of 27 March The value of these assets is reviewed at different intervals depending on the status of the loan for which they are pledged as collateral, its amount and its LTV. Different policies are applied to loans classed as problematic (doubtful, substandard or foreclosed) and those classed as standard or special mention.

a) Lending

The total nominal value of the portfolio of mortgage loans and advances outstanding at 31 December 2015 and 2014 was EUR 4,505,518 thousand and EUR 4,507,344 thousand, respectively, of which EUR 2,740,664 thousand and EUR 2,547,645 thousand, respectively, qualified as eligible (without taking account of the limits set by Article 12 of the Royal Decree). Index Annual Report 2015 Legal Documentation

Below, we give a breakdown of the nominal values of all the Group’s loans and advances backed by mortgage collateral, and all loans eligible under current legislation for inclusion in the calculation of the mortgage bond and mortgage covered bond issuance ceiling:

Thousands of euro Nominal value 2015 2014

Total loans (a) 4.505.518 4.507.344 Mortgage securities in issue 80.013 111.696 Of which: Loans retained on the balance sheet 55.782 73.408 Mortgage transfer certificates in issue 356.036 461.483 Of which: Loans retained on the balance sheet 355.379 460.685 Mortgage loans pledged as security for funds received -- Loans covering issues of mortgage bonds and mortgage covered bonds 4.069.469 3.934.165 Non-eligible loans (b) 1.328.805 1.386.520 Meet all eligibility requirements except the limit in article 5.1 of RD 716/2009 1.328.805 1.386.520 Other -- Eligible loans (c) 2.740.664 2.547.645 Non-qualifying portions (d) 109.191 113.072 Qualifying portions 2.631.473 2.434.573 Loans used to back issues of mortgage bonds -- Loans eligible for cover pool of mortgage covered bonds 2.631.473 2.434.573

(a) Balance drawn down and pending collection of loans and advances secured by mortgages to the Cooperative Bank (including those acquired via mortgage securities and mortgage transfer certificates), whether or not they have been derecognized from the balance sheet and irrespective of LTV. (b) Loans secured by mortgages not transferred to third parties nor pledged as security for funds received which do not meet the requirements of Article 3 of Royal Decree 716/2009 to be eligible as collateral for the issuance of mortgage bonds and mortgage covered bonds. (c) Loans eligible as collateral for the issuance of mortgage bonds and mortgage covered bonds under Article 3 of Royal Decree 716/2009 without deducting the limits set in Article 12 of Royal Decree 716/2009. (d) Amount of eligible loans which, in accordance with the criteria set out in Article 12 of Royal Decree 716/2009, do not qualify as collateral for issues of mortgage bonds and mortgage covered bonds. Below we present a breakdown of the mortgage loans and advances by different criteria, at 31 December 2015 and 2014: Index Annual Report 2015 Legal Documentation

Thousands of euro 2015 2014 Loans covering Loans covering issues of issues of mortgage bonds mortgage bonds and mortgage Of which: and mortgage Of which: covered bonds Eligible loans covered bonds Eligible loans (a) (b) (a) (b)

TOTAL 4,069,469 2,740,664 3,934,165 2,547,645

1 ORIGIN OF LOAN 4,069,469 2,740,664 3,934,165 2,547,645 1.1 Originated by Bank 3,520,871 2,392,281 3,414,005 2,225,445 1.2 Transferred from other lenders 548,598 348,383 520,160 322,200 1.3 Other - - - -

2 CURRENCY OF DENOMINATION 4,069,469 2,740,664 3,934,165 2,547,645 2.1 Euro 4,069,469 2,740,664 3,934,165 2,547,645 2.2 Other currencies - - - -

3 PAYMENT POSITION 4,069,469 2,740,664 3,934,165 2,547,645 3.1 Standard 3,772,438 2,594,685 3,532,261 2,364,590 3.2 Other 297,031 145,979 401,904 183,055

4 AVERAGE RESIDUAL TERM 4,069,469 2,740,664 3,934,165 2,547,645 4.1 Up to 10 years 1,579,423 1,086,376 1,448,148 938,459 4.2 10 to 20 years 2,363,195 1,594,703 2,259,317 1,488,296 4.3 20 to 30 years 119,030 52,280 220,567 115,258 4.4 More than 30 years 7,821 7,305 6,133 5,632

5 INTEREST RATE 4,069,469 2,740,664 3,934,165 2,547,645 5.1 Fixed 29,716 17,966 30,211 20,271 5.2 Variable 4,039,753 2,722,698 3,903,954 2,527,374 5.3 Split fixed/variable - - - -

6 BORROWER 4,069,469 2,740,664 3,934,165 2,547,645 6.1 Legal entities and self-employed 1,064,326 620,735 1,064,019 599,466 Of which: Real estate developments 103,785 52,083 11,747 8,987 6.2 Other individuals and NPISHs 3,005,143 2,119,929 2,870,146 1,948,179

7 TYPE OF COLLATERAL 4,069,469 2,740,664 3,934,165 2,547,645 7.1 Assets/buildings 3,997,765 2,705,155 3,905,807 2,535,230 7.1.1 Residential 3,208,811 2,190,654 3,138,100 2,045,324 Of which: State-subsidized housing 569,653 401,174 557,549 382,254 7.1.2 Commercial 20,152 9,452 - - 7.1.3 Other 768,802 505,049 767,707 489,906 7.2 Assets/buildings under construction 20,456 13,895 28,358 12,415 7.2.1 Residential 18,402 11,841 18,521 12,415 Of which: State-subsidized housing 16,758 10,639 17,666 12,310 7.2.2 Commercial 1,454 1,454 - - 7.2.3 Other 600 600 9,837 - 7.3 Land 51,249 21,614 - - 7.3.1 Development land 48,119 19,802 - - 7.3.2 Other 3,130 1,812 - - (a) Balance drawn down and pending collection of loans and advances secured by mortgages to the Cooperative Bank, irrespective of their LTV, not transferred to third parties nor pledged as security for funds received. (b) Loans eligible as collateral for the issuance of mortgage bonds and mortgage covered bonds under Article 3 of Royal Decree 716/2009 without deducting the limits set in Article 12 of Royal Decree 716/2009. Index Annual Report 2015 Legal Documentation

The total amount of loans which, in accordance with the criteria set out in Article 12 of Royal Decree 716/2009, qualified to be used as collateral for issues of mortgage bonds and covered bonds at 31 December 2015 and 2014 was EUR 4,069,469 thousand and EUR 3,934,165 thousand, respectively. Regarding nominal and present value, the latter being calculated in accordance with Article 23 of the Royal Decree, the Group had no mortgage bonds in issue at 31 December 2015 and the nominal value of the mortgage loans and advances remaining on the loan book that had been used for mortgage securities or mortgage transfer certificates at 31 December 2015 and 2014 was EUR 436,049 thousand and EUR 573,179 thousand, respectively. The nominal value of all non-eligible mortgage loans and advances was EUR 2,740,664 thousand and EUR 2,547,645 thousand at 31 December 2015 and 2014, respectively. Of this, none was classed as non-eligible for failing to comply with the limits set in Article 5.1 of Royal Decree 716/2009 while meeting all other requirements for eligibility (Article 4 of the same standard) at end-2015 or end- 2014. Index Annual Report 2015 Legal Documentation

The breakdown of the nominal values of mortgage loans and advances eligible to be used as collateral for mortgage bonds and mortgage covered bonds by LTV based on their latest appraisal value at 31 December 2015 and 2014 is as follows:

At 31 December 2015

Thousands of euro Loan to value (b) Between 40% Between 60% Up to 40% and 60% and 80% Above 80% TOTAL

Loans eligible to cover issues of mortgage bonds and mortgage covered bonds (a) 651,923 946,681 1,135,452 6,608 2,740,664 - On homes 436,156 740,193 1,019,538 6,608 2,202,495 - On other assets 215,767 206,488 115,914 - 538,169

At 31 December 2014

Thousands of euro Loan to value (b) Between 40% Between 60% Up to 40% and 60% and 80% Above 80% TOTAL

Loans eligible to cover issues of mortgage bonds and mortgage covered bonds (a) 589,283 877,986 1,073,940 6,436 2,547,645 - On homes 395,005 676,261 980,037 6,436 2,057,739 - On other assets 194,278 201,725 93,903 - 489,906

(a) Loans eligible as collateral for the issuance of mortgage bonds and mortgage covered bonds without deducting the limits set in Article 12 of Royal Decree 716/2009. (b) Loan to value is the ratio that comes from dividing the loan outstanding at the reporting date by the last appraisal value of the asset. Index Annual Report 2015 Legal Documentation

The change in nominal value of mortgage loans and advances used to cover the issue of mortgage bonds and mortgage covered bonds (eligible and non- eligible) in 2015 and 2014, is as follows:

Thousands of euro Eligible Non-eligible loans (a) loans (b)

1 Opening balance 2014 2,412,845 1,564,923 2 Eliminations from pool 786,135 622,635 2.1 Terminated at maturity 762,616 592,397 2.2 Repaid before maturity 23,519 30,238 2.3 Transferred to other entities - - 2.4 Other - - 3 Additions to pool 920,935 444,232 3.1 Originated by Bank 804,327 377,631 3.2 Transferred from other entities 116,608 66,601 3.3 Other - -

4 Closing balance 2014 2,547,645 1,386,520

1 Opening balance 2015 2,547,645 1,386,520 2 Eliminations from pool 311,012 333,912 2.1 Terminated at maturity 284,186 158,378 2.2 Repaid before maturity 7,611 9,869 2.3 Transferred to other entities - - 2.4 Other 19,215 165,665 3 Additions to pool 504,031 276,197 3.1 Originated by Bank 13,094 213,235 3.2 Transferred from other entities 31 28,752 3.3 Other 490,906 34,210

4 Closing balance 2015 2,740,664 1,328,805

(a) Loans eligible as collateral for the issuance of mortgage bonds and mortgage covered bonds under Article 3 of Royal Decree 716/2009 without deducting the limits set in Article 12 of Royal Decree 716/2009. (b) Loans secured by mortgages not transferred to third parties nor pledged as security for funds received which do not meet the requirements of Article 3 of Royal Decree 716/2009 to be eligible as collateral for the issuance of mortgage bonds and mortgage covered bonds. Index Annual Report 2015 Legal Documentation

The amounts of mortgage loans and advances available to be used as collateral for the issue of mortgage bonds and mortgage covered bonds at 31 December 2015 and 2014 are as follows:

Thousands of euro 2015 2014 Amounts Amounts available. available. Nominal value Nominal value (a) (a) Mortgage loans covering issues of mortgage bonds and mortgage covered bonds 234,977 224,497 - Potentially eligible (b) 144,170 126,482 - Non-eligible 90,807 98,015 (a) Amounts committed (limit) less amounts drawn of all loans secured by mortgages, irrespective of their loan to value, not transferred to third parties nor pledged as security for funds received. Amounts available also include those that are only granted to developers once homes are sold. (b) Loans potentially eligible to cover the issue of mortgage bonds and mortgage covered bonds in accordance with Article 3 of Royal Decree 716/2009.

At 31 December 2015 and 2014, the Parent Company did not consider it necessary to identify replacement assets for outstanding mortgage covered bonds as these represented only 61.35% and 56.92% of total eligible assets, respectively, compared to the maximum 80% allowed by Act 2/1981, of 25 March, on regulation of the mortgage market. Index Annual Report 2015 Legal Documentation

b) Funding

Details of issues of collateralized securities backed by the Group’s portfolio of mortgage loans and advances at 31 December 2015 and 2014 are given below:

Thousands of euro 2015 2014 Average Average residual term residual term Nominal to maturity Nominal to maturity Mortgage backed securities value (months) value (months) 1 Mortgage bonds in issue - - 2 Mortgage covered bonds in issue 1,650,000 1,450,000 Of which: off-balance sheet liabilities 600,000 900,000 2.1 Debt securities. Issued via public offering - - 2.1.1 Residual term up to 1 year - - 2.1.2 Residual term 1 to 2 years - - 2.1.3 Residual term 2 to 3 years - - 2.1.4 Residual term 3 to 5 years - - 2.1.5 Residual term 5 to 10 years - - 2.1.6 Residual term more than 10 years - - 2.2 Debt securities. Other issues 1,650,000 1,450,000 2.2.1 Residual term up to 1 year - - 2.2.2 Residual term 1 to 2 years - - 2.2.3 Residual term 2 to 3 years 500,000 - 2.2.4 Residual term 3 to 5 years - 500,000 2.2.5 Residual term 5 to 10 years 1,100,000 900,000 2.2.6 Residual term more than 10 years 50,000 50,000 2.3 Deposits - - 2.3.1 Residual term up to 1 year - - 2.3.2 Residual term 1 to 2 years - - 2.3.3 Residual term 2 to 3 years - - 2.3.4 Residual term 3 to 5 years - - 2.3.5 Residual term 5 to 10 years - - 2.3.6 Residual term more than 10 years - - 3 Mortgage securities in issue (b) 55,782 194 73,408 206 3.1 Issued via public offering - - - - 3.2 Other issues 55,782 194 73,408 206 4 Mortgage transfer certificates in issue (b) 355,379 195 460,685 207 4.1 Issued via public offering - - - - 4.2 Other issues 355,379 195 460,685 207

(a) Mortgage covered bonds include all those issued by the Cooperative Bank which have not been redeemed, even when they are not recognized on the liabilities side of the balance sheet (because they have been placed with third parties or bought back by the Cooperative Bank). (b) Amount of mortgage securities and mortgage transfer certificates issued, only including mortgage loans and advances recognized as assets (held on the balance sheet). Index Annual Report 2015 Legal Documentation

40. Agency agreements

The Cooperative Bank had no “agency agreements” within the meaning of Article 22 of Royal Decree 1245/1995, of 14 July, either at the 2015 and 2014 balance sheet close or at any time in the course of those years. Index Annual Report 2015 Legal Documentation

41. Abandoned balances and deposits

Pursuant to the provisions of Article 18 of Act 33/2003, of 3 November, on the Property of Government Institutions (Ley del Patrimonio de las Administraciones Públicas), the Parent Company has no balances in accounts qualified as abandoned in accordance with the definition provided in the aforesaid article. Index Annual Report 2015 Legal Documentation

42. Customer Services Department

The accompanying management report includes a summary of the report presented to the Parent Company’s Governing Board on the work performed by this Department in 2015, as required under Ministry for the Economy Order ECO/734/2004, of 11 March. Index Annual Report 2015 Legal Documentation

43.Segment reporting

Business segments

The core business of the Caja Rural de Navarra Group is retail banking. It has no other material business lines that, pursuant to prevailing regulations, require the Group to provide information segmented by business lines.

Geographical segments

The Parent Company and all other companies of the Caja Rural de Navarra Group carry out virtually all their activities in Spain and have a similar customer base in all parts of the country. It therefore reports all its operations under a single geographical segment. Index Annual Report 2015 Legal Documentation

44. Disclosures of average payment period to suppliers. Third additional provision “Disclosure obligation” of Act 15/2010, of 5 July

As required by the second final provision of Act 31/2014, of 3 December, amending the third additional provision of Act 15/2010, 5 July, itself amending Act 3/2004, 29 December, which set out measures to combat bad debt in commercial transactions and disclosures to include in the notes to the financial statements on delayed payments to suppliers in commercial transactions, calculated in accordance with the Spanish Accounting and Audit Institute (ICAC) Resolution of 29 January 2016, the details of the Parent Company’s average supplier payment period in 2015 are as follows: 2015

Days Average supplier payment period 16.47 Ratio of transactions paid 16.15 Ratio of transactions outstanding 25.73

Amount (thousands of euro) Total payments made 132,391 Total payments outstanding 12,588

As set out in the single additional provision of Spanish Accounting and Audit Institute (ICAC) Resolution of 29 January 2016 on disclosures to include in the notes to the financial statements on average supplier payment periods in commercial transactions, this being the first year of application no comparative information is supplied, these financial statements being considered initial for the purposes of uniformity and comparability only. Index Annual Report 2015 Legal Documentation

ANNEX I Index Annual Report 2015 Legal Documentation

CAJA RURAL DE NAVARRA, SOCIEDAD COOPERATIVA DE CRÉDITO Statement of financial position at 31 December 2015

Thousands of euro ASSETS 2015 2014

Cash and balances with central banks 39,330 36,224 Financial instruments held for trading 17,276 29,095 Loans and advances to credit institutions - - Loans and advances to customers - - Debt securities - - Equity instruments 1,382 367 Trading derivatives 15,894 28,728 Memorandum items: Loaned or advanced as collateral - - Other financial assets at fair value through profit or loss - - Loans and advances to credit institutions - - Loans and advances to customers - - Debt securities - - Equity instruments - - Memorandum items: Loaned or advanced as collateral - - Available-for-sale financial assets 2,565,249 2,005,998 Debt securities 2,429,875 1,901,045 Equity instruments 135,374 104,953 Memorandum items: Loaned or advanced as collateral 220,102 121,926 Loans and advances 6,606,337 7,000,438 Loans and advances to credit institutions 246,793 883,170 Loans and advances to customers 6,351,432 6,106,256 Debt securities 8,112 11,012 Memorandum items: Loaned or advanced as collateral 436,076 570,768 Held-to-maturity investments 94,385 44,940 Memorandum items: Loaned or advanced as collateral - - Adjustments to financial assets due to macro-hedging - - Hedging derivatives - 16 Non-current assets held for sale 59,494 42,246 Equity investments 160,760 165,009 Associates 32,875 34,773 Jointly-controlled entities - - Group companies 127,885 130,236 Pension-linked insurance contracts - - Property and equipment 103,817 104,477 Property and equipment 101,478 102,124 For own use 101,307 101,952 Leased out under operating lease - - Assigned to social projects 171 172 Investment property 2,339 2,353 Memorandum items: Acquired under finance leases - - Intangible assets - - Goodwill - - Other intangible assets - - Tax assets 46,948 56,755 Current 2,757 5,172 Deferred 44,191 51,583 Other assets 34,522 31,680

TOTAL ASSETS 9,728,118 9,516,878

Index Annual Report 2015 Legal Documentation

CAJA RURAL DE NAVARRA, SOCIEDAD COOPERATIVA DE CRÉDITO Statement of financial position at 31 December 2015 Thousands of euro L I A B I L I T I E S 2015 2014

Financial instruments held for trading 601 3,178 Deposits from central banks - - Deposits from credit institutions - - Customer deposits - - Debt securities - - Trading derivatives 601 3,178 Short securities positions - - Other financial liabilities - - Other financial liabilities at fair value through profit or loss - - Deposits from central banks - - Deposits from credit institutions - - Customer deposits - - Debt securities - - Subordinated liabilities - - Other financial liabilities - - Financial liabilities at amortized cost 8,654,679 8,504,375 Deposits from central banks - - Deposits from credit institutions 1,037,316 1,678,146 Customer deposits 6,493,934 6,137,638 Debt securities 1,086,337 645,298 Subordinated liabilities - - Other financial liabilities 37,092 43,293 Adjustments to financial liabilities due to macro-hedging - - Hedging derivatives 31 170 Liabilities associated with non-current assets held for sale - - Provisions 18,119 9,639 Provisions for pensions and similar obligations 860 807 Provisions for taxes and other legal contingencies - - Provisions for contingent exposures and commitments 17,259 8,832 Other provisions - - Tax liabilities 21,771 33,995 Current 1,329 1,669 Deferred 20,442 32,326 Social Welfare Fund 11,559 8,346 Other liabilities 77,366 92,288 Shares redeemable on demand - -

TOTAL LIABILITIES 8,784,126 8,651,991

Index Annual Report 2015 Legal Documentation

CAJA RURAL DE NAVARRA, SOCIEDAD COOPERATIVA DE CRÉDITO Statement of financial position at 31 December 2015 Thousands of euro 2015 2014

EQUITY

Shareholders’ equity 866,295 792,377 Share capital 163,920 151,602 Issued capital 163,920 151,602 Less: Uncalled capital - - Share premium - - Reserves 642,428 592,830 Other equity instruments - - Hybrid financial instruments - - Other equity instruments - - Less: Treasury shares - - Profit for the year 62,274 50,715 Less: Dividends and remuneration (2,327) (2,770) Valuation adjustments 77,697 72,510 Available-for-sale financial assets 77,697 72,510 Cash flow hedges - - Hedges of net investments in foreign operations - - Translation differences - - Non-current assets held for sale - - Other valuation adjustments - -

TOTAL EQUITY 943,992 864,887

TOTAL EQUITY AND LIABILITIES 9,728,118 9,516,878

MEMORANDUM ITEMS Contingent exposures 819,753 644,329 Contingent commitments 1,054,470 982,390

Index Annual Report 2015 Legal Documentation

CAJA RURAL DE NAVARRA, SOCIEDAD COOPERATIVA DE CRÉDITO Income statement for the year ended 31 December 2015

Thousands of euro 2015 2014

Interest and similar income 209,862 247,275 Interest and similar expense (61,348) (103,409) Remuneration paid to holders of shares redeemable on demand - -

NET INTEREST INCOME 148,514 143,866 Income from equity instruments 7,324 4,675 Fee and commission income 63,643 67,185 Fee and commission expense (3,602) (5,196) Gains (losses) on financial assets and liabilities (net) 4,952 8,910 Financial instruments held for trading 1,625 2,533 Other financial instruments at fair value through profit or loss - - Financial instruments not measured at fair value through profit or loss 3,149 6,372 Other 178 5 Translation differences (net) 939 728 Other operating income 3,827 3,377 Other operating expenses (10,541) (12,202)

GROSS INCOME 215,056 211,343 Administrative expenses (81,783) (75,332) Personnel expenses (47,065) (45,006) Other general administrative expenses (34,718) (30,326) Depreciation and amortization (6,965) (6,826) Provisions (net) (7,963) 1,405 Impairment losses on financial assets (net) (36,526) (64,762) Loans and advances (35,794) (63,915) Other financial instruments not measured at fair value through profit or loss (732) (847)

INCOME FROM OPERATING ACTIVITIES 81,819 65,828 Impairment losses on other assets (net) (5,033) (6,424) Goodwill and other intangible assets - - Other assets (5,033) (6,424) Gains (losses) on the derecognition of assets not classified as non-current assets held for sale (18) (25) Negative difference in business combinations - - Gains (losses) on non-current assets held for sale not classified as discontinued operations (349) 206

PROFIT BEFORE TAX 76,419 59,585 Income tax (7,484) (3,543) Mandatory allocation to welfare projects and funds (6,661) (5,327)

PROFIT (LOSS) FOR THE YEAR FROM CONTINUING OPERATIONS 62,274 50,715 Profit (loss) from discontinued operations(net) - -

PROFIT FOR THE YEAR 62,274 50,715

Index Annual Report 2015 Legal Documentation

CAJA RURAL DE NAVARRA, SOCIEDAD COOPERATIVA DE CRÉDITO I) Statement of Recognized Income and Expense for the year ended 31 December 2015

Thousands of euro 2015 2014

PROFIT FOR THE YEAR 62,274 50,715 OTHER RECOGNIZED INCOME AND EXPENSE 5,187 37,661 Items that will not be reclassified to income Remeasurements on defined benefit pension plans - - Non-current assets held for sale - - Tax on items that will not be reclassified to income - - Items that may be reclassified to income Available-for-sale financial assets 5,062 50,558 Measurement gains (losses), net 7,895 56,677 Amounts transferred to the consolidated income statement (2,833) (6,119) Other reclassifications - - Cash flow hedges - - Measurement gains (losses), net - - Amounts transferred to the consolidated income statement - - Amounts transferred to the initial carrying amount of hedged items - - Other reclassifications - - Hedges of net investments in foreign operations - - Measurement gains (losses), net - - Amounts transferred to the consolidated income statement - - Other reclassifications - - Translation differences - - Measurement gains (losses), net - - Amounts transferred to the consolidated income statement - - Other reclassifications - - Non-current assets held for sale - - Gains (losses) on measurement - - Amounts transferred to the consolidated income statement - - Other reclassifications - - Other recognized income and expense - - Tax on items that cannot be reclassified to income 125 (12,897)

TOTAL RECOGNIZED INCOME AND EXPENSE 67,461 88,376

Index Annual Report 2015 Legal Documentation

CAJA RURAL DE NAVARRA, SOCIEDAD COOPERATIVA DE CRÉDITO II) Comprehensive statement of changes in equity for the year ended 31 December 2015

CAPITAL AND RESERVES

and Less: Less: year Share shares Reserves premium Dividends Dividends instruments VALUATION VALUATION Profit for the the for Profit Other equity equity Other Total capital and reserves Less: Treasury Share capital Share TOTAL EQUITY remuneration 2015 ADJUSTMENTS

Closing balance at 31 December 2014 151,602 - 592,830 - - 50,715 (2,770) 792,377 72,510 864,887 Adjustments for changes in accounting - policies ------Adjustments to correct errors ------Adjusted opening balance 151,602 - 592,830 - - 50,715 (2,770) 792,377 72,510 864,887 Total recognized income and expense - - - - - 62,274 - 62,274 5,187 67,461 Other changes to equity 12,318 - 49,598 - - (50,715) 443 11,644 - 11,644 Capital increases 12,675 ------12,675 - 12,675 Capital reductions (357) ------(357) - (357) Conversion of financial liabilities to equity ------Income from other equity instruments ------Reclassification of financial liabilities as other equity instruments ------Reclassification of other equity instruments - as financial liabilities ------Payments to members ------(2,327) (2,327) - (2,327) Transactions in own equity instruments (net) ------Transfers between equity items - - 47,945 - - (50,715) 2,770 - - - Increases (reductions) in equity in connection with business combinations ------Discretional allocation to the Education and Development Fund ------Share-based payments ------Other increases (reductions) in equity - - 1,653 - - - - 1,653 - 1,653 Closing balance at 31 December 2015 163,920 - 642,428 - - 62,274 (2,327) 866,295 77,697 943,992 Index Annual Report 2015 Legal Documentation

CAJA RURAL DE NAVARRA, SOCIEDAD COOPERATIVA DE CRÉDITO II) Comprehensive statement of changes in equity for the year ended 31 December 2014

CAPITAL AND RESERVES

and year Share shares Reserves premium instruments VALUATION VALUATION Profit for the the for Profit Other equity equity Other Total capital and reserves Less: Treasury Less: Share capital Share TOTAL EQUITY remuneration ADJUSTMENTS 2014 Less: Dividends

Closing balance at 31 December 2013 142,696 - 566,993 - - 28,961 (2,551) 736,099 34,849 770,948 Adjustments for changes in accounting - policies ------Adjustments to correct errors ------Adjusted opening balance 142,696 - 566,993 - - 28,961 (2,551) 736,099 34,849 770,948 Total recognized income and expense - - - - - 50,715 - 50,715 37,661 88,376 Other changes to equity 8,906 - 25,837 - - (28,961) (219) 5,563 - 5,563 Capital increases 9,746 ------9,746 - 9,746 Capital reductions (840) ------(840) - (840) Conversion of financial liabilities to equity ------Income from other equity instruments ------Reclassification of financial liabilities as other equity instruments ------Reclassification of other equity instruments - as financial liabilities ------Payments to members ------(2,770) (2,770) - (2,770) Transactions in own equity instruments (net) ------Transfers between equity items - - 26,410 - - (28,961) 2,551 - - - Increases (reductions) in equity in connection with business combinations ------Discretional allocation to the Education and Development Fund ------Share-based payments ------Other increases (reductions) in equity - - (573) - - - - (573) - (573) Closing balance at 31 December 2014 151,602 - 592,830 - - 50,715 (2,770) 792,377 72,510 864,887 Index Annual Report 2015 Legal Documentation

CAJA RURAL DE NAVARRA, SOCIEDAD COOPERATIVA DE CRÉDITO Cash flow statement for the year ended 31 December 2015 Thousands of euro 2015 2014

A) CASH FLOW FROM OPERATING ACTIVITIES 8,204 31,324 Profit for the year 62,274 50,715 Adjustments to obtain cash flows from operating activities 76,167 85,320 Depreciation and amortization 6,965 6,826 Other adjustments 69,202 78,494 Net increase (decrease) in operating assets (190,628) 22,105 Financial instruments held for trading 11,819 (3,029) Other financial assets at fair value through profit or loss - - Available-for-sale financial assets (559,770) (235,188) Loans and advances 358,307 280,690 Other operating expenses (984) (20,368) Net increase (decrease) in operating liabilities 60,243 (126,898) Financial instruments held for trading (2,577) (716) Other financial liabilities at fair value through profit or loss - - Financial liabilities at amortized cost 86,491 (208,447) Other operating expenses (23,671) 82,265 Company income tax receipts (payments) 148 82

B) CASH FLOWS FROM INVESTING ACTIVITIES (15,089) (36,738) Payments (-) (38,644) (57,040) Property and equipment (6,885) (7,547) Intangible assets - - Equity investments (663) (18,344) Other business units - - Non-current assets held for sale and related liabilities (31,096) (31,149) Held-to-maturity investments - - Other payments related to investing activities - - Receipts (+) 23,555 20,302 Property and equipment 580 246 Intangible assets - - Equity investments 300 3,239 Other business units - - Non-current assets held for sale and related liabilities 8,313 9,587 Held-to-maturity investments 14,362 7,230 Other receipts related to investing activities - -

D) EFFECT OF EXCHANGE RATE FLUCTUATIONS - -

E) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (A+B+C+D) 3,106 722

F) CASH AND CASH EQUIVALENTS AT START OF YEAR 36,224 35,502 G) CASH AND CASH EQUIVALENTS AT END OF YEAR 39,330 36,224

Index Annual Report 2015 Legal Documentation

ANNEX II – ANNUAL BANKING REPORT Index Annual Report 2015 Legal Documentation

Information at 31 December 2015 of the Caja Rural de Navarra Group provided in accordance with Act 10/2014 and Directive 2013/36/EU of the European Parliament and Council. The information below has been prepared in compliance with article 87 and the twelfth transitional provision of Act 10/2014, of 26 June on the regulation, supervision and solvency of credit institutions, published in the Spanish Official State Bulletin on 27 June 2014, transposing Article 89 of Directive 2013/36/EU of the European Parliament and of the Council, of 26 June 2013, on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (“CRD IV”). CRD IV requires credit institutions to file with the Bank of Spain and publish an annual country-by-country breakdown of the following information on a consolidated basis: a) Name, nature and geographical location of activities. b) Turnover. c) Number of employees on a full time equivalent basis. d) Profit or loss before tax. e) Tax on profit or loss. f) Public subsidies received. Detailed information on these points is set out below: a) Name, nature and geographical location of activities: Caja Rural de Navarra (the “Cooperative Bank”), with registered office in Pamplona (Navarre), first opened for business on 23 January 1946. The Cooperative Bank’s articles of association state that its activity is national and its corporate purpose is to meet the financial needs of its members and third-parties by carrying on the activities typical of a credit institution. The Cooperative Bank may therefore engage in all kinds of lending, deposit and service activities in which other credit institutions are permitted to engage, prioritizing the financial needs of its members in the exercise of such activities. Caja Rural de Navarra is the Parent Company of a group of investees that together make up Caja Rural de Navarra and Subsidiaries (the “Group”). The entities making up the Group carry out a range of activities. b) Turnover: EUR 266,313 thousand. For the purposes of this report, turnover is taken to be the gross income reported in the 2015 consolidated income statement. c) Number of employees on a full time equivalent basis: 913 in the Caja Rural de Navarra Parent Company and 532 in its non-financial subsidiaries. FTE employee data was based on the headcount at each entity at end-2015. Index Annual Report 2015 Legal Documentation

d) Profit or loss before tax: EUR 80,845 thousand. Return on consolidated assets was 0,67% at 31 December 2015. e) Tax on profit or loss:EUR 8,093 thousand. f) Public subsidies received: The amount of public subsidies received by the Group in 2015 was immaterial. Index Annual Report 2015 Legal Documentation

CONSOLIDATED MANAGEMENT REPORT Index Annual Report 2015 Legal Documentation

INTRODUCTION

with maturities of up to two years. However, although favourable financing conditions persisted, such low rates and the abovementioned sources of uncertainty kept fixed-income markets in a state of high sensitivity, with repeated bouts of intense volatility and instability throughout 2015. The world’s advanced economies have not yet felt all the benefits of falling commodity prices. The initial impact tends to be negative, as investment is cut back and uncertainty reigns about the economy. But, with time, the positive effects come through. A prolonged period of low commodity prices will help keep monetary policy loose, good news for advanced economies which have yet to shake off the hangover from recession and which, as they now count for less than half of the world economy, have lacked the firepower to offset falls in world growth. That said, they did modestly accelerate growth, a gradual trend that is likely to intensify in 2016. Spain stood out for its macro-economic figures. GDP growth of 3.2% in 2015 was the fastest of the major developed economies. Favourable tailwinds in the form of low interest rates, a weak euro, cheaper energy and no inflation combined with the impact of recent structural reforms, domestic demand for consumption and investment, exports and the paying down of private sector debt. Nevertheless, serious imbalances and threats persist. These include massive unemployment, the public sector deficit and the rise in public sector debt, as well as political uncertainties. Index Annual Report 2015 Legal Documentation

2015 FINANCIAL YEAR

GENERAL COMMENTS

The key points affecting the financial sector as a whole during 2015 were as follows: • Continuation of the process to clean-up and improve the sector’s solvency undertaken over recent years. • Narrowing of recurrent margins from ordinary banking activities (intermediation) and surplus cash. • Historically low interest rates, tending to negative, which generated a scenario of uncertainty and is hitherto unknown in the sector. • Downtrend in NPL rates, though these remain high. • Weak and patchy growth in new lending, leading to fierce competition in the sector. • Sharp increase in the regulations imposed on the sector from both European directives and national institutions. • A strong drive towards digitalization of the sector, both in internal processes and dealing with customers. All of which helps improve the effectiveness and efficiency of service provision and productivity. In this complex environment, 2015 can be seen as a satisfactory year for Caja Rural de Navarra, developing in line with the Cooperative Bank’s forecasts. Development of the Cooperative Bank’s key variables in 2015 is explained below.

PROFIT

Caja Rural de Navarra posted consolidated profit of EUR 66,086 thousand after allocating EUR 6,661 thousand to the Social Welfare Fund, a 25.4% increase on the previous year’s profit. Most of the profit (EUR 63,759 thousand) will go to increase reserves, strengthening capital and the Cooperative Bank’s ability to grow in the future.

SOLVENCY

Including this profit, Caja Rural de Navarra’s solvency measured by its Common Equity Tier 1 (CET1) ratio was 15.91%, among the best in the Spanish financial sector. Index Annual Report 2015 Legal Documentation

INCOME STATEMENT

Profit was the result of the following income items:

CONSOLIDATED INCOME STATEMENT Change % 2015 2014 (thousands of euro) 2015/2014 Net interest income 146,150 141,261 +3.5% Gross income 266,313 252,618 +5.4% Income from operating activities 82,481 64,400 +28.1% Consolidated profit 66,086 52,709 +25.4%

TURNOVER

Customer deposits: On-balance sheet private sector customer funds under management rose by 5.7% to EUR 6,480,414 thousand at year-end. This growth, in a year when off- balance sheet savings grew strongly (especially Investment Funds) and where the market, on the latest available figures, shrank by 0.72%, meant that Caja Rural is continuing to improve its market share in all provinces where it operates. It also maintained the balance of its loan-to-deposit ratio, which stood at 98.3% (compared to 100% in the previous year) which underlines the stability of the Cooperative Bank’s recurrent business. Other savings products: As well as growing the items on its statement of financial position, Caja Rural increased by 7.9% its off-balance sheet resources under management, including an 18.2% rise in Investment Fund assets under management. Loans And Advances: Loans and advances to customers outstanding totalled EUR 6,370,430 thousand, 3.9% more than the previous year. This is a positive trend given the general decline in lending across the Spanish financial sector ( 3.5% on latest published data). Investment quality improved over the year. Writedowns to loans and advances and financial guarantees were 30% lower in 2015 than in 2014. The Cooperative Bank did notable work in supporting the international expansion of our companies. Financing of international trade transactions grew by 18% in 2015. Index Annual Report 2015 Legal Documentation

Regarding consumer credit, the Cooperative Bank remains very active in presenting its offering through channels such as the internet, especially to its customers, where the grant of pre-approved loans is growing fast.

NON-PERFORMING LOANS

The NPL ratio at the end of 2015 was 3.4%, less than the 4.4% of 2014 and well below the 10.12% average for the Spanish financial sector at the same date. The Cooperative Bank also has substantial provisions for doubtful loans covering more than their total value. The coverage rate of doubtful loans is 113.55%, compared to a sector average, on latest available figures, of 57.8%.

RATING

Caja Rural de Navarra is rated by two of the world’s leading agencies, Fitch and Moody’s, and is one of only four Spanish financial institutions rated investment grade by both (the others are Banco Santander, BBVA and Caixabank) and the only regional institution to achieve this feat. Its ratings are: Baa3 by Moody’s and BBB+ by Fitch. These ratings were affirmed during 2015 and Moody’s upgraded the Cooperative Bank’s outlook to “positive outlook”.

OTHER FIGURES

Caja Rural de Navarra has 246 branches spread over the following provinces: Navarre 141, Guipuzcoa 37, Vizcaya 28, Alava 16 and La Rioja 24. In 2015, two new branches were opened in Vizcaya province, a point that contributed to the improvement in the Cooperative Bank’s employment which rose in 2015 to 918 people. In 2016, the Cooperative Bank plans to continue this modest pace of expansion, opening new branches in provinces where it is already active. Currently, 39% of all transactions by customers are carried out through non- branch channels (chiefly ATMs, mobiles and the internet) reflecting the Cooperative Bank’s new ways of consuming financial services with operating platforms that meet customer expectations. On this point, we would point up the improvements made in 2015 to ruralvía (Caja Rural’s remote banking service) both in its specific mobile and tablet application and the development of internet banking. Index Annual Report 2015 Legal Documentation

In 2015, a total of 32,000 people took their first steps in financial activity with Caja Rural de Navarra, underlining its dynamism and market appeal. We would point out that in Navarre one of every two over-18s is a customer of the Cooperative Bank. Importantly, following the entry into force of the new regulations on ATM fees, Caja Rural de Navarra has given its customers free access to cash withdrawals at 7,793 cash machines throughout Spain. Forecasts for 2016, given the complex environment that we will face in the year, are for a slight fall in expected profit and a strengthening of the Cooperative Bank’s solvency, coupled with a stronger market presence measured by its main business metrics: funds from customers, loans and advances, customer numbers, etc. Finally, the Cooperative Bank would like to thank all its members and customers for the confidence they have placed in us and its employees for their work and dedication, without which none of these figures could have been achieved. PRODUCTS AND SERVICES

The most important new products and services offered to customers in 2015 were as follows. In Deposits, despite the atypical interest rate environment, eight new structured deposit products were launched filling out the range on offer to customers. The Cooperative Bank also launched a loyalty deposit account, available when a customer starts paying in a new salary or pension and expanded the range of products linking fixed-term deposits with investment funds. In the young customer segment, which means anyone under 30, Caja Rural de Navarra remains a leading player in Navarre, distributing its Carnet Joven savings account in the province under contract from the Navarre Government. All customers can enjoy the benefits of the JovenIn scheme alongside those of the Carnet Joven in a single card that offers discounts at shops, on transport, leisure facilities, etc.. Another event this year was the relaunch of the Promueve programme for the self-employed and professionals, with strengthened differentiating factors of products and services for this customer segment. In Loans, Caja Rural de Navarra maintained lending levels in consumer credit, pre-approved and individual home loans, as well as in products designed for the self-employed, companies, entrepreneurs and institutions. Note the major role in the product of automatic in-store credit as a point-of-sale finance channel. Index Annual Report 2015 Legal Documentation

Among Multi-channel options, the Cards division expanded the number of ATMs equipped with new functionalities. Also, agreement was reached with a number of financial institutions so that our customers can continue to carry out free withdrawals at 7,700 ATMs in Spain. Also in multi-channels, the Cooperative Bank continues to improve and extend the functionality of ruralvía, its home banking service, and continues to add new applications to the ruralvía mobile app. Caja Rural de Navarra continues to communicate through a range of social networks (Facebook, Twitter, YouTube) and a corporate blog with the aim of communicating flexibly and interactively with customers, keeping them informed about different activities, and publishing general and informative articles of interest. In Insurance, the marketing support structure was consolidated to improve the guidance and advice given to customers and we continue to see a healthy performance in sales of such products. In investment funds, customers wishing to invest at least EUR 20,000 are now offered fund contracts and portfolios which actively manage their savings. In Long-term Savings Products, the Group grew faster than the market and has a product range the meets the needs of all customer profiles. The roll-out of these new products and services and the continuous refinement of its existing offers, has helped Caja Rural de Navarra to accelerate the growth of its financial business, a business that serves the needs of all segments of the population and all economic sectors. It has also helped the Cooperative Bank to differentiate itself in the market and achieve a high level of specialization and service quality across its whole organization: from the branch network to central services departments. Index Annual Report 2015 Legal Documentation

SUMMARY OF THE ANNUAL REPORT OF THE CUSTOMER SERVICES DEPARTMENT

In accordance with the provisions of Article 17 of Order ECO/734/2004, of 11 March, issued by Spain’s Ministry for the Economy, on the Customer Services Department of Financial Institutions, a summary of the Department’s activities in 2015 is presented below. We ended 2015 on a similar trend to last year with the same two fundamental factors dominating the sector: first, a clear squeeze on financial margins and, second, a sensitivity and irritation from wider society and our customers which helps explain the number of complaints to our Customer Service Department. These rose by more than 29% compared to the previous year. Given this situation, we have to maintain the high quality which has always distinguished the Cooperative Bank. For this reason, aware that most financial institutions offer very similar products and prices, we have to make service quality our main differentiating factor probably our main identifying feature. By ensuring customer satisfaction and empathy we can secure their loyalty and continued custom. In 2015, a total of 1,391 customers contacted the Department to file complaints or claims or make suggestions, a 24.42% increase on the 1,118 heard from in 2014. As in recent years, the “floor clause” remains the main reason for complaints and claims, although service charges also stood out. Every six months the Bank of Spain requires a detailed report on complaints received by the Customer Service Department over the period. As a result, we are continuing to stress that insofar as possible we should strive, by effective management in the branch itself, to avoid complaints being passed up to this department to prevent damaging the image and service quality of the Cooperative Bank in the eyes of the regulator. Of the 1,391 customers who contacted the Department: - 1,138 did so by mail - 171 by telephone - 82 by e-mail By type of contact, the total breaks down as follows: - 1,357 Complaints - 9 Claims - 21 Suggestions - 4 Congratulations Index Annual Report 2015 Legal Documentation

Of the nine claims received, two were settled in favour of the customer. The other seven were dismissed. The cost to Caja Rural de Navarra of settling these two claims was EUR 791.45.

By region, the breakdown is as follows: - Pamplona area (including Head Office): 101 - Estella area: 45 - Tudela area: 142 - Tafalla area: 76 - Pamplona-Urbanas area: 333 - La Rioja area: 135 - Basque Country: 554 - Central Services: 5

The most common causes of query or complaint were: - Loans and advances: 955 - Interest, commissions, service fees, charges: 194 - Poor customer support, bad service, excessive waiting time, etc: 158 - Problems with cards: 23 - Insurance: 14 - Human resources: 14 - Technical issues (problems with ATMs, account updaters): 13 - Advertising, campaigns, promotions, gifts: 10 - Other: 10 Average resolution or response time, from the date of receiving the customer query or complaint, was 15 days. In addition to the individual action taken in response to each complaint or claim, a Quality Committee meets every four months to consider the complaints received and take appropriate preventive and improvement measures. FINANCIAL RISK MANAGEMENT

The main risks to which the Group is exposed in its financial instrument transactions are detailed in Note 6 to the consolidated financial statements. In addition, Notes 8, 9, 10, 11, 12 and 17 include information on the various portfolios of financial instruments. Index Annual Report 2015 Legal Documentation

RESEARCH AND DEVELOPMENT ACTIVITIES

The Group engaged in no research and development activities in 2015.

PERIODO MEDIO DE PAGO A PROVEEDORES

Payments to suppliers in 2015 were made in an average of 16 days, below the 60- day legal term required by Act 15/2010, of 5 July, on measures to combat bad debt in commercial transactions, amended by Act 31/2014, of 3 December, itself amending the Capital Companies Act on the improvement of corporate governance. The average payment period was calculated using the method set out in this law.

OUTLOOK FOR 2016

Financial year 2016 is covered by the 2016-2019 Strategic Plan which lays out the general strategic lines of action to be applied over these years. The Plan is constantly reviewed to monitor progress and will serve as a blueprint for annual planning over the period. Thus, in 2016, the Cooperative Bank will be applying the general lines of action set out in the Plan, which is aimed at improving net interest income and market positioning of the Cooperative Bank’s business. Index Annual Report 2015 Legal Documentation

ANNUAL CORPORATE GOVERNANCE REPORT BY OTHER INSTITUTIONS – NOT CAJAS DE AHORROS – THAT ISSUE SECURITIES TRADED ON OFFICIAL MARKETS

ISSUER INFORMATION

DATE OF YEAR END: 31/12/2015 COMPANY TAX ID NUMBER: F-31021611 Company name: Caja Rural de Navarra, Sociedad Cooperativa de Crédito Registered office: Plaza de los Fueros, 1, 31003 - Pamplona (Navarre) A.- OWNERSHIP STRUCTURE A.1- Give details of the owners of significant holdings in the company at the close of the year: A.2.- Indicate, as appropriate, any relationships of a family, commercial, contractual or corporate nature existing between the owners of significant holdings, insofar as they are known to the company, unless they have scant relevance or arise from the ordinary course of business: A.3.- Indicate, as appropriate, any relationships of a commercial, contractual or corporate nature existing between the owners of significant holdings and the company, unless they have scant relevance or arise from the ordinary course of business: A.4.- Indicate, as appropriate, any restrictions on the exercise of voting rights and any restrictions on the acquisition or transfer of shares:

YES X

Description of the restrictions Rights and obligations of new members Members’ rights and obligations start on the day after the agreement of the Governing Board or General Meeting takes definitive effect pursuant to article of association 10. Members must remain in the Institution for at least five years. The rights and obligations of members are set out in articles of association 11 and 12. Index Annual Report 2015 Legal Documentation

Loss of membership Articles of association 14, 15 and 16 list the grounds on which a member may lose their membership and the financial consequences this will entail. Misconduct and penalties Article 17 lists the actions defined as minor, severe and gross misconduct and the penalties imposed, which may involve suspension of membership rights. Availability of members’ contributions Article 18 describes the composition of the share capital and, among other matters, sets the maximum ceiling on share capital that can be held by any one member at 20% for a legal entity and 2.5% for an individual. Article 19 states that redemption of contributions to the share capital can be refused by the Governing Board at its entire discretion. Article 22 specifies the cases in which contributions can be transferred. Transfer is conditional on the Governing Board’s approval. Reduction of Share Capital Under article of association 23, any reduction in the minimum share capital set by article 18 requires the consent of the General Meeting. If the reduction goes beyond the minimum requirement per member official authorization is also needed. Contributions shall not be repaid if there is insufficient coverage as measured by Share Capital, Reserves, Solvency Ratio, or any other measures applicable now or in the future. Voting rights Article 39 defines the votes to which each member is entitled in proportion to their contribution to the share capital. The treatment of conflicts of interest is described in article 48. Index Annual Report 2015 Legal Documentation

B.- GENERAL MEETING OR EQUIVALENT BODY

B.1.- List the quorums for convening general meetings established in the articles of association. Describe how these differ from the system of minimum quorums established in Spanish Capital Companies Act or other applicable legislation. For general meetings to be validly convened, at least three-quarters of the Preparatory Meetings must first have taken place, as established in the articles of association. For meetings to be duly convened on first call, no less than 50% of the representatives elected in these Preparatory Meetings must be present. On second call, the presence of 40% of the elected representatives and corporate officers is sufficient. All of which complies with the regulations in force (Royal Decree 84/1193 of 22 January, Regulations governing Credit Cooperative Institutions) and the Cooperative Bank’s article of association 38. B.2.- Explain the rules for adopting corporate resolutions. Describe how they differ from the system of minimum quorums established in Spanish Capital Companies Act, or other applicable legislation. Except where regulations in force explicitly require otherwise, the General Meeting adopts resolutions by simple majority of the valid votes cast by those attending, not including spoilt ballots and abstentions. A majority of two-thirds of the votes present or represented is necessary for the adoption of resolutions modifying the articles of association or relating to a merger, spin-off, transformation, liquidation or global assignment of the Institution’s assets and liabilities, even when these do not involve contributions to share capital and members of the transferring institution do not become members of the acquiring institution by virtue of the transfer, and in any other circumstances provided for by Act notably including the issue of bonds or other securities. The same enhanced majority is also required to agree the removal or revocation of appointment of members of the Governing Board and to adopt any resolutions relating to asset, financial, organizational or operational changes at the Cooperative Credit Institution where such changes are of an essential nature. Amendments are considered to be essential when they affect at least twenty- five per cent of the Cooperative Bank’s total assets. This complies with the regulations in force (Royal Decree 84/1993 of 22 January, Regulations governing Credit Cooperative Institutions) and the Cooperative Bank’s article of association 40. The resolutions adopted by the Governing Board will be subject to the Cooperative Bank’s article of association 47. Index Annual Report 2015 Legal Documentation

B.3.- Briefly indicate the resolutions adopted by shareholders at the general meetings held in the reporting year and the percentage of votes with which each resolution was adopted. The agenda for the Cooperative Bank’s General Meeting was as follows: 1.- Appointment of two member-controllers to draw up and validate the list of attendees. 2.- Appointment of two member-controllers to approve the minutes for the Ordinary General Meeting. 3.- Report on the convocation and staging of the Preparatory Meetings. 4.- Election, appointment and acceptance of positions on the Governing Board. 5.- Reading and approval, where appropriate, of the annual financial statements (statement of financial position, income statement, statement of recognized income and expense, statement of changes in equity, cash flow statement and notes to the financial statements), proposal forthe calculation and appropriation of net surplus for the year, proposal for setting the basic policy for application of the Education and Development Fund, and Management Report for 2014 of Caja Rural de Navarra, Sdad. Coop. de Crédito and Subsidiaries making up the Caja Rural de Navarra, Sdad. Coop. de Crédito Group. 6.- Reading of the opinion issued by the auditors. 7.- Proposal for the company that is to audit the annual financial statements and the management report for 2015. 8.- Proposal to authorise the Governing Board to issue securities, shares and other finance vehicles. 9.- Various matters 10.- Any other business All agenda items were unanimously approved. B.4.- Indicate the URL and means of accessing corporate governance content on your website. Caja Rural de Navarra’s web address is: www.cajaruraldenavarra.com The corporate governance content on the website is accessed via the following links: www.cajaruraldenavarra.com/GobiernoCorporativo B.5.- State whether the various syndicates of holders of securities issued by the company, if any, have met and, if so, the purpose of the meetings held in the reporting year and the main resolutions adopted. Index Annual Report 2015 Legal Documentation

C.- MANAGEMENT STRUCTURE OF THE COMPANY

C.1.- Board of Directors or other governance body C.1.1.- Detail the maximum and minimum number of directors or members of the governance body as per the articles of association:

Maximum number of directors/board members 15

Minimum number of directors/board members 5

C.1.2.- Fill out the following table on the members of the board and their status: BOARD MEMBERS

Name or company name of Representative Date last appointed director/board member IGNACIO TERES LOS ARCOS 08/05/2015 JOSE MARIA ARIZALETA NIEVA 10/05/2013 ISIDRO BAZTERRICA MUTUBERRIA 10/05/2013 JOSE JAVIER LOPEZ MORRAS 26/10/2012 PEDRO MARIA BEORLEGUI EGEA 10/05/2013 JOSE ANGEL EZCURRA IBARROLA 08/05/2015 MELCHOR MIRANDA AZCONA 08/05/2015 LUIS MIGUEL SERRANO CORNAGO 08/05/2015 ALBERTO ARRONDO LAHERA 08/05/2015 PEDRO JESÚS IRISARRI VALENCIA 08/05/2015 ROBERTO ZABALETA CIRIZA 10/05/2013 FRANCISCO JAVIER ARTAJO CARLOS 08/05/2015 JESÚS ANDRÉS MAULEÓN ARANA 08/05/2015 PEDRO MARIA ECHARTE SEVINE 08/05/2015

C.1.3.- List the board members, if any, who hold offices as directors or executives at other companies forming part of the company’s group: Index Annual Report 2015 Legal Documentation

C.1.4.- Fill out the following table to show the number of female directors on the board and its committees, and how this has changed over the last four years:

Number of female directors 2015 2014 2013 2012

Number % Number % Number % Number % Board of Directors 0 0.00% 0 0.00% 0 0.00% 0 0.00%

Executive or Delegate 0 0.00% 0 0.00% 0 0.00% 0 0.00% Committee

Appointments Committee 0 0.00% 0 0.00% 0 0.00% 0 0.00% Remuneration Committee 0 0.00% 0 0.00% 0 0.00% 0 0.00%

Combined Audit and Risk 0 0.00% 0 0.00% 0 0.00% 0 0.00% Committee

C.1.5.- Fill out the following table on the aggregate compensation paid to directors in the year:

Thousands of euro Individual Group Concept Fixed compensation 12 0 Variable compensation 0 0 Per diems 52 0 Other compensation 0 0 TOTAL 64 0

Index Annual Report 2015 Legal Documentation

C.1.6.- List the members of senior management who are not executive directors and indicate the total compensation paid to them in the year

Name or company name Position IGNACIO ARRIETA DEL VALLE MANAGING DIRECTOR ALBERTO UGARTE ALBERDI DIRECTOR, RISK DEPARTMENT FELIX SOLA ARRESE DIRECTOR, GENERAL SECRETARIAT ISAAC LAZARO SORIANO SECRETARY, AUDIT COMMITTEE ANGEL LECUMBERRI SEVIGNE COMMERCIAL DIRECTOR JUAN MARIA AYECHU REDIN DIRECTOR, BUSINESS BANKING MIGUEL GARCIA DE EULATE MARTIN-MORO DIRECTOR, TREASURY OPERATIONS FRANCISCO JOSE RODRIGUEZ LASPIUR DIRECTOR, MANAGEMENT CONTROL

Total compensation received by senior 1,101 management (thousands of euro)

C.1.7.- State whether the bylaws or board regulations set a limited term of office for members of the board of directors:

YES

NO X

C.1.8.- State whether the individual and consolidated financial statements submitted to the board of directors for approval are certified previously:

YES

NO X

Identify, if appropriate, the person(s) certifying the individual and consolidated accounts for their presentation by the Board: Index Annual Report 2015 Legal Documentation

C.1.9.- Explain the mechanisms, if any, established by the board of directors to prevent the separate and consolidated financial statements prepared by it from being presented at the general meeting with a qualified auditors’ report: The Governing Board has an Audit Committee, whose regulations include the oversight of published financial information and the financial statements for the year as well as monitoring the work and recommendations of the external auditors.

C.1.10.- Is the board secretary a director?

YES X

C.1.11.- Describe the mechanisms, if any, established by the company to preserve the independence of the external auditors, of financial analysts, of investment banks, and of rating agencies. The Audit Committee carries out annual checks to ensure the auditor (currently PriceWaterhouseCoopers Auditores, S.L.) complies with requirements and that there is no situation that could pose a risk to their independence.

C.2.- Board committees:

C.2.- List the Board or other governance body committees: Number of Committee members EXECUTIVE OR MANAGEMENT COMMITTEE 5 APPOINTMENTS COMMITTEE 4 REMUNERATION COMMITTEE 5 COMBINED AUDIT AND RISK COMMITTEE 4 Index Annual Report 2015 Legal Documentation

C.2.2.- Give details of all committees of the Board or other governance body, their members and the proportion of executive, controlling company, independent and other external members (entities that are not capital companies need not complete the member category column and should explain in the text section the category of each member based on their legal form and how they fulfil the composition requirements of the audit and appointments and remuneration committees): EXECUTIVE OR MANAGEMENT COMMITTEE

Name Position Category IGNACIO TERES LOS ARCOS CHAIRMAN Independent LUIS MIGUEL SERRANO CORNAGO SECRETARY Independent JOSE MARIA ARIZALETA NIEVA MEMBER Independent PEDRO MARIA ECHARTE SEVINE MEMBER Independent JOSE ANGEL EZCURRA IBARROLA MEMBER Independent

% of controlling company members 0.00% % of independent members 100.00% % of other external members 0.00% Number of meetings 12

Explain the functions assigned to the committee, describe its procedures and organizational and functional rules and summarise its most important actions during the year. The Executive Committee was established by resolution of the Governing Board and is composed of a chairman, deputy chairman, secretary and two members of the Governing Board. Its functions are those delegated by the Governing Board and its attributes and powers are limited to those temporarily or permanently delegated by the Board. The main purpose of the Committee, which meets once a month, is to give the Cooperative Bank greater flexibility in decision making and approval of risks. Index Annual Report 2015 Legal Documentation

COMBINED AUDIT AND RISK COMMITTEE

Name Position Category JOSE ANGEL EZCURRA IBARROLA CHAIRMAN Independent LUIS MIGUEL SERRANO CORNAGO MEMBER Independent JOSE MARIA ARIZALETA NIEVA MEMBER Independent IGNACIO TERES LOS ARCOS MEMBER Independent

% of controlling company members 0.00% % of independent members 100.00% % of other external members 0.00% Number of meetings 4

Explain the functions assigned to the committee, describe its procedures and organizational and functional rules and summarise its most important actions during the year. The Combined Audit Committee meets regularly in both ordinary and extraordinary meetings. Ordinary meetings are held every quarter, while extraordinary meetings take place on the request of any member of the Committee whenever grounds for a meeting exist. The Committee’s core responsibility is to maintain an efficient internal audit system via ongoing monitoring and supervision of its operation, using to this end the services of both the internal audit unit and the external auditors. The Committee also took on the functions of the Risk Committee in accordance with regulation 27 of Bank of Spain Circular 2/2016. The functions of the committee are set out in article 42 of Royal Decree 84/2015 of 13 February. The Head of Risk is Francisco José Rodríguez Laspiur.

Identify the director on the Audit Committee who has been appointed for his/ her knowledge and experience in accounting, audit or both and report on the number of years the committee Chairman has been in post. Name of experienced director JOSE MARIA ARIZALETA NIEVA Number of years the Chairman has been in post 7 Index Annual Report 2015 Legal Documentation

APPOINTMENTS COMMITTEE

Name Position Category JOSE MARIA ARIZALETA NIEVA CHAIRMAN Independent LUIS MIGUEL SERRANO CORNAGO MEMBER Independent IGNACIO TERES LOS ARCOS MEMBER Independent PEDRO MARIA ECHARTE SEVINE SECRETARY Independent

% of controlling company members 0.00% % of independent members 100.00% % of other external members 0.00% Number of meetings 2

Explain the functions assigned to the committee, describe its procedures and organizational and functional rules and summarise its most important actions during the year. El Comité de nombramientos estará compuesto de cuatro miembros, siendo The Appointments Committee has four members, all also members of the Governing Board, and meets as often as its responsibilities require. The Committee is quorate when at least half its members are present. Members cannot appoint other natural or legal persons as proxies. Resolutions are approved by simple majority of the valid votes cast. The Committee’s functions encompass the identification and recommendation of candidates for vacant posts on the Governing Board and how to assess aptitudes and capacities of future directors. The Committee also regularly reviews the appropriateness of all current members of the Board, General Management and key management personnel in accordance with standard 30. The Committee also assesses the composition of the Governing Board and the appropriateness of its members. Therefore, all Governing Board members appointed since the entry into force of Circular 2/2016 have been appointed on a favourable report from this Committee and with the express approval of the Bank of Spain. Index Annual Report 2015 Legal Documentation

The Appointments Committee also periodically reviews the Board’s policy on the selection and appointment of senior management personnel. The Committee’s principal actions taken during the year all fell within one of the functions described above. REMUNERATION COMMITTEE

Name Position Category IGNACIO TERES LOS ARCOS MEMBER Independent JOSE MARIA ARIZALETA NIEVA SECRETARY Independent LUIS MIGUEL SERRANO CORNAGO MEMBER Independent JOSE JAVIER LOPEZ MORRAS MEMBER Independent PEDRO MARIA ECHARTE SEVINE CHAIRMAN Independent

% of controlling company members 0.00% % of independent members 100.00% % of other external members 0.00% Number of meetings 1

Explain the functions assigned to the committee, describe its procedures and organizational and functional rules and summarise its most important actions during the year. The Remunerations Committee will have five members, all also members of the Governing Board. The Committee is quorate when at least half its members are present. Resolutions are approved by a majority of those attending, with the Chairman’s vote being considered casting. The principal task of the Remunerations Committee is to propose and oversee questions relating to the remuneration of directors and senior management. It also oversees the transparency of remuneration programmes, considering their appropriateness and effectiveness and seeking to ensure that remuneration is moderate and appropriate to the Cooperative Bank’s results. The Committee’s principal actions taken during the year all fell within one of the functions described above. Index Annual Report 2015 Legal Documentation

D.- RELATED PARTY AND INTRAGROUP TRANSACTIONS

D.1.- Give details of transactions between the company and companies within its group, and shareholders, cooperative members, holders of controlling rights to the company or equivalent entities. There are no significant cooperative members.

D.2.- Give details of transactions between the company or entities of its group and the company’s directors or executives: There are no material transactions.

D.3.- Give details of intragroup transactions.

D.4.- Give details of the mechanisms in place for detecting, identifying and resolving any potential conflicts of interest between the company and/or its group, and its directors/board members or executives. Article 48 of the Cooperative Bank’s bylaws contains the following provisions in this regard: Contracts concluded and/or obligations assumed by Caja Rural that do not form part of the provision of the financial services that constitute its corporate purpose and are made in favour of members of the Governing Board or senior management, or their first- or second-degree relatives by blood or marriage, shall not be valid unless first approved at the General Meeting. Persons involved in the conflict-of-interest situation shall not be permitted to take part in the related vote at this Meeting. Approval at the General Meeting shall not be required when the contracts or obligations in question are related to the person’s status as a member. Resolutions of the Governing Board or Executive Committee relating to cooperative transactions and services in favour of members of the Governing Board, Executive Committee, General Management or their first- or second- degree relatives by blood or marriage shall necessarily be adopted by secret ballot, subject to the item’s inclusion on the agenda with due transparency, and shall require a majority of at least two thirds of all Directors. Where the beneficiary of the transactions or services is a Director or relative thereof, as indicated above, the beneficiary shall be deemed to be ina conflict-of-interest situation and shall not be permitted to take part in the vote. Index Annual Report 2015 Legal Documentation

Once the secret ballot has taken place and the result has been announced, any reservations or disagreements with regards to the resolution adopted must be duly recorded in the minutes. The provisions of the foregoing paragraphs shall also apply in relation to the establishment, suspension, modification, renewal or extinguishment of obligations and rights between the cooperative entity and entities at which the aforesaid persons or members of their family are proprietors, board members, directors, senior executives, advisors or core members with capital interests or five per cent or more. Also considered are the provisions of Act 10/2014 for the management, supervision and solvency of credit institutions and Royal Decree 84/2015 implementing its provisions on the reporting to and authorization of transactions involving directors and executives by the Bank of Spain. Index Annual Report 2015 Legal Documentation

E.- CONTROL AND RISK MANAGEMENT SYSTEMS

E.1.- Explain the scope of the company’s risk management system. The credit risk management system is centralised in the risk area, including responsibility for admitting, administering, monitoring and recovering credit risk, in accordance with the policies set by the Governing Board. Measurement and control of interest rate, liquidity and market risk are conducted through the Assets and Liabilities Committee, which reports quarterly and monitors the various risks. The Operational Risk Committee monitors operational risk.

E.2.- List the bodies within the company responsible for preparing and executing the risk management system. The Risk department ensures compliance with the policies, methods and procedures approved by the Governing Board to meet the requirements of Bank of Spain Circular 4/2004, of 22 December, on credit risk. Circular 4/2004 states that “entities shall establish policies, methods and procedures for the granting, analysis and documentation of debt instruments, contingent risks and contingent liabilities…and the identification of their impairment and measurement of the amounts necessary to hedge such credit risk, whether from insolvency attributable to the customer…” The Cooperative Bank’s internal audit department ensures that the various areas comply with policy, reporting any instances of non-compliance to the Governing Board, having evaluated or established their extent, and proposing corrective or enhancement measures when it sees fit. The Assets and Liabilities Committee oversees market, liquidity and interest risks. The Operational Risk Committee manages and monitors operational risk. E.3.- State the main risks that could affect achievement of the company’s business targets. The main risks inherent in our banking activities are the following: Credit risk: This is the risk of potential losses being incurred when loans and advances cannot be recovered. Where the bank acts as guarantor, the risk lies in the possibility of customers’ defaulting on their commitments, and the Coope- rative Bank therefore being required to assume these commitments by virtue of guarantees provided. This is the most significant risk assumed by the Cooperative Bank, since its activities are concentrated mainly on the retail banking business. Index Annual Report 2015 Legal Documentation

Interest rate risk: This consists of the risks arising as a result of potentially adverse fluctuations in interest rates on assets and liabilities. Liquidity risk: This is the risk of potential difficulties in raising or accessing liquid assets in sufficient quantity and value to cover the Group’s payment commitments at any time. Market risk: This consists of the risks arising as a result of potentially adverse fluctuations in the market price of marketable financial instruments andthe exchange rates of the currencies in which the Group’s balance sheet assets and liabilities or off-balance sheet commitments and exposures are denominated. Operational risk: Operational risk is the risk of suffering losses due to inadequate or failed processes, personnel or internal systems or due to external events. This definition includes legal risk, but excludes strategic and reputational risks.

E.4.- State whether the company has a risk tolerance level. The Cooperative Bank establishes risk tolerance levels, defined using various criteria according to the type of risk; • Credit risk: risk tolerance depends on rating/scoring levels associated to probability of default. • Interest rate risk: risk tolerance is established by measuring exposure to a maximum level of possible loss, in margin and economic value. • Liquidity risk: risk tolerance is measured based on minimum liquidity levels. • Market risk: limits are based on VaR.

E.5.- State which risks have materialized during the year. The normal processes of the Cooperative Bank’s operations include all the established controls and methods to manage the risks inherent to its business and there is no need to highlight any particular instance that affected the normal functioning of the Cooperative Bank.

E.6.- Explain the response and oversight plans to address the main risks facing the company. Credit risk: Risk management begins as soon as the customer submits a request for financing and ends when the whole of the loan has been repaid. When approving transactions, the Cooperative Bank prioritizes case-by-case analyses, which take account of the type of applicant, type of facility, the applicant’s repayment capacity and the guarantees provided. Once a transaction has been Index Annual Report 2015 Legal Documentation

approved and formalized, it is monitored: in the case of high-risk customers (either individually or as part of an economic group), the Cooperative Bank monitors financial position, any increases in system debt, payment record, etc.; for all other customers, all transactions that result in payment incidents are monitored. The Group monitors its investment portfolio by product, by interest rate and by decision-making centre, to identify potential changes in portfolio returns and the manner in which credit facilities are being granted (amounts, rates, charges, etc.) so that decisions affecting the investment policy to be adopted at any given time can be taken as quickly as possible. In respect of credit risk concentration, the Bank of Spain’s regulations establish that exposure to any one customer or group of customers constituting an economic group must not reach 25% of an entity’s eligible capital base. The entity’s eligible capital base is used for the purpose of calculating the Bank of Spain’s solvency ratio. The Cooperative Bank complies with all legal limits established in this regard. Regulations on solvency requirements lay great emphasis on concentration risk but it is not included in the regulatory calculations. The Internal Capital Adequacy Report (IAC) must disclose the institution’s own assessment of the capital required to meet this risk (Pillar II). Interest rate risk: To analyse and control this risk, the Cooperative Bank has established an Assets and Liabilities Committee (ALC) that meets quarterly to assess, inter alia, the sensitivity of its statement of financial position to changes in the yield curve in various scenarios and set short- and medium-term policies for managing prices and applications of funds. Liquidity risk: Caja Rural de Navarra monitors the performance of those balance sheet items that affect its liquidity on an ongoing basis, keeping within certain limits and using dedicated tools to predict potential fluctuations that may require action to sustain short-, medium- and long-term liquidity. These controls are carried out by the ALC. Market risk: The main controls applied for market risk are the various limits on market activity in the form of ceilings on fixed income and equity investments and stop-losses. The Cooperative Bank also applies concentration limits on exposures to securities and economic sectors, as well as on positions in foreign currency. Operational risk: Caja Rural de Navarra has adopted a standard model for identifying and monitoring operational risk. Improvement plans for critical risks have been drawn up, and the persons responsible for their execution and corresponding timetable have been defined. Loss events are registered in a loss event data base which is also used to produce reports that facilitate decision making to minimize risk. Index Annual Report 2015 Legal Documentation

F.- INTERNAL CONTROL OVER FINANCIAL REPORTING (ICFR)

Describe the control and risk management processes that make up the company’s system for internal control over financial reporting. F.1.- The control environment Report, highlighting as a minimum the main features of:

F.1.1.- The bodies and/or functions responsible for: (i) the existence and regular updating of a suitable, effective ICFR; (ii) its implementation; and (iii) its monitoring. o The Governing Board is ultimately responsible for the existence and regular updating of a suitable, effective ICFR. o The Combined Audit and Risk Committee is responsible for supervision of ICFR, including control of the preparation and presentation process, compliance with applicable standards, appropriate definition of the scope of consolidation and correct application of accounting principles. The Audit Committee relies on Internal Audit to oversee the ICFR system. o The Management Control Department is responsible for the design, implementation and operation of ICFR. It will run a process to identify risks in the preparation of financial reporting, draw up the descriptive documentation and flow charts of activities and control and direct the implementation and execution of ICFR. The Governing Board states in Article 39 of the Corporate Governance Code:

Article 39. Public relations, general.

o The Governing Board shall take all necessary steps to ensure that annual, half-yearly or quarterly financial reporting and any other financial reporting that may be done in the interests of prudence is prepared in accordance with the same principles, criteria and professional best practice as the annual financial statements and is equally true and fair. To this end, all such information shall be reviewed by the Combined Audit and Risk Committee. o The Governing Board, if considered necessary or convenient, shall include in its annual published documentation the governance rules of the Cooperative Bank and the degree of Compliance with the Corporate Governance Code. The rules of the Combined Audit and Risk Committee, which is drawn from the Governing Board, includes the following duties: Index Annual Report 2015 Legal Documentation

o To supervise any financial information published and the financial statements for the year. o To check compliance with internal standards, rules and laws that effect the activities of the organization.

F.1.2.- The existence or otherwise of the following components, especially in connection with the financial reporting process: Department and/or mechanisms in charge of: (i) the design and review of the organizational structure; (ii) defining clear lines of responsibility and authority, with an appropriate distribution of tasks and functions; and (iii) deploying procedures so this structure is communicated effectively throughout the company. Oversight of the organizational structure is the responsibility of General Management via the Human Resources Department which, based on needs identified by the Caja Rural de Navarra Group, analyses and adapts the departmental and branch structure, defining and assigning functions to the different members of each department and business line. To this end there are job descriptions which identify each post within the organizational chart. Any material change to the organization is approved by the Managing Director and published through Internal Communications by corporate email and on the corporate intranet, to which all employees have access. The intranet contains an organizational chart that is continuously updated. There are operational procedure manuals covering most of the Cooperative Bank’s business areas, available to all employees through the intranet. Code of conduct, approving body, dissemination and instruction, principles and values covered (stating whether it makes specific reference to record keeping and financial reporting), body in charge of investigating breaches and proposing corrective or disciplinary action. There is a code of conduct, with which all employees of Caja Rural de Navarra Group are familiar, setting out guidance for good conduct based on professional ethics and the obligation to be aware of and comply with regulations applicable to the Cooperative Bank. It is planned to incorporate specific reference to record-keeping and financial reporting as recommended by the supervisory authorities. Index Annual Report 2015 Legal Documentation

‘Whistle-blowing’ channel, for the reporting to the Audit Committee of any irregularities of a financial or accounting nature, as well as breaches ofthe code of conduct and malpractice within the organization, stating whether reports made through this channel are confidential. There is no specific formal whistle-blowing channel for the confidential reporting of financial or accounting irregularities to the Combined Audit and Risk Committee under conditions of anonymity. However, the employees’ code of conduct expressly establishes the possibility of employees’ highlighting instances of irregular or unethical actions, under conditions of confidentiality, which would obviously include financial and accounting irregularities.

Communication of Unethical or Fraudulent Actions If any employee should become aware of irregular or unethical actions by Company employees, he/she is obliged to notify the Cooperative Bank immediately. The Cooperative Bank has a number of persons to whom such circumstances may be reported, in addition to the line manager, who should be the first port of call. The Area Manager or Chief of Human Resources are the most appropriate persons to notify. All communications of this type will be immediately investigated under conditions of confidentiality. The Cooperative Bank will ensure the absence of reprisals for any employee who makes allegations of this kind. Similarly, the rules of the Audit Committee Rules list among the Committee’s responsibilities for internal control and compliance: To maintain the ethics of the organization, investigate any cases of irregular or fraudulent conduct and any allegations or suspicions brought to their attention as well as any conflicts of interest affecting employees.

Training and refresher courses for personnel involved in preparing and reviewing financial information or evaluating ICFR, which address, at least, accounting rules, auditing, internal control and risk management. Once a year, every employee of Caja Rural de Navarra undergoes a professional assessment and an action plan is drawn up including measures to improve areas where they are found to be weak, which is centred on training. The Training Department within the Human Resources Department has developed a training plan including traditional and online courses which are open to all employees of Caja Rural de Navarra. Index Annual Report 2015 Legal Documentation

All units involved in the preparation of financial reporting have been trained in financial reporting and receive continuous refresher courses as standards change. These courses cover first-time adoption of standards in the current year and those in the process of adoption that will take effect in future years.

F.2.- Financial reporting risk assessment Report, as a minimum, on:

F.2.1.- The main characteristics of the risk identification process, including risks of error or fraud, stating: • Whether the process exists and is documented. For Caja Rural de Navarra, like any other banking institution, risk management is a core part of its business. Risk identification processes are therefore clearly defined. • Whether the process covers all financial reporting objectives (existence and occurrence; completeness, valuation, presentation, disclosure and comparability, and rights and obligations), is subject to update and, if so, with what frequency. The Cooperative Bank knows which areas and departments impact financial reporting and therefore which areas or departments are material, as well as the risks of error within these which may have an impact on financial reporting. The risk assessment process covers all financial reporting objectives (existence and occurrence; completeness; valuation; presentation, disclosure and comparability; and rights and obligations). • Whether a specific process is in place to define the scope of consolidation, with reference to the possible existence of complex corporate structures, special purpose vehicles, holding companies, etc. Nevertheless: • The accounting information used to prepare the financial statements is based on heavily automated processes. The vast majority of transactions are automatically recorded and associated with a process that generates the right accounting information for record keeping. The design and maintenance of the accounts used to monitor transactions is the responsibility of the Management Control Department. No other area is authorized to interfere with this process. In this way the system ensures that: • All events reflected in financial reporting exist and have been recorded at the proper time. Index Annual Report 2015 Legal Documentation

• The information reported reflects all the transactions and events to which the Cooperative Bank was party. • All transactions are recorded and measured in accordance with applicable accounting standards. • Transactions are classified, presented and disclosed in line with applicable regulations.

• Whether the process addresses other types of risk (operational, technological, financial, legal, reputation, environmental, etc.) insofar as they may affect the financial statements. The material areas and departments have identified where the possibilities of error in financial reporting lie which might have a material impact on the Cooperative Bank. Risks of error or omission in financial reporting are included in the design and development of operating procedures for every area with critical impact on financial reporting. • Which of the company’s governing bodies is responsible for overseeing the process. Internal Audit will oversee the process of preparing financial reporting and the effectiveness of controls put in place to ensure its proper publication. F.3.- Control Report, highlighting as a minimum and where available the main features of:

F.3.1.- Procedures for reviewing and authorizing financial information and description of ICFR to be provided to the markets, stating who is responsible in each case. Also, documentation and flow charts of activities and controls (including those addressing the risk of fraud) for each type of transaction that may materially affect the financial statements, including procedures for closing accounts and specific review of critical judgements, estimates, evaluations and projections. Caja Rural de Navarra has an action plan in place to document formally and in standardized format all areas and processes identified as material to the Cooperative Bank, including those covering the closing of accounts, consolidation and exercise of critical judgements, estimates, and projections, among others. The Cooperative Bank has controls in place for the processes of closing accounts and review of critical judgements, estimates, evaluations and projections for the following processes and transactions, which might materially affect the financial statements: Index Annual Report 2015 Legal Documentation

o Impairment losses on certain financial instruments. o The assumptions used in the actuarial calculation of liabilities and commitments for post-employment benefits. o The useful lives of property and equipment and intangible assets o The measurement of goodwill arising on consolidation o The fair value of certain financial assets not listed on official secondary markets. o Estimates used to calculate other provisions o Income tax and deferred tax assets and liabilities

F.3.2.- Internal control policies and procedures for IT systems (including secure access, control of changes, system operation, continuity and segregation of duties) giving support to key company processes regarding the preparation and publication of financial information. The rural credit cooperatives that make up the Caja Rural Group have set up a number of companies to improve efficiency and achieve economies of scale. These include the technology services company Rural Servicios Informáticos SC and Banco Cooperativo Español, SA. Rural Servicios Informáticos SC provides IT services to all rural credit cooperatives making up the Caja Rural Group. Banco Cooperativo Español SA provides services including treasury management and capital markets services, investment fund administration and management, Spanish and international transfer systems, and support services for the rural credit cooperatives in relation to tax, legal, organizational and regulatory issues, etc. Rural Servicios Informáticos SC provides applications and IT management services from a shared central platform. Applications include those for transaction account-keeping and financial reporting. IT applications supporting the Cooperative Bank’s core banking operations are developed to comply with CMMI standards, designed to ensure IT systems function as intended, thus minimising the risk of introducing errors in financial reporting. Regarding business continuity, the abovementioned Caja Rural Group companies have a Systems Continuity Plan which, among other things, provides IT backup centres on separate sites which can replace the main centre in case of need. o Banco Cooperativa Español has a dedicated technology centre for SWIFT, treasury back office and private banking, and another alternative backup centre specifically for supporting treasury and capital markets, so that market operators and the control and support units for these activities can continue to function in the event of an emergency affecting the building now in use. Index Annual Report 2015 Legal Documentation

o Rural de Servicios Informáticos SC, which supports core banking and accounting operations, has an alternative backup centre, synchronized through a system of daily backup copies, one saved on the host itself and the other in the alternative IT centre. The backups are checked regularly for comprehensiveness. Finally, Caja Rural de Navarra has a specific Business Continuity Plan, with alternative workstations identified with duplicate systems for other operations, and the possibility for those in key functions to work remotely with access to the Group’s IT systems from designated locations over a secure connection. Caja Rural de Navarra has appropriate security protocols that include controlling access to each of the systems described.

F.3.3.- Internal control policies and procedures for overseeing the management of outsourced activities, and of the appraisal, calculation or valuation services commissioned from independent experts, when these may materially affect the financial statements. The Cooperative Bank regularly reviews which activities connected to financial reporting are subcontracted out and, where applicable, the Management Control Department puts in place control procedures to carry out sanity checks on information received. Caja Rural de Navarra uses independent third parties to provide certain valuations, calculations and estimates used in the preparation of the consolidated and separate financial statements provided to financial markets, such as asset appraisals, actuarial valuations, etc. At present, it has supervision and review procedures in place for activities outsourced to third parties, such as calculations or valuations by independent appraisers which are material to the process of financial reporting. These supervision procedures will be expressly reviewed to check their compliance with ICFR and brought into line with market best practice. The procedures cover the following areas: o Formal designation of those responsible for particular actions. o Pre-contract analysis, looking at alternative proposals. o Supervision and revision of information generated or services provided: • For subcontracted activities: requests for regular reports, inclusion in internal audit plans, mandatory external audit where applicable, regular review of the service provider’s capacity and qualifications. Index Annual Report 2015 Legal Documentation

• For valuations carried out by external appraisers: reviews of the correctness of the information provided, regular review of the appraiser’s capacity and qualifications. The Cooperative Bank reviews its estimates internally. Where it is deemed appropriate, the Cooperative Bank brings in third parties for certain specific tasks, having checked their competence and independence, and that the methods they use are valid and any assumptions made are reasonable.

F.4.- Reporting and communications Report, highlighting as a minimum and where available the main features of:

F.4.1.- A specific function in charge of defining and maintaining accounting policies (accounting policies area or department) and settling doubts or disputes over their interpretation, which is in regular communication with the team in charge of operations, and for maintaining and updating a manual of accounting policies and communicating these to all the company’s operational units. The Management Control Department is responsible for defining and maintaining the accounting policies applied to the Cooperative Bank’s transactions. New and amended standards are analysed by this department, which is responsible for giving instructions about how they should be implemented in the IT systems. There is no complete manual of accounting policies as such. Instead the Cooperative Bank’s accounting polices follow Bank of Spain circulars (Circular 4/2004 as amended) and international financial reporting standards (IFRS-EU). However, the Management Control Department does have documentation setting out accounting policies for certain critical activities and procedures. At subsidiaries of Caja Rural de Navarra, the accounting guidelines and standards applied are determined by the Management Control Department based on standardized criteria and formats which facilitate the preparation of consolidated financial information.

F.4.2.- Mechanisms in standard format for the capture and preparation of financial information, which are applied and used in all units within the entity or group, and support its main financial statements and accompanying notes as well as disclosures concerning ICFR. The process of consolidation and preparation of financial information is carried out centrally. Index Annual Report 2015 Legal Documentation

IT applications are organized according to a management model structured around the requirements of a banking IT system. This structure includes different areas providing different types of services: o general IT systems that supply data to the area or unit heads. o management systems that provide business monitoring and control information. o operational systems, i.e. applications to cover the full life-cycle of products, contracts and customers. o structural systems, that support data shared by all applications and services. These systems include all systems related to accounting and economic data. A key objective of this model is to provide the infrastructure needed to run the software that manages all transactions and their subsequent accounting treatment and to allow access to the various types of support data. Based on this accounting infrastructure, processes are developed for the preparation, communication and storage of all regulatory financial reporting and internal accounting data, under the supervision of the Management Control Department. Financial information is consolidated and prepared through a centralized process run by the Management Control Department. Subsidiaries are responsible for their own account-keeping in the dedicated and all report accounting information in Spanish GAAP format. The consolidation process is very straightforward and is carried out quarterly using an office software programme. There are nevertheless procedures to control and verify the information to ensure that intragroup items are identified and eliminated in the consolidation process. Also, to ensure the information is accurate and complete, the consolidation software is programmed to make the adjustments to eliminate intragroup equity holdings and transactions, which is done automatically in accordance with the validation procedures defined in the system. F.5.- Monitoring of system operations Report, highlighting as a minimum the main features of:

F.5.1.- The Audit Committee’s ICFR supervisory activities and whether the company has an internal audit function whose competencies include supporting the audit committee in its role of monitoring the internal control system, including ICFR. Companies should also report on the scope of the ICFR assessment conducted in the year and the procedure by which the assessor Index Annual Report 2015 Legal Documentation

communicates its findings. State also whether the company has an action plan specifying corrective measures for any flaws detected, and whether it has taken stock of their potential impact on its financial information. Internal Audit regularly presents to the Combined Audit and Risk Committee the results of its verification and validation work, and the resulting action plans. Work done by the external auditor or other independent experts follow the same procedure. The minutes of the Combined Audit and Risk Committee document the work done from its planning to the reviews of results obtained. Internal Audit functions are carried out by the Internal Audit Department of Caja Rural de Navarra which reports to the Combined Audit and Risk Committee. The Combined Audit and Risk Committee relies on the Internal Audit Department to monitor the Internal Control System and ICFR. Internal Audit reviews the risk management systems, internal operating procedures and compliance with internal and external regulations. The assessments carried out by the Internal Audit Department cover certain aspects of the process of financial reporting, mainly taking the form of reviews of accounting issues. The reports and documents produced as a result of these reviews show the recommendations for various improvements and the impact each would have on financial reporting.

F.5.2.- Indicate whether there is a discussion procedure whereby the auditor (pursuant to technical accounting standards), the internal audit function and other experts can report any significant internal control weaknesses encountered during their review of the financial statements or other assignments, to the company’s senior management and its Audit Committee or Board of Directors. State also whether the entity has an action plan to correct or mitigate the weaknesses found. The auditor issues an annual report of recommendations which is presented to the Combined Audit and Risk Committee. This sets out any weaknesses in the internal control procedures identified during the audit of the financial statements. The report is passed on to the units/areas concerned which are then responsible for proposing improvements to resolve the weaknesses identified. The rules of the Combined Audit and Risk Committee include the following functions: Index Annual Report 2015 Legal Documentation

o To propose the appointment of an external auditor for the Cooperative Bank and Group subsidiaries, the terms of their engagement, the scope of their professional mandate and if applicable, its termination or non- renewal. o To supervise the internal audit function and monitor the work of the external auditors. o To review the final auditors’ report, discussing, where necessary, any points that it considers appropriate, before these are made known to the Governing Board. o To oversee follow-up of recommendations made by internal and external audits.

F.6.- Other relevant information Nothing to report. F.7.- External auditor’s report Report on: F.7.1.- Whether the ICFR information delivered to the markets has been reviewed by the external auditor. If it has, the Entity is to include the corresponding report as an Annex. If it has not, the reasons for the absence of this review should be stated. The ICFR information delivered to the markets has not been reviewed by the external auditor in line with the policy on other information in the Annual Corporate Governance Report, only the accounting content of which is reviewed by the auditor. Also, it was felt that an external audit of the ICFR information delivered to the markets would be largely redundant, as technical audit standards require, in any case, that the external auditor review internal control as part of its audit of the financial statements. Index Annual Report 2015 Legal Documentation

G.- OTHER DISCLOSURES OF INTEREST

Briefly describe any other material points affecting the corporate governance of the company or its group subsidiaries that have not been included elsewhere in this Report, but which are essential to the full and reasoned disclosure of the company’s or group’s governance structure and practices: This section may also include any other relevant but not re-iterative information, clarification or detail related to previous sections of the report. Specifically, indicate whether the company is subject to corporate governance legislation from a country other than Spain and, if so, include the compulsory information to be provided when different from that required by this report. The company can also indicate whether it has voluntarily signed up to any other codes of ethics or best practice, whether international, industry-specific or covering some other scope. If so, the company should identify the code and its date of adoption. The information given in section A.4 complies with the requirements of the applicable standards: Act 13/1989, on Cooperative Credit Institutions, Royal Decree 84/1993, of 22 January, and Act 27/1999, on Cooperatives. Index Annual Report 2015 Legal Documentation

REMUNERATION OF GOVERNING BOARD

The per diems approved at the General Meeting of 9 May 2014 to remunerate Caja Rural de Navarra’s directors for attending Board and Committee meetings were approved with quorum of 77 people, 1,253 valid votes, 1,253 votes in favour, 0 against and 0 abstentions. Total remuneration accrued by each board member is as follows:

Thousands of euro Fixed income Per diems IGNACIO TERÉS LOS ARCOS 11.80 5.88 JOSÉ LUIS BARRIENDO ANTOÑANZAS 9.41 JOSÉ MARÍA ARIZALETA NIEVA 4.57 ISIDRO BAZTERRICA MUTUBERRÍA 2.44 JOSÉ JAVIER LÓPEZ MORRÁS 2.34 PEDRO MARÍA BEORLEGUI EGEA 2.14 JOSÉ ANGEL EZCURRA IBARROLA 4.13 MELCHOR MIRANDA AZCONA 2.77 ALBERTO ARRONDO LAHERA 1.55 LUIS MIGUEL SERRANO CORNAGO 5.09 JOSÉ LUIS SARABIA MORENO 0.21 ROBERTO ZABALETA CIRIZA 2.18 FRANCISCO JAVIER ARTAJO CARLOS 2.32 PEDRO MARÍA ECHARTE SEVINE 2.38 JESÚS ANDRÉS MAULEÓN ARANA 2.27 PEDRO BULDAIN ZOZAYA 0.66 PEDRO JESÚS IRISARRI VALENCIA 1.70 TOTAL 11.80 52.02 Index Annual Report 2015 Legal Documentation

INFORMATION ON IDENTIFIED PERSONNEL IN ACCORDANCE WITH REGULATION 1 OF CIRCULAR 2/2016

Regarding the personnel identified in accordance with regulation 1, the table below shows the categories of personnel whose professional activities have a material impact on the risk profile.

Number of people Category 1 General management 1 Risk management 1 Audit 1 Marketing 1 Sales management 1 Corporate clients management 1 Treasury/private banking management 1 Management control 1 Head of equity investments 1 Head of legal affairs 1 Head of human resources 1 Head of technology and organization 1 Head of housing and real estate assets

Total remuneration paid to this group in 2015 was EUR 1,674,586.78. Remuneration to the identified group is paid as fixed individual remuneration to fairly reflect each employee’s responsibility and professional career. This is reviewed regularly (at least annually) and changed where appropriate. The Remunerations Committee analyses the basic principles of the policy applied. Remuneration is adjusted through variable remuneration taking account of the results of each working team and the overall results of the Cooperative Bank. They are always based on the qualitative issues most closely related to long- term performance (maintenance of the customer base, customer satisfaction, balanced growth in terms of segments and products, etc.). Part of this remuneration may be deferred for between 3 and 5 years, tied to completion of the Strategic Plan for this period. No variable remuneration exceeding 100% of fixed remuneration has ever been approved. Index Annual Report 2015 Legal Documentation

This Annual Corporate Governance Report was approved by the Company’s Board at the meeting held on 31 March 2016. List the directors that voted against or abstained from approving this report. All Directors voted to approve this Report. Index Annual Report 2015 Legal Documentation

OTHER MATTERS

As of the date of issuance of this report, no post-balance sheet events which could modify or alter the Cooperative Bank’s equity position had occurred. Index Annual Report 2015

Other Information Other Information Index Annual Report 2015 Other Information

SOCIAL WELFARE FUND

As established in its articles of association, Caja Rural de Navarra maintains and develops an extensive portfolio of social projects benefiting a growing number of community and welfare initiatives that reflect its origins and past achievements. In 2015 in accordance with criteria approved at the General Meeting a total of EUR 3,447.46 thousand was appropriated from the net surplus for 2014 and used to cover the cost of maintaining the Social Welfare Fund. This amount was applied as follows:

1.-Consultancy, training and promotion of the cooperative model 1,577.25 45.75% 2.-Teaching work and research 1,035.21 30.03% 3.-Sports aid 144.28 4.18% 4.-Welfare projects 119.67 3.47% 5.-Cultural, recreational and other activities 118.19 3.43% 6.-Economic and social development 452.86 13.14% TOTAL 3,447.46 100% (Thousands of euro)

In each of the above areas, Caja Rural de Navarra carries out awareness- raising, training and research activities benefiting persons of all ages. As part of its work in the field of consultancy, training and promotion of the cooperative model, the Cooperative Bank undertakes a broad range of activities designed to enhance the advisory services it provides to customers in relation to both tax issues and the management of EU aid. It also provides valuable support to various professional organisations through a variety of initiatives that help improve the economic fabric of society. The promotion and development of cooperative structures - the Group’s own legal form and business structure - generate a constant stream of activities that, with the support of the Cooperative Bank, help strengthen and improve the cooperative entities, particularly those active in the primary sector, that represent its founding group. In its teaching work, the Cooperative Bank accords particular importance to partnerships with university institutions and has entered into agreements with various academic centres located in its area of operation. These partnerships Index Annual Report 2015 Other Information

not only foster training, awareness-raising and research but also give students access to work experience schemes that supplement the academic training they receive in the universities. The Cooperative Bank’s ongoing commitments in this area also include work to promote environmental education in schools as a means to raise awareness and foster the understanding that will encourage increased respect for the natural environment among young people. The Cooperative Bank’s broad and diverse portfolio of sports-related projects includes assistance in the organisation of numerous sporting events and support for various clubs, organisations and associations that work specifically to develop grassroots sport. Many sporting disciplines benefit from this support. The Cooperative Bank’s portfolio of welfare projects includes support for various not-for-profit and/or humanitarian organizations running projects and initiatives benefiting the most disadvantaged members of society. A key field of action in this area is the provision of support and assistance for the elderly that in one way or another helps improve their quality of life. As part of its cultural and recreational programme, the Cooperative Bank provides funding for numerous community-based initiatives, aiming to reflect in its portfolio the huge diversity of projects operated at the community level and paying particular attention to the various representations of popular culture and community empowerment that are organized in our immediate area. Index Annual Report 2015 Other Information

Employees, Branch and Regional Offices At the end of 2015 Caja Rural de Navarra had 918 employees and 246 branches, 105 of them located outside Navarre (37 in Guipuzcoa, 28 in Vizcaya, 24 in La Rioja and 16 in Alava).

Offices in Pamplona and surrounding area

DENOMINACION DOMICILIO POBLACION TELEFONO FAX ANSOAIN LAPURBIDE 2 ANSOAIN 948 143367 948 143367 BARAÑAIN PLZA. DE LOS CASTAÑOS, 4 BARAÑAIN 948 180368 948 185819 BARAÑAIN AVDA DE PAMPLONA, 4-6 BARAÑAIN 948 272705 948 272705 BARAÑAIN AVDA. CENTRAL, 12 BARAÑAIN 948 198457 948 198458 BERIÁIN PLAZA SIERRA DE IZAGA, 3 BERIÁIN 948 368443 948 368480 BERRIOZAR AVDA. GUIPÚZCOA, 30 BERRIOZAR 948 300361 948 300361 BURLADA CALLE MAYOR, 42 BURLADA 948 142662 948 142662 BURLADA C/ DE LAS LAVANDERAS, 12 BURLADA 948 292273 948 292274 HUARTE PLAZA DE SAN JUAN 14 HUARTE - PAMPLONA 948 332390 948 332390 MUTILVA BAJA AVDA. PAMPLONA, 9 MUTILVA BAJA 948 857028 948 292551 NOAIN CALLE REAL 41 NOAIN 948 312717 948 312717 ORCOYEN PLAZA ITURGÁIN, 5 BIS ORCOYEN 948 343634 948 343635 PAMPLONA-OFICINA PRINCIPAL PLAZA DE LOS FUEROS, 1 PAMPLONA 948 168100 948 244557 PAMPLONA ARTICA, 11 PAMPLONA 948 127223 948 144287 PAMPLONA AVENIDA DE BARAÑAIN 17 PAMPLONA 948 177856 948 177238 PAMPLONA AVDA. CARLOS III, 12 PAMPLONA 948 203778 948 203779 PAMPLONA AVDA. MARCELO CELAYETA, 49 PAMPLONA 948 383992 948 383993 PAMPLONA AVDA. NAVARRA, 2 PAMPLONA 948 174864 948 170953 PAMPLONA CONCEJO DE EGÜES,10 PAMPLONA 948 162639 948 162639 PAMPLONA DOCTOR FLEMING, 13 PAMPLONA 948 136492 948 136493 PAMPLONA GAYARRE, 30 PAMPLONA 948 153734 948 153734 PAMPLONA CALLE IRUNLARREA 17 PAMPLONA 948 173071 948 173071 PAMPLONA ITURRAMA, 12 - 14 PAMPLONA 948 264612 948 277189 PAMPLONA LUIS MORONDO, 2 PAMPLONA 948 292441 948 292666 PAMPLONA MARTÍN AZPILICUETA, 2-4 PAMPLONA 948 198953 948 198954 PAMPLONA MAYOR, 6 PAMPLONA 948 211120 948 211120 PAMPLONA MERCADERES, 6 PAMPLONA 948 204080 948 204081 PAMPLONA MIRAVALLES, 17-19 PAMPLONA 948 144753 948 124238 PAMPLONA MONASTERIO DE URDAX, 34 PAMPLONA 948 173462 948 173462 PAMPLONA OLITE, 37 PAMPLONA 948 236683 948 236683 PAMPLONA PADRE BARACE, 1 PAMPLONA 948 198188 948 198194 PAMPLONA PAULINO CABALLERO, 27 PAMPLONA 948 153492 948 153492 PAMPLONA PASEO ANELIER, 20 (ESQUINA B. TIRAPU) PAMPLONA 948 382499 948 382500 PAMPLONA PINTOR CRISPIN, 2-4 PAMPLONA 948 262762 948 262762 PAMPLONA PÍO XII, 8 PAMPLONA 948 366755 948 198957 PAMPLONA RIO IRATI, 10 PAMPLONA 948 240862 948 237074 PAMPLONA SANTESTEBAN, 1 PAMPLONA 948 382579 948 382580 PAMPLONA TAJONAR 8 PAMPLONA 948 152852 948 152852 PAMPLONA TUDELA, 1 PAMPLONA 948 206798 948 207291 PAMPLONA VENTURA RODRÍGUEZ, 75 PAMPLONA 948 354163 948 354164 PAMPLONA VILLAFRANCA, 10 PAMPLONA 948 140982 948 140982 SARRIGUREN BARDENAS REALES, 7 SARRIGUREN 948 164128 948 168055 VILLAVA AGUSTÍN GARCÍA, 2 VILLAVA 948 123978 948 128063 ZIZUR MAYOR LURBELTZETA 4 ZIZUR MAYOR 948 185095 948 185095 ZIZUR MAYOR SANTA CRUZ, 25 ZIZUR MAYOR 948 182700 948 181887 Index Annual Report 2015 Other Information

Navarra

DENOMINACION DOMICILIO POBLACION TELEFONO FAX ABARZUZA PZ. DE LOS FUEROS, 2 ABARZUZA 948 520108 948 520108 ABLITAS AVDA DE TUDELA, 22 ABLITAS 948 813178 948 813178 AIBAR TRAVESÍA DE SANGÜESA, 3 AIBAR 948 877531 948 877532 ALLO PLAZA FUEROS, 1 ALLO 948 523068 948 523068 ALSASUA ALZANIA, 2 ALSASUA 948 563858 948 563858 ANDOSILLA RAMÓN Y CAJAL, 49 ANDOSILLA 948 674093 948 674093 AÑORBE VALDIZARBE, 4 AÑORBE 948 350163 948 350163 AÓIZ DOMINGO ELIZONDO, 4 AÓIZ 948 336888 948 336889 ARANTZA KARRIKA NAGUSIA, 2 ARANTZA - ARANAZ 948 634051 948 634051 ARGUEDAS PLAZA GENERAL CLEMENTE 1 ARGUEDAS 948 830132 948 830132 ARIBE CL.SANTA MARIA, 18 ARIVE 948 764191 948 764191 ARRONIZ PRIMICIA 2 ARRONIZ 948 537352 948 537352 ARTAJONA HOSPITAL S/N ARTAJONA 948 364012 948 364838 AZAGRA AVENIDA DE LA PAZ, S/N AZAGRA 948 692039 948 692910 BARASOAIN DOCTOR NAVARRO, 6 BARASOAIN 948 720102 948 720102 BARGOTA BARRILILLA, 13 BARGOTA 948 648371 BERA CALLE BIDASOA 10 VERA DE BIDASOA 948 631112 948 631112 BERBINZANA CL. MAYOR, 23 BERBINZANA 948 722077 948 722077 BETELU CR. SAN SEBASTIAN BETELU 948 513065 948 513065 BUÑUEL PLAZA DE LOS FUEROS, 2 BUÑUEL 948 833126 948 833126 CABANILLAS LA VICERA, 6-8 CABANILLAS 948 810342 948 810342 CADREITA AVDA. DE NAVARRA, 16 CADREITA 948 836233 948 836233 CAPARROSO AVDA. DE PAMPLONA, 17 CAPARROSO 948 730025 948 730025 CARCAR PLAZA ANA MARIA MOGAS, 4 CARCAR 948 674456 948 674456 CARCASTILLO AVDA. DE ARAGÓN,5 CARCASTILLO 948 725557 948 725557 CASCANTE P OBISPO SOLDEVILLA, 7 CASCANTE 948 851772 948 850188 CASEDA CR. AIBAR-CAPARROSO 29 CASEDA 948 879208 948 879208 CASTEJON MERINDADES 25 CASTEJON 948 814313 948 814313 CINTRUENIGO MILAGROSA 1 CINTRUENIGO 948 811740 948 811740 CIRAUQUI NORTE CIRAUQUI 948 342088 948 342088 CORELLA SAN JOSE, 20 CORELLA 948 780366 948 401309 CORTES PZA DUQUESA DE MIRANDA, 5 CORTES 948 800034 948 800525 DANTXARINEA BARRIO DANTXARINEA, 29 DANCHARINEA 948 599253 948 599253 DICASTILLO PLAZA DE LOS FUEROS, SN DICASTILLO 948 527092 948 527092 ELIZONDO JAIME URRUTIA, 9 ELIZONDO 948 580729 948 580729 ERRO CR. FRANCIA ERRO 948 768068 948 768068 ESTELLA SAN ANDRES, 4 ESTELLA 948 550130 948 551912 ESTELLA AVDA. YERRI, 3 ESTELLA 948 555427 948 555428 ETXALAR ANDUTZETA 4 ECHALAR 948 635201 948 635201 EULATE MAYOR, S/N EULATE 948 543841 948 543841 FALCES CABALLEROS 3 FALCES 948 734182 948 734182 FITERO MAYOR, 28 FITERO 948 776246 948 776246 FONTELLAS AVDA DE TUDELA, 9 FONTELLAS 948 827329 948 827329 FUNES AVENIDA DE NAVARRA 3 FUNES 948 754244 948 754244 FUSTIÑANA LUIS BEAUMONT 2 FUSTIÑANA 948 840535 948 840535 HUARTE ARAQUIL PLAZA SAN JUAN, SN HUARTE-ARAQUIL 948 464127 948 464127 Index Annual Report 2015 Other Information

Navarra

DENOMINACION DOMICILIO POBLACION TELEFONO FAX IRURZUN CALLE SAN MARTIN, 7 IRURZUN 948 500281 948 600429 JAURRIETA CL. LLANA S/N JAURRIETA 948 890326 948 890326 LARRAGA CARRETERA ESTELLA, 6 LARRAGA 948 711233 948 711233 LARRÁINZAR SAN PEDRO, 28 BIS LARRAINZAR 948 305002 948 305002 LECUMBERRI ARALAR, 41 LECUMBERRI 948 504076 948 504076 LEIZA ELBARREN, 35 LEIZA 948 610735 948 610735 LERIN MAYOR, 33 LERIN 948 530267 948 530267 LESAKA PLAZA ZAHARRA, 2 LESAKA 948 637318 948 637318 LODOSA AVENIDA DE LA RIBERA, 3 LODOSA 948 693809 948 693809 LOS ARCOS RAMON Y CAJAL 8 LOS ARCOS 948 640224 948 640224 LUMBIER MAYOR, 70 LUMBIER 948 880177 948 880177 MARCILLA PASEO DE ARANJUEZ 3 MARCILLA 948 757327 948 757327 MELIDA ZUMALACÁRREGUI, 18 MELIDA 948 746377 948 746377 MENDAVIA AUGUSTO ECHEVARRIA, 51 MENDAVIA 948 685045 948 685045 MENDIGORRIA BERNARDINO AYALA, 6 MENDIGORRIA 948 340018 948 340018 MILAGRO NAVAS DE TOLOSA, 3 MILAGRO 948 409061 948 861663 MIRANDA DE ARGA BAJA, 3 MIRANDA DE ARGA 948 737005 948 737005 MONTEAGUDO AVDA. SAN AGUSTIN, 3 MONTEAGUDO 948 816621 948 816621 MURCHANTE MAYOR, 70 MURCHANTE 948 838151 948 838218 MURIETA CARRETERA ABAIGAR, 1 MURIETA 948 534232 948 534232 MURILLO EL FRUTO MAYOR, 31 MURILLO EL FRUTO 948 725450 948 725450 OBANOS SAN LORENZO, 2 OBANOS 948 344477 948 344777 OCHAGAVIA IRIBARREN,32 OCHAGAVIA 948 890301 948 890301 OLAGÜE CL.SAN JUAN OLAGÜE 948 307111 948 307111 OLITE RUA MAYOR 4 OLITE 948 740258 948 740258 OTEIZA DE LA SOLANA CARRETERA ESTELLA, SN OTEIZA DE LA SOLANA 948 543139 948 543139 PERALTA IRURZUN, 11 PERALTA 948 750553 948 750781 PITILLAS SAN JOSE S/N PITILLAS 948 745101 948 745101 PUENTE LA REINA PASEO FUEROS, 23 PUENTE LA REINA 948 340210 948 341123 RADA AVDA. NAVARRA, 15 RADA 948 731189 948 731189 RIBAFORADA CABALLEROS TEMPLARIOS, 1 RIBAFORADA 948 864117 948 819402 SAN ADRIAN DELICIAS, 2 SAN ADRIAN 948 670239 948 670239 SAN MARTIN DE UNX PLAZA MIGUEL SANZ, 5 SAN MARTIN DE UNX 948 738015 948 738015 SANGUESA PLAZA FUEROS, 7 SANGUESA 948 870653 948 870653 SANTACARA NTRA SRA DE UJUE SANTACARA 948 746107 948 746107 SANTESTEBAN PARROQUIA, 5 SANTESTEBAN 948 450404 948 451664 SARTAGUDA CARRETERA LODOSA, 1 SARTAGUDA 948 667102 948 667102 SESMA PADRE TOMAS ESTEBAN, 28 SESMA 948 698025 948 698025 SUNBILLA CL. LEKU EDER S/N SUNBILLA 948 450358 948 450358 TAFALLA PLAZA FUEROS, 2 TAFALLA 948 701511 948 701550 TAFALLA AVDA. BAJA NAVARRA, 1 TAFALLA 948 704622 948 704623 TUDELA MAULEON 1 ESQUINA J A FERNANDEZ TUDELA 948 412103 948 410852 TUDELA AVDA DE ZARAGOZA 1 TUDELA 948 822249 948 825704 TUDELA AVDA. AÑÓN BAIGORRI, 13 TUDELA 948 403273 948 403273 TUDELA DÍAZ BRAVO, 19 TUDELA 948 413581 948 413582 VALTIERRA PASEO DE LA RIBERA 105 VALTIERRA 948 867176 948 867300 VIANA ABAJO DE SAN PEDRO, 1 VIANA 948 645882 948 645882 VILLAFRANCA CRUCERO ANCHO 11 VILLAFRANCA 948 845106 948 845551 VILLATUERTA C/ SAN GINES, 1 VILLATUERTA 948 541416 948 541416 ZUDAIRE CL. SAN ANTÓN 27 ZUDAIRE 948 539011 948 539011 Index Annual Report 2015 Other Information

Guipúzcoa

DENOMINACION DOMICILIO POBLACION TELEFONO FAX ANDOAIN JUAN BAUTISTA ERRO, 7 ANDOAIN 943 300883 943 300686 ARRASATE PLAZA BITERI, 2 ARRASATE 943 795343 943 795426 AZKOITIA NAGUSIA, 69 AZKOITIA 943 853032 943 857237 AZPEITIA FORUEN IBILBIDEA, 10 AZPEITIA 943 811195 943 811195 BEASAIN NAFARROA ETORBIDEA, 1 BEASAIN 943 805481 943 805747 BERGARA PO. IRIZAR, 5 BERGARA 943 769393 943 769293 EIBAR JULIAN ETXEBERRIA, 9 EIBAR 943 820755 943 820756 ELGOIBAR SAN FRANTZISKO KALEA 2 ELGOIBAR 943 747382 943 747383 HERNANI CL. TXIRRITA, 10 HERNANI 943 335920 943 335994 HONDARRIBIA JAVIER UGARTE, 6 HONDARRIBIA 943 640938 943 640484 IRUN FUENTERRABIA, 15 IRUN 943 610480 943 610480 IRUN PASEO COLÓN, 15 IRUN 943 638723 943 638724 LASARTE NAGUSIA, 36 LASARTE 943 371844 943 371844 LEGAZPI KALE NAGUSIA (ESQUINA SANTIKUTZ) LEGAZPI 943 737098 943 737099 OIARTZUN SAN JUAN, 3 OIARTZUN 943 494264 943 494289 OÑATE FORUEN ENPARANTZA, 9 OÑATE 943 718867 943 718868 ORDIZIA GOEN, 5 ORDIZIA 943 805756 943 805767 PASAJES ANTXO GURE ZUMARDIA, 28 PASAJES ANTXO 943 340584 943 340838 RENTERIA PLAZA XENPELAR, 4 RENTERIA 943 519711 943 519711 RENTERIA-BERAUN SAN MARCOS, 1 RENTERIA 943 344361 943 344362 SAN SEBASTIÁN AV. ISABEL II, 3 SAN SEBASTIÁN 943 458327 943 452666 SAN SEBASTIÁN CL. IPARRAGUIRRE 11 SAN SEBASTIÁN 943 297817 943 297818 SAN SEBASTIÁN AV. LARRATXO, 24 SAN SEBASTIÁN 943 404901 943 404902 SAN SEBASTIÁN MATÍA, 17 SAN SEBASTIÁN 943 224115 943 224126 SAN SEBASTIÁN J.M. SALABERRIA, 33-35 SAN SEBASTIÁN 943 445105 943 445106 SAN SEBASTIÁN SAN FRANCISCO, 34 SAN SEBASTIÁN 943 297716 943 297717 SAN SEBASTIÁN URBIETA, 8 SAN SEBASTIÁN 943 428500 943 433498 SAN SEBASTIÁN VIRGEN DEL CARMEN, 6 SAN SEBASTIÁN 943 297870 943 297871 SAN SEBASTIÁN-INTXAURRONDO PASEO SAGASTIEDER, 10 SAN SEBASTIÁN 943 596003 943 273316 TOLOSA AV. DE NAVARRA, 9 TOLOSA 943 698318 943 698236 TRINTXERPE AVDA. EUSKADI, 33-35 PASAI SAN PEDRO 943 404525 943 404526 URNIETA IDIAZÁBAL, 30 URNIETA 943 596004 943 332939 USÚRBIL ZUBIAURRENEA, 4 USÚRBIL 943 368842 943 368843 VILLABONA NUEVA, 43 VILLABONA 943 690780 943 690916 ZARAUTZ AZARA, 17 ZARAUZ 943 895514 943 895515 ZUMAIA ERRIBERA, 7 ZUMAIA 943 865628 943 865629 ZUMARRAGA LEGAZPI, 1 ZUMÁRRAGA 943 729337 943 729338 Index Annual Report 2015 Other Information

Álava

DENOMINACION DOMICILIO POBLACION TELEFONO FAX

AMURRIO ELEXONDO, 10 AMURRIO 945 891768 945 891820 LLODIO AVDA. ZUMALACÁRREGUI, 38 LLODIO 94 6727881 94 6727882 VITORIA AVDA. GASTEIZ, 19 VITORIA 945 154045 945 154680 VITORIA AVDA. GASTEIZ, 80 VITORIA 945 215101 945 215102 VITORIA CL. LOS HERRAN 38 VITORIA 945 203477 945 203477 VITORIA CL. PARAGUAY, 12 VITORIA 945 214987 945 214988 VITORIA AVDA. SANTIAGO, 46 VITORIA 945 203220 945 203221 VITORIA PORTAL DE VILLARREAL, 34 VITORIA 945 123457 943 123458 VITORIA CORONACIÓN DE LA VIRGEN BLANCA, 11 VITORIA 945 215158 945 215159 VITORIA HERACLIO FOURNIER, 4 VITORIA 945 151113 945 151114 VITORIA JUNTAS GENERALES, 27 VITORIA 945 179456 945 179457 VITORIA BEATO TOMÁS DE ZUMÁRRAGA, 40 VITORIA 945 217194 945 217196 VITORIA DUQUE DE WELLINGTON, 12 VITORIA 945 197596 945 197597 VITORIA DIPUTACIÓN FORAL, 8 VITORIA 945 283933 945 262092 VITORIA C/ FRANCIA, 31 VITORIA 945 201645 945 201646 SANTA CRUZ DE CAMPEZO LA VILLA, 11 SANTA CRUZ DE CAMPEZO 945 415044 945 415044

Vizcaya

DENOMINACION DOMICILIO POBLACION TELEFONO FAX

ALGORTA TORRENE, 8 ALGORTA 94 4912052 94 4913873 AMOREBIETA GUDARI, 1 AMOREBIETA 94 4985073 BARAKALDO GIPUZKOA, 6 BARAKALDO 94 4180560 94 4180561 BARAKALDO AVDA. LIBERTAD, 40 BARAKALDO 94 4180636 94 4180646 BASAURI AVDA. LEHENDAKARI AGIRRE, 78 BASAURI 94 4266495 94 4266496 BILBAO JUAN ANTONIO ZUNZUNEGUI, 1 BILBAO 94 4277480 94 4277214 BILBAO ITURRIAGA, 82 BILBAO 94 4597627 94 4597628 BILBAO SALOU, 2 BILBAO 94 4222868 94 4223182 BILBAO FRAY JUAN, 1 BILBAO 94 4396679 94 4396686 BILBAO ALAMEDA DE SAN MAMÉS, 6 BILBAO 94 4221323 94 4222236 BILBAO JUAN DE GARAY, 57 BILBAO 94 4104905 94 4210075 BILBAO SOMBRERERÍA, 6 BILBAO 94 4164765 94 4794324 BILBAO AVDA. LEHENDAKARI AGUIRRE, 13 BILBAO 94 4474282 94 4474283 BILBAO ERCILLA, 14 (Plaza Jado) BILBAO 94 4240338 94 4355715 BILBAO AUTONOMÍA, 35-ESQ. GORDÓNIZ BILBAO 94 4985020 94 4703772 BILBAO SAN VALENTÍN DE BERRIOTXOA, 7-ESQ. PZA. TRAUKO BILBAO 94 4985300 94 4134267 DERIO AVDA. MUNGIA, 1 DERIO 94 4544374 94 4540357 DURANGO ANDRA MARÍA KALEA, 4 DURANGO 94 6232871 94 6232872 ERANDIO OBIETA, 7 ERANDIO 94 4676546 94 4676547 ERMUA ERDIKOKALE ZEHARBIDE, 1 ERMUA 94 3597300 94 3175444 GETXO AMISTAD, 10-ESQ. PAULINO MENDIBIL GETXO 94 4985004 GALDAKAO URKI, 2 GALDAKAO 94 4561720 94 4561722 MUNGIA CONCORDIA ALKARTASUNA, 4 MUNGUÍA 94 6748173 94 6748174 PORTUGALETE CARLOS VII, 2 PORTUGALETE 94 4830885 94 4937759 PORTUGALETE AVDA. REPÉLEGA, 15 PORTUGALETE 94 4957911 94 4956794 SANTURTZI AVDA. DE MURRIETA, 5 SANTURTZI 94 4934187 94 4934189 SESTAO ALAMEDA DE LAS LLANAS, 7 SESTAO 94 4960524 94 4960625 TRAPAGARÁN PRIMERO DE MAYO, 26 BIS TRAPAGARÁN 94 4862302 94 4920674 Index Annual Report 2015 Other Information

La Rioja

DENOMINACION DOMICILIO POBLACION TELEFONO FAX ALDEANUEVA DE EBRO LOMBILLA, 1 ALDEANUEVA DE EBRO (LA RIOJA) 941 163613 941 163613 ALFARO ALFOLIES, 8 ALFARO (LA RIOJA) 941 180512 941 180512 ARNEDO HUERTAS, 1 ARNEDO 941 385074 941 385075 AUTOL Nª SRA. DE YERGA, 14 AUTOL 941 390925 941 390926 CALAHORRA CAVAS, 1 CALAHORRA (LA RIOJA) 941 146240 941 146720 CALAHORRA RAMÓN SUBIRÁN, 29 CALAHORRA (LA RIOJA) 941 136088 941 136089 HARO AVDA. LA RIOJA, 25 HARO 941 304997 941 304998 LARDERO BRETÓN DE LOS HERREROS, 1 LARDERO 941 447844 941 447844 LOGROÑO AV. DE LA PAZ, 28 LOGROÑO 941 270984 941 270985 LOGROÑO AV. DE LA PAZ, 71 LOGROÑO 941 270369 941 270369 LOGROÑO CHILE, 18 LOGROÑO 941 286792 941 286793 LOGROÑO ESTAMBRERA, 14 LOGROÑO 941 501299 941 501299 LOGROÑO GENERAL VARA DE REY, 44 LOGROÑO 941 234670 941 234671 LOGROÑO GONZALO DE BERCEO, 14 LOGROÑO 941 287332 941 287333 LOGROÑO GRAN VIA, 16 LOGROÑO 941 287444 941 287445 LOGROÑO JORGE VIGÓN, 40 LOGROÑO 941 270987 941 270988 LOGROÑO SIETE INFANTES DE LARA 11 LOGROÑO 941 519050 941 519051 NÁJERA SAN FERNANDO, 56 NÁJERA 941 361775 941 361775 NAVARRETE AVDA. LOGROÑO, 4 NAVARRETE 941 440783 941 440663 PRADEJÓN DEL PRADO, 20 BIS PRADEJÓN 941 141446 941 141447 QUEL AVDA. LA RIOJA, 57 QUEL 941 403331 941 403341 RINCON DE SOTO PRINCIPE FELIPE, 18 RINCON DE SOTO (RIOJA) 941 142063 941 142063 SANTO DOMINGO DE LA JUAN CARLOS I, 5 SANTO DOMINGO DE LA CALZADA 941 343073 941 343412 CALZADA VILLAMEDIANA DE IREGUA AVDA. CAMEROS, 6 VILLAMEDIANA DE IREGUA 941 435900 941 435900 Index