Annual Report 2014 Annual Report 2014 Annual Report

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 Information on activities Employees, Branch and Regional Offices Annual Report 2014 Annual Report 2014

Introduction Introduction Annual Report 2014 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 Annual Report 2014 Annual Report 2014 Introduction

Governing Bodies Board of Directors

Chairman: Mr. José Luis Barriendo Antoñanzas Vice-Chairman: Mr. José Ángel Ezcurra Ibarrola Secretary: Mr. Ignacio Terés Los Arcos Board Members: Mr. Jesús Andrés Mauleón Arana Mr. José María Arizaleta Nieva Mr. José Luis Sarabia Moreno Mr. Pedro Buldáin Zozaya Mr. Isidro Bazterrica Mutuberria Mr. Francisco Javier Artajo Carlos Mr. Melchor Miranda Azcona Mr. Pedro María Beorlegui Egea Mr. José Javier López Morrrás Mr. Roberto Zabaleta Ciriza Mr. Luis Miguel Serrano Cornago

Executive Committee

Chairman: Mr. José Luis Barriendo Antoñanzas Vice-Chairman: Mr. José Ángel Ezcurra Ibarrola Secretary: Mr. Ignacio Terés Los Arcos Committee Member: Mr. Luis Serrano Cornago Committee Member: Mr. José María Arizaleta Nieva

Chief Executive Officer

Mr. Ignacio Arrieta del Valle Annual Report 2014 Introduction

Report from the Chairman

The economic picture that we had to deal with in 2014 varied widely from region to region. Among the developed countries, the USA and UK were growing at a satisfactory pace and showing signs of finally shaking off the financial crisis. In contrast, Japan and the euro zone repeatedly disappointed, publishing very low growth figures and near-zero inflation rates. Emerging market countries also significantly slowed their growth rates, especially in Latin America. The economic forecasts for international institutions were scaled down in the later months of the year. By October the IMF was expecting global growth of just 3.3% for 2014, compared to the 3.7% it had been forecasting in January.

In the second half of the year, these doubts about the economic strength of Europe, Japan, China and the emerging markets combined with a persistent decline in inflation rates in economies where expansionary monetary policies should have been pushing more strongly in the other direction. Demand was failing to respond to the cash injection with the hoped-for vigour, especially investment. There were more grounds for caution in the last few months as fears grew that high levels of public and private debt would continue to hamper growth for longer than had been expected. Meanwhile, serious geopolitical tensions, such as the dispute over Ukrainian sovereignty and the resulting EU sanctions on trade with Russia, the worsening tensions in the Middle East and widespread social protest in several parts of the world (Europe, Brazil, Mexico, Hong Kong, etc.) against the dominant political systems also urged prudence in markets that had, since the summer, already faced a simultaneous and speedy drop in the oil price and the euro/dollar exchange rate.

Also, it is still unclear what impact the transatlantic decoupling will have, as the Fed has now started winding down QE while the ECB has extended its range of actions to encourage more normal circulation of investment and financing flows through the economy after years of blockage. The different reactions reflect the recognition by monetary authorities either side of the ocean that economic growth is not well-embedded and they face a risk of Annual Report 2014 Annual Report 2014 Introduction

chronic stagnation with very low inflation for a long time to come. Other countries and economic zones have equally reached for expansionary monetary policy to try and reverse a relative slowdown in their economies (as in China) or defeat deflation and stagnation (Japan).

The European Central Bank has been the undisputed leader in the euro zone with its expansive monetary policy measures. Twice it has symbolically shaved its already rock-bottom policy rates: in June it said it was cutting refi rates by 0.10 points to 0.15% with banks having to pay negative rates (-0.10%) to deposit money at the ECB; then, on 4 September it announced another cut in the policy rate to 0.05% and a deeper negative rate for depositing banks of - 0.20%. Standing out among the successive batteries of non-conventional monetary policy measures announced in 2014 were the June announcement of the targeted longer-term refinancing operations (TLTRO) with a nominal value of EUR 400,000 million and the September buyback of EUR 300,000 million of securitisation and covered bonds to boost liquidity and address the shortage of credit by easing the banks' capital consumption. In the year's final quarter the ECB also announced a purchase programme for bank securitization issues whose underlyings were corporate loans and hinted it might look at buying euro area government debt in 2015. The pressure on the European monetary authorities to take far more aggressive steps built up as the year went on and year-on-year inflation figures edged ever nearer zero stoking fears continental Europe might be in for a long spell of stagnation and deflation.

Against this background of lax monetary policy financial positions in Europe's peripheral countries gradually strengthened, with Spain leading the way. The interest rate paid on Spanish government debt hit historical lows in December when 10-year bonds sold for 1.60% and the risk premium fell to 1 percentage point (100 bp). This meant that the Spanish country risk premium has come down by nearly 5 points (500 bp) since its July 2012 peak.

The Spanish economy's return to growth was consolidated and by end 2014 GDP had recorded six straight quarters of unbroken expansion after nine quarters of recession, making Spain one of Europe's fastest-growing states. The political steps taken, the recovery of domestic demand, the confidence of foreign investors, the debt-reduction in the private sector and the clean bill of health given Spanish banks in the ECB's solvency tests are all indicative of a Annual Report 2014 Introduction

changing scenario for the Spanish economy. That said, many imbalances remain, notably the appalling unemployment rate, a stubborn deficit and rising levels of public sector debt as well as fresh warning signs such as the balance of payments tipping back into the red and the deflation seen in 2014.

The improvement in the financial markets has clearly done much to bolster consumer confidence in Spain. Purse strings are being loosened. Consumption indicators continue to signal growth. The great hope for private sector consumption is that a pick-up in the labour market can consolidate the recovery in household consumption. With the economy now growing and backing from the ECB, Spain is looking good and investors and analysts have become less concerned about the fiscal imbalances. More worryingly, so have Spanish politicians. 2015 is an election year in Spain and this will be one of the key uncertainty factors this year.

2014 was a difficult year for the whole financial sector, which struggled to generate net interest income amid declining lending volumes, historically low interest rates and NPL ratios still blighted by the problems of recent years.

In this environment, the Group's financial highlights for 2014 were as follows:

Income statement (in thousands of euro) Net interest income 141,261 Gross income 252,618 Income from operating activities64,400 Consolidated profit for the year52,709

Business volumes

Customer deposits; Customer funds from the private sector (not including the single-issuer mortgage covered bonds, shown on the Cooperative Bank's 2014 statement of financial position) increased at an annual rate of 5.37% to EUR 6,133,759 thousand at year-end. The investment fund business grew by 32.08%. Pension plans and EPSVs (voluntary social insurance funds) grew by 9.85%. Annual Report 2014 Annual Report 2014 Introduction

Caja Rural de Navarra is highly specialised in managing this type of product, giving it a strong competitive positioning in business lines that are expected to prove a big success in coming years thanks to their forecast returns and favourable tax treatment.

Loans And Advances

Customer loans fell by 0.52% to EUR 6,131,845 thousand on the year, as demand by borrowers remained weak and a number of credit arrangements from prior years matured. Nevertheless, Caja Rural de Navarra continues to win market share in all provinces where it operates.

Non-performing loans The Group's NPL ratio at the end of 2014 was 4.42%, well below the 12.60% average for the Spanish financial sector at the same date.

Rating

Caja Rural de Navarra is rated by two of the world's leading agencies, Fitch and Moody's, and is one of only a few Spanish financial institutions rated investment grade by both. It can therefore fairly claim that its market positioning on this criteria is excellent, as it is the only local or regional credit institution to attain this rating grade. Caja Rural de Navarra's long-term ratings are: Baa3 by Moody’s and BBB by Fitch.

Solvency

Caja Rural de Navarra had Tier 1 capital of 15.57%, one of the highest levels of any Spanish financial institution active in the retail market.

Branches and employees

Caja Rural de Navarra has 244 branches spread over the following provinces: Navarra 141, Guipúzcoa 37, Vizcaya 26, Álava 16 and La Rioja 24. It should be noted that the Cooperative Bank has not shut any branches during the crisis, underlining the robustness of its branch business. This has also helped maintain jobs. At the end of the year the Cooperative Bank had 891 people on its payroll. Annual Report 2014 Annual Report 2014 Introduction

Business model

Caja Rural de Navarra is currently Navarre's flagship financial institution. For many years, it has supported and contributed to the province's economic dev elopment, acting as a long-term partner and independent entity whose most senior decision-making bodies are based in Navarre. Caja Rural de Navarra is a local entity committed to its home province, its citizens, its companies and its institutions. Its management style has always been marked by humility and prudence. It also belongs to the Caja Rural Group, a model inspired by the European cooperative credit movement and which has proven its worth historically, especially during this latest crisis, and has established itself as a model of success.

Drawing on this European model, the Cooperative Bank and wider Caja Rural Group have over many years combined their financial business with insurance in a "bancassurance" model. For 25 years, they have had a dedicated insurance company, Seguros RGA, which writes most of the insurance products distributed to customers: Life, Home and Automotive policies and, in a natural fit with the Cooperative Bank's business, all types of policy related to savings including Pension and Retirement Plans of all kinds. This is now an important component in the Cooperative Bank's earnings from services, enhancing business diversification and boosting the Group's capacity to generate net interest income.

Looking bank on the year, we can be pleased with the way we have risen to the challenge of the crisis; we can expect to emerge stronger as a result, remaining true to our way of banking and our way of delivering services to members and customers.

We thank you all: members and customers for their loyalty and confidence and all Caja Rural employees for their effort, since it is their commitment and dedication that has made it possible for us to present these positive results today.

Annual Report 2014 Annual Report 2014

Financial Data Financial Data Annual Report 2014 Annual Report 2014 Financial Data

Financial Report of the Year Consolidated balance sheet at 31/12/14 and 31/12/13

CHANGE 31/12/2014 31/12/2013 Thousands of euro %

CONSOLIDATED STATEMENT OF FINANCIAL POSITION ASSETS 1. CASH AND BALANCES WTIH CENTRAL BANKS 36.224 35.502 722 2,03% 2. FINANCIAL INSTRUMENTS HELD FOR TRADING 29.095 26.066 3.029 11,62% 2.4. Equity instruments 367 1.944 -1.577 -81,12% 2.5. Trading derivatives 28.728 24.122 4.606 19,09% Memorandum items: Loaned or advanced as collateral 0 0 0 - 3. OTHER FINANCIAL ASSETS AT FAIR VALUE THROUGHT 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 2.006.278 1.771.673 234.605 13,24% 4.1. Debt securities 1.901.045 1.660.391 240.654 14,49% 4.2. Equity instruments 105.233 111.282 -6.049 -5,44% Memorandum items: Loaned or advanced as collateral 121.926 174.827 -52.901 -30,26% 5. LOANS AND ADVANCES 7.031.492 7.374.484 -342.992 -4,65% 5.1. Loans and advances to credit institutions 888.635 739.456 149.179 20,17% 5.2. Loans and advances to customers 6.131.845 6.163.824 -31.979 -0,52% 5.3. Debt securities 11.012 471.204 -460.192 -97,66% Memorandum items: Loaned or advanced as collateral 570.768 612.094 -41.326 -6,75% 6. HELD-TO-MATURITY INVESTMENTS 44.940 52.324 -7.384 -14,11% 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 16 117 -101 -86,32% 9. NON-CURRENT ASSETS HELF FOR SALE 89.504 76.266 13.238 17,36% 10. EQUITY INVESTMENTS 45.423 56.957 -11.534 -20,25% 10.1. Associates 45.423 56.957 -11.534 -20,25% 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 184.896 148.431 36.465 24,57% 13.1. Property and equipment 179.463 142.549 36.914 25,90% 13.1.1. For own use 179.291 142.375 36.916 25,93% 13.1.2. Leased out under operating lease 0 0 0 - 13.1.3. Assigned to social projects 172 174 -2 -1,15% 13.2. Investment property 5.433 5.882 -449 -7,63% Memorandum items: Acquired under finance leases 663 512 151 29,49% 14. INTANGIBLE ASSETS 13.565 537 13.028 2426,07% 14.1. Goodwill 8.565 537 8.028 1494,97% 14.2. Other intangible assets 5.000 0 5.000 - 15. TAX ASSETS 63.054 59.109 3.945 6,67% 15.1. Current 6.347 2.042 4.305 210,82% 15.2. Deferred 56.707 57.067 -360 -0,63% 16. OTHER ASSETS 108.058 60.511 47.547 78,58% 16.1. Inventories 75.986 31.313 44.673 142,67% 16.2. Other 32.072 29.198 2.874 9,84% TOTAL ASSETS 9.652.545 9.661.977 -9.432 -0,10% Annual Report 2014 Annual Report 2014 Financial Data

L I A B I L I T I E S 1. FINANCIAL INSTRUMENTS HELD FOR TRADING 3.178 3.894 -716 -18,39% 1.5. Trading derivatives 3.178 3.894 -716 -18,39% 2. OTHER FINANCIAL LIABILITIES AT FAIR VALUE THROUGHT PROFIT OR LOSS 0 0 0 - 3. FINANCIAL LIABILITIES AT AMORTIZED COST 8.620.057 8.759.246 -139.189 -1,59% 3.1 Deposits from central banks 0 0 0 - 3.2. Deposits from credit institutions 1.737.539 2.338.924 -601.385 -25,71% 3.3. Customer deposits 6.133.759 5.821.374 312.385 5,37% 3.4. Debt securities 645.298 535.183 110.115 20,58% 3.5. Subordinated liabilities 0 0 0 - 3.6. Other financial liabilities 103.461 63.765 39.696 62,25% 4. ADJUSTMENTS TO FINANCIAL LIABILITIES DUE TO MACRO- HEDGING 0 0 0 - 5. HEDGING DERIVATIVES 170 3.742 -3.572 -95,46% 6. LIABILITIES ASSOCIATED WITH NON-CURRENT ASSETS HELD FOR SALE 0 0 0 - 7. INSURANCE LIABILITIES 0 0 0 - 8. PROVISIONS 9.639 10.489 -850 -8,10% 8.1. Provisions for pensions and similar obligations 807 0 807 - 8.2. Provisions for taxes and other legal contingencies 0 0 0 - 8.3. Provisions for contingent exposures and commitments 8.832 10.489 -1.657 -15,80% 8.4. Other provisions 0 0 0 - 9. TAX LIABILITIES 37.311 22.362 14.949 66,85% 9.1. Current 3.273 2.561 712 27,80% 9.2. Deferred 34.038 19.801 14.237 71,90% 10. SOCIAL WELFARE FUND 8.346 6.304 2.042 32,39% 11. OTHER LIABILITIES 92.292 70.219 22.073 31,43% 12. SHARES REDEEMABLE ON DEMAND 0 0 0 - TOTAL LIABILITIES 8.770.993 8.876.256 -105.263 -1,19% EQUITY 0 - 1. CAPITAL AND RESERVES 808.848 750.873 57.975 7,72% 1.1. Share capital 151.602 142.696 8.906 6,24% 1.1.1. Issued capital 151.602 142.696 8.906 6,24% 1.1.2. Less: Uncalled capital 0 0 0 - 1.2. Share premium 0 0 0 - 1.3. Reserves 607.307 580.512 26.795 4,62% 1.3.1. Retained earnings (losses) 604.928 578.988 25.940 4,48% 1.3.2. Reserves of companies accounted for using the equity method 2.379 1.524 855 56,10% 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 52.709 30.216 22.493 74,44% 1.7. Less: Dividends and remuneration -2.770 -2.551 -219 8,58% 2. VALUATION ADJUSTMENTS 72.510 34.849 37.661 108,07% 2.1. Available-for-sale financial assets 72.510 34.849 37.661 108,07% 3. NON-CONTROLLING INTERESTS 194 -1 195 -19500,00% 3.1. Valuation adjustments 0 0 0 - 3.2. Other 194 -1 195 -19500,00% TOTAL EQUITY 881.552 785.721 95.831 12,20% TOTAL EQUITY AND LIABILITIES 9.652.545 9.661.977 -9.432 -0,10% MEMORANDUM ITEMS 1. CONTINGENT EXPOSURES 641.986 898.663 -256.677 -28,56% 2. CONTINGENT COMMITMENTS 979.827 948.793 31.034 3,27% Annual Report 2014 Annual Report 2014 Financial Data

CHANGE 31/12/2014 31/12/2013 Thousands of euro % CONSOLIDATED INCOME STATEMENT 1. Interest and similar income 246.265 288.759 -42.494 -14,72% 2. Interest and similar expense 105.004 159.008 -54.004 -33,96% 3. Remuneration paid to holders of shares redeemable on demand 0 0 0 - A) NET INTEREST INCOME 141.261 129.751 11.510 8,87% 4. Income from equity instruments 3.407 1.971 1.436 72,86% 5. Profit (loss) of companies accounted for using the equity method 59 407 -348 -85,50% 6. Fee and commission income 65.620 56.808 8.812 15,51% 7. Fee and commission expense 5.196 5.939 -743 -12,51% 8. Gains (losses) on financial assets and liabilities (net) 8.910 15.857 -6.947 -43,81% 8.1. Financial instruments held for trading 2.533 4.519 -1.986 -43,95% 8.2. Other financial instruments at fair value through profit or loss 0 17 -17 -100,00% 8.3. Financial instruments not measured at fair value through profit or loss 6.372 11.374 -5.002 -43,98% 8.4. Other 5 -53 58 -109,43% 9. Translation differences (net) 728 611 117 19,15% 10. Other operating income 203.334 146.415 56.919 38,88% 10.1. Insurance and reinsurance premiums written 0 0 0 - 10.2. Sales and income from the provision of non-financial services 199.398 143.033 56.365 39,41% 10.3. Other operating income 3.936 3.382 554 16,38% 11. Other operating expenses 165.505 133.589 31.916 23,89% 11.1. Insurance and reinsurance contract costs 0 0 0 - 11.2. Change in inventories 878 -4.155 5.033 -121,13% 11.3. Other operating expenses 164.627 137.744 26.883 19,52% B) GROSS INCOME 252.618 212.292 40.326 19,00% 12. Administrative expenses 113.127 106.509 6.618 6,21% 12.1. Personnel expenses 58.444 55.300 3.144 5,69% 12.2. Other general administrative expenses 54.683 51.209 3.474 6,78% 13. Depreciation and amortization 11.066 10.333 733 7,09% 14. Provisions (net) -1.405 12.375 -13.780 -111,35% 15. Impairment losses on financial assets (net) 65.430 46.601 18.829 40,40% 15.1. Loans and advances 64.583 45.121 19.462 43,13% 15.2. Other financial instruments not measured at fair value through profit or loss 847 1.480 -633 -42,77% C) INCOME FROM OPERATING ACTIVITIES 64.400 36.474 27.926 76,56% 16. Impairment losses on other assets (net) 269 4.138 -3.869 -93,50% 16.1. Goodwill and other intangible assets 468 0 468 - 16.2. Other assets -199 4.138 -4.337 -104,81% 17. Gains (losses) on the derecognition of assets not classified as non- current assets held for sale -3.044 -227 -2.817 1240,97% 18. Negative difference in business combinations 5.040 0 5.040 - 19. Gains (losses) on non-current assets held for sale not classified as discontinued operations -3.834 -1.405 -2.429 172,88% D) PROFIT BEFORE TAX 62.293 30.704 31.589 102,88% 20. Income tax 4.257 3.292 965 29,31% 21. Mandatory allocation to welfare projects and funds 5.327 3.780 1.547 40,93%

E) PROFIT (LOSS) FOR THE YEAR FROM CONTINUING OPERATIONS 52.709 30.216 22.493 74,44% 22. Profit (loss) from discontinued operations(net) 0 0 0 - F) CONSOLIDATED PROFIT FOR THE YEAR 52.709 30.216 22.493 74,44% F 1) Profit attributable to owners of the parent 52.709 30.216 22.493 74,44% F 2) Profit (loss) attributable to non-controlling interests 0 0 0 - Annual Report 2014 Annual Report 2014 Financial Data

Distribution of Net Surplus

PROPOSED APPROPRIATION OF NET SURPLUS

Thousands of euro

Profit (loss) before mandatory allocation to the Social Welfare Fund and after tax 56.042 Interest to be paid to members on capital contributions 2.770

TOTAL AVAILABLE FOR APPROPRIATION 53.272

APPROPRIATION OF SURPLUS

Allocations to the Social Welfare Fund (1) 5.327 Allocations to the Mandatory Reserve Fund 47.945

TOTAL DISTRIBUTED 53.272

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

NOTE: The profits or losses of consolidated subsidiaries will be applied in the manner agreed at their respectived General Shareholders’Meetings. Annual Report 2014 Annual Report 2014 Financial Data

Comments to the Financial Statements

CAPITAL & RESERVES BALANCE SHEET (Millions of euro) (Millions of euro)

9.000 800 700 7.000 600 500 5.000 400 300 200 3.000 100 0 1.000 2010

2011 2010

2012 2011

2013 2012 2014 2013 2014

DEPOSITS LOANS & ADVANCES ASSETS SURPLUS CALLED CAPITAL ELIGIBLE CAPITAL

BRANCHES EMPLOYEES

260 1.000 240 900 220 800 200 700 180 600 160 140 500 120 400 100 300 2010 2010 2011 2011 2012 2012 2013 2013 2014 2014

BENEFICIONET NETO PROFIT (Millones (Millions de ofeuros) euro) 50 40 30 20 10 0 -10 -20 -30 -40 2010 2011 2012 2013 2014 Annual Report 2014 Annual Report 2014

Legal Documentation Legal Documentation Annual Report 2014 Legal Documentation Annual Report 2014 Annual Report 2014 Legal Documentation Annual Report 2014

Legal Documentation

2014 CONSOLIDATED FINANCIAL STATEMENTS AND MANAGEMENT REPORT Annual Report 2014 Annual Report 2014

Legal Documentation

CAJA RURAL DE NAVARRA, SOCIEDAD COOPERATIVA DE CRÉDITO AND SUBSIDIARIES

Consolidated financial statements approved by the Governing Board of CAJA RURAL DE NAVARRA, SOCIEDAD COOPERATIVA DE CRÉDITO at the Board meeting held on 27 March 2015 Annual Report 2014

Legal Documentation

Consolidated statement of financial position CAJA RURAL DE NAVARRA, SOCIEDAD COOPERATIVA DE CRÉDITO AND SUBSIDIARIES Annual Report 2014 Annual Report 2014

Legal Documentation

CAJA RURAL DE NAVARRA, SOCIEDAD COOPERATIVA DE CRÉDITO AND SUBSIDIARIES Consolidated statement of financial position at 31 December 2014

Thousands of euro ASSETS Note 2014 2013 (*)

Cash and balances with central banks 7 36,224 35,502 Fin an cial in s tru ments held for trading 8 29,095 26,066 Loans and advances to credit institutions - - Loans and advances to customers - - Debt securities - - Equity instruments 367 1,944 Trading derivatives 28,728 24,122 Memorandum items: Loaned or advanced as collateral - - Oth er fin ancial as sets 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-s ale financial assets 9 2,006,278 1,771,673 Debt securities 1,901,045 1,660,391 Equity instruments 105,233 111,282 Memorandum items: Loaned or advanced as collateral 121,926 174,827 Loans and advances 10 7,031,492 7,374,484 Loans and advances to credit institutions 888,635 739,456 Loans and advances to customers 6,131,845 6,163,824 Debt securities 11,012 471,204 Memorandum items: Loaned or advanced as collateral 570,768 612,094 Held-to-m atu rity in ve st me nt s 11 44,940 52,324 Memorandum items: Loaned or advanced as collateral - - Adjustments to financial assets due to macro-hedging - - Hedging derivatives 12 16 117 Non -current assets held for sale 13 89,504 76,266 Equity investments 14 45,423 56,957 Associates 45,423 56,957 Jointly-controlled entities - - Pension-linked insurance contracts - - Reinsurance assets - - Property and equipment 15 184,896 148,431 Property and equipment 179,463 142,549 For own use 179,291 142,375 Leased out under operating lease - - Assigned to social projects 172 174 Investment property 5,433 5,882 Memorandum items: Acquired under finance leases 663 512 Intangible assets 15 13,565 537 Goodwill 8,565 537 Other intangible assets 5,000 - Tax assets 63,054 59,109 Current 6,347 2,042 Deferred 23 56,707 57,067 Other assets 16 108,058 60,511 Inventories 75,986 31,313 Other 32,072 29,198

9,652,545 9,661,977 TOTAL ASSETS

*) 2013 figures are given for comparison purposes only and have been restated from those given in the 2013 published financial statements to reflect the changes in accounting policies described in Note 3. Annual Report 2014

Legal Documentation

CAJA RURAL DE NAVARRA, SOCIEDAD COOPERATIVA DE CRÉDITO AND SUBSIDIARIES Consolidated statement of financial position at 31 December 2014

Thousands of euro L I A B I L I T I E S Note 2014 2013 (*)

Financial instruments held for trading 8 3,178 3,894 Deposits from central banks - - Deposits from credit institutions - - Customer deposits - - Debt securities - - Trading derivatives 3,178 3,894 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 8,620,057 8,759,246 Deposits from central banks - - Deposits from credit institutions 1,737,539 2,338,924 Customer deposits 6,133,759 5,821,374 Debt securities 645,298 535,183 Subordinated liabilities - - Other financial liabilities 103,461 63,765 Adjustments to financial liabilities due to macro-hedging - - Hedging derivatives 12 170 3,742 Liabilities associated with non-current assets held for sale - - Insurance liabilities - - Provisions 9,639 10,489 Provisions for pensions and similar obligations 2.t) 807 - Provisions for taxes and other legal contingencies - - Provisions for contingent exposures and commitments 18 8,832 10,489 Other provisions - - Ta x l i a b ili ties 37,311 22,362 Current 3,273 2,561 Deferred 23 34,038 19,801 Social Welfare Fund 22 8,346 6,304 Other liabilities 16 92,292 70,219 Shares redeemable on demand - -

8,770,993 8,876,256 TOTAL LIABILITIES

(*) 2013 figures are given for comparison purposes only and have been restated from those given in the 2013 published financial statements to reflect the changes in accounting policies described in Note 3.

Annual Report 2014 Annual Report 2014

Legal Documentation

CAJA RURAL DE NAVARRA, SOCIEDAD COOPERATIVA DE CRÉDITO AND SUBSIDIARIES Consolidated statement of financial position at 31 December 2014

Thousands of euro Note 2014 2013 (*)

EQUITY

Shareholders’ equity 808,848 750,873 Share capital 20 151,602 142,696 Issued capital 151,602 142,696 Less: Uncalled capital - - Share premium - - Reserves 21 607,307 580,512 Retained earnings (lo s se s) 604,928 578,988 Reserves of companies accounted for using the equity method 2,379 1,524 Other equity instruments - - Hybrid financial instruments - - Other equity instruments - - Less: Treasury shares - - Profit attributable to owners of the parent 52,709 30,216 Less: Dividends and remuneration 20 (2,770) (2,551) Valuation adjustments 19 72,510 34,849 Available -for-sale financial assets 72,510 34,849 C a s h flo w he d ge s - - 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 194 (1) Valuation adjustments - - Other 194 (1)

TOTAL EQUITY 881,552 785,721

TOTAL EQUITY AND LIABILITIES 9,652,545 9,661,977

MEMORANDUM ITEMS Contingent exposures 24 641,986 898,663 Contingent commitments 24 979,827 948,793

Legal Documentation

Consolidated Income Statement CAJA RURAL DE NAVARRA, SOCIEDAD COOPERATIVA DE CRÉDITO AND SUBSIDIARIES Annual Report 2014 Annual Report 2014

Legal Documentation

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

Thousands of euro Note 2014 2013 (*)

In teres t and sim ilar income 26 246,265 288,759 Interest and similar expense 27 (105,004) (159,008) Remuneration paid to holders of shares redeemable on demand - -

NET INTEREST INCOME 141,261 129,751 Income from equity instruments 28 3,407 1,971 Profit (loss) of companies accounted for using the equity method 59 407 Fee and commission income 29 65,620 56,808 Fee and commission expense 30 (5,196) (5,939) Gain s (los s es) on finan cial ass ets and liabilities (net) 31 8,910 15,857 Financial instruments held for trading 2,533 4,519 Other financial instruments at fair value through profit or loss - 17 Financial instruments not measured at fair value through profit or loss 6,372 11,374 Other 5 (53) Translation differences (net) 728 611 Other operating income 203,334 146,415 Insurance and reinsurance premiums written - - Sales and income from the provision of non-financial services 199,398 143,033 Oth er oper ating income 3,936 3,382 Other operating expenses (165,505) (133,589) Insurance and reinsurance contract costs - - Change in inventories (878) 4,155 Other operating expenses (164,627) (137,744)

GROSS INCOME 252,618 212,292 Adm in is trative expen ses (113,127) (106,509) Personnel expenses 32 (58,444) (55,300) Other general administrative expenses 33 (54,683) (51,209) Depreciation and amortization 15 (11,066) (10,333) Provisions (net) 34 1,405 (12,375) Impairment losses on financial assets (net) 35 (65,430) (46,601) Loans and advances (64,583) (45,121) Other financial instruments not measured at fair value through profit or loss (847) (1,480)

INCOME FROM OPERATING ACTIVITIES 64,400 36,474 Impairment losses on other assets (net) 36 (269) (4,138) Goodwill and other intangible assets (468) - Other assets 199 (4,138) Gains (losses) on the derecognition of assets not classified as non-current assets held for sale 15 (3,044) (227) Negative difference in business combinations 15 5,040 - Gains (losses) on non-current assets held for sale not classified as discontinued operations (3,834) (1,405)

PROFI T BEFORE T AX 62,293 30,704 Income tax 23 (4,257) 3,292 Mandatory allocation to welfare projects and funds 4 (5,327) (3,780)

PROFIT (LOSS) FOR THE YEAR FROM CONTINUING OPERATIONS 52,709 30,216 Profit (loss) from discontinued operations(net) - -

CONSOLIDATED PROFIT FOR THE YEAR 52,709 30,216 Profit attributable to owners of the parent 52,709 30,216 Profit (loss) attributable to non-controlling interests - -

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Consolidated Statement of Changes in Equity CAJA RURAL DE NAVARRA, SOCIEDAD COOPERATIVA DE CRÉDITO AND SUBSIDIARIES Annual Report 2014 Annual Report 2014

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CAJA RURAL DE NAVARRA, SOCIEDAD COOPERATIVA DE CRÉDITO AND SUBSIDIARIES I) Consolidated Statement of Recognized Income and Expense at 31 December 2014 Consolidated Statement of Recognized Income and Expense at 31 December Consolidated Statement of Recognized Income and Expense at 31 Dece

Thousands of euro Note 2014 2013 (*)

CONSOLIDATED PROFIT FOR THE YEAR 52,709 30,216 OTHER RECOGNIZED INCOME AND EXPENSE 37,661 29,125 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 37,661 29,125 Available -for-sale financial assets 50,558 39,540 Measurement gains (losses), net 19 56,677 50,664 Amounts transferred to the consolidated income statement (6,119) (11,124) Other reclassifications - - C a s h flo w he d ge s - - 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 (lo s se s), 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 (12,897) (10,415)

TOTAL RECOGNIZED INCOME AND EXPENSE 90,370 59,341 Attributable to owners of the parent 90,370 59,341 Attributable to non-controlling interests - -

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

EQUITY ATTRIBUTABLE TO THE PARENT COMPANY CAP IT AL AND R ESER VES RESERVES

r using the

(losses) TOTAL RESERVES CONT R OLLING INTERESTS - VALUAT ION equity method Share capital remuneration ADJUST M ENT S EQUITY TOTAL Share premium Retained earnings Retained Less: Dividends and NON Reserves Reserves companies of Less: Treasury shares Profit attributable to T OT AL CAP IT AL AND accounted fo accounted the of parent owners 2014 Other equity instruments

Closing balance at 31 December 2013 142,696 - 586,487 1,524 - - 37,823 (2,551) 765,979 34,849 800,828 (1) 800,827 Adjustments for changes in - accounting policies - (7,499) - - - (7,607) - (15,106) - (15,106) - (15,106) 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

(*) 2013 figures have been restated from those given in the 2013 published financial statements to reflect the changes in accounting policies described in Note 3. Annual Report 2014 Annual Report 2014

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CAJA RURAL DE NAVARRA, SOCIEDAD COOPERATIVA DE CRÉDITO AND SUBSIDIARIES II) Consolidated statement of changes in equity at 31 December 2013

EQUITY ATTRIBUTABLE TO THE PARENT COMPANY CAP IT AL AND R ESER VES RESERVES

parent

(losses) TOTAL RESERVES CONT R OLLING INTERESTS - VALUAT ION equity method Share capital remuneration ADJUST M ENT S EQUITY TOTAL Share premium Retained earnings Retained Less: Dividends and NON Reserves Reserves companies of Less: Treasury shares Profit attributable to T OT AL CAP IT AL AND accounted for using the ofowners the 2013 Other equity instruments

Closing balance at 31 December 2012 129,988 - 623,857 3,096 - - (36,548) (2,350) 718,043 5,724 723,767 3 723,770 Adjustments for changes in - accounting policies - (7,251) - - - (248) - (7,499) - (7,499) - (7,499) Adjustments to correct errors ------Adjusted opening balance (*) 129,988 - 616,606 3,096 - - (36,796) (2,350) 710,544 5,724 716,268 3 716,271 Total recognized income and expense ------30,216 - 30,216 29,125 59,341 - 59,341 Other changes to equity 12,708 - (37,618) (1,572) - - 36,796 (201) 10,113 - 10,113 (4) 10,109 Capital increases 22,424 ------22,424 - 22,424 - 22,424 Capital reductions (9,716) ------(9,716) - (9,716) - (9,716) 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 ------(2,551) (2,551) - (2,551) - (2,551) Transactions in own equity instruments (net) ------Transfers between equity items - - (38,939) (207) - - 36,796 2,350 - - - - - 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 - - 1,321 (1,365) - - - - (44) - (44) (4) (48) 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

(*) Figures are given for comparison purposes only (**) 2012 figures have been restated from those given in the 2012 published financial statements to reflect the changes in accounting policies described in Note 3. Annual Report 2014

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Consolidated cash flow statement CAJA RURAL DE NAVARRA, SOCIEDAD COOPERATIVA DE CRÉDITO AND SUBSIDIARIES Annual Report 2014 Annual Report 2014

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CAJA RURAL DE NAVARRA, SOCIEDAD COOPERATIVA DE CRÉDITO AND SUBSIDIARIES Consolidated cash flow statement for the year ended 31 December 2014

Thousands of euro 2014 2013 (*)

A) CASH FLOW FROM OPERATING ACTIVITIES 22,057 59,254 Profit for the year 52,709 30,216 Adjustments to obtain cash flows from operating activities 90,413 74,043 Depreciation and amortization 11,066 10,333 Other adjustments 79,347 63,710 Net increase (decrease) in operating assets (54,889) (63,770) Financial instruments held for trading (3,029) (2,723) Other financial assets at fair value through profit or los s - 149 Available -for-sale financial assets (235,298) (755,932) Loans and advances 253,887 678,231 Other operating expenses (70,449) 16,505 Net increase (decrease) in operating liabilities (66,258) 18,670 Financial instruments held for trading (716) 818 Other financial liabilities at fair value through profit or loss - - Financial liabilities at amortized cost (139,189) (11,888) Other operating expenses 73,647 29,740 Company income tax receipts (payments) 82 95

B) CASH FLOWS FROM INVESTING ACTIVITIES (27,471) (69,807) Payments ( -) (51,282) (107,060) Property and equipment (11,484) (9,412) Intangible assets - (110) Equity investments (1,007) (104) Other business units - - Non-current assets held for sale and related liabilities (31,542) (90,596) Held-to-maturity investments - (6,838) Other payments related to investing activities (7,249) - Receipts (+) 23,811 37,253 Property and equipment 2,076 4,747 Intangible assets - - Equity investments 39 1,239 Other business units - - Non-current assets held for sale and related liabilities 14,466 21,193 Held-to-maturity investments 7,230 10,074 Other receipts related to investing activities - -

C) CASH FLOWS FROM FINANCING ACTIVITIES 6,136 10,157 Payments ( -) (3,610) (12,267) Dividends (2,770) (2,551) Subordinated liabilities - - Cancellation of own equity instruments (840) (9,716) Acquisition of own equity instruments - - Other payments related to financing activities - - Receipts (+) 9,746 22,424 Subordinated liabilities - - Issue of equity instruments 9,746 22,424 Disposal of equity instruments - - Other receipts relating to financing activities - - Subordinated liabilities - - Annual Report 2014

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D) EFFECT OF EXCHANGE RATE FLUCTUATIONS - -

E) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (A+B+C+D) 722 (396)

F) CASH AND CASH EQUIVALENTS AT START OF YEAR 35,502 35,898 G) CASH AND CASH EQUIVALENTS AT END OF YEAR 36,224 35,502

MEMORANDUM ITEMS CASH AND CASH EQUIVALENTS AT END OF YEAR Cash 36,224 35,502 Cash equivalents in central banks - - Other financial assets - - Less: Bank overdrafts repayable on demand - - Total cash and cash equivalents at end of year 36,224 35,502

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NOTES TO THE FINANCIAL STATEMENTS Annual Report 2014

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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 its 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 Cooperative Credit Institutions.

The Cooperative Bank may 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.

As established in its articles of association, the Caja Rural de Navarra operates on a nationwide basis. At 31 December 2014, it had a network of 244 branches (unchanged from 31 December 2013), 141 of them located in Navarre (unchanged from 31 December 2013) and the rest in neighbouring regions. Through this network it is able to perform all types of operation typical of and/or specific to institutions of its kind.

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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 must be deposited with the Bank of Spain so as to ensure coverage of the minimum reserve requirement, which at 31 December 2014 and 2013 was 1% of eligible liabilities (Note 7).

 That appropriations to the Mandatory Reserve Fund and to the Social Welfare Fund shall be made when distributing the net surplus for the year (Notes 21 and 22).

 That a minimum level of capital and reserves must be maintained (Notes 1.g and 21).

 That annual contributions shall be made to the Deposit Guarantee Fund for Credit Institutions to provide creditors with a further guarantee in addition to that provided by the Cooperative Bank’s equity (Note 1.h).

 That at least 50% of the Cooperative Bank’s total capital and reserves shall be 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, the Cooperative Bank is required to prepare consolidated annual financial statements for the Group.

The statements of the financial position of Caja Rural de Navarra, Sociedad Cooperativa de Crédito at 31 December 2014 and 2013 and the income statements corresponding to the years then ended are annexed to these notes. Annual Report 2014

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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 2014, 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 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 established in the aforesaid 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 Spanish law and IFRS which affect accounting standards. As a result, the Bank of Spain found it necessary to amend Circular 4/2004 and issued a number of Circulars mainly motivated by changes made in IFRS, new disclosure requirements imposed by the European Central Bank (ECB), disclosures required about the mortgage market, exposure to the construction and property development sectors, national classification of economic activities (NCEA), refinancing and restructuring transactions 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 Annual Report 2014 Annual Report 2014

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accounting principles and measurement criteria applied in the preparation of the Group’s consolidated annual financial statements for 2014 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 into 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 Board of 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 9 May 2014.

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 has been defined in accordance with IFRS-EU. All subsidiaries, joint ventures and associates are investees. Annual Report 2014

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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:

- 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. Annual Report 2014 Annual Report 2014

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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 recognized in equity when eventually settled. Annual Report 2014

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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 income.

The details of fully consolidated subsidiaries at 31 December 2014 and 2013 were as follows:

Thousands of euro % ow nership Acquisition cost interest 2014 2013 2014 2013 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% - 6,763 - Harinera del Mar Siglo XXI, S.L. (*) 100.00% - 21,989 - Promoción Estable del Norte, S.A. 100.00% 100.00% 139,474 142,674 Industrial Tonelera Navarra, S.A. 100.00% 100.00% 1,820 1,820 Tonnellerie de l’Adour, SAS 90.00% - 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 3,150 Prev ent ia Sport, S.L. 100.00% 100.00% 443 443 The Spanish Food & Drinks Company GM BH 100.00% 100.00% 25 25 Eólica La Calera, S.L. 75.00% 75.00% 6 6

(*) Associates at 31 December 2013 (Note 14). (**) 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 2014 are listed below: Annual Report 2014 Annual Report 2014

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Company Head office Line of business I nformes y Ges t iones Navarra, S. A. Pamplona Document preparat ion and processing Harivas a 2000, S. A. Noain ( Navarre) M anufact ure and s ale of flour Harinera de Tardient a, S. A. Tardient a ( Hues ca) M anufact ure and s ale of flour Harant ico, S. L. Pont evedra M anufact ure and s ale of flour Harinera del M ar Siglo XXI , S. L. Valencia M anufact ure and s ale of flour Promoción Es t able del Nort e, S.A. Pamplona Real es t at e development I ndus t rial Tonelera Navarra, S. A. M ont eagudo M anufact ure and s ale of barrels and cas ks ( Navarre) Tonnellerie de l’Adour, SAS Francia M anufact ure and s ale of barrels and cas ks Seres gerna, S.A. Pamplona Development and operat ion of senior care cent res Res idencia Torre de M onreal, S.L. Tudela ( Navarre) Development and operat ion of senior care cent res Solera Asistencial, S.L. Pamplona Development and operat ion of senior care cent res Bouquet Brands, S.A. Pamplona Distribution of agri-foodstuffs Prevent ia Sport , S. L. Pamplona M edical s port s s ervices The Spanish Food & Drinks Company Germany Distribution of agri-foodstuffs GM BH Eólica La Calera, S. L. Soria Generat ion and s ale of w ind energy

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

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 are 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.

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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 2014 and 2013 there were no equity interests classified as "Joint ventures".

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 2014 and 2013 see Note 14.

The accounting principles and standards and measurement criteria used to prepare the Group's 2014 and 2013 financial statements may differ Annual Report 2014 Annual Report 2014

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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) Accounting estimates and assumptions used In the preparation of the Group’s 2014 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 assumptions used in the actuarial calculation of 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)

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.

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f) Comparative information

Comparative figures for 2013 are presented alongside the accounting information for the year ended 31 December 2014 according to IFRS-EU criteria.

The 2013 figures have had to be restated to allow direct comparison as a result of the early adoption of IFRIC 21 from 1 January 2013 (Note 3). Retrospective application of this interpretation, coupled with the announcement by the Management Committee of the Deposit Guarantee Fund for Credit Institutions of the final calendar for certain outstanding payments, required the Parent Company to adjust the way it recognizes and accrues contributions to the Deposit Guarantee Fund.

g) Capital

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 standardised 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. Annual Report 2014 Annual Report 2014

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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.

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.

Until 31 December 2013, the minimum capital requirements applying to Spanish credit institutions either as an individual company or as a consolidated group and the manner in which their capital ratios should be calculated were regulated by Bank of Spain Circular 3/2008, of 22 May, on calculating and monitoring minimum capital requirements, as amended. The same Circular set out the capital self-evaluation procedures institutions should use and the information they should publish for the market.

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.

In managing its capital the Group has followed the conceptual definitions set out in the new solvency regulations described above since 1 January 2014. Prior to that, until 31 December 2013, it followed Bank of Spain Circular 3/2008, of 22 May (Note 21). Annual Report 2014

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h) Deposit Guarantee Fund

The Parent Company is a member of the Deposit Guarantee Fund. Royal Decree 19/2011, amending Royal Decree 16/2011, set institutions' contributions to the Deposit Guarantee Fund at 2 per thousand of the deposits guaranteed.

The expense for the ordinary contributions described above accrues as the Parent Company provides services to customers. Therefore, at each financial close the statement of financial position shows a liability corresponding to the contribution to be paid at the start of the following year.

On 30 July 2012, the Management Committee of the Deposit Guarantee Fund decided to levy a one-off supplementary contribution on its members, to be paid by each institution in ten equal annual instalments. For the Cooperative Bank, this amounted to EUR 12,275 thousand (ten annual instalments of 1,228 thousand each). These instalments will be deducted from any ordinary annual contribution for which the Cooperative bank may be liable up to the total amount of the ordinary contribution. On 31 December 2014, the Parent Company recorded a commitment of EUR 8,883 thousand (compared to EUR 9,797 thousand at 31 December 2013), 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. Annual Report 2014 Annual Report 2014

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This surcharge is payable in two tranches:

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 explained in Note 3, 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 2014, total expenses in respect of Fund contributions were EUR 11,787 thousand (EUR 22,434 thousand in 2013), recognized under "Other operating expenses" in the consolidated income statement.

i) 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.

j) Post-balance sheet events No events having material effects on the Group occurred between 31 December 2014 and the date of preparation of these consolidated financial statements. Annual Report 2014

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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 on the basis of the actual flow of goods and services, irrespective of the dates of payment or collection.

c) Other general principles

The 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. Annual Report 2014 Annual Report 2014

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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 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 of the 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.

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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.

 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 Annual Report 2014 Annual Report 2014

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host contract that is not a derivative 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 apply for 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 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 hedged item or position 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 Annual Report 2014

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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 by 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.

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 liabilities 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 Annual Report 2014 Annual Report 2014

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accounting hedges are also included in the held-for-trading portfolio.

o 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, provided that they have not been classified as “Financial assets at fair value through profit or loss”.

 Loans and advances

This 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.

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 Annual Report 2014

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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 Annual Report 2014 Annual Report 2014

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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.

IV. Classification of financial liabilities for measurement purposes

Financial liabilities are classified for measurement purposes into one of the following categories:

 Other financial liabilities at fair value through profit or loss.

o Financial liabilities 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 2014 and 2013 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.

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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.

 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 or loss cannot be reclassified either inside or outside this category of financial instruments once acquired, issued or assumed. Annual Report 2014 Annual Report 2014

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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 2014 and 2013.

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.

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. Annual Report 2014

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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 2014 and 2013, 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 Annual Report 2014 Annual Report 2014

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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. 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 less any impairment. 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 Annual Report 2014

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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).

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.

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• 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:

 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 2014 and 2013 the Group had no hedges of this kind.

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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 said 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”.

f) Transfers and derecognition of financial and asset 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. Annual Report 2014 Annual Report 2014

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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 2014 and 2013, the Group had assets transferred prior to 1 January 2004 for amounts of EUR 39,245 thousand and EUR 45,663 thousand, respectively, which, in accordance with prevailing legislation, were derecognized from the consolidated statement of financial position.

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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. Annual Report 2014 Annual Report 2014

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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 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 subcategorized into portfolios of instruments with similar characteristics in terms of age of past-due amounts, type of guarantee or collateral, sector of activity, geographical region, etc. Annual Report 2014

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• 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 the recognition of identified losses, the Group recognizes a global impairment allowance for losses incurred on debt instruments not identified as impaired (standard risk), corresponding to the statistical loss pending allocation to specific transactions, taking historical loss experience and other circumstances known at the date of the financial statements into account.

Because the Group does not have sufficient statistical information on its historical impairment loss experience, it has used the parameters established 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 Annual Report 2014 Annual Report 2014

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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%.

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 Annual Report 2014

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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 Annual Report 2014 Annual Report 2014

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on which buildings and other structures are constructed has an indefinite life and is not therefore depreciated.

Annual provisions for the depreciation of property 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 (*)

(*) Sum-of-years 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.

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. Annual Report 2014

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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. Annual Report 2014 Annual Report 2014

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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 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.

k) Intangible assets

Intangible assets are non-monetary assets that are without physical substance. They are deemed to identifiable when they are separable from other assets - i.e. they can be disposed of, let or transferred individually - or 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 Annual Report 2014

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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 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. Annual Report 2014 Annual Report 2014

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In any event, the Group 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 of its 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.

The carrying amount of inventories is derecognized from the consolidated statement of financial position and recycled to the income statement as an expense for the period in which the revenue from their sale is recognized.

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 Annual Report 2014

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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. Annual Report 2014 Annual Report 2014

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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.

At 31 December 2014 and 2013, the Group was potentially subject to certain lawsuits, liabilities and obligations arising out of the normal course of its business. Both the Group’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 2014 and 2013.

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 Annual Report 2014

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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 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.

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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:

- 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. Annual Report 2014

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At 31 December 2014, the value of assets and liabilities denominated in foreign currencies was EUR 34,727 thousand and EUR 33,746 thousand, respectively (compared with EUR 25,358 thousand and EUR 24,424 thousand at 31 December 2013).

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.

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. Fees, commissions and similar items

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: Annual Report 2014 Annual Report 2014

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- Fees related to financial assets and liabilities at fair value through profit or 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.

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 Annual Report 2014

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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. Annual Report 2014 Annual Report 2014

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The fees charged for these services are recognized in the consolidated income statement as “Fee and commission income”.

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 deceased in the course of duty. 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.

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"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 Com pany.

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.

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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 2014 2013

Interest rate 2. 50% 3. 50% Expect ed ret urn on plan as s et s 2. 50% 3. 50% M ortality tables PERM /F2000P PERM /F2000P I ncapacit y t ables N/A N/A Annual cumulat ive s alary increas e 2. 00% 2. 00%

The discount rate applied to plan commitments is based on the duration of the commitment, 23.8 years for post-employment obligations at a rate of 2.50%, 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 2014).

The percentage sensitivity of the defined benefit obligation to changes in the main assumptions for 2014 is as follows:

Change in assumption Increase Decrease

Discount rate 50 bp ( 7. 51%) 8. 23% Annual s alary grow t h rat e 50 bp 8. 69% ( 7. 14%)

The sensitivity analysis above assumes a change in the assumptions shown while all other factors remain constant.

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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 2014 2013 Pos t -employment obligations ( 2,218) ( 1,015) Fair value of plan as s et s 1,411 1,015 Net asset (provision) recognized on statement of financial position (Note 18) (807) -

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

Charged (credited) directly to income 2014 2013 Pers onnel expens es : - Current s ervice cos t 104 267 - Allocat ion t o provis ions - - Net int eres t and s imilar expens e 24 - Total expenses charged 128 267

The table below reconciles the amounts reported as present value of defined benefit obligations at the start and end of 2014 and 2013: Thousands of euro

Balance at 31 December 2012 904 Current s ervice cos t 267 I nt eres t expens e 21 Remeas urement s ( 174) Benefit s paid ( 3) Effect of curt ailment s /s et tlements - Balance at 31 December 2013 1.015 Current s ervice cos t 104 I nt eres t expens e 67 Remeas urement s 1. 103 Benefit s paid ( 71) Effect of curtailment s /s et tlements - Balance at 31 December 2014 2,218

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The table below reconciles the amounts reported as fair value of defined benefit plan assets at the start and end of 2014 and 2013:

Thousands of euro

Fair value at 31 December 2012 904 Expect ed ret urn on plan as s et s 21 Remeas urement s ( 174) Cont ribut ions by Parent Company 267 Benefit s paid ( 3) Effect of curt ailment s /s et tlements - Fair value at 31 December 2013 1.015 Expect ed ret urn on plan as s et s 42 Remeas urement s 339 Cont ribut ions by Parent Company 86 Benefit s paid ( 71) Effect of curt ailment s /s et tlements - Fair value at 31 December 2014 1,411

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

2014 2013

Equities - - Debt instruments - - Propert y - - Insurance policies 100% 100% Ot her as s et s - - Total 100% 100%

The Cooperative Bank expects to contribute EUR 162 thousand to defined post-employment benefit plans in respect of 2014. Annual Report 2014

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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):

2015 2016 2017 2018 2019 2020-2024 Probably pos t -employment benefit s 73 75 67 119 161 597

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 due to temporary differences, tax relief, tax credits and tax loss carry forwards.

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. Deferred tax assets, tax relief, tax credits and tax loss carry forwards are only recognized if it is considered likely that the Group will have sufficient future taxable profits against which they can be offset. Annual Report 2014 Annual Report 2014

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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 corrections identified as necessary in the review are then made.

Income and expenses recognized directly in equity are accounted for as temporary differences.

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

These statements included in these consolidated financial statements 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. Annual Report 2014

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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. Annual Report 2014 Annual Report 2014

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 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. Annual Report 2014

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w) Consolidated cash flow statement

The specific concepts used in the consolidated cash flow statement 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 on financing received, even if it relates to financial liabilities classified as financing activities.

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 net assets and liabilities that are not part of 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. Annual Report 2014 Annual Report 2014

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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 assumed to the prior owners of the acquiree and any equity interests in the acquiree issued by the Cooperative Bank. Consideration 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 are not remeasured and recognized in equity when eventually settled.

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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. Annual Report 2014 Annual Report 2014

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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 + β * (Rm – Rf) + α; w here Ke = rate of return demanded by the shareholder, β = the company's systemic risk factor, Rm = market rate of return, Rf = risk-free rate and α = 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.

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 standards 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 Annual Report 2014

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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 2014 underwent changes from those applied in the prior year. The most significant changes are detailed below.

i) Standards, amendments and interpretations mandatory for financial years starting on or after 1 January 2014

- IFRS 10 “Consolidated financial statements”:

IFRS 10 was issued in May 2011 and replaces the guidance on control and consolidation in IAS 27, “Consolidated and separate financial statements”, and SIC 12, “Consolidation - Special purpose entities”, which is withdrawn. It sets the principles for presentation and preparation of consolidated financial statements. The new standard makes some changes to the concept of control, which nonetheless remains the determining factor for whether an entity should or should not be included in the consolidated financial statements. The concept of uniform accounting principles for controlling company and subsidiaries for the purposes of consolidated financial statements and the consolidation procedures are unchanged from the prior IAS 27.

Application had no material impact on the Group's consolidated financial statements.

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- IFRS 11, "Joint arrangements"

IFRS 11 supersedes IAS 31 "Interests in joint ventures" and SIC 13 "Jointly controlled entities - Non-monetary contributions by venturers". IFRS 11 prescribes that joint arrangements should be accounted for based on the rights and obligations arising from the arrangement and not on its legal form. Joint arrangements must be classed as one of two types: joint operations or joint ventures. Joint operations are those where a party has rights to the assets and obligations arising from the arrangement, and therefore recognizes its proportional interest in the assets, liabilities, revenue and expenses of the investee. Joint ventures are those where a party has rights to the profit or loss or net assets of the entity in which it invests and therefore recognizes it by the equity method. It eliminates the option of reporting joint ventures by proportionate consolidation.

Application had no material impact on the Group's consolidated financial statements.

- IFRS 12 "Disclosure of interests in other entities"

IFRS 12 sets out the disclosure requirements for investments in subsidiaries, associates, joint ventures and unconsolidated structured entities.

Application had no material impact on the Group's consolidated financial statements.

- IAS 27 (amendment), "Separate financial statements"

The sections of IAS 27 previously dealing with the preparation of consolidated financial statements have been superseded by the new IFRS 10. The scope of application of IAS 27 is therefore reduced to the reporting of investments in subsidiaries, joint ventures and associates in the separate financial statements of the investing entity under IFRS. These are unchanged from the previous version. The standard requires an entity preparing separate financial statements to report these investments either at cost or under IFRS 9. Annual Report 2014

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Application had no material impact on the Group's consolidated financial statements.

- IAS 28 (amendment), "Investments in associates and joint ventures"

IAS 28 has been updated to include references to joint ventures, which, under IFRS 11 “Joint ventures”, must be recognized using the equity method. It also expands guidance on the accounting treatment of instruments that confer potential voting rights; investments in associates and joint ventures held by venture capital companies, mutual entities and other similar entities; accounting for reductions in interests in an associate or joint venture which continue to be reported by the equity method; and the treatment of contributions of non-monetary assets to an associate or joint venture as consideration for an equity stake in the investee.

Application had no material impact on the Group's consolidated financial statements.

- IAS 32 (amendment), "Offsetting financial assets and financial liabilities"

The amendment clarifies that the right to offset financial assets and liabilities must be currently available, i.e. not contingent on a future event. The right must also be legally enforceable in the normal course of business between the counterparties involved in the transaction, including in the event of their default, insolvency or bankruptcy.

Application had no material impact on the Group's consolidated financial statements. Annual Report 2014 Annual Report 2014

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- IFRS 10 (amendment), IFRS 11 (amendment) and IFRS 12 (amendment) “Consolidated financial statements, joint arrangements and Disclosure of Interests in Other Entities: Transition Guidance (amendments t o IFRS 10, 11 and 12)"

Its purpose was to clarify guidance of the transition to IFRS 10, specifying that the effective date of application is the first day of the first year when IFRS 10 is first applied. When IFRS is adopted, control must be assessed at the initial application date. It also allows greater flexibility in the transitional requirements to IFRSs 10, 11 and 12, limiting the requirement to restate comparative information to the prior year only. Regarding disclosures on unconsolidated structured entities, it eliminates the requirement to present comparative information for years prior to first- time application of IFRS 12.

Application had no material impact on the Group's consolidated financial statements.

- IFRS 10 (amendment), IFRS 12 (amendment) and IAS 27 (amendment) “Investment entities”

IFRS 10 was amended to define "investment entity" and exempt entities that meet this definition from consolidating their subsidiaries. Instead, such subsidiaries will be measured at fair value through profit or loss. The sole exeption to this is for subsidiaries providing support services related to the investment activities of the investment entity, which must be consolidated. The amendments to IFRS 12 require specific disclosure of such investment entity subsidiaries. The amendments to IAS 27, meanwhile, eliminate the previous option for investment entities to report investments in some subsidiaries at cost or fair value in their separate financial statements.

Application had no material impact on the Group's consolidated financial statements.

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- IAS 36 (Amendment) "Recoverable amount disclosures for non-financial assets"

This amended IAS 36 "Impairment of assets" clarifying that, for assets where recoverable value was based on fair value less costs of disposal, it is only only necessary to disclose information on the recoverable value when the assets have suffered impairmen. It requires a detailed description of how fair value less costs of disposal was measured when an impairment loss has been recognized or reversed.

Application had no material impact on the Group's consolidated financial statements.

- IAS 39 (amendment) "Novation of derivatives and continuation of hedge accounting"

This amendment introduces a restricted exemption from the need to discontinue hedge accounting where an instrument designated as a hedge is novated to a central counterparty as a result of laws or regulations.

Application had no 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 2014

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 2015:

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- IFRIC 21 "Levies"

On 13 June 2014, the European Commission issued Regulation 634/2014 adopting Interpretation 21 "Levies" of the IFRS Interpretations Committee (IFRIC 21). This interpretation offers guidance on accounting for levies imposed by governments, other than tax on income and fines and penalties imposed for breaches of law. The key issue is when the entity has to recognize a liability for the obligation to pay a levy under IAS 37. It also offers guidance on the accounting treatment of a liability for the payment of a levy whose timing and amount are certain.

Article 2 of the Regulation requires entities to apply IFRIC 21 "Levies" by that start of the first financial year starting after 17 June 2014. However, the Group took up the option to early adopt the Interpretation in the 2014 financial statements.

The biggest resulting change in the accounting policies relates to the ordinary and supplementary contributions to the Deposit Guarantee Fund, explained in Note 1.h):

 As regards ordinary contributions, expenses accrue as the Parent Company provides services to customers. Therefore, at each financial close the statement of financial position shows a liability corresponding to the contribution to be paid at the start of the following year. The previous accounting policy recognized expenses related to contributions in the year they were paid.

 As regards the one-off supplementary contribution imposed by Royal Decree 6/2013, expenses accrue as of 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. The previous accounting policy recognized expenses for this contribution as they were paid.

However, IFRIC 21 leaves unchanged the accounting treatment of the one-off supplementary contribution imposed by the Management Annual Report 2014

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Committee of the Deposit Guarantee Fund on 30 July 2012, as the amounts paid in respect of this supplementary contribution are deducted from the ordinary annual contribution and therefore accrue when the ordinary contribution is paid.

The table below shows the impact of retrospective application of IFRIC 21 on each of the affected items on the consolidated statement of financial position at 31 December 2013 and 2012 as well as on the 2013 consolidated income statement.

2013 2012 Consolidated 2013 consolidated Consolidated statement of financial income statement statement of financial position at 31 position at 31 December 2013 December 2012

Deferred t ax as s et s 5,036 - 2,500 Other liabilities 20,142 - 9,999 Res erves ( 7,499) - ( 7,251) Profit for t he year ( 7,607) - ( 248)

Ot her operat ing expens es - ( 10,143) - I ncome t ax - 2,536 - Profit for t he year - ( 7,607) -

- 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. Annual Report 2014 Annual Report 2014

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The new amendment is not expected to have a material impact on the Group’s consolidated financial statements.

- 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.

• IFRS 3 "Business combinations": Accounting for a contingent consideration in a business combination.

• 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.

• IFRS 13 “Fair value measurement”: Clarifies that short-term receivables and payables can continue to be measured at their invoice amounts when the effect of discounting is immaterial.

• 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. Annual Report 2014

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- 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. 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:

- 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 rate regulation under their previous accounting policies. However, to facilitate comparability with entities already applying IFRS which do not recognize Annual Report 2014 Annual Report 2014

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these amounts, the standard requires that the effect of such rate 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 11 (Amendment) "Accounting for acquisitions of an interest in a joint operation"

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 Group is analysing the impact that the amendment may have on the Group’s consolidated financial statements if adopted by the EU.

- 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. Annual Report 2014

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The Group is analysing the impact that the amendment may have on the Group’s consolidated financial statements if adopted by the EU.

- 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 a 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 2017. 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.

- 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 plant and equipment, unlike all otehr 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 form 1 January 2016 and will apply prospectively. Early adoption is permitted.

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The Group is analysing the impact that the amendment 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 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.

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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.

- 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 for 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 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) 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 busienss 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 or contributes assets to its associate or joint venture. The amendments to IFRS 10 and IAS 28 Annual Report 2014 Annual Report 2014

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are applied prospectively and will apply to financial years beginning on or after 1 January 2016.

The Group is analysing the impact that the amendment may have on the Group’s consolidated financial statements if adopted by the EU.

- Annual improvements process 2012-2014

This cycle of amendments affects IFRS 5, IFRS 7, IAS 19 and IAS 34 and, subject to adoption by the EU, will apply to financial years starting on or after 1 July 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.

• 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 Group is analysing the impact that the amendments may have on the Group’s consolidated financial statements if adopted by the EU.

- IAS 1 (amendment), “Presentation of financial statements”.

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. Annual Report 2014

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The amendments to IAS 1 can be applied immediately. Application is mandatory for financial years beginning on or after 1 January 2016.

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 form 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. Annual Report 2014 Annual Report 2014

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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, intiial 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.

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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.

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 2014 and 2013, 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.

4. Appropriation of earnings

The appropriation of the Parent Company’s net profit for 2014 that the Parent Company’s Governing Board will propose to members for approval at the Annual General Meeting, together with the appropriation for 2013 approved at the General Meeting held on 9 May 2014, is as follows: Annual Report 2014 Annual Report 2014

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Thous ands of euro 2014 2013 ( *) Profit ( los s ) for t he year before mandat ory allocat ion t o t he Educat ion and Development Fund and aft er I ncome Tax 56,042 40,348 To div idends and remunerat ion ( 2,770) ( 2,551)

53,272 37,797 Total retained earnings or surplus available

To Revaluat ion Res erves - - To t he St at ut ory Res erve Fund 47,945 34,017 To t he Educat ion and Development Fund 5,327 3,780

53,272 37,797 Total appropriated

(*) Figures do not include the impact of accounting changes to 2013 figures (Note 3).

The profits or losses of consolidated subsidiaries will be appropriated as agreed at their respective General Shareholders' Meetings.

In accordance with the Bank of Spain filing, approved by the Bank of Spain’s Executive Commission on 11 January 2013, members at the Annual General Meeting held 10 May 2013 agreed a final appropriation to dividends and remuneration of EUR 2,350 thousand in respect of 2012, charged against "Other reserves" (Note 21).

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. Annual Report 2014

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The table below sets out the gross remuneration received by members of the parent company’s Governing Board in 2014 and 2013:

Thousands of euro Board members 2014 2013

José Luis Barriendo Antoñanzas 24 22 I gnacio Terés Los Arcos 5 5 Jos é M aría Arizalet a Nieva 4 3 I s idro Bazt errica M ut uberría 2 2 Luis Recart e Goldaracena - 3 Jos é Angel Ezcurra I barrola 4 3 Jos é Luis Sarabia M oreno 1 1 Pedro Buldain Zozaya 2 1 M elchor M iranda Azcona 2 2 Jos é Javier López M orrás 2 2 Pedro M aría Beorlegui Egea 2 2 Luis M iguel M at eo Mat eo - 2 Francis co Javier Art ajo Carlos 1 1 Jes ús Andrés M auleón Arana 2 2 Robert o Zabalet a Ciriza 2 1 Luis M iguel Serrano Cornago 4 1

Total 57 53

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 2014 and 2013 are detailed in Note 38.

Remuneration paid to senior executives

Ordinary remuneration accrued by the Parent Company’s senior executives in 2014 and 2013 totalled EUR 1,044 thousand and EUR 1,017 Annual Report 2014 Annual Report 2014

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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).

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 in the 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 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 Annual Report 2014

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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.

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 2014 and 2013 is as follows:

Credit rating 2014 2013 S&P´s Moody´s Fitch DBRS 1 3. 53% 2. 38% AAA t o AA- Aaa t o Aa3 AAA t o AA- AAA t o AAL 2 86. 10% 89. 65% A+ t o A- A1 t o A3 A+ t o A- AH t o AL 3 9. 03% 6. 64% BBB+ to BBB- Baa1 t o Baa3 BBB+ to BBB- BBBH to BBBL 4 0. 60% 0. 59% BB+ to BB- Ba1 t o Ba3 BB+ to BB- BBH to BBL 5 0. 56% 0. 51% B+ t o B- B1 to B3 B+ t o B- BH to BL 6 0. 18% 0. 16% Less t han B- Less t han B3 Less t han B- Less t han BL U nrat ed 0. 00% 0. 07% 100.00% 100.00%

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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 the form of either of the following: 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.

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 Annual Report 2014

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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 2014 and 2013:

Thous ands of euro 2014 2013 Loans and advances t o cus t omers 6,131,845 6,163,824 Loans and advances t o credit inst itutions 888,635 739,456 Debt s ecurit ies 1,956,997 2,183,919 Derivat ives 28,744 24,239 Cont ingent expos ures 641,986 898,663

Tot al ris k 9,648,207 10,010,101

Credit lines drawable by third parties 807,801 793,382

Tot al expos ure 10,456,008 10,803,483

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

Thous ands of euro 2014 2013 No perceivable ris k 3,195,715 3,577,187 Low ris k 2,656,808 2,435,122 Low -medium risk 1,323,822 1,370,037 M edium risk 2,018,513 2,065,852 M edium -high risk 402,146 510,214 High ris k 51,203 51,689

Tot al ris k 9,648,207 10,010,101

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 2014 and 2013 is as follow s: Annual Report 2014 Annual Report 2014

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2014 2013 Thousands % of t ot al Thous ands of % of t ot al of euro ris k euro ris k Loans s ecured by mort gages on finis hed homes w here t he out st anding loan is less t han 80% of t he apprais al value 2,521,806 26. 22% 2,394,256 23. 98% Of w hich: Personal loans 2,450,270 25. 47% 2,316,905 23. 20% Trans act ions w it h ot her mort gage guarant ees 1,195,177 12. 42% 1,240,624 12. 42% Of w hich: Personal loans 875,740 9. 10% 892,486 8. 94% Loans s ecured by ot her collat eral ( pledge of cash or securities) 39,741 0. 41% 41,133 0. 41% Loans secured by public entities, credit institutions or mut ual guarant ee s chemes 87,441 0. 91% 88,198 0. 88% Loans secured by other individuals or entities 620,430 6. 45% 633,725 6. 35%

Information on the distribution of “Loans and advances to customers” by sector, region, NPL ratio, provisions and risk concentration is provided below.

Sector 2014 2013 Farming and cat t le-raising 3. 39% 3. 51% I ndust ry and const ruct ion 20. 45% 19. 83% Services 17. 26% 18. 16% Personal and ot her 58. 90% 58. 50%

Region 2014 2013 Navarre 56. 60% 58. 77% Guipúzcoa 17. 26% 17. 02% La Rioja 9. 22% 9. 13% Ál av a 6. 74% 6. 22% Vizcaya 10. 18% 8. 86%

Impaired assets and impairment adjustments 2014 2013 Tot al impaired as s et s 281,840 334,523 Tot al loans and advances t o customers, gross (before valuation adjustments) 6,400,536 6,433,751 NPL rat io 4. 40% 5. 20% Tot al valuat ion adjus t ment s for impairment of financial as s et s 267,945 268,831 NPL coverage 95. 07% 80. 36% Coverage of t ot al loans and advances t o cus t omers 4. 19% 4. 18%

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Concentration risk

The 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 2014, only 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. At 31 December 2013, only one group was considered to be a “large exposure” as it exceeded 10% of capital. Exposure to this group totalled EUR 119,568 thousand, equivalent to 15.30% of capital.

The table below gives a breakdown of “Loans and advances to customers” by type of counterparty at 31 December 2014 and 2013, 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). Annual Report 2014 Annual Report 2014

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Secured loans: loan to value Of which: Between Between Between Total (carrying Of which: Other real 40% and 60% and 80% and 31/12/2014 amount) mortgages collateral Up to 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 (a) Construction and real estate development (a) 290,065 275,998 2,625 179,889 33,644 42,721 13,227 9,142 (b) Civil engineering 116,605 34,369 5,724 8,174 14,313 6,730 7,748 3,128 (c) 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 SM Es 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 (d) Housing 3,287,748 3,209,940 17,319 506,206 769,271 1,126,971 596,032 228,779 (e) 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 140,030 112,565 2,315 49,241 24,154 22,704 7,766 11,015

Secured loans: loan to value Of which: Between Between Between Total (carrying Of which: Other real 40% and 60% and 80% and 31/12/2013 amount) mortgages collateral Up to 40% 60% 80% 100% Above 100%

Government bodies 113,005 1,269 252 - 40 - 1,229 252 Other financial institutions 2,548 106 137 - 106 - 137 - Non -financial companies and self- employed 2,478,933 1,039,950 64,371 348,787 300,107 248,523 93,038 113,866 – Construction and real estate development (a) 327,360 310,253 5,673 122,427 76,166 83,586 12,506 21,241 – Civil engineering 6,847 4,047 263 1,013 1,723 738 484 352 – Other 2,144,726 725,650 58,435 225,347 222,218 164,199 80,048 92,273 Large corporates 203,320 14,522 1,316 3,308 - 2,603 8,592 1,335 SM Es and self-employed 1,941,406 711,128 57,119 222,039 222,218 161,596 71,456 90,938 Other home loans and NPISHs 3,578,990 3,313,551 29,920 529,672 755,343 1,131,607 647,222 279,627 – Housing 3,237,971 3,150,597 20,350 475,130 703,645 1,095,023 632,743 264,406 – Consumption 38,150 6,817 878 3,133 2,182 949 801 630 – Other 302,869 156,137 8,692 51,409 49,516 35,635 13,678 14,591 SUBTOTAL 6,173,476 4,354,876 94,680 878,459 1,055,596 1,380,130 741,626 393,745 Less: Corrections for impairment of assets not attributable to specific loans (9,652) TOTAL 6,163,824 MEMORANDUM ITEMS Refinancing, refinanced and restructured loans 160,529 127,224 2,869 40,083 33,325 29,461 9,850 17,374 Annual Report 2014

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(f) Includes all activities related to construction and real-estate development, including land bank financing. 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 2014 and 2013:

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 - - - (a) Central government 1,331,814 1,331,814 - - - (b) 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 (c) Construction and real estate development 321,909 321,909 - - - (d) Civil engineering 124,326 124,326 - - - (e) 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

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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 (f) Central government 1,331,814 - - - - 1,331,814 (g) 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 (h) Construction and real estate development 321,909 198,338 6,546 91,290 25,735 - (g) Civil engineering 124,326 83,814 739 33,578 6,103 92 (h) 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

Total (carrying amount) (a) Spain Rest of EU Americas Rest of World

Credit institutions 1,939,827 1,934,359 5,468 - - Government bodies 1,508,772 1,508,772 - - - – Central government 1,275,018 1,275,018 - - - – Other 233,754 233,754 - - - Other financial institutions 131,795 93,090 37,842 300 563 Non-financial companies and self-employed 2,752,603 2,740,934 5,184 5,595 890 – Construction and real estate development 366,218 366,214 - - 4 – Civil engineering 7,489 7,489 - - - – Other 2,378,896 2,367,231 5,184 5,595 886 Large corporates 228,503 228,040 463 - - SMEs and self-employed 2,150,393 2,139,191 4,721 5,595 886 Other home loans and NPISHs 3,857,037 3,853,624 1,445 633 1,335 – Housing 3,466,995 3,463,686 1,366 615 1,328 – Consumption 40,849 40,827 14 8 - – Other 349,193 349,111 65 10 7 SUBTOTAL 10,190,033 10,130,778 49,939 6,528 2,788 Less: Corrections for impairment of assets not attributable to specific loans (9,749) TOTAL 10,180,284 Annual Report 2014

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REGIONAL GOVERNMENTS Total (carrying 31/12/2013 amount) Basque Spain (a) Navarre Madrid country La Rioja Other

Credit institutions 1,934,358 1,000 1,471,039 44,399 - 417,920 Government bodies 1,508,772 117,200 18,690 45,753 18,339 1,308,790 – Central government 1,275,018 - - - - 1,275,018 – Other 233,754 117,200 18,690 45,753 18,339 33,772 Other financial institutions 93,090 628 91,201 1,261 - - Non-financial companie s and self- employed 2,740,934 1,490,167 91,297 777,976 245,836 135,658 – Construction and real estate development 366,214 244,836 14,395 73,539 33,013 431 – Civil engineering 7,489 6,192 400 579 248 70 – Other 2,367,231 1,239,139 76,502 703,858 212,575 135,157 Large corporates 228,040 85,797 15,667 96,840 16,994 12,742 SMEs and self-employed 2,139,191 1,153,342 60,835 607,018 195,581 122,415 Other home loans and NPISHs 3,853,624 2,140,977 16,615 1,358,940 290,716 46,376 – Housing 3,463,686 1,888,373 11,273 1,270,025 251,127 42,888 – Consumption 40,827 28,161 58 8,717 3,170 721 – Other 349,111 224,443 5,284 80,198 36,419 2,767 TOTAL 10,130,778 3,749,972 1,688,842 2,228,329 554,891 1,908,744

(i) 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.

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 Annual Report 2014 Annual Report 2014

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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. Annual Report 2014

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 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.

- 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 Annual Report 2014 Annual Report 2014

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below gives a breakdown, at 31 December 2014 and 2013, of the refinancing, refinanced and restructured loans made by the Cooperative Bank:

STANDARD SUBSTANDARD D OUBTFUL

Full real-est at e Ot her real No real Full real-est at e Ot her real No real Full real-est at e Ot her real No real TOTAL mor t gage collat eral collat eral mor t gage collat eral collat eral mor t gage collat eral collat eral

value

Specific provisions Specific provisions N o. t ransact ions Gross value N o. t ransact ions Gross value N o. t ransact ions Gross value N o. t ransact ions Gross value N o. t ransact ions Gross value N o. t ransact ions Gross value N o. t ransact ions Gross value N o. t ransact ions Gross value N o. t ransact ions Gross value N o. t ransact ions Gross Specific provisions 31/12/2014

1. Government bodies ------2. Ot her legal ent it ies 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 f or constr uction and r eal est at e 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. Ot her 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. Tot al 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

STANDARD SUBSTANDARD D OUBTFUL

TOTAL Full real-est at e Ot her real No real Full real-est at e Ot her real No real Full real-est at e Ot her real No real mor t gage collat eral collat er al mor t gage collat eral collat eral mor t gage collat eral collat eral

Specific provisions Specific provisions N o. t ransact ions Gross value N o. t ransact ions Gross value No. t ransact ions Gross value N o. t ransact ions Gross value N o. t ransact ions Gross value N o. t ransact ions Gross value N o. t ransact ions Gross value N o. t ransact ions Gross value N o. t ransact ions Gross value N o. t ransact ions Gross value Specific provisions 31/12/2013

1. Government bodies ------2. Ot her legal ent it ies and self-employed 97 47,540 21 14,646 78 26,330 16 15,508 4 3,722 5 835 6,387 64 38,861 19 16,185 24 15,782 36,180 328 179,409 42,567 Of which: Loans f or constr uction and r eal est at e development 38 32,557 9 10,733 2 1,376 13 14,522 1 2,557 - - 5,860 43 31,002 12 12,220 5 7,487 25,745 123 112,454 31,605 3. Ot her individuals 164 20,157 16 4,160 59 1,835 1 63 - - - - 6 9 3,886 11 1,970 10 332 1,581 270 32,403 1,587 4. Tot al 261 67,697 37 18,806 137 28,165 17 15,571 4 3,722 5 835 6,393 73 42,747 30 18,155 34 16,114 37,761 598 211,812 44,154

The table below gives the breakdown, at 31 December 2014 and 2013, of the total gross value of loans classed as doubtful during the year after having been refinanced or restructured:

2014 Gross value Full real-estate Other real No real mortgage collateral collateral Government bodies - - - Ot her legal ent it ies and s elf-employed 3,098 - 2,465 Of w hich: Loans for construction and real estate development 1,537 - 492 Other individuals 3,269 - 1,678 Annual Report 2014

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2013 Gross value Full real-estate Other real No real mortgage collateral collateral Government bodies - - - Ot her legal ent it ies and s elf-employed 23,197 - 18,778 Of w hich: Loans for const ruct ion and real est at e development 20,241 - 10,432 Other individuals 3,536 - 1,411

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 27 March 2015. 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 property collateral. Annual Report 2014 Annual Report 2014

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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 Caja 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, Annual Report 2014

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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 2014, it was estimated that a 200 basis point decline in interest rates would increase net interest income by 1.14% (at 31 December 2013 the impact of such a movement was estimated to be a 1.86% 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 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 1 to 3 3 months to 1 More than 5 2014 month months year 1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years 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 1,875,935 1,627,596 4,130,487 303,890 128,343 695,601 88,077 127,548 8,977,477 Total

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 2,309,659 892,299 2,622,876 297,044 59,714 713,815 1,556,984 64,205 8,516,596 Total

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

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Thousands of euro Less than 1 1 to 3 3 months to 1 More than 5 2013 month months year 1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years years Total Assets

Loans and advances to credit institutions 676,485 34,971 28,000 - - - - - 739,456 Loans and advances to customers 939,650 1,510,320 3,406,753 196,481 23,062 19,993 15,228 52,337 6,163,824 Debt securities 125,381 437,713 286,775 653,081 41,074 58,736 539,477 41,682 2,183,919 Total 1,741,516 1,983,004 3,721,528 849,562 64,136 78,729 554,705 94,019 9,087,199

Liabilities

Deposits from credit institutions 1,365,341 434,487 296,674 223,718 4,014 2,472 1,630 10,588 2,338,924 Customer deposits 632,502 801,479 2,116,252 836,924 182,346 152,888 1,098,983 - 5,821,374 Debt securities 7,928 200 27,055 - - - 500,000 - 535,183 Total 2,005,771 1,236,166 2,439,981 1,060,642 186,360 155,360 1,600,613 10,588 8,695,481

Gap (264,255) 746,838 1,281,547 (211,080) (122,224) (76,631) (1,045,908) 83,431 391,718 (264,255) 482,583 1,764,130 1,553,050 1,430,826 1,354,195 308,287 391,718 391,718 Cumulative gap

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 equity securities” portfolio would have a one- day VaR of EUR 499 thousand at 31 December 2014 (compared with EUR 380 thousand at 31 December 2013). 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.

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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 cov er its paym ent 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 performance 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 2014 and 2013 is given below. The maturity dates used are those in the contractual terms and conditions. For the purposes of preparing the following table, the criteria described in the section on interest rate risk were used to group customer demand deposits, current accounts and savings by tranche.

Thousands of euro Less than 1 1 to 3 3 months to More than 5 2014 Dem an d month months 1 year 1 to 5 years 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 73,527 1,041,617 294,624 1,250,405 2,656,008 3,661,296 8,977,477 Total

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 Annual Report 2014 Annual Report 2014

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Thousands of euro Less than 1 1 to 3 3 months to More than 5 2013 Dem an d month months 1 year 1 to 5 years years Total Assets

Loans and advances to credit institutions 155,941 521,830 33,685 28,000 - - 739,456 Loans and advances to customers - 366,951 237,988 543,192 1,601,304 3,414,389 6,163,824 Debt securities - 10,000 15,888 274,832 1,675,767 207,432 2,183,919 155,941 898,781 287,561 846,024 3,277,071 3,621,821 9,087,199 Total

Liabilities

Deposits from credit institutions - 324,295 14,159 195,807 1,756,976 47,687 2,338,924 Customer deposits - 558,661 718,466 2,104,889 2,365,132 74,226 5,821,374 Debt securities - 7,928 200 27,055 500,000 - 535,183 - 890,884 732,825 2,327,751 4,622,108 121,913 8,695,481 Total

Gap 155,941 7,897 (445,264) (1,481,727) (1,345,037) 3,499,908 391,718 Cumulative gap 155,941 163,838 (281,426) (1,763,153) (3,108,190) 391,718 391,718

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 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 Annual Report 2014

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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 2014 and 2013, of the financial assets and liabilities indicated below grouped according to the different measurement methods used by the Group to determine fair value:

Thous ands of euro 2014 Tot al Fair Fair value hierarchy Balance value Level 1 Level 2 Level 3

Cas h and balances w it h cent ral banks 36,224 36,224 - - 36,224 Financial inst rument s held for t rading 29,095 29,095 367 28,728 - Ot her as s et s at fair value t hrough profit or los s - - - - - Available-for-s ale financial as s et s 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-mat urit y inves tments 44,940 43,852 - 43,852 - Hedging derivat ives 16 16 - 16 -

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

Financial inst rument s held for t rading 3,178 3,178 - 3,178 - Financial liabilities at amortized cost 8,620,057 8,803,844 - 8,644,869 158,975 Hedging derivat ives 170 170 - 170 -

Total financial liabilities 8,623,405 8,807,192 - 8,648,217 158,975

2013 Tot al Fair Fair value hierarchy Balance value Level 1 Level 2 Level 3

Cas h and balances w it h cent ral banks 35,502 35,502 - - 35,502 Financial inst rument s held for t rading 26,066 26,066 1,944 24,122 - Ot her as s et s at fair value t hrough profit or los s - - - - - Available-for-s ale financial as s et s 1,771,673 1,760,007 1,668,120 24,798 67,089 Loans and advances 7,374,484 8,400,622 - 8,367,976 32,646 Held-to-mat urit y inves tments 52,324 49,899 - 49,899 - Hedging derivat ives 117 117 - 117 -

Total financial assets 9,260,166 10,272,213 1,670,064 8,466,912 135,237

Financial inst rument s held for t rading 3,894 3,894 - 3,894 - Financial liabilities at amortized cost 8,759,246 8,836,199 - 8,749,432 86,767 Hedging derivat ives 3,742 3,742 - 3,742 -

Total financial liabilities 8,766,882 8,843,835 - 8,757,068 86,767 Annual Report 2014 Annual Report 2014

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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 2014 and 2013 the Group held unlisted equity instruments classified as Annual Report 2014

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available for sale which were recognized at historical cost, for amounts of EUR 13,810 thousand and EUR 12,779 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 using 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 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 economic situation of exceptional length and impact.

 Financial liabilities at amortized cost: Fair value has been estimated by discounting future cash flows using 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 Annual Report 2014 Annual Report 2014

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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:

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 2014 and 2013 was as follows:

2014 Valuation adjustments for Excess over value impairment of financial Gross value of collateral assets Specific provisions Loans for construction and real estate development (Spanish business) 359,089 54,087 71,000 Of w hich doubt ful 81,863 23,971 63,633 Of w hich subst andard: 24,079 4,128 7,367 Memorandum items: Default ed as s et s 47,670 Memorandum items: Carrying amount - Tot al loans and advances t o cus t omers , excluding public sector (Spanish businesses) 6,023,466 - Total assets (all busines ses ) 9,652,545 - Total generic provisions (all businesses) 80,342 Annual Report 2014

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2013 Valuation adjustments for Excess over value impairment of financial assets Gross value of collateral Specific provisions Loans for construction and real estate development (Spanish business) 453,293 81,266 105,283 Of w hich doubt ful 111,441 39,492 96,467 Of w hich subst andard: 33,145 3,735 8,816 Memorandum items: Default ed as s et s 39,683 Carrying Memorandum items: amount - Tot al loans and advances to customers, excluding public sector (Spanish businesses) 6,050,819 - Total assets (all businesses) 9,661,997 - Total generic provisions (all businesses) 10,081

The table below shows disclosures of finance for construction, real estate development and home loans at 31 December 2014 and 2013:

Loans for construction and real estate development Gross value 2014 2013

U ns ecured 19,711 18,434 Secured by mort gages 339,378 434,859 Finished buildings 168,561 191,195 Homes 151,740 171,763 Ot her 16,821 19,432 Buildings under construction 94,965 144,090 Homes 94,965 142,351 Ot her - 1,739 Land 75,852 99,574 Developed land 75,622 97,475 Ot her land 230 2,099 Total 359,089 453,293

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Information on home loans

The breakdown of home loans at 31 December 2014 and 2013, is as follows:

2014 2013 Gross value Of which doubtful Gross value Of which doubtful

Home loans 3. 139. 395 37. 524 3. 227. 808 43. 679 U ns ecured 43. 623 609 168. 743 2. 689 Secured by mort gages 3. 095. 772 36. 915 3. 059. 065 40. 990

At 31 December 2014 and 2013 the breakdown of home loans secured by mortgages according to the percentage loan to latest available value is as follows:

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

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

Loan to value 2013 Between Between Between 40% and 60% and 80% and Up to 40% 60% 80% 100% Above 100 % Total

Gross value 473,350 701,383 1,083,201 624,807 176,324 3,059,065 Of w hich doubt ful 3,931 3,687 8,007 10,575 14,790 40,990

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Information on assets acquired in settlement of debt

The detail of assets acquired in settlement of debt at 31 December 2014 and 2013 is as follows:

Thousands of euro 2014 2013 Gross debt Carrying Gross Carrying amount Provisions debt amount Provisions

1. Real es t at e as s et s acquired under loans granted to construction and real estate development companies 128,118 61,858 66,260 106,473 56,717 49,756 1.1. Finished buildings 35,374 23,944 11,430 34,650 24,183 10,467 1. 1. 1. Homes 25,667 17,324 8,343 24,406 16,959 7,447 1. 1. 2. Ot her 9,707 6,620 3,087 10,244 7,224 3,020 1.2. Buildings under construction 13,255 9,092 4,163 13,741 8,809 4,932 1. 2. 1. Homes 13,255 9,092 4,163 13,741 8,809 4,932 1. 2. 2. Ot her ------1. 3. Land 79,489 28,822 50,667 58,082 23,725 34,357 1. 3. 1. Developed land 43,585 16,034 27,551 26,079 12,406 13,673 1. 3. 2. Ot her land 35,904 12,788 23,116 32,003 11,319 20,684 2. Real estate assets originating from loans to individuals t o fund home purchases 21,496 14,336 7,160 17,135 10,689 6,446 3. Ot her real es t at e as s et s received in s et t lement of debt 21,801 12,457 9,344 13,266 8,550 4,716 4. Equit y inst rument s, shareholdings and loans t o non-consolidat ed companies holding such assets - - - 15,553 6,221 9,332 Total 171,415 88,651 82,764 152,427 82,177 70,250

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 Annual Report 2014 Annual Report 2014

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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.

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 2014 and 2013 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 2014 and 2013 was EUR 69,679 thousand and EUR 87,568 thousand and the net carrying amount of the company at these two dates was EUR 45,457 thousand and EUR 56,188 thousand, respectively. At 31 December 2014 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 142,674 thousand at 31 December 2013), against a revaluation for impairment of EUR 65,967 thousand (EUR 60,176 thousand at 31 December 2013).

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 Annual Report 2014

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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; - 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 m arket financing to grow its lending business, while at the same time maintaining the aforementioned contingency plans.

7. Cash and balances with central banks

The detail of this line of the statement of financial position at 31 December 2014 and 2013 is as follows: Thousands of euro 2014 2013 Cas h 36,224 35,502 Bank of Spain - - Valuat ion adjus t ment s - - 36,224 35,502 Annual Report 2014 Annual Report 2014

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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”.

8. Financial instruments held for trading

The breakdown of this line of the statement of financial position at 31 December 2014 and 2013 by type of counterparty and type of instrument is as follows:

Thousands of euro Assets Liabilities 2014 2013 2014 2013 By counterparty Credit institutions 28,728 24,403 705 1,324 Ot her res ident s ect ors 236 1,397 2,473 2,570 Ot her non-res ident s ect ors 131 266 - - Total 29,095 26,066 3,178 3,894 By type of instrument Debt s ecurit ies - - - - Deposits from credit institutions - - - - Equity instruments 367 1,944 - - Trading derivat ives 28,728 24,122 3,178 3,894 Total 29,095 26,066 3,178 3,894

The fair value of items included in “Financial instruments held for trading” was calculated using valuation techniques based on market data. Annual Report 2014

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Financial instruments held for trading. Equity instruments

The breakdown of this line of the consolidated statement of financial position at 31 December 2014 and 2013 is as follows:

Thousands of euro 2014 2013 Shares in credit institutions - 281 Shares in Spanish companies 236 1. 397 Shares in foreign companies 131 266 Total 367 1,944

All securities classified as “Equity instruments” at 31 December 2014 and 2013 were shares listed for trading on official markets.

Financial instruments held for trading. Trading derivatives

At 31 December 2014 and 2013 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: Annual Report 2014 Annual Report 2014

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Thous ands of euro Notional value Fair value Fair value M emorandum account s Assets Liabilities 2014 2013 2014 2013 2014 2013 By type of market Bilat eral ( OTC) market s 736,370 849,491 28,728 24,122 3,178 3,894 TOTAL 736,370 849,491 28,728 24,122 3,178 3,894

By type of product Sw aps 555,820 627,981 25,542 20,222 - - Opt ions 180,550 221,510 3,186 3,900 3,178 3,894 TOTAL 736,370 849,491 28,728 24,122 3,178 3,894

By counterparty Resident credit institutions 646,104 738,737 28,039 22,801 705 1,324 Ot her res ident s ect ors 90,266 110,754 689 1,321 2,473 2,570 TOTAL 736,370 849,491 28,728 24,122 3,178 3,894

By residual term to maturity Les s t han 1 year 81,510 88,813 906 865 705 865 1 t o 5 years 99,040 132,697 2,280 3,034 2,473 3,029 M ore t han 5 years 555,820 627,981 25,542 20,223 - - TOTAL 736,370 849,491 28,728 24,122 3,178 3,894

By type of risk I nt eres t rat e ris k 555,820 627,981 25,542 20,222 - - Equit y ris k 180,550 221,510 3,186 3,900 3,178 3,894 TOTAL 736,370 849,491 28,728 24,122 3,178 3,894

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. Annual Report 2014

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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 2014 2013 By counterparty Spanish public sector 1,540,163 1,387,275 Non-res ident government bodies - - Credit institutions 324,696 291,167 Ot her res ident s ect ors 124,737 62,135 Ot her non-res ident s ect ors 16,682 31,096 Total 2,006,278 1,771,673 By type of instrument Debt s ecurit ies 1,901,045 1,660,391 Spanish government debt 1,540,163 1,387,275 Non-res ident government bodies - - Issued by credit institutions 277,090 251,217 Ot her Spanish fixed-income s ecurit ies 73,727 12,579 Ot her non-res ident fixed-income s ecurit ies 10,065 9,320 Equity instruments 105,233 111,282 Shares in credit institutions 47,606 39,950 Shares in Spanish companies 50,828 48,258 Shares in foreign companies 178 197 U nit s and shares in invest ment funds 6,621 22,877 Total 2,006,278 1,771,673

The average annual interest rate for debt securities included in “Available-for-sale financial assets” in 2014 was 2.37% (3.02% in 2013), while interest accrued in 2014 on these financial assets was EUR 45,139 thousand (EUR 39,669 thousand in 2013).

The Group had sold, transferred or assigned EUR 116,076 thousand of the securities in this portfolio at 31 December 2014 and EUR 167,228 thousand at 31 December 2013 (Note 17).

A breakdown by residual term to maturity of debt securities recognized in this line at 31 December 2014 and 2013 is given in Note 6.

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At the close of 2014 and 2013, the breakdown of “Equity instruments” by listing status is as follows:

2014 2013 Thous ands of Thous ands of euro % of t ot al euro % of t ot al

Lis t ed for t rading 21,221 20. 17% 33,760 30. 34% Not listed for trading 84,012 79. 83% 77,522 69. 66%

105,233 100. 00% 111,282 100. 00%

The Group has recognized the following investments measured at fair value under “Equity instruments – Not listed for trading”:

Thousands of euro Fair value 2014 2013 Company Banco Cooperat ivo Es pañol, S. A. ( * ) 40,805 34,904 Seguros Generales Rural, S.A. de Seguros y Reas eguros 26,848 24,599 (*) Espiga Capital Inversión, Sociedad de Capital Riesgo 1,234 5,055 DZ B ank A. G. 1,315 1,127 Total 70,202 65,685

(*) 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 2014 and 2013.

In 2014, venture capital firm Espiga Capital Inversión, SCR, returned capital to its shareholders, of which the Cooperative Bank received EUR 2,757 thousand. Annual Report 2014

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The Group has recognized the following investments in this portfolio at cost since their fair value could not be reliably determined:

Thous ands of euro Carrying amount Company 2014 2013

Rural Servicios Informáticos, S.C. 3,260 3,092 Lazora, S. A. 2,000 2,000 M inicent rales Canal de las Bardenas A. I . E. 180 180 M ondragón Navarra, S. P. E. , S. A. 401 476 St art -U p Capit al Navarra, S. A. 100 100 I difarma Des arrollo Farmaceútico, S.L. 310 310 3P Biopharmaceut icals , S. L. 374 374 Espiga Capital Inversión II, Sociedad de Capital Riesgo de Régimen Simplificado, S.A. 750 750 Caja Rural de Jaén, S. C. C. 495 495 Caja de Crédit o y Ahorro Cooperat ivo, S.C.C. 409 409 Caja Rural de Burgos , Fuent epelayo, Segovia y Cas t elldans , S. C. C. 1,482 1,482 Caja Rural de Ext remadura, S. C. C. 1,844 Sociedad de Ges t ión de Act ivos Procedent es de la Rees t ruct uración Bancaria, S.A. ( SAR EB ) - 559 Abanca Corporación Bancaria, S. A. 671 671 Ot her 1,534 1,881

13,810 12,779

The breakdown of the “Valuation adjustments” shown under equity at 31 December 2014 and 2013 resulting from changes in the fair value of the assets in this portfolio is as follows:

Thous ands of euro 2014 2013

Debt s ecurit ies 53,431 19,621 Equity instruments 19,472 15,865

72,903 35,486

"Valuation adjustments" on the statement of financial position at 31 December 2014 and 2013 also includes losses on some fixed-income instruments, net of tax, of EUR 393 thousand and EUR 637 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.

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Movements recognized in “Valuation adjustments” corresponding to securities classified in “Available-for-sale financial assets” are detailed in Note 19.

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

. Debt securities

At 31 December 2014 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 7,060 thousand, compared with EUR 6,803 thousand at 31 December 2013.

Details of the valuation adjustments recognized by the Group at the 2014 and 2013 accounts close due to the impairment of debt securities included in “Available-for-sale financial assets” are as follows: Thous ands of euro 2014 2013

Opening balance 1,648 1,706

Net impairment los s es charged agains t income for t he year ( Not e 35) 287 ( 58) Determined individually - - Det ermined collect ively 287 ( 58)

Application of balances - -

Closing balance 1,935 1,648 Determined individually 1,628 1,628 Det ermined collect ively 307 20

. Equity instruments

In 2014 and 2013, the Group recorded impairment losses on equity instruments of EUR 406 thousand and EUR 1,515 thousand, respectively, (Note 35), and therefore adjusted the value of the portfolio accordingly, charged against income.

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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 2014 2013 Loans and adv ances to credit institutions 888,047 738,506 Loans and advances t o cus t omers 6,400,536 6,433,751 Debt s ecurit ies 11,072 471,220 Total 7,299,655 7,643,477 Valuat ion adjus t ment s ( 268,163) ( 268,993) Valuat ion adjus t ment s for impairment of financial as s et s ( 268,005) ( 268,847) Other valuation adjustments ( 158) ( 146) Total 7,031,492 7,374,484

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 2014 2013 By type Term depos it s 799,994 571,529 Revers e repurchas e agreement s - - Ot her account s 78,992 157,830 Ot her financial as s et s 9,061 9,147 Total 888,047 738,506 Valuat ion adjus t ment s 588 950 Total 888,635 739,456 By region Spain 888,047 738,506 Ot her count ries - - Valuat ion adjus t ment s 588 950 Total 888,635 739,456 By counterparty Euro 867,698 718,828 U S dollar 12,694 18,977 Ot her 8,243 1,651 Total 888,635 739,456

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In accordance with 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. for the indirect maintenance of its minimum reserves through a broker, as established in Article 10 of the aforementioned Regulation. Pursuant to this arrangement, the Bank maintains with Banco Cooperativo Español, S.A. a deposit of an amount sufficient to ensure indirect compliance with the minimum reserve ratio, which is included in “Term deposits”. The balance of this line at 31 December 2014 was EUR 53,229 thousand (compared with EUR 49,844 thousand at 31 December 2013).

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 167,050 thousand and EUR 239,539 thousand at 31 December 2014 and 2013, 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 2014 and 2013 is given in Note 6.

The average annual interest rate applied to deposits with credit institutions in 2014 was 0.96% (1.43% in 2013). Interest accrued on the financial assets included in this portfolio in 2014 totalled EUR 13,350 thousand compared with EUR 23,855 thousand in 2013 (Note 26). Annual Report 2014

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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 2014 2013

By loan type and status Commercial credit 393,363 331,349 Secured loans 3,962,380 3,887,404 Ot her t erm loans 1,521,440 1,659,993 Finance leas es 88,603 82,183 Repayable on demand and ot her 74,024 70,912 Ot her financial as s et s 78,886 67,387 Doubt ful asset s 281,840 334,523

Total 6,400,536 6,433,751

Valuat ion adjus t ment s ( 268,691) ( 269,927) Total 6,131,845 6,163,824

By borrower sector Government bodies 108,379 113,005 Ot her res ident s ect ors 5,996,445 6,039,884 Non-res ident s ect ors 27,021 10,935

Total 6,131,845 6,163,824

By interest rate type Float ing 5,846,257 5,792,388 Fixed 554,279 641,363 Total 6,400,536 6,433,751 Valuat ion adjus t ment s ( 268,691) ( 269,927) Total 6,131,845 6,163,824

The average annual interest rate applied to the financial instruments included in this item in 2014 was 2.93% (2.94% in 2013). Interest accrued on these financial assets in 2014 was EUR 181,615 thousand compared with EUR 187,431 thousand in 2013 (Note 26).

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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 asset and liabilities that were derecognized before 1 January 2004 (Note 2.f).

In respect of derecognitions that took place after 1 January 2004, as the conditions governing the asset transfers meant that the Credit Institution 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 to the payment received and is carried at amortized cost. These transactions therefore remain on the consolidated statement of financial position, in amounts of EUR 570,768 thousand and EUR 612,094 thousand at 31 December 2014 and 2013, respectively.

In addition, liabilities of EUR 56,457 thousand and EUR 45,269 thousand were recognized in “Financial liabilities at amortized cost – Customer deposits” in the statements of financial position at 31 December 2014 and 2013, 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 III, 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. Annual Report 2014

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In addition, the Group had subordinated loans in the amount of EUR 37,144 thousand outstanding with the aforementioned securitization funds at 31 December 2014 (EUR 28,425 thousand at 31 December 2013).

The detail of the valuation adjustments made in relation to transactions classified as “Loans and advances to customers” is as follows: Thous ands of euro Valuat ion adjus t ment s 2014 2013

Valuat ion adjus t ment s for impairment of financial as s ets ( 267,945) ( 268,831) Accrued int eres t 12,200 12,991 Fees and commissions ( 12,946) ( 14,087)

( 268,691) ( 269,927)

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

Details of the movement in 2014 and 2013 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 2014 2013 Opening balance 268,831 310,312 I mpairment los s es for t he year charged 75,624 177,165 t o income: Determined individually 7,529 177,165 Det ermined collect ively 68,095 - Revers als credit ed t o income ( 13,570) ( 134,364) Net impairment loss 62,054 42,801 Trans ferred t o default ed loans ( 40,962) ( 55,104) Trans ferred t o Valuat ion adjus t ment s for impairment of Non-current as s et s held for ( 49) ( 22,887) s ale ( Not e 13) Ot her movement s ( 21,929) ( 6,291) Closing balance 267,945 268,831 Determined individually 190,198 259,179 Det ermined collect ively 77,747 9,652

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The breakdown of “Impairment losses – Loans and advances” recognized in the consolidated income statement at 31 December 2014 and 2013 is as follows:

Thous ands of euro 2014 2013

Net impairment in t he period 62,054 42,801 Sus pens e it ems recovered ( 2,285) ( 1,667) Ass et s direct ly derecognized 4,656 4,605 Ot her it ems 114 150

64,539 45,889 Tot al ( Not e 35)

The impairment losses recognized at 31 December 2014 and 2013 cover the minimum provisions required by the Bank of Spain, taking account of the status and circumstances of the transactions and borrowers.

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 2014 2013 Counterparty Spanish public s ect or - - Non-res ident government bodies - - Credit institutions 1,305 455,781 Ot her res ident s ect ors 5,389 7,637 Ot her non-res ident s ect ors 4,378 7,802 Total 11,072 471,220 Valuat ion adjus t ment s for impairment of ( 60) ( 16) financial as s et s Total 11,012 471,204

The average annual interest rate for “Debt securities” included in “Loans and advances” in 2014 was 2.78% (3.61% in 2013), while interest accrued in 2014 on these financial assets came to EUR 3,440 thousand (EUR 34,425 thousand in 2013).

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A breakdown by residual term to maturity of debt securities recognized in this line at 31 December 2014 and 2013 is given in Note 6.

Details of the valuation adjustments for asset impairment recognized by the Group at the close of 2014 and 2013 for “Debt securities” included in “Loans and advances” are as follows:

Thous ands of euro 2014 2013

Opening balance 16 1,314

I mpairment los s es charged agains t income for t he year ( Not e 35) 44 ( 768) Determined individually - ( 458) Det ermined collect ively 44 ( 310) Application of balances - ( 530) 60 16 Closing balance Determined individually - - Det ermined collect ively 60 16

Impaired and overdue assets

Details of financial assets classified as “Loans and advances” and considered impaired due to credit risk at 31 December 2014 and 2013 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: Annual Report 2014 Annual Report 2014

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 Impaired assets Thous ands of euro 2014 2013 Transactions originally considered as “without perceivable risk” 4,004 4,732 Transactions subject to standard treatment 102,103 125,099 Less t han 6 mont hs 15,017 28,706 6 t o 9 mont hs 5,440 8,640 9 t o 12 mont hs 5,976 12,611 M ore t han 12 mont hs 75,670 75,142 Loans secured by property 175,065 203,066 Finished homes that are the borrower’s usual place of residence 46,378 48,577 Less t han 6 mont hs 11,968 13,617 6 t o 9 mont hs 4,890 5,601 9 t o 12 mont hs 3,810 5,091 M ore t han 12 mont hs 25,710 24,268 Working farms and finished offices, workshops and multi-purpose 42,281 41,923 industrial buildings Less t han 6 mont hs 4,376 6,791 6 t o 9 mont hs 5,480 1,513 9 t o 12 mont hs 975 2,997 M ore t han 12 mont hs 31,450 30,622 Finished homes (other) 23,608 28,189 Less t han 6 mont hs 6,144 9,028 6 t o 9 mont hs 2,661 2,793 9 t o 12 mont hs 922 1,401 M ore t han 12 mont hs 13,881 14,967 Plots of land, sites and other real estate assets 62,798 84,377 Less t han 6 mont hs 12,270 30,904 6 t o 9 mont hs 813 9,921 9 t o 12 mont hs 2,761 7,002 M ore t han 12 mont hs 46,954 36,550 Partially secured by collateral 668 1,626 Total 281,840 334,523

Accumulated finance income from impaired financial assets not recognized in income at 31 December 2014 and 2013 amounted to EUR 7,281 thousand and EUR 6,837 thousand, respectively. Annual Report 2014

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 Assets with overdue balances but not considered impaired

Thous ands of euro 2014 2013 Less t han 1 mont h 6,933 2,978 1 t o 2 mont hs 1,642 2,108 2 t o 3 mont hs 1,867 5,212 10,442 10,298

Details of the movement in impaired financial assets derecognized because the likelihood of their recovery was considered remote but in relation to which the Group has not discontinued actions to recover the amounts receivable are as follows:

Thousands of euro 2014 2013

Opening balance 106,028 42,749 Addit ions 53,477 68,504 Charged t o valuat ion adjus t ment s for impairment of financial as s et s 40,962 55,104 Charged direct ly t o income 4,656 4,605 Receivables pas t -due but not collect ed 7,859 8,695 Ot her it ems - 100 Recoveries ( 2,285) ( 1,667) Collected in cash ( 2,285) ( 1,667) Definit ively derecognized ( 15,472) ( 3,558) Due to write-offs ( 15,472) ( 2,734) Due t o debt res t ruct uring - - For ot her reas ons - ( 824) Closing balance 141,748 106,028

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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 2014 2013 Counterparty Credit institutions - - Res ident government bodies - - Non-res ident government bodies - - Ot her res ident s ect ors 45,155 52,385 Total 45,155 52,385 Valuat ion adjus t ment s for impairment of ( 215) ( 61) financial as s et s Total 44,940 52,324

The average annual interest rate on the financial securities included in the “Held-to-maturity investments” portfolio during 2014 stood at 5.07% (5.39% in 2013) and accrued interest in 2014 on the financial assets included in this portfolio came to EUR 2,482 thousand (EUR 2,918 thousand in 2013).

None of the securities classified in this portfolio had been sold, transferred or assigned at 31 December 2014 and 2013.

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 2014 and 2013 are reported in Note 6.d. Annual Report 2014

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Details of the valuation adjustments for impairment of “Held-to-maturity investments” recognized by the Group at the close of 2014 and 2013 are as follows:

Thous ands of euro 2014 2013

Opening balance 61 38

I mpairment los s es charged agains t income for t he year ( Not e 35) 154 23 Determined individually - - Det ermined collect ively 154 23

Closing balance 215 61 Determined individually - - Det ermined collect ively 215 61

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 2014 and 2013 is as follows:

Thous ands of euro Assets Liabilities 2014 2013 2014 2013 M icro-hedging Fair value hedges 16 117 170 3,742 Cas h flow hedges - - - -

16 117 170 3,742

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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:

Thous ands of euro Notional value Fair value Fair value M emorandum account s Assets Liabilities 2014 2013 2014 2013 2014 2013 By type of market Bilat eral ( OTC) market s 90,284 132,866 16 117 170 3,742 TOTAL 90,284 132,866 16 117 170 3,742

By type of product Sw aps 90,284 132,866 16 117 170 3,742 TOTAL 90,284 132,866 16 117 170 3,742

By counterparty Resident credit institutions 90,284 132,866 16 117 170 3,742 Ot her res ident s ect ors ------TOTAL 90,284 132,866 16 117 170 3,742

By residual term to maturity Les s t han 1 year 40,755 46,516 16 85 133 77 1 t o 5 years 49,529 66,350 - 32 37 1,057 M ore t han 5 years - 20,000 - - - 2,608 TOTAL 90,284 132,866 16 117 170 3,742

By type of risk I nt eres t rat e ris k 90,284 132,866 16 117 170 3,742 Equit y ris k ------TOTAL 90,284 132,866 16 117 170 3,742

The following financial swaps have been contracted (listed with their hedged items):

. Interest rate swap, to hedge “Debt securities” and 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 2014, the Group recognized net profit of EUR 764 thousand as a result of changes in the fair value of hedging Annual Report 2014

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transactions (compared with a net profit of EUR 1,797 thousand in 2013). With regard to the hedged items, in 2014 a net loss of EUR 759 thousand attributable to the hedged risk was recognized compared with a net loss of EUR 1,850 thousand in 2013 (Note 31).

13. Non-current assets held for sale

The breakdown of this line of the consolidated statement of financial position at 31 December 2014 and 2013 is as follows:

2014 2013

Propert y and equipment 76,266 76,266 I nves t ment propert y 703 310 Foreclos ed propert y and equipment 121,709 108,588 Valuat ion adjus t ment s for impairment of financial as s et s ( 32,908) ( 32,632)

89,504 76,266

Movements in "Foreclosed property and equipment" included in "Non- current assets held for sale" in 2014 and 2013 were as follows:

2014 2013

Opening balance 108,588 38,617 Addit ions 31,149 90,596 Ret irement s ( 18,028) ( 20,625) Trans fers - -

Closing balance 121,709 108,588

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Movement in "Valuation adjustments for impairment of financial assets" included in "Non-current assets held for sale" in 2014 and 2013 was as follows: 2014 2013

Opening balance 32,632 7,502 Net addit ions charged agains t income 1,165 2,724 Revers als or s ales ( 889) ( 481) Trans fers - 22,887

Closing balance 32,908 32,632

14. Equity investments

The detail of the Parent Company’s equity investments at 31 December 2014 and 2013, by company, is as follows: Thousands of euro % ownership interest Acquisition cost Net carrying amount 2014 2013 2014 2013 2014 2013 Associates Bodegas Príncipe de Viana, S.L. 50.00% 50.00% 11,015 11,015 12,238 12,025 Omegageo, S.L. 50.00% 50.00% 1,092 1,092 2,548 2,898 Harantico, S.L. (*) - 50.00% - 3,002 - 3,898 Harinera del Mar Siglo XXI, S.L. (*) - 50.00% - 9,500 - 6,845 Reivalsa Gestión, S.L 50.00% 50.00% 50 50 804 644 Renovables de la Ribera, S.L. 50.00% 50.00% 250 250 238 230 Cegima Gestión Hipotecaria, S.L. - 50.00% - 15 - 15 Bosqalia, S.L. 48.40% 48.40% 1,452 1,452 1,205 1,200 Errotabidea, S.L. 46.01% 45.00% 8,431 8,248 8,847 8,625 Servicios Empresariales Agroindustriales, S.A. 33.33% 33.33% 30 30 81 70 Albedo Solar 1, S.L. (**) - 33.33% - 1 - 1 Helian Energy 1, S.L. (**) - 33.33% - 1 - 1 Rioja Vega, S.A. 25.07% 25.07% 4,491 4,491 2,445 2,494 Eólica La Calera, S.L. ------Zagin Group, S.L. 25.00% 25.00% 2,031 2,031 1,541 1,790 Investi Navarra In Est, S.L. 25.00% 25.00% 5,000 5,000 - - Rural de Energías Aragonesas, S.A. 25.00% 25.00% 475 474 455 459 Chicaire de Cantabria, S.L. (**) - 25.00% - 37 - 34 Harantico, S.L. 24.90% 24.90% - - 25 25 Compañía Eólica de Tierras Altas, S.A. 23.75% 23.75% 3,184 3,184 7,856 8,877 Haribericas XXI, S.L. 20.00% 20.00% 876 876 (1,521) (537) Zeleny, Información y Mercado, S.L. 20.00% 20.00% 300 300 24 24 Iparlat, S.A. 19.72% 19.72% 4,173 4,173 8,637 7,339

Total 42,850 55,222 45,423 56,957

(*) Subsidiaries at 31 December 2014, both wholly owned. (**) Companies dissolved in 2014.

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The carrying amount of investees at 31 December 2014 and 2013 includes goodwill of EUR 548 thousand and EUR 4,897 thousand, respectively.

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 Earnings assets Renovables de la Ribera, S.L. Pamplona Cons t ruct ion and operat ion of 482 475 ( 7) w ind farms Bodegas Príncipe de Viana, S. L. Pamplona Product ion and sale of w ine 46,308 29,091 525 Omegageo, S. L. Pamplona Civil engineering and building 5,556 4,597 ( 724) project s Reivals a Ges tión, S.L Vitoria Provision of administrative 11,764 1,608 437 ( Alava) s ervices t o public s ect or bodies Bos qalia, S. L. Pamplona Fores t ry 5,989 2,490 8 Errot abidea, S. L. Pamplona Development and management 53,057 22,991 669 of rent -cont rolled hous ing Servicios Empresariales Agroindustriales, Pamplona M anagement of cooperat ive 682 242 ( 83) S. A. s ervices Rioja Vega, S. A. Viana Product ion and s ale of w ine 15,800 9,784 ( 194) ( Navarre) Zagin Group, S. L. Ainzoain Real es t at e development 11,983 5,300 ( 163) ( Navarre) I nves ti Navarra I n Est, S. L. Pamplona Real es t at e development 11,684 - - Rural de Energías Aragones as , S. A. Zaragoza Generat ion and s ale of 1,841 1,815 ( 20) renew able energy Compañía Eólica de Tierras Alt as , S. A. Soria Cons t ruct ion and operat ion of 44,766 33,077 ( 231) w ind farms Haribericas XXI , S. L. Pamplona M anufact ure and s ale of flour 47,602 2,344 ( 1,918) Zeleny, I nformación y M ercado, S.L. Pamplona I nt ermediat ion in cereal 178 121 - market ing I parlat , S. A. U rniet a Product ion of dairy product s 141,422 50,390 6,611 (Guipúzcoa)

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The activities, registered offices and key performance indicators of companies accounted for by the equity method at 31 December 2013 are as follows:

Thousands of euro Company Head office Line of business Total Equity Earnings assets Renovables de la Ribera, S.L. Pamplona Cons t ruct ion and operat ion of 565 459 (26) w ind farms Bodegas Príncipe de Viana, S. L. Pamplona Product ion and s ale of w ine 45,945 28,499 175 Omegageo, S. L. Pamplona Civil engineering and building 6,885 5,335 ( 406) project s Harant ico, S. L. Pont evedra M anufact ure and s ale of flour 27,481 7,818 543 Harinera del M ar Siglo XXI , S.L. Valencia M anufact ure and s ale of flour 70,132 14,654 50 Reivals a Ges tión, S.L Vitoria Provision of administrative 13,871 1,288 529 ( Alava) s ervices t o public s ect or bodies Bos qalia, S. L. Pamplona Fores t ry 6,024 2,479 ( 155) Errot abidea, S. L. Pamplona Development and management 54,448 23,083 470 of rent -cont rolled hous ing Servicios Empresariales Agroindustriales, Pamplona M anagement of cooperat ive 682 242 ( 52) S. A. s ervices Albedo Solar 1, S.L. Pamplona Generat ion and s ale of s olar energy 3 3 - Helian Energy 1, S. L. Pamplona Generat ion and s ale of solar energy 3 3 - Rioja Vega, S. A. Viana Product ion and s ale of w ine 15,580 9,970 ( 238) ( Navarre) Zagin Group, S. L. Ainzoain Real es t at e development 11,984 5,463 (495) ( Navarre) I nves ti Navarra I n Est, S. L. Pamplona Real es t at e development 11,684 - ( 1,500) Rural de Energías Aragones as , S. A. Zaragoza Generat ion and s ale of 1,871 1,836 ( 21) renew able energy Chicaire de Cant abria, S. L. Sant ander Generat ion and s ale of 137 137 ( 2) ( Cant abria) renew able energy Compañía Eólica de Tierras Alt as , S. A. Soria Cons t ruct ion and operat ion of 55,539 37,378 5,294 w ind farms Haribericas XXI , S. L. Pamplona M anufact ure and s ale of flour 47,835 4,598 ( 2,212) Zeleny, I nformación y M ercado, S.L. Pamplona I nt ermediat ion in cereal 178 121 - market ing I parlat , S. A. U rniet a Product ion of dairy product s 155,257 45,230 751 (Guipúzcoa)

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. Annual Report 2014

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All balances recognized under “Equity investments” at the close of 2014 and 2013 corresponded to shares that are not quoted on official markets.

Movements in this line of the consolidated statement of financial position in 2014 and 2013 were as follows:

Thous ands of euro

Balance at 31 December 2012 58,098

Addit ions 104 Profit ( los s ) of companies account ed for us ing t he equit y met hod 407 Ret irement s ( 1,646) Trans fers ( 6) 56,957 Balance at 31 December 2013

Addit ions 184 Profit ( los s ) of companies account ed for us ing t he equit y met hod 59 Ret irement s ( 1,331) Trans fers ( 10,446) 45,423 Balance at 31 December 2014

In accordance with the policy set out in 2.g) at 31 December 2014 and 2013 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 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 came under 100% ownership in 2014, the Parent Company's investment in the companies Annual Report 2014 Annual Report 2014

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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.

15. Property and equipment, intangible assets and business combinations

Property and equipment

Movements in "Property and equipment" line of the consolidated statement of financial position in 2014 and 2013 were as follows: Thousands of euro

Property and equipment As s ign ed to s ocial Investment property For own use projects Total Cost - Balance at 31 December 2012 279,726 416 8,895 289,037 Additions 9,412 - 327 9,739 Retirements and writedowns (4,319) - (807) (5,126) Transfers - - - - 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

Accumulated depreciation- Balance at 31 December 2012 130,074 239 873 131,186 Provisions 10,154 3 179 10,336 Retirements and writedowns (174) - (205) (379) Transfers - - - - 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

Valuation adjustments for impairment - Balance at 31 December 2012 1,957 - 1,359 3,316 (Note 36). 433 - 327 760 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

Property and equipment, net - Balance at 31 December 2013 142,375 174 5,882 148,431 Balance at 31 December 2014 179,291 172 5,433 184,896

At 31 December 2014 and 2013, property and equipment acquired under finance leases totalled EUR 663 thousand and EUR 512 thousand, respectively. Annual Report 2014

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At 31 December 2014 and 2013 the Group had no property and equipment that was temporarily out of service or had been withdrawn from active use.

At 31 December 2014 and 2013 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 2014 and 2013 was worth a total of EUR 100,048 thousand and EUR 84,916 thousand, respectively.

In accordance with Bank of Spain Circular 4/2004, the Group remeasured 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 2014 totalled EUR 8,565 thousand (compared to EUR 537 thousand for Bouquet Brands, S.A. at 31 December 2013): EUR 8,297 thousand and EUR 268 thousand from Harantico, S.L. and Bouquet Brands, S.A. respectively. In 2014 a EUR 468 thousand impairment loss was recorded against Bouquet Brands, S.A. goodwill (Note 36). This was followed by a capital increase that generated an additional EUR 199 thousand of goodwill. Annual Report 2014 Annual Report 2014

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The Parent Company had a 50% direct holding in Harantico, S.L. until 11 July 2011, when it acquired the remaining 50% taking full control. The company 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 Group tested the goodwill generated on acquisition of Harantico, S.L.'s assets for impairment at end-2014 by estimating its recoverable amount.

The valuation method used was to discount future distributable profits from the company's activities over a 5-year forecast period (to 2019) plus a terminal value measured using a perpetual growth rate of 1.5%. 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 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. This was determined using the CAPM (Capital Asset Pricing Model), which gave a discount rate of 6.85%.

A sensitivity analysis was carried out looking at the key variables in the valuation, which found no evidence of impairment.

Intangible assets

The Parent Company had a 50% direct holding in Harinera del Mar Siglo XXI, S.L. until 11 July 14, when it took over the remaining 50% giving it full control. 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 Annual Report 2014

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capital increase by the shareholders from whom the Parent Company acquired the additional 50% in the takeover.

At end-2014 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 Group valued the whole recoverable amount of the company, including the rights and commercial relations that comprised the EUR 5,000 thousand intangible assets, using the abovementioned method based on the estimates and forecasts available to the Parent Company's Directors. The company's financial forecasts justify the intangible assets acquired at the time of the takeover and at the 2014 reporting date.

The present value of distributable cash flows used to derive value in use is based on Harinera del Mar Siglo XXI, S.L.'s cost of equity (Ke) to a market participant. This was determined using the CAPM (Capital Asset Pricing Model). which gave a discount rate of 6.85%.

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 Annual Report 2014 Annual Report 2014

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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".

16. Other assets/liabilities

The breakdown of these asset and liability items in the accompanying consolidated statement of financial position at the close of 2014 and 2013 is as follows:

Thous ands of euro 2014 2013 Assets:

I nvent ories relat ing t o non-financial activities 75,986 31,313 Of w hich: Real es t at e bus ines s 20,810 20,730 Agricultural business 51,125 8,583 Ot her 4,051 2,000 Transact ions in t ransit 28,142 24,715 Accruals 261 798 Ot her it ems 3,669 3,685

108,058 60,511

Liabilities:

Transact ions in t ransit 21,454 620 Accruals 34,781 36,660 Ot her it ems 36,057 32,939

92,292 70,219 Annual Report 2014

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17. Financial liabilities at amortized cost

The breakdown of this balance sheet item at 31 December 2014 and 2013 is as follows:

Thousands of euro 2014 2013

Deposits from credit institutions 1,737,539 2,338,924 Cus t omer depos it s 6,133,759 5,821,374 Debt s ecurit ies 645,298 535,183 Other financial liabilities 103,461 63,765

8,620,057 8,759,246 Tot al

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 2014 2013

Type of deposit Term depos it s 1,607,905 2,135,296 Repurchas e agreement s ( Not e 9) 116,076 167,228 Ot her account s - 11,646 Valuat ion adjus t ment s 13,558 24,754 Total 1,737,539 2,338,924 Currency Euro 1,737,539 2,338,924 Total 1,737,539 2,338,924

At 31 December 2014 “Term deposits” included seven deposits from Banco Cooperativo Español, S.A. totalling EUR 1,151,725 thousand in cash from European Central Bank’s monetary policy operations. These deposits mature between 2015 and 2018 and pay interest of between 0.06% and 0.16%. At 31 December 2013, there were five deposits totalling EUR 1,113,225 thousand, paying 0.26% and maturing between 2014 and 2015.

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A breakdown of this item by residual term to maturity is given in Note 6.

“Term deposits” 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 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 Redempt ion 31/12/14 31/12/13 Issue date dat e Interest rate Loan I I I BCE guarant eed is s ue 141,061 215,000 22/01/2010 22/01/2015 4,242% Loan I V BCE guarant eed is s ue - 102,700 02/01/2012 02/06/2014 6,206% Loan V BCE guarant eed is s ue - 69,000 27/03/2012 27/03/2015 3-mont h Euribor + 2. 854% Loan VI BCE guarant eed is s ue - 275,000 27/03/2012 27/03/2017 3-mont h Euribor + 3. 350% 141,061 661,700

In 2014 the loans related with issues V and VI were cancelled before maturity and part of issue III was redeemed early.

Part of the cash raised by these financing operations, to a nominal value of EUR 5,000 thousand, remains invested in securities from the covered bond issue itself at 31 December 2014 (EUR 526,700 thousand Annual Report 2014

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at 31 December 2013) and is recognized under “Available-for-sale financial assets”. At 31 December 2013, 446,700 was recognized under Loans and advances – debt securities” and EUR 80,000 thousand under “Available-for-sale financial assets”.

The Cooperative Bank also jointly guarantees BCE, for as long as the government-backed issue remains outstanding, against any losses BCE may suffer on interbank loans to rural credit cooperatives belonging to the Grouping or on the issue of state-backed fixed-income securities. These sums are taken on by the 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 (EUR 198,511 thousand at 31 December 2013) (Note 24).

“Term deposits” also included EUR 236,428 thousand at 31 December 2014 corresponding to funds from the Official Credit Institute relating to brokerage loans (EUR 324,512 thousand at 31 December 2013).

The average interest rate of these securities was 0.81% in 2014 (1.34% in 2013) and the accrued interest in 2014 on the financial liabilities included in this portfolio came to EUR 22,299 thousand (EUR 45,087 thousand in 2013) (Note 27).

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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 2014 2013 Type of deposit Demand depos it s 2,448,206 2,125,684 Term depos it s 3,665,738 3,673,958 Revers e repurchas e agreement s - - Valuat ion adjus t ment s 19,815 21,732 Total 6,133,759 5,821,374 Sector of activity Spanish public sector 151,835 124,923 Ot her res ident s ect ors 5,964,239 5,681,376 Non-res ident s ect ors 17,685 15,075 Total 6,133,759 5,821,374 Type of interest rate Floating 308,333 347,426 Fixed 5,825,426 5,473,948 Total 6,133,759 5,821,374 Currency Euro 6,112,830 5,800,829 U S dollar 12,717 18,979 Ot her currencies 8,212 1,566 Total 6,133,759 5,821,374

The average interest rate of these securities was 1.09% in 2014 (1.50% in 2013) and the accrued interest in 2014 on the financial liabilities included in this portfolio came to EUR 64,833 thousand (EUR 103,125 thousand in 2013). (Note 27).

Pursuant to prevailing legislation, term deposits include the liability corresponding to the securitization transactions mentioned in Note 10, amounting to EUR 56,457 thousand at 31 December 2014 (EUR 45,269 thousand at 31 December 2013). In 2014 and 2013, the Cooperative Bank made market buybacks of bonds from the various securitization issues in which the Group had participated as originating entity for a total nominal amount of EUR 9,853 thousand and EUR 29,593 thousand, respectively, (the amount at which they were recognized), at a cost of acquisition of EUR 8,485 thousand and EUR 23,169 thousand, respectively. The differences between the cost of acquisition and Annual Report 2014

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carrying amount were recognized in the consolidated income statement under “Financial instruments not measured at fair value through profit or loss” in the “Gains (losses) on financial assets and liabilities” line.

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.

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

Thous ands of euro 2014 2013

Promis s ory not es and ot her bills 87,689 30,154 Bonds and debent ures out st anding 548,120 498,120 Valuat ion adjus t ment s 9,489 6,909

Tot al 645,298 535,183

“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 2014 corresponds to the twelfth issue of Caja Rural de Navarra promissory notes, registered with the CNMV on 23 January 2014, while the balance outstanding at 31 December 2013 corresponded to the eleventh issue of Caja Rural de Navarra promissory notes, registered with the CNMV on 29 January 2013. The maximum balances outstanding for the two issues were, respectively, EUR 300,000 thousand (extendible to EUR Annual Report 2014 Annual Report 2014

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600,000 thousand) and EUR 200,000 thousand (extendible to EUR 400,000 thousand).

On 22 January 2015, Caja Rural de Navarra registered its twelfth issue of promissory notes with the CNMV, fixing the maximum issue amount at EUR 200,000 thousand, extendible to EUR 400,000 thousand.

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 twelfth issue at 31 December 2014 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:

Redempt ion 31/12/20 1 31/12/201 dat e Effect ive int eres t rat e Issue 4 3 I s s ue dat e Issue I - Mort gage covered bonds 498,120 498,120 11/06/2013 11/06/2018 2,957% Issue III - Mort gage covered bonds 50,000 - 07/02/2014 07/02/2029 3,67% 548,120 498,120

At 31 December 2014 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 914,271 thousand recorded for this item of the consolidated statement of financial position (EUR 600,000 thousand at 31 December 2013), 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.

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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 2.83% in 2014 (2.85% in 2013) and the accrued interest in 2014 on the financial liabilities included in this portfolio came to EUR 17,814 thousand (EUR 10,796 thousand in 2013) (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:

Thous ands of euro 2014 2013 Payment obligations 16,382 13,305 Tax revenue collect ion account s 19,104 18,664 Payable for purchas es and non-financial services 60,168 23,422 Ot her it ems 7,807 8,374

Tot al 103,461 63,765

“Payment obligations” at 31 December 2014 and 2013 includes the commitment to the Deposit Guarantee Fund, explained in Note 1.h).

18. Provisions

The balance recognized under " Provisions for contingent exposures and commitments" and "Other provisions" of the consolidated Annual Report 2014 Annual Report 2014

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statement of financial position at the close of 2014 and 2013 and movements in those years were as follows:

Thousands of euro Provisions for contingent exposures and Other provisions commitments Balance at 31 December 2012 6,901 7,967 Addit ions charged against income 5,142 8,922 Revers als credit ed t o income ( 1,689) - Net addition (Note 34) 3,453 8,922 Application of balances - ( 16,889) Ot her movement s 135 - Balance at 31 December 2013 10,489 - Addit ions charged against income 2,992 178 Revers als credit ed t o income ( 4,575) - Net addition (Note 34) ( 1,583) 178 Application of balances - ( 178) Ot her movement s ( 74) - Balance at 31 December 2014 8,832 -

Note 2.t) to the consolidated financial statements shows the detail of movements in "Provisions for pensions and similar obligations" during 2014 and 2013.

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. Annual Report 2014

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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:

Thous ands of euro Debt s ecurit ies Equity instruments Tot al 2014 2013 2014 2013 2014 2013

Opening balance 18,984 (2,716) 15,865 8,440 34,849 5,724

Measurement gains (losses) 52,674 39,223 4,003 11,441 56,677 50,664 Amounts transferred to the cons olidat ed income s t at ement ( 7,269) ( 10,290) 1,150 ( 834) ( 6,119) ( 11,124) I ncome t ax ( 11,351) ( 7,233) ( 1,546) ( 3,182) ( 12,897) ( 10,415)

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

20. Share capital

Capital contributions made to the Parent Company by members in 2014 and 2013, and changes in capital occurring in those years, are shown in the table below.

Thousands of euro

Mandatory Voluntary Total contributions contributions Balance at 31 December 2012 11,676 118,312 129.988 Subs cript ions 22,424 22,424 Redempt ions ( 9,716) ( 9,716) Balance at 31 December 2013 142,696 142,696 Subs cript ions 9,746 9,746 Redempt ions ( 840) ( 840) Balance at 31 December 2014 151,602 151,602

Until 2012, the Parent Company classified contributions received as mandatory and voluntary, in accordance with the provisions of its articles of association. The articles were amended at the Annual General Meeting of 10 May 2013 and as a result all contributions to Annual Report 2014 Annual Report 2014

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capital are now treated equally, eliminating the previous distinction between mandatory and voluntary. 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 2014 and 2013 were represented by 2,522,076 and 2,373,916 fully paid-up registered shares, respectively, each with a nominal value of EUR 60.11 each.

The Cooperative Bank 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 2014 and 2013 remuneration paid to cooperative members in respect of contributions made came to EUR 2,770 thousand and EUR 2,551 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 2014 and 2013.

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 Annual Report 2014

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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 2014 and 2013 are as follows:

Thousands of euro

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

Balance at 1 January 2013 14,036 576,203 26,367 3,096 619,702 Appropriation of prior year’s profit (14,036) (25,510) (1,188) - (40,734) Dividends and remuneration (Note 4) - - (2,350) (2,350) Other movements - - 5,466 (1,572) 3,894 Balance at 31 December 2013 - 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 Balance at 31 December 2014 - 577,103 27,825 2,379 607,307

Revaluation reserves

Revaluation reserves at 31 December 2012 included the surpluses resulting from the revaluation carried out by the Group at 1 January 2004, pursuant to the First Transitional Provision of Bank of Spain Circular 4/2004, on certain properties included in property and equipment for own use. Following the appropriation of the Parent Company's net profit for 2012, the Group had no "Revaluation reserves" at 31 December 2014 and 2013.

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 Annual Report 2014 Annual Report 2014

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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.

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 2014 and 2013 is as follows: Thousands of euro

Reserves of companies accounted Other reserves for using the equity method 2014 2013 2014 2013 Parent institution, after consolidation adjustments 53,325 42,303 - - Informes y Gestiones Navarra, S.A. 329 260 - - Harivasa 2000, S.A. 8,713 8,330 - - Harinera de Tardienta, S.A. (2,903) (2,962) - - Promoción Estable del Norte, S.A. (30,984) (20,737) - - Industrial Tonelera Navarra, S.A. 1,420 1,231 - - Seresgerna, S.A. 2,511 2,411 - - Residencia Torre de Monreal, S.L. (667) (685) - - Solera Asistencial, S.L. (54) - - - Bouquet Brands, S.A. (1,808) (1,763) - - Pre ve ntia Sport, S.L. (117) 9 - - The Spanish Food & Drinks Company GMBH (175) (94) - - Eólica La Calera, S.L. (8) (8) - - Bodegas Príncipe de Viana, S.L. - - 1,008 981 Harantico, S.L. 897 - - 624 Bosqalia, S.L. - - (251) (177) Renovables de la Ribera, S.L. - - (9) (7) Harinera del Mar Siglo XXI, S.L. (2,654) - - (2,680) Omegageo, S.L. - - 1,819 1,958 Servicios Empresariales Agroindustriales, S.A. - - 51 40 Rioja Vega, S.A. - - (1,997) (1,937) Errotabidea, S.L. - - 179 156 Reivalsa Gestión, S.L. - - 535 329 Zagin Group, S.L. - - (365) (241) Investi Navarra In Est, S.L. - - (5,000) (4,625) Rural de Energías Aragonesas, S.A. - - (16) (11) Compañía Eólica de Tierras Altas, S.A. - - 4,726 4,436 Haribericas XXI, S.L. - - (1,438) (308) Zeleny, Información y Mercado, S.L. - - 15 15 Iparlat, S.A. - - 3,122 2,974 Chicaire de Cantabria, S.L. - - - (3) Total 27,825 28,295 2,379 1,524

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In 2013, the Parent Company's investments in Seresgerna, S.A. and Residencia Torre de Monreal, S.L. were transferred, via a non-cash contribution, to Solera Asistencial, S.L., a company created by the Parent Company to bring together the Group's investments in the development and operation of senior care centres. As the contributing party, the Parent valued its investment at the carrying amount of the assets and liabilities transferred as they stood in the consolidated financial statements on the transfer date. This gave a difference between the net carrying amount in the separate financial statements and the consolidated net carrying amount at the date of the business combination of EUR 2,360 thousand. After deduction of tax effects (Note 23) EUR 1,652 thousand was therefore recognized in the reserves of the Parent.

Shareholders’ equity and capital management

In managing its capital the Group has followed the conceptual definitions set out in the solvency regulations described in the CRD-IV and CRR since 1 January 2014, and those of Bank of Spain Circular 3/2008, of 22 May until 31 December 2013 (Note 1.g).

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, both as an individual entity and as a consolidated group.

 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 Group.

To achieve these objectives the Parent Company applies a range of capital management policies and processes, whose main elements are: Annual Report 2014 Annual Report 2014

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 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.

The detail of its eligible capital base and minimum requirements at 31 December 2014 and 2013 is as follows:

Thous ands of euro 2014 2013 ( *)

Common equity tier 1 capital ratio (CET1) (I) 792,083 761,082 Eligible capital 151,602 142,696 Eligible res erves 592,536 588,011 Qualifying profit 47,945 35,272 Deduct ions - ( 4,897)

Additional tier 1 capital (II) - -

Tier 2 capital (III) 47,009 20,280 Capital gains on equity instruments - 10,199 Complement ary credit risk allowances and provisions 47,009 10,081

Total eligible capital (I) + (II) +(III) 839,092 781,362

Total minimum capital requirement ( 407,078) ( 445,661)

Surplus 432,014 335,701

Risk-w eight ed as s et s 5,088,474 5,570,763

Capital ratios Common equity tier 1 ratio (minimum 4.5%) 15. 57% 13. 66% Tier 1 ratio (minimum 6%) 15. 57% - Capital ratio (minimum 8%) 16. 49% 14. 03%

(*) Comparative information at 31 December 2013 is based on Bank of Spain Circular 3/2008 and other solvency laws and regulations in force Annual Report 2014

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at the time. It takes no account of the accounting policy changes applied to the 2013 figures described in Note 3.

In addition to the guarantee that its shareholders’ equity provides to creditors, the Group is required, pursuant to prevailing regulations, to make annual contributions to the Deposit Guarantee Fund for Credit Institutions. The purpose of this fund is to guarantee deposits pursuant to the terms established in specific regulations (Note 1.h).

22. Social Welfare Fund

In accordance with Act 13/1998 on cooperative credit institutions, Act 27/1999 on cooperative entities 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.

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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 2014 and 2013, 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 2014 2013

Consult ancy , t raining and promot ion of t he cooperat iv e 1,495 1,396 business model Teaching and research 971 1,279 Sport s aid 132 340 Charity w ork 116 114 Cultural, recreational and other activities 105 98 Economic and social development 516 549 3,335 3,776

The balance of property and equipment assigned to the Education and Development Fund at 31 December 2014 and 2013 was EUR 172 thousand and EUR 174 thousand, respectively. (Note 15). Annual Report 2014

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The breakdown by item of the balances assigned to the Parent Company’s Education and Development Fund at 31 December 2014 and 2013 is as follows:

Thous ands of euro 2014 2013 Applicat ion of Educat ion and Development Fund M aint enance cost s incurred in t he year 3,286 3,782 Applied t o propert y and equipment ( 172) ( 174) Applied t o ot her inves t ment s ( 1) ( 13) 3,113 3,595 TOTAL

Amount committed 3,214 4,677 Amount not committed 6,803 3,780 Amount committed for investments 1,442 1,442 11,459 9,899 TOTAL

8,346 6,304 Educat ion and Development Fund (Social W elfare Fund)

23. Tax position

All taxes paid by the Group are open to inspection for the last four years. In accordance with tax legislation, 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. Annual Report 2014 Annual Report 2014

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Reconciliation between accounting and taxable profit

The breakdown of the balance of “Income tax” shown in the consolidated income statement for 2014 and 2013 is as follows:

Thous ands of euro 2014 2013 ( *) I ncome t ax expens e for t he year 3,536 ( 3,341) Tax rat e adjus t ment s t o prior years - - Ot her t axes on income 7 7 3,543 ( 3,334) TOTAL

(*) Income tax expense for the year 2013 has been restated from the figure in the 2013 published financial statements to reflect the changes in accounting policies described in Note 3.

Parent Company profit, measured in accordance with Navarre Regional Act 24/1996, of 30 December on Company Income Tax, is taxed at 25% for cooperative earnings and 30% for non-cooperative earnings, less applicable credits and deductions.

Certain deductions for double taxation, reinvestment and training expenses may be applied to the resulting tax liability. 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 Company, which is a cooperative entity. However, the reconciliation between the Cooperative Bank’s accounting profit and taxable profit for 2014 and 2013 is included below: Annual Report 2014

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Thousands of euro 2014 2013 (*) Increases Decreases Total Increases Decreases Total Cons olidat ed profit before accrued t ax and aft er mandat ory allocat ion t o t he Educat ion and Development 59,585 29,407 Fund Permanent differences 40 ( 32,004) ( 31,964) 741 ( 23,676) ( 22,935) Adjusted accounting profit 27,621 6,472 Temporary differences - Arising in t he year 30,126 ( 1,847) 28,279 20,363 ( 10,225) 10,138 - Arising in prior years 595 ( 112) 483 1,584 ( 78) 1,506 Taxable profit for the year 56,383 18,116

(*) Taxable profit for the year 2013 has been restated from the figure in the 2013 published financial statements to reflect the changes in accounting policies described in Note 3.

In 2014 and 2013, 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 2014 to adjusted accounting profit and taxable profit, the amounts of income tax expense accrued and repayable for the year were EUR 3,536 thousand and EUR 131 thousand, respectively.

Independently from the income tax expense recognized in the consolidated income statement, the Group recognized as tax liabilities in the statement of financial position taxes corresponding to “Valuation adjustments” and “Available-for-sale financial assets”, up to the moment of their sale, totalling EUR 26,024 thousand at 31 December 2014 (compared with EUR 13,127 thousand at 31 December 2013). Annual Report 2014 Annual Report 2014

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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 2014 and 2013 arose from the following sources:

Thousands of euro

2014 2013 Deferred tax assets arising from: Allocat ions t o pens ion funds 156 140 Deductions pending application 12,963 18,430 U nallowable loan loss provisions 7,500 - Revers al of originat ion fees 47 58 Tax los s carry forw ards of t he Parent 30,726 30,780 Ot her it ems 5,315 7,659 Total 56,707 57,067 Deferred tax liabilities arising from: Available-for-s ale debt s ecurit ies 17,679 6,328 Available-for-s ale equit y ins t rument s 8,345 6,799 Re-meas urement of propert y 4,301 4,420 Arising from business combination (Note 21) 140 708 Allocation investee companies 708 599 Accelerat ed depreciat ion and amort izat ion 1,153 161 Ot her it ems 1,712 786 Total 34,038 19,801

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At 31 December 2014 and 2013, the breakdown of income tax deductions and credits attributable to the Parent Company and pending application in future years is as follows:

Thous ands of euro Deadline for Year generat ed application 2014 2013

Double t axat ion deduct ions 2012-2013 2019-2020 - 1,732 Limit ed deduct ions agains t t ax expens e 2010-2014 2020-2024 579 2,430 U nlimited deductions against tax expense 2007-2014 2017-2024 12,384 14,268 Tax los s carry forw ards 2012 2027 30,726 30,780 43,689 49,210

Unlimited deductions against tax expense are mainly those generated by reinvestment of the proceeds of security sales.

Deferred tax assets arising from tax loss carry forwards 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 2014, the directors of the Parent Company considered it reasonable to recognize deferred tax assets of EUR 30,726 thousand in respect of tax loss carry forwards and EUR 12,963 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.

24. Contingent exposures and commitments

Contingent exposures

At the close of 2014 and 2013, 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: Annual Report 2014 Annual Report 2014

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Thousands of euro 2014 2013

Financial guarant ees 47,760 50,776 Guarant ees and ot her s uret ies 372,650 402,979 I rrevocable document ary credit s 11,465 6,859 Ot her cont ingent expos ures ( Not es 10 and 17) 210,111 438,049 Total 641,986 898,663

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 and EUR 198,511 thousand at 31 December 2014 and 2013, respectively, 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 167,050 thousand and EUR 239,539 thousand at 31 December 2014 and 2013, respectively, for the guarantee provided by the 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. Annual Report 2014

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Contingent commitments

The breakdown of contingent commitments at 31 December 2014 and 2013 is as follows:

Thous ands of euro 2014 2013 Draw able by t hird part ies 807,801 793,382 Subs cribed but unpaid capit al 590 2,250 Ot her cont ingent commit ment s 171,436 153,161

979,827 948,793

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 2014 and 2013 is as follows:

Thous ands of euro 2014 2013

Government bodies 38,022 20,765 Ot her res ident s ect ors Credit cards 247,328 257,472 Demand account s 291,920 264,827 Ot her 229,924 249,984 Non-res ident 607 334 807,801 793,382 Tot al

25. Off-balance sheet customer funds

The breakdown of funds from customers managed by the Group off the balance sheet at the close of 2014 and 2013 is as follows:

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Thousands of euro

2014 2013 981,346 742,922 Companies and invest ment funds Pension funds and endow ment policies 553,039 502,446 Total 1,534,385 1,245,368

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 2014 and 2013, which are included in “Fees and commissions for marketing non-banking products” (Note 29), is as follows:

Thous ands of euro 2014 2013

I nvest ment companies and funds 6,558 4,809 Pension funds and endow ment policies 4,630 4,687

11,188 9,496

The Group also provides securities administration and custody services to its customers. Commitments assumed by the Group in relation to these services at 31 December 2014 and 2013 came to EUR 575,450 thousand and EUR 523,573 thousand, respectively.

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 Annual Report 2014

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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 2014 and 2013 is as follows:

Thousands of euro

2014 2013

- - Depos it s at cent ral banks Loans and advances t o credit inst itutions (Note 10) 13,350 23,855 Loans and advances t o cus t omers ( Not e 10) 181,615 187,431 Debt s ecurit ies ( Not es 9, 10 and 11) 51,061 77,012 Ot her int eres t 239 461

Total 246,265 288,759

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 2014 and 2013 is as follows: Thousands of euro 2014 2013 - - Depos it s at cent ral banks Loans and advances t o credit inst itutions (Note 17) 22,299 45,087 Cus t omer depos it s ( Not e 17) 64,833 103,125 Debt s ecurit ies ( Not e 17) 17,814 10,796 Ot her int eres t 58 -

Total 105,004 159,008

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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

2014 2013

- - I nves t ments in as s ociat es Other equity instruments 3,407 1,971 Total 3,407 1,971

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

2014 2013

Cont ingent expos ures 7,879 5,180 Cont ingent commit ment s 1,606 1,427 Currency exchange 347 331 Collect ion and payment s ervices 24,290 24,126 Securit ies s ervices 2,370 2,228 Sale of non-banking product s 22,135 17,788 Ot her fees and commis s ions 6,993 5,728 Total 65,620 56,808

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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

2014 2013 Fees and commissions assigned t o ot her ent it ies and 4,804 5,662 corres pondent s Fees and commissions paid on securities 297 213 t rans act ions Ot her fees and commis s ions 95 64 Total 5,196 5,939

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 2014 2013 2,533 4,519 Financial inst rument s held for t rading Ot her financial inst rument s through profit and loss - 17 Av ailable-for-s ale financial as s et s 6,119 11,124 Loans and advances 233 ( 1,775) Financial liabilities at amortized cost (Note 17) - 1,368 Account ing hedges not included in int erest (Not e 12) 5 ( 53) Ot her 20 657 Total 8,910 15,857

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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 cost of ordinary pension plan servicing and breaks down as follows:

Thousands of euro 2014 2013 W ages and s alaries 35,600 35,885 Social security contributions 8,864 8,986 Trans fers t o defined benefit s plans ( Not e 2.t ) 147 267 Ot her pers onnel expens es 395 674 Pers onnel expens es of subs idiaries 13,438 9,488 Total 58,444 55,300

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

2014 2013 Men Women Men Women Senior managers 219 53 217 47 Execut ives 119 127 124 117 Administrative staff 147 234 131 260 M es s engers 3 - 3 - Staff of subsidiaries 237 250 159 219 Total 725 664 634 643

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33. Other general administrative expenses

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

Thousands of euro 2014 2013 4,381 4,931 Propert y and equipment Comput er hardw are and s oft w are 10,244 10,773 Communicat ions 2,234 2,186 Advert ising and market ing 3,725 3,661 Legal 4,308 4,241 St aff t ravel and agency cos t s 1,203 1,237 Securit y guards and cas h trans port at ion 999 1,002 Subcont ract ed adminis t rat ive s ervices 853 721 Cont ribut ions and t axes 1,206 519 Ot her general expens es 1,173 1,296 Ot her expens es of s ubs idiaries 24,357 20,642 Total 54,683 51,209

Fees paid for the audit of the Cooperative Bank’s consolidated financial statements and the annual financial statements of its subsidiaries amounted to EUR 112 thousand and EUR 88 thousand in 2014 and 2013, respectively. The auditors also received additional fees for the provision of non-audit services of EUR 15 thousand and EUR 11 thousand in 2014 and 2013, respectively. The Group also paid fees of EUR 3 thousand for consultancy services provided by companies related to the Auditor in 2013.

34. Allocations to provisions

The detail of this line of consolidated income statement is as follows: Thousands of euro 2014 2013

Provisions for contingent liabilities and commitments (Note 18) ( 1,583) 3,453 Net allocat ion t o ot her provis ions ( Not e 18) 178 8,922 Total (1,405) 12,375 Annual Report 2014 Annual Report 2014

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35. Impairment losses on financial assets (net)

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

Thousands of euro 2014 2013 Net impairment charge - Loans and advances - Loans and advances t o cus t omers ( Not e 10) 64,539 45,889 Net impairment charge - Loans and advances - Debt s ecurit ies ( Not e 10) 44 ( 768) Tot al loans and advances 64,583 45,121

Net impairment charge - Available-for-s ale financial as s et s - Debt s ecurit ies (Note 9) 287 ( 58) Net impairment charge - Available-for-s ale financial as s et s - Equit y ins trument s ( Not e 9) 406 1,515 Net impairment charge - Held-to-maturity investments (Note 11) 154 23 Total other financial instruments not measured at fair value through profit or loss 847 1,480 Total 65,430 46,601

36. Impairment losses on other assets (net)

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

Thousands of euro 2014 2013 Net impairment charge - Propert y and equipment for ow n us e ( Not e 15) - 433 Net impairment charge - Goodw ill ( Not e 15) 468 - Net impairment charge - I nves t ment propert y ( Not e 15) - 327 Net impairment charge - I nvent ories and ot her ( 199) 3,378 Total 269 4,138

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: Annual Report 2014

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Thous ands of euro 2014 2013

Parent Company ( aft er cons olidat ion adjus t ment s ) 58,249 39,324 Subsidiaries (after consolidation adjustments) ( 5,599) ( 9,515) Associates 59 407

52,709 30,216

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 2014 and 2013 and in the consolidated income statements for 2014 and 2013 that arise from transactions with related parties are as follows:

Associates Governing Board Other related and senior parties (*) management 2014 2013 2014 2013 2014 2013 Assets

Loans and advances t o 54,096 55,654 528 669 650 2,445 cus t omers Liabilities

Cus t omer depos it s 13,262 11,340 902 908 2,041 2,688 Other

Cont ingent expos ures 1,395 2,553 - - - 2 Commitments 7,695 2,039 192 130 - 988 Income

Interest and similar income and fee/commis s ion income 1,552 1,933 19 21 16 94 Interest and similar expens e 99 139 10 14 26 32 I ncome from equit y 1,268 1,500 - - - - inves t ment s

(*)“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. Annual Report 2014 Annual Report 2014

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All transactions with related parties were performed at arm’s length.

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 2014 and 2013, 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 Annual Report 2014

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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:  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 2014 and 2013 was EUR 4,507,344 thousand and EUR 4,587,179 thousand, respectively, of which EUR 2,547,645 thousand and EUR 2,412,845 thousand, respectively, qualified as eligible (without taking account of the limits set by Article 12 of the Royal Decree).

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:

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Thousands of euro Nominal value 2014 2013

Total loans (a) 4.507.344 4.587.179 Mortgage securities in issue 111.696 120.994 Of w hich: Loans ret ained on t he balance sheet 73. 408 76. 758 Mortgage transfer certificates in issue 461.483 488.417 Of w hich: Loans ret ained on t he balance sheet 460. 685 487. 522 Mortgage loans pledged as security for funds received - - Loans covering issues of mortgage bonds and mortgage covered bonds 3.934.165 3.977.768 Non-eligible loans (b) 1. 386. 520 1. 564. 923 Loans satisfying eligibility requirements except the limit in Royal Decree 716/2009 Art . 5. 1 1. 386. 520 1. 564. 923 Ot her - - Eligible loans (c) 2. 547. 645 2. 412. 845 Non-qualifying portions (d) 113. 072 121. 923 Qualifying portions 2. 434. 573 2. 290. 922 Loans us ed t o back is s ues of mort gage bonds - - Loans eligible for cover pool of mort gage covered bonds 2. 434. 573 2. 290. 922

(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. Annual Report 2014

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Below we present a breakdown of the mortgage loans and advances by different criteria, at 31 December 2014 and 2013:

Thousands of euro 2014 2013 Loans covering Loans covering issues of issues of mortgage bonds mortgage bonds and mortgage and mortgage covered bonds Of which: Eligible covered bonds Of which: Eligible (a) loans (b) (a) loans (b)

TOTAL 3,934,165 2,547,645 3,977,768 2,412,845

1 ORIGIN OF LOAN 3,934,165 2,547,645 3,977,768 2,412,845 1.1 Originated by Bank 3,414,005 2,225,445 3,502,215 2,139,591 1.2 Transferred from other lenders 520,160 322,200 475,553 273,254 1.3 Other - - - -

2 CURRENCY OF DENOMINATION 3,934,165 2,547,645 3,977,768 2,412,845 2.1 Euro 3,934,165 2,547,645 3,977,768 2,412,845 2.2 Other currencies - - - -

3 PAYMENT POSITION 3,934,165 2,547,645 3,977,768 2,412,845 3.1 Standard 3,532,261 2,364,590 3,527,832 2,190,108 3.2 Other 401,904 183,055 449,936 222,737

4 AVERAGE RESIDUAL TERM 3,934,165 2,547,645 3,977,768 2,412,845 4.1 Up to 10 years 1,448,148 938,459 1,475,180 912,483 4.2 10 to 20 years 2,259,317 1,488,296 2,125,582 1,326,379 4.3 20 to 30 years 220,567 115,258 371,679 168,695 4.4 More than 30 years 6,133 5,632 5,327 5,288

5 INTEREST RATE 3,934,165 2,547,645 3,977,768 2,412,845 5.1 Fixed 30,211 20,271 42,399 21,193 5.2 Variable 3,903,954 2,527,374 3,935,369 2,391,652 5.3 Split fixed/variable - - - -

6 BORROWER 3,934,165 2,547,645 3,977,768 2,412,845 6.1 Legal entities and self-employed 1,064,019 599,466 1,195,173 633,704 Of which: Real estate developments 11,747 8,987 17,225 9,864 6.2 Other individuals and NPISHs 2,870,146 1,948,179 2,782,595 1,779,141

7 TYPE OF COLLATERAL 3,934,165 2,547,645 3,977,768 2,412,845 7.1 Assets/buildings 3,905,807 2,535,230 3,948,165 2,392,684 7.1.1 Residential 3,138,100 2,045,324 3,045,039 1,859,656 Of which: State -subsidized housing 557,549 382,254 454,608 304,994 7.1.2 Commercial - - - - 7.1.3 Other 767,707 489,906 903,126 533,028 7.2 Assets/buildings under construction 28,358 12,415 29,603 20,161 7.2.1 Residential 18,521 12,415 18,309 12,655 Of which: State -subsidized housing 17,666 12,310 17,386 11,949 7.2.2 Commercial - - - - 7.2.3 Other 9,837 - 11,294 7,506 7.3 Land - - - - 7.3.1 Development land - - - - 7.3.2 Other - - - - Annual Report 2014 Annual Report 2014

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(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.

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 2014 and 2013 was EUR 3,934,165 thousand and EUR 3,977,768 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 2014 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 2014 and 2013 was EUR 573,179 thousand and EUR 609,411 thousand, respectively.

The nominal value of all non-eligible mortgage loans and advances was EUR 1,386,520 thousand and EUR 1,564,923 thousand at 31 December 2014 and 2013, 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-2014 or end-2013.

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 2014 and 2013 is as follows:

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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 ot her assets 194,278 201,725 93,903 - 489,906

At 31 December 2013

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) 562,439 805,633 1,039,670 5,103 2,412,845 - On homes 357,237 588,190 921,781 5,103 1,872,311 - On ot her assets 205,202 217,443 117,889 - 540,534

(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. Annual Report 2014 Annual Report 2014

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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 2014 and 2013, is as follows: Thousands of euro Eligible Non-eligible loans (a) loans (b)

1 Opening balance 2013 2,375,384 1,586,622 2 Eliminations from pool 494,747 301,901 2.1 Terminated at maturity 477,734 279,854 2.2 Repaid before mat urit y 17,013 22,047 2. 3 Trans ferred t o ot her ent it ies - - 2. 4 Ot her - - 3 Additions to pool 532,208 280,202 3. 1 Originat ed by Bank 483,063 255,392 3. 2 Trans ferred from ot her ent it ies 49,145 24,810 3. 3 Ot her - -

4 Closing balance 2013 2,412,845 1,564,923

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 mat urit y 23,519 30,238 2. 3 Trans ferred t o ot her ent it ies - - 2. 4 Ot her - - 3 Additions to pool 920,935 444,232 3. 1 Originat ed by Bank 804,327 377,631 3. 2 Trans ferred from ot her ent it ies 116,608 66,601 3. 3 Ot her - -

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

(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. Annual Report 2014

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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 2014 and 2013 are as follows:

Thousands of euro 2014 2013 Amounts Amounts available. available. Nominal value Nominal value (a) (a) Mortgage loans covering issues of mortgage bonds and mortgage covered bonds 224,497 241,264 - Potentially eligible (b) 126,482 166,010 - Non-eligible 98,015 75,254

(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 2014 and 2013, the Parent Company did not consider it necessary to identify replacement assets for outstanding mortgage covered bonds as these represented only 56.92% and 45.59% of total eligible assets, respectively, compared to the maximum 80% allowed by Act 2/1981, of 25 March, on regulation of the mortgage market.

b) Funding

Details of issues of collateralized securities backed by the Group's portfolio of mortgage loans and advances at 31 December 2014 and 2013 are given below: Annual Report 2014 Annual Report 2014

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Thousands of euro 2014 2013 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 1,450,000 1,100,000 Of w hich: off-balance sheet liabilities 900,000 600,000 2. 1 Debt securities. Issued via public offering - - 2. 1. 1 Res idual t erm up t o 1 year - - 2. 1. 2 Res idual t erm 1 t o 2 years - - 2. 1. 3 Res idual t erm 2 t o 3 years - - 2. 1. 4 Res idual t erm 3 t o 5 years - - 2. 1. 5 Res idual t erm 5 t o 10 years - - 2. 1. 6 Res idual t erm more t han 10 years - - 2. 2 Debt s ecurit ies . Ot her issues 1,450,000 1,100,000 2. 2. 1 Res idual t erm up t o 1 year - - 2. 2. 2 Res idual t erm 1 t o 2 years - - 2. 2. 3 Res idual t erm 2 t o 3 years - - 2. 2. 4 Res idual t erm 3 t o 5 years 500,000 500,000 2. 2. 5 Res idual t erm 5 t o 10 years 900,000 600,000 2. 2. 6 Res idual t erm more t han 10 years 50,000 - 2. 3 Depos it s - - 2. 3. 1 Res idual t erm up t o 1 year - - 2. 3. 2 Res idual t erm 1 t o 2 years - - 2. 3. 3 Res idual t erm 2 t o 3 years - - 2. 3. 4 Res idual t erm 3 t o 5 years - - 2. 3. 5 Res idual t erm 5 t o 10 years - - 2. 3. 6 Res idual t erm more t han 10 years - - 3 Mortgage securities in issue (b) 73,408 206 76,758 218 3. 1 Issued via public offering - - - - 3. 2 Ot her is s ues 73,408 206 76,758 218 4 Mortgage transfer certificates in issue (b) 460,685 207 487,522 219 4. 1 Issued via public offering - - - - 4. 2 Ot her is s ues 460,685 207 487,522 219

(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). Annual Report 2014

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40. Agency agreements

The Bank had no “agency agreements” within the meaning of Article 22 of Royal Decree 1245/1995, of 14 July, either at the 2014 and 2013 balance sheet close or at any time in the course of those years.

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.

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 2014, as required under Ministry for the Economy Order ECO/734/2004, of 11 March.

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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.

44. Disclosures of delayed payments to suppliers

In accordance with the disclosures required under Act 15/2010, of 5 July, amending Act 3/3004, of 29 December, which set out measures to combat bad debt in commercial transactions, and the Second Transitional Provision of the Spanish Accounting and Audit Institute (ICAC) Resolution of 29 December 2010, the breakdown of payments for commercial transactions by the Parent Company in 2014 and 2013 outstanding at the year-end beyond the legal payment period laid down by Act 15/2010 was as follows:

2014 2013 Thousands of Thousands of % % euro euro

Payments within legal payment period 110,425 99.30% 64,263 99.37% Other 776 0.70% 409 0.63% Total payments in the year 111,201 100.00% 64,672 100.00% Average days overdue of late payments 31 30

Amounts outstanding at year end beyond the legal payment period 42 21

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ANNEX I Caja Rural de Navarra, Sociedad Cooperativa de Crédito Statement of financial position at 31 December 2014 Thousands of euro ASSETS 2014 2013 (*)

Cash and balances with central banks 36,224 35,502 Fin an cial in s tru ments held for trading 29,095 26,066 Loans and advances to credit institutions - - Loans and advances to customers - - Debt securities - - Equity instruments 367 1,944 Trading derivatives 28,728 24,122 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-s ale financial assets 2,005,998 1,771,503 Debt securities 1,901,045 1,660,391 Equity instruments 104,953 111,112 Memorandum items: Loaned or advanced as collateral 121,926 174,827 Loans and advances 7,000,438 7,347,733 Loans and advances to credit institutions 883,170 737,567 Loans and advances to customers 6,106,256 6,138,962 Debt securities 11,012 471,204 Memorandum items: Loaned or advanced as collateral 570,768 612,094 Held-to-m atu rity in ve st me nt s 44,940 52,324 Memorandum items: Loaned or advanced as collateral - - Adjustments to financial assets due to macro-hedging - - Hedging derivatives 16 117 Non -current assets held for sale 42,246 20,078 Equity investments 165,009 156,567 Associates 34,773 47,130 Jointly-controlled entities - - Group companies 130,236 109,437 Pension-linked insurance contracts - - Property and equipment 104,477 103,997 Property and equipment 102,124 101,629 For own use 101,952 101,455 Leased out under operating lease - - Assigned to social projects 172 174 Investment property 2,353 2,368 Memorandum items: Acquired under finance leases - - Intangible assets - - Goodwill - - Other intangible assets - - Tax assets 56,755 55,442 Current 5,172 998 Deferred 51,583 54,444 Other assets 31,680 28,774

9,516,878 9,598,103 TOTAL ASSETS

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Caja Rural de Navarra, Sociedad Cooperativa de Crédito Statement of financial position at 31 December 2014

Thousands of euro L I A B I L I T I E S 2014 2013 (*)

Fin an cial in s tru ments held for trading 3,178 3,894 Deposits fr om central banks - - Deposits from credit institutions - - Customer deposits - - Debt securities - - Trading derivatives 3,178 3,894 Short securities positions - - Other financial liabilities - - Oth er fin ancial liabilities at fair value through profit or los s - - Deposits fr om central banks - - Deposits from credit institutions - - Customer deposits - - Debt securities - - Subordinated liabilities - - Other financial liabilities - - Fin an cial liabilities at amortized cost 8,504,375 8,712,822 Deposits fr om central banks - - Deposits from credit institutions 1,678,146 2,314,980 Customer deposits 6,137,638 5,822,316 Debt securities 645,298 535,183 Subordinated liabilities - - Other financial liabilities 43,293 40,343 Adj u s tm en ts to fin ancial liabilities due to m acro -hedging - - Hedging derivatives 170 3,742 L iabilities as s ociated with non -current assets held for sale - - Provis ion s 9,639 10,489 Provisions for pensions and similar obligations 807 - Provisions for taxes and other legal contingencies - - Provisions for contingent exposures and commitments 8,832 10,489 Other provisions - - T ax liabilities 33,995 19,688 Current 1,669 664 Deferred 32,326 19,024 Social Welfare Fund 8,346 6,304 Oth er liabilities 92,288 70,216 Shares redeemable on demand - -

8,651,991 8,827,155 TOTAL LIABILITIES

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Caja Rural de Navarra, Sociedad Cooperativa de Crédito

Statement of financial position at 31 December 2014

Thousands of euro 2014 2013 (*)

EQUITY

Shareholders’ equity 792,377 736,099 Share capital 151,602 142,696 Issued capital 151,602 142,696 Less: Uncalled capital - - Share premium - - Reserves 592,830 566,993 Other equity instruments - - Hybrid financial instruments - - Other equity instruments - - Less: Treasury shares - - Profit for the year 50,715 28,961 Less: Dividends and remuneration (2,770) (2,551) Valuation adjustments 72,510 34,849 Available -for-sale financial assets 72,510 34,849 C a s h flo w he d ge s - - Hedges of net investments in foreign operations - - Translation differences - - Non-current assets held for sale - - Other valuation adjustments - -

TOTAL EQUITY 864,887 770,948

9,516,878 9,598,103 TOTAL EQUITY AND LIABILITIES

MEMORANDUM ITEMS Contingent exposures 644,329 901,052 Contingent commitments 982,390 951,425

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Caja Rural de Navarra, Sociedad Cooperativa de Crédito

Income statement for the year ended 31 December 2014

Thousands of euro 2014 2013 (*)

Interest and similar income 247,275 289,286 Interest and similar expense (103,409) (157,832) Remuneration paid to holders of shares redeemable on demand - -

NET INTEREST INCOME 143,866 131,454 Incom e from equity instruments 4,675 3,471 Fee and commission income 67,185 58,324 Fee and commission expense (5,196) (5,939) Gains (losses) on financial assets and liabilities (net) 8,910 15,857 Financial instruments held for trading 2,533 4,519 Other financial instruments at fair value through profit or loss - 17 Financial instruments not measured at fair value through profit or loss 6,372 11,374 Other 5 (53) Translation differences (net) 728 611 Other operating i ncome 3,377 2,980 Other operating expenses (12,202) (22,816)

GROSS INCOME 211,343 183,942 Administrative expenses (75,332) (76,379) Personnel expenses (45,006) (45,812) Other general administrative expenses (30,326) (30,567) Depreciation and amortization (6,826) (7,524) Provisions (net) 1,405 (12,375) Impairment losses on financial assets (net) (64,762) (46,460) Loans and advances (63,915) (44,980) Other financial instruments not measured at fair value through profit or loss (847) (1,480)

INCOME FROM OPERATING ACTIVITIES 65,828 41,204 Impairment losses on other assets (net) (6,424) (12,020) Goodwill and other intangible assets - - Other assets (6,424) (12,020) Gains (losses) on the derecognition of assets not classified as non-current assets held for sale (25) (216) Negative difference in business combinations - - Gains (losses) on non-current assets held for sale not classified as discontinued operations 206 439

PROFIT BEFORE TAX 59,585 29,407 Income tax (3,543) 3,334 Mandatory allocation to welfare projects and funds (5,327) (3,780)

PROFIT (LOSS) FOR THE YEAR FROM CONTINUING OPERATIONS 50,715 28,961 Profit (loss) from discontinued op erations(net) - -

PROFIT FOR THE YEAR 50,715 28,961

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ANNEX II – ANNUAL BANKING REPORT

Information at 31 December 2014 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 Annual Report 2014 Annual Report 2014

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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 252,618 thousand. For the purposes of this report, turnover is taken to be the gross income reported in the 2014 consolidated income statement. c) Number of employees on a full time equivalent basis: 899 in the Caja Rural de Navarra parent company and 485 in its non-financial subsidiaries. FTE employee data was based on the headcount at each entity at end-2014. d) Profit or loss before tax: EUR 62,293 thousand. Return on consolidated assets was 0.55% at 31 December 2014. e) Tax on profit or loss: EUR 4,257 thousand. f) Public subsidies received: The amount of public subsidies received by the Group in 2014 was immaterial. Annual Report 2014

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CONSOLIDATED MANAGEMENT REPORT Annual Report 2014 Annual Report 2014

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INTRODUCTION

The economic picture that we had to deal with in 2014 varied widely from region to region. Among the developed countries, the USA and UK were growing at a satisfactory pace and showing signs of finally shaking off the financial crisis. In contrast, Japan and the euro zone repeatedly disappointed, publishing very low growth figures and near- zero inflation rates. Emerging market countries also significantly slowed their growth rates, especially Latin America. The economic forecasts for international institutions were scaled down in the later months of the year. By October the IMF was expecting global growth of just 3.3% for 2014, compared to the 3.7% it had been forecasting in January.

Also, it is still unclear what impact the transatlantic decoupling will have, as the Fed has now started winding down QE while the ECB has extended its range of actions to encourage more normal circulation of investment and financing flows through the economy after years of blockage. The different reactions reflect the recognition by monetary authorities either side of the ocean that economic growth is not well- embedded and they face a risk of chronic stagnation with very low inflation for a long time to come. Other countries and economic zones Annual Report 2014

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have equally reached for expansionary monetary policy to try and reverse a relative slowdown in their economies (as in China) or defeat deflation and stagnation (Japan).

The European Central Bank has been the undisputed leader in the euro zone with its expansive monetary policy measures. Twice it has symbolically shaved its already rock-bottom policy rates: in June it said it was cutting refi rates by 0.10 points to 0.15% with banks having to pay negative rates (-0.10%) to deposit money at the ECB; then, on 4 September it announced another cut in the policy rate to 0.05% and a deeper negative rate for depositing banks of -0.20%. Standing out among the successive batteries of non-conventional monetary policy measures announced in 2014 were the June announcement of the targeted longer-term refinancing operations (TLTRO) with a nominal value of EUR 400,000 million and the September buyback of EUR 300,000 million of securitisation and covered bonds to boost liquidity and address the shortage of credit by easing the banks' capital consumption. In the year's final quarter the ECB also announced a purchase programme for bank securitization issues whose underlyings were corporate loans and hinted it might look at buying euro area government debt in 2015. The pressure on the European monetary authorities to take far more aggressive steps built up as the year went on and year-on-year inflation figures edged ever nearer zero stoking fears continental Europe might be in for a long spell of stagnation and deflation.

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demand, the confidence of foreign investors, the debt-reduction in the private sector and the clean bill of health given Spanish banks in the ECB's solvency tests are all indicative of a changing scenario for the Spanish economy. That said, many imbalances remain, notably the appalling unemployment rate, a stubborn deficit and rising levels of public sector debt as well as fresh warning signs such as the balance of payments tipping back into the red and the deflation seen in 2014.

2014 FINANCIAL YEAR

Caja Rural de Navarra's financial highlights for 2014 were as follows:

 Income statement

( Thousands of euro) 2014 2013 Chg. % 2014/2013 Net int eres t income 141,261 129,751 + 8. 87% Gros s income 252,618 212,292 + 19. 00% Income from operating activities 64,400 36,474 + 76. 56% Profit for t he year 52,709 30,216 + 74. 44%

2013 figures have been restated for the change in accounting policy affecting the Group's contributions and commitments to the DGF. Stripping this out, Group profit would have grown 39.36% on its 2013 level.

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 Business volumes

Customer deposits: On-balance sheet private sector customer funds under management rose by an annual 5.37% to EUR 6,133,759 thousand at year-end. This differentiates the Group from the wider sector performance where, given the low interest rates on offer, balance sheet resources were down on the prior year as savers sought other homes for their money offering higher risk and better expected returns. For Caja Rural de Navarra, maintaining positive growth in this market meant a further improvement in its loan/deposit ratio to 99.97% (compared to 105.88% in 2013) underlining the balance and stability of the Group's recurrent business.

Other savings products: In addition to the growth of its statement of financial position, Caja Rural Group, following the market trend noted above, saw a 23.21% rise in off-balance sheet resources under management.

 Loans And Advances

Total loans and advances to customers were EUR 6,131,845 thousand, almost unchanged on the prior year (-0.53%). We can view this as positive given the general 6.3% decline seen across the sector. The reason for this is that during the crisis years Caja Rural de Navarra made no change to its lending policy and continued to support companies, the self-employed and individuals with their financial needs, which made it possible to outperform the sector in this respect.

 Non-performing loans

The NPL ratio at the end of 2014 was 4.40%, less than the 5.20% of 2014 and well below the 12.6% average for the Spanish financial sector at the same date Annual Report 2014 Annual Report 2014

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 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.

Caja Rural de Navarra's ratings are: Baa3 by Moody’s and BBB+ by Fitch. These were either affirmed or upgraded in 2014.

 Solvency

Caja Rural de Navarra's solvency measured by its Common Equity Tier 1 (CET1) ratio was 15.57%, among the best in the Spanish financial sector.

 Other figures Caja Rural de Navarra has 244 branches spread over the following provinces: Navarra 141, Guipúzcoa 37, Vizcaya 26, Álava 16 and La Rioja 24. The number of branches has remained stable throughout the crisis, reflecting the solidity of their business. This has also helped maintain jobs. At the end of the year the Cooperative Bank had 902 people on its payroll. The Group is currently considering opening one or more new branches in 2015. The Cooperative Bank's insurance business did well in 2014, improving its turnover by 18% compared to 2013.

PRODUCTS AND SERVICES

The most important new products and services offered to customers in 2014 were as follows.

In Deposits, despite the tough market, four new structured deposit products were launched filling out the range on offer to customers. It also updated the range of promotions to support the deposit range by Annual Report 2014

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giving customers cash payments, competing with new developments introduced by other players in the market.

In the young customer segment, which means anyone under 30, Caja Rural de Navarra continues to distribute 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..

To meet the needs of the self-employed and professional segment, the Cooperative Bank continues to build up its Promueve Program, a set of products and services with special features. This includes a demand account with differentiating benefits that can be linked to a loan, the Promueve card with its loyalty scheme, discounted insurance and a via-T card. There is also a free online help service.

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.

In Multi-channel options, 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, keep them informed about different activities, and publishing general and informative articles which may interest them.

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 can now choose from four new guaranteed investment funds. We are also offering customers with at Annual Report 2014 Annual Report 2014

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least EUR 20,000 to invest the option of managing their savings through fund portfolios and agreements. This helped us outperform the market in investment fund growth during 2014.

In Long-Term Savings Products, the Group followed a similar strategy to that used for Investment Funds in the final two months of the year. We marketed a new guaranteed pension plan called RGA Protegido 2024 to customers with a more conservative risk profile.

In Cards, trials have begun on mobile-only payments for day-to-day shopping, bypassing the need for traditional cards. The product is called wallet. This is a pioneering technology for card payments and leaves Caja Rural strongly placed in this developing area.

Also, four new affinity and private card schemes were launched in partnership with retailers' organisations.

The Cooperative Bank also embarked on a project to renew all its installed ATMs which will continue throughout 2015.

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 specialisation and service quality across its whole organization: from the branch network to central services departments.

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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 2013 is presented below.

We ended 2014 on a similar trend to recent years, when a number of fundamental factors dominated the sector: first, a clear squeeze on financial markets and lack of business and, second, special sensitivity and irritation from wider society and our customers which helps explain the rise in complaints to our Customer Service Department.

We must view this indicator as an accurate reflection of the ongoing difficulties that afflict the sector. We therefore suggest that as well being good professionals we must be aware that good service means making oneself useful to someone, which in implies giving our customers what they want. This means listening, being patient, getting the details right, making good on commitments and, insofar as possible, giving them satisfaction while always keeping in mind that customer satisfaction scores are a reflection of the expectations they have of our business and the perceptions they receive through our service. Logically, their opinions, attitudes and loyalty to the Cooperative Bank will be directly related with their level of satisfaction.

In 2014, a total of 1,118 customers contacted the Department to file complaints or claims or make suggestions, a 22.52% fall on the 1,443 heard from in 2013.

Besides customer sensitivities in the current climate, the main source of complaints was the "floor clause" in mortgages and, to a lesser extent, fees levied and service charges in general.

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prevent damaging the image and service quality of the Cooperative Bank in the eyes of the regulator.

Of the 1,118 customers who contacted the Department:

- 774 did so by mail - 216 by telephone - 128 by e-mail

By type of contact, the total breaks down as follows:

- 1,084 Complaints - 10 Claims - 23 Suggestions - 1 Congratulation

Of the 10 claims received, five were settled in favour of the customer. The other five were dismissed. The cost to Caja Rural de Navarra of settling these five claims was EUR 2,321.91.

By region, the breakdown is as follows:

- Pamplona area (including Head Office): 46 - Estella area: 40 - Tudela area: 104 - Tafalla area: 31 - Pamplona-Urbanas area: 261 - La Rioja area: Basque Country: 100 - Basque Country: 532 - Central Services: 4

The most common causes of query or complaint were:

- Loans and advances and interest rate cover: 693 - Interest, commissions, service fees, charges: 188 - Poor customer support, bad service, excessive waiting time, etc: 145 - Advertising, campaigns, promotions, gifts: 29 Annual Report 2014

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- Problems with cards: 27 - Technical issues (problems with ATMs, account updaters): 15 - Insurance: 9 - Human resources: 4 - Other: 8

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 received, 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.

RESEARCH AND DEVELOPMENT ACTIVITIES

The Group engaged in no research and development activities in 2014.

OUTLOOK FOR 2015

Financial year 2015 is covered by the 2012-2015 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 benchmark for annual planning over the period.

Thus, in 2015, 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 for the volumes the Cooperative Bank has under management. Annual Report 2014 Annual Report 2014

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

ISSUER INFORMATION DATE OF YEAR END: 31/12/2014 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:

Name or company name of TAX ID NUMBER % of share capital shareholder

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:

Name or company name of TAX ID NUMBER Type of relationship Brief description related persons

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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:

Name or company name of TAX ID NUMBER Type of relationship Brief description related persons

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.

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. Annual Report 2014 Annual Report 2014

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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 from each member official authorisation 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.

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. Annual Report 2014

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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). B.2.- Explain the rules for adopting corporate resolutions. Describe how they differ from the system of minimum quorums established in Spanish Capital Companies Law, 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, organization or operational changes at the Cooperative Credit Institution where such changes are of an essential nature. Amendments are considered to be substantial 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).

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. - Appointment of two member-controllers to draw up and validate the list of attendees. Annual Report 2014 Annual Report 2014

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2.- Appointment of two member-controllers to approve the minutes for the General Meeting. - Report on the convocation and staging of the Preparatory Meetings. - 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 for the 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 2013 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 2014. 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: w ww.cajaruraldenavarra.com Annual Report 2014

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The corporate governance content on the website is accessed via the following links: - Institutional information - Investor information - Material events

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.

C.- MANAGEMENT STRUCTURE OF THE COMPANY

C.1.- Board of Directors

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

Minimum number of directors/board members 5

Maximum number of directors/board members 15

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

Name or company name of director/board member Representative Date last appointed

I GNACI O TERES LOS ARCOS 10/05/2013

J OSE M AR I A AR I Z AL ETA NI EVA 10/05/2013

I SI DRO BAZTERRI CA M U TUBERRIA 10/05/2013

JOSE JAVIER LOPEZ M ORRAS 26/10/2012

PEDRO M ARI A BEORLEGU I EGEA 10/05/2013

JOSE ANGEL EZCU RRA IBARROLA 06/05/2011

M EL C H OR M I R ANDA AZ C ONA 06/05/2011

LU I S MIGUEL SERRANO CORNAGO 10/05/2013

J OSE L U I S B AR R I ENDO ANTOÑANZ AS 06/05/2011

JOSÉ LU I S SARABI A M ORENO 06/05/2011

R OB ER TO Z AB AL ETA C I R I Z A 10/05/2013

FRANCI SCO JAVIER ARTAJO CARLOS 06/05/2011

J ESÚ S ANDR ÉS M AU L EÓN AR ANA 06/05/2011

PEDRO BU L DAI N Z OZ AY A 06/05/2011

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:

Tax ID number Director's tax Name or company name of Company name of of the Group CargoPosition ID number director/board member group company company

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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:

Número de consejerasNumber of female directors

2014 2013 2012 2011

Number % Number % Number % Number %

Board of Directors 0 0 0 0

Executive Committee 0 0 0 0

Audit Committee 0 0 0 0

[Other] Committee 0 0 0 0

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

Miles de eurosThousands of euro

Concepto retribuídoItem Individual Group remunerated

Retribución fijaFixed 11 0 compensation

Variable compensation 0 0

Per diems 46 0

Other compensation 0 0

TOTAL 57 0

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: Annual Report 2014 Annual Report 2014

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Name or company name Position

I GNAC I O AR R I ETA DEL VAL L E M ANAGI NG DI R EC TOR

AL B ER TO U GAR TE AL B ER DI DI RECTOR, RI SK DEPARTM ENT

FEL I X SOL A AR R ESE DI RECTOR, GENERAL SECRETARIAT

I SAAC L AZ AR O SOR I ANO DI RECTOR, I NTERNAL AU DI T

ANGEL LECU M BERRI SEVI GNE COM M ERCIAL DI RECTOR

J U AN M AR I A AY EC H U R EDI N DI RECTOR, BU SI NESS BANKI NG

M I GU EL GAR C I A DE EU L ATE M AR TI N -M ORO DI RECTOR, TREASU RY OPERATIONS

FRANCI SCO JOSE RODRI GU EZ LASPI U R DI RECTOR, M ANAGEM ENT CONTROL

Total compensation received by senior management 1. 044 (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

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Identify, if appropriate, the person(s) certifying the individual and consolidated accounts for their presentation by the Board:

Tax ID number Name Position

C.1.9.- Explain the mechanisms, if any, established by the board of directors to prevent the individual 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. Annual Report 2014 Annual Report 2014

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C.2.- Board committees: C.2.1.- List the management bodies:

Number of Name Duties members

EXECU TI VE OR M ANAGEM ENT COM M ITTEE 5 See point C.2.3

AU DI T COM M ITTEE 6 See point C.2.3

C.2.2.- Give details of all committees of the board of directors and their members: EXECUTIVE OR MANAGEMENT COMMITTEE

Name Position

JOSE LUI S BARRI ENDO ANTOÑANZAS CHAI RM AN

I GNACI O TERES LOS ARCOS SECRETARY

LUI S M IGUEL SERRANO CORNAGO M EM BER

JOSE M ARI A ARI ZALETA NI EVA M EM BER

JOSE ANGEL EZCURRA I BARROLA M EM BER

AUDIT COMMITTEE

Name Position

JOSE ANGEL EZCURRA I BARROLA CHAI RM AN

LUI S M IGUEL SERRANO CORNAGO M EM BER

JOSE M ARI A ARI ZALETA NI EVA M EM BER

I GNACI O TERES LOS ARCOS M EM BER

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APPOINTMENTS COMMITTEE

Name Position

JOSE LUI S BARRI ENDO ANTOÑANZAS M EM BER

I GNACI O TERES LOS ARCOS M EM BER

LUI S M IGUEL SERRANO CORNAGO SECRETARY

JOSE M ARI A ARI ZALETA NI EVA CHAI RM AN

REMUNERATION COMMITTEE

Name Position

JOSE LUI S BARRI ENDO ANTOÑANZAS M EM BER

I GNACI O TERES LOS ARCOS M EM BER

LUI S M IGUEL SERRANO CORNAGO CHAI RM AN

JOSE M ARI A ARI ZALETA NI EVA SECRETARY

C.2.3.- Describe the rules of organization and operation and the responsibilities attributed to each of the board committees. Where applicable, describe the powers conferred upon the chief executive officer. EXECUTIVE COMMITTEE 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 can only include temporarily or permanently a part of the Board’s attributes and powers. Annual Report 2014 Annual Report 2014

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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. AUDIT COMMITTEE The Audit Committee meets regularly for both ordinary and extraordinary meetings. Ordinary meetings are held every quarter, while extraordinary meetings take place at the request of any member of the Committee whenever due 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.

APPOINTMENTS AND REMUNERATION COMMITTEE - COMBINED AUDIT COMMITTEE On 31 October 2014 the Governing Board of Caja Rural de Navarra set up these institutions, which are governed by Act 10/2014.

C.2.4.- State the number of audit committee meetings held in the year:

Number of meetings 4

C.2.5.- If there is an appointments committee, indicate whether all of its members are non-executive directors:

YES X

NO Annual Report 2014

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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 articles of association 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 Annual Report 2014 Annual Report 2014

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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 in a conflict-of-interest situation and shall not be permitted to take part in the vote. 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.

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 Annual Report 2014

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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 Cooperative 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. 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 and the exchange rates of the currencies in which the Group's balance sheet assets Annual Report 2014 Annual Report 2014

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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 approved and formalized, it is monitored: in the case of high-risk customers (either individually or as part of an economic group), the Annual Report 2014

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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. Bank of Spain Circular 3/2008 on solvency requirements lays 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. Annual Report 2014 Annual Report 2014

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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.

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 Audit 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: Annual Report 2014

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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 Audit Committee.

o The Governing Board, if considered necessary 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 Audit Committee, which is drawn from the Governing Board, includes the following duties:

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. Annual Report 2014 Annual Report 2014

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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.

‘Whi stle-blowing’ channel, for the reporting to the Audit Committee of any irregularities of a financial or accounting nature, as well as breaches of the 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 Audit 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. Annual Report 2014

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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. 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. Annual Report 2014 Annual Report 2014

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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 Annual Report 2014

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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.  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.- Contr ol 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 Annual Report 2014 Annual Report 2014

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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:

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 Annual Report 2014

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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.

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. Annual Report 2014 Annual Report 2014

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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.  For valuations carried out by external appraisers: reviews of the correctness of the information provided, regular review of the appraiser's capacity and qualifications. Annual Report 2014

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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. Annual Report 2014 Annual Report 2014

Legal Documentation

The process of consolidation and preparation of financial information is carried out centrally. 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. Annual Report 2014

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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 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 Audit 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 Audit 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 Audit Committee. The Audit 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.

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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 Audit 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 Audit Committee include the following functions:

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. Annual Report 2014

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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.

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. Annual Report 2014 Annual Report 2014

Legal Documentation

Information on the Audit Committee in C.2.2. is given as of the date of this Corporate Governance Report. At 31 December 2014, the compositions was as follows: - José Angel Ezcurra Ibarrola - Chairman - Isaac Lázaro Soriano - Secretary board member - Francisco José Rodríguez Laspiur - Member - Luis Miguel Serrano Cornago - Member - José María Arizaleta Nieva - Member - Ignacio Terés Los Arcos - Member

Caja Rural de Navarra is signatory to: - A Corporate Governance Code compliant with the recommendations of the “Olivencia Committee” (January 2012 – latest update)

- A Best Practice Code for the viable restructuring of mortgage debt. (March 2013) Until 30 January 2015 the Audit Committee also included Isaac Lázaro Soriano and Francisco José Rodríguez Laspiur as members. After 31 October 2014 the Cooperative Bank's Governing Board decided that the Audit Committee of Caja Rural de Navarra should be constituted as a Combined Audit Committee, taking over the functions of the Risk Committee.

This Annual Corporate Governance Report was approved by the Company’s Board at the meeting held on 20 February 2015.

List the directors that voted against or abstained from approving this report. All Directors voted to approve this Report. Annual Report 2014

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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. Annual Report 2014 Annual Report 2014 Annual Report 2014

Other Information Other information Annual Report 2014

INFORMATION ON ACTIVITIES

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 2014, in accordance with criteria approved at the General Meeting, a total of EUR 3,335.05 thousand was appropriated from the net surplus for 2013 and used to cover the cost of maintaining the Social Welfare Fund. This amount was applied as follows:

1. - Cons ult ancy, t raining and promot ion of t he cooperat ive model 1,495. 08 44. 83% 2. - Teaching w ork and res earch 970. 59 29. 10% 3. - Sport s aid 132. 51 3. 97% 4. -W elfare project s 115. 96 3. 48% 5. -Cultural, recreational and other activities 105. 03 3. 15% 6. - Economic and s ocial development 515. 88 15. 47% TOTAL 3,335. 05 100% (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.

Annual Report 2014

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 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. Annual Report 2014 Annual Report 2014

Other Information

Employees, Branch and Regional Offices At the end of 2013 Caja Rural de Navarra had 906 employees and 243 branches,At the end 103of 2014 of them Caja located Rural de outside Navarra Navarre had 906 (37 employees in Guipuzcoa, and 26243 in bran - Vizcaya,ches, 103 24of inthem La Rioja located and outside 16 in Alava). Navarra (37 in Guipuzcoa, 26 in Vizcaya, 24 in La Rioja and 16 in Alava).

Offices in Pamplona and surrounding area

DENOMINACION DOMICILIO POBLACION TELEFONO FAX ANSOAIN LAP UR BIDE 2 ANSOAIN 948 143367 948 143367 BAR AÑAIN P LZA. DE LOS CAST AÑOS, 4 BAR AÑAIN 948 180368 948 185819 BAR AÑAIN AVDA DE P AM P LONA, 4-6 BAR AÑAIN 948 272705 948 272705 BAR AÑAIN AVDA. CENT R AL, 12 BAR AÑAIN 948 198457 948 198458 BERIÁIN P LAZA SIER R A DE IZAGA, 3 BERIÁIN 948 368443 948 368480 BERRIOZAR AVDA. GUIP ÚZCOA, 30 BERRIOZAR 948 300361 948 300361 BUR LADA CALLE M AY OR , 42 BUR LADA 948 142662 948 142662 BUR LADA JOSÉ M INA, 12 BUR LADA 948 292273 948 292274 HUAR T E P LAZA DE SAN JUAN 14 HUAR T E - P AM P LONA 948 332390 948 332390 M UT ILVA BAJA AVDA. P AM P LONA, 9 M UT ILVA BAJA 948 857028 948 292551 NOAIN CALLE REAL 41 NOAIN 948 312717 948 312717 ORCOYEN P LAZA IT UR GÁIN, 5 BIS ORCOYEN 948 343634 948 343635 P AM P LONA-OFICINA P R INCIP AL P LAZA DE LOS FUEROS, 1 P AM P LONA 948 168100 948 244557 P AM P LONA AR T ICA, 11 P AM P LONA 948 127223 948 144287 P AM P LONA AVENIDA DE BAR AÑAIN 17 P AM P LONA 948 177856 948 177238 P AM P LONA AVDA. CAR LOS III, 12 P AM P LONA 948 203778 948 203779 P AM P LONA AVDA. M AR CELO CELAY ET A, 49 P AM P LONA 948 383992 948 383993 P AM P LONA AVDA. NAVAR R A, 2 P AM P LONA 948 174864 948 170953 P AM P LONA CONCEJO DE EGÜES,10 P AM P LONA 948 162639 948 162639 P AM P LONA DOCTOR FLEMING, 13 P AM P LONA 948 136492 948 136493 P AM P LONA GAY AR R E, 30 P AM P LONA 948 153734 948 153734 P AM P LONA CALLE IR UNLAR R EA 17 P AM P LONA 948 173071 948 173071 P AM P LONA IT UR R AM A, 12 - 14 P AM P LONA 948 264612 948 277189 P AM P LONA LUIS MORONDO, 2 P AM P LONA 948 292441 948 292666 P AM P LONA M AR T ÍN AZP ILICUET A, 2-4 P AM P LONA 948 198953 948 198954 P AM P LONA M AY OR , 6 P AM P LONA 948 211120 948 211120 P AM P LONA MERCADERES, 6 P AM P LONA 948 204080 948 204081 P AM P LONA M IR AVALLES, 17-19 P AM P LONA 948 144753 948 124238 P AM P LONA MONASTERIO DE URDAX, 34 P AM P LONA 948 173462 948 173462 P AM P LONA OLITE, 37 P AM P LONA 948 236683 948 236683 P AM P LONA P ADR E BAR ACE, 1 P AM P LONA 948 198188 948 198194 P AM P LONA P AULINO CABALLER O, 27 P AM P LONA 948 153492 948 153492 P AM P LONA P ASEO ANELIER , 20 (ESQUINA B. TIR AP U) P AM P LONA 948 382499 948 382500 P AM P LONA P INT OR CRISP IN, 2-4 P AM P LONA 948 262762 948 262762 P AM P LONA P ÍO XII, 8 P AM P LONA 948 366755 948 198957 P AM P LONA RIO IRAT I, 10 P AM P LONA 948 240862 948 237074 P AM P LONA SANT EST EBAN, 1 P AM P LONA 948 382579 948 382580 P AM P LONA T AJONAR 8 P AM P LONA 948 152852 948 152852 P AM P LONA T UDELA, 1 P AM P LONA 948 206798 948 207291 P AM P LONA VENTURA RODRÍGUEZ, 75 P AM P LONA 948 354163 948 354164 P AM P LONA VILLAFR ANCA, 10 P AM P LONA 948 140982 948 140982 SARRIGUREN BAR DENAS R EALES, 7 SARRIGUREN 948 164128 948 168055 VILLAVA CALLE RICARDO BEL, 4 VILLAVA 948 123978 948 128063 ZIZUR MAYOR LURBELTZETA 4 ZIZUR MAYOR 948 185095 948 185095 ZIZUR MAYOR SANT A CR UZ, 25 ZIZUR MAYOR 948 182700 948 181887

Annual Report 2014

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Navarra

DENOMINACION DOMICILIO POBLACION TELEFONO FAX ABAR ZUZA PZ. DE LOS FUEROS, 9 ABAR ZUZA 948 520108 948 520108 ABLIT AS AVDA DE T UDELA, 22 ABLIT AS 948 813178 948 813178 AIBAR CT R A. SANGÜESA, 4 AIBAR 948 877531 948 877532 ALLO P LAZA FUER OS, 1 ALLO 948 523068 948 523068 ALSASUA ALZANIA, 2 ALSASUA 948 563858 948 563858 ANDOSILLA RONCESVALLES, 2 ANDOSILLA 948 674093 948 674093 AÑOR BE P LAZA, SN AÑOR BE 948 350163 948 350163 AÓIZ DOMINGO ELIZONDO, 4 AÓIZ 948 336888 948 336889 AR ANT ZA CL. M AY OR AR ANT ZA - AR ANAZ 948 634051 948 634051 AR GUEDAS P LAZA GENER AL CLEM ENT E 1 AR GUEDAS 948 830132 948 830132 AR IBE CL.SANT A M AR IA AR IVE 948 764191 948 764191 AR R ONIZ P RIM ICIA 2 AR R ONIZ 948 537352 948 537352 AR T AJONA HOSPITAL S/N AR T AJONA 948 364012 948 364838 AZAGR A AVENIDA DE LA P AZ, S/ N AZAGR A 948 692039 948 692910 BAR ASOAIN DOCT OR NAVAR R O, 6 BAR ASOAIN 948 720102 948 720102 BAR GOT A BARRILILLA, 13 BAR GOT A 948 648371 BER A CALLE BIDASOA 10 VER A DE BIDASOA 948 631112 948 631112 BER BINZANA CL. MAYOR, 23 BER BINZANA 948 722077 948 722077 BETELU CR . SAN SEBAST IAN BETELU 948 513065 948 513065 BUÑUEL PLAZA DE LOS FUEROS, 2 BUÑUEL 948 833126 948 833126 CABANILLAS LA VICER A, 6-8 CABANILLAS 948 810342 948 810342 CADR EIT A GENER AL FR ANCO, 16 CADR EIT A 948 836233 948 836233 CAP AR R OSO GENER AL FR ANCO, 4 CAP AR R OSO 948 730025 948 730025 CAR CAR P LAZA ANA M AR IA M OGAS, 4 CAR CAR 948 674456 948 674456 CAR CAST ILLO CAR R ET ER A AIBAR , SN CAR CAST ILLO 948 725557 948 725557 CASCANT E P OBISPO SOLDEVILLA, 7 CASCANT E 948 851772 948 850188 CASEDA CR. AIBAR -CAP AR R OSO 29 CASEDA 948 879208 948 879208 CASTEJON M ER INDADES 14 CASTEJON 948 814313 948 814313 CINT R UENIGO R UA 7 CINT R UENIGO 948 811740 948 811740 CIRAUQUI NOR T E CIRAUQUI 948 342088 948 342088 CORELLA SAN JOSE, 20 CORELLA 948 780366 948 401309 CORTES P ZA DUQUESA DE MIR ANDA, 5 CORTES 948 800034 948 800525 DANT X AR INEA CASA ECHAR T ENEA DANCHAR INEA 948 599253 948 599253 DICAST ILLO PLAZA DE LOS FUEROS, SN DICAST ILLO 948 527092 948 527092 ELIZONDO JAIM E UR R UT IA, 9 ELIZONDO 948 580729 948 580729 ERRO CR . FR ANCIA ERRO 948 768068 948 768068 ESTELLA SAN ANDR ES, 4 ESTELLA 948 550130 948 551912 ESTELLA AVDA. Y ER R I, 7 ESTELLA 948 555427 948 555428 ET X ALAR ANDUZET A 4 ECHALAR 948 635201 948 635201 EULAT E M AY OR , S/ N EULAT E 948 543841 948 543841 FALCES CABALLER OS 3 FALCES 948 734182 948 734182 FIT ERO M AY OR , 28 FIT ERO 948 776246 948 776246 FONT ELLAS AVDA DE T UDELA, 9 FONT ELLAS 948 827329 948 827329 FUNES AVENIDA DE NAVAR R A 3 FUNES 948 754244 948 754244 FUST IÑANA LUIS BEAUM ONT 2 FUST IÑANA 948 840535 948 840535 HUAR T E AR AQUIL P LAZA SAN JUAN, SN HUAR T E-AR AQUIL 948 464127 948 464127

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Navarra

DENOMINACION DOMICILIO POBLACION TELEFONO FAX IRURZUN CALLE SAN M AR T IN, 7 IRURZUN 948 500281 948 600429 JAURRIETA CL. LLANA S/ N JAURRIETA 948 890326 948 890326 LAR R AGA CARRETERA ESTELLA, SN LAR R AGA 948 711233 948 711233 LAR R ÁINZAR SAN PEDRO, SN LAR R AINZAR 948 305002 948 305002 LECUMBERRI AR ALAR , 8 LECUMBERRI 948 504076 948 504076 LEIZA ELBAR R EN, 35 LEIZA 948 610735 948 610735 LERIN M AY OR , 33 LERIN 948 530267 948 530267 LESAK A BIT T IR IA (CASA K UT HUNA) LESAK A 948 637318 948 637318 LODOSA AVENIDA DIP UT ACION 4 LODOSA 948 693809 948 693809 LOS ARCOS R AM ON Y CAJAL 8 LOS ARCOS 948 640224 948 640224 LUM BIER M AY OR , 70 LUM BIER 948 880177 948 880177 MARCILLA P ASEO DE AR ANJUEZ 3 MARCILLA 948 757327 948 757327 M ELIDA P LAZA FUER OS S/ N M ELIDA 948 746377 948 746377 M ENDAVIA AUGUST O ECHEVAR R IA, 51 M ENDAVIA 948 685045 948 685045 M ENDIGORRIA BER NAR DINO AY ALA, 6 M ENDIGORRIA 948 340018 948 340018 M ILAGR O VOLUNT AR IOS DE NAVAR R A 16 M ILAGR O 948 409061 948 861663 M IR ANDA DE AR GA BAJA, 3 M IR ANDA DE AR GA 948 737005 948 737005 M ONT EAGUDO AVDA. SAN AGUST IN, 3 M ONT EAGUDO 948 816621 948 816621 M UR CHANT E M AY OR , 78 M UR CHANT E 948 838151 948 838218 M URIET A CARRETERA ESTELLA-VIT ORIA, S/N M URIET A 948 534232 948 534232 MURILLO EL FRUTO M AY OR , 31 MURILLO EL FRUTO 948 725450 948 725450 OBANOS SAN LORENZO, 7 OBANOS 948 344477 948 344777 OCHAGAVIA IRIBARREN,32 OCHAGAVIA 948 890301 948 890301 OLAGÜE CL.SAN JUAN OLAGÜE 948 307111 948 307111 OLIT E R UA M AY OR 4 OLIT E 948 740258 948 740258 OT EIZA DE LA SOLANA CARRETERA ESTELLA, SN OT EIZA DE LA SOLANA 948 543139 948 543139 P ER ALT A IRURZUN, 11 P ER ALT A 948 750553 948 750781 P IT ILLAS SAN JOSE S/N P IT ILLAS 948 745101 948 745101 P UENT E LA R EINA PASEO FRAY VICENTE DE BERNEDO 4 P UENT E LA R EINA 948 340210 948 341123 R ADA AVDA. NAVAR R A, 15 R ADA 948 731189 948 731189 R IBAFOR ADA CABALLEROS TEMPLARIOS, 1 R IBAFOR ADA 948 864117 948 819402 SAN ADR IAN CARRETERA ESTELLA, 63 SAN ADR IAN 948 670239 948 670239 SAN M AR T IN DE UNX P LAZA M IGUEL SANZ, 5 SAN M AR T IN DE UNX 948 738015 948 738015 SANGUESA P LAZA FUER OS, 7 SANGUESA 948 870653 948 870653 SANT ACAR A NT R A SR A DE UJUE SANT ACAR A 948 746107 948 746107 SANT EST EBAN P AR R OQUIA, 5 SANT EST EBAN 948 450404 948 451664 SAR T AGUDA P ABLO SAR ASAT E, 26 SAR T AGUDA 948 667102 948 667102 SESMA P ADR E T OM AS EST EBAN, 28 SESMA 948 698025 948 698025 SUNBILLA CL. LEKU EDER S/N SUNBILLA 948 450358 948 450358 T AFALLA P LAZA FUER OS, 2 T AFALLA 948 701511 948 701550 T AFALLA AVDA. BAJA NAVAR R A, 1 T AFALLA 948 704622 948 704623 T UDELA M AULEON 1 ESQUINA J A FER NANDEZ T UDELA 948 412103 948 410852 T UDELA AVDA DE ZAR AGOZA 1 T UDELA 948 822249 948 825704 T UDELA AVDA. AÑÓN BAIGOR R I, 13 T UDELA 948 403273 948 403273 T UDELA DÍAZ BR AVO, 19 T UDELA 948 413581 948 413582 VALTIERRA P ASEO DE LA RIBER A 91 VALTIERRA 948 867176 948 867300 VIANA LA SOLANA , S/ N VIANA 948 645882 948 645882 VILLAFR ANCA CRUCERO ANCHO 11 VILLAFR ANCA 948 845106 948 845551 VILLATUERTA C/ SAN GINES, 31 VILLATUERTA 948 541416 948 541416 ZUDAIR E CL. SAN ANT ÓN S/ N ZUDAIR E 948 539011 948 539011

Annual Report 2014

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Guipúzcoa

DENOMINACION DOMICILIO POBLACION TELEFONO FAX ANDOAIN JUAN BAUT IST A ER R O, 7 ANDOAIN 943 300883 943 300686 AR R ASAT E M AHALAK O AR R ABALA, 6 AR R ASAT E 943 795343 943 795426 AZK OIT IA NAGUSIA, 69 AZK OIT IA 943 853032 943 857237 AZP EIT IA FORUEN IBILBIDEA, 10 AZP EIT IA 943 811195 943 811195 BEASAIN NAFAR R OA ET OR BIDEA, 1 BEASAIN 943 805481 943 805747 BERGARA P O. IRIZAR, 5 BERGARA 943 769393 943 769293 EIBAR ERREBAL, 12 EIBAR 943 820755 943 820756 ELGOIBAR SAN FR ANCISCO, 2 ELGOIBAR 943 747382 943 747383 HER NANI CL. T XIRRIT A, 10 HER NANI 943 335920 943 335994 HONDAR R IBIA JAVIER UGAR T E, 6 HONDAR R IBIA 943 640938 943 640484 IRUN FUENT ER R ABIA, 15 IRUN 943 610480 943 610480 IRUN JOAQUÍN GAM ÓN, 2-4 IRUN 943 638723 943 638724 LASAR T E NAGUSIA, 36 LASAR T E 943 371844 943 371844 LEGAZP I K ALE NAGUSIA (ESQUINA SANT IK UT Z) LEGAZP I 943 737098 943 737099 OIAR T ZUN SAN JUAN, 3 OIAR T ZUN 943 494264 943 494289 OÑAT E FOR UEN ENP AR ANT ZA, 9 OÑAT E 943 718867 943 718868 ORDIZIA GOEN, 6 ORDIZIA 943 805756 943 805767 P ASAJES ANT X O GURE ZUM AR DIA, 28 P ASAJES ANT X O 943 340584 943 340838 RENTERIA P LAZA X ENP ELAR , 4 RENTERIA 943 519711 943 519711 RENTERIA-BER AUN AIT A DONOST I, 1 RENTERIA 943 344361 943 344362 SAN SEBAST IÁN AV. ISABEL II, 3 SAN SEBAST IÁN 943 458327 943 452666 SAN SEBAST IÁN CL. IPARRAGUIRRE 11 SAN SEBAST IÁN 943 297817 943 297818 SAN SEBAST IÁN AV. LAR R AT X O, 24 SAN SEBAST IÁN 943 404901 943 404902 SAN SEBAST IÁN M AT ÍA, 17 SAN SEBAST IÁN 943 224115 943 224126 SAN SEBAST IÁN J.M. SALABERRIA, 33-35 SAN SEBAST IÁN 943 445105 943 445106 SAN SEBAST IÁN SAN FR ANCISCO, 34 SAN SEBAST IÁN 943 297716 943 297717 SAN SEBAST IÁN UR BIET A, 8 SAN SEBAST IÁN 943 428500 943 433498 SAN SEBAST IÁN VIR GEN DEL CAR M EN, 6 SAN SEBAST IÁN 943 297870 943 297871 SAN SEBAST IÁN-INT X AUR R ON DO PASEO SAGASTIEDER, 10 SAN SEBAST IÁN 943 596003 943 273316 TOLOSA AV. DE NAVAR R A, 9 TOLOSA 943 698318 943 698236 TRINTXERPE AVDA. EUSK ADI, 33-35 P ASAI SAN P EDR O 943 404525 943 404526 UR NIET A IDIAZÁBAL, 30 UR NIET A 943 596004 943 332939 USÚR BIL ZUBIAUR R ENEA, 4 USÚR BIL 943 368842 943 368843 VILLABONA NUEVA, 43 VILLABONA 943 690780 943 690916 ZAR AUT Z AZAR A, 17 ZAR AUZ 943 895514 943 895515 ZUM AIA ERRIBERA, 7 ZUM AIA 943 865628 943 865629 ZUM AR R AGA LEGAZP I, 1 ZUM ÁR R AGA 943 729337 943 729338

Álava

DENOMINACION DOMICILIO POBLACION TELEFONO FAX AMURRIO ELEXONDO, 10 AMURRIO 945 891768 945 891820 LLODIO AVDA. ZUM ALACÁR R EGUI, 38 LLODIO 94 6727881 94 6727882 VIT ORIA AVDA. GAST EIZ, 23 VIT ORIA 945 154045 945 154680 VIT ORIA AVDA. GAST EIZ, 80 VIT ORIA 945 215101 945 215102 VIT ORIA CL. LOS HER R AN 38 VIT ORIA 945 203477 945 203477 VIT ORIA CL. P AR AGUAY , 8 VIT ORIA 945 214987 945 214988 VIT ORIA AVDA. SANT IAGO, 46 VIT ORIA 945 203220 945 203221 VIT ORIA PORTAL DE VILLARREAL, 34 VIT ORIA 945 123457 943 123458 VIT ORIA COR ONACIÓN DE LA VIR GEN BLANCA, 11 VIT ORIA 945 215158 945 215159 VIT ORIA HERACLIO FOURNIER, 4 VIT ORIA 945 151113 945 151114 VIT ORIA JUNT AS GENERALES, 27 VIT ORIA 945 179456 945 179457 VIT ORIA BEAT O T OM ÁS DE ZUM ÁR R AGA, 40 VIT ORIA 945 217194 945 217196 VIT ORIA DUQUE DE WELLINGTON, 12 VIT ORIA 945 197596 945 197597 VIT ORIA DIP UT ACIÓN FOR AL, 8 VIT ORIA 945 283933 945 262092 VIT ORIA C/ FR ANCIA, 31 VIT ORIA 945 201645 945 201646 SANTA CRUZ DE CAMPEZO LA VILLA, 11 SANTA CRUZ DE CAMPEZO 945 415044 945 415044 Annual Report 2014 Annual Report 2014

Other Information

Vizcaya

DENOMINACION DOMICILIO POBLACION TELEFONO FAX ALGOR T A TORRENE, 8 ALGOR T A 94 4912052 94 4913873 BAR AK ALDO GIP UZK OA, 6 BAR AK ALDO 94 4180560 94 4180561 BAR AK ALDO AVDA. LIBER T AD, 40 BAR AK ALDO 94 4180636 94 4180646 BASAUR I AVDA. LEHENDAK AR I AGIR R E, 78 BASAUR I 94 4266495 94 4266496 BILBAO JUAN ANT ONIO ZUNZUNEGUI, 1 BILBAO 94 4277480 94 4277214 BILBAO IT UR R IAGA, 82 BILBAO 94 4597627 94 4597628 BILBAO SALOU, 2 BILBAO 94 4222868 94 4223182 BILBAO FR AY JUAN, 1 BILBAO 94 4396679 94 4396686 BILBAO ALAM EDA DE SAN M AM ÉS, 6 BILBAO 94 4221323 94 4222236 BILBAO JUAN DE GAR AY , 57 BILBAO 94 4104905 94 4210075 BILBAO SOMBRERERÍA, 6 BILBAO 94 4164765 94 4794324 BILBAO AVDA. LEHENDAK AR I AGUIR R E, 13 BILBAO 94 4474282 94 4474283 BILBAO ERCILLA, 14 (Plaza Jado) BILBAO 94 4240338 94 4355715 BILBAO AUT ONOM ÍA, 35-ESQ. GORDÓNIZ BILBAO 94 4985020 94 4703772 BILBAO SAN VALENT ÍN DE BER R IOT X OA, 7-ESQ. P ZA. T R AUK O BILBAO 94 4985300 94 4134267 DER IO AVDA. M UNGIA, 1 DER IO 94 4544374 94 4540357 DUR ANGO ANDR A M AR ÍA K ALEA, 4 DUR ANGO 94 6232871 94 6232872 ER ANDIO OBIETA, 7 ER ANDIO 94 4676546 94 4676547 ERMUA ERDIKOKALE ZEHARBIDE, 1 ERMUA 94 3597300 94 3175444 GALDAK AO MUGURU-ESQ. GANEKOGORTA GALDAK AO 94 4561720 94 4561722 M UNGIA CONCOR DIA ALK AR T ASUNA, 4 MUNGUÍA 94 6748173 94 6748174 PORTUGALETE CARLOS VII, 2 PORTUGALETE 94 4830885 94 4937759 PORTUGALETE AVDA. R EP ÉLEGA, 15 PORTUGALETE 94 4957911 94 4956794 SANTURTZI AVDA. DE M UR R IET A, 40 SANTURTZI 94 4934187 94 4934189 SESTAO ALAM EDA DE LAS LLANAS, 7 SESTAO 94 4960524 94 4960625 T R AP AGAR ÁN PRIMERO DE MAYO, 26 BIS T R AP AGAR ÁN 94 4862302 94 4920674

La Rioja

DENOMINACION DOMICILIO POBLACION TELEFONO FAX ALDEANUEVA DE EBR O LOMBILLA, 1 ALDEANUEVA DE EBRO (LA RIOJA) 941 163613 941 163613 ALFAR O PUERTA DE TUDELA, 3 ALFAR O (LA R IOJA) 941 180512 941 180512 AR NEDO HUER T AS, 1 AR NEDO 941 385074 941 385075 AUT OL Nª SR A. DE Y ER GA, 14 AUT OL 941 390925 941 390926 CALAHOR R A CAVAS, 1 CALAHOR R A (LA R IOJA) 941 146240 941 146720 CALAHOR R A R AM ÓN SUBIR ÁN, 29 CALAHOR R A (LA R IOJA) 941 136088 941 136089 HAR O AVDA. LA R IOJA, 2 HAR O 941 304997 941 304998 LARDERO BRETÓN DE LOS HERREROS, 1 LARDERO 941 447844 941 447844 LOGROÑO AV. DE LA P AZ, 28 LOGROÑO 941 270984 941 270985 LOGROÑO AV. DE LA P AZ, 71 LOGROÑO 941 270369 941 270369 LOGROÑO CHILE, 18 LOGROÑO 941 286792 941 286793 LOGROÑO EST AM BR ER A, 14 LOGROÑO 941 501299 941 501299 LOGROÑO GENER AL VAR A DE R EY , 44 LOGROÑO 941 234670 941 234671 LOGROÑO GONZALO DE BERCEO, 14 LOGROÑO 941 287332 941 287333 LOGROÑO GR AN VIA, 16 LOGROÑO 941 287444 941 287445 LOGROÑO JORGE VIGÓN, 40 LOGROÑO 941 270987 941 270988 LOGROÑO SIET E INFANT ES DE LAR A 11 LOGROÑO 941 519050 941 519051 NÁJER A SAN FER NANDO, 56 NÁJER A 941 361775 941 361775 NAVAR R ET E AVDA. LOGR OÑO, 4 NAVAR R ET E 941 440783 941 440663 PRADEJÓN DEL P R ADO, 20 BIS PRADEJÓN 941 141446 941 141447 QUEL AVDA. LA R IOJA, 57 QUEL 941 403331 941 403341 R INCON DE SOT O P RINCIP E FELIP E, 18 RINCON DE SOTO (RIOJA) 941 142063 941 142063 SANT O DOM INGO DE LA CALZADA JUAN CAR LOS I, 5 SANT O DOM INGO DE LA CALZADA 941 343073 941 343412 VILLAM EDIANA DE IR EGUA AVDA. CAM ER OS, 6 VILLAM EDIANA DE IR EGUA 941 435900 941 435900