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Inverseguros, Sociedad de Valores, S.A., Sole-Shareholder Company Financial Statements and Directors’ Report for the year ended 31 December 2019, together with Independent Auditors’ Report

Translation of a report originally issued in Spanish based on our work performed in accordance with the audit regulations in force in Spain and of financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Company in Spain (see Notes 1 and 29). In the event of a discrepancy, the Spanish-language version prevails.

ASSETS Note 31/12/2019 31/12/2018 (*) LIABILITIES AND EQUITY Note 31/12/2019 31/12/2018 (*)

CASH 5 1 1 LIABILITIES

FINANCIAL ASSETS HELD FOR TRADING: FINANCIAL LIABILITIES HELD FOR TRADING 8 75,192 118,025 Debt instruments 8 64,366 118,538 Equity instruments - - OTHER FINANCIAL LIABILITIES AT FAIR VALUE THROUGH Trading derivatives - - PROFIT OR LOSS - - Other financial assets - -Memorandum item: Loaned or advanced as collateral - - FINANCIAL LIABILITIES AT AMORTISED COST:

Debts to financial intermediaries 13 64,008 117,880OTHER FINANCIAL ASSETS AT FAIR VALUE THROUGH Debts to individuals 14 217 86 PROFIT OR LOSS: - - Borrowings and subordinated liabilities - - Debt instruments - - Other financial liabilities - - Other equity instruments - - Other financial assets - - HEDGING DERIVATIVES - -Memorandum item: Loaned or advanced as collateral - - LIABILITIES ASSOCIATED WITH NON-CURRENT ASSETS

HELD FOR SALE - -AVAILABLE-FOR-SALE FINANCIAL ASSETS: Debt instruments - - PROVISIONS: Other equity instruments 9 2,288 3,202 Provisions for pensions and similar obligations 15 4 24Memorandum item: Loaned or advanced as collateral - - Provisions for taxes 16 - 35

Other provisions - -LOANS AND RECEIVABLES: Loans to financial intermediaries 6 76,271 119,486 TAX LIABILITIES: Loans to individuals 7 6,013 6,362 Current - - Other financial assets - - Deferred 18 84 111

HELD-TO-MATURITY INVESTMENTS: - - OTHER LIABILITIES 12 2,077 2,038Memorandum item: Loaned or advanced as collateral - -

TOTAL LIABILITIES 141,582 238,199HEDGING DERIVATIVES - -

SHAREHOLDERS' EQUITY: 7,360 9,319NON-CURRENT ASSETS HELD FOR SALE: - - SHARE CAPITAL: Debt instruments - - Registered 17 4,515 4,515 Equity instruments - - Less: Uncalled capital - - Tangible assets - - SHARE PREMIUM - - Other - - RESERVES 17 2,519 5,104

OTHER EQUITY INSTRUMENTS: - -INVESTMENTS: - - Less: Treasury shares - - Subsidiaries - - PROFIT FOR THE YEAR 676 (300) Jointly controlled entities - - LESS: DIVIDENDS AND REMUNERATION 3 (350) - Associates - -

VALUATION ADJUSTMENTS: 249 330INSURANCE CONTRACTS LINKED TO PENSIONS - - Available-for-sale financial assets 9 249 330

Cash flow hedges - -TANGIBLE ASSETS: Hedges of net investments in foreign operations - - Property, plant and equipment for own use 10 60 68 Exchange differences - - Investment property - - Other valuation adjustments - -

GRANTS, DONATIONS AND LEGACIES - -INTANGIBLE ASSETS: Goodwill - - TOTAL EQUITY 7,609 9,649 Other intangible assets 11 11 21

TAX ASSETS: Current - - Deferred 18 36 52

OTHER ASSETS 12 145 118TOTAL ASSETS 149,191 247,848 TOTAL LIABILITIES AND EQUITY 149,191 247,848

Memorandum items:Contingency and commitment accounts 21 1,485 -Other memorandum items 21 888,222 837,048

The accompanying Notes 1 to 29 and Appendix are an integral part of the balance sheet at 31 December 2019.

(*) Presented for comparison purposes only.

Translation of financial statements originally issued in Spanish and prepared in accordance with the regulatory financial

reporting framework applicable to the Company in Spain (see Notes 1 and 29). In the event of a discrepancy, the Spanish-language version prevails.

Inverseguros, Sociedad de Valores, S.A., Sole-Share holder Company

BALANCE SHEETS AT 31 DECEMBER 2019 AND 2018 (NOTES 1 TO 4)(Thousands of Euros)

Year YearNote 2019 2018 (*)

INTEREST AND SIMILAR INCOME 8, 12, 13 and 15 2,661 1,603INTEREST EXPENSE AND SIMILAR CHARGES 6 and 13 (394) (360)

NET INTEREST INCOME 2,267 1,243

INCOME FROM EQUITY INSTRUMENTS - -FEE AND COMMISSION INCOME 24 365 326FEE AND COMMISSION EXPENSE 25 (356) (337)GAINS/LOSSES ON FINANCIAL ASSETS AND LIABILITIES (net): Held for trading 26 1,443 913 Other financial instruments at fair value through profit or loss - -

Financial instruments not measured at fair value through profit or loss 26 188 86 Other - -

EXCHANGE DIFFERENCES (net) 6 1 (2)OTHER OPERATING INCOME 2 4OTHER OPERATING EXPENSES 1-h (22) (21)

GROSS INCOME 3,888 2,212

STAFF COSTS 27 (1,737) (1,556)GENERAL EXPENSES 28 (1,266) (1,071)DEPRECIATION AND AMORTISATION 10 and 11 (18) (18)PROVISIONS (net) 16 35 33IMPAIRMENT LOSSES ON FINANCIAL ASSETS (net): Loans and receivables - - Other financial instruments not measured at fair value through profit or loss - -

PROFIT FROM OPERATIONS 902 (400)

IMPAIRMENT LOSSES ON OTHER ASSETS (net): Tangible assets - - Intangible assets - - Other assets - -

GAINS/(LOSSES) ON DISPOSAL OF ASSETS NOT CLASSIFIED AS NON-CURRENT ASSETS HELD FOR SALE - -NEGATIVE GOODWILL ON BUSINESS COMBINATIONS - -GAINS/(LOSSES) ON NON-CURRENT ASSETS HELD FOR SALE NOT CLASSIFIED AS DISCONTINUED OPERATIONS - -

PROFIT BEFORE TAX 902 (400)

INCOME TAX 18 (226) 100

PROFIT FOR THE YEAR 676 (300)

PROFIT FROM DISCONTINUED OPERATIONS (net) - -


EARNINGS PER SHARE (Euros)Basic 3 0.90 (0.40) Diluted 3 0.90 (0.40)



INCOME STATEMENTSFOR THE YEARS ENDED 31 DECEMBER 2019 AND 2018 (NOTES 1 TO 4)

(Thousands of Euros)

The accompanying Notes 1 to 29 and Appendix are an integral part of the income statement for the year ended 31 December 2019.


Inverseguros, Sociedad de Valores, S.A., Sole-Shareholder Company



OTHER RECOGNISED INCOME/EXPENSE (66) (115)Available-for-sale financial assets (108) (130) Revaluation gains/(losses) 9 80 (44) Amounts transferred to income statement 9 (188) (86) Other reclassifications - -Cash flow hedges - - Revaluation gains/(losses) - - Amounts transferred to income statement - - Amounts transferred to the initial carrying amount of hedged items - - Other reclassifications - -Hedges of net investments in foreign operations - - Revaluation gains/(losses) - - Amounts transferred to income statement - - Other reclassifications - -Exchange differences - - Revaluation gains/(losses) - - Amounts transferred to income statement - - Other reclassifications - -Non-current assets held for sale - - Revaluation gains/(losses) - - Amounts transferred to income statement - - Other reclassifications - -

Actuarial gains/(losses) on pension plans 15 20 (23)

Other recognised income and expense - -

Income tax 18 22 38

TOTAL INCOME AND EXPENSE FOR THE YEAR 610 (415)

the statement of recognised income and expense for the year ended 31 December 2019.



STATEMENTS OF CHANGES IN EQUITY



FOR THE YEARS ENDED 31 DECEMBER 2019 AND 2018 (NOTES 1 TO 4)A) STATEMENTS OF RECOGNISED INCOME AND EXPENSE


The accompanying Notes 1 to 29 and Appendix are an integral part of

Other Less: Less: Total Grants,Share Share Equity Treasury Profit for Dividends and Shareholders' Valuation Donations TotalCapital Premium Reserves Instruments Shares the Year Remunera tion Equity Adjustments and Legacies Equity

BALANCE AT 2017 YEAR-END (*) 4,515 - 5,121 - - 2,246 (1,500) 10,382 428 - 10,810Adjustments due to changes in the accounting policies - - - - - - - - - - -Adjustments made to correct errors - - - - - - - - - - -

ADJUSTED BEGINNING BALANCE AT 1 JANUARY 2018 (*) 4,51 5 - 5,121 - - 2,246 (1,500) 10,382 428 - 10,810 Total income and expenses recognised - - (17) - - (300) - (317) (98) - (415) Other changes in equity Distribution of dividends - - - - - - - - - - - Transfers between equity items - - - - - (2,246) 1,500 (746) - - (746) Other increases (decreases) in equity - - - - - - - - - - -

ENDING BALANCE AT 31 DECEMBER 2018 (*) 4,515 - 5,104 - - (300) 9,319 330 - 9,649

Adjustments due to changes in the accounting policies - - - - - - - - - - -

Adjustments made to correct errors - - - - - - - - - - -

ADJUSTED BEGINNING BALANCE AT 1 JANUARY 2019 4,515 - 5,104 - - (300) - 9,319 330 - 9,649

Total recognised income/(expense) - - 15 - - 676 - 691 (81) - 610

Other changes in equity

Distribution of dividends - - (2,300) - - - (350) (2,650) - - (2,650)

Transfers between equity items - - (300) - - 300 - - - - -

Other increases (decreases) in equity - - - - - - - - - - -ENDING BALANCE AT 31 DECEMBER 2019 4,515 - 2,519 - - 676 (350) 7,360 249 - 7,609




The accompanying Notes 1 to 29 and Appendix are an integral part of the statement of changes in total equity for the year ended 31 December 2019.


STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED 31 DECEMBER 2019 AND 2018 (NOTES 1 TO 4)


B) STATEMENTS OF CHANGES IN TOTAL EQUITY


1. CASH FLOWS FROM OPERATING ACTIVITIES Profit for the year 676 (300)Adjustments made to obtain the cash flows from operating activities: (194) (88) Depreciation and amortisation 10 and 11 18 18 Net impairment losses - - Period provisions for contingencies, net 16 (35) (33) Gains/(Losses) on disposal of non-financial assets - - Gains/(Losses) on disposal of investments 26 (188) (86) Other items 13 and 18 11 13Adjusted profit for the year 482 (388)Net increase (decrease) in operating assets 96,332 (229,056) Loans and receivables 6 and 7 41,193 (114,827) Financial assets held for trading 8 54,172 (116,375) Available-for-sale financial assets 9 994 1,950 Other operating assets 12 (27) 196Net increase (decrease) in operating liabilities (96,535) 230,094 Financial liabilities at amortised cost 13 and 14 (53,741) 113,472 Other operating liabilities 12 39 (1,313) Financial liabilities held for trading 8 (42,833) 118,021Collections/payments of income tax - (86)

Total net cash flows from operating activities 279 650

2. CASH FLOWS FROM INVESTING ACTIVITIES - (14)Payments - (14) Intangible assets 11 - (14)Collections - -

Total net cash flows from investing activities - (14)

3. CASH FLOWS FROM FINANCING ACTIVITIES - (2,338)Payments - (1,498) Return and amortization of subordinated liabilities, bonds, loans and other financings received 13 - (1,498)Collections - (94) Issuance of subordinated liabilities, loans and other financings - (94)Dividends paid and return on other equity instruments 3 - (746)

Total net cash flows from financing activities - (2,338)

4. EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS - -

5. NET INCREASE/DECREASE IN CASH AND CASH EQUIVALENTS (1+2+3+4) 279 (1,702)

Cash and cash equivalents at beginning of year 5 and 6 441 2,143Cash and cash equivalents at end of year 5 and 6 720 441





The accompanying Notes 1 to 29 and Appendix are an integral part of the statement of cash flows for the year ended 31 December 2019.


FOR THE YEARS ENDED 31 DECEMBER 2019 AND 2018 (NOTES 1 TO 4)STATEMENTS OF CASH FLOWS

Translation of financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Company in Spain (see Notes 1 and 29). In the event of a discrepancy, the Spanish-language version prevails.

Inverseguros, Sociedad de Valores, S.A., Sole-Share holder Company Notes to the Financial Statements for the year ended 31 December 2019

1. Company description, basis of presentation of th e financial statements and other information

a) Company description

Inverseguros, Sociedad de Valores, S.A., Sole-Shareholder Company (“the Company”) was incorporated on 10 October 1989 as a broker-dealer. On 13 July 1998, it re-registered as a stock-exchange member broker-dealer, and changed its name to Inverseguros, Sociedad de Valores y Bolsa, S.A., Sole-Shareholder Company. At its Annual General Meeting on 28 January 2009 the shareholders of the Company resolved to adopt its current company name.

The Company’s business activity is subject to Royal Legislative Decree 4/2015, of 23 October, which approves the consolidated Securities Market Law, to Royal Decree 217/2008, of 15 February, on the legal system for investment services companies and companies that render investment services and subsequent amendments thereto, and to other rules issued by the Spanish National Securities Market Commission (CNMV).

The Company was registered in the Broker-Dealers Register of the Spanish National Securities Market Commission with number 75 on 2 November 1989. The Company also obtained authorisation to act as a government debt management company on 21 January 1991. Subsequently, on 11 August 1998 the company was registered as Inverseguros, Sociedad de Valores y Bolsa, S.A. in the Stock-Exchange Member Broker/Dealers Register, and on 17 March 2009 the new company name was registered.

Below is a list of investment services which may be provided by the Company, as defined in its activity program authorised by CNMV:

1. Reception and transmission of client orders regarding one or more financial instruments.

2. Execution of the above-mentioned client orders.

3. Trading for own account.

4. The placement of financial instruments without a firm commitment basis.

5. Underwriting of issuance or placement of financial instruments on a firm commitment basis.

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To perform the above investment services, the Company can conduct the auxiliary services which are envisaged in the legislation applicable and, in particular, the following:

1. Custody and management on behalf of client of financial instruments as per Article 2 of the consolidated Securities Market Law, which was approved by the Royal Legislative Decree 4/2015, of 23 October.

2. Advisory services for companies about capital structure, industrial strategy and related matters, as well as mergers and acquisitions.

3. Services related to underwriting of issuance and placement operations.

4. Preparation of investment reports and financial analyses or other general recommendations related to operations with financial instrument.

5. Currency exchange services related to the provision of investment services

The investment services and, where appropriate, any ancillary activities, will be performed in respect of the instruments envisaged in the legislation applicable from time to time and, in particular, in respect of those referred to in Articles 2.1, 2.2, 2.6 and 2.7 of the consolidated Securities Market Law, which was approved by the Royal Legislative Decree 4/2015, of 23 October.

On 18 December 2006, the Company became a member of the Barcelona Stock Exchange. On 4 January 2007, the company entered into a contract with Centro de Cálculo de Bolsa, S.A., S.U., a subsidiary of the Barcelona Stock Exchange, for the provision of bookkeeping services in connection with the clearing of transactions with Iberclear, i.e. transactions carried out in the Barcelona Stock Exchange, the Madrid Stock Exchange and the Spanish AIAF Fixed-Income Market and government debt markets. Nevertheless, during 2017, as a result of the Company not holding equity nor operating positions related to these type of assets, the Company ceased as member of Madrid and Barcelona Stock Exchanges and government debt markets. This cease was formalized during the first quarter of 2017. In 2018, the Company retained its membership of the private fixed-income market (AIAF), but ceased to be a member in March 2019 due to changes in its operations.

Additionally, at the beginning of December 2016 the Company entered into a securities custody agreement with Cecabank, S.A. whereby Cecabank, S.A would discharge the custody function with respect to the Company's own account assets and those of its customers, agreement in force at the current time. As a result of this decision, in 2017 the Company terminated the agreement entered into with Iberclear and ceased to be a clearing member of the market.

The Company carries on all its business activities from its offices in Madrid. The Company’s registered office is in Plaza de las Cortes, 2 (Madrid). This office is under finance leases to other Group entity (see Note 28).

At 31 December 2019, the Company belonged to a group of companies as defined by Article 42 of the Spanish Commercial Code. The Company is under control of Inverseguros, S.A.U. (Parent of Inverseguros Group and Sole Shareholder of the Company –see Note 17) Accordingly, both the Company and the Inverseguros, S.A.U. are subsidiaries of the Dunas Capital Group, the parent of which is Dunas Capital España, S.L., whose registered office is located at the same address as the Company, and which prepares consolidated financial statements. The last consolidated financial statements of the Dunas Capital Group were formally prepared by the directors of Dunas Capital España, S.L. at the Board of Directors Meeting held on 27 March 2019 and were filed at the Madrid Mercantile Registry.

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b) Basis of presentation of the financial statement s

Regulatory financial reporting framework applicable to the Company

These financial statements, which were obtained from the accounting records of the Company, were formally prepared by the directors in accordance with the regulatory financial reporting framework applicable to the Company, which consists of:

a) The Spanish Commercial Code and all other Spanish corporate law.

b) Spanish National Securities Market Commission Circular 7/2008, of 26 November, and other obligatory rules approved by the Spanish National Securities Market Commission and in matters not covered by them, the Spanish National Chart of Accounts approved by Royal Decree 1.514/2007, Bank of Spain Circular 4/2017, of 22 November and the International Financial Reporting Standards adopted as Regulations of the European Commission in force, provided that they do not contravene the previous standards.

c) The mandatory rules approved by the Spanish Accounting and Audit Institute in order to implement the Spanish National Chart of Accounts and the relevant secondary legislation.

d) All other applicable Spanish accounting legislation.

Fair presentation

The Company’s financial statements for the year 2019 are prepared in accordance with the regulatory financial reporting framework applicable to the Company and, in particular, with the accounting principles and rules contained therein, and, accordingly, present fairly the Company’s equity and financial position at 31 December 2019 and the results of its operations and its cash flows for the year then ended.

These financial statements, which were prepared by the Company’s directors at their meeting on 27 April 2020, will be submitted for approval by its sole-shareholder, and it is considered that they will be approved without any changes. The financial statements for 2018 were approved by its sole-shareholder on 30 April 2019.

In view of the magnitude of the amounts presented in these financial statements, the directors have prepared them in thousands of euros.

Non-obligatory accounting principles applied

No non-obligatory accounting principles were applied. Also, the Company’s directors formally prepared these financial statements by taking into account the obligatory accounting principles and standards with a significant effect thereon. All obligatory accounting principles and measurement bases were applied.

Key issues in relation to the measurement and estim ation of uncertainty

The results and the determination of equity are sensitive to the accounting policies, measurement bases and estimates used by the Company’s directors in preparing the financial statements. The main accounting policies and rules and measurement bases are set forth in Note 2.

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In preparing these financial statements estimates were occasionally made by the Company’s directors in order to measure certain of the assets, liabilities, income, expenses and obligations reported herein. These estimates relate basically to the following:

- The assessment of possible impairment losses (see Notes 2-e, 2-g, 2-h, 6, 7, 9, 10 and 11).

- The useful life of property, plant and equipment and intangible assets (see Notes 2-g, 2-h, 10 and 11).

- The fair value of certain financial instruments (see Notes 2-b, 8 and 9).

- The calculation of provisions (see Notes 2-l and 16).

- The assumptions used in the actuarial calculation of the pension obligations and other employees obligations (see Notes 2-ñ and 15).

Although these estimates were made on the basis of the best information available at 2019 year-end, events that take place, where appropriate, in the future might make it necessary to change them in coming years. Changes in accounting estimates, where appropriate, would be applied prospectively and the effects of any changes in estimates that might arise would be recognised in the related income statement.

c) Comparative information

The information relating to 2018 contained in these notes to the financial statements is presented, for comparison purposes, with the information relating to 2019.

d) Grouping of items

Certain items in the balance sheet, income statement, statement of changes in equity and statement of cash flows are grouped together to facilitate their understanding; however, whenever the amounts involved are material, the information is broken down in the related notes to the financial statements.

e) Correction of errors

In preparing the accompanying financial statements no significant errors were detected that would have made it necessary to restate the amounts included in the financial statements for 2018.

f) Changes in accounting policies

There were no changes in accounting policies in 2019 with respect to those applied in 2018.

g) Information on the environment

In view of the business activities carried on by the Company, it does not have any environmental liabilities, expenses, assets, provisions or contingencies that might be material with respect to its equity, financial position or results. Therefore, no specific disclosures relating to environmental issues are included in these notes to the financial statements.

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h) Investment Guarantee Fund and Fund for the Order ly Restructuring of the Banking Sector

The Company is a member of the Investment Guarantee Fund. The contributions made by the Company to the Investment Guarantee Fund in 2019 amounted to EUR 20 thousand (2018: EUR 20 thousand), and were recognised under “Other Operating Expenses" in the income statement. Also, in 2019 it includes EUR 1 thousand related to the contribution made by the Company to the Fund for the Orderly Restructuring of the Banking Sector (2018: EUR 1 thousand).

i) Minimum capital requirements and liquidity ratio

European Parliament and Council Directive 2013/36, of 26 June 2013, on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, and European Parliament and Council Regulation 575/2013, of 26 June 2013, on prudential requirements of credit institutions and investment firms, regulate access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, as well as the minimum capital requirements for these companies, the manner of calculating them, and the procedures and information used in the capital adequacy self-assessments they are required to conduct. CNMV Circular 2/2014, of 23 June, entered in force at 29 June 2014, on the exercise of various regulatory options regarding the solvency of investment firms and their consolidated groups, regulates the options that Regulation No 575/2013 attributes to the national competent authorities, vis-à-vis consolidated groups of investment services companies and Spanish investment services companies, whether or not they form part of a consolidated group, in relation to the matters considered necessary in order to apply the aforementioned Regulation No 575/2013 from 1 January 2014 (see Note 20).

Also, broker-dealer companies must maintain a liquidity ratio, in the form of low risk, high liquidity assets, equal to 10% of its eligible liabilities. At 31 December 2019 and 2018 the Company met this ratio.

j) Events after the balance sheet date

The spread of COVID-19 and its global impact have affected the outlook for growth for 2020. The economic consequences of the spread of the epidemic are difficult to quantify at present and, therefore, it is highly likely that uncertainty will continue to last in the markets, particularly in the first half of the year. In this regard, we consider that the virus will have a temporary impact, and create a degree of disruption to activity and the markets in the first few months of the year, although with the measures being implemented and that are expected to be applied, we expect that this situation will be reversed in the second half of the year.

However, the Company's directors have conducted a preliminary assessment of the current situation, based on the best available information. In this connection, no significant risks have arisen in relation to liquidity or the measurement of on-balance sheet assets and liabilities and although we consider that the current scenario might give rise to a fall in income in the coming year, in our opinion the possible impact on the Company’s profit or loss for 2020 would not affect its compliance with the existing capital requirements.

Lastly, the Company has adapted its processes and continues to provide its services in the new scenario and the directors are constantly monitoring the evolution of the situation in order to successfully address any possible impacts, both financial and non-financial, that may arise.

From 2019 year-end to the date when these financial statements were authorised for issue, no further significant events took place that would have a material impact on the financial statements that are not described in the remaining notes to these financial statements.

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2. Accounting policies and measurement bases

The principal accounting policies and measurement bases used by the Company in preparing its 2019 financial statements, in accordance with CNMV Circular 7/2008, of 26 November, were as follows:

a) Definitions and classification of financial inst ruments

i. Definitions

A “financial instrument” is any contract that gives rise to a financial asset of one entity and, simultaneously, to a financial liability or equity instrument of another entity.

An “equity instrument” is any agreement that evidences a residual interest in the assets of the issuing entity after deducting all of its liabilities.

A “financial derivative” is a financial instrument whose value changes in response to the changes in an observable market variable (such as an interest rate, foreign exchange rate, financial instrument price or market index), whose initial investment is very small compared with other financial instruments with a similar response to changes in market factors, and which is generally settled at a future date.

ii. Classification of financial assets for measurement purposes

Financial assets are presented in the balance sheet classified into the various categories used for management and measurement purposes, unless they have to be presented, where appropriate, as “Non-Current Assets Held for Sale” or they relate to “Cash”, “Hedging Derivatives” or “Investments”, in which case they are reported separately.

Accordingly, financial assets are included for measurement purposes in one of the following categories:

- Financial assets held for trading (at fair value through profit or loss): this category includes the financial assets acquired for the purpose of generating a profit in the near term from fluctuations in their prices.

- Available-for-sale financial assets: this category includes debt instruments not classified as “Held-to-Maturity Investments”, “Financial Assets Held for Trading” or as “Other Financial Assets at Fair Value through Profit or Loss”, and equity instruments issued by entities other than subsidiaries, associates and jointly controlled entities, provided that such instruments have not been classified as “Financial Assets Held for Trading” or as “Other Financial Assets at Fair Value through Profit or Loss”.

- Loans and receivables: this category includes financial assets that are not quoted in an active market, do not have to be measured at fair value, and have fixed or determinable cash flows in which the Company will recover all of its initial investment, other than losses because of credit deterioration. Accordingly, it includes unquoted debt instruments, financing granted to third parties in connection with ordinary lending activities carried out by the Company and receivables from users of services that the Company provides and the investment of the Company’s capital, in the form, where appropriate, of deposits (on demand and time) and reverse repurchase agreements.

iii. Classification of financial assets for presentation purposes

Financial assets are classified by nature into the following items in the balance sheet:

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- Cash: cash balances and balances receivable on demand with the Bank of Spain and other central banks.

- Loans to financial intermediaries: loans to financial intermediaries of any type except, where appropriate, those instrumented in such a way as to make them tradable.

- Loans to private parties: loans and credits granted by the Company, other than those represented by marketable securities, and loans and advances to credit institutions.

- Debt instruments: bonds and other securities that create a debt for their issuer, that generate an implicit or explicit interest return at a contractually agreed rate, and that are in the form of certificates or book entries, irrespective of the issuer.

- Equity instruments: financial instruments issued by other entities, such as shares and non-voting equity units, or units in collective investment funds and companies, which have the nature of equity instruments for the issuer, unless they are investments in subsidiaries, jointly controlled entities or associates.

iv. Classification of financial liabilities for measurement purposes

Financial liabilities are classified in the balance sheet grouped into the various categories used for management and measurement purposes, unless they have to be presented, where appropriate, as “Liabilities Associated with Non-Current Assets Held for Sale” or they relate to “Hedging Derivatives”, which are reported separately.

The financial liabilities are included for measurement purposes into the following items:

- Financial liabilities held for trading (at fair value through profit or loss): includes financial liabilities arising from the outright sale of financial assets acquired under reverse repurchase agreements (“short positions”).

- Financial Liabilities at Amortised Cost: includes the financial liabilities that cannot be included under any other item in liability balances and that arise from financing activities, irrespective of their instrumentation and maturity.

v. Classification of financial liabilities for presentation purposes

Financial liabilities are classified by nature into the following items:

- Debts to financial intermediaries: includes the balances payable relating to payment obligations to financial intermediaries, such as loans and credits received, repurchase agreements, advances for the purchase of securities, cash deposits received to guarantee transactions, balances payable to clearing houses and settlement agencies, temporary balances on securities transactions carried out for the account of customers, amounts payable for shares subscribed and similar debit balances, except those instrumented as marketable securities.

- Debts to individuals: includes the balances payable relating to payment obligations to individuals, such as loans and credits received, repurchase agreements, advances for securities purchase orders, cash deposits received to guarantee transactions, amounts payable for shares subscribed and similar debit balances, except those instrumented as marketable securities.

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- Financial liabilities held for trading: payment obligations arising from the outright sale of financial assets acquired under reverse repurchase agreements (see Note 2-a.iv above).

b) Measurement of financial assets and liabilities and recognition of fair value changes

In general, financial assets and liabilities are initially recognised at fair value which, in the absence of evidence to the contrary, is deemed to be the transaction price. This amount is adjusted by the transaction costs that are directly attributable to the acquisition of the financial asset or the issue of the financial liability, except for any financial instruments measured, where appropriate, at fair value through profit or loss. These instruments are subsequently measured at each period-end as follows:

i. Measurement of financial assets

Financial assets are measured at fair value, without deducting any transaction costs that may be incurred on their sale or other form of disposal, except for loans and receivables, held-to-maturity investments, equity investments whose fair value cannot be objectively determined in a sufficiently objective manner and financial derivatives that have those equity instruments as their underlying and are settled by delivery of these instruments.

The fair value of a financial instrument on a given date is taken to be the amount for which it could be bought or sold on that date by two knowledgeable, willing parties in an arm's length transaction. Fair value is calculated without deducting any transaction costs that may be incurred on disposal. 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 organised, transparent and deep market (“quoted price” or “market price”).

If there is no market price for a given financial instrument, its fair value is estimated on the basis of the price established in recent transactions involving similar instruments and, in the absence thereof, of valuation techniques sufficiently used by 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. However, the inherent limitations of the valuation techniques used and the possible inaccuracies of the assumptions made under these techniques may result in a fair value of a financial instrument which does not exactly coincide with the price at which this instrument could be bought or sold at the date of measurement.

Equity instruments of other entities whose fair value cannot be determined in a sufficiently objective manner are measured at acquisition cost adjusted, where appropriate, by any related impairment loss.

Loans and receivables are measured at amortised cost using the effective interest method. Amortised cost is understood to be the acquisition cost of a financial asset or liability plus or minus, where appropriate, the principal repayments and the cumulative amortisation (taken to the income statement) of the difference between the initial cost and the maturity amount. In the case of financial assets, amortised cost furthermore, where appropriate, includes any reductions for impairment or uncollectibility.

The effective interest rate is the discount rate that exactly matches the net carrying amount of a financial instrument to all its estimated cash flows of all kinds over its remaining life. For fixed rate financial instruments, the effective interest rate coincides with the contractual interest rate established on the acquisition date plus, where appropriate, the fees that, because of their nature, can be equated with a rate of interest. In the case of floating rate financial instruments, the effective interest rate coincides, where appropriate, with the rate of return prevailing in all connections until the next benchmark interest reset date.

The amounts at which the financial assets are recognised represent, in all material respects, the Company’s maximum exposure to credit risk at each reporting date.

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ii. Measurement of financial liabilities

In general, financial liabilities are measured at amortised cost, as defined above, except for those included, where appropriate, under “Financial Liabilities Held-for-Trading”, “Other Financial Liabilities at Fair Value through Profit or Loss” or “Financial Liabilities at Fair Value through Equity”, which are measured at fair value.

iii. Valuation techniques

The main valuation technique applied by the Company to measure financial instruments carried at fair value is the use of publicly quoted prices in active markets and prices published by financial broadcasting entities. This valuation technique is used basically for public- and private-sector debt securities, equity instruments and derivatives. In the case of investments in Collective Investment Undertakings apply the redemption price. Lastly, in the case of the shares of Gestora del Fondo General de Garantía de Inversiones, S.A., these shares are measured at cost since they are equity instruments which may not be traded in an active market and there is no other evidence of the fair value of the shares.

iv. Recognition of gains and losses

As a general rule, changes in the fair value of financial assets and liabilities are recognised in the income statement. A distinction is made between the changes resulting from the accrual of interest or dividends, which are recognised under “Interest and Similar Income”, “Interest Expense and Similar Charges” and “Income from Equity Instruments”, where appropriate; those arising from the impairment of asset quality; and those arising for other reasons, which are recognised at their net amount under “Gains/Losses on Financial Assets and Liabilities (net)” in the income statement.

Any adjustments due to changes in fair value arising from “Available-for-Sale Financial Assets” are recognised temporarily, net of the related tax effect, in equity under “Valuation Adjustments”, unless they relate, where appropriate, to exchange differences on monetary financial assets, in which case they are recognised in the income statement. Items charged or credited to “Valuation Adjustments” remain in the Company's equity until the asset giving rise to them is derecognised, at which time they are recognised in the income statement.

c) Derecognition of financial assets and liabilitie s

Financial assets are only derecognised when the cash flows they generate have been extinguished or when substantially all the inherent risks and rewards have been transferred to third parties. Similarly, financial liabilities are only derecognised when the obligations they generate have been extinguished or when they are acquired (with the intention either to cancel them or to resell them).

d) Offsetting

Asset and liability balances are offset, i.e. reported in the balance sheet at their net amount, when, and only when, they arise from transactions in which a contractual or legal right of set-off exists and the Company intends to settle them on a net basis or to realise the asset and settle the liability simultaneously, or when one of the parties is a financial institution.

Also, balances arising from unsettled transactions in the same stock exchange or active market clearing house or settlement system are set off, provided they are settled simultaneously and are denominated in the same currency.

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e) Impairment of financial assets

i Definition

A financial asset is considered to be impaired –and therefore its carrying amount is adjusted to reflect the effect of impairment– when there is objective evidence that events have occurred which:

- In the case of debt instruments (loans and debt securities), give rise to an adverse impact on the future cash flows that were estimated at the transaction date.

- In the case of equity instruments, mean that it will not be possible to fully recover their carrying amount.

As a general rule, the carrying amount of impaired financial instruments is adjusted with a charge to the income statement for the period in which the impairment becomes evident, and the reversal, if any, of previously recognised impairment losses is recognised in the income statement for the period in which the impairment is reversed or reduced.

ii. Debt instruments measured at amortised cost

The amount of an impairment loss incurred on these instruments is equal to the negative difference between their carrying amount and the present value of their estimated future cash flows, and is presented as a reduction of the balance of the asset adjusted.

Possible impairment losses on these assets are assessed individually, for all debt instruments measured at amortised cost.

Interest accrual is suspended for all debt instruments individually classified as impaired when they have payments more than three months past due.

iii. Available-for-sale financial assets

The amount of the impairment losses on these financial instruments is the positive difference between their acquisition cost (net of any principal repayment or amortisation in the case of debt instruments) and their fair value less any impairment loss previously recognised in the income statement.

When there is objective evidence that the losses arising on measurement of these assets are due to impairment, they are removed from “Valuation Adjustments” in the balance sheet and are recognised, for their cumulative amount, in the income statement. If all or part of the impairment losses are subsequently reversed, the reversed amount is recognised in the income statement for the period in which it occurs (in “Valuation Adjustments” in the case of equity instruments).

iv. Equity instruments carried at cost

The amount of the impairment losses on equity instruments is the positive difference between their carrying amount and the recoverable amount (calculated as the higher of fair value less costs to sell and the present value of the expected future cash flows). Unless there is better evidence of the recoverable amount, the equity status of the investee (consolidated, where appropriate), adjusted for the unrealised gains disclosed at the measurement date, is taken into account.

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Impairment losses are recognised in the income statement for the period in which they arise as a direct reduction of the cost of the instrument. These losses can only be recovered subsequently in the event of the disposal of the assets.

f) Repurchase agreements and reverse repurchase agr eements (buy-sell back or sell-buy back transactions)

Purchases (sales) of financial assets under buy-sell back transactions are recognised as financing granted (received) based on the nature of the debtor (creditor) under “Loans to Financial Intermediaries” or “Loans to Individuals” (“Debts to Financial Intermediaries” or “Debts to Individuals”) on the asset (liability) side of the balance sheet.

Differences between the purchase and sale prices are recognised as interest over the contract term.

g) Tangible assets

This caption includes property, plant and equipment for own use, comprising, where appropriate, furniture, fixtures, IT equipment and communications equipment owned by the Company, which are intended to be held for continuing use.

Tangible assets are measured initially at acquisition or production cost, less the related accumulated depreciation and any impairment losses.

Depreciation is calculated, using the straight-line method, on the basis of the acquisition cost of the assets less their residual value. The land on which the buildings and other structures stand has an indefinite life and, therefore, is not depreciated.

The tangible asset depreciation charge is recognised under “Depreciation and Amortisation” in the income statement and is calculated basically using the following depreciation rates (based on the average years of estimated useful life of the various assets):

Depreciation

Rate Furniture and fixtures 8.00% – 10.00% IT and communications equipment 33.33%

The Company assesses at the reporting date whether there is any indication that an asset may be impaired (i.e. its carrying amount exceeds its recoverable amount). If this is the case, the carrying amount of the asset is reduced to its recoverable amount and future depreciation charges are adjusted in proportion to the revised carrying amount and to the new remaining useful life (if the useful life has to be re-estimated).

Similarly, if there is an indication of a recovery in the value of an impaired tangible asset, the Company recognises the reversal of the impairment loss recognised in prior periods and, consequently, adjusts the future depreciation charges. In no circumstances may the reversal of an impairment loss on an asset raise its carrying amount above that which it would have if no impairment losses had been recognised in prior years.

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The Company recognises, where appropriate, any impairment loss on the carrying amount of these assets through “Impairment Losses on Other Assets (net) – Tangible Assets” in the income statement. There were no impairment losses on these assets at 31 December 2019 and 2018.

The estimated useful lives, residual values and depreciation methods of tangible assets for own use are reviewed at least at the end of every reporting period with a view to detecting significant changes therein. If changes are detected, the useful lives of the assets are adjusted by correcting the depreciation charge to be recognised in the income statement in future years on the basis of the new useful lives.

Upkeep and maintenance expenses relating to property, plant and equipment for own use are recognised in the income statement for the year in which they are incurred. However, the amounts invested in improvements leading to increased capacity or efficiency, or to a lengthening of the useful lives of the assets are capitalised.

At 31 December 2019 and 2018 no assets had been acquired or leased out under finance leases.

h) Intangible assets

Intangible assets are identifiable non-monetary assets (separable from other assets) without physical substance which arise as a result of a legal transaction or which are developed, where appropriate, internally by the Company. Only intangible assets whose cost can be estimated reliably and from which the Company considers it probable that future economic benefits will be generated are recognised.

Intangible assets are recognised initially at acquisition or production cost and are subsequently measured at cost less any accumulated amortisation and any accumulated impairment losses.

All the intangible assets owned by the Company (all of which have finite useful lives) at 31 December 2019 and 2018, comprise computer software acquired for consideration. These intangible assets with finite useful lives are amortised over these useful lives using methods similar to those used to depreciate tangible assets, on a straight-line basis over three years, the period in which software is expected to be used.

The intangible asset amortisation charge is recognised under “Depreciation and Amortisation”.

The Company recognises any impairment loss on the carrying amount of intangible assets with a charge to “Impairment Losses on Other Assets (net) - Intangible Assets” in the income statement. The criteria used to recognise the impairment losses on these assets and, where applicable, the reversal of impairment losses recognised in prior years are similar to those used for tangible assets (see Note 2-g above).

i) Accounting for leases

All the leases outstanding at 31 December 2019 were operating leases. In operating leases, ownership of the leased asset and substantially all the risks and rewards incidental thereto remain with the lessor.

j) Tax assets and liabilities

“Tax Assets” and “Tax Liabilities” in the balance sheet include the amounts of all tax assets and liabilities as a result of the income tax, divided into “current” (amounts of tax to be recovered or paid within the next twelve months) and “deferred” (amounts of tax to be paid or recovered in future years, including those arising from tax loss and tax credit carryforwards).

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k) Other assets and liabilities

“Other Assets” in the balance sheet includes the amount of assets not recorded in other items, including advances and loans to employees and other assets.

“Other Liabilities” in the balance includes the payment obligations having the substance of financial liabilities not included in any other category.

These items also includes the balances of prepayments and accrued income and of accrued expenses and deferred income, excluding accrued interest, which is recognised in the same item as the financial instruments giving rise to it.

l) Provisions

Provisions are present obligations arising from past events which are clearly specified as to their nature at the reporting date but are uncertain as to their amount or timing, the settlement of which on maturity is expected to result in an outflow of resources embodying economic benefits.

Contingent liabilities are possible obligations that arise from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more future events not wholly within the control of the Company. They include present obligations when it is not probable that an outflow of cash resources embodying economic benefits will be required to settle them or when their amount cannot be quantified in a sufficiently reliable manner.

The financial statements include all the material provisions with respect to which it is considered more likely than not that the obligation will have to be settled. Contingent liabilities are not recognised in the financial statements, but rather are disclosed in the notes to the financial statements.

Provisions, which are quantified on the basis of the best information available on the consequences of the event giving rise to them and are reviewed and adjusted at the end of each year, are used to cater for the specific obligations for which they were originally recognised. Provisions are fully or partially reversed when such obligations cease to exist or are reduced.

m) Equity instruments

An equity instrument represents a residual interest in the net assets of the Company after deducting all of its liabilities.

Equity instruments issued by the Company are recognised in equity at the proceeds received, net of issue costs. Treasury shares acquired by the Company in the year are recognised, where appropriate, at the value of the consideration paid, deducted directly from equity. Gains or losses arising from the purchase, sale, issue or redemption of equity instruments are recognised directly in equity and under no circumstances are they recognised in the income statement.

n) Revenue and expense recognition

The most significant criteria used by the Company to recognise its income and expenses are summarised as follows:

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i. Interest income, interest expenses and similar items

Interest income, interest expenses and similar items are generally recognised on an accrual basis using the effective interest method under “Interest and Similar Income” and “Interest Expense and Similar Charges”, respectively, in the income statement. Dividends received from other companies are recognised, where appropriate, as income under “Income from Equity Instruments” in the income statement when the Company’s right to receive them arises. Any interest and dividends accrued prior to the date of acquisition are not recognised in the income statement, but the related asset is derecognised when they are collected.

ii. Commissions, fees and similar items

Commission and fee-related income and expenses are recognised in the income statement using different criteria depending on their nature. The main criteria are:

- Fee and commission income and expenses arising from transactions or services that are performed over a period of time are recognised over the term of these transactions or services.

Fee and commission income from securities custody of collective investment undertakings are included in the balance of “Fee and Commission Income” in the income statement (see Note 24). To the extent that such fees and commissions arise from services provided over time, they are recognised in the income statement over the life of these services.

- Those relating to services provided on a one-off basis are recognised when the related act takes place.

Fee and commission income from the brokerage of equity securities are included in the balance of “Fee and Commission Income” in the income statement.

Also, these commissions include the expenses incurred in brokerage services that are included in the balance of “Fee and Commission Expense” in the income statement.

iii. Non-finance income and expenses

These are recognised for accounting purposes on an accrual basis.

ñ) Pension obligations and post-employment benefit obligations

The Company’s post-employment obligations to its employees are deemed to be “defined contribution plans” when the Company makes pre-determined contributions to a separate entity and will have no legal or effective obligation to make further contributions if the separate entity cannot pay the employee benefits relating to the service rendered in the current and prior periods. Post-employment obligations that do not meet the aforementioned conditions are classified as “defined benefit plans”.

All the Company’s post-employment benefit obligations correspond to defined contribution plans. There is no additional obligation with the Company’s employees.

Defined benefit plans

The Company’s defined benefit post-employment obligations correspond to the obligation to pay a retirement bonus to employees pursuant to the collective employment agreement (to which the Company's employees

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have adhered) regulating the employment relationship between securities brokers and dealers in Madrid and their employees.

On September 2016, the Company externalised the retirement bonus commitments through the execution of an insurance policy with a creditworthy insurance company.

The Company recognises under “Provisions – Provision for pensions and similar obligations” on the liability side of the balance sheet the present value of its defined benefit post-employment obligations, net of the fair value of the plan assets and of the past service cost the recognition of which is deferred over time, as explained below.

If application of the foregoing gives rise to an asset, this asset is recognised under "Other Assets" on the asset side of the balance sheet, up to the limit of the present value of the economic benefits that may return to the Company in the form of direct refunds or reductions in future contributions, and of the past service cost the recognition of which is deferred over time, as explained below. Any adjustments made when measuring the asset associated with post-employment remuneration are recognised directly in equity under reserves.

Plan assets are defined as those that will be directly used to settle obligations and that meet the following conditions:

- They are not owned by the Company, but by a legally separate third party that is not a party related to the Dunas Capital Group.

- They are only available to pay or fund post-employment benefits and they cannot be returned to the Company unless the assets remaining in the plan are sufficient to meet all the benefit obligations of the plan and of the entity to current and former employees, or they are returned to reimburse employee benefits already paid by the Company.

“Actuarial gains and losses” are gains or losses which arising from the differences between the previous actuarial assumptions and what has actually occurred and from the effects of changes in actuarial assumptions. “Actuarial gains and losses” which arise in the year will be recognised directly in equity, as reserves.

Any past service cost, which arises from changes to existing post-employment benefits or from the introduction of new benefits, is recognised in the income statement on a straight-line basis from the date on which the new obligations arise to the date on which the employee acquires the irrevocable right to receive the new benefits.

Post-employment benefit obligations are recognised in the income statement as follows:

- Current service cost, i.e. the increase in the present value of the obligations resulting from employee service in the current period, is recognised under “Staff Costs” and non-recognized past service costs (see Note 27).

- Interest cost, i.e. the change in the year in the net defined benefit liability as a result of the passage of time, is recognised under “Interest Expense and Similar Charges” in the income statement.

- The expected return on plan assets and gains or losses on the value of the plan assets, less any plan administration costs and less any applicable taxes, are recognised under “Interest and Similar Income”.

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o) Termination benefits

Under current labour legislation, the Company is required to pay termination benefits to employees terminated under certain conditions. The Company recognised the termination benefits paid to employees dismissed in 2019 and 2018 under “Staff Costs” (see Notes 16 and 27). In the opinion of the Company’s directors, there was no need to record any additional provision in this respect at 31 December 2019.

p) Securities deposits

The Company recognises the market value of securities and other financial instruments of its own or belonging to third parties when it assumes the risk of custody thereof under “Other Memorandum Items – Securities Deposits – Deposits of Securities and Other Financial Instruments”, except the financial instruments that are entrusted to other companies for custody and managing, that are recognised under “Other Memorandum Items – Securities Deposits - Own and Third-Party Financial Instruments Held by Other Entities” (see Note 21).

q) Income tax

The current income tax expense is calculated as the tax payable with respect to the taxable profit for the year, after considering any changes, where appropriate, in the year in the assets and liabilities recognised arising from temporary differences and from any tax credit and tax loss carryforwards.

A temporary difference is considered to exist when there is a difference between the carrying value of an asset or liability and its tax base. The tax base of an asset or liability is the amount attributed to that asset or liability for tax purposes. A taxable temporary difference is one that will generate a future obligation for the Company to make a payment to the related tax authorities. A deductible temporary difference is one that will generate a right for the Company to a refund or to make lower payment to the related tax authorities in the future.

Tax credits and reductions and tax loss carryforwards are amounts that, after performance of the activity or obtainment of the profit or loss giving entitlement to them, are not used for tax purposes in the related tax return until the conditions for doing so established in the tax regulations are met, and the Company considers it probable that they will be used in future periods.

Current tax assets and liabilities are the taxes that are expected to be recoverable from or payable to the related tax authorities within 12 months from the date they are recognised. Deferred tax assets and liabilities are the amounts that are expected to be recoverable from or payable to, respectively, the related tax authorities in future years

Deferred tax liabilities are recognised for all material taxable temporary differences. The Company only recognises deferred tax assets arising from deductible temporary differences and from tax credit and tax loss carryforwards if it is considered probable that the Company will have sufficient future taxable profits against which the deferred tax assets can be utilised.

No deferred tax assets or liabilities are recognised if they arise from the initial recognition of an asset or liability, other than in a business combination that at the time of recognition affects neither accounting profit nor taxable profit.

The deferred tax assets and liabilities recognised are reassessed each year in order to ascertain whether they still exist, and the appropriate adjustments are made on the basis of the findings of the analyses performed.

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The Company files consolidated income tax returns with the companies which are part of the Dunas Capital Group (see Note 18), of whose Parent is Dunas Capital España, S.L., in terms of Corporation Tax. The resulting tax charge is distributed based on the participation of each entity in the aforementioned Group in the total tax incurred.

Article 7 of Law 16/2012, of 27 December, adopting various tax measures aimed at consolidating public finances and boosting economic activity, established that depreciation and amortisation charges on property, plant and equipment, intangible assets and investment property for tax periods beginning in 2013 and 2014 for entities that, in those years, did not meet the requirements established in sections 1, 2 or 3 of Article 108 of the Consolidated Corporation Tax Law, approved by Legislative Royal Decree 4/2004, of 5 March, then in force, would be deducted from the tax base. This deduction will be limited to 70% of the amount that would have been tax- deductible if the percentage had not been applied, in accordance with sections 1 and 4 of Article 11 of the aforementioned Law. Depreciation and amortisation charges that were not tax-deductible under the aforementioned Article will be deducted on a straight-line basis over a ten-year period or, optionally, over the life of the asset, as from the first tax period commencing in 2015. Also, thirty-seventh transitional provision of the Spanish Corporation Tax Law 27/2014, of 27 November, establishes that contributors who are taxed at the rate set out in section 1 of the article 29 of such Law, and applied the limit set out in the article 7 of Law 16/2012, of 27 December, will be entitled to a gross tax payable deduction equal to 5% of the amounts included in the taxable profit (2% in the tax periods beginning in 2015), which arise of the depreciation and amortisation charges not deducted in tax periods beginning in 2013 and 2014.

Article 13.2 of Spanish Corporation Tax Law 27/2014, of 27 November established that the impairment losses on tangible assets, investment properties and intangible assets (goodwill included), securities representing holdings in the share capital or own funds of entities and debt instruments will not be considered tax-deductible expenses. Fifteenth transitional provision of the Spanish Corporation Tax Law 27/2014, of 27 November, establishes that reversal of impairment losses on tangible assets, investment properties, intangible assets and debt instruments which were deductible for income tax purposes in tax periods commencing prior to 1 January 2015, will be included in the tax base for the period in which its book value is recovered. The sixteenth transitional provision of such Corporation Tax Law establishing that any reversals of impairment losses on securities representing holdings in share capital or equity of entities that were deductible for income tax purposes in tax periods commencing prior to 1 January 2013 (in accordance with Consolidated Corporation Tax Law, approved by Legislative Royal Decree 4/2004, of 5 March, then in force), regardless of how they were recognised in the income statement, will be included in the tax base for the period in which the value of the shareholders' equity at the end of the year exceeds that at the beginning of the year, in proportion to the ownership interest held, taking into account any contributions or reimbursements of contributions performed in the year, limited by the aforementioned excess. For these purposes, the positive difference between the value of the shareholders' equity at the end of the year and at the beginning of the year, in the terms established in this paragraph, will relate firstly to the impairment losses that were tax-deductible.

Royal Decree-Law 3/2016, of 2 December, adopting measures in the tax field aimed at the consolidation of public finances and other urgent social security measures established that any impairment losses which had been treated as tax deductible before fiscal year 2013 and have not yet been reversed must be recognized, at least, in equal parts in the tax base for each of the first five taxable years beginning on or after January 1, 2016.

Finally, according to Spanish Corporation Tax Law 27/2014 the applicable rate for this tax is 25%.

r) Consolidated statements of cash flows

The following terms are used in the statements of cash flows:

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- Cash flows: inflows and outflows of cash and cash equivalents, which are short-term, highly liquid investments that are subject to an insignificant risk of changes in value.

- Operating activities: the principal revenue-producing activities of the Company and other activities that are not investing or financing activities.

- Investing activities: the acquisition and disposal of long-term assets and other investments not included in cash and cash equivalents.

- Financing activities: activities that result in changes in the size and composition of the equity and liabilities of the Company that are not operating activities.

In the preparation of the statements of cash flows, “cash and cash equivalents” were defined as highly liquid short-term investments that are subject to an insignificant risk of changes in value. Consequently, the Company treats the balances of the demand deposits recognised under “Loans and Receivables – Loans to Financial Intermediaries” on the asset side of the balance sheet (see Note 6) and cash in hand, cash held at the Bank of Spain and at other central banks, which are recognised under "Cash" on the asset side of the balance sheet (see Note 5), as cash and cash equivalents.

s) Statements of changes in equity

The statements of changes in equity presented in these financial statements show the changes in total equity in the year. This information is in turn presented in two statements: the statement of recognised income and expense and the statement of changes in total equity. The main characteristics of the information contained in the two parts of the statements are explained below:

Statements of recognised income and expense

This part of the statements of changes in equity present the income and expenses generated by the Company as a result of its business activity in the year, distinguishing between the income and expenses recognised in the income statement for the year and other income and expenses recognised directly in equity, pursuant to the regulations in force.

Therefore, these statements include:

a) Profit/loss for the year.

b) The net amount of the income and expenses recognised temporarily as valuation adjustments in equity.

c) The net amount of the income and expenses recognised definitively in equity, where appropriate.

d) The income tax chargeable in respect of the items indicated in b) and c) above.

e) Total recognised income and expense, calculated as the sum of a) to d) above.

The detail of the changes in income and expenses recognised in equity under “Valuation Adjustments” is as follows:

a) Revaluation gains/(losses): includes the amount of the income, net of the expenses incurred in the year, recognised directly in equity.

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b) Amounts transferred to the income statement: includes the amount of the revaluation gains and losses previously recognised in equity, albeit in the same year, which are recognised in the income statement.

c) Other reclassifications: includes, where appropriate, the amount of the transfers made in the year between valuation adjustment items in accordance with current regulations.

The amounts of these items are presented gross and the related tax effect, if any, is recognised in this statement under “Income Tax”.

Statements of changes in total equity

This part of the statement of changes in equity presents all the changes in equity, including those arising from any changes in accounting policies and from the correction of errors, where appropriate. Accordingly, this statement presents a reconciliation of the carrying amount at the beginning and end of the year of all the equity items, the changes in the year being grouped together on the basis of their nature in the following items:

a) Adjustments due to changes in accounting policies and adjustments made to correct errors: include, where appropriate, any changes in equity arising as a result of the retrospective restatement of the balances in the financial statements due to changes in accounting policies or to the correction of errors.

b) Income and expenses recognised in the year: includes, in aggregate form, the total of the aforementioned items recognised in the statement of recognised income and expense.

c) Other changes in equity: includes the remaining items recognised in equity, such as the distribution of profit, transactions involving own equity instruments, equity-instrument-based payments, transfers between equity items and any other increases or decreases in equity.

t) Foreign currency transactions

The Company's functional currency is the euro. Therefore, all balances and transactions denominated in currencies other than the euro are deemed to be denominated in “foreign currency”.

The equivalent euro value of the total assets in foreign currency held by the Company at 31 December 2019 amounted to EUR 15 thousand (31 December 2018: EUR 34 thousand) –see Note 6–. The exchange rates used in translating the foreign currency balances to Euros were the closing rates published by the European Central Bank.

The exchange differences arising on the translation of foreign currency balances to the functional currency are generally recognised at their net amount under “Exchange Differences (net)” in the income statement, except for exchange differences arising on financial instruments at fair value through profit or loss, which are recognised, where appropriate, in the income statement without distinguishing them from other changes in the fair value of these instruments, and for exchange differences arising on instruments classified as available-for-sale financial assets, which are recognised in equity.

u) Transactions with related parties

All transactions entered into between the Company and the entities and persons meeting the requirements of Rule 54.1 of CNMV Circular 7/2008, of 26 November.

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The Company performs all its transactions with related parties on an arm’s length basis. The transfer prices are adequately supported and, therefore, the Company’s directors consider that there are no material risks in this regard that might give rise to significant liabilities in the future (see Note 22).

3. Distribution of the Company's profit

a) Distribution of the Company's profit

The proposed distribution of profit for the year ended 31 December 2018 was approved by the Sole Shareholder of the Company on 30 April 2019.

The proposed distribution of the net profit of the Company for 2019 that its Board of Directors will submit for approval by the Sole Shareholders of the Company is as follows:

Thousands of

Euros Interim dividends 350 Final dividend 326 Net profit or loss of the Company 676

At its meeting held on 19 December 2019, the Company’s Board of Directors resolved to distribute an interim dividend out of 2019 profit of EUR 350 thousand, which is recognised under "Equity - Less: Dividends and Remuneration" in the accompanying balance sheet as at 31 December 2019. This amount was offset against a portion of the debt owed to the Company by its sole shareholder (see Note 7).

The provisional accounting statement prepared by the directors of the Company, in accordance with legal requirements, evidencing the existence of sufficient liquidity for the distribution of the dividends is as follows:

Thousands of Euros

30/11/2019

Maximum amount to be distributed according the article 277.b of the Consolidated Spanish Limited Liability Companies Law 439 Proposed interim dividend 350 Cash available at the date: Banks and credit institutions 869 Receivable outstanding (*) 21 890

(*) Depository and administration fees of the investment funds for November 2019, which were received at the beginning of December 2019.

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b) Earnings per share

i. Basic earnings per share

Basic earnings per share are calculated by dividing the Company’s net profit or loss in a period by the weighted average number of ordinary shares outstanding during that period, excluding the average number of treasury shares held in the year.

Accordingly:

Thousands of Euros

Year 2019 Year 2018

Net profit for the year 676 (300) Weighted average number of shares outstanding (Note 17) 750,000 750,000 Assumed conversion of convertible debt - - Adjusted number of shares 750,000 750,000 Basic earnings per share (Euros) 0.90 (0.40)

ii. Diluted earnings per share

Diluted earnings per share are calculated by dividing net profit or loss for the year attributable to ordinary shareholders adjusted for the effect attributable to the dilutive potential ordinary shares by the weighted average number of ordinary shares outstanding in the year, adjusted by the weighted average number of ordinary shares that would have been outstanding assuming the conversion of all the dilutive potential ordinary shares into ordinary shares of the Company.

At 31 December 2019 and 2018 there were no ordinary shares with a dilutive effect.

4. Remuneration and other benefits paid to the Comp any's directors and senior managers

The detail of the remuneration received in 2019 and 2018 by the members of the Board of Directors and Senior Managers of the Company, by type of remuneration, is as follows:

Year 2019:

Thousands of Euros

Short-term Remunerations

(*) Expense

Allowances Other Long-term Benefits

Retirement Benefits

Termination Benefits

Equity Instrument

Remuneration Directors 40 - - - - - Senior Managers (**) - - - - - -

(*) Relating to the amounts earned and paid in 2019 to the Company’s independent director.

(**) The Company is organised and structured so that the main strategic and business decisions are made by other companies in the Group to which it belongs. Consequently, the personnel considered to be senior executives belong to those companies.

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Year 2018:

Thousands of Euros

Short-term Remunerations

(*) Expense

All owances Other Long-term Benefits

Retirement Benefits

Termination Benefits (***)

Equity Instrument

Remuneration Directors 40 - - - - - Senior Managers (** ) - - - - - -

(*) Relating to the amounts earned and paid in 2018 to the Company’s independent director.

(**) The Company is organised and structured so that the main strategic and business decisions are made by other companies in the Group to which it belongs. Consequently, the personnel considered to be senior executives belong to those companies.

At 2019 and 2018 year-end, and during these years, the Company has not taken out any civil liability insurance of directors.

At the end of 2019 and 2018 and throughout these years, the Company had not arranged, on an individual basis, any third-party liability insurance for the directors, as this matter was covered by a policy arranged by Inverseguros, S.A.U. (sole shareholder of the Company and a Dunas Capital Group company –see Notes 1 and 17) that covers the entire Dunas Capital Group.

At 31 December 2019 and 2018, the Company’s Board consisted of three men.

Information regarding situations of conflict of int erest involving the directors

At 2019 year-end, the Company's directors had not notified the Board of Directors of any direct or indirect conflict of interest that they (or any persons related to them) might have with the Company's interests.

5. Cash

The detail of “Cash” in the asset side of the balance sheet at 2019 and 2018 year-end is as follows:

Thousands of Euros 2019 2018

Cash 1 1 1 1

6. Loans to financial intermediaries

The breakdown, by classification, type and currency, of “Loans to Financial Intermediaries” on the asset side of the balance sheet at 31 December 2019 and 2018 is as follows:

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Classification: Loans and receivables 76,271 119,486 76,271 119,486 Nature: Demand deposits 719 440 Time deposits - - Reverse repurchase agreements 75,244 118,281 Other loans 319 803 Valuation adjustments- Accrued interest receivable (11) (38) 76,271 119,486 Currency: Euro 76,256 119,452 Other currencies 15 34 76,271 119,486

The balance of “Demand Deposits" in the foregoing detail reflects balances of the demand deposits held by the Company at financial institutions, which are remunerated at market rates of interest. The detail of the demand deposits entered into by the Company at 31 December 2019 and 2018 is as follows:


Demand deposits in Euros: BBVA 432 38 Caixabank 15 10 Euroclear 3 7 Cecabank 234 202 Altura (*) 16 148 BNP 4 1 704 406 Demand deposits in other currencies: BNP - 7 Euroclear 2 - Cecabank 13 27 15 34 719 440

(*) Balances with Altura Matkets, Sociedad de Valores, S.A.

In 2019, foreign currency balances gave rise to a profit for the Company of EUR 1 thousand (2019: EUR 1 thousand) which are recognised under “Exchange Differences (net)” in the income statement.

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The balance of “Other Loans” also includes the amount of the custody fees receivable by the Company at 31 December 2019, amounting to EUR 55 thousand (31 December 2018: EUR 47 thousand). This balance mainly includes the fees receivable from the Collective Investment Undertakings managed by the Group (see Note 24). Also, at 31 December 2019 the balance of this account included a margin deposit for derivatives trading of EUR 264 thousand (31 December 2018: EUR 557 thousand).

At 31 December 2019, there were reverse repurchase agreements entered into by the Company, amounting to EUR 75,224 thousand (31 December 2018: EUR 118,281 thousand). The average annual return on the reverse repurchase agreements in 2019 was -0.6528% (2018: 0.2925%).

The interest earned in 2019 on the demand deposits, time deposits and reverse repos totalled EUR 394 thousand, y, and was recognised under “Interest and Similar Income” in the income statement (2018: EUR 346 thousand). Furthermore, in 2019 one-off overdraft on the Company’s Euroclear demand deposits gave rise to a loss of a non-significant amount (2018: EUR 1 thousand), which are recognised under “Interest Expense and Similar Charges” in the income statement.

In 2019 and 2018 there were no impairment losses affecting this type of assets.

The changes in the loans to financial intermediaries in 2019 and 2018, disregarding demand deposits and valuation adjustments, were as follows:


Beginning balances 119,084 2,304 Acquisitions/subscriptions 5,372,341 4,537,347 Disposals/repayments (5,415,862) (4,420,567) Ending balances 75,563 119,084

7. Loans to individuals

a) Breakdown

The breakdown, by classification, kind and situation, of “Loans to individuals” on the asset side of the balance sheet at 31 December 2019 and 2018 is as follows (fully included in Spain):


Classification: Loans and receivables 6,013 6,362 Kind and situation: Group company debtors 6,013 6,362

6,013 6,362

The balance of “Group company debtors” in the foregoing table includes EUR 447 thousand at the 2019 year-end, related to the income tax prepayments in those years to Dunas Capital España, S.L., parent of the Dunas

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Group, because the Company files consolidated income tax returns with the Dunas Group – see Notes 1, 18 and 22.

Furthermore, during 2019 and 2018, the Company registers the amount of EUR 209 thousands in relation to 2018 income tax receivable from the Parent of its consolidated Group, which will settle this tax.

At 2019 and 2018 year-end, the balance of this account also includes the amount lent by the Company to other Group entities, as detail below:


Dunas Capital España, S.L. 132 435 Inverseguros, S.A.U. 4,153 5,343 Inmoseguros Gestión, S.A.U. 190 20 Dunas Capital Real Assets, S.L.U. 151 15 Dunas Capital Real Estate, S.L.U. 731 340 5,357 6,153

The balances drawn down against by other Group entities earn a rate equal to 3 months Euribor (in case that 3 months Euribor is negative, interest rate will be equal to 0%). In this regard, no interest have been earned in 2019 and 2018.

8. Debt instruments

The debt instruments carried in the balance sheet at 31 December 2019 and 2018 relate in full to fixed-income, held-to-maturity securities, which are quoted on the Stock Exchange or other official markets and are denominated in Euros. The detail is as follows:

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31 December 2019:

Thousands of Euros

Maturity Annual Interest

Rate Par Value Carrying Amount

Government bonds 1 1 31/01/2029 6.00% Interest-only strip - (*) - (*) 31/01/2029 0.00% Interest-only strip 1 1 31/01/2020 0.00% Interest-only strip 1 1 31/01/2021 0.00% Interest-only strip 1 1 31/01/2023 0.00% Interest-only strip 1 1 31/01/2024 0.00% Interest-only strip 1 1 31/01/2028 0.00% Interest-only strip 2 2 31/01/2029 0.00% Alitalia Bond 400 20 30/07/2020 5.25% Montenegro Sovereign bond 3,000 2,984 03/10/2029 2.55% Anima bond 12,100 12,044 23/10/2026 1.75% Government bonds 17,000 18,462 30/04/2025 1.60% German Sovereign bond 7,000 12,044 04/07/2034 4.75% Schleswig-Holstein bond 7,000 6,614 15/08/2039 0.20% Italia Sovereign bond - (*) - (*) 01/11/2030 0.00% Italia Sovereign bond 8,040 8,001 01/08/2022 0.00% Italia Sovereign bond 900 770 01/09/2030 0.00% Italia Sovereign bond 3,000 2,991 01/04/2030 1.35% 58,448 63,938 Accrued interest receivable - 428 58,448 64,366

(*) Less than EUR 1 thousand.

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31 December 2018:

Thousands of Euros



Government bonds 1 1 31/01/2029 6.00% Interest-only strip - (*) - (*) 31/01/2029 0.00% Interest-only strip - (*) - (*) 31/01/2019 0.00% Interest-only strip 1 1 31/01/2020 0.00% Interest-only strip 1 1 31/01/2021 0.00% Interest-only strip 1 1 31/01/2023 0.00% Interest-only strip 1 1 31/01/2024 0.00% Interest-only strip 1 - (*) 31/01/2028 0.00% Interest-only strip 2 2 31/01/2029 0.00% Government bonds 30,000 34,017 12/08/2021 5.50% Government bonds 3,000 2,915 30/04/2024 0.00% Government bonds 2,500 2,592 07/06/2027 2.70% Alitalia 400 20 30/07/2020 5.25% Italia Sovereign bond 37,000 36,985 14/11/2019 0.00% Italia Sovereign bond 12,000 12,038 01/12/2028 2.80% Italia Sovereign bond 19,000 18,704 01/11/2021 0.00% KFW Bond 10,000 10,095 28/09/2028 0.50% 113,908 117,373 Accrued interest receivable - 1,165 113,908 118,538

(*) Less than EUR 1 thousand.

The interest earned on debt instruments in 2019 totalled EUR 2,357 thousand (2018: EUR 1,349 thousand) and was recognised in the balance of “Income from Equity Instruments” in the income statement.

The changes in this portfolio of securities, disregarding the interest earned and impairment losses in 2019 and 2018, were as follows:


Beginning balances 117,373 2,080 Acquisitions 16,624,974 11,767,702 Disposals (16,678,409) (11,652,409) Ending balances 63,938 117,373

The detail of “Financial liabilities held for trading” on the on the liability side of the balance sheet at 31 December 2019 and 2018 includes the debt instruments relate in full to fixed-income, held-to-maturity securities, which are quoted on the Stock Exchange or other official markets and are denominated in Euros. The detail is as follows:

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31 December 2019:

Thousands of Euros



Italia Sovereign bond 8,000 8,156 01/08/2022 0.90% Italia Sovereign bond 4,000 4,600 31/08/2029 3.00% German Sovereign bond 5,000 4,575 15/08/2050 0.00% German Sovereign bond 20,000 20,578 15/08/2026 0.00% German Sovereign bond 12,000 12,819 15/02/2028 0.50% Government bonds 24,000 24,307 30/07/2024 0.25% 73,000 75,035 Accrued interest receivable - 157 73,000 75,192

31 December 2018:

Thousands of Euros



Government bonds 16,000 16,251 30/04/2027 1.50% Government bonds 50,000 50,055 30/01/2021 0.05% Government bonds 40,000 40,084 01/11/2020 0.65% Government bonds 12,000 11.309 01/02/2028 2.00% 118,000 117,699 Accrued interest receivable - 326 118,000 118,025

The changes in this portfolio of securities, disregarding the interest earned and impairment losses in 2019 and 2018, were as follows:


Beginning balances 117,699 - Acquisitions 1,889,921 1,074,880 Disposals (1,932,585) (957,181) Ending balances 75,035 117,699

9. Other equity instruments

Other equity instruments

The detail, by classification, listing status, currency and type, of “Other Equity Instruments” on the asset side of the balance sheet at 31 December 2019 and 2018 is as follows:

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Classification: Available-for-sale financial assets 2,288 3,202 2,288 3,202 Listing status: Listed 2,287 3,201 Unlisted 1 1 2,288 3,202 Currency: Euro 2,288 3,202 2,288 3,202 Type: Shares of Spanish companies 2,288 3,202 2,288 3,202

Equity instruments – Available-for-sale financial a ssets

a) Breakdown

The detail of “Available-for-Sale Financial Assets" on the asset side of the balance sheet at 31 December 2019 and 2018 is as follows:


Cost Fair Value Cost Fair Value Fogain shares 1 1 1 1 Dunas Valor Prudente, F.I. units - - 542 567 Segurfondo Inversión, FII (in liquidation) units 1,105 1,435 1,105 1,435 Dunas Valor Equilibrio, F.I. units 685 687 1,113 1,199 Dunas Aviation I, FCR units 165 165 - - 1,956 2,288 2,761 3,202

At 2019 and 2018 year-end, the increase in the fair value of the shares and investment fund units was recorded as a liability, net of the related tax effect, under “Valuation Adjustments – Available-for-Sale Financial Assets” in the balance sheet.

b) Purchases and sells

The non-quoted shares correspond to the unit held by the Company in Gestora del Fondo General de Garantía de Inversiones, S.A. On 31 December 2019 the Company shares in Gestora del Fondo General de Garantía de Inversiones, S.A. stand at a position of 3 units of EUR 200 par value each (31 December 2018: 3 units of EUR 200 par value each).

At the end of 2018, the Company held 113,748.6193 class I units of Dunas Valor Equilibrio, Fondo de Inversión and 2,405.54467 class I units of Dunas Valor Prudente, Fondo de Inversión. In 2019 the Company redeemed all

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these units, giving rise to gains of EUR 131 thousand and EUR 26 thousand, respectively, which are recognised under “Gains (Losses) on Financial Assets and Liabilities (Net) - Financial Instruments Not Measured at Fair Value Through Profit or Loss” in the income statement for 2019. Subsequently, the Company acquired another 61,579.5478 class I units of Dunas Valor Equilibrio, Fondo de Inversión.

In 2019 the Company acquired 61,387.2257 class I units of Dunas Valor Flexible, Fondo de Inversión which, subsequently, but also in 2019, were redeemed, giving rise to a gain of EUR 31 thousand, which is recognised under “Gains (Losses) on Financial Assets and Liabilities (Net) - Financial Instruments Not Measured at Fair Value Through Profit or Loss” in the income statement for 2019.

Also, in 2019 the Company subscribed, on incorporation, 1,650 class A units of Dunas Aviation I, Fondo de Capital Riesgo for EUR 165 thousand. In this connection, at the end of 2019 the Company had a commitment to invest EUR 1,485 thousand in this private equity fund (see Note 21).

Moreover, in 2018, the Company redeemed 8,030.15325 class I units of Dunas Valor Prudente, Fondo de Inversión, giving rise to a gain of EUR 86 thousand, which is recognised under “Gains (Losses) on Financial Assets and Liabilities (Net) - Financial Instruments Not Measured at Fair Value Through Profit or Loss” in the income statement for 2018.

The balance of “Other Liabilities - Other” on the liability side of the balance sheet included EUR 1,435 thousand at the end of 2019 (31 December 2018: EUR 1,435 thousand) relating to the amount of the proceeds received from the settlement, on account, of the units held by the Company in Segurfondo Inversión, Fondo de Inversión Inmobiliaria (in liquidation) –see Note 12–. In order to determine the liquidating dividend that will be paid to the Company when the final liquidation of the Fund takes place, the amount of the aforementioned settlement on account recognised under the aforementioned heading will be deducted from the amount at which the Company’s ownership interest in the Fund is recognised at that time.

The Company measures its investment in Segurfondo Inversión, Fondo de Inversión Inmobiliaria (in liquidation) based on the net asset value reported by the Management Entity of the Fund, as established by applicable legislation (see Note 2-b).

c) Impairment losses

There have not been impairment losses related to equity instruments in 2019 and 2018.

d) Valuation adjustments

Any adjustments due to changes in fair value arising from “Available-for-Sale Financial Assets” are recognised temporarily, net of the related tax effect, in equity under “Valuation Adjustments”. The breakdown of the balance of “Valuation Adjustments – Available-for-sale financial assets” at 31 December 2019 and 2018 is as follows:

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Thousands of Euros Fair Value Valuation Adjustments

2019 2018 2019 2018

Fogain shares 1 1 - - Dunas Valor Prudente, FI units - 567 - 19 Segurfondo Inversión (in liquidation), FII units 1,435 1,435 247 247 Dunas Valor Equilibrio, FI units 687 1,199 2 64 Dunas Aviation I, FCR units 165 - - - 2,288 3,202 249 330

The changes in the balance of “Valuation Adjustments – Available-for-sale financial assets” in 2019 and 2018 is as follows:


Beginning balances 330 428 Valuation Changes 80 (44) Amounts transferred to income statement (Note 26) (188) (86) Net deferred tax (*) (Note 18) 27 32 Ending balances 249 330

(*) Calculated as the 25% of the valuation changes (see Note 2-q).

10. Tangible assets

The changes in the balance of “Tangible Assets”, which consists solely of property, plant and equipment for own use, on the asset side of the 2019 and 2018 balance sheet were as follows:

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Thousands of Euros

Furniture and Fixtures

IT and Communications

Equipment Total Cost: Balances at 1 January 2018 176 166 342 Additions - - - Disposals - - - Balances at 31 December 2018 176 166 342 Additions - - - Disposals - - - Balances at 31 December 2019 176 166 342 Accumulated depreciation: Balances at 1 January 2018 (104) (160) (264) Charge for the year (6) (4) (10) Disposals - - - Balances at 31 December 2018 (110) (164) (274) Charge for the year (7) (1) (8) Disposals - - - Balances at 31 December 2019 (117) (165) (282) Net tangible assets: Balances at 31 December 2018 66 2 68 Balances at 31 December 2019 59 1 60

At 31 December 2019 there were fully depreciated tangible assets in use by an amount of EUR 259 thousand (31 December 2018: EUR 256 thousand).

There have not been impairment losses related to intangible assets in 2019 and 2018.

11. Intangible assets – Other intangible assets

The changes in the balance of “Other intangible Assets”, which consists solely of intangible assets (software), on the asset side of the 2019 and 2018 balance sheet were as follows:

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Thousands of

Euros Cost: Balance at 1 January 2018 460 Additions 14 Balance at 31 December 2018 474 Additions - Balance at 31 December 2019 474 Accumulated depreciation: Balance at 1 January 2018 (445) Charge for the year (8) Balance at 31 December 2018 (453) Charge for the year (10) Balance at 31 December 2019 (463) Net intangible assets: Balance at 31 December 2018 21 Balance at 31 December 2019 11

At 31 December 2019 there were fully depreciated intangible assets in use by an amount of EUR 443 thousand (31 December 2018: EUR 441 thousand).

There have not been impairment losses related to intangible assets in 2019 and 2018.

12. Other assets and liabilities

The detail of “Other Assets” and “Other Liabilities” in the balance sheet at 31 December 2019 and 2018 is as follows:

Thousands of Euros Asset Liability

2019 2018 2019 2018 Advances and loans to staff 13 29 - - Remuneration payable (Note 27) - - 532 480 Other assets - - - - Other liabilities (Notes 9, 7 and 28) - - 1,478 1,488 Tax authorities (Note 18) 36 22 67 70 Prepaid expenses 96 67 - - 145 118 2,077 2,038

The interest earned on loans to staff of the Company in 2019 and 2018 totalled a non-significant amount and were recognised in the balance of “Income from Equity Instruments” in the income statement.

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13. Debts to financial intermediaries

The breakdown, by classification, type, geographical area and currency, of the balance of “Debts to Financial Intermediaries” at 31 December 2019 and 2018 is as follows:


Classification: Financial liabilities at amortised cost 64,008 117,880 64,008 117,880 Type: Repurchase agreements 64,010 117,893 Other debts 1 - Valuation adjustments-

Accrued interest payable (3) (13) 64,008 117,880 Geographical area: Spain 64,008 117,880 64,008 117,880 Currency: Euro 64,008 117,880 64,008 117,880

At 31 December 2019 all of the repurchase agreements had a maturity of less than six months. The average annual cost of these liabilities was 0.2838% in 2019 (2018: 0.2138%).

The interest accrued on repurchase agreements entered into by the Company with financial intermediaries in 2019 totalled EUR 304 thousand (2018: EUR 252 thousand) and this amount was recognised under “Interest and Similar Income” in the income statement.

The Company, together with its sole shareholder, has entered into a credit facility with Banco de Sabadell with a joint limit of EUR 3,000 thousand for the two companies; the facility matures on 13 September 2020, has an annual nominal ordinary interest rate of 2% on the balances drawn down by the Company on a daily basis and drawdowns may only be made through the Company’s sole shareholder. At the end of 2019 and 2018 no drawdowns had been made against this facility. The facility bore interest of EUR 13 thousand in 2018, and this amount is recognised under “Interest Expense and Similar Charges” in the income statement for 2018 (2019: no amount in this connection, as the Company did not make any drawdowns in 2019).

14. Debts to individuals

The breakdown, by classification, type, geographical area and currency, of the balance of “Debts to Individuals” on the liability side of the balance sheet at 31 December 2019 and 2018 is as follows:

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Classification: Financial liabilities at amortised cost 217 86 217 86 Type: Payable to Group companies 217 86 217 86 Geographical area: Spain 217 86 217 86 Currency: Euro 217 86 217 86

At 31 December 2019 the balance of “Payable to Group Companies”” in the foregoing detail included the amounts in relation to 2019 income tax payable by the Company to the Parent of its consolidated Group, Dunas Capital España S.L., which will settle this tax (see Notes 18 and 22). At 31 December 2018 the foregoing detail included EUR 86 thousand, related to the income tax receivables in this year to Dunas Capital España, S.L.

15. Provisions for pensions and similar obligations – Other assets

The changes in the balance of “Provisions – Provisions for pensions and similar obligations” on the liability side of the balance sheet at 31 December 2019 and 2018, were as follows:


Balance at 1 January 24 - Addition net charged to income 15 (92) Addition (released) net charged (credit) to equity (see Notes 17 and 18) (20) 17 Premiums paid (15) (7) Charged rebates - 106 Balance at 31 December 4 24

In 2016, the Company externalised the retirement bonus commitments through the execution of an insurance policy with a creditworthy insurance company (see Note 2-ñ). The present value of the obligations was determined on the basis of the work performed by independent actuaries using the following actuarial techniques:

- Valuation method: projected unit credit method, which sees each period of service as giving rise to an additional unit of benefit entitlement and measures each unit separately.

- Actuarial assumptions used: unbiased and mutually compatible. On a general basis, the most significant actuarial assumptions used in the calculations were as follows:

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Retirement Bonus

Commitments Mortality tables GRM/F 95 Interest rate 1.338% Actuarial technique UNIT CREDIT

The amounts recognised in the 2019 and 2018 income statement related to the defined post-employment benefit obligations is as follows:


Current service cost (see Note 27) 15 (91) Expected return on insurance contracts (*) - (1) 15 (92)

(*) Amount recognised under “Interest and Similar Income” in the income statement.

The changes in the present value of the Company’s defined benefit post-employment obligations in 2019 and 2018, were as follows:


Present value of the obligations at 1 January 140 244 Current service cost 15 (91) Actuarial gains and losses (12) (13) Present value of the obligations at 31 December 143 140

The changes in the present value of the insurance contracts linked to the defined post-employment benefit obligations, were as follows:


Fair value of insurance contracts linked to pensions at 1 January 116 244 Expected return on insurance contracts - 1 Actuarial (gains)/losses 8 (30) Premiums paid 15 7 Charged rebates - (106) Fair value of insurance contracts linked to pensions at 31 December 139 116

The funding status of the defined post-employment benefit obligations at 31 December 2019 and 2018, was as follows:

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Fair Value of plan assets 139 116 Minus: Present value of the obligations (143) (140) Balance (4) (24)

16. Provisions

Provisions for taxes

The balance of “Provisions – Provision for taxes” in the asset side of the balance sheet at 31 December 2019 and 2018 included the provision made by the Company in that year to cover the potential claim of the Administration for certain taxes paid by the Company in previous years. The changes in the balance of “Provisions – Provisions for taxes” in 2019 and 2018 is as follows:


Balance at 1 January 35 68 Amount charged to income - - Amount disposed (*) (35) (33) Balance at 31 December - 35

(*) Amount registered under “Provisions” in the income statement.

17. Equity

Share capital

At 31 December 2019 and 2018, the Company’s share capital was represented by 750,000 fully subscribed and paid registered shares of 6.02 par value each (all with the same dividend and voting rights). There were no restrictions on the free transferability of the shares. At that date, all the shares comprising the Company’s share capital were owned by Inverseguros, S.A.U., which belongs to the Dunas Capital Group (see Note 1). Pursuant to the aforementioned Law, it is hereby stated that at the end of 2019 and 2018 the only contracts in force between the Company and its sole shareholder were those relating to the credit facility entered into by the two companies (see Notes 7 and 22) and the allocation of expenses for administrative services and rent on the Company’s head office (see Notes 22 and 28).

Reserves

The detail of the balance of “Reserves” in the balance sheet and of the changes therein in 2019 and 2018 is as follows:

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Thousands of Euros Legal

Reserve Voluntary Reserves

Prior periods’ losses

Total Reserves

Balances at 1 January 2018 903 4,218 - 5,121 Distribution of net profit for 2017 - - - - Distribution of dividends - - - - Actuarial (gains)/losses (Note 15) - (17) - (17) Balances at 31 December 2018 903 4,201 - 5,104 Distribution of net profit for 2018 - - (300) (300) Distribution of dividends - (2,300) - (2,300) Actuarial (gains)/losses (Note 15) - 15 - 15 Balances at 31 December 2019 903 1,916 (300) 2,519

Legal reserve

Under the Consolidated Spanish Limited Liability Companies Law, 10% of net profit for each period must be transferred to the legal reserve until the balance of this reserve reaches at least 20% of the share capital, except when accumulated losses reduce the Company’s equity to below the share capital amount, in which case the profit will be used to offset these losses until equity is equal to the share capital amount, and 10% of the remaining profit will be transferred to the legal reserve.

The legal reserve can be used to increase capital provided that the remaining reserve balance does not fall below 10% of the increased share capital amount. Otherwise, until the legal reserve exceeds 20% of share capital, it can only be used to offset losses, provided that sufficient other reserves are not available for this purpose. The legal reserve recorded by the Company at 31 December 2019 and 2018 amounted to 20% of share capital.

Voluntary reserve

The balance of “Voluntary reserve” on the balance related to unrestricted reserves. On 19 December 2019, the Company's sole shareholder resolved to distribute a dividend amounting to EUR 2,300 thousand with a charge to the Company’s voluntary reserves. This amount was offset against a portion of the debt owed to the Company by its sole shareholder (see Note 7).

18. Tax matters

The Company files consolidated tax returns with the companies which belong to Dunas Capital Group related to the income tax (see Note 2-q).

i. Balances with tax authorities

The balance of “Other Assets” on the asset side of the balance includes balances with tax authorities. The detail of these balances at 31 December 2019 and 2018 is as follows (see Note 12):


Tax withholdings 36 22 36 22

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The balance of “Other Liabilities” on the liability side of the balance includes balances with tax authorities. The detail of these balances at 31 December 2019 and 2018 is as follows (see Note 12):


VAT 4 4 Personal income tax 40 45 Accrued social security taxes payable 23 21 67 70

ii. Reconciliation of the accounting profit to the taxable profit

The reconciliation of the accounting profit to the taxable profit for income tax purposes for 2019 and 2018 is as follows:


Accounting profit before tax 902 (400) Permanent differences Increases - - Decreases due to intra-Group transactions - - Temporary differences Increases (1) 15 - Decreases (2) (58) (435) Taxable profit 859 (835) Gross tax payable (3) 215 (209) Tax relief - - Net tax payable 215 (209)

(1) Relating to the expense associated with the provisions for long-term employee benefit obligations (see Notes 15 and 27).

(2) Including EUR 35 thousand at 31 December 2019 (31 December 2018: EUR 33 thousand) relating to an excess provision for taxes that was considered to be non-deductible when it was recognised (see Note 16). Also including EUR 23 thousand in 2019 (2018: EUR 118 thousand) relating to the net amount (the difference between the expense recognised in the income statement and the payments made) of the variable remuneration the payment of which is deferred over several years (see Note 27). Lastly, including in 2018 EUR 192 thousand relating to compensation payments paid the expense for which was not tax deductible in previous years and EUR 92 thousand relating to net income associated with the provisions for long-term employee benefit obligations (see Notes 15 and 27).

(3) At 31 December 2019, this amount is recognised under “Financial Liabilities at Amortised Cost - Debts to Individuals” on the liability side of the balance sheet (see Note 14). At 31 December 2018, this amount is recognised under “Loans and Receivables - Loans to Individuals” on the asset side of the balance sheet (see Note 7).

The balance of “Loans and Receivables – Loans to individuals” on the asset side of the balance includes the tax prepayments in 2019 and 2018 (see Note 7). Also, the income tax received on account by the Company in 2018

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was included under “Financial Liabilities at Amortised Cost - Debts to Individuals” on the liability side of the balance sheet at the end of 2018 (see Note 14).

iii. Reconciliation of the accounting profit to the income tax expense

The reconciliation of the accounting profit to the income tax expense for 2019 and 2018 is as follows:


Accounting profit before tax 902 (400) Tax charge (*) (226) 100 Effect of permanent differences - - Tax credits Depreciation and amortisation charges which were not tax-deductible in previous years - - Total income tax expense / (income) recognised in the income statement (226) 100

(*) Calculated as the 25% of the accounting profit before tax (see Note 2-q).

iv. Breakdown of income tax expense

The breakdown of the income tax expense for 2019 and 2018 is as follows:


Current tax: Continuing operations (215) (209) Deferred tax: Continuing operations (11) 109 Total tax expense (income) (226) (100)

v. Taxes recognised in equity

The detail of taxes recognised in equity at 31 December 2019 and 2018, is as follows:

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Thousands of Euros Deferred Tax Assets Deferred Tax Liabilities 2019 2018 2019 2018

Retirement bonus commitments (see Notes 15 and 17): Beginning balances 6 - - - Increases - 6 - - Decreases (5) - - - Ending balances 1 6 - - Financial assets held for trading (see Notes 2-b and 9): Beginning balances - - 111 143 Increases (Note 9) - - 20 17 Decreases (Note 9) - - (47) (49) Ending balances - - 84 111 Total taxes recognised in equity 1 6 84 111

The deferred tax assets indicated above were recognised because the Company’s directors considered that, based on their best estimate of the Company’s future earnings, including certain tax planning measures, it is probable that these assets will be recovered.

vi. Deferred tax assets

The detail of the balance of “Tax Assets – Deferred” on the asset side of the balance sheet at 31 December 2019 and 2018 without taking into account taxes recognised in equity, and of the changes therein in 2019 and 2018 is as follows:

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Remunerations (see Note 27): Beginning balances 13 90 Increases - - Decreases (6) (77) Impact of the income tax rate change (see Note 2-q) - - Ending balances 7 13 Provisions (see Note 16): Beginning balances 9 17 Increases - - Decreases (9) (8) Ending balances - 9 Retirement bonus commitments (see Notes 15 and 27): Beginning balances 24 48 Increases 4 3 Decreases - (27) Ending balances 28 24 Total deferred tax assets not recognised in equity 35 46

The deferred tax assets indicated above were recognised because the Company’s directors considered that, based on their best estimate of the Company’s future earnings, including certain tax planning measures, it is probable that these assets will be recovered.

vii. Pending exercises of verification and inspecting actions

The Company has all the taxes applicable to it open for review by the tax authorities since 2015.

In view of the varying interpretations that can be made of the tax legislation applicable to the Company’s operations, the years open for review may give rise to contingent tax liabilities which cannot be objectively quantified. However, the possibility of such contingent liabilities arising is considered to be remote and, in any event, such tax debt as might arise would not have a material effect on these financial statements.

19. Risk management

Risk management structure. Hedges

The Company performs interest rate hedging transactions to cover its position in available-for-sale fixed-income securities by buying and selling frequently traded futures on German government debentures. The hedges are adjusted daily using a model based on calculations of the sensitivity of the portfolio. Both the fixed-income securities portfolio and the hedging instruments are measured at market prices.

Available-for-sale equity securities are not hedged.

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Fair value of financial instruments

The fair values of the financial assets forming the Company’s portfolio are determined with reference to public prices in active markets. Fixed-income securities are benchmarked against transactions carried out in active markets. Where there are no transactions that would provide an appropriate benchmark to determine market price, estimates are made using internal models based on discounted cash flows at market interest rates adjusted for the risk premium estimated in respect of each issuer.

Credit risk

The Company does not grant customer loans or financing. Where positions are taken in financial assets that could entail credit risk in relation to the issuers, solvency, credit ratings issued by recognised ratings agencies, other public information and background characteristics (country, sector, etc.) are taken into consideration. Counterparties are diversified to avoid concentration of risk.

Interest rate risk

Portfolio positions subject to the risk of fluctuations in interest rates are hedged, as described in the above section on the risk management structure.

Other market risks

The Company does not take significant currency positions on its own behalf.

Operational risk

The Company has security copies available on local servers and, in addition, one of the suppliers thereof provides a storage and custody service of these copies.

20. Capital management

European Parliament and Council Directive 2013/36, of 26 June 2013, on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, and European Parliament and Council Regulation 575/2013, of 26 June 2013, on prudential requirements of credit institutions and investment firms, regulate access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, as well as the minimum capital requirements for these companies, the manner of calculating them, and the procedures and information used in the capital adequacy self-assessments they are required to conduct. CNMV Circular 2/2014, of 23 June, entered in force at 29 June 2014, on the exercise of various regulatory options regarding the solvency of investment firms and their consolidated groups, regulates the options that Regulation No 575/2013 attributes to the national competent authorities, vis-à-vis consolidated groups of investment services companies and Spanish investment services companies, whether or not they form part of a consolidated group, in relation to the matters considered necessary in order to apply the aforementioned Regulation No 575/2013 from 1 January 2014.

The minimum capital requirements established by the regulation are calculated on the basis of the Company’s exposure to market, credit, liquidity and operational risk and any other risks that could arise from its activity.

The Company’s capital management strategy consisted of ensuring at all times that its capital levels exceed the requirements established in the legislation in force. With a view to ensuring compliance with these risk-related regulations, the Company and the Consolidated Group monitor the risk profile and the established control area

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on an ongoing basis, seeking to identify possible weaknesses in the risk management and control policies. They also monitor any information systems and resources that could entail an increase in capital requirements.

Directive 2013/36, on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, contains provisions relating to access to the activity of the entities, the forms of their governance and their supervisory framework, including the provisions governing the authorisation of the business, the acquisition of qualifying holdings, the exercise of the freedom of establishment and of the freedom to provide services, the powers of supervisory authorities of home and host Member States in this regard and the provisions governing the initial capital and the supervisory review of the entities.

Regulation 575/2013 on prudential requirements of credit institutions and investment firms contains, inter alia, prudential requirements for institutions that relate strictly to the functioning of banking and financial services markets and are meant to ensure the financial stability of the operators on those markets as well as a high level of protection of investors and depositors.

This legislative package, inter alia, aims to:

a. Increase the quantity, quality, consistency and transparency of the European Banking System's capital.

b. Limit its leverage.

c. Prevent and reduce macroprudential and systemic risks.

d. Develop a system of liquidity buffers to ensure that the institutions have a diversified reserve of sufficient liquid assets to meet their liquidity needs in a short-term liquidity crisis.

e. Develop a regulatory framework designed to ensure that the institutions have a stable, long-term financing structure.

f. Reinforce the institutions' corporate governance practices, thereby improving market discipline.

The results of this ongoing monitoring are reported on through the Annual Capital Adequacy-Assessment Report and the Solvency Report, approved by the Board of Directors.

At 31 December 2019 and 2018, the Company’s eligible capital and that of its consolidation Group exceeded the minimum required under the legislation in force at each moment.

21. Memorandum items

These include balances representing rights, obligations and other legal situations that in the future may have an impact on net assets, as well as any other balances needed to reflect all transactions entered into by the Company although they may not impinge on its net assets.

Contingency and commitment accounts

The detail of this balance of “Contingency and Commitment Accounts” in the balance sheet at 31 December 2019 includes the Company’s commitment to invest in a private equity fund (see Note 9):

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Other memorandum items

The detail of this caption in the balance sheet at 31 December 2019 and 2018 is as follows:


Unsettled customer orders - - Own and third-party securities and financial instruments held by other entities Own securities 66,654 118,538 Third-party securities 746,533 600,881 Loan of securities received 75,035 117,699 Drawable at credit institutions (see Note 1) - - 888,222 837,048

The balance of “Own and third-party securities and financial instruments held by other entities” reflects the cash value of securities owned by the Company and its customers and sub-deposited with other custodian entities.

At 31 December 2019 the Company had deposited securities owned by the collective investment undertakings managed by the Group’s investment fund management company with a total market value of EUR 436,767 thousand (31 December 2018: EUR 313,489 thousand).

22. Related parties

The detail of “Related Parties” at 31 December 2019 and 2018 is as follows:


Assets: Loans to individuals (Note 7) 6,013 6,362 6,013 6,362 Liabilities: Debts to individuals (Note 14) 215 86 215 86 Income statement: General expenses – Leases (Note 28) (89) (85) General expenses – Administration costs (Note 28) (446) (399) (535) (484)

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23. Customer Service Department

Pursuant to Ministry of Economy Order 734/2004, of 11 March, on customer care departments and services and consumer ombudsmen at financial institutions, implemented by Law 44/2002, of 22 November, on Financial System Reform Measures, at its meeting held on 29 June 2004 the Board of Directors of Inverseguros, S.A.U., Sole Shareholder of the Company (see Note 1), approved the creation of a Customer Care Department for the whole Group replacing the one that existed within the Company until that date.

On 27 April 2019 the Customer Care Department informed the Company’s Board of Directors of the performance of its functions in 2018, stating that in 2019 no claims or complaints were lodged against the Company at the Dunas Capital Group’s Customer Care Department. Therefore, no decision, recommendation or suggestion had to be made in this connection.

24. Fee and commission income

The balance of this statement for 2019 and 2018 is as follows includes EUR 348 thousand in respect of financial asset custody and management fees received by the Company in 2019 (2018: EUR 309 thousand) of which EUR 234 thousand (2018: EUR 201 thousand) are related to fees received from the investment funds managed by Dunas Capital Asset Management, S.G.I.I.C., S.A. (Sole-Shareholder Company), a Dunas Capital Group company.

25. Fee and commission expense

The detail of “Fee and Commission Expense” in the income statement for 2019 and 2018 is as follows:


Securities transactions 76 71 Derivates transactions 93 83 Fees paid to markets and clearing houses 1 22 Other fees 186 161 356 337

“Other Fees” in the foregoing table basically comprise the fees paid by the Company to international custodians for deposit, clearing and custody services related to international financial instruments.

26. Gains/losses on financial assets and liabilitie s

“Gains/Losses on Financial Assets and Liabilities (net)” includes the amount of the valuation adjustments of financial instruments, except those attributable to interest accrued as a result of application of the effective interest method and to allowances, and the gains or losses obtained from the sale and purchase thereof.

The breakdown, by origin and type, of the balance of “Gains/Losses on Financial Assets and Liabilities (net)” in the income statement is as follows:

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Financial instruments classified as: Financial instruments not valued at fair value through profit or loss (Note 9) 188 86 Held for trading 1,443 913 1,631 999 Origin: Fixed-income securities 3,450 1,472 Equity securities 188 86 Derivatives (2,007) (559) 1,631 999

27. Staff costs

a) Breakdown

The breakdown of the balance of “Staff Costs” in the income statement is as follows:


Wages and salaries 953 985 Bonuses 474 317 Social security costs 225 207 Termination benefits (see Note 2-o) - 76 Other staff costs 85 (29) 1,737 1,556

The balance of “Bonuses” in the foregoing relates entirely with the share in profits of the Company’s employees. At 2019 and 2018 year-end EUR 435 thousand and EUR 317 thousand, respectively, had not yet been paid at the end of 2019 and 2018 and they are included under “Other Liabilities – Remuneration payable” on the liability side of the balance sheets (Note 12). Also, at the end of 2019 the balance of this line item includes EUR 79 thousand (2018: EUR 163 thousand) relating to a portion of the remuneration of certain Company employees the payment of which is deferred over several years.

In 2019 and 2018, the balance of “Other staff costs” in the foregoing detail includes EUR 15 thousand, on both years, related to the retirement bonus commitments (see Notes 15 and 18). Also, at 31 December 2018 “Other Staff Costs” included extraordinary income of EUR 106 thousand relating to rebates received on the refund of retirement bonus obligations relating to employees who left the Company in 2018.

b) Number of employees

The average number of employees at the Company in 2019 and 2018, by professional category and gender at year-end, was as follows:

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2019 2018 Employees at year-end Average

Number of Employees

Employees at year-end Average Number of Employees Women Men Total Women Men Total

Executives - 1 1 1 - 1 1 1 Other line personnel 2 3 5 5 2 3 5 5 Clerical staff 7 3 10 10 6 4 10 13 9 7 16 16 8 8 16 19

In 2019 and 2018 the Company did not have employees with a disability equal or higher than 33%.

28. General expenses

The detail of “General Expenses” in the income statement for 2019 and 2018 is as follows:


Leases 89 85 Communications 3 5 IT systems 538 516 Repairs and upkeep 6 5 Advertising and publicity 18 18 Entertainment and travel expenses 31 34 Other independent professional services 99 70 Administration services (*) 446 399 Taxes other than income tax 35 37 Other expenses (**) 1 (98) 1,266 1,071

(*) Relating to services (basically IT, legal and financial services) performed by other Dunas Capital Group entities and charged to the Company (see Note 22).

(**) At 2018 included EUR 86 thousand of income arising from the adjustment of an outstanding amount from prior years that was not finally claimable.

The Company operates in an office leased by entities in the Dunas Capital Group. Inverseguros, S.A.U. (Sole Shareholder of the Company –see Note 17) allocates to each of the companies in the Dunas Capital Group, based on the number of employees thereof.

The balance of “Leases” relates entirely to the expense allocated by Inverseguros, S.A.U. to the Company for the portion of the cost it incurs for the lease of the offices where the entity carries on its activities (see note 22).

The balance of “Other independent professional services” in the foregoing table includes the fees billed by the external auditor in 2019 and 2018 related to audit services amounted to EUR 21 thousand. Furthermore, in 2019 and 2018 this balance includes EUR 15 thousand and EUR 14 thousand, respectively, associated to other audit-related services paid by the Entity to the corresponding auditor, in both years.

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Furthermore, the balance of “Other Independent Professional Services” in the foregoing table includes EUR 40 thousand in 2019 relating to the remuneration of one of the members of the Board of Directors of the Company who is not an employee (see Note 4).

The unpaid amount in this connection at the end of 2019 and 2018 is included under "Other Liabilities" (Note 12).

Disclosures relating to the average period of payme nts to suppliers

Set forth below are the disclosures required by Additional Provision Three of Law 15/2010, of 5 July (amended by Final Provision Two of Law 31/2014, of 3 December), prepared in accordance with the Spanish Accounting and Audit Institute (ICAC) Resolution of 29 January 2016 on the disclosures to be included in notes to financial statements in relation to the average period of payment to suppliers in commercial transactions:

Days

2019 2018 Average period of payments to suppliers 11 13 Transactions paid ratio 11 13 Outstanding payment transactions ratio 43 34

Amount (Thousands of Euros)

2019 2018 Total payments made 1,309 1,302 Total outstanding payments 11 3

In accordance with the ICAC Resolution, the average period of payment to suppliers was calculated by taking into account the commercial transactions relating to the supply of goods or services for which payment has accrued since the date of entry into force of Law 31/2014, of 3 December.

For the sole purpose of the disclosures provided for in the Resolution, suppliers are considered to be the trade creditors for the supply of goods or services included in “Other Liabilities” on the liability side of the balance sheet.

“Average period of payment to suppliers” is taken to be the period that elapses from the delivery of the goods or the provision of the services by the supplier to the effective payment of the transaction.

29. Explanation added for translation to English

These financial statements are presented on the basis of the regulatory financial reporting framework applicable to the Company in Spain (see Note 1-b). Certain accounting practices applied by the Company that conform with that regulatory financial reporting framework may not conform with other generally accepted accounting principles and rules.

Translation of an appendix originally issued in Spanish. In the event of a discrepancy, the Spanish-language version prevails.

Appendix

Information of Inverseguros, Sociedad de Valores, S .A. Sole-Shareholder Company for compliance with article 192 of the consolidated Securities Market L aw which was approved by the Royal Legislative Decree 4/2015, of 23 October (“Annual Investment Se rvices Companies Report”)

This information has been prepared for the purpose of complying with the article 192 of the consolidated Securities Market Law, approved by the Royal Legislative Decree 4/2015, of 23 October, which transpose the article 89 of the Directive 2013/36/EU of the European Parliament and Council, of 26 June 2013, on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms.

a) Corporate name, nature and geographic location o f the business

Inverseguros, Sociedad de Valores, S.A. Sole-Shareholder Company (“the Company”) was incorporated on 10 October 1989. Its company object is the performance of all manner of activities and transactions inherent to broker-dealer companies, pursuant to the legislation in force applicable thereto. Its business activity is subject to Royal Legislative Decree 4/2015, of 23 October, which approves the consolidated Securities Market Law, to Royal Decree 217/2008, of 15 February, on the legal system for investment services companies and companies that render investment services and subsequent amendments thereto, and to other rules issued by the Spanish National Securities Market Commission (“CNMV”). The Company also obtained authorisation to act as a government debt management company on 21 January 1991.

Below is a list of investment services, which may be provided by the Company, as defined in its activity program authorised by CNMV:

1. Reception and transmission of client orders regarding one or more financial instruments.

2. Execution of the above-mentioned client orders.

3. Trading for own account.

4. The placement of financial instruments without a firm commitment basis.

5. Underwriting of issuance or placement of financial instruments on a firm commitment basis.

To perform the above investment services, the Company can conduct the auxiliary services which are envisaged in the legislation applicable and, in particular, the following:

1. Custody and management on behalf of client of financial instruments as per Article 2 of the Royal Legislative Decree 4/2015, of 23 October, which approves the consolidated Securities Market Law.

2. Advisory services for companies about capital structure, industrial strategy and related matters, as well as mergers and acquisitions.

3. Services related to underwriting of issuance and placement operations.

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4. Preparation of investment reports and financial analyses or other general recommendations related to operations with financial instrument.

5. Currency exchange services related to the provision of investment services.

The investment services and, where appropriate, any ancillary activities, will be performed in respect of the instruments envisaged in the legislation applicable from time to time and, in particular, in respect of those referred to in Articles 2.1, 2.2, 2.6 and 2.7 of the Royal Legislative Decree 4/2015, of 23 October, which approves the consolidated Securities Market Law.

The Company develops all its business in Spain.

b) Business volume

In 2019 the business volume of the Company amounted to EUR 3,888 thousand. In this regard, the gross income shown in the 2019 income statement of the Company has been considered as the business volume.

c) Number of full-time employees

At 2019 year-end the 16 employees of the Company were full-time employees.

d) Profit before tax

In 2019 the profit before tax of the Company amounted to EUR 902 thousand.

e) Income tax

In 2019 income tax of the Company amounted to EUR 226 thousand.

f) Subsidies or government aid received

In 2019 the Company did not received subsidies or government aid received.

g) Asset returns

At 2019 year-end the asset returns of the Company, calculated as the ratio between its 2019 profit for the year and its total assets at 31 December 2019, was 0.45%.

Lastly, the information required by article 192 of the Royal Legislative Decree 4/2015, of 23 October, which approves the consolidated Securities Market Law, of Dunas Capital Group to which the Company belongs is presented, on a consolidated basis, as appendix in the 2019 consolidated financial statements of Dunas Capital Group.

Translation of a report originally issued in Spanish. In the event of a discrepancy, the Spanish-language version prevails.


2019 Directors’ Report

1.- Business performance and situation of the Compa ny

Inverseguros, Sociedad de Valores, S.A., Sole-Shareholder Company (“the Company”) was incorporated on 10 October 1989. Its company purpose is to carry out all activities and transactions specific to stock-exchange broker-dealers pursuant to the applicable legislation in force. The Company has been authorised to operate as a government debt management company since 1991.

2019 was a highly positive year for the financial markets, with gains in the vast majority of assets. This outcome was based, to a considerable extent, on fresh backing from the central banks, which continued to pursue an increasingly expansive monetary policy in the main developed economies and even in many emerging economies. This gave rise to a further strengthening of the financial repression that was already very clear beforehand; this led many investors to continue to demand risk assets in an attempt to find a minimal profit, which is also the reason for the exceptionally low levels of volatility. This could give the impression that the year was as calm as a millpond, without any kind of turbulence, which is not entirely true. In fact, there were shocks of various types that called into question the market dynamic discussed above, but without actually breaking it. Many of these shocks stemmed from Donald Trump’s clearly protectionist policy and his trade crusade against China and, to a lesser extent, the EU. Another factor to create a significant dose of uncertainty were the Brexit negotiations, although in the end the UK and the EU managed to reach a departure agreement.

2020 will be directly linked to Covid-19. The pandemic obliged the main economies to come to an abrupt halt, which will lead to a severe global recession that will take place mainly in the first and second quarters of the year. This had a considerable impact on the markets, with heavy falls in a very short period of time. At the moment we are in a period of partial correction, bolstered by the clearly expansive fiscal and monetary policies that have been implemented and should serve to get out of this slump to the best degree possible In any case, the possibility of an immediate rebound seems remote and there is still a considerable amount of uncertainty, firstly, because there is the possibility of new outbreaks of Coronavirus following the return to normality from the third quarter onwards, and secondly, because the macroeconomic imbalances that have arisen in some economies such as Italy and Spain may give rise to serious doubts on the part of investors.

The Company continues to adapt its bilateral fixed-income operations to electronic trading on the Bloomberg TOMS (Trade Order Management Solutions) trading system and performs its ex-post transparency obligations through Bloomberg’s Approved Publication Arrangement (APA). The Company retained its membership of the private fixed-income market (AIAF) in 2018, but ceased to be a member in March 2019 because it was no longer necessary for it to belong to the market since it currently conducts operations mainly through Bloomberg’s multilateral trading facility -SMN.

The Company’s business volume increased from EUR 2,212 thousand in 2018 to EUR 3,888 thousand in 2019. This volume its in line with last year’s standard, even if it was extraordinarily low in 2018 due to the negative performance of the financial markets, which were mainly affected by extraordinary changes such as the Italian public debt crisis. This significant increase in business volume changed the pre-tax result to a positive pre-tax benefit EUR 902 thousand which contrasts against the Company’s pre-tax loss of EUR 400 thousand reported in 2018.

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Assets in the third-party security depository and custody services business rose from EUR 600,811 thousand at 2018 year-end to EUR 746,533 thousand a year later.

2.- Other information

a) Significant events occurring subsequent to 2019 year-end.

The spread of COVID-19 and its global impact have affected the outlook for growth for 2020. The economic consequences of the spread of the epidemic are difficult to quantify at present and, therefore, it is highly likely that uncertainty will continue to last in the markets, particularly in the first half of the year. In this regard, we consider that the virus will have a temporary impact, and create a degree of disruption to activity and the markets in the first few months of the year, although with the measures being implemented and that are expected to be applied, we expect that this situation will be reversed in the second half of the year.

However, the Company's directors have conducted a preliminary assessment of the current situation, based on the best available information. In this connection, no significant risks have arisen in relation to liquidity or the measurement of on-balance sheet assets and liabilities and although we consider that the current scenario might give rise to a fall in income in the coming year, in our opinion the possible impact on the Company’s profit or loss for 2020 would not affect its compliance with the existing capital requirements.

Lastly, the Company has adapted its processes and continues to provide its services in the new scenario and the directors are constantly monitoring the evolution of the situation in order to successfully address any possible impacts, both financial and non-financial, that may arise.

b) Outlook for the Company

In 2020 the COVID-19 crisis will foreseeably have a positive impact on the activity of the trading desk due to the widening of spreads in the fixed-income asset trading it brokers. However, such trading in this context is not exempt from potential losses for the Company, for which reason the control of the risks of own-account trading has been intensified. No changes are expected in the Company’s management.

c) Research and development activities

The Company did not carry out any research and development activities.

d) Disclosures relating to the average period of pa yments to suppliers

At 31 December 2019 the Company’s average period of payments to suppliers was 11 days (see Note 28 to the financial statements).

e) Acquisition of treasury shares

The Company did not acquire or sell any treasury shares in 2019, and at year end it did not hold any treasury shares.

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3.- Use of financial instruments by the Company whe re relevant for the valuation of its assets, liabil ities, financial position and results

a) Risk management objectives and policies of the C ompany, including the policy applied to hedge each type of transaction for which hedge accounting is u sed

The Company’s trading portfolio comprises securities traded in organised markets and quoted fixed-income securities. Fixed-income positions are hedged daily for interest rate risk using derivative hedges.

The Board of Directors establishes the general management and risk lines and strategies, and communicates them to the Regulatory Compliance and Risk Management Unit and management. Management periodically reports to the Board of Directors on the Company’s business.

The Regulatory Compliance and Risk Management Unit informs the Board of Directors of any inefficiencies or shortcomings that arise and evaluates the extent to which the Company’s actual activity reflects the guidelines and strategies defined by the Board of Directors.

The Company uses futures transactions on securities to hedge its asset and liability positions. In accordance with current legislation, these futures transactions are recognised in memorandum accounts for the future rights and commitments that might have an equity effect, or for the balances required to reflect the transactions (even where they have no impact on the Company’s equity. Accordingly, the notional amount of these instruments (theoretical value of the contracts) does not reflect the total credit or market risk assumed by the Company.

b) Exposure of the Company to price risk, credit ri sk, liquidity risk and cash flow risk

The Company has established the following limits, which were authorised by its Board of Directors:

Structure of counterparty risk limits

- The quantification of counterparty risk will be the estimate of the possible loss that we would incur if any of our counterparties defaulted on their payment commitments or failed to deliver securities, as shown in the following table:

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MARKET COUNTERPARTIES RISK

GOVERNMENT DEBT SECURITIES

Spanish Fixed-Income Securities Market (AIAF)

Other markets

OPERATORS

CUSTOMERS

Failure to deliver securities or cash in spot transactions, forwards or simultaneous transactions with repurchase agreements which have not yet been performed.

Failure to meet commitments relating to OTC derivatives.

STOCK EXCHANGE

CUSTOMERS Failure to deliver securities or cash in unsettled transactions without the prior deposit of securities or cash.

Rejection of transactions to be settled at other entities.

PRIMARY ISSUER Failure to deliver securities.

MARKET CUSTOMER Failure to deliver cash.

- The Trading Desk manager propose to General Management the classification of the customers and operators with which trading relationships are to be established and indicate the limit of counterparty risk that is to be assumed based on the type of customer or entity, their projected transactions, financial position and any other information that may be of interest. Since our customer base is largely composed of insurance companies and their groups, the Board of Directors has approved an automatic classification mechanism which does not require further authorisations or documentation.

- Both Operators and the Back Office have access to direct information concerning compliance with counterparty risk limits.

- Similarly, on a daily basis the Internal Control Unit generates a list containing the fixed-income transactions for which commitments have been undertaken with customers and operators, stating the counterparty risk limits and checking compliance and authorisations.

Structure of market risk limits

- A position is considered to be exposed to interest rate or market risk when the purchase or sale of a block of securities is arranged for own account without the simultaneous arrangement of the sale or purchase of the same block of securities with the same date of trade. In other words, there is an open (purchase or sale) position without an exact counterparty either in terms of the nominal value or the trading and settlement date.

- The traders desk have models to monitor the own account positions and hedges thereof, based on calculations of duration and sensitivity.

- The Fixed-Income Back Office Department has software for the on-line monitoring of the securities making up the Company’s own portfolio.

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- Similarly, on a daily basis the Internal Control Unit monitors the positions, results and transactions of the Company’s own account.

- The equity positions held on its own account relates solely to investments in capital and are authorised by the Company’s Financial Management.

- The Company's Board of Directors approved a market risk limit structure based on setting a maximum volume of open transactions, a maximum potential loss (in VaR terms) on the portfolio and a maximum assumable realised loss or through valuing the open positions at market prices.

Other risks

As regards other risks, such as legal, liquidity, operating, computer risks, etc., the Company’s General Management conducts the relevant analyses with the support of the Internal Control Unit and takes measures at Procedures Manual level. The Company’s General Management will report to the Board of Directors when they are relevant.

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