Corporate Governance Report

or qualifications in the audit report. In exceptional cases in which said reservations or qualifications may

arise, both the Chairman of the Audit and Control Committee and the auditors will have to provide

shareholders with a clear explanation of the content and scope thereof.

The Audit and Control Committee regularly assists both the Financial Director and the Internal Audit and

Process Control Director who, in this way, can directly process all queries from directors regarding

matters dealt with by the Committee. Moreover, the Committee regularly requires the participation of

external auditors at some of the meetings envisaged in the year -with the adequate level of

responsibility and representativeness of the audit firm- and in any case, with respect to the half-yearly

review and the conclusions of the preliminary and final audit work. At these meetings, the conclusions

reached by the external auditors as a consequence of their work are anticipated and analysed, to take

the required measures and avoid the need to include any potential reservation, mention or qualification

in the auditors' report. At such meetings, a review is performed of all the worked carried out by the

external auditors (with the collaboration of the Financial Division and the Internal Audit Division). Their

conclusions are analysed in detail for each of the periods reviewed, and the auditor adequately informs

the Audit and Control Committee of the main points of such review.

The Chairman of the Audit and Control Committee immediately informs the Board of Directors of the

content of its meetings. After the meetings, all Board members receive a copy of the Committee

minutes.

C.1.33

Does the Secretary to the Board have the status of director?

Yes



No X

Name or corporate name of the secretary:

Mr. Manuel de la Viuda Fernández de Heredia.

C.1.34 Section revoked.

C.1.35

Indicate what mechanisms the Company has established, if any, to preserve the independence of the

external auditors, the financial analysts, the investment banks and the rating agencies.

On 24 February 2016 (the same date on which this corporate governance report was approved), the

Board of Directors resolved to amend its Regulations, specifically article 23, to adapt it to the

amendment of article 529 quatercedies of the Spanish Companies Law, which will enter into force in

June 2016 and which was introduced by Audit Law 22/2015, of 20 July.

The Audit and Control Committee is tasked with establishing the appropriate relationships with the

external auditor, in order to receive information and examine the audit plan and all those matters that

may threaten its independence, as well as any other issues related with the audit process and

development. This Committee is also charged with granting the required authorisation, when necessary,

to provide services other than prohibited services, in line with applicable independence regulations, and

with performing or supervising those other notifications envisaged in audit legislation and regulations,

verifying that the Company's senior management takes into account its recommendations.

In any case,

the Company must receive an annual declaration from the external auditors regarding their

independence vis-à-vis the Company or entities directly or indirectly related thereto, together with

detailed, itemised information on additional services of any kind provided and the related fees

received from these companies by the external auditor or by persons or entities related thereto, in

accordance with the audit regulations in force.

The Company will have to inform the Spanish Securities Market Commission (CNMV), in a

regulatory statement, of a change of auditor, attaching thereto, as the case may be, a statement

regarding the possible disagreements with the outgoing auditor and, if they had existed, the

content thereof.

The Company has established the appropriate measures to ensure compliance with the applicable

laws regarding the provision of services other than auditing services, the restrictions on the

concentration of the auditor’s business, and, in general, with other laws stipulated to safeguard the

independence of auditors.