EXPLANATORY MEMORANDUM IN RELATION TO THE AMENDMENT OF THE BOARD REGULATIONS RESOLVED BY THE BOARD OF DIRECTORS AT ITS MEETING ON DECEMBER 17, 2020

1. Introduction

This report is prepared by the Board of Directors of SACYR, S.A. ("Sacyr" or the "Company"), pursuant to section 528 of the Corporate Enterprises Act, following a favourable report from the Sustainability and Corporate Governance Committee in accordance with article 3.2 of the Regulations of the Board of Directors, to inform the General Shareholders Meeting of the amendments made by the Board of Directors to the Board Regulations and to explain the reasons why the Board has considered it appropriate to make these amendments.

To make the amendments underlying this report and proposal easier to understand, an explanation of the purpose and justification for these amendments is given below, followed by the new wording of the articles of the Board Regulations that have been amended.

2. General justification for the amendments

Last June, the Spanish Securities and Exchange Commission (Comisión Nacional del Mercado de Valores) approved the partial revision of the Good Governance Code for Listed Companies (Código de Buen Gobierno de las Sociedades Cotizadas) ("GGC") with a view to aligning the corporate governance of Spanish companies with the highest international standards. This revision led to the amendment of 20 of the 64 recommendations contained in the GGC.

Based on the above and as part of the Company's ongoing review and updating process of its internal corporate governance rules, it was considered appropriate to review, among other internal regulations, the Board Regulations to bring them further into line with certain recommendations of the GGC, to ensure that they are better monitored by the Company.

3. Structure of the amendment and justification for the amendment The proposed amendment is structured in the following blocks:

  1. Amendment of Articles 7 (Qualitative composition and categories of directors) and 22 (Selection of directors), so as to include the age of directors as a further criterion of diversity on boards of directors, together with the criteria of knowledge, experience and gender, which were already included previously, with a view to having an appropriate composition of the board, in line with new Recommendation 14 of the GGC.

The text of new Recommendation 14 of the GGC is as follows:

"The board of directors should approve a policy aimed at promoting an

appropriate composition of the board that:

a) is concrete and verifiable;

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  1. ensures that appointment or re-election proposals are based on a prior analysis of the competences required by the board; and
  2. favours diversity of knowledge, experience, age and gender. Therefore, measures that encourage the company to have a significant number of female senior managers are considered to favour gender diversity

The results of the prior analysis of competences required by the board should be written up in the nomination committee's explanatory report, to be published when the general shareholders' meeting is convened that will ratify the appointment and re-election of each director.

The nomination committee should run an annual check on compliance with this policy and set out its findings in the annual corporate governance report."

  1. Amendment of Article 28 (General obligations of directors), to include the maximum number of boards of listed companies on which directors of Sacyr, S.A. may sit, in accordance with Recommendation 25 of the GGC, which was not amended in the last revision of the GGC, but which had only been partially complied with by Sacyr, S.A.

This proposed amendment to limit the maximum number of boards of listed companies on which their directors may sit is intended to achieve full compliance with Recommendation no. 25.

The text of Recommendation 25 of the GGC is as follows:

"The nomination committee should ensure that non-executive directors have sufficient time available to discharge their responsibilities effectively.

The board of directors' regulations should lay down the maximum number of company boards on which directors can serve."

  1. Amendment of Articles 16 (Audit Committee) and 16 bis (Sustainability and Corporate Governance Committee) to transfer the function of supervising and evaluating the drafting process and the integrity of non-financialinformation, as well as the Company's non-financialrisk management and control systems, from the Sustainability and Corporate Governance Committee -currentlyresponsible for this function- to the Audit Committee, in accordance with new Recommendation 42 of the GGC.

The text of new Recommendation 42 of the GGC is as follows:

"The audit committee should have the following functions over and above those legally assigned:

1. With respect to internal control and reporting systems:

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  1. Monitor and evaluate the preparation process and the integrity of the financial and non-financial information, as well as the control and management systems for financial and non-financial risks related to the company and, where appropriate, to the group -including operating, technological, legal, social, environmental, political and reputational risks or those related to corruption- reviewing compliance with regulatory requirements, the accurate demarcation of the consolidation perimeter, and the correct application of accounting principles.
  2. Monitor the independence of the unit handling the internal audit function; propose the selection, appointment and removal of the head of the internal audit service; propose the service's budget; approve or make a proposal for approval to the board of the priorities and annual work programme of the internal audit unit, ensuring that it focuses primarily on the main risks the company is exposed to (including reputational risk); receive regular information on its activities; and verify that senior management are acting on the findings and recommendations of its reports.
  3. Establish and supervise a mechanism that allows employees and other persons related to the company, such as directors, shareholders, suppliers, contractors or subcontractors, to report irregularities of potential significance, including financial and accounting irregularities, or those of any other nature, related to the company, that they notice within the company or its group. This mechanism must guarantee confidentiality and enable communications to be made anonymously, respecting the rights of both the complainant and the accused party.
  4. In general, ensure that the internal control policies and systems established are applied effectively in practice.

2. With regard to the external auditor:

    1. Investigate the issues giving rise to the resignation of the external auditor, should this come about.
    2. Ensure that the remuneration of the external auditor does not compromise the quality or independence of their work.
    3. Ensure that the company notifies any change of external auditor through the CNMV, accompanied by a statement of any disagreements arising with the outgoing auditor and the reasons for those disagreements.
    4. Ensure that the external auditor has a yearly meeting with the board in full to inform it of the work undertaken and developments in the company's risk and accounting positions.
    5. Ensure that the company and the external auditors adhere to current regulations on the provision of non-audit services, the limits on the concentration of the auditors' business and, in general, other regulations on the auditors' independence.
  1. A second amendment to Article 16 is also proposed (Audit Committee)

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however, it does not result from following the GGC's recommendations. The proposed amendment affects section 16.7.m) to adapt its wording in accordance with the update of the Group's regulatory compliance model.

4. New wording of the articles of the Board's Regulations that are to be amended

The new wording of the articles of the Board Regulations to be amended is set out in full below, with the proposed amendments highlighted in bold:

Article 7. Qualitative composition and types of directors

  1. The Board of Directors, within the exercise of its powers of proposal to the General Meeting and co-optation to cover vacancies, shall promote and adequate diversity of knowledge, experiences, age and gender and will attempt that the composition of the external boards bodies or non executive bodies represent the majority of the executive directors.
  2. According to the provisions of the Corporations Act, the Directors must necessarily ascribe to one of the following categories: (i) Executive Directors or (ii) Non-executive Directors and, within this category, to Directors representing controlling shareholders, Independent Directors or Other External ones. The annual report of Corporate Governance must indicate to which category and which specific type each of the Directors belongs to.
  3. Executive Directors are those who perform management functions of Company or its Group, regardless of the legal relation that is held. However, those Directors who are senior executives or Directors of companies belonging to the group of the parent Company will be considered as directors representing controlling shareholders. When a Director performs management responsibilities and, at the same time, is or represents a significant shareholders or one represented in the Board of Directors, he/she will be considered as Executive. All remaining directors of the Company will be considered as non executive directors.
  4. Directors representing controlling shareholders will be those who own shares equal or exceeding 3 percent of the capital stock or had been assigned due to his/her condition as shareholder, even if their share participation does not reach said amount, as well as those representing the abovementioned shareholders. According to what is established under the Articles of Association, the shareholding participation which will be taken into account for these purposes will be the one resulting from the Detailed Records of the participating companies in "Sociedad de Gestión de los Sistemas de Registro,
    Compensación y Liquidación de Valores" (Iberclear).
  5. Independent Directors will be those individuals who, appointed due to their personal or professional conditions, can develop their responsibilities without finding themselves conditioned by relations with the Company or its group, its significant shareholders or their Directors. A Director who owns shares in the Company can have the condition of independent, provided that he/she meets all the conditions established in this article and, in addition, when his/her participation is not significant. Directors representing controlling shareholders who lose said condition due to the sale of their participation of the shareholder they represented can only be reelected as independent

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directors when the shareholder who he/she represented until that time would have sold the totality of his/her shares in the Company. No one who finds themselves in the following situation can be considered as an independent Director:

  1. Those who have been employees or executive directors of the group, except when a period of 3 or 5 years has elapsed, respectively, since the end of the relationship.
  2. Those who receive from the Company, or from the same group, any amount or benefit by a concept different that director remuneration, except if it is not significant for the director. For the purposes of what is established in this document neither the dividends nor the complements of pensions that are received by the director will be taken into account due to his/her previous professional or work relationship, as long as said complements are unconditional and, as a consequence, the Company that pays them cannot at its own discretion suspend, modify or cancel its accrual without default of his/her obligations.
  3. Those who are or have been during the past 3 years partners of the external auditor or supervisors of the audit report, either in relation to the audit for that listed Company period or any other company of its Group.
  4. Those who are executive directors or senior managers of a company different from the one in which any executive director or senior manager of the company is an external director.
  5. Those who maintain or have maintained during the past year, a significant business relationship with the Company or any Group company, either in their own name or as a significant shareholder, director or senior manager of an entity that maintains or has maintained said relationship. Business relations are considered to be that of suppliers of goods or services, including financial, and that of advisor or consultant.
  6. Those who are significant shareholders, executive directors or senior management of an entity that receives or has received during the last 3 years, donations from the company or its group. Those who are merely trustees of a foundation that receives donations will not be included in this document.
  7. Those who are spouses, people related by similar kinship relationship or relatives up to second degree of a Company Executive or high management of the company or a director representing controlling shareholders.
  8. Those that have not been proposed, whether for their appointment or renewal by the Appointments and Retributions Committee.
  9. Those who have been directors during a continuous period exceeding more than 12 years.

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Sacyr SA published this content on 06 April 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 06 April 2021 14:19:06 UTC.