Prosegur Compañía de Seguridad S A : Individual Annual Accounts 2019

Prosegur Compañía de Seguridad, S.A.

Annual Accounts

31 December 2019

Directors' Report

2019

(With Independent Auditor's Report Thereon)

(Free translation from the original in Spanish. In the event of discrepancy, the Spanish-language version prevails.)

KPMG Auditores, S.L. Pº de la Castellana, 259C 28046 Madrid

Independent Auditor's Report

on the Annual Accounts

(Translation from the original in Spanish. In the event of discrepancy, the Spanish-language version prevails.)

To the shareholders of Prosegur Compañía de Seguridad, S.A.

REPORT ON THE ANNUAL ACCOUNTS

Opinion __________________________________________________________________

We have audited the annual accounts of Prosegur Compañía de Seguridad, S.A. (the "Company"), which comprise the balance sheet at 31 December 2019, and the income statement, statement of changes in equity and statement of cash flows for the year then ended, and notes.

In our opinion, the accompanying annual accounts give a true and fair view, in all material respects, of the equity and financial position of the Company at 31 December 2019, and of its financial performance and its cash flows for the year then ended in accordance with the applicable financial reporting framework (specified in note 2 to the accompanying annual accounts) and, in particular, with the accounting principles and criteria set forth therein.

Basis for Opinion _________________________________________________________

We conducted our audit in accordance with prevailing legislation regulating the audit of accounts in Spain. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Annual Accounts section of our report.

We are independent of the Company in accordance with the ethical requirements, including those regarding independence, that are relevant to our audit of the annual accounts in Spain pursuant to the legislation regulating the audit of accounts. We have not provided any non-audit services, nor have any situations or circumstances arisen which, under the aforementioned regulations, have affected the required independence such that this has been compromised.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

KPMG Auditores S.L., sociedad española de responsabilidad limitada y firma miembro de la red KPMG de firmas independientes afiliadas a KPMG International Cooperative ("KPMG International"), sociedad suiza.

Inscrita en el Registro Oficial de Auditores de Cuentas con el nº.S0702, y en el Registro de Sociedades del Instituto de Censores Jurados de Cuentas con el nº.10. Reg. Mer Madrid, T. 11.961, F. 90, Sec. 8, H. M -188.007, Inscrip. 9

N.I.F. B-78510153

2

Key Audit Matters ________________________________________________________

Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the annual accounts of the current period. These matters were addressed in the context of our audit of the annual accounts as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Tax provisions and contingencies

See notes 14 and 16

Key audit matter	How the matter was addressed in our audit
As the head of the Spanish tax group of the	Our audit procedures included the following:
Prosegur Group, the Company is exposed to	• Obtaining representations from lawyers outside
possible tax claims. Assessing and monitoring
the Company regarding the status of these
lawsuits, including contingencies and, where
matters, their probability and, where applicable,
applicable, the related provisions, is a complex
possible outflows of resources for the
process that entails evaluating future developments
Company.
in these proceedings. Furthermore, these
• Assessing the underlying events and
proceedings may be ongoing for a long period of
circumstances deemed relevant by the legal
time, which further complicates evaluation of these
advisors to establish their conclusions and
processes.
evaluating the Company's best estimate.
The Company also has contingencies for contested
• Evaluating whether the information disclosed in
tax assessments amounting to Euros 24 million for
the annual accounts meets the requirements of
which no provision has been recognised.
the financial reporting framework applicable to
Due to the judgement inherent in assessing these
the Company.
different matters, the uncertainty associated with
the estimates relating to the ongoing tax
proceedings, and because changes therein could
give rise to material differences with respect to the
amounts recognised to date, this has been
considered a key audit matter of the current period.

3

Recoverable amount of investments in Group companies

See notes 9 and 25.4

Key audit matter	How the matter was addressed in our audit

The Company has investments in Group companies amounting to Euros 1.328 million.

In 2019 the Company did not recognise any impairment of these investments.

There is a risk that the carrying amount of the investments in Group companies may exceed their recoverable amount in entities whose financial position has declined.

As required under the applicable financial reporting framework, the Company performs an annual assessment of whether there are indications of impairment of the investments in Group companies and estimates the recoverable amount at the reporting date of the entities which present indications of impairment.

The recoverable amount of each entity has been determined considering their value in use in the case of Cash and Surveillance business companies and based on their fair value in the case of those in the Alarms business.

To estimate this value, the Company used valuation techniques that require the Directors to exercise judgement and make assumptions and estimates.

Due to the uncertainty associated with these estimates and the significance of the carrying amount of the investments in Group companies, this has been considered a key audit matter of the current period.

Our audit procedures included the following:

• Assessing the design and implementation of the controls associated with the process of identifying indications of impairment and estimating the recoverable amount of investments in Group companies.
• Analysing the indications of impairment of the investments in Group companies identified by the Company.
• When estimating the value in use of the Cash and Surveillance businesses:
• • Evaluating the reasonableness of the method used to calculate value in use and the main assumptions considered, with the involvement of our valuation specialists.
  • Contrasting the consistency of the estimated growth in future cash flows of each investment used in the calculation of value in use with the business plans approved by the Company's governing bodies.
  • Contrasting the cash flow forecasts of the entities estimated in prior years with the actual cash flows obtained.
• When estimating the fair value of companies in the Alarms business:
• • Assessing, with the involvement of our valuation specialists, the reasonableness of the estimated fair value of the companies in the Alarms business, which was calculated by applying market multiples to recurrent monthly revenues per connection, obtained on the basis of the latest transactions observed.
  • Contrasting the consistency of the multiple used to calculate this value with the market reports on the latest transactions observed.
• Analysing the sensitivity of the estimated recoverable amounts to changes in the relevant assumptions and judgements, such as the discount rate, the future growth rate or the EBITDA used when calculating the value in use of companies in the Cash and Surveillance businesses and the recurrent monthly revenues per connection and the multiplier when estimating the fair value of the companies in the Alarms business.

4

Recoverable amount of investments in Group companies

See notes 9 and 25.4

Key audit matter	How the matter was addressed in our audit

• Evaluating whether the information disclosed in the annual accounts meets the requirements of the financial reporting framework applicable to the Company.

Other Information. Directors' Report _______________________________________

Other information solely comprises the 2019 Directors' Report, the preparation of which is the responsibility of the Company's Directors and which does not form an integral part of the annual accounts.

Our audit opinion on the annual accounts does not encompass the directors' report. Our responsibility as regards the content of the directors' report is defined in the legislation regulating the audit of accounts, which establishes two different levels:

1. A specific level applicable to certain information included in the Annual Corporate Governance Report, as defined in article 35.2. b) of Audit Law 22/2015, which consists solely of verifying that the aforementioned information has been provided in the directors' report, and if not, to report on this matter.
2. A general level applicable to the rest of the information included in the directors' report, which consists of assessing and reporting on the consistency of this information with the annual accounts, based on knowledge of the entity obtained during the audit of the aforementioned accounts and without including any information other than that obtained as evidence during the audit. Also, assessing and reporting on whether the content and presentation of this part of the directors' report are in accordance with applicable legislation. If, based on the work we have performed, we conclude that there are material misstatements, we are required to report them.

Based on the work carried out, as described above, we have verified that the information mentioned in section a) above has been provided in the directors' report, that the rest of the information contained in the directors' report is consistent with that disclosed in the annual accounts for 2019, and that the content and presentation of the report are in accordance with applicable legislation.

Directors' and Audit Committee's Responsibility for the Annual Accounts ____

The Directors are responsible for the preparation of the accompanying annual accounts in such a way that they give a true and fair view of the equity, financial position and financial performance of the Company in accordance with the financial reporting framework applicable to the entity in Spain, and for such internal control as they determine is necessary to enable the preparation of annual accounts that are free from material misstatement, whether due to fraud or error.

5

In preparing the annual accounts, the Directors are responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

The audit committee is responsible for overseeing the preparation and presentation of the annual accounts.

Auditor's Responsibilities for the Audit of the Annual Accounts______________

Our objectives are to obtain reasonable assurance about whether the annual accounts as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with prevailing legislation regulating the audit of accounts in Spain will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence economic decisions of users taken on the basis of these annual accounts.

As part of an audit in accordance with prevailing legislation regulating the audit of accounts in Spain, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the annual accounts, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Directors.
• Conclude on the appropriateness of the Directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the annual accounts or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the annual accounts, including the disclosures, and whether the annual accounts represent the underlying transactions and events in a manner that achieves a true and fair view.

6

We communicate with the audit committee of Prosegur Compañía de Seguridad, S.A. regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the entity's audit committee with a statement that we have complied with the applicable ethical requirements, including those regarding independence, and to communicate with them all matters that may reasonably be thought to bear on our independence and, where applicable, related safeguards.

From the matters communicated to the audit committee of the entity, we determine those that were of most significance in the audit of the annual accounts of the current period and which are therefore the key audit matters.

We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

Additional Report to the Audit Committee _________________________________

The opinion expressed in this report is consistent with our additional report to the Company's audit committee dated 27 February 2020.

Contract Period __________________________________________________________

We were appointed as auditor by the shareholders at the ordinary general meeting on 4 June 2019 for a period of one year, specifically for the year ended 31 December 2019.

Previously, we were appointed by consensus of the shareholders at their general meeting, and have been auditing the annual accounts since the year ended 31 December 2010.

KPMG Auditores, S.L.

On the Spanish Official Register of Auditors ("ROAC") with No. S0702

(Signed on original in Spanish)

María Lacarra

On the Spanish Official Register of Auditors ("ROAC") with No. 20,411

27 February 2020

Annual Accounts

and Directors'

Report at 31

December 2019

(Free translation from the original in Spanish. In the event of discrepancy, the Spanish language version prevails)

Prosegur Compañía de Seguridad, S.A.

2019 ANNUAL ACCOUNTS

	Table of contents
I. INCOME STATEMENT FOR THE YEARS ENDED 31 DECEMBER 2019
	AND 2018 ......................................................................................	4
II. BALANCE SHEET AT 31 DECEMBER 2019 AND 2018...................	5
III. STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED 31
	DECEMBER 2019 AND 2018 .........................................................	7
IV. CASH FLOW STATEMENTS FOR THE YEARS ENDED 31 DECEMBER
	2019 AND 2018 .............................................................................	9
V. NOTES TO THE ANNUAL ACCOUNTS FOR THE YEAR ENDED 31
	DECEMBER 2019 .........................................................................	10
1.	General Information........................................................................	10
2.	Basis of Presentation .......................................................................	11
3.	Income and Expenses .....................................................................	12
4.	Net Finance Income........................................................................	14
5.	Profit/(loss) for the year ..................................................................	15
6.	Intangible assets .............................................................................	16
7.	Property, Plant and Equipment .......................................................	18
8.	Analysis of financial instruments ......................................................	20

9. Investments in Group Companies, Jointly Controlled Companies and

	Associates .......................................................................................	24
10.	Financial assets ...............................................................................	29
11.	Loans and receivables ....................................................................	30
12.	Cash and cash equivalents .............................................................	31
13.	Share capital, share premium and own shares ................................	31
14.	Non-current provisions ....................................................................	35
15.	Debts and payables ........................................................................	36
16.	Taxation ..........................................................................................	39
	2

2019 ANNUAL ACCOUNTS

17.	Contingencies.................................................................................	45
18.	Commitments ..................................................................................	46
19.	Other related party transactions .....................................................	46
20.	Remuneration of Directors and Senior Management Personnel.......	54
21.	Employee Information .....................................................................	55
22.	Audit Fees .......................................................................................	56
23.	Financial risk management .............................................................	56
24.	Events after the reporting date .......................................................	59
25.	Accounting principles .....................................................................	59
25.1.	Intangible assets................................................................................................................................	59
25.2.	Property, plant and equipment.........................................................................................................	60
25.3.	Impairment losses on non-financial assets ....................................................................................	60
25.4.	Financial assets .................................................................................................................................	61
25.5.	Cash and cash equivalents...............................................................................................................	62
25.6.	Net equity............................................................................................................................................	63
25.7.	Financial liabilities.............................................................................................................................	63
25.8.	Current and deferred taxes...............................................................................................................	64
25.9.	Employee benefits .............................................................................................................................	64
25.10.	Provisions and Contingent Liabilities .............................................................................................	65
25.11.	Business combinations ....................................................................................................................	66
25.12.	Revenue recognition .........................................................................................................................	66
25.13.	Leases.................................................................................................................................................	67
25.14.	Foreign currency transactions .........................................................................................................	67
25.15.	Related party transactions................................................................................................................	67
VI.	APPENDIX I - INVESTMENTS IN GROUP COMPANIES ..........	68
DIRECTORS' REPORT FOR 2019 .......................................................	72

3

2019 ANNUAL ACCOUNTS

1. INCOME STATEMENT FOR THE YEARS ENDED 31 DECEMBER 2019 AND 2018

(Expressed in thousands of EUR)		Notes		2019		2018
Net turnover	3		108,595		130,653
Dividend received		3 and 19	80,440	95,255
Loan interest income		3 and 19	2,131	2,570
Provision of services		3 and 19		26,024			32,828
Supplies				(18)			(22)
Consumption of raw materials and other consumables				(18)			(22)
Other operating income				610			4,776
Non-core and other operating revenues				610			4,776
Personnel Expenses	3		(783)			(3,922)
Wages, salaries and similar charges			(580)	(3,452)
Social security obligations				(203)			(470)
Other operating expenses				(12,248)		(11,238)
External services	3	(8,618)	(7,057)
Taxes			(193)	(134)
Losses, impairment and changes in commercial provisions			-	(19)
Other ordinary expenses				(3,437)			(4,028)
Fixed assets deterioration		6 and 7		(4,617)			(4,644)
Other profit/(loss)				-			(38)
EBIT				91,539		115,565
Financial income	4		498			1,325
2) Third parties				498		1,325
Finance expenses	4		(9,996)			(12,013)
From payables to Group companies and associates		4 and 19	(927)	(821)
From payables to third parties				(9,069)			(11,192)
Variation in fair value of financial instruments				354			(732)
Variation in fair value of financial instruments				354			(732)
Exchange differences	4		122			(91)
NET FINANCE INCOME				(9,022)		(11,511)
PROFIT BEFORE TAX				82,517			104,054
Income tax	16		(643)		(1,069)
PROFIT/(LOSS) FOR THE YEAR	5		81,874			102,985

The accompanying notes form an integral part of the Annual Accounts for 2019.

4

2019 ANNUAL ACCOUNTS

1. BALANCE SHEET AT 31 DECEMBER 2019 AND 2018

(Expressed in thousands of EUR)
ASSETS		Note		2019		2018
NON-CURRENT ASSETS				1,452,791		1,015,010
Intangible assets	6		28,260		32,179
Patents, licences, trademarks and others			28,257	32,162
Computer software			3	8
Other intangible assets			-	9
Property, Plant and Equipment	7		11,795		12,480
Technical facilities and other property, plant and equipment			11,795	12,480
Long-term investments in Group companies and associates				1,401,311		956,552
Equity instrument	9	1,328,311	956,552
Loans to companies		8 and 11	73,000	-
Long-term financial investments		8 and 11		2,943		2,943
Equity instrument			2,650	2,650
Other financial assets			293	293
Deferred tax assets	16	8,482	10,856
CURRENT ASSETS				625,065		1,132,622
Trade and other receivables				92,497		53,205
Clients' receivables for sales and services	8	192	348
Clients, Group companies and associates		8, 11 and 19	42,285	13,512
Miscellaneous receivables		8 and 11	6	285
Personnel		8 and 11	1	1
Current tax assets	16	50,008	39,052
Public entities, other receivables	16	5	7
Short-term investments in Group companies and associates		8, 11 and 19		161,256		450,666
Loans to companies			62,790	366,305
Other financial assets			98,466	84,361
Short-term financial investments		8 and 11		320,289		489,936
Loans to companies			348	348
Debt securities			319,621	489,268
Other financial assets			320	320
Short-term deferrals				1,144		552
Cash and cash equivalents	12		49,879		138,263
Cash and other cash equivalents			49,879	138,263
TOTAL ASSETS
			2,077,856		2,147,632

The accompanying notes form an integral part of the Annual Accounts for 2019.

5

2019 ANNUAL ACCOUNTS

(Expressed in thousands of EUR)
NET EQUITY AND LIABILITIES		Notes		2019		2018
EQUITY			1,033,718		1,136,296
Shareholders' equity			1,033,718		1,136,296
Subscribed capital	13	35,921		37,027
Registered capital			35,921	37,027
Share premium	13	25,472		25,472
Reserves	13	1,077,404		1,115,106
Legal and statutory reserves			7,406	7,406
Other reserves			1,069,998	1,107,700
(Own shares and equity holdings)	13	(107,927)		(65,240)
Profit/(loss) for the year	5	81,874		102,985
(Dividend on account)	5	(79,026)		(79,054)
NON-CURRENT LIABILITIES			720,990		720,101
Non-current provisions	14	1,413		1,649
Obligations for long-term personnel benefits			1,412	1,648
Other provisions			1	1
Long-term debts		8 and 15	698,054		696,877
Debentures and other negotiable securities			696,203	694,932
Other financial liabilities			1,851	1,945
Deferred tax liabilities	16	21,523		21,575
CURRENT LIABILITIES			323,148		291,235
Short-term debts		8 and 15	94,978		88,999
Debentures and other negotiable securities			6,252	6,252
Debts with credit institutions			6,020	-
Other financial liabilities			82,706	82,747
Short-term payables to Group companies and associates		8 and 19	214,913		184,198
Trade and other payables			13,257		18,038
Suppliers, Group companies and associates		8, 15 and 19	5,593	7,143
Sundry accounts payable		8 and 15	1,774	1,680
Personnel (salaries payable)		8 and 15	950	4,083
Public entities, other payables	16	4,940	5,132
TOTAL EQUITY AND LIABILITIES
			2,077,856		2,147,632

The accompanying notes form an integral part of the Annual Accounts for 2019.

6

2019 ANNUAL ACCOUNTS

1. STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED 31 DECEMBER 2019 AND 2018

A) STATEMENTS OF RECOGNISED INCOME AND EXPENSE

(Expressed in thousands of EUR)
	Note		2019		2018
Profit/(losses) in the income statement	5	81,874	102,985
Total comprehensive income
	81,874	102,985

The accompanying notes form an integral part of the Annual Accounts for 2019.

7

2019 ANNUAL ACCOUNTS

B) STATEMENT OF TOTAL CHANGES IN EQUITY

(Expressed in thousands of EUR)
	Share capital		Share premium		Legal Reserve			Other	(Own shares		Profit/(loss) for		(Dividend on		TOTAL
						and equity
					Reserves			the year		account)
									holdings)
	(Note 13)		(Note 13)		(Note 13)			(Note 13)		(Note 13 c)		(Note 5)		(Note 5)
START OF FINANCIAL YEAR 2018	37,027	25,472	7,406	632,637	(65,542)	830,334	(351,878)	1,115,456
Recognised income and expense	-	-	-	-	-	102,985	-	102,985
Operations with partners or owners	-	-	-	480,803	302	(830,334)	272,824	(76,405)
Operations with own stocks or shares (net)	-	-	-	182	-	-	-	182
Accrued share-based incentives	-	-	-	-	302	-	-	302
Other operations with partners or owners	-	-	-	480,621	-	(830,334)	351,878	2,165
Dividend on account	-	-	-	-	-	-	(79,054)	(79,054)
Other changes in equity.	-	-	-	(5,740)	-	-	-	(5,740)
Other changes	-		-		-		(5,740)		-		-		-		(5,740)
BALANCE AT YEAR END 2018	37,027	25,472	7,406	1,107,700	(65,240)	102,985	(79,054)	1,136,296
Total comprehensive income	-	-	-	-	-	81,874	-	81,874
Operations with partners or owners	(1,106)	-	-	(37,702)	(42,687)	(102,985)	28	(184,452)
(-) Capital reductions	(1,106)	-	-	(63,795)	64,901	-	-	-
Operations with own stocks or shares (net)	-	-	-	-	(107,588)	-	-	(107,588)
Other operations with partners or owners	-	-	-	26,093	-	(102,985)	79,054	2,162
Dividend on account	-		-		-		-		-		-		(79,026)		(79,026)
BALANCE AT YEAR END 2019	35,921	25,472	7,406	1,069,998	(107,927)	81,874	(79,026)	1,033,718

The accompanying notes form an integral part of the Annual Accounts for 2019.

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2019 ANNUAL ACCOUNTS

IV. CASH FLOW STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2019 AND 2018

(Expressed in thousands of EUR)

Pre-tax financial year profit

Adjustments made to results

Fixed assets depreciation (+)

Change in provisions (+/-)

Results from fixed asset disposals and sale

Financial income (-)

Dividend received (-)

Finance expenses (+)

Exchange differences (+/-)

Variation in fair value of financial instruments (+/-)

Changes in current capital

Clients and other receivables (+/-)

Other current assets (+/-)

Trade and other payables (+/-)

Other current liabilities (+/-)

Other non-current assets and liabilities (+/-)

Other cash flows from operating activities

Interest payments (-)

Dividend collection (+)

Interest collection (+)

Income tax received/(paid) (+/-)

Other payments (receipts) (+/-)

Cash flows from operating activities

Payments for investments (-)

Group companies and associates

Intangible assets

Property, Plant and Equipment

Collections from disposal of investments (+)

Group companies and associates

Cash flows from investing activities

Collections and payments for equity instruments

Purchase of instruments (-)

Sale of equity instruments (+)

Collections and payments for liability instruments

Issue

Debentures and similar securities (+)

Debts with credit institutions (+)

Loans to Group companies and associates (+)

Repayment and amortisation of

Debentures and similar securities (-)

Debts with credit institutions (-)

Other payables (-)

Dividends payable and remunerations from other equity instruments

Dividends (-)

Cash flows from financing activities

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS

Cash and equivalents at the beginning of the year

Cash and equivalents at the end of the year

Note		2019		2018
	82,517	104,054
6 and 7	(65,964)	(79,112)
4,617	4,644
14
129	(50)
4	-	38
(498)	(1,325)
3	(80,440)	(95,255)
4	9,996	12,745
4	(122)	91
	354	-
	(27,259)	(22,579)
	(28,338)	(7,492)
	5,968	3,242
	(1,429)	(18,329)
	(3,366)	-
	(94)	-
	59,141	23,646
	(573)	(11,378)
	75,053	49,127
	647	1,325
	(15,245)	(15,428)
		(741)		-
		48,436		26,009
	(149,765)	(130,328)
	(149,751)	(130,214)
6	(3)	(3)
7	(11)	(111)
	-	29,434
		-		29,434
13		(149,765)		(100,894)
(107,286)	-
	(107,937)	-
	651	-
	197,425	180,164
	197,425	760,897
	160,690	694,932
	6,020	-
	30,715	65,965
	-	(580,733)
	-	(500,000)
	-	(80,639)
	-	(94)
	(77,194)	(71,882)
		(77,194)		(71,882)
		12,945		108,282
		(88,384)		33,397
12	138,263	104,866
12
49,879	138,263

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2019 ANNUAL ACCOUNTS

1. NOTES TO THE ANNUAL ACCOUNTS FOR THE YEAR ENDED 31 DECEMBER 2019

1. General Information

PROSEGUR COMPAÑÍA DE SEGURIDAD, S.A. (hereinafter the Company or Prosegur), the parent company of the Prosegur Group, has its registered offices at Calle Pajaritos 24 in Madrid. The Company was incorporated on 14 May 1976 and is entered in the Companies Register of Madrid as the first inscription on page 32,805, section 3, sheet 22 of volume 4,237.

The corporate purpose of the Company is described in article 2 of its Articles of Association, including the following services and activities:

1. Security and the protection of goods, premises, shows, competitions and conventions.
2. The protection of certain individuals subject to prior authorisation.
3. The storage, safekeeping, counting and classification of coins and banknotes, deeds, securities and other items that require special protection due to their economic value, the expectations they generate or the associated risk, notwithstanding any activities inherent to financial institutions.
4. The transportation and distribution of the aforementioned objects using, where necessary, vehicles with characteristics regulated by the Spanish Ministry of Home Affairs to avoid confusion with those used by the armed forces or state security forces.
5. The installation and maintenance of security equipment, devices and systems.
6. The operation of centres in which alarm signals are received, verified, broadcast and reported to state security forces, as well as the provision of response services in circumstances that do not come under the state security forces.
7. Planning of security activities and related advisory services.
8. Security services and the protection of rural property by private security guards.

The activities comprising the corporate purpose can also be performed indirectly by the Company, by means of the shareholding in other companies of an identical or similar corporate purpose.

The services provided by the Prosegur Group are distributed into the following business lines:

• Security.
• Cash.
• Alarms.

From 2013 the Company segregated the private security branch of activity in Spain to Prosegur España S.L.U. resulting in the main activity of the Company now becoming the acquisition, holding, management and administration of securities and shares or any other form of representation of interest in the capital of entities that are resident and non-resident in Spain and of funding in investee companies; and the provision of services that are complementary or ancillary to the management of activities carried out by the investee companies.

The Company's statutory activity does not include activities expressly restricted by law to entities that comply with special requirements not met by the Company, particularly financial brokerage activities

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2019 ANNUAL ACCOUNTS

that are restricted by financial legislation governing collective investment undertakings and the securities market law and supplementary provisions applicable to collective investment undertakings.

Prosegur is controlled by Gubel, S.L., a company incorporated in Madrid which, after the capital reduction approved in the General Shareholders Meeting held on 4 June 2019, owns 51.618% of the shares of Prosegur Compañía de Seguridad, S.A.,

Prosegur Compañía de Seguridad, S.A. is a public limited company that is listed on the Stock Exchanges of Madrid, Valencia, Bilbao and Barcelona whose shares are traded on the Spanish Stock Exchange Interconnection System (SIBE).

In accordance with prevailing legislation, Prosegur Compañía de Seguridad, S.A. is the parent of a group of companies (hereinafter the Group). In accordance with generally accepted accounting principles in Spain, Consolidated Annual Accounts must be prepared to present fairly the financial position of the Group, the results of operations and changes in its equity and cash flows. Details of investments in group companies, associates and jointly controlled companies are disclosed in Appendix I.

The Directors prepare the Consolidated Annual Accounts of Prosegur Compañía de Seguridad, S.A., in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and approved by the European Commission Regulations in force at 31 December 2019. The consolidated Annual Accounts were drawn up by the Board of Directors, together with these Individual Annual Accounts, on 27 February 2020 and are pending approval by the shareholders at their general meeting, after which they will be filed at the Companies Register of Madrid.

The Consolidated Annual Accounts of Prosegur Compañía de Seguridad, S.A. and its subsidiaries for 2019 present consolidated profit of EUR 160,226 thousand and consolidated equity of EUR 898,340 thousand (EUR 180,006 thousand and EUR 1,066.457 thousand respectively in 2018).

2. Basis of Presentation

a) Fair image

The Annual Accounts have been prepared on the basis of the accounting records of the Company and are presented in accordance with mercantile legislation in force and the rules established in the General Chart of Accounts approved by Royal Decree 1514/2007, in order to reflect a true and fair image of the equity, financial situation and results of the Company, as well as the veracity of the cash flows shown in the cash flow statement.

b) Critical issues regarding the valuation and estimation of relevant uncertainties

Preparation of the Annual Accounts requires the Company to make certain estimates and judgements concerning the future. These are evaluated constantly and based on historical experience and other factors, including expectations of future events that are considered reasonable under certain circumstances.

Although estimates are calculated by the Company's Directors based on the best information available at year end, future events may require changes to these estimates in subsequent years. Any effect on the Annual Accounts of adjustments to be made in subsequent years would be recognised prospectively.

The estimates and judgements that present significant risk of a material adjustment to the carrying amounts of assets and liabilities in the subsequent reporting period are as follows:

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2019 ANNUAL ACCOUNTS

Estimate of the recoverable value of investments in subsidiaries

The Company carries out impairment testing on investments made in subsidiaries if there is any proof of value impairment. The calculation of impairment involves the comparison of the carrying amount of the investment with its recovery value, this being understood as the higher fair value less cost of sale and value in use. The Company generally uses cash flow discounting methods to calculate these values. Discounted cash flow calculations are based on five-year projections of the budgets approved by Management. The cash flows take into account past experience and represent Management's best estimate of future market performance. Cash flows as of five years are extrapolated using individual growth rates. The key assumptions to determine the fair value less cost of sale and value in use include growth rates, average weighted rate of capital and tax rates (see Notes 9 and 25.4).

Provisions and contingencies

The Company has made judgements and estimates in relation to the probability of risks liable to cause the recording of provisions, and the amount thereof, where appropriate, recording a provision only when the risk is considered probable, when they estimate the cost that said obligation would cause (Notes 17 and 25.10).

c) Functional and presentation currency

The figures disclosed in the Annual Accounts are expressed in thousands of EUR, the Company's functional and presentation currency, rounded off to the nearest thousand.

d) Comparative information

For comparative purposes and for each item in the balance sheet, income statement, statement of changes in equity, cash flow statement and notes to the Annual Accounts, in addition to the figures for financial year 2019, the Annual Accounts show those pertaining to the previous year, those of 2018, approved by the General Shareholders' Meeting at 4 June 2019.

3. Income and Expenses

a) Net turnover

Details of net turnover by category of activity and geographical area are as follows:

											Thousands of euros
	National			Europe			Row			LatAm			Total
	2019			2018	2019			2018	2019			2018	2019			2018	2019			2018
Dividend received:
- Group companies and associates	80,440			95,255	-			-	-			-	-			-	80,440			95,255
Loan interest income	266			2,262	-			72	1,573			23	292			213	2,131			2,570
Provision of services:
- General services	28,180			28,255		560			112		36			(367)		(2,752)			4,828		26,024			32,828
Total	108,886			125,772		560			184		1,609			(344)		(2,460)			5,041		108,595			130,653

Negative amounts correspond to credits associated with brand use transfer services.

Of the total dividend income, an amount of 44,447 thousand euros corresponds to the Cash business while an amount of 35,993 thousand euros corresponds to the asset management business.

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2019 ANNUAL ACCOUNTS

b) Personnel Expenses

Details of the employee benefits expense are as follows:

Salaries and wages

Social security obligations

Other employee benefits expenses

Total

Thousands of euros

2019 2018

536 3,452

1. 391

1. 79

783 3,922

The 2017 and 2020 long-term incentive plans for Executive Director and Senior Management (Note 25.9), within the Salaries and wages paragraph, have been included in the expense accrued during the year in relation to the 2019 commitment amounting to EUR 712 thousand (EUR 2,855 thousand in 2018).

Additionally, the salary and salaries heading includes a reversal during 2019 of the provision of said incentive, for an amount of 4,742 thousand euros.

c) External Services

Details of external services are as follows:

	Thousands of euros
	2019		2018
Leases and levies	290	262
Independent professional services	5,473	5,085
Transport	2	1
Insurance premiums	40	203
Banking and similar services	422	355
Advertising and supplies	1,687	783
Other services	704	368
Total
8,618		7,057

d) Sale of Fixed Assets

In 2019 and 2018, there were no significant sales of property, plant and equipment.

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2019 ANNUAL ACCOUNTS

4.	Net Finance Income
Details of financial income and costs are as follows:
		Thousands of euros
	Financial income	2019	2018
	852		593
	Third parties	498	1,325
	Short-term financial income	354	(732)
	Finance expenses	(9,996)	(12,013)
	From payables to Group companies (Note 19)	(927)	(821)
	From payables to third parties	(9,069)	(11,192)
	Exchange differences	122	(91)
	NET FINANCE INCOME	(9,022)		(11,511)

Finance income and costs

Finance costs in relation to Group companies reflect interest earned on current loans to Group companies (Note 19).

The interest for debts with third parties correspond to the accrued interest for uncovered bonds issued in 2013 and 2018 (Note 15).

The financial income amounting to EUR 498 thousand (EUR 640 thousand in 2018) corresponds to the interest generated by the investments in time deposits (Note 8).

Exchange profit/losses

The main currency conversion difference items are the following:

	Currency		Thousands of euros
		2019		2018
Barclays bank loan	South African Rand	-	(324)
Debt due to acquisition of Martom	Brazilian Real	-	7
Debt due to acquisition of Beloura Investment	Colombian Peso	(21)	76
Other items		143	150
			122		(91)

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2019 ANNUAL ACCOUNTS

5. Profit/(loss) for the year

a) Distribution of profit

On the date these Annual Accounts are authorised for issue, the Directors will propose to the shareholders at their general meeting that profit for the year be distributed as follows.

	Thousands of euros
Basis of allocation	2019	2018
Profit/(loss) for the year	81,874	102,985
Total	81,874		102,985
Allocation
Voluntary reserves	2,848	(21,069)
Capitalisation Reserve	-	45,000
Dividend on account	79,026	79,054
Total	81,874		102,985

The distribution of the profit for 2018 was approved on 29 May 2019:

On 19 December 2019 the Board of Directors approved the distribution of a regular dividend of EUR 0.132 per share on account of the 2019 profits, or a total maximum dividend of EUR 79,026 thousand (considering that the share capital is currently represented by 598,679,362 shares). This dividend will be distributed to shareholders as four payments, in January, April, July and October 2020. Each payment is calculated as EUR 0.0330 per outstanding share at the payment date.

At 31 December 2019 dividends payable of EUR 79,026 thousand have been recognised under current liabilities as other payables within other financial liabilities.

The maximum amount represented by own shares at each payment date, and therefore not distributed, will be transferred to voluntary reserves. The amount for undistributed dividends out of the maximum total agreed for the year 2018 is reflected in the item of "Other operations with partners or owners" of the statement of changes in equity for the amount of EUR 2,060 thousand.

Nevertheless, if the number of shares changes between two payment dates as a result of a share capital increase or reduction, the total maximum amount of the dividend at each payment date (EUR 19,756 thousand) should be divided by the new number of outstanding shares that corresponds following the aforementioned increase or reduction.

The provisional accounting statement presented by the Board of Directors in accordance with the legal requirements that evidenced the lack of sufficient liquidity to pay the aforementioned interim dividend is set forth below:

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2019 ANNUAL ACCOUNTS

		Thousands of
		euros
		2019
1.	Initial cash on hand (before the interim dividend)	(43,882)
2.	Group current bank account balances	422,863
3.	Proceeds pending	57,067
4.	Temporary financial investments	689,998
5.	Payments for Current Operations	(3,807)
6.	Payments for Financial Transactions	(8,725)
7.	Extraordinary Payments	(962)

Forecast Cash	1,112,552
Less dividend payments according to the proposal	(79,026)
Final cash after dividends
1,033,526

b) Dividend restrictions

Reserves and profit for the year are freely distributable except for the restrictions described in Note 13.

6. Intangible assets

Details of intangible assets and movement are as follows:

							EUR thousand
					Trademarks		Computer		Other
		Licences					intangible		Total
				and similar		software
							assets
Cost
Balance at 01 January 2018	5	39,068	26	362	39,461
Additions	3		-		-		-		3
Balance at 31 December 2018	8	39,068	26	362	39,464
Additions	3	-	-	-	3
Disposals	-	-	(1)	-	(1)
Balance at 31 December 2019	11		39,068		25		362		39,466
Depreciation and amortisation
Balance at 01 January 2018	(1)	(3,005)	(14)	(317)	(3,337)
Amortisation for the year	(1)		(3,907)		(4)		(36)		(3,948)
Balance at 31 December 2018	(2)	(6,912)	(18)	(353)	(7,285)
Amortisation for the year	(1)	(3,907)	(4)	(9)	(3,921)
Balance at 31 December 2019	(3)		(10,819)		(22)		(362)		(11,206)
Carrying amount						12
At 01 January 2018	4		36,063		45		36,124
At 31 December 2018	6	32,156	8	9	32,179
At 31 December 2019	8		28,249		3		-		28,260

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2019 ANNUAL ACCOUNTS

a) Description of the main movements

In 2019, the additions correspond to the acquisition of Microsoft Software licences for EUR 3 thousand (EUR 3 thousand in 2018).

There are no significant disposals of property, plant and equipment in 2019 nor in 2018.

The Company invoices and recognises revenue from the transfer to its subsidiaries of the rights of use of the Prosegur Trademark.

b) Licences

Details of licences at year end are as follows:

				Thousands of euros
				2019
Description and		Depreciation	Amortisation		Accumulated	Carrying
Expiry date	period (Note	Cost
operation	for the year	amortisation	amount
	25.1)
Licences - Software	2026	10 years	-	1	1	-
Licences - Software	2027	10 years	1	4	2	2
Licences - Software	2028	10 years	-	3	-	3
Licences - Software	2028	10 years	-	3	-	3
			1	11	3	8
				Thousands of euros
				2018
Description and	Expiry date	Amortisation	Amortisation	Cost	Accumulated	Carrying
operation		period	for the year		amortisation	amount
Licences - Software	2026	10 years	-	1	1	-
Licences - Software	2027	10 years	1	4	1	3
Licences - Software	2028	10 years	-	3	-	3
			1	8	2	6

c) Fully amortised intangible assets

The cost intangible assets items which are fully amortised and still in use at 31 December is as follows:

	Thousands of euros
Computer software	2019		2018
2		2
Other intangible assets	362	-
	364		2

d) Assets subject to guarantees and title restrictions

At 31 December 2019 and 2018 the Company has no significant intangible assets that are subject to restrictions on title or pledged as security for liabilities.

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2019 ANNUAL ACCOUNTS

7. Property, Plant and Equipment

Details of property, plant and equipment and movement are as follows:

	Thousands of euros
	Other install.,		Other property,
	equipment and		plant and		Total
	furniture		equipment
Cost
Balance at 01 January 2018	310	13,366	13,676
Additions	103	8	111
Disposals	(35)		(2)		(37)
Balance at 31 December 2018	378	13,372	13,750
Additions	-	11	11
Balance at 31 December 2019	378		13,383		13,761
Depreciation and amortisation
Balance at 01 January 2018	(256)	(355)	(611)
Disposals	35	2	37
Amortisation for the year	(34)		(662)		(696)
Balance at 31 December 2018	(255)	(1,015)	(1,270)
Amortisation for the year	(31)	(665)	(696)
Balance at 31 December 2019	(286)		(1,680)		(1,966)
Carrying amount
At 01 January 2018	54		13,011		13,065
At 31 December 2018	123	12,357	12,480
At 31 December 2019	92		11,703		11,795

a) Description of the main movements

In the 2019 financial year, the most significant additions correspond to information processing equipment for EUR 10 thousand and telephony for EUR 1 thousand.

There were no disposals in the 2019 financial year.

In 2018, the most significant additions in property, plant and equipment corresponded to the installation of security systems for EUR 103 thousand, to the purchase of information equipment for EUR 6 thousand and telephony for EUR 2 thousand.

The most significant disposals in property, plant and equipment in 2018 corresponded to furniture for EUR 35 thousand and another PPE for EUR 2 thousand.

b) Fully depreciated property, plant and equipment

The cost of property, plant and equipment items which are fully amortised and still in use at 31 December is as follows:

		Thousands of euros
		2019				2018
Other installations, equipment and furniture	131	23
Other property, plant and equipment	187	185
		318			208

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2019 ANNUAL ACCOUNTS

c) Property, plant and equipment pledged as collateral

At 31 December 2019 and 2018 the Company has no property, plant and equipment subject to restrictions on title or pledged as security for liabilities.

1. Assets under operating lease Lessee

The Company rents offices and office equipment under non-cancellable operating leases.

Operating lease payments have been recognised as an expense under other operating expenses, external services as follows (Note 3):

	Thousands of euros
	2019		2018
Lease expenses	290	262
	290		262

Future minimum payments under non-cancellable operating leases are shown in Note 18.

e) Insurance

The Company has taken out insurance policies to cover the risk of damage to its property, plant and equipment. The coverage of these policies is considered sufficient.

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2019 ANNUAL ACCOUNTS

8. Analysis of financial instruments

8.1 Analysis by category

The carrying amount of each category of financial instrument specified in the significant accounting policy on financial instruments, except investments in Group companies, jointly controlled companies and associates (Note 9) and cash and cash equivalents (Note 12), is as follows:

a) Financial assets:

Thousands of euros		2019
			At amortised cost or cost
	Credits and		Trade and		Financial
		other			Total
	other			Investments
		receivables
Non-currents
Loans and Receivables (Note 11)	-	-	293	293
Available-for-sale financial assets (Note 10)	-	-	2,650	2,650
Loans to companies (Note 11)	73,000	-	-	73,000
					2,943		75,943
Current	73,000	-
62,790	42,484	98,814
Loans and Receivables (Note 11)	204,088
Other financial assets (Note 11)	-	-	319,941	319,941
					418,755		524,029
Total	62,790	42,484
135,790		42,484		421,698		599,972
Thousands of euros		2018
			At amortised cost or cost
	Credits and		Trade and		Financial
		other			Total
	other			Investments
		receivables
Non-currents
Loans and Receivables (Note 11)	-	-	293	293
Available-for-sale financial assets (Note 10)	-		-		2,650		2,650
Current	-	-	2,943	2,943
Loans and Receivables (Note 11)	366,305	14,146	84,709	465,160
Other financial assets (Note 11)	-		-		489,588		489,588
Total	366,305	14,146	574,297	954,748
366,305		14,146	577,240		957,691

The carrying amount of the financial assets valued at cost or at amortised cost is close to their fair value, given the non-significant effect of the discount.

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2019 ANNUAL ACCOUNTS

b) Financial liabilities:

Thousands of euros

Non-currents

Debts and payables (Note 15)

Current

Debts and payables (Note 15)

Total

Thousands of euros

2019

		At amortised cost or cost
Debentures		Debts with					Other
and other			Trade and
	credit		financial		Total
negotiable			other payables
	institutions		liabilities
securities
696,203	-	-			1,851	698,054
696,203		-		-			1,851		698,054
6,252	6,020	8,317			297,619	318,208
6,252		6,020		8,317			297,619		318,208
702,455	6,020	8,317			299,470	1,016,262

2018

At amortised cost or cost

	Debentures		Debts with				Other
	and other			Trade and
		credit			financial		Total
	negotiable			other payables
		institutions			liabilities
	securities
Non-currents
Debts and payables (Note 15)	694,932		-	-	1,945	696,877
Current	694,932	-	-	1,945	696,877
Debts and payables (Note 15)	6,252	-	12,906	266,945	286,103
Total	6,252	-	12,906	266,945	286,103
701,184	-	12,906	268,890	982,980

The carrying amount of the financial liabilities valued at cost or at amortised cost is close to their fair value, given the non-significant effect of the discount.

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2019 ANNUAL ACCOUNTS

8.2.Analysis by maturity

Details of financial instruments with fixed or determinable maturity, by year of maturity, are as follows:

a) Financial assets:

						2019
					Financial assets
Thousands of euros	2020	2021	2022	2023		Subsequent		TOTAL
	years
Investments in Group companies and
associates:										135,790
- Loans to companies (Note 19)	62,790	-	-	-	73,000
- Other financial assets	98,466	-	-	-	-	98,466
	161,256		-		-		-		73,000		234,256
Financial Investments:										2,650
- Equity instruments	-	-	-	-	2,650
- Loans to companies	348	-	-	-	-	348
- Other financial assets	319,941	-	-	-	293	320,234
Trade and other receivables:	320,289		-		-		-		2,943		323,232
									192
- Clients from sales and other	192	-	-	-	-
- Clients, Group companies and assoc.	42,285	-	-	-	-	42,285
- Sundry Debtors	6	-	-	-	-	6
- Personnel	1	-	-	-	-	1
Total	42,484	-	-		-		-		42,484
524,029		-		-		-		75,943		599,972

						2018
					Financial assets
Thousands of euros	2019	2020	2021	2022		Subsequent		TOTAL
	years
Investments in Group companies and
associates:
- Loans to companies (Note 19)	366,305	-	-	-	-	366,305
- Other financial assets	84,361		-		-		-		-		84,361
	450,666	-	-	-	-	450,666
Financial Investments:
- Equity instruments	-	-	-	-	2,650	2,650
- Loans to companies	348	-	-	-	-	348
- Other financial assets	489,588		-		-		-		293		489,881
Trade and other receivables:	489,936		-		-		-		2,943		492,879
									348
- Clients from sales and other	348	-	-			-
- Clients, Group companies and assoc.	13,512	-	-	-	-	13,512
- Sundry Debtors	285	-	-	-	-	285
- Personnel	1	-	-		-		-		1
Total	14,146	-	-	-	-	14,146
						-		2,943		957,691
954,748		-	-

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2019 ANNUAL ACCOUNTS

Other financial assets include fixed-term deposits contracted with the following characteristics:

• On 7 April 2017, a fixed income investment fund was set up with Gesconsulting, S.A. for the amount of EUR 25,000 thousand with an annual interest rate of 0.14%. This fund of 6 November 2019 was written off for EUR 20,000 thousand.
• On 19 April 2017, a fixed income investment fund was set up with Gesconsulting, S.A. for the amount of EUR 25,000 thousand with an annual interest rate of 0.14%.
• On 22 June 2017, Repo was constituted for EUR 150,000 thousand in Citibank Global Markets, with an annual interest rate of 0.05%.
• On 15 March 2018, Repo was constituted for EUR 150,000 thousand in Citibank Global Markets, with an annual interest rate of 0.05%. This fund of 16 December 2019 was written off for EUR 150,000 thousand.
• On 20 March 2018, time deposits were constituted for EUR 140,000 thousand in Morgan Stanley with indefinite maturity and an annual interest rate of 0.17%.

1. Financial liabilities:

							2019
										Financial liabilities
Thousands of euros	2020	2021	2022			2023				Subsequent			TOTAL
					years
Debentures and other negotiable securities (Note
15)	6,252	-	-			-	696,203	702,455
Payables to Group companies (Note 19)	214,913	-	-			-	-	214,913
Debts with credit institutions (Note 15)	6,020	-	-			-	-	6,020
Suppliers, Group companies and associates (Note							-
15)	5,593	-			-	-	5,593
Sundry creditors (Note 15)	1,774	-	-			-	-	1,774
Personnel (Note 15)	950	-	-			-	-	950
Other financial liabilities (Note 15)	82,706	94	94			94	1,569	84,557
Total		318,208			94			94			94			697,772			1,016,262

				2018
					Financial liabilities
Thousands of euros	2019	2020	2021			2022		Subsequent		TOTAL
			years
Debentures and other negotiable securities (Note
15)	6,252	-	-			-	694,932	701,184
Payables to Group companies (Note 19)	184,198	-	-			-	-	184,198
Suppliers, Group companies and associates (Note								-
15)	7,143	-	-			-	7,143
Sundry creditors (Note 15)	1,680	-	-			-	-	1,680
Personnel (Note 15)	4,083	-	-			-	-	4,083
Other financial liabilities (Note 15)	82,747	94	94			94	1,663	84,692
Total	286,103		94		94
				94
				696,595
					982,980

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2019 ANNUAL ACCOUNTS

9. Investments in Group Companies, Jointly Controlled Companies and Associates

Details of the movements in investments in Group companies, jointly controlled companies and associates are as follows:

	Thousands of euros
	2019		2018
Balance at 1 January	956,552	960,254
Investments	371,759		(3,702)
Additions	371,759	4,355
Disposals	-	(8,057)
Balance at 31 December	1,328,311		956,552

In 2019 the Company made a series of capital increases by capitalising loans in companies in which it had a holding in previous years (Note 8).

During 2018, the Company carried out a restructuring process to bring the companies of the cybersecurity business line into a single company, Prosegur Global Ciber Security, S.L.U. The following operations were therefore carried out in chronological order:

At the beginning of 2018, the Company acquired Prosegur Ciberseguridad Uruguay, S.A. for EUR three thousand, Dognaedis Limited SASU for EUR 1,700 thousand and Prosegur CIberseguridad Paraguay SA for EUR 335 thousand.

On March 2, 2018, the Company constituted Prosegur Global Ciber Security, S.L.U.

On 4 July 2018, the Company participated in the capital increase of Prosegur Global Ciber Security, S.L.U. by EUR 2,317 thousand through the non-monetary contributions of the following companies valued at the corresponding carrying amount in the Consolidated Annual Accounts on the date on which the operation is carried out:

• Prosegur Ciberseguridad Uruguay, S.A: loss of participation of EUR 3 thousand and contribution of EUR four thousand.
• Dognaedis Limited SASU: loss of participation of EUR 1,700 thousand and contribution of EUR 30 thousand.
• Prosegur Ciberseguridad Paraguay SA: loss of participation of EUR 335 thousand and contribution of EUR one.
• Dognaedis Lda: loss of participation of EUR 2,760 thousand and contribution of EUR 2,283 thousand.
• Prosegur Ciberseguridad SAS: loss of participation of EUR 15 thousand and contribution of EUR 1.
• Prosegur Ciberseguridad Spain, S.L: loss of participation of EUR 3,244 thousand and contribution of EUR 1.

As a result of the contributions made, the Company added an amount of EUR 2,317 thousand in Prosegur Global Ciber Security, S.L.U. and recognised a negative impact on reserves amounting to EUR 5,740 thousand (Note 13), which corresponds to the difference between the cost of the derecognised participation (EUR 8,057 thousand) and the carrying amount of the companies added in the Consolidated Annual Accounts (EUR 2,317 thousand).

24

2019 ANNUAL ACCOUNTS

a) Additions

Increases in investments in Group companies, jointly controlled companies and associates in 2019 and 2018 are as follows:

			Thousands of euros
			2019		2018
Prosegur Global Ciber Security, S.L.U.	(1)	28,853	2,317
Prosegur Gestion de Activos, S.L.U.	(2)	85,500	-
Prosegur Global SIS ROW, S.L.U.	(3)	3,900	-
Prosegur Global Alarmas ROW, S.L.U.	(4)	10,000	-
Prosegur Global Alarmas, S.L.U.	(5)	78,800	-
Prosegur Global SIS, S.L.	(6)	164,700	-
Prosegur Finance, S.L.	(7)	3	-
Prosegur ODH, S.L.	(8)	3	-
Prosegur Ciberseguridad Uruguay, S.A.	(9)	-	3
Dognaedis Limited SASU	(10)	-	1,700
Prosegur Ciberseguridad Paraguay SA	(11)	-		335
Total			371,759		4,355

Increases in investments in Group companies, jointly controlled companies and associates in 2019 and 2018 are as follows:

1. Prosegur Global Cyber Security, S.L.:

• On 1 January 2019, the Company subscribed the capital increase of the Spanish company Prosegur Global Cyber Security, S.L., by capitalising loan rights for a total EUR 28,853 thousand.
• On 2 March 2018, the Company constituted the Spanish Prosegur Global Cyber Security, S.L., with a capital of EUR 3 thousand, which remain outstanding, disbursed in 2019.
• On 4 July 2018, the Company increased the capital through the non-monetary contribution of 100% of the participations of the Colombian Prosegur Ciberseguridad, SAS for the amount of EUR 1; 100% of the participations of the Uruguayan Prosegur Ciberseguridad Uruguay, S.A. (formerly Loredat, S.A.) for EUR 4 thousand; 100% of the participations of the British company Dognaedis Limited, for EUR 30 thousand; 90% of the participations of the Paraguayan company Prosegur Ciberseguridad, S.A. for the amount of EUR 1; and 100% of the participations of the Portuguese Dognaedis Lda. for EUR 2,283 thousand and 100% of the participations in the Spanish company Prosegur Ciberseguridad, S.L. for EUR 1.

1. Prosegur Gestión de Activos, S.L.U

• On 1 January 2019, the Company subscribed the capital increase of the Spanish company Prosegur Gestión de Activos, S.L.U., by capitalising loan rights for a total EUR 68,000 thousand.
• On 1 April 2019, the Company subscribed the capital increase of the Spanish company Prosegur Gestión de Activos, S.L.U. by capitalising loan rights for a total EUR 17,500 thousand.

1. Prosegur Global SIS ROW, S.L.U.

• On 1 January 2019, the Company subscribed the capital increase of the Spanish company Prosegur Global SIS ROW, S.L.U., by capitalising loan rights for a total EUR 3,900 thousand.

25

2019 ANNUAL ACCOUNTS

1. Prosegur Global Alarmas ROW, S.L.U.

• On 1 January 2019, the Company subscribed the capital increase of the Spanish company Prosegur Global Alarmas ROW, S.L.U., by capitalising loan rights for a total EUR 10,000 thousand.

1. Prosegur Global Alarmas, S.L.U.

• On 1 January 2019, the Company subscribed the capital increase of the Spanish company Prosegur Global Alarmas, S.L.U. by capitalising loan rights for a total EUR 78,800 thousand.

1. Prosegur Global SIS, S.L.

• On 1 January 2019, the Company subscribed the capital increase of the Spanish company Prosegur Global SIS, S.L., by capitalising loan rights for a total EUR 156,700 thousand.
• On 23 June 2019, the Company participated in the capital increase of the Spanish company Prosegur Global SIS, S.L. by capitalising loan rights for a total EUR 8,000 thousand.

1. Prosegur Finance, S.L.

• On 26 July 2019, the Company acquired 100% of the Spanish company Prosegur Finance, S.L., through a monetary contribution of EUR 3 thousand.

1. Prosegur ODH, S.L.

• On 1 January 2019, the Company acquired 100% of the Spanish company Prosegur ODH, S.L. through a monetary contribution of EUR 3 thousand.

1. Prosegur Ciberseguridad Uruguay, S.A.:

• On 10 January 2018, the Company acquired 100% of the Uruguayan company for EUR 3 thousand.

1. Dognaedis Limited SASU:

• On 12 January 2018, the Company acquired 100% of the British company for EUR 1,700 thousand.

1. Disposals

In 2019 there were no decreases in investments in Group, multi-group and associated companies.

26

2019 ANNUAL ACCOUNTS

Decreases in investments in Group companies, jointly controlled companies and associates in 2018 were as follows:

			Thousands of euros
Cost		2019		2018
Prosegur Ciberseguridad Uruguay, S.A.	(9)			-	(3)
Dognaedis Limited SASU	(10)			-	(1,700)
Prosegur Ciberseguridad Paraguay SA	(11)			-	(335)
Dognaedis Lda	(12)			-	(2,760)
Prosegur Ciberseguridad SAS	(13)			-	(15)
Prosegur Ciberseguridad España, S.L.	(14)				(3,244)
Total Cost				-			(8,057)

1. Prosegur Ciberseguridad Uruguay, S.A.:

• On 4 July 2018, the Company participated in the capital increase of the Spanish Prosegur Global Cyber Security, S.L. through the non-monetary contribution of 100% of the shares of Prosegur Ciberseguridad Uruguay, S.A. (point 2). The amounts derecognised amounted to EUR 3 thousand corresponding to the carrying amount of the investment and had a positive impact on reserves amounting to EUR 1 thousand (Note 13).

1. Dognaedis Limited SASU:

• On 4 July 2018, the Company participated in the capital increase of the Spanish company Prosegur Global Cyber Security, S.L. through the non-monetary contribution of 100% of the shares of Dognaedis Limited SASU. The amounts written off amounted to EUR 1,700 thousand corresponding to the carrying amount of the investment and produced a negative impact on reserves amounting to EUR 1,670 thousand (Note 13).

1. Prosegur Ciberseguridad Paraguay, S.A.:

• On 4 July 2018, the Company participated in the capital increase of the Spanish Prosegur Global Cyber Security, S.L. through the non-monetary contribution of 90% of the shares of Prosegur Ciberseguridad España, S.A. The amounts written off amounted to EUR 335 thousand corresponding to the carrying amount of the investment and produced a negative impact on reserves amounting to EUR 335 thousand (Note 13).

1. Dognaedis Lda:

• On 4 July 2018, the Company participated in capital increase of the Spanish Prosegur Global Cyber Security, S.L. through the non-monetary contribution of 100% of the shares of Dognaedis Lda. The amounts derecognised amounted to EUR 2,760 thousand corresponding to the carrying amount of the investment and produced a negative impact on reserves amounting to EUR 478 thousand (Note 13).

1. Prosegur Ciberseguridad SAS:

• On 4 July 2018, the Company participated in capital increase of the Spanish Prosegur Global Cyber Security, S.L. through the non-monetary contribution of 100% of the shares of Prosegur Ciberseguridad SAS. The amounts derecognised amounted to EUR 15 thousand corresponding to the carrying amount of the investment and produced a negative impact on reserves amounting to EUR 15 thousand (Note 13).

27

2019 ANNUAL ACCOUNTS

1. Prosegur Ciberseguridad España, S.L:

• On 4 July 2018, the Company participated in the capital increase of the Spanish company Prosegur Global Cyber Security, S.L. through the non-monetary contribution of 100% of the shares of Prosegur Ciberseguridad España, S.L. The amounts written off amounted to EUR 3,244 thousand corresponding to the carrying amount of the investment and produced a negative impact on reserves amounting to EUR 3,244 thousand (Note 13).

Impairment losses and profit/(losses) on disposal of financial instruments

In 2019 and 2018 there were no impairment losses due to investment impairment.

The impairment losses on investments in the following Group companies, jointly controlled companies and associates at the end of the year:

	Thousands of euros
	2019			2018
Rosegur Holding Corporation, S.L.		6,650			6,650
Esta Service, SAS	1,740			1,740
Rosegur Cash Services, S.A.	230			230
Prosegur Activa Perú, S.A.	27			27
Prosegur Tecnologia Chile Ltda.		1			1
Total		8,648			8,648

The Company annually evaluates the existence of indicators of impairment of the stakes in Group companies and estimates the recoverable value at the closing date of those entities for which there are signs of impairment. The impairment indicator was calculated by comparing the net book value of the stake with the net worth of the investee and the recoverable value of the entities with an impairment indicator was determined considering its value in use for the Cash and Surveillance businesses and based on the fair value for the companies of the alarm business. Based on the analysis made, the Company did not record any valuation adjustments for stock impairment during 2019.

c) Investments in Group companies

The information on shares held in Group companies is contained in Appendix I of these Annual Accounts.

28

2019 ANNUAL ACCOUNTS

10.Financial assets

1. Available-for-saleassets

There were no movements in non-current financial assets, either in 2019 or 2018.

Details of available-for-sale equity instruments are as follows:

	Thousands of euros
		2019
	Recoverable
Name	amount		% ownership	Investment
Equity shares not officially listed
Euroforum Escorial, S. A.	2,595	8%			2,595
Others	55					-
Total	2,650

Thousands of euros

		2018
	Recoverable
Name	amount		% ownership		Investment
Equity shares not officially listed
Euroforum Escorial, S. A.	2,595	8%	2,595
Others	55	-	-
Total	2,650

Prosegur's maximum exposure to credit risk at the reporting date is the fair value of these assets. All assets are denominated in EUR.

29

2019 ANNUAL ACCOUNTS

11.Loans and receivables

Details of loans and receivables at 31 December 2019 and 2018 are as follows:

	Thousands of euros
	2019		2018
Loans and receivables - non-current
- Loans to companies (Note 19)	73,000	-
- Other financial assets	293	293
Loans and receivables - current	73,293	293
- Loans to Group companies (Note 19)	62,790	366,305
- Clients' receivables for sales and services	192	348
- Clients, Group companies and associates (Note 19)	42,285	13,512
- Other financial assets (Note 19)	98,466	84,361
- Sundry Debtors	6	286
- Personnel	1	-
- Loans to companies	348	348
- Debt securities (Note 8)	319,621	489,268
- Other financial assets	320	320
Total	597,322		955,041

There is no concentration of credit risk with respect to trade receivables, given that these are with Group companies (Note 19).

Loans and receivables are measured at their nominal amount, which does not differ significantly from their fair value, as these items are current and the effect of discounting the cash flows is therefore not significant.

The carrying amounts of loans and receivables are denominated in the following currencies:

	Thousands of euros
Euros	2019	2018
595,057		951,353
US Dollar	2,261	-
Australian Dollar	4	-
Mexican Pesos	-	348
South African Rand	-	3,340
Total	597,322		955,041

Impaired receivables are usually written off when the Company does not expect to recover any further amount.

Loans and receivables have not been impaired in 2019 and 2018.

The maximum exposure to credit risk at the reporting date is the fair value of the receivables in each of the above-mentioned categories. The Company does not hold any collateral to secure receivables.

There was no movement of other financial assets during the 2019 and 2018 financial years. Under this heading, guarantees are recorded as collateral for leases and others.

30

2019 ANNUAL ACCOUNTS

12.Cash and cash equivalents

Details of cash and cash equivalents are as follows:

	Thousands of euros
Cash in hand and at banks	2019		2018
49,879	138,263
Total	49,879		138,263

The effective interest rate on current bank deposits is 0.1%.

Cash in hand and at banks essentially reflects cash at banks at each year end.

13.Share capital, share premium and own shares

Details of equity and movement during the year are shown in the statement of changes in equity.

a) Share capital

At 31 December 2019, the share capital of Prosegur Compañía de Seguridad, S.A. totals EUR 35,921 thousand (2018: EUR 37,027 thousand) and is represented by 598,679,362 shares with a par value of EUR 0.06 each (2018: 617,124,640 shares with a par value of EUR 0.06 each), fully subscribed and paid. These shares are listed on the Madrid, Valencia, Bilbao and Barcelona stock exchanges and traded via the Spanish Stock-Exchange Interconnection System (electronic trading system) (SIBE).

On 26 June 2019 the share capital was reduced following approval by the Shareholders General Meeting held on 4 June 2019.

The Company's share capital was reduced by EUR 1,106,716.68, through the cancellation of 18,445,278 own shares.

Consequently, article 5 of the Company's Articles of Association was modified and after the reduction, the share capital stood at EUR 35,920,761.72, divided into 598,679,362 ordinary shares of the same class and series each with a par value of EUR 0.06, fully subscribed and paid up.

The capital reduction was made against free reserves, by provisioning an amortised capital reserve with an amount equivalent to the par value of the cancelled shares (that is EUR 1,106,716.68).

These shares are freely transferable.

31

2019 ANNUAL ACCOUNTS

Details of the Company's shareholders are as follows:

	Shareholders		Number of shares
		2019		2018
	Ms Helena Revoredo Delvecchio (1)	309,240,330	309,240,330
	FMR LLC (2)	37,089,806	30,970,374
	Ms Mirta Giesso Cazenave (3)	34,778,187	34,778,187
	Invesco Limited (4)	21,318,944	-
	Oppenheimer Acquisition Corporation (4)	-	34,957,437
	Others	196,252,095	207,178,312
	Total	598,679,362		617,124,640
(1)	Through Gubel, S.L. and Prorevosa, S.L.U.
(2)	Investstment through various managed funds
(3)	Both directly and through AS Inversiones, S.L.
(4)	Investment through various managed funds

In May 2019 Invesco Ltd. acquired and subsequently merged with Oppenheimer Funds Inc.

At 31 December 2019 and 2018, the members of the Board of Directors, either directly or through companies over which they exercise control, hold 310,131,060 shares (310,125,760 shares in 2018), representing 51.80% of the Company's share capital (50.25% in 2018).

b) Share premium

The share premium amounts to EUR 25,472 thousand, is freely distributable and has not changed in 2019 or 2018.

c) Own shares and equity holdings

Details of movements in own shares are as follows:

	Number of		Thousands of
Balance at 01 January 2018	shares		euros
18,627,835	65,542
Other awards	(85,829)		(302)
Balance at 31 December 2018	18,542,006	65,240
Purchase of shares	30,083,417	107,937
Shares sale	(18,445,278)	(64,901)
Other awards	(99,185)	(349)
Balance at 31 December 2019	30,080,960		107,927

At the general meeting held on 27 June 2011, the shareholders authorised the acquisition of own shares up to the legal maximum. All or part of these own shares may be granted or transferred to the Directors of the Company or Prosegur employees, either directly or as a result of a share option being exercised within remuneration schemes linked to the quoted share price.

On 4 June 2019 the Board of Directors of Prosegur decided to implement an own share buyback programme.

The Programme puts into effect under the provisions of Regulation (EU) no. 596/2014 on market abuse and the Commission Delegated Regulation 2016/1052, making use of the authorisation granted by the Shareholders General Meeting held on 27 April 2016 for the purchase of own shares, for the purpose

32

2019 ANNUAL ACCOUNTS

of reducing the share capital of Prosegur Compañía de Seguridad, S.A. in the terms agreed by the Shareholders General Meeting held on 4 June 2019.

The Programme will apply to a maximum of 59,850,000 shares, representing approximately 10% of Prosegur's share capital (after the capital reduction agreed upon).

The Programme will have the following features:

• Maximum amount allocated to the Programme: EUR 300,000 thousand.
• Maximum number of shares that can be acquired: up to 59,850,000 shares representing approximately 10% of the Company's share capital.
• Maximum price per share: the Company will not buy shares at a price higher than the highest
  of the following: (i) the price of the last independent trade; or (ii) the highest current independent bid on the trading venues where the purchase is carried out.
• Maximum volume per trading session: in so far as volume is concerned, Prosegur must not purchase more than 25% of the average daily volume of the shares in any one day on the regulated market on which the purchase is carried out.
• Duration: the Programme will commence on 5 June 2019 and finish no later than 5 June 2022. Notwithstanding the above, Prosegur reserves the right to conclude the Programme, if prior to the indicated maximum date of the term, it has acquired the maximum number of shares authorised by the Board of Directors, if it has reached the maximum monetary amount of the Programme or if any other circumstances arise that call for it.

On 26 June 2019 a capital decrease took place by means of the redemption of 18,445,278 of its own shares.

No purchase or sale transactions took place in 2018 with treasury stock.

Prosegur Compañía de Seguridad holds 5.02% (3.00% in 2018) of treasury stock deemed strategic to satisfy possible future corporate transactions.

In 2019 and 2018, "Other awards" reflects the delivery of shares to employees at market value.

d) Reserves

Details of reserves are as follows:

	Thousands of euros
	2019	2018
Legal reserve
Legal reserve	7,406	7,406
Total
7,406		7,406
Other reserves
Voluntary reserves	1,014,833	1,097,535
Reserves due to revised Budget Act of 1983	104	104
Capitalisation reserve	55,000	10,000
Differences on translation of share capital to EUR	61	61
Total	1,069,998		1,107,700

Legal reserve

The legal reserve has been appropriated in compliance with article 274 of the Spanish Companies Act, which requires that companies transfer 10% of profits for the year to a legal reserve until this reserve reaches an amount equal to 20% of share capital.

33

2019 ANNUAL ACCOUNTS

The legal reserve is not distributable to shareholders and if it is used to offset losses, in the event that no other reserves are available, the reserve must be replenished with future profits.

At year end, the Company had appropriated to this reserve the minimum amount required by law.

Voluntary reserves

These reserves are freely distributable. The movement of these reserves is shown below:

		Thousands of euros
		2019		2018
Opening balance	1,107,700	632,637
Investment contributions (Note 9)	-	(5,740)
Prosegur Ciberseguridad, S.L. (Spain)	-	(3,243)
Prosegur Ciberseguridad, SAS (Colombia)	-	(15)
Prosegur Ciberseguridad Uruguay, SA	-	1
Prosegur Ciberseguridad Paraguay, S.L.	-	(335)
Dognaedis Limited SASU (United Kingdom)	-	(1,670)
Dognaedis Lda (Portugal)	-	(478)
Extraordinary dividend share-out (Note 5)	-	468,456
Own dividend refund (Note 5)	2,060	2,165
Distribution of result of last year (Note 5)	(21,069)	-
Capitalisation Reserve (Note 5)	45,000	10,000
(-) Capital reductions	(63,693)		182
Closing balance	1,069,998	1,107,700

The dividends approved by the General Shareholders' Meeting and the Board of Directors of the Company are described in Note 5.

On June, 2019, a reduction share capital has been carried out through the amortization of 18,445,278.

Reserves due to revised Budget Act of 1983

This reserve arises from balances revalued in accordance with the aforementioned act applied by the Company and is subject to restrictions on distribution. This reserve amounts to EUR 104 thousand (EUR 104 thousand in 2018).

Differences on translation of share capital to EUR

This non-distributable reserve arises from the translation of share capital from Pesetas to EUR. This reserve amounts to EUR 61 thousand (EUR 61 thousand in 2018).

Capitalisation reserves

The General Shareholders' Meeting held on 4 June 2019, agreed to endow a capitalisation reserve charged to the profits of the year 2018. This reserve amounts to EUR 55,000 thousand.

34

2019 ANNUAL ACCOUNTS

14.Non-current provisions

Details of provisions and movement are as follows:

		Thousands of euros
	Accruals with			Other		TOTAL
	personnel			provisions
Balance at 01 January 2018	-	51	51
Applications	-	(45)	(45)
Provisions	1,648	-	1,648
Reversals	-	(5)	(5)
Balance at 01 January 2019	1,648	1	1,649
Applications	(365)	-	(365)
Provisions	712	-	712
Reversals	(583)	-	(583)
Balance at 31 December 2019	1,412			1		1,413

These provisions include the accrued incentive, payable in cash, corresponding to the 2017 and 2020 Plan (Note 25.9).

The fair value of the incentives referred to the share quotation price was estimated on the basis of Prosegur's share quotation price at the close of the period or at the payment time.

35

2019 ANNUAL ACCOUNTS

15.Debts and payables

Details of debts and payables are as follows:

Thousands of euros

	2019		2018
Non-current
- Debentures and other negotiable securities	696,203	694,932
- Other financial liabilities	1,851	1,945
Total		698,054		696,877
Current
- Debentures and other negotiable securities	6,252	6,252
- Bank borrowings	6,020	-
- Other financial liabilities	82,706	82,747
- Payables to Group companies (Note 19)	214,913	123,608
- Other financial liabilities with Group companies (Note 19)	-	60,590
- Loans to group companies (Note 19)	5,593	7,143
- Sundry accounts payable	1,774	1,680
- Other payables	950	4,083
Total		318,208		286,103

The exposure of the Company's debts and payables to fluctuations in interest rates and the contractual price review dates are as follows:

Thousands of euros

	2019		2018
Between 6 and 12 months		220,933		123,608
Total		220,933		123,608

a) Debentures and other negotiable securities

On 2 April 2018 the uncovered bonds issued on 2 April 2013 for EUR 500,000 thousand were amortised on their due date. On 8 February 2018 an issue of uncovered bonds with a nominal value of EUR 700,000 thousand, maturing on 08 February 2023, was made. The bonds are traded on the secondary market, on the Irish Stock Exchange. They accrue an annual coupon of 1.00% payable at the end of each year.

b) Bank borrowings

In 2019 and 2018 the company has no bank borrowings.

Credit facilities

They correspond to the balances drawn from the credit facilities contracted with national and international banks with a limit of EUR 35,000 thousand (limit of EUR 35,000 thousand in 2018). As of 31 December 2019 and 2018, no amount of this credit facility has been drawn down.

The Company has the following unused credit facilities:

36

2019 ANNUAL ACCOUNTS

Floating interest rate:

maturing in less than 1 year (credit policies) maturing in more than 1 year (syndicated loans)

Thousands of euros

20192018

35,00035,000

200,000200,000

235,000 235,000

Credit facilities are subject to various interest rate reviews in 2019 and 2018.

c) Other financial liabilities

Details of financial liabilities by maturity are as follows:

Thousands of euros

2019

																Total
	2020		2021		2022		2023	2024				subsequent years		Non-current		Total
Other financial liabilities	82,706		94		94		94			1,569				-		1,851		84,557
								Thousands of euros
								2018
																Total
	2019		2020		2021		2022			2023				subsequent years		Non-current		Total
Other financial liabilities	82,747		94		94		94			94				1,569		1,945		84,692

The most significant other financial liabilities at 31 December 2019 and 2018 are as follows:

• Non-currentamounts at 31 December 2019 were EUR 1,851 thousand (EUR 1,945 thousand in 2018), corresponding mainly to a loan received from the Ministry of Industry under the Avanza I+D programme of EUR 470 thousand and the debt for the purchase of the Portuguese company Dognaedis Lda for EUR 1,381 thousand.
• The current amounts at 31 December 2019 amounted to EUR 82,706 thousand (EUR 82,747 thousand in 2018), the most significant correspond to the outstanding dividend for 2019 for EUR 79,026 thousand (EUR 79,054 thousand in 2018) (Note 5), which will be settled in January, April, July and October 2020 as approved by the Board of Directors.

d) Other payables

Other payables comprise salaries payable that have been accrued by different Company personnel.

The Company's remuneration policy for personnel includes a variable component determined through specifically designed incentive programmes, which aim to recognise and reward Company employees' contribution to its success by achieving or surpassing set targets and developing the necessary skills for excellence in their duties and responsibilities.

The Incentive Programme is based on the direct link of variable remuneration with the achievement of previously set targets during a specific period of time by the Company Executive Management or the direct superior of the employee.

The liability for this as of 31 December 2019 amounts to EUR 708 thousand (EUR 785 thousand in 2018) and the amount recognised in the income statement for this item classified under the "Personnel Expenses" heading amounts to a EUR 773 thousand (negative EUR 2,886 thousand in 2018)

"Other debts" includes the accrued incentive, payable in cash, corresponding to the 2017 and 2020 Plans for EUR 1,412 thousand, as of 31 December 2019 (EUR 3,076 thousand as of 31 december 2018) (Note 25.9).

37

2019 ANNUAL ACCOUNTS

The fair value of the incentives referred to the share quotation price was estimated on the basis of Prosegur's share quotation price at the close of the period or at the payment time.

Additionally, this item also includes salaries payable and accrued extraordinary salary instalments amounting to EUR 242 thousand (EUR 223 thousand in 2018).

e) Foreign currency

The carrying amount of the Company's financial liabilities is denominated in the following currencies:

	Thousands of euros
	2019		2018
Euros	1,014,234	980,890
Argentine Peso	102	159
Colombian Peso	1,926	1,906
Brazilian Real	-		25
Total	1,016,262		982,980

1. Deferred payments to suppliers. Third additional provision. "Reporting Requirement", of Act 15/2010 of 5 July 2010

The information required by the "Reporting Requirement", third additional provision of Act 15/2010 of 5 July 2010 (modified through the Final Provision Two of Act 31/2014, of 3 December) prepared in accordance with the ICAC Resolution of 29 January 2017, on the information to be included in the annual accounts report in relation to the average period of payment to suppliers in commercial operations is detailed below.

Information on deferred payments to suppliers by the company is as follows:

Payments made and outstanding at close of balance sheet

	2019	2018
Average payment period to suppliers	Days	Days
73	62
Ratio of transactions paid	74	59
Ratio of transactions pending payment	61	103
	Amount
	(thousands of EUR)
Total payments made	9,249	9,519
Total payments pending	564	706

In accordance with the ICAC Resolution, the calculation of the average payment period to suppliers has considered the commercial transactions corresponding to the delivery of goods or the rendering of services accrued through the date of entry into force of Act 31/2014, 3 December.

For the exclusive purposes of providing the disclosures envisaged in this Resolution, suppliers are deemed as commercial creditors holding debts for the supply of goods or services, included under "Suppliers and other payables" of current liabilities of the balance sheet.

38

2019 ANNUAL ACCOUNTS

"Average payment period to suppliers" is understood as the period between the delivery of the goods or the rendering of the services by the supplier and the material payment of the transaction.

The maximum legal term of payment applicable to the companies in 2019 and 2018, according to Act 11/2013, of 26 July, is of 30 days (unless the conditions set forth in the Act allowing the maximum payment period to be raised to 60 days are fulfilled).

16.Taxation

1. Public administration:

Details of balances with public entities are as follows:

						Thousands of euros
			2019			2018
			No	Current				No	Current
			Current				Current
Assets
Deferred tax assets	8,482			-	10,856			-
Current tax assets	-			50,008	-			39,052
Value added tax and similar liabilities	-			5	-			7
			8,482			50,013	10,856			39,059
Liabilities
Deferred tax liabilities	21,523			-	21,575			-
Withholdings	-			4,889	-			5,076
Social Security		-			51			-			56
			21,523			4,940	21,575			5,132

The Company is the parent of a group that files consolidated income tax returns in Spain. This consolidated tax group comprises the Company and Spanish subsidiaries of the Prosegur Group that meet the requirements set out in regulations governing consolidated taxation.

From 2001 the Company, as parent, and its subsidiaries Servimax Servicios Generales, S.A. (merged with ESC Servicios Generales, S.L. in 2014), Prosegur Transportes de Valores, S.A. (absorbed in 2011) and Formación, Selección y Consultoría, S.A. have filed consolidated tax returns since 2001, pursuant to Chapter VII of Spanish Corporate Income Tax Act 43/1945 of 27 December 1945 (Official State Gazette (BOE) 28/10/1995). In 2002, Prosegur Alarmas España, S.A. was incorporated in the Tax Group regime (Prosegur Multiservicios in 2011 and Prosegur Soluciones, S.A. in 2015), and Prosegur Tecnología, S.L.U., (formerly Nordés Prosegur Tecnología, S.L.U. absorbed in 2011) and ESC Servicios Generales, S.L. in 2005. In 2006, Prosegur Activa Holding, S.L.U. was incorporated (in 2015: Prosegur Global Alarmas, S.L.U.) and Prosegur Activa España, S.L.U. (absorbed in 2011); in

2009: Prosegur Servicio Técnico, S.L.U. (absorbed in 2011); in 2010: Prosegur Gestión de Activos,

S.L.U; In 2011 Pitco Ventures, SCR Simplificada, S.A (in 2014: wound up). In 2012, the companies

acquired in 2011 were incorporated: Seguridad Vigilada, S.A., STMEC, S.L., Salcer Servicios Auxiliares, S.L, and Beloura Investments, S.L.U. Prosegur España S.L.U. has been added in 2013. In 2014 there has been no addition to the tax group. In 2015, Armor Acquisitón, S.A., Juncadella Prosegur International, S.A. Prosegur Global SIS, S.L.U., Prosegur Alarmas España, S.L.U., Prosegur Global CIT, S.L.U., Prosegur Vigilancia España, S.L.U., Prosegur Colombia 3, S.L.U. (formerly Prosegur Berlín, S.L.U.), Prosegur AVOS España, S.L.U. (formerly Prosegur BPO España, S.L.U.), Prosegur International CIT 1, S.L.U., Prosegur International CIT 2, S.L.U., Prosegur Global Alarmas ROW,

39

2019 ANNUAL ACCOUNTS

S.L.U., Prosegur Global CIT ROW, S.L.U. and Prosegur Global SIS ROW, S.L.U. were brought in Servimax Servicios Generales, S.A. and PITCO Ventures, SCR Régimen Simplificado were excluded. Company name changes in 2015: Prosegur Gestión de Activos International, S.L.U. (formerly Seguridad Vigilada, S.A.), Prosegur International SIS S.L.U. (formerly STMEC, S.L.), Prosegur USAP International, S.L.U. (formerly Salcer Servicios Auxiliares, S.L.U.), Prosegur International Alarmas, S.L.U. (formerly Beloura Investments, S.L.U.) and Prosegur Servicios de Efectivo España, S.L.U. (formerly Prosegur España, S.L.U.). In 2017 Prosegur Cash, S.A., Centro Informático de Servicios de Vigo, S.A. (wound up in 2018), Prosegur Ciberseguridad España, S.L. and Prosegur Assets Management, S.L.U. were brought in. In 2018, Contesta Teleservicios, S.A.U., Integrum 2008, S.L.U., Bloggers Brokers,S.L.U., Contesta Servicios Auxiliares, S.L.U., Prosegur Colombia 1, S.L., Prosegur Colombia 2, S.L.U., Prosegur Global Cyber Security, S.L., Segtech Ventures, S.A., and Prosegur Sevicios de Pago EP, S.L. were brought in. In the 2019, Risk Management Solutions,S.L.U., Compliofficer, S.L.U., Work 4 Data LAB, S.L., Dopar Servicios, S.L. (wound up in 2019), Enclama, S.L. (merged in Prosegur AVOS España, S.L.U. in 2019), Iberprofin, S.L. (wound up in 2019), Prosegur Alpha 3 Cashlabs, S.L., Prosegur Finance, S.L., Prosegur ODH, S.L., Gelt Cash Transfer, S.L., Cash Centroamérica Uno, S.L. and Cash Centroamérica Tres, S.L. were all brought in.

After the first listing of the shares of Prosegur Cash, S.A. on the stock market, the Company considered that Prosegur Cash, S.A. is still part of the tax group in Spain. For the purposes of Corporate Income Tax, the Prosegur Group prepares a consolidated balance sheet and the income statement corresponding to the fiscal consolidation scope in accordance with the consolidation accounting standards in Spain.

On 10 May 2016, the Company was notified of the beginning of a partial inspection for Corporate Income Tax on whether the freedom to amortise was appropriate due to the maintenance or creation of jobs in 2011 and on whether the remunerations made to the Directors for the years 2011 to 2014 are deductible.

Additionally, on the same date, the Company (absorbing entity) was informed of the beginning of inspection proceedings as successor of the merger by absorption of the companies Prosegur Transporte de Valores and Prosegur Activa España (both absorbed entities), for Corporate Income Tax and which partially affects the origin of the freedom to amortise for maintenance or creation of employment in 2011.

As a result of those inspections, the following records were signed:

• Record of acceptance relating to the freedom to amortise.
• Record of non-acceptance regarding the Directors' remunerations with a tax charge of EUR 390 thousand and interest of EUR 30 thousand.

In relation to the record of non-acceptance, on 9 March 2018, the Technical Office issued a Resolution for rectifying the settlement proposal contained in the record of non-acceptance, establishing the debt at the amount of EUR 1,344 thousand, of which EUR 1,195 thousand correspond to principal and EUR 149 thousand to late-payment interest. After the Company had filed its arguments for the defence, on 6 June 2018, the Technical Office issued a Resolution for settlement for the amount of EUR 1,355 thousand, of which EUR 1,195 thousand correspond to principal and EUR 159 thousand to late- payment interest. The Company has lodged a claim against that Resolution with the Central Court for Economic-Administrative Issues. That claim is awaiting a decision.

In addition, the Company has filed two lawsuits awaiting decision arising from two records of non- acceptance and for which no provision was made by the Spanish Administration. The first was brought in 2012, in relation to Corporate Income Tax for the years 2005, 2006 and 2007 and is for a tax liability of EUR 10,200 thousand, of which EUR 8,269 thousand are capital and EUR 1,931 thousand are late- payment interest. In relation to this first litigation, on 14 November 2019, the National Court issued a dismissal decision against which the Company has prepared a cassation appeal before the Supreme Court, which is pending admission. The second was brought in 2015 in relation to Corporate Income

40

2019 ANNUAL ACCOUNTS

Tax for the years 2008 and 2009 and is for a tax liability of EUR 20,041 thousand, of which EUR 16,088 thousand are capital and EUR 3,953 thousand are late-payment interest. That lawsuit is awaiting a decision by the National Court.

The Company has considered that the resolution of these disputes is considered possible but not probable.

Due to the different interpretations that could be made of the fiscal legislation in force, additional tax liabilities could arise in the event of inspection. In any event, the Directors of the Company do not consider that any such liabilities that could arise would have a significant effect on the Annual Accounts.

A reconciliation of the accounting profit and taxable income is as follows:

	Thousands of euros
Account finance income before tax	2019		2018
82,517	104,054
Permanent differences	(78,422)	(93,228)
Timing differences:	(1,284)	(3,319)
- Originating in the current period	3,366	4,808
- Arising in previous years	(4,648)		(8,127)
Taxable base for tax consolidation	2,811	7,507
Tax rate	25%		25%
Resulting tax payable	703	1,877
Deductions:	(519)	(1,659)
- Double taxation	(242)	(595)
- Contributions made to Foundations	(275)	(633)
- Other deductions	(2)	(431)
Tax payable	184		218

The main permanent differences of the accounting profit for the year 2019 correspond to items that do not have a tax deductible expense or taxable revenue, which are mainly: the exemption of dividends received from the subsidiaries in Spain amounting to EUR 80,440 thousand (Note 19) and contributions to foundations for a positive amount of EUR 822 thousand.

The main permanent differences of the accounting profit for the year 2018 correspond to items that do not have a tax deductible expense or taxable revenue, which are mainly: the exemption of dividends received from the subsidiaries in Spain amounting to EUR 95,255 thousand (Note 19) and contributions to foundations for a positive amount of EUR 1,830 thousand.

The main temporary difference adjustments to accounting profit originating in the year that are deductible in subsequent years are as follows:

1. Positive:

• Provision for personnel expenses, amounting to EUR 1,413 thousand (EUR 2,855 thousand in 2018).
• Other adjustments for EUR 1,953 thousand (EUR 1,953 thousand in 2018).

1. Negative:

• There are no negative adjustments in the year or in the previous year.

The main temporary difference adjustments to accounting profit originating in previous years are as follows:

1. Positive:
2. • Application of EUR 21 thousand, corresponding to the reversal of the negative adjustment of

41

2019 ANNUAL ACCOUNTS

elements of property, plant and equipment subject to the freedom to amortise for the years 2009, 2010, 2011 and until March 2012 (EUR 23 thousand in 2018).

1. • Impairment of stakes in Group companies amounting to EUR 1,272 thousand (EUR 1,272 thousand in 2018).
2. Negative:
3. • Reversal of provisions from previous years amounting to EUR 5,941 thousand (EUR 9,422 thousand in 2018).

The positive tax adjustments corresponding to the correction of the value of the investees correspond to the reversal of negative differences from previous years due to the obligation introduced by Royal Decree Law 3/2017 to reverse a minimum annual amount of one fifth of the impairment of securities representing the shares in the treasury of entities that was fiscally deductible and that is pending reversal. Positive tax adjustments reflect the impairment of investees for accounting purposes recognised in the income statement.

In 2019, the main deductions correspond to that of international double taxation, referring to taxes paid abroad for various services amounting to EUR 242 thousand, deduction for donations to non-profit entities for EUR 275 thousand.

In 2018, the main deductions corresponded to that of international double taxation, referring to taxes paid abroad for various services amounting to EUR 595 thousand, deduction for donations to non-profit entities for EUR 633 thousand and deduction in technological innovation of EUR 431 thousand.

The amount payable by the Company of EUR 184 thousand (EUR 218 thousand in 2018) is recorded under "Current tax assets". Current tax assets, reflected under "Trade and other receivables", amounting to EUR 50,008 thousand (EUR 39,052 thousand in 2018), correspond to the net between the Tax Group payments on account of Corporate Income Tax for 2019 of EUR 15,245 thousand (EUR 44,710 thousand in 2018) and the payable fee of EUR 5,264 thousand (EUR 6,089 thousand in 2018) and the reimbursement of Corporate Income Tax from previous years of EUR 40,027 thousand (EUR 431 thousand in 2018), because, as the parent of the tax group, the Company reflects the entire tax credit of the Tax Group.

Details at year end of available tax loss carryforwards and deductions recognised by the Group and pending application are as follows:

		Thousands of euros
	2019	2018
Deductions and tax credit rights	2,875	5,406
		2,875	5,406

42

2019 ANNUAL ACCOUNTS

Deductions recognised by the Group are as follows:

	Thousands of euros
	2019		2018
International double taxation	2,864	4,582
Innovation Technology (IT)	11	824
	2,875			5,406

Details of the income tax expense for the year are as follows:

	Thousands of euros
Account finance income before tax	2019		2018
82,517	104,054
Permanent differences	(78,422)	(93,228)
Elimination of own shares transactions	(135)	(243)
Taxable base	3,959	10,583
Tax rate	25%	25%
Resulting tax payable	990	2,646
- Double taxation	(242)	(595)
- Contributions made to Foundations	(275)	(431)
- Other deductions	(2)	(633)
Expense (income) from tax on profit	471	987
- Withholdings at source and other	172	82
Final expense (income) from tax on profit	643		1,069

The corporate income tax expense is as follows:

	Thousands of euros
Current tax	2019		2018
184	218
Elimination of own shares transactions	(34)	(61)
Deferred tax	321	830
Provision outside the regime of fiscal neutrality and others	172	82
	643		1,069

The item "Provision outside the regime of fiscal neutrality and others" mainly includes withholdings in other countries for various services and differences in the tax settlement of the previous year.

Pursuant to tax legislation in force for 2019 and 2018 the Company's tax loss carryforwards may only be offset up to a maximum of 25% of taxable income prior to offset. For these same periods financial and non-financial goodwill may only be amortised up to one twentieth of its amount per year. Furthermore, for 2014 and 2013 property, plant and equipment, intangible assets and property investments may only be depreciated or amortised up to 70% of the assets' depreciation/amortisation for accounting purposes. As of 2015, they will be incorporated for 10 years.

In 2019 no corporate restructuring operation was carried out under the neutral tax regime. In 2018 the following operation was carried out: contribution of 100% of the shares and corporate stakes of Prosegur Ciberseguridad SAS, Loredat SA, Dognaedis Limited, Prosegur Ciberseguridad Paraguay, S.A., Dognaedis Lda and Prosegur Ciberseguridad, S.L. from Prosegur Compañía de Seguridad, S.A. to Prosegur Global Cyber Security, S.L.

43

2019 ANNUAL ACCOUNTS

b) Deferred taxes

Tax assets and tax liabilities are offset when the Company currently has the legally enforceable right to offset the recognised amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

Gross movement in deferred tax is as follows:

Deferred tax assets Stock impairment Provisions

Goodwill tax and portfolios Amortisation and depreciation Credits for deductions Others

Deferred tax assets Stock impairment Provisions

Goodwill tax and portfolios Amortisation and depreciation Credits for deductions Others

Deferred tax liabilities

Goodwill for tax purposes

Stock impairment

Freedom of Amortisation Act 4/2008

Others

Deferred tax liabilities

Goodwill for tax purposes

Stock impairment

Freedom of Amortisation Act 4/2008

Others

Thousands of euros

01/01/2019	Recognised	Other	31/12/2019
in profit /
adjustments
		loss
1,120	271	-	1,391
1,323	(954)	79	448
1,323	(177)	-	1,146
896	487	-	1,383
5,406	-	(2,530)	2,876
788	-	450	1,238
10,856	(373)	(2,001)	8,482
		Thousands of euros
01/01/2018	Recognised	Other	31/12/2018
in profit /	adjustments
	849	271	-	1,120
2,865	(1,464)	(78)	1,323
1,500	(177)	-	1,323
409	487	-	896
8,003	-	(2,597)	5,406
338	-	450	788
	13,964	(883)	(2,225)	10,856
		Thousands of euros
01/01/2019	Recognised	Other	31/12/2019
in profit /
adjustments
		loss
(13)	-	-	(13)
(94)	47	-	(47)
(6)	5	-	(1)
(21,462)	-	-	(21,462)
	(21,575)	52	-	(21,523)
		Thousands of euros
01/01/2018	Recognised	Other	31/12/2018
in profit /
adjustments
		loss
(13)	-	-	(13)
(141)	47	-	(94)
(12)	6	-	(6)
(21,459)	-	(3)	(21,462)
	(21,625)	53	(3)	(21,575)

The Company has generated a deferred tax liability in accordance with the eleventh additional provision of Revised Spanish Income Tax Act 4/2008, which regulates eligibility to apply accelerated depreciation for investments in new items of property, plant and equipment and property investments for the

44

2019 ANNUAL ACCOUNTS

purposes of economic activity that are made available to the taxable entity during the tax periods beginning in 2009 and 2010, provided that, during the 24 months after the start of the tax period in which the acquired assets are brought into service, the Company's average workforce remains consistent with the average headcount of the prior 12 months. For years commencing after 2011 and the first quarter of 2012, this provision was amended, and the requirement of a consistent headcount was eliminated.

The Company has opted to depreciate the property, plant and equipment during the same year in which they come into operation.

17.Contingencies

1. Contingent liabilities

The Company has contingent liabilities from litigation arising in the ordinary course of business which are not expected to give rise to significant liabilities.

Guarantees provided by the Company to third parties at year end are as follows:

	Thousands of euros
Commercial guarantees	2019		2018
40	63
Financial guarantees	73,842	72,827
	73,882		72,890

Financial guarantees essentially include those relating to litigations in process.

b) Contingent assets

At 31 December 2019 and 2018 the Company has no contingent assets.

c) National Commission on Markets and Competition

On 22 April 2015, Spain's National Commission on Markets and Competition (hereinafter, the CNMC) commenced disciplinary proceedings against Prosegur, Prosegur Servicios de Efectivo España, S.L.U (currently a subsidiary of Prosegur Cash) and Loomis España, S.A. for alleged anticompetitive practices in accordance with European Union legislation. On 10 November 2016, the Competition Chamber of the CNMC ordered a fine of EUR 39,420 thousand to be imposed on Prosegur and its subsidiary.

On 13 January 2017, Prosegur announced it planned to file, in the National Court (Audiencia Nacional), a contentious-administrative appeal against said ruling and requested the adoption of an interim measure consisting of suspending payment of the fine imposed.

On 13 February 2017, the National Court accepted the appeal proposed by Prosegur for processing, commencing the relevant proceedings, prior to formal filing of the appeal. On 6 September 2018, Prosegur filed the relevant appeal which at present remains pending resolution by the National Court in respect of the underlying matter.

With regard to the request for the interim measure, on 31 March 2017, the National Court agreed to it and suspended execution of the CNMC resolution in particular concerning payment of the fine by Prosegur, on the condition that, within a maximum of two months, Prosegur should provide surety or any other guarantee in the amount of the fine. On 9 June 2017, Prosegur presented the National Court

45

2019 ANNUAL ACCOUNTS

with a bank guarantee amounting to EUR 39,420 thousand.

Prosegur will exclusively and at its own expense assume the defence of Prosegur and Prosegur Servicios de Efectivo España S.L., having sole power regarding the directing and control of that defence and of the lawsuit.

18.Commitments

1. Purchase commitments for property, plant and equipment and intangible assets

Investments committed at year end but not recognised on the balance sheet are as follows:

	Thousands of euros
Property, Plant and Equipment	2019		2018
-	1
	-		1

b) Operating lease commitments

Future minimum payments under non-cancellable operating leases are as follows:

						Thousands of euros
		2019	2018
Less than 1 year		Buildings				Vehicles				Buildings			Vehicles
197	122	89			96
1 to 5 years	807	132	440			73
					254			529			169
	1,004

Pursuant to the provisions of the sixth and ninth clauses of the leases for the properties at Calle Pajaritos, 24 (Madrid) and Calle Santa Sabina, 8 (Madrid), respectively, between Proactinmo, S.L.U and the Company, these are subrogated to Prosegur Gestión de Activo S.L. as the lessor of both premises, from 1 January 2017 (Note 19.b)

The lease commitments correspond to the impact that Prosegur Gestión de Activo S.L makes on the Company.

19. Other related party transactions

Prosegur is controlled by Gubel, S.L., which was incorporated in Madrid and holds 51.618% of the Company's share capital. The remaining 48.382% is held by various shareholders, including Invesco Limited with 3.561%, AS Inversiones S.L. with 5.492% and FMR LLC with 6.195% (Note 13).

46

2019 ANNUAL ACCOUNTS

a) Group companies, jointly controlled companies and associates

The Company's financial assets and financial liabilities with Group companies, excluding equity instruments (Note 9), are as follows:

				2019
			Financial assets			Financial liabilities
			Current				Current
Thousands of euros	Credits	Debtors (Note	Other financial		Debts	Suppliers	Other financial
(Note 11)	11)	assets (Note		(Note 15)	(Note 15)	liabilities (Note
		11)		15)
Group companies in Spain
Prosegur Soluciones Integrales de Seguridad	-	2,743	4,836	(17,168)	(131)	-
España, S.L.U.
Prosegur Gestion de Activos, S.L.U.	-	250	20,346	(5,137)	(67)	-
Prosegur Global Alarmas, S.L.U.	8,288	24	-	(395)		-
Compañia Ridur, S.A.	-	-	8	(1,219)	-	-
Formación, Selección y Consultoría, S.A.	-	-	-	(1,645)	(12)	-
Prosegur Gestión de Activos International, S.L.U.	-	-	-	(345)	-	-
Prosegur International SIS, S.L.U.	1,957	3	-	(90)	-	-
Prosegur USAP International, S.L.U.	20	-	-	(6)	-	-
Prosegur International Alarmas, S.L.U.	4,409	8	-	(119)	-	-
Prosegur Soluciones, S.A.U.	-	-	1,061	(10,176)	(56)	-
MIV Gestión, S.A.	-	-	118	(26)	-	-
Prosegur Ciberseguridad, S.L.	2,475	22	-	(1,537)	(302)	-
Indiseg Evolium Group SL	141	3	-	(120)	-	-
Prosegur Assets Management, S.L.U.	-	-	19,737	(56,403)	(429)	-
Prosegur Global SIS, S.L.U.	27,032	38	4,741	(328)	(7)	-
Prosegur Servicios de Efectivo España, S.L.U.	-	1	7,209	(3,332)	(13)	-
Prosegur Alarmas España, S.L.U.	-	1,009	730	(23,848)	(213)	-
Prosegur Global CIT, S.L.U.	-	-	-	(2,642)	-	-
Prosegur Cash, S.A.	-	28,917	33,335	(15,839)	(13)	-
Prosegur Colombia 3 SL	-	-	-	(2)	-	-
Prosegur BPO España, S.L.U.	-	-	802	(1,750)	-	-
Armor Acquisition, S.A.	-	-	-	(1,568)	-	-
Juncadella Prosegur Internacional, S.A.	-	-	-	(37,708)	-	-
Prosegur International CIT 1, S.L.	-	-	-	(34)	-	-
Prosegur International CIT 2, S.L.U.	-	-	-	(5)	-	-
Prosegur Global Alarmas ROW, S.L.U.	-	-	101	(15,099)	(25)	-
Prosegur Global CIT ROW, S.L.U.	-	1	-	(292)	-	-
Prosegur Global SIS ROW, S.L.U.	21	17	3,456	(4,168)	-	-
ESC Servicios Generales, S.L.U.	4,252	15	135	(171)	-	-
Contesta Teleservicios	-	-	213	(138)	-	-
Integrum 2008	-	-	81	(43)	-	-
Bloggers Brokers	-	-	42	(9)	-	-
Contesta Servicios Auxiliares	-	-	137	90	-	-
Prosegur Colombia 1 SLU	-	-	-	(10)	-	-
Prosegur Colombia 2 SLU	-	-	-	(11)	-	-
Prosegur Global Cyber Security, S.L.	1,425	21	-	(107)	-	-
Segtech Ventures	8,282	65	35	(6)	-	-
Prosegur Servicios de Pago EP, S.L.	-	-	-	(112)	-	-
Risk Management Solutions, S.L.U	-	-	96	-	-	-
Compliofficer, S.L.U.	-	-	52	-	-	-
Work4Data Lab, S.L.	-	-	-	(33)	-	-
Prosegur Alpha3 Cashlabs, S.L.	-	-	-	(4)	-	-
Prosegur ODH, S.L.	-	-	-	(2)	-	-
UTES	-	-	8	-	-	-
Total Spain		58,302	33,137	97,279	(201,557)	(1,268)	-

47

2019 ANNUAL ACCOUNTS

			Thousands of euros
			2019
		Financial assets			Financial liabilities
		Current				Current
	Credits	Debtors (Note	Other financial		Debts	Suppliers	Other financial
	(Note 11)	11)	assets (Note		(Note 15)	(Note 15)	liabilities (Note
	11)		15)
Subsidiaries abroad
Prosegur Group in Abu Dhabi	711	60	-	-	-	-
Prosegur Group in Germany	-	-	-	-	-	-
Prosegur Group in Argentina	3,275	4,995	51	(98)	(2,059)	-
Prosegur Group in Australia	-	63		-	-	-
Prosegur Group in Brazil	-	395	225	(463)	(125)	-
Prosegur Group in Chile	-	704	22	(117)	(353)	-
Prosegur Group in China	-	-	-	-	-	-
Prosegur Group in Colombia	-	229	322	(3)	(21)	-
Prosegur Group in Denmark	-	-	-	-	-	-
Prosegur Group in the USA	502	1,563	5	-	-	-
Prosegur Group in France	-	58	-	(382)	(23)	-
Prosegur Group in Greece	-	-	-	-	-	-
Prosegur Group in India	-	280	-	(32)	-	-
Prosegur Group in Ireland	-	-	-	-	-	-
Prosegur Group in Luxembourg	-	-	-	(10,213)	-	-
Prosegur Group in Mexico	-	1	17	(149)	(75)	-
Prosegur Group in Paraguay	-	-	-	(302)	(6)	-
Prosegur Group in Peru	-	161	43	(219)	(1,077)	-
Prosegur Group in Portugal	-	588	2	(1,016)	(13)	-
Prosegur Group in Romania	-	-	-	-	-	-
Prosegur Group in Singapore	-	-	-	-	-	-
Prosegur Group in Italy	-	-	-	(362)	-	-
Prosegur Group in Uruguay	-	51	-	-	(573)	-
Prosegur Group in the United Kingdom	-	-	500	-	-	-
Total Foreign	4,488	9,148	1,187	(13,356)	(4,325)	-
Total
62,790	42,285	98,466		(214,913)	(5,593)	-

48

2019 ANNUAL ACCOUNTS

					2018
			Financial assets			Financial liabilities
			Current				Current
		Credits	Debtors	Other financial		Debts	Suppliers (Note	Other financial
Thousands of euros		assets (Note		liabilities (Note
		(Note 11)	(Note 11)	11)		(Note 15)	15)	15)
Group companies in Spain
Prosegur Soluciones Integrales de Seguridad España,	10,422	19	3,496	-	(4,753)	(2,502)
S.L.U.
Prosegur Compañia de Seguridad, S.A.	-	-	-	-	-	-
Prosegur Gestion de Activos, S.L.U.	68,014	1,056	7,546	-	(6)	(3,584)
Prosegur Global Alarmas, S.L.U.	60,840	-	40	-	-	(311)
Compañia Ridur, S.A.	-	-	-	(1,211)	-	(3)
Formación, Selección y Consultoría, S.A.	-	-	7	(1,742)	-	(1)
Prosegur Gestión de Activos International, S.L.U.	-	-	-	(325)	-	(2)
Prosegur International SIS, S.L.U.	27,377	-	17	-	-	(77)
Prosegur USAP International, S.L.U.	18	-	-	-	-	(6)
Prosegur International Alarmas, S.L.U.	18,498	-	12	-	-	(89)
Prosegur Soluciones, S.A.U.	-	-	-	(6,573)	-	(384)
MIV Gestión, S.A.	-	-	75	-	-	(29)
Prosegur Ciberseguridad, S.L.	1,752	1	2	-	-	(1,107)
Indiseg Evolium Group SL	435	-	-	-	-	(83)
Prosegur Assets Management, S.L.U.	-	-	18,788	(53,940)	-	(133)
Prosegur Global SIS, S.L.U.	129,763	-	85	-	(7)	(461)
Prosegur Servicios de Efectivo España, S.L.U.	-	87	6,448	-	(12)	(3,448)
Prosegur Alarmas España, S.L.U.	-	1	722	(33,488)	(15)	(122)
Prosegur Global CIT, S.L.U.	-	-	-	-	-	(1,694)
Prosegur Cash, S.A.	-	3,007	45,154	-	(12)	(9,847)
Prosegur Berlín, S.L.U.	-	-	-	-	-	-
Prosegur BPO España, S.L.U.	-	-	289	-	-	(219)
Armor Acquisition, S.A.	-	-	116	-	-	(1,641)
Juncadella Prosegur Internacional, S.A.	-	-	522	-	-	(32,118)
Prosegur International CIT 1, S.L.	-	-	-	-	-	(2)
Prosegur International CIT 2, S.L.U.	-	-	-	-	-	(4)
Prosegur Global Alarmas ROW, S.L.U.	11,762	-	17	-	-	(56)
Prosegur Global CIT ROW, S.L.U.	-	-	-	-	-	(163)
Prosegur Global SIS ROW, S.L.U.	3,998	-	4	-	(1,609)	(503)
ESC Servicios Generales, S.L.U.	3,067	2,480	-	-	-	(246)
Prosegur Global Cyber	3,668	-	2	-	-	(1)
Segtech Ventures	6,851	-	4	-	-	(33)
Integrum 2008	-	-	76	-	-	(43)
Contesta Teleservicios	-	-	280	-	-	(137)
Bloggers Brokers	-	-	23	-	-	(9)
Contesta Servicios Auxiliares	-	-	164	-	-	(75)
Prosegur Colombia 1 SLU	-	-	-	-	-	(1)
Prosegur Colombia 2 SLU	-	-	-	-	-	(1)
UTES	-	-	44	-	-	-
Total Spain		346,465	6,651	83,933	(97,279)	(6,414)	(59,135)

49

2019 ANNUAL ACCOUNTS

				Thousands of euros
					2018
			Financial assets					Financial liabilities
			Current						Current
		Credits	Debtors	Other financial				Debts	Suppliers (Note	Other financial
		assets (Note				liabilities (Note
		(Note 11)	(Note 11)	11)				(Note 15)	15)	15)
Subsidiaries abroad
Prosegur Group in Abu Dhabi	760	-	-	-	-	-
Prosegur Group in Germany	-	-	39	-	-	-
Prosegur Group in Argentina	4,128	4,206	-	-	(194)	(86)
Prosegur Group in Australia	-	36	-	-	-	-
Prosegur Group in Brazil	-	288	-	(3,229)	(63)	(513)
Prosegur Group in Chile	-	723	22	-	(257)	(117)
Prosegur Group in China	-	-	-	-	-	-
Prosegur Group in Colombia	-	155	276	-	(15)	(3)
Prosegur Group in the USA	14,952	14	28	-	-	-
Prosegur Group in France	-	36	-	(11,169)	-	(4)
Prosegur Group in India	-	244	-	-	-	(32)
Prosegur Group in Luxembourg	-	-	-	(10,922)	-	-
Prosegur Group in Mexico	-	14	20	-	(75)	(149)
Prosegur Group in Paraguay	-	-	-	-	(120)	(335)
Prosegur Group in Peru	-	637	43	-	-	(212)
Prosegur Group in Portugal	-	5	-	(1,009)	-	-
Prosegur Group in Uruguay	-	503	-		-	(5)	(4)
Total Foreign	19,840	6,861	428	(26,329)	(729)	(1,455)
Total
	366,305	13,512	84,361			(123,608)	(7,143)	(60,590)

Financial assets - Non-current loans correspond to a loan granted to Prosegur Global SIS ROW S.L.U that has been classified in the long term as it is expected to be capitalized.

Financial assets - the loans correspond, on the one hand, to short-term loans delivered to Group companies within the framework of the centralised treasury management. These are denominated in EUR, accruing annual interest of 0.75% in Spain, of 1.5 % in France and 1.25% in Germany. We also found short-term loans granted to subsidiaries in Abu Dhabi and Argentina, denominated in EUR and accruing annual interest of 1.5 % in Abu Dhabi and of 9 % and 7.5% in Argentina (1.75% in Spain, 6.75% in France, 1% in Hong Kong, 6.25% in Argentina, 5.75%, in 2018). Interest accrued in 2019 amounted to EUR 2,131 thousand (EUR 2,569 thousand in 2018).

Financial liabilities - the debts correspond, on the one hand, to short-term loans received from Group companies within the framework of the centralised treasury management. They are denominated mainly in EUR, accruing annual interest of 0.75% in Spain, 0.75% in Portugal and 2% in France. We also found short-term loans granted to the Company mainly by subsidiaries in Luxembourg, denominated in EUR and accruing annual interest of 0.75% (0.75% in Spain, 0.75% in Portugal in 2018). Interest accrued amounted to EUR 927 thousand in 2019 (EUR 821 thousand in 2018).

Receivables and suppliers mostly reflect the outstanding balances relating to invoices for centralised services issued to and received from, respectively, the various Group companies.

The current accounts with Group companies (other financial assets), include payments and collections of balances payable to/receivable from each consolidated tax group company, as follows:

50

2019 ANNUAL ACCOUNTS

			Thousands of euros
		2019				2018
	Other	Corporate	Receivable/		Other	Corporate	Receivable/
	payments/r		payments/
	Income Tax	(payable)		Income Tax	(payable)
	eceipts		receipts
Prosegur Global CIT, S.L.U.	-	(2,642)	(2,642)	-	(1,694)	(1,694)
Prosegur Global CIT ROW, S.L.U.	-	(292)	(292)	-	(163)	(163)
JUNCADELLA Prosegur INT., S.A.	-	(37,708)	(37,708)	-	(31,596)	(31,596)
Prosegur Gestion de Activos, S.L.U.	(1)	4,824	4,823	46	3,915	3,961
Prosegur Servicios de Efectivo España, S.L.U.	168	3,708	3,876	(182)	3,182	3,000
Prosegur International SIS, S.L.U.	-	(90)	(90)	17	(77)	(60)
Prosegur Soluciones, S.A.	-	743	743	(5)	(380)	(385)
ARMOR ACQUISITION, S.A.	-	(1,568)	(1,568)	-	(1,525)	(1,525)
Prosegur International Alarmas, S.L.U.	-	(119)	(119)	12	(89)	(77)
Prosegur Global Alarmas ROW, SL	-	49	49	10	(50)	(40)
Formación, Selección y Consultoría	-	(6)	(6)	-	7	7
Prosegur Global SIS, S.L.U.	4,068	346	4,414	86	(461)	(375)
Prosegur SIS España, S.L.U.	(87)	2,104	2,017	(13)	1,007	994
ESC Servicios Generales, S.L.U.	-	(37)	(37)	(1)	(245)	(246)
Prosegur Gestión Activos Int., S.L.U.	(2)	(13)	(15)	(4)	(2)	(6)
Prosegur USAP International S.L.U.	-	(6)	(6)	-	(6)	(6)
Transportadora de Caudales	(11)	-	(11)	37	-	37
Prosegur Alarmas España, S.L.U.	222	386	608	(19)	619	600
Prosegur International CIT 1, S.L.U.	-	(34)	(34)	-	(2)	(2)
Prosegur International CIT 2, S.L.U.	-	(5)	(5)	-	(4)	(4)
Prosegur Global SIS ROW, S.L.U.	-	(4,167)	(4,167)	4	(503)	(499)
Prosegur Global Alarmas, S.L.U.	-	(395)	(395)	41	(311)	(270)
Compañia Ridur, S.A.	(9)	6	(3)	-	(2)	(2)
Prosegur Ciberseguridad, S.L.	-	(1,537)	(1,537)	2	(1,107)	(1,105)
Prosegur Assets Management, S.L.U.	-	(125)	(125)	(35)	(98)	(133)
Prosegur Cash, S.A.	-	(15,838)	(15,838)	(1,818)	(8,028)	(9,846)
MIV Gestión, S.A.	-	92	92	-	46	46
Indiseg Evolium Group SL	-	(120)	(120)	-	(83)	(83)
Prosegur SIS USA Inc.	-	-	-	27	-	27
Xiden SACI	(3)	-	(3)	(3)	-	(3)
Prosegur Tecnologia Argentina	(2)	-	(2)	(2)	-	(2)
General Industries Argentina	(8)	-	(8)	(8)	-	(8)
Prosegur Holding, S.A.	(7)	-	(7)	(7)	-	(7)
Prosegur Argentina, S.A.	2	-	2	2	-	2
Prosegur Brasil, S.A.	-	-	-	(230)	-	(230)
Prosegur Seguridad, S.A.	(17)	-	(17)	(17)	-	(17)
Prosegur Gestão de Efetivo	-	-	-	(44)	-	(44)
Prosegur Tecnologia	(237)	-	(237)	(238)	-	(238)
Compañía de Seguridad Peru	(187)	-	(187)	(180)	-	(180)
Proseguridad	20	-	20	20	-	20
Prosegur Cajeros S.A.	(32)	-	(32)	(32)	-	(32)
Prosegur Tecnología Peru	2	-	2	2	-	2
Orus, S.A.	14	-	14	14	-	14
Prosegur Activa Peru	7	-	7	7	-	7
Segtech Ventures	-	28	28	4	(33)	(29)
Prosegur Security Holding	-	-	-	(4)	-	(4)
SingPai India Private	(32)	-	(32)	(32)	-	(32)
Servicios de Seguridad	(116)	-	(116)	(116)	-	(116)
Empresa de Transportes Cia de Seguridad Chile	15	-	15	15	-	15
Prosegur Chile	7	-	7	7	-	7
Prosegur Seguridad Privada Logistica	9	-	9	6	-	6
Prosegur Seguridad Privada	6	-	6	11	-	11
Prosegur Consultoria	(141)	-	(141)	(141)	-	(141)
Prosegur Custodias	2	-	2	2	-	2
Grupo Mercurio de Transporte	(8)	-	(8)	(8)	-	(8)
Integrum 2008	-	38	38	-	33	33
Prosegur Ciberseguridad International	(302)	-	(302)	(335)	-	(335)
Bloggers Brokers	-	33	33	-	14	14
Contesta TeleServicios	-	76	76	-	143	143
Tellex	-	-	-	(48)	-	(48)
Prosegur Global Cyber	-	(107)	(107)	-	(1)	(1)
Contesta Servicios Auxiliares	-	227	227	-	90	90
Prosegur AVOS	-	(948)	(948)	-	70	70
Prosegur Colombia 2	-	(11)	(11)	-	(1)	(1)
Prosegur Colombia	-	(10)	(10)	273	-	273
Prosegur Colombia 3 SL	-	(2)	(2)	-	-	-
Prosegur Servicios de Pago	-	(112)	(112)	-	-	-
Risk Management Solutions, S.L.U.	-	96	96	-	-	-
Compliofficer, S.L.U,	-	52	52	-	-	-
Work4Data Lab, S.L.	-	(33)	(33)	-	-	-
Enclama, S.L.	-	(4)	(4)	-	-	-
Prosegur ODH, S.L.	-	(1)	-	-	-	-
Compañia Transportadora de Valores Prosegur	129	-	-	-	-	-
de Colombia SA
Inversiones BIV SAS	144	-	-	-	-	-
Servimax Servicios Generales	40	-	-	-	-	-
Italy (EP)	(362)	-	-	-	-	-
United Kingdom (EP)	500	-	-	-	-	-
Others	51	-	(1)	36	-	36
Total	3,842	(53,122)	(49,782)		(2,841)	(37,335)	(40,212)

51

2019 ANNUAL ACCOUNTS

Transactions between the Company and Group companies are as follows:

				Thousands of euros
				2019
			Income				Expenses
								Result due
		Services	Interest	Dividends		Services	Interest (Note	to
		provided and	(Note 3)	(Note 3)		rendered	4)	impairment
Prosegur Soluciones Integrales de Seguridad España,		other income						(Note 9)
S.L.U.	2,358	-	-	(185)	(67)	-
Ridur	-	-	-	-	(9)	-
Prosegur Gestion de Activos, S.L.U.	(45)	22	16,256	(263)	-	-
Prosegur Global Alarmas, S.L.U.	-	23	-	-	-	-
Formación, Selección y Consultoría, S.A.	-	-	-	-	(12)	-
Prosegur Gestión de Activos International, S.L.U.	-	-	-	-	(2)	-
Prosegur International SIS, S.L.U.	-	3	-	-	-	-
Prosegur Soluciones, S.A.U.	-	-	-	-	(56)	-
Prosegur Ciberseguridad, S.L.	-	22	-	(302)	-	-
Indiseg Evolium Group, S.L.	-	3	-	-	-	-
Prosegur Assets Management, S.L.U.	-	-	19,737	-	(429)	-
Prosegur Global SIS, S.L.U.	(117)	37	-	-	-	-
Prosegur Alarmas España, S.L.U.	832	-	-	-	(198)	-
Prosegur Cash, S.A.	23,391	-	44,447	-	-	-
Prosegur Global Alarmas ROW, S.L.U.	-	-	-	-	(25)	-
Prosegur Global SIS ROW, S.L.U.	-	47	-	-	-	-
ESC Servicios Generales, S.L.U.	-	15	-	(2)	-	-
Prosegur Global Cyber	-	21	-	-	-	-
Segtech Ventures, S.A.	-	65	-	-	-	-
Prosegur Group in Abu Dhabi	-	11	-	-	-	-
Prosegur Group in Argentina	(577)	291	-	-	-	-
Prosegur Group in Brazil	121	-	-	-	(18)	-
Prosegur Group in Peru	(1,087)	-	-	-	-	-
Prosegur Group in Chile	(49)	-	-	-	-	-
Prosegur Group in France	32	-	-	-	(18)	-
Prosegur Group in Colombia	81	-	-	-	-	-
Prosegur Group in Uruguay	(544)	-	-	-	-	-
Prosegur Group in Paraguay	(12)	-	-	-	-	-
Prosegur Group in Portugal	529	-	-	-	(8)	-
Prosegur Group in Mexico	-	1	-	-	-	-
Prosegur Group in Luxembourg	-	-	-	-	(85)	-
Prosegur Group in India	36	-	-	-	-	-
Prosegur Group in the USA	-	1,562	-	-	-	-
Total		24,949	2,131	80,440	(752)	(927)	-

52

2019 ANNUAL ACCOUNTS

				Thousands of euros
				2018
			Income				Expenses
		Services	Interest	Dividends		Services	Interest	Result due
			to
		provided and	(Note 3)	(Note 3)		rendered	(Note 4)	impairment
Prosegur Soluciones Integrales de Seguridad España,		other income						(Note 9)
(2,595)	92	-	(353)	-	-
S.L.U.
Prosegur Gestion de Activos, S.L.U.	-	455	10,000	(733)	-	-
Prosegur Global Alarmas, S.L.U.	-	356	-	(16)	-	-
Compañia Ridur, S.A.	-	-	-	-	(9)	-
Formación, Selección y Consultoría, S.A.	-	-	-	(5)	(9)	-
Prosegur Gestión de Activos International, S.L.U.	-	-	-	-	(2)	-
Prosegur International SIS, S.L.U.	-	190	-	-	-	-
Prosegur International Alarmas, S.L.U.	-	97	-	-	-	-
Prosegur Soluciones, S.A.U.	-	-	-	(48)	(57)	-
Prosegur Ciberseguridad, S.L.	-	21	-	(6)	-	-
Indiseg Evolium Group, S.L.	-	4	-	-	-	-
Prosegur Assets Management, S.L.U.	-	-	25,050	(13)	(369)	-
Prosegur Global SIS, S.L.U.	-	849	-	(104)	-	-
Prosegur Servicios de Efectivo España, S.L.U.	-	-	-	(119)	-	-
Prosegur Alarmas España, S.L.U.	-	-	-	(44)	(266)	-
Prosegur Cash, S.A.	27,398	-	60,205	(84)	-	-
Prosegur Global Alarmas ROW, S.L.U.	-	117	-	(6)	-	-
Prosegur Global CIT ROW, S.L.U.	-	-	-	(283)	-	-
Prosegur Global SIS ROW, S.L.U.	-	-	-	(31)	-	-
ESC Servicios Generales, S.L.U.	2,027	62	-	(16)	(2)	-
Prosegur Global Cyber	-	3	-	-	-	-
Segtech Ventures, S.A.	-	17	-	-	-	-
Prosegur Foundation	-	-	-	(11)	-	-
Prosegur Group in Abu Dhabi	-	23	-	-	-	-
Prosegur Group in Argentina	2,167	137	-	(4)	-	-
Prosegur Group in Australia	-	-	-	(18)	-	-
Prosegur Group in Brazil	287	-	-	-	-	-
Prosegur Group in Peru	1,382	-	-	5	-	-
Prosegur Group in Chile	(253)	-	-	(8)	-	-
Prosegur Group in France	41	-	-	-	(4)	-
Prosegur Group in Colombia	33	-	-	-	-	-
Prosegur Group in Germany	-	72	-	(1)	-	-
Prosegur Group in Uruguay	1,287	-	-	-	-	-
Prosegur Group in Portugal	85	-	-	(2)	(8)	-
Prosegur Group in Mexico	(75)	29	-	-	-	-
Prosegur Group in Luxembourg	-	-	-	-	(95)	(38)
Prosegur Group in the USA	-	46	-	(76)	-	-
Total		31,784	2,570	95,255	(1,981)	(821)	(38)

Within the services provided and other income, the most significant are EUR 25,939 thousand (EUR 31,784 thousand in 2018) invoiced for trademark assignment. In this sense, Prosegur Compañía de Seguridad, S.A., owner of the "Prosegur" brand, concedes its brand to the rest of the Group's companies and invoices them based on the utility that it reports to the different lessee entities. The Company policy follows the OECD Guidelines on Transfer Pricing.

Interest income and borrowing costs reflect the amounts accrued on the aforementioned current loans extended to and by Group companies.

1. Other related parties Procurement of goods and services

During the year, Euroforum Escorial S.A. (controlled by Gubel S.L.) invoiced no service to Prosegur Security Company, S.A.

Through the company Gestconsult S.A. Prosegur invested EUR 50,000 thousand in a fixed income fund in 2017, for which an expense was recognised for a management fee of 0.60%. The chairman of Gestconsult, Juan Lladó Fernandez-Urrutia, is a person related to Mr Christian Gut Revoredo. Following a favourable report from the corresponding Committee, on 3 April 2017 the Board of Directors authorised this related transaction. In 2019 a disinvestment of EUR 20,000 thousand took place in the fixed income fund mentioned above.

53

2019 ANNUAL ACCOUNTS

20.Remuneration of Directors and Senior Management Personnel

1. Remuneration of members of the Board of Directors

The total remuneration accrued by members of the Board of Directors is as follows:

Thousands of euros

		2019			2018
Fixed remuneration				1,724	1,724
Variable remuneration	250	308
Remuneration for membership of the Board and Committee	160	160
Per diems	169	143
Life insurance premiums	73	67
Total			2,376			2,402

b) Remuneration of Senior Management personnel

Senior Management personnel are Company employees who hold, de facto or de jure, Senior Management positions reporting directly to the Board of Directors, executive committees or managing directors on the Board, including those with power of attorney not limited to the entity's statutory activity or specific areas or matters.

The total remuneration accrued by Senior Management personnel of the Company is as follows:

Thousands of euros

		2019			2018
Fixed remuneration		669	563
Variable remuneration	1,017	664
Remuneration in kind	13	11
Life insurance premiums	2	2
Total				1,701			1,240

These amounts reflect the provisions for the accrued incentive, payable in cash, corresponding to the 2017 and 2020 Plan (Note 25.9).

In this period, provisions to results were made of EUR 712 thousand (2,855 thousand in 2018) (Note 3). This amount includes the adjustment for fair value of the share price for the Plan 2017 and the Plan 2020 and the corresponding accrual.

In 2019 a sum of EUR 174 thousand was applied (EUR 374 thousand in 2018).

The fair value of the incentives referred to the share quotation price was estimated on the basis of Prosegur's share quotation price at the close of the period or at the payment time.

Lastly, this provision was recognised as current provisions in an amount of EUR 1,412 thousand (EUR 3,076 thousand in 2018) since the maturity of this commitment will take place in the first half of 2019 regarding the Plan 2017.

c) Information required by article 229 of the Spanish Companies Act

As required by articles 228, 229 and 230 of the Restated Text of the Spanish Companies Act, approved by Royal Legislative Decree 1/2010 of 2 July 2010 and amended by Act 31/2014 concerning

54

2019 ANNUAL ACCOUNTS

improvements to corporate governance, the members of the Board of Directors declare that they have not been involved in any direct or indirect conflicts of interest with the company in 2019.

Recurrently, and for many years before the appointment of Fernando Vives as a director of the Company, the law firm J&A Garrigues, S.L.P. has provided Prosegur with legal counsel and tax advice, within the ordinary course of business and in market terms. Prosegur does not work solely with J&A Garrigues, S.L.P., but also receives legal counsel and tax advice from other firms. The fees received by J&A Garrigues, S.L.P. from Prosegur are not material for the firm and neither do they represent a significant amount on the accounts of Prosegur. At 31 December 2019, fees totalled EUR 161 thousand (EUR 70 thousand at 31 December 2018).

Furthermore, these services are provided through partners from the firm other than Fernando Vives, whose remuneration as a partner of J&A Garrigues, S.L.P. is entirely independent and in no way linked to the amount invoiced by the firm to Prosegur. Accordingly, the Board of Directors considers that the business relationship between the law firm J&A Garrigues, S.L.P. and Prosegur, due to its recurrent, non-exclusive nature in the ordinary course of business, and its scant significance in the terms outlined, in no way affects the independence of Fernando Vives to discharge the duties of independent director of Prosegur.

21.Employee Information

The average headcount of the Company in these years, distributed by category, is as follows.

	2019			2018
Indirect personnel			30	30
Total		30		30

At year end the distribution by gender of Company personnel is as follows:

				2019		2018
			Female				Men				Women			Men
Indirect personnel			9			23	10			21
Total		9			23			10			21

The year-end (and average) distribution by gender of the Board of Directors and Senior Management personnel is as follows:

				2019		2018
			Female			Men								Women	Men
Directors			2			6					2				5
Senior Management	-			8	-				9
Total		2			14				2				14

There are no employees in the Company with a disability rating of 33% or more.

55

2019 ANNUAL ACCOUNTS

22.Audit Fees

KPMG Auditores, S.L., the auditors of the Annual Accounts of the Company, have invoiced the following fees and expenses for professional services:

Thousands of euros

	2019		2018
Audit services		261		373
Other audit-related services	20	2
Total		281		375

Audit services detailed in the above table include the total fees for services rendered in 2019 and 2018, irrespective of the date of invoice.

Other services related to the audit correspond mainly to limited audits of interim financial statements, reports on procedures agreed for compliance with covenants and others, provided by KPMG Auditores, S.L. to Prosegur Compañía de Seguridad, S.A. for the year ending 31 December 2019.

Additionally, other KPMG International affiliates have invoiced the Company the following fees for professional services during the year:

Thousands of euros

	2019			2018
Other services		15	30
Total		15		30

Under Other services, financial advisory services are included mainly in the evaluation of the takeover of businesses (due diligence and related services).

23.Financial risk management

Financial risk factors

The Company's activities are exposed to various financial risks: market risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk. The Company's risk management programme focuses on uncertainty in the financial markets and aims to minimise potential adverse effects on the Company's business.

The Company uses hedges to mitigate certain risks. Risk management is controlled by the Company's Treasury Department, which identifies, proposes and carries out the hedging instructions approved by the Company's Executive Committee.

1. Currency risk

The Company mainly operates on a national basis. Likewise, Prosegur Group, of which the Company is the parent, operates internationally. As a result, the Company is exposed to currency risk when operating with its subsidiaries in foreign currencies and through the assets and liabilities contracted in foreign currencies from third parties, specifically the Brazilian Real, the American Dollar and, to a lesser extent, the Argentine Peso. Currency risk is associated with recognised assets and liabilities denominated in foreign currency.

56

2019 ANNUAL ACCOUNTS

Management has a currency risk management policy to control the risk arising from the exchange of foreign currencies to its functional currency to minimise the Company's exposure. Currency risk arises when future transactions or recognised assets and liabilities are presented in a currency other than the parent's functional currency.

When so required by its policies and market expectations, the Company uses forward contracts approved and contracted by the Treasury Department in the corresponding market to control currency risk arising on trade transactions and recognised assets and liabilities. The Treasury Department is responsible for managing the net position of each foreign currency by entering into external or local forward currency contracts, depending on their competitiveness and appropriateness.

Since the Company, as parent of the Prosegur Group, intends to remain in the foreign markets in which it is present in the long term or permanently, it does not hedge the currency risk related to equity investments in those markets.

The value of the financial assets and liabilities attributable to the Company at 31 December, by type of currency, is as follows:

					Thousands of euros
	2019			2018
		Assets			Liabilities						Assets			Liabilities
Euros	595,825			1,008,214	961,567			981,148
Argentine Peso	-			102	-			-
US Dollar	2,261			-	-			159
Peruvian Nuevo Sol	-			-	834			-
Australian Dollar	4			-	-			-
Brazilian Real	-			-	-			1,906
Chilean Peso	-			-	-			25
Colombian Peso	-			1,926	-			-
Mexican Peso	-			-	21			-
Total					1,010,242				962,422			983,238
598,090

1. Interest rate, cash flow and fair value risks

As the Company does not have a significant amount of assets remunerated at variable interest rates, income and cash flows from operating activities are not significantly affected by fluctuations in market interest rates.

Interest rate risk mainly arises from non-current borrowings. Borrowings at variable interest rates expose the Company to cash flow interest rate risks. Fixed-interest borrowings expose the Company to fair value interest rate risks.

In 2019 and 2018 the Company's borrowings at variable interest rates were basically denominated in EUR.

The Company analyses its interest rate risk exposure dynamically. A simulation of various scenarios, considering refinancing, the renewal of current positions, alternative financing and hedges is performed. Based on these scenarios, the Company calculates the effect of a certain variation in interest rates on profit and loss. These scenarios are only analysed for the liabilities that represent the most significant positions in which a variable interest rate is paid.

Details of loans and borrowings by debentures and other negotiable securities and bank loans and borrowings, either at a fixed rate or using derivatives, are as follows:

57

2019 ANNUAL ACCOUNTS

		Thousands of euros
		2019
Non-current (Note 15)	Total debt						Hedged debt			Debt exposure
698,054	698,054			-
Current (Note 15)	23,776	23,776			-
Total debt	721,830					721,830			-
		Thousands of euros
		2018
Non-current (Note 15)	Total debt						Hedged debt			Debt exposure
696,566	696,566			-
Current (Note 15)	23,569	23,569			-
Total debt	720,135						720,135			-

1. Credit risk

The Company has no significant credit risk concentrations given that, following the 2013 spin-off of the private security business line to Prosegur España S.L.U. the Company's main activity has been that of a holding of Group companies.

1. Liquidity risk

The Company applies a prudent policy to cover its liquidity risks, based on having sufficient cash and marketable securities as well as sufficient financing through credit facilities to settle market positions. Given the dynamic nature of its underlying business, the Company's Treasury Department aims to be flexible with regard to financing through drawdowns on committed credit facilities.

Management monitors the Company's liquidity reserves, which comprise credit drawdowns (see Note

1. and available cash and cash equivalents (see Note 12), and are forecast based on expected cash flows.

The table below presents an analysis of the financial liabilities that will be settled for the net amount, grouped by maturities based on the period remaining from the balance sheet date until contractual maturity dates. The amounts presented in this table reflect the cash flows stipulated in the contract.

			Thousands of euros
	Less than 1		1 to 2 years		2 to 5 years		More than 5		Total
	year				years
31 December 2019	-	23,776	698,054	-	721,830
31 December 2018	-	31,111	700,000	-	731,111

Finally, systematic forecasts are prepared for cash generation and requirements, allowing the Company to determine and monitor its liquidity position on an ongoing basis.

1. Price volatility risk

As the Company is a security-holding service business, there are no significant price volatility risks.

58

2019 ANNUAL ACCOUNTS

24.Events after the reporting date

On 15 January 2020, the first payment was made of the dividend approved on 19 December 2018.

On 28 January 2020 and aside from the own share buyback programme (Note 22.1), Prosegur acquired a package of 5,850,000 of its own shares from an institutional investor, representing 0.98% of the share capital, at a price of 3.592 Euros per share, with a discount of 0.05 Euros per share.

25.Accounting principles

25.1. Intangible assets

The assets in intangible assets are posted at purchase price. The capitalisation of production cost appears under "Works carried out by the Company for assets" in the income statement. Intangible fixed assets are shown in the balance sheet at cost value less the amount of accumulated depreciation and impairment.

Fixed asset prepayments are recognised initially at cost. In subsequent years and provided the period between the payment and receipt of the asset exceeds one year, prepayments earn interest at the supplier's incremental rate.

a) Computer software

Computer software purchased and those developed by the Company, including costs of development of websites, are recognised insofar as they meet the criteria set for development costs. Such costs are amortised over the estimated useful lives of the applications, at 5 years.

Disbursements made for the development of a website for promotional purposes or the advertisement of products or services of the Company are recognised as expenses at the time these are incurred.

Computer software maintenance costs are charged as expenses when incurred.

b) Licences

Licences have defined useful lives and are recognised at cost less accumulated amortisation and impairment. Licences are amortised on a straight-line basis to allocate the cost over their estimated useful lives of between 10 years.

c) Trademarks

Trademarks are initially recognised at their cost of purchase and are presented at historical cost. They have defined useful lives and are recognised at cost less amortisation and accumulated impairment losses. Trademarks are amortised on a straight-line basis to allocate the cost over their estimated useful lives (between 1.6 to 30 years), and the amortisation of the Prosegur brand is in 10 years (Note 6).

59

2019 ANNUAL ACCOUNTS

25.2. Property, plant and equipment

Property, plant and equipment are recognised at cost of acquisition or production, less accumulated depreciation and any accumulated impairment.

Costs incurred to extend, modernise or improve property, plant and equipment are only recorded as an increase in the value of the asset when the capacity, productivity or useful life of the asset is increased and it is possible to ascertain or estimate the carrying amount of the assets that have been replaced in inventories.

The cost of major repairs is capitalised and depreciated over their estimated useful life, while recurring maintenance costs are charged to the income statement during the year in which they are incurred.

The replacement of property, plant and equipment that may be capitalised carries a reduction in the carrying amount of the items replaced. When the cost of the items replaced has not been depreciated separately and the calculation of the carrying amount thereof were not feasible, the cost of replacement is used as an indication of the cost of the items at the time of acquisition or construction thereof.

Depreciation of property, plant and equipment is calculated systematically on a straight-line basis over the estimated useful lives of the assets based on the actual decline in value and use.

The Company uses the following depreciation rates:

Technical installations and machinery	Ratio (%)
10 to 25
Computer equipment	25
Transport elements	16
Other property, plant and equipment	10 to 25

The residual values and useful lives of assets are reviewed and adjusted, if necessary, at each balance sheet date.

When an asset's carrying amount exceeds its estimated recoverable amount, the carrying amount is written down immediately to the recoverable amount.

Profit and losses on the sale of property, plant and equipment are calculated as the difference between the consideration received and the carrying amount, and are recognised in the income statement.

25.3. Impairment losses on non-financial assets

If an event or change in circumstances indicates that the carrying amount of assets subject to amortisation or depreciation may not be recoverable, Prosegur determines whether impairment losses have been incurred. The difference between the carrying amount of the asset and its recoverable amount is recognised as an impairment loss. The recoverable amount is the greater between the fair value of an asset less the costs to sell or other type of disposal, or the value in use. For the purposes of assessing impairment, assets are grouped together at the lowest levels for which there are separately identifiable cash flows (cash-generating units, CGU). Prosegur reviews impaired non- financial assets other than goodwill at the end of each reporting period to assess whether the loss has been reversed.

60

2019 ANNUAL ACCOUNTS

25.4. Financial assets

a) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. The assets are classified as current unless they mature in more than 12 months after the balance sheet date, in which case they are classified as non-current. Loans and receivables are generally recognised under "Loans to companies" and "Trade and other receivables" in the balance sheet.

These financial assets are initially carried at fair value, including directly attributable transaction costs, and are subsequently measured at amortised cost, recognising accrued interest at the effective interest rate, which is the discount rate that matches the instrument's carrying amount with all estimated cash flows to maturity. Nevertheless, trade receivables falling due in less than one year are carried at their face value on both initial recognition and subsequent measurement, provided the effect of not updating is immaterial.

Loans with interest contingent on the borrower achieving a milestone such as obtaining profits, or calculated by reference to the financial performance of the borrower, are measured at cost, plus the attributable interest. In these cases, transaction costs are recognised on a straight-line basis over the term of the loan.

At least at year end, the necessary impairment losses are recognised when there is objective evidence that all the amounts receivable will not be collected.

The impairment loss is calculated as the difference between the carrying amount of the asset and the present value of the estimated future cash flows, discounted at the effective interest rate upon initial recognition. Impairment losses are recognised and reversed in the income statement.

b) Financial assets held for trading

An asset is classified as a financial asset held for trading if it is acquired principally for the purpose of selling it in the near term, forms part of a portfolio of identified financial instruments that are managed together for short-termprofit-taking or is a derivative financial instrument, except for financial guarantee contracts or designated hedging instruments.

These financial assets are recognised at fair value both on initial recognition and on subsequent measurement and any changes in fair value are recognised in the income statement. Transaction costs directly attributable to the acquisition are recognised in the income statement.

1. Investments in equity instruments of Group companies, jointly controlled companies and associates

These investments are initially recognised at cost, which is equivalent to the fair value of the consideration paid, including for jointly controlled companies and associates the transaction costs incurred, and are subsequently measured at cost net of any accumulated impairment losses.

If there is objective evidence that the carrying amount is not recoverable, the amount of the impairment loss is measured as the difference between the carrying amount and the recoverable amount, the latter of which is understood as the higher of the fair value less costs to sell and the present value of estimated future cash flows from the investment. Unless there is better evidence of the recoverable amount of the investment, when estimating the impairment of these types of assets, the investee's equity is taken into consideration, corrected for any unrealised gains existing at the measurement date. Impairment losses are recognised and reversed in the income statement.

61

2019 ANNUAL ACCOUNTS

d) Available-for-sale and other non-current financial assets

This category comprises debt securities and equity instruments that are not included in the aforementioned categories. Available-for-sale financial assets are classified as non-current assets unless management intends to derecognise the investment within twelve months after the balance sheet date.

Available-for-sale financial assets are measured at fair value and any changes are recognised directly in equity until the financial asset is derecognised or impaired, at which time the cumulative gain or loss previously recorded in equity is recognised in the income statement, provided that the fair value can be determined. Otherwise, it is recognised at cost less any impairment losses.

An available-for-sale financial asset is impaired if there is objective evidence that the estimated future cash flows are reduced or delayed, in the case of acquired debt instruments, or the carrying amount of the asset is uncollectible, in the case of equity instruments. The impairment of these assets is the difference between the cost or amortised cost less any impairment previously recognised in the income statement, and the fair value on the date of measurement. Impairment of equity instruments that are measured at cost because their fair value cannot be determined is calculated in the same way as for investments in Group companies, jointly controlled entities and associates.

If there is objective evidence of impairment, the Company recognises in the income statement the accumulated losses previously recognised in equity as a result of a decrease in the fair value of the assets. Impairment losses on equity instruments recognised in the income statement are not reversed through the income statement.

e) Derecognition of financial assets

Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire or have been transferred and the Company has transferred substantially all the risks and rewards of ownership.

On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration received, net of transaction costs, including any new assets obtained less any new liabilities assumed and any cumulative profit or loss deferred in recognised income and expense, is recorded in equity.

f) Offsetting principles

A financial asset is offset only when the Company currently has the legally enforceable right to offset the recognised amounts and intends either to settle on a net basis or to realise the asset simultaneously.

25.5. Cash and cash equivalents

Cash and cash equivalents include cash in hand, demand deposits at banks and financial instruments that are convertible to cash and have a maturity of three months or less from the date of acquisition, provided that there is no significant risk of changes in value and that they form part of the Company's usual cash management policy.

62

2019 ANNUAL ACCOUNTS

25.6. Net equity

The share capital of the Company is represented by ordinary shares.

The acquisition by the Group of equity instruments of the Parent Company is presented at acquisition cost separately as a reduction in net equity in the consolidated statement financial position, regardless of the reason for the acquisition. No profit or loss was recognised in transactions with own equity instruments.

The subsequent amortisation of the parent's equity instruments leads to a capital reduction in the nominal amount of said shares and the positive or negative difference between the acquisition price and the nominal share price is charged or credited to reserves.

The transaction costs relating to own equity instruments are recognised as a reduction in net equity once any tax effect has been taken into account.

25.7. Financial liabilities

a) Debts and payables

This category includes trade and non-trade payables. These borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement for at least 12 months after the balance sheet date.

The payables are initially recognised at fair value, adjusted for directly attributable transaction costs, and subsequently measured at amortised cost using the effective interest method.

The effective interest rate is the discount rate that matches the instrument's carrying amount with the expected future flow of payments to the maturity date of the liability.

Nevertheless, trade payables falling due in less than one year without a contractual interest rate are carried at their face value on both initial recognition and subsequent measurement, provided the effect of not discounting flows is not significant.

If existing payables are renegotiated but the lender has not changed and the present value of future cash flows, including net fees paid, differs by less than 10% from the present value of future cash payments for the original liability, calculated using the same method, the liability is not considered to be substantially modified.

b) Derecognition of financial liabilities

A financial liability, or part of a financial liability, is derecognised when the Company either discharges the liability by paying the creditor, or is legally released from primary responsibility for the liability either by process of law or by the creditor.

c) Offsetting principles

A financial liability is offset only when the Company currently has the legally enforceable right to offset the recognised amounts and intends either to settle on a net basis or to settle the liability simultaneously.

63

2019 ANNUAL ACCOUNTS

25.8. Current and deferred taxes

The income tax expense (income) for the year comprises current tax and deferred tax.

The current and deferred tax expense (income) is recognised in the income statement. However, the tax effect of items recognised directly in equity is recorded in equity.

Current tax assets and liabilities are measured at the amount expected to be paid to or recovered from the taxation authorities, using the tax laws that have been enacted or substantially enacted at the balance sheet date.

Deferred tax assets and liabilities are calculated using the liability method on the basis of the temporary differences that arise between the tax base of assets and liabilities and their carrying amount. However, if deferred tax assets or liabilities arise from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affect neither accounting profit nor taxable income, they are not recognised. Deferred tax assets or liabilities are measured using the tax rates that have been enacted or substantially enacted at the balance sheet date and are expected to be applicable when the corresponding deferred tax asset is realised or deferred tax liability is settled.

Deferred tax assets are recognised provided that it is probable that sufficient taxable income will be generated against which the temporary differences can be offset.

Deferred tax assets arising from deductible temporary differences are recognised provided future tax gains are likely to exist for offset thereof that will reverse within ten years. Assets arising from the initial recognition of assets and liabilities in a transaction which is not a business combination and which does not affect either the carrying profit or the taxable base on transaction date, are not subject to recognition. Assets which will reverse in a period exceeding ten years are recognised over the years, provided there is a likelihood of future tax gains.

Tax planning opportunities are only considered when assessing the recovery of deferred tax assets, if the Company intends to use them or is likely to do so.

The Company recognises the reversal of a deferred tax asset in an account receivable with a Public Entity when it is enforceable in accordance with tax legislation in force. Likewise, the Company recognises the exchange of a deferred tax asset for Public Debt Securities when ownership thereof is acquired.

25.9. Employee benefits

a) Compensations based on the share price of Prosegur shares - 2017 and 2020 Plan

At the general meeting held on 28 April 2015, the shareholders approved the 2017 Plan of long-term incentives for Prosegur's Executive Director and Senior Management. The 2017 Plan is generally linked to value creation during the 2015-2017 period and foresees the payment of share-based incentives and/or cash-based incentives to the Executive Director and Senior Management.

At the general meeting held on 28 May 2018, the shareholders approved the 2020 Plan of long-term incentives for Prosegur's Executive Director and Senior Management. The Plan is linked to the creation of value in the 2018-2020 period and envisages the payment of cash incentives, calculated for certain beneficiaries based on the share price. The Plan has a duration of three years and is based on length of service and target achievement. In the vast majority of cases, the Plan measures target achievement from 1 January 2018 until 31 December 2020 and length of service from 1 January 2018 until 31 December 2022.

64

2019 ANNUAL ACCOUNTS

In both plans, for the purpose of determining the value in cash of each share to which the Beneficiary is entitled, the average listed price of the Prosegur shares on the Stock Exchange will be taken as reference during the last fifteen trading sessions of the month prior to the one in which the shares are awarded.

Quantification of the total incentive will depend on the degree of achievement of the targets established in line with the strategic plan.

The 2017 and 2020 long-term incentive plans for the Executive Director and Senior Management of Prosegur, within the "Salaries and wages" paragraph, have been included in the expense accrued during the year in relation to the 2019 commitment amounting to EUR 712 thousand (EUR 2,855 thousand in 2018) (Note 3).

The fair value of the incentives referred to the share quotation price was estimated on the basis of Prosegur's share quotation price at the close of the period, EUR 4.88 share (EUR 4.42 share in 2018) or at the payment time.

b) Termination benefits

Termination benefits are paid to employees as a result of the Company's decision to terminate employment before the normal retirement age or when the employee accepts voluntary redundancy in exchange for these benefits. The Company recognises these benefits when it has demonstrably committed to terminating the employment of employees, in accordance with a detailed formal plan with no possibility of withdrawal, or to granting termination benefits in an offer of voluntary redundancy.

c) Profit-sharing plans and bonuses

The Company calculates the liability and expense for bonuses using a formula based on EBITDA (earnings before interest, tax, depreciation and amortisation) when these are contractually binding or where past practice has given rise to implicit obligations.

d) Senior Management remuneration

As well as profit-sharing plans, Prosegur has incentive plans for Senior Management linked to the achievement of certain targets set by the corresponding remuneration Committees. At the end of the reporting period, provision has been made for these plans based on management's best possible estimate of the extent to which targets will be met.

25.10. Provisions and Contingent Liabilities

Provisions for possible restructuring costs and/or litigation are recognised when the Company has a present obligation (legal or tacit) as a result of a past event; it is probable that an outflow of resources will be required to settle the obligation; and a reliable estimate can be made of the amount of the obligation.

Provisions are measured at the present value of the estimated expenditure required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. Any adjustments made to update the provision are recognised as a financial expense when accrued.

Provisions expiring in one year or less, the financial effect of which is immaterial, are not discounted.

Reimbursements from third parties of the expenditure required to settle a provision are recognised as a separate asset provided that it is virtually certain that the reimbursement will be received.

65

2019 ANNUAL ACCOUNTS

Possible obligations arising from past events, the materialisation of which is contingent on one or more future events beyond the control of the Company, are considered contingent liabilities. These contingent liabilities are not recognised in the Annual Accounts but are disclosed in the notes (see Note 17).

25.11. Business combinations

In accordance with the third transitional provision of Royal Decree 1514/2007, the Company has only recognised business combinations that occurred on or after 1 January 2008, the date of transition to the Spanish General Chart of Accounts, using the acquisition method. Business combinations that occurred prior to that date were recognised in accordance with accounting principles prevailing at that time, taking into account the necessary corrections and adjustments at the transition date.

Business combinations carried out since 1 January 2010 are recognised by applying the acquisition method established in Recognition and Measurement Standard 19 of the Spanish General Chart of Accounts amended by article 4 of Royal Decree 1159/2010, which approves the standards for the preparation of consolidated annual accounts and amends the Spanish General Chart of Accounts.

The Company applies the acquisition method for business combinations, except for mergers, spin-offs and non-monetary contributions of a business between Group entities.

Mergers, spin-offs and non-monetary contributions between Group companies are recognised using the criteria applicable to related party transactions (see Note 25.17).

Business combinations arising as a result of the acquisition of shares or equity holdings in a company are recognised using the criteria applicable to investments in group companies, jointly controlled companies and associates (see Note 25.4).

The acquisition date is the date on which the Company obtains control of the acquiree.

25.12. Revenue recognition

Revenue is recognised at the fair value of the consideration receivable and reflects the amounts to be collected for goods handed over and services rendered in the ordinary course of the Company's activities, less returns, rebates, discounts and value added tax.

The Company recognises revenue when the amount can be reliably estimated, it is probable that the future economic benefits will flow to the Company and the specific conditions are met for each of the activities, as described below. The Company's estimates are based on historical results, taking into account client type, transaction type and specific contractual terms.

In accordance with the Resolution of the Institute of Accounting and Auditing (I.C.A.C) 79/2009 Consultation 2, regarding the classification in individual annual accounts of income and expenses of a holding company, whose main activity is the holding of shares and the financing of transactions carried out by its investees, income from dividends and interest earned from funding granted to investees are classified as "Net turnover" in the income statement. An item has been added within the operating margin to reflect impairment losses in equity instruments associated with its activity.

Initial estimates of revenues are reviewed where circumstances so require. These reviews may result in an increase or reduction in the estimated revenues and costs, and are recognised in the income statement for the period in which the circumstances giving rise to the review become known to management.

66

2019 ANNUAL ACCOUNTS

a) Provision of services

These primarily consist of brand assignment services and general services provided by the Group parent company such as management and administrative support, marketing services, information technology, legal and tax advice provided by the Company to its subsidiaries.

b) Interest received

Interest income is recognised using the effective interest method. When a receivable is impaired, the Company writes the carrying amount down to the recoverable amount, discounting estimated future cash flows at the original effective interest rate of the instrument, and carries the discount as a reduction in interest received. Interest received on impaired loans is recognised using the effective interest method.

c) Dividend received

Dividends received are recognised in the income statement when the right to receive payment is established.

25.13. Leases

a) Operating leases - lessee

Leases in which the lessor retains substantially all the risks and rewards incidental to ownership are classified as operating leases. Lease payments under an operating lease (net of any incentive received) are recognised in the income statement as an expense on a straight-line basis over the lease term.

25.14. Foreign currency transactions

Foreign currency transactions are translated into the functional currency using the exchange rate prevailing at the transaction date. Foreign currency profit and losses arising on the settlement of these transactions and the translation into EUR of monetary assets and liabilities denominated in foreign currencies at the closing exchange rate are recognised in the income statement.

25.15. Related party transactions

Transactions between Group companies, except those related to mergers, spin-offs and non-monetary contributions, are initially recognised at the fair value of the consideration given or received. If the agreed price differs from the fair value, the difference is recognised based on the economic substance of the transaction. Transactions are subsequently measured in accordance with applicable standards.

In the non-monetary contributions to a Group company, the contributor will value their investment at the carrying amount of the delivered equity items in the consolidated Annual Accounts on the date on which the transaction is made, according to the Standards for the Preparation of Consolidated Annual Accounts. The acquiring company will recognise them for the same amount.

In the merger and spin-off transactions between companies of the group in which the parent company of the group or the parent company of a subgroup and its subsidiary directly or indirectly intervene, the acquired equity items are valued for the amount that would correspond to them after the operation in the consolidated annual accounts of the group or subgroup according to the aforementioned Standards for the Preparation of Consolidated Annual Accounts. The difference that could be shown in the accounting entry by the application of the above criteria will be recorded in a reserves item.

67

2019 ANNUAL ACCOUNTS

VI. APPENDIX I - INVESTMENTS IN GROUP COMPANIES

Below is the information relating to shares held in Group companies:

						2019
				Shareholding	Voting rights
Obs.	Name	Registered offices	Asset.	Dir. %	Ind. %	Dir. %	Ind. %	Auditor

*	Prosegur Gestion de Activos, S.L.U.		C/ Pajaritos, 24	Madrid
*	Prosegur Global Alarmas, S.L.U.		C/ Pajaritos, 24	Madrid
*	Compañía Ridur S.A.		C/ Pajaritos, 24	Madrid
Prosegur Asset Management, S.L.		C/ Pajaritos, 24	Madrid
*	Prosegur Global SIS, S.L.		C/ Pajaritos, 24	Madrid
*	Prosegur Cash, S.A.		C/ Santa Sabina, 8	Madrid
*	Prosegur Global Alarmas ROW, S.L.		C/ Pajaritos, 24	Madrid
*	Prosegur Global SIS ROW, S.L.		C/ Pajaritos, 24	Madrid
*	Prosegur Global Cyber Security, S.L.U.	C/ Pajaritos, 24	Madrid
	Prosegur Finance, S.L.		C/ Pajaritos, 24	Madrid
	Prosegur ODH, S.L.		C/ Pajaritos, 24	Madrid
*	Prosegur Holding, S.A.		Tres Arroyos 2835	Ciudad de Buenos Aires
*	Prosegur Inversiones, S.A.		Tres Arroyos 2835	Ciudad de Buenos Aires
	Prosegur Tecnologia Chile Ltda.		Avda.Loboza 8395, Mod,3	Pudahuel-Santiago
	Prosegur Gestão de Activos, Ltda.		Thomas Edison 813 Barra Funda	São Paulo
	Prosegur Tecnologia Peru, S.A.		La Chira, 103 Surco	Lima
	Prosegur Activa Perú, S.A.		Avda.República de Panamá, 3890-Surquillo	Lima
	Prosegur Servicios Administrativos, S.A.	La Chira, 103 Surco	Lima
	Prointrans, LLC		411 Lafayette Street, 6th Floor, NY 10003	New York
	Prosegur Technological Security Solutions LLC	Al Falah Street-211	Abu Dhabi
	Obs: (*): These companies hold a share in other Group companies within their same geographical area.
	Obs: (**): Company under dissolution
	Obs: (***): Company under creditor intervention
	Activity: 1. Comprehensive security solutions 2. Logistics 3. Alarms 4. Two or more activities 5. Holding company 6: Financial services 7: Ancillary services 8: Inactive
	Auditor:	A. Audited by KPMG	B. Not subject to audit	C. Others

5	100%	-	100%	-	A
5	100%	-	100%	-	A
7	100%	-	100%	-	B
5	100%	-	100%	-	B
5	100%	-	100%	-	A
5	51%	22.5%	51%	22.5%	A
5	100%	-	100%	-	B
5	100%	-	100%	-	A
5	100%	-	100%	-	B
7	100%	-	100%	-	B
7	100%	-	100%	-	B
5	9%	91%	9%	91%	A
5	9%	91%	9%	91%	A
1	0%	100%	0%	100%	B
7	0%	100%	0%	100%	B
1	99%	1%	99%	1%	B
3	0%	100%	0%	100%	B
7	99%	1%	99%	1%	B
5	100%	-	100%	-	B
1	49%	-	49%	-	B

68

2019 ANNUAL ACCOUNTS

						2018
				Shareholding	Voting rights
Obs.	Name	Registered offices	Asset. Dir. %	Ind. %	Dir. %	Ind. %	Auditor

*	Prosegur Gestion de Activos, S.L.U.		C/ Pajaritos, 24	Madrid
*	Prosegur Global Alarmas, S.L.U.		C/ Pajaritos, 24	Madrid
*	Compañía Ridur S.A.		C/ Pajaritos, 24	Madrid
Prosegur Asset Management, S.L.		C/ Pajaritos, 24	Madrid
*	Prosegur Global SIS, S.L.		C/ Pajaritos, 24	Madrid
*	Prosegur Cash, S.A.		C/ Santa Sabina, 8	Madrid
*	Prosegur Global Alarmas ROW, S.L.		C/ Pajaritos, 24	Madrid
*	Prosegur Global SIS ROW, S.L.		C/ Pajaritos, 24	Madrid
*	Prosegur Global Cyber Security, S.L.U.	C/ Pajaritos, 24	Madrid
*	Prosegur Holding, S.A.		Tres Arroyos 2835	Ciudad de Buenos Aires
*	Prosegur Inversiones, S.A.		Tres Arroyos 2835	Ciudad de Buenos Aires
	Prosegur Tecnologia Chile Ltda.		Avda.Loboza 8395, Mod,3	Pudahuel-Santiago
	Prosegur Gestão de Activos, Ltda.		Thomas Edison 813 Barra Funda	São Paulo
	Prosegur Tecnologia Peru, S.A.		La Chira, 103 Surco	Lima
	Prosegur Activa Perú, S.A.		Avda.República de Panamá, 3890-Surquillo	Lima
	Prosegur Servicios Administrativos, S.A.	La Chira, 103 Surco	Lima
	Prointrans, LLC		411 Lafayette Street, 6th Floor, NY 10003	New York
	Prosegur Technological Security Solutions LLC	Al Falah Street-211	Abu Dhabi
	Obs: (*): These companies hold a share in other Group companies within their same geographical area.
	Obs: (**): Company under dissolution
	Obs: (***): Company under creditor intervention
	Activity: 1. Comprehensive security solutions 2. Logistics 3. Alarms 4. Two or more activities 5. Holding company 6: Financial services 7: Ancillary services 8: Inactive
	Auditor:	A. Audited by KPMG	B. Not subject to audit	C. Others

5	100%	-	100%	-	A
5	100%	-	100%	-	A
7	100%	-	100%	-	B
5	100%	-	100%	-	B
5	100%	-	100%	-	A
5	51%	22.5%	51%	22.5%	A
5	100%	-	100%	-	B
5	100%	-	100%	-	A
5	100%	-	100%	-	B
5	9%	91%	9%	91%	A
5	9%	91%	9%	91%	A
1	0%	100%	0%	100%	B
7	0%	100%	0%	100%	B
1	99%	1%	99%	1%	B
3	0%	100%	0%	100%	B
7	99%	1%	99%	1%	B
5	100%	-	100%	-	B
1	49%	-	49%	-	B

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2019 ANNUAL ACCOUNTS

						2019
Thousands of euros					N E T E Q U I T Y			Operating	Profit/(Loss)	Dividends
Name				Share
Country	Carrying amount	capital	Reserves	Other items	Total	profit/(loss)	for the Year	Received
Companies in Spain:
Prosegur Gestion de Activos, S.L.U.	Spain	248,526		29,953	4,131	133,073	415,683	928	2,575	16,256
Prosegur Global Alarmas, S.L.U.	Spain	179,285		2,000	81,974	(55,012)	208,248	2,857	(170)	-
Compañía Ridur S.A.	Spain	49,873		881	228	64	51,045	688	25	-
Prosegur Asset Management, S.L.	Spain	77,315		52,351	10,946	6,226	146,838	(631)	18,543	19,737
Prosegur Global SIS, S.L.	Spain	369,496		3	160,016	167,140	696,655	2,857	4,272	-
Prosegur Cash, S.A.	Spain	15,300		30,000	41,772	(88,696)	(1,624)	(2,842)	89,485	44,447
Prosegur Global Alarmas ROW, S.L.	Spain	63,565		3	11,045	52,482	127,095	(316)	8,339	-
Prosegur Global SIS ROW, S.L.	Spain	285,643		3	2,477	272,669	560,792	(1,799)	14,652	-
Prosegur Global Cyber Security, S.L.U.	Spain	31,170		3	28,850	2,314	62,337	(546)	(40)	-
Prosegur Finance, S.L.	Spain	3		3	-	-	6	(1)	(1)	-
Prosegur ODH, S.L.	Spain	3		3	-	-	6	(4)	(4)	-
Subsidiaries abroad:		1,755,301		645,285	44,870	7,702,578	10,148	(19,212)	473,203	-
Prosegur Holding, S.A.	Argentina
Prosegur Inversiones, S.A.	Argentina	195,496		72,807	5,039	845,879	1,119	(19,050)	42,662	-
Prosegur Tecnologia Chile Ltda.	Chile	-		14,806,086	(1,976)	(11,167,151)	3,637	(1,546,610)	(1,725,520)	-
Prosegur Gestão de Activos, Ltda.	Brazil	-		22,291,575	2,362,727	8,422,455	33,077	1,418,319	1,164,388	-
Prosegur Tecnologia Peru, S.A.	Peru	5,698,011		581,921	39,242	51,778	6,371	342,414	138,312	-
Prosegur Activa Perú, S.A.	Peru	100,836		18,545,479	3,052,834	(9,168,371)	12,531	(5,461,916)	(1,971,694)	-
Prosegur Servicios Administrativos, S.A.	Peru	109,053		112,712	-	(115,870)	106	9,962	3,137	-
Prointrans, LLC	USA	274		311,554	-	101,428	687	(37,129)	236,570	-
Prosegur Technological Security Solutions LLC	Arab Emirates	-		60,453		(586,459)	(526)	(19,747)	(9,614)	-
TOTAL		1,328,311								80,440

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2019 ANNUAL ACCOUNTS

						2018
Thousands of euros				N E T E Q U I T Y
		Carrying		Share							Operating	Profit/(Loss)	Dividends
Name	Country	amount	capital	Reserves	Other items	Total	profit/(loss)	for the Year	Received
Companies in Spain:
Prosegur Gestion de Activos, S.L.U.	Spain	163,026		29,953	2,420	129,047				161,420	29,299	21,993	10,000
Prosegur Global Alarmas, S.L.U.	Spain	100,485		2,000	3,175	55,761				60,936	(402)	(750)	-
Compañía Ridur S.A.	Spain	49,872		881	228	70				1,179	(17)	(6)	-
Prosegur Asset Management, S.L.	Spain	77,315		52,351	11,909	(87)				64,173	(760)	25,088	25,050
Prosegur Global SIS, S.L.	Spain	204,796		3	(4,684)	180,336				175,655	(1,694)	(4,362)	-
Prosegur Cash, S.A.	Spain	15,300		30,000	24,495	(119,993)				(65,498)	(4,506)	135,618	60,205
Prosegur Global Alarmas ROW, S.L.	Spain	53,566		3	1,045	52,387				53,435	(79)	95	-
Prosegur Global SIS ROW, S.L.	Spain	281,743		3	(1,423)	279,253				277,833	(2,823)	(2,284)	-
Prosegur Global Cyber Security, S.L.U.	Spain	2,317		3	-	2,317				2,320	(2)	(3)	-
Subsidiaries abroad:		1,755		1,006	70	10,724				11,801	(19)	416	-
Prosegur Holding, S.A.	Argentina
Prosegur Inversiones, S.A.	Argentina	195		114	8	1,170				1,292	(5)	52	-
Prosegur Tecnologia Chile Ltda.	Chile	-		10,118	5,424	(10,978)				4,564	(759)	(745)	-
Prosegur Gestão de Activos, Ltda.	Brazil	-		23,152	1,588	8,748				33,488	1,146	866	-
Prosegur Tecnologia Peru, S.A.	Peru	5,698		560	38	39				637	(81)	11	-
Prosegur Activa Perú, S.A.	Peru	101		13,561	3,006	(5,148)				11,420	(2,662)	(3,679)	-
Prosegur Servicios Administrativos, S.A.	Peru	109		109	-	(113)				(5)	10	2	-
Prointrans, LLC	USA	274		306	-	124				430	(34)	(24)	-
Prosegur Technological Security Solutions LLC	Arab Emirates	-		59	-	(581)				(522)	8	8	-
TOTAL		956,552											95,255

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DIRECTORS' REPORT 2019

Directors' Report for 2019

Prosegur Compañía de Seguridad, S.A. and subsidiaries

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DIRECTORS' REPORT 2019

	Table of contents
1.	The Company's situation............................................................................	74
1.1. Organisational structure .........................................................................................................	74
1.2. Operation..................................................................................................................................	76
2.	Business performance and profit/(loss) ....................................................	78
2.1. Investment activity...................................................................................................................	79
2.2. Investments..............................................................................................................................	80
2.3. Personnel .................................................................................................................................	81
2.4. Environmental issues..............................................................................................................	81
3.	Liquidity and capital resources .................................................................	81
3.1. Liquidity....................................................................................................................................	81
3.2. Capital resources.....................................................................................................................	81
3.3. Analysis of contractual obligations and off balance sheet obligations...............................	82
4.	Main risks and uncertainties .......................................................................	82
4.1. Client concentration ................................................................................................................	83
4.2. Financial risks..........................................................................................................................	83
	4.2.1. Market risk.......................................................................................................................	83
	4.2.2. Credit risk ........................................................................................................................	83
	4.2.3. Liquidity risk.....................................................................................................................	83
5.	Average payment period to suppliers .....................................................	84
6.	Important circumstances after the reporting period .............................	84
7.	Information on the foreseeable performance of the entity..................	84
8.	R&D+i Activities ............................................................................................	85
9.	Acquisition and disposal of own shares ...................................................	86
10. Alternative performance measures........................................................	87
11. Other significant information ...................................................................	89
12. Statement of Non-financial Information ................................................	91

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DIRECTORS' REPORT 2019

Directors' Report for 2019

This Directors' Report has been prepared in accordance with the recommendations contained in the Guidelines for the preparation of the Directors' Reports of listed companies, published by the CNMV.

1. The Company's situation

Prosegur is a multinational group, whose holding company is Prosegur Compañía de Seguridad, S.A. (hereinafter, the Company), which provides global and comprehensive security solutions adapted to the needs of our clients.

Prosegur provides private security services in the following countries: Germany, Argentina, Australia, Brazil, Chile, China, Colombia, Costa Rica, El Salvador, Spain, the United States, the Philippines, France, Guatemala, Honduras, India, Luxembourg, Mexico, Nicaragua, Paraguay, Peru, Portugal, Singapore, South Africa, Turkey and Uruguay.

The main activity of the Company is the acquisition, holding, management and administration of securities and shares or any other form of representation of interest in the capital of entities that are resident and non-resident in Spain and of funding in investee companies; and the provision of services that are complementary or ancillary to the management of activities carried out by the investee companies.

1.1. Organisational structure

The organisational structure of Prosegur is designed to improve business processes and add value to clients. Its flexibility allows for a permanent adaptation to an ever-changing environment and the evolution of Prosegur as a business Group. In addition, it fosters transversal knowledge of business areas and it results in a closer approach to client needs.

Business is the backbone of the organisation and is made up of the General Business Management Areas which are responsible for the design of security solutions for clients and cover the main business lines (Seguridad, Cash and Alarms).

The corporate functions are supervised by the Global Support Divisions which cover the Financial- Economic department, Prosegur Gestión de Activos (Prosegur Asset Management), Executive Director's Office and Risk and Resources Management.

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DIRECTORS' REPORT 2019

The organisation of Prosegur is shown in the table below:

The representation power of the parent company of the Group pertains to the Board of Directors acting collectively and by majority decision. The Board has broad powers to manage the activities of the companies, with the sole exception of matters under the jurisdiction of the General Shareholders' Meeting or which are not included in the corporate purpose.

The delegated committees of the Board of Directors are the Audit Committee and the Appointments and Remuneration Committee. Among the Audit Committee's responsibilities are: propose the appointment of the auditor; review the Prosegur accounts; ensure compliance with legal requirements and application of accounting principles generally accepted. For its part, the duty of the Appointments

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DIRECTORS' REPORT 2019

and Remuneration Committee is to establish and review the criteria for the composition and remuneration of the Board of Directors, and of the members of the Prosegur management team. It also periodically reviews remuneration programmes.

1.2. Operation

The unceasing development of the environment in which Prosegur operates has played a crucial role in the company's transformation over the last few years. In this connection, Prosegur established three main goals:

• Respond to clients' new needs, in line with market trends.
• Become their trusted strategic partner.
• Boost their value through efficiency in processes and by implementing increasingly technological services.

Prosegur is in the midst of a new Three-Year Strategic Plan 2018-2020. Our ambition to lead the transformation of the industry has led us to embark on a digital transformation of the company, hinging upon three basic pillars: Digitalise, Innovate and Grow.

Specific goals have been set in connection with each pillar and, after the second year of the plan, considerable progress has already been made.

Digitalise

With regard to digitalisation, the established goals are:

• Support operational excellence and the technological improvement of processes.
• Roll out the necessary platforms and tools to simplify management and enhance the client experience.
• Reduce the weight of indirect costs.
• Attract, develop and retain the most highly-qualified professionals.

In 2019, the second year of the 2018-2020Three-Year Plan, progress was made in the following areas:

• Advances in the process for digital transformation with regard to agility, scalability and operational excellence.
• The creation of a new area of Technology and Processes, focusing on the development of systems, processes and data governance.
• Agreement with Oracle to foster the digital transformation of operations, with emphasis on ERP Cloud.

Innovate

With regard to innovation, the established goals are:

• Listen to clients to develop new value proposals that meet their needs.
• Introduce new products that improve client satisfaction, transform the business, increase margins and evidence our firm commitment to innovation.

The following advances have already been made in 2019:

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DIRECTORS' REPORT 2019

• Increase in the weight of new products over total sales in all businesses.
• Definition of innovation methodology based on horizons and under ad hoc governance model.
• Incorporation of talent in innovation.
• Collaboration with Amazon on the challenges of digital innovation in Security, Cash and Prosegur Foundation.

Grow

With regard to growth, the established goals are:

• Maintain high rates of profitable organic growth.
• In Prosegur Security, to boost the integrated sale of surveillance and technology products.
• In Prosegur Cash, maintaining the pace of growth logged in recent years, spearheading market consolidation and stimulating the sale of new products.
• In Prosegur Alarms, to boost the value of the business by increasing the number of connections.

2019 has seen advances made in the following business lines:

• The solidity of the business model translated into a strong growth in local currency.
• Creation of a joint venture with Telefónica for development of the Alarms business in Spain.
• Consolidation of the entry of the Security business in the US market.
• Bolt-onacquisitions in traditional businesses and acceleration of new products, particularly in Cash and cybersecurity with Cipher.

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DIRECTORS' REPORT 2019

2. Business performance and profit/(loss)

The Company has obtained positive results in 2019 of EUR 81.87 million derived from its income as a holding. The comparison with the results of the previous year are shown below:

(Millions of euros)			2019		2018	Variation
Sales	108,595.00	130,653.00	-17%
EBITDA	96,155.00	120,209.00	-20%
Margin	88.54%	92.01%
PPE depreciation	-696	-696	0%
Amortisation of intangible assets	-3,921.00	-3,948.00	-1%
EBIT	91,538.00	115,565.00	-21%
Margin	84.29%	88.45%
Financial results	-9,022.00	-11,511.00	-22%
Profit before tax	82,516.00	104,054.00	-21%
Margin	75.99%	79.64%
Tax	-643	-1,069.00	-40%
Tax rate	-0.78%	-1.03%
Net result	81,873.00	102,985.00	-21%

There are no substantial variations with respect to 2018.

The most significant events reflected in the income statement of 2019 are the following:

													Thousands of euros
	National				Europe				Row				LatAm				Total
	2019			2018	2019			2018	2019			2018	2019			2018	2019			2018
Dividend received:
- Group companies and associates	80,440			95,255	-			-	-			-	-			-	80,440			95,255
Loan interest income	266			2,262	-			72	1,573			23	292			213	2,131			2,570
Provision of services:
- General services	28,180			28,255		560			112		36			(367)		(2,752)			4,828		26,024			32,828
Total	108,886			125,772		560			184		1,609			(344)		(2,460)			5,041		108,595			130,653

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DIRECTORS' REPORT 2019

2.1. Investment activity

The changes in the composition of the Prosegur Group, of which the Company is the parent, during

2019 were mainly due to the following acquisitions:

• Cash business combinations in LatAm: In 2019, in Latam Prosegur acquired a series of security companies and assets providing cash in transit and cash management services and conducting correspondent banking activities. The total purchase price was EUR 65,094 thousand, comprising a cash consideration of EUR 30,812 thousand, a deferred contingent consideration amounting to a total of EUR 24,507 thousand, due in 2019 and 2020 and a deferred payment of EUR 9,776 thousand, due in 2020 and 2021.
• Cash Europe business combinations: During the 2019 financial year, in Europe Prosegur took over a software engineering company specialised in the development of technological solutions for the insurance industry implemented in open systems and platforms, and a company that provides cash management services related to digital software of the retail sector. The total purchase price was EUR 22,846 thousand, consisting of a cash payment of EUR 15,320 thousand, and a deferred contingent consideration for a total of EUR 7,526 thousand due for payment in 2020, 2021, 2022 and 2023.
• Cash business combinations in ROW: In 2019, Prosegur acquired a security company providing cash in transit and cash management services. The total purchase price was EUR 4,320 thousand, comprising a cash payment of EUR 1,241 thousand, and a deferred payment of EUR 3,079 thousand maturing in 2019 and 2020.
• Alarma Business combinations in LatAm: In 2019, Prosegur acquired a series of assets in LatAm from a security company specialising in monitoring residential alarm systems. The total purchase price was EUR 8,515 thousand, comprising a cash payment of EUR 4,683 thousand and a deferred payment of EUR 3,832 thousand maturing in 2020.
• Alarms Business combinations in LatAm: In 2019, Prosegur acquired in LatAm a security company specialising in cybersecurity. The total purchase price was EUR 21,675 thousand, comprising a cash consideration of EUR 14,450 thousand, a deferred contingent consideration amounting to a total of EUR 6,221 thousand, due in 2023 and 2024 and a deferred payment of EUR 1,004 thousand, due in 2021, 2022, 2023, 2024 and 2025.
• Security business combinations in Europe: During 2019, Prosegur acquired in Europe a security company specialising in cybersecurity. The total purchase price was EUR 2,813 thousand, comprising a cash consideration of EUR 1,875 thousand, a deferred contingent consideration amounting to a total of EUR 808 thousand, due in 2023 and 2024 and a deferred payment of EUR 130 thousand, due in 2021, 2022, 2023, 2024 and 2025.
• Security business combinations in ROW: During 2019, Prosegur acquired in ROW a number of security companies providing services of surveillance, remote video-surveillance, cybersecurity and sales of security devices. The total purchase price was of EUR 58,440 thousand, comprising a cash consideration of EUR 47,539 thousand, a deferred contingent consideration amounting to a total of EUR 10,295 thousand, due in 2019, 2022, 2023, and 2024 and a deferred payment of EUR 606 thousand, due in 2021, 2022, 2023, 2024 and 2025.

The following companies were incorporated or wound up in 2019:

• In March 2019, Prosegur Alpha3 Cashlabs S.L. was incorporated in Spain.
• In April 2019, Prosegur Pay Consultoria em Tecnologia da Informação Ltda. was incorporated in Brazil.

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DIRECTORS' REPORT 2019

• In June 2019, Prosegur Serviços Aeroportuarios, Ltda. was wound up in Brazil.
• In July 2019, Prosegur Finance, S.L. was incorporated in Spain.
• In August 2019, Prosegur Technology International Incorporated was incorporated in the United States.
• In August 2019, Prointrans, LLC. was wound up in the United States.
• In September 2019, Prosegur STV 1 PTY Limited was incorporated in Australia.
• In October 2019, Prosegur ODH, S.L. was incorporated in Spain.
• In October 2019, Gelt Cash Transfer, S.L. was incorporated in Spain.
• In October 2019, Prosegur BSI Canada Limited was incorporated in Canada.
• In October 2019, Shangai Bigu Security Technology Co Ltd. was incorporated in China.
• In October 2019, Dopar Servicios, S.L. was wound up in Spain.
• In October 2019, Iberprofin, S.L. was wound up in Spain.
• In November 2019, Yellow RE SA. was incorporated in Luxembourg.

Furthermore, the following mergers took place between subsidiaries in 2019:

• In May 2019, Integra Security Systems SA, merged with and into Prosegur Seguridad Electrónica SAS in Colombia.
• In August 2019, the takeover merger of Tellex, S.A. by Transportadora de Caudales Juncadella, S.A. was formalised in Argentina.
• In November 2019, the takeover merger of Enclama, S.L. by Prosegur AVOS España, S.L. was formalised in Spain.

On 4 February 2019, Prosegur sold 100% of the German companies M Sicherheitstechnik Venwaltungs Gmbh, AC Alarm Verwaltungs Gmbh, M Sicherheitstechnik Gmbh & Co KG and AC Alarm Gmbh & Co KG for the total amount of EUR 559 thousand. The cash and cash equivalents that were sold with the company amounted to EUR 51 thousand. The net assets of the German companies at the time of sale amounted to EUR 65 thousand. The sale involved revenue for Prosegur of EUR 494 thousand.

Prosegur Cash exercised the put option on its 33.33% stake in SBV Services Propietary Limited on 4 June 2019.

Prosegur signed the sale agreement of 100% of the capital of Prosegur Cash Holding France to Loomis AB on 22 July 2019.

2.2. Investments

All of the Company's investments are analysed by the corresponding technical and operating areas and the management control department, which estimate and examine the strategic importance, period and yields of the investments before these are approved. Subsequently these are submitted to the Investment Committee for a final decision on whether to proceed with the investment. Investments in excess of EUR 0.6 million are submitted to the Executive Committee for approval.

Amortisation and depreciation charges totalled EUR 4.6 million in 2019 (EUR 4.6 million in 2018). Of this total, EUR 0,7 millions were for property, plant and equipment (EUR 0.7 million in 2018), and EUR

3.9 million for intangible assets (EUR 3.9 million in 2018).

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DIRECTORS' REPORT 2019

EUR 0.1 thousand was invested in property, plant and equipment in 2019 (EUR 111 thousand in 2018). Investments were made in intangible assets during 2019 for EUR 3 thousand (EUR 0 million in 2018).

2.3. Personnel

The workforce of the company at the end of 2019 was of 31 persons. At the close of 2018, the workforce of the company was 31 persons.

2.4. Environmental issues

At the end of 2019, the Company has no environment-related contingencies, legal claims or income and expenses relating to the environment.

3. Liquidity and capital resources

3.1. Liquidity

Prosegur keeps a reasonable level of liquid reserves and a great financing capacity available to ensure flexibility and rapidity in meeting the requirements of working capital, of investing capital or inorganic growth.

3.2. Capital resources

The structure of the financial debt is determined by the following contracts:

1. On 8 February 2018 an issue of uncovered bonds with a nominal value of EUR 700 million, maturing on 8 February 2023, has been made. The bonds are traded on the secondary market, on the Irish Stock Exchange. They accrue an annual coupon of 1.00% payable at the end of each year.
2. On 10 February 2017 Prosegur arranged a five-year syndicated credit financing facility of EUR 200,000 thousand to provide the company with long-term liquidity. At 31 December 2019, no amount of this credit facility has been drawn down.

Long-term gross financial debt totals EUR 695.7 million in 2019 (EUR 696.9 million in 2018).

The current and non-current maturities of gross financial debt are distributed as follows:

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DIRECTORS' REPORT 2019

In 2019 financial debt had an average cost of 0.95% (1.22% in 2018).

The following table shows the maturities of the contractual obligations at 31 December 2019:

	Less tan 1	1 to 2	2 to 5	More tan	TOTAL
	years	years	years	5 years
31.Dic.2019	7			696	702
31.Dic.2018	89			697	786

3.3. Analysis of contractual obligations and off balance sheet obligations

Note 18 of the Annual Accounts included the amounts of future minimum payments arising from operating lease contracts by maturity tranches.

4. Main risks and uncertainties

The Company's activities are exposed to currency risk, interest rate risk and price risk, credit risk and liquidity risk. The Company's global risk management programme aims to reduce these risks using a variety of methods, including financial instruments.

The management of these risks has been identified, proposed and executed by the Treasury Department, responsible for identifying, proposing and executing actions in accordance with policies approved by the Board of Directors of the Company.

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DIRECTORS' REPORT 2019

4.1. Client concentration

The Group of which the Company is the parent company has no significant concentrations of clients.

4.2. Financial risks

The Company mainly operates in the domestic market; however, the Group of which it is the Parent Company, operates on an international level and, therefore, the Company is exposed to currency risk in its foreign currency operations with foreign subsidiaries and assets and liabilities is foreign currency held with third parties.

As the Company, as the Parent Company of Prosegur Group, intends to remain in the foreign markets in which it is present in the long term, it does not hedge equity investments, assuming the risk relating to the translation to EUR of the assets and liabilities denominated in foreign currencies.

4.2.1. Market risk

Interest rate, cash flow and fair value risks

The Company is exposed to interest rate risk due to its monetary assets and liabilities.

At the close of financial year 2019, there are no significant positions in financial investment at a fixed or variable interest rate. The Company analyses its interest rate risk exposure dynamically.

A simulation of various scenarios, considering refinancing, the renewal of current positions, alternative financing and hedges is performed. Based on these scenarios, the Company calculates the effect of a certain variation in interest rates on profit and loss. These scenarios are only analysed for the liabilities that represent the most significant positions in which a variable interest rate is paid.

Currency risk

The diversity of risks to which the Company is exposed has resulted in an increasingly active policy in the derivatives market, aiming to limit this exposure, although the Company at 31 December 2019 has no hedges in place with derivatives.

4.2.2. Credit risk

The Company is not significantly exposed to credit risk.

4.2.3. Liquidity risk

A prudent liquidity risk management policy is based on having sufficient cash and marketable securities, as well as sufficient short-, medium- and long-term financing through credit facilities to reach the Company's business targets safely, efficiently and on time. The Treasury Department aims to maintain liquidity and sufficient availability to guarantee the Company's business operations.

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DIRECTORS' REPORT 2019

The information required by the "Reporting Requirement", third additional provision of Act 15/2010 of 5 July 2010 (modified through the Final Provision Two of Act 31/2014, of 3 December) prepared in accordance with the ICAC Resolution of 29 January 2016, on the information to be included in the annual accounts report in relation to the average period of payment to suppliers in commercial operations is detailed below.

5. Average payment period to suppliers

The average payment period to suppliers in 2019 was 73 days (49 days in 2018).

6. Important circumstances after the reporting period

On 15 January 2020, the first payment was made of the dividend for a maximum total of EUR 79,016 thousand.

On 28 January 2020 and aside from the own share buyback programme (Note 22.1), Prosegur acquired a package of 5,850,000 of its own shares from an institutional investor, representing 0.98% of the share capital, at a price of EUR 3.592 per share, with a discount of EUR 0.05 per share.

7. Information on the foreseeable performance of the entity

The general forecasts and estimates for 2020 point toward a potential stabilisation of the main macroeconomic aspects of the main regions of company operations. This may result in a decreased volatility of exchange rates, which could help refine a year in which the profitability growth rate increases.

Prosegur will nevertheless continue reinforcing its internal control procedures that ensure the efficiency in the various businesses. Such as the maintenance of the financial discipline of the Group and the reinforcement of corporate supervision policies aimed at an increased control of profitability by business line. Furthermore, it will continue working in each market to promote organic growth via new products of greater margin.

This exhaustive level of internal control and optimisation will bring improvements and increases in cash generation in 2020, continuing with the path shown in previous years.

The levers for improvement, which are expected to show effectiveness in 2020, are mainly:

In Prosegur Seguridad, an increasing penetration of integrated and advanced security solutions. These solutions account for around 28% of the total sales of the division, and their margin continues to expand as the service becomes more sophisticated within the client. On the other hand, the consolidation of the brand and conclusion of the integration of the acquisitions made in the United States will be another relevant aspect. Likewise, the increasing demand for remote monitoring and cybersecurity services and, lastly, the improvement expected of Brazil.

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In Prosegur Cash currencies of the countries of the LatAm region are expected to continue depreciating over the course of 2020, albeit less so than in the previous year. To this regard, the Company expects to be able to mitigate that impact as much as possible by capturing the natural growth of the markets in which it operates, shifting the increase of our costs to our clients while preserving and increasing margins and offering new solutions and services that allow us to expand our client base.

In addition, we expect the results of our regions in Europe and ROW will improve thanks to the sale of our operations in France and the progress of given initiatives of a commercial and operational nature implemented during 2019 in Australia.

Lastly, in the Alarms business, the main focus will be on the development and launch of the joint company with Telefónica in an endeavour to obtain the best growth rates of the market in the shortest time possible. In other regions, Prosegur Alarmas expects to maintain a growth trend similar to the one in 2019. Although it is expected to continue to be greater than the average global growth of the industry, the strategy will continue to focus more on healthy and long-term growth by means of the intensification of the client credit rating processes. With this strategy, the Company intends to improve the quality of the client portfolio, ensuring a lower drop-out rate than at present, and improving the global margin on each new connection, even at the expense of slightly detracting from the strong growth rate.

In addition, worthy of note is the significant wager of the company for digital transformation, which will also contribute to the growth and improved profitability of the group.

As observed, Prosegur will face interesting growth challenges in the years ahead. In any case, the company has excellent leverage for growth. Starting with the best platform in the world for cash-in- transit, to the set of the most integrated security solutions, to the optimum solvency and financial soundness with which to address these challenges. The years ahead will focus more on innovation with strong control over profitability and organic growth. Prosegur expects to continue to consolidate its leadership position, gaining market share and reinforcing its image as a worldwide company with the most advanced security solutions.

8. R&D+i Activities

The important projects carried out in recent years have brought differentiation to the quality of the services offered by Prosegur and reflect the Company's commitment to innovation and excellence. Among the projects which have recently and successfully been completed or which are currently in progress, we shall highlight the following:

Prosegur Security

The developments in innovation are closely linked to the security needs and requirements posed by customers. Therefore, various environments have been designed in which to collaborate and explore the search for new solutions together. In addition, the business unit has developed an Ecosystem of Partners to which to add in the different activities.

The main initiatives carried out in 2019 have been developed in the field of internet of things (IoT) and artificial intelligence. They are diverse projects to which the company continuously monitors them and that would, according to their degree of progress, be integrated into a single larger project.

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In addition, Prosegur Security has brought to the market a pioneering initiative called POPS, Prosegur Security Operating Platform. A perfect example of how the company is aligning its R&D effort with the global strategy focused on the development of comprehensive security solutions to and from the customer.

Finally, it is worth highlighting the implementation of virtual and augmented reality in support of the operational teams in the client. Its applications are very diverse and it is already being used in surveillance and maintenance. The next step will be to incorporate it into the formation and training processes.

Prosegur Cash

In 2019, Prosegur Cash has focused on working agilely so that processes and services are continuously improved. The creation of different lines of action has allowed concentrating efforts and, consequently, accelerating innovation.

In the traditional business, the company has launched a series of initiatives with a high impact on productivity and efficiency aimed at reducing operating costs. In addition, in the business of collecting cash in retail, Prosegur Cash has worked to improve, expand and strengthen the range of Smart Cash services with innovations that complement the value offer.

Finally, one of the open lines of action has focused on opening a new area of B2C business development 'mobile first' with global aspiration, which complement and reinforce the leadership of the main business.

Prosegur Alarms

In 2019, Prosegur Alarms has continued working to get to know the customer better. The objective is to understand how and how the user wants to protect himself. Among other initiatives, new predictive models such as the use of the alarm or the discharge qualification model have been developed. In this way, the company can anticipate customer behavior and design the launch of linkage and retention initiatives to reduce the dropout rate at the total connection base (BTC).

Another priority area of work has been the continuous improvement of the Prosegur Smart platform. Throughout the exercise, new features have been added that improve the user experience. The results are very positive since the number of frequent users has doubled and about 70% of the new Alarms customers are users of the application.

9. Acquisition and disposal of own shares

At 31 December 2019 the Company held 12,186,707 own shares (18,627,835 shares in 2018), which represent 5.02% of the share capital (3.00% in 2018) and have a value of EUR 107.9 million (EUR 65.2 million in 2018).

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10. Alternative performance measures

In order to comply with ESMA Guidelines on APM's, Prosegur presents this additional information to enhance the comparability, reliability and understanding of its financial reporting. The company presents its profit/(loss) in accordance with International Financial Reporting Standards (IFRS). However, Management considers that certain alternative performance measures provide additional useful financial information that should be taken into consideration when assessing its performance. Management also uses these APMs to make financial, operating and planning decisions, as well as to assess the Company's performance. Prosegur provides those APMs it deems appropriate and useful for users to make decisions and those it is convinced represent a true and fair view of its financial information.

APM

Definition and calculation

Purpose

Capex (Capital Expenditure), is the expense that a company incurs in capital goods and that creates benefits for the company, whether through the acquisition of new

Capexfixed assets or by means of an increase in the value of fixed assets already in existence. CAPEX includes additions of property, plant and equipment as well as additions of IT applications of the intangible assets.

CAPEX is an important indicator of the life cycle of a company at any given time. When the company grows rapidly, the CAPEX will be greater than fixed asset depreciations, which means that the value of the capital goods is increasing rapidly. On the other hand, when the CAPEX is similar to the depreciations or even less, it is a clear sign that the company is decapitalising and may be a symptom of its clear decline.

EBIT margin

Net Financial Debt

EBITA

EBITDA

The EBIT margin is calculated by dividing the operating income of the company by the total figure of revenue.

The Company calculates financial debt as the sum of the current and non-current financial liabilities (including other non-bank payable corresponding to deferred M&A payments and financial liabilities with group companies) minus cash and cash equivalents, minus current investments in group companies and minus other current financial assets.

EBITDA is calculated on the basis of the consolidated profit/(loss) for the period without including the profit/(loss) after taxes from discontinued operations, taxes on earnings, financial income or costs, or depreciations of Goodwill or the amortisation of intangible assets, but including the depreciation of IT applications.

EBITDA is calculated on the basis of the consolidated profit/(loss) for the period for a company, excluding earnings after taxes from discontinued operations, income taxes, finance income or costs, and amortisation expenses or depreciation on goodwill.

The EBIT margin provides the profitability obtained of the total revenue accrued.

The net debt provides the gross debt less cash in absolute terms of a company.

The EBITDA provides an analysis of earnings before taxes, tax burden and amortisation of intangible assets.

The purpose of the EBITDA is to obtain a fair view of what the company is earning or losing in the business itself. The EBITDA excludes variables not related to cash that may vary significantly from one company to another depending upon the accounting policies applied. Amortisation is a non- monetary variable and thereof of limited interest for investors.

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The reconciliation of Alternative Performance Measures is as follows:
CAPEX (In thousands of Euro)		31.12.2019		31.12.2018
Other installations and furniture	0	111
Other assets		11		0
Subtotal: Property, Plant and Equipment additions	0		111
Software additions	11	0
Total CAPEX		11
	111
EBIT margin (In thousands of Euro)
31.12.2019		31.12.2018
EBIT		91,538.00
	115,565.00
Revenues	108,595.00	130,653.00
Margen EBIT		84.29%		88.45%
Financial liabilities
31.12.2019		31.12.2018
Financial liabilities (A)		787,012.00		785,876.00
Cash and cash equivalents (B)		-43,859.00		-138,263.00
Less: other financial current assets (C)		-319,621.00		-489,268.00
Total Net Financial Debt (A+B+C)		423,532.00		158,345.00
Less. Other non banking debts (D)	-84,557.00	-84,692.00
Total Net Financial Debt (excluding other non-bank
payables corresponding to deferred payments for M&A	338,975.00		73,653.00
acquisitions) (A+B+C+D)
EBITA (In thousands of Euro)
31.12.2019		31.12.2018
Profit of the year		81,873.00
	102,985.00
Income tax	643	1,069.00
Financial costs	9,022.00	11,511.00
Amortisation	4,617.00	3,900.00
EBITA		96,155.00
	119,465.00
EBITDA (In thousands of Euro)
31.12.2019		31.12.2018
Profit of the year		81,873.00
	102,985.00
Income tax	643.00	1,069.00
Financial costs	9,022.00	11,511.00
Depreciation and amortization	4,617.00	4,644.00
EBITDA		96,155.00
	120,209.00

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DIRECTORS' REPORT 2019

11. Other significant information

Stock market information

Prosegur focuses its efforts in the creation of value for its shareholders. Improving profit/(loss) and transparency, as well as rigour and credibility, are what guides the company's actions.

The policy of relationship with shareholders and investors of Prosegur aims to establish a communication that is direct, personal and stable over time. The Company has a close relationship with its shareholders, private and institutional investors and with the main stock analysts, to whom it provides detailed information on a continuous basis.

In order to meet this transparency commitment, Prosegur uses multiple communication channels such as the webcast held every quarter to report results or the creation of the Investors Newsletter, added to the publication of other information bulletins with specific content of interest to the investment community.

Analysts coverage

At the close of the market in 2019, of a total of 18 analysts covering Prosegur's equity stock, most of them had a positive perception of the company, although somewhat more conservative than in 2018 due to the negative effect of the currencies. In this manner, six of them maintain a neutral recommendation (seven in 2018), twelve recommend purchasing (ten in 2018) and none of them had a negative rating or recommendation to sell.

Prosegur's shares started 2019 listed at EUR 4.29 per share, and at close, on 31 December at EUR

3.68 per share. During the year, the Company's share price went down by 14.26% mainly caused by the sharp adjustment that the market applied from the end of August to shares with high exposure to the LatAm region and to emerging countries in general.

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DIRECTORS' REPORT 2019

Main shareholders

The shareholding structure of Prosegur reflects its solidity and stability.

At 31 December 2019, 67.22% of the capital of the Company is in the hands of significant shareholders. 5.02% were own shares and the remaining 27.76 was free float.

The strong presence of the shareholding in the Board of Directors enables the management bodies to define that the strategic lines and decisions are in line with the interests of all its shareholders. This solid and stable shareholder base of relevance, made up largely of significant shareholders and institutional investors, provides Prosegur with the ideal conditions to develop its project and achieve its objectives.

Geographical distribution of free float

At an international level and given its growth potential, Prosegur has always been well accepted among investors. For these reasons, its shareholding includes foreign investors which account for a very significant part of its free float.

In 2019 there was a significant increase in participation in the United States, attaining 20.58% of the shareholding structure identified with an increase of 258 basis points with respect to the 18.44% in 2018.

For yet another year, worthy of significant mention is the positive rotation of 4% in the total number of Prosegur shares purchased in the United States and Canada market with respect to 2018. This is a clear indicator of a more long-term approach of the investors in that market, that see Prosegur as more of an opportunity.

On the other hand, the negative rotation in the European market stands out, probably due to the exposure by Prosegur to the LatAm region. To this regard, the capital from the United Kingdom has decreased its stake slightly with respect to 2018, to 3.36% of the shareholding structure. Scandinavian investors have also chosen to decrease their percentage to 1.35%. Capital from France, Spain and Switzerland have decreased their presence in the Prosegur shareholding structure to 1.51%, 2.45% and 1.38% respectively.

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12. Statement of Non-financial Information

The Statement of Non-financial Information of Prosegur Compañía de Seguridad, S.A. is described in Note 12 of the Consolidated Directors' Report of Prosegur Compañía de Seguridad.

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DIRECTORS' REPORT 2019

STATEMENT OF RESPONSIBILITY FOR THE ANNUAL FINANCIAL REPORT OF 2019

The members of the Board of Directors of Prosegur Compañía de Seguridad, S.A. hereby confirm that, to the best of our knowledge, the individual Annual Accounts of 2019, authorised for issue by the Board of Directors at the meeting held on 27 February 2020 and prepared in accordance with applicable accounting principles, present fairly the equity, financial position and profit/(loss) of Prosegur Compañía de Seguridad, S.A., and that the respective individual Directors' Reports provide a reliable analysis of the Company's performance and results and the position of Prosegur Compañía de Seguridad, S.A., together with the main risks and uncertainties facing the Company.

In Madrid, 27 February 2020.

Ms Helena Irene Revoredo Delvecchio	Mr Isidro Fernández Barreiro
Chair	Vice-chairman

Mr Christian Gut Revoredo	Mr Fernando D'Ornellas Silva
Executive Director	Director

Ms Chantal Gut Revoredo	Mr Ángel Durández Adeva
Director	Director

Mr Fernando Vives Ruiz	Mr Eugenio Ruiz-Gálvez Priego
Director	Director

DIRECTORS' REPORT 2019

DIRECTORS' RESPONSIBILITY OVER THE ANNUAL ACCOUNTS

The Annual Accounts of Prosegur Compañía de Seguridad, S.A. are the responsibility of the Directors of the Company, and have been prepared in accordance with General Accounting Plan endorsed by Spain.

The Directors are responsible for the completeness and objectivity of the Annual Accounts, including the estimates and judgements included therein. They fulfil their responsibility mainly by establishing and maintaining accounting systems and other regulations, supporting them adequately using internal accounting controls. These controls have been designed to provide reasonable assurance that the Company's assets are protected, that transactions are performed in accordance with the authorisations and regulations laid down by Management and that accounting records are reliable for the purposes of drawing up the Annual Accounts. The automatic correction and control mechanisms are also a relevant part of the control environment, insofar as corrective action is taken when weaknesses are observed. Nevertheless, an effective internal control system, irrespective of how perfect its design may be, has inherent limitations, including the possibility of circumventing or invalidating controls, and can therefore provide only reasonable assurance in relation with preparation of the Annual Accounts and the protection of assets. However, the effectiveness of internal control systems may vary over time due to changing conditions.

The Company evaluated its internal control system at 31 December 2019. Based on this evaluation, the Directors believe that existing internal accounting controls provide reasonable assurance that the Company's assets are protected, that transactions are performed in accordance with the authorisations laid down by Management, and that the financial records are reliable for the purposes of drawing up the Annual Accounts.

Independent auditors are appointed by the shareholders at their annual general meeting to audit the Annual Accounts, in accordance with the technical standards governing the audit profession. Their report, with an unqualified opinion, is attached separately. Their audit and the work performed by the Company's internal services include a review of internal accounting controls and selective testing of the transactions. The Company's management teams hold regular meetings with the independent auditors and with the internal services in order to review matters pertaining to financial reporting, internal accounting controls and other relevant audit-related issues.

Mr Antonio Rubio Merino

Chief Financial Officer