Martinsa Fadesa Annual Report 2006

Index Index
LETTER FROM THE PRESIDENT ● 7
ECONOMIC SUMMARY ● 11
Introduction
Key Data Business
Development Analysis
Stock-market Development
LINES OF ACTIVITY ● 31
Real-estate Activity
Property Development in 2006
Asset Management Activity
Significant Events
CORPORATE SOCIAL RESPONSIBILITY ● 65
ASSET VALUATION ● 71
FINANCIAL INFORMATION ● 79
FADESA INMOBILIARIA, S.A.
FINANCIAL INFORMATION ● 121

FADESA INMOBILIARIA, S.A. and Subsidiaries
LETTER FROM THE CHAIRMAN
Letter from the Chairman
2006 was a year of great activity in the

property sector in Spain and also in other international markets.In this con-
text of growth and expansion,FADESA has consolidated its position as a re-
ference in the Spanish market with a marked increase in its performance in
the residential segment, which constitutes 94.6% of the company’s revenue,
and has continued its progress on the international front, extending its pro-
jects in both number and size as well as moving into new countries.
FADESA has proved its ability to open

up new markets, diversifying its activity in terms of geographical location
and new products without neglecting its traditional business, all of which
has led to growth in the company’s principal ratios.
Throughout this last financial year

FADESA has significantly reinforced its presence in various Central and
Eastern European countries, on the Mediterranean coast and in North and
Central America. Our brand is now present in 13 markets outside Spain
and is proving to be a key player in the field of property development in
these countries. As the sector in Spain faces a downturn in growth rates,
with a certain deceleration of demand, the opportunity of being able to
count on projects in countries immersed in a period of rapid expansion re-
presents a guarantee for the future.
Our commitment to this external

market is clearly reflected in the number of units sold in 2006, accounting
for 44% of total sales and set to increase to over 50% in 2007.
A further highlight of 2006 was the

strong progress made in the company’s asset business, particularly in the
8 LET TER FROM THE C H A I R M A N • Annual Repor t 2006

FERNANDO MARTÍN ÁLVAREZ
CHAIRMAN
hotel and shopping centre sectors. By entering into partnership with com-
panies specialising in the management of this kind of asset, FADESA has
embarked upon a new route to growing its business which will steadily
consolidate itself in the years to come.
In late 2006 FADESA was faced with a

friendly takeover bid that finally became reality in early 2007 and is direc-
ted towards an eventual merger with MARTINSA. The purpose of this mer-
ger is to create an entrepreneurial group that will be a leader in Spain and
in Europe, with a business model based on the promotion of property de-
velopments, boosting the process of internationalisation and diversifying
its business activities. Within this latter process of diversification, FADESA
is currently considering its entry in the renewable energy sector, one that
has clear synergies with the Group’s core business. At the same time, em-
phasis is being placed on reinforcing the criteria of quality, transparency
and sustainability, essential features of a company that behaves respon-
sibly towards its shareholders and customers.
The work of FADESA’s management

team is to improve the company’s results and to create value for its share-
holders. In order to accomplish these goals, FADESA will need to count on
the best possible team of talented individuals, employees who are prepa-
red to give of their best. The growth of the company must take place in an
environment of strict financial discipline that will enable us to meet our
commitments, and must be compatible with the conservation of the envi-
ronment and the efficient use of energy resources.The strategy of diversifi-
cation and internationalisation put in place by FADESA will bear its fruits
in future years in the form of continuous sustainable growth that will pro-
ve able to withstand changes in market cycles.
LET TER FROM THE C H A I R M A N • Annual Repor t 2006 9

ECONOMIC SUMMARY
Introduction
FADESA ended the 2006 financial year with a

total turnover of 1,281.1 million euros, 31% up on
the figure for 2005, the overall gross margin
remaining above 40%. Comparable net profit
(before expenditure associated with the takeover
In 2006 the company’s principal
bid) was 230.4 million euros as against the activity continued to be its pro-
previous year’s 181.2 million euros, this perty business, accounting for
94.6% of turnover, although its
representing a 27% increase over the 2005 figure, hotel division, with 16 establis-
demonstrating for yet another year the hments open, continued to ma-
ke progress with turnover up
company’s ability to deliver a high rate of growth 46% at year end at 50.42 million
euros, compared with the 34.5
million euros generated in 2005.
Performance was strong in the

residential area, with advance sa-
les rising by 39% to 10,055 ho-
mes from the 7,228 sold in 2005,
equivalent in monetary terms to
1,472 million euros. This has ena-
bled FADESA to set a new histori-
cal record in its stock of pre-sold
dwellings, which now stands at
14,822, representing 2,333 mi-
llion euros, providing guaranteed
results for the years to come. 44%
12 E CO N O M I C S U M M A RY • Annual Repor t 2006

of all pre-sold units in 2006 were rose by 44% to reach 899 million paid to external advisers and a
in developments outside Spain, a euros. 6,913 units were delivered, one-off payment to employees,
remarkable achievement when 51% of which were first homes, totalled 70.4 million euros.
one considers that only two years 17% second homes, 21% subsidi-
previously this proportion was a sed dwellings and 11% plots.
mere 15%. The number of pre-
sold homes in countries other FADESA’s robust performance led
than Spain grew by 107% in com- to an increase in margins genera-
parison with the previous year. In ted in all areas of the company’s
terms of the number of units sold, activity, with the overall gross
the two largest foreign develop- margin growing 33% to reach
ments have been Residencial Me- 516.9 million euros, as compared
diterrania Saïdia (Morocco) and with 388.3 in 2005. The EBITDA
Ostoja Wilanow (Poland). Strong showed similar positive growth,
growth was also achieved in the up 28% on the previous year at
number of subsidised dwellings, 360.4 million euros. Total assets
which at year end totalled 4,157, amounted to 4,387.8 million eu-
an increase of 149% in relation to ros, an increase of 30%, whilst net
the 2005 figure. equity also stood 30% higher than
in 2005 at 685.2 million euros.
With regard to completed dwe-
llings and other residential units, Expenditure associated with
revenue deriving from this area the TOB, which includes fees
E CO N O M I C S U M M A RY • Annual Repor t 2006 13

Principal financial and business indicators

Summary Group Profit and Loss Account
(000,000 euros) 2006 2005 Var. % 06/05

Total Turnover 1,281.1 977.4 31%
Real Estate Revenue 1,211.4 925.4 31%
Total Gross Margin 516.9 388.3 33%
EBITDA 360.4 282.6 28%
EBIT 344.1 263.9 30%
Profit before taxation 345.9 262.7 32%
Net profit attributable to shareholders 230.4 181.2 27%
The FADESA Group’s total turnover once again grew significantly

during the 2006 financial year, giving an annual growth rate of
over 40% for the last five years.
Mean net profit grew at a rate of 61% per year during the period
2001 – 2006.
Turnover Net Profit

(000,000 euros) (000,000 euros)
Figures for 2001, 2002 and 2003 are based on General Spanish Accounting Standards

Balance Sheet
The increasing strength of the

balance sheet is a reflection of
the growth registered in the
company’s main business area
during the financial year. For this
reason land in its various stages
of development, which constitu-
tes our raw material and therefo-
re included under the heading of Summary Group Balance Sheet
stocks, not only continues to re- 000,000 euros Dec 2006 Dec 2005 %
present a large part (69%) of to- Tangible fixed assets 400.3 442.3 -9.5%
tal assets, but has also risen sig- Stocks 3,027.1 2,180.4 38.8%
Liquid assets 46.3 73.1 -36.7%
nificantly (+39%) in comparison Other assets 914.1 672.1 36.0%
to the previous year.
Total assets 4,387.8 3,367.9 30.3%
Net equity 685.2 526.1 30.3%
Financial liabilities, as a propor- Financial liabilities 1,996.4 1,408.8 41.7%
tion of total liabilities (45.5%), Creditors 1,422.2 1,297.0 9.6%
are also slightly up on last year Other liabilities 284.0 136.0 108.8%
(42%) as a consequence of our
process of expansion, given the Total liabilities 4,387.8 3,367.9 30.3%
need to finance a growing num-
Net financial liabilities 1,950.1 1,335.8 46.0%
ber of development projects si-
multaneously. Net profit 230.4 181.2 27.2%
Number of shares 113.31 112.22 1.0%

Profit ratios have thus fallen Profit per share 2.03 1.61 25.9%
slightly over the past financial ye- Net net asset value per share 44.60 38.23 16.7%
ar due to this emphasis on inves-
Return on equity 38% 41% -7.2%
tment, an effort that will reap its Return on capital employed 16% 19% -15.7%
rewards in the form of a signifi-
cant increase in the number of Gross asset value 10,537 8,813 19.6%
Net asset value 7,171 6,330 13.3%
units delivered, revenue and pro- Net net asset value 5,054 4,290 17.8%
fits in the years to come. Net liabilities / Gross asset value 18.5% 15.2% 22.1%

now be seen in various indica-
tors, such as the fact that in
2006 87% of total turnover (in-
cluding land sales) correspon-
ded to developments in Spain,
as compared to 98% only two
years previously. Morocco, the
foreign country in which the
company has the greatest pre-
sence, now accounts for 10% of
units delivered, and revenue
from units delivered outside
Spain increased by 132% during
the past financial year.
With regard to advance sales,

the prime indicator of the com-
Operating Figures mercial strength of a property
company, it should be pointed
out that the number of advance
Operating Figures 2006 2005 2004 2003 2002 2001 sales in the non-subsidised first
Land portfolio* 23.7 20.1 16.5 11.8 9.1 5.9 home market increased was
Advance sales 60% up on the previous year,
Units 10,055 7,228 5,918 7,110 3,232 2,688 whilst that of subsidised first ho-
000,000 euros 1,472.0 1,394.2 959.0 1,005.0 481.9 355.4 mes grew by 149%. Furthermo-
re, in connection with the pro-
Deliveries
cess of international expansion
Units 6,913 5,973 3,931 4.252 3,235 2,026
000,000 euros 1,192 924.5 661.3 594.8 417.0 213.4 mentioned above it is relevant
to note that 32% of total volume
corresponded to developments
Advance sales stock 2,332.9 2,052.6 1,535.6 1,211.2 750,9 685.9
abroad and 44% of units sold li-
* potentially buildable m2 kewise belonged to projects un-
der way outside Spain, when 2
years previously this figure scar-
Highlights of business perfor- we look at income growth from cely reached 15%.
mance in terms of units delivered, residential units delivered alo-
advance sales and final stock in- ne, the year-on-year increase In the case of the stock of defe-
clude the following: was 44%. In part this extremely rred advance sales, once again
positive performance is due to this indicator reached a record
The number of units delivered the process of international ex- high at 2,333 million euros, 16%
during the year was 16% up on pansion upon which the com- up on the December 2005 figure.
the figure for the previous twel- pany embarked some years In this area, 39% corresponds to
ve-month period. However, if ago, the results of which can sales outside Spain.

Business Performance
Balance Sheet
2006 was, from the point of view centage of units delivered in is therefore a key factor in gene-
of business activity in the pro- developments outside Spain, rating revenue and profits for
perty sector, one in which reve- which at the close of 2006 ac- the company not only at pre-
nue generated by dwellings and counted for 13% of the total sent, but also, we expect, in the
other residential units grew by number when only two years near future. In this regard, the
44 %, the gross operating margin ago it was less than 8% (it most significant steps forward
in this area increasing by 42%. should also be noted that the during the past twelve months
number of units delivered has have been our entry into three
With regard to the first of these risen by 74% over the same pe- new countries: Mexico, Rumania
points, we can attribute this po- riod), or in the fact that units ha- and Bulgaria; the acquisition of
sitive performance to our policy ve been delivered in over 30 dif- land in other cities in Poland in
of expansion both at home and ferent developments. This addition to Warsaw; the agree-
abroad, upon which we embar- process of diversification (or put ments reached with the local
ked several years ago with the another way, of reducing depen- district council of Csepel, in Bu-
intention of opening up new dence on a single business cen- dapest (Hungary); or the embar-
markets. This is a fundamental tre) is expected to intensify in king on our first major projects
priority in a sector such as real the future, since the trend is in France.
estate which has land as its raw even more visible in the number
material. The fruits of this proof units sold in advance. Consoli- In the case of the second as-
cess can be observed in the per- dation of our expansion abroad pect, it should be noted that

the gross operating margin ob- partly thanks to operations out-
tained when only the delivery side Spain, in this case in Mo-
of dwellings is taken into consi- rocco.
deration was the highest ever
recorded by the company, or We now present the comparati-
that results from the sale of ve Profit and Loss Accounts for
land have been clearly positive, the last two financial years:
(000,000 euros) 2006 2005 Var. % 06/05

Real Estate Activity
Turnover 1,211.4 925.4 31%
Cost of sales -707.7 -548.1 29%
Gross margin 503.7 377.3 34%
margin % 42% 41%
Hotel Activity
Turnover 50.4 34.5 46%
Cost of sales -41.2 -29.1 42%
Gross margin 9.2 5.4 71%
margin % 18% 16%
Industrial Activity
Turnover 17.4 17.2 1%
Cost of sales -15.3 -11.9 28%
Gross margin 2.1 5.3 -60%
margin % 12% 31%
Other operating income 1.9 0.3 441% As can be seen from the above ta- financial year. Another item to no-
Total income 1,281.1 977.4 31% ble, in the financial year just en- te is the growth in income from
Overall gross margin 516.9 388.3 33%
overall gross margin % 40% 40%
ded the total income obtained by the sale of land, which rose signi-
Other operating expenses -156.5 -105.7 48% the FADESA Group reached ficantly to over 211 million euros,
1,281.1 million euros, 31% up on 27% up on the previous year.
EBITDA 360.4 282.6 28%
EBITDA margin% 28% 30%
the figure for the previous year.
Provision for fixed asset depreciation -17.9 -17.9 0% The overall gross margin of the
Variation in trading provisions 1.6 -0.8 -304% The company’s principal business company’s real estate activity re-
EBIT 344.1 263.9 %
activity, real estate, accounted for flects an extremely positive trend
Financial loss -8.6 -2.6 230% 94.6% of this total amount, a year- in both real and relative terms, in-
Financial income 3.1 8.4 -63% on-year improvement of 31%, creasing by 34% to reach almost
Financial costs -68.0 -44.4 53%
Capitalized interest costs 42.7 26.6 61%
with the gross margin rising to 504 million euros in the case of
Net translation differences 11.5 5.8 98% 42%. The most important item in the former, and representing 42%
Interest from companies consolidated in equity 2.2 1.0 112% this business line is the sale of of total income generated by this
Profit from variation in asset values 10.4 1.4 654%
Operating profit before taxation 345.9 262.7 32%
dwellings and other residential activity in the case of the latter,
Exceptional items 0.1 0.0 units, which represents 74% of one percentage point higher
Profits before taxation 345.9 262.7 32% the total and was 44% up on the than in 2005 in spite of the incre-
Tax on profits -115.2 -81.5 41%
Profit attributable to external partners -0.3 0.0 -836%
previous year, reaching the hig- ased proportion of turnover co-
hest ever gross margin posted by rresponding to the delivery of
Profit attributable to shareholders 230.4 181.2 27% the company at the close of the dwellings, traditionally the pro-

duct with the lowest gross margin
amongst those included in the
company’s principal activity.
The second business line in

terms of importance, that of ho-
tels, generated over 50 million
euros, 46% up on the previous
year. Margins in this sector of the
company’s business grew by 2
percentage points in spite of the
considerable investment outlay,
since many of our hotels are only
in the initial phase of operation,
the least profitable of all.
Finally, the company’s industrial

activities are immersed in a res-
tructuring process that has given
rise to a sharp increase in costs
and a subsequent drop in the
gross margin obtained.
All in all, therefore, the Overall

Gross Margin increased by 31%, re-
presenting 40% of total turnover.
With regard to expenditure, other

operating expenses rose signifi-
cantly as a result of the general in-
crease in the company’s activities
and the finance needed to under-
write the on-going process of in- in comparison with the previous ness) accounted for a mere 14%,
ternational expansion. Neverthe- year, remaining at the same level and of the increased cost of finan-
less, this item only increased by as at the close of 2004 in spite of ce deriving from the general rise
16% of the growth recorded for the investment outlay of the past in interest rates. The mean cost of
total income. two years. servicing loans was 3.51%.
EBITDA for the financial year Annual financial expenditure in- Finally, the net profit recorded by
amounted to 360 million euros, creased as a result of the increase the FADESA Group grew 27% in
28% up on the figure for 2005. In in the amount of debt, of which comparison with the previous ye-
relative terms the EBITDA margin corporate debt (the rest is linked ar, standing at over 230 million
fell back by one percentage point to the company’s real estate busi- euros at the close of 2006.

Balance Sheet
As at year end 2006 the balance
stood in excess of 4,387 million
euros, reflecting strong growth
over the year of 30%.
On the asset side one of the

highlights was the close to 847
million euro rise in the value of
stocks. This is mainly attributa-
ble to the land currently going
Assets (000.000 euros) 2006 2005 Variation
through the process of obtai-
Tangible fixed assets 400.3 442.3 -10%
Real estate investments 64.7 26.2 147%
ning planning permission and
Goodwill 9.2 10.5 -12% developments in progress,
Intangible assets 3.3 2.7 21% which grew by 49% and 33%,
Non-current financial assets 19.3 5.4 259%
Equity investments 76.8 96.5 -20%
respectively. A second item
Deferred taxation 35.9 42.8 -16% worthy of note is that of deb-
Non-current assets 609.5 626.3 -3% tors, where the rise is the result
Stocks 3,027.1 2.180.4 39%
Trade debtors 575.9 448.5 28%
of a steady increase in commer-
Other current financial assets 17.7 8.4 111% cial activity.
Other current assets 98.1 31.2 214%
Cash and other liquid assets 46.3 73.1 -37%
Non-current assets held for sale 13.2 0.0
On the liability side, the Group’s
Current assets 3,778.3 2,741.6 38% Net Equity grew by 30% over
Total Assets 4,387.8 3,367.9 30% the year, thus consolidating
even further the strong finan-
Liabilities (000,000 euros) 2006 2005 Variation
cial position already enjoyed by
Net equity 685.2 526.1 30%
Deferred income 3.4 2.2 54%
the company. Clear proof of this
Non-current liabilities 255.2 205.4 24% is that at year end the net debt
Liabilities with financial institutions 173.2 154.5 12% to GAV (asset market value) ra-
Liabilities for tax on current income 35.9 31.0 16%
Provisions 24.5 19.4 26%
tio stood at 18.5% (considerably
Other non-current liabilities 21.6 0.5 4317% lower than the sector average).
Current liabilities 3,444.0 2,634.2 31%
Liabilities with financial institutions 1,823.2 1,254.3 45%
Trade creditors 1,422.2 1,297.0 10%
As a result, and in spite of the
Provisions 42.1 31.9 32% high level of investment, mostly
Liabilities from deferred taxation 60.0 42.2 42% financed by bank loans, the
Other current liabilities 96.5 8.9 987%
company continues to enjoy a
comfortable position. Mention
Stocks 2006 2005 should be made in this regard
Land and building plots 1,536.0 1,031.3 of the fact that only 14% of this Finally, in terms of profitability
Promotions ongoing 1,252.8 939.1 debt is corporate, the rest being FADESA continues to outper-
Constructed buildings 220.7 188.2
Hotel stocks 0.9 0.7 associated with housing acti- form average values for the sec-
Industrial stocks 16.7 21.0 vity, and that its year-on-year tor, with ROE standing at 38%
Total 3,027.1 2,180.4 growth rate was a modest 10%. and RoCE at 16%.

Portfolio of land under management
As has been the case in previous at potential for growth. In this re-
years, the majority of this inves- gard it should be noted that 33%
tment is deferred and is depen- of the land portfolio is now held
dant on meeting certain urban outside Spain, compared with
planning targets. This is reflected 23% a year previously.
in accounting terms by an increa-
se in Trade creditors (which also
includes other concepts).
Of the 5.1 million square metres

of land mentioned, 75% corres-
pond to land that is in the initial
stages of the urban planning pro-
cess, in keeping with the com-
pany’s business model, the aim
being to retain most of the value
created during this process. One
of the points of note in this con-
text is the proportion of undeve-
loped land acquired outside
Spain, where the company is alre-
ady introducing the business mo-
Asset investment
del that has been at the core of its
success at home. Nevertheless, fo- At 31 December 2006 a total of With regard to golf courses,
llowing the trend of previous ye- 16 hotel establishments were built primarily to provide added
ars, 0.4 million square metres of operational, 15 located throug- value for homes already sold
development land have also be- hout Spain and one in the city and the group’s hotels, 2006
en purchased in Spain, mostly in of Casablanca (Morocco). The saw the opening of a further
the provinces of Valencia, Sevilla FADESA Group has a further ten course, bringing the total num-
and Guadalajara. projects under construction in ber in operation to 5, with a fur-
different parts of Spain and Mo- ther 18 either under construc-
In terms of geographical distribu- rocco, and others still at the tion or at the project stage.
tion, major investments have be- planning stage in Spain, Moroc-
en made in Rumania, where land co, Mexico and France. In all ca-
with a potential for building ap- ses the offer includes both city
proximately one million square centre hotels and holiday hotels
metres of built surface area has in strategic locations for holi-
been acquired, or Poland, where daymakers wishing to enjoy the
land has been purchased in cities beach, water sports, golf or
other than Warsaw that show gre- mountain activities.

Operating figures
2005 2006
Rise in advance sale stock 000.000 euros Units 000.000 euros Units
Advance sale portfolio at start of year 1,508.9 10,307 2,052.6 11,680
+ Additions following the acquisition of FRG 35.4 118
+ Advance sales for the year 1,394.2 7,228 1,472.0 10,055
- Deliveries for the year 924.5 5,973 1,191.7 6,913
IFRS adjustments 38.6 0
Advance sale portfolio at year end 2,052.6 11,680 2,332.9 14,822
FRG = Financière Rive Gauche
The most significant indicator of pitalet in 2005, advance sale re- types of product and geogra-
the company’s progress, advan- venue would be 15% up on the phical location.
ce sales made during the course previous year.
of the year, rose by 39% in terms In the first of these cases, it
of the number of units sold. Ta- In terms of the number of finis- should be noted that 30% of the
king only housing units, the ye- hed houses delivered to their units in stock correspond to se-
ar-on-year increase was 55% owners, revenue from residen- cond homes, a noticeably lower
over the 2005 figure, a signifi- tial properties alone was 44% percentage than in 2005 (34%),
cant percentage indeed, and un- higher than in 2005. A good but still well within the targets
doubtedly proof of the excellent example of the importance of for the company’s product dis-
positioning of FADESA’s pro- the company’s international ex- tribution policy.
duct, particularly if we bear in pansion is the increase in reve-
mind that the number of non- nue from units sold outside Secondly, there is also clear evi-
subsidised first homes grew by Spain, which was 132% up on dence of the ongoing process of
60% over the financial year. The- the same figure for 2005. geographical diversification un-
se brilliant results can be attri- dertaken by the company, with
buted to a variety of factors, but As a result, the stock of units 39% of the stock of units sold in
there can be no doubt that one sold in advance reached a new advance as of December 2006
of the most important reasons is historical high of 14,822 dwe- corresponding to dwellings in
the ongoing process of interna- llings, 27% more than in De- developments being built outsi-
tional expansion undertaken by cember 2005. These units, for de Spain, with Morocco to the
the company in recent years. In which private contracts of sale fore, representing 28% of the to-
this regard it should be noted have been signed, represent re- tal figure.
that the number of dwellings venue in excess of 2,333 million
sold outside Spain increased by euros, deferred pending their
107% in comparison with the completion.
previous year.
An analysis of the advance sale
Furthermore, with regard to the stock provides clear evidence of
growth of turnover in the past the process of diversification
financial year, if we exclude the which FADESA is currently un-
sale of two office blocks in Hos- dergoing, both with regard to

Land Portfolio Distribution
At 31 December 2006 FADESA’s ITS POSITION WITHIN THE URBAN cess. Throughout the year 2.0 mi-
land portfolio was 18% greater PLANNING PROCESS llion buildable square metres we-
than at the end of the previous The balance achieved depends to re consumed through delivery of
year (23.7 million buildable squa- a great extent on the applications completed dwellings and buil-
re metres as opposed to 20.1 mi- for planning permission made ding plots, as well as through the
llion sq. m. In 2005). during the year (5.1 million squa- direct sale of land to other pro-
re metres during 2006) and the perty developers.
This land portfolio is characteri- acquisition of new land, which
sed by its high degree of diversi- usually takes place at the begin-
fication in several respects: ning of the urban planning pro-
Land use
Land portfolio
Ongoing L a n d b a n k
developments Ready Urbanisable Pre-urbanisable Total
2005 5.7 2.6 6.3 5.5 20.1

Acquisitions 0.4 1.0 4.2 5.6
Transfers/In 2.0 1.6 1.5 5.1
Transfers/Out -2.0 -2.0 -1.6 -1.5 -7.1
2006 5.7 2.6 7.2 8.2 23.7

* potentially buildable m2

ITS DISPERSION
Of the 23.7 potentially builda- Within Spain itself, the company
ble square metres in the portfo- owns land in almost all of the 17
lio, 33% is located outside autonomous regions.
Spain, mainly in Morocco, where
the company has had a presen- PRODUCT DIVERSITY
ce since the year 2000; in Hun- The portfolio of land for residen-
gary, where the first land was tial use is divided as follows: 62%
bought in 2004; and in Ruma- for unsubsidised first homes,
nia, a country in which FADESA 10% for subsidised housing and
has recently established itself. 28% for second homes.
Geographical distribution of the portfolio of buildable land Breakdown by type of dwelling

Share report
FADESA’s shares closed 2006 at at flotation (12.40 euros) in April

35.15 euros per share, thereby in- 2004.The following table summari-
creasing their value over the year ses this information and establis-
by 26%.This increase in value goes hes a comparison with the perfor-
as high as 183% if we compare the mance of the Spanish Stock
year end price to that established Exchange during the same period:
Days Starting price Closing price Increase in value

FADESA 679 12.4 35.15 183%
IBEX 35 679 8,109.50 14,146.50 74%
The performance of FADESA’s

shares has therefore been positi-
ve not only in absolute terms, but
also relative to that of the IBEX 35
stock market index.
FADESA share peformance

This performance has increased
the company’s market capitalisa-
tion from an initial 1,381 million
euros at flotation to 3,982 million
euros in December 2006.
Market capitalisation
2006 Share price (000,000 euros) Date
IPO 12.40 1,381 30-Apr-04
Initial 27.84 3,124 30-Dec-05
Minimum 24.01 2,720 14-Jun-06
Maximum 35.40 4,011 05-Dec-06
Close 35.15 3,982 29-Dec-06
Share dealing
During 2006 in excess of 182 Similarly, the number of shares
million shares were traded for traded and the mean daily tra-
the total sum of 5,503 million ding value (excluding the elec-
euros, 134% up on the figure for tronic market) over the past ye-
the previous year. This volume ar, when compared to 2004 and
of dealing is equivalent to 138% 2005, is as follows:
of FADESA’s market capitalisa-
tion at year end.
Shares traded daily Daily trading value

2004 474,683 5,868,867
2005 413,573 9,175,864
2006 629,191 19,030,317
VAR (06-04) 33% 224%
Shareholders
There was no significant move- to be Mr Manuel Jove Capellán, nizaciones Martín, S.A. (Martinsa)
ment amongst the main sharehol- who held 54.6% of its share capital and Huson Big, S.L. filed a request
ders of the Group during the fi- indirectly, through his participa- for authorisation to launch a take-
nancial year 2006, and therefore tion in asset holding companies. over bid for 100% of FADESA’s
the main shareholder of the com- shares with the CNMV, at a price
pany, according to information However, on 2 November the of 35.7 euros per share. Mr Ma-
lodged with the CNMV, continued companies Promociones y Urba- nuel Jove, FADESA’s majority sha-

reholder with 54.6% of the com- been successful, 85% of FADESA’s held on 15 March 2007, elected
pany’s shares (through the com- share capital having accepted it. Mr Fernando Martín Álvarez as
panies in which he has a contro- Executive Chairman of the com-
lling stake), assured the bidders As a result of the takeover bid, the pany, the Board being composed
that he would accept the said bid Board of Directors, in a meeting of the following members:
with all his shares even if another
competitive bid was later tabled. Date first
Name Position appointed Nature
On 6 February this year the Board
Mr. Fernando Martín Álvarez Execurtive Chairman 15/03/2007 Proprietary/Executive
of the CNMV finally authorised Mr. Antonio Martín Criado Deputy Chairman 15/03/2007 Proprietary
the takeover bid. In an extraordi- Mr. Antonio de la Morena Pardo Managing Director 28/11/2001 Executive
Mr. Fernando Martín del Agua Director 15/03/2007 Proprietary
nary meeting held the following
Mr. Rafael Bravo Caro Director 15/03/2007
day, the Board of Directors of AGUIEIRA INVERSIONES,S.L. Proprietary
FADESA unanimously approved (represented by Mr. Juan Carlos Rodríguez Cebrián) Director 15/03/2007 Proprietary
Caja de Ahorros de Valencia, Castellón y Alicante, BANCAJA 15/03/2007 Proprietary
the favourable report on the said
(represented by Mr. José Luis Olivas Martínez) Director
takeover bid. Mr. Jesús Ignacio Salazar Bello Director 15/03/2007 Proprietary
Mr. José Manuel Serra Peris Director 15/03/2007 Independent
Mr. Joaquín Sánchez-Izquierdo Aguirre Director 28/11/2001 Independent
On 12 March the CNMV informed
Mr. José Luis Suárez Barragato Director 28/11/2001 Independent
that the takeover bid tabled by Mr. Ángel Varela Varas Secretary to the Board
Martinsa and Huson Big SL. had Mr. Federico Cañas García-Rojo Deputy Secretary to the Board
After the Board Meeting held on

15 March 2007, the Executive
Committee consisted of the follo-
wing members:
Name Position Nature

(Vacant) Chairman
(Vacant) Deputy Chairman
Mr. Antonio de la Morena Pardo Member Executive
(Vacant) Member
(Vacant) Secretary to the Committee

15 March 2007, the Appoint-
ments and Remuneration Com-
mittee consisted of the follo-
wing members:
Name Position Nature

Mr. Joaquín Sánchez-Izquierdo Aguirre Chairman Independent
Mr. Jesús Ignacio Salazar Bello Deputy Chairman Proprietary
Mr. Fernando Martín del Agua Member Proprietary
Mr. Ángel Varela Varas Secretary to the Committee Consejero

15 March 2007, the Audit Com-
mittee consisted of the follo-
wing members:
Name Postion Nature

Mr. José Luis Suárez Barragato Chairman Independent
Mr. Rafael Bravo Caro Deputy Chairman Proprietary
Mr. José Manuel Serra Peris Member Independent
Mr. Ángel Varela Varas Secretary to the Committee no miembro
Analyst coverage
The companies and brokerages that have issued reports on FADESA’s

shares since flotation are:
• Ahorro Corporación • Dexia Equities

• Banesto Bolsa • Merrill Lynch
• BBVA • Interdin
• Caja Madrid • Venture Finanzas
• CSFB • Bankinter
• Invercaixa • Cazenove
• Cheuvreux • ING Financial Markets
• Espíritu Santo • Norbolsa
• Fidentiis • Urquijo bolsa y valores
• Fortis Bank • BPI*
• Ibersecurities • Lehman Brothers*
• Kepler
• Morgan Stanley
• UBS *Produced their first report on FADESA in 2006
Capital variations Information for shareholders
A total of 1,092,273 new shares FADESA shareholders can ac-

were issued in respect of the final cess all the publicly available in-
dividend for the year ended 31 formation on the company via
December 2005 for the 75% of its website at www.fadesa.es, by
shareholders who wished to par- sending an e-mail to accionis-
ticipate in the Share Dividend tas@fadesa.es or by calling +34
Plan, the issue price being set at 981 179 200.
26.85 euros per share.

LINES OF ACTIVITY
Real Estate Activity
During 2006, FADESA consolidated its presence

in the countries in which it had recently begun its
activity, such as France, Poland and Hungary,
where it launched extremely important real-
estate projects, as well as continuing its
expansion strategy with its entry into Mexico and
Bulgaria, and strengthening its status as one of
the main foreign investors in Morocco. In
addition, the company increased its sales
network with new commercial offices both in
Spain and other European countries
32 LINES OF A C T I V I T Y • Annual Repor t 2006

Diversification and Comprehensive Real Estate Service
If there are two features which
distinguish FADESA from other
companies working in the real-
estate sector, these are its diver-
sification plan and its business
model.
Geographic diversification,
thanks to its presence in all of
Spain and its international ex-
pansion plan, but also product
diversification, given its development and performs the appro-
ment of first and second homes priate market research studies.
for different kinds of target cus- Its Technical Office prepares ar-
tomers. A profile which has hel- chitectural projects, while its
ped it become one of the top Eu- own sales network markets its
ropean real-estate companies. different products; the building
and post-sales processes are al-
But much of FADESA’s success is so included in company activity,
the result of being a real-estate thus completing the business
company characterised by a circle. This comprehensive work
comprehensive work philo- philosophy enables FADESA to
sophy, by means of which it co- act quickly at each stage of the
vers the whole real-estate circle. process, to be aware of the ne-
Thus, the company itself looks eds of each location, and to of-
for ground on which to build, fer its customers excellent value
carries out its urban develop- for money.
LINES OF A C T I V I T Y • Annual Repor t 2006 33

International FADESA
In the late 1990s, the company

stood out as one of the first Spa-
nish real-estate firms to enter the
international market, with an am-
bitious expansion process outsi- and having a commercial net-
de Spain, which has resulted in work which represents the com-
the company being present in pany in the main European cities.
Morocco, Portugal, Hungary, Po- Currently, FADESA is researching
land, France, Mexico and Bulgaria, the market in yet more countries.
Morocco
In 2000, FADESA became the first invest more than 470 million eu- tre in the Tangiers bay; and the
Spanish company to go to Mo- ros. In all, as part of these three luxury resort it is developing in
rocco and develop real-estate projects, the Group will develop the exclusive Palmeral area of
projects, and now, six years later, hotels, golf courses, leisure and Marrakech. The project, Palmerai
it is one of the main foreign in- sport areas and more than 4,000 Mall, has an investment of 300
vestors in this country, thanks to homes. To the resorts in Smir million euros, and will include
its activities in Casablanca, Sai- must also be added the Medite- more than 2,600 homes, three
dia, Marrakech, Rabat, Agadir rrania Saidia resort, which stands hotels, an 18-hole golf course
and the coast of Smir. Currently, next to a 7 kilometre long beach, and a shopping centre.
the company is playing a very and comprises approximately
active role in the Moroccan go- 3,000 homes and 16,000 hotel FADESA’s activity in Morocco is
vernment’s plan to turn the beds, as well as golf courses, leisu- completed with two promotional
country into an important holi- re and services areas, and a mari- residential developments in Ra-
day destination near Europe. na with 800 berths, which will be bat and Agadir, comprising more
in operation in the spring of 2007. than 2,600 homes, which are al-
For this purpose, the Group is de- most finished. To this must be ad-
veloping a series of tourist resorts In addition to the Mediterrane- ded the Barceló Casablanca hotel,
on the shores of the Mediterrane- an Sea area, FADESA is building with a 4-star Premium rating and
an Sea. This is the case of the two other large-scale resorts: 85 rooms, which has been in ope-
three tourist developments awar- the Tangiers City Centre, develo- ration since March, 2006.
ded to FADESA on the coast of ped in partnership with the An-
Smir, an exclusive area where the joca group, which will consist of
Moroccan royal family spends its 850 homes, two hotels, a large
summer holidays, in which it will office building and leisure cen-

da Prata housing project, a deve-
lopment with more than 3,000
homes near Lisbon.
HUNGARY
In the case of Hungary, FADESA
has continued with the construc-
tion of the Central Passage Buda-
pest development, which has be-
en very well received, and has
purchased other land for new
projects. At the same time, the
company is planning a resort on
the island of Csepel, south of Bu-
dapest. This real-estate operation
is unique in terms of its configu-
Europe ration and volume, and, in addi-
tion to homes, it will include com-
mercial areas, sports facilities,
Throughout 2006, FADESA has hotels and various public servi-
strengthened its presence in ces, making it the most important
Portugal, Hungary, Poland and urban development in the city.
France with the launching of
new projects, while continuing POLAND
its expansion plan with its acti- Meanwhile, in Poland, through
vity in Bulgaria. its subsidiary FADESA Prokom
Polska, the group has continued
PORTUGAL with the development of the
In 2006, FADESA, which has been Ostoja Wilanow project, a large
present in this country since the housing development compri-
late 1990s, boosted its activity in sing approximately 1,900 ho-
Portugal with its first develop- mes in Warsaw, and has also
ment in Porto: Allegro Design Ho- purchased more land, both in
mes, a state-of-the-art project di- the Polish capital and in other
rected at a young and up-market parts of the country, in order to
target audience. With this deve- carry out new projects.
lopment, the Group seeks to
strengthen its position in the re- FRANCE
al-estate market in Portugal, whe- For its part, France has become a
re it is also researching other pro- strategic market for FADESA.
jects, for both first- and Through its subsidiary in this
second-homes, and where it is country, Financiere Rive Gauche
currently promoting the Quinta FADESA, the group reached an

agreement with the Town Coun- target audience. With this pro-
cil of Levallois-Perret to develop ject, and following extensive re-
two forty-two-storey high-rises search into the possibilities of
near Paris. With an investment of the Bulgarian real estate market,
500 million euros, the project co- FADESA begins its activity in a
vers 110,000 square metres, country which offers great busi-
90,000 of which are will be used ness opportunities. In fact, the
for offices and commercial areas, group is already researching
and 20,000 for the construction other projects in this country.
of a hotel. The Torres de Levallois,
in the Collage-Front de Seine
quarter, just half a kilometre from
the Paris business area of La De-
fence and four-and-a-half kilome-
tres from the Eiffel Tower, will ha-
ve a height of 165 metres.
In addition, in 2006, FADESA sig-

ned an agreement with the
North American fund COLONY
CAPITAL to jointly develop over
the next five years a large-scale
real estate project in the town of
Massy, very close to Paris. The
America
project will be set in a six-hecta-
re plot of land and will cover In 2006, FADESA began a new
100,000 square metres, most of phase of its ambitious internatio-
which will be devoted to homes, nalisation plan, which until now
with the rest being used for offi- had focused on Europe and Mo-
ces. The estimated total inves- rocco, by crossing the Atlantic
tment is 213.5 million euros. ocean to arrive at Mexico, where it
will take part in the creation of a
BULGARIA large tourism and residential re- tions, four of which will be develo-
Lastly, in November 2006 sort on the Pacific coast. ped byFADESA to build hotels,
FADESA announced its entry in- homes and leisure centres.
to Bulgaria, with a high-rise de- The main attraction of the resort
velopment comprising homes, lies in its strategic geographical FADESA’s project is part of the
commercial premises and offi- location, in the state of Nayarit, 30 first phase of a plan devised by
ces. With an investment of 23 minutes from Puerto Vallarta, on a the Mexican government, which
million euros, FADESA’s first 2-kilometre beach.The entire pro- by 2025 hopes to turn Cip Nayarit
project in Bulgaria will be loca- ject, whose first stage has been into a leading tourism destination
ted in the centre of Sofia, and is named Litibu, covers an area of along the lines of the Mayan Ri-
aimed at a middle-upper level 170 hectares, divided into 21 sec- viera, in the Mexican Caribbean.

International Commercialisation
The beginning of its property de- the developments themselves,

velopment activity outside the structures of more than 1,000
Spanish borders led FADESA to square metres which feature mo-
establish local offices in all the dern customer service facilities,
countries where it operates. The large models and fully furnished
company has adapted its com- and decorated show flats.
mercialisation system in these
countries, creating a network of In addition, given its significant
sales offices in the centre of large second-home portfolio, FADESA
cities, to provide information completes its international acti-
about its real-estate offer, as well vity with a network of offices
as setting up sales warehouses on which mainly market its real esta-
te offer in Spanish and Moroccan
tourist locations, and in European
capital cities like Budapest and
Warsaw. This is the case of the
company’s commercial offices in
Frankfurt, London, Paris, Dublin
and Stockholm.

URBANIZACIÓN COSTA ESURI courts and other areas devoted to
Property developments in 2006 CASAS & GOLF, IN HUELVA commercial and hotel activities.
SPAIN FADESA has developed the Costa
Esuri Casas & Golf residential pro- URBANIZACIÓN NUEVA
ject in the Huelva town of Aya- CALAHONDA HOUSING, IN
monte, next to the mouth of the MÁLAGA
river Guadiana. Because of its Right on the Costa del Sol, betwe-
configuration and size, this pro- en Marbella and Fuengirola,
ject is unique, involving the cons- FADESA is building the Nueva Ca-
truction of around 6,000 Medite- lahonda housing development. To
rranean-style low-density homes, be exact, the project is located in
as well as an 18-hole golf courses, Mijas, five minutes from the town
a hotel, and large shopping and itself, and comprises 84 luxury
leisure areas. The complex, which apartments and swimming pools,
covers an area of 4,638,878 squa- only five minutes from the beach.
re metres, is one of the most im-
Andalucía portant operations on the west URBANIZACIÓN ALTOS DE LA
coast of Andalucía. ZUBIA, IN GRANADA
Aragón The Altos de la Zubia develop-
Residencial Almenara RESIDENCIAL MIRADOR DE ment comprises 272 plots of land,
del Guadalquivir,
ALMUÑÉCAR, IN GRANADA set in exceptional surroundings,
in Sevilla Islas Baleares The Mirador de Almuñécar hou- very close to the Natural Park of
Urbanización Costa sing development is set on the be- Sierra Nevada, in Granada, with
Esuri Casas & Golf,
in Huelva
Cantabria ach of Cantarriján, bordering the excellent views of the capital. The
Natural Park of Cantarriján, on project is finished off by 20,000
Castilla La Mancha what is known as the Tropical Co- squares metres of play areas and
ast.The development has 211 low- green spaces, as well as 1,850
density homes, including flats and square metres of sports areas.
Castilla León apartments, as well as swimming
pools and sports areas.
Cataluña
RESIDENCIAL ALMENARA DEL
Comunidad Valenciana GUADALQUIVIR, IN SEVILLA
Five kilometres from Sevilla, on
the left bank of the river Guadal-
Galicia quivir, in the town of La Algaba,
the company has built the Alme-
Islas Canarias nara del Guadalquivir housing de-
velopment, which comprises 600
La Rioja single-family and collective ho-
mes. The development also featu-
res a river promenade, a park,
Madrid swimming pool, sports tracks and

Urbanización Nueva
Calahonda, in Málaga
Residencial Mirador de
Almuñecar, in Granada
URBANIZACIÓN LOS CADOS DE LA Andalucía

JOYOSA, IN ZARAGOZA
The Los Cados de la Joyosa hou- Aragón
sing development is a large-scale
real estate project near Zaragoza,
in the town of La Joyosa, in an Islas Baleares
area of city expansion and great
natural beauty, which also enjoys Cantabria
every urban advantage. The pro-
ject comprises 2,800 homes, in- Castilla La Mancha
cluding flats and semi-detached
houses.
Castilla León
Urbanización Las
UBANIZACIÓN LAS DEHESAS DE Dehesas de San
SAN MATEO, IN ZARAGOZA Mateo, in Zaragoza Cataluña
Continuing with its commitment
to the Aragonese market, FADESA Comunidad Valenciana
has developed in Zaragoza a
housing project comprising more
than 2,200 homes. The Dehesas Galicia
de San Mateo is a new kind of re-
sidential project in this province, Islas Canarias
featuring different types of ho-
mes, as well as an 18-hole golf La Rioja
course, and is located in the town
of San Mateo de Gallego, only a
short distance from the capital. Madrid

RESIDENCIAL SA MARINA, IN Solagua Casas & Golf residential
PALMA DE MALLORCA project. This development com-
Set in the municipality of Palma prises more than 1,400 homes, in-
itself, and with excellent views of cluding collective homes, semi-
the bay, FADESA has built the Sa detached and terraced houses,
Marina housing development, an built around a 9-hole golf course
exclusive resort comprising 166 and with large leisure areas and
high-rise luxury homes, as well as green spaces.
large gardens, swimming pools
and paddle tennis courts. RESIDENCIAL FADESA PLAZA, IN
GUADALAJARA
RESIDENCIAL COSTA VERDE, IN FADESA´s Plaza housing develop-
SANTANDER ment is in the town of Horche,
In the beautiful Santander town only 13 kilometres from the capi-
of Santa Cruz de Bezana, 6 kilo- tal, and comprises 566 homes of
metres from the capital, FADESA different types, including flats
Andalucía has developed the Costa Verde and semi-detached houses. The
housing project, a development, development will be outstanding
Aragón comprising approximately 600 for its excellent communications,
homes of different types: apart- as it is close to the forthcoming
ments and flats, semi-detached AVE station, which means it will
Islas Baleares houses and plots of land. be only 15 minutes from the Ma-
drid city centre.
Cantabria RESIDENCIAL JARDINES DE SAN
JUAN, IN SANTANDER
Castilla La Mancha The Jardines de San Juan deve-
lopment comprises approxima-
tely 350 homes of different
Castilla León types, which FADESA is building
in the coastal town of Soto de la
Cataluña Marina. It is aimed at a target au-
dience which seeks to live next Residencial
to the beach all year round wi- Residencial Sa Marina, in Jardines de San
Comunidad Valenciana Palma de Mallorca Juan, in Santander
thout having to give up the be-
nefits of being near the centre of
Galicia Santander. The project also fea-
tures large green areas.
Islas Canarias
URBANIZACIÓN SOLAGUA CASAS &
La Rioja GOLF, IN TOLEDO
In the town of Illescas, in Toledo,
scarcely 30 kilometres from Ma-
Madrid drid, FADESA has developed the

Urbanización La
Cañada del Conde,
in Valladolid
Urbanización Ciudad Jardín Soto

Sotoverde Casas & del Real, in Burgos
Golf, in Valladolid
CIUDAD JARDIN SOTO DEL REAL,

IN BURGOS
In the town of Buniel in Burgos,
FADESA is developing the Ciudad Andalucía
Jardin Soto del Real housing pro-
ject, comprising more than 1,200 Aragón
homes, ranging from flats, semi-
detached houses, terraced hou-
ses and collective homes. It is 14 Islas Baleares
kilometres from the capital, and is
the company’s first large inves- from the centre of Valladolid, the Cantabria
tment in this province. Sotoverde Casas & Golf housing
development is a unique project Castilla La Mancha
URBANIZACIÓN LA CAÑADA DEL in this province. It comprises
CONDE, IN VALLADOLID around 800 single-family homes
With the La Cañada del Conde of different types, built around an Castilla León
housing development, FADESA 18-hole golf course.
again proves its commitment to Cataluña
Urbanización the province of Valladolid, where URBANIZACIÓN PAGO DEL NOGAL,
Solagua Casas & it has been operating since 1996. IN VALLADOLID
Golf, in Toledo Comunidad Valenciana
The project is located in the town Only a few minutes from Valla-
of Aldeamayor, 16 kilometres dolid, in the town of Boecillo,
from the capital, and comprises and very close to the Technolo- Galicia
1,244 plots of land which have a gical Park of Illisoletano, FADESA
network of necessary services. has built the Pago del Nogal Islas Canarias
housing development, a quality
URBANIZACIÓN SOTOVERDE CASAS project formed only by single- La Rioja
& GOLF, IN VALLADOLID family homes of different styles:
Situated in the district of Arroyo semi-detached, terraced, and
de la Encomienda, a stone’s throw detached houses. Madrid

Residencial
Torres Europa,
in Barcelona
VALL FOSCA RESORT SKI & GOLF, town of Sitges, at the foot of the
IN LLEIDA Natural Part of Garraf.The develop-
Right in the Lleida Pyrenees, ment is surrounded by large green
FADESA has developed the Vall Fos- spaces and has common areas de-
ca Resort Ski & Golf, a mountain voted to children’s games and a
project which is centred around a private swimming pool.
ski resort. The residential section of
the project comprises 965 luxury URBANIZACIÓN EL MIRADOR DEL
apartments built in the Pyrenean EBRO, IN TARRAGONA
style, and located in the large pe- In the town of L’Aldea, next to the
destrian village, where hotels and delta of the river Ebro, set in beauti-
apart-hotels will also be built. The ful natural surroundings, FADESA
village is completed by commercial, has developed the El Mirador del
sports, restaurant and leisure areas, Ebro housing development, a pro-
as well as a golf course and a spa.All ject comprising more than 900 ho-
of this stands at the foot of the ski mes, including semi-detached hou-
Andalucía lifts of the resort, which will have 30 ses, Mediterranean-style homes,
kilometres devoted to Alpine skiing low-density collective homes and
Aragón and 5.7 kilometres to cross-country plots of land.
skiing, as well as ski-lifts and a state-
of-the-art three-cabled cable-car.
Islas Baleares
RESIDENCIAL TORRES EUROPA, IN
Cantabria BARCELONA
The Torres Europa housing deve-
Castilla La Mancha lopment is an innovative and
unusual project comprising five Residencial
Nou Alberic,
towers designed by the architects in Valencia
Castilla León Alonso & Balaguer, three of which
are devoted to luxury homes and
Cataluña the remaining two to offices. In all, RESIDENCIAL NOU ALBERIC, IN URBANIZACIÓN BELLAROTJA, IN
the residential section comprises VALENCIA ALICANTE
Comunidad Valenciana 291 homes featuring all the digi- Aimed at a young target audience The Bellarotja housing develop-
tal home technology, distributed seeking first homes, the Nou Albe- ment is situated in one of the
over three 19-storey towers. ric housing development covers most beautiful areas of the Costa
Galicia an area of 58,312 square metres of Blanca, in the town of Pego, 10 ki-
URBANIZACIÓN MIRABLAU PLAYA buildable land, 600 of which will lometres from Denia. The project
Islas Canarias & CASAS & MONTAÑA, IN be devoted to a commercial area. comprises plots of land for indivi-
BARCELONA The project, which comprises mo- dual construction, as well as mo-
La Rioja The Mirablau Playa & Casas & Mon- re than 500 homes, including flats re than 900 Mediterranean-style
taña housing development is an and apartments, has excellent homes of different types.
exclusive project comprising 34 lu- communications with the capital
Madrid xury homes, located in the coastal thanks to the motorway.

CASAS DE MARALTA, IN URBANIZACIÓN MIRASOL, IN
PONTEVEDRA OURENSE
Casas de Maralta is FADESA’s first The Mirasol housing develop-
project on the south coast of Gali- ment is a project comprising al-
cia, in Sanxenxo, to be exact, an im- most 80 homes, including semi-
portant tourist destination in sou- detached, terraced or detached
thern Galicia.The project comprises villas. It is surrounded by green
around 400 homes of different spaces, has a swimming pool, and
Vall Fosca Resort Ski types, including Mediterranean is only five minutes from the city
& Golf, in Lleida
houses, semi-detached houses and of As Burgas, in Pereiro de Aguiar. Casas de Maralta,
flats,with excellent views of the sea. in Pontevedra
It is aimed at a middle-upper and URBANIZACIÓN BELLA VISTA, IN
up-market target audience. OURENSE
This project is situated near the
URBANIZACIÓN COSTA ANÁCARA, hospital, in an area undergoing ra-
IN LA CORUÑA pid expansion, and is very close to
In the coastal town of Miño, in a the city centre. It comprises 212 Andalucía
beautiful area with some of the single-family and collective homes,
best beaches in the north of as well as extensive green areas. Aragón
Spain, FADESA, is developing the
Costa Anácara housing develop-
ment, a second-home project ba- Islas Baleares
rely 15 minutes from the centre of
La Coruña. The Costa Anácara de- Cantabria
velopment comprises 1,220 ho-
mes of different types surroun- Castilla La Mancha
ded by an 18-hole golf course.
Castilla León
Cataluña
Urbanización Bellavista, Urbanización Costa
in Ourense Anácara, in La Coruña
Comunidad Valenciana
Galicia
Islas Canarias
La Rioja
Madrid

COMPLEJO RESIDENCIAL GRAN land of Fuerteventura. The deve-
GUANARTEME, IN LAS PALMAS lopment comprises more than
The Gran Guanarteme housing 190 high-rise 2- and 3-bedroom
resort comprises 300 high-rise homes, set in a low-density archi-
homes, a stone’s throw from the tectural complex featuring a com-
beach of Las Canteras and the Jo- munal swimming pool.
sé Mesa y Lopez Avenue. It is in
modern architectural style, and its RESIDENCIAL HELIOS, IN TENERIFE
services will be completed by a The Helios residential project is si-
Complejo Residencial commercial and office area, with tuated in El Médano, a quiet town
Gran Guanarteme, in the aim of becoming the top re- on the south coast of Tenerife,the is-
Las Palmas sort in Las Palmas. land’s tourist area par excellence.
The development comprises 197
VILLAS JANDIA GOLF RESIDENCIAL, high-rise homes,as well as large gre-
IN FUERTEVENTURA en spaces, a communal swimming
The Villas Jandia Golf housing de- pool and a children’s play area.
Andalucía velopments comprises 15 exclusi-
ve luxury villas of different sizes, RESIDENCIAL LAS ACACIAS, IN
Aragón and facing different directions. Its TENERIFE
location is superb, in a unique The Las Acacias housing develop-
area at the foot of a golf course, ment is FADESA’s new project in the
Islas Baleares with excellent communications south of Tenerife, in the town of San
with the rest of the island and Isidro to be exact, a stone’s throw
Cantabria very close to its main beaches. from the beach of El Médano. The
development comprises 124 ho-
Castilla La Mancha URBANIZACIÓN LA OLIVA CASAS & mes,including flats and apartments.
GOLF, IN FUERTEVENTURA
On the island of Fuerteventura,next
Castilla León to the Natural Park of Las Dunas de
Corralejo,FADESA has developed an
Urbanización
Cataluña excellent architectural project, com- La Oliva Casas y Golf,
prising more than 340 homes. The in Fuerteventura
Comunidad Valenciana La Oliva Casas & Golf housing deve-

lopment features villas and bunga-
lows, and stands next to an 18-hole
Galicia golf course, as well as being very
close to the beach.
Islas Canarias
RESIDENCIAL ROSAVILA, IN
La Rioja FUERTEVENTURA
FADESA has developed the Rosa-
vila first-home project in Puerto
Madrid Rosario, the nerve centre of the is-

Urbanización
Moncalvillo Green
Casas & Golf, in
Logroño
Residencial par-
que Colmenar,
in Madrid
Residencial Villanueva de la
Cañada, in Madrid
Andalucía
Aragón
URBANIZACIÓN
MONCALVILLOGREEN CASAS &
GOLF, IN LOGROÑO Islas Baleares
The MoncalvilloGreen Casas &
Golf housing development is one Cantabria
of the most important projects to
be carried out in Logroño up to Castilla La Mancha
now. It comprises more than
1,000 homes of different types:
flats, apartments, semi-detached Castilla León
houses and plots of land, surroun-
Residencial Rosavila, ding a golf course. Cataluña
in Fuerteventura
RESIDENCIAL VILLANUEVA DE LA RESIDENCIAL PARQUE COLMENAR, Comunidad Valenciana
CAÑADA, IN MADRID IN IN MADRID
The FADESA Group continues to The Parque Colmenar housing
strengthen its activities in the Au- development is situated in Col- Galicia
tonomous Community of Madrid menar Viejo, to the north of the
with a new housing project in the capital. It comprises 278 homes of Islas Canarias
town of Villanueva de la Cañada. different types, including collecti-
The development comprises 276 ve buildings, and semi-detached La Rioja
homes of different types and has and terraced houses, and will fea-
excellent communications with ture large green spaces, as well as
the Madrid city centre. commercial and leisure areas. Madrid

MOROCCO shores of the Mediterranean sea,
overlooking a 7 kilometre-long
beach, has a residential section
comprising approximately 3,000
homes, including 1-, 2- and 3-be-
Mediterrania
Saïdia droom apartments and 3- and 4-
bedroom villas, erected next to a
golf course, and featuring indivi-
dual landscaped plots of land.
The homes are a stone’s throw
from the beach and the marina,
and they are all built in the Medi-
terranean style displayed in Mo-
rocco’s architecture, respectful of
their surroundings and forming a
harmonious group. The first pha-
se of the residential section will
be finished by the spring of 2007.
Alcudia Smir
LES JARDINS DE MOULAYA, IN
SAIDIA
Les Jardins de Moulaya is a pro-
motional development compri-
sing around 3,000 2-bedroom
homes. The project will also fea-
ture sports facilities, and shop-
ping, cultural and services areas.
Les jardins de
Moulaya PALMERAI MALL, IN MARRAKECH
FADESA is developing in the ex- ALCUDIA SMIR
clusive Palmeral area of Marra- Alcudia Smir is a luxurious resi-
Marrakech kech, a luxury tourist resort with dential and tourist resort deve-
spectacular view of the Atlas. loped by FADESA on the exclusi-
Saïdia The residential section of the ve Smir coast, in the Moroccan
Palmerai Mall comprises more Mediterranean, just over 4 kilo-
than 2,600 homes, including metres from Ceuta. The resort,
Smir apartments and villas. This re- situated on a 1 kilometre-long
sort will also include hotels, an beach, comprising 2,189 homes,
Tangiers 18-hole golf course and a shop- with sea views, distributed ap-
ping centre. proximately as follows: 1,656 re-
Rabat sidential apartments, 354 tourist
MEDITERRANIA SAIDIA apartments and 179 villas, and
The Mediterrania Saidia resort will be completed by leisure are-
Agadir developed by FADESA on the as and a hotel.

Residencial
Jnane Ennahda,
in Rabat
Tanger City Center
TANGER CITY CENTRE

Facing the Bay of Tangiers, FADESA
has developed a residential, tourist
and leisure resort displaying inno-
vative architecture. The residential
section of Tanger City Centre com-
Complejo
prises approximately 850 homes,
Residencial Tafoukt,
in Agadir distributed over three buildings,
which cover an area of 97,782 squa-
re metres.The project is completed
by a large office building and a
shopping and leisure centre.
RESIDENCIAL JNANE ENNAHDA, IN

RABAT
Only a few minutes from the Ra-
bat city centre, FADESA has built Marrakech
the Jnane Ennahda housing deve-
lopment, a promotional project Saïdia
comprising 1,559 homes with all
services.
Smir
COMPLEJO RESIDENCIAL TAFOUKT,
IN AGADIR Tangiers
In the tourist town of Agadir,
FADESA is building the Tafoukt Rabat
housing project, comprising 1,100
homes, surrounded by green spa-
ces and leisure areas. Agadir

PORTUGAL QUINTA FONTE DA PRATA, IN
LISBON
The Quinta Fonte da Prata hou-
sing development covers 52
hectares and comprises 3,200
high-rise homes located in the
town of Moita, on the left bank
of the river Tajo, facing Lisbon.
The project is a new city con-
cept with all services, as it fea-
tures green spaces and com-
mercial, leisure and sports
facilities, as well as schools, cul-
tural and health facilities. Urbanización Quinta
Fonte da Prata, in Lisbon
ALLEGRO HOMES DESIGN, IN
PORTO
This modern first-home project
is situated a stone’s throw from
the new Dragao Stadium and
the Vita Porto Shopping Centre.
It is aimed at a young and up-
market target audience, and
comprises 44 modern homes, as
well as a private interior square
Lisbon
and extensive green areas.
Porto
HUNGARY CENTRAL PASSAGE BUDAPEST

Central Passage Budapest is an
unusual building situated in the
historic zone of Pest, where it
stands out because of its modern
architectural style. It is aimed at
an up-market target audience
and comprises 271 high-rise ho-
Budapest mes, a shopping mall and offices.

OSTOJA WILANÓW POLAND
The Ostoja Wilanów housing pro-
ject is a modern development com-
prising more than 1,900 homes.It is
formed by buildings in different
styles,each with a maximum of four
storeys,which are perfectly integra-
ted into one of the most exclusive
neighbourhoods of the Polish capi-
tal, only ten minutes from the city
centre. In addition, the project, ai-
med at a mid to up-market target
audience, is surrounded by 79,000
square metres of green spaces de-
voted to leisure activities. Warsaw
Residencial Ostoja Wilanów, in Warsaw
Allegro Homes
Desing, in Porto
Central Passage
Budapest
SOFIA (BULGARIA) BULGARIA
FADESA’s first project in the Bul-
garian market is a housing deve-
lopment in the south centre of
Sofia. It is aimed at a mid/upper
market target audience, and is
rounded off by commercial pre-
mises and offices. In all, the deve-
lopment will cover a surface of
36,800 square metres. Sofia

Asset Management Activity
Throughout 2006, FADESA has maintained its

strategy of strengthening its asset
management division, which focuses mainly on
the building and development of hotel and
golf-course projects, as well as the creation of
other business lines in order to offer its clients
more and better services.

Hotels and Tourist Resorts
New initiatives
The year 2006 saw the beginning
of FADESA’s new line of business:
tourist apartments, also known as
condo-hotels, which are the re-
sult of the symbiosis of the real
estate and tourism sectors. These
homes are purchased by clients
who become the current owners,
with the difference that, when
they are not living there, they em- new kind of real estate product to
ploy an agency to rent it and use which FADESA has lent added
it as a tourist establishment, so value. Currently, the company is
that, at the end of the year, the building condo-hotels in Jaca,
owner makes a profit. This is a Illescas (Toledo) and Morocco.
Agreements with hotel chains
FADESA currently has 16 esta- balia. This agreement includes med, of which FADESA holds
blishments in operation, which three projects in Saidia (Moroc- 83.5% of the capital, and Barce-
are managed by experts, thanks co), Ayamonte (Huelva) and ló the remaining 16.5%. It is also
to the agreements reached by Fuerteventura. worth noting the agreement
the Group. As a result of this po- signed in 2005 with the HUSA
licy, in 2006 FADESA signed an To this agreement must be ad- chain, whereby it will manage,
agreement with Globalia Corpo- ded the alliance between the under franchise, five hotels be-
ración Empresarial to create a company and the Barceló chain, longing to FADESA. This agree-
hotel management company in which has been in place since ment is yet another step in the
a 50:50 joint venture, while 90% 2004, for the exploitation of ho- business relation between the
of properties entering the port- tel assets developed by two companies, which began in
folio would belong to FADESA FADESA, for which a series of 2000 with the opening of the
and the remaining 10% to Glo- asset companies have been for- Barcelona Mar hotel.

Hotels in operation
FADESA owns 16 operational establishments in different parts of Spain

and Morocco.
IN SPAIN
HOTEL BARCELÓ CORUÑA of Isla Cristina. It has a 4-star ra- HOTEL GLOBALIA JANDIA GOLF
With a 4-star rating and 160 rooms, ting and 233 rooms, as well as 110 This hotel, which is also located in
the Hotel Barceló Coruña is a mo- apartments. the Fuerteventura resort, has a 4-
dern building located on the road star rating. Its 166 apartments are
into the city of La Coruña.The hotel HOTEL BARCELÓ MARBELLA GOLF next to an 18-hole golf course.
has a conference centre which is This hotel has a 4-star rating and
unparalleled in Galicia and rooms 206 rooms, and is surrounded by HOTEL BARCELÓ JANDIA MAR
equipped with the most advanced one of the best and most comple- With a 4-star rating and 485 ro-
audiovisual systems. te golf resorts in Europe, the Gua- oms, this establishment com-
dalmina Club de Golf, which has pletes FADESA’s resort in Fuer-
HOTEL BARCELÓ ARANJUEZ two 18-holes courses and one 9- teventura. It has swimming
This establishment is situated next hole course. pools, a crèche, a theatre, sports
to the Royal Casino of Aranjuez, the courts and a disco, among other
second in the Autonomous Com- HOTEL BARCELÓ JANDÍA PLAYA facilities.
munity of Madrid, and has a 4-star This is one of the three hotels
rating and 168 rooms,and is located comprising the resort FADESA is HOTEL BARCELÓ CABO DE GATA
next to a golf course. developing in the south of Fuer- This hotel is located in the town
teventura. It has a 4-star rating of El Toyo, the Village of the 2005
HOTEL BARCELÓ ISLA CRISTINA and 649 rooms, and is located on Mediterranean Games, and has a
This hotel is located on the sea- one of the island’s most spectacu- 4-star rating and 223 rooms, as
front in the Huelva fishing village lar beaches. well as a conference area and all

IN MOROCCO
sorts of relaxation facilities, such ting and 42 rooms. It opened in APARTHOTEL AS GALERAS HOTEL BARCELÓ CASABLANCA
as a Jacuzzi, a gym, a sauna, treat- July 2006 and aims to become This establishment, erected next to This hotel, situated right on the
ment booths, etc. the most important thermal the beautiful beach of Bastiagueiro, Boulevard D’Anfa, Casablanca’s
centre in Galicia, thanks to the in the village of Oleiros near A Co- financial and commercial quar-
HOTEL BARCELÓ JACA more than 2,400 square metres ruña, has a 3-star rating and 96 ter, is a 4-star superior hotel with
This hotel, which opened in the given over to its spa. apartments with kitchen facilities. 85 rooms. It was inaugurated by
summer of 2006, forms part of FADESA in 2006, and is the com-
the spectacular mountain tou- HOTEL HUSA BARCELONA MAR APARTHOTEL VALLES pany’s first venture in the Moroc-
rist resort Lomas de Badaguas, This hotel, situated in the Olympic With a 3-star rating and 100 room, can hotel sector.
developed by FADESA in Jaca. Village, has a 4-star rating and 75 it stands in the development
The 74-room establishment has rooms, and was one of the first FADESA has built in Sabadell. It
a 4-star rating, with an 18-hole ones to be developed by FADESA. has a social hall and restaurant.
golf course, a spa and fitness
centre, and a children’s play APARTHOTEL CAMPUS SAN MAMES RESIDENCIAL PORTAZGO
area, among other facilities. This 3-star hotel features studio This small 45-apartment establis-
flats, and is situated near the Leon hment opened in 1993, and has
HUSA HOTEL SPA VILLALBA University campus. excellent communications with A
This hotel, situated in the Lugo Coruña city centre.
town of Villalba, in an area
known for the medicinal proper-
ties of its water, has a 4-star ra-

Under construction
FADESA has about a dozen hotel projects under construction in diffe-

rent parts of Spain and Morocco. Cataluña, Aragon and Andalucia, as
well as the Mediterrania Saidia Resort being developed by the Group
on the Moroccan coast, are some of the places chosen to continue
strengthening its hotel activity.
IN SPAIN
HOTEL HUSA SANT JOAN HOTEL GLOBALIA AYAMONTE
Near Barcelona, FADESA is buil- Also located in the Costa Esuri Ca-
ding a 3-star 96-bedroom hotel, sas & Golf complex, this 4-star ho-
which will open in 2007.This esta- tel has approximately 185 apart-
blishment will feature a car park, ments set around a golf course.
social hall and restaurant.
COMPLEJO TURÍSTICO DE
HOTEL AYAMONTE MONTAÑA JACA
Part of the Costa Esuri Casas & Situated in the Lomas de Bada-
Golf complex FADESA is develo- guas mountain resort, this esta-
ping in Ayamonte, this luxury ho- blishment comprises 190 apart-
tel has 206 rooms and is erected ments, which are distributed over
only a few metres from one of the 7 blocks and are built in the clas-
jetties of the river Guadiana and sic Pyrenean style.
from two 18-hole golf courses.

IN MOROCCO
FADESA currently has five hotel sports and leisure facilities, and a
projects under construction at wide range of restaurants.
the Mediterrania Saidia Resort.
HOTEL GLOBALIA SAIDIA
HOTEL BARCELÓ SAIDIA Situated next to the Iberostar Ho-
This hotel, which is right next to tel, with which it shares the be-
the beach, is the first 5-star hotel ach, this establishment will have a
developed by FADESA. Its 602 ro- 4-star rating and 500 rooms.
oms will feature all amenities, and
the resort will include a wide ran- APARTAMENTOS TURISTÍCOS SAIDIA
ge of restaurants, as well as sports This complex is formed by 228
facilities, a fitness and spa club first-rate apartments, which are si-
and large social areas, including a tuated right next to the beach
theatre, a conference hall, shops and surrounded by a golf course.
and a children’s play area.
VILLAS TURÍSTICAS SAIDIA
HOTEL IBEROSTAR SAIDIA This complex comprises 104
This 4-star hotel has 484 rooms, villas right next to a golf course.
and is also located next to the Sai-
dia beach. It will have outstanding

Planned projects
In addition, FADESA has a portfolio of more than twenty hotel projects

in Spain, Morocco, Mexico and France.
IN SPAIN
APARTAMENTOS TURÍSTICOS APARTAMENTOS AYAMONTE

ILLESCAS FADESA has a third 4-star establis-
This complex, located in the Sola- hment in its Costa Esuri Casas &
gua Casas & Golf housing deve- Golf resort, in Ayamonte, in the
lopment, will comprise more than planning stage. It would comprise
200 apartments built next to a approximately 160 apartments.
golf course.
OTHER PROJECTS
HOTEL HUSA TORRELAGO FADESA has two hotels in the
The Group is developing a 3-star ho- planning stage in Granada and
tel will 44 bedrooms built around Lleida, in its Vallfosca Ski & Golf re-
the housing development in the Va- sort, amongst others.
lladolid town of Laguna del Duero.
HOTEL CLT
This hotel, situated in the Logisti-
cal Transport Centre of Culleredo,
in A Coruña, will have a 3-star ra-
ting and 57 rooms.

IN OTHER COUNTRIES
FRANCE
FADESA is finalising the project
for a 4-star hotel in one of the sky-
scrapers of the Torres de Levallois.
The establishment will have ap-
proximately 400 rooms, which will
be situated in the top 16 floors of
one of the towers.
MEXICO
The company is working on the
Nayarit resort, right on the Pacific
Coast, which will have hotels and
tourist apartments right beside
the beach.
MOROCCO
FADESA has other hotels in the
planning stage in the beautiful
city of Marrakech, in the Bay of
Tangiers, and on the shores of the
Mediterranean Sea, on the exclu-
sive coast of Smir and on the be-
ach of Saidia.

Golf courses
An important element of FADE- golf or Aymerich Golf Manage-

SA’s asset activity is its development, with the aim of providing
ment policy of large residential their golf courses with the hig-
complexes linked to golf. As of hest level of professionalism.
the 31st of December, 2006, the
company owns 24 golf courses,
five of which are in operation,
and the rest under construction
or in the planning stage. The de-
velopment of golf courses as
part of the residential comple-
xes built by the company makes
FADESA a European leader in
the field of town and country
planning tied to golf.
The strategy of delegating the

management of hotels to ex- Added Value Services – Conforta
perts is also applied in the case
of its golf courses. To this end, This is a business area which aims renovations, and any other issue
FADESA has signed agreements to offer added value services, pro- relating to the maintenance of re-
with leading companies with viding an answer to all the needs al estate assets. In 2006, the 902
long experience in the field of arising from owning a home. In helpline for Conforta clients was
golf management, such as Fina- this sense, currently, anyone who launched, which is operated from
signs a contract with FADESA au- FADESA’s Contact Centre.
tomatically becomes a client of
Conforta, and is given a loyalty FADESA offers this whole range
card. Among the benefits they en- of services through a network of
joy is a free one-year life insuran- offices which the company has in
ce and a 6-month home insuran- the different communities where
ce, as well as discounts at it currently has real estate pro-
FADESA’s golf courses and hotels. jects in operation, and, in 2007, is
expected to open a Conforta offi-
In addition, through Conforta, ce in Morocco.
FADESA rounds off its Compre-
hensive Real Estate Service, by of-
fering services covering decora-
tion, care and maintenance of the
homes, gardens or pools, interna-
tional removals, security systems,

Other developments
SHOPPING CENTRES
FADESA’s large-scale residential
projects all have an area devoted
to commercial use, to serve the
residents of the complex and its
surrounding areas.This is the case
of the Ventura Shopping Centre
(Fuerteventura), the El Toyo Shop-
ping Centre (Almeria), the Parking
Palma and the Dos Regos Shop-
ping Centre, as well as the forth-
coming commercial areas which
will serve other FADESA housing
projects, like the Costa Esuri
Shopping Centre (Ayamonte), the
Saidia Shopping Centre (Moroc-
co) and the Central Passage Shop-
ping Centre (Budapest). The first
will open in 2008 and the rest in
2007.
In addition, in 2006 FADESA and

the VID Group signed a frame-
work agreement for the exploita-
tion of three recreational and lei-
sure centres in the residential
projects FADESA is developing in
Morocco.
LOGISTICAL TRANSPORT CENTRE

In the district of Culleredo, near A
Coruña, FADESA has built the lar-
gest Logistical Transport Centre
(LTC) in Galicia. It is equipped with ready operational, has a compre-
all kinds of services, and covers an hensive fibre optic network and
area of more than 600,000 square 24-hour security, and will be com-
metres, as well as having excellent pleted by a restaurant, a hotel, a
communications with the main shopping area, a crew reception
Galician cities thanks to the Atlan- centre, a service station and an
tic Motorway. The LTC, which is al- MOT centre, among others.

Significant Events
FEBRUARY MARCH
Through its subsidiary in France, On the 17th of March, the Barceló
Financiere Rive Gauche FADESA, Casablanca hotel, the first joint
the company signed an agree- FADESA and Barceló chain hotel
ment with the Town Council of in Morocco, was inaugurated. The
Levallois-Perret to develop, in event was presided over by the
the vicinity of Paris, two 42-sto- Moroccan Minister for Tourism,
rey skyscrapers, whose expected Adil DOUIRI, and the presidents of
total investment will be 500 mi- FADESA and BARCELÓ, Manuel
llion euros, and which will stand Jove and Simón Pedro Barceló,
out for their state-of-the-art ar- respectively, as well as other Mo-
chitecture. The Torres de Leva- roccan authorities and public fi-
llois will be 165 metres tall and gures, such as el Walli, Moham-
will comprise offices, a commer- med EL KABBAJ, and the Mayor of
cial area, and a hotel. Casablanca, Omar BAHRAOUI.
Also in February, FADESA signed

JANUARY an agreement with the BBVA Pro-
The company announced the cre- perty Real Estate Fund, formali-
ation of a General Tourist Accom- sing the acquisition, by BBVA, of
modation Office, a decision which 253 homes for 76 million euros. It
forms part of its strategy to boost is the third operation of this kind
its asset management activity, signed by these two institutions
which focuses mainly on the de- in little more than a year.
velopment of hotels, tourist ac-
commodation and golf courses.
Town council of Levallois

Perret
The Moroccan Minister

for Tourism

Left. Madrid Real
Estate Show
Centre. General
Meeting of
Shareholders
APRIL MAY JUNE Right. Residencial
FADESA and ANJOCA signed the On the 9th of May, FADESA cele- The Group, through its subsidiary Ostoja Wilanów
agreement for the development of brated in La Coruña its second in Poland, FADESA Prokom Pols- (Poland)
the Tanger City Centre. The event General Meeting of Shareholders, ka, officially presented in Warsaw
was presided over by the Moroccan after the company went public, to its first project in this country: the
Minister for Tourism,Adil DOUIRI,joi- examine and approve the annual Ostoja Wilanów housing develop-
ned by the presidents of FADESA accounts for 2005. In addition, the ment, a large-scale residential
and BARCELÓ, Manuel Jove and Si- Board agreed to appoint Antonio project comprising approxima-
món Pedro Barceló, respectively. de la Morena Pardo as Managing tely 1,900 homes. The presenta-
Director, and a subsequent mee- tion event was presided over by
The company was present at the ting of the Board of Directors for- the Polish Minister for Building,
Madrid Real Estate Show (SIMA) mally appointed him as the Group Antoni Jaszczak.
where it presented its products in Managing Director. The sharehol-
the Autonomous Community of ders approved a distribution of di- In addition, the company an-
Madrid and the rest of Spain, and its vidends of 0.41 euros per share, nounced the construction of a
products abroad. almost twice the amount of the luxury residential and tourist de-
previous year. velopment in the exclusive area
In addition, through its subsidiary of the Palmeral of Marrakech, a
in France, Financiere Rive Gauche, Also in May, FADESA and Globalia new project which establishes
FADESA closed a deal with the Corporación Empresarial signed a the company as one of the lea-
North American fund COLONY framework agreement for the cre- ding investors in the country,
CAPITAL to jointly develop over ation of a hotel management and which will have an inves-
the next five years a large-scale re- company in a 50:50 joint venture, tment of 300 million euros.
al estate project. This operation while the ownership of the hotels
will have an investment of more and tourist apartments included Also in June, FADESA and Telefo-
than 213 million euros, to build in the agreement will be divided nica signed a framework agree-
homes and offices in the town of as follows: 90% to FADESA and ment for the development and
Massy, very near Paris. the remaining 10% to Globalia. promotion of homes equipped
This agreement initially compri- with the latest communication
Lastly, FADESA announced the ses three projects in Saidia (Mo- services and solutions. Thanks to
construction of the Alcudia Smir, a rocco), Ayamonte (Huelva) and this project, FADESA’s forthco-
luxury complex on the Smir coast, Fuerteventura. ming developments can feature
one of the most exclusive tourist all of these services from the mo-
destinations in Morocco. With an ment the homes, offices or com-
investment of 150 million euros, mercial premises are delivered, if
the project will comprise more both companies so wish.
than 2,000 homes, a hotel and lei-
sure areas.

SEPTEMBER
LAZORA acquired 146 million eu-
ros worth of FADESA assets, in an
operation which was part of the
framework agreement for the bu-
ying and selling of homes signed
by both companies in 2005. The
transaction, one of the biggest so-
cial housing initiatives in Spain at
HUSA Hotel Spa Villalba Prize for Excellence in Work-Related Risk this time involves the purchase by
Management and Prevention Lazora of a total of 1,375 homes
that FADESA has in different Spa-
nish towns.
JULY AUGUST FADESA opened a Sales Office in

FADESA announced its entry into The company took another step Valencia, its first in the Autono-
Mexico, where it will take part in in its consolidation process in Por- mous Community of Valencia. The
the creation of Cip Nayarit, a lar- tugal with the launching of a resi- office completes the commercial
ge-scale tourist and residential re- dential complex featuring state- network the group has in diffe-
sort on the Pacific Coast, 30 minu- of-the-art architecture right in the rent points of Spain and overseas.
tes from Puerto Vallarta and on a centre of Porto: Allegro Homes
2-kilometre beach. The Spanish Design.The development compri- The Fundación CIP awarded
company will build a luxury hotel ses 44 homes and had an inves- FADESA the Prize for Excellence
and apartments, as well as a be- tment of 12 million euros. in Work-Related Risk Manage-
ach club. ment and Prevention, in recogni-
tion of its commitment to preven-
In the month of July, two of the tion, which exceeds the demands
company’s hotels were inaugura- of current legislation.
ted, the Barceló Jaca and the Husa
Hotel Spa Villalba, both with a 4- The businessmen Fernando Mar-
star rating. The first has 74 rooms tín and Antonio Martín Criado
and is located in the Lomas de Ba- launched a takeover bid for 100%
daguas housing project, develo- Allegro Homes Design (Porto)
of FADESA. The bid was presen-
ped by FADESA, just 8 kilometres ted through Martinsa and Huson
from Jaca (Huesca), and close to Big, the companies owned by the
the ski resorts of Astún, Candan- two businessmen, at a price of
chú and Formigal.The second is in 37.50 euros per share. Manuel Jo-
the village of Villalba, in the pro- vé, president of FADESA, signed
vince of Lugo, next to Alligal, an agreement with the bidders
known for the thermal properties whereby they will purchase his
of its water, and features a 2,100 entire stock, i.e. 54.61%.
square metre spa.

NOVEMBER DECEMBER
FADESA continued with its plan FADESA was awarded the deve-
for international expansion with lopment of two tourist resort on
its entry into Bulgaria, where it Morocco’s Mediterranean coast,
purchased land in the centre of after winning a tender put out by
Sofia, destined for the construc- the Moroccan Government. The
tion of a first high-rise develop- main appeal of the resorts will be
ment comprising homes, com- their location, on the exclusive “Ta-
mercial premises and offices. muda Bay” coast, the holiday des-
Meeting of the President of Sales Office in Ceuta tination of the Moroccan Royal Fa-
the Galicia Goverment At its stand at the Professional mily.The first resort will be located
with Fernando Martín, Showroom of the Barcelona Real around an unspoilt saltwater lake,
Antonio M. Criado and
Javier Losada
Estate Fair, Meeting Point, FADESA and will comprise a luxury hotel, a
showed a preview of TV FADESA, spa, a golf course, an activities area
OCTOBER its own Internet television chan- with beach clubs and a waterpark,
The FADESA Group opened its nel, which will be launched in and around 1,100 homes. The se-
Sales Office in Ceuta, in an event 2007, and is a new, unparalleled, cond resort will comprise a golf
attended by Juan Jesús Vivas Lara, pioneering commercial tool in the course, a leisure area, a sports cen-
president of the Autonomous Spanish sector, which responds to tre, an activities area and around
Community of Ceuta. From this market demands and whose main 1,000 homes. In total, FADESA will
office, FADESA will market all of priority is to bring the product clo- invest approximately 324 million
its first- and second home real es- ser to the customer. euros in these projects.
tate products, responding to the
potential demand of this Commu- FADESA and the Grupo VID sig-
nity, and paying special attention ned a framework agreement for
to the projects closest to Ceuta. the exploitation of three recreatio-
nal and leisure centres integrated
The company took another step in the residential complexes
in its consolidation process in Po- FADESA is developing in Morocco.
land with a new residential pro-
ject in Warsaw, with an inves-
tment of 37 million euros. This
new operation by FADESA in the FADESA TV in BMP
Polish capital will cover an area of
66,454 square metres, on which
approximately 400 homes will be
built, in a three-storey building.

CO R P O R AT E S O C I A L R E S P O N S I B I L I T Y
FADESA, conscious of the role played by housing
in today’s society, combines the financial
profitability of its activity with a real estate policy
which respects the environment and encourages
sustainable and rational growth. In addition,
through the María José Jove Foundation, the
Group carries out important social projects,
through different initiatives in the fields of
culture, education and medicine, with priority
given to activities aimed at children
Commitment to our employees

One of FADESA’s main assets is
it human resources. The profes-
sional attitude of its staff is one
of the keys of its continual and
permanent growth over time. In
this sense, staff training is one of
FADESA’s priorities, with provi-
sions made for constant training
updates, particularly in the areas
relating to safety in the workpla- cern, one of the main priorities of
ce and the legislation regarding FADESA’s former Vice-President,
the prevention of work-related the kindergarten Os Pequerre-
hazards. chos was created, the origin of the
María José Jové Foundation,
In addition, FADESA was one of which is named after her. This
the first companies to respond to centre provides the children of
one of the challenges of today’s employees with care for their first
society: to combine work and fa- years of life, and gives important
mily life. As a result of this con- support to working parents.
66 C O R P O R AT E S O C I A L R E S P O N S I B I L I T Y • Annual Repor t 2006

Supporting science
RESEARCH
In 2005 FADESA signed an agre- that from other leading Spanish
ement with the Fundación Pro- companies, has enabled,
CNIC in support of the scientific amongst other achievements,
research activities of the Spa- the appointment of eminent
nish National Cardiovascular Re- cardiologist Dr. Valentín Fuster
search Centre. This backing pro- as Chairman of the Scientific Ad-
vided by FADESA, together with visory Committee.
María José Jove Foundation

The María José Jove Founda- sing its activity on health, edu-
tion, created on the 28th of Ja- cation and culture.
nuary, 2003 in memory of María
José Jove, is particularly com-
mitted to children, women and
the most disadvantaged, focu-
Responsible Activity
One of FADESA’s main aims is to

offer its customers a Comprehen-
sive Real Estate Service, which Health
provides them with the best qua- P R E V E N T I O N A N D I N V E S T I G AT I O N
lity at competitive prices. Custo-
mer satisfaction is, thus, a guaran- DRUG ADDICTION ther families and the education and
tee for the future. Agreement with the Fundación scientific communities to discuss a
Monte do Gozo Proyecto Hombre health issue which has been on the
Thus, in terms of the environment, for the financing of a unit within increase in Spain the last few years.
the company is committed to sus- the therapeutic centre of the Pazo
tainable development which res- del Bosque de Cernadas (La Coru- ASTHMA AND ALLERGIES AMONGST
pects nature. Hence, it follows en- ña), to provide shelter for preg- CHILDREN
vironmental protocols to nant drug-addict women who are Collaboration agreement betwe-
minimise the damage caused by in the process of rehabilitation, en the Regional Government’s
harmful emissions, as well as appl- and for their children. Public Health Commission, the
ying strict policies on the han- Galician Paediatric Society and
dling of waste products CHILDHOOD OBESITY the Galician universities to carry
The Foundation organised a seminar out an epidemiological report on
with the objective of bringing toge- asthma and allergies.
C O R P O R AT E S O C I A L R E S P O N S I B I L I T Y • Annual Repor t 2006 67

DOWN’S SYNDROME am from the universities of Va-
A series of conferences about lencia and Navarra, and led by
Down’s syndrome to share in- Joan Climent Bataller, Jose A.
formation with families and Martínez and Ana Lluch.
professionals regarding the
many contributions music can ANOREXIA AND BULIMIA
make to the education of peo- The Foundation has participated
ple with disabilities. in the funding of the A Coruña
Anorexia and Bulimia Association
DISORDER DETECTION RESEARCH (ABAC) day centre since 15th of
The Foundation is funding an ex- June, 2004.
perimental project for the detec-
tion of behaviour problems in
young school-age children. The
programme, which is taking place
at six Galician schools, aims to en-
courage tolerant attitudes which
will contribute to the integration
of schoolchildren while reducing known as “FADESA leader-scho-
academic failure and truancy. larships”, for students of architec-
ture and engineering. In addition,
ASPERGER’S SYNDROME it has also created a scholarship
The Foundation has sponsored a which has provided the Cyber-
series of conferences which will classroom at the Juan Canalejo
be attended by some of the Spa- Education Hospital Complex with activity le-
nish experts who have studied KINDERGARTEN AND SCHOLARSHIPS aders who contribute to making
this alteration of brain develop- their hospital stay more pleasant
ment in depth. for children and their relatives.
ESCUELA INFANTIL OS
BREAST CANCER PEQUERRECHOS CÁTEDRA MARÍA JOSÉ JOVÉ
The II María José Jove National This kindergarten has a team of The María Jose Jové Professorship
Prize for Breast Cancer Research 11 professionals and 112 places, was created at the University of A
was awarded to the following 10 of which are for children with Coruña to provide support for those
projects: Genetic Study of Chro- disabilities. It also has a psycho- students who have special educa-
mosome 8 in Invasive Breast motor activity and rehabilitation tional needs.This initiative has led to
Cancer: the Role of c-MYC in Bre- room which is unparalleled in Ga- the creation of 36 scholarships, with
ast Cancer, carried out in the Pi- licia and a pioneer in Spain. a total value of 38,880 euros.
tié Salpetriére Hospital in Paris
by a research team led by doc- SCHOLARSHIPS WORKSHOPS AND COURSES
tors Angelita Rebollo and Aarne FADESA has an agreement with Programme of free art, drama and
Fleischer; and the Genomic Pro- the University of Coruña under English workshops and courses
file of Breast Cancer: its Clinical which it contributes to the crea- for children, to take place during
Implications, carried out by a te- tion of a scholarship programme, the school year.
68 C O R P O R AT E S O C I A L R E S P O N S I B I L I T Y • Annual Repor t 2006

Culture
PRIZES , ENCOUNTERS AND ACTIVITIES
THEATRE AWARD OPERA FESTIVAL

The National María José Jové Chil- Every year, FADESA sponsors the
dren’s Playwriting Award aims to A Coruña Opera Festival
encourage the creation of theatri-
cal works for children. With “¡Viva PUPPET FESTIVAL
el Teatro!”, José Luis Alonso de The Foundation has an agree-
Santos, from Valladolid, was the ment with the A Coruña Town
winner of the last edition, which is Council whereby it organises the
worth 30,000 euros, the largest María José Jove Puppet Festival.
prize in a competition for theatri-
cal works in Spain.
Investment by the María José
ART AWARD Jove Foundation in Non-Profit
The National María José Jové Ar- Activities
tejoven (Young Art) Award was Euros
created to promote young ar- 2003 141,814
tists. It is an annual nationwide 2004 283,263
2005 577,144
competition with a 6,000 euro 2006 822,546
prize. The winner of the first edi-
tion was José María de la Rubia
Tejeda, from Madrid, with the
work “Pili, Mili, Memories of the
Twentieth Century”.
ART EXHIBITIONS AND COLLECTION

The Foundation’s interest in the
promotion of art is expressed by
the cultural project “Artistic Itine-
raries”, an initiative which has ex-
hibited throughout Galicia a se-
lection of works by 52 artists of
the stature of Tapiés, Barceló, Bro-
to and Laxeiro. This project is
completed by a series of periodic
visits by schoolchildren to the Art
Collection on display at the Foun-
dation’s exhibition hall.
C O R P O R AT E S O C I A L R E S P O N S I B I L I T Y • Annual Repor t 2006 69

ASSET VA LUAT I O N
72 ASSET VA LUAT I O N • Annual Repor t 2006
ASSET VA LUAT I O N • Annual Repor t 2006 73
FINANCIAL I N F O R M AT I O N
FA D E S A I N M O B I L I A R I A S . A .
Annual Accounts and Management

Report for the year ended December
31, 2006
Translation of a report and financial statements originally issued in Spanish and prepared in accordance with generally accepted accounting
principles in Spain (“Spanish GAAP”). In the event of a discrepancy, the Spanish language version prevails. Spanish GAAP may not conform to
generally accepted accounting principles in other countries.
FADESA INMOBILIARIA S.A.
Balance sheets at December 31, 2006 and 2005
Thousand E
80 FINANCIAL I N F O R M AT I O N • Annual Repor t 2006

Thousand E
FINANCIAL I N F O R M AT I O N • Annual Repor t 2006 81

Profit and loss accounts for the years ended at December 31, 2006 and 2005
Thousand E

Thousand E

ANNUAL ACCOUNTS FOR THE YEAR ENDED DECEMBER 31, 2006
1 • CORPORATE INFORMATION Prior to the announcement of the takeover bid, as

described in the previous paragraph, on Septem-
ber 28, 2006 the companies Almarfe, S. L. and
1.1 • Group activities. Agosuier, S. L. (companies related to the Bidders’
partners) and companies controlled by Mr. Ma-
Fadesa Inmobiliaria, S.A. formerly Urbanizadora nuel Jove Capellán, who together hold
Inmobiliaria Fadese, S.A. (hereinafter, the com- 61,884,891 shares of Fadesa Inmobiliaria, S.A., re-
pany) was incorporated on July 24, 1980 for an in- presenting 54.614% of its share capital, reached
definite period. The Company engages mainly in an agreement whereby they made an irrevocable
promoting and constructing real estate develop- undertaking to accept the Offer once it was sub-
ment projects, rental of housing and commercial mitted to, and authorized by, the regulatory body.
premises, as well as other real estates services.
As part of agreements reached prior to the an-
The Company is the parent company of a holding nouncement of the takeover bid, on September
engaged mainly in real estate and construction 28, 2006, an “Asset Transfer Agreement” was sig-
activities. The Company’s real estate promotion ned, whereby:
activity is carried out in Spain and Portugal.
a) Fadesa Inmobiliaria, S.A. will acquire land in
The registered address of the company was esta- Mexico from a company related to Mr. Manuel
blished in A Coruña. Jove Capellán at a price of 118,600 thousand
euros. This acquisition will take place once the
1.2 • Takeover bid for Fadesa Inmobiliaria, S.A. takeover bid is completed.
On November 2, 2006, the companies Promocio- b) Fadesa Inmobiliaria, S.A. will sell certain as-
nes y Urbanizaciones Martín, S.A. and HUSON BIG, sets at a price of 20,177 thousand euros to en-
S. L. made a takeover bid for 113,312,799 shares, tities related to Mr. Manuel Jove Capellán.
representing 100% of Fadesa Inmobiliaria, S.A.’s
share capital, at a price of 35.70 euros per share. On the same date that these agreements were
The bid was authorized by the Board of the Spa- signed, Mr. Manuel Jove Capellán, Chairman of
nish Securities Commission (hereinafter CNMV) Fadesa Inmobiliaria, S. A., informed the Bidders of
on February 6, 2007, which signals the start of the his intention to propose to the Board of Directors
mandatory acceptance period during which time that a special remuneration or bonus be paid to
Fadesa Inmobiliaria, S. A.’s shareholders may ac- certain employees as a reward for work perfor-
cept the offer. All the information required by cu- med during a certain length of time in the Com-
rrent regulations regarding this bid is available in pany. The total amount, net of tax withholdings, is
the corresponding Explanatory Brochure on the to be 30 million euros. The gross amount of this
CNMV website. special remuneration, amounting to 46,154 thou-
sand euros, was recorded as an expense for 2006

under “Extraordinary expenses” in the accompan- Extraordinary expenses
ying income statement. This heading includes expenses related to the ta-
keover bid mentioned above and is broken down
On October 27, 2006, Fadesa Inmobiliaria, S.A. as follows:
submitted a binding offer to acquire from Arpe-
gio Áreas, Promociones Empresariales, S.A. (Arpe-
gio) and other shareholders, a 60.73% interest in
Parque Temático de Madrid, S.A., a company in
which it already holds a 13.09% interest. On No-
vember 2, 2006, Arpegio notified Fadesa Inmobi-
liaria, S.A. of its acceptance of the offer.
In order not to compromise Fadesa Inmobiliaria,

S.A.’s future strategy, its President informed the
Bidders that he was willing to acquire from
Fadesa all the shares of Parque Temático de Ma- 2 • BASIS OF PRESENTATION
drid, S.A. under the same terms and conditions as
those of the abovementioned binding offer. On
November 29, 2006, the Bidders announced their A • True and fair view.
agreement to such a transaction.
The annual accounts have been obtained from the
At year end 2006, Fadesa Inmobiliaria, S.A. had individual accounting records of the company and
not acquired the abovementioned shares of Par- are prepared based on the Spanish General Chart of
que Temático de Madrid, S.A., which is a prerequi- Accounts and applicable to Real Estate Companies,
site for Mr. Manuel Jove Capellán’s completion of in order to give a true and fair view of the Compan-
the abovementioned transaction. Therefore, at y’s equity, financial position and results. These 2005
the time these consolidated financial statements annual accounts have been prepared by the Com-
were prepared, neither transaction had been ca- pany’s Management, will be presented at the Gene-
rried out. ral Shareholder’s Meeting and are expected to be ap-
proved without modifications.
The General Shareholders Meeting held on May 9th,

2006 approved the 2005 Annual Accounts.

B • Comparison of information. 3 • APPROPRIATION OF RESULTS
The accompanying annual accounts have been pre- The appropriation of results of the year ended 2006
pared based on General Chart of Accounts of Real the Administrators will present to the Board Mem-
State Companies approved by Orden of December bers at the General Shareholder’s Meeting for appro-
28, 1994, thus standard formats of financial state- val is as follows:
ments approved by Mercantile Register are not ap-
plicable.
The accompanying annual accounts are those of the

individual company Fadesa Inmobiliaria, S.A. As pa-
rent company of a consolidated group, the Company
has also prepared consolidated annual accounts.
In compliance with Spanish mercantile law, for com-

parative purposes the Company’s directors have in-
cluded for each of the captions presented in the ba-
lance sheet, the profit and loss account, and the
statement of sources and application of funds in ad- 4 • ACCOUNTING PRINCIPLES AND
dition to the figures of 2005, those of 2004, keeping VALUATION CRITERIA
uniformity in their presentation.
The accounting principles and valuation criteria
C • Accounting principles. used by the Company to prepare the annual ac-
counts, in accordance with the General Chart of Ac-
The accounting principles and criteria applied in the counts and applicable to Real Estate Companies, we-
preparation of the 2006 annual accounts are descri- re the following:
bed in Note 4. All mandatory accounting principles
pertinent to the Company’s equity, financial position A • Start up expenses.
and results have been applied in their preparation.
This chapter includes expenses incurred in capital in-
The figures shown in the documents composing the creases, as well as star-up expense for new projects.
annual accounts are denominated in thousand euros. They are amortized in five years, being the charge to
the Profit and Loss account for the year of 330 thou-
These financial statements are presented on the ba- sand euros.
sis of accounting principles generally accepted in
Spain. Consequently, certain accounting practices B • Intangible assets.
applied by the Company may not conform to gene-
rally accepted principles in other countries. The assets are shown at acquisition cost. Assets ac-
quired under leasing arrangements are recorded as
intangible fixed assets at the cash value of the asset
and are amortized according to the same criteria
described in “Tangible assets.” The total debt repre-
sented by lease instalments plus the purchase op-

tion are recorded in liabilities. The difference betwe-
en the cash value and the final price (financial ex-
penses) is recorded as deferred expenses, and is ta-
ken to the profit and loss account based on financial
a criteria.
“Software” corresponds mainly to the acquisition

costs of computer programs, which are amortized
using the straight-line method over a five-year pe-
riod.
An accelerated depreciation method that doubles
Administrative concessions correspond to the cost the rate resulting from the above mentioned useful
for the acquisition of a concession for the use of a life is applied to second hand goods.
mineral-medicinal aquifer. This cost is amortized
using the straight-line method over the remaining Depreciation charge for the year 2006 amounted to
term of the concession (18 years beginning in 2002). 2,088 thousand euros.
Charge to the profit and loss account due to the D • Investments.

amortization for the year 2006 amounted to 2,514
thousand euros. Equity investments are recorded at acquisition
cost, less the provision for any difference betwe-
C • Tangible assets. en the acquisition cost and the theoretical book
value of the shares, adjusted by the amount of ta-
These assets are shown at the lower of acquisition or cit capital gains arising upon acquisition that re-
production.The company records the necessary pro- main at year end. Nevertheless, when the acquisi-
visions for depreciation of tangible assets when the- tion cost adjusted by the indicated provision is
re is reason to doubt that the book value of the asset higher than the value obtained applying rational
cannot be recovered. The Company did not take ad- criterion admitted in the practice, the provision is
vantage of any tax laws to update the value of its increased to adjust the value in books of the par-
tangible assets. ticipation to its realization value.
Maintenance and repair expenses are charged to the In the case of shares in companies that are also
profit and loss account in the period incurred. parent companies of a subgroup, the theoretical
book value is calculated based on the consolida-
Depreciation of tangible assets is calculated based ted net equity of the subgroup.
on the straight-line method, according to the related
estimated useful lives as follows: The Company holds the majority of shares of cer-
tain companies and more than a 20% of others.
As explained in Note 2, the 2006 annual accounts
do not reflect increases or decreases in the value
of said shares, which would result from applying
consolidation criteria.

Shares in capital derived from the land contribu- LONG-TERM DEVELOPMENTS IN PROGRESS:
ted by acquired companies are carried at the ac- This heading includes developments in progress
quisition cost of said land. with its final construction date over a year from
December 31, 2006.
E • Deferred expenses.
3 • Finished buildings.
This heading corresponds to interests derived Upon completion, the Company transfers the cost
from trade debts or fixed assets that mature in of the related buildings not yet sold from “Deve-
over one year. Said interests are charged to the lopments in progress” to “Finished buildings”.
profit and loss account in accordance with a fi-
nancial criteria. 4 • Construction-in-progress.
This heading includes the total costs incurred in
F •Inventories. developments in which the company is hired as
builder and will be invoiced to third parties.
Inventories are comprised of:
The Company records the corresponding provi-
1 • Land and plots. sions of stock depreciation when the book value
Land and plots acquired to promote real estate exceeds market value. Since future losses are not
developments are recorded at the acquisition expected, the attached annual accounts do not
price, plus any other expenses directly related to include any provision for this concept.
the purchase (taxes, property registration fees,
etc.). This amount is transferred to “Develop- G • Debtors
ments in progress” once construction work be-
gins. 1. Other debtors.
Other debtors are recorded at amounts given and
2 • Developments in progress. classified as short or long term based on related ma-
In addition to those already stated, this heading turity dates. Interest income is recorded during the
also includes costs incurred into for real estate year accrued in keeping with a financial criterion.
developments in progress at the end of the fiscal
year. For each development these costs include 2. Trade debtors.
the amount for the plot, landscaping and cons- Trade debtors are shown at their nominal values
truction, as well as other directly related costs which include discounted bills pending maturity
(studies and projects, licenses etc.) and financial and are recorded under “Amounts owed to credit
expenses accrued during the construction period institutions.”
for specific financing.
The Company records bad debt provisions based
SHORT-TERM DEVELOPMENTS IN PROGRESS: on estimates of balances for which recovery may
This heading includes developments in progress be doubtful.
with its final construction date less than a year
from December 31, 2006.

H • Treasury shares J • Trade provisions
The Company carries out, as authorized by the stock This paragraph reflects the following items:
holders meetings, acquisition and disposal of trea-
sury shares to provide liquidity to market. These tre- 1. Guarantee provisions
asury shares are valued by the minor value between The balance shown under the heading “Trade pro-
acquisition cost, market value and net book value. visions” for 5,812 thousand euros reflects estima-
Market value should be considered the lower of the ted future costs for small repairs to be done in re-
market price at year-end or the average market pri- cently sold housing developments. This cost has
ce in the last quarter of the year. been calculated, using statistical data, as a percen-
tage of what was sold during the current and pre-
When net book value of shares is lower than market vious fiscal year. The net change in 2006 for this
value, a provision is recorded against equity. provision was 2,448 thousand euros. Balance at ye-
ar end amounts to 8,260 thousand euros.
I • Deferred income
The Company has also contracted all appropriate in-
1. Official grants. surance that will cover any contingencies that may
This heading includes grants received to acquire arise either during or after construction.
land to build government-subsidized housing.
They are recorded when authorized by the co- 2. Provisions for future expenses.
rresponding National or Autonomous Govern- This heading refers to expenses to be incurred in-
ment Agency. Related amounts are recorded as to for those real estate developments for which sa-
income based on a matching income and expen- le has been registered. Its value is the difference
se criteria whereby the balances corresponding between estimated and actual costs. The balance
to units sold are recorded as income for the year. shown at year en is of 69,751 thousand euros.
Other amounts relating to units still in stock are
recorded under “Other official grants”. 3. Provision for future losses.
The Company conducts an analysis of those cu-
2. Other deferred income. rrent housing developments which after deduc-
This heading relates mainly to amounts received ting marketing expenses, might throw a negative
for the company’s temporary user rights to shares margin. The provision will be done for the value
of Guadalmina Golf, S.A. These amounts are taken of future losses that might produce the afore-
to income on a straight-line basis depending on mentioned housing development once sold. At
the term of the agreement. the close of fiscal year 2006 there are no losses by
this concept.
K • Provisions for liabilities and charges
1. Provision for taxes

Given the varying interpretations of the tax legisla-
tion applicable to Capital Transfer Tax on mortgage
loans, until 2002 the Company had adopted the cri-
teria of paying this tax on the principal of these lo-

ans exclusively, based on sentences handed L • Debts
down by the Supreme Court. However, in accor-
dance with the principle of prudence, Group These amounts are recorded at their repayment
companies maintain a balance of 5,922 thousand values. They are classified as long or short-term
euros in “Provision for taxes” to meet any future based on their maturity, sale, or cancellation da-
obligations arising from future court sentences. tes. Those that fall due within less than 12
As a consequence of a legal change in force since months of the balance sheet are considered
year 2003, Capital Transfer Tax is being liquidated short-term.
using as tax basis the maximum mortgage res-
ponsibility. Assumable mortgage loans are recorded under
“Amounts owed to credit institutions” at the
In addition, the Group has recorded a provision of amount drawn down. Loans used to finance hou-
7,808 thousand euros for other tax risks. sing for which there are firm sale agreements
(private contracts) and which is to be delivered
2. Other provisions: within less than one year are classified as short-
This heading refers to liabilities and charges ari- term, even if they fall due in over 12 months.
sing from on-going litigation and amounts to
1,902 thousand euros. This heading also includes M • Income tax
the cost to cover the Company’s responsibility to
restore the net equity of those companies it par- Corporate income tax is calculated based on pro-
ticipates in. For this reason, the Company has a fit for the year, increased or decreased accor-
provision of 4,157 thousand euros to cover its dingly by permanent differences between ac-
responsibility towards Eurogalia, S.L. counting and tax results, less any allowances or
deductions from tax payable, net of withholdings
3. Provisions for contingent liabilities due to and payments on account.
construction defects.
The Company has received judicial lawsuit for The Company also records in its balance sheet
constructive defect in delivered promotions with deferred and on account taxes resulting from the
a total of 10,845 thousand of euros. In accord temporarily differences between the accounting
with expert informs analyzed are being esteem and financial results.
that the amount necessary to attend at the judi-
cial resolutions for these motives would be 6,597 N • Revenue recognition
thousand of euros.
Income derived from sales of buildings is recor-
ded when construction is fully completed and
delivered. The amounts received in advance from
customers whether in the form of cash or receiva-
ble trade bills from the signing of the private sale
contract to the signing of the public deed are re-
corded in “Advance payments received from cus-
tomers” on the liabilities side of the accompan-
ying balance sheet.

Income from the sale of plots will be recognized Compensation packages to be paid to employees
when the private purchase-sale contract is sig- for possible lay-offs which might take place as re-
ned and a provision is recorded for the future sult of company restructuring or for other reasons
costs to be incurred. beyond the employee’s control, are calculated ba-
sed on years of service. Any expenses toward, this
O • Business activities having environmental concept is recorded in the profit and loss account
impact of the year in which the event takes place.
All of the Company activities have been designed

to be carried out with a minimum impact on the
environment. Expenses incurred to minimize en-
vironment impact in the real state activity are in-
cluded as part of the construction cost.
P • Pension plans and other commitments
The Company has not pension plans for its em-

ployees. That benefit is provided by Government
Social Security.
5 • START UP EXPENSES
The activity in this heading for the year 2006 was the following:

6 • INTANGIBLE ASSETS
The activity for the various accounts included under “Intangible assets” as well as their related accumulated
amortization in 2006 was the following:
The detail of assets under capital leases at December 31, 2006 is the following:
The main leasing agreement is for a 10 year period and at year end, there are still remaining 5.8 years.

7 • TANGIBLE ASSETS
The activity in the various accounts listed under this heading, as well as the related accumulated deprecia-
tion for 2006 was the following:
Net book value of tangible fixed assets serving as mortgage guarantees at year-end is as follows:

The detail of the entry “Rental property” at year end is the following:
At December 31, 2006 the detail of the plots and construction is the following:
Fully depreciated tangible assets still in use are as follows:

8 • INVESTMENTS
The activity of the different accounts under this heading for 2006 was the following:
Shares in Group companies:

The detail of this heading, as well as the relevant data at year-end obtained from the annual accounts
pending approval, is as follows:

Associated companies:

The activity and address of the group and associated companies are as follows:

La actividad y domicilio social de las sociedades del grupo y asociadas son los siguientes (Continuación):
(*) Indicates assets in the process of being built.
Associated Group companies activity and address:

None of the companies above are quoted in the There is a provision in place for 29,702 thousand eu-
stock exchange. ros related to said participative loan to cover poten-
tial losses that could arise in the near future, due to
Loans to group companies. the financial situation of the Subgroup Eurogalia.
Among loans receivable from Group Companies Long term securities portfolio.
there are two profit participative loans granted to
Eurogalia, S.L. for 30,000 and 20,000 thousand euros Mainly integrated by investments in non-quoted
each. In both instances, the loan bear interests are shares. The detail is the following:
based on:
• Euribor to six months

• 10% of net profits
Thematic Park of Madrid, S.A. shares are pledged to a loan granted by Caja Madrid bank to that company.
Other information.
• The amount shown in “Public bodies” corresponds to deferred tax assets, which will be recovered in the
long term.
• “Other receivables” corresponds mostly to two loans for 2,045 and 1,900 thousand euros each granted
to Parque Temático de Madrid. The maturity date for both is January 23, 2008.

9 • DEFERRED EXPENSES
The activity under this heading during 2006 was the following:
10 • STOCKS
The detail of “Stocks” at December 31, 2006 was the following:
Additional information with the option to purchase some plots. Should

the purchase option be exercised, these plots
At year end, these stocks included financial expen- would be used for real estate development and
ses amounting to 57,795 thousand euros, 33,275 sold. Of the above mentioned amount, 1,930
thousand euros of which were capitalized in 2006. thousand euros belong to the cost of the purcha-
se option, which is included in Payments on ac-
A portion of these stocks is mortgaged in guaran- count heading.
tee of the reassignable mortgage loans granted
to finance real state developments. At year end, the Company has signed sale contracts
relating to stocks of developments under construc-
At year end, the Company has entered into seve- tion amounting to 1,697,151 thousand euros.
ral contracts amounting 355,615 thousand euros

11 • SHORT-TERM INVESTMENTS
The detail of this heading at year-end was the following:
The amount registered in “Other credits” mainly correspond to investments done

in said companies due to the increase of their activity.
12 • TREASURY SHARES
During 2006 the Company handled the following transactions with its own shares:
The net profit obtained for transactions done with the Company’s treasury
shares was 4,969 thousand euros.

13 • CAPITAL AND RESERVES
The activity under the heading “Capital and Reserves” during 2006 is as follows:
At December 31, 2006 the detail of Reserves was as follows:
Issued Capital ding 39,108,853.31 euros (equivalent to 85% of

the gross dividend amount) by the issue price.
On May 9, 2006 the Ordinary and Extraordinary The issue price was determined by averaging the
General Meeting of Fadesa Inmobiliaria, S.A. weighted average changes of the Company’s
agreed to a capital increase through the issue of share on the continuous market (SIBE) for the fi-
common stock with a par value of 0.10 euros a ve trading days immediately prior to the divi-
share, of the same class and series as existing dend payment date (May 31, 2006) and applying
shares, and represented by book entries. The a 1% discount. The difference between the abo-
number of shares issued was the result of divi- vementioned issue price and the par value of the

share represents an issue premium of 26.75 eu- Share premium
ros per share.
Share premiums amounting to 97,085 thousand
The approved capital increase described in the euros may be freely distributed.
above paragraph was under-subscribed and con-
sequently the share capital was increased Legal Reserve
in1.092.273 subscribed shares all of them fully
paid-up at a par value of 0.10 euros a share. According to Spanish Corporate Law, companies
must transfer 10% of profits for the year to a legal
As a result of the above, at December 31, 2006 reserve until this reserve is at least 20% of capital.
Fadesa Inmobiliaria, S.A.’s share capital is repre- At year end, the Company is compliant with this
sented by 113,312,799 fully subscribed and paid- requirement.
up shares with a par value of 0.10 euros each, re-
presented by book entries. These shares have Legal reserves can be used to increase capital by
been trading on the Madrid and Barcelona stock the amount exceeding 10% of the new capital af-
exchanges on the continuous market since April ter the increase.
30, 2004. All shares have equal rights and are fre-
ely negotiable. With the exception already mentioned and as far as
the reserve does not exceed 20% of the share capi-
Due to the nature of the shares, the Company is tal, this reserve can only be used to compensate los-
aware of the percentages of each participant ses only if there is no other reserves available.
only if the participant decides to communicate it
to the Comisión Nacional del Mercado de Valores Canary Island Investment Reserve
(Stock Market National Commission). At the date
of the preparation of the current accounts, the The Company availed itself of the tax benefits of-
only institutions with 10% or more of subscribed fered under Law 19/94 relating to amounts allo-
capital that made their participation known to cated to provisions for investments in the Canary
the Commission were Inversiones Frieira, S.L., Islands. The Company has registered a reserve of
Frieira Gestión de Inversiones, S.L. and IAGA Ges- 20,493 thousand euros that is undistributable un-
tión de Inversiones, S.L. each holds 23.36%, til reinvestment is done.
10.09% and 21.61% respectively. At year end and
according to the same source, the Company Bo- Voluntary reserve, merger reserve
ard Members own altogether a 58.175% of direct
and indirect shares in the Company. Can be freely distributed.

14 • DEFERRED INCOME
The activity recorded under this heading during the year 2006 was the following:
“Other deferred income” refers to income obtained from the right to use the shares the Company owns in
Gualdamina Golf, S.A.
15 • PROVISIONS FOR LIABILITIES AND CHARGES

The activity under this heading in 2006 was the following:

16 • PAYABLE TO CREDIT INSTITUTIONS
The detail of the various amounts owed to credit institutions at December 31, 2006 was the following:
“Government-subsidized and non-subsidizing sand euros correspond to subsidize housing and

housing assumable mortgage loans” correspond 15,718 thousand euros to non-subsidized housing.
to amounts drawn down from mortgage loans
with a number of financial institutions for mort- While most assumable mortgage loans are not
gages which can be assumed by the buyer when. payable in less than twelve months, since they
Said loans are guaranteed by existing mortgage have maturities of over one year (as detailed in
loans and stocks developments in progress. The- the maturity schedule for non-current debt),
se loans are secured by mortgages on existing in- Group Companies classify as current debt all
ventory and at year ended December 31 they amounts corresponding to the financing of pro-
amount to 485,110 thousand euros, correspon- perties that meet the following conditions:
ding to the drawn down portion of mortgages to-
talling 887,467 thousand euros. 1) At December 31, 2006 there are firm sales
commitments for which private purchase-sale
Financial expenses relating to loans mentioned in contracts have been entered into with respect
paragraph above incurred this year amount to to the assets for which the loans were gran-
16,537 thousand euros. Of this amount, 819 thou- ted, and

2) The estimated delivery date (public deed) is to The repayment schedules for debts classified as long
take place less than twelve months from the ye- term and assuming that said loans have not been
ar-end closing date. previously reassigned would be the following:
The average interest rate on long-term liabilities was 3.51%. Advances from customers at year end amounted to
382,213 thousand euros, 172,175 thousand euros
At December 31, 2006, the Company had discount lines at were received in cash and the remaining in bills of
several banks for various amounts. Discounted bills at year commerce.
end amounted to 77,031 thousand euros and bills discoun-
ted during the year amounted to 148,326 thousand euros. Of the total balance of 1,302,093 thousand euros of
long and short term trade creditors, 247,990 thou-
sand euros are bills of exchange payables.
17 • TRADE CREDITORS
The 476,722 thousand euros balance of “Long-term tra- 18 • NON-TRADE CREDITORS
de payables” at year-end reflects amounts payable for
the acquisition of land with the following maturity dates: Other long-term debts correspond mainly to liabili-
ties for the acquisition of shares in other companies
and will mature in the year 2008.
The 8,190 thousand euros under the “Public bodies”

heading, refers to deferred tax arising from tempo-
rary adjustments in the recording of corporation in-
come tax, which will be reversed in the long term.
The balance under this heading correspond to defe-
rred taxes resulting from the dissolution of some of
the subsidiary companies carried out last year.

19 • INCOME AND EXPENSES Personnel costs
Net turnover The detail of this profit and loss account heading is
the following:
Company activity is carried out throughout Spain in
the amount of 1,060,481 thousand. The breakdown
of net turnover by activity is as follows:
Other personnel expenses mainly relate to employer

social security contributions for the year.
Average number of employees
In 2006 the average number of employees, by pro-

fessional category, was the following:
Consumption of goods
The detail of this profit and loss account heading

was the following:

Changes in trade provisions Extraordinary income and expenses.
The composition and the activity during the year we- The most significant entries were the following:
re the following:
Transactions with group and associated companies
The Company carried out the following transactions with

group and associated companies during the year 2006:
These transactions were made in euros.
20 • TAX SITUATION
Since January 1, 1999, Fadesa Inmobiliaria, S.A. as a holding company of a Group of companies has filed in-
come tax under a consolidated tax scheme with group companies and is responsible for paying income tax
for the Group companies.
The following companies comprise the consolidated tax Group at year end:

Fadesa Inmobiliaria, S.A. as the parent Company; and as subsidiaries:
The reconciliation of the profit before taxes and the In addition, due to the fact that it is liable to tax
tax basis, is as follows: under the consolidated tax system, the Company
and each of its subsidiaries have recorded
amounts payable and receivable in respect of in-
come tax. At December 31, 2006, there is a net
balance of 6,934 thousand euros receivable from
Group companies, which increases the debt with
public bodies referred to in the paragraph above
by the same amount. The most significant credit
balances are Obralar, S.L., and Urbanizadora Club
de Campo de Logroño, S.L. with 3,067 and 2,224
thousand euros respectively.
The Company has opened to inspection the last

four fiscal years. It is not expected that the Com-
pany will incur in any significant liabilities as a re-
sult of the inspection.

In 2003, the Oficina Nacional de Inspección (Na- In reference to benefits offered by Law 19/94
tional Inspection Office) of the AEAT (Spanish Tax (changes in the Economic and Tax Regime in the
Authorities) completed its inspection and investi- Canary Islands) relating to amounts allocated to
gation activities relating to the periods 1996 to “Reserve for investments in the Canary Islands”, all
1998 for Corporate Income Tax, and 1997 and reinvestments commitments due on December
1998 for VAT and withholdings of personal inco- 31, 2006 have been fully met at said date.
me tax. As a result, Grupo Empresarial Fadesa, S.A.,
a company absorbed by Fadesa Inmobiliaria, S.A. Under Chapter VIII of Title VII of Legislative Royal
in 1999, was also inspected and investigated by Decree 4/2004, in 2005 the Company made non-
the tax authorities for the periods 1997 to 1998. monied contributions for a book value of 12,827
thousand euros, receiving 20,180 thousand euros
Tax assessments were signed in the amount of in shares.
783 thousand euros. The Company also signed
tax assessments in disagreement in the amount
of 4,799 thousand euros and a refund amount of
206 thousand euros. The tax amount owed is for 21 • GUARANTEES GIVEN TO THIRD
Corporate Taxes as it relates to disagreements for PARTIES AND OTHER CONTINGENT
the different criteria applied in cost allocation.
LIABILITIES
All tax liabilities arising from the abovementio- Guarantees and commitments
ned contested tax assessments and fines are co-
vered by provisions recorded in the appended At December 31, 2006, the Company has given gua-
annual accounts, as described in Note 14 “Provi- rantees amounting to 84,398 thousand euros to fi-
sions for commitments and contingencies”, taking nancial institutions for loans, credit lines and gua-
into account amounts that would be recoverable rantees granted to Group companies.
from fiscal years still open to inspection.
As of December 31, the Company obtained guaran-
The Company intends to apply in its 2006 Corpo- tees from financial institutions in the amount of
rate Taxes payment deductions for 155 thousand 525,381 thousand euros. These guarantees cover
euros due to extraordinary reinvestment benefits cash advances from clients, as well as for the diffe-
obtained from 2006 gains. Reinvestments were rent Company housing developments.
done through 2006 amounting to 774 thousand
euros which qualify for said deduction.
Also, and under current fiscal law, the amounts

subjected to deductions for reinvestments were
5,680 thousand euros in 2003, 8,378 thousand
euros in 2004 and 2,051 thousand euros in 2005
with deductions of 1,136, 1,675 and 410 thou-
sand euros respectively. Reinvestments were do-
ne in each of the referred fiscal years.

22 • OTHER INFORMATION AND SUBSEQUENT EVENTS
Remuneration and other benefits received As indicated in Note 2.1, within the framework of
by the Board of Directors. the takeover bid for Fadesa Inmobiliaria, S. A. by
Promociones y Urbanizaciones Martín, S. A and
In 2006, neither Board Members nor other senior Huson Big, S. L., Mr. Manuel Jove Capellán, presi-
management members of Fadesa Inmobiliaria, dent of Fadesa Inmobiliaria, S. A., notified the Bid-
S.A., nor any shareholders represented on the Bo- ders of his intention to propose to the Board of
ard of Directors, carried out significant transac- Directors the payment of an extraordinary remu-
tions with Group Companies. neration or bonus to certain employees as a re-
ward for their work during a certain length of time
Remunerations and other considerations received in the Company. The total amount involved, net of
by the Board of Directors members during the tax withholdings, is 30 million euros, while the es-
2006 amount to 3,677 thousand euros, of which timated gross amount is 46,154 thousand euros.
2,952 thousand euros correspond to Directors’ fe-
es and 725 thousand euros correspond to salaries. Board member participation in other
companies.
Board Members do not receive any other benefits
such as loans, pension plans, life insurance poli- Board Members holding stakes in other compa-
cies, or the like. nies with the same, similar or complementary ac-
tivity type to that one of the Company, and their
Board Members do not receive any other remune- position or duties are the following:
ration or consideration, neither do they sit on any
other boards of directors of other Group Compa-
nies. A list of positions held by Board Members in
other Group Companies is to be found in the An-
nual Corporate Governance Report.
Significant transactions made with the María José

Jove Foundation (a directors related party belon-
ging to the Jove family Group) correspond to dona-
tions from Fadesa Inmobiliaria, S.A. amounting to
321 thousand euros and the collection of a loan plus
interest amounting to 263 thousand euros.
Remunerations received during 2006 by senior

managers amounted to 2,727 thousand euros. Ex-
cept for life insurance policies which amounted
to 4 thousand euros in 2006, Senior managers do
not receive any other benefits, such as loans, pen-
sion plans, or the like.

None of the Members of the Board of Directors perform Subsequent events
the same, similar or complementary activities to those
of Fadesa Inmobiliaria, S.A. whether on their own or for Subsequent to year end and prior to the preparation of
third parties. these annual accounts, no events have occurred which
could have a significant effect thereon.
The Corporate Governance Report of 2006 includes a
detail of Board of Directors duties in the Companies in- Environmental information
tegrated in the Group Fadesa Inmobiliaria, S.A.
All of the Group’s activities have been designed to be
Auditor’s fees carried out with a minimum impact on the environ-
ment in particular,with regards to the Company real es-
The fees paid to the auditor for the audit of the 2006 an- tate activity, all projects have been carried out in com-
nual accounts amounted to 75 thousand euros. pliance with the provisions established in the
“Statement of Environmental Effects” set forth in the
In addition, the fees paid in the year for other services respective project plans. Therefore the Company does
rendered by the amounts to 91 thousand euros. This not expect significant contingencies to arise in connec-
amount includes fees obtained by other firms belon- tion with environmental protection or restoration. Con-
ging to their international network. sequently, it has not recorded any provision relating to
environmental activities.
23 • STATEMENT OF SOURCE AND APPLICATION OF FUNDS

In A Coruña, on February 26th, 2007, the undersigned, all of whom are members of the Board of Directors of
Fadesa Inmobiliaria S.A., have prepared this Management Report of the Company and its Subsidiaries for the
year 2006. The remainder of the pages that comprise the consolidated financial statements and Manage-
ment Report are signed only by the Chairman and the Secretary of the Board of Directors in representation
of all the Board Members.
Mr. Manuel Jove Capellán Ms. Felipa Jove Santos Iaga Gestión de Inversiones, S.L.
CHAIR 1 DEPUTY CHAIRPERSON
ST
2 DEPUTY CHAIRPERSON
ND
Mr. Antonio de la Morena Pardo Mr. José María Castellano Ríos Mr. Modesto Rodríguez Blanco
MANAGING DIRECTOR MEMBER MEMBER
Mr. José Luis Suárez Barragato Mr. Joaquín Mr. José Luis Macía Sarmiento
MEMBER Sánchez-Izquierdo Aguirre MEMBER
MEMBER
Mr. Manuel Guerrero Pemán Mr. José Enrique

MEMBER Fernández-Llamazares Nieto
MEMBER
For the purpose of information, and with regard to the preparation and laying of the annual accounts and Ma-
nagement Report, at a Meeting of the Board of Directors held on 15 March 2007 Mr Fernando Martín Álvarez
was appointed Executive Chairman of the company, the Board of Directors being constituted as follows:
Mr. Fernando Martín Álvarez- Mr. Antonio Martín Criado Mr. Antonio de la Morena Pardo
CHAIRMAN DEPUTY CHAIRMAN MANAGING DIRECTOR
Mr. Fernando Martín del Agua Caja de Ahorros de Valencia, Mr. José Manuel Serra Peris
MEMBER Castellón y Alicante, BANCAJA MEMBER
representada por
Mr. José Luis Olivas Martínez
Mr. Jesús Ignacio Salazar Bello MEMBER Mr. José Luis Suárez Barragato
MEMBER MEMBER
Aguieira Inversiones, S.L.
Mr. Joaquín representada por
Sánchez-Izquierdo Aguirre Mr. Juan Carlos Rodríguez Cebrián Mr. Rafael Bravo Caro
MEMBER MEMBER MEMBER

Management Report for the year ended December 31, 2006
Fadesa Inmobiliaria, S.A. is the parent company of Preformance of Fadesa Inmobiliaria. S.A.
the Fadesa Group, a group of companies mainly en- businesses.
gaged in the real estate and construction business.
Its corporate purpose and core activities consist of In the year 2006, Fadesa Inmobiliaria, S.A. has con-
real estate development and construction, together solidated the business growth of the past years
with all related activities (purchase and sale of plots, through its main magnitudes of profit and loss ac-
building, urban land use management, etc.). counts. Specifically, revenues of the year have rea-
ched 1,060.5 million euros, a growth of 19% with
For Fadesa the year 2006 was characterized by a respect to 2005.
number of significant events that occurred, which
marked a watershed in the history of the company: The sale of homes and plots is still the main source
of income and represents 86% of total revenues.
March saw a renewal of the senior management
with the appointment of a new CEO, the creation The net profit improved a 25% during 2006. Profit
of an Executive Committee, and the setting up of from ordinary activities showed a significant incre-
five new departments. The main purpose of the- ment (+30%) reaching a record amount for the Com-
se changes was to create an organizational struc- pany of 300 million euros.
ture that was more focused on where Company’s
main activity is carried out: the various local offi- The assets figure at year end also reflects the
ces or geographic business areas. Company’s progress reaching 3,812 million euros,
an 18% more than the year before. It is especially
In September, a number of holding companies of significant the increase in inventory, 417 million
which Mr. Manuel Jove Capellán is the majority euros (+22%), a balance that encompasses both,
shareholder reached an agreement with the land and work in progress.
companies of Grupo Martinsa and Mr. Antonio
Martín to launch a takeover bid for 100% of the On the liabilities side, the Company’s net equity
stock of Fadesa Inmobiliaria. Accordingly, on No- has increased a 24% and the net debt has reached
vember 2, Promociones y Urbanizaciones Martín, 1,628 million euros, a 40% increase with respect to
S.A. and Huson Big, S.L. requested authorization the previous year.
from the CNMV for a takeover bid for 100% of
Fadesa Inmobiliaria, S.A.’s stock at a price of 35.7 Performance of the Group’s businesses
euros per share.
Comparable net profit for 2006 amounts to 230.4
The year also saw the continuation of the Compan- million euros, 27% up on the same figure for 2005.
y’s international expansion process. This process has The Directors are satisfied with these figures and
led to the acquisition of more land in Poland, France, puts them down to the continuing success of the
and Morocco, while the Company has also started Company’s unique business model for its core bu-
operations in Mexico, Rumania, and Bulgaria. siness. This is evidenced by significant growth

both in absolute terms and in relative terms (mar- business opportunities arising in other markets
gins), and by the fact that the international expan- that might be of interest, is starting to have an im-
sion process initiated some years ago is now be- pact on the Company’s overall figures. In 2006 the
ginning to bear fruit. following significant events took place:
Performance by activity In Mexico: Fadesa started operations in Mexico

The Group’s revenues during 2006 totaled 1,279 mi- by participating in the creation of a major resi-
llion euros, a 31% increase, with a gross margin of dential and tourist complex on a 2 kilometer
40.3%, 0.6 percentage points higher than in 2005. beach front, 30 minutes away from Puerto Va-
llarta, consisting of a luxury hotel, apartments,
Real estate activity generated a turnover of 1,211 and a beach club.
million euros, with a YoY growth of over 31% and
gross margin of 42%. This margin, significantly In France: The first major projects are under-
higher than 2003’s and 2004’s figures - 30% and way, including the development of a 6 hectare
37%, respectively -, is slightly higher than the figu- site in the town of Massy, very close to Paris, in
re achieved in the previous year. However, there is collaboration with the American investment
a fundamental difference between the two years: fund, Colony. Land in Lyon and the Île de Fran-
while in 2005 the activities which traditionally ha- ce region are being acquired for the construc-
ve a higher gross margin (the sale of land and par- tion of some 2,000 homes.
cels) represented 30% of all revenue from real es-
tate activity, in 2006 this percentage was only In Morocco the first hotel, the Barceló Casa-
23%. The key to this positive performance lies in blanca, was opened, and the Company won
the margin obtained from the delivery of homes two tenders held by the Moroccan govern-
and other residential units, which was the highest ment for the development of two tourist re-
ever posted by the Company at year end. This sorts on the Mediterranean coast of Morocco,
achievement has obviously been aided by the sig- near Tetuan. Meanwhile two projects were offi-
nificant rise of house prices, albeit somewhat slo- cially launched; one in Marrakech, where the
wer than in past years, set against a moderate in- Group will invest approximately 300 million
crease in the cost of the raw material – land. But euros in a complex comprising 2,685 homes
this does not detract from the existence of other and the other in Kabila, where a high-end resi-
drivers, such as international expansion, product dential and tourist complex will be built.
diversification, or Fadesa’s healthy positioning in a
highly competitive business environment. In Poland several sites under various urban
development regimes were acquired in War-
Turnover from this activity, the Group’s core busi- saw and other cities with major growth poten-
ness, therefore includes the sale of homes and tial with a view to building more than 6,000
other residential units, which amounted to nearly homes.
899 million euros, 44% more than in 2005, and sa-
les of parcels and tracts of land, which amounted In Bulgaria, the first operation was finalized
to 279.8 million euros. with the purchase of a piece of land in the cen-
ter of the capital city, Sofia, earmarked for the
The international expansion process, initiated so- construction of an initial development of high-
me years ago with the aim of exploiting any new rise housing, commercial units, and offices.

In Romania the first land was acquired, among Investment in land and assets
which is a site for approximately 12,000 homes in Land is considered as inventory on Fadesa’s ba-
Bucharest. lance sheet as the Company’s business model for
its core activity - real estate development – invol-
In Portugal the Group took a further step for- ves the acquisition of this raw material, its urban
ward in the process of establishing itself with the management, the design and construction of re-
launch of a residential complex featuring mo- sidential units, and their subsequent sale. The
dern architecture in the very center of Oporto. Company’s inventory of available land is therefo-
re one of the main indicators of the investment
In Hungary the acquisition of land in district made in order to drive the company’s growth.
XIII was completed for the development of a
residential and commercial project involving At December 31, 2006 the Company’s inventory
2,700 homes. Agreements were also reached of entitled land in Spain, Portugal, Morocco, Fran-
with District XXI City Council for the develop- ce, Poland, Hungary, Bulgaria, Romania, and Mexi-
ment of Csepel. co amounted to over 23.7 million buildable squa-
re meters, 18% higher than the previous year (see
After taking into account general costs and the attached table).
margins generated by all the Group’s various ac-
tivities, we can conclude that the Group’s EBITDA
has improved significantly in absolute terms,
+28% to 361 million euros while there has been a
slight drop in terms of profitability mainly due to
the investment required by the international ex-
pansion process that Fadesa is currently immer-
sed in, which the Directors consider to be one of
the cornerstones of the Company’s medium term
development plan.
Backlog
The number of private contracts signed during
2006 amounted to 10,055 units at a value of
1,472 million euros. This represents a very positi-
ve upward trend compared to the previous year
(+39% and +15%, respectively) if we exclude the
sale of Torres Europa de L’Hospitalet in 2005
which should be considered as a an extraordinary
transaction. Bearing in that mind in 2006 the
Group delivered 6,913 units of all types (1st and
2nd homes, social housing, and parcels) worth
1,192 million euros, the backlog at December 31
amounts to 14,822 units worth a little over 2,332
million euros, which will provide a solid basis for
future results in 2007 and 2008.

The Group’s asset management business is cente- Positive income net of taxes obtained from own sha-
red on developing the hotel business which leve- re transactions amounted to 4,969 thousand euros.
rages developments for tourism on land in inven-
tory zoned for such a purpose. In 2004 a Activities of the Audit Committee during 2006
framework management agreement was signed The Committee met on six occasions.
with the Barceló chain for the development of
what, in principle, is to be a total of 19 hotel pro- The purpose of the meetings was to review financial
jects. At year end the Group was operating 16 ho- information to be submitted to the Board of Direc-
tels (4 more than the previous year). tors. The Financial Director and the CEO were pre-
sent at these meetings.
Asset valuation
The market value of the Fadesa Group’s real esta- In the course of the year the external auditors atten-
te assets at December 31, according to the valua- ded three meetings of the Audit Committee in order
tion made by CB Richard Ellis, amounts to 10,500 to:
million euros.
i) Analyze the audit work performed on the 2005
Research & Development accounts
Due to the nature of the company, its activities, and
its structure the Company does not normally carry ii) Report on the audit plan for 2006
out research and development activities.
iii) Report on the preliminary phase of the 2006
Own shares audit.
During 2006 Fadesa Inmobiliaria, S.A. performed the
following transactions with own shares: In each of these meetings the Committee issued a
favorable report on the quarterly accounts pre-
sented by the Company for the first quarter, first
half year, and first nine-months of 2006, and ma-
de progress in setting up the internal audit de-
partment; a risk map has been produced, risks ha-
ve been classified, and the Internal Audit Plan for
2007 has been approved.

ST
ND
MEMBER

MEMBER
representada por
MEMBER MEMBER

AUDIT REPORT ON THE ANNUAL ACCOUNTS

FINANCIAL I N F O R M AT I O N
FA D E S A I N M O B I L I A R I A S . A . A N D S U B S I D I A R I E S
Consolidated Financial
Statements and Management
Report for the year ended
December 31, 2006
Translation of consolidated financial statements originally issued in Spanish and prepared in accordance with IFRS,
as adopted by the European Union. In the event of a discrepancy, the Spanish-language version prevails.
Table of CONSOLIDATED BALANCE SHEET
CONSOLIDATED INCOME STATEMENT
CONSOLIDATED C ASH FLOW STATEMENT

●
●
128
129
130
Table of contents
contents
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ● 131
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ● 132

Corporate information
Main accounting principles
Scope of consolidation
Business combinations and acquisition of minority interests
Financial information by segment
Property, plant and equipment
Investment properties
Goodwill
Intangible assets
Non-current financial assets
Equity method investments
Inventories
Trade and other receivables
Other current financial assets
Other current assets
Cash and cash equivalents
Non-current assets held for sale
Share capital and reserves
Deferred income
Interest-bearing loans and borrowings
Provisions
Other non-current liabilities
Trade and other payables
Other current liabilities
Commitments and contingencies
Income tax
Revenue and expenses
Related party disclosures
Auditor’s fees
Events after the balance sheet date
Business risks and risk management policies
MANAGEMENT REPORT ● 196
AUDIT REPORT ● 204

FADESA INMOBILIARIA S.A. AND SUBSIDIARIES
Consolidated balance sheet at December, 31 2006 and 2005
Thousand E
The accompanying notes 1 to 31 are an integral part of the consolidated balance sheet at December 31, 2006

Consolidated Income Statement for the years ended December 31, 2006 and 2005
Thousand E
The accompanying notes 1 to 31 are an integral part of the consolidated balance sheet at December 31, 2006

Consolidated cash flow statement for years ended December 31, 2006 and 2005
Thousand E
The accompanying notes 1 to 31 are an integral part of the consolidated cash flow statement for the year ended December 31, 2006

Consolidated statement of changes in net equity for the years ended December 31, 2006 and 2005
Thousand E

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1 • CORPORATE INFORMATION cept the offer. All the information required by cu-
rrent regulations regarding this bid is available in
1.1 • Group activities the corresponding Explanatory Brochure on the
CNMV website.
Fadesa Inmobiliaria, S.A. (FADESA), hereinafter, “the
Parent Company” or “the Company”, was incorpora- Prior to the announcement of the takeover bid, as
ted on July 24, 1980 for an indefinite period. Group described in the previous paragraph, on Septem-
companies are engaged mainly in: ber 28, 2006 the companies Almarfe, S. L. and
Agosuier, S. L. (companies related to the Bidders’
• Acquisition and sale of land and plots, promo- partners) and companies controlled by Mr. Ma-
ting and constructing real estate development nuel Jove Capellán, who together hold
projects, rental of properties. 61,884,891 shares of Fadesa Inmobiliaria, S.A., re-
presenting 54.614% of its share capital, reached
• Operation of hotels an agreement whereby they made an irrevocable
undertaking to accept the Offer once it was sub-
• Production, manufacturing and marketing mitted to, and authorized by, the regulatory body.
several industrial products in the construction
sector. As part of agreements reached prior to the an-
nouncement of the takeover bid, on September
Fadesa Inmobiliaria, S.A.’s registered address is Ave- 28, 2006, an “Asset Transfer Agreement” was sig-
nida del Alcalde Alfonso Molina, s/n, A Coruña. The ned, whereby:
registered addresses of the companies within the
Company’s scope of consolidation are to be found in a) Fadesa Inmobiliaria, S.A. will acquire land in
Note 3 of this report. Mexico from a company related to Mr. Manuel
Jove Capellán at a price of 118,600 thousand
Fadesa Inmobiliaria, S.A. shares are quoted on the euros. This acquisition will take place once the
Madrid and Barcelona stock exchanges. takeover bid is completed.
1.2 • Takeover bid for Fadesa Inmobiliaria, S.A. b) Fadesa Inmobiliaria, S.A. will sell certain assets
at a price of 20,177 thousand euros to entities re-
On November 2, 2006, the companies Promocio- lated to Mr. Manuel Jove Capellán.
nes y Urbanizaciones Martín, S.A. and HUSON BIG,
S. L. made a takeover bid for 113,312,799 shares, On the same date that these agreements were
representing 100% of Fadesa Inmobiliaria, S.A.’s signed, Mr. Manuel Jove Capellán, Chairman of
share capital, at a price of 35.70 euros per share. Fadesa Inmobiliaria, S. A., informed the Bidders of
The bid was authorized by the Board of the Spa- his intention to propose to the Board of Directors
nish Securities Commission (hereinafter CNMV) that a special remuneration or bonus be paid to
on February 6, 2007, which signals the start of the certain employees as a reward for work perfor-
mandatory acceptance period during which time med during a certain length of time in the Com-
Fadesa Inmobiliaria, S. A.’s shareholders may ac- pany. The total amount, net of tax withholdings, is

to be 30 million euros. The gross amount of this
special remuneration, amounting to 46,154 thou-
sand euros, was recorded as an expense for 2006
under “Takeover bid related expenses” in the ac-
companying consolidated income statement.
On October 27, 2006, Fadesa Inmobiliaria, S.A.

submitted a binding offer to acquire from Arpe-
gio Áreas, Promociones Empresariales, S.A. (Arpe-
gio) and other shareholders, a 60.73% interest in
Parque Temático de Madrid, S.A., a company in
which it already holds a 13.09% interest. On No-
vember 2, 2006, Arpegio notified Fadesa Inmobi-
liaria, S.A. of its acceptance of the offer. 2 • MAIN ACCOUNTING PRINCIPLES
In order not to compromise Fadesa Inmobiliaria, 2.1 • Basis of presentation.
S.A.’s future strategy, its President informed the
Bidders that he was willing to acquire from The consolidated financial statements for 2006 of
Fadesa all the shares of Parque Temático de Ma- Fadesa Inmobiliaria, S.A. Group were prepared by
drid, S.A. under the same terms and conditions as the directors at the Board of Directors’ Meeting
those of the abovementioned binding offer. On held on February 26, 2007, in accordance with In-
November 29, 2006, the Bidders announced their ternational Financial Reporting Standards (“IFRS”)
agreement to such a transaction. adopted by the European Union, in conformity
with Regulation (EC) 1606/2002 of the European
At year end 2006, Fadesa Inmobiliaria, S.A. had Parliament and of the Council. The consolidated fi-
not acquired the abovementioned shares of Par- nancial statements have been prepared on a histo-
que Temático de Madrid, S.A., which is a prerequi- rical cost basis, except for investment properties
site for Mr. Manuel Jove Capellán’s completion of that have been measured at fair value. The finan-
the abovementioned transaction. Therefore, at cial statements will be submitted to the General
the time these consolidated financial statements Shareholder’s Meeting and are expected to be ap-
were prepared, neither transaction had been ca- proved without modifications.
rried out.
These financial statements present fairly the Grou-
Takeover-related costs, net of corporate inco- p’s consolidated equity and financial position at
me tax. December 31, 2006, and the results of the Group’s
The detail of this heading is as follows: operations, changes in equity, and cash flows for
the year then ended.

The Group classifies its assets and liabilities ac- Subsidiaries are defined as companies over
cording to whether they are current or non-cu- which the Parent controls half or more of the vo-
rrent as defined by its core activity, real estate de- ting power of the investee or, even if this percen-
velopment, which is deemed to have an average tage is lower, when it has the power to govern
operating cycle of five years. For other assets and the financial and operating policies thereof. The
liabilities relating to the Group’s other busines- Group’s control over subsidiaries was determi-
ses, assets and liabilities with a maturity of twelve ned, when applicable, considering potential vo-
months or less from balance sheet date are consi- ting rights that can be exercised at year end.
dered to be current, while assets and liabilities
with a maturity of more than twelve months from The results of investments/divestments of subsidia-
that date are deemed to be non-current. ries during the year are included in the consolidated
income statement from the effective date of the in-
The consolidated annual accounts of Fadesa vestment or until the effective date of the dives-
Group were prepared on the basis of the accoun- tment, as appropriate.
ting record kept by the Company and by other
group companies. Each company prepares its fi- The integration of operations of the parent and of
nancial statements in accordance with the ac- the consolidated subsidiaries was made in accor-
counting principles and standards in force in the dance with the following basic principles:
country in which it operates and, therefore, the
required adjustments and reclassifications were • On acquisition, the assets, liabilities, and con-
made on consolidation to unify the policies and tingent liabilities of a subsidiary are measured
methods used and to ensure their compliance at their market value. Any excess of the cost of
with IFRS. acquisition of the subsidiary over the market
value of its assets and liabilities, in proportion
The consolidated financial statements for 2005 to the Parent’s ownership interest, is recogni-
included for comparative purposes were also pre- zed as goodwill. Any negative difference is cre-
pared in accordance with IFRS adopted by the dited to the consolidated income statement.
European Union on a basis consistent with that
applied in 2006. • The interest of minority shareholders in the
equity and results of the fully consolidated
The financial statements are denominated in eu- subsidiaries is presented under equity in “Mi-
ros, which is the group’s functional currency, and nority interests” in the consolidated balance
are rounded to the next thousand (thousand eu- sheet and under “Profit attributable to mino-
ros), unless a different currency is stated. rity interests” in the consolidated income sta-
tement, respectively.
2.2 • Basis of consolidation.
• Each subsidiary has a functional currency co-
a) Subsidiaries rresponding to the country where it is loca-
Subsidiaries are fully consolidated and all their ted. The financial statements of foreign com-
assets, liabilities, income, expenses and cash panies with a functional currency other than
flows are included in the consolidated financial the euro are translated into euros as follows:
statements after making the adjustments and eli-
minations relating to intra-Group transactions.

a) Assets and liabilities are translated into eu- The Group recognizes its interest in joint ventu-
ros at the exchange rates prevailing on the res using proportionate consolidation until the
date of the consolidated financial statements. date on which the Group ceases to have joint
control over the joint venture. The Group combi-
B) Income and expenses are translated at the nes its share of each of the assets, liabilities, inco-
average exchange rates for the year. me and expenses of the joint venture with the si-
milar items, line by line, in its consolidated
c) Equity is translated at the historical ex- financial statements. The financial statements of
change rates prevailing at the date of acquisi- the joint venture are prepared for the same re-
tion (or at the average exchange rates in the porting year as the parent company, using consis-
year it was generated, in the case of both ac- tent accounting policies. Adjustments are made
cumulated earnings and the contributions to bring into line any dissimilar accounting poli-
made), as appropriate. cies that may exist.
• All balances and transactions between fully c) Interest in associates

consolidated companies were eliminated on Companies accounted by the equity method are
consolidation. those where the Group has a significant influen-
ce, but not control, over its financial and opera-
Subsidiaries included in Fadesa Inmobiliaria, S.A.’s tional policies. The consolidated financial state-
consolidated financial statements are detailed in ments recognize the participation that the Group
Note 3. Changes in the scope of consolidation in has in the profits and losses of associates using
2006 and 2005 are also shown. the equity method from the moment when it be-
gan to exercise a significant influence until such
b) Interest in joint ventures. time as that influence ceases to exist. When the
The Group has interests in joint ventures which Group’s share in losses exceeds the value of its in-
are jointly controlled entities. A joint venture is a terest, the carrying amount of the interest is nil,
contractual arrangement whereby two or more and any future losses will be recognized only to
parties undertake an economic activity that is the extent that that the Group has a legal or im-
subject to joint control, and a jointly controlled plicit obligation, or has made payments on behalf
entity is a joint venture that involves the establis- of the associate.
hment of a separate entity in which each ventu-
rer has an interest. 2.3 • Significant accounting judgments and
estimates.
When the Group contributes or sells assets to the
joint venture, any portion of gain or loss from the a) Judgments.
transaction is recognized according to the subs- When applying the Group’s accounting policies,
tance of the transaction. When the Group purcha- the directors have made the following value
ses assets from the joint venture, the Group does judgments that impact significantly on the
not recognize its share of the profits of the joint amounts recognized in the consolidated financial
venture from the transaction until it resells the statements:
assets to an independent party.
• Real estate development revenues from land
and plots sale contracts are recognized accor-

ding to percentage of completion. A theoretical amounts of assets and liabilities in the following
gross margin is estimated for this type of work. year are as follows:
• Cost of sales includes an estimate of the 1. The Group performs an impairment test on
outstanding costs to be incurred at that date, goodwill at least once a year. This requires an
based on the budgets corresponding to that estimate of the value in use of the cash gene-
development. rating units (CGUs) to which the goodwill is
allocated. To estimate the value in use, the
• A provision is recognized for after-sales wa- Group needs to make an estimate of future
rranty costs for completed developments, cal- expected cash flows from the CGUs, and to de-
culated on the basis of a percentage of sales cide on an appropriate discount rate to calcu-
for the year and for the previous year. This per- late the present value of those cash flows. The
centage is based on historical statistics. carrying amount of goodwill at December 31,
2006 was 9,245 thousand euros (10,480 thou-
• In the real estate business, some land acqui- sand euros in 2005). More details in Note 8.
sitions are made by means of land swaps in-
volving the future delivery of real estate de- 1. Impairment of tangible assets. The Group
pending on the urban development that is performs an impairment test of its tangible
finally approved. For this type of acquisitions assets once a year. Once the value in use of
the Group records the cost of acquisition and the industrial activity assets was analyzed, the
its corresponding consideration on the basis Group deemed it necessary to maintain the
of the most reliable information it has at the impairment provision of 20,100 thousand eu-
time. As a result of possible variations in the ros. This loss was estimated on the basis of ex-
parameters used to make the valuation, it may pected cash flows for the coming years, which
be necessary to make changes to the valua- could vary considerably due to the introduc-
tion in the future, in which case such changes tion of a new industrial plan that is currently
will only affect the value of the inventory and being designed for this business.
the debt recorded. At year end, the cost recor-
ded for all such transactions amounts to 222.2 2.4 • Summary of main accounting policies.
million euros (129.1 in 2005) of which 46.7 mi-
llion euros corresponds to acquisitions made a) Property, plant and equipment.
in 2006. Property, plant and equipment are stated at acqui-
sition or production cost, less accumulated depre-
• The Group set aside a provision for litigation ciation and accumulated impairment in value.
in progress which, in the opinion of the legal
department, will lead to future cash outlays An item of property, plant and equipment is dere-
for the Group. cognized upon disposal or when no future econo-
mic benefits are expected from its use or disposal.
b) Uncertainty in estimates. Any gain or loss arising on derecognition of the
Key assumptions concerning the future and asset (calculated as the difference between the
other key sources of estimation uncertainty at net disposal proceeds and the carrying amount of
balance sheet date for which there is a significant the asset) is included in the income statement in
risk of material adjustments to the carrying the year the asset is derecognized.

Assets’ residual values, useful lives and methods the date of the transfer and its previous carrying
are reviewed, and adjusted if appropriate, at each amount is recognized in profit or loss.
financial year end.
Borrowing costs incurred directly related to ac-
Periodic maintenance expenses are recorded in the quisition, production or construction of property,
consolidated income statement on an accrual basis plant and equipment are capitalized. Capitaliza-
as incurred. When each major inspection is perfor- tion of borrowing costs as part of the cost of qua-
med, its cost is recognized in the carrying amount lifying assets shall commence when the activities
of the plant and equipment as a replacement pro- that are necessary to prepare the assets for their
vided that recognition criteria are satisfied. intended use or sale are in progress. When the
carrying amount exceeds the recoverable amount
The estimated useful lives of each type of property, or net realizable value, the carrying amount is
plant and equipment are as follows (in years): written off and an impairment loss is recognized.
The interest rate used is that which relates to spe-
cific-purpose financing for that development, or
the average financing rate of the company ma-
king the investment.
b) Investment properties.
Investment properties are properties held by the
Group to earn rentals or for capital appreciation
or both.
Investment properties are measured initially at

cost, including transaction costs. The costs of day
to day servicing of an investment property are ex-
cluded. Subsequent to initial recognition, inves-
tment properties are stated at fair value, which re-
flects market conditions at the balance sheet
date. Gains or losses arising from changes in the
fair values of investment properties are included
in the income statement in the year in which they
arise. Investment properties are annually assessed
by a reputable qualified independent appraiser
with recent experience in fair value asset valua-
tion in the areas concerned.
Properties that are being constructed or develo-
ped to be used in the future as investment pro- Investment properties are derecognized either
perties are classified as “Investment properties in when they have been disposed of or when the in-
progress”. When the Group completes the cons- vestment property is permanently withdrawn
truction or development, the properties are from use and no future economic benefit is ex-
transferred to “Investment properties”. Any diffe- pected from its disposal. Any gains or losses on
rence between the fair value of the properties at the retirement or disposal of an investment pro-

perty are recognized in the income statement in cash generating units, or groups of cash genera-
the year of retirement or disposal. ting units that are expected to benefit from the
synergies of the combination, irrespective of
Transfers are made to investment property when, whether other assets or liabilities of the Group
and only when, there is a change in use, eviden- are assigned to those units or groups of units.
ced by ending of owner occupation, commence- Each unit or group of units to which the good-
ment of an operating lease to another party or will is allocated:
ending of construction or development. Transfers
are made from investment property when, and • represents the lowest level within the Group at
only when, there is a change in use, evidenced by which the goodwill is monitored for internal ma-
commencement of owner occupation or com- nagement purposes; and
mencement of development with a view to sale. • is not larger than a segment based on either the
Group’s primary or the Group’s secondary repor-
For a transfer from investment property to ow- ting format determined in accordance with IAS
ner occupied property or inventory, the cost of 14 Segment Reporting.
the property for subsequent accounting is dee-
med to be its fair value at the date of reclassifica- Impairment is determined by assessing the reco-
tion. If the property occupied by the Group as an verable amount of the cash generating unit
owner occupied property becomes an inves- (group of cash generating units), to which the go-
tment property, the Group accounts for such a odwill relates. Where the recoverable amount of
property in accordance with the policy stated the cash generating unit (group of cash genera-
under “Property, plant and equipment” up to the ting units) is less than the carrying amount, an
date of reclassification. For a transfer from inven- impairment loss is recognized. Where goodwill
tories to investment property, any difference forms part of a cash generating unit (group of
between the fair value of the property at that cash generating units) and part of the operation
date and its previous carrying amount is recog- within that unit is disposed of, the goodwill asso-
nized in profit or loss. ciated with the operation disposed of is included
in the carrying amount of the operation when
c) Goodwill. determining the gain or loss on disposal of the
Goodwill acquired in a business combination is operation. Goodwill disposed of in this circums-
initially measured at cost, being the excess of the tance is measured based on the relative values of
cost of the business combination over the Group’s the operation disposed of and the portion of the
interest in the net fair value of the identifiable as- cash generating unit retained.
sets, liabilities and contingent liabilities. Following
initial recognition, goodwill is measured at cost d) Intangible assets.
less any accumulated impairment losses. Goodwill Intangible assets acquired separately are measu-
corresponding to acquisitions made prior to Ja- red on initial recognition at cost. Following initial
nuary 1, 2004 is recorded as required under Spa- recognition, intangible assets are carried at cost
nish GAAP, and was amortized up to that date. less any accumulated amortization and any accu-
mulated impairment losses. The cost of intangi-
For the purpose of impairment testing, goodwill ble assets acquired in a business combination is
acquired in a business combination is, from the its fair value as at the date of acquisition. Inter-
acquisition date, allocated to each of the Group’s nally generated intangible assets, excluding capi-

talized development costs, are not capitalized • Loans and receivables: These items are measu-
and expenditure is charged against profits in the red at amortized cost, which is basically the
year in which the expenditure is incurred. amount of cash delivered, minus principal pay-
ments, plus the accrued interest receivable, in the
The useful lives of intangible assets are assessed to case of loans, and the present value of the consi-
be either finite or indefinite. Intangible assets with fi- deration paid, in the case of receivables.
nite lives are amortized over the useful economic li-
fe and assessed for impairment whenever there is an • Held-to-maturity investments: Investments that
indication that the intangible asset may be impai- the Group has the intention and ability to hold to
red. The amortization period and the amortization the date of maturity, which are also measured at
method for an intangible asset with a finite useful li- amortized cost.
fe are reviewed at least at each financial year end.
Changes in the expected useful life or the expected • Financial assets at fair value through profit or
pattern of consumption of future economic benefits loss: These include the held-for-trading financial
embodied in the asset is accounted for by changing assets and financial assets that are managed and
the amortization period or method, as appropriate, assessed at fair value. They are recognized in the
and treated as changes in accounting estimates.The consolidated balance sheet at fair value and the
amortization expense on intangible assets with fini- changes in fair value are recognized in the con-
te lives is recognized in the income statement. solidated income statement. At December 31,
2006 and 2005 there were no assets of this natu-
The specific intangible assets of the Group are: a) re.
Administrative concessions, which are recorded at
their acquisition cost and are amortized on the basis • Available-for-sale financial assets: These com-
of the concession period, and, b) Software, recorded prise all other financial assets that do not fall in-
at their acquisition cost and amortized using the to any of the three aforementioned categories,
straight-line method over a five year period. and mostly correspond to equity investments
(see Note 10). These assets are recognized in the
The gain or loss arising from derecognition of an in- consolidated balance sheet at fair value when
tangible asset shall be determined as the difference fair value can be
between the net disposal proceeds, if any, and the
carrying amount of the asset. It shall be recognized • Reliably determined. Since it is usually not possi-
in the profit or loss when the asset is derecognized. ble to determine reliably the fair value of inves-
tment in companies that are not publicly listed,
e) Financial instruments. when this is the case, such investments are measu-
Financial assets. red at acquisition cost or at a lower amount if the-
The Group classifies its non-current and current fi- re is evidence of impairment. Changes in fair value,
nancial assets, excluding investments accounted for net of the related tax effect, are recognized with a
using the equity method (see Note 11) and assets charge or credit, as appropriate, to “Net equity: un-
classified as held-for-sale, in four categories: realized assets and liabilities revaluation reserve”,
until these assets are disposed of,at which time the
cumulative balance of this account relating to tho-
se assets is recognized in full in the Consolidated
Income Statement. If fair value is lower than acqui-

sition cost, the difference is recognized directly in rest at market rates. No financial instruments with an
the Consolidated Income Statement. implicit interest rate have been entered into.
Financial liabilities. Trade and other payables.

All loans and borrowings are initially recognized at Group’s Directors consider that the carrying amount
the fair value of the consideration received less di- of the items recorded in this heading of the consoli-
rectly attributable transaction costs. After initial re- dated balance sheet to be a reasonable approxima-
cognition, interest bearing loans and borrowings are tion of fair value.
subsequently measured at amortized cost using the
effective interest method. The main financial instruments used by the Group
are bank loans, credits, finance leases, hire purcha-
Fair value of financial instruments. se agreements, cash, bills of exchange accepted by
customers, and short-term deposits. The main pur-
Non-current financial assets pose of these financial instruments is to finance
For long-term loans granted there is no difference the Group’s operations. The Group also has other
between fair value and carrying amount since all lo- financial assets and liabilities such as trade ac-
ans granted accrue interest at market rates. counts receivable and payable.
Financial assets available for sale are carried at their f) Investments accounted for the equity method.
fair value or, if fair value cannot be reliably measu- The Group’s investment in an associate is accoun-
red, at acquisition cost less impairment. ted for under the equity method of accounting. In
general terms, the Group has a significant influen-
Trade and other receivables. ce in an associate company when a participation
Long-term accounts receivable (over one year) are higher than 20% is held.
carried at fair value as indicated in Note 13 of this
report. Short-term accounts receivable (less than Under the equity method, the investment in the as-
one year) the Group’s Directors consider their sociate is carried in the balance sheet at cost plus
carrying amount to be a reasonable approxima- post acquisition changes in the Group’s share of net
tion of fair value. assets of the associate, including when applicable,
the elimination of transactions carried out with
Current financial assets Group’s companies, plus any unrealized gain related
For short-term loans granted there is no difference to goodwill paid on acquisition of the associate.
between fair value and carrying amount since all lo-
ans granted accrue interest at market rates. If the resulting amount were negative, the Group’s
participation in the associate is deemed recorded
For other current financial assets, the Group’s Direc- as nil in the consolidated balance sheet unless
tors consider their carrying amount to be a reasona- there is an obligation to make good the compan-
ble approximation of fair value. y’s asset position, in which case a provision for
risks and charges is recorded.
Debts with credit institutions
For short- and long-term debts with credit institu- Dividends received from an investee reduce the
tions there is no difference between fair value and carrying amount of the investment. The Group’s
carrying amount since all loans granted accrue inte- share of the profit or loss of the investee is recogni-

zed in the Group’s consolidated profit or loss, net of Industrial inventory.
tax effect, in “Income from companies accounted • Raw materials: are valued at the lower of cost
for under the equity method”, unless they relate to and net realizable value using weighted ave-
income recorded by the associate in net equity in rage cost
which case they are recorded directly in net equity.
• Finished products and work in progress: the
g) Inventories. cost of direct materials and labor plus a pro-
Inventories are valued at the lower of cost and net portion of manufacturing overhead based on
realizable value. normal operating capacity but excluding bo-
rrowing costs
Inventories of real estate activity.
• Land and plots: Land and plots acquired to Net realizable value is the estimated selling price in
promote real estate developments are recor- the ordinary course of business, less estimated costs
ded at acquisition cost, plus any other expen- of completion and the estimated costs necessary to
ses directly related to the purchase (taxes, make the sale.
property registration fees, etc.). This amount is
transferred to “Developments in progress” on- h) Cash and cash equivalents.
ce construction work begins. Cash and short term deposits in the balance sheet
comprise cash at banks and in hand and short
• Development in progress: This includes the term deposits with an original maturity of three
total costs incurred for real estate develop- months or less, since the acquisition or deposit of
ment in progress at the end of the fiscal year. the financial asset.
For each development, these costs included
the amount for the plot, landscaping and For the purpose of the consolidated cash flow state-
construction, as well as other directly related ment, cash and cash equivalents consist of cash and
costs (studies and projects, licenses, etc.) and cash equivalents as defined above, net of outstan-
financial expenses accrued during the cons- ding bank overdrafts.
truction period for specific financing.
i) Impairment of asset value.
• Finished buildings: Upon completion of each At each year end the Group assesses whether its
real estate development, the companies of the assets are impaired. If there is any indication of
Group transfer the cost of the related buildings impairment, or when an annual impairment test
not yet sold from “Development in progress” to is required, the Group estimates the recoverable
“Finished buildings”. amount of assets. The recoverable amount of an
asset or CGU is the higher of its fair value less
• Construction-in-progress: This includes the to- costs to sell and its value in use, and is determi-
tal costs incurred in developments in which ned individually for each asset, unless the asset
Group companies act as builders, the amounts of does not generate cash inflows that are largely
which will be invoiced to third parties. independent of those from other assets or group
of assets. When the carrying amount of an asset
Real estate activity inventories value is based on exceeds its recoverable amount, the asset is con-
specific identification of their individual costs sidered impaired and is written down to its reco-
components. verable amount.

When calculating value in use, future cash inflows Diluted earnings per share are calculated by divi-
are discounted to their present value using a pre- ding net profit for the year attributable to the Pa-
tax discount rate that a pre-tax discount rate that rent by the average number of ordinary shares
reflects current market assessments of the time outstanding during the year. During 2005 the
value of money and the risks specific to the asset. Group did not carry out any transaction that repre-
Impairment losses of continuing operations are sented a diluted earnings per share different from
recognized in the income statement. in those ex- the basic earnings per share at year end.
pense categories consistent with the function of
the impaired asset. In addition, in 2006 net comparable basic and dilu-
ted earnings per share are calculated by dividing net
At each year end an assessment is also made as to profit attributable to ordinary equity holders of the
whether there are indications that the impairment parent and thus, do not include expenses corres-
loss previously recognized may no longer exist or is ponding to the public offering of shares, by the
diminished. Where such indications exist, the reco- weighted average of ordinary shares outstanding
verable value will be estimated. A previously recog- during the year, less the number of parent company
nized impairment loss is only reversed if there has shares held by the Group.
been a change the estimates used to determine
the asset’s recoverable amount since the last im- l) Dividends.
pairment loss was recognized. If this is the case, the Any interim dividend to be paid out of the Grou-
asset’s carrying amount is increased to its recovera- p’s profit on approval by the Board of Directors
ble value. Any such increase should not exceed the would be presented as a deduction from the
carrying amount that would have been recorded, Group’s equity. This did not occur in 2006 and
net of amortization, had no impairment loss been 2005. The dividend proposed by Fadesa Inmobi-
recorded for the asset in previous years. This rever- liaria, S.A.’s Board of Directors to the Annual Ge-
sal is recorded in the income statement. After this neral Meeting of Shareholders will not be deduc-
reversal, the depreciation charge is adjusted in fu- ted from equity until it has been approved by the
ture periods to allocate the asset’s revised carrying Annual General Meeting of Shareholders. In the
amount, less any residual value, on a systematic ba- Parent Company’s annual accounts, given the
sis over its remaining useful life. existence of a takeover bid for 100% of Fadesa In-
mobiliaria, S.A.’s stock, the Board of Directors has
j) Treasury shares. proposed not to distribute a dividend for 2006. In
Own equity instruments which are reacquired (trea- 2006, on approval by the Annual General Meeting
sury shares) are deducted from equity. Gain or loss is of Shareholders, a dividend was paid out of pro-
recognized in accumulated earning of the net fits for 2005 in the amount of 0.41 euros gross per
equity. No gain or loss is recognized in profit or loss. share, or 46,010 thousand euros.
k) Earnings per share. m) Deferred income.

Basic earnings per share are calculated by divi-
ding net profit for the year attributable to the Pa- Official grants.
rent by the weighted average number of ordinary Government grants are recognized where there is
shares outstanding during the year, excluding the reasonable assurance that the grant will be recei-
average number of shares of the Parent held by ved and all attaching conditions will be complied
the Group companies. with. When the grant relates to an expense item,

it is recognized as income over the period neces- 1. Provision for retirement awards: Group
sary to match the grant on a systematic basis to Companies have no retirement pension sche-
the costs that it is intended to compensate. Whe- mes for their employees other than the cove-
re the grant relates to an asset, the fair value is rage provided by the state Social Security
credited to a deferred income account and is re- scheme. The collective bargaining agree-
leased to the income statement over the expec- ments of some Group Companies include the
ted useful life of the relevant asset by equal an- obligation to make a one-off payment to so-
nual installments. me employees upon reaching retirement age
if they meet certain conditions regarding the
Other deferred income. number of years worked in the company. Pro-
This heading relates mainly to amounts received vision liability is recognized based on an ac-
for the Parent company’s temporary transfer of the tuarial calculation. The balance at year end of
usufruct shares that the company holds in Guadal- that provision amounts to 99 thousand euros
mina Golf, S.A. These amounts are taken to income (60 thousand euros in 2005). See Note 21.
on a straight-line basis depending on the term of
the share transfer agreement. 2. Provisions for tax liabilities: to cover litiga-
tion or tax risks jointly amounting to 14,953
n) Provisions. thousand euros (12,289 thousand euros in
The present obligation at the consolidated balan- 2005). Of the balance recorded in 2006, 5,922
ce sheet date arising from past events which thousand euros (4,481 thousand euros in
could give rise to a loss for the Group which is un- 2005) correspond to the estimated potential
certain as to its amount and timing are recogni- loss resulting from rulings against Group
zed as provisions in the consolidated balance Companies by the courts or tax authorities in
sheet at the present value of the most probable respect of the ITPAJD (Transfer Tax and Stamp
amount that it is considered the Group will have Duty). Also, in order to cover claims arising
to disburse to settle the obligation. Provisions are from tax audits and related litigation, provi-
quantified on the basis of the best information sions for tax assessments relating to the va-
available at the date of preparation of the conso- rious taxes payable by Group Companies
lidated financial statements on the consequen- amounting to 7,808 thousand euros (7,808
ces of the event living rise to them and are revie- thousand euros in 2005) were set aside. Addi-
wed and adjusted at the end of each year. tionally, during 2006 a provision was made to
cover a number of risks of a fiscal nature per-
Where the Group expects some or part of a provi- taining to Group Companies operating abro-
sion to be reimbursed, for example under an insu- ad. This provision amounted to 1,223 thou-
rance contract, the reimbursement is recognized sand euros (nil in 2005).
as a separate asset but only when the reimburse-
ment is virtually certain. The expense relating to 3. Provision for contingent liabilities due to
any provision is presented in the income state- construction defects: The Company is invol-
ment net of any reimbursement. ved in a number of lawsuits for construction
defects in delivered developments amounting
Non-current provisions. to 10,845 thousand euros (12,169 thousand
The following items are included in under this he- euros in 2005). Expert reports estimate that
ading: the amount required to settle any potential

rulings against the Company in this respect is to be recovered from or paid to the tax authorities.
6,597 thousand euros (4,897 thousand euros The tax rates and tax laws used to compute the
in 2005). See Note 21. amount are those that are enacted or substantively
enacted by the balance sheet date.
4. Other provisions: Correspond to the esti-
mated contingent liabilities related to litiga- Income tax.
tion in progress. The balance of provisions re- Income tax is recognized in the consolidated inco-
corded by Group Companies in this respect me or in equity accounts in the consolidated balan-
amounts to 2,785 thousand euros (2,165 thou- ce sheet depending on where the profits or losses
sand euros in 2005). See Note 21. giving rise to it have been recognized. Differences
between the carrying amount of the assets and lia-
Current provisions. bilities and their tax bases give raise to deferred tax
assets and liabilities, which are measured at the tax
This heading includes the following items: rates that are expected to apply in the period when
the asset is realized or the liability is settled.
1. Guarantee provisions: The balance recorded
of 8,738 thousand euros (6,273 thousand euros Deferred tax liabilities are recognized for all taxable
in 2005) reflect estimated future costs for small temporary differences, except:
repairs to be performed in recently sold hou-
sing developments. This cost has been calcula- • where the deferred tax liability arises from the
ted, using statistical data, as a percentage of cu- initial recognition of goodwill or of an asset or
rrent and previous year sales. The net change in liability in a transaction that is not a business
the current year for this provision was 2,465 combination and, at the time of the transaction,
thousand euros (1,533 thousand euros in affects neither the accounting profit nor taxable
2005). In addition, to cover any contingencies profit or loss; and
that may occur during the construction period
and after the developments are completed, the • in respect of taxable temporary differences as-
Group has contracted some compulsory and sociated with investments in subsidiaries, asso-
voluntary insurance. See Note 21. ciates and interests in joint ventures, where the
timing of the reversal of the temporary differen-
2. Provisions for costs to be incurred: This re- ces can be controlled and it is probable that the
fers to expenses to be incurred for real estate temporary differences will not reverse in the fo-
developments for which a sale has been re- reseeable future.
corded. Its value is the difference between
budgeted and actual costs. The balance at ye- Deferred income tax assets are recognized for all de-
ar end amounts to 33,368 thousand euros ductible temporary differences, to the extent that it
(25,632 thousand euros in 2005). See Note 21. is probable that future taxable profit will allow the
deferred tax asset to be recovered.
o) Taxes.
The carrying amount of deferred income tax assets
Current taxes. is reviewed at each balance sheet date and reduced
Current tax assets and liabilities for the current and to the extent that it is no longer probable that suffi-
prior periods are measured at the amount expected cient taxable profit will be available to allow all or

part of the deferred income tax asset to be utilized. Operating lease payments are recognized as an ex-
Unrecognized deferred income tax assets are reas- pense in the income statement on a straight-line ba-
sessed at each balance sheet date and are recogni- sis over the lease term.
zed to the extent that it has become probable that
future taxable profit will allow the deferred tax asset The Group as lessor.
to be recovered. Leases where the Group retains substantially all
the risks and benefits of ownership of the asset
Deferred income tax assets and liabilities are me- are classified as operating leases. Initial direct
asured at the tax rates that are expected to apply costs incurred in negotiating an operating lease
to the year when the asset is realized or the liabi- are added to the carrying amount of the leased
lity is settled, based on tax rates (and tax laws) asset and recognized over the lease term on the
that have been enacted or substantively enacted same bases as rental income.
at the balance sheet date.
q) Recognition of income and expenses.
Deferred tax assets and deferred tax liabilities are Revenues and expenses are recognized based on
offset, if a legally enforceable right exists to set off the accrual basis.
current tax assets against current tax liabilities and
the deferred taxes relate to the same taxable entity Revenue is recognized to the extent that it is proba-
and the same taxation authority. ble that the economic benefits will flow to the
Group and the revenue can be reliably measured.
p) Leases. The following specific recognition criteria must also
The determination of whether an arrangement is, or be met before revenue is recognized:
contains, a lease is based on the substance of the
arrangement and requires an assessment of whe- Sale of assets.
ther the fulfillment of the arrangement is depen- Revenue is reported when the significant risks and
dent on the use of a specific asset or assets and the rewards associated with ownership of the assets
arrangement conveys a right to use the asset. have passed to the buyer. In particular, sales of
properties are recorded when their construction is
Group as lessee. fully completed, the title deed is duly signed, and
Finance leases, which transfer to the Group substan- the keys are handed over. Advance payments re-
tially all the risks and benefits incidental to owners- ceived from customers in the period between the
hip of the leased item, are capitalized at the incep- signature of the private sale-purchase contract
tion of the lease at the fair value of the leased and the moment when the public deed is signed
property or, if lower, at the present value of the mini- are recorded under “Advance payments received
mum lease payments. Lease payments are apportio- from customers” on the liabilities side of the con-
ned between the finance charges and reduction of solidated balance sheet.
the lease liability so as to achieve a constant rate of
interest on the remaining balance of the liability. Fi- Income from the sale of land and plots is recogni-
nance charges are charged directly against income. zed when the private sale-purchase contract is
signed for the part corresponding to the land. For
Capitalized leased assets are depreciated over the the part corresponding to the development of the
shorter of the estimated useful of the asset and land, construction contract regulations apply (see
the lease term. section below).

Construction contracts Dividends.
Where the outcome of a construction contract Revenue is recognized when the Group’s right to
can be estimated reliably, revenue and costs are receive the payment is established.
recognized by reference to the stage of comple-
tion of the contract activity at the balance sheet Rental income.
date. This is normally measured by reference to Rental income arising on investment properties
the proportion that contract costs incurred for is accounted for on a straight line basis over the
work performed to date bear to the estimated to- lease terms on ongoing leases.
tal contract costs. Variations in contract work,
claims and incentive payments are included to Operating revenues do not include any income
the extent that they have been agreed with the obtained by the Group when acts as agent or
customer. commissioned on behalf of third parties. Opera-
ting revenues only include those related to the
Where the outcome of a construction contract own activity.
cannot be estimated reliably, contract revenue is
recognized to the extent of contract costs incu- r) Foreign currency transactions.
rred that are likely to be recoverable. Contract Each entity in the Group determines its own func-
costs are recognized as expenses in the period in tional currency and items included in the finan-
which they are incurred. cial statements of each entity are measured using
that functional currency. Transactions in foreign
When it is probable that total contract costs will currencies of each consolidated company are in-
exceed total contract revenue, the expected loss itially recorded in the functional currency rate ru-
is recognized as an expense immediately. ling at the date of the transaction. All differences
are taken to profit or loss.
Provision of services.
Revenues for services rendered are recognized in s) Business activities with environmental im-
the income statement by reference to the per- pact.
centage-of-completion of the transaction at the All activities carried out by the Group have been
balance sheet date. The percentage of comple- designed and performed to cause the least possi-
tion is measured by reference to the proportion ble environmental impact. Therefore no signifi-
that costs incurred to date bear to the estimated cant contingencies are expected in relation to
total costs. Where the outcome of a contract can- the protection and improvement of the environ-
not be estimated reliably, revenue is recognized ment and consequently the Group does not con-
to the extent of contract costs incurred that are sider it necessary to record a provision for envi-
likely to be recoverable. ronmental activities.
Interest income. In relation to real estate development, the Grou-

Revenue is recognized as interest accrues (using the p’s core activity, all developments carried out by
effective interest method that is the rate that exactly the Group meet all the provisions of the Environ-
discounts estimated future cash receipts through mental Impact Statement as defined in the res-
the expected life of the financial instrument to the pective development projects and/or reports.
net carrying amount of the financial asset).

t) Acquisition of minority interests
The Group records minority interest acquisitions
in companies that it controls at the carrying
amount of its assets and liabilities at transaction
date. The resulting difference is recorded as go-
odwill or accumulated gains.
2.5 • Adoption of IFRS during the year.
Changes in IFRS and IFRIC interpretations in 2006

had no effect on the Group’s consolidated inco-
me statements. Neither will changes in IFRS and
IFRIC interpretations to come into effect as of Ja-
nuary 1, 2007 have any effect on the Group’s con-
solidated income statements, although they will
require the following additional breakdowns:
• IFRS 7. Breakdowns of financial instruments

and related risks.
• IAS 1. Modification of the presentation of fi-

nancial statements with regard to the Group’s
objectives, policies and processes for mana-
ging capital (interest rate, foreign currency,
credit, and liquidity risk)

3 • SCOPE OF CONSOLIDATION
The Groups’ composition has been modified in 2006 and 2005, as a consequence of inclusions, exclusions,
and increased interests in companies within the scope of consolidation.
a) Inclusions in the scope of consolidation.
b) Exclusions from scope of consolidation.
c) Participation increases.

d) Decreases due to divestments.
In these notes to the financial statements, information has been included in the tables affected by the changes
to the scope of consolidation described above to show the effect of new companies entering the scope of con-
solidation,and the increases and decreases in interests held in consolidated companies.Where the increases and
decreases in the course of the year involved significant amounts, these amounts are identified separately.
The companies included in the scope of consolidation at December 31, 2006 were as follows:
Subsidiaries:

Joint ventures:

Joint ventures:
Associates:
(*) Assets under construction

(**) Company audited by Ernst &Young
The participations in dormant associates shown in Subsidiaries excluded from the scope of consolidation:
the table above were acquired on the basis of the es- The following dormant subsidiaries companies were
timated value of the real estate assets (land) they excluded from the scope of consolidation due to
own.This valuation is lower than the result of the va- their immateriality, individually or aggregated, in
luation performed by an independent expert at ye- terms of the fair presentation of Fadesa Group’s con-
ar end (CB Richard Ellis). solidated financial statements.
Subsidiaries:

The key financial figures of unconsolidated subsidiaries are set out below:
Subsidiaries
4 • BUSINESS COMBINATIONS AND ACQUISITION OF MINORITY INTEREST.
Business combinations for 2006. Club de Campo de Logroño, S. L., of which it alre-
ady controlled 85%, giving rise to goodwill of
The acquisitions shown in Note 3 are not considered 3,084 thousand euros (Note 8).
as business combinations due to the fact that either
they are acquisitions of assets intended for real esta- Business combinations for 2005.
te development, or they correspond to companies
abroad acquired upon their initial incorporation. Acquisition of Group SA Financière Rive Gauche.
In June 2005, the Fadesa Group acquired a 70% sta-
In 2006 it was possible to determine the fair value of ke of voting shares in SA Financière Rive Gauche. Its
the assets, liabilities, and contingent liabilities of the shares are not listed on the stock market and it is lo-
business combination completed in 2005 of the cated in France. Its main activity is real estate deve-
French group SA Financière Rive Gauche. The good- lopment.
will initially recorded in 2005 was reassigned to “In-
ventories” due to the fact that its fair value was hig- The fair value of assets and liabilities of Group SA Fi-
her than its carrying amount (Note 8). nancière Rive Gauche at acquisition date were:
Minority interest acquisitions in 2006.
During 2006, the Group acquired 30% of the

French group SA Financière Rive Gauche, of which
it already controlled 70% of the share capital, gi-
ving rise to goodwill of 6,061 thousand euros. In
this same year it acquired 15% of Urbanización

Thousand E
The total cost of the acquisition was 10,442 thou- would have increased by 14,841 thousand euros
sand euros, including related acquisition expenses. and consolidated profit would have fallen by 126
thousand euros.
Since its acquisition date, SA Financière Rive Gau-
che has contributed -375 thousand euros to the The difference between the fair value of the as-
Group’s net profit. If the combination had occu- sets, liabilities, and contingent liabilities was pro-
rred at the beginning of the year, Group sales visionally assigned to goodwill.
5 • FINANCIAL INFORMATION BY SEGMENT
The primary reporting format of the Group’s fi- ness is carried out mainly in Spain, Portugal, Mo-
nancial information is by business segments. The rocco, France, Poland and Hungary.
secondary format is by geographical segments.
Operating businesses are organized and mana- b) The hotel services segment includes: revenue
ged separately according to the nature of the pro- from the operation of hotels. This business is ca-
ducts and services provided, and each segment rried out in Spain and Morocco.
represents a strategic business unit offering diffe-
rent products and servicing different markets. c) The industrial business segment includes: the
production, transformation, and marketing of
The business segments are as follows: construction sector products. These production
activities are mainly carried out in Romania.
a) Real estate: Includes the sale of housing, land
and plots; provision of real estate services; and
income from the leasing of property. This busi-

Transfer prices between segments are based on
Thousand E
arms length basis. Segment revenue, segment ex-
penses and segment results include transfers bet-
ween business segments. These transfers are elimi-
nated on consolidation.
The Group defines its geographical segments based

on the location of the real estate and hotel assets or,
in the case of the industrial business segment, based
on the location of the customers.
Business segments.
The following tables provide information about re-

venues and results, and some information about as-
sets and liabilities, relating to the Group’s business
segments for the years ended December 31, 2006
and 2005.

The breakdown of revenues corresponding to the Group’s real estate activity, representing 93.7% (94.7% in
2005) of total consolidated revenues in 2006, is as follows:
Thousand E
Other main segment information:

Thousand E
Thousand E

Assets and liabilities of each business segment at December 31, 2006 and 2005 are as follows:
Thousand E

Thousand E
Geographical segment.
The following tables show information relating to revenues and certain assets of the Group’s geographical
segments for the years ended December 31, 2006 and 2005.
Year ended December 31, 2006 Thousand E

Year ended December 31, 2005
Thousand E
6 • PROPERTY, PLANT AND EQUIPMENT

Thousand E
Thousand E
Transfers in “Land and buildings” and “Machinery, apartments on completion of the building phase.
plant and equipment” include the transfer of a Also included are transfers to “Non-current assets
hotel that was to be operated by the Group and held for sale” (see Note 17).
which in 2006 the Group decided to sell it as

Accumulated provisions for impairment losses in Real estate investments in progress.
2006 amounts to 23,562 thousand euros (27,165
thousand euros in 2005) and represents the differen- “Advances and work in progress” include inves-
ce between the carrying amount and the recoverable tments in progress which, upon completion, will
amount of certain items of property, plant and equip- form part of the Group’s real estate assets. The value
ment belonging to the industrial business segment. of these investments at December 31, 2006 is 20,102
thousand euros (32,257 thousand euros in 2005).
The recoverable amount has been determined based
on the recoverable value of the cash generating unit Other information.
to which the asset belongs, by reviewing future ex-
pected cash flows for the cash generating units of the Interest for the year capitalized as an increase in
industrial segment, or by independent expert valua- the value of property, plant and equipment in ac-
tion of the cash generating unit of the hotel segment. cordance with the valuation rule set out in Note 2
of this report amounted to 78 thousand euros
Land and buildings. (619 thousand euros in 2005).
The detail of the various items included in pro- The capitalization rate is based on the average
perty, plant and equipment is as follows, in thou- cost of debt (Note 20).
sands of euros:
Group assets subject to mortgage amounted to
Thousand E 133,651 thousand euros at December 31, 2006
(136,728 thousand euros in 2005).
The cost of fully depreciated assets in use is 13,611

thousand euros, of which 3,540 thousand euros co-
rresponds to manufacturing assets. (9,572 and
3,253 thousand euros respectively in 2005).
The carrying amount of temporarily idle fully de-

Advances and work in progress. preciated tangible fixed assets amounts to 5,868
The year end balance broken down by business
segments is as follows: Investment in tangible fixed assets located outsi-
de Spain mostly corresponds to the Group’s ma-
Thousand E
nufacturing business, and are as follows:

Thousand E
The policy of the Fadesa Group is to insure its fi-

xed assets against any risks they may be exposed
to. At December 31, 2005 there was no insurance
coverage shortfall with regard to the carrying
amount of fixed assets.
7 • INVESTMENT PROPERTIES
The current year movements of this heading of the consolidated balance sheet are as follows:
Thousand E
Thousand E
Real estate investments are recorded at fair value, be exchanged in a current transaction between wi-
based on valuations made by CB Richard Ellis at De- lling independent parties, in an arm’s length transac-
cember 31, 2006 and December 31, 2005. CB Richard tion, in accordance with International Valuation
Ellis are specialists in appraising this type of proper- Standards. Leased Group properties at year end
ties. Fair value is the amount at which an asset could 2006 are as follows:

Thousand E
8 • GOODWILL
The balance recorded at December 31, 2006 corres- During 2006, goodwill amounting to 10,480 thou-
ponds to the acquisition of minority interests repre- sand euros arising in 2005 from the acquisition of
senting 30% of Financière Rive Gauche, S.A.’s share 70% of Financière Rive Gauche, S. A. was definitively
capital (6,061 thousand euros) and 15% of U.C.C. Lo- assigned to specific assets. See Note 4.
groño (3,184 thousand euros).These amounts repre-
sent the difference between the carrying amount of
the assets, liabilities, and contingent liabilities of the-
se companies and the acquisition amount.
9 • INTANGIBLE ASSETS
Movements of “Intangible assets” during 2006 and 2005 were as follows:
Thousand E

Thousand E
Fully depreciated assets still in use at December 31, Administrative temporary concessions are amortized
2006 amount to 629 thousand euros (642 thousand eu- using the straight-line method throughout the conces-
ros in 2005). sion period (18 years). The cost to be amortized
amounts to 2,254 thousand euros in 2006 and 2005.
10 • NON-CURRENT FINANCIAL ASSETS

The breakdown of this heading is as follows: Thousand E
Investment in unlisted
The detail of investment in unlisted companies at

December 31, 2005 is as follows:
Thousand E

As indicated in Note 1.2,within the framework of the ta- at a net value of nil as a result of the impairment test
keover bid for Fadesa Inmobiliaria, S. A. by Promociones performed in previous years, the same value will be
y Urbanizaciones Martín, S. A and Huson Big, S. L., the maintained until the transaction actually takes place.
Bidders and the President of Fadesa Inmobiliaria, S. A., The shares of Parque Temático de Madrid. S.A. are pled-
Mr. Manuel Jove Capellán, reached an agreement whe- ged as collateral for a loan the company has with Caja
reby the latter would acquire the shares of Parque Te- Madrid. The detail of investment in unquoted compa-
mático de Madrid,S.A..As this investment was recorded nies at December 31, 2006 is as follows:
Thousand E
11 • EQUITY METHOD INVESTMENTS

Investment in associates accounted for under the equity method as disclosed in Note 3.The movements re-
corded in this chapter in the years 2006 and 2005 were as follows:
Thousand E
In 2006, on the basis of agreements reached between the parties involved in the acquisition of an interest in Casa-
sola Explotaciones Agropecuarias,S.A.,the acquisition price of that interest was reduced to 19,766 thousand euros.
Thousand E

Key figures of subsidiaries accounted for under the equity method in 2006 are as follows:
Thousand E
At December 31, 2005 the balance of subsidiaries accounted for under the equity method was as follows:
Thousand E
Thousand E
12 • INVENTORIES
The detail of inventories at December 31, 2006
and 2005, broken down by activity, is as follows:
a) Inventory of real estate activity

December 31, 2006 Thousand E

Inventory held that is expected to be realized in more
than twelve months from balance sheet date is as follows:
• LONG-CYCLE DEVELOPMENTS UNDER CONSTRUCTION:
• LAND AND PLOTS: Turnover is expected within the Turnover expected in 12 to 36 months.
Group’s business cycle which is from one to five
years depending on land commercialization po- • WORK IN PROGRESS: Turnover expected in less
licies, the degree of urban development, and the than 12 months.
building time required.
• CONSTRUCTED Turnover mostly ex-
BUILDINGS:
• SHORT-CYCLE DEVELOPMENTS UNDER CONSTRUCTION: pected in less than 12 months from balance
Turnover expected in less than 12 months. sheet date.
b) Hotel and industrial activities


Real estate inventories at year end include capi- At year end 2006, Group companies have a num-
talized borrowing costs of 66,200 thousand euros ber of call option contracts amounting to 355,615
(39,084 in 2005), of which 41,034 thousand euros thousand euros (157,843 thousand euros in 2005)
were capitalized in 2006 (20,340 thousand euros on land intended for real estate development
in 2005). should the option be exercised. Of the abovemen-
tioned amount, 1,930 thousand euros (13,153
Financial expenses are capitalized in 2006 at the thousand euros in 2005) corresponds to the cost
same rate as the related debt (see Note 20) of the option and is recorded as advance pay-
ments in “Trade and other accounts receivable”.
Of the balance recorded in “Inventories” for deve- The acquisition cost of the land, should the rele-
lopments in progress and completed buildings, vant options be exercised, comprises a present va-
totaling 1,458,206 thousand euros, 711,844 thou- lue amounting to 225,612 thousand euros
sand euros are subject to mortgages (579,370 (144,693 thousand euros in 2005) and an estima-
thousand euros in 2005). ted value that will depend on the final develop-
ment approved for the land amounting to 130,003
13 • TRADE AND OTHER ACCOUNTS RECEIVABLES

The breakdown of these items on the consolidated balance sheet at December 31, 2006 and 2005 is shown
in the following table:
Thousand E
A provision for bad debts was made for those custo- Trade and other receivable balances whose realiza-
mers whose financial position showed evidence of tion period is deemed to be higher than twelve
impairment at year end. months from balance sheet date are as follows:
Customer accounts receivable are recognized at fair Thousand E

value, whereby their nominal value is discounted at
a rate equivalent to the market interest rate. As a
consequence, the nominal value of customer ac-
counts receivable has been reduced by 6,436 thou-
sand euros (6,104 thousand euros in 2005).

14 • OTHER CURRENT FINANCIAL ASSETS
The breakdown of this heading of the consolidated balance sheet is as follows:
“Other loans” includes, among others, the following items:
• Loans to companies consolidated by the equity method amounting to 5,100 thousand euros.
• Participations in FIM’s (Security Investment Funds) amounting to 2,017 thousand euros.
• Short-term deposits amounting to 1,400 thousand euros.
15 • OTHER CURRENT ASSETS
The breakdown of the heading “Other current assets” on the consolidated balance sheet at December 31,
2006 and 2005 is included in the following table:
The balance of “Public administrations” for 2006 includes, among others, the following items:
• VAT to be offset by foreign companies amounting to 37,206 thousand euros.

• VAT to be refunded amounting to 23,947 thousand euros.
• IGIC (Special Canary Islands tax) to be refunded amounting to 2,884 thousand euros.

16 • CASH AND CASH EQUIVALENTS
The breakdown of this heading of the consolidated balance sheet is as follows:
Thousand E
Cash in banks accrue a variable interest rate based
on the daily interest rate for bank deposits. The ma-
turity of short-term deposits ranges from one day to
three months depending on the Group’s immediate
liquidity requirements; deposits accrue interest ac-
cording to the prevailing rate. The fair value of cash
and cash equivalents is a reasonable approximation
of its carrying amount.
17 • NON-CURRENT ASSETS HELD FOR SALE

As indicated in Note 1.2, within the framework of the takeover bid for Fadesa Inmobiliaria, S. A. by Promocio-
nes y Urbanizaciones Martín, S. A and Huson Big, S. L., the Bidders and the President of Fadesa Inmobiliaria,
S. A., Mr. Manuel Jove Capellán reached an agreement regarding the latter’s acquisition of a number of non-
current assets. These assets are recorded as “Non-current assets held for sale” at a net carrying value that, at
December 31, 2006, amounted to 13,322 thousand euros.
18 • SHARE CAPITAL AND RESERVES
The composition and movements of net equity of On May 9, 2006 the Ordinary and Extraordinary Ge-
the Group is shown in the “Statement of changes in neral Meeting of Fadesa Inmobiliaria, S.A. agreed to
net equity”, which forms part of the consolidated fi- a capital increase through the issue of common
nancial statements. stock with a par value of 0.10 euros a share, of the sa-
me class and series as existing shares, and represen-
Equity. ted by book entries. The number of shares issued
was the result of dividing 39.108.853,31 euros (equi-
Share capital at December 31, 2006 is represented valent to 85% of the gross dividend amount) by the
by 113,312,799 fully subscribed and paid-up sha- issue price.The issue price was determined by avera-
res with a par value of 0.10 each, represented by ging the weighted average changes of the Compan-
book entries. These shares have been trading on y’s share on the continuous market (SIBE) for the five
the Madrid and Barcelona stock exchanges on the trading days immediately prior to the dividend pay-
continuous market since April 30, 2004. All shares ment date (May 31, 2006) and applying a 1% dis-
have equal rights and are freely negotiable. count.The difference between the abovementioned
issue price and the par value of the share represents
an issue premium of 26.75 euros per share.

The approved capital increase described in the Share premium.
above paragraph was under-subscribed and con-
sequently the share capital was increased by the Spanish Commercial Law specifically allows com-
amount of the subscribed shares (109,227.30 eu- panies to use the balance of this account to incre-
ros). A total of 1,092,273 fully paid-up common ase share capital. There are no specific restric-
shares were issued at a par value of 0.10 euros a tions on the disposition of that balance.
share. The corresponding issue premium was
29,218,302.75 euros. Legal reserve.
The weighted average number of shares during According to Spanish Corporate Law, companies
2006 was 112,857,685 (111,854,503 in 2005). must transfer 10% of profits for the year to a legal re-
serve until this reserve is at least 20% of capital. At
In their ordinary and extraordinary general mee- year end, the Company is compliant with this requi-
ting held on May 6, 2005, the shareholders of rement.
Fadesa Inmobiliaria, S.A. resolved to increase share
capital through the issue of ordinary shares with a Legal reserves can be used to increase capital by
nominal value of 10 euros cents each of the same the amount exceeding 10% of the new capital af-
type and series as the existing shares. The new sha- ter the increase. With the exception already men-
res are recorded using the Bank of Spain’s book tioned and as far as the reserve does not exceed
entry system. The number of shares to be issued 20% of the share capital, this reserve can only be
would be the result of dividing 25,558,513 euros used to compensate losses only if there is no
(an amount equal to 85% of total gross dividends other reserves available.
distributed) by the rate of issue per share. The rate
of issue is determined as the simple average of the Other non-distributable reserves.
weighted average changes in the Company’s share
on the SIBE market (Spanish Stock Market Inter- The balance corresponds to the “Canary Island in-
connection System) for the last five days immedia- vestment reserve”. The Group’s companies availed
tely prior to the dividend payment date (May 27, themselves of the tax benefits offered under Law
2005), with a 1% discount, establishing a share pre- 19/94 relating to amounts allocated to provisions for
mium for the difference between the aforementio- investments in the Canary Islands. The companies
ned rate of issue and the nominal value of the sha- recorded a reserve of 20,493 thousand euros (18,483
re equivalent to 19.53 euros per share. thousand euros in 2005) which is non-distributable
until reinvestment takes place.
The capital increased as described above was not
fully subscribed and therefore capital was increa- Translation differences.
sed by the amount of the shares actually subscri-
bed (85,445.60 euros), issuing 854,456 ordinary, This reserve relates to the cumulative translation dif-
paid-in shares with a nominal value of 10 euro ference for the conversion of financial statements
cents each. denominated in foreign currencies not arising from
Parent Company transactions.

The detail of conversion differences by company at The following table summarizes the abovementio-
December 31, 2006 and 2005 is as follows: ned transactions for 2006:
Thousand E
Thousand E
The following table summarizes the abovementio-

ned transactions for 2005:
Thousand E
Own shares.
To enhance the liquidity of Fadesa Inmobiliaria, S.A.’s

shares at certain times, the General Meeting of Sha-
reholders of May 9, 2006 approved the acquisition
during 2006 of 2,767,784 own shares worth 74,568 Revaluation reserve.
thousand euros, at an average price of 26.94 euros
per share, and the sale of 3,229,516 shares for 92,466 The revaluation reserve corresponds to investment
thousand euros, at an average price of 28.63 per sha- properties valued at fair value from the transition da-
re, generating gains of 4,969 thousand euros over te. Movements produced in years 2006 and 2005 re-
the cost of acquisition. late to the changes in the fair value of each year.
Similarly, to enhance the liquidity of Fadesa Inmobi- Other information.

liaria, S.A.’s shares at certain times, the General Mee-
ting of Shareholders of May 6, 2005 approved the ac- Due to the nature of its shares, the Parent is only
quisition during 2005 of 1,368,696 own shares worth aware of the percentage interests held by persons
38,075 thousand euros at an average price of 27.82 who report them to the Comisión Nacional del Mer-
euros per share, and the sale of 906,964 shares for cado de Valores (National Stock Market Commis-
25,645 thousand euros at an average price of 28.28 sion). At the date of preparation of these financial
euros per share, generating gains of 499 thousand statements, the only entities holding equity interests
euros over the cost of acquisition. of 10% or more that have notified the CNMV are In-
versiones Frieira, S.L. and Frieira Gestión de Inversio-
nes S.L., and IAGA Gestión de Inversiones, S.L. with di-
rect interests of 23.36 %, 10.09 % and 21.16%
respectively. At the same date and according to the

same source, Parent board members hold direct and At December 31, 2006 the following non-Group
indirect interests amounting to 58.175 % of the companies hold equity interests of more than 10%
company’s share capital. in Group or Multi-Group companies:
None of the subsidiaries shares are listed in the stock market.

Minority interest net equity.
Changes in the net equity of minority interests during 2006 and 2005 are as follows:
Thousand E
Thousand E
19.- DEFERRED INCOME

The detail and movements of this heading of the consolidated balance sheet are as follows:
Thousand E

Thousand E Official grants.
This heading includes grants received to acquire land to
build government-subsidized housing for rent or sale.
Group companies have met all the requirements es-

tablished for administrative grants.
20 • INTEREST-BEARING LOANS AND BORROWINGS

As described in Note 2.1, the Group classifies as current liabilities all debt associated with the real estate bu-
siness regardless of the due dates specified in the respective contracts, and classifies other debt with a ma-
turity of over one year from balance sheet date as non-current financial debt.
Accordingly, classification of debts is as follows: Thousand E
Classification of real estate activity debt is as follows:

2006 Thousand E

2005 Thousand E 1) That at December 31, 2006 there is a firm
commitment to sell; that is, that a private sale-
purchase contract has been entered into with
respect of the mortgaged assets
2) The estimated delivery date (public deed)

is less than twelve months from the year-end
closing date.
Loans and credit facilities for financing land.
Assumed mortgage loans. This heading corresponds to amounts drawn

down from loans and credit facilities arranged
This heading includes amounts drawn down from with various financial institutions that are to be
mortgage loans with a number of financial insti- extended and converted into assumable mortga-
tutions for mortgages which can be assumed by ge loans, which can be assumed by the buyer
the buyer when the home is delivered, and which when the sale becomes effective. Most of these
the Group Companies use to finance real estate loans and credit facilities mature in under a year,
developments in progress. These loans are secu- although due to their convertibility to assumable
red by mortgages on existing inventory and at mortgage loans they will become loans with a
year ended December 31, 2006 they amount to maturity of at least 20 years.
928,079 thousand euros (824,456 in 2005), corres-
ponding to the drawn down portion of mortga- Group Companies have credit facilities amoun-
ges totaling 535,721 thousand euros (481,027 ting to 953,530 thousand euros (592,599 thou-
thousand euros in 2005). sand euros in 2005), of which 880,749 thousand
euros (486,607 thousand euros in 2005) are
Financial expenses relating to “Assumable mort- drawn down.
gage loans” incurred this year amount to 18,099
thousand euros of which 819 thousand euros Discounted bills payable.
(700 thousand euros in 2005) correspond to sub-
sidized housing and 17,280 thousand euros At December 31, 2006, Group Companies had dis-
(11,565 thousand euros in 2005) to private sector count facilities with several financial institutions
housing developments. for various amounts. The total amount of discoun-
ted notes at balance sheet date 2006 is 77,884
While most assumable mortgage loans are not thousand euros (107,851 thousand euros in 2005).
payable in less than twelve months, since they ha-
ve maturities of over one year (as detailed in the The amount of discounted notes as a result of re-
maturity schedule for non-current debt), Group al estate development business in the year tota-
Companies classify as current debt all amounts led approximately 148,326 thousand euros
corresponding to the financing of properties that (182,798 thousand euros in 2005).
meet the following conditions:

Maturity of debt payable to credit les for loans arranged when there are no prior
institutions. mortgage assumptions. The accounting classifi-
cations described in the previous section on as-
Amortizations of assumable mortgage loans are sumable mortgage loans do not therefore apply.
those corresponding to the amortization schedu- The breakdown by maturities is as follows:
Thousand E
Thousand E
The average interest rate for long-term debt in 2006 ranges from 3.53% to 3.83% (2.6% - 3.6% in 2005)
21 • PROVISIONS
Non-current provisions.
The detail and movements of this heading of the consolidated balance sheet is as follows:
Thousand E
Thousand E

The following are included under the heading “Non- In addition to the abovementioned provision, the
current provisions”: Group has a provision of 9,031 thousand euros (7,808 in
2005) for other tax contingencies.
Provisions for commitments to staff
As a result of their respective collective labor agree- It is not possible to determine when these provisions will
ments,some Group Companies are committed to provi- accrue although it is expected to be more than 5 years.
ding retirement awards to employees who, upon rea-
ching retirement age,meet certain conditions regarding Provisions for other litigation
the number of years worked in the company. To meet Corresponds to future risks and expenses that could ari-
these commitments, the Group Companies affected ha- se from litigations in progress. In 2006 Group Compa-
ve made a provision based on actuarial studies. nies made provisions amounting to 2,785 thousand eu-
ros (2,165 thousand euros in 2005) see Note 25.
Provisions for taxes
The Group has a provision amounting to 5,922 thousand eu- It is not possible to determine when these provi-
ros (4,481 thousand euros in 2005) for Tax on Capital Transfers sions will accrue although it is expected to be more
and Documented Legal Acts that applies to mortgage loans. than 3 years.
Current provisions.
Thousand E
Thousand E
Provisions for warranty claims. ted as a percentage of current and previous year
A provision is recognized for expected warranty sales based on statistical data.
claims on products sold during the last two years,
according to the Directors’ best estimate of the The risk is expected to materialize or not within a pe-
future outcome for the Group. The cost is calcula- riod of two years following the balance sheet date.

Provisions for outstanding costs plots sold, this heading includes any outstanding
This refers to outstanding costs from properties general expenses, such as financing interest,
for which a sale has been recorded. Generally, for commercial and general expenses.
delivered homes, this includes building costs,
normally outstanding costs of real estate deve- These expenses are expected to be incurred wi-
lopments and general infrastructures in major thin a period of two years following the balance
housing developments. In addition, for land and sheet date.
22 • OTHER NON-CURRENT LIABILITIES
Thousand E
The balance of “Bills of exchange payable” mostly
corresponds to debt arising from the acquisition
of shares in companies accounted for by the
equity method.
The balance of “Other payables” corresponds to

loans granted by minority shareholders to a sub-
sidiary.
23 • TRADE AND OTHER PAYABLES
Thousand E
As described in Note 2.1., the Group classifies all re-
al estate segment related debts as current liabilities.
Recorded in “Trade and other payables” are debts
arising from the acquisition of land for development
totaling 688,643 thousand euros (631,110 thousand
euros in 2005) that do not bear interest. The matu-
rity date of 528,013 thousand euros (400,735 thou-
sand euros in 2005) of that debt depends on mee-
ting certain development milestones.
The maturity, actual or estimated, of debt arising

from the purchase of land is as follows, broken
down by year:

Thousand E
Trade payables do not bear interest and, in gene-

ral terms, mature between 90 and 180 days. Other
debts do not bear interest and mature in 60 days
on average.
“Payables for purchases and services” includes

40,453 thousand euros corresponding to fees for
intermediary services related to the takeover bid,
as indicated in Note 1.2.
24 • OTHER CURRENT LIABILITIES

Thousand E
The balance of “Public administrations” includes,
among others, the following items:
• VAT payable amounting to 19,189 thousand

euros.
• Withholdings on employee salaries and profes-
sional fees totaling 3,393 thousand euros.
• Social security amounting to 3,058 thousand
euros.
• Local taxes totaling 4,850 thousand euros.
In addition to provisions for accrued salaries unpaid

at year end, the balance of “Outstanding remunera-
tions” at December 31, 2006 includes extraordinary
remunerations amounting to 46,154 thousand eu-
ros, as indicated in Note 1.2.
25 • COMMITMENTS AND CONTINGENCIES

Finance lease and hire purchase commitments.
The Group has finance lease and hire purchase contracts on transport equipment assets and machinery.The
contracts include renewal options, but not call options or acceleration clauses. Renewal options are exerci-
sable at the option of the specific lessee. Future minimum payments relating to finance lease and hire pur-
chase, together with the present value of minimum net payments, are as follows:

Thousand E
Thousand E
Litigation. der protest amounts to 4,799 thousand euros

plus a rebate of 206 thousand euros, correspon-
At the date of preparation of these consolidated ding to a Corporate Income Tax related debt that
financial statements, Group Companies are invol- is mainly due to discrepancies regarding cost
ved in the following litigation: allocation criteria.
Tax related litigation A provision for all tax liabilities arising from dis-
In 2003, the Oficina Nacional de Inspección (Natio- puted tax assessments, including their corres-
nal Inspection Office) of the AEAT (Spanish Tax Au- ponding penalties, was made in the accompan-
thorities) completed its inspection and investiga- ying consolidated income statements, as detailed
tion activities relating to the periods 1996 to 1998 in Note 21 “Provisions”, after having taken into ac-
for Corporate Income Tax and 1997 and 1998 for count any recoverable amounts from years not
VAT and Personal Income Tax withholdings. This affected by the statute of limitations.
tax audit also affects the 1997 and 1998 accounts
of Grupo Empresarial Fadesa, S.A., a company ab- Other litigations
sorbed by the Parent Company in 1999. • There are ten civil actions against FADESA
due to construction defects, brought by va-
Tax assessments amounting to 783 thousand eu- rious home owner associations in Malaga, Las
ros were accepted. The part that was signed un- Palmas de Gran Canaria, Sabadell, Madrid, Ovie-

do and A Coruña for construction defects for lawsuit against the company demanding that
over 500 thousand euros each. Taking into ac- his call option rights over 169,054 company
count the expert reports commissioned by shares, at a price of 2.2 euros per share, be re-
FADESA and prepared by independent techni- cognized, or an equivalent compensation be
cians who visited the buildings, and after com- paid based on the share’s current vale. The La-
paring them with the expert reports submitted bor Court of A Coruña ruled against the plain-
with the claims, and taking into consideration tiff who has filed an appeal in the High Court
all the evidence and therefore the outcome of Justice of Galicia.
that can reasonably be expected, the real cost
of repairs and compensation that FADESA will • In response to a suit brought by FADESA be-
have to incur should be significantly lower than fore the Civil Court of Lisbon in relation to the
the amounts claimed by the plaintiffs. termination of a contract to purchase a site in
Lisbon and FADESA’s subsequent claim for da-
• In the civil proceedings brought by several mages (for a total of 11,800 thousand euros),
companies belonging to the Cenavi group the Portuguese entity ONLYPROPERTIES filed
against Fadesa Inmobiliaria, S. A. with regard to a counterclaim for 1,200 thousand euros for
the sale-purchase agreement in respect of land economic damages caused by the execution
owned by Fadesa Inmobiliaria, S. A. in Santa of a bank guarantee by FADESA for that
Cruz de Bezana, the First Instance Court of San- amount, plus 1,000 thousand euros for alle-
tander ruled in favor of the Cenavi Group. ged non-economic damages. While a ruling in
Fadesa Inmobiliaria, S. A. appealed against this favor of ONLYPROPERTIES cannot be ruled
ruling and the case is still pending. out, FADESA’s legal advisors are of the opinion
that the initial action is more viable, and that
• The Department of Employment and Social therefore the counterclaim by ONLYPROPER-
Affairs of the Canary Islands initiated four sanc- TIES will be rejected. At present the civil pro-
tion proceedings against FADESA as a contrac- ceeding is suspended at the request of the
ting company. They allege a breach of the pro- two parties, in order to reach a transactional
hibition of agreements with subcontractors agreement that will not result in any loss to
intended to evade legal responsibilities of the Fadesa Inmobiliaria, S. A.’s equity.
contractor, in respect of a clause in a number of
contracts that authorize FADESA to withhold • In 1995 the bankruptcy trustee of Julián Or-
amounts owing to the subcontractor if the sub- tega S.A. brought an action against FADESA,
contractor has acted in joint responsibility ma- claiming the amount of a payment from
king payments arising from events caused by FADESA that was declared null and void as a
the subcontractor. The total sum of these fines, result of having been made during the retro-
currently being appealed by FADESA before action period. After the Provincial Court of A
the administrative court, would be a maximum Coruña ruled that FADESA was obliged to ma-
of 700 thousand euros. However, in the opinion ke the payment, FADESA appealed to the Su-
of FADESA’s legal advisors, these allegations are preme Court where the case is now pending.
largely unfounded. The maximum liability arising from this law-
suit is a little over 1,3 million euros, plus legal
• A former executive of FADESA who left the interests.
company voluntarily in 2000 brought a labor

• A lawsuit has been filed against Fadesa In- Fadesa Inmobiliaria, S.A.’s directors consider that
mobiliaria, S.A. by a construction company in the provisions for litigation risk and other risks
Cantabria (Cenavi) claiming 6.8 million euros described in this note are adequate, and they do
for damages for an alleged breach of agree- not expect any additional liabilities to arise in
ment by Fadesa Inmobiliaria, S. A. related to this respect other than those recorded.
preparatory agreements reached regarding
the award to Cenavi of building works in Pié- Guarantees.
lagos. In response to the claim, Fadesa Inmobi-
liaria, S. A. will argue that the rescission of the As a result of the sale contract of Escayolas Alba,
agreements was legitimate and therefore the S.L., the Group undertook to assume a number of
Company is not liable for damages. Without liabilities in the event that the La Rioja govern-
prejudice to the above, in the event of a hypo- ment were to demand the return of subsidies
thetical adverse ruling, in the opinion Fadesa worth 800 thousand euros. The Group’s directors
Inmobiliaria, S. A.’s legal and technical advi- consider that, according to information available
sors, the amount of compensation would be at the date of preparation of these financial state-
significantly less than the sum being claimed ments, this scenario is possible but not probable.
by the plaintiff company.
Other commitments.
• With regard to the development at Miño (A
Coruña High Court of Justice of Galicia decla- Group companies hold sale contracts worth
red null and void the agreement made by the 2,333 million euros (2,053 million euros in 2005)
Miño Town Council on 10 de mayo de 2002 re- relating to developments in progress.
garding the choice of the method of action
(expropriation). Fadesa Inmobiliaria, S. A. ap-
pealed against this ruling before Higher Court
of Justice, which is currently in process, and a
favorable outcome cannot be ruled out. If the
appeal were to be denied, this could lead to a
procedural situation whereby Fadesa Inmobi-
liaria, S. A. would be obliged to provide com-
pensation in an amount that should not exce-
ed 25% of the value of the expropriations.
26 • INCOME TAX
26.1 • Consolidated income tax group
As the parent company of a group of companies, since January 1, 1999 Fadesa Inmobiliaria, S.A. has filed
income tax under a consolidated tax scheme with group companies and is responsible for paying income
tax for the group companies.

The following are the companies, which are included under the scope of consolidation in these annual ac-
counts and comprise the consolidated tax group:
Fadesa Inmobiliaria, S.A. as parent company and the following subsidiaries companies:
The remaining Group Companies each file indivi- 26.3 • Reconciliation of accounting and tax
dual income tax returns, in accordance with local tax income.
rules applicable in each country.
Set forth below is the reconciliation of the income
26.2 •Years open for review by the tax tax resulting from the application of the standard
inspection authorities. tax rate in force in Spain to the profit before inco-
me tax expense recognized in the consolidated in-
The accounts of Group Companies included in the come statement for the years ended December
consolidated income tax return may be inspected 31, 2006 and 2005.
by the tax authorities with regard to all applicable
taxes in the last four fiscal years, as well as 2000.
No additional material liabilities are expected to
be incurred by the Company as a result of any pos-
sible inspection.

Thousand E
The Group intends to apply 2,428 thousand euros pectively. These amounts were reinvested in
in deductions for reinvestment of extraordinary each of the aforementioned years.
profit from capital gains obtained in 2006 on its
2006 income tax return. The income to which the In the tax settlement for 2006, the Company
deductions were applied amounted to 12,136 plans to avail itself of Law 19/1994 (on the
thousand euros and the relevant amounts were amendment of the Fiscal and Economic Regime
reinvested in 2006. In addition, some subsidiaries of the Canary Islands) in respect of an allocation
are entitled to tax rebates of 5,997 thousand eu- to the “Reserve for investments in the Canary Is-
ros due to existing agreements with governmen- lands” amounting to 170 thousand euros. The
tal institutions. Company has up to December 31, 2010 to meet
its reinvestment obligations in connection with
In accordance with prevailing tax legislation, the the allocations made to this reserve. Reinves-
income to which the deductions for reinvestment tment deadlines at December 31, 2006 have been
were applied amounted to 603 thousand euros in fully met at that date.
2002, 34,538 thousand euros in 2003, 9,470 thou-
sand euros 2004 and 12,136 thousand euros in In 2006, Group companies adjusted deferred tax
2005; the related deductions amounted to balances to reflect the new rates in force as from
102,545 thousand euros, 6,907 thousand euros, January 1, 2007. An additional expense of 1,439
894 thousand euros and 411thousand euros, res- thousand euros was recorded.

26.4 • Deferred taxes. At December 31, 2006, no deferred income tax liabi-
lities were recognized (2005: nil) for taxes to be paid
The origins of deferred taxes recorded for 2006 and on accumulated earnings from certain subsidiary or
2005 are as following: associated companies, or joint ventures, since:
Thousand E
1. The Group has decided that the undistributed

income of its subsidiaries will not be distributed
in the foreseeable future
2. The Group has an agreement with its associated
and subsidiary companies and joint ventures that
their profits will not be distributed without the
Fadesa Group’s prior consent. At balance sheet da-
te, the Parent does not foresee giving such consent
3. Joint ventures cannot distribute their profits
without the Fadesa Group’s prior consent. At ba-
lance sheet date, the Parent does not foresee gi-
ving such consent.
26.5 • Other information. The undistributed income of the subsidiaries in 2005

amount to 49,936 thousand euros (17,566 thousand
Individually a number of Group Companies have tax euros in 2005).
loss carryforwards amounting to 58,574 thousand
euros (62,376 thousand euros in 2005) to offset
against future taxable income of the companies that
27 • REVENUES AND EXPENSES
reported losses in accordance with the statute of li- 27.1 • Cost of sales and other operating
mitations set out below. No deferred tax asset rela- expenses.
ting to those losses has been recognized, since these
tax losses cannot be offset against future taxable in- The breakdown of “Cost of sales and other operating
come of other Group Companies, and were genera- expenses” by type is as follows: (Expense is shown as
ted by subsidiaries with recurring losses. positive and income as negative).
Thousand E
Tax losses available for offset against future taxable

income:
Thousand E

The most significant items included in “Non-recurring expenses” are as follows:
Thousand E
Personnel expenses.
Thousand E
The average number of employees of the Group by professional categories is as follows:

2006 Thousand E
2005 Thousand E

27.2 • Changes in trade provisions. Changes in provisions for property, plant and
equipment
Movements of “Changes in trade provisions” are as In 2006 provisions were made for property, plant and
follows (income is shown in brackets): equipment of the hotel segment amounting to 2,164
thousand euros. In the same year, provisions were ma-
Thousand E de for property, plant and equipment of the industrial
segment amounting to 7,736 thousand euros.
27.3 • Financial income and expenses.
The detail of this heading is as follows:
Thousand E
Changes in trade provisions.

Movements of “Changes in trade provisions” are
as follows:
Thousand E
28 • RELATED PARTY DISCLOSURES

The consolidated financial statements include the annual accounts of Fadesa Inmobiliaria, S.A. and of
its subsidiary companies mentioned in Note 3. Transactions between the Parent and its subsidiaries,
which are related parties, carried out in the Company’s ordinary course of business, have been elimi-
nated in the consolidation process.
In addition to the abovementioned, related parties include:
• Significant shareholders:
• Associated and joint venture companies
• Board members and senior executives

Significant shareholders. Significant transactions with major shareholders
in 2006 correspond to the acquisition of 2 parking
As Fadesa Inmobiliaria, S.A. shares are represented spaces in the Conde de Fenosa Building in the
by book entries and therefore no register of share- amount of 45 thousand euros.
holders is maintained, it is impossible to know the
Company’s exact shareholder structure. The Com- As indicated in Note 1.2, within the framework of
pany is unaware of the existence of shareholders the takeover bid for Fadesa Inmobiliaria, S. A. by
with significant shareholdings who are not board Promociones y Urbanizaciones Martín, S. A and
members (including any indirect interest). Huson Big, S. L., the companies Iaga Gestión de In-
versiones, S.L., Frieira Gestión de Inversiones, S.L.
Fadesa Inmobiliaria, S.A. is a subsidiary company of and Inversiones Frieira, S.L., all controlled by the
IAGA Gestión de Inversiones, S.L., which holds a total current president of Fadesa Inmobiliaria, S.A., ha-
interest of 54.61% (21.16% direct interest; 33.45% in- ve given an irrevocable undertaking to accept the
direct interest) as indicated in the following chart: Bid during the first five days of the acceptance
period. The total number of Fadesa shares invol-
ved is 61,884,891 shares, representing 54.614% of
the Company’s share capital. At the date of prepa-
ring these consolidated financial statements, the
abovementioned acceptance of the bid has alre-
ady taken place.
Also, as part of the agreements reached prior to the

presentation of the takeover bid, on September 28
an “Asset transfer agreement” was signed, whereby:
a) Fadesa Inmobiliaria, S.A. will acquire land in

Finca del Noroeste, S. L. is another significant share- Mexico from a company related to Mr. Manuel
holder which, due to its particular circumstances, no- Jove Capellán at a price of 118,600 thousand
tified the CNMV of its 2.97% interest. euros. This acquisition will take effect once the
takeover is completed.
The following chart shows the total amount of trans- b) Fadesa Inmobiliaria, S.A. will sell certain as-
actions carried out under market conditions betwe- sets to entities related to Mr. Manuel Jove Ca-
en significant shareholders or companies of their pellán at a price of 20,177 thousand euros.
respective Groups and Group Companies during
2006 and 2005. Additionally, within the framework of the takeo-
ver bid, the president of Fadesa Inmobiliaria, S.A.
undertook to acquire the shares of Parque Temá-
Thousand E
tico de Madrid, S. A. currently held by the parent
Company, as indicated in Note 1.2.

Associated companies and joint ventures. donations from Fadesa Inmobiliaria, S.A. amoun-
ting to 321 thousand euros and the collection of
Associates companies and joint ventures are de- a loan plus interest amounting to 263 thousand
tailed in Note 3 of the consolidated financial sta- euros (311 and 1,397 thousand euros in 2005).
tements. During 2006 no transactions were ca-
rried out with these companies (60,450 thousand Remunerations received during 2006 by senior
euros for purchase of land in 2005). managers amounted to 2,727 thousand euros
(2,217 thousand euros in 2005). Except for life in-
Board of Directors and Senior management surance policies which amounted to 4 thousand
euros in 2006 (nil in 2005), Senior managers do
In 2006, neither Board Members nor other senior not receive any other benefits, such as loans, pen-
management members of Fadesa Inmobiliaria, sion plans, or the like.
S.A., nor any shareholders represented on the Bo-
ard of Directors, carried out significant transac- As indicated in Note 1.2, within the framework of
tions with Group Companies. the takeover bid for Fadesa Inmobiliaria, S. A. by
Promociones y Urbanizaciones Martín, S. A and Hu-
Remunerations and other considerations received son Big, S. L., Mr. Manuel Jove Capellán, president
by the Board of Directors members during the of Fadesa Inmobiliaria, S. A., notified the Bidders of
2006 amount to 3,677 thousand euros (3,846 in his intention to propose to the Board of Directors
2005), of which 2,952 thousand euros correspond the payment of an extraordinary remuneration or
to Directors’ fees (2,948 in 2005) and 725 thousand bonus to certain employees as a reword for their
(898 in 2005) de euros correspond to salaries. work during a certain length of time in the Com-
pany. The total amount involved, net of tax with-
Board Members do not receive any other benefits holdings, is 30 million euros, while the estimated
such as loans, pension plans, life insurance poli- gross amount is 46,154 thousand euros.
cies, or the like.
Other information regarding the Board of
Board Members do not receive any other remune- Directors.
ration or consideration, neither do they sit on any
other boards of directors of other Group Compa- Members of the Board of Directors holding sha-
nies. A list of positions held by Board Members in res in companies with the same, similar or com-
other Group Companies is to be found in the An- plementary type of activity as the Parent or its
nual Corporate Governance Report. Group, are listed below, with their respective po-
sitions and functions:
Significant transactions made with the María Jo-
sé Jove Foundation (a directors related party be-
longing to the Jove family Group) correspond to

Thousand E
29 • AUDITOR’S FEES amounts also include fees obtained by other

firms belonging to their international network.
Audit fees regarding consolidated financial state-
ments of 2006 amounts to 399 thousand euros
(324 thousand in 2005).
In addition, fees paid in the year for other servi-

ces rendered by the auditor amounts to 83 thou-
sand euros (267 thousand euros in 2005). These

30 • EVENTS AFTER THE BALANCE ment of this type of risk is focused on finding fi-
nancial structures that minimize the cost of debt
SHEET DATE over a multi-year horizon to reduce volatility on
As indicated in Note 2.1 the bid was authorized by the balance sheet.
the CNMV on February 6, 2007, which signals the
start of the mandatory acceptance period during The interest rates of financial instruments classi-
which time Fadesa Inmobiliaria, S. A.’s shareholders fied as variable interest rate instruments are re-
may accept the offer. All the information required by viewed at intervals equal to or less than one year.
current regulations regarding this bid is available in
the corresponding Explanatory Brochure on the Exchange rate risk.
CNMV website. As a result of significant investment in Romania
and Hungary, the Group’s balance sheet is expo-
Subsequent to year end and prior to the preparation sed to exchange rate fluctuations. During the ye-
of these annual accounts, no events have occurred ars covered by these notes, the Group did not se-
which could have a significant effect thereon. ek to hedge against this risk because transactions
carried out in Romania have been of increasingly
lower relative importance.
31 • BUSINESS RISKS AND RISK The Group is also exposed to transaction exchan-
MANAGEMENT POLICIES ge rate risk. This risk stems from purchases and
sales made by operating units in currencies other
Risks derived from financial instruments. than the functional currency. Approximately 5.6%
of Group sales are made in currencies other than
The main risks arising from the Group’s financial the functional currency of the unit making the
instruments are interest rate cash flow risk, liqui- sale, while nearly 5.4% of expenses are in curren-
dity risk, exchange rate risk, and credit risk. The cies other than the functional currency of the
Board reviews and adopts policies to manage unit incurring them.
each risk, as described below.
Credit risk.
Interest rate cash flow risk. With regard to credit risk arising from other fi-
The Group’s policy consists of managing interest nancial assets of the Group such as cash and cash
rate costs by mostly opting for variable interest equivalents, financial assets available for sale, and
rates. Consequently, practically all Group Com- certain derivative instruments, the Group’s expo-
pany debt is based on variable interest rates. sure to credit risk arises from a possible default
by a counterpart, with a maximum risk equal to
As most of that debt corresponds to the real esta- the carrying amount of these instruments.
te business which, as a rule, is either amortized or
assumed by third parties in less than five years, With regard to the Group’s core activity, real esta-
up until now it has not been considered neces- te, since ownership of the property is not transfe-
sary to use interest rate hedges. However, given rred until the entire debt is collected, and given
the Group’s growth in the hotel segment, where a the current upward trend in the real estate mar-
certain degree of financial leverage is required ket and appraisal values, at year-end 2005 there
over periods longer than ten years, the manage- were no losses from credit risk.

There is no concentration of credit risk, since no cus- The Group’s risk control systems are based on a se-
tomer is responsible for more than 5% of the balan- ries of strategic and operational actions aimed at im-
ce recorded in trade and other receivables. plementing risk policies in each area of activity. The-
se systems provide accurate information that enable
Liquidity risk. Group Companies to analyze and assess the various
The Group’s aim is to maintain a balance between con- risks they are exposed to.
tinuity and flexibility of funding by the use of credit fa-
cilities, bank loans, finance leases, and hire purchase Strategic risks
contracts.Fadesa works with practically all Spanish cre- The Executive Committee is responsible for defining
dit institutions with which it arranges credit facilities to Fadesa Group strategy. It establishes the various tar-
be used as required by each particular activity. These gets to achieve, periodically checks for deviations
facilities are for amounts that are far higher than Com- from those targets at the different levels of responsi-
pany’s actual requirements at any given moment, so bility, and takes corrective measures.
the risk of unavailability of funds is practically nil.
Operating risks
Risks derived from the Group’s Activity. Quality and construction cost control
systems
The FADESA Group’s core activity is real estate deve- The Company has formal quality management
lopment in Spain, Portugal, France, Poland, Hungary, systems in place.
Morocco, Mexico, Bulgaria and Romania which inclu-
des, among other activities, the design, construction, These systems are based on the assignation and as-
and marketing of housing. sumption of responsibility at different levels, and on
adequate documentation of procedures aimed at pre-
The main risks facing the Group in each activity can venting, detecting, and correcting any possible devia-
be grouped into the following categories: tions from budgeted construction costs. Housing built
by the Fadesa Group is insured against structural de-
• STRATEGICRISK: Arising from the definition of fects by mandatory ten-year insurance policies.
Fadesa Group’s strategy.
Environmental
• OPERATING RISK: Arising from the actual activity The Group places great importance on ensuring
carried out by the Company which can be bro- strict compliance with environmental standards, by
ken down into quality risk, construction cost risk, assessing possible environmental impacts on a case
environmental risk, and labor risk. by case basis. In addition to complying with manda-
tory standards, the Company applies a number of
• BUSINESS RISK: Refers to the risks that could cause environmental management principles:
the destruction or reduction of the Company’s as-
sets,principally as a result of construction accidents. • Energy saving.
• The use, whenever possible, of recyclable or
• FINANCIAL RISK: Arising from interest rate fluctua- biodegradable materials.
tions. • The use of appropriately certified materials.
• The minimization and treatment of waste.
• TECHNOLOGICAL RISK: Affecting IT or technologi- • The raising of awareness in technicians and
cal systems. other workers.

Labor risks and analysis of the risks affecting business assets.
Ensuring that its workers perform their tasks with The possible consequences of accidents are
the highest level of safety and satisfaction is a quantified and covered by appropriate insurance
constant priority for the Group. policies.
To this end, in addition to ensuring strict com- Financial risk

pliance with prevailing regulations, the Company The purpose of the control systems for managing
maintains a policy of providing relevant training, financial risk is basically to identify, evaluate, and
encouraging staff participation, and controlling cover all risks arising from interest rate changes.
the conditions under which staff work. The Company aims to manage debt within an ap-
propriate financial structure, mainly by the use of
Labor risks are assessed periodically and preventive assumable mortgage loans.
actions (safety programs) involving the Company’s
own staff and external professionals are put in place. Technological risk
This involves the security of information systems
Business risk (access control by personal passwords and the
Prevention of business risk is achieved by means creation of backup copies) and the protection of
of internal control procedures, and the evaluation intellectual and industrial property rights.

ST
ND
MEMBER

MEMBER
representada por
MEMBER MEMBER

Management Report for the year ended December 31, 2006
Thousand E

RESULTS OVERVIEW der of the day in the year just ended. With regard
to key figures affecting the sector, while house
Economic climate prices and the cost of land have continued their
trend of the last two years and are slowing down,
The successful growth pattern of the Spanish the growth rate is still considerable. According to
economy continued unabated into 2006. The the Ministry of Housing, the price of private hou-
strength of internal demand, household con- sing grew by a YoY 9.1% while the price of social
sumption, and the dynamism of the real estate housing rose by 7.5%. These increases, combined
sector pushed GDP by 3.9%, the highest growth with rising interest rates, meant that in 2006 it
rate since 2001, thus continuing a 13 year run of became even more difficult for Spanish families
expansion. However, the bases upon which this to get on the housing ladder. However, there are
dynamism is founded are still the source of imba- a number of reasons for optimism: price rises ha-
lances: YoY inflation is several points higher than ve been slowing with every quarter (during the
the EU average, current account deficit is up to last half-year of 2006 the average growth rate in
8.4% of GDP, and the external sector will once provincial capitals was only 3%, according to the
again shrink the overall growth of our economy. Sociedad de Tasación (Spanish Society of Real Es-
tate Appraisers), the economy is performing well,
Another highlight is the good performance of the unemployment is constantly falling, the arrival of
labor market, partly due to the recent reform that immigrants ensures a strong source of demand,
has significantly increased subsidies for open-en- and the mortgage delinquency is still at a histori-
ded contracts: more than 700,000 jobs have been cally low rate.
created. The jobless rate is at a 30 year low and
the number of workers registered with the Social Meanwhile, the number of new home starts again
Security has ended the year at close to a record reached a historical high. Published studies report
19 million. There has also been a significant boost that nearly 900,000 new homes may have been
to industrial activity, partly thanks to the growth started during the year just ended which, accor-
of productive investment, and to the revival of ding to the Ministry of Economy and Finance, is
the German and French economies, which has re- twice the ideal number for a balanced develop-
vitalized exports. ment of the economy. The reasons for this new re-
cord continue to be favorable interest rates, em-
In short, in macroeconomic terms, Spain is enjo- ployment growth, housing demand arising from
ying a robust growth rate, with government ac- the growing divorce rate, the access to housing by
counts in the black, but with a productivity short- immigrants working in our country, foreign inves-
fall compared with our European partners which tment in second homes, the flexible mortgage
should be corrected if this current boom cycle is terms offered by Spanish financial institutions,
to have a chance of continuing. and a new factor that entered the equation in the
year just ended - the new building control regula-
The situation of the Spanish residential market tions that came into force in September.
can be summed up by saying that the real estate
euphoria of the last ten years did not only not In the light of these figures we need to reflect on
abate in 2006 but we might even say that it spre- the Spanish real estate stock, which has grown
ad to most companies in the sector as takeovers, spectacularly in recent years. According to figures
new listings, and foreign ventures became the or- from the Ministry of Housing, Bank of Spain, and

Caixa Cataluña, the number of houses in Spain • The new Mortgage Law, the aim of which is
grew from 19.7 million in 1998 to 23.2 million at to reduce the cost to borrowers – in particular,
the end of 2005. In this same period the number notary and registry expenses –, to promote
of homes increased from 12.8 million in 1998 to greater competition between financial institu-
15.5 million in December 2005. These figures tions, to prevent default by permitting the in-
show a major growth in demand running parallel troduction of new products, and to provide
to supply, either due to longer life expectancy, or greater transparency and information for the
the change in the traditional family model (an in- end customer.
crease of single person households) or due to im-
migration, because what we can be sure of is that With regard to future trends, the Directors belie-
Spain’s population has not experienced such a ve – as do most analysts and professionals in the
high rate of growth. Another aspect of this scena- sector – that the current growth rate of the hou-
rio that should be mentioned is that the apparent sing market may slacken during 2006. We expect
excess of supply has practically no effect on the house prices to rise by between 5% and 7% and
primary home market; rather it affects houses ac- that the number of new home starts will gra-
quired as holiday homes and for investment. dually ease to around 600,000 units a year, a figu-
re which may be considered as sustainable for
Finally, as mentioned earlier, it should be remem- the years ahead.
bered that 2006 was a year of frenetic corporate
activity. Takeovers in progress or recently com- In conclusion, the real estate sector is enjoying a
pleted and the IPO’s launched – all newly listed stable climate or one with a gentle trend towards
companies performed exceptionally well – is in- deceleration which will allow the companies in-
direct evidence of the confidence that the marke- volved to open up new business lines, such as the
t’s financial players have that the sector will re- provision of extra customer services, or product
main robust in the years ahead. or geographic diversification in the race for grea-
ter size and efficiency which may well be the keys
The future to future success. The most serious concern for
the future is the possibility that so many years of
This coming year, 2007, will be marked by the appe- intense building activity may give way to an ex-
arance of some important new laws and regulations: cess of demand or make it harder for people to
access the housing market due to rising interest
• The new Land Use Law, the main purpose of rates and house prices.
which is to modify the criteria used to rate
land in order to prevent it from becoming ar- Significant events
tificially expensive.
Fadesa Inmobiliaria, S.A. is the parent company of
• The new Spanish Technical Building Code the Fadesa Group, a group of companies mainly
(CTE), the main purpose of which is to impro- engaged in the real estate and construction busi-
ve building quality but, according to some ness. Its corporate purpose and core activities
studies that have been published, it may also consist of real estate development and construc-
affect construction costs and therefore push tion, together with all related activities (purchase
up final prices. and sale of plots, building, urban land use mana-
gement, etc.).

For Fadesa the year 2006 was characterized by a Performance by activity
number of significant events that occurred, which The Group’s revenues during 2006 totaled 1,279
marked a watershed in the history of the company: million euros, a 31% increase, with a gross margin
of 40.3%, 0.6 percentage points higher than in
• March saw a renewal of the senior manage- 2005.
ment with the appointment of a new CEO, the
creation of an Executive Committee, and the set- Real estate activity generated a turnover of 1,211
ting up of five new departments. The main pur- million euros, with a YoY growth of over 31% and
pose of these changes was to create an organiza- gross margin of 42%. This margin, significantly
tional structure that was more focused on where higher than 2003’s and 2004’s figures - 30% and
Company’s main activity is carried out: the va- 37%, respectively -, is slightly higher than the figu-
rious local offices or geographic business areas. re achieved in the previous year. However, there is
a fundamental difference between the two years:
• In September, a number of holding companies while in 2005 the activities which traditionally ha-
of which Mr. Manuel Jove Capellán is the majo- ve a higher gross margin (the sale of land and par-
rity shareholder reached an agreement with the cels) represented 30% of all revenue from real es-
companies of Grupo Martinsa and Mr. Antonio tate activity, in 2006 this percentage was only
Martín to launch a takeover bid for 100% of the 23%. The key to this positive performance lies in
stock of Fadesa Inmobiliaria. Accordingly, on No- the margin obtained from the delivery of homes
vember 2, Promociones y Urbanizaciones Martín, and other residential units, which was the highest
S.A. and Huson Big, S.L. requested authorization ever posted by the Company at year end. This
from the CNMV for a takeover bid for 100% of achievement has obviously been aided by the sig-
Fadesa Inmobiliaria, S.A.’s stock at a price of 35.7 nificant rise of house prices, albeit somewhat slo-
euros per share. wer than in past years, set against a moderate in-
crease in the cost of the raw material – land. But
The year also saw the continuation of the Compan- this does not detract from the existence of other
y’s international expansion process. This process has drivers, such as international expansion, product
led to the acquisition of more land in Poland, France, diversification, or Fadesa’s healthy positioning in a
and Morocco, while the Company has also started highly competitive business environment.
operations in Mexico, Rumania, and Bulgaria.
Turnover from this activity, the Group’s core busi-
Performance of the Group’s businesses ness, therefore includes the sale of homes and
other residential units, which amounted to nearly
Comparable net profit for 2006 amounts to 230.4 899 million euros, 44% more than in 2005, and sa-
million euros, 27% up on the same figure for les of parcels and tracts of land, which amounted
2005. The Directors are satisfied with these figu- to 279.8 million euros.
res and puts them down to the continuing suc-
cess of the Company’s unique business model for The international expansion process, initiated so-
its core business. This is evidenced by significant me years ago with the aim of exploiting any new
growth both in absolute terms and in relative business opportunities arising in other markets
terms (margins), and by the fact that the interna- that might be of interest, is starting to have an
tional expansion process initiated some years impact on the Company’s overall figures. In 2006
ago is now beginning to bear fruit. the following significant events took place:

• In Mexico: Fadesa started operations in Mexi- • In Portugal the Group took a further step for-
co by participating in the creation of a major ward in the process of establishing itself with
residential and tourist complex on a 2 kilome- the launch of a residential complex featuring
ter beach front, 30 minutes away from Puerto modern architecture in the very center of
Vallarta, consisting of a luxury hotel, apart- Oporto.
ments, and a beach club.
• In Hungary the acquisition of land in district
• In France: The first major projects are under- XIII was completed for the development of a
way, including the development of a 6 hectare residential and commercial project involving
site in the town of Massy, very close to Paris, in 2,700 homes. Agreements were also reached
collaboration with the American investment with District XXI City Council for the develop-
fund, Colony. Land in Lyon and the Île de Fran- ment of Csepel.
ce region are being acquired for the construc-
tion of some 2,000 homes. With regard to other activities, considered by the
Directors to be secondary, the hotel business tur-
• In Morocco the first hotel, the Barceló Casa- ned over more than 50 million euros, a YoY incre-
blanca, was opened, and the Company won ase of nearly 50%. Another important aspect is
two tenders held by the Moroccan govern- that the gross margin of the hotel activity is up
ment for the development of two tourist reby 2 percentage points, in spite of the fact that
sorts on the Mediterranean coast of Morocco, many of the hotels are in their initial operating
near Tetuan. Meanwhile two projects were of- phase, which is when the require the most inves-
ficially launched; one in Marrakech, where the tment. Therefore, not only are there more hotels
Group will invest approximately 300 million in the Company’s inventory, but their individual
euros in a complex comprising 2,685 homes margins are gradually increasing.
and the other in Kabila, where a high-end resi-
dential and tourist complex will be built. In the year just ended, industrial activity contri-
buted 17.4 million euros to the Group’s consoli-
• In Poland several sites under various urban dated turnover, 1% more than in the previous ye-
development regimes were acquired in War- ar. As we have stated on several occasions, this
saw and other cities with major growth poten- business line is considered to be non-strategic
tial with a view to building more than 6,000 and, therefore, may be sold off in the not too dis-
homes. tant future.
• In Bulgaria, the first operation was finalized After taking into account general costs and the
with the purchase of a piece of land in the cen- margins generated by all the Group’s various ac-
ter of the capital city, Sofia, earmarked for the tivities, we can conclude that the Group’s EBITDA
construction of an initial development of high- has improved significantly in absolute terms,
rise housing, commercial units, and offices. +28% to 361 million euros while there has been a
slight drop in terms of profitability mainly due to
• In Romania the first land was acquired, the investment required by the international ex-
among which is a site for approximately pansion process that Fadesa is currently immer-
12,000 homes in Bucharest. sed in, which the Directors consider to be one of

the cornerstones of the Company’s medium term At December 31, 2006 the Company’s inventory
development plan. of entitled land in Spain, Portugal, Morocco, Fran-
ce, Poland, Hungary, Bulgaria, Romania, and Mexi-
Backlog co amounted to over 23.7 million buildable squa-
The number of private contracts signed during re meters, 18% higher than the previous year (see
2006 amounted to 10,055 units at a value of attached table).
1,472 million euros. This represents a very positi-
ve upward trend compared to the previous year
(+39% and +15%, respectively) if we exclude the
sale of Torres Europa de L’Hospitalet in 2005
which should be considered as a an extraordinary
transaction. Bearing in that mind in 2006 the
Group delivered 6,913 units of all types (1st and
2nd homes, social housing, and parcels) worth
1,192 million euros, the backlog at December 31
amounts to 14,822 units worth a little over 2,332
million euros, which will provide a solid basis for
future results in 2007 and 2008.
Investment in land and assets

Land is considered as inventory on Fadesa’s ba-
lance sheet as the Company’s business model for
its core activity - real estate development – invol-
ves the acquisition of this raw material, its urban
management, the design and construction of re-
sidential units, and their subsequent sale. The
Company’s inventory of available land is therefo-
re one of the main indicators of the investment
made in order to drive the company’s growth.
The Group’s asset management business is centered on developing the hotel business which leverages de-
velopments for tourism on land in inventory zoned for such a purpose. In 2004 a framework management

agreement was signed with the Barceló chain for the development of what, in principle, is to be a total of 19
hotel projects. At year end the Group was operating 16 hotels (4 more than the previous year).
Asset valuation Analyze the audit work performed on the 2005 ac-
The market value of the Fadesa Group’s real estate counts
assets at December 31, according to the valuation
made by CB Richard Ellis, amounts to 10,500 million Report on the audit plan for 2006
euros.
Report on the preliminary phase of the 2006 audit.
Research & Development
Due to the nature of the company, its activities, and In each of these meetings the Committee issued a fa-
its structure the Company does not normally carry vorable report on the quarterly accounts presented
out research and development activities. by the Company for the first quarter, first half year,
and first nine-months of 2006, and made progress in
Own shares setting up the internal audit department; a risk map
During 2006 Fadesa Inmobiliaria, S.A. performed the has been produced, risks have been classified, and
following transactions with own shares: the Internal Audit Plan for 2007 has been approved.
Thousand E
Positive income net of taxes obtained from own sha-

re transactions amounted to 3,230 thousand euros.
Activities of the Audit Committee during 2006

The Committee met on six occasions.
The purpose of the meetings was to review financial

information to be submitted to the Board of Direc-
tors. The Financial Director and the CEO were pre-
sent at these meetings.
In the course of the year the external auditors attended

three meetings of the Audit Committee in order to:

ST
ND
MEMBER

MEMBER
representada por
MEMBER MEMBER

AUDIT REPORT ON CONSOLIDATED FINANCIAL STATEMENTS

HEAD OFFICE:
Avda. Alonso Molina s/n - Edificio FADESA - 15008 La Coruña - Spain
Phone: +31 981 179 200 - Fax: +31 981 170 050
www.fadesa.es
DEPARTMENT OF CORPORATE MARKETING AND COMMUNICATIONS, FADESA

LEGAL DEPOSIT: C-2412-03 PRINTERS: Imprenta Mundo PHOTOGRAPHS: Documentary Collection, FADESA DESIGN AND COORDINATION: Octo Publicaciones

Martinsa Fadesa Annual Report 2006

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Martinsa Fadesa Annual Report 2006

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Index Index

LETTER FROM THE PRESIDENT ● 7

CORPORATE SOCIAL RESPONSIBILITY ● 65

FINANCIAL INFORMATION ● 121

2006 was a year of great activity in the

FADESA has proved its ability to open

Throughout this last financial year

Our commitment to this external

A further highlight of 2006 was the

8 LET TER FROM THE C H A I R M A N • Annual Repor t 2006

In late 2006 FADESA was faced with a

The work of FADESA’s management

LET TER FROM THE C H A I R M A N • Annual Repor t 2006 9

FADESA ended the 2006 financial year with a

Performance was strong in the

12 E CO N O M I C S U M M A RY • Annual Repor t 2006

E CO N O M I C S U M M A RY • Annual Repor t 2006 13

14 E CO N O M I C S U M M A RY • Annual Repor t 2006

(000,000 euros) 2006 2005 Var. % 06/05

The FADESA Group’s total turnover once again grew significantly

Turnover Net Profit

E CO N O M I C S U M M A RY • Annual Repor t 2006 15

The increasing strength of the

Number of shares 113.31 112.22 1.0%

16 E CO N O M I C S U M M A RY • Annual Repor t 2006

With regard to advance sales,

E CO N O M I C S U M M A RY • Annual Repor t 2006 17

18 E CO N O M I C S U M M A RY • Annual Repor t 2006

(000,000 euros) 2006 2005 Var. % 06/05

E CO N O M I C S U M M A RY • Annual Repor t 2006 19

The second business line in

Finally, the company’s industrial

All in all, therefore, the Overall

With regard to expenditure, other

20 E CO N O M I C S U M M A RY • Annual Repor t 2006

On the asset side one of the

E CO N O M I C S U M M A RY • Annual Repor t 2006 21

Of the 5.1 million square metres

22 E CO N O M I C S U M M A RY • Annual Repor t 2006

FRG = Financière Rive Gauche

E CO N O M I C S U M M A RY • Annual Repor t 2006 23

2005 5.7 2.6 6.3 5.5 20.1

2006 5.7 2.6 7.2 8.2 23.7

24 E CO N O M I C S U M M A RY • Annual Repor t 2006

Geographical distribution of the portfolio of buildable land Breakdown by type of dwelling

E CO N O M I C S U M M A RY • Annual Repor t 2006 25

FADESA’s shares closed 2006 at at flotation (12.40 euros) in April

Days Starting price Closing price Increase in value

The performance of FADESA’s

FADESA share peformance

26 E CO N O M I C S U M M A RY • Annual Repor t 2006

Shares traded daily Daily trading value

E CO N O M I C S U M M A RY • Annual Repor t 2006 27

After the Board Meeting held on

Name Position Nature

After the Board Meeting held on

Name Position Nature

28 E CO N O M I C S U M M A RY • Annual Repor t 2006

Name Postion Nature

The companies and brokerages that have issued reports on FADESA’s

• Ahorro Corporación • Dexia Equities

Capital variations Information for shareholders

A total of 1,092,273 new shares FADESA shareholders can ac-

E CO N O M I C S U M M A RY • Annual Repor t 2006 29