NH Consolidated financial statements 2006 7 Consolidated Financial Statements CONSOLIDATED MANAGEMENT REPORT In 2006 NH Hoteles continued to strengthen its presence in the medium city hotel segment through sustained organic growth and the signing of two agreements that have consolidated its position in the Italian market; one with Tourist Ferry Boat, S.r.l. for the  acquisition  of  the  Framon  chain,  and  one  with  Joker  Partecipazione,  S.r.l.  and  Banca  Intesa,  S.p.a.  (today  Banca  Intesa Sanpaolo, S.p.a.) to acquire no less than 74.47% of Jolly Hotels, S.p.a. As regards organic growth, in 2006 some 15 hotels were opened with 2,486 rooms and projects were signed for a further 3,911 rooms. These projects are in countries where NH Hoteles already has a strong presence (Spain, Netherlands and Germany) and in those where its presence is scanty (Eastern Europe and the UK). As a result of the agreement with Tourist Ferry Boat, S.r.l. (TFB), a joint venture have been created (75% NH Italia 25% TFB) to which NH Hoteles contributes the assets held to date in the Italian market and TFB contributes fifteen hotels operated under the “Framon” brand and four projects under development, of which twelve are located in Sicily and seven in the Italian cities of Rome, Genoa, Venice, Florence, Padova and Amalfi. As a result of this operation, the Group operates a total of 1,807 new rooms all in the Italian market. Of greater significance is the agreement with Joker Partecipazione, S.r.l. and Banca Intesa, S.p.a. (today Banca Intesa Sanpaolo, S.p.a.) to assume majority control of Jolly Hoteles, S.p.a.; a listed company with 45 hotels, 38 located in Italy and 7 abroad. This deal  consolidates  NH  Hoteles’  position  as  the  leading  chain  on  the  Italian  market  with  an  additional  5,863  rooms  to  those previously operated in Italy. This acquisition also enables NH Hoteles to consolidate its position in markets where it was already present (Netherlands, Germany, Belgium and the UK) and to enter other international markets where it was not present such as Paris and New York. When this deal is concluded, NH Hoteles will be present in 21 countries, with 334 hotels and 48,502 rooms, of which 27% are owned, 57% leased (8% with a purchase option) and 16% under management. Contracts have also been signed for 31 projects and a total of 5,907 rooms. The purchase of minority shareholdings begun in 2005 was concluded in 2006 with the purchase via the exchange of NH Hoteles, S.A. shares of the shareholdings that Equity International Properties, Ltd. held in Latinoamericana de Gestión Hotelera, S.A. and the conclusion of the takeover of those shares of Sotogrande, S.A. not controlled by the Group at the time of the takeover. As a result of the operations described above, two capital increases have been approved and subscribed in NH Hoteles: one to acquire the shareholding held by Equity International Properties, Ltd. in Latinoamericana de Gestión Hotelera, S.A. for a total of 57.38 million euros through the issuance of 4,250,000 new shares, and another to exchange for shares of Sotogrande, S.A. held by minority shareholders subscribing to the takeover, for a total amount of 101.6 million euros, through the issuance of 7,815,589 new shares. With  the  conclusion  of  the  takeover,  NH  Hoteles  owned  97.72%  of  Sotogrande  and  the  Group  has  begun  to  reorganise  the company’s assets. Real estate projects previously owned by NH Hoteles have been transferred to Sotogrande (for example the Cap Cana development) and other, non real estate assets have been transferred to NH Hoteles (such as the NH Alanda and NH Marbella hotels and the company Gran Círculo de Madrid, S.A.) converting Sotogrande in a purely real estate operator. In addition to these two capital increases, in November 2006 the Board of NH Hoteles approved a capital increase of up to 250 million euros, via the issuance of a maximum of 16,371,971 new shares, to fund the acquisition of Jolly Hotels, S.p.a. finance an ambitious organic growth plan for the next three years and maintain the Group's healthy financial leverage ratio. As at the date these annual accounts were prepared, this capital increase was fully subscribed and paid-in. The Growth Plan envisages opening 18,000 rooms in 2007-2009, of which 1,198 have been signed to date, evidence of the good progress of this ambitious plan.

NH Consolidated financial statements 2006 8 New products Expansion of the FAST GOOD restaurants continued in 2006. Like NHUBE, this product was a result of the cooperation between Ferrán Adrià and NH Hoteles. After the success of the first restaurant, which opened in the NH Eurobuilding in Madrid in 2004, two new restaurants were opened in 2005 and three more in 2006, proving the success of this new product based on simple, innovative fast food of the very highest quality. The “NHOW” concept developed in 2005 as a new and exclusive category of hotels for avant-garde clients, became a reality in 2006 with the opening of a hotel in Via Tortona, in Milan’s new fashion centre. In the holiday hotel area, the Group has recently launched “SOTOGRANDE RESORTS” which will be the name under which NH Hoteles will operate its top of the range resorts aimed at replicating the lifestyle and the leisure opportunities of Sotogrande in the new locations. Given the Group’s activity, no investments have been made nor expenses incurred in R&D. Results The most positive figure for 2006 is that average revenue per room (Revpar) has increased significantly from the previous year in all business units, with an increase of 10.47% in comparable hotels. The  key  to  this  good  performance  lies  in  the  price-centred  revenue  management  strategy.  In  2006  the  Group  managed  to increase the average price by 8.39% in comparable hotels with a slight improvement on occupancy levels from the previous year. In Germany and Austria Revpar improved by 12.04% and 11.65% respectively, which together with cost savings on rents due to refinancing has meant that positive EBITDA was obtained in these countries for the first time. In 2006, Revpar in Spain grew by 8.36%, thanks mainly to the increase in the average price during periods of low occupancy. NH Hoteles’ positioning in city hotels in Spain means it is benefiting from the growing popularity of Spanish cities as alternative tourist destinations, resulting in significant improvements in occupancy levels during periods of traditionally low demand. Also of note is the excellent performance of the Benelux business unit, which saw growth in Revpar of 10.19%, confirming the good trend maintained by the Group in these countries. As regards the hotel activity, between 2005 and 2006, the chain’s sales rose 12.05% and its Ebitda by 8.5%, thanks to the good business performance by all business units. Sotogrande’s real estate activity declined by 16.9% in 2006 compared to the previous year. This result is not only due to the growing weight of sales of houses and apartments compared to sales of plots of land in total real estate products currently for sale, but because a large plot of land was sold in the last quarter of the previous year for 35 million euros. Sales recorded in 2006 amounted to 69.37 million euros with EBITDA of 27.09 million euros. Unrecorded sales commitments amounted to 74.6 million euros at the end of the year with an estimated margin of some 29.6 million euros. As regards the outlook for 2007, NH Hoteles expects to improve revenue from the sale of rooms in all its business units with the main goal of increasing customer loyalty and numbers but maintaining the pro-active price management strategy that proved so successful in 2006. General description of the risk policy Next year NH Hoteles will continue to seek out new opportunities to expand, while attempting to minimise the risks inherent to its sector which is sensitive to economic cycles and has a high level of operating leverage. One of the main goals of NH Hoteles is the management of the risks it is exposed to in its business activities, in order to preserve the value of its assets and consequently the investment of its shareholders. In this regard, Group Management analyses risk maps in an attempt to minimise risks and optimise their management. Financial  risks  are  analysed  by  the  Corporate  Financial  Management  Area  which  has  the  necessary  instruments  to  control, depending on economic variables, the exposure to changes in interest and exchange rates in addition to liquidity and credit risk.   Credit risk is mainly attributable to the Group’s trade payables. Amounts are shown net of provisions for bad debts, although the risk is very small as the client portfolio is fragmented among a large number of agencies and companies.

NH Consolidated financial statements 2006 9 As regards interest rate risk, information concerning the derivative instruments the company owns at 31 December 2006 and its policies in this respect are described in the accompanying notes to the consolidated annual accounts. Consolidated debt at the end of 2006 excluding the Jolly Hotels operation has slipped to 620.8 million euros from 678.57 million euros at December 2005, with a gearing ratio (net debt/equity) of 0.60x, well below the Group’s target of 1x. Taking into account the Jolly operation, debt would amount to 1,124.8 million euros, including the call and put options for 277.4 million euros and Jolly’s debt at 31 December 2006 that totalled 227 million euros. With this level of debt, the gearing ratio would be around 1x, falling well below the target ratio of 1x after the 250 million euro capital increase recently fully subscribed. Maintaining cash flow sources depends on the performance of the hotel business and on sales of plots of land and developments made by the Group’s real estate activity. These variables depend on the general state of the economy and on the market situation as regards supply and demand. Consolidated management account (in millions of euros) NH HOTELES, S.A. AND DEPENDENT COMPANIES 2006 2005 2006/2005 P&L ACCOUNT AS AT DECEMBER, 31^ST  2006 M Eur. % M. Eur % Var. % Room revenues 1,005.58 92.18% 897.45 91.14% 12.05% Real estate sales and other 69.37 6.36% 83.44 8.47% -16.86% Other non-recurring revenues 15.99 1.47% 3.77 0.38% 324.14% TOTAL REVENUES 1,090.94 100.00% 984.66 100.00% 10.79% Cost of real state sales -32.26 -2.96% -16.89 -1.72% 91.00% Staff cost -344.09 -31.54% -316.04 -32.10% 8.88% Other operating expenses -332.41 -30.47% -299.29 -30.40% 11.07% Other non recurring expenses -9.10 -0.83% -2.10 -0.21% 333.33% GROSS OPERATING PROFIT 373.08 34.20% 350.34 35.58% 6.49% Lease payments and property taxes -184.19 -16.88% -169.49 -17.21% 8.67% EBITDA 188.89 17.31% 180.85 18.37% 4.45% Depreciation -75.00 -6.87% -68.82 -6.99% 8.98% EBIT 113.89 10.44% 112.03 11.38% 1.66% Interest income (expense) -29.79 -2.73% -23.13 -2.35% 28.82% Profit (loss) of companies carried out using the equity method 1.28 0.12% -0.65 -0.07% -296.92% EBT 85.38 7.83% 88.25 8.96% -3.26% Corporation tax -24.09 -2.21% -17.85 -1.81% 34.99% NET INCOME before minorities 61.29 5.62% 70.41 7.15% -12.95% Minority interests 1.16 0.11% -8.17 -0.83% -114.20% NET INCOME 62.45 5.72% 62.24 6.32% 0.34% Note: This consolidated operating account has been prepared using hotel management grouping criteria that do not always coincide with accounting criteria used in the consolidated annual accounts of the NH Hoteles Group.

NH Consolidated financial statements 2006 10 Shares and shareholders The execution of the agreement with minority shareholders of Latinoamericana de Gestión Hotelera, S.A. (LGH) resulted in a capital increase in 2006 of 4,250,000 shares with an issue value, for exchange purposes, of 13.50 euros per share. In exchange, NH Hoteles has received 35.4% of the shares of LGH. The conclusion of the takeover bid for the share capital of Sotogrande, S.A. resulted in a capital increase in 2006 of 7,815,589 shares  with  an  issue  value,  for  exchange  purposes,  of  13  euros  per  share.  In  exchange,  NH  Hoteles  now  owns  97.72%  of Sotogrande, S.A. In 2006, the Group bought (616,762 shares) and sold (411,219 shares) own shares, within legally stipulated limits and sending the required notifications to the Spanish Securities Exchange Commission, obtaining a total capital gain of 3,890 euros. At the year close, the NH Hoteles Group held 230,543 own shares representing 0.18% of share capital for a total cost of 3.5 million euros. In 2006, 220,118,673 shares in NH Hoteles, S.A. were traded on the Continuous Market (228,305,659 in 2005), which represents 1.78 times (1.91 times in 2005) the total number of shares in which the share capital is divided, with average daily trading of 866,608 shares. 1,100,000 0 100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000 900,000 1,000,000 1,200,000 1995 109,713 1996 207,116 1997 439,104 1998 497,391 1999 380,789 2000 577,128 2001 808,156 2002 693,650 2003 911,729 2004 820,896 2005 891,818 2006 866,608 until 28/02/07 1,079,910 18 0 1 2 3 4 6 8 10 12 14 16 20 1996 0.35 1997 1.66 1998 4.97 1999 4.38 2000 7.12 2001 10.02 2002 7.8 2003 8.1 2004 7.47 2005 10.26 2006 12.56 until 28/02/07 17.94 19 17 15 13 11 9 7 5 Average daily trading in shares 1995 - 2007 Average daily trading in millions of euros 1996 - 2007

NH Consolidated financial statements 2006 11 180 90 95 100 105 110 120 130 140 150 160 170 175 165 155 145 135 125 115 12/ 04 01/ 05 02/ 05 03/ 05 04/ 05 05/ 05 06/ 05 07/ 05 08/ 05 09/ 05 10/ 05 11/ 05 12/ 05 01/ 06 02/ 06 03/ 06 04/ 06 05/ 06 06/ 06 07/ 06 08/ 06 09/ 06 11/ 06 01/ 07 10/ 06 12/ 06 NH Hoteles IBEX Performance NH Hoteles vs IBEX december 2004 - february 2007 1,800 0 100 200 300 400 600 800 1,000 1,200 1,400 1,600 2,000 1996 1997 1998 1,017.69 1999 916.76 2000 1,565.88 2001 1,335.18 2002 1,250.31 2003 1,088.94 2004 1,166.64 2005 1,583.81 2006 1,857.98 until 28/02/07 2,281.92 1,900 1,700 1,500 1,300 1,100 900 700 500 2,100 2,200 2,300 213.67 410.66 Capitalisation in millions of euros 1996 - 2007 The following charts show fluctuations in the share price and in the stock market capitalisation in the last two years. The average price of the share in 2006 was 14.49 euros compared to 11.50 euros the previous year, with a maximum of 18.19 euros in August and a minimum of 12.25 in June. The maximum price in 2005 was 14.11 euros, and the minimum 9.31 euros.