NH Consolidated financial statements 2006 37 13 SHORT-TERM FINANCIAL INVESTMENTS 13.1 Financial investments at maturity Shown below is the composition of this heading in the accompanying consolidated balance sheet at 31 December 2006 and 2005: The  line  “Short-term  deposits”  records  the  placement  in  a  short-dated  interest-earning  deposit  of  the  cash  value  of  the  200 million euros capital increase carried out in NH Italia, S.r.l. on 27 December 2006 for the purpose of financing for part of the acquisition of Jolly Hotels, S.p.a. As at 31 December 2006 and 2005, the fixed-income financial assets and short-term deposits all mature in less than one year and earn an average market rate of interest. 13.2 Traded financial assets This caption of the accompanying consolidated balance sheet as at 31 December 2006 and 2005 has the following composition: 14 CASH AND BANKS AND OTHER CASH EQUIVALENTS This caption mainly includes the Group's cash and bank accounts, as well as bank loans and deposits with maturity of no more than  three  months.  The  average  interest  rate  earned  by  the  Group  on  the  balances  of  its  cash  and  banks  and  other  cash equivalents during 2006 and 2005 was a floating rate benchmarked to the Euribor. These assets are recorded at their fair value. There are no restrictions on the disposal of cash. 15 NET EQUITY 15.1 Subscribed capital stock As at December 31 2005 the Parent Company’s share capital was represented by 119,532,898 fully subscribed and paid-in bearer shares each with a nominal value of 2 euros. On 15 August 2005 the shares in the Parent Company were delisted permanently from Euronext Amsterdam, after the approval by the governing body of the Amsterdam Stock Exchange. On 5 May 2006, the annual General Meeting of shareholders approved two capital increases with the following characteristics and disapplication of pre-emption rights: - Capital increase by a nominal value of 8.5 million euros, with issue and placement in circulation of 4,250,000 ordinary shares with a nominal value of 2 euros, of the same class and series as the existing shares, and a share premium of 11.5 euros per share. The new  shares  issued  were  subscribed  for  and  paid  up  in  full  by  Equity  International  Properties,  Ltd.,  by  means  of  a  non-cash contribution  of  1,162,439  shares  of  Latinoamericana  de  Gestión  Hotelera,  S.A.  The  capital  increase  was  registered  in  the Companies Registry of Madrid on 25 May 2006. 2006 2005 Fixed-income financial assets 7,586 26,621 Short-term deposits 200,000 - 207,586 26,621 2006 2005 Variable-yield financial assets 417 638 Interest rate swap (see Note 10.2.2) 11 680 Provision for impairment of equity securities (45) (95) 383 1,223

NH Consolidated financial statements 2006 38 Euros 000s 2006 2005 Debts to credit institutions (*) (Note16) (886,633) (735,669) Liability derivatives (Note 19) (1,909) (4,983) Gross debt (888,542) (740,652) Asset derivatives (Note 19) 17,413 16,877 Financial assets at maturity (Note 13.1) 207,586 26,621 Traded financial assets (Note 13.2) 372 543 Cash and bank and other cash equivalents (Note 14) 42,369 18,039 Treasury assets 267,740 62,080 Total Net Debt (620,802) (678,572) Total Net Equity 1,031,288 890,268 Financial leverage 0.60 0.76 (*) Short-term and long-term debt to credit institutions not including the debt formalisation expenses. -  Capital  increase  for  a  maximum  nominal  value  of  17.54  million  euros,  with  the  issue  and  placement  in  circulation  of  up  to 8,770,130 ordinary shares with a nominal value of 2 euros, of the same class and series as the existing shares, and a share premium of 11 euros per share. The capital increase was approved for purposes of settling the tender offer made by the Parent Company by means of a stock swap over all of the 8,770,130 shares in the company Sotogrande, S.A. that it did not yet own. On 26 December 2006 the tender offer for Sotogrande, S.A. was closed, with the placement in circulation of 7,815,589 ordinary shares with a nominal value of 2 euros, and a share premium of 11 euros per share. As a result of the transactions described above, at 31 December 2006 the share capital of the Parent Company was represented by 131,598,487 bearer shares each with a nominal value of 2 euros and fully subscribed and paid in. All the shares have equal voting and financial rights and are listed on the Continuous Market in the Madrid Stock Exchange and included in the IBEX 35. As at the date these annual accounts were drawn up, an additional capital increase by a total value of 250 million euros has been fully subscribed and paid in, with the issue of 16,371,971 new ordinary shares with a nominal value of 2 euros and a share premium of 13.27 euros per share (see Note 28). According to the latest notifications the Parent Company has received and to the notifications made to the Spanish Securities Exchange Commission before the end of each year, the most significant shareholdings were as follows as at 31 December: At  the  end  of  2006  and  2005,  the  different  members  of  the  Board  of  Directors  held  or  were  the  stable  representatives  of shareholdings representing approximately 30.97% and 33.02% of the share capital, respectively. The main objectives in the management of the NH Hoteles Group’s capital are to ensure short and long-term financial stability, positive  performance  of  the  NH  Hoteles,  S.A.  shares  and  adequate  funding  of  investments,  while  maintaining  the  level  of indebtedness. All with the aim of having the NH Hoteles Group maintain its financial strength and financial ratios so as to support its businesses and maximise shareholder value. During 2006 the NH Hoteles Group strategy did not vary with respect to the previous year, maintaining a financial leverage of 0.60x, far below the 1x ratio always proposed as the Group’s objective. The leverage ratios at 31 December 2006 and 2005 were as shown below: 2006 2005 Grupo Inversor Hesperia, S.A. 22.19% 5.02% Caja de Ahorros y Monte de Piedad de Madrid 10.04% 5.00% Pontegadea Inversiones, S.L. 9.33% 10.27% Caja de Ahorros y Monte de Piedad de Gipuzkoa y San Sebastian 5.09% - Caja de Ahorros de Valencia, Castellón y Alicante 5.56% 6.12% Caja de Ahorros y Monte de Piedad de Zaragoza, Aragón y Rioja 4.54% 5.00% Finaf 92, S.A. - 5.24% Hoteles Participados, S.L. 5.04% 5.25% Shares used for Compensation Plans plus Management Team’s holding 3.32% 4.14%

NH Consolidated financial statements 2006 39 15.2 Reserves of the Parent Company i) Legal reserve According to the consolidated text of the Spanish Public Limited Companies Act, 10% of the net profits of the year must be allocated to the Legal reserve until it reaches at least 20% of share capital. This reserve may be used to increase capital to the extent that its balance exceeds 10% of the capital already increased. Except for this purpose, and for so long as its balance does not exceed 20% of share capital, this reserve may only be used to offset losses if no other reserves are available sufficient for that purpose. ii) Share premium The  consolidated  text  of  the  Public  Limited  Companies  Act  expressly  permits  use  of  the  balance  of  this  reserve  for  capital increases and does not establish any restrictions on its distribution. As indicated in Note 2.4.6. to the accompanying consolidated financial statements, during 2006 the Parent Company carried out two capital increases to acquire the equity stakes held by minority interests in Latinoamericana de Gestión Hotelera, S.A. and Sotogrande, S.A., by means of a swap for those holdings for shares in the Parent Company, with an aggregate increase in the value of the paid-in surplus there of 134.85 million euros. Given that the Parent Company controlled the aforesaid subsidiaries and consolidates them by the global integration method prior to the aforesaid capital increases, the difference between the value of the minority interests acquired and the subscription price of each of the increases, plus the expenses associated therewith, has been recorded in an aggregate of 76.83 million euros in the heading “Share premium” of the accompanying consolidated balance sheet at 31 December 2006. iii) Other reserves not available for distribution Until such time as start-up expenses and goodwill (not including goodwill on consolidation) recorded in the individual Annual Accounts of the companies that are included in the scope of consolidation of the NH Hoteles Group have been written off in full, no dividends may be distributed, unless the amount of reserves available for distribution is at least equal to the balances write-off. iv) Dividends The General Meeting of shareholders held on 5 May 2006 approved the distribution of a gross dividend against voluntary reserves of 0.26 euros per share, giving a total dividend payout of 31.08 million euros. 15.3 Reserves of subsidiaries Shown below is the breakdown for each company of the balances of this account in the consolidated balance sheets -after taking into account the effect of the consolidation adjustments- and the exchange differences recognised in net equity as a result of the consolidation process: Euros 000s 2006 2005 Fully consolidated and consolidated Exchange Exchange using the proportional method Reserves differences Reserves differences NH Participaties, N.V. and subsidiaries 196,957 (84) 167,185 152 Sotogrande, S.A. and subsidiaries 72,027 - 54,136 - Latinoamericana de Gestión Hotelera, S.A. and subsidiaries (6,902) (3,412) 3,460 17,553 NH Private Equity, B.V. and subsidiaries 80 - 72 - NH Central Europe GmbH & Co.KG. and subsidiaries (60,939) (21) (101,164) (46) NH Italia, S.r.l. and subsidiaries (2,869) - (1,216) - Other Spanish hotel companies 37,188 (387) 28,312 162 Subtotal 235,542 (3,904) 150,785 17,821 Consolidated using the equity method Jolly, S.p.a. 8,463 - 9,073 - Palacio de la Merced, S.A. (456) - (418) - Fonfir, S.L. (4) - (4) - Harrington Hall Hotel, Ltd. (379) - - - Corporación Hotelera Dominicana, S.A. - (1,771) - - Corporación Hotelera Oriental, S.A. - (224) - - Subtotal 7,624 (1,995) 8,651 - TOTAL 243,166 (5,899) 159,436 17,821

NH Consolidated financial statements 2006 40 15.4 Equity valuation adjustments Cash flow hedges This  caption  on  the  consolidated  balance  sheet  records  the  net  amount  of  the  changes  in  value  of  the  financial  derivatives designated as cash-flow hedging instruments (see note 4.6.3). Set out below is the movement in the balance of this caption during 2006 and 2005: The reserve for equity valuation adjustments will expire in full over the course of 2007 and 2008 depending on how the rights of the Compensation Plan based on share price are exercised (see Note 24). 15.5 Own shares During 2006, the Group has carried out several operations to purchase 616,862 shares (2,203,349 shares in 2005) and sell 411,219 shares (2,228,349 shares in 2005) of its own shares, within the limits stipulated by law and has made the required notifications to the Spanish Securities Exchange Commission and the Governing Corporations of the Stock Exchanges. At the year end, the Group held 230,543 shares in NH Hoteles, S.A. (25,000 at the end of 2005), representing 0.18% of its share capital, at a cost of 3,504 thousand euros. 15.6 Minority interests Set out below is the breakdown by company of the balance of the heading “Minority Interests” on the consolidated balance sheets as at 31 December 2006 and 2005 and the participation of outside shareholders in the income statement for 2006 and 2005: Euros 000s 2006 2005 Opening balance 4,772 - First application of IAS 32 and 39 - 3,492 Additions 3,306 7,118 Retirements (5,978) (5,838) Closing balance 2,100 4,772 Euros 000s 2006 2005 Profit (loss) Profit (loss) Minority attributed to Minority attributed to Company interests minority interests interests minority interests Latinoamericana de Gestión Hotelera, S.A. and subsidiaries 12,745 130 63,729 2,128 Sotogrande, S.A. and subsidiaries 11,893 179 37,970 6,818 NH Participaties N.V. and subsidiaries 4,147 696 4,030 362 NH Italia, S.p.a. and subsidiaries 136,756 (2,996) 130 (1,332) Other Spanish hotel companies 11,137 1,093 13,823 194 176,678 (898) 119,682 8,170

NH Consolidated financial statements 2006 41 Shown below is a summary of the movement in this caption during 2005 and 2006: The  line  “Changes  in  the  scope  of  consolidation”  records  in  2006  and  2005  the  balances  of  certain  companies  which  were included for the first time in the scope of consolidation of the Group in those years (see Note 2.4.6) and the incorporation of Banca Intesa (today Banca Intesa Sanpaolo, S.p.a.) in the share capital of NH Italia, S.r.l. by means of a cash contribution of 133.74 million euros. The   line   “Change   in   percentage   holdings”   basically   records,   in   2006,   the   purchase   of   35.63%   of   the   share   capital   of Latinoamericana de Gestión Hotelera, S.A. and of 18.66% of Sotogrande, S.A., and in 2005, the purchase of 38% of the share capital of Nacional Hispana de Hoteles, S.R.L. de C.V. (see Note 2.4.6). 16 DEBTS TO CREDIT INSTITUTIONS Set out below is the composition of debts to credit institutions as at 31 December 2006 and 2005 (in thousands of euros): Euros 000s 2006 2005 Opening balance 119,682 137,266 Profit (loss) for the year attributed to minority int. (898) 8,170 Changes in the scope of consolidation 142,517 2,643 Change in percentage holdings (82,326) (31,704) Dividends paid to minority interests (2,042) (2,637) Differences on exchange (255) 6,193 Other movements - (249) Closing balance 176,678 119,682 Maturity date Limit Available Drawn 2006 2007 2008 2009 2010 Rest Mortgage loans 109,338 - 109,338 - 16,930 27,337 6,386 11,276 47,409 Fixed rate 35,907 - 35,907 - 2,983 21,378 921 4,527 6,098 Floating rate 73,431 - 73,431 - 13,947 5,959 5,465 6,749 41,311 Unsecured loans 599,184 - 599,184 - 260,326 105,837 113,898 109,242 9,881 Fixed rate 970 - 970 - 456 344 170 - - Floating rate 598,214 - 598,214 - 259,870 105,493 113,728 109,242 9,881 Subordinated loans 40,000 - 40,000 - - - - - 40,000 Credit lines 339,158 206,778 132,380 - 67,948 32,746 11,384 20,302 - Floating rate 339,158 206,778 132,380 - 67,948 32,746 11,384 20,302 - Interest debt 5,731 - 5,731 - - - - Debt formalization expenses (7,300) (1,179) (1,132) (1,132) (1,132) (2,725) Debt situation at 31.12.06 1,087,680 206,778 879,333 - 349,756 164,788 130,536 139,688 94,565 Debt situation at 31.12.2005 (net of formalization expenses) 776,957 44,401 729,700 136,829 248,603 117,452 95,255 92,873 38,688

NH Consolidated financial statements 2006 42 Shown below is the breakdown of the mortgage loans, be they syndicated or not (in thousands of euros): The line “Unsecured loans, floating rate” includes the following loans: - A syndicated loan granted to NH Hoteles, S.A. by 25 European banks, on 23 June 2004 for 350 million euros. As at 31 December 2006 the outstanding balance of this loan amounted to 311.5 million euros. The loan falls due on 23 June 2010 and pays annual interest at the one-month Euribor plus a margin that varies between 1.1% and 0.60 % depending on the “Net financial debt/EBITDA” ratio. The loan is to be repaid in five instalments, the first of which took place in July 2006 for an amount of 38.5 million euros, being the following in July 2007 for an amount of 77.9 million euros and the last three instalments for equivalent amounts in the following anniversaries. This loan requires that certain financial ratios be complied with. As at 31 December 2006, none of these are in a position that can trigger acceleration of the loan’s maturity by the lenders. - A syndicated loan through Banco Bilbao Vizcaya Argentaria granted to NH Hoteles, S.A. for a maximum of 42.07 million euros, to be used to finance the acquisition, via a public tender offer, of shares in Promociones Eurobuilding, S.A. (company taken over by NH Hoteles, S.A. in 2002). As at 31 December 2006, there were 26 million euros still outstanding. The interest on this loan is charged at a rate equal to the Euribor plus a margin and the loan will be repaid gradually starting in 2001 and ending in 2011. Net book value of Bank Mortgaged asset Fixed rate Floating rate Total the mortgaged asset Spain La Caixa NH Ciutat de Reus - 213 213 2,279 BBVA NH Málaga - 3,245 3,245 9,540 BBVA NH Calderón - 6,283 6,283 29,120 SCH NH Calderón - 8,196 8,196 - Caja Madrid Commercial premises Hotel NH Eurobuilding - 83 83 1,016 BBVA NH Lagasca - 14,400 14,400 17,439 Banco Popular NH Ppe. de la Paz - 7,786 7,786 9,869 SCH NH Alcalá 6,010 - 6,010 12,441 Banco Popular NH Sotogrande - 9,000 9,000 12,793 Bankinter "Las cimas 2 de Sotogrande" development - 4,391 4,391 7,078 Total Spain 6,010 53,597 59,607 101,575 Uruguay Bco. de la República NH Columbia - 397 397 11,134 Total Uruguay - 397 397 11,134 Mexico Caixanova Santa Fe Project - 6,232 6,232 11,875 Total Mexico - 6,232 6,232 11,875 Netherlands NIB NH Gran Krasnapolsky 22,522 - 22,522 80,439 Friesland NH Groningen - 3,480 3,480 5,707 ABN NH Jan Tabak 289 - 289 8,341 Total Netherlands 22,811 3,480 26,291 94,487 Italy Efibanca Donnafugata - 4,400 4,400 1,800 Unicredit Villa de San Mauro - 4,500 4,500 7,500 Banca Popolare San't Angelo Hotel Quattro Canti Project - 825 825 1,700 Total Italy - 9,725 9,725 11,000 Switzerland Banco Cantonale NH Fribourg 7,086 - 7,086 6,991 Total Switzerland 7,086 - 7,086 6,991 Total 35,907 73,431 109,338 237,062

- A loan granted through a “Club Deal” between the banks Banco Bilbao Vizcaya Argentaria, Caja Madrid and Barclays Bank, for 114 million euros, for the purpose of funding the capital increase in NH Italia, S.r.l. (see Note 13.1). This loan accrued interest at a rate equal to the Euribor plus a margin and will be repaid in full in July 2007. - An 18 million euro loan with maturity date in July 2007, the same as the loan described in the preceding paragraph. It was granted for the purpose of financing the repayment of the mortgage loans of Nacional Hispana de Hoteles, S.r.l. de C.V. and subsidiaries. The loan accrues interest at a rate equal to the Euribor plus a margin. - A 40 million dollar loan granted by Caja Madrid to fund the operations currently being carried out in the Caribbean region. It accrues interest at a rate equal to the Libor plus a margin, will begin to be repaid in May 2008 and be repaid in full by May 2010. -  A  loan  to  the  company  NH  Hotel  Rallye,  S.A.  of  40  million  dollars  granted  by  Banco  Bilbao  Vizcaya  Argentaria  to  fund  the Group’s foreign investments. It was granted in January 2006 and matures on November 2009. The loan accrues interest at a rate equal to the Libor plus a margin. In addition, the line “Subordinated loans”, includes a loan of 40 million euros that was completely drawn down at 31 December 2006. This loan accrues interest at a rate equal to the Euribor plus a margin of 1.70%, has a term of 30 years and is to be repaid in a single payment at maturity. Set out below are the average interest rates of financing of the Group during 2006 and 2005: NH Consolidated financial statements 2006 43 2006 2005 Mortgage loans Fixed rate 4.80% 5.09% Floating rate Euribor +1.10 Euribor +1.18 Unsecured loans Fixed rate