LA SEDA DE BARCELONA · positive adjustment to corporate income tax 2004 profit from the financial...

ECONOMIC REPORT

LA SEDA DE BARCELONA

ANNUAL ACCOUNTS AMD MANAGEMENT REPORT

4

BALANCE SHEET AT 31 DECEMBER 2006 AND 2005

Notes 1 to 36 to the attached report are an inseparable part of the balance sheet at 31 December 2006.

31.12.2006

27,096

979 45,085 10,555 2,311 4,773

(6,133)57,570

31,449 156,562

1,185 676

5,788 (114,580)

81,080

428,998 187,878

2,450 86,511 21,499

35 727,371

893,117

11,720

93 6,906 3,051 3,183 3,213 (191)

16,255

153,528 44,758 8,828

103 8,286

(1,087)214,416

4,209 28,171

315 8

(10)32,693

2,135 4,570

14 270,083

1,174,920

31.12.2005

5,381

3.349 85

8,258 -

4,773 (4,434)12,031

51,434 202,631

1,222 5,350 5,158

(152,581)113,214

59,304 -

170 139

23,775 273

83,661 214,287

7,081

209 6,250 1,870

13.956 -

(227)22,058

157,319 37,814 2,786

101 1,596

(1,782)197,834

331 29,872

715 8.007

(10)38,915

223 5,710

109 264,849

486,217

ASSETSFIXEDPreliminary expenses (Note 6)

Intangible fi xed assets (Note 7)Research & development expensesConcessions, patents, licences, trademarks and similarComputer applicationsGreenhouse effect gas emission rightsRights to assets under fi nance leasesDepreciation

Tangible fi xed assets (Note 8)Land and buildingsTechnical plant and machineryOther plant, tools and fi ttingsAdvances and tangible fi xed assets in progressOther fi xed assetsDepreciation

Financial Investments (Note 9)Shares in group companies and affi liatesLoans to group companiesLong-term stock portfolio investmentOther loansLong-term debts with Public BodiesLong-term deposits and guarantees

DEFERRED EXPENSES (Note 10)

CURRENT ASSETS

Inventories (Note 11)Trade stocksRaw materials and other suppliesProducts in progress and semi-fi nishedFinished goodsAdvancesProvisions

DebtorsClients for services and salesGroup companies and affi liates, debtors (Note 12)Sundry Debtors (Note 13)StaffPublic BodiesProvisions

Short-term fi nancial investmentsLoans to group companiesShort-term securities portfolio (Note 9)Other loans (Note 9)Deposits and guarantees set up in the short-term (Note 9)Provisions (Note 9)

Short-term own shares (Note 14) Cash End-of-period adjustments

(Thousands of Euros)

5

BALANCE SHEET AT 31 DECEMBER 2006 AND 2005

LIABILITIESSHAREHOLDERS’ EQUITY (Note 15)

Share Capital (Note 16)Issue Premium (Note 17)Reserves (Note 18)Losses from previous fi nancial years (Note 18) Fiscal period income/loss

DEFERRED INCOME Capital subsidies (Note 5.o)

PROVISIONS FOR RISKS AND EXPENSES Provision greenhouse gas effect emission (Note 19)

LONG-TERM CREDITORS Issue of Debenture Loans and Other Marketable Securities (Note 20) Convertible bonds

Bank borrowing Long-term bank debts (Note 21)Long-term fi nancial lease creditors (Note 7.1)

Debts with group and associate companies (Note 11)

Other creditors (Note 20)Long-term, Public BodiesOther liabilitiesLong-term deposits received

SHORT-TERM CREDITORSIssue of Debenture Loans and Other Marketable Securities (Note 20)Interests from bonds and other securities

Bank borrowing Loans and other debts (Note 21) Short-term fi nancial lease creditors (Note 7.1)Interest debts (Note 21)

Debts with group and associate companiesDebts with group and associate companies (Note 12)

Trade creditorsAdvances received for ordersDebts from purchases and services rendered

Other non-trade debts (Note 22)Public Bodies Other liabilitiesPayments pending

31.12.2006

416,787 175,662 86,248 (1,975)

5,343 682,065

1,036 1,036

1,275 1,275

2,258 2,258

388,250 2,124

390,374

--

478 3,320

9 3,807

396,439

44 44

3,791 1,416

136 5,343

10,415 10,415

-39,117 39,117

2,133 32,250 4,803

39,186 94,105

1,174,920

31.12.2005

101,599 26,918 86,911

-(1,868)

213,560

--

--

47,469 47,469

51,125 3,540

54,665

12,274 12,274

42,008 4,709

9 46,726

161,134

923 923

33,611 1,416

574 35,601

34,348 34,348

2,000 13,774 15,774

15,117 4,647 5,113

24,877 111,523

486,217


6Notes 1 to 36 to the attached report are an inseparable part of the profi t and loss statement for the 2006 fi nancial year..

OPERATING EXPENSES

ProcurementConsumption of Raw Materials and Other Consumable Materials (Note 25) Other outside expenses

Personnel expenses (Note 26)Wages, salaries and assimilated expensesSocial security contributionsFixed Asset Depreciation/Amortisation

Changes in trade provisionsVariation in inventory provisionsVariation in provisions and bad-debt losses (Note 27)Other Operating ExpensesOutside servicesTaxesOther current operating expenses

OPERATING PROFITS

FINANCIAL AND ASSIMILATED EXPENSES

Financial and assimilated expensesFor debts with third parties and assimilated expensesChanges in fi nancial investment provisionsNegative change differences

NEGATIVE FINANCIAL RESULTS

EXTRAORDINARY EXPENSESLosses from intangible fi xed assets, tangible fi xed assets and control portfolioLosses from transactions with own bonds and sharesExtraordinary expenses

EXTRAORDINARY POSITIVE RESULTS

EXTRAORDINARY NEGATIVE RESULTSLOSSES FROM ORDINARY ACTIVITIESPROFIT BEFORE TAX

LOSS BEFORE TAXCORPORATE INCOME TAX (Note 23) - ACCRUED - ADJUSTMENTS TO TAX ON PROFITSPOSITIVE ADJUSTMENT TO CORPORATE INCOME TAX 2004 PROFIT FROM THE FINANCIAL YEAR

PROFIT & LOSS STATEMENT FOR THE YEAR-END 31 DECEMBER2006 AND 2005

31.12.2006

138,633 244

19,983 6,269

14,331

9,090 1,120

28,939 530

1,275 220,414 11,533 231,947

25,752 240 36

26,028

26,028

20,659 20,659

2,853 1

437

3,291 14,366 17,657

-9,126 5,240

14,366

-

5,171 (5,274)

-5,343

5,240

31.12.2005

123,902 211

23,210 5,463

10,765

70 7,547

31,365 546

-203,079 10,032 213,111

11,518 (2)24

11,540

11,540

11,428 11,428

111 1

1,433

1,545 -

1,545

685 1,396

-2,081

2,081

(106)

(107)-

1,868


7

OPERATING INCOME

Net turnover (Note 28) SalesProvision of servicesIncrease in stocks of fi nished products and work-in-progressWork carried out by the company for fi xed assetsOther Operating IncomeAccessory income and other current management income (Note 29)Subsidies

FINANCIAL AND ASSIMILATED INCOME

Share capital income From non-group companiesIncome from other negotiable securities and credit securities of fi xed assetsOther interests and assimilated income Other interestsPositive exchange differences

NEGATIVE FINANCIAL RESULTS

OPERATING PROFITLOSSES FROM ORDINARY ACTIVITIES

EXTRAORDINARY INCOME

Profi ts from transfer of intangible fi xed assets, tangible fi xed assets and control portfolioProfi ts from transactions with own bonds and sharesSubsidies for capital transferred to the profi t/loss for the fi nancial yearExtraordinary income

EXTRAORDINARY NEGATIVE RESULTS

EXTRAORDINARY POSITIVE RESULTSLOSS BEFORE TAX

PROFIT BEFORE TAXLOSS FOR THE FINANCIAL YEAR

31.12.2006

181,272 3,177 1,186 3,065

43,245 2

231,947

231,947

14 482

4,754 119

5,369 20,659 26,028

11,533 9,126

20,659

14,579 515

1,275 1,288

17,657 -

17,657

14,366 -

14,366

5,240 -

5.240

31.12.2005

197,243 5,389

859 9,552

68 -

213,111

213,111

12 -

70 30

112 11,428 11,540

10,032 1,396

11,428

130 201

-529 860 685

1,545

-2,081 2,081

-1,868

1.868


8

La Seda de Barcelona, S.A.

Notes to the balance sheet and profi t and loss statementat 31 December 2006

Note 1. Company Activity

The Company was set up on 23 May 1925, its duration is indefi nite and as stated in its memorandum of association of the same date, its

corporate purpose is the manufacture and sale of artifi cial silk in all its aspects and derivatives, the production, handling, processing and

sale of all kinds of fi bres and textile and technical threads and artifi cial and synthetic materials, including the construction of its own machi-

nery, the production of power and steam earmarked for its plants, as well as the carrying out of research in the aforesaid fi elds.

The aforementioned activities may also be carried out fully or partially in an indirect manner, through shareholdings in other companies with

identical or similar corporate purposes. Furthermore and as a result of the different merger processes described below, its corporate purpose

has been extended to include the manufacture and trading of polyester resin, polyester fi bre, polyethylene terephthalate (PET polymer), the

production of eicosapentaenoic acid (EPA), docosahexaenoic acid (DHA) and all kinds of polyunsaturated fatty acids.

The Company is registered in the Companies Register for Barcelona, on page 16,004, sheet 11, volume 209 and it has its registered offi ces

and carries out its activity at Avda. Remolar, 2, 08820 El Prat de Llobregat. The Company’s central offi ces are located at Pº de Gracia, 85,

08008 Barcelona.

On 2 June 1998 and by means of a public deed of the same date, the Company merged with the subsidiary company called Industrias Quí-

micas Asociadas-IQA, S.A.U. through the absorption and liquidation of the latter, thus assigning all its equity in a block and completely to

La Seda de Barcelona, S.A. The merger was carried out and came into effect on 1 January 1997. Furthermore, on 14 December 2001, the

Company took over, by means of the procedure of overall assignment of assets and liabilities, the whole of the equity of Hispano Química,

S.A.U and Viscoseda Barcelona, S.L.U.

On 1 October 2003, the spin-off was performed, by means of the provision of a branch of activity, for the industrial complex called “IQA”

in Tarragona to a company called Industrias Químicas Asociadas LSB, S.L.U., fully owned by the Company (see Note 5. h).

Subsequently, on 29 December 2004, the Annual General Meeting of Shareholders of La Seda de Barcelona, S.A. approved the merger by

absorption with effect on 1 January, whereby the Company took over the group companies: Catalana de Polímers, S.A.U., KD-IQA, S.L.U.,

Iberseda, S.L.U., Proyectos Voltak, S.L.U., Celtibérica de Finanzas, S.L.U. and Mendilau, S.L.U., of which it was the holder of 100% of

their share capital.

As regards the annual accounts for 2004, the Company Administrators proceeded to draw them up again on 7 July 2005 due to the fact

that the merger agreement described above was registered at the Companies Registry on 16 June 2005. The aforesaid new wording was

submitted to and approved by the Extraordinary General Meeting of Shareholders held on 21 October 2005, with the merger being entered

in the accounts of tax year 2005.

The accounting effects of the aforementioned transactions were described in the pertinent annual accounts.

La Seda de Barcelona, S.A. is the controlling company for the Seda Group, which includes several companies with common manage-

ment and shareholders.

Not3 2. Bases for Presentation of the Annual Accounts

a) True and fair view.

The enclosed balance sheet, profi t & loss statement and notes were drawn up on the basis of the Company’s accounting records at 31

December 2006, modifi ed by the effects of the update carried out according to Royal Decree-Act 7/1996, of 7 June, and they are presented

in line with generally accepted accounting principles. The said annual accounts are pending approval by the Company’s Annual General

9

Meeting of Shareholders. The Administrators of La Seda de Barcelona, S.A. believe they will be approved without any modifi cations. The

annual accounts for 2005 were approved on 12 June 2006.

b) Comparison of the information.

The enclosed fi nancial statements for La Seda de Barcelona, S.A. closed on 31 December 2006 and 2005, are presented in accordance

with the schedules and regulations on accounting for Companies contained in Act 19/1989, of 25 July, for partial restatement and adap-

tation of company legislation to comply with European Economic Community directives in terms of Companies and the Revised Text of the

Public Limited Companies Act, approved by Legislative Royal Decree 1564/1989, of 22 December, with the aim of showing a true and fair

view of the net worth, the fi nancial situation and the Company’s profi ts/losses. However, and taking into account the effects of the asset

and the business operation resulting from the segregation and subsequent non-monetary contribution of the textile business (see Note

3.1), as well as the purchase of several foreign companies whose corporate purpose is the manufacture of PET polymer (see Note 3.2), the

comparable nature of the attached fi nancial statements is conditioned by this circumstance.

Note 3. Relevant facts

3.1 On 10 October 2006, the Board of Directors of La Seda de Barcelona, S.A. approved the non-monetary contribution of the branch of

activity made up by the assets and liabilities corresponding to the publication of polyester fi bre at the El Prat de Llobregat plant to Fibracat

Europa, S.L.U., the breakdown of which is as follows:

The accounting effects of this operation are shown under the “spin-off of the branch of activity” description in the corresponding notes of

this report.

Subsequently, on 30 November 2006 La Seda de Barcelona, S.A. sold 68.32% of the company shares of Fibracat Europa, S.L.U. to a

Mexican company. The remaining shares are given as a non-monetary contribution targeted at the incorporation of the company Fibras

Europeas de Poliéster, S.L. for a value of 2.28 million euros (see Note 9.5).

3.2 During 2006 and pursuant to the growth strategy of the Group in the PET sector, La Seda de Barcelona, S.A. acquired shares in di-

fferent foreign companies whose corporate purpose is the manufacture and distribution of PET polymer, with a breakdown as follows (see

Note 9.2):

ASSETS (Thousands of Euros)

FIXED ASSETS

Net Intangible Assets 822

Net tangible Assets 18,919

CURRENT ASSETS

CURRENT ASSETS 2,006

Trade Payables 55,520

77,267

LIABILITIES

LONG-TERM LIABILITIES 70,067

NON-REQUIRABLE LIABILITIES 7,200

77,267

- Artenius Portugal, Industria de Polimeros, S.A.

- Artenius Italia, S.p.A

- Artenius Holding, B.V.

- Artenius Romania, SRL

- Artenius Turkpet Kimyevi Maddeler

ve Pet Ambalat MalzemeleriSanayi Anonim Sirketi

- Artenius Hellas Holding, S.A.

- Simpe, S.p.A.

- Artenius Sines, S.A.

10

For the purpose of tackling the growth and restructuring process of the resulting Group it has set up a syndicated loan for 405 million euros

(see Note 21) with a bank as the sole broker. This amount is to be targeted mainly at the restructuring of liabilities, by cancelling out all of

the debts held with banks and public authorities.

Note 4. Distribution of profi ts/losses

The distribution of the profi t from the tax year shall be decided at the Annual General Meeting of Shareholders.

The Administrators will propose the following allocation of profi ts:

BASIS OF THE SHARE-OUT (Thousands of Euros)

Results for the fi nancial year 5,343

5,343

Distribution

To legal reserve 534

To other reserves 2,834

To losses from previous periods 1,975

5,343

Note 5. Valuation Standards a) Preliminary expenses.

These basically correspond to the expenses incurred in relation to the incorporation and the setting up of new plants for the companies

included in the merger (see Note 1), as well as the share capital increases carried out by the Company (see Note 16).

Their depreciation is carried out using the straight-line method, at a rate of 20% per year.

b) Research & development expenses.

The expenses incurred in the individual research & development projects are valued at their acquisition price or direct production cost, with

their capitalization being carried out when there are credible reasons for their technical success and fi nancial and commercial profi tability,

which are entered as an expense otherwise.

Depreciation is carried out based on the straight-line method, within a term of 5 years.

c) Concessions, patents, licences, trademarks and similar.

They are valued at the acquisition price, including the cost for registration and arrangement of the pertinent patent or trademark.

Their depreciation is carried out using the straight-line method, at a rate of 10% per year.

d) Computer applications.

Computer applications are valued at the purchase price and/or production cost for the ownership of computer programmes and applications,

both those purchased from third parties and those produced by the Company itself, therefore the maintenance charges for the computer

applications would not appear.

Their depreciation is carried out using the straight-line method over a maximum term of fi ve years.

e) Greenhouse effect gas emission rights.

This corresponds to the greenhouse effect gas emission rights assigned by virtue of a National Plan through acquisition - generation. They

are valued at their purchase price, which is the price paid for the rights assigned free of charge by the Ministry of the Environment by virtue

of the National Allocation Plan, at the listing price of their corresponding secondary market on the date of incorporation. They are unders-

tood to form part of the company’s net assets at the start of the calendar year to which they correspond. These rights will be disposed of

once they are shown in the National Register of Emission Rights.

11

f) Assets under fi nance leases, lease-back transaction.

In accordance with that stipulated in Temporary Provision 5 of Royal Decree 1643/1990, of 20 December, whereby the General Accoun-

tancy Plan was passed, the Company proceeded to enter the assets deriving from the lease-back contracts as intangible assets at the net

book value of the asset that was the object of the transaction, whilst entering on the liabilities side the total debt for the repayments plus

the sum total of the purchase option. The difference between the latter and the value of disposing of the asset that was the object of the

transaction, made up by the fi nancial charges for the transaction, is entered in the accounts under deferred expenses. Assets entered as

intangible assets are depreciated by taking into account the useful life of the asset that was the object of the contract. When the purchase

option is exercised, the value of the assets entered and their pertinent accumulated depreciation are removed from the accounts, since

they then go on to form part of the value of the purchased asset.

The deferred expenses are entered under profi ts/losses in accordance with a fi nancial criterion.

g) Tangible fi xed assets.

Tangible fi xed assets are valued at the cost price, production cost or transfer value, with the latter matching the book value of the elements

incorporated as a result of the takeover processes described in Note 1 above. The said cost is adjusted in accordance with the value re-

appraisal carried out in accordance with that set forth by Royal Decree-Act 7/1996 (see Note 8.1). The gains or net increases in the value

resulting from the aforesaid reappraisal transaction are amortised in the tax periods that are outstanding until the end of the useful life of

the reappraised elements.

Subsequent additions are valued at the cost price, which includes additional expenses until the asset is in proper working order.

Repairs that do not represent an increase in the useful life and the maintenance charges are charged directly to the profi t & loss statement.

The costs for extension or improvement that give rise to a greater duration for the asset or an increase in the productivity, capacity or effi -

ciency, are capitalized as the greater value thereof.

During the tax year and on its own behalf the Company carried out building works and works that may be entered as the greater cost of the

tangible fi xed assets for a sum total of 3.07 million euros.

Depreciation of the elements of the tangible fi xed assets is started in relation to their purchase and/or repair date, in a straight-line method

according to the estimated years of useful life and applying it to the cost values, as per the following breakdown:

Group of elements % Depreciation

Depreciation 1-5

Technical plant and machinery 1,5-15

Other plant, tools and fi ttingso 5-9,1

Other fi xed assets 7,2-12,5-16-25

If factors identifying obsolescence are detected which could affect these assets, the appropriate provisions are made for their depreciation.

There are no items of the tangible fi xed assets that appear on the assets side for a fi xed sum.

h) Negotiable securities and other similar investments

The Company uses the following criterion when entering its investments in negotiable securities:

1. Securities with offi cial listing. At cost or market price, the lower of the two. The offi cial average listing from the last quarter of the tax

year or the quotation at the close is deemed to be the market value, the lower of the two.

2. Securities without offi cial listing. Generally speaking, at cost and reduced, where applicable, by the necessary provisions for deprecia-

tion, by the excess of the cost as regards its reasonable value at the close of the tax year.

In relation to the criterion described above, certain specific circumstances should be stated relating to the following companys

hareholdings:

12

• Petrolest, S.L. The shareholdings received, equivalent to 49% of the share capital, correspond to the valuation made for the contribu-

tion to the Company’s net worth from the branch of activity consisting of the distribution, logistics, loading, unloading and transportation

of the whole range of products that La Seda de Barcelona, S.A. manufactures and trades, made up by a number of tangible fi xed assets

that form an autonomous operating unit and the sum total of which amounts to 2.74 million euros (see Note 9.2).

• Industrias Químicas Asociadas LSB, S.L.U. The holdings acquired match the valuation made for the contribution to the net worth of

the company for the branch of activity consisting of the manufacture and trade of glycol and ethoxylates, made up by a number of assets,

rights and duties that form an autonomous fi nancial unit and the sum total of which amounts to 30.74 million euros (see Note 9.2).

• Fibras Europeas de Poliéster S.L. The holdings acquired match the valuation made for the contribution to the net worth of the com-

pany for the branch of activity consisting of the manufacture of polyester fi bres at the El Prat de Llobregat plant, made up of a number

of assets, rights and duties that form an autonomous fi nancial unit and the sum total of which amounts to 2.28 million euros (see Notes

3 and 9.5).

The capital losses between the cost and the market value, if they correspond to holdings that are quoted on an organised market, or otherwise

between the cost and the reasonable value at the close of the tax year that is taken from the last balance sheet approved at the Annual General

Meeting and/or drawn up by the Governing Body corresponding to each one of the non-quoted holdings, are entered, if they are correct, in

the account for “Provisions” under the heading for “Long-term fi nancial investments” and “Temporary fi nancial investments” on the enclosed

balance sheet.

Along this line, and as an exception to the criterion described above, the Company, with regard to its holding in Artenius Portugal, Industria

de Polimeros, S.A., Artenius Italia, S.p.A, Simpe, S.p.A., Artenius Hellas Holding, S.A. and Petrolest, S.L. has chosen not to make a

provision for the difference between the pertinent theoretical book value of the said holding (see Note 9.4) and their respective purchase

prices on the basis of the existence of reasonable expectations for achieving future profi ts that ensure the recovery of investment in the fi rst

fi ve and a saving in costs for the Group from the fact that Petrolest, S.L. will perform the transportation service for all its range of products

exclusively. In the aforementioned cases, the profi ts budgeted for and checked on drawing up these annual accounts justify this decision.

Non-trade loans, both in the short and the long term, to Group companies and other loans, are entered according to the sum total handed over.

The difference with the nominal value is deemed to be income from interest in the tax year in which it is accrued, following a fi nancial criterion.

The deposits and guarantees set up, both in the short- and in the long-term, are entered according to the sums actually paid over.

Short-term deposits are shown at their nominal value.

Along this line, as stated in Note 9.2., the Company is the majority shareholder or owns holdings of over 20% in the share capital of certain

companies.

The enclosed annual accounts do not refl ect the effect that would arise in the pertinent fi nancial statements if they were to include the said

holdings in the latter by applying the Standards for the Preparation of Consolidated Annual Accounts.

The Company has also drawn up its consolidated annual accounts and management report for the tax year ending on 31 December 2006.

13


31.12.2006

Total assets 1,460,974

Net worth 690,658

- Controlling company 676,291

- Minority shareholders 14,367

Net turnover 644,564

Results for the year 2,743

- Controlling company 2,741

- Minority shareholders 2

i) Long-term debts with public bodies.

The following items are entered under this heading:

• As regards Assets, the tax credit for compensation of the taxable bases owed that the Company plans to recover in the coming tax

years, as well as the tax deductions and allowances pending application. An amount of 2.30 million euros has been registered in the

short-term for these items.

• With regard to liabilities, the deferred intragroup tax.

Pursuant to Law 35/2006 dated 28 November 2006, which amends the taxable rate of corporation tax, the Company has adjusted the tax

credits, advanced taxes and deferred taxes for a net amount of 2.28 million euros.

j) Deferred expenses.

This basically corresponds to the expenses from deferred charges for the postponement of debts, which are attributed to profi ts/losses

in accordance with a fi nancial criterion in the period for their duration, with a sum total of 8.01 million euros having been transferred to

profi ts/losses during the tax year.

k) Inventories.

Raw materials and other procurements. They are valued at the cost price in accordance with the weighted average price method. As an ex-

ception to the aforementioned criterion, the basic raw materials derived from petroleum are valued at the latest price agreed with the suppliers,

which is not signifi cantly different from the one that would be obtained from a valuation using the weighted average price method. The value

correction for reversible losses is deducted from the amount obtained. The estimate for such losses is made at the close of the tax year when

the market value of the raw materials and other procurement is lower than their cost price.

Work in progress, half-fi nished and fi nished goods. They are valued by means of a cost list per article and process that is established by the

company for this purpose.

The production cost defi ned by the price list is found by adding to the purchase price of the raw materials and other consumable materials,

the costs directly attributable to the product, as well as the part that corresponds from the costs indirectly attributable thereto insofar that

such costs correspond to the manufacturing process from the pertinent period.

The valuation of obsolete, defective or slow-moving products has been reduced to their possible realization value.

l) Debtors and creditors for trade transactions.

The debt and credit balances resulting from the Company’s trade transactions, both in the short and the long term, are entered at their no-

minal value. The interest charges included in the value of such transactions with maturity exceeding one tax year are deferred and accrued,

then they are attributed to the profi ts/losses following fi nancial criteria.

The main fi gures for the consolidated accounts for La Seda de Barcelona, S.A. for the 2006 tax year, drawn up in accordance with that

set forth in the fi nal Provision Eleven of Act 62/2003 of 30 December, by applying the International Financial Reporting Standards passed

by the European Commission regulations, are the following:

14

ll) Non-trade debts.

Non-trade debts, both short and long term, are registered for the amount received. The difference with the nominal value, if applicable, is

deemed to be income from interest in the tax year in which it is accrued, following a fi nancial criterion.

m) Provision for bad debts.

The provision for bad debts is allocated with a charge to the profi ts/losses for the tax year, and for the whole of the outstanding balance,

when the following circumstances coincide:

• Clients whose balances reveal a debt lasting for over 6 months.

• Clients declared to be undergoing bankruptcy proceedings.

• Clients tried for the crime of concealment of assets.

• Clients whose balances have been sued for, with the aim of going to court or arbitration proceedings.

n) Own shares.

They appear valued at their cost price, with the pertinent restricted reserve being entered under the heading for “Equity” for the same amount,

in accordance with Article 79.3. of the Revised Text of the Public Limited Companies Act (see Notes 14, 15 and 18).

At the year-end, if the purchase price of the securities is less than the lower of the listed price on the last day of the tax year or the avera-

ge listed price of the last quarter or of the book value of the shares, the following provisions shall be applied pursuant to the principle of

prudence. When the book value is the lower amount, the amount of the provision may be broken down into the defi ned as “market effect”

and effect resulting from the possible reduction of capital”, with the counter entries being the profi t and loss statement and the reserve’s

statement, respectively.

The purchase of the Company’s own shares was authorised by the Annual General Meeting of Shareholders held on 12 June 2006 and for

a maximum duration of eighteen months.

ñ) Undertakings with the staff.

Furthermore, in the 1998 tax year, the Company, applying the collective agreement signed with its workers, set up an external pension

fund which consists of the sum of 2.20% of each gross annual salary for each and every one of the participants. This annual contribution

began in the year 1998.

At the same time, on 23 October 2000 the Company, in compliance with Act 30/1995 and Royal Decree 1588/1999, proceeded to outsour-

ce its undertakings with its workers using the method of taking out insurance policies with the fi rm Norton Life M.P.S.

o) Subsidies.

For the purpose of entering the subsidies received into the books, the Company applies the following criteria:

1. Operating subsidies. These are entered as “Other operating expenses” as soon as notifi cation of the subsidy is received.

2. Subsidies linked to the greenhouse effect gas emission rights.

The non-repayable subsidies linked to the greenhouse effect gas emission rights, acquired free of charge or for a price substantially below

their vendible value are entered as “Income to be allocated over several years”, and are registered as extraordinary revenue. The expenses

stemming from gas emissions related to the subsidised emission rights are entered to results.

Depreciation that may affect the emission rights lead to the corresponding subsidy being attributed to results in proportion to the same, with

the part of these rights that has been funded free of charge considered to be of an irreversible nature.

15

p) Provisions for contingencies and expenses

Provision for greenhouse effect gas emission rights. The obligations that existed at 31 December 2006 are those that arose as a conse-

quence of the expense linked to the consumption of real emissions of greenhouse gases, concerning the emission rights transferred to the

Company. These are entered on to the balance sheet as best estimation provisions of the payment to be made in order to cancel out the

foregoing obligation.

q) Convertible bonds.

Convertible bonds appear on the liabilities side in the long-term on the balance sheet for the sum total to be handed over in accordance

with the nominal value of the bonds issued. The interest charges are acknowledged in the current liabilities, as and when they accrue.

The expenses for issuing bonds are amortised during the period in which the bonds are kept in circulation, in proportion to the maturity

there of.

r) Debts with banks.

The debts with banks for loans and credits received are entered in the accounts at their repayment value. The fi nancial interest charges

accrued and pending payment at the close of the tax year appear separately under the heading “Debts for interest charges” on the enclo-

sed balance sheet.

s) Revenues and expenses.

The income and expenses are attributed depending on the real fl ow of goods and services that they represent, and regardless of the time

at which the monetary or fi nancial fl ow deriving from them actually arises.

Nonetheless, following the principle of prudence, the Company only enters in its accounts the profi ts made at the close of the tax year, while

foreseeable risks and losses, which are still possible, are entered as soon as they are known.

The sales of goods and revenues from services provided are entered without including the amounts corresponding to the taxes that apply

to these transactions, deducting as the lowest amount of the transaction all the discounts, whether or not shown on invoices, which do not

belong to prompt payment. The latter are deemed to be fi nancial charges.

The sums of the taxes applicable to the purchases of merchandise and other goods for resale and other goods for their subsequent resale,

excluding Value Added Tax (VAT), are entered as the highest value of the goods or services acquired.

Discounts following the issue or reception, where applicable, of an invoice, brought about by defects in quality, breach of time limits for de-

livery or other similar causes, as well as discounts for volume, are entered by differentiating between the sums from the sales or purchases

of goods and the income or expenses from services, respectively.

t) Transactions in currencies other than the euro.

The conversion of transactions carried out in currencies other than the euro and their pertinent balances is carried out by applying the

following criteria:

1.Tangible and intangible fi xed assets. The conversion into euros is carried out by applying the exchange rate in force to the cost price or

production cost on the inclusion of the goods in the Company’s net worth.

2. Credits and debits. The conversion of credits and debits into currencies other than the euro is carried out by applying the exchange rate

in force on the transaction, then transferring the exchange gains/losses to the profi t and loss account that arise at the time of the pertinent

settlement or payment. At the close of the tax year the value of the debit and credit balances in currencies other than the euro was worked

out at the exchange rate in force on 31 December 2006, with the gains/losses obtained being entered onto the balance sheet. For this

purpose, the sum total entered for exchange gains was not signifi cant at 31 December 2006.

u) Corporation Tax.

So as to enter Corporation Tax in the accounts, the differences were taken into account that might arise between the book profi t/loss and the

tax profi t/loss, with the latter being understood to be the taxable base of the tax, as well as the allowances and deductions from the charge

16

for the tax that are deemed to be a lesser amount of the charge to be paid for Corporation Tax for the tax year in which that profi t is obtained,

providing that the taxable base for the tax is positive.

v) Transactions with Group companies.

Transactions between Group companies were carried out under the same conditions as those applied with third parties not linked to the

Company as regards shareholdings.

w) Classifi cation of the balances as short -and long-term.

On the enclosed balance sheet, transactions deemed to be long-term ones are those for which the maturity period at 31 December 2006

is over twelve months.

x) Instruments for risk hedging.

During the 2006 tax year the Company signed contracts for swaps as instruments for covering the risk in the change of the interest rate for

its fi nancial debts referenced at a variable interest rate. Since they are hedge transactions without any purpose for speculation, the profi ts/

losses arising from them are entered at the time of the settlement of the transactions.

At the close of the 2006 tax year the possible fi nancial risk was mitigated as a result of the rise in the interest rates on the inter-bank market.

y) Environment.

The expenses incurred through the purchase of systems, equipment, fi xtures and fi ttings, the purpose of which is the removal, restriction

or control of possible impact that the Company’s standard activity could have on the environment, are considered as investments in fi xed

assets.

The expenses concerning the environment, other than those carried out for the purchase of fi xed assets, are considered as expenses per-

taining to the year in which they accrue.

Note 6. Preliminary expenses

Analysis of the movement during the tax year. The movement recorded during the tax year ended on 31 December 2006, was the

following:


Items for 2006

Balance at31.12.2005

TransfersBalance at31.12.2006Addition Provision D (H)

Formation expenses 3 - (3) - - -

Initial start-up expenses 798 - (295) - - 503

Capital increase costs 4,580 25,503 (3,490) - - 26,593

5,381 25,503 (3,788) - - 27,096

The charge to profi ts/losses for the period by way of allocation to depreciation of preliminary expenses amounted to 3.79 million euros.

17


Items for 2006 Balance at 31.12.2006


Branch spin-off of activity (*)

Transfers Accumulated

Additions Drops D (H) Cost Depreciation Net value

Research & development expenses 3,349 (1,580) 30 (820) - - 979 (232) 747

Concessions, patents, licences, trademarks and similar 85 - 45,000 - - - 45,085 (819) 44,266

Computerapplications 8,258 - 2.297 - - - 10,555 (4,662) 5,893

Greenhousegas effect emission rights - - 4,070 (1,759) - - 2,311 - 2,311

Rights to assetsunder fi nanceleases 4,773 - - - - - 4,773 (420) 4,353

16,465 (1,580) 51,397 (2,579) - - 63,703 (6,133) 57,570


Items for 2006



TransfersBalance at31.12.2006Additions Drops D (H)

Accumulated depreciation

Research & development expenses (1,070) 758 (462) 542 - - (232)


Concessions, patents, licences, trademarks and similar (66) - (753) - - - (819)


Computer applications (3,143) - (1,519) - - - (4,662)


Rights to assetsunder fi nanceleases (155) - (265) - - - (420)

(4,434) 758 (2,999) 542 - - (6,133)

Note 7. Intangible fi xed assets

Analysis of the movement during the tax year. The movement recorded during the tax year ended on 31 December 2006, was the following:

In 2006 the Company purchased trademarks, patents and licensing rights from Advansa BV, for the amount of 45 million euros. The sale

of the use of licensing rights has led to revenue of 36.44 million euros at 31 December 2006 (see Note 29).

The charge to profi ts/losses for the period by way of allocation to depreciation of intangible fi xed assets amounted to 3 million euros.

*: See Note 3

18

7.1. Assets under fi nance leases. In accordance with the criterion set forth in Note 5 f), the Company entered the goods included in the

lease-back transaction arranged during the 2005 tax year at their net book value. This transaction consisted of obtaining fi nance by means

of the sale to fi nancial institutions of a plant for the post-condensation of bottle granules, for a sum total of 5.29 million euros.

On the date for the maturity of the contract, 10 June 2009, the Company may exercise the purchase option for a sum total of 0.12

million euros.


Date of contractNet book

valueTransfer (*)

valueFinancial (**)expensesELEMENT Start Maturity Total

Granule post-condensation plant 10-06-05 10-06-09 4,773 5,292 489 5,781

4,773 5,292 489 5,781

(*) Includes residual valuel (**) Financial expenses according to original fi nancial lease contract.

The maturity terms for the long-term liabilities are distributed as follows:


2008 2009 Totals

1,416 708 2,124

7.2. Fully depreciated assets. The sum total for the assets fully depreciated at 31 December 2006 amounts to 0.46 million euros and their

breakdown is the following:


Research & development expenses 50

Concessions, patents, trademarks and similar 63

Computer applications 344

457


Pending maturity al 31.12.2006

Quotas paidejercicio 2006

Quotas paidin previous years

ELEMENTFinancialfexpenses

Short term

Long term Capital IInterest Total Capital Interest Total

Granule post-condensation plant 198 1,416 2,124 1,236 180 1,416 715 111 826

198 1,416 2,124 1,236 180 1,416 715 111 826

19

Note 8. Tangible fi xed assets

8.1. As stated in Note 5 g), the Company has carried out a restatement of the values of its tangible fi xed assets pursuant to Royal Decree-

Act 7/1996 of 7 June.

The accounts affected by the restatement pursuant to Royal Decree-Act 7/1996 of 7 June and their effect at 31 December 2006 are

as follows:


IncreaseAccumulatedDepreciation Efect Net

Buildings 2,810 (1,153) 1,657

Technical plant and machinery 3,598 (3,425) 173

Other plant, tools and fi ttings 19 (19) -

Other fi xed assets 17 (17) -

6,444 (4,614) 1,830

The effect of the restatement on the depreciation in the period amounted to 0.29 million euros. For the 2007 tax year, this effect is estimated

to be 0.16 million euros.

Analysis of the movement during the tax year. Its composition and progress during the tax year ended on 31 December 2006 were

as follows:




Branch spin-offof activity (*)

TransfersAccumulatedDepreciationAdditions Drops L (A) Cost Net Effect

Land and buildings 51,434 (15,364) - (7,500) 2,879 - 31,449 (10,196) 21,253

Technical facilities and machinery

202,631 (44,293) - (5,852) 4,076 - 156,562 (99,544) 57,018

Other facilities, toolingand fi xtures

1,222 (39) - - 2 - 1,185 (1,022) 163

Advancesand fi xedtangibleassetsin progress

5,350 (50) 2,992 - - (7,616) 676 - 676

Other fi xed assets 5,158 (29) - - 659 - 5,788 (3,818) 1,970

265,795 (59,775) 2,992 (13,352) 7,616 (7,616) 195,660 (114,580) 81,080

20


Items for 2006


Branch spin-offof activity (*)

Transfers Balance at

Additions Drops L (A) 31.12.2006

AccumulateddepreciationBuildings (14,486) 2,910 (668) 2,048 - - (10,196)

Accumulated depreciationTechnicalfacilities andmachinery (133,388) 37,.896 (6,691) 2,639 - - (99,544)

Accumulated depreciationOther facilities, toolingandfi xtures (1,021) 21 (22) - - - (1,022)

AccumulateddepreciationOther fi xed assets (3,686) 29 (161) - - - (3,818)

(152,581) 40,856 (7,542) 4,687 - - (114,580)

The charge to profi ts/losses for the period by way of depreciation of intangible fi xed assets amounted to 7.54 million euros.

*: See Note 3

8.2. Fully depreciated assets. The sum total for the assets fully depreciated at 31 December 2006 amounts to 54.75 million euros and

their breakdown is the following:


Buildings 874

Technical plant and machinery 49,903

Other plant, tools and fi ttings 800

Other fi xed assets 3,169

54,746

21

Note 9. Financial investments9.1. Analysis of the movement during the tax year. Its composition and progress during the tax year ended on 31 December 2006

were as follows:


Items for 2006



TransfersBalance at

31.12.2006Additions Decreases L (A)

Long-term

Holdings in group com-panies and associated companies 59,304 7,200 392,188 (27,412) - (2,282) 428,998

Loans to companies inthe group - - 187,878 - - - 187,878

Long-term stock portfolio investment 170 - - (2) 2,282 - 2,450

Other loans 139 - 89,045 (2,673) - - 86,511

Long-term toPublic Bodies 23,775 - 3,091 (5,367) - - 21,499

Long-term depositsand guarantees 273 - - (238) - - 35

83,661 7,200 672,202 (35,692) 2,282 (2,282) 727,371

Short-term

Loans to companiesin the group 331 - 4,560 (682) - - 4,209

Short-term securities portfolio 29,872 - 354,631 (356,332) - - 28,171

Other loans 715 - - (400) - - 315

Short-term depositsand guarantees 8,007 - 10 (8,009) - - 8

Provisions (10) - - - - - (10)

38,915 - 359,201 (365,423) - - 32,693

*: See Note 3

22

Long term

9.2. Shares in Group companies and associated companies. The breakdown of this heading, as of the date of the close of the tax year, was

the following: te:

Group Companies (Thousands of Euros) Stake Direct

Artenius Holding, B.V. 210,430 100,00%

Artenius Italia, S.p.A. 58,704 100,00%

Artenius Turkpet Kimyevi Maddeler ve Pet Ambalat

MalzemeleriSanayi Anonim Sirketi 84.520 100,00%

Artenius Portugal, Industria de Polímeros, S.A. 22,014 100,00%

Artenius Romania, SRL 5,440 100,00%

Artenius Hellas Holding, S.A. 4,000 100,00%

Industrias Químicas Asociadas LSB, S.L.U. 30,742 100,00%

SLIR, S.L.U. 3,325 100,00%

Artenius Sines, S.A. 50 100,00%

ANERIQA, A.I.E.(*) - 10,00%

419,225

Associated Companies

Simpe, S.p.A. (**) 7,030 19,09%

Petrolest, S.L. 2,743 49,00%

9,773

428,998

(*) In addition, a 90% stake is held through Industrias Químicas Asociadas LSB, S.L.U.

(**) The undertaking to subscribe the majority share capital during 2007 was acquired as part of the purchase operation.

23

9.3. Investments covered by a guarantee. At the date of preparing these annual accounts the shares of Industrias Químicas Asociadas

LSB, S.L.U., Artenius Italia, S.p.A., Artenius Portugal, Industria de Polímeros, S.A., Artenius Holding BV, Artenius UK, Limited and

Artenius Turkpet Kimyevi Maddeler ve Pet Ambalat MalzemeleriSanayi Anonim Sirketi were pledged in favour of the bank that granted

the loan specifi ed in Note 21.

9.4 The most relevant information in relation to the previous heading is as follows:

% Holding in La Seda de

Barcelona, S.A.

Company Registered Offi ces

Direct andIndirect

Result

Main activity Direct

Subscribed capital Reserves last year Extraordinary

Group

Industrias QuímicasAsociadas LSB, S.L.(Sociedad Unipersonal) (*)Pº de Gracia, 8508008-Barcelona (1)

100% 100% 30,742 4,368 (175) 367

ANERIQA, A.I.E.Ctra. Nacional 340, Km.1157Polígono Industrial La Canonja (Tarragona) (2) 10% 100% 1 - - -

SLIR, S.L.(Sociedad Unipersonal)Carretera de Carcastillo a Figarol Carcastillo (Navarra) (3) 100% 100% 2,404 749 139 -

Artenius Holding B.V. (*)Kruisweg 829, 2132 NGHoofdorp (Netherlands) (4) 100% 100% 18 443,514 - -

Artenius Italia, S.p.A.Via Montereale 10/APordenone (Italy) (5) 100% 100% 12,750 4,953 (7,347) -

Artenius Turkpet Kimyevi Maddeler ve Pet Ambalat MalzemeleriSanayi Anonim SirketiTarsus 10th01322 Adana (Turkey) (6) 100% 100% 117.413 2,219 (11,518) -

Artenius Portugal, Industria de Polimeros, S.A.Quinta de Sao Vicente, Estrada Nacional 246Ribeira de Nisa, Portalegre (Portugal) (7) 100% 100% 10,000 5,040 (4,875) -

Artenius Romania, SRLBdul. Basarabiei 256, Anexa Tehnico-Sociala, etaj 1, sector 3Bucuresti (Rumanía) (8) 100% 100% 5,995 (165) (329) -

24

Company Main activity Main activityNet book

valueShare capital book value

Dividends received

during yearStock

market Price

Exclusion from perimeter of consolidation

Group

Industrias QuímicasAsociadas LSB, S.L.(Sociedad Unipersonal) (*)Pº de Gracia, 8508008-Barcelona (1) 34,935 30,742 - NO NO

ANERIQA, A.I.E.Ctra. Nacional 340, Km.1157Polígono Industrial La Canonja (Tarragona) (2) 1 - - NO NO

SLIR, S.L.(Sociedad Unipersonal)Carretera de Carcastillo a Figarol Carcastillo (Navarra) (3) 3,292 3,325 - NO NO

Artenius Holding B.V. (*)Kruisweg 829, 2132 NGHoofdorp (Netherlands)) (4) 443,532 210,430 - NO NO

Artenius Italia, S.p.A.Via Montereale 10/APordenone (Italy) (5) 10,356 58,704 - NO NO

Artenius Turkpet Kimyevi Maddeler ve Pet AmbalatMalzemeleriSanayi Anonim SirketiTarsus 10th01322 Adana (Turkey) (6) 108,114 84,520 - NO NO

Artenius Portugal, Industria de Polimeros, S.A.Quinta de Sao Vicente, Estrada Nacional 246Ribeira de Nisa, Portalegre (Portugal) (7) 10,165 22,014 - NO NO

Artenius Romania, SRLBdul. Basarabiei 256, Anexa Tehnico-Sociala, etaj 1, sector 3Bucuresti (Rumanía) (8) 5,502 5,440 - NO NO

(1) Any industrial or commercial activity related to the chemical industry.

(2) Electrical cogeneration plant.

(3) Recycling of agricultural waste and sale of organic manure.

(4) Chemical research; participation, fi nance and management of other companies and enterprises: provision of guarantees to group companies.

(5) Production and distribution of polymers, chemicals, plastics and similar materials.

(6) Commercialisation, export and import and marketing of chemicals, PET packaging materials and raw materials.

(7) Production and commercialisation of polymers and other by-products.

(8) Production and wholesale of plastic derivatives.

(9) Holding of securities.

(10) Production and commercialisation of purifi ed terephthalic acid and similar products.

(11) Specialised transport of chemicals and similar products

(12) Production of polyester polymers.

(*) Companies at the top of consolidation sub-groups

25

Company Main activityMain

activityNet book

valueShare capital book value

Dividends received

during yearStock

market Price

Exclusion from perimeter of consolidation

Group

Artenius Hellas Holding, S.A. (*)Meandron, 15Atenas (Greece) (9) 7 4,000 - NO NO

Artenius Sines, S.A.Quinta de Sao Vicente,Estrada Nacional 246Ribeira de Nisa, Portalegre (Portugal) (10) 108,114 50 - NO NO

724,018 419,225

Associated

Petrolest, S.L.Raset, 7 2º 3ª08021 - Barcelona (11) 1,692 2,743 - NO NO

Simpe, S.p.A.C/ PagliaroneAcerra (NA) ((Italy) (12) 5,814 7,030 - NO NO

7,506 9,773

731,524 428,998


Barcelona, S.A.

Result

Company Main activityMain

activity Direct

Direct and

IndirectSubscribed

capital Reserves last year Extraordinary

Group

Artenius Hellas Holding, S.A. (*)Meandron, 15Atenas (Greece) (9) 100% 100% 60 - (53) -

Artenius Sines, S.A.Quinta de Sao Vicente, Estrada Nacional 246Ribeira de Nisa, Portalegre (Portugal) (10) 100% 100% 117,413 2,219 (11,518) -

Associated

Petrolest, S.L.Raset, 7 2º 3ª08021 - Barcelona (11) 49% 49% 118 3,241 94 1

Simpe, S.p.A.C/ PagliaroneAcerra (NA) (Italy) (12) 19% 19% 36,670 - (6,070) -

26

9.5. Securities portfolio. Under this heading, the Company has registered the equity shares it holds in Fibras Europeas de Poliéster, S.L.

for an amount of 2.28 million euros (see Note 3).

9.6.Other loans. The breakdown of this heading, as of the date of the close of the tax year, was the following:


Fibracat Europa, S.L:U: 70,082

Debtors through sale of lands 16,311

Other 118

86,511

Fibracat Europa, S.L.U. A total amount of 69.6 million euros corresponds to Fibracat Europa, S.L.U. as a consequence of acceptance by

La Seda de Barcelona, S.A., of the non-transferred debt concerning the fi bre business unit contributed by the latter (see Note 3).

At the close of the tax year the sum total of the fi nancial charges accrued and not due amounted to 0.48 million euros.

This loan and its corresponding interest are underwritten with a real estate guarantee over the lands on which the Fibracat Europa, S.L.U.

facilities are located

Debtors through sale of lands. This corresponds to the amount pending payment for the sale made during 2006 of an estate that was

the property of La Seda de Barcelona, S.A. located in El Prat de Llobregat as stated in the Land Register for that municipal district, under

Volume 1,295, Book 655, Sheet 137, Estate No. 35,250, Entry four.

9.7. Long-term debts with public bodies. This heading records the tax credits for Corporation Tax to be compensated with future taxable

bases, as well as taxes paid in advance deriving from the tax deductions pending application.

Analysis of the movement during the tax year. The movements recorded during the tax year ended on 31 December 2006 are the

following:


Tax credit for lossesto be compensated

Deductions pending application Total

Balance at 31.12.2005 23,065 710 23,775

Adjustment of tax credit tax rate application Act 35/2006 (2,363) - (2,363)

Activation negative taxable amounts from previous years (see Note 23) 7,639 - 7,639

Short-term transfer (2,184) - (2,184)

Adjustment declared negative taxable amounts (72) (16) (88)

Tax credit to be compensated applied in year (5,280) - (5,280)

Balance at 31.12.2006 20,805 694 21,499

27

Short term

9.8. Loans to Group companies. This corresponds to the interest accrued and pending payment from the loans to group companies

listed in Note 12.

9.9. Short-term securities portfolio. This is broken down as follows:


Securities with offi cial listing 172

Investment fund 4,399

Treasury bills 2,200

Short-term attributions 21,400

28,171

The investments that make up the balance as of the date of the close of the tax year provide an average annual return of 2.20%.

Note 10. Deferred Expenses

The movements recorded during the tax year ended on 31 December 2006 are the following:


Balance at 31.12.2005

Items for 2006Balance at 31.12.2006Additions Applications

Debt formalisation expenses 6,703 12,651 (7,832) 11,522

Deferred lease-back interest expenses 378 - (180) 198

7,081 12,651 (8,012) 11,720

Note 11. Inventories

Its breakdown at 31 December 2006 was the following:


Goods 93

Raw materials and other procurement 4,261

Spare parts 2,645

Work in progress 3,051

Finished products 3,183

Supplier advances 3,213

Provision for depreciation (191)

16,255

In accordance with the criteria shown in Note 5 k), the corresponding depreciation of the value of inventories for an amount of 9.12 million

euros was recorded in 2006.

There is no kind of limitation on the availability of stocks due to guarantees, pledges, deposit guarantees or similar reasons.

No stock items appear in the enclosed annual accounts on the assets side for a fi xed sum.

There are no fi rm undertakings for the purchase or sale of stocks.

28

Note 12. Group companies and associated companies

With regard to short-term balances, these correspond to balances generated as a result of customary transactions between the compa-

nies specifi ed.

Long-term loans to group companies have been extended as intragroup fi nancing lines whose maximum maturity for repayment is six years

for Industrias Químicas Asociadas LSB, S.L.U. and seven years for the remaining companies. The loans accrue an interest rate pegged

to the euribor plus a 2% differential


(Thousands of Euros))

Short-term Long-term

Debit Credit Debit Credit

Group Companies

Artenius Portugal, Industria de Polimeros, S.A. 4,259 982 29,173 -

Artenius Italia, S.p.A. 1.674 - 49,000 -

Artenius Turkpet Kimyevi Maddeler ve Pet Ambalat MalzemeleriSanayi Anonim Sirketi 270 - - -

Artenius UK, Limited 2,819 1,456 50,782 -

Artenius Sines, S.A. 20,000 - - -

Artenius Hellas Holding, S.A. 10 - 13,032 -

Industrias Químicas Asociadas LSB, S.L.U. 3,219 6,204 45,891 -

SLIR, S.L.U. 598 - - -

ANERIQA, A.I.E. 16,114 - - -

48,963 8,642 187,878 -


Petrolest, S.L. 4 1,773 - -

4 1,773 - -

48,967 10,415 187,878 -

Note 13. Sundry receivables

At the close of the tax year, its breakdown was the following:


Sale of Fibracat Europa, S.L. shares (see Note 3) 4,921

Debtors through sale of lands 3,712

Others 195

8,828

Debtors through sale of lands: This corresponds to the amount pending payment for the sale of two properties belonging to La Seda de Barcelona,

S.A., by virtue of the deed of merger through absorption dated 31 May 2005. These properties are located in El Prat de Llobregat, as shown on the

Land Registry of that municipal district, in Volume 1,326, Book 686, Folio 137, Property No. 35,815, Entry one and Volume 1,295, Book 655, Folio

137, Property No. 35,250, Entry four.

29

Note 14. Own Shares

The Company’s own shares held by the Company at the close of the tax year represent an irrelevant percentage of the total share capital

(0.31%), transferring for this purpose and at its cost price the pertinent non-restricted reserve (see Notes 15 and 18), in accordance

with Article 79.3. of the Revised Text of the Public Limited Companies Act. The total number of own shares held directly by the Company

amounts to 1,310,000 with an average cost price of 2.40 euros/share. The stock market quotation for the Company’s shares at the close

of the tax year was 2.42 euros/share.

In accordance with the criteria shown in Note 5 n) the corresponding provisions through depreciation of treasury stock was registered in

2006 for the purpose of adjusting the value of own shares and of the corresponding non-available reserve at the book value of the Com-

pany for an amount of 1.01 million euros, with the difference between the purchase price and the average quoted price of the last quarter

charged to the profi t and loss statement for an amount of 0.24 million euros.

Note 15. Movement of shareholders’ equity

Trend.

Its composition and trend over the tax year closed at 31 December 2006 were as follows:


Items for 2006

Balance at31.12.2005 Increase Reduction

TransfersBalance at31.12.2006(L) A

Share Capital 101,599 315,188 - - - 416,787

Issue Premium 26,918 148,744 - - - 175,662

Reserves:

- Legal reserve 11,719 - - - 11 11,730

- Reserve for own shares 223 - - (1,010) 2,922 2,135

- Voluntary reserves 22,195 - (770) (2,922) 1,106 19,609

- Reserve for depreciated capital 93,168 - - - - 93,168

- Reserve for assignment (14,432) - - - - (14,432)

- Reserve for merger (25,962) - - - - (25,962)

Losses from previous fi nancial years - - - (1,975) - (1,975)

Results fi nancial year 2005 (1,868) - - - 1.868 -

Results fi nancial year 2006 - - - - - 5.343

213,560 463,932 (770) (5,907) 5,907 682,065

30

Note 16. Share capital

On 27 June 2003, the Annual General Meeting of Shareholders of La Seda de Barcelona, S.A. authorised the Company’s Board so that within

a term of one year it could carry out a share capital increase of up to a maximum of 30,050,600 euros by means of the issue and sale of

10,000,000 new common shares, with an individual face value of 3.005060 euros.

On 1 April 2004, the Board of Directors, using the authorisation granted by the AGM, agreed to increase the full corporate share capital by

27,700,643.08 euros, by means of the issue and sale of 9,218,000 shares issued at par, with an individual face value of 3.005060 euros,

with a share in the company profi ts as from 1 January 2004. This share increase was subscribed by means of a cash outlay of 1.63 euros per

share that was supported by 1.37506 euros per share charged to the freely available reserves, and with the award to the shareholders of a

preferential subscription right in a proportion of ten new shares for every thirty-seven old shares (10 for 37).

Once both subscription periods ended, on 16 July and 26 July 2004, the whole of the share increase was covered, with a fi gure for the subs-

cribed share capital of 27,700,643.08 euros, divided into 9,218,000 shares, with an individual face value 3.005060 euros, by means of a cash

outlay from the shareholders of 15,025,340.00 euros plus 12,675,303.08 euros charged to the Company’s freely available reserves.

On 27 June 2005, the Ordinary and Extraordinary General Meeting of Shareholders unanimously approved, passed by the present and re-

presented shareholders with voting rights, a reduction in the share capital for a sum total of 87,107,802.50 euros by means of the reduction

of the face value of each one of the shares that make up the Company share capital and which was fi nally set at 1.00 euro per share, with

the pertinent restricted reserve being set aside for this purpose in accordance with Article 167.3. of the Revised Text of the Public Limited

Companies Act.

In accordance with the resolution unanimously adopted by the Extraordinary General Meeting of Shareholders held on 21 October 2005 and

the agreement for implementation passed on that same day by the Board of Directors, the increase of the share capital for La Seda de Bar-

celona, S.A. was passed for a sum total of 72,693,750.00 euros by means of the issue and sale of 58,155,000 new common shares, with an

individual face value of 1.00 and an issue premium of 0.25 euros per share, which will have a share in the Company profi ts as from 1 January

2005. The preferential subscription right for the new shares in a proportion of 5 new shares for every 7 old shares/convertible securities is

acknowledged in this share increase.

Once the fi rst subscription period ended, on 19 November 2005, the share capital increase was fully covered, with a fi gure for the subscribed

share capital of 58,155,000 euros, divided into 58,155,000 shares, each one with a face value of 1.00 euros plus an issue premium of 0.25

euros per share for an overall sum total of 14,538,750 euros, by means of a cash outlay by the shareholders of 72,693,750 euros.

On 10 February 2006, once the initial conversion period of the issue of convertible bonds agreed on 27 June 2005 by the company’s Board

of Directors had fi nalised (see Note 20), the right to convert 35,847,883 convertible bonds into shares was carried out, by dividing these

into 35,847,883 shares with an individual face value of 1.00 euro and an issue premium of 0.25 euros per share for an overall amount of

44,809,854 euros. .

On 12 June 2006, the shareholders present or represented with the right to vote at the Ordinary and Extraordinary General Meeting of

Shareholders of the company unanimously authorised the Board of Directors to enable this body to perform a share capital increase within

a maximum period of one year for a cash sum of 418,721,946.00 euros through the issue of 279,147,964 shares with an individual face

value of 1 euro, with an issue premium of 0.5 euros per share, which will participate in company profi ts from 1 January 2006 onwards.

Once the fi rst subscription period ended, on 3 August 2006, the share capital increase was fully covered, with a fi gure for the subscribed

share capital of 279,147,964.00 euros, divided into 279,147,964 shares, each with a face value of 1.00 euro plus an issue premium of 0.5

euros per share for an overall sum total of 139,573,982.00 euros, by means of a cash outlay by the shareholders of 418,721,946.00 euros

31

On 10 August 2006, once the initial conversion period of the issue of convertible bonds agreed on 27 June 2005 by the company’s Board

of Directors had fi nalised (see Note 20), the right to convert 320,509 convertible bonds into shares was carried out, by dividing these

into 192,569 shares with an individual face value of 1.00 euro and an issue premium of 1.08 euros per share for an overall amount of

400,543.52 euros.

The fi nal fi gure for the share capital after the share capital increase and the conversion of convertible bonds into shares stood at

416,787,398.00 euros, divided into 416,787,398 common shares, fully subscribed and paid up, each one with a face value of 1.00 euro,

belonging to the same single series and represented by means of book entries.

Holdings in the Company share capital equal to or over 3%, excluding the treasury stock (see Note 14), correspond to the following

breakdown:

Shareholder % Stake

Imatosgil Investimentos SPGS, S.A. 11,01

Liquidamar, Inversiones Financieras, S.L. 5,02

Caixa Geral de Depósitos, S.A. 5,00

Caixa Capital Sociedade de Capital Risco, S.A. 4,50

Note 17. Issue premium

As regards this sum total, the Revised Text of the Public Limited Companies Act expressly allows the use thereof for increasing the share

capital and does not establish any restriction as regards to its availability.

Note 18. Reserves

Their breakdown at the close of the tax year was as follows:


Restricted reserves

Legal reserve 11,730

Reserves for own shares (see Note 14) 2,135

Reserve for depreciated capital 93,168

Reserve for assignment (14,432)

Reserve for merger (25,962)

Freely available reserves

Voluntary reserves 19,609

Losses from previous fi nancial years (1,975)

84,273

Legal reserve. In accordance with Article 214 of the Revised Text of the Public Limited Companies Act, the said reserve must be endowed

with 10% of the profi ts from the tax year, until the fund set up for the reserve reaches 20% of the share capital paid up. The legal reserve

may be used to increase the share capital to the extent that its balance exceeds 10% of the share capital already increased. Except for that

purpose and as long as it does not exceed 20% of the share capital, this reserve may only be used to offset losses and as long as there are

no other suffi cient reserves available for this purpose.

As of 31 December 2006, the sum total for the legal reserve did not cover 20% of the share capital.

Reserves for own shares. As stated in Note 14, the Company, pursuant to Article 79.3. of the Revised Text of the Public Limited Companies

Act, proceeded to endow the restricted reserve corresponding to the cost price of its own shares.

32

Reserve for depreciated capital. In accordance with Article 167.3. of the Revised Text of the Public Limited Companies Act, the Company

proceeded to endow a reserve for the face value of its own shares depreciated in 1996 (6.06 million euros) and which were acquired by

the Company in the said tax year for free.

During the 2005 tax year and as a result of the reduction in share capital approved by the Ordinary and Extraordinary General Meeting of

Shareholders held on 27 June 2005 (see Note 16), the Company, pursuant to the article mentioned in the preceding paragraph, endowed

a reserve for a sum total of 87.11 million euros as a result of the reduction in the face value of each one of the shares that make up the

Company share capital and which fi nally stood at 1.00 euro per share.

The endowed reserve may only be used with the same requirements as those demanded for the reduction of the share capital.

Reserve for assignment. As a result of the takeover by the Company of Hispano Química, S.A.U. and Viscoseda Barcelona, S.L.U. carried

out on 14 December 2001 (see Note 1), a reserve for assignment was set up for the difference between the assets and liabilities provided

by the companies that had been taken over.

Reserve for merger. This amount is recorded as a consequence of the merger process fi led with the Companies Register in the 2005 tax

year (see Note 1).

Note 19. Provisions for contingencies and expenses

The breakdown of movements under this heading of the balance sheet in 2006 was as follows:


Items for 2006

Other provisionsBalance at31.12.2005

Provision2006

Application2006


Provision for greenhouse effectgas emission rights - 2,585 (1,310) 1,275

At its meeting dated 21 January 2005, the Council of Ministers approved the defi nitive individualised assignment of the emission rights for

the premises included within the scope of application of Royal Decree Law 5/2005, dated 27 August, as well as the technical adjustments

required in RD 1866/2005 of the National Assignment Plan of emission rights.

This defi nitive assignment enables Spanish companies, including La Seda de Barcelona, S.A., to participate in the European CO2 emission

rights market, which was set up on 1 January 2005 as part of the effort to satisfy the undertakings to reduce greenhouse gases set forth

in the Kyoto Protocol.

The details of the 2005-2007 National Assignment, corresponding to the Company, are as follows:

Assignment (tonnes of CO2)

Activity Facility 2005 2006 2007

Cogeneration La Seda de Barcelona, S.A. 78,717 103,397 103,397

33

As a consequence of the merger process fi led with the Companies Registry on 16 June 2005 (see Note 1), the company did not have

the defi nitive concession of the 2005 rights until 5 September 2006, the date on which the Ministry of Industry and Environment of the

Catalonia Regional Government resolved the proceedings through which the preliminary authorisations conceded for the Seda Group

were unifi ed.

For accountancy purposes, the Company treats the emission rights in accordance with the Resolution dated 8 February 2006, from the

Accounting and Accounts Auditing Institute (ICAC), which implements the accounting aspects referred to in Law 1/2005, dated 9 March

which regulates the trade regime of emission rights of greenhouse gases.

Note 20. Issue of bonds and other negotiable securities

On 27 June 2005, the Company Board of Directors, using the authorisation granted by the AGM of Shareholders on the same date and pur-

suant to Article 153.1 a) of the Public Limited Companies Act, agreed to an issue of convertible securities for a sum total of 47,468,750.00

euros, by means of the issue of 37,975,000 convertible securities, each with a face value of 1.25 euros.

The conversion of the securities issued shall be carried out in the initial period at a fi xed rate of 1.25 euros, viz., a face value of 1.00 euro

plus an issue premium of 0.25 euro per share and in the ordinary periods for conversion, as well as in the exceptional ones, at a variable

rate equal to 90% of the average list price of the common shares in the Company in the 65 trading sessions prior to the date of the start

for each ordinary conversion period.

Once the initial conversion period and the fi rst period of ordinary conversion had fi nished -10 February and 10 August 2006 respectively-

the right to convert 35,847,883 and 320,509 convertible bonds into shares at an individual face value of 1.25 euros was exercised. The

valuation of the shares for the aforementioned conversion period was 1.25 and 2.08 euros, respectively (see Note 16).

The securities issued accrue a fi xed nominal interest of 5% payable half-yearly, as from the date of the outlay (11 August 2005) until the

redemption date (11 August 2010) or, where applicable, from conversion into Company shares. In accordance with the criterion set forth in

Note 5 q), for the item on the balance sheet “Interest from debenture loans and other securities” the Company enters the interest accrued

pending settlement, which, at the date of the close of the tax year, stood at 0.04 million euros.

On the date of preparing these annual accounts, the Company’s Board of Directors has opted for early redemption of all of the bonds exis-

ting 31 December 2006, and which represent 4.75% of the total issued. The aforementioned redemption will take place in August 2007,

to coincide with the fi nalisation of the interest period.

Note 21. Bank borrowing

The breakdown for this heading at 31 December 2006 was the following:

(Miles de Euros)

Credit Drawn Límit(1)

Type of transaction Short-term Long-term Granted Available

Loans 3,250 388,250 - -

Discounted bills 541 - 9,547 9,006

3,791 388,250 9,547 9,006

(1) This corresponds to short-term transactions.

34

The amount recorded as a loan corresponds to a syndicated loan from a bank (as the sole broker) for an amount of 405 million euros, the

maximum maturity date of which is nine years, ratifi ed in a contract dated 14 June 2006. This loan is guaranteed through the pledge of

shares of group companies (see Note 9.3) and through surety from Industrias Químicas Asociadas LSB, S.L.U. (see Note 24).

The maturity terms for the long-term liabilities are distributed as follows:


2008 2009 2010 20112012 andfollowing Totals

Loans 5,200 10,400 26,059 41,068 305,523 388,250

The aforementioned operations are mainly pegged to the EURIBOR at one year plus a differential that ranges between 1.75%

and 2.5%.


Note 22. Other accounts payable

22.1. Public bodies. Its breakdown at 31 December 2006 was the following:


Main debtFinal demand surcharges

and interest Total debt

ShortTerm

LongTerm Total

ShortTerm

LongTerm Total

ShortTerm

LongTerm TotalFinanced debt

Electricity tax 1,358 - 1,358 - - - 1,358 - 1,358

-

Deferred intra-group tax 193 478 671 - - - 193 478 671

1,551 478 2,029 - - - 1,551 478 2,029

Current debt

Incometaxcorrespondingto the monthof December 2006,paid in January 2007 351 - 351 - - - 351 - 351

Social Security payablecorresponding to the monthof December 2006,paidin January 2007 231 - 231 - - - 231 - 231

2,133 478 2,611 - - - 2,133 478 2,611

At 31 December 2006, the balance for long-term debt with Public Bodies includes deferred tax amounting to 0.48 million euros by way of

the transactions within the Group, with 0.30 million euros having been applied in this tax year.

35

22.2. Other liabilities. The breakdown for this heading as at the close of the tax year is the following:



Purchase of a stake in Grupo Advansa 20,000 -

Purchase of a stake in Simpe, S.p.A. 6,000 -

Suppliers of fi xed assets 2,057 58

Staff-Salaries and wages pending payment 4,803 3,262

Loan to Industrias Químicas Textiles, S.A. 2,966 -

Others 1,227 -

37,053 3,320

The most signifi cant aspects as regards this heading are the following:

- Staff - Salaries and wages pending payment. Debts with staff basically correspond to compensation payments taken on by the Com-

pany as a result of the overall transfer of assets and liabilities from Hispano Química, S.A. (Single-member Company) and Viscoseda

Barcelona S.L. (Single-member Company) (see Note 1) and the restructuring process carried out by the Group, with the latter having

been generated between 2000 and 2006. The maturity terms for the long-term debt are distributed according to the following breakdo-


2008 2009 2010 20112012 andfollowing Totals

1,918 1,105 67 56 116 3,262

- Loan to Industrias Químicas Textiles, S.A. This corresponds to the resulting balance of the settlement of payables and recei-

vables that exist between both companies prior to the sale of the stakes in Industrias Químicas Textiles, S.A. by La Seda de

Barcelona, S.A.

Note 23. Tax Situation

In the tax year ended on 31 December 2006, La Seda de Barcelona, S.A. and its companies, owned directly or indirectly with at least 75%

of their share capital (see Note 9.2.), were covered by the System for Consolidated Statements through forming part of the Consolidated

Group 236/03, with La Seda de Barcelona, S.A. being the Controlling Company.

The Companies that make up the Group covered by the said Tax System are:

- La Seda de Barcelona, S.A (which includes Catalana de Polímers, S.A.U., KD-IQA, S.L.U., Celtibérica de Finanzas, S.L.U., Mendilau,

S.L.U., Proyectos Voltak, S.L.U., Iberseda, S.L.U., taken over by means of a merger approved by the Extraordinary General Meeting of

Shareholders dated 29 December 2004 and registered on 16 June 2005 at the Companies Registry).

- SLIR, S.L.U.

- Industrias Químicas Asociadas LSB, S.L.U.

36

Application of the Consolidated Tax System means that the individual credits and debits for Corporation Tax are included within

the Controlling Company (La Seda de Barcelona, S.A.), hence the companies have to pay over to La Seda de Barcelona, S.A. the

settlement for this tax. The provision for Corporation Tax is entered under the heading for “Public Bodies” of the assets side of the

enclosed balance sheet and amounts to 33.7 thousand euros, corresponding to withholdings at source from the yield on movable

capital and interim payments. The controlled companies not included in the said Consolidated Group pay tax individually and directly

to the Tax Authorities.

Reconciliation of the book profi t/loss with the taxable base for corporation tax


Increases Decreases Amount

Book profi t/loss for the year before tax 5,152

Permanent differences:

- Non-deductible expenses 525 - 525

- Inventories depreciation 9,115 - 9,115

Timing differences

- JV timing difference - (36) (36)

- Timing difference within group 594 - 594

Offsetting taxable bases

Previous years (15,085)

Taxable base -

Tax result 265

The amount from the tax year closed 31 December 2006 to be paid after withholdings and interim payments has been calculated in the following way:


Taxable base 265

35% of taxable base 93

Withholdings and interim payments (23)

70

In accordance with the accounting criterion mentioned in Note 5 u), the sum total entered for the Corporation Tax accrued in the 2006 tax

year has been calculated by performing the following operations:


Book profi t/loss for the year before tax 5,152

Permanent differences 9,641

Adjusted book profi t/loss 14,793

35% of adjusted book profi t/loss 5,178

Deductions from the individual instalment -

Accrued Corporation Tax 5,178

37


Year to whichthe compensation correspond 31.12.1997 31.12.1998 31.12.1999

Balance before tax inspection

Effect of tax inspection

Balance after tax inspection

Application year

Final balance

Applicationyear

Additions year

La Seda deBarcelona, S.A.

Final balance

1991 8,722 (1,380) 7,342 (7,342) - - - -

1992 42,772 - 42,772 (3,281) 39,491 (7,950) - 31,541

1993 7,162 - 7,162 - 7,162 - - 7,162

1996 13,571 (118) 13,453 (625) 12,828 - - 12,828

1997 5,341 - 5,341 - 5,341 - - 5,341

1998 - - - - - - - -

1999 - - - - - - 13,754 13,754

2000 - - - - - - - -

2001 - - - - - - - -

2002 - - - - - - - -

2003 - - - - - - - -

2004 - - - - - - - -

77,568 (1,498) 76,070 (11,248) 64,822 (7,950) 13,754 70,626


Year to whichthe compensation correspond 31.12.2000 31.12.2001 31.12.2002

Application year

Additions year

Final balance

Additionfor transfer

Applicationyear

Final balance

Applicationyear

Additions year


Final balance

1991 - - - - - - - - -

1992 (4,292) - 27,249 - (3,004) 24,245 (3,276) - 20,969

1993 - - 7,162 - - 7,162 - - 7,162

1996 (754) - 12,074 - (885) 11,189 (872) - 10,317

1997 - - 5,341 11,847 - 17,188 - - 17,188

1998 - - - 15,167 - 15,167 - - 15,167

1999 - - 13,754 6,084 - 19,838 - - 19.838

2000 - 1,063 1,063 2,622 - 3,685 (5) - 3,680

2001 1,530 - 1,530 - - 1,530

2002 - 15 15

2003

2004

(5,046) 1,063 66,643 37,250 (3,889) 100,004 (4,153) 15 95,866

23.1. The negative taxable amounts pending tax compensation are listed as follows:

38


Year to whichthe compensation correspond 31.12.2003 31.12.2004


ApplicationIndividual

ApplicationTax group

Additions Individual

AdditionsTax group

Final balance

Applica-tion

Individual

Appli-cation

Tax group

Additi-ons

Indivi-dual

Additi-onsTax

groupFinal

balance

1991 - - - - - - - - - -

1992 (3,169) - - - 17,800 - - - - 17,800

1993 - - - - 7,162 - - - - 7,162

1996 (966) - - - 9,351 - - - - 9,351

1997 - - - - 17,188 - - - - 17,188

1998 - - - - 15,167 - - - - 15,167

1999 - - - - 19,838 - - - - 19,838

2000 (6) - - - 3.674 - - - - 3.674

2001 - - - - 1,530 - - - - 1,530

2002 - - - - 15 - - - - 15

2003 - - - 1 1 - - - - 1

2004 - (1,356) - 1,356 -

(4,141) - - 1 91,726 - (1,356) - 1,356 91,726


Year to whichthe compensation correspond 31.12.2005


ApplicationIndividua


AdditionsIndividual

Additi-ons

Tax groupFinal

balance

1991 - - - - -

1992 (363) - - - 17,437

1993 - - - - 7,162

1996 - - - - 9,351

1997 - - - - 17,188

1998 - - - - 15,167

1999 - - - - 19,838

2000 - - - - 3,674

2001 - - - - 1,530

2002 - - - - 15

2003 - - - - 1

2004 - - - - -

(363) - - - 91,363

39


Year to whichthe compensation correspond 31.12.2006


ApplicationIndividual


AdditionsIndividual

AdditionsIndividual


Final balance

1991 - - - - - -

1992 (15,085) - - - - 2.352

1993 - - - - - 7,162

1996 - - - - - 9,351

1997 - - - - - 17,188

1998 - - - - - 15,167

1999 - - (205) - - 19,633

2000 - - - - - 3,674

2001 - - - - - 1,530

2002 - - - - - 15

2003 - - - - - 1

2004 - - - - - -

(15,085) - (205) - - 76,073

The restructuring of the Seda Group targeted at PET production and distribution, as well as the international projection achieved through

the purchase of stakes in non-resident companies, leads us to forecast that tax profi ts will be obtained that will enable us to offset the ne-

gative tax bases of previous years that have not as yet been activated, and to do so over the next 10 years. To this end, the Company has

recorded the corresponding activation of the aforementioned bases for an amount of 7,639 thousand euros in 2006 in accordance with

the Resolution dated 20 March 2002 from the ICAC. As a consequence of the change to the rate of Corporation Tax, and in application of

the Ruling from the ICAC dated 20 March 2002, the negative tax bases have been activated at the rate of 30% scheduled for tax years that

close from 2008 onwards.

Likewise, and pursuant to rule eight of the aforementioned ICAC Ruling, the Company has recorded the variation of the taxable rate in its

books, adjusting this to the amount of advanced and deferred taxes, as well as the credits of the activated taxable bases.

As set forth by the legislation in force, taxes cannot be deemed to have been fi nally settled until the declarations presented have been

inspected by the Tax Authorities, or the statute-barred period of four years has elapsed. For the tax year that closed on 31 December 2006,

the company has years 2002 to 2005 open for inspection, both inclusive, with regard to corporation tax. Years 2003 to 2006, both inclusive,

are open for inspection for other main taxes.

In 2006, the Tax Department fi nished the inspection notifi ed on 22 June 2005 with regard to the company Catalana de Polímers, S.A.U.

(see Note 1), which had been taken over.

As of 31 December 2006, the company has an amount pending of 0.73 million euros corresponding to allowances and deductions from

previous tax years and 7 thousand euros corresponding to allowances and deductions from this tax year. According to the Ruling of the

I.C.A.C. dated 15 March 2002, the deductions and allowances not applied in the declaration for the tax year because of insuffi cient tax

payable, must be entered in the accounts providing there are no reasonable doubts regarding their possible application in future tax years.

For this purpose, the allowances and deductions from the tax year were entered with payment to account 630 “Corporation Tax”, for a sum

total of 7 thousand euros, with their balancing entry being the account for “Short-term public bodies - Deductions pending application”.

40

At 31 December 2006, the following deductions were pending application:

Tax year of origin (Thousands of Euros)Maximum term

or compensation

1997 128 2007

1998 158 2008

1999 305 2009

2000 22 2010

2001 50 2011

2002 30 2012

2003 9 2013

2004 8 2014

2005 18 2015

2006 7 2016

735

23.2. According to the merger deed registered at the Companies Registry on 16 June 2005, the companies involved in the merger re-

corded their intent to be covered by the system of tax neutrality envisaged in Chapter VIII, under Heading VII, of Legislative Royal Decree

4/2004 of 5 March, whereby the Revised Text of the Corporation Tax Act was passed.

The breakdown by purchase date of the assets transferred that are liable to be amortised that have been included in the accounts for the

Controlling Company is the following:

Purchase Dates

Preliminary expenses 2000-2001

Research & development expenses 2000, 2001 y 2003

Concessions, patents and licences 2002

Computer applications 2001 y 2003

Buildings 1961-2003

Technical plant and machinery 1987-2003

Other plant, tools and fi ttings 1987-2001

Other fi xed assets 1996-2003

41

The latest fi nalised balance sheets corresponding to the companies transferring their assets which take part in the merger process descri-

bed in Note 1 are the following:

Catalana de Polímers, S.A. (*)

Celtiberica de Finanzas, S.L. (*)

Projects Voltak, S.L. (*)

Mendilau, S.L. (*)

KD-IQA,S.L. (*)

Iberseda,S.L. (*)

(Thousands of Euros) (Thousands of Euros) (Thousands of Euros) (Thousands of Euros) (Thousands of Euros) (Thousands of Euros)

Assets

Fixed

Preliminary expenses 1,238 - - - - -

Net intangible fi xed assets 6,907 - - - 694 -

Net tangible fi xed assets 92,002 - - - 3,111 -

Net investments 5,180 7,266 6,606 2,117 - -

Charges to be spreadoverseveral years 6,922 - - - - -

Current

Inventories 20,308 - - - 679 -

Debtors 91,944 - - - 2,608 3

Temporary

investments 1,691 - - - - 1

Cash 203 - - - 7 6

End-of-period adjustments 482 - - - - -

226,877 7,266 6,606 2,117 7,099 10

Liabilities

Non-requirable liabilities 56,851 58 24 712 2.292 (22)

Provisions for risks and expenses - - - - - -

Long-term requi-rable liabilities 34,036 7,208 6,581 1,405 - -

Long-term requi-rable liabilities 135,990 - 1 - 4,807 32

226,877 7,266 6,606 2,117 7,099 10

(*) Single-member Company

The purchasing Company, as a result of the merger process described in Note 1 above, has included the tax gains for the amount of 57

thousand euros from the Company taken over called Catalana de Polímers, S.A.U., corresponding to the deductions and allowances pen-

ding application.

Note 24. Guarantees arranged with third parties

As regards this point and in addition to that already stated in Note 9.3, at 31 December 2006 the Company had guarantees arranged with

third parties amounting to 7.31 and 3.58 million euros, respectively. The Company has also received a bond from Industrias Químicas

Asociadas LSB, S.L.U. for an amount of 405 million euros (see Note 21) and has received guarantees from banks for an amount of 24.12

million euros. ha recibido avales de entidades fi nancieras por importe de 24,12 millones de euros.

42

Note 25. Consumption of raw materials and other consumable materials

Its breakdown at the close of the tax year was the following:


Purchase of goods 932

Consumption of raw materials and other consumable materials 142,657

Change in stocks (4,956)

138,633

The changing stocks include consumption from the date of spin-off of the branch activity (see Note 3) as well as the effect on the transfer

of fi nal stocks of the divided branch of activity (Fibracat Europa, S.L.U.) existing at 10 October 2006.

Note 26. Personnel expenses The breakdown for this heading at 31 December 2006 was the following:


Wages and salaries 14.817

Indemnities 5.166

Social Security payable by the Company 3.865

Contributions to complementary pensions schemes 1.368

Other social welfare expenses 1.036

26.252

Average number of people employed in the tax year by professional category as per collective agreement

Categories Average number of Employees

Management staff and middle managers 15

Technical and administrative workers 82

Manufacturing staff 270

367

Note 27. Difference in provisions and losses from bad debts

Their breakdown at 31 December 2006 was the following:


Losses through bad trade debts 406

Endowment for provision for trade debts 714

Application of provision for bad debts -

1,120

43

Note 28. Net sum for turnover

28.1. Its breakdown at the close of the tax year was the following:


Sales 224,959

Refunds and volume discounts (43,687)

Provision of services 3,177

184,449

28.2. The breakdown for the net sum of the turnover for the 2006 tax year by markets and geographical activities is as follows:


OtherCountriesDomestic UE Total

Polyester fi bre 5,917 9,627 448 15,992

PET polymer 68,444 82,085 12,615 163,144

Others 5,285 27 1 5,313

79,646 91,739 13,064 184,449

Note 29. Additional income and miscellaneous operating income

In 2006 the Company recorded sales corresponding to the license rights for installation of the PET and PTA production process and the

engineering services developed on each project, for an amount of 36,440 and 3,246 million euros, respectively. An amount of 3,278 million

euros has also been recorded for technology maintenance services and industrial property provided to group companies.

Note 30. Transactions carried out with Group companies and associated companies


(Miles de Euros)

Services Interest

Sales Purchases Rendered Received Charged Paid

Group Companies 2,082 31,031 1,573 30 4,199 -

Associated Companies - - 41 5,378 - -

2,082 31,031 1,614 5,408 4,199 -

44

Note 31. Transactions in currencies other than the euro

The volume of transactions in currencies other than the euro, basically for sales and purchases, amounts to 0.85 and 2.85 million euros,

respectively, with their breakdown as follows:

(Foreign Currency)

Currency Sales Purchases

US Dollar 87 2.931

Pound Sterling 535 309

Swiss Franc - 17

In this item, the trade payables and receivables in currencies other than the euro at 31 December 2006 amounted to 0.16 million euro and

0.34 million euro respectively, and their breakdown into currencies was the following:

(Foreign Currency)

Currency Debit Credit

US Dollar 1 40

Pound Sterling 108 -

Swiss Franc - 5

Note 32. Environment

In 2006, in order to apply the strategy defi ned by the Group, it continued to make investments in fi xed assets earmarked for protecting the

environment, the sum total of which amounted to 1 thousand euros. The most signifi cant aspects in the section for the Environment for

the present tax year were the following:

- The company has obtained environmental authorisation for all activities of La Seda de Barcelona, S.A. at its production plant in Prat de

Llobregat, including energy type activities, and therefore satisfi es the IPPC Act prior to the obligatory deadline.

- Recycled material continues to be used in the production of polyester fi bre, thus reducing the environmental impact of our activities

by reducing consumption of virgin raw materials.

- The company has commenced an ambitious project that will lead to the construction and operation of a new polygeneration plant in

2008 which will replace the current power station and which will largely improve energy effi ciency and enable the Company to reduce

atmospheric emissions.

- In 2006, La Seda de Barcelona, S.A. has been subject to the rules governing the trading of CO2 emission rights. In compliance with

current regulations, the annual report on the tracking of emissions correspond to 2006 has been prepared and verifi ed by an accredited

agency, and tonnage emitted has been lower than forecast.

The current expenses supported by the Company during the present tax year amount to 196 thousand euros. This includes the expenses

for transportation and external management of the waste, as well as those associated with the operation of the chemical waste plant.

45

Note 33. Other Information

Retribuciones y otras prestaciones a los Administradores. Durante el ejercicio fi nalizado al 31 de diciembre de 2006 las retribuciones

percibidas por los miembros del Consejo de Administración de la Sociedad se corresponden con el siguiente detalle:


Wages and salaries 325

Expense allowances for attending board meetings 242

567

There were no credits, advances, loans or securities contracted in terms of pensions with regard to the Board of Directors.

In relation to the information demanded by new Article 127, section three, 4 of the Public Limited Companies Act, the shareholdings and

posts and/or functions that Company Directors hold and/or exercise in other companies with the same, similar or complementary kind of

activity that represents the Company’s corporate purpose, are the following:

- Mr Rafael Español Navarro holds the post of sole administrator at Artenius Italia S.p.A., in representation of La Seda de Barcelona, S.A.

at Artenius Portugal, Industria de Polímeros, S.A., Artenius UK Limited, Artenius Holding, B.V. and Artenius Sines, S.A., joint adminis-

trator at CARB-IQA de Tarragona, S.L., chairman and joint administrator at Artenius Hellas Holding, S.A., director of DOGI, S.A., Endesa

Internacional, S.L. and Enersis, S.L. adviser at FECSA-Endesa at the date of preparing their respective annual accounts.

- Mr Ramon Pascual Fontana holds the post of director at Petrolest, S.L. at the date of drawing up its annual accounts.

- The Company called Ibersuizas Alfa, S.L., fully owned by Ibersuizas Participadas, S.A., holds the post of Director in the fi rm called

Selenis, SGPS, S.A.

Note 34. Fee for the auditors

The fee for the auditors for carrying out the audit on the individual and consolidated annual accounts at 31 December 2006 amounts to

139,373 euros, being the only item for which they were paid.

Note 35. Events following the close of the tax year

On 6 February 2007 the company, together with Bionor Transformación, S.A., a subsidiary of Cie Automotive, S.A., incorporated Bio-

combustibles La Seda, S.L. for the purpose of developing biodiesel plants of the different industrial locations of the Seda Group. The new

company has been incorporated with a share capital of 3 million euros and 60% is held by La Seda de Barcelona, S.A.

Following the strategy defi ned by the Group, on 20 February 2007 the Company reached an agreement to purchase Eastman Chemical

Iberia, S.A. for 50 million euros, including working capital. The operation is pending approval by the fair trading commission. With this

purchase the Company will increase its PET production capacity by 175,000 tonnes.

As a consequence of the Group’s structural reorganisation procedure, La Seda de Barcelona, S.A. has focused the PET activity under the

ARTENIUS brand, which has led to an amendment of the trading name of the different subsidiaries in order to adapt to the aforementioned

brand.

On 6 March 2007 and for the purpose of closing the PET production process, the company reached an agreement to purchase 60% of the PET

recycling company Recuperaciones de Plásticos Barcelona for an amount of 2.6 million euros, and the agreement to subscribe to the full amount

of a capital increase of 1 million euros in order to raise its stake to 67.4%.

46

Applications


Origins


Year Year

31.12.2006 31.12.2005 31.12.2006 31.12.2005

Purchase of fi xed assets Resources from operations 21,312 31,642

• Preliminary expenses 25,503 3,675

• Intangible fi xed assets 47,327 277 Corresponding resources generated by effect

• Tangible fi xed assets 2,992 9,797 of the spin-off (see Note 3) 57,526 -

• Financial investments

Group companies 580,066 - Contributions from shareholders

Other fi nancial investments 89,045 94 • Increases in capital 418,722 72,694

Expenses to be deferred 12,651 6,070 Long-term debts

• Loans and other similar liabilities 391,500 105,461

Resources applied due to the effect

of the merger operation (see Note 1) - 22,898 Disposal of fi xed assets

• Intangible fi xed assets 1,074 -

Short-term cancellation or transfer • Tangible fi xed assets 19,688 31

of long-term debts • Financial investments

• Loans and other similar liabilities 101,002 31,233 Group companies and associated companies 28,921 -

• Fom other debts - 2,532 Other fi nancial investments 21 -

Total applications 858,586 76,576 Total origins 938,764 209,828

Increase in working capital 80,178 133,252

938,764 209,828 938,764 209,828

Change in working capital


31.12.2006 31.12.2005

Increases Decreases Increases Decreases

Inventories - 5,803 22,058 -

Debtors 16,582 - 166,521 -

Temporary fi nancial investments - 6,222 37,478 -

Own Shares 1,912 - - 402

Creditors 17,418 - - 75,107

Cash - 1,140 5,493 -

End-of-period adjustments - 95 109 -

Increase in working capital due to the effect of the spin-off operation 57,526 - - 22,898

93,438 13,260 231,659 98,407

Change in working capital - 80,178 - 133,252

93,438 93,438 231,659 231,659

Note 36. Finance table

47

Reconciliation of the book profi t/loss with the funds generated by transactions


31.12.2006 31.12.2005

Results for the fi nancial year 5,343 (1,868)

Transactions not related to the movement of funds:

Fixed Asset Depreciation/Amortisation 14,331 10,765

Net effect of deferred income and expenses 8,012 22,739

Application of tax credit to result and long-termadvance taxes 5.352 25

Losses in the transfer of intangible fi xed assets andcontrol portfolio 2,853 111

Profi ts in the transfer of intangible fi xed assets andcontrol portfolio (14,579) (130)

Resources from operations 21,312 31,642

48

Management Report

In compliance with that set forth in Article 171 of the Revised Text of the Public Limited Companies Act, the present management report for

the Company is drawn up in relation to the corporate tax year closed on 31 December 2006, including the matters required in Article 202

of the said legal corpus, as modifi ed by Article 107 of Act 62/2003 on Measures of a Tax, Administrative and Social nature.

1. Progress of the business and the Company’s situation. The progress of the Company’s activities during the 2006 tax year was the

following:

One of the objectives of La Seda de Barcelona, S.A. in 2006 was to increase its size through an Acquisitions Programme that has made

the group the biggest PET and PTA producer in Western Europe, with an installed capacity of 800,000 tonnes and 670,000 tonnes, res-

pectively. As a consequence of this acquisitions plan La Seda de Barcelona is present in Spain, Portugal, Italy, Greece, Turkey, Romania

and the UK.

Two large fi nancial operations also took place in 2006:

1) Capital increase of 418 million euros, the second-largest operation on the Spanish stock exchange in the last two years.

2) Syndicated loan of 405 million euros from Deutsche Bank, which has strengthened the fi nancial structure of the company to ensure

that it remains solvent during its expansion and growth stage.

This combination between the sources of funding provides fi nancial stability that enables new challenges associated to growth to be tackled

successfully.

INVESTMENT ACTIVITY.

In 2006 La Seda de Barcelona, S.A. made the following purchases which have increased installed capacity of the group to 800,000 and

670,000 tonnes per year of PET and PTA, respectively:

- 100% of Artenius Portugal, Industria de Polímeros, S.A., a factory located in Portalegre (Portugal) with annual production capacity of

70,000 tonnes of PET.

- 100% of Artenius Artenius Italia, S.p.A, two factories located in Udine (Italy) with annual production capacity of 200,000 tonnes of PET.

- 51% of Artenius Hellas, S.A., the sole producer of PET in the Balkans and located in Volos (Greece) with a strategic location that ena-

bles access to Europe, the Balkans, the Middle East and the Euro-Asian markets. Production capacity in 2006 was an annual 80,000

tonnes of PET.

- 100% of Artenius UK Limited, located in Wilton and comprising three production plants: two producing PTA and one producing PET.

The production capacity of PTA is 670,000 tonnes a year and the production capacity of PET is 150,000 tonnes a year.

- 100% of Artenius Turkpet Kimyevi Maddeler ve Pet Ambalat MalzemeleriSanayi Anonim Sirketi, located in Adana and which produces

PET and Preforms. The PET production capacity is 130,000 tonnes a year.

- 100% of Artenius Romania, SRL, located in Bucharest and which produces preforms. The preforms production capacity is 10,000

tonnes a year.

At the same time, building work has started on the 7.5 Mwh polygeneration plant in El Prat de Llobregat (Barcelona), which will make pos-

sible energy savings of around 35%. This facility will come into operation during the fi rst quarter of 2008 and will represent an investment

of 8 million euros.

49

PROGRESS OF THE PET MARKET.

PET is the Company’s main industrial project. It is a product with strong accumulated growth and great potential for development.

During the 2006 tax year, the PET market continued its ongoing growth of the last few years, with an annual average rate close to 10%.

This percentage may rise in the short-term with the defi nitive implementation of the PET pack on the market for fruit juices, milk products

and beer.

The use of PET has been consolidated on the market for mineral waters, carbonated drinks and oils and it is very quickly gaining ground

in new applications in the sectors for foodstuffs, cleaning products, cosmetics and pharmaceuticals, as well as in applications for industry

and engineering.

RESEARCH & DEVELOPMENT ACTIVITIES.

In 2006 the Company focused its R&D&i efforts on analysis of different technologies and production processes to which it has had access

through the aforementioned acquisitions, for the purpose of extending this know-how to all production plants and of setting up the best

practices of each of these at the remaining subsidiaries. This has been in detriment to the performance of other projects.

2. Risk factors. Any activity is subject to risks, not merely external ones but also those that are inherent to the activity itself. Economic

activities are no exception and competent management requires that the risks that might affect a company’s business not just in the short

term but also in the long term should be identifi ed, measured and assessed.

The Company’s top management is in charge of carrying out ongoing monitoring so as to identify, assess and prioritise current and po-

tential risks and take the pertinent measures to counteract as far as possible the threats to the business that might arise from the risks

that are identifi ed.

The main fi nancial risks are listed below and the measures taken by the Company’s management for dealing with them:

Interest rate risk:

La Seda de Barcelona, S.A. uses hedge instruments to cover this risk. The derivatives held by the group correspond mainly to interest rate

hedge operations and ensure the existing borrowing at a defi ned rate of interest. For bookkeeping purposes these are processed as cash

fl ow hedges in so far as they correspond to cash fl ow hedges that are attributable to a specifi c risk linked to a liability previously recognised,

viz., the loan granted for an amount of 405 million euros.

Risk in the management of raw materials:

The Company’s main risk in the management of the raw materials is the change in the price of PTA. This product comes under the aroma-

tics cut (BTX), with the composition of the latter being Benzene, Toluene and Xylene.

These three components are also used for manufacturing derivatives of gasolines with the aim of cheapening their cost. Due to the

rise in the price of oil, there is a rise in demand for Benzene, Toluene and Xylene from the fuel manufacturers.

One of the derivatives of Xylene, commonly known as paraxylene, is the base for obtaining PTA and its price ranges according to the supply

and demand for Xylene on the international market, which is closely linked to the price of fuel.

The price of the PTA, therefore, will depend on the end use that the producers of aromatic fractions decide for Benzene, Toluene

and Xylene.

There is no system for covering specifi c risks in this market segment.

50

Market risk:

During the 2006 tax year a new competitor on the international PET market was discovered in Lithuania, which caused a drop in prices

on the latter.

As of the date of the close of the tax year, no project is known to be underway for building new plants for PET by any possible competitors.

The risk of new competitors appearing in the next few years is mitigated by the need for a minimum of 2 years and a high fi nancial cost for

building new plants for manufacturing PET, apart from obtaining the pertinent permits related to the environment

Exchange rate risk:

Practically 90% of the purchase and sale transactions carried out by La Seda de Barcelona, S.A. are done so in Euros, which is why there

is no need for specifi c risk management in this fi eld.

Liquidity risk:

The liquidity policy followed by the Group ensures performance of the undertakings for payment without having to resort to fi nance from

third parties under exorbitant conditions.

Credit risk:

The credit risk deriving from the failure of a counterpart (client, supplier, partner or fi nancial institution) is properly controlled in the Seda

Group through different policies and risk limits in which requirements are established relating to:

• Suitable contracts in the transaction carried out.

• Proper internal or external credit rating for the counterpart.

• Additional guarantees where necessary.

• Limitation of the costs for bankruptcy and the fi nancial cost deriving from bad debts.

3. Important events occurring after the close of the tax year.

No other important events have arisen following the close of the tax year apart from those already stated in Note 35 above.

4. Foreseeable progress for the Company.

2007 will see the Company adopted the opportune measures and policies to consolidate the new structure of the Group’s focus mainly on

PET activity, which has become the core business of the group under the Artenius brand and has created a specifi c division for the PTA

raw material (purifi ed terephthalic acid).

With the purchase of the PET plant of Eastman Chemicals Ibérica in San Roque, La Seda de Barcelona Group will increase annual produc-

tion capacity by 175,000 tonnes of PET, raising the total production capacity of La Seda up to approximately 1 million tonnes per year.

5. Purchases and disposals of own shares.

At its meeting dated 12 June 2006, the General Meeting of Shareholders of La Seda de Barcelona, S.A., authorised the Company and its

subsidiaries to acquire own shares under the protection of the provisions set forth in article 75 and Additional Provision One of the Public

Limited Companies Act, for a period of 18 months from that date onwards and with a limit of 5% of the share capital under conditions of cash

sale and for a price equivalent to the applicable stock market listing price.

CONSOLIDATED ANNUAL ACCOUNTSAND MANAGEMENT REPORT

56

CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2006 AND 2005(International Financial Reporting Standards adopted)

ASSETS 31.12.2006 31.12.2005

NON-CURRENT ASSETS

Tangible fi xed assetsl (Note 5) 524,726 245,841

Goodwill (Note 6) 124,412 8,275

Other intangible assets (Note 7) 56,397 8,186

Non-current fi nancial assets (Note 8) 92,467 1,297

Investments entered using the shareholding method (Note 9) 9,869 2,794

Assets from deferred taxes (Note 17.2) 47,401 34,309

855,272 300,702

CURRENT ASSETS

Inventories (Note 10) 113,362 61,744

Trade debts and other accounts to be settled 406,784 150,407

Other current fi nancial assets (Note 11) 23,536 8,120

Assets from taxes on current revenue 414 19

Other current assets (Note 12) 22,330 2,606

Cash and other equivalent liquid assets 38,200 36,897

604,626 259,793

Non-current assets classifi ed as maintained for saleand discontinued activities 1,076 877

605,702 260,670

1,460,974 561,372


Notes 1 to 32 to the attached consolidated report are an inseparable part of the consolidated balance sheet at 31 December 2006.

57

LIABILITIES AND NET ASSETS 31.12.2006 31.12.2005

NET WORTH (Note 13)

Capital 416,787 101,599

Other reserves 246,549 137,375

Accumulated revenue 12,125 13,608

Other net assets 23 1,855

Own securities (3,145) (223)

Exchange differences 3,952 -

Minority interest 14,367 482

690,658 254,696

NON-CURRENT LIABILITIES

Issue of Debenture Loans and Other Marketable Securities (Note 14) 2,086 42,936

Bank borrowing (Note 15.1) 403,825 54,143

Other fi nancial liabilities (Note 15.2) 6,257 69,686

Liabilities from deferred taxes (Note 17.3) 23,451 20,495

Provisions (Note 16) 44,594 -

Other non-current liabilities (Note 18) 11.018 449

491,231 187,709

CURRENT LIABILITIES

Issue of Debenture Loans and Other Marketable Securities (Note 14) 56 1,095

Bank borrowing (Note 15.1) 28,607 48,359

Trade creditors and other accounts to be paid 198,475 34,232

Other fi nancial liabilities (Note 15.2) 5,280 15,793

Other current liabilities (Note 18) 46,667 19.488

279,085 118,967

1,460,974 561,372

CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2006 AND 2005(International Financial Reporting Standards adopted)


Notes 1 to 32 to the attached consolidated report are an inseparable part of the consolidated balance sheet at 31 December 2006.

58

CONSOLIDATED PROFIT & LOSS STATEMENT FOR THE YEAR-END31 DECEMBER 2006 AND 2005 (International Financial Reporting Standards adopted)

OPERATING INCOME

Net turnover (Note 20)

Other operating income

Variation in stocks of fi nished products and work-in-progress

OPERATING EXPENSES

Procurement (Noe 21.1)

Personnel (Note 21.2)

Fixed asset depreciation/amortisation

Other operating expenses

OPERATING PROFIT (LOSS)

FINANCIAL INCOME AND CHARGES

Financial income

Financial charges

Gain/loss on exchange differences

fi nancial instruments

Increase/decrease in provision (debtors and stock)asset impairment charges

Share of associated companies’profi t/losses

Gain (loss) on disposal of fi xed assets

Other income or losses

PROFIT (LOSS) BEFORE TAXFROM ONGOING ACTIVITIES

Corporation tax (Note17.1)

PROFIT (LOSS) FROM ONGOING ACTIVITIES

Profi t (loss) from the fi nancial year (Note 22)

BENEFICIO (PÉRDIDA) DEL EJERCICIO

Minority interest

PROFIT (LOSS) ATTRIBUTABLE TO PARENT COMPANY’SSHAREHOLDERS

31.12.2006

672,408

644,564

36,984

(9,140)

(643,774)

(491,346)

(42,263)

(25,222)

(84,943)

28,634

2,786

(20,196)

(793)

35

9,608

45

12,649

-

32,768

(245)

32,523

(29,565)

2,958

(2)

2,956

31.12.2005

296,005

255,976

13,906

26,123

(272,426)

(168,395)

(34,650)

(15,566)

(53,815)

23,579

560

(14,401)

(49)

2

(58)

17

144

(995)

8,799

(2,682)

6,117

-

6,117

(2)

6,115

Notes 1 to 32 of the attached consolidated report are an inseparable part of the consolidated profi t and loss statement for the fi nancial years closed at 31 December 2006 and 2005.


59

CONSOLIDATED CASH FLOW STATEMENT FOR THE FINANCIAL YEARS 2006 AND 2005

Cash from activities

Net result after taxResult of consolidated companies in equityFixed asset depreciation/amortisationGoodwillAsset impairment charge Result of transfer of assets

Cash from operations

Accounts receivableOther current assetsAccounts payableOther current liabilitiesBanksOther items

Cash from circulating capital

Corporation tax

Cash from activities

Cash applied in investment activities

Purchase of tangible fi xed assetsPurchase of intangible fi xed assetsPurchase of other fi nancial assetsCash obtained/paid derivative contractsTransfers of tangible fi xed assetsTransfers of intangible fi xed assetsTransfers of subsidiaries and associated companiesTransfers of other fi nancial assetsDividends received

Net cash applied in investment activities

Cash applied in fi nance activities

Increases in capital Issue of bondsLoan withdrawalsLoan repaymentsFinancial lease payments

Net cash applied in fi nance activities Effect of exchange differences on cash and otherequivalent assets

Increase (reduction) in cash and other equivalent assets

Cash and other equivalent assets at start of year

Cash and other equivalent assets at end of year


2,958 (45)

25,222 1,868

(11,476)12,649

31,176

46,594 49,213

(22,317)(41,586)(94,433)

-

(62,529)

245

(31,108)

(27,410)(56,089)

(481,233)-

42,532 --

3,331 -

(518,869)

418,722 -

391,500 (257,327)

(1.416)

551,479

-

1,502

37,774

39,276


6,117 (17)

15,566 58

7,463 (144)

29,043

(22,660)(35,152)(40,982)(41,691)

-(453)

(140,938)

2.682

(109,213)

(15,423)(2,925)

(499)-

263 --

37 -

(18,547)

72,694 47,469 66,711

(30,159)4,466

161,181

-

33,421

4,353

37,774


Notes 1 to 32 of the attached consolidated report are an inseparable part of the consolidated cash fl ow statements of the years 2006 and 2005

60



Distribution of resultsModifi cation of perimeter

of consolidation


Description Dividends Decreases Increases Decreases

Others adjustments Increases Decreases Transfers

Share Capital 101,599 - - - - - 315,188 - - 416,787

Issue Premium 26,918 - - - - - 148,744 - - 175,662

Other reserves 109,701 - 4,381 - - - - (44,925) 5,167 74,324

Reserves fi rst application IFRS 17,289 - - - - - - - 709 17,998

Other net asset instruments 1,855 - - - - - - (1,832) - 23

Own securities (223) - - - - - - (2,922) - (3,145)

Reserve for merger (18,192) - - - - - - - - (18,192)

Reserves in consolidated companies forglobal integration 9,118 - 1,716 - - - 916 - (5,876) 5,874

Reserves inequity companies 34 - 18 - - - - - - 52

Exchange differences - - - - - - 3,952 - - 3,952

Minority interest 482 - - 14,039 - - 2 (156) - 14,367

Profi t and loss 6,115 - (6,115) - - - 2,956 - - 2,956

254,696 - - 14,039 - - 471,758 (49,835) - 690,658

STATEMENT FOR CHANGES IN THE CONSOLIDATED NET WORTH IN THE FISCAL YEARS 2006 AND 2005

Notes 1 to 32 of the attached consolidated report are an inseparable part of the statements for changes in the consolidated net worth at 31 December 2006 and 2005

61


Distribution of resultsModifi cation of perimeter

of consolidation


Others adjustments

Balance at31.12.2005Description Dividends Reserves Increases Decreases Increases Decreases Transfers

Share Capital 130,552 - - - - - 58,155 - (87,108) 101,599

Issue Premium 12,.379 - - - - - 14,539 - - 26,918

Other reserves 24,476 - 1,289 - - (3,372) 200 - 87,108 109,701

Reserves fi rst application IFRS 17,998 - - - - - - (709) - 17,289

Other net asset instruments - - - - - - 1,855 - - 1,855

Own securities - - - - - - - (223) - (223)

Reserve for merger - - - - - 7,770 - (25,962) - (18,192)

Reserves in consolidated companies forglobal integration (11,230) - (1,900) 22,248 - - - - - 9,118

Reserves inequity companies 8 - - - - - 26 - - 34

Minority interest 637 - - - (155) - - - - 482

Profi t and loss (611) - 611 - - - 6,115 - - 6,115

174,209 - - 22,248 (155) 4,398 80,890 (26,894) - 254,696

STATEMENT FOR CHANGES IN THE CONSOLIDATED NET WORTH IN THE FISCAL YEARS 2006 AND 2005

Notes 1 to 32 of the attached consolidated report are an inseparable part of the statements for changes in the consolidated net worth at 31 December 2006 and 2005

62

La Seda de Barcelona, S.A.Consolidated Report at 31 December 2006

Note 1. Group information

a) Group activity

La Seda de Barcelona, S.A. is the controlling company for the Group, which includes several companies with common management and

shareholders. The Company was incorporated on 23 May 1925, its duration is open-ended and as stated in its memorandum of associa-

tion of the same date, its corporate purpose is the manufacture and sale of artifi cial silk in all its aspects and derivatives, the production,

handling, processing and sale of all kinds of fi bres and textile and technical threads and artifi cial and synthetic materials, including the

construction of its own machinery, the production of power and steam for use at its plants, as well as research into the aforesaid fi elds.

Furthermore and as a result of the merger process described below, its corporate purpose has been extended to include the manufacture

and trading of polyester resin, polyester fi bre, polyethylene terephthalate (PET polymer), the production of eicosapentaenoicacid (EPA),

docosahexaenoic acid (DHA) and all kinds of polyunsaturated fatty acids.

Through the companies in which La Seda de Barcelona, S.A. has a majority shareholding (see Note 1 b), the group’s main acti-

vities are:

- The manufacture and trading of continuous chemical fi bres, raw sliced and mass-dyed fi bres, granules for plastics, and sheets and

heat-moulded products in compounds made from synthetic polymers, as well as any industrial or commercial activity concerning the

chemical industry and the assembly of industrial plants, participation, management and operation of chemical fi rms.

- Manufacture and trading of resins and polyester fi bres.

- Manufacture and trading of purifi ed terephthalic acid (PTA).

- Manufacture and trading of polyethylene terephthalate (PET polymer).

- Manufacture and trading of PET packaging materials (preforms).

- Electrical production through a cogeneration plant.

- Production, distribution and sale of gases.

- Recycling of farm waste and sale of organic manures.

On 29 December 2004, the Annual General Meeting of Shareholders of La Seda de Barcelona, S.A. approved the merger by absorption

with effect on 1 January, whereby the Company took over the group companies: Catalana de Polímers, S.A.U., KD-IQA, S.L.U., Iberseda,

S.L.U., Proyectos Voltak, S.L.U., Celtibérica de Finanzas, S.L.U. and Mendilau, S.L.U., of which it was the holder of 100% of their share

capital, with its effect according to the companies being described in detail in Note 17.6.

b) Shareholding body

The companies that make up the Group fi le individual fi nancial statements in accordance with the applicable rules in the country in which

they operate.

The breakdown of the held companies at 31 December 2006 is shown on the following pages, classifi ed into the following categories:

• Subsidiary companies:Those companies in which the Controlling Company holds a majority of the voting rights or, even if this is not so,

has the power to manage the fi nancial and operating policies for the former.

• Joint management companies: Those companies managed jointly with another partner, by holding 50% of the shareholding and an

equal number of voting rights on the Board of Directors, without the individual power to manage the fi nancial and operating policies of

the company.

• Associated companies: Those companies in which the Controlling Company directly or indirectly has a shareholding of between 20% and

50% or, even without these stake percentages, holds a signifi cant infl uence over the management.

63

None of the companies that belong to the Group has been excluded from the consolidation perimeter and none of them is listed on the

stock exchange Moreover, no company has received dividends during the period in which they form part of the Group.


Barcelona, S.A. Result

Company /Registered Offi ces

Mainactivity Direct

Direct and Indirect

Subscribed capital Reserves

Net accounting

valueCost value

of holding (*)Last

fi nancial year Extraordinary

Global integration

Industrias Químicas Asociadas LSB, S.L.(Single-member Company)Pº de Gracia, 85, 08008 - Barcelona (1) 100% 100% 30,742 4,367 (175) - 34,934 30,742

CARB-IQA de Tarragona, S.L.Ctra. Nacional 340, Km. 1157Polígono Industrial La Canonja (Tarragona) (2) - 50% 625 27 3 - 328 313

SLIR, S.L. (Sociedad Unipersonal)Carretera de Carcastillo a FigarolCarcastillo (Navarra) (3) 100% 100% 2,404 749 139 - 3,292 3,325

ANERIQA, A.I.E.Ctra. Nacional 340, Km. 1157Polígono Industrial La Canonja (Tarragona) (4) 10% 100% 1 - - - 1 1

Artenius Italia, SPAVia Montereale 10/A33179 - Pordenone (Italy) (5) 100% 100% 12,750 4,954 (7,347) - 10,357 58,702

Artenius Portugal, Industria de Polimeros, S.A. Apartado 23, Quinta de Sao Vicente, EstradaNacional, 246. 7300-952 Portalegre (Portugal) (5) 100% 100% 10,000 5,040 (4,875) - 10,165 22,614

Artenius Sines, S.A. Apartado 23, Quinta de Sao Vicente, EstradaNacional, 246. 7300-952 Portalegre (Portugal) (6) 100% 100% 50 - (4) - 46 50

Artenius Holding, B.V.Kruisweg, 8292132 NG - Hoofdorp (Netherlands) (7) 100% 100% 18 443,514 - - 443,531 -

Artenius Uk, LimitedDavies Offi ces, Wilton SiteRedcar, TS10 4XZ (United Kingdom) (5) / (6) - 100% 395,538 (192,290) 46,707 - 249,955 210,430

Artenius Pension Truste es, Ltd., Davies Offi ces, Wilton SiteRedcar, TS10 4XZ United Kingdom (8) - 100% - - - - - -

Artenius Turkpet Kimyevi Maddeler ve Pet Ambalat MalzemeleriSanayi Anonim SirketiTarsus Yolu 10. km. Sasa Fabrika içi SeyhanAdana (Turkey) (5) / (9) 100% 100% 120,386 2,275 11,810 - 134,471 84,520

Artenius Romania, SRLBulebardul Basarabiei, 256 AnexaTehnico-Sociala, etaj 1, sector 3. Bucharest (Rumania) (9) 100% 100% 6,266 (172) (343) - 5,751 5,440

Artenius Hellas Holdings, S.A.Meandrou, 15. 11528 - Atenas (Greece) (7) 100% 100% 60 - (53) - 7 7

Artenius Hellas, S.A., Volos Industrial Area B Zone37500 - Volos (Greece) (5) / (9) - 51% 24,615 3,427 609 - 14,612 18,542

907,450 434,686

64

c) Variation in the perimeter of consolidation

For the very fi rst time, the Controlling Company has used the global integration method to include the following companies within its peri-

meter of consolidation:

- Artenius Italia, S.p.A, formerly called Selenis Italia, SPA, incorporated into the perimeter on 31 January 2006, with headquarters

in Italy.

- Artenius Portugal, Industria de Polimeros, S.A. formerly called Selenis Industria de Polimeros, S.A., incorporated into the perimeter

on 31 January 2006, with headquarters in Portugal.

- Artenius Sines, S.A. formerly called Artensa – Produçao e Comercializaçao de Ácido Tereftálico Purifi cado e Productos Conexos, S.A.,

incorporated into the perimeter on 28 September 2006, with headquarters in Portugal.

- Artenius Holding, B.V., formerly called Advansa Holding, B.V., incorporated into the perimeter on 30 September 2006, with head-

quarters in the Netherlands.

- Artenius UK, Limited, formerly called Advansa UK Limited, incorporated into the perimeter on 30 September 2006, with headquarters

in the United Kingdom.

- Artenius Pension Trustees, Ltd., formerly called Advansa Pension Trustees Limited, incorporated into the perimeter on 30 September

2006, with headquarters in the United Kingdom.

- Artenius Romania, SRL formerly called Advansa Romania, SRL, incorporated into the scope on 30 September 2006, with headquar-

ters in Romania.

- Artenius Turkpet Kimyevi Maddeler ve Pet Ambalat MalzemeleriSanayi Anonim Sirketi, formerly called Artensa Kimyevi Maddeler ve

Pet Ambalaj Malzemeleri Sanayi Anonim Sirketi., incorporated into the perimeter on 30 September 2006, with headquarters in Turkey.

- Artenius Hellas Holding, S.A., formerly called Selenis Hellas Holding, S.A., incorporated into the perimeter on 31 December 2006,

with headquarters in Greece.

- Artenius Hellas, S.A., formerly called Volos Pet Industry, S.A., incorporated into the perimeter on 31 December 2006, with headquar-

ters in Greece.

(1) Industrial or commercial activity related to the chemical industry.(2) Production, distribution and sale of gases.(3) Recycling of farm waste and sale of organic manure.(4) Electrical cogeneration plant.(5) Manufacture and commercialisation of polyethylene terephthalate (PET polymer).(6) Manufacture and commercialisation of purifi ed terephthalic acid (PTA).

(7) Holding of securities.(8) Management of pension funds.(9) Manufacture and commercialisation of PET packaging materials (Preforms)..(10) Provision of services.(11) Specialised transport of chemical products and similar.(12) Manufacture and commercialisation of polyester fi bres and resins.

(*)The cos tvalue of the holding is not registered entirely with the parent company, but rather the reare companies that merely holds hares.In the case of the global take over of a group of companies, the cost value of the holding has been assigned in accordance with the economic criteria of income generation capacity.


Barcelona, S.A. Result

Global integrationMain

activity DirectDirect and

IndirectSubscribed

capital Reserves

Net accounting

valueCost value

of holding (*)

Lastfi nancial

year Extraordinary

PROPORTIONAL INTEGRATION

Selenis Servicios Técnicos, SRLApartado 23, Quinta S.Vicente. Estrada Ncional 2467300-952 Portalegre (Portugal) (10) - 50% 100 1.064 23 - 594 200

EQUITY

Petrolest, S.L.Raset, 7 2º 3ª. 08021 - Barcelona (11) 49% 49% 118 3.240 91 - 1,690 2,743

Simpe, S.p.AContrada Pagliarone 80011 Acerra (NA) – Italy (12) 19% 19% 4,810 - (155) - 4,655 7,030

6,345 9,773

444,659

65

The company Selenis Servicios Técnicos, SRL, with headquarters in Portugal, joined the perimeter of consolidation on 31 January 2006

through the proportional integration method (50%).

In addition, and for the very fi rst time, the Controlling Company has included the company Simpe, SPA with headquarters in Italy -within

its perimeter of consolidation on 31 December 2006.

The company Industrias Químicas Textiles, S.A. has been excluded from the perimeter of consolidation by the Controlling Company on 30

June 2006 as a consequence of its disposal.

On 10 October 2006 the Board of Directors of Seda de Barcelona, S.A. approved the non-monetary contribution of the branch of activity

made up by the assets and liabilities corresponding to the manufacture of polyester fi bres at the El Prat de Llobregat plant to Fibracat Eu-

ropa, S.L.U. Subsequently, on 30 November 2006, La Seda de Barcelona, S.A. sold 68.32% of the company shares belonging to Fibracat

Europa, S.L.U. to a Mexican trading company. The remaining shares that it holds were applied as a non-monetary contribution targeted

at the incorporation of the company Fibras Europeas de Poliéster, S.L. for an amount of 2.28 million euros. As a consequence of the

foregoing operations, the company Fibracat Europa, S.L.U. does not fall within the sphere of consolidation as control of the held company

has been lost.

The breakdown of segregated assets and liabilities is as follows:

ASSETS (Thousands of Euros)

FIXED ASSETS

Net intangible fi xed assets 822

Net tangible fi xed assets 18,919

CURRENT ASSETS

Net inventories 2,006

Trade debtors 55,520

77,267

LIABILITIES LONG-TERM LIABILITIES 70,067

NON-REQUIRABLE LIABILITIES 7,200

77,267

Note 2. Bases for presentation of the consolidated annual accounts

a)ITrue and fair view.

The consolidated annual accounts for the 2006 tax year have been drawn up in accordance with that set forth by the International Financial

Reporting Standards (hereinafter “IFRS”), as passed by the European Union, in accordance with Regulation (EC) No. 1606/2002 of the

European Parliament and of the Council, taking into account all of the accounting principles and standards and the assessment criteria

that are obligatory to apply that have a signifi cant effect, as well as the alternatives that the regulations allow in this matter. Along this line,

in accordance with that set forth in IFRS 1, the Controlling Company in the Group as well as Industrias Químicas Asociadas LSB, S.L.U.,

have kept the restatements made in accordance with the legislation in force prior to 1 January 2004, in particular prior to the update carried

out pursuant to Royal Decree-Law 7/1996 of 7 June (see Note 5.1).

The enclosed consolidated annual accounts have been drawn up based on the individual accounting records of La Seda de Barce-

lona, S.A. and of each one of the Subsidiary Companies and show a true and fair view of the net worth, the fi nancial position at 31

December 2006 and of the results of their transactions, the changes in the statement of acknowledged income and expenses and of

the cash fl ows which arose in the consolidated Group during the tax year closed on the said date.

66

The fi rst consolidated annual accounts presented under IFRS criteria were those for the tax year that closed on 31 December 2005.

As a consequence, IFRS 1 “Initial use of the International Financial Reporting Standards” was applied on the transition date of 1

January 2004.

The Group has not adopted the standards approved by the European Union and the Interpretations Committee of the IFRS (CINIIF) in

advance, the application of which was not obligatory in 2006 and they shall be applied when they come into force. These standards shall

not have an impact on the fi nancial situation of the Group and only the following standards will involve additional breakdowns:

- IFRS 7 – Financial instruments: Information to be disclosed, which requires breakdowns that enable users to assess the importance

of the Group’s fi nancial instruments and the nature and scope of the risks that the aforementioned fi nancial instruments entail.

- Amendments to the IAS 1 – Presentation of fi nancial statements, which requires new breakdowns to be drafted that enable users to

assess the objectives, policies and procedures to manage the capital.

- IFRS 8 – Operative segments

The enclosed consolidated annual accounts, which have been drawn up by the Board of Directors of the Controlling Company, shall be

submitted for approval by the Ordinary Annual General Meeting of Shareholders. The Administrators of the Controlling Company believe

they will be approved without any modifi cation. The consolidated annual accounts of the Group corresponding to the tax year that ended

on 31 December 2005, drafted in accordance with the International Financial Reporting Standards, were approved by the General Meeting

of Shareholders on 12 June 2006.

b) Comparison of information.

As mentioned in Note 1, section c) of this note, the perimeter of consolidation of La Seda de Barcelona group has changed signifi cantly due

to the acquisitions carried out in Italy, Portugal, United Kingdom, Turkey, Rumania and Greece and the disposals from the scope of con-

solidation as a consequence of the sale of shareholdings in Industrias Químicas Textiles, S.A. and the segregation of the branch of activity

formed by the assets and liabilities given to Fibracat Europa, S.L. As a consequence, the comparable nature of the data corresponding to

the 2005 in 2006 tax year’s included in the attached balance sheet, the profi t and loss statement, the cash fl ow statement and the report

is conditioned.

c) Responsibility for the information and the estimates made.

The information contained in these annual accounts is the responsibility of the Group’s Administrators.

In the consolidated annual accounts corresponding to the 2006 tax year, estimates have been used occasionally that were made by the

Group’s Management and the other companies to quantify some of the assets, liabilities and undertakings that are recorded therein. Basi-

cally, these estimates refer to:

- The valuation of the assets and goodwill in order to determine the existence of losses through the impairment of these (see Note 6).

- The hypotheses used for calculating the actuarial value of liabilities.

- The useful life of the tangible and intangible assets (see Notes 5 and 7).

- The probability of occurring and the sum total for the indeterminate or contingent liabilities.

- Deferred taxes.

Despite the fact that these estimates were made according to the best information available on the date of drawing up these consolidated

annual accounts regarding the facts analysed, it is possible that events which may take place in the future may force them to be altered

(upwards or downwards) in forthcoming tax years, which would be done in a prospective way acknowledging the effects of the change in

the estimate on the pertinent future consolidated profi t and loss statements.

d) Consolidation methodology

• Consolidation methods. The criteria followed for deciding on the consolidation method applicable to each one of the companies that

make up the perimeter for consolidation were the following:

67

1. Global integration: This method was applied to the companies in which the Controlling Company controls the majority of the voting

rights or, even if this is not so, has the power to manage the fi nancial and operating policies for the former.

2. Proportional integration: This has been applied to those companies managed jointly with another partner, by holding 50% of the

shareholding and an equal number of voting rights on the Board of Directors, without the individual power to manage the fi nancial and

operating policies of the company.

3. Method of shareholding: This method was applied for the associated companies, with these deemed to be those in which the direct

or indirect holding in the share capital belonging to La Seda de Barcelona S.A. stands at between 20% and 50% or, even if it does not

reach the said percentages of shareholding it does have a signifi cant infl uence on the management. This method consists of entering

the shareholding on the balance sheet for the fraction of its net worth that the Group’s holding in its share capital represents once, where

applicable, the effect of the transactions performed with Group companies has been adjusted, plus the tacit capital gains that corres-

pond to the goodwill paid in the takeover of the company.

• Timing and appraisal uniformity. The annual accounts of all the companies included within the perimeter of consolidation are uniform

in their structure, year-end and accountancy principles applied.

• Removal of internal operations. All the sizeable balances and transactions between the companies included within the perimeter for

consolidation have been removed from the enclosed consolidated annual accounts, as well as the sum total of the shareholdings held

between them, except for the profi t margin obtained by the company selling them, which is included in the value of the stocks at the close

of the tax year, stemming from transactions between Group companies, since the said margin is of very little interest with regards the true

and fair view of the consolidated annual accounts.

• First consolidation differences. The items of goodwill acquired prior to 1 January 2004 are kept at their net value entered at 31 Decem-

ber 2003 in accordance with Spanish accounting criteria. As from 1 January 2004 goodwill is not amortised and at the close of each tax

year there is an estimate to see whether there has been any reduction that would cut the recovery price to an amount lower than the net

cost entered, then carrying out, where applicable, the pertinent write-off.

Elsewhere, for those business combinations incorporated into the group after the aforementioned date on the basis of satisfying IFRS 3,

the differences that arise in the removal of investment and shareholders’ equity have been assigned to assets, liabilities and contingent

liabilities, as far as feasible, whose reasonable value on the date of combination would differ from the value shown on the balance sheet

of the purchased company, with the exception of the subsidiary Artenius UK, Limited, whose value is being assessed at the date of draf-

ting these consolidated annual accounts and shall be updated over the course of the next tax year. The surplus amounts that cannot be

assigned are attributed to “Consolidation goodwill”, when the difference is positive and as “Other operating income” of the profi t and loss

statement if this amount is negative.

Notwithstanding the foregoing, the incorporations into the consolidation perimeter have been provisionally carried out in accordance with

IFRS 3, paragraph 62, insofar as the goodwill values shown could be modifi ed over the forthcoming year.

• Minority interests. The interests belonging to external shareholders represent the aliquot of the shareholders’ equity at 31 Decem-

ber 2006 for those Subsidiary Companies that are consolidated using the global integration method, in which ownership is shared

with third parties.

• Conversion of fi nancial statements in currencies other than the euro. The fi nancial statements of foreign companies, none of which

operate in a hyper-infl ationary economy, and designated in a functional currency other than the currency used in the consolidated fi nancial

statements, are converted into euros through the exchange rate method, by virtue of which:

- Capital reserves are converted at the historic exchange rate.

- The profi t and loss statement entries have been converted by applying the average exchange rate of the period as the approximate

rate of exchange on the transaction date.

68

(Thousands of euros)

BASIS OF THE SHAREOUTFinancial period income/loss 5,343

DISTRIBUTIONTo legal reserve 534

To other reserves 2,834

To losses from previous periods 1,975

5,343

Note 4. Valuation rules

a) Tangible fi xed assets

The tangible fi xed assets are valued at their purchase price or production cost, net of the corresponding depreciation or provisions that exist

over these, except for the restatement carried out on the lands on which the different production units are located, based on the provisions

set forth in IAS 16, as well as the restatements carried out under the auspices of Royal Decree-Law 7/1996, dated 7 June, by the Contro-

lling Company of the Group as well as Industrias Químicas Asociadas LSB, S.L.U. The IFRS 1 enables these restatements carried out in

accordance with the governing regulations to be maintained. Likewise, and prior to its incorporation into the perimeter of consolidation and

in accordance with the current regulations in Portugal, Artenius Portugal has proceeded to restate the elements registered under the “Tech-

nical installations and machinery” heading at the market value based on an independent expert’s report. The amount of the aforementioned

restatement is 14.40 million euros charged to net worth. Likewise, and in application of the “disinquinamento del cespiti” act published on

17 January 2003, Artenius Italia, S.p.A. has proceeded to restate its tangible fi xed assets for an amount of 5.91 million euros.

As we mentioned in Note 2, section d) and in compliance with IFRS 3, with regard to the business combinations incorporated into the peri-

meter of consolidation (see Note 1, section c) during 2006, the tangible fi xed assets have been valued in accordance with their reasonable

value based on independent expert appraisals, with the exception of Artenius UK, Limited, whose value is currently being assessed and

shall be restated over the course of the next fi nancial year.

The fi nancial charges corresponding to the loans granted by fi nancial institutions directly related with the construction of tangible fi xed

assets are entered as the highest value of the fi xed assets. This amount totals 581.28 thousand euros.

Repairs that do not represent an increase in the useful life and the maintenance charges are charged directly to the profi t & loss statement.

The costs for extension or improvement that give rise to a greater duration for the asset or an increase in the productivity, capacity or effi -

ciency, are capitalized as the greater value thereof.

Works performed for fi xed assets are valued according to the costs incurred for labour, materials and other indirect costs. Over the year,

- Remaining balance sheet entries have been converted at the year-end exchange rate.

As a consequence of the application of the foregoing method, the exchange rate differences are included under the “Conversion differen-

ces” of the net worth of the consolidated balance sheet heading.

Note 3. Distribution of profi ts/losses of the Controlling Company

The distribution of the profi t from the tax year for La Seda de Barcelona, S.A. shall be decided at the Annual General Meeting of

Shareholders.

The Board of Directors shall propose the following distribution of the profi t, in thousands of euros: :

69

the companies that make up the Group have carried out works and tasks for themselves which are susceptible to be recorded as cost

increase of tangible fi xed assets for an amount of 3.39 million euros, which appears under the “Other operating income” heading of the

consolidated profi t and loss statement.

Depreciation of the elements of the tangible fi xed assets is started in relation to their purchase and/or repair date, in a straight-line method

according to the estimated years of useful life and applying it to the cost values, as per the following breakdown:

% ofrepayment

Buildings 1 - 5

Technical plant and machinery 1,5 - 15

Other plant, tools and fi ttings 5 - 9,1

Other fi xed assets 7,2 - 25

The sum totals for the restatement carried out according to Royal Decree-Law 7/1996 are amortised in line with the years of useful life

remaining at 31 December 1996 for the pertinent elements of the equity restated.

The tangible fi xed assets acquired through leases or lease-back are entered under the heading for “Tangible fi xed assets” to which the

assets leased corresponds, which is amortised during its scheduled useful life following the same method as for assets which are owned or

within the term of the pertinent lease, should the said useful life be shorter. The sales transaction with a subsequent lease back arranged

by the Controlling Company in 2005 was entered by deferring and amortising the excess of the sum total of the sale over the book value for

the asset sold throughout the term of the lease.

b) Other intangible assets.

As with patents, computer applications have been valued at the purchase price and/or the owner’s production costs with regard to those

assets acquired from third parties as well as those manufactured by the Company itself. The corresponding maintenance costs are there-

fore not shown. Amortisation is computed on the straight-line method, over a maximum period of 5 and 10 years.

The research expenses are attributed to costs when they are incurred, while development expenses incurred in an individual project are

capitalised if the Group is able to prove that the product is feasible from a technical and commercial point of view, if suffi cient technical and

fi nancial resources are available to commence the project and the costs incurred can be reliably determined. The capitalised development

costs are depreciated over the period during which income or returns from the aforementioned project are expected.

The group registers the emission rights when it owns these. In the case of rights assigned free of charge to each installation within the Na-

tional Assignment Plan, the assessment corresponds to the market value at the date of concession. The emission rights are removed from

the balance sheet when they are disposed to third parties, handed over or expire.

c) Asset impairment.

At the close of each tax year, or on the date deemed necessary, the value of the assets is analysed to determine whether there is any sign

that they have undergone a loss through impairment. If there is a sign, an estimate is made of the sum total recoverable for the said asset

to determine, where applicable, the sum total of the write-off required. If this involves identifi able assets that do not generate cash fl ows

independently, the capacity for recovery is estimated for the unit generating cash to which the asset belongs.

In the case of units generating cash to which the items of goodwill with an indefi nite useful life have been assigned, the analysis of recovery

capacity is carried out in a systematic fashion at the close of each tax year or under the circumstances deemed necessary in order to per-

form such an analysis, with the exception of acquisitions of businesses carried out in 2006, the recovery capacity of which will be analysed

in the next fi nancial year.

70

The recoverable sum total is determined as the higher between the market value reduced by the cost required for its sale and the value of

use, with the latter being understood to be the current value of the estimated future cash fl ows.

The losses through impairment acknowledged in an asset in previous tax years are reverted when a change arises in the estimates regar-

ding its recoverable amount by increasing the value of the asset with the limit of the book value that the asset would have had if the write-off

had not been carried out. The reversion of the loss of value through impairment is immediately acknowledged as income on the profi t and

loss account, except in the case of goodwill, for which impairment cannot be reverted.

d) Financial instruments.

1. Non-current and current fi nancial assets. The following are entered under this heading:

1.1. Investments to be kept until their maturity. Investments are classifi ed as being non-current when they are the ones that the Group

intends to hold on to and is capable of holding on to until their maturity. These are entered at their amortised cost value.

1.2. Loans and accounts to be settled. These are entered, both in the long and short terms, at their amortised cost, corresponding to

the cash handed over, less the repayments made for the principal. In certain cases, they include the interest accrued and not due at

the date of closure.

1.3. Deposits and guarantees. These are entered, both in the long and short terms, for the amounts actually paid over.

2. Cash and other equivalent liquid assets. This heading on the consolidated balance sheet records the cash available and in banks, sight

deposits and other short-term investments with high liquidity and which do not have any risk of changes in their value.

3. Financial liabilities. Loans, undertakings and similar debts are entered at the sum total received, net of the costs incurred in the tran-

saction. Financial charges and transaction costs are entered on the profi t and loss account according to the criterion for accrual based on

the effective interest-rate method. The sum total accrued and not settled is entered as the higher amount to be paid.

Accounts payable are initially entered at market cost and then valued at the amortised value using the effective interest-rate method.

4. Compound fi nancial instruments. The issue of bonds that may be exchanged for shares carried out by the Controlling Company du-

ring the 2005 tax year meets the necessary requirements set forth by the IFRS to be considered as “Capital instruments”. That is why the

amount corresponding to the item of liability from the component of net worth, which represents the reasonable value of the option incor-

porated from this instrument, has been differentiated from the net amount received since the issue of the bonds.

5. Hedge instruments. The derivatives held by the group correspond mainly to interest rate hedge operations and ensure the existing

borrowing at a defi ned rate of interest. For bookkeeping purposes these are processed as cash fl ow hedges in so far as they correspond to

cash fl ow hedges that are attributable to a specifi c risk linked to a previously recognised liability.

The net variations in the reasonable value of these hedge operations have been recorded against net worth, as the fl ow hedging is consi-

dered effi cient (see Note 15.2).

e) Investments entered using the shareholding method.

This heading enters the shareholding that the Controlling Company holds in Petrolest, S.L. and Simpe S.p.a. (see Note 9). This

method consists of entering the shareholding on the balance sheet for the fraction of its net worth that the Group’s holding in its

share capital represents once, where applicable, the tacit capital gains that correspond to the goodwill paid in the takeover of the

company have been adjusted.

The profi ts/losses obtained by the associated company that correspond to the Group according to its shareholding are entered, net of their

tax result, on the profi t and loss account under the heading “Profi t/loss from companies using the shareholding method”.

71

f) Non-current assets maintained for sale.

Non-current assets kept for sale are entered at the lower amount between the book value and the reasonable value after deducting the

costs required for carrying out the sale, and are not depreciated.

Non-current assets are classed as kept for sale if their book value is expected to be recovered through their subsequent sale and not from

their continued use as part of the performance of the Company’s main activity. This condition is deemed to be met only when the sale is

highly probable and the asset is available for immediate sale in its current state. Management must undertake to carry out the sale, which

is likely to be acknowledged as a completed sale within the term of one year from the date of the classifi cation.

g) Inventories.

Raw materials and other procurement. These are valued at the purchase price in accordance with the average weighted price method,

with the exception of spare parts, which are recorded through the specifi c identifi cation method. The value correction for reversible losses

is deducted from the amount obtained. The estimate for such losses is made at the close of the tax year when the market value of the raw

materials is lower than their cost price.

Works in progress, half-fi nished and fi nished products. They are valued by means of cost sounding per article and processes established for

that purpose.

The production cost defi ned by the price list sounding is found by adding to the cost price of the raw materials and other consumable

materials the costs directly attributable to the product, as well as the part that corresponds from the costs indirectly attributable thereto in

so far that such costs correspond to the manufacturing process from the pertinent period.

The valuation of obsolete, defective or slow-moving products has been reduced to their possible realization value.

h) Trade debts and other accounts to be settled.

Trade debts and other accounts to be settled are entered at their nominal value, with those balances that the Group deems diffi cult to

recover being written off against the profi ts.

i) Other current assets

The balance recorded under this heading corresponds to the full amount of the debts pending settlement or offsetting with Public Bodies

and which are recorded for their nominal value.

j) Shares in the Controlling Company.

They appear valued at their cost price, with the pertinent restricted reserve being entered under the heading for “Equity” for the same

amount, in accordance with Article 79.3. of the Revised Text of the Public Limited Companies Act (see Note 13.3).

These shares appear as from 1 January 2005 and applying IAS 32 and 39 thus reducing the net worth for the Group.

k) Undertakings with the staff.

External pensions fund (La Seda de Barcelona, S.A. and Industrias Químicas Asociadas LSB, S.L. (Single-Member Company).

Monthly contributions are made to an external pensions plan in the mode of a fi xed contribution:

- Staff from La Seda de Barcelona, S.A.: 2.20% of the gross salary, excluding

- Staff from Industrias Químicas Asociadas LSB, S.L. (Sociedad Unipersonal): percentages of the pension-related salary, i.e., basic

salary plus time employed, which range between:

- 3.5%-10.5% as regards the Company’s contribution.

- Up to a maximum of 3.5% as regards the contribution payable by the employee.

72

Internal pension fund

- Fixed staff:

In compliance with Law 30/1995 and Royal Decree. 1588/1999, on 23 October 2000, La Seda de Barcelona, S.A. and Industrias

Químicas Asociadas LSB, S.L. (Single-Member Company) proceeded to outsource their undertakings with their fi xed workers using

the method of taking out insurance policies with the fi rm called Norton Life M.P.S.

- Fixed staff at the industrial plant in Tarragona (Industrias Químicas Asociadas LSB, S.L. (Single-Member Company).

This includes the staff who appear on the payroll for the company stated as of the date of the close and who joined the latter prior to 31

December 1994.

Whilst the Company does not outsource it, the employees who are entitled to any of the benefi ts envisaged by the pensions plan are

entitled to receive the full amount of the accumulated individual internal fund.

Its sum total is obtained from the pertinent actuarial study carried out by an independent expert, by means of individual capitalization.

The yield for the fund is linked to the one that is obtained by the external pensions plan mentioned in the previous point, equivalent to

6.25% per year at 31 December 2006.

On 13 November 2002 a plan was approved to restore a balance with the transfer and outsourcing of the internal fund. The starting date

for the transfer was 31 October 2002, with an interest rate of 4% being applied to the balance pending amortisation and which, at 31

December 2006, amounted to 0.34 million euros. The time limit for the transfer was set at 10 years.

Post-employment benefi ts

Post employments benefi ts comprise pension benefi ts provided to employees, primarily employed at the UK subsidiary, Artenius UK.

For the defi ned benefi t plan, the cost is calculated using the projected unit credit method and it is recognised over the average expected

remaining service lives of participating employees, in accordance with the advice of qualifi ed actuaries. All cumulative actuarial gains and

losses have been recognised in equity at the date of acquisition of the UK subsidiary.

For the cost charged to the income statement, costs consist of current service costs, interest costs, the expected return on the plan’s assets

and past service costs. Additionally, in respect of the actuarial gains and losses generated subsequent to the date of acquisition of Artenius

UK, to the extent they exceed 10% of the present value of the future obligations of the plan or of the fair value of the plan’s assets, the

corresponding portion is recognised in the income statement.

For defi ned contribution plans, the cost represents the Group’s contributions to the plans and they are charged to the income statement in

the period in which they fall due.

l) Provisions.

The provisions are recognised at the time when:

• The Group has a current obligation (whether legal or implicitly assumed) as a result of a past occurrence; and occurrence; and

• It is likely that the Group has to pay out to cancel the aforementioned obligation; and

• There is a reliable estimate of the amount of the obligation.

In cases in which the timing value of money is signifi cant, the amount of the provision is determined as the present value of future cash

fl ows that are expected to be necessary in order to cancel the obligation.

73

ll) Acknowledgement of income and expenses.

Income and expenses are attributed according to the criterion of accrual regardless of the time at which the monetary or fi nancial fl ow

deriving from them arose.

Revenue is recognised from the time which it is likely that the economic benefi ts corresponding to the transaction will be received by the

Group and can be reliably quantifi ed.

Income corresponding to the licence to use the right to the installation of the PET and PTA production process, as well as revenue through

the engineering services carried out on each project are recorded under the “Other income” heading”.

The sales of goods and revenues from services provided are entered without including the amounts corresponding to the taxes that apply

to these transactions, deducting all the discounts, whether or not included on invoices.

The sums of the taxes applicable to the purchases of merchandise and other goods for resale and other goods for their subsequent resale,

excluding Value Added Tax (VAT), are entered as the highest value of the goods or services acquired.

Discounts following the issue or reception, where applicable, of an invoice brought about by defects in quality, breach of time limits for de-

livery or other similar causes, as well as discounts for volume, are entered by differentiating between the sums from the sales or purchases

of goods and the income or expenses from services, respectively.

m) Result of discontinued operations.

A discontinued operation or interrupted activity is a business line that has been abandoned and/or disposed of, whose assets, liabilities and

results can be distinguished from a tax point of view, operationally and for fi nancial information purposes.

Income and expenses of discontinued operations are shown separately on the balance sheet under the heading “Post tax result of discon-

tinued activities” (see Note 22).

n) Capital subsidies.

Offi cial subsidies are shown for their reasonable value when there is certainty of complying with the conditions established in order to obtain

the subsidies, and that the aforementioned subsidies will be received. When this is a subsidy concerning a fl ow of expenses, it is systema-

tically recorded in the period required to match the subsidy against the expenses that the aforementioned subsidy is targeted at offsetting.

When the subsidy concerns an asset, the reasonable value is recognised as deferred income and is entered into results in accordance with

the expected useful life of this asset.

The non-repayable subsidies linked to the greenhouse effect gas emission rights, acquired free of charge or for a price substantially below

their vendible value are entered as “Income to be allocated over several years”, and are registered as income against the expenses resulting

from gas emissions related to the subsidised emission rights.

Depreciation that may affect the emission rights lead to the corresponding subsidy being attributed to results in proportion to the same, with

the part of these rights that has been funded free of charge considered to be of an irreversible nature.

ñ) Tax situation.

The expense for tax on earnings from the tax year is calculated by means of the sum of the expense for the current tax and the deferred

tax. The expense for current tax is calculated, in each one of the consolidated companies, according to the profi t/loss from the tax year

with the differences being taken into account that might exist between the book profi t/loss and the tax profi t/loss, with the latter unders-

tood as the taxable base for the tax, as well as allowances and deductions from the payment of tax deemed to be the lower amount of the

tax payment to be paid for Corporation Tax from the tax year in which profi t is obtained, providing the taxable base for the tax turns out to

be positive.

The assets and liabilities for deferred taxes come from the temporary differences defi ned as the sums envisaged that may be recovered or payable

in the future and which are derived from the difference between the book value for the assets and liabilities and their taxable base. Said sums

74

are entered by applying the tax rate at which it is expected they will be recovered or settled to the temporary difference. At the same

time, the latter also come from the taxable bases pending compensation and from credits for tax deductions and allowances generated

and not applied.

La Seda de Barcelona, S.A. La Seda de Barcelona, S.A. and its companies owned directly or indirectly with at least 75% of their share

capital and registered in Spain (see Note 1.b) are covered by the System for Consolidated Statements through forming part of the 236/03

Consolidated Tax Group, with La Seda de Barcelona, S.A. being the Controlling Company. Pursuant to Law 35/2006 dated 28 November

2006, the taxable rate of assets and liabilities for deferred taxes corresponding to companies with registered offi ces in Spain has been mo-

difi ed on the attached consolidated fi nancial statements. The end effect of this standardisation has entailed the negative impact of 2,377

thousand euros, broken down into a tax cost of 2,278 thousand euros and a reduction of reserves for an amount of 99 thousand euros.

o) Transactions in currencies other than the euro.

Transactions carried out in currencies other than the euro are entered at the exchange rates in force at the time of the transaction. During

the tax year, the differences that arise between the exchange rate entered and the one in force on the date of settlement or payment are

entered as fi nancial profi ts/losses on the consolidated profi ts/losses account.

p) Classifi cation of balances between current and non-current.

In general, assets and liabilities are classifi ed as current or non-current depending on the operating cycle, with the Group choosing to

consider as current assets and liabilities all those with maturity date equal to or prior to twelve months counting from the date thereof, and

as non-current those with a maturity date after the said period.

q) Per-share profi t.

Basic per-share profi t is calculated as the ratio between net profi t from the period attributable to the Controlling Company and average

number of common shares for the latter in circulation during the said period, not including the average number of shares in the Controlling

Company held by the Group.

To calculate diluted per-share profi t, the increase in the weighted average number of shares in circulation will be issued as a result of

conversion into common shares of the convertible bonds issued by the Group during the 2005 tax year and pending conversion at the

year-end (see Note 27).

r) Business actions with an impact on the environment.

The expenses incurred through the purchase of systems, equipment, fi xtures, and fi ttings, the purpose of which is the removal, restriction

or control of possible impact that the Group companies’ standard activity could have on the environment, are considered as investments

in fi xed assets.

The expenses concerning the environment, other than those carried out for the purchase of fi xed assets, are considered as expenses

pertaining to the year.

s) Statement of cash fl ows.

The following expressions are used in the statements of cash fl ows with the meanings that appear below:

- Cash fl ows: cash incomes and outgoings or those of other equivalent means, with the latter being understood to be investments with a

term of less than three months with fast liquidity and a low risk of change in their value.

- Operating activities: these are the activities that make up the main source of ordinary income for the Group, as well as other activities

that cannot be classed as being for investment or fi nancing.

- Investment activities: those for purchase, sale or disposal by other means of fi xed assets and other investments not included in the

cash at hand and its equivalents.

- Financing activities: activities that cause changes in the size and make-up of the net worth and the liabilities of a fi nancial nature.

Note 5. Tangible fi xed assets

5.1. As stated in Note 4 a), Industrias Químicas Asociadas LSB, S.L.U. and La Seda Barcelona, S.A. carried out a restatement of the value

75

of their tangible fi xed assets pursuant to different legal provisions, inter alia, Royal Decree 7/1996 of 7 June.

lThe accounts affected by the restatement pursuant to the Royal Decree-Act 7/1996 of 7 June and their effect at 31 December 2006 are

as follow:


IncreaseCumulative amortisation

Net effect

Buildings 3,218 (1,153) 2,065

Technical plant and machinery 6,449 (5,923) 526

Other plant, tools and fi ttings 55 (55) -

Other fi xed assets 20 (20) -

9,742 (7,151) 2,591

The effect of the restatement on the amortisations in the period amounted to 0.42 million euros. For the 2007 tax year, this effect was

estimated to be approximately 0.28 million euros.

5.2. Analysis of the movement during the tax year. Its composition and progress during the tax year closed on 31 December 2006 were

as follows:


Movements for fi nancial year 2006 Balance at 31.12.2006


Modifi cation perimeter Transfers

ConversiondifferencescAdditions (*) Remvals (*) Additions Drops L (A) Depreciation

Accumulateddepreciation

Net value

Land andbuildings 119,034 67,086 (40,387) 13 (22,864) 3,106 - 172 126,160 (30,053) 96,107

Technical facilities and machinery 379,272 634,862 (24,290) 6,852 (59,828) 21,489 - 4,551 962,908 (522,504) 440,404

Other facilities, toolingand fi ttings 2,989 9,045 (189) 147 (3,486) 225 (150) 8 8.589 (7,046) 1,543

Advances and tangiblefi xedassetsin progress 8,784 14,257 (,063) 20,321 (52) - (25,444) 55 16,858 - 16,858

Other fi xed assets 6,353 400 (257) 78 (185) 774 - - 7,163 (4,917) 2,246

516,432 725,650 (66,186) 27,411 (86,415) 25,594 (25,594) 4,786 1,121,678 (564,520) 557,158

Provision for deterioration - (32.092) - - - - - (296) (32,432) - (3,432)

516,432 693,558 (66,186) 27,411 (86,415) 25,594 (25,594) 4,490 1,089,246 (564,520) 524,726

(*) See Note 1.c

76


Movements for fi nancial year 2006

balance at31.12.2005

Perimeter TransfersConversionDifferences

Balance at 31.12.2006Additions (*) Drops( *) Additions Drops L (A)

Accumulateddepreciation Buildings (19,225) (18,629) 4.,557 (1,684) 4,958 - - (30) (30,053)

Accumulated depreciationTechnical facilitiesand machinery (244,337) (324,963) 21,908 (21,641) 48,461 (2) - (1,930) (522,504)

Accumulated depreciation Other facilities,toolingand fi ttings (2,225) (7,854) 180 (222) 3,075 - - - (7,046)

Accumulated depreciationOther fi xed assets (4,804) (94) 205 (261) 38 - - (1) (4,917)

(270,591) (351,540) 26,850 (23,808) 56,532 (2) - (1,961) (564,520)

(*) See Note 1.c

The charge to profi ts/losses for the current tax year by way of allocation to the depreciation of tangible fi xed assets amounted to

23.81 million euros.

The breakdown of the net additions to the perimeter by companies is as follows:

Company (Thousands of euros)

Artenius Hellas, S.A. 35,004

Artenius Italia, S.p.A 85,059

Artenius Portugal, Industria de Polimeros, S.A. 30,631

Selenis Servicios Técnicos, SRL 3

Artenius Turkpet Kimyevi Maddeler ve Pet Ambalat MalzemeleriSanayi Anonim Sirketi 40,624

Artenius Uk, Limited 147,449

Artenius Romania, SRL 3,248

342,018

The net disposals from the consolidation perimeter corresponds to Industrias Químicas Textiles, S.A. as a consequence of this disposal,

as shown in Note 1 c).

77

5.3. Fully amortised assets. The sum total for the assets fully amortised at the year-end amounted to 163.64 million euros and their

breakdown is the following:


Buildings 2,480

Technical plant and machinery 150,278

Other plant, tools and fi ttings 6,846

Other fi xed assets 4,038

163,642

5.4. Assets covered by a guarantee. The sum total for assets covered by a guarantee at 31 December 2006 corresponds to the following

breakdown (fi gures expressed in thousands of euros):

5.5. The most signifi cant transactions that took place in the 2006 tax year are described below:

Additions and disposals to and from the perimeter of consolidation (see modifi cations to the perimeter in Note 1, section c):

Additions of tangible fi xed assets:

• Finalisation, and therefore transfer from “Fixed assets in progress” to “Technical installations and machinery” of the investments in

progress are described in section 5.7 of this note.

• Investments made through the Buhler project at the company Artenius Italia, SpA.

• Investment in a new catalyser.

• Repairs and improvements to installations.

• Sundry investments for a lesser amount.

The disposals for the tax year correspond mainly to the contribution of the branch of activity described in foregoing Note 1 c) and to the sale

of an estate belonging to La Seda de Barcelona, S.A., located in El Prat de Llobregat as recorded in the Property Register of that municipal

district in Volume 1,295, Book 655, Folio 137, Estate No. 35,250, entry 4.

Type of charge

Sum total of the chargeArtenius Italia, SpA Benefi ciary

FactorieslocatedatCalleE.Fermi(sheetB/1-p lo tn .63-CategoryD/1)andatCa l leE .Majorana(sheetB/4-plotn.99-CategoryD/1) in San Giorgio (Italy).

Mortgage 1 10,742 Mortgage in favour of Mediocredito del Friuli Venezia Giulia.

Mortgage 2 15,000

Mortgage in favour of Banca Popolare Di Vicenza, Banca Popolare Friuladria, Banca Nazionale del Lavoro, Mediocredito del Friuli Venezia Giulia, Interbanca SPA, Banca Popolare di Milano and Veneto Banca Scarl.

Mortgage 3 11,840 Mortgage in favour of Unicredit - FRIE.

37,582

78

5.6. Analysis of the movement during the 2005 tax year. Its breakdown and progress during the tax year closed on 31 December 2005

were the following:




ApplicationIFRS

Transfers

Additions Drops L (A) CostAccumulated Depreciation Net value

Land and buildings 117,069 - 4 (6) 1,967 - 119,034 (19,225) 99,809

Technical facilitiesand machinery 372,172 5,292 49 (14,740) 16,499 - 379,272 (244,337) 134,935

Other facilities, toolingand fi ttings 2,975 - - (1) 15 - 2,989 (2,225) 764

Advances and tangiblefi xedassets in progress 15,838 1,004 15,370 (27) - (23,401) 8,784 - 8,784

Other fi xed assets 6,206 - - - 147 - 6,353 (4,804) 1,549

514,260 6,296 15,423 (14,774) 18,628 (23,401) 516,432 (270,591) 245,841




ApplicationIFRS

TransfersBalance at31.12.2005Additions Drops L (A)


Buildings (18,356) - (869) - - - (19,225)

AccumulateddepreciationTechnicalfacilitiesand machinery (246,247) (155) (12,590) 14,655 - - (244,337)

Accumulated depreciation Other facilities,toolingand fi ttings (2,141) - (84) - - - (2,225)


Other fi xed assets (4,561) - (243) - - - (4,804)

(271,305) (155) (13,786) 14,655 - - (270,591)

5.7. The most signifi cant transactions that took place in the 2005 tax year are described below:

Additions of tangible fi xed assets:

• Conversion of electrical equipment to comply with the regulations in force and renovation of the fi re-detection equipment.

• New well for getting better quality water, thus improving the environment and safety for the factory.

79

• New electrical control for the PTA crane, to make this equipment reliable, which is the one that ensures the entry of raw materials in

the factory.

• Sundry investments for a lesser amount.

Removals of tangible fi xed assets:

During the 2005 tax year the main items removed from the accounts were the plants called RX I and II and benches numbers 3 and 4 for stretching fi bres.

Investments from previous periods, not yet fi nished:

• The assembly of silencers and improvements to the CSSP-2 and CPU-2 installations.

• Several investments are being made at the production centre in Tarragona for plant meant to cut CO2 emissions.

• Lease-back transaction: This transaction consists of obtaining fi nancing by means of the sale to fi nancial institutions of a plant for the

post-condensation of bottle granules, for an overall sum total of 5.29 million euros plus Value Added Tax. According to the criterion set

forth in Note 4 a), this kind of transaction is entered under the heading for “Tangible fi xed assets”.

• Ongoing investment in the electrical drive of the PTA crane.

Note 6. Goodwill

Analysis of the movement during the tax year. Its composition and progress during the tax year closed on 31 December 2006 were

as follows:

(Thousands of Euross)


Deteriorationof year

Balance at31.12.2006Increases

Catalana de Polímers, S.A.U. 6,406 - - 6,406

Celtibérica de Finanzas, S.L.U. 768 - (768) -

Proyectos Voltak, S.L.U. 669 - (669) -

Mendilau, S.L.U. 432 - (432) -

Artenius Portugal, Industria de Polímeros, S.A. - 18,193 - 18,193

Artenius Italia, S.p.A - 33,050 - 33,050

Artenius Uk, Limited - 52,260 - 52,260

Artenius Turkpet Kimyevi Maddeler ve Pet Ambalat MalzemeleriSanayi Anonim Sirketi - 10,572 - 10,572

Artenius Hellas, S.A. - 3,931 - 3,931

8,275 118,006 (1,869) 124,412

80

The cost of purchases made over 2006 were as follows:

Purchase cost

Artenius Portugal, Industrias de Polímeros, S.A. 22,614

Selenis Sevicios Técnicos, SRL 200

Artenius Hellas holding, S.A. 7

Artenius Hellas, S.A. 18,542


Artenius UK, Limited 210,430

Artenius Turkpet Kimyevi Maddeler ve Pet Ambalat Malzemeleri Sanayi Anonim Sirketi 84,520

Artenius Rumania, SRL 5,440

Artenius Sines, S.A. 50

400,505

As we mentioned in Note 2, section d) and in compliance with IFRS 3, with regard to the business combinations incorporated into the

perimeter of consolidation during 2006, the fi xed assets delivered and the liabilities acquired have been valued in accordance with their

reasonable value based on independent expert appraisals in the case of land and buildings, with the exception of Artenius UK, Limited,

whose value is currently being assessed and shall be restated over the course of the next fi nancial year.

The signifi cant differences between the reasonable value of identifi able assets and liabilities corresponding to the companies incorporated

into the business combinations with regard to the book value of the same are:

• Artenius UK, Limited. Recognition of a labour liability for an amount of 42.3 million euros, corresponding to the fl aw between the

current value of the liabilities contracted as future pension scheme commitments, an appraisal study carried out by an actuarial expert

and the reasonable value of the assets linked to the foregoing pension fund on the date of incorporation into the group, a fl aw calculated

on the basis of the “principle of total recognition” defi ned in IAS 19. Moreover, the trade payables have been reduced by 1.9 million

euros given the company is unlikely to receive these amounts.

• Artenius Italia, S.p.A. Increase to the value of lands and technical installations for amounts of 9.5 and 6.8 million euros, respectively.

• Artenius Turkpet Kimyevi Maddeler ve Pet Ambalat Malzemeleri Sanayi Anonim Sirketi. Restatement of the net book value of the

clients’ machinery on deposit for an amount of 1.8 million euros, by readjusting the depreciation period, formerly estimated as the useful

lifespan of the machinery and currently re-estimated as the period in which the machines are going to be owned by the group, as there

are fi rm sales contracts in future periods.

• Artenius Portugal, Industrias de Polímeros, SA. Certain assets have been re-stated for an amount of 10.8 million euros, considering

these as not realisable. Likewise, and as set forth in foregoing Note 4 a), prior to its incorporation into the perimeter of consolidation

and in accordance with the current regulations in Portugal, the company has proceeded to restate the elements registered under the

“Technical installations and machinery” heading at the market value based on an independent expert’s report. The amount of the afo-

rementioned restatement is 14.40 million euros charged to net worth.

The differences that arise between the purchase cost and the reasonable value of assets and liabilities detailed previously have been recor-

ded as goodwill, and provisionally entered into the books in accordance with IFRS 3, paragraph 62.

As a consequence of the segregation of the branch of activity described in Note 1, section c), during the 2006 tax year the goodwill linked

to disposed assets stemming from Industrias Químicas Textiles, S.A. has been cancelled.

81

Nota 7. Other intangible assets


as follows:




Perimeter modifi cation Transfers

Conversión differences


NetvalueAdditions (*) Removals (*) Additions Drops L (A) Cost

Development costs - - - 2,093 - - - - 2,093 - 2,093

Concessions, patents and licences,trademarksand similar - 49 - 45,016 - - - - 45,065 (789) 44,276

Computerapplications 11,543 753 (170) 2,358 - - - - 14,484 (5,405) 9,079

Other intangiblefi xed assets - 768 - 6,622 (5,016) - - - 2,374 (1,425) 949

11,543 1,570 (170) 56,089 (5,016) - - - 64,016 (7,619) 56,397


Items for 2006


Perimeter modifi cation Transfers

Conversiondifferences

Balance at 31.12.2006Additions Drops L (A)Additions (*) Removals (*)

Accumulated depreciatiDevelopmen cost - - - - - - - - -

Accumulated depreciationConcessions, patents and licences, trademarksand similar - (34) - (755) - - - - (789)

Accumulated depreciationComputer applications (3,357) (657) 108 (2,156) - - - - (6,062)

Accumulated depreciation Other intangiblefi xed assets - (766) - (2) - - - - (768)

(3,357) (1,457) 108 (2,913) - - - - (7,619)

(*) See Note 1.c

82

In 2006 the Company purchased trademarks, patents and licensing rights from Advansa BV, for an amount of 45 million euros. The sale

of the use of licensing rights has led to revenue of 16.44 million euros at 31 December 2006.

The charge to profi ts/losses for the current tax year by way of allocation to the depreciation of intangible fi xed assets amounted to 2.91

million euros.

The breakdown of the additions to the perimeter by companies is as follows:

Company (Thousands of Euros)

Artenius Hellas, S.A. 95

Artenius Italia, S.p.A. 14

Artenius Portugal, Industria de Polimeros, S.A. 2

Artenius Romania, SRL 2

113

7.2. Analysis of the movement during the 2005 tax year. ts breakdown and progress during the tax year closed on 31 December 2005

were the following:




ApplicationIFRS

Transfers


Net ValueAdditions Drops L (A) Cost

Computer applications 9,622 - 1,921 - - - 11,543 (3,357) 8,186

Advances and intangible fi xed assets in progress

- (1,004) 1,004 - - - - - -

Rights on assets underfi nancial lease - (4,773) - - 4,773 - - - -

9,622 (5,777) 2,925 - 4,773 - 11,543 (3,357) 8,186




ApplicationIFRS

TransfersBalance at31.12.2005Additions Drops L (A)

Accumulated depreciation Computer applications (1,729) - (1,628) - - - (3,357)


Accumulated depreciation Rights on assets under fi nancial lease - 155 (155) - - - -

(1,729) 155 (1,783) - - - (3,357)

83

7.3. Fully amortised assets. The sum total for the assets fully amortised at year end amounts to 1.1 million euros and their breakdown is

the following:


Computer applications 344

Other intangible fi xed assets 768

1,112

Note 8. Non-current fi nancial assets

8.1. Analysis of the movement during the tax year. The breakdown during the fi nancial year closed at 31 December 2006 was the following:



Modifi cationperimeter Transfers

Balance at31.12.2006Additions (*) Removals (*) Increases Decreases L (A)

Non-current

Holdings in companiesexcluded from theconsolidation perimeter - - - 2,281 - - - 2,281

Long-term stock portfolio investment 509 112 (2,754) 2,747 (69) - - 545

Other loans 263 88 - 92,582 (2,964) - (525) 89,444

Long-term deposits andguarantees 525 27 (4) 33 (367) - (17) 197

1.297 227 (2.758) 97.643 (3.400) - (542) 92.467

(*) See Note 1.c)

The breakdown of the additions to the perimeter of consolidation is as follows:



Artenius Italia, S.p.A 20

Artenius Portugal, Industria de Polimeros, S.A. 92

227

The disposals from the perimeter of consolidation corresponds to Industrias Químicas Textiles, S.A.

8.2. The “Shareholdings in companies excluded from the perimeter of consolidation” heading includes the stake in the company Fibras

Europeas de Poliéster, S.L. (see Note 1, section c).

84

8.3. The composition of the “Other credits” epigraph at the close of the fi nancial year is as follows:


Fibracat Europa, S.L. 70,082

Debtors for sale of lands 16,311

Other loans 3.051

89,444

Fibracat Europa, S.L.U. A total amount of 69.6 million euros corresponds to Fibracat Europa, S.L. as a consequence of acceptance by La

Seda de Barcelona, S.A., of the non-transferred debt concerning the fi bre business unit contributed by the latter (see Note 1, section c)

as formalised loans.


This loan and its corresponding interest are underwritten with a real estate guarantee over the lands on which the Fibracat Europa, S.L.U.

facilities are located.

Debtors through sale of lands: This corresponds to the amount pending payment for the sale made during 2006 of an estate that was

the property of La Seda de Barcelona, S.A. located in El Prat de Llobregat as stated in the Land Register for that municipal district, under

Volume 1,295, Book 655, Sheet 137, Estate No. 35,250, entry 4.

8.4. Investments covered by a guarantee. At the date of preparing these consolidated annual accounts the shares of Artenius Italia, SPA,

and Artenius Portugal, Industria de Polímeros, S.A., Industrias Químicas Asociadas LSB, S.L. (Single-Member Company), Artenius

Holding BV, Artenius UK, Limited and Artenius Turkpet Kimyevi Maddeler ve Pet Ambalat MalzemeleriSanayi Anonim Sirketi were

pledged in favour of the bank that granted the syndicated loan for 405 million euro (see Note 15.1).


were the following:




Modifi cation perimeter

consolidationApplication

IFRS

IIncorporationjoint

venture (*)

TransfersBalance at31.12.2005Increases Decreases L (A)

Long-term

Holdings incom-paniesof the group excluded from theconsolidation perimeter 1 (1) - - - - - - -

Long-term stock portfolio investmen 509 - - - - - - - 509

Other loans 7,030 - - 4 156 (37) - (6,890) 263

Long-termdeposits andguarantees 38 - - 178 309 - - - 525

7,578 (1) - 182 465 (37) - (6,890) 1,297

85

Note 9. Shareholdings entered using the shareholding method.


as follows:

Petrolest, S.L. The shareholdings equivalent to 49% of the share capital correspond to the fraction of net worth that represents the Group’s

shareholding in its capital. The different with regard to the valuation made of the contribution to the company’s net worth of the branch of

activity comprising the distribution, logistics, loading, unloading and transportation of the full range of products manufactured and marketed

by La Seda de Barcelona, S.A. totals 610 thousand euros and has been recorded as the higher cost of the shareholding.

Simpe, S.p.A. The shareholdings equivalent to 19% of the share capital were acquired by La Seda de Barcelona, S.A. on 22 December

2006 and are recorded for an amount corresponding to the fraction of its net worth that represents the Group’s shareholding in its capital,

with the difference concerning the value of the company’s net worth recorded as higher cost of the shareholding for an amount of 1,188

thousand euros. In this regard we must highlight the fact that the commitment to purchase the majority of share capital during the 2007

tax year was acquired as part of the purchase operation.


were the following:



Perimeteradditions

Balance at31.12.2006Increases Decreases

Petrolest, S.L. 2,794 - 45 - 2,839

Simpe, S.p.A - 7,030 - - 7,030

2,794 7,030 45 - 9,869



Balance at31.12.2005Increases

Petrolest, S.L. 2,777 17 2,794

Note 10. Inventories

The breakdown at 31 December 2006 was the following:


31.12.2006 31.12.2005

Goods - 209

Raw materials and other procurement 36,007 10,885

Spare parts 14,073 2,655

Work in progress 10,622 6,091

Finished products 48,279 42,131

Supplier advances 3,213 -

Others 2,001 -

Provision for depreciation (833) (227)

113,362 61,744

86


31.12.2006 31.12.2005

Opening balance (227) (222)

Additions to the perimeter of consolidation (8,136) -

Endowment (20) (70)

Application 7,550 65

Closing balance (833) (227)

No stock items appear in the enclosed annual accounts on the assets side for a fi xed sum.

The movement of provision for impairment is as follows:

Note 11. Other current fi nancial assets

LThe composition of this epigraph at 31 December 2006 is as follows:


Short-term taxes 1,250

Deposits and guarantees 21,000

Other loans 1,286

23,536

he breakdown by companies at year-end is as follows:


Industrias Químicas Asociadas LSB, S.L.U. 1,229

La Seda de Barcelona, S.A. 21,022


23,536

Note 12. Other current assets

The balance of this heading corresponds mainly to the debt pending offsetting with Public Bodies. The breakdown by Company at year-end

is as follows:


La Seda de Barcelona, S.A. 5,894

Industrias Químicas Asociadas LSB, S.L.U. 1,238

Artenius Turkpet Kimyevi Maddeler ve Pet Ambalat MalzemeleriSanayi Anonim Sirketi 11,605


Artenius Romania, SRL 994

Other companies 923

22,330

87

Note 13. Net worth

13.1. Capital social. On 27 June 2003, the Annual General Meeting of Shareholders of La Seda de Barcelona, S.A. authorised the

Company’s Board so that within a term of one year it could carry out a share capital increase of up to a maximum of 30,050,600 euros by

means of the issue and sale of 10,000,000 new common shares, with an individual face value of 3.005060 euros.

On 1 April 2004, the Board of Directors, using the authorisation granted by the AGM, agreed to increase the full corporate share capital by

27,700,643.08 euros, by means of the issue and sale of 9,218,000 shares issued at par, with an individual face value of 3.005060 euros,

with a share in the company profi ts as from 1 January 2004. This share increase was subscribed by means of a cash outlay of 1.63 euros

per share that was supported by 1.37506 euros per share charged to the freely available reserves, and with the award to the shareholders

of a preferential subscription right in a proportion of ten new shares for every thirty-seven old shares (10 for 37).

Once both subscription periods ended, on 16 July and 26 July 2004, the whole of the share increase was covered, with a fi gure for

the subscribed share capital of 27,700,643.08 euros, divided into 9,218,000 shares with an individual face value 3,005,060 euros,

by means of a cash outlay from the shareholders of 15,025,340.00 euros plus 12,675,303.08 euros charged to the Company’s freely

available reserves.

On 27 June 2005, the Ordinary and Extraordinary General Meeting of Shareholders unanimously approved, passed by the present and

represented shareholders with voting rights, a reduction in the share capital for a sum total of 87,107,802.50 euros by means of the

reduction of the face value of each one of the shares that make up the Company share capital and which was fi nally set at 1.00 euro

per share, with the pertinent restricted reserve being set aside for this purpose in accordance with Article 167.3. of the Revised Text

of the Public Limited Companies Act.

According to the decision passed unanimously by the Ordinary and Extraordinary General Meeting of Shareholders held on 21 October

2005 and the agreement for implementation passed on that same day by the Board of Directors, the increase of the share capital for

La Seda de Barcelona, S.A. was passed for a sum total of 72,693,750.00 euros by means of the issue and distribution of 58,155,000

new common shares, each one with a face value of 1.00 euro with an issue premium of 0.25 euros per share, which will have a share

in the Company profi ts as from 1 January 2005. The preferential subscription right for the new shares in a proportion of 5 new shares

for every 7 old shares/negotiable securities is acknowledged in this share increase.

Once the fi rst subscription period ended, on 19 November 2005, the share capital increase was fully covered, with a fi gure for the

subscribed share capital of 58,155,000 euros, divided into 58,155,000 shares, each with a face value of 1.00 euro plus an issue

premium of 0.25 euros per share for an overall sum total of 14,538,750 euros, by means of a cash outlay by the shareholders of

72,693,750 euros.

On 10 February 2006, once the initial conversion period of the issue of convertible bonds agreed on 25 June 2005 by the company’s Board

of Directors had fi nalised (see Note 14), the right to convert 35,847,883 convertible bonds into shares was carried out, by dividing these

into 35,847,883 shares with an individual face value of 1.00 euro and an issue premium of 0.25 euros per share for an overall amount of

44,809,854.00 euros.

On 12 June 2006, the shareholders present or represented with the right to vote at the Ordinary and Extraordinary General Meeting of

Shareholders of the company unanimously authorised the Board of Directors to enable this body to perform a share capital increase within

a maximum period of one year for a cash sum of 418,721,946.00 euros through the issue of 279,147,964 shares with an individual face

value of 1 euro, with an issue premium of 0.5 euros per share, which will participate in company profi ts from 1 January 2006 onwards.

Once the fi rst subscription period ended, on 3 August 2006, the share capital increase was fully covered, with a fi gure for the subscribed

share capital of 279,147,964.00 euros, divided into 279,147,964 shares, each with a face value of 1.00 euro plus an issue premium of

0.5 euros per share for an overall sum total of 139,573,982.00 euros, by means of a cash outlay by the shareholders of 418,721,946.00

euros.

88

On 10 August 2006, once the initial conversion period of the issue of convertible bonds agreed on 25 June 2005 by the company’s Board

of Directors had fi nalised (see Note 14), the right to convert 320,509 convertible bonds into shares was carried out, by dividing these

into 192,569 shares with an individual face value of 1.00 euro and an issue premium of 1.08 euros per share for an overall amount of

400,543.52 euros.

The fi nal fi gure for the share capital after the share capital increase and the conversion of convertible bonds into shares stood at

416,787,398.00 euros, divided into 416,787,398 common shares, fully subscribed and paid up, each one with a face value of 1.00 euro,

belonging to the same single series and represented by means of book entries.

Holdings in the Company share capital equal to or over 3%, excluding the treasury stock (see Note 13.3), correspond to the following

breakdown:

Shareholder % Shareholding

Imatosgil Investimentos SPGS, S.A. 11,014

Liquidambar Inversiones Financieras, S.L. 5,023

Caixa Geral de Depositos, S.A. 5,002

Caixa Capital Sociedade de Capital Risco, S.A. 4,502

13.2. Issue premium. As regards this sum total, the Revised Text of the Public Limited Companies Act expressly allows the use thereof for

increasing the share capital and does not establish any restriction as regards to its availability.

13.3. Reserves.

Legal reserve. In accordance with Article 214 of the Revised Text of the Public Limited Companies Act, the said reserve must be endowed with

10% of the profi ts from the tax year, until the fund set up for the reserve reaches 20% of the paid up share capital. The legal reserve may be

used to increase the share capital to the extent that its balance exceeds 10% of the already increased share capital. Except for that purpose

and as long as it does not exceed 20% of the share capital, this reserve may only be used to offset losses and as long as there are no other

suffi cient reserves available for this purpose. At the year-end, this amount totalled 11.73 million euros.

As of 31 December 2006, the sum total for the legal reserve did not cover 20% of the share capital.

Reserves for own shares. The Company, pursuant to Article 79.3. of the Revised Text of the Public Limited Companies Act, proceeded to

endow the restricted reserve corresponding to the cost price of its own shares held by the latter.

The Company’s own shares held by the Company at the close of the tax year represent an irrelevant percentage of the total share capital

(0.31%), transferring for this purpose and at its cost price the pertinent non-restricted reserve, in accordance with Article 79.3. of the

Revised Text of the Public Limited Companies Act. The total number of own shares held directly by the Company amounts to 1,310,000

with an average cost price of 2.40 euros/share. The stock market quotation for the Company’s shares at the close of the tax year was 2.42

euros/share. At the year-end, this amount totalled 3.05 million euros.

Reserve for depreciated capital. In accordance with Article 167.3. of the Revised Text of the Public Limited Companies Act, the Company

proceeded to endow a reserve for the face value of its own shares depreciated in 1996 (6.06 million euros) and which were acquired by the

Company in the said tax year for free. During the 2005 tax year and as a result of the reduction in share capital approved by the Ordinary

and Extraordinary General Meeting of Shareholders held on 27 June 2005 (see Note 13.1), the Company, pursuant to the article mentioned

in the preceding paragraph, endowed a reserve for a sum total of 87.11 million euros as a result of the reduction in the face value of each

one of the shares that make up the Company share capital and which fi nally stood at 1.00 euro per share. At the year-end, this balance

totalled 93.17 million euros.

The endowed reserve may only be used with the same requirements as those demanded for the reduction of the share capital.

89

Reserve for assignment. As a result of the takeover by the Company of Hispano Química, S.A.U. and Viscoseda Barcelona, S.L.U. ca-

rried out on 14 December 2001, a reserve for assignment was set up for the difference between the assets and liabilities provided by the

companies that had been taken over for an amount of 14.43 million euros.

Reserve for merger. This amount is recorded as a consequence of the merger process fi led with the Business Register in the 2005 tax year

(see Note 1.a).

Reserves for initial application of IFRS. As a result of the fi rst application of the IFRS in the Group’s fi nancial statements at 1 January

2004, certain assets and liabilities appeared which are explained in the annual accounts of the previous year and the effect of which on the

net worth is acknowledged in this heading.

Reserves in companies consolidated by global integration and by the shareholding method. The breakdown for undertakings in this

heading at 31 December 2006 and 2005 is the following:



Balance at31.12.2005Group Companies

Industrias Químicas Asociadas LSB, S.L. 5,876 3,291

Industrias Químicas Textiles, S.A. (Sociedad Unipersonal) - 6,032

SLIR, S.A. (Sociedad Unipersonal) (173) (215)

CAR B-IQA de Tarragona, S.L. 171 11

Other companies - (1)

5,874 9,118


Petrolest, S.L. 52 34

13.4. Minority interest. The balance included in this heading on the enclosed consolidated balance sheet at 31 December 2006 shows

the value of the holding of the minority shareholders in the Consolidated Companies. Moreover, the balance shown on the enclosed

profi t and loss statement under the heading “Profi ts attributed to external shareholders” represents the shareholding for these minority

shareholders.

The breakdown of the interests belonging to the external shareholders in those Subsidiary Companies that are consolidated using the global

integration method in which the ownership is shared with third parties is the following:



Perimeter additions

Otheradjustments


Breakdown at 31 December 2006

Company

Result attributed

to minority Capital Reserves Result Total

CARB-IQA de Tarragona, S.L. 482 - (156) 2 328 312 14 2 328

ArteniusHellas, S.A. - 14,039 - - 14,039 12,061 1,978 - 14,039

482 14,039 (156) 2 14,367 12,373 1,992 2 14,367

90

Note 14. Issue of bonds and other negotiable securities

On 27 June 2005, the Company Board of Directors, using the authorisation granted by the AGM of Shareholders on the same date and pur-

suant to Article 153.1 a) of the Public Limited Companies Act, agreed to an issue of convertible securities for a sum total of 47,468,750.00

euros, by means of the issue of 37,975,000 convertible securities, each with a face value of 1.25 euros.

The conversion of the securities issued shall be carried out in the initial period at a fi xed rate of 1.25 euros, viz., a face value of 1.00 euro

plus an issue premium of 0.25 euro per share and in the ordinary periods for conversion, as well as in the exceptional ones, at a variable

rate equal to 90% of the average list price of the common shares in the Company in the 65 trading sessions prior to the date of the start

for each ordinary conversion period.

Once the initial conversion period and the fi rst period of ordinary conversion had fi nished -10 February and 10 August 2006 respectively-

the right to convert 35,847,883 and 320,509 convertible bonds into shares at an individual face value of 1.25 euros was exercised. The

valuation of the shares for the aforementioned conversion period was 1.25 and 2.08 euros, respectively (see Note 13).

The securities issued accrue a fi xed nominal interest of 5% payable half-yearly, as from the date of the outlay (11 August 2005) until the

redemption date (11 August 2010) or, where applicable, from conversion into Company shares.

This issue meets the requirements required by the IFRS in order to be considered to be “Capital instruments”. That is why the amount

corresponding to the item of liability from the component of net worth, for a value of 23 thousand euros, which represents the reasonable

value of the option incorporated by this instrument, has been differentiated from the net amount received since the issue of the bonds.

The amount shown on the balance sheet at 31 December 2006 corresponds to the current net value of the future payments that will be

generated, restated at the effective interest rate.

On the date of preparing these annual accounts, the Board of Directors of La Seda de Barcelona, S.A. has opted for early redemption of

all of the bonds existing at 31 December 2006, and which represent 4.75% of the total issued. The aforementioned redemption will take

place in August 2007, to coincide with the fi nalisation of the interest period.

Note 15. Debt fi nanced

15.1. Debts with banks. The breakdown for this heading at 31 December 2006 was the following:


Credit Drawn Limit (1)

Type of transaction Short-term Long-term Granted Available

Loans 11,654 401,789 - -

Lease 1,282 2.036 - -

Credits 12,695 - 16,197 4,742

Discounted bills 2,976 - 1,650 1,170

28,607 403,825 17,847 5,912

(1) This corresponds to short-term transactions.

The amount recorded as a loan corresponds to a syndicated loan from a bank (as the sole broker) for an amount of 405 million euros, the

maximum maturity date of which is nine years, ratifi ed in a contract dated 14 June 2006. This loan is guaranteed through the pledge of

shares of group companies (see Note 8.4) and through surety from Industrias Químicas Asociadas LSB, S.L.U. (see Note 19).

91

The maturity terms for the long-term debt correspond to the following breakdown:


2012 andthereafter2008 2009 2010 2011 Total

Loans 9,746 13,629 28.,249 41,719 308,446 401,789

Lease 1,341 695 - - - 2,036

The aforementioned operations are mainly pegged to the EURIBOR at one year plus a differential that ranges between 1.75%

and 2.5%.


15.2. Other fi nancial liabilities. The breakdown for this heading at 31 December 2006 was the following:


Shortterm Longterm

Postponement of debt with Public Bodies 1,358 -

Indemnities 3,922 2,908

Derivatives - 3,349

5,280 6,257

The most signifi cant aspects as regards this heading are the following:

- Deferral of debt with Public Bodies. This corresponds fully to the debt assumed as a consequence of the extinction of “La Seda de

Barcelona-Courtaulds España, Central Energética, Unión Temporal de Empresas Law 18/82, dated 26 May”, with the Tax Authorities as

a consequence of payment of the electricity tax for the 2000 to 2004 tax years.

- Derivatives. The Group has 8 interest rate hedges contracted to cover variation of cash fl ows attributed to the risk linked to interest rate va-

riations affecting the loan granted for the amount of 405 million euros (see Note 15.1), the characteristics of which are shown hereunder:


Notional Value Maturity

Loan 94,574 12/11/2012

Loan 25,000 14/08/2007

Loan 95,000 30/06/2014

Loan 95,000 30/06/2015

Loan 65,000 30/06/2013

Loan 10,000 30/06/2013

Loan 5,000 30/05/2011

Loan 5,000 30/12/2010

The interest rates contracted range between 1.75% and 2.5%. The repayments of these contracts follows a straight-line method over the

period of enforceability of the same.

The amount recorded under net worth over the tax year corresponding to cash fl ow hedging totals 3.35 million euros.

92

- Indemnities. These correspond to the indemnity payments assumed by the Company as a result of the overall transfer of assets and

liabilities from Hispano Química, S.A.U. and Viscoseda Barcelona S.L.U. and from the restructuring process carried out by the Group, the

latter generated between 2000 and 2006.

The long-term maturities of the indemnities are shown hereunder:


2012 andthereafter2008 2009 2010 2011 Total

Indemnities 1,766 964 55 44 79 2,908

Note 16. Provisions

The composition of this epigraph at 31 December 2006 is as follows:


Provisions for pensions and similar 43,557

Other provisions 1,037

44,594

The breakdown by Company at year-end is as follows:




Artenius Turkpet Kimyevi Maddeler ve Pet AmbalatMalzemeleriSanayi Anonim Sirketi 1,286



44,594

The Group accounts for post-employment benefi ts in accordance with IAS 19 Employee Benefi ts.

However, the Group operates 2 retirement schemes that cover at least 25% of its employees (including senior management). Of these

schemes, only one is a defi ned benefi t plan that relates to the employees of the UK subsidiary, Artenius UK. This plan covers 263 current

employees and is closed to new employees who are covered by a defi ned contribution scheme. The other schemes in operation are of

a defi ned contribution nature. A defi ned contribution scheme requires that the employer pays pension contributions for each employee

covered by the scheme into an individual retirement account which is used to provide pension benefi ts at retirement. However, in the case

of the defi ned benefi t retirement plan, the retirement benefi ts are based on employees’ years of service and average fi nal remuneration

and the plan is funded through a separate trustee-administered fund. A full actuarial valuation of the UK defi ned benefi t plan is undertaken

regularly by independent qualifi ed actuaries on a triennial basis and adopting the projected unit method. The last full actuarial valuation was

obtained in 2004 and the next valuation is due in July 2007. In addition to this, a full accounting valuation as at 31 December is obtained

each year under IFRS.

93

Key fi nancial assumptions relating to the Artenius UK defi ned benefi t plan

The principal weighted average rates used at 31 December were:

2006 % p.a 2005 % p.a

Discount rate 5,1 4,9

Infl ation rate 2,8 2,5

Long-term expected rate of return on plan assets 6,7 6,4

Future salary increases 3,8 4,0

Pension increases 2,5-2,8 2,5

The rates are based on market expectations by asset classes, at the beginning of the period, for returns over the entire life of the related

obligations. The assumption setting process is based on short and long-term historical analysis and investment managers’ forecasts for

equities and for bonds.

Assumptions on mortality: Defi ned benefi ts plan, United Kingdom

The Group analyses the mortality experience for the Artenius UK fund in terms of the current mortality tables applied: PMA92CO5MC and

PFA92CO5MC. These tables have been applied as of the date of acquisition of the subsidiary. Previously the tables applied were not based on

short- to medium-term projections and consequently the defi cit assumed on acquisition has been increased by 18 million euros to account for

the increase in longevity for both male and female participants.

Defi ned contribution plan: information disclosure on pensions

Amounts recognised on the Group balance sheet

31.12.2006

Total fair value of Plan assets 107,242

Present value of defi ned obligations (148,046)

Net (defi cit) of the plan (40,804)

Unrecognised actuarial gain (1,507)

Net liability/asset recognised in the Group balance sheet (40,567)

Analysis of the amounts recognised in the Group income statement

Quarter to 31.December 2006,

thousands of euros

Current service costs 609

Interest costs 1,517

Expected return on plan assets (1,546)

Total amount charged to the income statement 580

94

Changes in the fair value of the defi ned benefi t obligations for the three months ended 31 December 2006

Movements the fair value of plan assets during the year

(Thousand of euros)

As at 30 September 2006 144,670

Current service cost 609

Interest cost 1,517

Plan participants contributions 222

Actuarial (gain)/loss 1,923

Benefi ts paid from the plan (718)

Expenses paid (97)

Premiums paid (80)

Benefi t obligation at 31 December 2006 148,046

(Thousand of euros)

Fair value of plan assets at 30 September 2006 102,357

Expected return on plan assets 1,546

Actuarial gain (loss) on plan assets 3,205

Employer contributions 807

Member contributions 222

Benefi ts paid from plan/company (718)

Expenses paid (97)

Premiums paid (80)

Fair value of plan assets at 31 December 2006 107,242

Investment policies and strategies

Currently the majority of the plan assets are represented by equity investments, though the current and future asset allocations are deter-

mined by the plan trustees.

Note 17. Tax Situation

In the tax year ended on 31 December 2006, La Seda de Barcelona, S.A. and its companies in Spain owned directly or indirectly with

at least 75% of their share capital (see Note 1.b), were covered by the System for Consolidated Statements through forming part of the

Consolidated Group 236/03, with La Seda de Barcelona, S.A. being the Controlling Company.

The Companies that make up the Group covered by the said Tax System are:

- La Seda de Barcelona, S.A (which includes Catalana de Polímers, S.A.U, KD-IQA, S.L.U., Celtibérica de Finanzas, S.L.U., Mendilau,

S.L.U., Proyectos Voltak, S.L.U., Iberseda, S.L.U., taken over by means of a merger approved by the Extraordinary General Meeting of

Shareholders dated 29 December 2004 and registered on 16 June 2005 at the Business Register).

- SLIR, S.L.U.

- Industrias Químicas Asociadas LSB, S.L.U.

95

Application of the Consolidated Tax System means that the individual credits and debits for Corporation Tax are included within the Contro-

lling Company (La Seda de Barcelona, S.A.), hence the companies have to pay over to La Seda de Barcelona, S.A. the settlement for this

tax. The controlled companies not included in the said Consolidated Group pay tax individually and directly to the Tax Authorities.

All the taxable bases calculated individually for each company belonging to the Group are initially added, and corrected for the tax effect

resulting from the special consolidated consideration of the “Tax Group”.

17.1. Reconciliation of the book profi t/loss with the taxable base for Corporation Tax. The following chart shows the reconciliation bet-

ween the result of applying the general tax rate in force in Spain to the consolidated book profi t/loss calculated according to the International

Financial Reporting Standards and the charge for tax on earnings entered in the 2006 and 2005 tax years.


2006 2005

Consolidated result before tax 32,768 8,799

Permanent differences (4,828) 1,615

Adjusted result 27,940 10,414

Tax rate 35% 35%

Result adjusted by tax rate 9,779 3,645

Effect of the application of different tax rates 130 80

Deductions and bonuses (14) (149)

Compensation for negative taxable bases (49) (15)

IFRS application adjustments (1,962) (772)

Adjustments to the result of the previous year - (107)

Activation of negative taxable amountsfrom previous years (7,639) -

Accrued tax 245 2,682

17.2. Deferred tax assets. The following are entered under this heading: tax credits for Corporation Tax to be offset with future taxable

bases, taxes paid in advance deriving from tax deductions pending application, as well as temporary asset differences envisaged to be

recoverable in the future and which derive from the difference between the book value for the assets and liabilities and their tax base.

The movement recorded during the tax year ended on 31 December 2006 is the following:


Modifi cation perimeterConversiondifferences31.12.2005 Additions Removals Increases Decreases 31.12.2006

Group tax credits 26,509 - (3,368) 11,554 (7,716) - 26,979

Deductions pending application 779 - - 41 (48) - 772

Advance taxes 7,021 2,088 - 10,615 (77) 3 19,650

34,309 2,088 (3,368) 22,210 (7,841) 3 47,401

96

The removals from the perimeter of consolidation correspond to the activation of taxable bases corresponding to the company Industrias

Quimicas Textiles, S.A. (see Note 1, section c).

The restructuring of the Seda Group targeted at PET production and distribution, as well as the international projection achieved through

the purchase of stakes in non-resident companies, leads us to forecast that tax profi ts will be obtained that will enable us to offset the ne-

gative tax bases of previous years that have not as yet been activated, and to do so over the next 10 years. To this end, the Company has

recorded the corresponding activation of the aforementioned bases for an amount of 11,554 thousand euros in 2006. The negative taxable

bases have been activated with the tax rate forecasts for the year-ends from 2008 onwards applicable to each company.

The different companies with registered offi ces in Spain have proceeded to enter the variation of the taxable rate into their books, adjusting

the amount of the advanced taxes and deferred taxes, as well as the credits of the activated taxable bases (see impact in Note 4,

section ñ).

The breakdown at 31 December 2006 is as follows:


31.12.2006 31.12.2005

Group tax credits 26,979 26,509

Deductions amd bonuses pending application 772 779

Application IFRS 9,565 6,956

- Preliminary expenses 8,284 1,890

- Tangible fi xed assets 507 1,190

- Expenses to be deferred

- Accounts receivable and others

751 918

23 2,958

Others 10,085 65

47,401 34,309

The breakdown and movements recorded during the tax year ended on 31 December 2005 are the following:



Temporary asset

differencesJoint

venture

Tax credit to be compensated

generatedin period

Tax credit to be compensated

applied in periodBalance at31.12.2005

Tax credit for losses to becompensated 25,920 - - 1,323 (734) 26,509

Advance tax 10,531 (3,575) 65 - - 7,021

Deductions pendingapplication 760 - - 19 - 779

Total 37,211 (3,575) 65 1,342 (734) 34,309

The breakdown of the additions to the perimeter by companies is as follows:



Artenius Italia, S.p.A. 1,141

2,088

97

17.3. Liabilities for deferred taxes. The temporary differences of liabilities that are scheduled to be recovered in the future and which stem

from the difference between the book value of the assets and liabilities and their tax base are recorded under this heading.

The breakdown at 31 December 2006 is as follows:


31.12.2006 31.12.2005

For intra-group transactions 671 973

Accelerated amortisation 2,232 17

Application IFRS 13,030 19,495

- Land update

- Debt update

- Lease-back application

12,811 19,382

143 88

76 25

Exemption for reinvestment - 10

Others 7,518 -

23,451 20,495

17.4. As set forth by the legislation in force, taxes cannot be deemed to have been fi nally settled until the declarations presented have been

inspected by the Tax Authorities, or the statute-barred period has elapsed.

In 2006, the Tax Department fi nished the inspection notifi ed on 22 June 2005 with regard to the company Catalana de Polímers, S.A.U.,

which had been taken over.

In relation to the tax years that are open to inspection, the Company Administrators do not expect, in the event of an inspection, any extra

sizeable liabilities to arise.

17.5. The negative taxable bases and the allowances that correspond to the companies that belong to the Spanish Tax Group and to the

rest of the group, pending tax offsetting, are listed hereunder:

Negative taxable amounts corresponding to the Spanish tax group.

Company Year of generation Year of prescription Thousands of Euros

La Seda de Barcelona, S.A. 1992 2007 2,352

1993 2008 7,162

1996 2011 9,352

1997 2012 17,188

1998 2013 15,167

1999 2014 19,632

2000 2015 3,674

2001 2016 1,530

2002 2017 15

2003 2018 1

Industrias Químicas Asociadas LSB, S.L.(Single-member Company) 2003 2018 216

SLIR, S.L. (Single-member Company) 1995 2010 158

1996 2011 472

1997 2012 396

1998 2013 520

1999 2014 61

2000 2015 550

2001 2016 569

98


Artenius Turkpet Kimyevi Maddeler ve PetAmbalat MalzemeleriSanayi Anonim Sirketi 2006 2011 11.659

Artenius Uk, Limited 2000 Indefi nite 109

2001 Indefi nite 51,141



Artenius Romania, SRL 2005 2010 167

2006 2011 217

Artenius Italia, S.p.A 2006 2011 6,478

2004 2009 3,526


La Seda de Barcelona, S.A. 1997 2007/08 128

1998 2008/09 158

1999 2009/10 305

2000 2010/11 22

2001 2011/12 51

2002 2012/13 29

2003 2013/14 9

2004 2014/15 8

2005 2015/16 18

2006 2016/17 7

Industrias Químicas Asociadas LSB, S.L. 1997 2007/2008 7

(Single-member Company) 2000 2010/2011 26

2003 2013/2014 0

2004 2014/2015 0

2005 2015/2016 2

2006 2016/2017 2

SLIR, S.L. (Single-member Company) 1998 2008 2

2001 2011 16

Negative taxable amounts corresponding to the rest of the group.

Deductions pending application.

99

17.6. According to the merger deed registered at the Business Register on 16 June 2005 (see Note 1.a), the companies involved in the

merger recorded their intent to be covered by the system of tax neutrality envisaged in Chapter VIII, under Heading VII, of Legislative Royal

Decree 4/2004 of 5 March, whereby the Revised Text of the Corporation Tax Act was passed.

The breakdown by purchase date of the assets transferred that are liable to be amortised that have been included in the accounts for the

Controlling Company is the following:

Purchase Dates

Preliminary expenses 2000 - 2001

Research & development expenses 2000, 2001 and 2003

Concessions, patents and licences 2002

Computer applications 2001 and 2003

Buildings 1961 - 2003

Technical plant and machinery 1987 - 2003

Other plant, tools and fi ttings 1987 - 2001

Other fi xed assets 1996 - 2003

The latest fi nalised balance sheets corresponding to the companies transferring their assets which take part in the merger process descri-

bed in Note 1 are the following:

(*) Single-member Company

Catalana de Polímers,S.A. (*)

Celtiberica de Finanzas,S.L. (*)

Proyectos Voltak,S.L. (*)

Mendilau,S.L. (*)

KD-IQA,S.L. (*)

Iberseda,S.L. (*)




(Thousands of Euros))



Assets

Fixed

Start-up costs 1,238 - - - - -

Net intangible fi xed assets 6,907 - - - 694 -

Net tangible fi xed assets 92,002 - - - 3,111 -

Net investments 5,180 7,266 6,606 2,117 - -

Deferred charges 6,922 - - - - -

Current

Inventories 20,308 - - - 679 -

Debtors 91,944 - - - 2,608 3

Investments temporary 1,691 - - - - 1

Cash 203 - - - 7 6

End-of-period adjustments 482 - - - - -

226,877 7,266 6,606 2,117 7,099 10

Liabilities

Non-requirable liabilities 56,851 58 24 712 2,292 (22)

Provisions for risks and expenses - - - - - -

Long-term requirable liabilities 34,036 7,208 6,581 1,405 - -

Short-term requirable liabilities 135,990 - 1 - 4,807 32

226,877 7,266 6,606 2,117 7,099 10

100

The purchasing Company, as a result of the merger process described in Note 1 above, has included in its assets, for the sum total of

57,000 euros, the tax gains from the Company taken over called Catalana de Polímers, S.A.U., corresponding to the deductions and

allowances pending application.

Note 18. Other current and non-current liabilities

At the close of the tax year, its breakdown was the following:



Current debt with Public Bodies 5,737 -

Wages for staff pending payment 3,331 -

Suppliers of fi xed assets 4,335 58

End-of-period adjustments - 9,608

Purchase of shares Grupo Advansa 20,000 -

Purchase of shares Simpe, S.p.A. 6,000 -

Loan Industrias Químicas Textiles, S.A. 2,966 -

Others 4,298 1,352

46,667 11,018

The Prepayments and accrued income heading mainly includes amounts that correspond to subsidies, broken down hereunder:

The loan to Industrias Químicas Textiles, S.A. corresponds to the resulting balance of the settlement of payables and receivables that exist

between both companies prior to the sale of the stakes in Industrias Químicas Textiles, S.A. by La Seda de Barcelona, S.A.

Note 19. Guarantees arranged with third parties

As regards this point and in addition to that already stated in Notes 5.4 and 8.4, at 31 December 2006 the Controlling Company had gua-

rantees arranged with third parties amounting to 7.31 and 3.58 million euros, respectively.

La Seda de Barcelona, S.A. has also received a bond from Industrias Químicas Asociadas LSB, S.L.U. for an amount of 405 million euros

(see Note 15.1) and has received guarantees from banks for an amount of 24.12 million euros.


Subsidies for gas emissions 1,919

Subsidies granted to Artenius UK Limited 3,338

Subsidies granted to Artenius Hellas, S.A. 4,301

9,608

101

The guarantees arranged with third parties corresponding to the remaining group companies are detailed here under:




Artenius Turkpet Kimyevi Maddeler ve Pet Ambalat MalzemeleriSanayi Anonim Sirketi 204

SLIR, S.L. (Single-member Companyl) 6

6,614

Note 20. Sales

Its breakdown at the close of the tax year was the following:


2006 2005

Sales of Polymers 478,864 139,498

Preform sales 12,028 -

PTA sales 80,695 -

Sales of chemical products 65,371 51,611

Sales of Fibres - 50,682

Other sales and services 7,606 14,185

644,564 255,976

Note 21. Operating expenses 21.1. Procurement. Its breakdown at the close of the tax year was the following:

21.2. Personnel. Its breakdown at 31 December 2006 was the following:


Purchase of raw materials and other consumable materials 496,434

Change in stocks (5,088)

491,346

(Miles de Euros)

Wages and salaries 26,905

Social security contributions 7,154

Indemnities 5,715

Contributions to complementary pensions systems 309

Other social expenses 2,180

42,263

102

The number of persons employed at 31 December 2006, as well as the average number of persons employed during the year and allocated

by professional categories is as follows:

Categories Average number

of employeesEmployees at

31.12.06

Management staff and intermediate 94 236

Technical and administrative workers 199 276

Manufacturing staff 512 657

805 1,169

The results of operations interrupted in 2006 corresponds to the company Industrias Químicas Textiles, S.A. and to the branch of activity

made up of the assets and liabilities corresponding to the manufacture of polyester fi bres of the El Prat de Llobregat plant and which were

split and subsequently provided to the company Fibracat Europa, S.L. (See Note 1.c).

At 31 December 2005, the Group did not have any results from discontinued operations.

Note 23. Transactions in currencies other than the euro

he volume of transactions in currencies other than the euro, basically for sales and purchases, amounts to 29.99 million euros and 33.62

million euros, respectively, with their breakdown being the following:

Note 22. Discontinued activities The result of operations defi nitively interrupted that have been included in the consolidated balance sheet are shown hereunder:

(Thousands of Euros)31.12.06

Revenues 37,421

Expenses (60,209)

Net result attributable to discontinued operations (22,788)

Results of disposal of discontinued operations (6,777)

Discontinued operations (29,565)


Sales Purchases

Swiss Franc - 17

Pound Sterling 797 487

US Dollar 29,196 33,112

29,993 33,616

103


Accounts receivable Accounts payable

Swiss Franc - 49

Pound Sterling 160 -

US Dollar 8,167 16,015

8,327 16,064

In this item, the trade payables and receivables in currencies other than the euro at 31 December 2006 amounted to 8.33 million euros

and 16.06 million euros, and their breakdown into currencies was the following:

Note 24. Transactions carried out with associated companies

December 2006, the transactions carried out with Petrolest, S.L. by way of services provided and received by the said Company to the Group

amounted to 7.2 million euros and 0.04 million euros, respectively, with 0.03 million euros by way of fi nancial income.

Note 25. Balances and transactions with affi liated companies

At 31 December 2006, the Group had trade payables and trade receivables with companies of the Imatos Group for amounts of 13.15 and

2.68 million euros, respectively. In this regard, the transactions carried out as purchases, sales, services rendered and received totalled

1.17, 2.58, 1.41 and 3.93 million euros, respectively.

Note 26. Business and geographical segments

In accordance with directives from Group Management and internal reports, the information by segments is presented by business activity

and geographical zone:

26.1. Main business segments. The business lines described below were set up according to the Group’s organisational structure in force

at the close of the 2006 tax year, bearing in mind the nature of the products and services offered.

104


Polymers Preforms PTA

2006 2005 2006 2005 2006 2005

Net turnover 483,755 199,948 9,879 - 80,695 -

Net turnover - inter-segments 12,386 4,100 169 - 40,078 -

Other income 25,840 9,647 247 - 5,036 -

Variation in stocks of fi nished products and work-in-progress 1,789 25,681 (206) - (12,185) -

Procurement (405.842) (145,420) (8,777) - (94.281) -

Staff expenses (28,203) (26,685) (405) - (3,786) -

Allocation to depreciation (15,982) (11,165) (1,165) - (2,760) -

Other expenses (49,052) (37,761) (1,132) - (19,134) -

Operating profi t (loss) 24,691 18,345 (1,390) - (6,337) -

Financial income 6,080 555 172 - 651 -

Financial charges (21,129) (12,026) 29 - (419) -

Gain/loss on exchange difference (32) 49 127 - (906) -

Income (loss) fromfi nancial instruments 35 2 - - - -

Income (loss) fromnon-fi nancial assets - - - - - -

Asset impairment charges 2,275 (58) (19) - 7,581 -

Share of associated companies’profi t/losses - - - - - -

Gain (loss)on disposal offi xed assets 13,284 144 - - - -

Other income or losses - (994) - - - -

Profi t (loss) after tax from discontinued fromongoing activities 25,204 6,017 (1,081) - 570 -

Income tax cost 818 (1,938) 322 - - -

Profi t (loss) after tax from discontinuedoperations 26,022 4,079 (759) - 570 -

Profi t (loss) after tax from discontinuedoperations (29,565) - - - - -

Profi t (loss) from the fi nancial year (3,543) 4,079 (759) - 570 -

Minority interest - - - - - -

Profi t (loss) attributable toParent Company’sShareholders (3,543) 4,079 (759) - 570 -

BALANCE

Assets 1,032,103 487,017 46,069 - 225,978 -

Non-current 587,695 210,174 27,032 - 126,396 -

Current 444,408 276,843 19,037 - 99,582 -

Liabilities 1,032,103 487,017 46,069 - 225,978 -

Shareholders’ equity 461,081 200,778 38,786 - 142,513 -

Non-current 383,285 157,063 250 - 39,242 -

Current 187,737 129,176 7,033 - 44,223 -

105

(Thousands of euros )

Chemical Others Total

2006 2005 2006 2005 2006 2005

Net turnover 65,369 52,416 4,866 3,612 644,564 255,976

Net turnover - inter-segments 28,423 19,230 (81,056) (23.330) - -

Other income 5,781 2,659 80 1,600 36,984 13,906

Variation in stocks of fi nished products and work-in-progress 1,101 42 361 400 (9,140) 26,123

Procurement (56,318) (37,588) 73,872 14,613 (491,346) (168,395)

Staff expenses (7,839) (7,553) (2,030) (412) (42,263) (34,650)

Allocation to depreciation (5,121) (4,303) (194) (98) (25,222) (15,566)

Other expenses (24,296) (20,995) 8,671 4,941 (84,943) (53,815)

Operating profi t (loss) 7,100 3,908 4,570 1,326 28,634 23,579

Financial income 73 1 (4,190) 4 2.786 560

Financial charges (2,785) (2,353) 4,108 (22) (20,196) (14,401)

Gain/loss on exchange difference 18 (98) - - (793) (49)

Income (loss) fromfi nancial instruments - - - - 35 2

Income (loss) fromnon-fi nancial assets - - - - - -

Asset impairment charges (229) - - - 9,608 (58)

Share of associated companies’profi t/losses - - 45 17 45 17

Gain (loss) on disposal offi xed assets (634) - (1) - 12,649 144

Other income or losses - (1) - - - (995)

Profi t (loss) after tax from discontinued fromongoing activities 3,543 1,457 4,532 1,325 32,768 8,799

Income tax cost (1,223) (583) (162) (161) (245) (2,682)

Profi t (loss)from ongoing activities 2,320 874 4,370 1,164 32,523 6,117

Profi t (loss) after tax from discontinuedoperations - - - - (29,565) -

Profi t (loss) from the fi nancial year 2,320 874 4,370 1,164 2,958 6,117

Minority interest - - (2) (2) (2) (2)

Profi t (loss) attributable toParent Company’sShareholders 2,320 874 4,368 1,62 2,956 6,115

BALANCE

Assets 125,361 135,143 31,463 (60,788) 1,460,974 561,372

No corrientes 89,893 84.697 24,256 5,831 855,272 300,702

Corrientes 35,468 50,446 7,207 (66,619) 605,702 260,670

Liabilities 125,361 135,143 31,463 (60,788) 1,460,974 561,372

Shareholders’ equity 40,973 47,533 7,305 6,385 690,658 254,696

Non-current 53,564 30.387 14,890 259 491,231 187,709

Current 30,824 57,223 9,268 (67,432) 279,085 118,967

106

26.2. Secondary geographical segments. The group sales are carried out basically with countries that belong to the European Union and

other European countries. The following chart shows the breakdown of the turnover for the Group by the type of product, in accordance

with the geographical distribution in which its activities are carried out.


OthercountriesDomestic Europe Total

PET 130,360 311,004 37,500 478,864

Preform - 382 9,497 9,879

PTA - 76,583 4,112 80,695

Chemicals 52,170 12,821 379 65,370

Fibre 1,838 - - 1.838

Others 6,424 1,785 (291) 7,918

190,792 402,575 51,197 644,564

The assets of the Seda Group are located in seven countries.

Note 27. Per-share profi t

Basic per-share profi t is calculated by dividing the net profi t (attributable to the Group) by the average weighted number of shares in circu-

lation during the period, excluding the average number of common shares purchased and kept by the Group.

The calculation of the basic per-share profi t for the 2006 and 2005 tax years is as follows:

Financial year

2006 2005

Net profi t, in thousands of euros 2,956 6,115

Number of weighted average shares in circulation 259,348,915 52,302,647

Profi t per share 0,01 0,12

The diluted per-share profi t is calculated by taking the total of fi nancial instruments that grant access to the share capital of the parent

company, both if they were issued by the company itself or by any of its subsidiaries. The dilution is calculated, instrument by instrument,

bearing in mind the conditions present on the date of the balance sheet, excluding the instruments for preventing dilution.

The calculation of the diluted per-share profi t for the 2006 and 2005 tax years is as follows:

Financial year

2006 2005

Net profi t, in thousands of euros 3,189 6,828

Number of weighted average shares in circulation 265,377,211 67,180,523

Profi t per share 0,01 0,10

107

Note 28. Subsequent occurrences

On 6 February 2007 the company, together with Bionor Transformación, S.A. a subsidiary of Cie Automotive, S.A., incorporated Bio-

combustibles La Seda, S.L. for the purpose of developing biodiesel plants at the different industrial locations of the Seda Group. The new

company has been incorporated with a share capital of 3 million euros and 60% is held by La Seda de Barcelona, S.A.

Following the strategy defi ned by the Group, on 20 February 2007 the Company reached an agreement to purchase Eastman Chemical

Iberia, S.A. for 50 million euros, including working capital. The operation is pending approval by the fair trading commission. With this

purchase the Company will increase its PET production capacity by 175,000 tonnes.

As a consequence of the Group’s structural reorganisation procedure, La Seda de Barcelona, S.A. has focused the PET activity under the

ARTENIUS brand, which has led to an amendment of the trading name of the different subsidiaries in order to adapt to the aforementioned

brand (see Note 1.c).

On 6 March 2007 and for the purpose of closing the PET production process, the company reached an agreement to purchase 60% of the

PET recycling company Recuperaciones de Plásticos Barcelona for an amount of 2.6 million euros, and the agreement to subscribe to the

full amount of a capital increase of 1 million euros in order to raise its stake to 67.4%.

Note 29. Environment

During the 2006 tax year, so as to apply the long-term strategy defi ned by the Group, it continued to make investments in fi xed assets

earmarked for protecting the environment, the sum total of which amounts to 3,704 euros.

The current expenses supported by the Company during the present tax year amount to 3,515 thousand euros. This includes the expenses

for transportation and external management of the waste, as well as those associated with the operation of the chemical waste plant.

The distribution of investments made and the common expenses paid by the different group companies this year is as follows:


Costs Investments

Romania 6 -

UK 2,344 3,592

Italy 611 -

LSB 196 1

IQA 352 111

3,509 3,704


Wages and salaries 325

Expense allowances for attending board meetings 242

567

Note 30. Other Information

Payments and other benefi ts for the Administrators. During the tax year ended on 31 December 2006 the payments received by the

members of the Controlling Company’s Board of Directors corresponded to the following breakdown:

108

There were no credits, advances, loans or securities contracted in terms of pensions with regards to the Board of Directors.

In relation to the information demanded by new Article 127, indent three, 4 of the Public Limited Companies Act, the shareholdings and

posts and/or functions that Company Directors hold and/or exercise in other companies with the same, similar or complementary kind of

activity that represents the Company’s corporate purpose are the following:

- Mr Rafael Español Navarro carries out the post of sole administrator at Artenius Italia S.p.A., in representation of La Seda de Bar-celona, S.A. at Artenius Portugal, Industria de Polímeros, S.A., Artenius UK Limited, Artenius Holding, B.V. and Artenius Sines, S.A., joint administrator at CARB-IQA de Tarragona, S.L., chairman and joint administrator at Artenius Hellas Holding, S.A., director

of DOGI, S.A., Endesa Internacional, S.L. and Enersis, S.L. adviser at FECSA-Endesa at the date of preparing their respective annual

accounts.

- Mr Ramon Pascual Fontana holds the post of director at Petrolest, S.L. on the date of drawing up its annual accounts.

- The Company called Ibersuizas Alfa, S.L., fully owned by Ibersuizas Participadas, S.A., holds the post of Director in the fi rm called

Selenis, SGPS, S.A.

Note 31. Fee for the auditors

The payment to the accounts auditors for carrying out the audit of the 2006 individual and consolidated annual accounts to 31 December

2006 totals 139.37 thousand euros.

The fee paid to the accounts auditor for other services rendered in 2006 totalled 150 thousand euros.

Note 32. Information on the companies included within the consolidation

The main impact on the balance sheet relating to the acquisition of subsidiary companies is summarised below:


ArteniusPortugal, Industria de Polimeros, S.A.

Artenius Italia, S.p.A.

Artenius Uk, Limited

Artenius Turkpet Kimyevi Maddeler

ve Pet Ambalat Malzemeleri Sanayi

Anonim Sirketi

Artenius Hellas, S.A. (Subgroup) Other

Non-current assets 30,725 86,232 147,449 40,624 36,161 3,037

Current fi nancial investmentsand cashand other equivalentliquid assets 5,033 9,268 2,312 1,336 1,158 6,516

Other current assets 33,196 49,651 164,586 45,382 32,654 6,040

Current and non-current liabilities (64,533) (119,499) (156,177) (13,394) (41,315) (9,904)

Minority Interests - - - - (14,039) -

Reasonable value of net assets acquired 4,421 25,652 158,170 73,948 14,619 5,689

Goodwill 18,193 33,050 52,260 10,572 3,931 -

Consideration in cash 22,614 58,702 210,430 84,520 18,550 5,689

Consideration - other - - - - - -

Total consideration 22,614 58,702 210,430 84,520 18,550 5,689

The acquired companies involved an increase in the turnover of Euros 378.5 million and a net loss attributable to the controlling company

of Euros 7.4 million. If the acquisitions had taken place on January 1, 2006 and the perimeter of the consolidation had been that existing

as at December 31, 2006, the amount of the increase in the turnover involved and on the net profi t of the controlling company would have

been approximately Euros 1,144 and 1.1 million, respectively.

109

Consolidated management report at 31 December 2006

In compliance with that set forth in Article 171 of the Revised Text of the Public Limited Companies Act, the present management report for

the Company is drawn up in relation to the corporate tax year closed on 31 December 2006, including the matters required in Article 202

of the said legal corpus, as modifi ed by Article 107 of Act 62/2003 on Measures of a Tax, Administrative and Social nature.

1. Progress of the business and the Company’s situation. The progress of the Company’s activities during the 2006 tax year was the

following:

One of the objectives of La Seda de Barcelona, S.A. in 2006 was to increase its size through an Acquisitions Programme that has made

the group the biggest PET and PTA producer in Western Europe, with an installed capacity of 800,000 tonnes and 670,000 tonnes, res-

pectively. As a consequence of this acquisitions plan La Seda de Barcelona is present in Spain, Portugal, Italy, Greece, Turkey, Romania

and the UK. These strategic purchases lead to La Seda de Barcelona, S.A. being ranked top PET producer, at the same time as increasing

the global coverage of our clients.

Two large fi nancial operations also took place in 2006:

1) Capital increase of 418 million euros, the second-largest operation on the Spanish stock exchange in the last two years.

2) Syndicated loan of 405 million euros from Deutsche Bank, which has strengthened the fi nancial structure of the company to ensure

it remains solvent during its expansion and growth stage.

Investment activity.

In the 2006 tax year La Seda de Barcelona, S.A. made the following purchases that have increased the installed capacity of the group to

a yearly total of 800,000 tonnes:

- 100% of Artenius Portugal, Industria de Polímeros, S.A., a factory located in Portalegre (Portugal) with annual production capacity

of 70,000 tonnes of PET.

- 100% of Artenius Italia, S.p.A, two factories located in Udine (Italy) with annual production capacity of 200,000 tonnes of PET.

- 51% of Artenius Hellas, S.A., the sole producer of PET in the Balkans and located in Volos (Greece) with a strategic location that

enables access to Europe, the Balkans, the Middle East and the Euro-Asian markets. Production capacity in 2006 was an annual 80,000

tonnes of PET.

PET

Preform

PTA

Ethylene Oxide

Glycol and its derivatives

Fibr

Chemical

Aggregated sales %in euros

Sales % in tonnes 2006

Fibr2,08%

PET69,41%

Preform3,29%

PTA13,04%

Chemical12,19%

Gycol y derivado14,03%

Fibr1,49%

PET61,15%

Preform2,89%

PTA19,62%

EthyleneOxide6,36%

110

- 100% of Artenius UK Limited, located in Wilton and comprising three production plants: two producing PTA and one producing PET.

The production capacity of PTA is 670,000 tonnes a year and the production capacity of PET is 150,000 tonnes a year.

- 100% of Artenius Turkpet Kimyevi Maddeler ve Pet Ambalat MalzemeleriSanayi Anonim Sirketi, located in Adana and which pro-

duces PET and Preforms. The PET production capacity is 130,000 tonnes a year.

- 100% of Artenius Romania, SRL, located in Bucharest and which produces preforms. The preforms production capacity is 10,000

tonnes a year.

The Group has likewise made the following investments during the 2006 tax year:

• Building work started on a 7.5 Mwh polygeneration plant in El Prat de Llobregat (Barcelona), which will enable energy savings of around

35%. This facility will come into operation during the fi rst quarter of 2008 and will represent an investment of 8 million euros.

• The fi rst quarter of 2006 also saw fi nalisation of the investment in a post condensation unit at the factory in St Giorgio (Italy) which has

increased capacity by 35,000 tonnes/year, as well as achieving a reduction of energy and maintenance costs. This investment totalled

9.2 million euros has been complemented with different actions to enhance quality and security totalling an outlay of 570,000 euros. The

erection of new silos at the Italian plant has entailed an investment of 900,000 euros

• An investment in a second preforms injection machine at the Volos-VPI plant (Greece) has been made for an amount of 950,000 euros,

representing an increased capacity of 3,000 tonnes/year. The safety and oil heating systems have also been improved through an additional

outlay of 630,000 euros.

• At the Wilton plant (UK), there were investments in 2006 for an amount of 6.5 million euros that will fi nalise in 2007. These investments

are framed within the reduction of environmental impact policy which reduces dumping of sewage.

• Multiple actions of small individual amounts have taken place at the IQA plant in Tarragona, which jointly represent an investment in

excess of 5 million euros. These investments have entailed increased productivity, safety and equipment renewal.

Progress of the PET Market

PET is the Seda Group’s main industrial project. It is a product with strong accumulated growth and a great potential for development.

During the 2006 tax year, the PET market continued its ongoing growth of the last few years, with an annual average rate close to 10%.

This percentage may rise in the short-term with the defi nitive implementation of the PET pack on the market for fruit juices, milk products

and beer.

Expectations for the coming years indicate that PET will carry on with its rate of expansion. Its exceptional characteristics and properties

have turned this polymer into one of the most versatile plastics in the world with multiple and varied applications, both novel ones and those

replacing other materials.

111

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006E 2007E

PROGRESS OF WORLDWIDE-EUROPEAN CONSUMPTION OF PET POLYMERS

14.000

12.000

10.000

8.000

6.000

4.000

2.000

0

Thou

sand

s of

ton

nes

/ yea

r

2.8993.262

4.0064.800

6.0356.769

7.639

8.463

9.548

10.58411.291

12.146

13.064

791 864 1.097 1.2541.840

2.089 2.288 2.5002.986 3.173 3.309 3.535 3.817

European Consumption

Worldwide Consumption

The technological advances achieved in the manufacturing processes, as well as in the materials used in the sector for containers and

packaging, have allowed the exceptional properties of the PET polymer to be very widely assessed, and it is now gaining ground as an

essential raw material in the sector.

The use of PET has been consolidated on the market for mineral waters, gassy drinks and oils and it is very quickly gaining ground in new

applications in the sectors for foodstuffs, cleaning products, cosmetics and pharmaceuticals, as well as in applications for industry and

engineering.

Research & development activities. In 2006 the Seda Group focused its R&D&i efforts on analysis of different technologies and production

processes to which it has had access through the aforementioned acquisitions, for the purpose of extending this know-how to all production

plants and to set up the best practices of each of these at the remaining subsidiaries. This has been in detriment to the performance of

other projects.

2. Risk factors. Any activity is subject to risks, not just external ones but also those that are inherent to the activity itself. Economic activities

are no exception and competent management requires that the risks that might affect a company’s business not just in the short term but

also in the long term should be identifi ed, measured and assessed.

The Company’s top management is in charge of carrying out ongoing monitoring so as to identify, assess and prioritise current and potential

risks and take the pertinent measures to counteract as far as possible the threats to the business that might arise from the risks that are

identifi ed.

The main fi nancial risks are listed below and the measures taken by the Company’s management for dealing with them:

Interest rate risk

La Seda de Barcelona, S.A. uses hedge instruments to cover this risk. The derivatives held by the group correspond mainly to interest rate

hedge operations and ensure the existing borrowing at a defi ned rate of interest. For bookkeeping purposes these are processed as cash

fl ow hedges in so far as they correspond to cash fl ow hedges that are attributable to a specifi c risk linked to a liability previously recognised,

viz., the syndicated loan granted for an amount of 405 million euros.

Risk in the management of raw materials:

he Group’s main risk in the management of the raw materials is the change in the price of PX that comes from Xylene. This product

comes under the aromatics cut (BTX), with the composition of the latter being Benzene, Toluene and Xylene.

These three components are also used for manufacturing derivatives of gasolines with the aim of cheapening their cost. Due to the rise

in the price of oil, there is a rise in demand for Benzene, Toluene and Xylene from the fuel manufacturers.

112

One of the derivatives of Xylene, commonly known as paraxylene, is the base for obtaining PTA and its price ranges according to the

supply and demand for Xylene on the international market, which is closely linked to the price of fuel.

The price of the PTA, therefore, will depend on the end use that the producers of aromatic cuts decide for Benzene, Toluene

and Xylene.

There is no system for covering specifi c risks in this market segment.

Market risk:

During the 2006 tax year a new competitor on the international PET market was discovered in Lithuania, which caused a drop in prices

on the latter.

As of the date of the close of the tax year, no project was known to be underway for building new plants for PET by any possible competitors.

The risk of new competitors appearing in the next few years is mitigated by the need for a minimum of 2 years and a high fi nancial cost for

building new plants for manufacturing PET, apart from obtaining the pertinent permits related to the environment.

In addition to the foregoing we must add the increase of forecast demand.

Exchange rate risk:

Practically 90% of the purchase and sale transactions carried out by the Group are done so in euros, which is why there is no need for

specifi c risk management in this fi eld.

Liquidity risk:

The liquidity policy followed by the Group ensures performance of the undertakings for payment without having to resort to fi nance from

third parties under exorbitant conditions.

Credit risk:

The credit risk deriving from the failure of a counterpart (client, supplier, partner or fi nancial institution) is properly controlled in the Seda

Group through different policies and risk limits in which requirements are established relating to:

• Suitable contracts in the transaction carried out.

• Proper internal or external credit rating for the counterpart.

• Additional guarantees where necessary.

• Limitation of the costs for bankruptcy and the fi nancial cost deriving from bad debts.

3. Important events occurring after the close of the tax year. No other important events have arisen following the close of the tax year

apart from those already stated in Note 28 above.

4. Foreseeable progress for the Company. During the 2007 tax year the appropriate measures and policies are going to be taken in order

to back up the Group’s new structure that is mainly concentrated on the manufacture of PET which has become the core business of the

group under the Artenius brand, and has created a specifi c division for the PTA raw material (purifi ed terephthalic acid).

With the purchase of the PET plant of Eastman Chemicals Ibérica in San Roque, La Seda de Barcelona Group will increase annual produc-

tion capacity by 175,000 tonnes of PET, raising the total production capacity of La Seda up to approximately 1 million tonnes per year.

5. Purchases and disposals of own shares. At its meeting dated 12 June 2006, the General Meeting of Shareholders of La Seda de Barcelo-

na, S.A., authorised the Company and its subsidiaries to acquire own shares under the protection of the provisions set forth in article 75 and

Additional Provision One of the Public Limited Companies Act, for a period of 18 months from that date onwards and with a limit of 5% of the

share capital under conditions of cash sale and for a price equivalent to the applicable stock market listing price.

117

Main Offi ces

LA SEDA DE BARCELONAPasseig de Gràcia, 85

08008 Barcelona

T. +34 93 467 17 50

E-mail: [email protected]

Production Plants

ARTENIUS PRAT

Avda. Remolar, 2

08820 El Prat de Llobregat (Barcelona)

T. +34 93 401 75 00

IQA-LSB

Ctra. Nacional 340, Km. 1157

43006 Tarragona

T. +34 977 556 015

ARTENIUS SAN ROQUE

Poligono Industrial Guadarranque, 3

11369 San Roque (Cádiz)

T. +34 956 585 201

ARTENIUS ITALIA

Via E. Majorana, 10

33508 San Giorgio di Nogaro (Udine)

T. +39 0431 620 261

ARTENIUS PORTUGAL

Quinta de San Vicente - EN 246

7300 952 Portalegre

T. +351 245 339 200

ARTENIUS HELLAS

Area B’ Zone

37500 Volos (Greece)

T. +30 2425 061 200

ARTENIUS UK

P.O. Box 1923, Davies Offi ces

Wilton Internacional,

REDCAR TS10 4XZ

T. +44 (0)1642 451 000

ARTENIUS TURKPET

Tarsus Yolu Ozeri 10. Km PK.371

01322 Seyhan / Adana

T. +90 322 441 0253

Organize San Bölgesi 2 cadde

16400 Inegöl / Bursa

T. +90 224 714 8567

ARTENIUS ROMANIA

Bulervardul Basarabie 256

Sector 3

Burcherest

SHAREHOLDER’S OFFICE SERVICE

Tel. 902 10 49 15

e-mail: [email protected]

ADDRESSES OF THE LA SEDA DE BARCELONA

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Realización y Diseño: Joker & Valls • Fotografías ESTUDIO PICAZO • Impresión Gràfi cas TL • D.L.: B. 33.578-2007

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