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ANNUAL REPORT

What matters most People GRIFOLS Annual Report 2006

Timeline for 2006 6 Key Data 8 Letter from the President 10 Bodies of Governance 12 Corporate Strategy 13 1 2 3 4 SUMMARY OF ACTIVITIES 14 DIVISIONS 26 GRIFOLS COMMITMENT 46 THE STOCK 58 5 ANNUAL ACCOUNTS 64 GRIFOLS Annual Report 2006

TIMELINE FOR 2006 January February March April May June July Grifols reaches an agreement with Cardinal Health to distribute Grifols purchases 8 plasmapheresis centers its Pyxis products in from Baxter Portugal These new centers were incorporated into the Biomat USA Grifols Hospital Logistics division will extend its reach structure, amounting to 59 USbased plasmapheresis centers. through Grifols Portugal after its success in Spain. acquires PlasmaCare and its 14 plasmapheresis centers By incorporating this Cincinnati, Ohio based plasma collection company, Grifols ensures its supply of plasma, the key prime material in the production of plasma derivatives, our main line of products. PlasmaCare operates in the Midwest and Southeast of the United States. A representation office is opened in Osaka, Japan Grifols opens a representation office in Japan in preparation for extending its presence to the Japanese market. Grifols makes its debut on the Barcelona Stock Market On May 17 Grifols floated shares on the stock market. The opening price per share was 4.40 euros. At the day s close, its value rose 15% to 5.09 euros per share. reaches an agreement with Kardex- Remstar to distribute its rotating carrousels in Latin America This agreement covers the distribution of rotating carrousels for the main storage supply warehouse in hospitals in the main markets of Latin America: Argentina, Mexico, Brazil and Chile where Grifols offers integrated logistical systems to modernize the hospital pharmacy. GRIFOLS is included in the Ibex Medium Cap index The technical assessment committee of the Ibex Medium Cap index (20 adjusted medium capitalization stocks quoted on the Spanish stock market which fulfill certain liquidity requirements) has decided to include Grifols in the place of Mapfre Corporation which has moved to the Ibex-35. Grifols reaches an agreement with the Italian company, Diesse Diagnostica Senese S.p.A The agreement includes the distribution of its in vitro diagnostic system, Chorus, in the United States for an initial period of 5 years. This alliance will allow Grifols to access a new area of the diagnostics market and to make the foundation for a business line which will significantly strengthen the Diagnostic division. The Germans Trias i Pujol Research Institute in Barcelona and Grifols sign a collaboration agreement This alliance will allow these two entities to jointly develop clinical nutrition, biotech and diagnostics products. GRIFOLS Annual Report 2006

August September October November December The newspaper The International Symposium on coagulation factors is held in Chicago, USA. Grifols organized this meeting of US hematologists to discuss the therapeutic aspects of hemophilia treatment. Launch of the new line of large volume bags in the Hospital Division A new totally automated production line for parenteral solutions was launched in the Parets del Valles plant (inaugurated in 2003) which will improve the cost of the product and increase production capacity. The capacity of the DG Gel manufacturing plant in the Diagnostic Division is expanded The company will be able to significantly increase production of its gel cards to increase its presence in the world immunohematology market. The Spanish Minister of Industry, Joan Clos, visits Grifols The recently appointed Minister of Industry, Commerce and Tourism, along with the Mayor of Parets, visited Grifols Parets del Valles (Barcelona) facilities. He emphasized the important role that the company plays as a reference in the world pharmaceutical sector. Expansión analyzes the first six months of Grifols on the stock market on November 17, 2006. Grifols sixth month on the stock market shows an 90% increase and good prospects The analysts are optimistic in their outlook on company growth. The FDA approves the marketing of Flebogamma DIF The outcome of the company s own research, the new liquid intravenous immunoglobulin has an improved safety margin and an increased yield per liter of plasma. Grifols Executive Committee approves the launch of the Minifrac After this decision was made, the preparation for FDA approval was begun for this manufacturing plant. This plant is located in the industrial complex of Los Angeles and will increase the company s fractionation capacity. GRIFOLS Annual Report 2006

Key Data (In millions of Euros) Other indicators 2006 2005 % var. Shareholders equity 368.4 55.9 558.4 Total assets/liabilities 913.7 821.7 11.2 Fixed assets 185.0 186.6-0.9 Other relevant information 2006 2005 % var. Sales USA 243.0 149.4 62.7 Staff (In units) Spain 1,931 1,799 7.3 USA 2,116 1,483 42.7 Row 276 275 0.4 Total 4,323 3,557 21.5 GRIFOLS Annual Report 2006

Income Ebitda In millions of euros In millions of euros 600 648.8 524.3 23.7% 120 100.5 29.2% 129.8 400 80 200 40 0 2005 2006 0 2005 2006 Ebit Net Results In millions of euros In millions of euros 120 100.5 50 45.4 80 73.6 36.5% 40 30 25.6 77.6% 40 20 10 0 2005 2006 0 2005 2006 The Bioscience division saw growth of 21% thanks to the increase in sales of IVIG, Factor VIII and albumin Sales in overseas markets rose by 30.3% to account for 74.4% of the group s total turnover GRIFOLS Annual Report 2006

LETTER FROM THE PRESIDENT Dear shareholders, I am pleased to present the 2006 annual report. It has been a good year in terms of results, and I would like to share with you the three main reasons why I believe it has been so special. First of all, May 17, 2006 will go down in the history of our company as the day on which Grifols was first listed on the stock market. This was the culmination of a successful process of years of preparation in which there were many obstacles to overcome. Prior to joining the stock exchange, shares were oversubscribed by a factor of 10, a reflection of the confidence of institutional investors in the company s strategy. Since flotation, our stock has risen almost without interruption on Spain s Mercado Continuo. This rise also reflects the company s success at meeting its commitments, something which has been appreciated by the market. Secondly, 2006 has confirmed the company s commercial and industrial potential in the United States. Our company s long history and our rigorous commitment to excellence have formed the basis of our success, and today the quality of our products and of our production methods, together with our R&D activities, are what allow us to compete on equal terms in the US market. The third aspect which I would like to highlight is the significant increase in our plasma collection capacity with the incorporation of US plasmapheresis centers into our structure. This year we have focused our efforts on expanding our network of centers in the United States through acquisitions. We acquired 8 new centers from Baxter and also acquired PlasmaCare and their 14 centers located in the Midwest and Southeast of the United States. Thanks to these purchases, Grifols is the second largest provider of plasma in the world. We will continue to work to achieve our goal of self-sufficiency by securing our plasma supply in order to guarantee our future. This year s results are explained in great detail on the following pages, so I will restrict myself to commenting briefly on some of the more important points. The year end sales figure of 648 million euros, an increase of 23% over the previous year, far exceeded the targets set out in the plan for 2006. The main engine of growth continues to be our international expansion, with 74.4% of total sales being made outside of Spain. In the Bioscience Division we have given priority to the US as this is the leading market for plasma derivatives. This has been a wise strategy as turnover in the US has grown 62.7%, amounting to 242.9 million euros, representing more than a third of the company s total sales. Among the achievements in 2006, and more specifically in the Bioscience Division, was the granting of the US FDA license to market our new product, Flebogamma DIF, in the United States. This new generation of liquid intravenous immunoglobulin is the result of advances in technology achieved by Grifols R&D team after 10 years of work. This ambitious project required the investment of more than 30 million euros, divided between the construction of the Barcelona plant where the new IVIG is manufactured and the clinical trials of the product. After several years of strategic investment, the company is well positioned to meet the growing demand for plasma derivatives. 10 GRIFOLS Annual Report 2006

At the end of 2006, Grifols had 4,380 employees. Training our personnel and enhancing their professional knowledge is a long-term objective for the company because we believe that our human resources are the key to performing our activities, and to implementing our expansion plans and future projects for the company. On behalf of the Board of Directors, I would like to thank our employees for their hard work, efforts and loyalty. And I thank you, our shareholders, for the confidence you have placed in our management. Víctor Grifols Roura President and CEO GRIFOLS Annual Report 2006 11

Bodies of Governance Board of Directors Name Position Type Víctor Grifols Roura President Executive Juan Ignacio Twose Roura Member Executive Ramón Riera Roca Member Executive Tomás Dagà Gelabert Member Other/external Thorthol Holdings B.V. Member Dominical Christian M. C. Purslow Member Independent Thomas Edwin Doster Member Dominical Thomas Glanzmann Member Independent Edgar Dalzell Jannotta Member Dominical Raimon Grifols Roura Secretary of the Board of Directors (non-member) Nuria Martín Barnés Vice-Secretary Audit Committee Name Position Type Christian M.C. Purslow President Independent Tomás Dagà Gelabert Member Other/external Thomas Glanzmann Member Independent Raimon Grifols Roura Secretary (non-member) Appointments and Retributions Commission Name Position Type Thomas Glanzmann President Independent Víctor Grifols Roura Member Executive Thomas Edwin Doster Member Dominical 12 GRIFOLS Annual Report 2006

Corporate Strategy Improving people s health and well-being, offering high quality innovative products made with cutting edge technology while respecting the environment, generating a profit for our investors and promoting the professional development of our employees: together, these form the mission of Grifols, a company which was born in Barcelona in 1940. We aspire to be a leading company in the world health sector for our contributions to the community through our research, commitment to ethics, economic performance and our professional team. Grifols products and services help to improve the health and well-being of people around the world. Some of our products are vital to saving the lives of people who suffer from blood disorders. We strive to ensure that these treatments are safer, more effective and convenient for the patient and that they give peace of mind to those who prescribe them. We incorporate the latest technological advances available, design different systems to improve our processes and investigate other uses for our existing products. Improving processes, quality in manufacturing and launching new products all involve a significant scientific and technological component. We work hard to keep abreast of advances in these fast-moving fields as part of our strategy for the future. Grifols has been a pioneer in the development of hemotherapy since 1940. Our experience and the quality of our human resources, scientists and technicians all guarantee the high purity levels of our products. We have become a world leader in the production of plasma derivatives due to the quality and innovation of our processes and the design of our plants. Grifols corporate commitment aims to make our mission a reality, achieving sustained and sustainable value for our shareholders and offering a stimulating and safe environment to our professionals while respecting social and cultural differences and, of course, the environment. GRIFOLS Annual Report 2006 13

1 SUMMARY OF ACTIVITIES SUMMARY OF ACTIVITIES Macroeconomic environment Internationalization of Grifols Analysis of results R&D: A step forward Information Technologies 14 GRIFOLS Annual Report 2006

In a changing economic and financial environment, characterized by fluctuations in the main stock exchange indexes, some of which reached historic highs, by rising interest rates in Europe and the United States, and by unstable oil prices throughout the financial year, Grifols has successfully met the dual commitment it made to its shareholders: floating on the stock exchange and consolidating its presence in the US market. On May 17, 2006 the company was floated on the Spanish Mercado Continuo. Two months later the company was included in the Spanish index of Medium Capitalization Companies (IBEX MEDIUM CAP). By the end of the year, the group s turnover had reached 648.8 million euros, 23.8% more than in 2005. Profits rose by 77.6% and stood at 45.4 million euros. The stock exchange valuation of the company amounted to 2,152 million euros, growth of 130% since the launch. Macroeconomic environment World economic activity remained dynamic in 2006 and economic growth, according to the estimates of the International Monetary Fund (IMF), stood at 5.1%, compared with the 4% recorded in 2005. At the same time, the volume of world trade has risen significantly, growing at a rate of 9.5%. Activity decelerated during the final months of the year as a result of the slowdown in the US economy. However, growth has continued to be strong in the eurozone, in Japan, and in the emerging economies such as China or India. A key feature during the financial year was the growth of the stock exchanges, some of which reached historic highs, reflecting the company s positive profit expectations and the absence of liquidity problems. In addition, oil prices fell after reaching all-time peaks at the start of August, when geopolitical tensions were particularly high. Subsequently, crude oil prices fell by around 20%, and this reduced inflationary pressures and increased the purchasing power of families in importing countries. In 2006 the United States was responsible for a significant part of the growth although, for the second year in a row, this was lower than the year before. Gross Domestic Product (GDP) for the US rose by 3.4% in 2006 compared to 3.5% in 2005, due largely to the weakness of the property and car manufacturing sectors. However, this slowdown was precisely what the Federal Reserve (FED) wanted in order to put a brake on inflation which, during 2006 stood at 3.2%. For this reason, since August 2006 it has held interest rates at 5.25%, bringing to an end the run of 17 successive interest rate rises since June 2004, when the rate stood at 1%. For their part, the members of the European Union are also experiencing rising interest rates, creating upward pressure on the euro. Strong employment has provided one of the foundations the European Union s economic recovery which, after years of weakness, closed 2006 with growth of 2.7%. According to the European Commission this is the highest rate in the last five years. The rapid creation of employment has encouraged consumer demand and has, in turn, boosted the industrial sector and the region s exporters. With regard to the emerging economies, China and India have maintained impressive growth rates. Finally, in the specific case of Spain, during 2006 the economy maintained growth rates above the European average and closed the year with a 3.9% increase in GDP. Rising employment and family incomes contributed towards moderate growth in domestic demand, which was marked by moderation in expenditure on housing and consumption in the face of rising interest rates. At the same time, the dynamism of the European economy favored the export of goods and services, in particular tourism, as a result of which the Spanish growth rate is evidence of the reduced imbalances between the positive contributions of domestic demand, and the negative contributions from overseas. The global market for medications grew by 7% in 2006 (at constant exchange rates) and reached 643 thousand million dollars, according to IMS Health. Once again, the growth of the pharmaceutical sector was driven by rising life expectancy together with the development and sale of new medications, principally in oncology and immunology, and the significant growth of other GRIFOLS Annual Report 2006 15

1 SUMMARY OF ACTIVITIES treatments such as those aimed at respiratory illnesses. The year as a whole saw significant growth in the consumption of pharmaceuticals by countries such as India or China, which in a short time have gone from being developing countries to emerging markets with particular significance for the global pharmaceutical industry. In fact, China saw growth of 12.3% in 2006, with sales of medications reaching 13,400 million dollars. For its part, India has been immersed in the process of opening up its health sector to multinational pharmaceutical companies, and this brought about a rapid rise in sales of pharmaceuticals in 2006. Sales rose by 17.5% to reach 7,300 million dollars. In 2006 it is important to note that 27% of global growth in sales was generated in countries with annual per capita income of less than 20,000 dollars. Apart from the emerging countries, the United States continued to be the fastest growing market, with an expansion of 8.3%. For their part, the five principal European markets France, Germany, Italy, Spain and the United Kingdom saw overall growth of 4.4%, reaching 123,200 million dollars. In Latin America, sales of medications rose by 12.7% to reach 33,600 million dollars and Japan continued to grow at similar rates to preceding years. The world pharmaceuticals sector grew by 7% in 2006. Emerging countries such as China and India consolidate as the main areas of expansion for the industry The Spanish pharmaceutical sector grew by 5.8% in 2006, faster than the Spanish economy as a whole according to Farmaindustria. Only 20% of the income generated came from hospital sales. The most recent data available about the plasma-fractionating industry, corresponding to 2005, indicates that the global plasma products market reached 7,000 million dollars, 20% more than in 2003 In recent years, the sector has experienced growing demand and rising prices. At the same time, the concentration which has occurred in the sector since 2002 means that five companies generate 55% of global sales. By geographical area, in 2005 the United States generated approximately 2,600 million dollars of plasma products sales, growth of 15.5% over 2004. Significant features of 2005 were the strong increase in demand for albumin and of IVIG, which also saw rising prices. The demand for plasma products (plasma derivatives) continues to grow In the medium term, the increase in patients who can be treated with plasma products, as a result of new treatments being approved and the entry into the market of new countries, makes it possible to predict growth for the sector. Development of operations Grifols business turnover stood at 648.8 million euros, a rise of 23.8% Net profit was 45.4 million euros, 77.6% more than in 2005, and EBITDA grew by 29.2%, amounting to 129.8 million euros The Bioscience division saw growth of 21% thanks to the increase in sales of IVIG, Factor VIII and albumin Sales in overseas markets rose by 30.3% to account for 74.4% of the group s total turnover In 2006 Grifols met its two key goals for the year: floating on the stock exchange and consolidating its presence in the US market. These were two milestones for the company and will underpin future growth both from an operational and a financial perspective. The consolidation of the business in the United States was clearly demonstrated by the achievement, at the end of 2006, of the United States FDA license to market the new Flebogamma DIF in the United States, where sales account for 37.5% of the group s total turnover. At the same time, the completion of the integration process initiated after the purchase in 2003 of the assets of Alpha Therapeutic Corporation, which included a plasma fractionation plant in Los Angeles, has made it possible to bring the technological and manufacturing standards up to those of the 16 GRIFOLS Annual Report 2006

manufacturing facilities in Barcelona, with the result that the group now has two cutting-edge plasma fractionation plants. The integration also meant that, during 2006, the number of plasmapheresis centers in the United States grew as a result of purchases linked to the main business line. The 22 new centers purchased are vital to ensure the supply of plasma over the medium and long term. Joining the stock exchange gives the group the possibility of obtaining finances directly from the capital market, if this is needed to fund new strategic investments, in addition to allowing it to compete on equal terms in the plasma products market, where the group is currently the fourth-largest by sales volume and third in terms of production capacity. 2006 was marked by flotation on the stock exchange and consolidation in the US market In 2006, consolidated business turnover was 648.8 million euros, an increase of 23.8% in comparison to 2005. The EBITDA stood at 129.8 million euros, 29.2% more than during the previous year thanks, mainly, to success in containing operating costs. Financial expenses developed favorably as a result of the reduction of the group s debt levels. Excluding the impact of canceling non-voting shares in May 2006, financial expenses fell by 23.4% to a figure of 15.2 million euros, compared to the 19.8 million euros recorded the year before. The company s net profit was 45.4 million euros, growth of 78%. Development by business line All of the different business lines achieved significant growth during 2006. The Bioscience division, which brings together all those products and activities related to plasma for therapeutic use, generated 68% of the group s turnover. Sales amounted to 440.3 million euros, an increase of 20.9% with respect to 2005. The Hospital division brings together all non-biological pharmaceutical products for the hospital pharmacy sector, such as parenteral solutions, parenteral and enteral nutrition products, medical supplies and integrated systems for hospital logistics. During 2006 the sales of this business line grew by 8% over the preceding year to stand at 62.9 million euros. This division currently contributes 9.7% of total income. The Diagnostic division brings together the manufacture and development of devices, instruments and reagents for clinical analysis laboratories. In 2006 it generated sales income of 74.6 million euros. In comparison with 2005, it grew by 7% and currently accounts for 11.5% of business. Finally, the Raw Materials & Others division, responsible for the sales of intermediary products and the sale of special albumin for industrial use or as a culture medium, generated sales of 71 million euros, 120.8% more than in the preceding year. This represents 10.9% of the group s total turnover. Of this turnover, 31 million euros correspond to sales of plasma to Talecris as part of a commitment taken on by PlasmaCare Inc before the company was purchased by Grifols. The existing contractual obligation ends on February 28, 2007, and after this date all the plasma produced by PlasmaCare will be assigned to the group. 1 1 Aerial view of Grifols industrial complex in Los Angeles, California GRIFOLS Annual Report 2006 17

1 SUMMARY OF ACTIVITIES Turnover and growth by division in 2006 (millions of euros) Turnover % growth % of turnover Bioscience 440.3 + 20.9 67.9 Hospital 62.9 + 7.9 9.7 Diagnostic 74.6 + 7.1 11.5 Raw Materials 71.0 + 120.8 10.9 &Others Development by business line 2 700 600 500 400 300 200 100 0 31 60 51 279 33 65 54 303 32 70 58 364 440 2003 2004 2005 2006 Bioscience Hospital Diagnostic Raw Materials 71 75 63 The central testing lab for plasma collected in the US plasmapheresis centers 2 18 GRIFOLS Annual Report 2006

Internationalization of Grifols International expansion was the principle engine of growth for Grifols in 2006. 74.4% of sales were generated outside of Spain. Grifols sales turnover from overseas markets to the end of financial year 2006 represented 74.4% of total business turnover. International sales grew by 30.3% and reached 482.6 million euros, a trend which is likely to continue in the coming years. The group s strategy of giving priority to the US market, in particular in the Bioscience division, was confirmed in 2006. In the United States, the principle market for the plasma products sector, Grifols turnover rose by 62.7% and reached 242.9 million euros. As a result, sales in the US market at the year end represented 37.5% of total turnover. Promoting sales in the United States has led, in relative terms, to the weakening of sales in Europe. These amounted to 340.3 million euros in 2006, an increase of 6.4% which generates 52.4% of the company s income. The company has also had a presence in the Asia-Pacific region through subsidiary companies in Malaysia, Thailand and Singapore since 2003 and has commercial links with countries such as China and India through its International Division. Geographical distribution of the group s operating income: (millions of euros) % of total sales % of total sales 31/12/06 31/12/05 European Union 335.5 52% 314.1 60% United States 243.0 37% 149.4 28% Rest of World 70.3 11% 70.3 12% Consolidated 648.8 100% 524.3 100% In Latin America, Grifols achieved growth of 23.1% and in Asia, a key geographical region in the company s expansion strategy, it grew by 21.2%. While it only accounted for 3.5% of sales in 2006, the company expects to gradually increase its presence. As a result, in the third quarter of 2006 a representation office was set up in Japan, where Grifols currently markets diagnostic devices. Representation office in Osaka, Japan In March 2006 Grifols opened its representation office in Japan, with the aim of paving the way for the future commercialization of its products there. The company currently has a presence in the Japanese market through its Diagnostic division. It sells devices and instruments for immunohematology diagnostics to Japanese companies which are technological world leaders. 3 3 The main entrance to the plasma derivatives production plant in Los Angeles, USA GRIFOLS Annual Report 2006 19

1 SUMMARY OF ACTIVITIES Grifols has a presence in over 90 countries around the world and has 18 subsidiary companies UK 1997 Germany 1997 Poland 2004 USA 1990 Mexico 1993 France 1999 Portugal 1998 Spain Italy 1997 Czech Rep. 1992 Slovakia 1999 Singapore 2000 Thailand 2003 Japan 2006 Brazil 1998 Malaysia 2003 Chile 1990 Argentina 1991 20 GRIFOLS Annual Report 2006

Analysis of results The net profit attributable to Grifols at the end of 2006 was 45.4 million euros, an increase of 77.6% over the preceding year. The gross margin over sales was 39.6%, more than one percentage point lower than in 2005. This slight fall is due principally to the increase in the price of plasma and the set-up costs incurred by the new facilities of the Hospital division, designed for the production of 3-liter irrigation bags. It should be noted that EBITDA rose to 129.8 million euros and represents 20% of sales. This was an increase of 29% over 2005 due to the improvement in operating costs. These accounted for 24.3% of income, compared to 26.5% the preceding year, a reduction of 2.1 percentage points, to a total of 156 million euros. The company s EBIT was 100.5 million euros, 36.5% higher than in 2005. The financial results have continued to develop positively as a result of the reduction in the group s debt levels. Excluding the impact of the cancellation of non-voting shares in May 2006, these fell by 23.4% to 15.2 million euros, compared to the 19.8 million euros recorded the previous year. The increase in the gross operating results (EBITDA) in 2006 and the significant improvement in working capital allowed the group to reduce its debt ration (net financial debt/ebitda) to 2.3, compared to the figure of 2.7 for the previous financial year. The net financial debt amounted to 303.3 million euros at the close of the year. Balance sheet At the end of the year, Grifols total consolidated assets amounted to 913.7 million euros, compared to 821.7 million euros in 2005. Particularly noteworthy are the 33.7 million euros increase in the commercial fund as a consequence of purchases made in 2006 of the company PlasmaCare, which permitted Grifols to integrate 14 plasma collection centers into its structure, and of 8 plasmapheresis centers from Baxter. It is also worth mentioning the increase in the creditors account during the year as a result of higher activity levels. Accounts due totaled 196.9 million euros, compared with 155 million in 2005. This increase reflects the inclusion of interest due on late payments from organizations funded by the Spanish social security system after the approval of the European Directive Combating Late Payment in December 2004. Subsequent to this date, the gradual adoption of this directive by the various regions of Spain has significantly reduced the company s payment periods from a range of bodies. The current average payment period for the year is 97 days, and this has helped to reduce financial requirements. The company s debts reduced during the year, falling to 545.3 million euros from the figure of 765.7 million euros recorded in 2005. While long-term debt with institutional lenders remained at similar ratios, standing at 198.32 million euros at the end of 2006, the entry for other creditors fell by more than 260 million euros. This was principally due to the amortization and cancellation of non-voting shares after the capital increase prior to the company s flotation on Spain s Mercado Continuo. At the end of the year, the majority of the financial debt held by Grifols related to the syndicated loan taken out in April 2006 for the sum of 225 million euros. Net worth On December 31, 2006, Grifols net worth amounted to 368.4 million euros compared to the 55.9 million euros recorded in 2005. This increase was fundamentally due to the capital increase carried out by the company by means of an Initial Public Offering (IPO), prior to all Grifols securities being listed on Spain s Mercado Continuo on May 17, 2006. The corporate capital was increased by 35.5 million euros by the issue and circulation of 71 million ordinary shares, each with a nominal value of 0.5 euros. On May 15, 2006 the price of the shares which were the object of the capital increase was set at 4.40 euros per share, representing an issue bonus of 3.90 euros per share. The increase meant that at the end of 2006 the subscribed capital had a value of 106.53 million euros. The heading Other Reserves includes the share issue bonus for a value of 115.7 million euros, reduced by the costs of canceling the non-voting shares, the main purpose to which resources obtained by the company in the IPO were allocated. The other differences recorded under the group s shareholder s equity for the preceding year were due to the increase GRIFOLS Annual Report 2006 21

1 SUMMARY OF ACTIVITIES in legal reserves, in accordance with Spanish legislation on reserve funds, and the increase in accumulated profits as a consequence of retained profits corresponding to 2005 in line with the group s dividends policy. R&D: A step forward Research was central to the origins of the company: in 1951 Dr. Josep Antoni Grifols i Lucas developed the technique of plasmapheresis used across the globe. Ever since then the company has promoted investigation into more efficient processes, the search for new applications for plasma products, and the research and development of new products. This is Grifols commitment to science and to people. In Spain, resources allocated to R&D in the health sector in 2006 exceeded 700 million euros, a figure which represents 20% of total research investment. According to the latest data from Farmaindustria, the R&D sector employs over 4,000 people in the pharmaceutical industry, with research into new drugs driving the sector and representing one of the key bases of competitiveness in our country. The leading pharmaceutical companies have a long record of allocating significant resources to R&D, although the latest data shows a slowdown in comparison with previous years. During the period 2000-2004 the average annual growth rate was 18.9%, while in 2005 growth was only 5.5%. This trend is probably also reflected in the rest of Europe, where forecast R&D investment could fall over the coming years. Grifols allocates 25.6 million euros to R&D in 2006 While the current trend appears to point towards a reduction of resources for R&D, Grifols remains committed to staying one step ahead. The company will continue to be a pioneer in the research and development of new applications and processes in the areas in which it operates, principally in the plasma products and diagnostic sectors. For this reason it allocates around 6% of its annual turnover to R&D activities, translating into expenditure of 25.6 million euros in 2006, 11.4% more than in 2005. Grifols also employs 132 people in R&D, the majority of whom work in Spain. The company s main concern is to ensure the maximum safety of its products. This is such an important issue that there is a specific research line dedicated to it. Among the milestones of 2006 a key achievement was the new Flebogamma DIF, a liquid intravenous immunoglobulin approved in December 2006 by the FDA. The company also promotes collaboration agreements for the joint development of research projects. A major development in 2006 was the agreement signed with the Research Foundation of the Germans Trias i Pujol Hospital in Barcelona for the development and evaluation of new clinical nutrition products, biotech products, and diagnostic products in the field of gastroenterology. Grifols R&D policy is set after taking into consideration the products manufactured by the company. The research areas and the principal projects on which work is currently being conducted are: 4 Detail of the Quality area laboratory in Los Angeles 4 22 GRIFOLS Annual Report 2006

Bioscience Division: Flebogamma DIF (Europe) Flebogamma DIF: Indication ITP (United States) Flebogamma Antihepatitis (Spain) Liquid IVIG Fibrin Adhesive Antithrombin III (United States) Indication: von Willebrand Factor VIII (Europe) Clinical trial: Alpha 1PI Incorporation of nanofiltration to other plasma products 5 Hospital Division: Grifill 3.0 Pre-diluted drug solutions Solutions of hypernitrogenized aminoacid Diagnostic Division: Q Coagulometer Wadiana F-100 Hemostasis Reagents In the Bioscience area various clinical trials are in progress into the use of plasma proteins with known applications in other illnesses. During 2006, clinical trials aimed at extending the application of these products were conducted, such as the treatment of von Willebrand disease with complexes of FVIII/VWF, in addition to other studies with immunoglobulins (polyvalent and specific), albumin, alpha-1-antitrypsin and antithrombin. The first of these has been designed to perform immunohematology tests on DG Gel cards, with a high capacity and increased autonomy without requiring intervention from the operator. It has been planned as a flexible analyzer which can be loaded with new samples without the need to stop tests already undergoing analysis. The second instrument will be the new generation of Triturus, which will also increase its capacity and flexibility to perform Elisa techniques. Finally, in the Hospital division efforts have been focused both on the enteral nutrition and fluid therapy areas and on the design of machines and equipment which make it possible to make sterile intravenous mixtures in the hospital pharmacy. Key developments in 2006 were the approval by the Spanish Agency for Medications and Health products of the Tauramin 8% and 10% aminoacids solution, and obtaining registration for a 10% and 20% lipid emulsion in Spain, Italy, the United Kingdom and Germany. There are also plans to present registers for new lipid emulsions and All in One nutrition bags (for parenteral nutrition) during 2007. The Diagnostic division focuses its innovative efforts on developing technical solutions in the field of in vitro diagnostics. During the year, projects have focused on the design and development of two new automatic analyzers. 5 Flebogamma DIF. The results of a decade of research and development in Spain GRIFOLS Annual Report 2006 23

1 SUMMARY OF ACTIVITIES information technologies Activity in the information technology field has focused mainly on restructuring and improvements in Quality Management. Quality Management - Sap Quality Management This was launched in 2006, and is expected to be put into operation during 2007. In the first phase the system will be integrated into all the group s industrial companies in Spain, and will then be rolled out in the international subsidiaries. Its introduction will ensure high levels of automation in the quality control functions, and it will therefore be a basic tool for supporting the functions of the technical areas of the companies involved. The fact that this system is based on SAP facilitates its integration with the information handled by the other departments, and because it is being implemented in all the companies it will make it possible to standardize criteria and methods. Centralization of use of Plasma Donations Control System Most of Grifols plasmapheresis centers in the United States are managed using the DMS system (Donor Management System) on an outsourcing basis with a supplier in that country. In 2006 we began the process of transferring this service to the Grifols Data Processing Center in Spain, at the same time as designing contingency procedures and infrastructures for disaster situations at the new Grifols DPC (data processing center) in the United States, currently under construction. This reorganization will deliver higher quality services and greater continuity guarantees. There will also be increased internal control of a system which is vital to the group s activities. Finally, this change will also provide the opportunity to renew the communications network of the plasmapheresis centers, with the aim of increasing their capacity and redundancy levels, and this will lead to significant cost reductions. Implementation of the SAP System at PlasmaCare Inc. and Grifols Argentina The group s standard management system has been implemented at PlasmaCare, after it was acquired in 2006. As a result, in addition to integrating the company s internal management, this will lead to the standardization of processes and will facilitate control and accounting consolidation. SAP has also been implemented in the Argentina subsidiary for the same reasons. Purchasing management in the Industrial division 6 In 2006 a SAP-based electronic workflow system was implemented, automating the cycle of request, authorization and control of receipt for purchases of the Industrial division, and this will be extended to other units of the group. One of the Biomat USA plasmapheresis centers 6 24 GRIFOLS Annual Report 2006

GRIFOLS Annual Report 2006 25

2 DIVISIONS - Bioscience DivisionS Bioscience Division Diagnostic Division HOSPITAL DIVISION 26 GRIFOLS Annual Report 2006

Bioscience Division The Bioscience Division encompasses the company s products and activities related to human plasma. In addition to plasma derivatives, it also includes a plasma inactivation service for hospitals in Spain. GRIFOLS Annual Report 2006 27

2 DIVISIONS - Bioscience BIOSCIENCE ACTIVITY IN 2006 In 2006, 68% of the company s total turnover was generated by the Bioscience Division, with sales from this division reaching 440.3 million euros. Compared to 2005, Bioscience grew by 20.9% due to an increased volume of sales of the majority of products and the upward trend in prices of some plasma derivatives. This year saw an increased demand for Factor VIII in the United States, which grew 35.1% compared to 2005. The price of albumin increased in the United States and both the price and demand for intravenous immunoglobulin (IVIG) rose. Income generated by the sale of Flebogamma grew 24.2% compared to the previous year as a result of the higher sales and the rise in prices in the United States. Grifols is fourth in the world in the sale in plasma derivatives In December of 2006 the Food & Drug Administration granted a license to market a new product: the new generation of intravenous immunoglobulin (IVIG). This plasma derivative, launched in 2007 under the name Flebogamma DIF, is manufactured in the new US FDA-certified IVIG production plant located in Parets del Vallés (Barcelona). Last year the agreement with Gambro Renal Products (GRP) was renewed, extending the distribution of the MARS liver support therapy. This product is currently sold in Brazil, Chile and Mexico. The World Health Organization (WHO) estimates that 12 million people worldwide suffer from severe liver diseases and that more than 70,000 people per year could benefit from the MARS liver support therapy based on albumin dialysis. Collecting plasma for fractionation Plasma derivatives are purified plasma proteins with therapeutic properties obtained through fractionating human plasma. These proteins require thorough treatment and purification and are the products manufactured by Grifols. The majority of plasma Grifols uses for fractionation comes from Grifols plasmapheresis centers in the United States. At the end of 2006 and after the acquisitions carried out that year, Grifols had 73 plasma collection centers supplying approximately 2 million liters of plasma per year. Currently, Grifols is the second largest plasma provider in the world and collects the raw material in order to be able respond to the market demand for plasma derivates. The incorporation of 22 new plasmapheresis centers has strengthened the company s vertical integration, specifically in the Bioscience Division. In 2006 Grifols acquired 22 plasmapheresis centers in the United States to ensure the company s supply of its main raw material, plasma. 7 Inside one of Grifols plasmapheresis centers in the USA 7 28 GRIFOLS Annual Report 2006

Diagram of the increase in Grifols plasmapheresis centers: Centers (000) liters 80 2,000 60 14 1,500 40 1,000 20 45 50 50 51 59 500 8 0 2002 2003 2004 2005 2006 0 Biomat USA PlasmaCare Liters Origin of fractionated plasma 2005 2006 Liters Liters US Plasma 1.089 1.889 Sales of plasma though contract obligations 0 386 Total US plasma available 1.089 1.503 European plasma 320 308 Specifis plasma 24 33 Total plasma 1.433 1.844 Plasmapheresis centers incorporated into Grifols structure in 2006: 14 plasmapheresis centers after the acquisition of the US company PlasmaCare in March 2006. 8 Baxter centers in April 2006. 8 Main plasma fractionation plant in Los Angeles GRIFOLS Annual Report 2006 29

2 DIVISIONS - Bioscience Plasma fractionation In 2006 Grifols fractionated 1.8 million liters of plasma, 13.4% more than the previous year. The majority of plasma came from the United States: 1.5 million liters from the US compared to 362,000 liters from Europe. Grifols has fractionated 1.8 million liters of plasma in 2006, almost 13.4% more than in 2005 9 The company has achieved a significant level of autonomy in terms of raw materials: 74% of the plasma Grifols fractionates comes from the company s own plasmapheresis centers. This trend will continue in the future and will nearly eliminate Grifols dependence on outside suppliers. Grifols will therefore be able to exercise greater control on the cost of its plasma and increase margins. Biomat, a Grifols company located in Spain, offers a plasma inactivation service called IPTH (Inactivation of Plasma for Transfusion in the Hospital), aimed at preventing virus transmission through the transfusion of plasma units. In 2006, 85,591 units were inactivated through photo-inactivation in the presence of blue methylene. These 22,400 liters came from Transfusion Centers from different areas of Spain. In June 2007, Biomat inactivated the millionth unit since this service was first launched. In July of the same year the IPTH program celebrated its tenth anniversary. Plasma derivatives production facilities in Barcelona, Spain 9 30 GRIFOLS Annual Report 2006

Plasma derivative production plants In order to fractionate plasma and obtain different proteins for therapeutic use, the raw material undergoes different processes and treatments which separate and precipitate each of these proteins. Once they have been obtained, they undergo rigorous processes of inactivation and purification before being bottled. Plasma fractionation and the production of plasma derivatives is carried out in Grifols two plants located in Barcelona (Spain) and in Los Angeles (United States) which are licensed by the FDA and European Union health authorities. Together, their fractionation capacity amounts to 3.6 million liters per year. Barcelona Plant: Fractionation Capacity: 2.1 million liters/year. Los Angeles Plant: Fractionation Capacity: 1.5 million liters/year. The fractionation plants are not currently functioning at 100% capacity. In 2006, Grifols fractionated 1.8 million liters of plasma, putting to use only 50% of its total capacity, which clearly demonstrates the company s growth potential. Development of Grifols fractionation capacity (000) liters 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Barcelona capacity L.A. capacity Throughput In March, the FDA granted a license for the new IVIG production plant designed and built by Grifols in Parets del Valles, Barcelona, where the other Bioscience manufacturing facilities are located. 10 10 Minifrac. New plasma fractionation plant, in the process of validation. This plant will increase fractionation capacity by 700,000 liters in the Los Angeles facilities GRIFOLS Annual Report 2006 31

2 DIVISIONS - Bioscience Investments in 2006 In 2006, the Bioscience Division s investments were aimed at improving R&D and the plasma derivatives manufacturing facilities in Barcelona and Los Angeles. A number of improvements were carried out to bring the US production plant up to the standards of the Spanish plant. Another important investment was the construction of a new building in the Los Angeles industrial complex. The first floor houses the new sterile filling areas currently undergoing validation. The second floor will be home to the coagulation proteins purification area, and the technical and service areas will be located on the third floor. Portfolio of products Bioscience Division products are aimed at health professionals for the treatment of patients with different conditions. Grifols large portfolio of plasma derivatives are recognized for their maximum levels of quality and safety. They are used in the following therapeutic areas: Coagulation Hemophilia disease Intensive Care Immunology Construction of a new plant for the purification and bottling of albumin was also begun. 11 At the Barcelona plant, investments have gone toward improvements in production and the construction of a plant for the purification of residual water from the production of plasma derivatives. Partial view of the Los Angeles industrial complex including the new 325 building 11 32 GRIFOLS Annual Report 2006

Plasma derivative Commercial Name Clients Factor VIII Fanhdi Hemophilia Units Alphanate Hemophilia Units Factor IX Novix Hemophilia Units Alphanine Hemophilia Units Prothrombin Complex Profilnine Hemophilia Units Intravenous Immunoglobulin IGIV Flebogamma Immunology Hematology - Neurology Flebogamma DIF Immunology Hematology - Neurology Albumin Albúmina Humana Grifols Hospital Pharmacy - Hepatic Units Burns - ICU Surgery Albutein Hospital Pharmacy Intramuscular Immunoglobulins Pharmacy Anti-thrombin III Anbin Hemostasis Unit Alpha-1 antitrypsin Trypsone Pneumology Unit Raw materials and others Clients Albumin for non-therapeutic use Intermediary R&D Biotech Centers Plasma Fractionations products and Pharmaceutical Industry Alpha-1 fractionation service Pharmaceutical Industry GRIFOLS Annual Report 2006 33

2 DIVISIONS - Bioscience Grifols obtains the US FDA license to market the new Flebogamma DIF in the United States in 2006 Flebogamma DIF (Double Inactivated and Filtered) is the only product on the market which incorporates two specific inactivation steps and 20 nanometer ultrafiltration into its production process, improving its safety margin even further. Grifols efforts in research produced a new manufacturing method which significantly improves the yield per liter of plasma used in the production of Flebogamma DIF. This project spanned over the course of 10 years, involving efforts in the research, development, validation and registration of the new Flebogamma DIF. This new generation IVIG forms part of Grifols commitment to its patients in offering the best product possible to guarantee their health and well-being. This R&D team upholds this commitment by devising new processing methods and incorporating the newest technologies available in the sector. In the United States, Flebogamma DIF is indicated for the replacement treatment in primary immune deficiencies. Projects carried out in 2006: FDA licensing of the new Flebogamma DIF in the United States. Launch of Anbinex in Italy, the main European market for Antithrombin. Launch of Alphanine (Factor IX) in Germany. Launch of the 1500 IU presentation of Fanhdi (Factor VIII) in several countries. Projects carried out in 2007: 12 Flebogamma DIF marketed in the USA. Flebogamma DIF licensing obtained in Europe. Pending approval from the European Agency for the Evaluation of Medicinal Products (EMEA). Approval of the indication of von Willebrand disease for Alphanate in the USA. The indication is approved later in the EU. Approval of the indication of von Willebrand disease for Fanhdi (Factor VIII) in the EU. Exterior view of the purification and production plant for Flebogamma DIF in Barcelona, Spain 12 34 GRIFOLS Annual Report 2006

Diagnostic Division The Diagnostic Division specializes in the development of devices, instruments and reagents for in vitro diagnostics. The main clients are blood donation centers, clinical analysis laboratories and hospital immunohematology units. GRIFOLS Annual Report 2006 35

2 DIVISIONS - Diagnostic Bioscience DIAGNOSTIC ACTIVITY IN 2006 Grifols has increased its business activity in the Diagnostic Division in the United States by creating a new US diagnostic sales team. In 2006, the Diagnostic Division generated 74.6 million euros in income from sales. Compared to 2005 this represents a 7% increase and 11.5% of the company s total earnings. All the subdivisions of this area showed growth from the previous year, with hemostasis (+13%), immunology (+8%) and immunohematology (+3.5%) as the main engines for growth in this division. In the Immunohematology area, the WADiana autoanalyzer recorded impressive sales. At the close of 2006, Grifols had installed more than 2,000 analyzers around the world. This has had a positive impact on sales of DG Gel next-generation gel cards for pre-transfusion blood typing tests in donors and patients. Sales of DG Gel cards were especially good in Russia, Brazil and Asia. In Immunology, sales of the Triturus autoanalyzer, an instrument for large scale testing with ELISA techniques in clinical labs, remained constant in 2006. An open instrument, the Triturus autoanalyzer can use a wide range of ELISA reagents, the sales of which increased 13.2% in 2006, and most notably in Infectious Serology, Autoimmunity and Hematology. Grifols inaugurates a new line of in vitro diagnostics After signing an agreement with the Italian company Diesse, Grifols has begun distribution of the in vitro diagnostics system, Chorus. This agreement is effective for five years and will include Spain, UK, Portugal, Chile and the United States. With this agreement, Grifols will access a new market in diagnostics and will lay the foundations for this line to gain importance, contributing to significantly strengthening the Diagnostic Division. The sales for this product line are expected to reach 15 million euros per year. The Diagnostic Division obtained distribution rights for ELISA reagents from Nordic Bioscience, Quidel and DBC in 2006. This has allowed Grifols to offer a more complete portfolio of reagents for Triturus in the field of Immunochemistry. 13 Q autoanalyzer for hemostasis testing 13 36 GRIFOLS Annual Report 2006

New products in 2006 A new line of immunohematology products At the Congress of the International Society of Blood Transfusion held in Cape Town (South Africa) in 2006, Grifols presented its new immunohematology products. The new products are manual instruments for processing gel cards and include the DG Therm digital incubator, the DG Spin digital centrifuge and the DG Rack. These products feature next generation technical characteristics and design. A new version of the WADiana analyzer At the same congress, an updated version of the WADiana analyzer was presented. This in vitro diagnostics instrument goes beyond other analyzers in the same specialty, offering maximum automation and safety with minimal handling for the user. 14 New products and services in 2006: New manual instrumentation for DG Gel cards. Updated version of the WADiana analyzer. Larger offer of ELISA reagents in the field of Immunochemistry after obtaining distribution rights from Nordic Bioscience, Quidel and DBC. Launch of the Sintromac Web: a new version of the software for oral anticoagulant therapy. Extension of Sintromac-INRatio to Primary Medicine centers and final users (Telecontrol) sold in pharmacies. 15 14 DG Gel card for immunohematology and routine pretransfusion testing 15 Partial view of the Diagnostic Division s scientific instrumentation production plant GRIFOLS Annual Report 2006 37

2 DIVISIONS - Diagnostic Bioscience Products - description WADiana / Diana Systems Automated immunohematology analyzers with gel technology. Indications and use Routine pre-transfusion general testing immunohematology tests. Manual instruments: DG Therm digital incubator DG Spin digital centrifuge DG Rack work rack Manual processing of gel cards. Triturus System Totally open and automated analyzer for any ELISA test. Also multi-test/multi-lot. Automates immunochemical testing in microplates for clinical analysis labs. Reagents, instruments and software for coagulation tests Reagents and instruments for coagulation tests in clinical analysis labs. Leucored and other blood bags Containers for storing units of whole blood or fractions. Leucored incorporates a leucocyte filter. Containers for blood units to be transfused to patients. Q Coagulometer. Totally automated analyzer with a detection system for hemostatic tests. Automates hemostasis tests in clinical analysis labs. 38 GRIFOLS Annual Report 2006

Investments in 2006 Investments in the Diagnostic Division over the course of the year have focused mainly on strengthening R&D and the expansion and improvement of the manufacturing plants. In October 2006, the expansion work began on the Diagnostic Division production plant in Barcelona (Spain). The project, a three storey 750m 2 building, will triple production output for DG Gel cards. It will also include a 15m tall automated storage facility which can store up to 3 million cards. Construction work on the plant is expected to be completed in the second quarter of 2007 and has required an investment of approximately 2.3 million euros. 16 16 Exterior view of the recently built annex for the DG Gel cards production area GRIFOLS Annual Report 2006 39

2 DIVISIONS - Diagnostic Bioscience Our Immunohematology line of instruments This year the Diagnostic division which develops innovative technical solutions in the field of in vitro diagnostics, has presented new integrated instruments including the digital incubator DG Therm, the digital centrifuge DG Spin and the DG Rack. These instruments are useful in processing DG Gel cards manually for blood typing donors and patients in pretransfusion tests. This instrumentation is next generation within this speciality because of its technological features and design. This manual instrumentation complements the new version of the WADiana autoanalyzer with its updated functions and a modernized exterior design. These new products were presented to the international market at the XXIX edition of the ISBT congress (International Society of Blood Transfusion), in Cape Town, South Africa in September 2006. 17 New Immunohematology instruments line 17 40 GRIFOLS Annual Report 2006

HOSPITAL DIVISION The Hospital Division serves the needs of the hospital pharmacy through the supply of products in four specialties: I.V. Therapy, Clinical Nutrition, Hospital Logistics and Medical Material. GRIFOLS Annual Report 2006 41

2 DIVISIONS - hospital Bioscience 18 HOSPITAL ACTIVITY IN 2006 In 2006, sales from the Hospital Division represented 9.7% of the total company turnover, or 62.9 million euros, representing an increase of 8% with respect to the previous year. The majority of the products from this division are destined to the markets in Spain and Portugal. All the product lines which make up this division grew in 2006. The most significant developments were seen in hospital logistics, where Grifols has become the main supplier of these systems in Spain. The I.V. Therapy line of products grew 7.5% thanks to the launch of the new 3-liter irrigation bags and Fleboflex polypropylene bags, a new format which will eventually substitute PVC bags in coming years. The Oncotools line of products and the increase in contract manufacturing of parenteral solutions also significantly contributed to the increase in sales. Grifols Partnership, the contract manufacturing service, has allowed our fluid therapy line to access the international market and has increased profitability for the company s intravenous solution plants in Barcelona and Murcia (Spain). The Clinical Nutrition line which includes products manufactured by Grifols for enteral and parenteral diets has increased 15% compared to the previous year. In parenteral nutrition, sales of the product Tauramin, an amino acid solution launched in 2005, grew approximately 300% after its first year on the market. In enteral nutrition, diets and gastronomic pumps grew 23.6% and 26% respectively. Hospital Logistics sales increased 19% mainly as a result of the consolidated technical and commercial structure of the company in Latin America. Several projects for hospital installations have been agreed this year in different parts of Spain. Also, commercial agreements were renewed with the main providers of automation technology for central supply storage warehouses for health centers. Medical Material grew 7%. This line provides instruments and disposable sterile medical products for one time use to the urology, radiology, hemodynamics and anesthesia units. Grifols uses the most advanced technological innovations in order to ensure that its medical materials benefit from the very latest developments. Agreements reached in 2006 2006 was characterized by several agreements reached between Grifols Hospital Division and Siemens, General Electrics and Kardex Remstar. These agreements will be mutually beneficial and will have a positive impact on the turnover of this division in the following years. The following lists the highlights from 2006: Grifols is the leader in the production of parenteral solutions in Spain, with a market share of 34% The distribution agreement with General Electric to market their specialized ultrasound machine for the field of urology in Spain. The distribution agreement with Concentric for the only system approved by the FDA for intracranial thrombus removal. The distribution agreement with Kardex Remstar to integrate the Kardex equipment into Grifols automation systems for general supply storage warehouses in hospital pharmacy units in Latin America. The agreement with Siemens to automate the pharmacy unit at the Hospital Pedro de Logroño (Spain). This hospital will install technological solutions similar to those developed for other hospitals such as Vall d`hebron (Barcelona, Spain) or Gregorio Marañón (Madrid, Spain). Grifols will design and install the main storage unit for the hospital pharmacy, whose technology equipment project is handled by Siemens. Industrial complex in Murcia, Spain, with production facilities for the Hospital and Diagnostic divisions 18 42 GRIFOLS Annual Report 2006

The agreement with USP Hospitales to implement an automated medication dispensing system in the hospital units of the new Dexeus University Institute, which will become one of the most advanced hospitals in Europe. This technology helps reduce pharmacy costs and contributes to patient safety as it carries out an exhaustive monitoring of patient treatment and reduces the incidence of medication errors. New products and services in 2006 A new presentation of Gentamicin 1.2 mg/ml, a perfusion solution in 200 ml of physiological saline contained in a PVC bag. This presentation is useful for hospitals requiring formats to administer aminoglycosides in a single daily dose The launch of Oncofarm: a software program which integrates the complete cycle of chemotherapy and allows electronic prescriptions, validations and treatment preparations by the hospital pharmacist. At the same time, Oncofarm improves the control and follow-up after administration on the part of the nursing unit. Launch of the new Fleboflex polypropylene bag, an inert material which is appropriate for the preparation of intravenous mixtures. Grifols offers the entire range of its parenteral solutions in this new container. 19 Investments in 2006 The investments carried out in 2006 in the Hospital Division were aimed at improving the production plants in Barcelona and Murcia (Spain) and R&D. Some of the improvements in the plants included: The September 2006 launch of a new production line of large volume bags in the Barcelona (Spain) plant. The flexibility of the new plant allows 4 million 2 and 5 liter bags per year to be manufactured in both PVC and polypropylene. The project was designed by Grifols Engineering, a Grifols company which specializes in pharmaceutical engineering. Investments aimed at fulfilling the requirements and processes necessary to obtain the Parametric Release of its parenteral solutions manufactured in Murcia and Barcelona. This recognition was finally possible thanks to a rigorous quality system and the most advanced technology which guarantees the sterility of the product without the need for an additional sterility test. Grifols has become one of the first manufacturers in Europe to obtain this certification, reaffirming the company s leadership in the parenteral solutions market. Hospital Logistics marks a milestone in 2006 Currently Grifols has become the leading Spanish provider of integrated hospital logistics systems. Through the Hospital Division, the company designs and installs new technologies which contribute to controlling the costs of medications and ensuring the safety of patients. 20 19 Facilities for the treatment and purification of water in the industrial complex of the Hospital division in Barcelona, Spain 20 Detail of the manufacturing line for large volume parenteral solutions in bags. Barcelona, Spain GRIFOLS Annual Report 2006 43

2 DIVISIONS - hospital Bioscience More than 100 hospitals in Spain have incorporated logistics systems for medications and hospital supplies. In 2006 an agreement was reached with Siemens and USP Hospitales allowing the division to automate the pharmacy service of the Hospital San Pedro de Logroño (Spain) and to install an automated pharmacy service in the new Dexeus University Institute. Products and description Fluid therapy Glucose and electrolyte solutions Washing/irrigation solutions Intravenous mixtures. Ready to use in different applications Grifill Misterium Indications and use Carbohydrates and electrolytes nutrition, a conductor in medication administration. Washing solution for injuries, operation wounds. Increased safety and efficiency because it eliminates the need for mixing solutions in the hospital pharmacy. System for preparing intravenous mixtures in hospital pharmacies which use sterile filtration. Modular cleanroom system for the hospital Enteral and parenteral nutrition Soyacal Lipid emulsion. Intravenous lipid emulsion at 10% and 20%. Glucose solutions. Concentrates in 15%, 30% and 50%. Lipid emulsion is the main source of energy in terms of calories and fatty acids in parenteral nutrition. Provides carbohydrates to the diet. Dietgrif Liquid Enteral Diet. Oral diet fulfilling all the requirements for balanced nutrition. Presentations: standard, fiber standard, polypeptides, hyperprotein and energetic. For patients with difficulties ingesting food. Administrated with infusion tubes or orally. Tauramin amino acid solution Bags, sensors and pumps. Provides amino acids to the diet Hospital Pharmacy Hospital Logistics Pyxis Kardex Hospital Software Hospital Management Hospital Management Hospital Pharmacy Medical Material Caddi Urology disposables ICU/Cardio disposables Radiology unit Urology unit ICU/cardiology unit 44 GRIFOLS Annual Report 2006

Hospital logistics is undergoing a transformation, evolving to optimize hospital resources and improve the quality of care. The projects developed at Grifols are focused on optimizing efficiency and safety in the distribution of medications and health products in the different hospital units and services, and are actively contributing to the modernization of health systems. 21 ONCOTOOLS, a new concept presented in 2006 Oncotools is a series of tools under the concept of user safety. It is designed for the Pharmacy and Oncology units in the hospital. Some are Grifols products, like Grifill, Misterium and Fleboflex, and others are from companies like Phaseal, Accufuser and Oncofarm. All are related to the preparation and administration of cytostatics, medications used to treat cancer, which, because of the chemical composition, they must be handled in safely, from their preparation to their administration. The Oncofarm software was presented in Malaga at the Congress for the Spanish Society of Hospital Pharmacies in September 2006. This software integrates the entire chemotherapy cycle in hospitals: it allows electronic prescription by the oncologist/hematologist, the validation and preparation by the hospital pharmacist and the monitoring and follow up of the administration of the medication by the nursing unit. This software is currently being used by numerous hospitals, and has been well-received in the sector. 21 Hospital Logistics. Automated horizontal storage system for medication and hospital supply GRIFOLS Annual Report 2006 45

3 Grifols Commitment Grifols Commitment Committed to our people Committed to the Environment Committed to Society 46 GRIFOLS Annual Report 2006

Committed to our people Throughout its 66-year history, Grifols has remained strongly committed to its employees, offering them a healthy, secure position in an environment which promotes their professional development and providing a level of pay which reflects their professional status. Grifols human capital is key both to the implementation of the company s activities and its expansion plan. Because it views its workforce as one of the company s main assets, Grifols believes that the efficient management of human resources is essential if the company is to meet its commitments and satisfy the expectations of its different customer groups. It is vital that the company has a workforce which is balanced, well-motivated and endowed with the skills and know-how they need to perform their duties. Key workforce indicators During 2006, Grifols employed an average of 4,323 people, 21.5% more than the previous year. This increase, which includes the integration of over 400 employees of PlasmaCare after the acquisition of the company in March 2006, is largely a response to the requirements of the growth of the business in the United States. This market accounts for 49% of the company s human capital, while 45% are employed in Spain and the remaining 6% in the rest of the world, distributed across the subsidiary companies in Europe, Latin America and Asia-Pacific. Growth in number of employees 5,000 1. Attracting and retaining talent The aim of people management, as a driving force within the company, is to achieve a competitive advantage within the market. Human talent is one of the differentiating factors between companies and as a result attracting, deploying, retaining and developing such talent is a growing challenge. For this reason, Grifols has maintained a policy of collaborating with universities and business schools in order to recruit young talent to the organization. The head of the corporate Human Resources area is the director of Human Resources, who is also a member of the Executive Committee, the senior managing body of the company. This area sets policies for professional development and training, and implements those policies approved by the executive committees. Its responsibilities are: Selection and training of staff Rewards and profits. Staff administration Employment relationships Training and development Health and safety at work 4,000 3,000 2,000 1,000 0 276 2,116 296 288 275 1,343 1,385 1,483 295 817 1,737 1,833 1,777 1,799 1,937 2002 2003 2004 2005 2006 Spain USA Row GRIFOLS Annual Report 2006 47

3 Grifols Commitment Percentage of staff by geographical region Distribution of staff by sex 6% 45% 46% 54% 49% USA Spain Rest of World Male Female 31% of the employees have worked for the country for over five years, ensuring a stable and highly experienced workforce with a thorough knowledge of the business. In Spain, for example, the workforce is very young, with 52% aged between 18 and 35, a statistic which makes clear the development potential of the company s employees. The number of university graduates is also growing, now accounting for 34% of the workforce in Spain, almost 3% higher than the previous year, and reflecting our employees high levels of education and training. In the United States, the proportion of university graduates is 43% (excluding the staff at the plasma collection centers). Another interesting fact is that 54% of the group s employees are women, compared to 46% who are men. The overall staff turnover rate was 6.4%, excluding the plasma collection centers. Selection, promotion and development The criteria governing selection and internal promotion are based on ensuring equal opportunities for all candidates, regardless of gender, race, religion or personal circumstances. The most important factors when selecting candidates are those relating to skills and the candidate s suitability for the post in question. In 2006, in order to facilitate the process of selecting employees who apply for vacant positions, a new online notification and registration procedure was introduced. This new system is quicker and provides information about all the vacancies and positions available at all the group s establishments across the globe. Fair rewards for efforts Grifols remuneration policy is in line with that of the sector as a whole. Grifols has a variable rewards system which allows it to recognize outstanding work and the commitment and responsibilities of the company s employees. 48 GRIFOLS Annual Report 2006

In addition, Grifols has established a system of employee benefits. the principal aim of which is to improve their quality of life. Among others, employees have access to: Pension Plan with a 2/3 contribution by the company and 1/3 by the employee, with amounts established depending on the professional category. Insurance against invalidity and death as a result of accidents. Dialogue and participation Business Plans: every year the specific training needs of each company are identified, for the different areas and groups, and a Training Plan is drawn up for implementation during the coming year. This contains training activities relating both to specific jobs and to technical or strategic changes. Corporate Training Plans: open to all staff, the contents of this program reflect the areas which the organization wishes to develop. The program covers technical disciplines, general understanding of the business, the improvement of personal skills and refresher courses. Grifols respects its employees freedom of association and their right to be represented by labor unions on the different bodies for the legal representation of employees in Grifols companies and workplaces in accordance with the legislation applicable in the different countries. The staff are protected by a collective agreement or by market regulations. Grifols provides delegates and members of company committees with the information which labor regulations stipulate should be received by employee representatives. Employees are informed of changes to the organizational structure and of other proceedings through internal memoranda sent either by email or by post. 2. Professional development The recruitment and retention of talent is one of the company s major challenges in a highly competitive industry. As a result, Grifols invests in its employees in order to ensure that they are able to develop professionally and realize their potential within the company. Grifols training portfolio consists of four areas: Technical Training, Business Training, Skills Training and Refresher Training. The programs are structured on the basis of their functionality: Induction Training: this aims to help integrate new employees into the organization. On-line Training Platform Thanks to the introduction of a range of IT applications, face-to-face training is now being combined with online training. The company has a catalogue of off-the-shelf online training courses on such subjects as basic office software, languages, health and safety at work, and induction training on its own platform entitled CAMPUS GRIFOLS. This platform, which was introduced in Spain in 2006, has facilitated the access and adaptation of courses and has become one of the main channels through which training is delivered. The company is now extending the courses and developing additional applications in response to the success of the new channel. 22 22 Interior of the Flebogamma DIF facilities in Barcelona GRIFOLS Annual Report 2006 49

3 Grifols Commitment During 2006, a total of 141 students took part in and completed online courses. The completion rate was 90%, and there is also evidence that good use is being made of this learning. Learning via CAMPUS was rated excellent for 85% of courses, figures which confirm the tool s usefulness and its suitability as a solution to some of the company s training needs. Key training indicators Training broken down by group No. of events No. of participants No. of hours Quality 323 2,167 6,690 Purchasing/Logistics 5 6 139 Product Knowledge 52 426 3,971 Finance 6 62 840 Skills/HR Management 72 931 6,800 Languages 7 43 2,469 IT/New technologies 76 556 5,002 Engineering/Maintenance 19 92 997 Management/Marketing 5 7 761 Production/Industrialization 76 688 3,712 Safety and the Environment 319 3,900 4,761 Technical Training 124 363 3,308 Written Procedures 2,130 96,053 16,009* Total Grifols 2006 3,214 105,294 55,459 * Estimated average time of 10 minutes per person per written procedure. 50 GRIFOLS Annual Report 2006

3. health and Safety at Work A safe, healthy workplace is part of Grifols commitment to its employees, and is particularly important in the production areas. This commitment is met by the Health and Safety Department, which is directly answerable to the Human Resources Directorate and ensures optimal conditions in each of the company s centers. One of the principles established by Grifols through its management system is to involve production lines and production managers in all activities implemented in the risk prevention sphere. Commitment to Workplace Health and Safety in 2006 2006 saw the approval of a single Health and Safety Policy for all the group s companies, containing a commitment to meet all the regulatory requirements, both nationally and internationally, together with our additional requirements endorsed by the organization. The policy is applicable to the group s employees and also to external suppliers to ensure that their work is covered by comprehensive health and safety guarantees. Grifols centers in Spain have been awarded OHSAS 18001 certification. This demonstrates that the company is continuously applying the must demanding health and safety standards in the workplace, in line with a very strict set of guidelines which have been developed by the leading certifying bodies. These regulations are significantly stricter than the minimum standards which legislation imposes upon all companies. Certification was issued by Det Norske Veritas (DNV), who audited and certified the compliance with these regulations of the management system for the Prevention of Workplace Risks implemented by Grifols in its work centers. Workplace risk prevention plan The management system includes specific procedures to identify, analyze, assess and prevent workplace risks. Preventive activities are systematically implemented within the framework of a Prevention Plan which has been integrated into the system: Assessment of workplace risks. Monitoring of risks to conduct planning, monitoring and control of preventive activity in each workplace. Investigation of incidents and accidents. Development of procedures and rules in a preventive management manual. Participation and consultation through the established channels, and dialogue with the workers and their representatives. Grifols preventive plan has been drawn up in each country with the cooperation of accredited external bodies specialized in developing third-party risk prevention services, supporting the company in those preventive activities in which they have the greatest level of specialization. 23 23 Partial view of the sterile filling area in the 325 building in Los Angeles, USA in the process of validation GRIFOLS Annual Report 2006 51

3 Grifols Commitment Committed to the Environment Because Grifols is aware of the importance of preserving the Environment both for society as a whole and for the continuation of our activities, the company has established and consolidated an Environmental Management System setting out a series of guidelines on behavior which respects the environment. Since 2005, the company has held ISO Certification 14001 for all the group s companies in Spain. Over the last two years, production activity has grown by over 27%. In contrast, consumption of water, energy and gas and the generation of waste has remained stable, or grown only slightly and at rates well below the levels of growth in production. As part of this trend, Grifols is becoming increasingly eco-efficient, producing more while reducing the environmental impact of each unit produced. This continuous improvement of environmental performance is reflected in environmental targets which are set in accordance with the opportunities for improvement of each company in the group. Energy and Water The consumption of electricity of all production centers in Spain and the United States increased by 5.3% over the last year, amounting to 68 million kwh. The cogeneration plant at the principal production center at Parets supplies 30% of the total consumption at these facilities, and is at full capacity. In order to secure electrical energy requirements during the next 10 years, it is planned to replace this with another plant which will increase capacity to 6.1 Mw. This will start to produce electricity in 2008 and, in addition to electricity, it will also supply steam and hot water thanks to the use of residual heat. This technology will make it possible to reduce CO 2 emissions by 23% in comparison with electrical energy purchased from the power grid and natural gas used to produce steam and hot water in conventional boilers. The consumption of natural gas at the production centers in Spain (excluding that used for cogeneration) rose by 1.4% to 61 million kwh in 2006. 52 GRIFOLS Annual Report 2006

Overall water consumption reached 732,000m 3, 9.8% higher than for the previous year, with 44.5% coming from the company s own supplies and the rest from the water network. This distribution is unchanged from previous years. Residues, waste and emissions In 2006, 8,768 tons of residues were generated, 7.3% more than during the previous year. However, it is important to stress the improvement in the treatment of residues, with 58% of these being recycled or used as a sub-product and the amounts which are disposed of remaining stable. Residue management costs amounted to 971,000 euros, 4.25% lower than the previous year, with 56.4% of this being incurred in Spain and the rest in the USA. All waste from Grifols facilities ends up in the public sewage system after the application of homogenization and neutralization systems to the waste where this is required. Due to the startup of the new facility for the manufacture of Flebogamma DIF, and in order to cope with the increased production levels forecast for the Spanish plant, in July 2006 construction work began on a biological purification plant using modern ultrafiltration membrane technology. The main atmospheric emissions generated by Grifols activities come from the use of natural gas and indirectly from the consumption of electricity. Emissions of CO 2, both direct and indirect, amounted to 40,224 tons, 3.4% higher than in 2005. The majority of the coolant gases used are environmentally friendly, and do not contain chlorate molecules which can contribute to the destruction of the ozone layer. Development of electricity consumption and production, represented by the cost of sales corrected by the Consumer Price Index. Electricity consumption in kwh 90,000,000 70,000,000 50,000,000 30,000,000 10,000,000 0 2004 2005 2006 Cost of sales - CPI (%) Development of water consumption compared to increase in production Water consumption in m3 1,000,000 800,000 600,000 400,000 200,000 0 127% 64,029,790 64,682,218 68,094,340 729,164 2004 2005 2006 140 120 100 80 60 40 20 0 Cost of sales - CPI (%) 127% 666,994 732,417 140 120 100 80 60 40 20 0 Consumption Total paper consumption was 70 tons, a reduction of 2% with respect to the previous year. Over 61% of this consumption relates to recycled paper. GRIFOLS Annual Report 2006 53

3 Grifols Commitment Residues generated in tons Cost of sales - CPI (%) 10,000 6,000 6,983 8,173 8,768 127% 140 100 60 2,000 0 2004 2005 2006 20 0 Destination of residues tn 4,732 5,049 4,000 3,698 3,294 3,441 3,719 2,000 0 2004 2005 2006 Residues disposed of (tn) Residues reused (sub-product + recycling) Investment and expenditure Expenditure on managing the various environmental pathways during 2006 totaled 1.4 million euros, while investment amounted to 382,000 euros. 54 GRIFOLS Annual Report 2006

Committed to Society During over sixty years of existence, the company has undergone a huge transformation. Grifols operates in over 90 countries through its 18 commercial subsidiaries and distribution agreements. The company employs over 4,000 people and, since its foundation in 1940, Grifols has maintained an unwavering commitment to society. Bioethics foundation The Víctor Grifols i Lucas Foundation was created in 1998 and in less than a decade it has succeeded in becoming one of the leading institutions in bioethical issues, arguably because it has always sought to ensure that all of its activities are of the highest quality and reflect current concerns. Its main objective is to provide a platform which promotes dialogue on the bioethical issues affecting today s society and for which there were not previously any outlets or discussion forums. In achieving this it has been aided by people who are widely respected within this field, and who have helped to disseminate knowledge of bioethics to the life sciences as a whole. The Foundation has published twelve monographs on a range of issues, translations of two works which are of seminal importance, and various opinion documents on issues which have given rise to heated debate in Spain, such as therapeutic cloning. The Foundation s prestige has been particularly helped by its Board of Trustees and by its President, Victoria Camps, whose proposals and plans have ensured the value of the Foundation s work. Website All the information about the Foundation s activities and publications, together with its annual prizes and grants for research into bioethics, is available at www.fundaciongrifols.org. The site received 27,100 unique visitors during 2006, and a total of 106,812 user sessions. Information transparency Grifols applies international principles of information transparency, issuing regular information about the development of the business and projects underway to its stakeholders: employees, shareholders and investors, partners, suppliers and the health community. Prioritizing product safety Due to the fact that it is active in the highly sensitive health sector, the company s main task is to ensure that its products meet the highest standards of quality and safety. This is why a portion of the R&D investments are allocated to improving the safety level of its plasma products by developing new production methods. Having met established international standards, Grifols has sought to incorporate new advances, such as the double inactivation and ultra-filtration implemented in the new manufacturing method of immunoglobulin (IVIG) produced at the new plant at Parets del Vallés. These advances also respond to our commitment to offering the best possible product to the medical-health community. Committed to Patients: PatientCare Program Grifols has implemented the PatientCare program in the United States, aimed at the hemophiliac community there. The initiative rises from the need to maintain treatment for people where there is a temporary lack of health insurance or as a result of a lack of financial resources at a given time. The PatientCare program ensures the continuity of treatment with two care modes: Grifols Assurance for Patients (GAP) for insured patients in the case of temporary lack of insurance cover and who have been treated with Grifols products in the last three months Grifols Patient Assistance (GPA) aimed at uninsured patients with a temporary need for care, independently of whether they have been treated with Grifols products before. One of the foundation stones of the company s philosophy with regard to corporate responsibility and communication is that of information transparency. GRIFOLS Annual Report 2006 55

3 Grifols Commitment Both therapies for the treatment of type A hemophilia with Factor VIII and those for treatment of type B with Factor IX are covered by the PatientCare program. All patients need to do in order to benefit from this assistance is to send a form and meet certain financial requirements. In addition, the coordinators of the program help patients to make use of alternative health insurance policies. Committed to the Medical-Health Community: Symposium on the safety of plasma products of human origin Grifols organized a symposium in Chicago which brought together a distinguished panel of hemophilia experts, who drew on their professional backgrounds to examine different aspects of the safety of coagulation factors, an issue which continues to be of interest for those doctors treating this congenital condition. The treatment of hemophilia in those patients who develop inhibitors (an antibody which neutralizes factor VIII and IX protein) continues to be a challenge for specialists. Recent studies are demonstrating that plasma derivatives of human origin are less likely to cause reactions in patients and are the best option for treating hemophiliacs who have become sensitized. Sponsorship of the inauguration of AESKU.KIPP INSTITUTE Grifols sponsored the inauguration of the Aesku.Kipp Institute, a not-for-profit institution whose purpose is to support and promote international research into the causes of autoimmune diseases, and to improve diagnostic methods and therapeutic options. Aesku.Kipp, Institute is based in Wendelsheim in Germany. some of the most basic needs suffered by hospitals in Mauritania, one of the countries through which the rally s route passes. In 2006, the foundation took more than a ton of health supplies to the Mauritanian hospitals of Atar, Chinguetti and Nouakchott. Among other medical material, 70 units of medical instrumentation and devices, medication, basic health and nursing supplies were distributed. At the Children s Surgical Center in Nouakchott, 300 children have been operated on thanks to the material received. Cooperation with the World Federation of Hemophilia Grifols donated 1.4 million dollars worth of product to the World Federation of Hemophilia as a contribution to its Treatment for all program. The program is aimed at patients in countries where access to treatment is restricted, and the organization s aims include improving the quality and range of therapeutic products in developing countries. It is estimated that 400,000 people across the globe suffer from hemophilia, but that only 25% receive adequate treatment. Exhibition at the Official College of Doctors of Barcelona The Official College of Doctors of Barcelona organized the exhibition Leading lights of Catalan medicine in the first half of the 20th Century to render homage to doctors who pioneered medical and surgical developments in Catalonia. The exhibition included material granted by Catalonia s Museum of the History of Medicine and the Grifols Museum, including books, notes, documents, photographic material, instruments and X-rays from the period. Collaboration with the Dakar Solidarity Foundation Grifols products were included in the several tons of health material and medication which the Dakar Solidarity Foundation collected for distribution to various hospitals along the route of the Dakar Rally in order to supply at least 56 GRIFOLS Annual Report 2006

GRIFOLS Annual Report 2006 57

4 the stock the stock Share capital Shareholders Progress of the stock on the market Dividends and yield 58 GRIFOLS Annual Report 2006

Since 1940, Grifols has been present in the field of health, creating innovative products and services based on ethics and responsibility. On May 17, 2006 the company was quoted on the Mercado Continuo and is present in four Spanish stock markets: Madrid, Barcelona, Bilbao and Valencia. At the close of 2006, the share capital rose to 106.5 million euros. The company is represented by 213,064,899 common stock shares at a nominal value of 0.50 euros each. Share capital On December 31, 2006 Grifols share capital was 106.5 millions euros, represented by 213,064,899 common stock shares with a nominal value of 0.50 euros per share. The capital is fully subscribed, paid, and there are no existing preferential shares. All enjoy the same policy and economics rights. At the close of 2005, the company s share capital was represented by 140,598,299 shares at a nominal value of 0.50 euros per share, of which 260,000 were preferential and non-voting. They were recorded on the books as Other non-current payables. The share capital has been modified over the course of the year for different reasons. Seen in the following table: Changes in shareholdings Date Operation Shares issued/amortized Resulting number of shares Number of shares in circulation through December 2005 140,338,299 class A 260,000 class B 5 April Increase in capital charged to reserves 1,726,600 142,064,899 class A 260,000 class B 16 May Decrease in capital/purchase 260,000 clase B 142,064,899 class A and redemption of non-voting shares 16 May Increase in capital (IPO) 71,000,000 213,064,899 17 May All company shares are authorized 213,064,899 to be listed on the stock market Number of shares in circulation as of December 2006 213,064,899 GRIFOLS Annual Report 2006 59

4 the stock Porcentaje de participación Shareholders Given that the company shares are represented through book entries, the exact structure of the ownership cannot be known, except for what the shareholders voluntarily communicate or in compliance with current regulations, or information provided by Iberclear and its participating entities. According to information available to the company, the structure of the major shareholdings in Grifols capital is the following: % share capital 31/12/06 31/12/05 Scranton Enterprises, B.V. 10.78% 16.45% Thorthol Holdings, B.V. 7.00% 10.59% Novosti, S.L. 7.76% 11.79% Deria, S.A. 8.77% 13.32% Morgan Stanley & Co. Inc. 13.25% 20.99% Others 52.44% 26.86% 100.00% 100.00% Number of shareholders The company cannot estimate the total number of shareholders as no General Shareholder s Meeting was held prior to the quoting of the shares on the stock market. Treasury stock As of December 31, 2006 Grifols did not have any shares in its treasury. The increase in share capital carried out in April 2006 through the issue and floating of 1,726,600 shares at a nominal value of 0.5 euros per share, was carried out so that the shares could be distributed for free to the company s employees (with the exception of the members of the board and executives) in accordance with the agreement reached at the General Shareholder s Meeting on May 25, 2001. This distribution of shares was carried out in 2006 according to seniority, once all the shares of the group were issued for trade. On May 17, 2006 Grifols was first listed on the Stock Exchanges of Barcelona, Madrid, Valencia and Bilbao and on the Continuous Market once the Initial Public Offering was carried out and before the shares were authorized for listing. This involved an increase in capital and in the number of shares representing the company. The company also was included in the IBEX-MEDIUM CAP and the general index of the Madrid Stock Market (IGBM). Since May 17, Grifols shares have appreciated significantly. The price at the close of the year was 10.10 euros, a 129% increase compared to the reference price at which the stock was originally quoted, 4.4 euros per share. At the end of 2006, the market value of the group rose to 2.152 billion euros. This rise was well above the IBEX-35 national reference index which grew 25.8% in the same period. 24 In terms of closing prices, the yearly high reached 10.10 euros on December 29 and the yearly low occurred on May 26, at 5 euros. Generally the trading for Grifols stock remained stable with an average of 1.1 million shares a day, with the exception of the first two days after shares were floated when the movements of large blocks of shares distorted the volume. The volume of total cash rose to 1,223 million euros. Since Grifols was quoted on the Stock Market, 184 million shares have moved, representing an annual turnover rate of 8.5 times the total number of shares in the company which is calculated over an average number of shares per year. Dr. V. Grifols ringing the opening bell of the Barcelona Stock Exchange on May 17, 2006 24 60 GRIFOLS Annual Report 2006

Progress of the stock on the market Days Listed Closing Price Accum. % Var Maximum Pric - Date Mínimum Price - Date Average Daily Volume (shares)* May 11 5.45 23.9 5.59 31/05 4.7 23/05 4,700,076 June 22 6.43 46.1 6.86 26/06 5.13 05/06 1,190,898 July 21 6.74 53.2 7.15 25/07 6.13 05/07 852,022 August 23 6.73 52.9 7.24 31/08 6.13 16/08 775,840 September 21 7.99 81.6 8.19 25/09 6.74 01/09 950,099 October 22 8.20 86.4 8.48 23/10 7.66 06/10 657,585 November 22 8.30 88.6 8.62 16/11 7.72 07/11 797,895 December 19 10.10 129.6 10.58 28/12 8.10 05/12 966,927 Total 2006 161 10.10 129,6 10.58 28/12 4.7 23/05 1,142,743 IBEX-35 161 14,146.50 25.77 14,387.60 15/12 10,797.50 13/06 * Excluding stock market applications from the first two days. Share prices in 2006 % 200 190 180 170 160 150 140 130 120 110 100 90 % 200 190 180 170 160 150 140 130 120 110 100 90 Grifols (M) (255.4028) Ibex Medium (I) (143.8328) Ibex 35 (I) (130.1275) 17 24 JUN 9 14 20 27 JUL 10 14 21 AGO 9 14 21 28 SEP 11 18 25 OCT 10 17 24 NOV 9 14 21 DIC 11 18 21 GRIFOLS Annual Report 2006 61

4 the stock Dividends and yield In 2006, in accordance with the results from 2005, Grifols paid out a gross dividend of 0.0553 euros per share to its shareholders, distributing the only monetary payment of 2006 in April. The total cost of the dividends was 7 million euros, or 27.5% of earnings. The yield for Grifols shareholders from May 17, 2006 to the close of the year was 129%, including only the increase in value of the shares. The demand for Grifols shares was more than 10 times the supply Grifols debut on the Stock Market of Barcelona occurred on May 17, 2006, finalizing an intense process in which many employees and departments were involved and which enjoyed the support of all shareholders from the beginning. Grifols on the stock market in 2006: the Main Indicators Year end (euros) 10.10 Interday High (euros) (December) 10.58 Interday Low (euros) (May) 4.70 Yearly volume (number of shares) 208,013,023 Average daily volume (number of shares) 1,292,006 Yearly cash volume (millions of euros) 1,344 Daily shares volume ( in millions of euros) 8.3 Days listed 161 Capitalization (millions of euros) 2,152 Number of shares 213,064,899 Earnings per share (euros) 0.244 62 GRIFOLS Annual Report 2006

Morgan Stanley was the global coordinator of the operation, and other entities such as Banco Sabadell, Banesto and BBVA banks participated in the Spanish segment and JP Morgan and William Blair participated in the international segment. After the process of estimating the demand, the definitive Grifols share price was set at 4.4 euros per share. The overall demand was 10.1 times higher than the number of shares offered, which rose to a total of 71,000,000. In the international segment, 75% of the total stock was offered (53,250,000 shares), and the demand was 12.5 times that offer. In Spain, where the remaining 25% of the total shares was offered (17,750,000 shares), the demand surpassed the offer 2.9 times. Summary of Grifols IPO Global coordinating entity: Morgan Stanley Director and Assurance Entities: Spanish Institutional Segment: Banco Sabadell, Banesto and BBVA International Institutional Segment: JP Morgan and William Blair Opening price: 4.4 per share Number of shares offered in the PSO: 71,000,000 Free float: 33% Spanish Institutional Segment: 25% International Institutional Segment: 75% Green-shoe: Up to 10% of the total offering (Up to 7 million shares) Authorization of stock listing: May 17 Lock- up: 12 months for the executive committee/6 months for the reference members Official Trading: Stock Markets of Madrid, Barcelona, Bilbao and Valencia GRIFOLS Annual Report 2006 63

5 annual accounts annual accounts Auditor s report Consolidated annual accounts management report for the 2006 financial year 64 GRIFOLS, S.A. AND SUBSIDIARIES

Auditor s report Consolidated annual accounts management report for the 2006 financial year CONSOLIDATED ANNUAL ACCOUNTS prepared under eu-endorsed international financial reporting standards and consolidated directors report. 31 december 2006. (Free translation from the original in spanish. in the event of discrepancy, the spanish-language version prevails) CONSOLIDATED annual ANNUAL accounts ACCOUNTS 65 65

5 annual accounts auditors report 66 GRIFOLS, S.A. AND SUBSIDIARIES

AUDITORS REPORT 67

5 annual accounts CONSOLIDATED ANNUAL ACCOUNTS Consolidated Balance Sheets AT 31 december 2006 AND 2005 Assets 31/12/06 31/12/05 Non-current assets Intangible assets (note 6) Goodwill 150.820 117.115 Other assets 60.850 48.718 Total intangible assets 211.670 165.833 Property, plant and equipment (note 7) 184.993 186.621 Investments (note 8) Investments accounted for using the equity method 253 210 Other investments 843 803 Total investments 1.096 1.013 Deferred tax assets (note 29) 41.452 30.529 Financial assets available-for-sale (note 9) 1.169 1.393 Total non-current assets 440.380 385.389 Current assets Inventories (note 10) 235.475 249.545 Trade and other receivables (note 11) 196.998 155.046 Short-term investments (note 12) 6.232 661 Public entities (note 13) 7.706 8.186 Cash and cash equivalents 26.883 22.856 Total current assets 473.294 436.294 Total assets 913.674 821.683 The accompanying notes form an integral part of the consolidated financial statements. 68 GRIFOLS, S.A. AND SUBSIDIARIES

Consolidated Balance Sheets AT 31 december 2006 AND 2005 Equity and liabilities 31/12/06 31/12/05 Equity (note 14) Share capital 106,532 70,169 Reserves 284,040 1,603 Profit for the year 45,394 25,556 Translation differences (68,022) (41,502) Total majority shareholders equity 367,944 55,826 Minority interests (note 15) 408 121 Total equity 368,352 55,947 Liabilities Non-current liabilities Notes & other liabilities (note 16) 0 5,323 Borrowings (note 17) 198,329 184,671 Other payables (note 18) 18,367 281,233 Deferred tax liabilities (note 29) 45,862 42,104 Total non-current liabilities 262,558 513,331 Current liabilities Notes and other liabilities (note 16) 5,375 0 Borrowings (note 19) 132,748 99,514 Derivatives (note 20) 648 3,049 Payables to related parties (note 21) 39 41 Trade payables (note 22) 82,271 74,708 Other payables (note 23) 45,075 51,981 Public entities (note 13) 16,608 23,112 Total current liabilities 282,764 252,405 Total liabilities 545,322 765,736 Total equity and liabilities 913,674 821,683 The accompanying notes form an integral part of the consolidated financial statements. CONSOLIDATED annual accounts 69

5 annual accounts Consolidated income statements for the years ended 31 December 2006 and 2005 Profit and loss 31/12/06 31/12/05 Revenues Net sales (note 24) 648,417 523,727 Other operating income 380 550 Total revenues 648,797 524,277 Operating expenses Change in inventories of finished goods and work in progress and cost of raw materials consumed and services (note 10) (203,172) (153,897) Personnel expenses (note 25) (184,730) (154,887) Depreciation and amortization (notes 6 and 7) (29,357) (26,898) Other operating expenses (note 26) (132,889) (114,071) Total operating expenses (550,148) (449,753) Other income/expense Other income 2,799 1,029 Other expense (958) (1,967) Total other income/expense (note 27) 1,841 (938) Operating profit 100,490 73,586 Financial income/expense Financial income 7,107 3,549 Financial expense (43,100) (37,855) Exchange gains/(losses) (1,064) 1,550 Net financing costs (note 28) (37,057) (32,756) Interest in equity accounted companies (note 8) 76 (10) Profit before income tax 63,509 40,820 Income tax (note 29) (17,824) (15,315) Profit after income tax 45,685 25,505 Minority interest (note 15) 291 (51) Profit attributable to the Group 45,394 25,556 The accompanying notes form an integral part of the consolidated annual accounts. 70 GRIFOLS, S.A. AND SUBSIDIARIES

Consolidated cash flow statements for the years ended 31 December 2006 and 2005 31/12/06 31/12/05 Cash flows from operating activities Net profit 45,394 25,556 Profit / (loss) from equity accounted companies (76) 10 Amortization and depreciation 29,357 26,898 Net provisions for fixed assets - (69) Net provisions for liabilities and charges 101 114 Profit / (loss) on disposal of fixed assets 574 526 Minority interests 291 11 Capital grants taken to income (202) (159) Exchange gains - (10) Deferred tax assets / liabilities (7,676) 109 Financial expense / income 35,993 34,306 Income tax expense 25,500 15,315 Operating profit prior to changes 129,256 102,607 Changes in inventories 7,456 6,090 Changes in receivables (43,616) 39,654 Changes in short-term investments (5,655) (219) Changes in current liabilities 8,159 6,638 (33,656) 52,163 Cash generated from operations 95,600 154,770 Interest paid (15,259) (17,438) Tax paid / recovered (31,265) (17,608) (46,524) (35,046) Net cash from operating activities 49,076 119,724 Cash flows from investing activities Sale of non-current assets 190 323 Business combination (60,458) - Acquisition of non-current assets (35,025) (28,934) Net cash used in investing activities (95,293) (28,611) Cash flows from financing activities Purchase / sale of treasury (279,803) (303,149) Net capital increase 300,796 301,515 Additions / settlement of loans 35,381 (88,640) Dividends paid (7,000) (2,840) Conversion differences 1,038 (638) Net cash used in financing activities 50,412 (93,752) Net increase in cash and cash equivalents 4,195 (2,639) Cash and cash equivalents at beginning of the year 22,856 22,996 Effect of exchange rate fluctuations on cash held (1,056) 2,499 Cash and cash equivalents from business combinations 888 - Cash and cash equivalents at close of year 26,883 22,856 The accompanying notes form an integral part of the consolidated annual accounts. CONSOLIDATED annual accounts 71

5 annual accounts Consolidated statements of changes in equity for the years ended 31 December 2006 and 2005 Accumulated Share Legal earnings capital reserves Other reserves for the year Balance at 1 January 2005 105.841 7.661 183.975 26.402 Changes in equity during 2005 Reserves for foreign currency translation -- -- -- -- Financial assets available for sale Profit/(loss) recognised as equity -- -- -- -- Revaluation of property, plant & equipment Net increase/decrease in assets -- -- -- -- Operations with treasury shares -- (870) 4.512 -- Net income / expense recognised directly in equity 0 (870) 4.512 0 Profit / (loss) for the year -- -- -- 25.556 Total income and expense recognised during the year 0 (870) 4.512 25.556 Distribution of profits for 2004 Reserves -- 760 22,802 (23,562) Dividends -- -- -- (2,840) Capital increase with monetary contribution 11,226 -- 48,774 -- Capital increase with a charge to share premium 7,017 -- (7,017) -- Capital increase expenses (with voting rights) -- -- (2,253) -- Share capital decrease (53,914) -- (256,837) -- Balance at 31 December 2005 70,169 7,551 (6,044) 25,556 Changes in equity during 2006 Reserves for foreign currency translation -- -- -- -- Available for sale financial assets Profit/(loss) recognised as equity -- -- -- -- Other movements -- -- (405) -- Net income/expense recognised directly in equity 0 0 (405) 0 Profit / (loss) for the year -- -- -- 45,394 Total income and expense recognised directly during the year 0 0 (405) 45,394 Distribution of profits for 2005 Reserves -- 1,579 16,977 (18,556) Dividends -- -- -- (7,000) Capital increase with monetary contribution 35,500 -- 276,900 -- Capital increase with a charge to share premium 863 -- (863) -- Capital increase costs -- -- (11,604) -- Balance at 31 December 2006 106,532 9,130 274,962 45,394 The accompanying notes form an integral part of the consolidated annual accounts. 72 GRIFOLS, S.A. AND SUBSIDIARIES

Attributable to equity holders of the Parent Recognised income and expense Equity Financial attributable Treasury Conversion instrument to the Minority Net shares differences reserve parent interests equity (870) (69.915) 198 253.292 110 253.402 -- 27.002 -- 27.002 62 27.064 -- -- (103) (103) -- (103) -- 1.411 -- 1.411 -- 1.411 870 -- -- 4.512 -- 4.512 870 28.413 (103) 32.822 62 32.884 -- -- -- 25.556 (51) 25.505 870 28.413 (103) 58.378 11 58.389 -- -- -- 0 -- 0 -- -- -- (2,840) -- (2,840) -- -- -- 60,000 -- 60,000 -- -- -- 0 -- 0 -- -- -- (2,253) -- (2,253) -- -- -- (310,751) -- (310,751) 0 (41,502) 95 55,826 121 55,947 -- (26,520) -- (26,520) (4) (26,524) -- -- (147) (147) -- (147) -- -- -- (405) -- (405) 0 (26,520) (147) (27,072) (4) (27,076) -- -- -- 45,394 291 45,685 0 (26,520) (147) 18,323 287 18,610 -- -- -- 0 -- 0 -- -- -- (7,000) -- (7,000) -- -- -- 312,400 -- 312,400 -- -- -- 0 -- 0 -- -- -- (11,604) -- (11,604) 0 (68,022) (52) 367,944 408 368,352 CONSOLIDATED annual accounts 73

5 annual accounts (1) Nature, principal activities and subsidiaries (a) Grifols, S.A. Grifols, S.A. (hereinafter the Company) was incorporated with limited liability under Spanish law on 22 June 1987. On 27 June 2005 the Company changed its name from Probitas Pharma, S.A. to Grifols, S.A. Its registered offices are in Barcelona (Spain). The Company s statutory activity consists of providing administrative and management services to its subsidiaries. The principal activity of Grifols, S.A. and subsidiaries (hereinafter the Group) is the procurement, manufacture, preparation and sale of therapeutic products, especially haemoderivatives. Grifols, S.A. is the parent company in a Group formed by the subsidiaries listed in section 1(b) of these notes. The Group acts on an integrated basis and under common management. The Spanish companies main installations are located in Barcelona, Parets del Vallés (Barcelona) and Torres de Cotilla (Murcia). On 17 May 2006 the Company completed the public offering of shares through a capital increase of Euros 312.4 million (including the share premium) equivalent to 71,000,000 ordinary shares of Euros 4.40 par value each (see note 14). (b) Subsidiaries The Group companies are grouped into three areas of activity: industrial, commercial and services. Industrial The following companies are included: Diagnostic Grifols, S.A. with registered offices in Parets del Vallès (Barcelona), Spain, was incorporated into the Group on 24 March 1987, and is engaged in the development and manufacture of diagnostic equipment, instrumentation and reagents. Instituto Grifols, S.A. which has registered offices in Parets del Vallès (Barcelona), Spain, and was incorporated into the Group on 21 September 1987, carries out its activities in the area of bioscience and is engaged in plasma fractioning and the manufacture of haemoderivative pharmaceutical products. Laboratorios Grifols, S.A. with registered offices in Parets del Vallès (Barcelona), Spain, was incorporated into the Group on 18 April 1989 and is engaged in the production of glass- and plastic-packaged parenteral solutions, parenteral and enteral nutrition products and blood extraction equipment and bags. Its production facilities are in Barcelona and Murcia. Biomat, S.A. with registered offices in Parets del Vallès (Barcelona), Spain, was incorporated into the Group on 30 July 1991. It operates in the field of bioscience and basically engages in analysis and certification of the quality of plasma used by Instituto Grifols, S.A. It also provides transfusion centres with plasma virus inactivation services. Grifols Engineering, S.A. with registered offices in Parets del Vallès (Barcelona), Spain, was incorporated into the Group on 14 December 2000 and is engaged in the design and development of the Group s manufacturing installations and part of the equipment and machinery used at these installations. The company also renders engineering services to external companies. Logister, S.A. was incorporated with limited liability under Spanish law on 22 June 1987 and its registered offices are at Polígono Levante, calle Can Guasch, s/n, 08150 Parets del Vallés, Barcelona. Its activity comprises the manufacture, sale and purchase, marketing and distribution of all types of computer products and materials. 99.985% of this company is solely-owned directly by Movaco, S.A. Biomat USA, Inc. with registered offices in 1209, Orange Street, Wilmington, New Castle (Delaware Corporation), was incorporated into the Group on 1 March 2002 and carries out its activities in the area of bioscience, procuring human plasma. This company is wholly owned by Instituto Grifols, S.A. 74 GRIFOLS, S.A. AND SUBSIDIARIES

Grifols Biologicals, Inc., with registered offices in 15 East North Street, Dover, (Delaware), was incorporated into the Group on 15 May 2003 and is exclusively engaged in plasma fractioning and the production of haemoderivatives. Grifols, Inc. directly owns 100% of this company. PlasmaCare, Inc., with registered offices at 1209 Orange Street, County of New Castle, Wilmington, Delaware 19801. This company joined the Group on 3 March 2006 and its activity, developed in the bioscience area, consists of obtaining human plasma. This company is 100% owned by Instituto Grifols, S.A. and is the holding company of a group of 14 companies comprising the sub-consolidated group. On 1 January 2007 this sub-group was restructured, grouping all the companies under PlasmaCare, Inc. Commercial area These companies are mainly responsible for the marketing and distribution of products manufactured by the industrial companies and are all grouped under commercial activities: Movaco, S.A. was incorporated with limited liability under Spanish law on 21 July 1987 and its registered offices are at Polígono Levante, calle Can Guasch, s/n, 08150 Parets del Vallés, Barcelona. Its principal activity is the distribution and sale of reagents, chemical products and other pharmaceutical specialities, and of medical-surgical materials, equipment and instruments for use in laboratories and healthcare centres. Grifols International, S.A., with registered offices in Barcelona, Spain, was incorporated into the Group on 4 June 1997. This company directs and coordinates the marketing, sales and logistics for all the Group s commercial subsidiaries. Products are marketed through subsidiaries operating in different countries. These subsidiaries, their registered offices and date of incorporation into the Group, are listed below. Grifols Portugal Productos Farmacéuticos e Hospitalares, Lda., was incorporated with limited liability under Portuguese law on 10 August 1988. Its registered offices are at Jorge Barradas, 30 c R/C, 1500 Lisbon (Portugal) and it imports, exports and markets pharmaceutical and hospital equipment and products, particularly Grifols products. 99.975% of this company is owned directly by Movaco, S.A. Grifols Chile, S.A. was incorporated under limited liability in Chile on 2 July 1990. Its registered offices are at calle Avda. Americo Vespucio 2242, Comuna de Conchali, Santiago de Chile (Chile). Its authorised activity under its statutes comprises the development of pharmaceutical businesses, which can involve the import, production, marketing and export of related products. Grifols Argentina, S.A. was incorporated with limited liability in Argentina on 1 November 1991 and its registered offices are at Bartolomé Mitre 1371, fifth floor office P (CP 1036), Buenos Aires (Argentina). Its authorised activity under its statutes consists of clinical and biological research, the preparation of reagents and therapeutic and diet products, the manufacture of other pharmaceutical specialities and the marketing thereof. Grifols s.r.o. was incorporated with limited liability under Czech Republic law on 15 December 1992. Its registered offices are at Zitná 2, Prague (Czech Republic) and its authorised activity under its statutes consists of the purchase, sale and distribution of chemical-pharmaceutical products, including human plasma. Grifols México, S.A. de C. V. was incorporated with limited liability under Mexican law on 9 January 1970, with registered offices at calle Eugenio Cuzin no 909, Parque Industrial Belenes Norte, 45150 Zapopan, Jalisco (Mexico). Its authorised activity under its statutes comprises the manufacture and marketing of pharmaceutical products for human and veterinary use. Grifols USA, Inc. was incorporated in the state of Florida (USA) on 19 April 1990. Its registered offices are at 8880 N.W. 18 Terrace, Miami, Florida (USA) and its authorised activity under its statutes is any activity permitted by US legislation. On 1 July 2004 this company merged with the companies Grifols America, Inc, and Grifols Quest, Inc. This company is directly owned by Grifols, Inc. Grifols Italia S.p.A. has its registered offices at Via Carducci 62 d, 56010 Ghezzano, Pisa (Italy) and its authorised activity under its statutes comprises the purchase, sale and distribution of chemical-pharmaceutical products. 66.66% of this company was acquired on 9 June 1997 and the remaining 33.34% on 16 June 2000. Grifols UK Ltd., the registered offices of which are at 72, St. Andrew s Road, Cambridge CB4 1G (United Kingdom), is engaged in the distribution and sale of therapeutic and other pharmaceutical products, especially haemoderivatives. 66.66% of this company was acquired on 9 June 1997 and the remaining 33.34% on 16 June 2000. CONSOLIDATED ANNUAL ACCOUNTS 75

5 annual accounts Grifols Deutschland GmbH was incorporated with limited liability under German law on 21 May 1997, with registered offices at Siemensstrasse 18, D-63225 Langen (Germany). Its authorised activity under its statutes consists of the import, export, distribution and sale of reagents, chemical and pharmaceutical products, especially to laboratories and healthcare centres, and medical and surgical materials, equipment and instruments for laboratory use. Grifols Brasil, Ltda. was incorporated with limited liability in Brazil on 4 May 1998. Its registered offices are at Rua Marechal Hermes 247, Centro Cívico, CEP 80530-230, Curitiba (Brazil). Its authorised activity under its statutes consists of the import and export, preparation, distribution and sale of pharmaceutical and chemical products for laboratory and hospital use, and medical-surgical equipment and instrumentation. Grifols France, S.A.R.L. was incorporated with limited liability under French law on 2 November 1999, with registered offices at Centre d affaires auxiliares system, Bat. 10, Parc du Millenaire 125, Rue Henri Becquerel, 34036, Montpellier (France). Its statutory activity is the marketing of chemical and healthcare products. Alpha Therapeutic Europe, Ltd was incorporated on 5 April 2000 and its registered offices are at 100 New Bridge Street, London. It renders technical, financial and marketing services to other Group companies. Alpha Therapeutic UK, Ltd was incorporated on 8 April 2000 and its registered offices are at 100 New Bridge Street, London. Its activity consists of the distribution and sale of therapeutic products, especially haemoderivatives. The company is wholly owned by Alpha Therapeutic Europe, Ltd. Alpha Therapeutic Italia, S.p.A. was incorporated on 3 July 2000, with registered offices at Piazza Meda 3, 20121 Milan (Italy), and engages in the distribution and sale of therapeutic products, especially haemoderivatives. Grifols Asia Pacific Pte, Ltd (formerly Alpha Therapeutic Asia Pte, Ltd) was incorporated on 10 September 1986, with registered offices at 501 Orchard Road #20-01 Wheelock Place, Singapore, and its activity consists of the distribution and sale of medical and pharmaceutical products. Grifols Malaysia Sdn Bhd is partly owned (30%) by Grifols Asia Pacific Pte, Ltd. The registered offices of this company are in Selangor (Malaysia) and it engages in the distribution and sale of pharmaceutical products. Grifols (Thailand) Ltd was incorporated on 1 September 1995 and its registered offices are at 287 Liberty Square Level 8, Silom Road, Bangkok. Its activity comprises the import, export and distribution of pharmaceutical products. 48% of this company is directly owned by Grifols Asia Pacific Pte., Ltd. Grifols Polska Sp.z.o.o. was incorporated on 12 December 2003, with registered offices at UL. Nowogrodzka, 68, 00-116, Warsaw, Poland, and engages in the manufacture and sale of pharmaceutical, cosmetic and other product Services The following companies are included in this area: Grifols, Inc. was incorporated on 15 May 2003 with registered offices at 15 East North Street, Dover (Delaware, USA). Its principal activity is the holding of investments in companies. The company changed its name from Probitas Pharma Inc. to the current name on 19 September 2005. Grifols Viajes, S.A., with registered offices in Barcelona, Spain, was incorporated into the Group on 31 March 1995 and operates as a retail travel agency exclusively serving Group companies. Squadron Reinsurance Ltd., with registered offices in Dublin, Ireland, was incorporated into the Group on 25 April 2003 and engages in the reinsurance of Group companies insurance policies. 76 GRIFOLS, S.A. AND SUBSIDIARIES

(c) Associated companies Associated companies are as follows: Quest Internacional, Inc, 35% owned by Diagnostic Grifols, S.A., with registered offices in Miami, Florida (USA), engages in the manufacture and marketing of reagents and clinical analysis instruments and is accounted for under the equity method. (d) Business combinations d.1 Adquisición Plasmacare Inc. On 3 March 2006 the Group acquired 100% of Plasmacare Inc. through Instituto Grifols, S.A. PlasmaCare Inc. has registered offices in 1209 Orange Street, County of New Castle, Wilmington, Delaware 19801 and its principal activity, consists of obtaining human plasma. The business acquired has generated a consolidated profit of Euros 4,440 thousand for the Group during the period between the date of acquisition and the year-end close. Had the acquisition taken place at 1 January 2006, the Group s ordinary income and consolidated profit for the year ended 31 December 2006 would have been Euros 655,959 thousand and Euros 46,259 thousand, respectively. Details of the aggregated business combination cost and fair value of the net assets acquired and goodwill (or excess of net assets acquired over the cost of the business combination) are as follows: Cost of combination Cash paid 50,131 Directly attributable costs 364 Total cost of combination 50,495 Fair value of net assets acquired 7,738 Goodwill (excess of net assets acquired over cost of acquisition) 42,757 (note 6) CONSOLIDATED ANNUAL ACCOUNTS 77

5 ANNUAL ACCOUNTS The assets, liabilities and contingent liabilities recognised at the acquisition date are as follows: Fair value Carrying amount Property, plant and equipment 2,106 2,106 FDA licenses (note 6) 6,581 -- Intangible assets 18 18 Financial assets 6 6 Trade and other receivables 1,085 1,085 Inventories 2,649 2,649 Cash and cash equivalents 888 888 Deferred tax assets 1,103 -- Total assets 14,436 6,752 Trade and other payables 4,024 873 Deferred tax liabilities 2,674 238 Total liabilities and contingent liabilities 6,698 1,111 Total net assets 7,738 5,641 Goodwill 42,757 Amount paid in cash 50,495 Cash and cash equivalents of acquire (888) Cash flow paid on acquisition 49,607 d.2 Acquisition of plasma centres. On 1 April 2006 the Group acquired through Biomat Usa, Inc. eight plasma centres in the USA from Biolife Plasma Service L.P., a subsidiary of Baxter Healthcare corporationplasma Service L.P., filial de Baxter Healthcare corporation. 78 GRIFOLS, S.A. AND SUBSIDIARIES

Details of the aggregated business combination cost and fair value of the net assets acquired and goodwill (or excess of net assets acquired over the cost of the business combination) are as follows: Cost of combination Cash paid 1,554 Payment deferred 8,408 Total cost of combination 9,963 Fair value of net assets acquired 4,844 Goodwill (excess of net assets acquired over cost of acquisition) 5,119 The fair value of the net assets acquired amounting to Euros 4,844 thousand includes Euros 3,357 thousand in FDA licences (see note 6). (note 6) (2) Basis of Preparation The accompanying consolidated annual accounts have been prepared on the basis of the accounting records of Grifols, S.A. and the companies forming the Group. The consolidated annual accounts for 2006 have been prepared under EU-endorsed International Financial Reporting Standards (IFRS-EU) to present fairly the consolidated equity and consolidated financial position of Grifols, S.A. and subsidiaries at 31 December 2006, as well as the consolidated results from their operations, their consolidated cash flows and changes in consolidated equity (changes in recognised income and expenses) for the year then ended. The 2005 consolidated annual accounts were the first to be prepared by the Group under IFRS-EU and consequently, IFRS 1 First-time Adoption of International Financial Reporting Standards was applied with effect from 1 January 2004. (a) Bases of preparation of the consolidated annual accounts These consolidated annual accounts have been prepared on the historical cost basis except for: Financial instruments, which are stated at fair value through profit or loss, and available-for-sale financial assets, which have been recorded at fair value. (b) Comparison of information The consolidated annual accounts include, for each caption of the consolidated balance sheet and consolidated income statements, cash flow and changes in equity and the consolidated notes thereto for 2006, comparative data for 2005, which was obtained through consistent application of IFRS-EU, except for the criteria outlined in the following paragraphs. The Group s accounting policies detailed in note 4 have been consistently applied to the years ended 31 December 2006 and 2005. CONSOLIDATED ANNUAL ACCOUNTS 79

5 annual accounts (c) Relevant accounting estimates, assumptions and judgements Preparation of the consolidated annual accounts under IFRS-EU requires that accounting estimates, judgements and assumptions be made in the process of applying the Group s accounting policies. Aspects which involved a greater degree of judgement, complexity or for which the assumptions and estimates are significant for preparation of the consolidated annual accounts, are detailed below: The assumptions used for calculation of the fair value of financial instruments (see note 4(f)). Measurement of assets and goodwill to determine any related impairment losses (see note 4(d)). Useful lives of property, plant and equipment and intangible assets (see notes 4(b) and 4(c)). (d) consolidation The percentages of direct or indirect ownership of subsidiaries by the parent company at 31 December 2005 and 2004, as well as the consolidation method used in each case for preparation of the accompanying consolidated annual accounts, are detailed below: 80 GRIFOLS, S.A. AND SUBSIDIARIES

31/12/06 31/12/05 Percentage interest Percentage interest Direct Indirect Direct Indirect Parent company Grifols, S.A. -- -- -- -- Companies fully consolidated Laboratorios Grifols,S.A. 99.998 0.002 99.998 0.002 Instituto Grifols,S.A. 99.998 0.002 99.998 0.002 Movaco,S.A. 99.999 0.001 99.999 0.001 Grifols Portugal Productos Farmacéuticos e Hospitalares,Lda. 0.015 99.985 0.015 99.985 Diagnostic Grifols,S.A. 99.998 0.002 99.998 0.002 Logister,S.A. -- 100.000 -- 100.000 Grifols Chile,S.A. 99.000 -- 99.000 -- Biomat,S.A. 99.900 0.100 99.900 0.100 Grifols Argentina,S.A. 100.000 -- 100.000 -- Grifols.s.r.o. 100.000 -- 100.000 -- Grifols México.S.A. de C.V. 100.000 -- 100.000 -- Grifols Viajes,S.A. 99.900 0.100 99.900 0.100 Grifols USA, Inc. -- 100.000 -- 100.000 Grifols International,S.A. 99.900 0.100 99.900 0.100 Grifols Italia,S.p.A. 100.000 -- 100.000 -- Grifols UK,Ltd. 100.000 -- 100.000 -- Grifols Deutschland,GmbH 100.000 -- 100.000 -- Grifols Brasil,Ltda. 100.000 -- 100.000 -- Grifols France,S.A.R.L. 99.000 1.000 99.000 1.000 Grifols Engineering,S.A. 99.950 0.050 99.950 0.050 Biomat USA, Inc. -- 100.000 -- 100.000 Squadron Reinsurance Ltd. 100.000 -- 100.000 -- Grifols, Inc. 100.000 -- 100.000 -- Grifols Biologicals, Inc. -- 100.000 -- 100.000 Alpha Therapeutic Europe, Ltd. 100.000 -- 100.000 -- Alpha Therapeutic UK, Ltd. -- 100.000 -- 100.000 Alpha Therapeutic Italia, S.p.A. 100.000 -- 100.000 -- Grifols Asia Pacific Pte., Ltd. 100.000 -- 100.000 -- Grifols Malaysia Sdn Bhd -- 30.000 -- 30.000 Grifols (Thailand) Ltd. -- 48.000 -- 48.000 Grifols Polska Sp.z.o.o. 100.000 -- 100.000 -- Plasmacare, Inc. -- 100.000 -- -- Companies accounted for using the ecquity method Quest International, Inc. -- 35.000 -- 35.000 CONSOLIDATED ANNUAL ACCOUNTS 81

5 annual accounts Subsidiaries in which the Company directly or indirectly owns the majority of equity or voting rights have been fully consolidated. Associates in which the Company owns between 20% and 50% of share capital and has no power to govern the financial or operating policies of these companies have been accounted for under the equity method. All significant balances and transactions between consolidated companies and unrealised gains and losses have been eliminated in the consolidation process. Financial statements of foreign subsidiaries expressed in foreign currencies have been translated to Euros using the closing exchange rate method. According to this method, all assets, rights and obligations are converted to Euros using the prevailing year-end exchange rate. Income statement items are translated to Euros at the average exchange rate for the period. The difference between net equity, including the income for the period, translated at the historical exchange rate, and the net equity position resulting from the translation of assets, rights and liabilities at the closing exchange rate, is included as Translation differences under equity in the accompanying consolidated balance sheet. The accounting principles and criteria used by subsidiaries have been realigned with those applied by the parent company in the preparation of the consolidated annual accounts. The attached consolidated annual accounts include the assets and liabilities of Biomat USA, Inc. at 31 December 2006 and its income and expenses for the period 1 January 2006 and 31 December 2006, together with the comparative figures of Biomat USA, Inc. s balance sheet as at 31 December 2005 and its income and expenses for the period 1 December 2004 to 31 December 2005. Inter-group transactions between Biomat USA, Inc. and other group companies for the month of December 2004 were duly considered for consolidation purposes. (3) distribution of profits The profits of Grifols, S.A. and subsidiaries will be distributed as agreed by respective shareholders at their general meetings. The proposal for the distribution of results corresponding of the parent company for the fiscal year ended 31 December 2006, prepared by the directors and pending approval by the shareholders in their general meetings, is as follows: Legal reserves 1,821 Voluntary reserves 3,581 Dividends 12,805 18,207 The distribution of the profit for the year ended 31 December 2005 is presented in the Consolidated Statement of Changes in Equity. 82 GRIFOLS, S.A. AND SUBSIDIARIES

(4) Accounting and Valuation Principles applied (a) Foreign currency transactions (i) Functional currency and presentation currency The consolidated annual accounts are presented in thousands of Euros, which is the functional and presentation currency of the parent company. (ii) Transactions, balances and cash flows in foreign currency Foreign currency transactions are translated into the functional currency using the exchange rate prevailing at the transaction date. Monetary assets and liabilities expressed in foreign currencies have been translated into Euros at the year-end exchange rate, whereas non-monetary assets and liabilities measured at historical cost in a foreign currency are translated using the exchange rate at the transaction date. Non-monetary assets denominated in foreign currencies measured at fair value are translated to Euros at the foreign currency exchange rate prevailing at the date the value was determined. Cash flows from transactions in foreign currency are translated into Euros in the consolidated cash flow statement at the foreign exchange rate prevailing at the transaction date. The effect of variations in exchange rates on cash and cash equivalents expressed in foreign currencies is presented separately in the cash flow statement as Effect of exchange rate conversion differences on cash and cash equivalents. Differences arising from settlement of transactions in foreign currency and on the translation to Euros of monetary assets and liabilities expressed in foreign currency are taken to the income statement. However, translation differences arising from monetary items forming part of the net investment in businesses abroad, the functional currency of which is that of the country in which their registered offices are located, are recognised as translation differences in equity. Translation gains or losses related with monetary financial assets or liabilities expressed in foreign currency are also recognised in the income statement. (iii) Translation of foreign businesses The translation to thousands of Euros of foreign businesses for which the functional currency is not that of a hyperinflationary economy is based on the following criteria: Assets and liabilities, including goodwill and adjustments to net assets deriving from the acquisition of businesses, including comparative balances, are translated at the year-end exchange rate at each balance sheet date; Income and expenses, including comparative balances, are translated at the exchange rates prevailing at each transaction date; and Translation differences arising from application of the above criteria are recognised as translation differences in equity; In the consolidated cash flow statement, the cash flows, including comparative balances, from subsidiaries and jointly-controlled foreign businesses are translated to Euros applying the exchange rates prevailing at the date of the cash flows. (b) Property, plant and equipmentl (i) Initial recognition Property, plant and equipment is measured at cost or attributed cost, less accumulated depreciation and any impairment losses. The cost of self-constructed assets is determined using the same principles as for an acquired asset, considering the principles established for the cost of production of inventories. The cost of production is capitalised with a credit to the caption Amounts capitalised for self-constructed assets in the consolidated income statement. On 1 January 2004 the Group applied the exemption relating to the fair value or revaluation as attributed cost from IFRS 1 First-time Adoption of International Financial Reporting Standards. CONSOLIDATED ANNUAL ACCOUNTS 83

5 annual accounts (ii) Depreciation Depreciation method Rates Buildings Straight line 1% - 3% Plant and machinery Straight line 8%-10% Other installations, equipment and furniture Straight line 10% - 30% Other property, plant & equipment Straight line 16% - 25% Depreciation of items of property, plant and equipment is calculated using the straight-line basis over their estimated useful lives. The depreciable amount of items of property, plant and equipment is the cost of acquisition or attributed cost less the residual value. Each component of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately. Depreciation of property, plant and equipment is determined based on the criteria outlined below: The Group reassesses residual values, useful lives and depreciation methods at the end of each financial year. Changes to the initially established criteria are recognised as a change in estimates. On the basis of a study by an independent third party, the Group reestimated the useful lives of buildings with effect from 1 January 2005. These are now depreciated over a period of between 33 and 100 years. (iii) Subsequent recognition Subsequent to initial recognition of the asset, only those costs incurred which will generate future economic benefits, which can be reliably measured are capitalised. Maintenance costs are expensed as they are incurred. Replacements of property, plant and equipment which meet the requirements for capitalisation are recognised together with a reduction of the carrying amount of the items replaced. Where the cost of the replaced items has not been depreciated independently and it has not been practical to determine the respective carrying amount, the replacement cost is used as indicative of the cost of items at the time of acquisition or construction. (iv) Impairment The Group evaluates and determines impairment losses and reversals of impairment losses on property, plant and equipment based on the criteria set out in point (d) in this note. (c) Intangible assets (i) Goodwill Goodwill is generated on the business combinations. The Group has applied the exception permitted under IFRS 1 First-time adoption of International Financial Reporting Standards, whereby only those business combinations performed as from 1 January 2004, date of transition to IFRS_EU, have been recognised using the acquisition method. Acquisitions of entities prior to that date have been recognised in accordance with Spanish GAAP, subsequent to considering any corrections and adjustments required at the transition date. Goodwill is not amortised, but tested for impairment annually or more frequently where there have been indications of a potential impairment loss. Goodwill on business combinations is allocated to the cash-generating units (CGUs) or groups of CGUs which are expected to benefit from the synergies of the business combination and the criteria described in note 6 are applied. Following initial recognition, goodwill is measured at cost less accumulated impairment losses. Internally generated goodwill is not recognised as an asset. 84 GRIFOLS, S.A. AND SUBSIDIARIES

(ii) Self-constructed assets Any research and development expenditure incurred during the research phase of projects is recognised when it is incurred. Costs related with development activities are capitalised when: The Group has technical studies justifying the feasibility of the production process; The Group has a commitment to complete production of the asset whereby it is in condition for sale (or internal use); The asset will generate sufficient economic benefits; The Group has the necessary financial and technical resources to complete production of the asset and has developed budget and cost accounting control systems which allow budgeted costs, introduced changes and costs actually assigned to different projects to be monitored. The cost of self-constructed assets is determined following the same principles as established for determining the production cost for inventories. The cost of production is capitalised with a credit to the caption Amounts capitalised for self-constructed assets in the consolidated income statement. Costs incurred in the course of activities which contribute to increasing the value of the different businesses in which the Group as a whole operates are expensed as they are incurred. Replacements or subsequent costs incurred for intangible assets are generally expensed unless they increase the future economic benefits expected from the assets. (iii) Other intangible assets Other intangible assets are stated at cost, less accumulated amortisation and impairment losses. (iv) Useful lives and amortisation rates The Group evaluates whether the useful life of each intangible asset acquired is defined or indefinite. An intangible asset is considered to have an indefinite useful life where there is no foreseeable limit to the period over which it will generate net cash inflows. Intangible assets with indefinite useful lives are not amortised but tested for impairment at least annually. Intangible assets with defined useful lives are amortised on a straight-line basis in accordance with the following criteria: Amortization method Rates Development costs Straight line 3-5 Concessions, patents, licenses, trademarks & similar Straight line 5 Software Straight line 3-6 The amortisable amount of intangible asset items is the cost of acquisition or attributed cost less the residual value. The Group reassesses residual values, useful lives and amortisation methods at the end of each financial year. Changes to initially established criteria are recognised as a change in estimates. (v) Impairment The Group evaluates and determines impairment losses and reversals of impairment losses on intangible assets based on the criteria described in note 6. CONSOLIDATED ANNUAL ACCOUNTS 85

5 annual accounts (d) Impairment of non-financial assets subject to depreciation or amortisation The Group evaluates whether there are indications of possible impairment losses on non-financial assets subject to amortisation or depreciation to verify whether the carrying amount of these assets exceeds the recoverable amount. Irrespective of whether any indication of impairment exists, at least annually the Group verifies the possible impairment of goodwill, intangible assets with indefinite useful lives, and intangible assets not yet available for use. The recoverable amount of assets is the greater of their fair value less selling costs and value in use. An asset s value in use is calculated based on the expected future cash flows deriving from use of the assets, expectations of possible variations in the amount or timing of those future cash flows, the time value of money, the price for bearing the uncertainty inherent in the asset and other factors that market participants would reflect in pricing the future cash flows the entity expects to derive from the asset. Losses arising from comparison of carrying amounts of assets with their recoverable amounts are expensed through the income statement. Recoverable amounts are calculated for individual assets, unless the asset does not generate cash inflows that are largely independent from those corresponding to other assets or groups of assets. In this case, the recoverable amount is determined for the cash-generating unit (CGU) to which the asset belongs. Impairment losses recognised for cash-generating units are initially allocated to reduce, where applicable, the goodwill distributed to the CGU and then to the other assets of the CGU pro rata on the basis of the carrying amount of each of the assets with a limit of the higher of the following values for each asset, fair value less selling costs, value in use and zero. At each close the Group assesses whether there is any indication that an impairment loss recognised in prior periods may no longer exist or may have decreased. Impairment losses on goodwill are not reversible. Impairment losses for other assets are only reversed if there has been a change to the estimates used to calculate the asset s recoverable amount. A reversal of an impairment loss for an asset is recognised in the consolidated income statement. However, the reversal of the loss cannot increase the carrying amount of the asset in excess of the carrying amount which would have been obtained, net of depreciation, had no impairment loss been recorded. The amount of the reversal of the impairment of a CGU is distributed between its assets, except goodwill, pro rata on the basis of the carrying amount of the assets, with the limit per asset of the lower of its recoverable value and the carrying amount which would have been obtained, net of depreciation, had no impairment loss been recorded. (e) Leases (i) Lease accounting The Group has the right to use certain assets through lease contracts. Lease operations are classified as finance leases and operating leases. Unlike operating leases, under finance leases the significant risks and rewards of ownership of the contract asset are transferred. Finance leases At the commencement of the lease term, the Group recognises finance leases as assets and liabilities at amounts equal to the fair value of the leased asset or, if lower, the present value of the minimum lease payments. Initial direct costs are added to the carrying amount of the leased asset. Lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent payments are expensed in the years when they are incurred. 86 GRIFOLS, S.A. AND SUBSIDIARIES

Operating leases Lease payments under an operating lease, net of any incentives received, are recognised as an expense on a straight-line basis unless another systematic basis is representative of the time pattern of the user s benefit. (ii) Investment in leased properties Long-term investments in properties used under leases from third parties are measured based on the same criteria for property, plant and equipment. Investments are amortised over the lower of their useful lives and the term of the lease contract. The lease period is consistent with that established for the classification of the lease. (f) Financial instruments (i) Classification of financial instruments Financial instruments are classified on initial recognition as a financial asset, financial liability or equity instrument, in accordance with the substance of the contractual agreement and the definitions of a financial liability, financial asset and equity instrument as set out in IAS 32 Financial Instruments: Disclosure and Presentation. For the purpose of measurement, financial instruments are also classified as financial assets and liabilities at fair value with changes reflected through the income statement, loans and receivables, held-to-maturity investments, available-for-sale financial assets and financial liabilities. This classification depends on the purpose for which the financial instrument was acquired. Conventional purchases and sales are accounted for at trade date, when the Group undertakes to purchase or sell the asset. a) Financial assets at fair value with changes reflected through profit or loss Financial assets and financial liabilities at fair value, with changes reflected through profit or loss are those which are classified as held for trading or which the Group has, upon initial recognition, designated as such at and from 1 January 2005. A financial asset or liability is classified as held for trading if: it is acquired or incurred mainly for sale or repurchase in the immediate future it forms part of a portfolio of identified financial instruments which are managed jointly and for which there is evidence of a recent pattern of short-term profits, or it is a derivative, except a derivative which has been designated as a hedging instrument and complies with conditions for effectiveness Financial assets and liabilities at fair value with changes through profit or loss are initially recognised at fair value. Transaction costs directly attributable to the purchase or accrual are recorded as an expense in the consolidated income statement. The Group does not reclassify any financial assets or liabilities from or to this category while they are recorded in the consolidated balance sheet. b) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and differ from those classified in other financial asset categories. Loans and receivables are initially recognised at fair value, including transaction costs incurred and are subsequently carried at amortised cost using the effective interest method. c) Available-for-sale financial assets Available-for-sale financial assets are non-derivative financial assets that are either designated specifically to this category or do not comply with requirements for classification in the above categories. CONSOLIDATED ANNUAL ACCOUNTS 87

5 annual accounts Available-for-sale financial assets are initially recognised at fair value, plus any transaction costs directly attributable to the purchase. Subsequent to initial recognition, financial assets classified in this category are measured at fair value, recording the gain or loss under recognised gains or losses in equity. Amounts recorded in equity are taken to the consolidated income statement when the financial assets are disposed of or written off. d) Financial assets and liabilities measured at cost Investments in equity instruments for which the fair value cannot be reliably estimated and linked derivatives which are settled through the delivery of these unquoted equity instruments are measured at cost. However, if at any time the Group is able to reliably measure the financial asset or liability, these are then recognised at fair value, recording the gains or losses based on their classification. For investments in equity instruments measured at cost, the Group recognises income on investments only to the extent that the reserves for accumulated earnings from the investee entity, created following its acquisition, are distributed. Dividends received in excess of these profits are considered as a recovery of the investment and therefore recognised as a decrease in its value. (ii) Offsetting principles A financial asset and a financial liability can only be offset when the Group has a legally enforceable right to set off the recognised amounts or intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. (iii) Fair value Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm s length transaction. In general the Group applies the following hierarchical system to calculate the fair value of assets and liabilities: Firstly, the Group applies the price quotations from the most advantageous active market to which it has immediate access, adjusted as necessary to reflect any difference in credit risk between the instruments usually traded and that being measured. The purchasing price is used for purchased assets or liabilities pending issuance and the selling price is used for assets pending purchase or liabilities issued. If the Group possesses assets and liabilities which between them offset market risks, average market prices are used for the offset risk positions, applying the appropriate price to the net position. If no market prices are available, prices of recent transactions are used, adapted to current conditions. Otherwise, the Group applies generally accepted measurement techniques using market data as far as possible and, to a lesser extent, specific Group data. (iv) Amortised cost The amortised cost of a financial asset or liability is the amount at which the asset or liability was initially measured, less repayments of the principal, plus or minus imputed or gradually accumulated amortisation, based on the effective interest method, from any difference between the initial value and repayment value on maturity, less any reduction due to impairment or defaults. The effective interest rate is the discount rate when applied to the estimated cash inflows and outflows over the expected life of the financial instrument or, where appropriate, over a shorter period, equals to the carrying amount of the financial asset or liability. For financial instruments, for which the related variable for fees, base points, transaction costs, discounts or premiums is revised at market rates prior to expected maturity, the amortisation period is that until the following review of conditions. Cash flows are estimated considering all the contractual conditions of the financial instrument without considering future credit losses. The calculation includes the fees and interest base points paid or received by the contract parties, as well as the transaction costs and any other premium or discount. In those cases where the Group is unable to reliably estimate the cash flows or expected life of a financial instrument, contractual cash flows are used over the full term of the contract. 88 GRIFOLS, S.A. AND SUBSIDIARIES

(v) Impairment and default of financial assets A financial asset or group of financial assets is impaired and has generated an impairment loss if there is objective evidence of impairment as a result of an event or events which have occurred subsequent to initial recognition of the asset, and where the event or events causing the loss have an impact on the estimated future cash flows from the asset or group of financial assets which can be reliably estimated. The Group recognises impairment losses and defaults on loans and other receivables and debt instruments through recognition of a provision for financial assets. (vi) Impairment of financial assets measured at amortised cost The amount of the impairment loss on assets carried at amortised cost is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows, excluding future credit losses not incurred, discounted at the financial asset s original effective interest rate. The amount of the loss is recognised in the income statement and can be reversed in subsequent years if the decrease of the impairment loss can be related objectively to an event occurring after the impairment was recognised. However, the loss can only be reversed up to the limit of the amortised cost which the assets would have had if the impairment loss had not been recorded. (vii) Impairment of financial assets measured at cost The amount of the impairment loss on assets carried at cost is measured as the difference between the carrying amount of the financial asset and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses cannot be reversed and are therefore recorded directly against the value of the asset and not as a corrective provision. (viii) Impairment of available-for-sale financial assets A decline in the fair value of an available-for-sale financial asset which has been recognised directly in equity is recognised in profit or loss when there is objective evidence that the asset is impaired, even though the financial asset has not been derecognised. The amount of the loss recognised in the income statement is the difference between the acquisition cost, net of any repayment or amortisation of the principal, and the current fair value, less any impairment loss on that financial asset previously recognised in the income statement. Impairment losses relating to investments in equity instruments are not reversible and are therefore recorded directly against the value of the asset and not as a corrective provision. The increase in the fair value of debt instruments, which could objectively be related with an event subsequent to recognition of the impairment, is recorded in the income statement up to the amount of the previously recognised impairment loss and the excess, where applicable, is recorded against equity. (ix) Financial liabilities Financial liabilities, including trade and other payables, which are not classified at fair value with fluctuations through profit or loss, are initially recognised at fair value, less, as applicable, directly attributable transaction costs. Subsequent to initial recognition, the liabilities classified in this category are measured at amortised cost using the effective interest method. CONSOLIDATED ANNUAL ACCOUNTS 89

5 annual accounts (g) Parent Company (Treasury) shares Equity instruments acquired by the Group are presented separately as a reduction in equity in the consolidated balance sheet, irrespective of the purpose of their acquisition, and no gains or losses have been recorded as a result of transactions carried out with own equity instruments. The Group also applies the following criteria when accounting for operations with its own equity instruments: Distributions to holders of own equity instruments are charged to equity once any tax effect has been considered; Transaction costs related with own equity instruments, including the issue costs related with a business combination, are recorded as a reduction in equity, once any tax effect has been considered. Dividends relating to equity instruments are recognised as a reduction in equity when approved at the general meeting of shareholders. (h) Inventories Inventories are measured at the lower of cost and net realisable value. Cost comprises all costs of acquisition, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Inventory conversion costs comprise the costs directly related with the units produced and a systematically calculated part of the indirect, variable or fixed costs incurred in the conversion process. Indirect fixed costs are distributed on the basis of the higher of normal production capacity or actual production. The cost of materials and other supplies and merchandise and conversion costs are assigned to the different inventory units based on the FIFO method. The Group uses the same cost formula for all inventories that have the same nature and similar use within the Group. Volume discounts extended by suppliers are recognised as a reduction in the cost of inventories when it is probable that the discount conditions will be met. Discounts for prompt payment are recognised as a reduction in the cost of the inventories acquired. The cost of inventories is subject to adjustments against profit or loss in cases where cost exceeds net realisable value. Net realisable value is considered as the following: Raw materials and other supplies: replacement cost. However, materials are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost; Goods for resale and finished products: estimated sale price, less selling costs; Work in progress: the estimated sale price for corresponding finished products, less the estimated costs for completion of their production and selling costs; When the circumstances that previously caused inventories to be written down below cost no longer exist or when there is clear evidence of an increase in net realisable value because of changed economic circumstances, the amount of the write-down is reversed against the account captions Changes in Inventories of finished products and work in progress and Consumption of materials and other supplies. Write-downs may be reversed to the limit of the lower of cost and the new net realisable value. (i) Cash and cash equivalents Cash and cash equivalents include cash in hand, demand deposits with banks, other short-term highly-liquid investments with original maturities of three months or less, providing these are readily convertible to known amounts of cash. Bank overdrafts which are recognised as financial liabilities on the consolidated balance sheet are included as a component of cash and cash equivalents for the purposes of the statement of cash flows. The Group recognises interest received and paid under cash flow from operating activities, and dividends received and distributed by the Company are classified under financing activities. 90 GRIFOLS, S.A. AND SUBSIDIARIES

(j) Government grants Government grants are recognised in the balance sheet when there is reasonable assurance that they will be received and that the Group will comply with the conditions attached. (i) Capital grants Outright non-returnable capital grants are initially recorded as deferred income in the consolidated balance sheet. Income from capital grants is recognised as other income in the income statement in line with the depreciation of the corresponding assets financed by the grants. (ii) Operating subsidies Operating subsidies are recognised as other income in the consolidated income statement. Operating subsidies received as compensation for expenses or losses already incurred, or for the purpose of providing immediate financial support unrelated with future expenses, are recognised as other income in the consolidated income statement. (iii) Interest rate subsidies Financial liabilities with implicit interest-rate subsidies in the form of below-market rates of interest are initially recognised at fair value. The difference between this value, adjusted where applicable by the costs of issue of the financial liability and the amount received, is recorded as an official grant and classified according to the nature of the grant. (k) Employee benefits (i) Defined contribution plans The Group records contributions to defined contribution plans in line with employees periods of service. Accrued contributions are recorded as an employee benefit expense in the corresponding consolidated income statement. (ii) Termination benefits The Group recognises benefits for termination of employment unrelated to restructuring processes when it is demonstrably committed to terminating the employment of current employees before the normal retirement date. The Group is demonstrably committed to terminating the employment of current employees when a detailed formal plan has been prepared and there is no possibility of withdrawing or changing the decisions made. Except in the case of justifiable cause, companies are liable to pay indemnities to employees whose services are discontinued. Indemnity payments are expensed when the decision to terminate employment is taken. (iii) Short-term employee benefits Short-term benefits accrued for the Group s personnel is recorded in line with the employees period of service. The amount is recorded as an employee benefit expense and as a liability once already settled amounts have been deducted. If the contribution already paid exceeds the contribution due, an asset is recorded to the extent that the prepayment will lead to a reduction in future payments or a cash refund. The Group recognises the expected cost of short-term benefits in the form of accumulated compensated absences, when the employees render service that increases their entitlement to future compensated absences, and in the case of non-accumulating compensated absences, when the leave is taken. The Group recognises the expected cost of profit-sharing and bonus payments when it has a present legal or constructive obligation to make such payments as a result of past events and a reliable estimate of the obligation can be made. CONSOLIDATED ANNUAL ACCOUNTS 91

5 annual accounts (l) Provisions The Group recognises provisions when it has a present obligation (legal or constructive) as a result of a past event; it is more likely than not that an outflow of resources embodying economic benefits will be required to settle the obligation; and a reliable estimate can be made of the amount of the obligation. The amounts recognised as a provision are the best estimate of the outflows required to settle the present obligation at the consolidated balance sheet date, taking into account the risks and uncertainties related with the provision and, where significant, the effect of the time value of money, provided that the outflows required in each period can be reliably measured. The discount rate is a pre-tax rate that reflects current market assessments of the time value of money and adjusted for the specific risks which have not been considered in future cash flow estimates related to the provision. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed against the consolidated income statement caption where the corresponding expense was recorded, and any excess is recognised as other income. (m) Revenue recognition Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services, net of VAT and any other amounts or taxes which are effectively collected on the behalf of third parties. Volume or other types of discounts for prompt payment are recorded as a reduction in revenues if considered probable at the time of revenue recognition. (i) Sale of goods Revenues on the sale of goods are recognised when the following conditions have been satisfied: the Group has transferred the significant risks and rewards of ownership of the goods to the buyer; the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; the amount of revenue and associated costs can be measured reliably; it is probable that the economic benefits associated with the transaction will flow to the Group; and the costs incurred or to be incurred in respect of the transaction can be measured reliably. (ii) Rendering of services When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with the transaction is recognised by reference to the stage of completion of the transaction at the balance sheet date. The outcome of a transaction can be estimated reliably when the amount of revenue, the stage of completion, the costs incurred for the transaction and the costs to complete the transaction can all be measured reliably, and it is probable that the economic benefits associated with the services will be received. When the outcome of the transaction involving the rendering of services cannot be estimated reliably, revenue is recognised only to the extent of the expenses recognised that are recoverable. (iii) Dividends Income from dividends is recognised when the Group s right to receive payment is established. (n) Income tax Income tax on the profit for the year comprises current and deferred tax. Current tax is the amount of income taxes payable or recoverable in respect of the taxable profit or tax loss for the year. Current tax assets or liabilities are measured for amounts payable to or recoverable from tax authorities, using tax rates enacted or substantively enacted at the balance sheet date. 92 GRIFOLS, S.A. AND SUBSIDIARIES

Deferred tax liabilities are the amounts of income taxes payable in future periods in respect of taxable temporary differences, whereas deferred tax assets are the amounts of income taxes recoverable in future periods in respect of deductible temporary differences, the carryforward of unused tax losses, and the carryforward of unused tax credits. Temporary differences are differences between the carrying amount of an asset or liability in the balance sheet and its tax base. Current and deferred tax is recognised as income or an expense and included in profit or loss for the year except to the extent that the tax arises from a transaction or event which is recognised, in the same or a different year, directly in equity, or from a business combination. (i) Taxable temporary differences Taxable temporary differences are recognised in all cases except where: Arising from the initial recognition of goodwill or an asset or liability in a transaction which is not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit; Associated with investments in subsidiaries over which the Group is able to control the timing of the reversal of the temporary difference and it is probable that the timing difference will reverse in the foreseeable future. (ii) Deductible temporary differences Deductible timing differences are recognised provided that: it is probable that taxable profit will be available against which the deductible temporary difference can be utilised, unless the differences arise from the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit; the temporary differences are associated with investments in subsidiaries to the extent that the difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilised; Tax planning opportunities are only considered on evaluation of the recoverability of deferred tax assets and if the Group intends to use these opportunities or it is probable that they will be used. (iii) Measurement Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the years when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date and reflecting the tax consequences that would follow from the manner in which the Group expects to recover or settle the carrying amount of its assets or liabilities. The carrying amounts of deferred tax assets are reviewed by the Group at each balance sheet date to reduce these amounts to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of the deferred tax assets to be utilised. Deferred tax assets which do not comply with the abovementioned conditions are not recognised in the consolidated balance sheet. At year end the Group reassesses unrecognised deferred tax assets. (iv) Classification and Offset The Group only offsets current tax assets and liabilities if it has a legally enforceable right to set off the recognised amounts and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. The Group only offsets tax assets and liabilities where it has a legally enforceable right, where these relate to taxes levied by the same tax authority and on the same entity, and where the tax authorities permits the entity or a group of entities to settle on a net basis, or to realise the asset and settle the liability simultaneously for each of the future years in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled. Deferred tax assets and liabilities are recognised on the consolidated balance sheet under non-current assets or liabilities, irrespective of the date of realisation or settlement. CONSOLIDATED ANNUAL ACCOUNTS 93

5 annual accounts (o) Segment reporting A business segment is an identifiable component of the Group that is engaged in providing products or services which are subject to risks and rewards that are different from those of other segments within the Group. Factors considered by the Group in determining whether products or services are related include the nature of the products and services, the nature of the production processes, and the type or class of customer for the products or services. A geographical segment is an identifiable component of the Group that is engaged in providing products or services within a particular economic environment and that is subject to risks and returns that are different from those of components operating in other economic environments. Factors considered by the Group in identifying geographical segments are essentially the location of its assets and the final destination of sales. (p) Classification of assets and liabilities as current and non-current Assets and liabilities are classified as current and non-current in the consolidated balance sheet based on the following criteria: Assets are classified as current when they are expected to be realised, sold or traded in the Group s ordinary course of business within 12 months of the balance sheet date and when held essentially for trading. Cash and cash equivalents are also classified as current, except where they may not be exchanged or used to settle a liability, at least within the 12 months following the balance sheet date. Liabilities are classified as current when expected to be settled in the Group s ordinary course of business within 12 months of the balance sheet date and when essentially held for trading, or where the Group does not have an unconditional right to defer settlement of the liability for at least 12 months from the balance sheet date. Current liabilities such as trade creditors, personnel expenses and other operating costs are classified as current, even if maturing more than 12 months from the balance sheet date. Financial liabilities which must be settled within the 12 months following the balance sheet date are classified as current, even if the original maturity exceeded 12 months and a refinancing or restructuring agreement for long-term payments exists which has been finalised subsequent to the close and before the consolidated annual accounts have been prepared. (q) Environment The Group takes measures to prevent, reduce or repair the damage caused to the environment by its activities Assets used by the Group to minimise the environmental impact of its activity and protect and improve the environment, including the reduction or elimination of future pollution caused by the Group s operations, are recognised in the consolidated balance sheet based on the criteria for recognitio n, measurement and disclosure detailed in note 33. (r) Share-based payment The Group recognises goods or services received or acquired in a share-based payment transaction when it obtains the goods or as the services are received. If the share-based transaction is equity-settled, equity is increased with a balancing entry under consolidated profit and loss or under assets in the consolidated balance sheet, whilst cash-settled share-based payments are recorded under liabilities. The Group recognises equity-settled share-based payments, including non-monetary contributions to capital increases and the corresponding increase in equity, at the fair value of the goods or services received, unless fair value cannot be estimated reliably, in which case value is determined by reference to the fair value of the equity instruments granted. Equity-settled payments for services rendered by the Group s employees or third parties providing similar services are valued by reference to the fair value of the equity instruments granted. The Group opted to apply IFRS 2 Share-based payment for transactions subscribed between parties subsequent to 7 November 2002, the vesting date of which is subsequent to 1 January 2005. Any other transactions are recognised in accordance with accounting principles prevailing in Spain. 94 GRIFOLS, S.A. AND SUBSIDIARIES

(5) Financial Information by Segment In accordance with IAS 14 Segment Reporting, financial information for business segments is reported in the accompanying Appendix I, which forms an integral part of this note to the consolidated annual accounts. Group companies are classified under three areas: companies in the industrial area, companies in the commercial area and companies in the services area. Within each of these areas, activities are organised based on the nature of the products and services manufactured and marketed. Based on the Group s internal management information system, business segments have been defined as primary and geographical segments as secondary. Assets, liabilities, income and expenses for segments include directly attributable items as well those which can be reasonably and reliably assigned to a segment. Items which are not assigned to segments by the Group are: Balance sheet: cash and cash equivalents, debtors, public entities, deferred tax assets and liabilities, borrowings and creditors. Income statement: general administration expenses, other operating income / expenses, financial income / expense and income tax. (a) Business segments The business segments defined by the Group are as follows: Bioscience: concentrating all activities related with products deriving from human plasma for therapeutic use. Hospital: comprising all non-biological pharmaceutical products and medical supplies manufactured by Group companies earmarked for hospital pharmacy. Products related with this business which the Group does not manufacture but markets as supplementary to its own products are also included. Diagnostic: comprises the marketing of diagnostic testing equipment, reagents and other equipment, manufactured by Group or other companies. Materials: including sales of intermediate biological products and the rendering of manufacturing services to third parties. (b) Geographical segments Geographical segments are grouped into three areas: European Union United States of America Rest of the world The financial information reported for geographical segments is based on sales to third parties in these markets as well as the location of assets CONSOLIDATED ANNUAL ACCOUNTS 95

5 annual accounts (6) Intangible Assets Details of intangible assets and movement during the years ended 31 December 2006 and 2005 are included in Appendix II, which forms an integral part of these notes to the consolidated annual accounts. godwill Details of goodwill and movement during the year ended 31 December 2005 are as follows: Balances at 31/12/04 Translation differences Balances at 31/1/05 Net carrying amount Grifols UK,Ltd. 9,746 281 10,027 Grifols Italia,S.p.A 6,118 0 6,118 Biomat USA, Inc. 87,449 13,521 100,970 103,313 13,802 117,115 Details of goodwill and movement during the year ended 31 December 2006 are as follows: Balances at 31/12/05 Business combinations Translation differences Balances at 31/12/06 Net carrying amount Grifols UK,Ltd. 10.027 -- 206 10.233 Grifols Italia,S.p.A. 6.118 -- -- 6.118 Biomat USA, Inc. 100.970 5.119 (10.643) 95.446 Plasmacare, Inc. -- 42.757 (3.734) 39.023 117.115 47.876 (14.171) 150.820 (note 1 (d)) At 31 December 2006 the Group has recognised licenses and other intangible assets with indefinite useful lives for a carrying amount of Euros 24,955 thousand (Euros 16,850 thousand at 31 December 2005). The PlasmaCare and Baxter business combinations have led to increases of Euros 6,581 thousand (note 1(d)) and Euros 3,357 thousand, respectively, in FDA licences with no expiry date. In 2006, additions of concessions, patents, licences, trademarks and similar include Euros 4,030 thousand for the cost of the licences to use patents owned by Novartis Vaccines and Diagnostics, Inc. These licences are amortised over a period of five years. Impairment testing: Goodwill and indefinite-lived intangible assets have been allocated to the Group s cash-generating units (CGUs) in accordance with their respective business segment. These assets have been allocated to the Bioscience segment. The recoverable amount of a CGU is calculated from its value in use. These calculations are based on cash flow projections from the financial budgets approved by management over a period of five years. Cash flows subsequent to this five-year period are extrapolated using the following estimated growth rates: 96 GRIFOLS, S.A. AND SUBSIDIARIES

The key assumptions used in calculating value in use are as follows: Growth rate: 3% Discount rate: 12% These assumptions have been used in analysing each CGU within the business segment. Management determines projected gross margins based on past performance and forecast market development. Average weighted growth rates are in line with the forecasts included in industry reports. The discount rates used are before tax and reflect the specific risks of the relevant segments. (7) Property, plant and equipment Details of property, plant and equipment and movement in the consolidated balance sheet at 31 December 2006 and 2005 are included in Appendix III, which forms an integral part of these notes to these consolidated annual accounts. Property, plant and development under construction at 31 December 2006 and 2005 mainly comprises investments made to extend the companies installations and to increase their productive capacity. a) Mortgaged property, plant and equipment At 31 December 2006 certain land and buildings have been mortgaged for Euros 460 thousand (Euros 1,619 thousand at 31 December 2005) to secure payment of certain loans (see note 17). b) Official capital grants received The Group received capital grants totalling Euros 35 thousand in 2006 (Euros 45 thousand in 2005) (see note 18). c) Insurance Group policy is to contract sufficient insurance coverage for the risk of damage to property, plant and equipment. At 31 December 2006 the Group has a combined insurance policy for all Group companies, which adequately covers the carrying amount of all the Group s assets. d) Revalued assets The Group opted to apply the exemption regarding fair value and revaluation as deemed cost as permitted by IFRS 1 First time Adoption of IFRS. In accordance with this exemption, the Group s land and buildings were revalued based on independent expert appraisals at 1 January 2004. Appraisals were carried out at market value. The Group has contracted the following types of property, plant and equipment under finance leases at 31 December 2005: Asset Cost Accumulated depreciation Carrying amount Land and buildings 625 (110) 515 Plant and machinery 7,338 (1,268) 6,070 Other installations, equipment and furniture 3,214 (575) 2,639 Other fixed assets 6,493 (3,482) 3,011 17,670 (5,435) 12,235 CONSOLIDATED ANNUAL ACCOUNTS 97

5 annual accounts This company has been accounted for using the equity method, as the Group does not exert significant influence. Asset Cost Accumulated depreciation Carrying amount Land and buildings 625 (117) 508 Plant and machinery 7,158 (1,545) 5,613 Other installations, equipment and furniture 2,227 (577) 1,650 Other fixed assets 5,129 (2,320) 2,809 15,139 (4,559) 10,580 Details of this caption and movement during the year ended 31 December 2005 are as follows: 31/12/06 31/12/06 31/12/05 31/12/05 Current Non current Current Non current Minimum payments 3,704 3,850 4,969 2,971 Interest (266) (261) (191) (72) Current value 3,438 3,589 4,778 2,899 (note 19) (note 17) (note 19) (note 17) 31/12/06 31/12/06 31/12/06 31/12/05 31/12/05 31/12/05 Minimum payments Interest Current value Minimum payments Interest Current value Maturity: Up to 1 year 3,704 266 3,438 4,969 191 4,778 Up to 2 years 2,009 134 1,875 2,386 58 2,328 Up to 3 years 983 72 911 585 14 571 Up to 4 years 275 38 237 0 0 0 Up to 5 years 583 17 566 0 0 0 More than 5 years 0 0 0 0 0 0 Total 7,554 527 7,027 7,940 263 7,677 98 GRIFOLS, S.A. AND SUBSIDIARIES

(8) Investments Details of investments and movement during the year ended 31 December 2005 are as follows: Balances at 01/01/2005 Additions Disposals/Reversals Translation differences Balances at 31/12/05 Equity accounted interest: 333 (10) (110) (3) 210 Other investments: Long-term guarantee deposits 718 105 (67) 43 799 Others investments 4 0 0 0 4 Carrying amount of other investments 722 105 (67) 43 803 1,055 95 (177) 40 1,013 Details of investments and movement during the year ended 31 December 2006 are as follows: Balances at 31/12/05 Additions Disposals/Reversals Business combinations Translation differences Balances at 31/12/06 Equity accounted interest: 210 76 0 0 (33) 253 Other investments: Long-term guarantee deposits 799 192 (120) 6 (38) 839 Others investments 4 0 0 0 0 4 Carrying amount of other investments 803 192 (120) 6 (38) 843 Total investments 1,013 268 (120) 6 (71) 1,096 Investments accounted for using the equity method at 31 December 2006 and 2005 comprise the investment held by Diagnostic Grifols, S.A in the company Quest International, Inc. This company is located in Miami, Florida (USA) and its activity consists of the manufacture and commercialisation of reagents and clinical analysis instruments. Country % interest Assets Liabilities Equity Sales Profit (Loss) 2006 Quest International, Inc EE.UU 35% 1,048 147 901 1,229 208 1,048 147 901 1,229 208 2005 Quest International, Inc EE.UU 35% 825 50 775 788 (29) 825 50 775 788 (29) This company has been accounted for using the equity method, as the Group does not exert significant influence. CONSOLIDATED ANNUAL ACCOUNTS 99

5 annual accounts (9) Financial Assets Available-for-sale Details of this caption and movement during the year ended 31 December 2005 are as follows: Balances at 01/01/05 Disposals/ Reversals Effect of valuation Balances at 31/12/05 Investments (quoted shares) 534 (9) (175) 350 Fixed income securities 1,025 (4) 22 1,043 1,559 (13) (153) 1,393 Details of this caption and movement during the year ended 31 December 2006 are as follows: Balances at 31/12/05 Disposals/ Reversals Effect of valuation Translation differences Balances at 31/12/06 Investments (quoted shares) 350 0 (251) 0 99 Fixed income securities 1,043 0 27 0 1,070 1,393 0 (224) 0 1,169 Investments in quoted shares mainly reflect the Group s investment in Northfield Laboratorios, Inc (USA), which amounts to less than 1% of share capital. Fixed interest securities reflect a term deposit of approximately Euros 1 million held by the Group, which matures on 30 June 2013. (10) Inventories Details of inventories at 31 December are as follows: 31/12/06 31/12/05 Goods for resale 33,850 29,968 Raw materials and supplies 77,214 70,320 Work in progress and semi-finished goods 79,105 106,926 Finished goods 48,235 46,585 238,404 253,799 Less, provision of obsolescence (2,929) (4,254) 235,475 249,545 As mentioned in note 32 (b), at 31 December 2006, the raw materials and supplies caption includes 350 thousand litres of plasma which have been pledged to secure payment of US Dollars 27,500 thousand for the acquisition of Alpha Therapeutic Corporation, which falls due in July 2007. 100 GRIFOLS, S.A. AND SUBSIDIARIES

Change in inventories of finished products, work in progress and materials consumed was as follows: 31/12/06 31/12/05 Goods for resale Net purchases 35,571 36,906 Changes in inventories (4,800) 7,023 30,771 43,929 Raw materials and supplies Net purchases 157,004 100,437 Changes in supplies (9,209) 5,156 147,795 105,593 Other external expenses 2,975 8,566 Supplies of inventories 181,541 158,088 Changes in inventories of finished goods and work in progress 21,631 (4,191) Changes in inventories of finished goods and work in progress and supply of inventories 203,172 153,897 Movement in goods for resale during 2006 and 2005 was as follows: 31/12/06 31/12/05 Opening goods for resale 29,968 34,641 Increase/ (Decrease) in goods for resale 4,800 (7,023) Translation differences (918) 2,350 Closing goods for resale 33,850 29,968 Changes in inventories of raw materials and supplies during 2006 and 2005 were as follows: 31/12/06 31/12/05 Opening raw materials 70,320 74,212 Business combinations 2,649 0 Increase/(decrease) in raw materials 9,209 (5,156) Translation differences (4,964) 1,264 Closing raw materials 77,214 70,320 CONSOLIDATED ANNUAL ACCOUNTS 101

5 annual accounts Changes in inventories of finished products and work in progress during 2006 and 2005 were as follows: 31/12/06 31/12/05 Opening finished goods and work in progress 153,511 141,542 Increase/ (decrease) in finished goods and work in progress (21,631) 4,191 Translation differences (4,540) 7,778 Closing finished goods and work in progress 127,340 153,511 Net sales include sales made in the following foreign currencies: 31/12/06 31/12/05 Currency US Dollars 125,492 87,637 Others currencies 3,668 962 Movement in the provision for obsolescence was as follows: 31/12/06 31/12/05 Opening balance 4,254 4,419 Net provision for the year (1,020) (556) Net applications for the year 0 (61) Translation differences (305) 452 Closing balance 2,929 4,254 (11) Trade and Other Receivables Details of trade and other receivables at 31 December are as follows: 31/12/06 31/12/05 Trade receivables 173,053 133,543 Sundry receivables 15,815 14,167 Advances for fixed assets 95 15 Other advances 2,682 3,249 Prepayments 5,353 4,072 196,998 155,046 102 GRIFOLS, S.A. AND SUBSIDIARIES

Trade receivables net of the provision for bad debts include notes receivable discounted at banks at 31 December 2006, which amount to Euros 1,350 thousand (Euros 1,634 thousand at 31 December 2005) (see note 19). Sundry debtors at 31 December 2006 mainly comprises Euros 11,324 thousand (Euros 11,215 thousand at 31 December 2005) reflecting interest receivable from social security-affiliated bodies. In 2005 the Group also made a Euros 5,000 thousand advance payment on account to the Spanish Haemophilia Federation relating to an agreement which provides an economic contribution to this entity, which is calculated on the basis of sales of a certain product of the Group between 2005 and 2009. At 31 December 2006 Euros 2,189 thousand (Euros 2,188 thousand in 2005) has been accrued and recognised as an expense under other operating expenses. At 31 December 2006 and subsequent to the payment of Euros 1,487 thousand in 2006, the balance of the advance of Euros 2,110 thousand (Euros 2,812 thousand at 31 December 2005) has been included under sundry debtors. In 2006 and 2005 certain Grifols Group companies have sold trade receivables from several public entities to Deutsche Bank, S.A.E. At 31 December 2006 Euros 2,038 thousand (Euros 2,236 thousand in 2005) receivable from Deutsche Bank for balances receivable from public entities sold in December 2006 was recorded under sundry debtors. This balance will be collected by the Group once Deutsche Bank has collected the nominal amount of the receivables sold plus delay interest. Total trade receivable balances receivable sold to Deutsche Bank, S.A.E amount to Euros 16.3 million (Euros 47.5 million in 2005). The Company s directors consider that these contracts transfer all credit collection and financial risks to the purchaser. Consequently, balances of Euros 16,306 thousand have been treated as a sale and derecognised from the balance sheet, (Euros 47,508 thousand in 2005). The financial cost of these operations for the Group totals approximately Euros 245 thousand which has been recognised under finance costs in the 2006 consolidated income statement (Euros 3,776 thousand in 2005) (see note 28). In 2006 the Group has also collected Euros 640 thousand (Euros 2,251 thousand in 2005) from Deutsche Bank reflecting a cash collection bonus for receivables sold in prior years. This income was recorded on the 2006 consolidated income statement as a reduction in the finance expenses (see note 28). Trade receivables include balances in the following foreign currencies: Currency 31/12/06 31/12/05 US Dollars 25,432 16,831 Pounds Sterling 4,225 4,766 Czech Crown 2,505 2,952 Argentine Peso 1,056 877 Chilean Peso 4,429 4,891 Mexican Peso 3,139 2,765 Other currencies 2,660 4,688 CONSOLIDATED ANNUAL ACCOUNTS 103

5 annual accounts Movement in the provision for bad debts was as follows: 31/12/06 31/12/05 Opening balance 3,065 3,299 Net provisions for the year 713 91 Net applications for the year (281) (434) Business combinations 4 0 Translation differences (53) 109 Closing balance 3,448 3,065 (12) Short-term investments Details of short-term investments and movement during the year ended 31 December 2005 are as follows: Balances at 01/01/05 Additions Disposals Translation differences Balances at 31/12/05 Investment portfolio 2,773 0 (2,772) 0 1 Guarantee deposits 221 406 (296) 83 414 Other loans 145 77 0 24 246 3,139 483 (3,068) 107 661 Disposals of investment securities reflect the sale of on option held by the Company to purchase shares in an American company. This sale has generated a net profit of Euros 124 thousand which has been recognised under other financial income (see note 28). Details of short-term investments and movement during the year ended 31 December 2006 are as follows: Balances at 31/12/05 Additions Disposals Translation differences Balances at 31/12/06 Investment portfolio 1 5,645 0 0 5,646 Guarantee deposits 414 587 (502) (57) 442 Other loans 246 3,671 (3,682) (91) 144 Additions to the investment portfolio comprise short-term guarantee deposits extended by a group company. 661 9,903 (4,184) (148) 6,232 104 GRIFOLS, S.A. AND SUBSIDIARIES

(13) Public entities Accounts receivable from public entities are as follows: 31/12/06 31/12/05 Tax authorities: VAT 3,002 2,843 Capital grants 38 511 Social security 126 134 Recoverable income tax: Current year 3,559 3,268 Prior years 151 338 Other public entities 830 1,092 7,706 8,186 Accounts payable to public entities are as follows: 31/12/06 31/12/05 Payable to tax authorities: VAT/ Canary Island tax 5,841 4,221 Withholdings 2,195 1,907 Social security 2,621 2,300 Income tax payable to tax authorities: Current year 4,043 3,098 Prior years 302 266 Deferred payment on account 0 7,067 Other public entities 1,606 4,253 16,608 23,112 At 31 December 2005 the second and third instalment of income tax on account of 2005 of the Parent company was payable. During 2006 the Company has settled the second payment on account and has requested that the third instalment be offset using the income tax debtor balance for 2005. On 29 December 2006 the Company received notification that this request had been accepted. At 31 December 2005 other public entities included the amount provided for as a result of additional taxes assessed through a tax inspection which the Company received on 19 December 2005. At 30 January 2006 the Group accepted these assessments, for an amount similar to that which had been estimated (see note 29). CONSOLIDATED ANNUAL ACCOUNTS 105

5 annual accounts (14) Equity On 17 May 2006 Grifols, S.A. (the Company) completed its flotation on the Spanish stock market which was conducted through the public offering of 71,000,000 ordinary shares of Euros 0.50 par value each and a share premium of Euros 3.90 per share. The total capital increase (including the share premium) amounted to Euros 312.4 million, equivalent to a price of Euros 4.40 per share (see note 1(a)). Since that date, all of the Company s shares have been quoted on the Barcelona, Madrid, Valencia and Bilbao stock exchanges and on the electronic stock market. Details of consolidated equity and movement are shown in the consolidated statement of changes in equity, which forms an integral part of the consolidated annual accounts. (a) Share capital At 31 December 2006 the Company s share capital is represented by 213,064,899 ordinary shares of Euros 0.50 par value each, which are subscribed and fully paid and have the same voting and profit-sharing rights. At 31 December 2005 share capital in Grifols, S.A. comprised 140,598,299 shares of Euros 0.50 par value each, 260,000 of which did not confer voting rights. As mentioned in note 18 (a), these 260,000 shares have been recorded under non-current payables. The Company only has information on the identity of its shareholders when this information is provided voluntarily or to comply with prevailing legislation. Based on the information available to the Company, its most significant shareholders at 31 December 2006 and 2005 are as follows: Percentage interest 31/12/06 31/12/05 Scranton Enterprises, B.V. 10.78% 16.45% Thorthol Holdings, B.V. 7.00% 10.59% Novosti, S.L. 7.76% 11.79% Deria, S.A. 8.77% 13.32% Morgan Stanley & Co. Inc. 13.25% 20.99% Others 52.44% 26.86% 100.00% 100.00% Movements during 2006 are as follows: Share capital increase with a charge to the share premium In a general meeting held on 5 April 2006 the shareholders agreed to increase the Company s capital with a charge to the share premium of Euros 863.3 thousand by issuing and putting into circulation 1,726,600 new ordinary shares of Euros 0.50 par value each. All of the Company s shareholders agreed to freely transfer their free assignation rights to the Company to enable the Company to fulfil the obligation agreed with the Group s employees on 25 May 2001 (see note 32 (c)). Reduction of share capital In a general meeting held on 6 April 2006 the shareholders agreed to reduce share capital by Euros 130,000 by redeeming with a charge to voluntary reserves all of the 260,000 non-voting shares. This agreement was made on the condition that the Company would first acquire these shares without voting rights and that the operation would take place prior to the Company s shares being floated on the stock market. 106 GRIFOLS, S.A. AND SUBSIDIARIES

On 17 May 2006 the board of directors exercised the rights granted to it by the shareholders and acquired all the non-voting shares for an amount of Euros 279.8 million and redeemed these shares with a charge to voluntary reserves, all of which took place prior to the flotation of the Company s shares. These two movements relating to non-voting shares are not recognised under equity but under other non-current payables and other payables (see notes 18 & 23). Increase of share capital through a public offering As authorised by the shareholders in their general meeting on 5 April 2006, on 6 April 2006 the board of directors increased the Company s share capital by Euros 35.5 million by issuing and putting into circulation 71,000,000 ordinary shares of Euros 0.50 par value each. All of the shareholders waived their preferential subscription rights in relation to the shares included in this capital increase to enable these shares to be offered publicly. On 15 May 2006 the price of the shares to be offered publicly was established at Euros 4.40 per share, equivalent to a share premium of Euros 3.90 per share. Consequently, the total capital increase was fixed at Euros 312.4 million, Euros 35.5 million of which corresponds to the nominal value and Euros 276.9 million to the share premium. On 16 May 2006 this capital increase was registered by public deed, which was filed in the Mercantile Registry on the same date. Movements in equity during 2005 were as follows: Share capital increase with a charge to the share premium As authorised by the shareholders at their general meeting on 30 June 2005 the Company agreed to increase share capital by Euros 7,017 thousand, through the issue of 14,033,831 new shares of Euros 0.5 par value each. The shareholders agreed to freely transfer their assignation rights to Morgan Stanley & Co, Inc. Share capital increase with monetary contribution and subsequent share capital reduction At their annual general meeting held on 10 August 2005 the shareholders agreed to: Increase share capital by issuing 260,000 new non-voting shares with a par value of Euros 0.5 each, plus a total share premium of Euros 259,870 thousand. The total share capital increase amounted to Euros 260,000 thousand, which, after deducting expenses incurred in this operation (Euros 15,018 thousand) was recorded under other non-current payables (see note 18 (a)). The Company s shareholders renounced their preferential subscription rights and this share capital increase was fully subscribed and paid by the new shareholder Morgan Stanley & Co., Inc. At their annual general meeting held of 10 August 2005 the shareholders agreed to issue 260,000 non-voting shares of Euros 0.5 par value each, which included a new Class B share without voting rights. The preferential rights of non-voting shares, as stated in the share issue agreements, were also approved by the shareholders at their annual general meeting and are as follows: 1. Non-voting shares are entitled to receive a minimum annual dividend of: 10% during the first period, 12.5% during the second period, 13.125% during the third period, increasing at an annual rate of 0.625% every three months up to a maximum of 17.5% per annum, and 0.5% during the fourth period. The first period is until 10 August 2007. The second three-month period starts the day after the end of the first period and last for three months, whereas the third period begins the day after expiry of the second period and continues until 1 October 2012 unless, (i) the shareholders, at an annual general meeting, agree to redeem the non-voting shares, in which case the period will last until this resolution is adopted, or (ii) the Company is floated on the stock exchange, in which case this period shall continue until part or all of the ordinary shares are admitted for trading in any organised national or international market. The fourth period is of indefinite duration, commencing on the day subsequent to the end of the third period. CONSOLIDATED ANNUAL ACCOUNTS 107

5 annual accounts The minimum dividend will be distributed pro rata temporis, taking into account the date that shares were issued. Accordingly, if non-voting shares were issued on 1 July, the minimum dividend in respect of these shares for the year of issue would be fixed taking into account the days remaining until year end, resulting in a minimum dividend of 5%. 2. The minimum annual dividend is calculated in accordance with deemed cost of non-voting shares (hereinafter Deemed Cost), which is set at Euros 1,000 per share. Once the minimum dividend has been approved, holders of non-voting shares shall be entitled to the same dividend as that corresponding to ordinary shares. Deemed cost of non-voting shares reflects the value of the investment, which is the par value plus share premium paid, or the minimum dividend which substitutes it, in accordance with section 1.3 below. 3. As approved by the shareholders at their annual general meeting and without the need for the majority approval of non-voting shares, the Company may opt to pay the minimum dividend either in cash or by distributing new non-voting shares with the same characteristics as those which are the subject of the present agreement. Accordingly, the number of non-voting shares to be distributed would be calculated by dividing the total dividend corresponding to each holder of non-voting shares by the deemed cost of the non-voting shares. 4. Although the right to receive the minimum dividend depends on distributable profits for the year, the Company will pay dividends (either in cash or by distributing new non-voting shares) from the share premium reserve where possible. 5. If there are distributable profits for the year, the Company is obliged to approve distribution of the minimum dividend indicated in the preceding paragraphs. If there are no distributable profits, or if profits are insufficient to pay the established minimum dividends, the unpaid portion of the dividend must be paid within seven years of the year in which the minimum dividend was not paid, with annual interest of 10%. While the minimum dividend remains unpaid, non-voting shares shall be entitled to vote in equal conditions as ordinary shares, and retaining, where applicable, their economic benefits. Minimum dividends accrued from prior years shall be settled prior to payment of the minimum dividend of the current year. 6. In the event of the Company s dissolution and liquidation, holders of non-voting shares shall have the right to repayment of the shares deemed cost plus, where applicable, the unpaid dividends accrued at the date of liquidation, prior to the distribution of any amounts to the other shareholders. Nevertheless, this repayment must be equivalent to deemed cost plus the additional amount required for non-voting shareholders to receive a return of at least 10% of deemed cost per share annually, from the date of issue to the date of repayment. 7. In exceptional circumstances, the holders of non-voting shares shall have the right to vote on matters defined as Extraordinary Agreements in Article 12 bis as permitted by Company by-laws. 8. Non-voting shares are freely transferable. 9. Non-voting shares shall benefit from all other rights as established by articles 91 and 92 of the Spanish Companies Act. 10. The holders of non-voting shares have the right to convert these into ordinary shares at a ratio of one ordinary share for each non-voting share, in the following circumstances: i. Merger of the Company, except in the event of absorption as described in Article 250 of the Spanish Companies Act. ii. Change of control of the Company. Change of control is defined as where one shareholder or group of shareholders acting jointly acquire, directly or indirectly, over 24% of the Company s share capital for the first time. iii. If shareholders do not approve the redemption of the non-voting shares at an annual general meeting prior to 1 October 2012. iv. If 30 days have elapsed subsequent to all or some ordinary shares having been admitted to trade in any organised national or international market, and the shareholders, at their annual general meeting have not agreed to redeem non-voting shares. 11. Conversion rights must be exercised in writing within two months of the reference date. Increase share capital by issuing 22,451,474 new voting shares with a par value of Euros 0.5 each, plus a share premium of Euros 48,775 thousand. The total share capital increase amounts to Euros 60,000 thousand The issue expenes incurred (Euros 2,252 thousand) were charged to distributable reserves (see consolidated statement of changes in equity). The Company s shareholders renounced their preferential subscription rights and the share capital increase was fully subscribed and paid by the new shareholder Morgan Stanley & Co., Inc. Reduce share capital by redeeming 107,828,446 treasury shares (see section (d)) of Euros 0.5 par value each. The total share capital reduction, including a par value of Euros 53,914 thousand, amounted to Euros 310,752 thousand of which Euros 231,082 thousand was charged against share premium and Euros 25,756 thousand charged against voluntary reserves. 108 GRIFOLS, S.A. AND SUBSIDIARIES

(b) Other reserves During 2006 other reserves has been reduced by Euros 115,665 thousand due to the share issue costs related to the public share offering. This caption has also been decreased by Euros 405 thousand, Euros 642 thousand of which is due to the effect of the change in tax rates on deferred tax assets and liabilities (see note 29). At 31 December 2005 other reserves included a share premium of Euros 115,665 thousand which was partly reduced by the issue of non-voting shares included under other non-current payables (see notes 14 (a) and 18 (a)). This caption also included the Group s other non-legal reserves. The availability of other reserves is subject to legislation applicable to each of the Group s companies. (c) Legal reserve Companies in Spain are obliged to transfer 10% of each year s profits to a legal reserve until this reserve reaches an amount equal to 20% of share capital. This reserve is not distributable to shareholders and may only be used to offset losses if no other reserves are available. Under certain conditions it may be used to increase share capital provided that the balance left on the reserve is at least equal to 10% of the nominal value of the total share capital after the increase. Distribution of the legal reserves of Spanish companies is subject to the same restrictions as those of the Parent company. The Company had set aside in prior years the corresponding reserve for treasury shares (see section (d)). This reserve was released in 2005 when these shares were disposed of. (d) Treasury shares At 31 December 2006 the Company has performed the following transactions with treasury shares: On 5 April 2006 the Company increased capital by Euros 863,300 with a charge to the share premium by issuing and putting into circulation 1,726,600 shares of Euros 0.50 par value each. These shares were distributed to the Company after the Company s shareholders waived their preferential subscription rights. These shares were distributed to Group employees and their distribution was dependant upon meeting certain conditions and previously established periods. On 17 May 2006 the Company issued the group companies employees with 1,726,600 treasury shares of Euros 0.50 par value each, based on previously established terms and conditions (see notes 32(c)). During the year ended 31 December 2005 the Company carried out the following operations with treasury shares: On 25 July 2005 the Company acquired 1,048,509 treasury shares at Euros 3 each, this operation amounting to Euros 3,146 thousand in total. On 10 August 2005 the Company acquired 111,039,045 treasury shares for a total amount of Euros 320,000 thousand. On 10 August 2005 the Company redeemed and cancelled 107,828,446 treasury shares for a total amount of Euros 310,751 thousand (see (a)). On 30 November 2005 the Company sold all its treasury shares for a total amount of Euros 19,997 thousand. This operation resulted in net movement in distributable reserves of Euros 4,512 thousand. CONSOLIDATED ANNUAL ACCOUNTS 109

5 annual accounts (15) Minority interests Details of minority interests and movement during the year ended 31 December 2005 are as follows: Balances at 31/12/04 Additions Translation differences Balances at 31/12/05 Grifols (Thailand) Pte Ltd 110 (68) 6 48 Grifols Malaysia Sdn Bhd 0 17 56 73 110 (51) 62 121 Details of minority interests and movement during the year ended 31 December 2006 are as follows: Balances at 31/12/05 Additions Translation differences Balances at 31/12/06 Grifols (Thailand) Pte Ltd 48 204 1 253 Grifols Malaysia Sdn Bhd 73 87 (5) 155 121 291 (4) 408 (16) Notes and Other Remunerated Liabilities In 2005 a Group company issued bearer promissory notes of Euros 3,000 thousand par value each for a total amount of Euros 5,748 thousand being the maximum amount authorised by the Spanish Securities and Exchange Commission on 15 April 2005, which were earmarked for Group employees. At 31 December 2006 promissory notes of Euros 5,463 thousand par value have been subscribed (Euros 5,682 thousand at 31 December 2005) which were redeemed during the year). At 31 December 2006 unaccrued interest payable on these promissory notes in 2005 amounts to Euros 88 thousand which is shown deducted from the previous amount (Euros 359 thousand at 31 December 2005). 110 GRIFOLS, S.A. AND SUBSIDIARIES

(17) Non-current Borrowings Details of non-current borrowings at 31 December 2005 are as follows: Taken to current 31/12/05 Extended by Date Maturity Amount Amount In prior In current Non awarded date awarded drawn down years year current Syndicated loan 21/06/05 21/06/11 222,532 190,537 0 15,470 175,067 Caja Ahorros Mediterraneo 12/03/04 12/03/06 600 600 0 600 0 Institut Catalá de Finances 01/11/02 01/11/16 1,024 1,024 220 73 732 Bancaja (note 7) 01/05/00 01/05/12 902 902 366 76 460 EBN (note 7) 01/07/03 03/07/15 1,300 1,300 217 96 987 Banc Sabadell 24/05/05 31/12/07 504 504 0 0 504 Institut Catalá de Finances 27/01/05 28/02/10 6,221 6,209 937 1,249 4,022 233,083 201,076 1,740 17,564 181,772 Non current finance lease liabilities (note 7) 2,899 Amounts are shown net of loan arrangement expenses amounting to Euros 2,002 thousand. 233,083 201,076 1,740 17,564 184,671 On 21 June 2005 the Company signed a syndicated loan with BBVA as agent bank for Euros 225,000 thousand. This syndicated loan, which matures on 21 June 2011, is subject to compliance with certain financial ratio covenants. In accordance with the agreed-upon conditions, the level of compliance with financial ratios and levels is determined at year end. The Company is required to provide financial information to the lending banks within the six-month period subsequent to 31 December of each year of duration of the contract. At 31 December 2005 the Company has complied with the ratios established in this contract. CONSOLIDATED ANNUAL ACCOUNTS 111

5 annual accounts Details of non-current borrowings at 31 December 2006 are as follows: Taken to current 31/12/06 Extended by Date Maturity Amount Amount In prior In current Non awarded date awarded drawn down years year current Sydicoted loan 21/06/05 21/06/11 223,632 223,632 15,469 65,469 142,694 Institut Catalá de Finances 01/11/02 01/11/16 1,024 1,024 293 73 658 Bancaja (note 7) 01/05/00 01/05/12 902 902 442 77 383 EBN 01/07/03 01/10/06 1,300 1,300 313 987 0 Banc Sabadell 24/05/05 31/12/07 504 504 0 0 504 Institut Catalá de Finances 27/01/05 28/02/10 6,221 6,221 2,186 1,249 2,786 Instituto de crédito Oficial 01/06/06 26/05/16 29,844 29,844 0 0 29,844 Banc Sabadell 27/07/06 30/06/08 202 202 0 0 202 Banc Sabadell 27/07/06 30/06/08 147 147 0 0 147 BBVA 27/02/06 24/02/09 14,978 14,978 0 6,000 8,978 Comerica Bank 17/03/06 17/03/08 8,544 8,544 0 0 8,544 287,298 287,298 18,703 73,855 194,740 Non current finance lease liabilities (note 7) 3,589 Amounts are shown net of loan arrangement expenses amounting to Euros 1,609 thousand. 287,298 287,298 18,703 73,855 198,329 The majority of these loans bear interest at variable rates (of Euribor + between 0.7% and 1.5%). On 21 November 2006 the Company renegotiated the syndicated loan contract with the relevant financial institutions so that the financial ratios established in the loan contract are calculated using the figures presented under IFRS-EU. At 31 December 2006 the Company fulfils the ratios established in the syndicated loan contract. 112 GRIFOLS, S.A. AND SUBSIDIARIES

Details of maturity of non-current borrowings at 31 December 2006 and 2005 are as follows: 31/12/06 31/12/05 Maturity a: Two years 47,166 32,356 Three years 36,883 31,946 Four years 33,058 32,040 Five years 32,949 31,210 More than five years 44,684 54,220 Details of the maturities of non-current finance lease liabilities are presented in note 7. 194,740 181,772 (18) Other Non-current Payables Details are as follows: 31/12/06 31/12/05 Shareholders with no voting rights (a) 0 247,668 Mitsubishi Pharma Corporation 0 21,640 Biolife Plasma Services LP 1,316 0 Novartis 2,270 0 Privileged loans from Ministry of Science & Technology 9,060 8,701 Other debts (b) 12,646 30,341 Provisions for pensions & similar 685 626 Other provisions 217 156 Provisions for liabilities & charges (c) 902 782 Capital grants 830 908 Other grants 1,663 0 Capital grants for privileged loans 2,326 1,534 Deferred income (d) 4,819 2,442 Other non-current payables 18,367 281,233 CONSOLIDATED ANNUAL ACCOUNTS 113

5 annual ACCOUNTS (a) Non-voting share capital increase As described in note 14, on 10 August 2005 the Company increased share capital by issuing 260,000 new non-voting shares of Euros 0.5 par value each plus a share premium of Euros 259,870 thousand. The share capital increase amounted to Euros 260,000 thousand in total. This operation also incurred net share capital increase expenses of Euros 15,018 thousand, which were deducted from the prior amount at 31 December 2005. During 2006 Euros 12,332 thousand has been accrued for the redemption of share issue costs (Euros 2,686 thousand during 2005) (note 28). In relation to the floating of the Company on the stock market, on 17 May 2006 these non-voting shares were purchased and subsequently redeemed by the Company (see note 14(a)). Details of movement at 31 December 2005 are as follows: Balace at Capital Dividend accrued Share issue Financial expenses Balance at 31/12/04 increase during year costs accrued during year 31/12/05 Other non-current payables 0 260,000 -- (15,018) 2,686 247,668 Other current payables (note 23) 0 -- 10,258 -- -- 10,258 0 260,000 10,258 (15,018) 2,686 257,926 (note 14) (note 28) (note 14) (note 28) Details of movement at 31 December 2006 are as follows: Balance at Dividend accrued Financial expenses Purchase of Balance at 31/12/05 during year accrued during year non-voting shares 31/12/06 Other non-current payables 247,668 -- 12,332 (260,000) 0 Other current payables (note 23) 10,258 9,545 -- (19,803) 0 (b) Other debts 257,926 9,545 12,332 (279,803) 0 (note 28) (note 28) (note 14) At 31 December 2005 Other debts include Euros 23,311 thousand reflecting the Euros equivalent of a long-term debt in US Dollars payable to Mitsubishi Pharma Corporation for the acquisition of certain assets from Alpha Therapeutic Corporation, (notes 23 and 32 (b)). Deferred financial expenses resulting from the transaction amounted to Euros 1,671 thousand at 31 December 2005, which were deducted from the aforesaid amounts. During 2006 this debt has been reclassified to other payables (see note 23). At 31 December 2006 other debts includes Euros 1,343 thousand comprising the Euros equivalent of the debt in US Dollars payable in the long term to Biolife Plasma Service L.P., subsidiary of Baxter Healthcare Corporation, for the eight plasma centres acquired in the USA (note 1 (d.2)). Deferred financial expenses resulting from this transaction amount to Euros 27 thousand and have been deducted from the aforementioned amount. Other payables includes the current portion of this debt which amounts to Euros 2,410 thousand (see note 23). At 31 December 2006 this caption also includes Euros 2,620 thousand comprising the long-term debt with Novartis Vaccines and Diagnostics, for the licence contract signed by a group company during 2006. Deferred financial expenses resulting from this transaction amount to Euros 350 thousand and have been deducted from the aforementioned amount. Other payables includes the current portion of this debt which amounts to Euros 852 thousand (see note 23). 114 GRIFOLS, S.A. AND SUBSIDIARIEs

Details of interest-free privileged loans granted by the Spanish Ministry of Science and Technology, to various different Group companies are as follows: 31/12/06 31/12/06 31/12/06 31/12/05 31/12/05 31/12/05 Company Date awarded Amount awarded Non-current Current Non-current Current Instituto Grifols S.A 22/2/02 749 196 106 286 107 Instituto Grifols S.A 31/1/01 637 231 86 299 86 Instituto Grifols S.A 13/2/02 691 329 94 400 94 Instituto Grifols S.A 17/1/03 1,200 718 165 842 165 Instituto Grifols S.A 13/11/03 2,000 1,422 279 1,623 -- Instituto Grifols S.A 17/1/05 2,680 2,210 -- 2,116 -- Instituto Grifols S.A 29/12/05 2,100 1,603 -- 2,100 -- Instituto Grifols S.A 29/12/06 1,700 1,232 -- -- -- Laboratorios Grifols, S.A 20/3/01 219 79 30 103 30 Laboratorios Grifols, S.A 29/1/02 210 100 29 122 29 Laboratorios Grifols, S.A 15/1/03 220 132 30 154 30 Laboratorios Grifols, S.A 26/9/03 300 216 42 247 -- Laboratorios Grifols, S.A 22/10/04 200 165 -- 158 -- Laboratorios Grifols, S.A 20/12/05 180 137 -- 180 -- Laboratorios Grifols, S.A 29/12/06 400 290 -- -- -- Diagnostic Grifols, S.A 23/5/02 507 -- 77 71 149 13,993 9,060 938 8,701 690 In application of IAS 32 and 39 at 1 January 2005 Euros 1,210 thousand has been recognised as implicit interest on this grant. In 2006 the implicit interest expense taken to profit and loss amounted to Euros 419 thousand (Euros 349 thousand in 2005) (see note 28). Details of the maturity of other debts are as follows: Maturity a: 31/12/06 31/12/05 Two years 3,053 22,530 Three years 2,219 1,147 Four years 2,360 1,093 Five years 1,377 956 More than five years 3,637 4,615 12,646 30,341 CONSOLIDATED ANNUAL ACCOUNTS 115

5 annual ACCOUNTS (c) Provisions for Liabilities and Charges At 31 December 2006 and 2005 this balance mainly comprises provision made by a foreign subsidiary in respect of labour commitments with certain employees. (d) deferred income Details of capital grants are as follows: 31/12/06 31/12/05 Total amount of the grant: 1992 182 182 1993 43 43 1994 105 105 1995 627 627 1996 54 54 1997 426 426 1998 65 65 1999 42 42 2000 179 179 2001 214 214 2002 626 626 2005 37 45 Current year 35 0 2,635 2,608 Less, recognised income: In prior years During the year (1,700) (1,541) (105) (159) (1,805) (1,700) Carrying amount of capital grant 830 908 At 31 December 2006 the privileged loan subsidies caption includes Euros 2,326 thousand of implicit interest on loans extended by the Spanish Ministry of Science and Culture as these are interest free (Euros 1,534 thousand at 31 December 2005). Movement during 2005 is as follows: Balances at 01/01/05 Additions Transfer to profit (loss) Balances at 31/12/05 Capital grants through privileged loans 1,232 651 (349) 1,534 (note 27) 116 GRIFOLS, S.A. AND SUBSIDIARIEs

Movement during 2006 is as follows: Balances at 31/12/05 Additions Transfer to profit (loss) Balances at 31/12/06 Capital grants through privileged loans 1,534 1,211 (419) 2,326 (note 27) (19) Current Borrowings Details of current borrowings are as follows: Interest rate (*) min - max Drawn down 31/12/06 31/12/05 Limit 31/12/06 31/12/05 Loans in: US Dollars 8.25% - 7.35% 8,360 8,594 30,372 9,885 Euros 2.33% - 7.75% 113,792 73,626 258,389 217,191 Other currencies TIIE +1,75-19% 5,132 9,090 9,750 11,098 127,284 91,310 298,511 238,174 Discounted trade notes (note 11) 3.07% - 5.275% 1,350 1,634 Current interest on borrowings 1,387 2,516 Finance lease payables (note 7) 3,704 4,969 133,725 100,429 298,511 238,174 Less, current portion of deferred financial expenses for leasing (note 7) (266) (191) Less, current portion of loan arrangement expenses (711) (724) (*) Loans accrue variable interest rates. 132,748 99,514 CONSOLIDATED ANNUAL ACCOUNTS 117

5 annual ACCOUNTS (20) Derivatives a) Exchange rate hedges The Group on occasions uses hedges to cover its foreign currency operations and cash flows. The instruments used mainly comprise term exchange rate insurance for the currencies of the main markets in which the Group operates. Exchange rate risks assumed by the Group mainly related to the following operations: Foreign currency debt contracted by Group companies. Results from activities carried out in countries outside the Euro zone which are referenced to the evolution of the respective currencies.. Investments made to acquire shareholdings in foreign companies. At 31 December 2006 the Group has an exchange rate hedging instrument contracted, the value of which is negative by Euros 37 thousand. At 31 December 2005 the Group had no exchange rate hedging instruments contracted. The steady increase in foreign currency cash inflows has resulted in an increasingly higher coverage. b) Interest rate hedges: The Group is exposed to variations in interest rates as practically all of its debt with financial entities accrues interest at variable rates. Consequently, at 31 December 2005 the Group had contracted financial interest rate swaps of Euros 10,000 thousand and Euros 50,000 thousand par value, which mature on 26 April 2006 and 26 July 2011, respectively. The fair value of these contracts at 31 December 2005 was negative in amounts of approximately Euros 39 thousand and Euros 3,010 thousand, respectively. The fair value of the contract in force at 31 December 2006 is negative by Euros 611 thousand. Movement in this caption at 31 December 2005 was as follows: Balances at 01/01/05 Changes in fair value Balances at 31/12/05 Financial derivatives: Interest rate swap 2,041 1,008 3,049 Fair value 2,041 1,008 3,049 (note 28) (note 32(e)) Movement in this caption at 31 December 2006 has been as follows: Balances at 31/12/05 Additions/ Disposals Changes in fair value Balances at 31/12/06 Financial derivatives: Interest rate swap 3,049 (644) (1,794) 611 Exchange rate hedge 0 (277) 314 37 Fair value 3,049 (921) (1,480) 648 (note 28) (note 32(e)) 118 GRIFOLS, S.A. AND SUBSIDIARIEs

(21) Balances and Transactions with Related Parties Details are as follows: Payables to: 31/12/06 31/12/05 Associates 39 41 Key management personnel 0 0 Members of the Board of Directors 0 0 At 31 December 2006 and 2005 there were no balances with members of the board of directors or with key management personnel. 39 41 a) Group transactions with related parties Group transactions with related parties during 2006 were as follows: Associates Key management personnel Board of Directors of the company Net purchases (131) -- -- Net sales -- -- -- Other services (8,373) -- (1,905) (8,504) 0 (1,905) Interest -- -- -- Dividends & other distributed profits -- 38 1,534 Dividends & other received profits -- -- -- 0 38 1,534 Group transactions with related parties during 2005 were as follows: Associates Key management personnel Board of Directors of the company Net purchases (120) -- -- Net sales -- -- -- Other services -- -- -- 120 0 0 Interest Dividends & other distributed profits -- 10 826 Dividends & other received profits 113 -- -- 113 10 826 CONSOLIDATED ANNUAL ACCOUNTS 119

5 annual ACCOUNTS b) Information on the Board of Directors of the Parent company and key Group personnel During 2006 the Members of the Board of Directors of Grifols, S.A. have received Euros 60,000 in respect of their office (Euros 0 during 2005). Details of remuneration of Members of the Board of Directors who have an employment relationship with Group companies and remuneration received by key management personnel are as follows: 31/12/06 31/12/05 Current remuneration 1,771 1,559 Total key management personnel 1,771 1,559 c) Investments and positions held by Directors of the Parent company in other companies The directors of the Company do not hold any investments in companies with a statutory activity which is identical, similar or complementary to that of the Company. The positions, functions and activities developed and/or performed by the members of the Board of Directors of Grifols S.A., in the group s companies and/or companies whose statutory business is identical, similar or complementary to those developed by the company, are detailed in the attached Appendix IV, which forms an integral part of these consolidated notes. (22) Trade payables Details are as follows: 31/12/06 31/12/05 Suppliers 66,478 65,502 Notes payable to suppliers 758 4,121 Trade provisions 3,890 1,245 Advances received 11,019 2,948 Accruals 126 892 82,271 74,708 Balances with suppliers include the following accounts payable in foreign currencies:: 31/12/06 31/12/05 Currency US Dollars 18,538 22,291 Pounds Sterling 1,632 815 Japanese Yen 560 0 Czech Crowns 355 311 Other currencies 933 157 120 GRIFOLS, S.A. AND SUBSIDIARIEs

Movement in trade provisions in 2005 was as follows: Balance at 31/12/04 Provision Reversal Translation differences Balance at 31/12/05 Trade provisions 1,591 (350) (53) 57 1,245 1,591 (350) (53) 57 1,245 Movement in this provision in 2006 was as follows: Balance at 31/12/05 Provision Reversal Translation differences Balance at 31/12/06 Trade provisions 1,245 2,611 46 (12) 3,890 1,245 2,611 46 (12) 3,890 (23) Other Payables Details are as follows: 31/12/06 31/12/05 Dividend guaranteed to shareholders with no voting rights (notes 14 and 28) 0 10,258 Mitsubishi Pharma Corporation 20,343 22,800 Receivables from social security transferred to Deutsche Bank 5,366 4,300 Biolife Plasma Services LP (note18 (b)) 2,410 0 Novartis (note 18 (b)) 852 0 Privileged loans from Ministry of Science & Technology (note 18 (b)) 938 690 Others 956 1,875 Other payables 30,865 39,923 Remunerations payable 14,140 12,020 Guarantee deposits received 70 38 45,075 51,981 At 31 December 2006 other payables include Euros 20,881 thousand (Euros 23,311 thousand in 2005) reflecting the Euros equivalent of the short-term balance payable in US Dollars to Mitsubishi Pharma Corporation for the acquisition of certain assets from Alpha Therapeutic Corporation (notes 18 (b) and 32 (b)). Deferred financial expenses resulting from the transaction amount to Euros 538 thousand (Euros 511 thousand at 31 December 2005) and have been deducted from the above balance. At 31 December 2006 and 2005 other payables also include approximately Euros 5,366 thousand and Euros 4,300 thousand, respectively, which was collected directly from social security affiliated bodies, as the receivables had been transferred from Deutsche Bank (see note 11). The 2005 balance with Deutsche Bank was settled in January 2006. CONSOLIDATED ANNUAL ACCOUNTS 121

5 annual ACCOUNTS (24) Net Sales The distribution of consolidated net sales in 2006 and 2005, by segment, was as follows: 31/12/06 31/12/05 Bioscience 68% 70% Diagnostic 11% 13% Hospital 10% 11% Raw materials 10% 5% Others 1% 1 % 100% 100% The geographical distribution of consolidated net sales is as follows: 31/12/06 31/12/05 Sales, European Union 52% 60% Sales, USA 37% 28% Sales, rest of the world 11% 12% 100% 100% Net sales include sales made in the following foreign currencies: Currency 31/12/06 31/12/05 US Dollars 258,643 158,805 Pounds Sterling 40,295 38,114 Mexican Pesos 13,451 10,541 Chilean Pesos 9,834 8,334 Czech Crowns 7,779 7,476 Brazilian Real 4,240 3,671 Thai Bath 2,806 2,885 Argentine Pesos 3,512 2,669 Singapore Dollars 2,377 2,244 122 GRIFOLS, S.A. AND SUBSIDIARIEs

(25) Personnel Expenses Details are as follows: 31/12/06 31/12/05 Wages and salaries 148,472 125,202 Pension plan contributions 1,814 812 Welfare benefits 34,444 28,873 184,730 154,887 The average headcount in 2006, by department, was as follows: Average number 31/12/06 31/12/05 Manufacturing 3,065 2,348 Research & development technical area 209 201 Administration and others 349 319 General management 80 79 Marketing 68 71 Sales and distribution 428 425 4,199 3,443 (26) Operating Expenses Details are as follows: 31/12/06 31/12/05 Changes in trade provisions (notes 10, 11 and 22) 2,304 (815) Amounts capitalized for self-constructed assets (12,472) (10,795) Professional services 24,200 20,829 Supplies and other material 17,775 15,479 Operating leases (note 31 a) 11,237 9,248 Lease financing and others leases 4,288 4,375 Transport 13,133 12,548 Repairs and maintenance costs 12,196 10,827 Publicity 10,563 10,218 Insurance 10,791 9,695 Royalties and service charges 10,790 9,066 Travel expenses 10,244 8,185 External services 13,101 11,325 Others 4,739 3,886 Other operating expenses 132,889 114,071 CONSOLIDATED ANNUAL ACCOUNTS 123

5 annual ACCOUNTS (27) Other non recurring Operating Income/Expenses Details are as follows: 31/12/06 31/12/05 Profit on disposal of property, plant & equipment, intangible assets and treasury shares 37 22 Government grants taken to income 112 158 Privileged loans taken to income (note 18 (d)) 419 349 Others 2,231 500 Other non-recurring operating income 2,799 1,029 Changes in provisions for property, plant & equipment (note 7) 0 (69) Losses from property, plant & equipment, intangible assets and treasury shares 611 1,423 Others 347 613 Other non-recurring operating expenses 958 1,967 Total non-recurring operating expenses/income 1,841 (938) In 2006 other non-recurring operating income basically comprises compensation received from insurance claims. (28) Net Financing Costs Details are as follows: 31/12/06 31/12/05 Interest from Social Security 4,014 3,041 SLS sale and purchase option (note 12) 0 124 Change in fair value of financial derivatives (note 20) 2,440 0 Other financial income 653 384 Financial income 7,107 3,549 Syndicated loan (Other financial expenses) 801 2,131 Syndicated loan (Interest) 7,657 7,930 Financial expenses from sale of receivables (note 11) (395) 1,525 Dividend guaranteed to shareholders with no voting rights (note 23) 9,545 10,258 Financial expenses on preference shares (note 18 (a)) 12,332 2,686 Changes in provisions for financial investments (note 20) 960 1,008 Implicit interest on privileged loans (note 18 (b)) 419 349 Other financial expenses 11,781 11,968 Financial expenses 43,100 37,855 Exchange gains 6,688 10,053 Exchange losses 7,752 8,503 Exchange differences (1,064) 1,550 Net financing costs (37,057) (32,756)

(29) Income Tax Companies present annual income tax returns. The standard rate of tax is 35%, which may be reduced by certain credits. Grifols, S.A. is authorised to present a consolidated tax return with Diagnostic Grifols, S.A., Movaco, S.A., Laboratorios Grifols, S.A., Instituto Grifols, S.A., Logister, S.A., Biomat, S.A., Grifols Viajes, S.A., Grifols International, S.A. and Grifols Engineering, S.A. Grifols, S.A., in its capacity as Parent company, is responsible for the presentation and payment of the consolidated tax return. The North-American company Grifols, Inc. is permitted to present consolidated tax returns with Grifols Biologicals, Inc. and Grifols USA, Inc. a) Reconciliation of accounting and taxable income Details of the income tax expense/(income) are as follows: 31/12/06 31/12/05 Profit/(loss) for the year before income tax 63,509 40,820 Tax at 35% 22,228 14,287 Permanent differences 3,361 1,725 Effect of different tax rates (69) 1,397 Deductions for research and development (3,654) (2,904) Other deductions (145) (612) Tax credits not recognised in prior years 0 (2,927) Expense for income tax in prior years 240 2,369 Other income tax expenses/(recoverable) (4,137) 1,980 Total income tax expense 17,824 15,315 Deferred tax expenses (7,924) (7.924) 1,260 Current tax expenses 25,748 14,055 Total 17,824 15,315 b) Deferred tax assets and liabilities On 28 November 2006 Law 35 on Personal Income Tax was published, which partially modifies the Corporate Income Tax Law. This law establishes that an additional provision to the modified text of the Corporate Income Tax Law enacted by Royal Decree Law 4 dated 5 March 2004 will be applicable for periods starting 1 January 2007 which states that the income tax rate for tax periods starting on 1 January 2007 will be 32.5% and 30% for tax periods starting on 1 January 2008 and thereafter. At 31 December 2006 the Spanish companies deferred tax assets and liabilities have been recalculated in accordance with the new criteria. The effect of this adjustment has been a profit of Euros 4,056 thousand (recorded as other income tax recoverable (see note 29(a)) and a reduction in reserves of Euros 642 thousand (see note 14(b)). The net effect of this adjustment in deferred tax assets and liabilities has been Euros 3,414 thousand. CONSOLIDATED ANNUAL ACCOUNTS 125

5 annual ACCOUNTS Details of deferred tax assets and liabilities, by type, are as follows: Tax effect with rate change 31/12/06 adjustment to tax rate without rate change 31/12/06 31/12/05 Assets Deductions 18,737 0 18,737 14,760 Tax credits in respect of loss carry forwards 7,534 (517) 8,051 2,430 Non-current assets & amortization 1,117 (31) 1,148 2,817 Derivatives 143 (24) 167 1,067 Unrealized margins on inventories 5,349 (226) 5,575 5,987 Provision for bad debts 478 0 478 403 Inventories 707 0 707 860 Share issue costs 4,969 (638) 5,607 940 Others 2,418 (44) 2,462 1,265 41,452 (1,480) 42,932 30,529 Liabilities Goodwill (6,895) 1,150 (8,045) (4,950) Revaluation of non-current assets (16,379) 1,782 (18,161) (19,244) Non-current assets & amortization (14,911) 993 (15,904) (5,788) Finance leases (2,573) 426 (2,999) (2,586) Inventories (872) 0 (872) (5,953) Provision for treasury shares (3,235) 539 (3,774) (2,179) Others (997) 4 (1,001) (1,404) (45,862) 4,894 (50,756) (42,104) As permitted by Royal Decree Law 3/1993 governing urgent tax and financial measures and Royal Decrees Law 7/1994 and Law 2/1995 governing accelerated depreciation of property, plant and equipment for investments which generate employment, the Spanish companies have opted to apply accelerated depreciation to certain additions to property, plant and equipment, which has resulted in the corresponding deferred tax liability. Details of deferred tax assets and liabilities on items directly debited and credited to equity during the year are as follow: Efecto impositivo Tax effect Efecto impositivo with rate change 31/12/06 adjustment to tax rate without rate change 31/12/06 31/12/05 Available for sale financial assets (21) 3 (24) (51) (21) 3 (24) (51) 126 GRIFOLS, S.A. AND SUBSIDIARIEs

The remaining assets and liabilities recognised in 2006 have been credited/debited to the income statement. No other significant temporary differences which have generated deferred tax liabilities have arisen from investments in subsidiaries or associates. The Spanish consolidated companies have deductions pending application mainly in respect of research and development, which are detailed below: Year of origin Applicable through 2002 1,695 2017 2003 5,598 2018 2004 4,138 2019 2005 3,423 2020 2006 (estimated) 3,883 2021 18,737 At 31 December 2006 the Group has recorded a tax credit of Euros 18,737 thousand (Euros 14,760 thousand at 31 December 2005) from the deductions pending application, as its future recovery is reasonably assured. At 31 December 2006 the Group has future tax deductions of Euros 32,346 thousand (Euros 40,006 thousand at 31 December 2005) pending application as a result of goodwill generated on the acquisition of Biomat USA, Inc. This amount will be deducted annually from the taxable profits until 2022, without being limited by the amount of tax payable in any one year. The amount that will be deducted in 2007 at the rate of 32.5% will be Euros 2,298 thousand, whilst in prior years an amount of Euros 2,121 thousand will be deducted at a rate of 30%. The Group has recognised a deferred tax liability of Euros 6,364 thousand in respect of this item at 31 December 2006 (Euros 4,950 thousand at 31 December 2005). At 31 December 2006 the Group has a future tax deduction of Euros 12,346 thousand pending application as a result of the goodwill generated on the acquisition of PlasmaCare, Inc. This amount will be deducted annually from the taxable profits until 2026. The annual amount applicable in 2007 at the rate of 32.5% is Euros 695 thousand, whilst Euros 641 thousand will be applied in subsequent years at the rate of 30%. The Group has recognised a deferred tax liability for this item amounting to Euros 531 thousand at 31 December 2006. At 31 December 2006 the Group has recognised tax assets for loss carryforwards amounting to Euros 7,534 thousand. Euros 6,722 thousand of this amount has been generated by Spanish companies in 2006 and these tax losses can be offset until 2021. The remaining amount has been generated by the North American companies Biomat Usa, Inc and Grifols Usa, Inc. At 31 December 2006 these two North American companies have loss carryforwards amounting to Euros 2,430 thousand. The Group has not recognised loss carryforwards of Euros 1,311 thousand (Euros 1,049 thousand at 31 December 2005) from Grifols Portugal as deferred tax assets. The remaining companies do not have significant loss carryforwards which have not been recognised. c) Years open to inspection In accordance with current legislation, taxes cannot be considered definitive until they have been inspected and agreed by the tax authorities or before the prescribed inspection period has elapsed. On 8 February 2005 the Group received notification from the tax authorities of an inspection of all applicable taxes from 2001 to 2003 (both inclusive) of the Spanish companies in the tax group (2000 to 2003 for income tax). On 30 January 2006 the Group signed agreements in respect of these taxes. The total tax expense for 2005, including delay interest and fines, amounts to Euros 2,743 thousand whereas total additional tax payable amounts to Euros 1,375 thousand. CONSOLIDATED ANNUAL ACCOUNTS 127

5 annual ACCOUNTS (30) Earnings per Share The calculation of basic earnings per share is based on the profit for the year attributable to the shareholders of the Parent and a weighted average number of ordinary shares in circulation throughout the year, excluding treasury shares. Details of the calculation of basic earnings per share are as follows: 2006 2005 Profit for the year attributable to equity holders of the Parent company (thousands of Euros) 45,394 25,556 Average weighted value of ordinary shares in circulation 185,966,769 182,361,067 Earnings per share (Euros per share) 0.24410 0.14014 The weighted average number of ordinary shares issued is determined as follow: no shares 2006 2005 Ordinary shares in circulation at 1 January 140,338,299 211,681,440 Effect of own shares 0 (1,740,892) Effect of own shares issued 45,822,416 7,074,589 Net effect of issue and redemption of shares 0 (33,449,060) Effect of treasury shares (193,947) (1,714,599) Effect of sale of treasury shares 0 509,589 185,966,769 182,361,067 Diluted earnings per share are calculated by dividing profit attributable to shareholders of the Parent by the weighted average number of ordinary shares in circulation considering the diluting effects of potential ordinary shares. Details of the diluted earnings per share calculation are as follows: 2006 2005 Profit for the year attributable to equity holders of the Parent Company (thousands of Euros) 45,394 25,556 Average weighted value of ordinary shares in circulation 184,240,169 180,616,156 Earnings per share (Euros per share) 0.24638 0.14149 Weighted average number of ordinary shares issued is determined as follows: 2006 2005 Average weighted value of ordinary shares in circulation 185,966,769 182,361,067 - Effect of shares issued for employees (see note 14 (d)) (1,726,600) (1,740,892) - Effect of preferential shares issue (see notes 14 and 23) 0 (4,019) Average weighted value of ordinary diluted shares in circulation 184,240,169 180,616,156 128 GRIFOLS, S.A. AND SUBSIDIARIEs

(31) Operating Leases (a) Operating leases (as lessee) At 31 December 2006 and 2005 the Group leases buildings from third parties under operating leases. The Group has warehouses and buildings contracted under operating lease. The duration of these lease contracts ranges from between 1 to 30 years. Contracts may be renewed on termination. Lease instalments are adjusted periodically in accordance with the price index established in each contract. One Group company has entered into lease contracts which include contingent rents. These contingent rents have been based on production capacity, surface area used and the real estate market and are expensed on a straight line basis. Operating lease instalments of Euros 11,237 thousand have been recognised as an expense for the year at 31 December 2006 (Euros 9,248 thousand at 31 December 2005). Of this amount Euros 11,218 thousand (Euros 9,183 thousand at 31 December 2005) corresponds to minimum lease payments and Euros 19 thousand (Euros 65 thousand at 31 December 2005) to contingent rent instalments. Future minimum payments on non-cancellable operating leases at 31 December are as follows: Maturity: 31/12/2006 31/12/2005 Up to 1 year 7,236 5,753 Between1 and 5 years 13,817 11,050 More than 5 years 977 1,324 Total future minimum payments 22,030 18,127 One Group company sublets a building which it leases to third parties. The amount recognised under income for the year in respect of this item at 31 December 2005 amounted to Euros 48 thousand. This contract expired in 2005. (b) Operating leases (as lessor) At 31 December 2006 the Group does not have any buildings leased to third parties under operating leases. At 31 December 2005 the Group had a building leased to third parties under an operating lease: 31/12/2005 Cost 931 Accumulated amortization (367) Carrying amount, buildings 564 CONSOLIDATED ANNUAL ACCOUNTS 129

5 annual ACCOUNTS (32) Other Commitments with Third Parties and Other Contingent Liabilities and Assets (a) Guarantees extended and other deposits Instituto Grifols, S.A., Laboratorios Grifols, S.A., Movaco, S.A., Diagnostic Grifols, S.A., Biomat S.A., Grifols Biologicals, Inc. and Biomat USA, Inc. have given a joint guarantee at 31 December 2006 and 2005 on a syndicated loan of Euros 209,531 thousand and 225,000 thousand, respectively. At 31 December 2006 the Parent company has given guarantees of Euros 158,840 thousand to banks on behalf of group companies (Euros 142,078 thousand at 31 December 2005). At 31 December 2006 the Company together with Diagnostic Grifols, S.A., Laboratorios Grifols, S.A., Biomat S.A. and Movaco, S.A., has given guarantees of Euros19,061 thousand to banks (Euros 6,247 thousand at 31 December 2005). At 31 December 2006 Biomat, S.A. in conjunction with Laboratorios Grifols, S.A., Diagnostic Grifols, S.A., Movaco, S.A., Instituto Grifols, S.A., Grifols Deutschland GmbH, Grifols Italia S.p.A. and Grifols UK Ltd has given guarantees to banks amounting to Euros 30,000 thousand. At 31 December 2006 Instituto Grifols, S.A. together with Laboratorios Grifols, S.A., Movaco, S.A., Diagnostic Grifols, S.A. and Grifols Internacional, S.A. have given have given guarantees of Euros 731 thousand to banks on behalf of Grifols, S.A. (Euros 1,024 thousand at 31 December 2005). (b) Guarantees with third parties Details of payment commitments which exist at 31 December 2006 and 2005 arising from the acquisition of Alpha Therapeutic Corporation in 2003 are as follows: Maturity: 17/07/06 (early payment) 31/12/2006 31/12/2005-27,500 16/07/07 27,500 27,500 27,500 55,000 (notes 18 & 23) The Group has constituted a floating pledge over 350 thousand litres of blood plasma to guarantee the US Dollars 27,500 thousand payable to Mitsubishi Pharma Corporation which falls due on 16 July 2007. (c) Obligations with personnel As described in note 4 (k) section (i), Spanish companies of the Group are obliged to contribute to a defined contribution pension plan. Contributions made by the Group amounted to Euros 344 thousand in 2006 (Euros 383 thousand at 31 December 2005). In successive years this contribution will be defined through labour negotiations. Some foreign subsidiaries of the Group made contributions of Euros 1,470 thousand to complementary pension schemes (Euros 429 thousand at 31 December 2005). 130 GRIFOLS, S.A. AND SUBSIDIARIEs

At the annual general meeting held on 25 May 2001 the shareholders agreed to freely distribute 1,740,892 shares among the Group s employees (excluding directors and senior management) with a minimum of one year s service from the date of the agreement and using criteria based on employees length of service. The directors will determine the date the shares are awarded, which will be subsequent to the Company s flotation on the stock market. During 2006 and subsequent to the floating of the Company s shares on the stock market (17 May 2006), the board of directors distributed these shares to employees free-of-charge. (d) Judicial procedures and arbitration Details of legal proceedings in which the Company or Group companies are involved are as follows: Instituto Grifols, S.A. Litigation was initiated in February 2000. Proceedings have been brought jointly against the Company and another plasma fractioning company. The claimant (an individual) claimed Euros 542 thousand in damages due to the alleged contraction of HIV and Hepatitis C. The first instance court in Cadiz fully rejected the claim against Instituto Grifols, S.A on 25 November 2005. An appeal to this ruling is currently underway. A claim brought against the Health Board of Castilla y León in February 2005. The defendant (an individual) claimed Euros 180 thousand in damages due to the alleged contraction of Hepatitis C. The health authorities requested that this claim be extended to include the Company. A court ruling is pending since this company has contested the claim. Grifols Biologicals, Inc. Legal proceedings (consent decree) which were brought against the plasma fractioning centre in Los Angeles. The blood plasma fractioning centre in Los Angeles is managed through consent decree which was applied for in January 1998 to the Courts by the FDA and US Department of Justice as a result of an infringement of FDA regulations committed by the former owner of the centre (Alpha Therapeutic Corporation). As a result of this consent decree, the Los Angeles centre is subject to strict FDA audits and may only sell products manufactured in the centre subsequent to prior authorisation. The Company cannot guarantee if or when the consent decree will be lifted. These proceedings could result in the temporary closure of the centre. The Company considers that the investments planned for the centre (including the construction of a new sterile purification dosage area) and the previous good record with the FDA should help the centre to return to normal activity. Furthermore, as a result of improvements to the centre made by the Group, the FDA awarded several free sales certificates for the former ATC products manufactured in this centre in March 2004. Recently, the FDA carried out an inspection of the centre which was concluded without any significant matters arising. Some previous litigation was not quantified as this was not possible while proceedings were underway. At the date on which the events took place, the Group still had not implemented its self-insurance policy (through its reinsurance subsidiary Squadron Reinsurance, Ltd) and consequently, insurance companies will cover all risks. The amount claimed for product liability amounts to approximately Euros 2,942 thousand. No accounting provision has been made for this litigation as in each case the Company considers that the risks are adequately covered by insurance. Movaco, S.A. Legal proceedings initiated in March 2005. The claim was made against the Company in its capacity as importer in Spain of a product, which, according to the claimant, was defective. The claimant sought damages of Euros 4,500 before the first instance court of Valencia since Court ruled that this claim fell under the jurisdiction of the courts of the Company s registered offices. This case has been provisionally filed. CONSOLIDATED ANNUAL ACCOUNTS 131

5 annual ACCOUNTS (e) Swaps As a result of the application of IAS 32 and IAS 39 dated 1 January 2005, the Company recognised the following swaps at 31 December 2005: Swap Par 31/12/05 Maturity Interest rate swap 10,000 (39) 26/04/2006 Interest rate swap 50,000 (3,010) 26/11/2011 60,000 (3,049) (note 20) The Company has recognised the following swaps at 31 December 2006: Swap Par 31/12/06 Maturity Interest rate swap 10,000 0 26/04/2006 Interest rate swap 50,000 611 26/07/2011 (f) Materials supply contract with Mitsubishi Pharma Corporation 60,000 611 On 15 July 2003, one of the Group s companies in the USA signed a contract for the supply of raw materials with Mitsubishi Pharma Corporation, undertaking to purchase 270,000 litres of plasma at a fixed price and until no later than 31 December 2007. During 2005 and 2006 the Group has acquired the agreed number of litres of plasma. (note 2) (g) Materials supply contract with DCI Management Group LLC On 9 January 2006, one of the Group s companies in the USA entered a contract for the supply of raw materials with DCI Management Group LLC, undertaking to purchase between 150,000 and 250,000 litres of plasma every year at a fixed price and until 2010. (h) Services contract with Baxter Healthcare CorporatioN On 5 April 2004 the Group and Baxter Healthcare Corporation signed a new contract to resolve disagreements existing at 31 December 2003. As a consequence of the new agreement, the parties signed a new manufacturing and supply contract. At the same date, both parties signed a raw materials supply contract for the period from 1 July 2004 to 30 June 2005 inclusive. On 2 January 2006, the Group and Baxter Healthcare Corporation entered another contract whereby the Group will manufacture finished products for Baxter until December 2008. This contract has no impact on any other contracts previously signed by the parties. 132 GRIFOLS, S.A. AND SUBSIDIARIEs

(33) Environment The most significant systems, equipment and fixtures for the protection and improvement of the environment at 31 December 2005 are as follows: Project Cost Accumulated amort. & deprec. Carrying amount Clean in Process 484 (40) 444 Water treatment plant 156 (39) 117 Equalization pool 141 (109) 32 Installation of PEG collector 77 (55) 22 TOC meter for waste water 72 (17) 55 Joint effluent doors 58 (17) 41 Neutralization tank automation 42 (24) 18 Water recovery 42 (40) 2 Well improvements 39 (14) 25 Alcohol transfer engineeringl 31 (16) 15 Water containers 30 (5) 25 HCL deposit for water area 26 (4) 22 20m3 deposit 22 (8) 14 Chemical product storage deposit 20 (12) 8 Others 20 (3) 17 Preparation of external areas 19 (2) 17 Concentrated effluent recovery 15 (5) 10 Equalization of effluents 13 0 13 PEG collection 11 (1) 10 Drainage adequation 9 (9) 0 1,327 (420) 907 CONSOLIDATED ANNUAL ACCOUNTS 133

5 annual ACCOUNTS The most significant systems, equipment and fixtures for the protection and improvement of the environment at 31 December 2006 are as follows: Project Cost Accumulated amort. & deprec. Carrying amount Cips (clean in process) 484 (89) 395 Water treatment plant 156 (156) 0 Equalization pools 141 (123) 18 Installation of PEG collector 77 (63) 14 TOC meter for waste water 72 (8) 64 Joint effluent doors 58 (21) 37 Water recovery 42 (42) 0 Well improvements 39 (18) 21 Automation of regenerant neutralization 36 (23) 13 Series of 220m condensers 36 (1) 35 Alcohol transfer engineering 31 (19) 12 HCL deposit for dosifying neutralization pool 26 (8) 18 LG 20m3 deposit in P9 22 (12) 10 Chemical product storage deposit 20 (14) 6 Preparation of external areas 19 (4) 15 HCI deposit for water area 16 (4) 12 NaOH deposit for water area 14 (4) 10 Concentrated effluent recovery 14 (5) 9 Equalization of effluents 13 (1) 12 Drainage adequation 9 (9) 0 Others 32 (13) 19 1,357 (637) 720 Expenses incurred by the Group for protection and improvement of the environment in the year ended 31 December 2006 totalled approximately Euros 968 thousand (Euros 880 thousand at 31 December 2005). The Group considers that the environmental risks are adequately controlled by the procedures currently in place. The Group has not received any environmental grants during the year ended 31 December 2006 (Euros 10,000 at 31 December 2005). 134 GRIFOLS, S.A. AND SUBSIDIARIEs

(34) Other Information (a) Audit fees: KPMG Auditores, S.L. and other companies related to the auditors as defined in the fourteenth additional provision of legislation governing the reform of the financial system, have invoiced the Company and its subsidiaries fees and expenses for professional services during the years ended 31 December 2006 and 2005, as follows: 31/12/2006 31/12/2005 For annual audit services 262 185 For other audit services & related items 696 44 For other services -- -- 958 229 Audit services detailed in the above table include the total fees for the 2006 and 2005 audits, irrespective of the date of invoice. Other companies associated with KPMG International have also invoiced the Company and its subsidiaries fees in 2006 and 2005, as follows: 31/12/2006 31/12/2005 For annual audit services 667 519 For other audit services & related items 94 10 For other services 144 228 905 757 (35) Subsequent Events On 2 February 2007 the Company acquired 700,000 treasury shares on the electronic stock market at a price of Euros 10 per share. (36) Changes in IFRS-EU in 2006 These consolidated annual accounts do not include any significant changes in accounting policies compared to those issued at 31 December 2005. The Group has not applied in advance standards and interpretations which will be applicable in the future and which are not expected to have a material effect. CONSOLIDATED ANNUAL ACCOUNTS 135

5 annual ACCOUNTS APPENDIX I financial information by segments. bussiness segments. Bioscience Hospital Diagnostic Raw materials Others/Unallocated Consolidated 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 Revenues from third parties 440,335 364,200 62,900 58,281 74,566 69,646 66,019 25,056 4,977 7,094 648,797 524,277 Total revenues 440,335 364,200 62,900 58,281 74,566 69,646 66,019 25,056 4,977 7,094 648,797 524,277 Profit/(Loss) for the segment 120,190 97,731 6,507 7,493 17,448 15,454 17,066 4,709 4,977 7,094 166,189 132,481 Unallocated expense (67,540) (57,957) (67,540) (57,957) Other unallocated (expense) income 1,841 (938) 1,841 (938) Operating profit 100,490 73,586 Net financing cost (37,057) (32,756) Interest in equity accounted companies 0 0 - - 76 (10) - - - - 76 (10) Income tax (17,824) (15,315) Profit for the year 45,685 25,505 Segment assets 579,141 548,459 45,201 42,362 52,132 45,153 6,068 2,858 - - 682,542 638,832 Equity accounted investments - - - - 253 210 - - - - 253 210 Unallocated assets 230,879 182,641 230,879 182,641 Total assets 913,674 821,683 Segment liabilities 83,688 94,112 2,093 1,771 5,900 5,092 0 0 - - 91,681 100,975 Unallocated liabilities 453,641 664,761 453,641 664,761 Total liabilities 545,322 765,736 Other information: Amortization and depreciation 18,759 16,220 3,327 3,337 4,143 3,980 18 24 3,110 3,337 29,357 26,898 Expenses that do not require cash payments (1,373) (471) 48 (6) 25 (34) 691 (477) 2,913 173 2,304 (815) Additions for the year of property, plant & equipment & intangible assets 30,715 12,611 2,836 2,214 5,768 2,334 0 6,246 7,419 5,470 46,738 28,875 This Appendix forms an integral part of note 5 to the consolidated annual accounts. 136 GRIFOLS, S.A. AND SUBSIDIARIEs

APPENDIX I financial information by segment. GEOGRAPHICAL SEGMENTS. European Union United States Rest of the world Non-assignable Consolidated 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 Ordinary revenues 335,492 314,146 242,978 149,365 70,327 60,766 0 0 648,797 524,277 Operating income from third parties Assets by segment 537,197 454,872 349,310 338,367 27,167 28,444 0 0 913,674 821,683 Other information: Additions for the year of property, plant & equipment & intangible assets 22,689 13,035 22,720 14,878 1,329 962 - - 46,738 28,875 This appendix forms an integral part of note 5 of the consolidated annual accounts APPENDIX II Movement of intangible assets for the year ended 31 December 2006 Balance at Additions Business Transfers Disposals Translation Balance at 31/12/2005 combinations differences 31/12/2006 Goodwill Goodwill 131,628 0 47,876 0 0 (15,272) 164,232 Accumulated amortization of goodwill (14,513) 0 0 0 0 1,101 (13,412) Provisions 0 0 0 0 0 0 0 Carrying amount of goodwill 117,115 0 47,876 0 0 (14,171) 150,820 Other Development costs 33,032 4,854 0 0 (69) (107) 37,710 Concessions, patents, licenses brands and similar 32,628 4,030 9,938 0 (4) (2,632) 43,960 Software 12,770 2,740 133 0 (26) (208) 15,409 Total cost other 78,430 11,624 10,071 0 (99) (2,947) 97,079 Accum. amort. of development costs (11,764) (2,542) 0 0 0 0 (14,306) Accum. Amort of concessions. patents, licenses, brands & similar (9,873) (2,690) 0 0 4 551 (12,008) Accum. Amort. of software (8,075) (1,884) (115) 0 26 133 (9,915) Total Accum. amort other (29,712) (7,116) (115) 0 30 684 (36,229) Carrying amount of other intangible assets 48,718 4,508 9,956 0 (69) (2,263) 60,850 TOTAL INTANGIBLE ASSETS 165,833 4,508 57,832 0 (69) (16,434) 211,670 This appendix forms an integral part of note 6 of the consolidated annual accounts. (note 7) CONSOLIDATED ANNUAL ACCOUNTS 137

5 annual ACCOUNTS APPENDIX II Movement of intangible assets for the year ended 31 December 2005 Balance at Additions Transfers Disposals Translation Balance at 31/12/2004 differences 31/12/2005 Goodwill Goodwill 116,293 0 0 0 15,335 131,628 Accumulated amortization of goodwill (12,980) 0 0 0 (1,533) (14,513) Provisions Carrying amount of goodwill 103,313 0 0 0 13,802 117,115 Other Development costs 28,423 5,103 0 (573) 79 33,032 Concessions, patents, licenses brands and similar 29,470 0 0 0 3,158 32,628 Software 11,509 1,115 151 (240) 235 12,770 Total cost other 69,402 6,218 151 (813) 3,472 78,430 Accum, amort, of development costs (9,157) (2,809) 0 202 0 (11,764) Accum, Amort of concessions, patents, licenses, brands & similar (7,370) (1,895) 0 0 (608) (9,873) Accum, Amort, of software (6,345) (1,866) 0 238 (102) (8,075) Total Accum, amort other (22,872) (6,570) 0 440 (710) (29,712) Carrying amount of other intangible assets 46,530 (352) 151 (373) 2,762 48,718 TOTAL INTANGIBLE ASSETS 149,843 (352) 151 (373) 16,564 165,833 This appendix forms an integral part of note 6 of the consolidated annual accounts. (note 7) 138 GRIFOLS, S.A. AND SUBSIDIARIEs

APPENDIX III Movement in property, plant and equipment for the year ended 31 December 2006 Balance at Additions Business Transfers Disposals Translation Balance at 31/12/05 combinations differences 31/12/06 Cost: Land and buildings 77,527 22 960 4,537 (28) (2,349) 80,669 Plant and machinery 95,657 1,489 2,699 12,859 (1,244) (3,056) 108,404 Other installations, equipment & furniture 75,418 7,901 2,842 4,053 (1,776) (2,866) 85,572 Other 27,084 4,873 2 129 (985) (991) 30,112 Under construction 20,768 10,839 5 (21,802) (72) (1,386) 8,352 296,454 25,124 6,508 (224) (4,105) (10,648) 313,109 Accumulated depreciation: Buildings (5,460) (1,043) (215) 224 28 130 (6,336) Plant and machinery (44,197) (9,661) (1,996) 0 1,198 1,355 (53,301) Other installations, equipment & furniture (40,061) (7,373) (676) 0 1,327 1,081 (45,702) Other (20,115) (4,164) (1) 0 857 646 (22,777) (109,833) (22,241) (2,888) 224 3,410 3,212 (128,116) Provisions: Provisions 0 0 0 0 0 0 0 Carrying amount 186,621 2,883 3,620 0 (695) (7,436) 184,993 This appendix forms an integral part of note 7 of the consolidated annual accounts. (note 6) CONSOLIDATED ANNUAL ACCOUNTS 139

5 annual ACCOUNTS APPENDIX III Movement in property, plant and equipment for the year ended 31 December 2005 Balance at Additions Transfers Disposals Translation Balance at 31/12/04 differences 31/12/05 Cost: Land and buildings 74,598 0 52 (60) 2,937 77,527 Plant and machinery 84,175 900 7,667 (258) 3,173 95,657 Other installations, equipment & furniture 63,437 3,192 7,617 (1,665) 2,837 75,418 Other 22,733 3,548 23 (485) 1,265 27,084 Under construction 19,780 15,017 (15,510) (25) 1,506 20,768 264,723 22,657 (151) (2,493) 11,718 296,454 Accumulated depreciation: Buildings (4,367) (1,003) 0 0 (90) (5,460) Plant and machinery (33,970) (9,387) 0 191 (1,031) (44,197) Other installations, equipment & furniture (33,527) (6,292) 0 963 (1,205) (40,061) Other (15,973) (3,646) 0 393 (889) (20,115) (87,837) (20,328) 0 1,547 (3,215) (109,833) Provisions: Provisions (69) 69 0 0 0 0 Carrying amount 176,817 2,398 (151) (946) 8,503 186,621 This appendix forms an integral part of note 7 of the consolidated annual accounts. (note 6) 140 GRIFOLS, S.A. AND SUBSIDIARIEs

APPENDIX IV Members of the Board of Directors with positions in companies with identical, similar or complementary statutory activities 31 December 2006 Director Company in which position held Position Dagà Gelabert, T. Grifols, Inc. Board member Dagà Gelabert, T. Biomat USA, Inc. Board member Dagà Gelabert, T. PlasmaCare, Inc. Board member Duster, T. E. Instituto Grifols, S.A. Board member Glanzmann, T. Instituto Grifols, S.A. Board member Grifols Gras, J.A. Instituto Grifols, S.A. Board member Grifols Roura, V. Biomat. S.A. Director Grifols Roura, V. Diagnostic Grifols, S.A. Director Grifols Roura, V. Grifols Engineering, S.A. Director Grifols Roura, V. Grifols International, S.A. Director Grifols Roura, V. Grifols Viajes, S.A. Director Grifols Roura, V. Instituto Grifols, S.A. Chairman / Director / Managing director Grifols Roura, V. Laboratorios Grifols, S.A. Director Grifols Roura, V. Logister, S.A. Director Grifols Roura, V. Movaco, S.A. Director Grifols Roura, V. Grifols Deutschland, Gmbh Director Grifols Roura, V. Grifols, Inc. Board member Grifols Roura, V. Biomat USA, Inc. Board member Grifols Roura, V. Grifols, s.r.o. Director Grifols Roura, V. Grifols UK, Ltd. Director Grifols Roura, V. Alpha Therapeutic UK, Ltd. Director Grifols Roura, V. Alpha Therapeutic Europe, Ltd. Director Grifols Roura, V. Grifols Portugal Productos Farmacéuticos e Hospitalares, Lda. Director Grifols Roura, V. Grifols France S.A.R.L. Co-manager Grifols Roura, V. Grifols Chile, S.A. Owner Grifols Roura, V. Grifols Italia S.p.A. President Grifols Roura, V. PlasmaCare, Inc. President Purslow, C.M.C. Instituto Grifols, S.A. Board member Riera Roca, R. Instituto Grifols, S.A. Board member Riera Roca, R. Grifols International, S.A. Director Riera Roca, R. Instituto Grifols, S.A. Board member Riera Roca, R. Grifols, Inc. Board member Riera Roca, R. Biomat USA, Inc. Board member Riera Roca, R. Grifols Argentina, S.A. Chairman Riera Roca, R. Grifols Polska Sp.z.o.o. Chairman Riera Roca, R. Grifols France S.A.R.L. Co-manager Riera Roca, R. Grifols Chile, S.A. Owner Riera Roca, R. Alpha Therapeutic Italia, S.p.A. Chairman Riera Roca, R. PlasmaCare, Inc. Board member Twose Roura, J.I. Grifols Engineering, S.A. Director Twose Roura, J.I. Instituto Grifols, S.A. Board member Twose Roura, J.I. Grifols, Inc. Board member Twose Roura, J.I. Biomat USA, Inc. Board member Twose Roura, J.I. PlasmaCare, Inc. Board member This appendix forms an integral part of note 21 of the consolidated financial statements. CONSOLIDATED ANNUAL ACCOUNTS 141

5 annual ACCOUNTS APPENDIX IV Members of the Board of Directors with positions in companies with identical, similar or complementary statutory activities 31 December 2005 Director Company in which position held Position Bolin, J. Instituto Grifols, S.A. Board member Dagà Gelabert, T. Grifols, Inc. Board member Dagà Gelabert, T. Biomat USA, Inc. Board member Duster, T. E. Instituto Grifols, S.A. Board member Grifols Gras, J.A. Instituto Grifols, S.A. Board member Grifols Roura, V. Biomat. S.A. Director Grifols Roura, V. Diagnostic Grifols, S.A. Director Grifols Roura, V. Grifols Engineering, S.A. Director Grifols Roura, V. Grifols International, S.A. Director Grifols Roura, V. Grifols Viajes, S.A. Director Grifols Roura, V. Instituto Grifols, S.A. Chairman / Director / Managing director Grifols Roura, V. Laboratorios Grifols, S.A. Director Grifols Roura, V. Logister, S.A. Director Grifols Roura, V. Movaco, S.A. Director Grifols Roura, V. Grifols Deutschland, Gmbh Director Grifols Roura, V. Grifols, Inc. Board member Grifols Roura, V. Biomat USA, Inc. Board member Grifols Roura, V. Grifols, s.r.o. Director Grifols Roura, V. Grifols UK, Ltd. Director Grifols Roura, V. Alpha Therapeutic UK, Ltd. Director Grifols Roura, V. Alpha Therapeutic Europe, Ltd. Director Grifols Roura, V. Grifols Portugal Productos Farmacéuticos e Hospitalares,Lda. Director Grifols Roura, V. Grifols France S.A.R.L. Co-manager Grifols Roura, V. Grifols Chile, S.A. Owner Grifols Roura, V. Grifols Italia S.p.A. Chairman Land, A. Instituto Grifols, S.A. Board member Plost, B. Instituto Grifols, S.A. Board member Purslow, C.M.C. Instituto Grifols, S.A. Board member Riera Roca, R. Grifols International, S.A. Director Riera Roca, R. Instituto Grifols, S.A. Board member Riera Roca, R. Grifols, Inc. Board member Riera Roca, R. Biomat USA, Inc. Board member Riera Roca, R. Grifols Argentina, S.A. Chairman Riera Roca, R. Grifols Polska Sp.z.o.o. Chairman Riera Roca, R. Grifols France S.A.R.L. Co-manager Riera Roca, R. Grifols Chile, S.A. Owner Riera Roca, R. Alpha Therapeutic Italia, S.p.A. Chairman Twose Roura, J.I. Grifols Engineering, S.A. Director Twose Roura, J.I. Instituto Grifols, S.A. Board member Twose Roura, J.I. Grifols, Inc. Board member Twose Roura, J.I. Biomat USA, Inc. Board member This appendix forms an integral part of note 21 of the consolidated financial statements. 142 GRIFOLS, S.A. AND SUBSIDIARIEs

DIRECTORS REPORT To the Shareholders: Grifols, S.A. is a Spanish holding and parent company of the Grifols Group operating in the pharmaceutical and healthcare field. Its activities are focused on research, development, manufacture and marketing of plasma derivatives, fluid therapy products, enteral nutrition, reagents, clinical analysis instruments and medical equipment. At 2006 year end, Grifols operating income amounted to Euros 648.8 million, marking a 23.7% increase on the prior year; while the 62.7% growth in sales in the USA is particularly noteworthy. The consolidated operating profit for the year totals Euros 100.5 million, 36.6% up on the prior year s figure. The Group has recorded a net consolidated profit of Euros 45.6 million, representing an increase of 79.1% compared to 2005. On 2 March 2006, in line with its growth policy, the Group acquired PlasmaCare, an American company specialised in obtaining human plasma. Subsequently, on 1 April 2006, the Group purchased eight plasma centres from a Baxter subsidiary. These investments in vertical integration ensure a supply of raw materials to the Group which, together with its fractioning capacity, will enable it to continue expanding. The Group has also continued to invest in manufacturing plants in both the Spanish and American markets, with a view to automating certain processes and increasing output. Meanwhile, the necessary investments have been made for maintenance of our commercial branch offices and warehouses. During the first half of the year, relocation to the South branch (Seville) took place. This project had been initiated in the prior year. In Research and Development, Grifols has continued to focus on improving activity in this field, giving priority to activities that enable new processing methods while incorporating the latest technology. The Group s policies in this area have enabled it to obtain procedure patents and sanitary registers, enabling the different products to be used by patients. On 22 December 2006, the US Food and Drug Administration (FDA) granted a licence to the Bioscience division for the marketing in the United States of a new generation of intravenous immunoglobulin (IVIG), known as Flebogamma DIF. This drug will be manufactured at the Group s new IVIG production plant in Parets del Vallés (Barcelona), which was constructed in 2004 specifically for this purpose and which has also been approved by the FDA. At the end of January 2007, the Group received FDA approval to market its hemo-derivative, Alphanate (factor VIII), for treatment of the Von Willebrand disease. Alphanate is the first and only high-purity, factor VIII and Von Willebrand factor complex concentrate, with a double inactivation stage during the production process, to be awarded an FDA licence for the treatment of the Von Willebrand disease. This division plans to increase the number of clinical studies with a view to registering new products and obtaining new usage indications for certain products already registered. In Hospital division R&D activities, development and validation of the third generation Grifill has concluded. The Grifill is a machine designed to facilitate sterile intravenous mixing in hospital pharmacy and is commercialised in the Spanish and US markets. During 2007, there are plans to file registers for new lipid emulsions and All in One nutrition bags for parenteral nutrition. CONSOLIDATED DIRECTORS ANNUAL ACCOUNTS report 143

5 annual ACCOUNTS Furthermore, in the Diagnostic division work has continued on the new auto analyser, designed to perform immunohematological tests on gel cards. The significant working capacity and level of autonomy of this instrument should be highlighted. At a commercial level, Bioscience division sales are up 21% on 2005 while Raw Material division sales figures have risen by 263%. The increase in the Bioscience division is due to greater unit sales coupled with higher selling prices. The rise recorded in the Raw Materials division reflects the incorporation into the Group of PlasmaCare, with third-party sales of Euros 31 million. Market share is expected to be maintained in 2007 and we will promote our currently marketed lines as well as new launches from the various divisions. In the Hospital division, Laboratorios Grifols, S.A. has planned the final launch of Grifill 3.0, a unique and innovative system that automates the preparation of intravenous mixtures and, particularly, cytostatic preparations. This system will enable us to provide hospital pharmacy with a new range of products in the intravenous therapy and oncology fields. Finally, the Diagnostic division has scheduled the launch of a new automatic instrument for Q-coagulation, manufactured by Diagnostic Grifols, S.A., which should enable us to gain considerable ground in terms of market share in the Haemostasis segment. We will also add new techniques to our portfolio, particularly in the Microbiology and Immunology areas. Alongside existing techniques, these will serve to meet the notable technological demand in this sector. All of the above enables us to forecast an optimistic and profitable year, thus upholding the Group s customary performance. The Group s future profits could be affected by events relating to its own activities, such as a lack of raw materials for product manufacturing, the appearance of competitor products on the market or regulatory changes in the markets in which it operates, inter alia. At the date of preparation of these annual accounts, the Group has taken the necessary measures to mitigate any possible effects arising from the aforementioned events. Details of transactions with treasury shares during 2006 are provided in notes 14 and 32(c) to the accompanying consolidated annual accounts. In accordance with the provisions of article 171, section 1, of the Spanish Limited Companies Act currently in force, the directors of Grifols, S.A. have prepared the annual accounts and directors report of the Company for 2006, both of which are drawn up and identified on sheets of paper bearing the official State seal, 8th class, numbered from OI0377624 to OI0377746. Parets del Vallés, 16 February 2007 144 DIRECTORS report

Executive Committee and Corporate Addresses Executive Committee Chief Executive Officer Víctor Grifols Roura Chief Financial Officer Alfredo Arroyo Vice President Marketing and Sales Ramón Riera Vice President Industrial Division Juan Ignacio Twose Administration Director and Controller Montserrat Lloveras Financial Director Javier Roura Planning and Control Director Antonio Viñes Scientific Director Eva Bastida GENERAL Information Investors and shareholders relations C /Marina, 16-18 Planta 26 08005 Barcelona, España Tel.: (34) 935 710 500 Fax.: (34) 935 710 267 Email: investors@grifols.com Press relations comunicacion@grifols.com Tel.: (34) 935 710 410 Corporate webpage www.grifols.com CORPORATE HEADQUARTERS Grifols, S.A. C /Marina, 16-18 Planta 26 08005 - Barcelona España Tel.: (34) 935 710 50 Technical Director Vicente Blanquer Human Resources Director Pere Oteo Information Technologies Director Carlos Roura Managing Director of Instituto Grifols, S.A. Javier Jorba President and CEO of Grifols Inc. Gregory Rich Vice President of Grifols Inc. Davi Bell CONSOLIDATED ANNUAL ACCOUNTS 145

5 annual ACCOUNTS Corporate Addresses SPAIN Grifols International, S.A. C /Marina, 16-18 planta 26 08005 Barcelona España Tel.: (34) 935 710 500 Instituto Grifols, S.A. Can Guasch, 2 08150 Parets del Vallès. Barcelona. España Tel.: (34) 935 710 200 Laboratorios Grifols, S.A. Can Guasch, 2 08150 Parets del Vallès Barcelona España Tel.: (34) 935 710 100 Av. Juan Carlos I, 97 30565 Las Torres de Cotillas Murcia España Tel.: (34) 968 387 638 Diagnostic Grifols, S.A. Passeig Fluvial, 24 08150 Parets del Vallès Barcelona España Tel.: (34) 935 710 400 Biomat, S.A. Marineta, nave 5-6 08150 Parets del Vallès Barcelona España Tel.: (34) 935 710 494 Grifols Engineering, S.A. Can Guasch, 2 08150 Parets del Vallès Barcelona España Tel.: (34) 935 710 300 Logister, S.A. Passeig Fluvial, 24 08150 Parets del Vallès Barcelona España Tel.: (34) 935 710 278 Movaco, S.A. Passeig Fluvial, 24 08150 Parets del Vallès Barcelona España Tel.: (34) 935 710 278 Grifols Viajes, S.A. C/ de la Marina, 16-18 planta 26 08005 Barcelona España Tel.: (34) 935 710 500 Museo Grifols Fundació Victor Grifols Lucas C/ Jesús y María, 6 08022 Barcelona España Tel.: (34) 935 710 429 UNITED STATES Grifols, Inc. 2410 Lillyvale Avenue Los Angeles California 90032 Tel.: (800) 421-0008 Grifols Biologicals, Inc. 5555 Valley Boulevard Los Angeles California 90032 Tel.: (800) 421-0008 Biomat USA, Inc. 2410 Lillyvale Avenue Los Angeles California 90032 Tel.: (323) 225-2221 Grifols USA, Inc. 2410 Lillyvale Avenue Los Angeles California 90032 Tel.: (800) 474-3657 Florida Facilities 8870-80 N.W. 18th Terrace Miami, Florida 33172 Tel.: (305) 593-8366 PlasmaCare, Inc. 1128 Main Street Cincinnati, Ohio 45202 Tel.: (513) 621-8728 EUROPE Grifols Deutschland Siemensstrasse, 18 D-63225 Langen Hessen Tel.: (49) (6103) 75020 Grifols Czech Republic Zitná, 2-12000 Praha 2 República Checa Tel.: (42) (02) 22231415 Grifols France Parc Technologique Sainte Victoire Bâtiment 10 1er étage 13590 Meyreuil France Tel.: (33) 04 42 54 44 00 Grifols Italia Via Carducci 62 D - Loc. La Fontina 56010 Ghezzano Pisa Italia Tel.: (39) (50) 8755111 Grifols Polska UL. Nowogrodzka 68, 02-014 Warsaw Polonia Tel.: (48) (22) 5040640 Grifols Portugal Rua Sao Sebastiao, nº 2 Z. Ind. de Cabra Figa 2635-448 Rio de Mouro Portugal Tel: (351) (21) 9255200 Grifols Intl Slovakia Trnavská cesta 50/B 821 02 Bratislava 2 República Eslovaca Tel.: (421) (2) 44 63 82 01 Grifols UK Byron House Cambridge Business Park, Cowley Road Cambridge, CB4 0WZ Reino Unido Tel.: (44) (0845) 241 3090 146 GRIFOLS, S.A. AND SUBSIDIARIEs

LATIN AMERICA Grifols Argentina Av. Mitre, nº 3790 (CP 1605) Munro, Partido Vicente López Buenos Aires Argentina Tel.: (54) 11 4762-5100 Grifols Brasil Rua Umuarama, 263 Vila Perneta, Pinhais Condominio Portal da Serra CEP 83325-000 Brasil Tel.: (55) (41) 3668 2444 Grifols Chile Av. Américo Vespucio, 2242 Comuna de Conchali Santiago de Chile Chile Tel.: (56) (2) 355 72 00 Grifols Mexico Eugenio Cuzín 909 Polígono Industrial Belenes Norte 45150 Zapopan Jalisco, México Tel.: (52) (33) 3636 1922 ASIA Grifols Asia-Pacific 501 Orchard Road nr 20-01 Wheelock Place Singapore 238880 Tel.: (65) 6 735-2606 Grifols Intl Japan Level 19, Hilton Plaza West Office Tower 2-2-2 Umeda, Kita-Ku Osaka 530-0001 Japan Tel.: (81) 6 6133-5410 Grifols Malaysia Suite 1202, Menara PJ. AMCORP Trade Centre No 18 Jalan Persiaran Barat 46050 Petaling Jaya Selangor Malasia Tel.: (603) 7954 8182 Grifols Thailand 8th Fl., Liberty Square 287 Silom Road, Bangrak Bangkok 10500 Tailandia Tel.: (662) 631 2056-58 CONSOLIDATED ANNUAL ACCOUNTS 147

07/3366 10607