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    Annual Report 2005 Annual Report 2005 1 Letter to Shareholders 2 Board of Directors 5 Key Data 6 Stock Market Data 7 Management Report on the Zardoya Otis Group 10 A nnual Report for the year: Profit and Loss 11 1-12-2004 to 30-11 - 2005 Sales 12 Dividends 14 presented by the Board of Evolution of Capital 15 Directors at the General Stock Market 16 Meeting of Shareholders held Creating Value for the Shareholder 19 on April 19, 2006 upon the Forecast Evolution 20 Technical and Commercial Information 21 first call, or April 20, 2006 Manufacturing and Engineering 24 upon the second call. Achieving Competitive Excellence 26 Corporate Social Responsibility 28 Auditor´s Report and Consolidated Annual Accounts 35 Auditor´s Report 37 Consolidated Balance Sheets 38 Consolidated Profit and Loss Accounts 40 Notes to the Consolidated Annual Accounts 41 Proposals to the General Shareholders´Meeting 69 Consolidated Balance Sheets 70 Financial Statements of the Last Five Years 73 Network 76 OTIS 1


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    Zardoya Otis S.A. OTIS F. JAVIER ZARDOYA Golfo de Salónica, 73 28033 Madrid - España Telf: 91 343 51 00 fax: 91 343 51 41 Presidente April 20, 2006 Dear Shareholders, During the year 2005, ZARDOYA OTIS, S.A. once again maintained its history of sustained growth, which has been constant since it was incorporated. As always, in the charts we include at the beginning of our Annual Report, you can find all the data that we consider you will find relevant. I would like to draw special attention to some of these data, with comments and forecasts for the near future. The net profit per share was 0.603 €, considering all the outstanding shares at the year end. Total net profit was 143.7 million euros, showing an increase of 9.9% on the preceding year. We billed 700.7 million euros, 5.3% up on 2004. New Sales grew by 8.5% representing 25% of total sale. Service increased by 6.9% equivalent to 67% of total sale. Although these two sales figures are very significant, they could have been higher if there had not been delays in the completion of buildings and, especially, in the creation of homeowners’ associations. Exports dropped by 14.5% in relative terms. However, in absolute terms, they fell by only 9.2 million euros, totalling 53.8 million euros, similar to the billing in previous years. Exports represented 8% of total sale in 2005. Orders received for New Sales were in line with those of the preceding year and, for the reasons I describe in my above comments on delays, the backlog of unfilled orders reached the record figure of 149.4 million euros. OTIS


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    In 2006, we are still receiving a good level of orders for New Sales. Logically, it appears that this will probably fall off, although the truth is that we have been considering this possibility for several years. Moreover, as we have said repeatedly, elevators are assembled in the final phase of the construction of a building and, therefore, in the event of a certain decline in the building industry, we would have time to reorganize ourselves, enabling us to maintain a reasonably logical profit level. Regarding the Stock Exchange, our shares closed the year at 21.40 euros, with a revaluation of 24.7%, which, added to the 3.3% obtained through dividends, furnishes a share held at the end of 2004 with total profitability of 28.0%. The PER, which was 35.5, was objectively higher than the average of the Spanish Stock Exchange. However, at the last General Meeting, all the shareholders who spoke found this logical, given the confidence we have generated over more than 26 years through our policy of creating value, with the dividends that have been uninterruptedly distributed on a quarterly basis and the annual bonus issues. In relation to the preceding point, I have the pleasure of informing you that the Board of Directors has decided to: • Maintain the four quarterly dividends in 2006. • Propose a bonus issue at a ratio of 1 new share for every 10 old shares for the approval of the General Meeting. If this capital increase is approved, it will be our 26th bonus issue. And I would like to finish by expressing, on my own behalf and on behalf of the whole Board of Directors, our deepest and most heartfelt gratitude: To our customers, without whom we would not exist as a Company. To all those who work and collaborate with our Group, without whose effort and dedication the positive results shown in our Annual Report would not have been possible. And to the shareholders for having placed their trust in us, assuring them that we will do everything possible to attain the objectives that they expect of our Company. Yours faithfully, F. Javier Zardoya 3


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    Puerta América Hotel Madrid OTIS


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    Board of Directors %HOLDING POSITION CAPACITY IN SHARE CAPITAL Mr. Francisco Javier Zardoya García Chairman Shareholders 0.198 Representative Mr. Mario Abajo García (1) Deputy Chairman Executive 0.263 Mr. José María Loizaga Viguri* Deputy Chairman Independent - Mr. Angelo Messina (1)* Board Member Shareholders - Representative Mr. Sandy Diehl (1) Board Member Shareholders - Representative Mr. Bruno Grob (1)* Board Member Shareholders - Representative Otis Elevator Company (1) Board Member Shareholdersl - (Mr. Johan Bill) Representative Euro- Syns, S.A. Board Member Shareholders 10.622 (Mr. Jesús María Fernández-Iriondo) Representative Investment, S.A. Board Member Shareholders 0.251 (Mr. Francisco Javier Zardoya Arana) Representative 11.334 United Technologies Holdings, S.A. (2) 51.067 62.401 Mr. Mario Abajo García CEO Mr. Pedro Sainz de Baranda y Riva General Manager Mr. Alberto Fernández-Ibarburu Arocena Secretary (1) Represents the parent company United Technologies Corporation (UTC). (2) United Technologies Corporation (UTC) holds 51.067% of the share capital through United Technologies Holdings, S.A. (*) Members of the Audit Committee. 5


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    Key Data at November 30 (Fiscal year end) (Consolidated figues in millions of euros) % variance over prior year ANNUAL RESULTS 2005 2004 2003 2002 2001 05 04 03 02 01 Profit before tax 218.8 200.6 179.9 155.4 129.1 9.0 11.6 15.8 20.4 15.0 Profit after tax 143.7 130.7 116.1 98.1 82.4 9.9 12.6 18.4 19.1 15.7 Cash-Flow 151.4 139.6 131.2 113.8 93.5 8.5 6.4 15.3 21.7 29.0 Gross dividens 134.2 119.8 101.4 87.2 74.8 12.0 18.1 16.4 16.5 11.8 % variance over prior year SHAREHOLDERS´ EQUITY 2005 2004 2003 2002 2001 05 04 03 02 01 Capital and Reserves 102.1 99.0 91.6 81.9 76.6 3.2 8.0 11.8 6.9 (4.3) % variance over prior year SALES DATA 2005 2004 2003 2002 2001 05 04 03 02 01 New Installations 172.7 159.2 171.7 168.8 144.5 8.5 (7.3) 1.7 16.8 14,8 Service 474.2 443.4 413.6 388.4 352.6 6.9 7.2 6.5 10.1 13.5 Total Exports 62.9 74.6 61.9 59.4 59.2 (15.6) 20.5 4.2 0.3 (2.9) Exports to Portugal (*) (9.1) (11.6) (10.8) (11.0) (13.0) (21.9) 7.2 (1.7) (15.5) 14.3 Net Exports (without Portugal) 53.8 63.0 51.1 48.4 46.2 (14.5) 23.3 5.5 4.7 (6.8) Total 700.7 665.5 636.4 605.6 543.3 5.3 4.6 5.1 11.5 11.7 (*) Deducted as they are already included in consolidated sales. % variance over prior year NEW INSTALLATIONS 2005 2004 2003 2002 2001 05 04 03 02 01 Orders received 176.1 181.3 152.2 182.0 150.7 (2.9) 19.2 (16.4) 20.7 0.3 Backlog 149.4 129.6 109.9 124.6 112.8 15.3 17.9 (11.8) 10.4 5.9 % variance over prior year SERVICE DATA 2005 2004 2003 2002 2001 05 04 03 02 01 Units under maintenance 219,167 210,428 203,447 194,487 183.735 4.2 3.4 4.6 5.9 4.2 Maintenance centers 340 338 329 325 324 0.6 2.7 1.2 0.3 0.6 % variance over prior year MANPOWER 2005 2004 2003 2002 2001 05 04 03 02 01 Total manpower 5,262 5,109 5,045 4,974 4,780 3.0 1.3 1.4 4.1 1.0 OTIS


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    Stock Market Data at December 31 (Euros) CAPITAL STOCK 2005 2004 2003 2002 2001 Amortized Shares - - - 855,321 1,346,557 Number of shares before increase share capital 216,473,697 196,794,270 178,903,882 162,639,892 148,632,013 Increase in share capital (bonus) Ratio 1x10 1X10 1X10 1X10 1X10 Number of shares at December 31 238,121,066 216,473,697 196,794,270 178,903,882 163,495,214 Par value 0.10 0.10 0.10 0.10 0.10 Capital Stock (millions) 23.8 21.6 19.7 17.9 16.3 PROFIT PER SHARE 2005 2004 2003 2002 2001 Profit After Tax 0.603 0.604 0.590 0.548 0.504 P.A.T. adjusted by capital increase 0.549 0.488 0.412 0.346 P.A.T. adjusted variance 9.9% 12.6% 18.4% 19.1% 15.7% DIVIDEND PER SHARE (*) 2005 2004 2003 2002 2001 Total dividend paid in calendar year (Millions) 134.2 119.8 101.4 87.2 74.8 Dividend per share paid in calendar year 0.620 0.609 0.567 0.536 0.504 adjusted by share capital increase 0.609 0.515 0.443 0.380 Adjusted dividend variance 12.0% 18.1% 16.4% 16.5% 11.8% PRICE PER SHARE 2005 2004 2003 2002 2001 Price 21.40 18.87 16.50 12,55 10.42 Adjusted price by share capital increase 17.15 13.64 9.43 7.15 Adjusted price variance 24.7% 25.8% 44.6% 31.8% 21.5% ANNUAL YIELD OF ONE SHARE (%) (*) 2005 2004 2003 2002 2001 Dividend 3.286 3.691 4.518 5.144 5.390 Increase in market value 24.748 25.800 44.621 31.792 21.488 Total 28.034 29.491 49.139 36.936 26.878 (*) Calculated with dividends paid in the calendar year, for a share owned on January 1st and valued at last price on December 31st. TRADING DATA 2005 2004 2003 2002 2001 Market capitalization (millIons) 5,096 4,085 3,247 2,245 1,704 Trading Frequency (%) 100.0 100.0 100.0 100.0 100.0 Efective value traded (millions) 683 506 332 223 310 STOCK MARKET RATIOS 2005 2004 2003 2002 2001 PER (Price/Profit after tax: times) 35.5 31.2 28.0 22.9 20.7 PER variance 13.5% 11.7% 22.2% 10.6% 5.0% Pay-out % (Dividend paid/Profit after tax) (*) 93.4 91.7 87.4 88.9 90.8 Change in Zardoya Otis´ Market Value: Annual (%) 24.7 25.8 44.6 31.8 21.5 Base 100 = 31/12/1985 (IGBM start) 6,700.8 5,371.5 4,269.8 2,952.4 2,240.2 Base 100 = 1/1/1990 (IBEX 35 start) 1,537.7 1,232.7 979.9 677.5 514.1 Madrid Stock Market Index (IGBM) variance Annual (%) 20.6 18.7 27.4 (23.1) (6.4) Base 100 = 31/12/1985 1,156.2 959.1 808.0 634.0 824.4 Base 100 = 1/1/1990 389.8 323.4 272.4 213.8 278.0 IBEX 35 variance Annual (%) 18.2 17.4 28.2 (28.1) (7.8) Base 3000 = 1/1/1990 10,733.9 9,080.8 7,737.2 6,036.9 8,397.6 Base 100 = 1/1/1990 357.8 302.7 257.9 201.2 279.9 (*) See explanation on page 18 of management report 7


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    OTIS


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    Management Report on the Zardoya Otis Group Financial and Stock Market Data


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    Management Report on the Zardoya Otis Group Presentation of Annual Accounts I n accordance with the provisions of current Likewise, both these Annual Accounts and the mercantile legislation, we present the Management Report for the year have been Consolidated Annual Accounts, formulated by reviewed and certified by the firm the Directors of Zardoya Otis S.A., below. PricewaterhouseCoopers Auditores, S.L. These Consolidated Annual Accounts of the The Notes accompanying the consolidated Zardoya Otis Group for the year ended financial statements of the Zardoya Otis Group November 30, 2005 were signed by the include the accounting principles applied and members of the Board of Directors at the provide, in explanatory notes, details of the meeting held in Madrid on February 23, 2006. most important captions, showing the movements in 2004 and 2005 in two columns Tenerife Auditorium OTIS


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    Profit and Loss T he consolidated profit before tax was 218.8 The profit per share was 0.603 euros in 2005. million euros at the 2005 year end, representing This figure should be compared with the profit an increase of 9.0% on the 200.6 million euros per share of 0.549 euros in 2004, which value of 2004. was reached after applying the pertinent This increase was slightly higher in net terms: adjustment for the capital increase (0.604 9.9%, totalling 143.7 million euros, in euros/1.10 shares), finally representing growth comparison with the 130.7 million of the of 9.9%. preceding year. Although the rate of 9.9% was The consolidated cash flow rose by 8.5% in lower than the 12.6% attained in 2004, it 2005, totalling 151.4 million euros. clearly exceeds the percentage increase in the consolidated sales for 2005, which was 5.3%. Profit after Tax vs. Dividends Paid in the calendar year (Pay-Out %) Millions of Euros 110% 94.01 % 170 93.40 % 90.83 % 91. 67 % 89.89 % 88.85 % 87.36 % 160 84.73 % 90% 150 80.78 % 143.7 140 130.7 130 134.2 70% 120 116.1 119.8 110 98.1 100 101.4 50% 90 82.4 80 87.2 71.2 70 62.9 74.8 57.1 66.9 30% 60 51.6 50 56.5 48,4 40 41.6 30 10% 20 10 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 Profit after Tax Dividends Paid in the calendar year Pay-Out (%) 11


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    Sales Total Sales New Sales T otal consolidated sales for the year 2005 grew Work completed: The value of work by 5.3%, reaching 700.7 million euros, in completed in New Installations grew by 8.5% comparison with the 665.5 million of 2004. in 2005, meaning that the highest level in the By areas of activity, the behaviour of the Group’s whole history was attained: 172.7 businesses may be summarized as follows: million euros, higher than the previous record (the 171.7 million of 2003). This was due to the heavy upward trend in both orders received and the backlog of unfilled orders in 2004, which is the essential basis for determining the higher or lower rate of new sales in later months. New Sales billing represented 25% of total billing in 2005. Orders received: The 2005 figure for orders received for new sales was 176.1 million euros, slightly lower than the 2004 figure, which was Sales 181.3 million. Millions of Euros Backlog of unfilled orders: The slight decrease in the value of orders received did 800 not prevent the backlog of unfilled orders from 701 666 +5% undergoing a strong forward thrust, as in 2004. 700 636 +5% 606 +5% 8% The increase was, specifically, 15.3%, reaching +12% 9% 600 543 8% a record volume of 149.4 million euros, almost +12% 8% 9% 20 million higher than one year earlier. 500 The backlog of unfilled orders existing at the 400 beginning of 2006 represents a volume 64% 64% 65% 67% 67% equivalent to almost 10 months of New 300 Installations activity, thus guaranteeing an important part of the activity for the year. 200 100 27% 28% 27% 24% 25% 0 2001 2002 2003 2004 2005 New Equipment Service Exports OTIS


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    Service Exports Sales: Overall Service billing totalled 474.2 Finally, net export billing (not including sales million euros, 6.9% higher than in 2004. to Portugal) dropped from 63 million euros in The importance of the Service activity within 2004 to 53.8 euros in 2005, i.e. by 9.2 million Zardoya Otis’ business structure was again euros. Nevertheless, it was in line with the obvious in 2005, since it represented 67% of billing of previous years. total Consolidated Sales. In 2005, net exports had a percentage share Units under maintenance of the Zardoya of 8% in the Group’s total consolidated billing. Otis Group: At the 2005 year end, the increase was 4.2% on the preceding year. The growth in absolute terms was 8,739 units, totalling 219,167. 13


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    Dividends The dividends distributed and paid during the calendar year 2005 were: 2005 Gross per share Shares entitled to dividend Total gross dividend March 10. 2005 0.145 euros 216,473,697 31,388,686.07 € June 10. 2005 0.145 euros 216,473,697 31,388,686.07 € September 12. 2005 0.150 euros 238,121,066 35,718,159.90 € December 10. 2005 0.150 euros 238,121,066 35,718,159.90 € TOTAL DIVIDENDS PAID IN THE CALENDAR YEAR 2005 134,213,691.94 € Shares entitled to dividends Total gross dividend paid in the calendar year T he first dividend, paid on March 10, 2005, and The dividends paid in 2005 totalled 134.2 the second, paid on June 10, 2005, were applied million euros, in comparison with the 119.8 to the total outstanding shares, the volume of million of the preceding year, representing a which was 216,473,697. The amount of each 12% increase and a pay-out of 93.4%, thus one of these dividends was 0.145 euros per continuing the progressive increase in this rate share. over recent years. The 21,647,369 shares resulting from the 1 x 10 bonus issue that took place on June 13, Millions of Euros 2005 were entitled to the third dividend, 140 +12,0% distributed on September 12, 2005, and the fourth, paid on December 10, 2005, meaning +18,1% 120 that the total shares entitled to dividends were +16,4% 238,121,066. The amount of both the third 100 +16,5% and fourth dividends was 0.150 euros per 80 share. +11,8% 134.2 60 119.8 101.4 87.2 74.8 40 20 0 2001 2002 2003 2004 2005 OTIS


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    Evolution of Capital Capital increase Treasury Stock A fter the first quarterly dividend charged to the The Board of Directors did not make use of the 2005 profit had been distributed on June 13, authorization to acquire treasury stock granted 2005, the capital increase approved by the by the General Meeting of Shareholders of April General Meeting of Shareholders held on April 21, 2005. 21, 2005 took place. At the date of the present General Meeting of The ratio was one new share for each ten old Shareholders, no Zardoya Otis Group company outstanding shares, by means of the issuance holds treasury stock. of 21,647,369 new bonus shares charged to the Voluntary Reserve, for an amount of 2,164,736.90 euros. The subscription took place between June 13 and 27, 2005, inclusive. As a result of this increase, the capital stock rose to 23,812,106.60 euros, represented by 238,121,066 ordinary shares with a par value of 0.10 euros each. The new shares were entitled to the dividends paid after the closing date of the increase and, therefore, received the dividends distributed on September 12 and December 10, 2005. The new shares were listed on the Madrid, Barcelona, Valencia and Bilbao Stock Exchanges, effective July 29, 2005. 15


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    Stock Market T he Spanish stock market ended its third year of which reached their highest point of over 70 heavy revaluations. The main indicator, the IBEX dollars, and the successive interest rate increases 35, gained 18.2 percent in 2005, which was in the United States, in addition to the change added to the rises of 28.2 and 17.4 percent in in monetary policy in Europe with the first rise 2003 and 2004, respectively. in rates in five years. 2005 was the year of the small and medium- The stock markets, notwithstanding, found several sized securities in the Spanish market. Several allies. Firstly, with the 15% drop in the euro, dozens of them amply exceeded the stock which improves European export expectations. market’s average profitability and nine companies Secondly, with the symptoms of economic more than doubled their quoted price. recovery in Europe and the solid growth of the The great interest shown by the investors in this United States. And, lastly, with the healthy state type of securities led to the creation of two new of companies in general, which presented record Spanish stock market indices, the IBEX Small results and, apart from some exceptions, raised Cap and the IBEX Mid Cap –in which the Zardoya their forecasts for the year 2006. Otis share was included-, which began to operate European investors appear to have become in July 2005. In addition, the avalanche of convinced that the worst of the crisis has passed purchases of shares in these companies had a and that Germany will gradually recover strength great deal to do with the growing activity of and, therefore, the markets have distanced venture capital funds, which has become a themselves from the pessimism that has recently determining factor in the market. been predominant in the United States market, The markets have confirmed their attraction by where the interest rate rises have left a bitter meeting the challenge of threats so serious for sensation among the investors, who fear that the economy as the rise in oil prices, the high price of money will lead to a slowdown in economic growth in a fairly immediate future. For the first time in four years, the euro lost against the dollar in 2005, ending the year at 1.1830 dollars, 12 percent lower than twelve months earlier. The difference between interest rates at the two sides of the Atlantic –in favour of the United States currency- and the institutional crisis into which the European Union sunk in the middle of the year after the draft European Constitution had been rejected, tilted demand towards the dollar, at the expense of the common currency. OTIS


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    Evolution of Zardoya Otis, S.A. During the upward cycle of the international and at the 2005 year end, in comparison with the Spanish stock exchanges, the evolution of Zardoya 1,332 million with which it ended 1999. In these Otis’ shares once again beat the main references 6 years, therefore, the capitalization has been indices in 2005 (IBEX-35 and the General Index multiplied by 3.8. of the Madrid Stock Exchange). This has been Reflecting this excellent sustained behaviour on happening uninterruptedly since the year 2000. the Stock Exchange, the PER rose again in 2005, The price of the share at the 2005 year end was reaching 35.5 at the year end. 21.40 euros per share, which represented a The keys to Zardoya Otis’ stock market evolution revaluation of 24.7% in relation to the adjusted have not changed. If anything, they have been share value of 17.15 euros at the 2004 year reinforced. They are, basically, the company’s end. The adjustment to which we refer is the capacity to generate growing profit rates year result of dividing the value of 18.87 euros at after year, irrespective of whether the economic December 31, 2004 by 1.1, as a consequence cycle is favourable or otherwise, and the of the 1 x 10 bonus issue carried out in company’s shareholder remuneration policy, very June 2005. much appreciated among the investor community With 2005, Zardoya Otis has now achieved an because of its scope, continuity and predictability, upward evolution in the markets over 6 qualities which are all very attractive in the consecutive years. This meant that the stock context of the uncertainties of the global market capitalization was 5,096 million euros economy. Zardoya Otis Variation of Stock Stock Market Evolution Market Evolution INDEX Base 100 = 31 / 12 / 85 Madrid Stock Market Index 9000 8000 6,700.8 7000 6000 5,371.5 5000 4,269.8 4000 2,952.4 3000 2,240.2 1,751.6 1,844.0 2000 1000 1,008.6 959.1 1,156.2 880.7 824.4 634.0 808.0 0 2000 2001 2002 2003 2004 2005 Zardoya Otis’ Index is the % variation in its Stock Market Capitalization 17


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    Stock Market I n the usual way, to allow the evolution of our shares to be analyzed historically, we provide a chart with the key figures since 1990, the year when the selective index IBEX-35 first appeared. Historical Stock Market Data ( Euros) SHARE PRICE Date Capital Increase Last Adjusted Variance P.E.R. Pay-Out Market and Splits Price Price % % (*) Capitalization (Mill. Euros) dec-90 63.71 1.47 5.69 13.8 80.1 350.2 dec-91 1x5 61.30 1.70 15.46 14.0 75.5 404.4 dec-92 52.23 1.45 (14.80) 11.0 79.8 344.6 dec-93 1 x 10 81.74 2.49 72.15 17.0 80.8 593.1 dec-94 1 x 10 82.28 2.76 10.73 17.4 57.4 656.8 dec-95 1 x 10 79.63 2.94 6.46 17.0 98.4 699.2 dec-96 1 x 10 90.75 3.68 25.36 19.5 100.9 876.5 dec-97 1 x 10 106.68 4.76 29.31 22.0 80.8 1,133.4 dec-98 split 5 x 1 and 1 x 6 26.62 6.93 45.56 28.9 84.7 1,649.8 dec-99 split 2 x 1 and 1 x 10 9.77 5.59 (19.26) 21.2 89.9 1,332.1 dec-00 1 x 10 9.35 5.89 5.27 19.7 94.0 1,402.3 dec-01 1 x 10 10.42 7.15 21.49 20.7 90.8 1,703.6 dec-02 1 x 10 12.55 9.43 31.79 22.9 88.9 2,245.2 dec-03 1 x 10 16.50 13.64 44.62 28.0 87.4 3,247.1 dec-04 1 x 10 18.87 17.15 25.80 31.2 91.7 4,084.9 dec-05 1 x 10 21.40 21.40 24.75 35.5 93.4 5,095.8 (*) Dividends paid in the calendar year / Profit after tax OTIS


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    Creating Value for the Shareholder I n the company’s more than 30 years’ history by returning contributions to the shareholder. on the Stock Exchange, one of the main The present par value is 0.10 euros per share. priorities of the Board of Directors of Zardoya In 2001 and 2002, the Company repurchased Otis has always been creating value for the its own shares at a reasonable price and shareholder, measured as total remuneration: subsequently wrote them off. Although this did revaluation of the share value plus dividends not represent any income for the shareholder, plus other monetary contributions. it improved the profit per share. Zardoya Otis, S.A. was one of the first companies Zardoya Otis, S.A. is the only company on the in Spain to pay four quarterly dividends on a Spanish Stock Exchanges to have followed a regular basis (in 1979) and is the only one that policy of bonus issues -24 in the last 25 years- has maintained this policy uninterruptedly over , maintaining the same dividend for all the new the last 26 years. The dividend paid on shares issued and recovering the price the share December 10, 2005 was the 104th dividend to had before the bonus issue took place. be paid by the Company since the As may be seen in the Stock Market Data chart, commencement of the policy of regular at December 31, 2005, the total annual payments, which, furthermore, have been for profitability of a share acquired at the closing growing amounts each year. price on December 31 comprised one part The dividend pay-out, which was 80% at the relating to the dividend received and another beginning of the eighties, has risen gradually relating to the variation in the adjusted share until it has reached a level of almost 100%. price. In 2005, the total profitability was 28.0%, In addition to the dividend, Zardoya Otis, S.A. which should be added to the 29.5% of 2004, has reduced the par value of its shares on four the 49.1% of 2003 and the 36.9% of 2002. occasions -1997, 1998, 1999 and 2000- 19


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    Forecast Evolution F ar from the deceleration that many forecast for the building sector in 2005, this sector once again showed considerable strength and confirmed its position as one of the driving forces behind the Spanish economy, which continues to lead the growth levels in the whole of the European Union. This favourable environment is reflected in the new orders obtained by Zardoya Otis in 2005, which were very similar to those of the record year 2002, allowing the Company to enjoy a very significant backlog of unfilled orders. In the light of these factors (and, primarily, the markedly anti-cyclical nature of a very significant part of our activity), we can contemplate 2006 with moderate optimism. OTIS


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    Technical and Commercial Information Otis GeN2 Comfort, the efficient solution for homes T he new Otis GeN2 Comfort model is mainly Moreover, Otis’ new elevator has a gearless aimed at the residential segment, where silent machine. Thus, numerous mobile parts are performance, energy saving and durability are eliminated, reducing wear and tear, increasing indispensable. reliability and durability and attaining a This is a machine room less elevator with a considerable quieter performance, an aspect permanent-magnet engine. The main innovation of fundamental importance that provides is that it does not use the traditional steel greater comfort for the top floors of buildings. traction and suspension ropes, but flat The GeN2 Comfort travels at a speed of 1 metre polyurethane-coated steel belts exclusive to per second and has been designed to carry Otis (GeN2 system), which allows the greatest loads of from 320 kg. (4 people) to 1,000 kg. technological advances to be applied to (13 people). It includes variable frequency eliminate noise and save both energy and movement control, which provides greater space. comfort and a smoother performance, and an The flat belts weight 20 percent less than the excellent stopping accuracy. In the residential traditional ropes and use a considerably smaller market at present, it is very usual for the speed traction sheave, which allows the mechanical control to have two speeds, which makes for components to be made lighter and smaller, a much less comfortable trip than that attained thus reducing energy consumption by up to 70 when the control is by variable frequency. percent. At the same time, contaminating waste is not generated, since neither the polyurethane belts nor the machine need oiling. 21


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    Technical and Commercial Information GeN2 system, the reinvention of the elevator T he GeN2 represented the first substantial change in traction technology since the elevator The reinforced steel belts are much more flexible than the ropes, which makes it possible to use was invented in 1853. The use of flat belts, a traction sheave with a very small diameter rather than the traditional steel ropes, has and a small machine. Thus, the machine room become one of Otis’ distinguishing features. becomes unnecessary. Furthermore, they are It is a technology developed and patented very quiet and last for two or three times longer by Otis. than the traditional ropes because, since the On each belt, 12 parallel groups of 588 steel surface of adherence is larger, they undergo wires are distributed. They are 3 mm thick and less wear. 30 mm wide and each one of them can support Du to their polyurethane coating, they do not a weight of 3,200 kg. require lubrication (unlike the traditional ropes, which have to be lubricated through their central core) and a more silent performance is attained with less vibrations, since direct contact of metal with metal is avoided. OTIS


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    Decoration Óptima, quality and functionality Lúmina, a contemporary classic The Óptima cab is a perfect example of how Probably the most significant factor that defines elegance is attained through a simple and a cab is the lighting. In the Lúmina cab, we original design. Its unmistakable personality have created an extraordinary range of is marked by the control panel, from where the possibilities, varying from the most discreet to cab lighting originates. the most sumptuous. In combination with 4 In addition to creating a pleasant atmosphere, possible materials for the wall finishes, infinite its simple curved design endows the cab with aesthetic effects may be attained. originality and elegance. Furthermore, the steel The great pains that have been taken over the buttons guarantee reliability and durability. details are obvious in the cab accessories: Attractive easy-maintenance finishes are offered ranging from the directional cab light, which in three different materials. uses blue LED diodes to achieve a greater light Selecta, personality and distinction intensity, to the aluminium kick plates. The attractive concept of a car operating panel from which the cab lighting originates, creating a pleasant atmosphere, is complemented by a large selection of finishes for the car panels. The wide range of options is also applicable to the floor, together with two attractive designs for the handrails. The car operating panel is offered in two versions: with or without button plates. In the latter case, the floor numbers are cut by laser. 23


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    Manufacturing and Engineering I n the year 2005, the increase in the demand our costs, a program to detect opportunities for our products that had commenced in the and reduce inefficiencies was launched, preceding year continued, reaching a historical involving a large part of the personnel, as may record in relation to the supply of complete be seen by the fact that almost 40% of the elevators. In this section, we should highlight suggestions made in the Company came from the favourable evolution of exports to other manufacturing. This effort and the beneficial Otis companies, which grew by 13.2%. All this effect of the increase in volume, which allowed speaks clearly of the quality of our elevators, us to reduce the repercussions of the fixed also corroborated by the fact that various other expenses per unit produced, partially palliated Otis companies have taken them as references the impact of the raw material price increase for the benchmarking of their own elevators. on the cost of the product. One of the consequences of this increase in Although all the foregoing is very significant, activity is that the plants’ contribution to the we will remember the year 2005 as the year company’s profit grew by 11.7%. in which Zardoya Otis launched its Otis GeN2 During the year, the upward pressure on material Comfort model. prices was confirmed, although the evolution was uneven. Thus, while steel plate behaved favourably in the second half of the year, the prices of aluminium and copper showed a spectacular increase in the last few months, as was also the case of logistic costs and plastics, as a result of the increase in crude oil and the rise in value of the dollar. In order to contain the inflationist threat that this represented for OTIS


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    This machine room less elevator, designed in has this elevator been chosen by the magazine Spain, has allowed a reduction in the weight Actualidad Económica as one of the 100 best of machinery and its suspension elements, ideas of 2005 and received a prize for Social which has a beneficial effect, not only by Responsibility due to its considerable energy reducing the energy used by our customers to saving and low noise level. operate their elevators and the raw materials Turning to other matters, the decrease in employed in the elevator components component production was much less than themselves, but also on the energy and by- expected. Thus, shipments of geared machines products consumed in the manufacturing dropped by only 1.7%, in spite of the fact that, processes. in most of the markets we supply, Otis has bet We have estimated that, when all the machine on promoting the GeN2 model equipped with room less elevators produced by Zardoya Otis a gearless machine, produced in the USA and use this technology, around four million kilos China. Anticipating that the technological of materials will be saved per year. Not in vain change will inevitably affect us and that the production of geared machines will drop very considerably, a project was launched in the year to design and manufacture locally a gearless machine equipped with a permanent- magnet synchronous engine, with which we hope to equip the Gen2 elevators commercialized by Zardoya Otis and compete with the foreign manufacturers in supplying to other Otis companies. The mass production of this innovative machine should commence in mid-2006. 25


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    Achieving Competitive Excellence T he constant improvement in the quality of • Processes will be carried out without failures Zardoya Otis’ products and services, which has or errors “at the first attempt”. enabled it to reach and maintain the leading • Anything that prevents this from being position in its sector, has always been one of achieved will be a difficulty, which will be the Company’s priorities. considered a treasure, since it will show us For several years, Zardoya Otis has been why and how the errors took place, giving implementing the corporate program A.C.E. us the opportunity to eliminate them. (Achieving Competitive Excellence), aimed to • The result will be measured objectively optimize processes in all the Company’s (process metrics) and subjectively (customer activities (commercialization, design, opinions). There are three areas of action manufacturing, assembly, maintenance and within this program: management) with the goal of attaining the • ACE Manufacturing: Aimed to improve Excellence that allows us to fully satisfy our manufacturing processes. This is the program customers, at the same time as failures, time applied to the Madrid and San Sebastián plants. wasting and activities with no value-added are • ACE Management: Aimed to optimize the eliminated and competitiveness is assured. Company’s management processes. This program was launched by United Implemented in the head administrative offices Technologies Corporation (UTC), the parent and for the commercial network management company of Otis Elevator, and is a system area. common to the whole Corporation, starting on • ACE Sales and Works: Addressed to the three premises: operational processes of the commercial network. This is the program applied to the Company’s basic business processes: Sales, Assembly, Maintenance, Unit Modernization, Customer Service and Collections. The priority of the ACE program is to find the initial cause of the errors and thus identify, prioritize and continuously improve the processes, avoiding delays and failures on the basis of employees’ knowledge and application of the following Decalogue: OTIS


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    1.Oriented at the Company’s business. The 8.Obtain the customer’s opinion on our products result of ACE activity is measured in tangible and services, analyze and set up plans for benefits. continuing improvement. 2.Team work and active participation. 9.Treat complaints as an opportunity that allows 3.Put the work environment in order and always failures to be detected and eliminated keep it in optimal condition without risks. definitively. 4.Always keep the Company’s tools and 10.ACE is a CONTINUING IMPROVEMENT equipment ready for immediate use. PROCESS that is evaluated and certified at 5.Describe the processes without ambiguities, four levels. continually analyze and improve them. The certification at each one of these levels is 6.Measure errors, analyze the causes thereof carried out in audits performed at each work as a team and establish corrective actions centre and central area or department. These intended to eliminate the causes of the error audits evaluate the degree to which the definitively. requirements fixed for each level are met, the 7.Identify unnecessary activities, those which improvements made and the quantifiable do not add competitive value, in each process benefits obtained. and eliminate them. Excelence Worldwide Example Tangible Results Application and 1ST Evaluation Gold Knowledge and Definition of the Starting point Silver Bronze Qualification 27


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    Corporate Social Responsibility Safety Z ardoya Otis is aware of the role it must play in Zardoya Otis has been implementing a full Safety, the Spanish market, due to its number of Health and Environment Management System employees and long list of customers, its presence for years in all its work centres. This System in every corner of the country and the social establishes the activities and guidelines to follow relevance of the industry in which it operates, in order to reach the highest standards in the vertical transport, on which everyone’s everyday sector in these areas. mobility depends to a greater or lesser degree. The structure of this Management System begins Neither should we forget, of course, the growing with Management commitment, which is number of investors who, year after year, decide communicated to all the employees through the to place part of the savings they have today or Safety, Health and Environment Policy and their provisions for the future in our shares. personal participation in the different activities Thinking about this whole universe of different established each year in the pertinent Plan. publics, the Company wishes to go beyond mere This Policy establishes the priority objective of trading activity to create profound links with all providing all the Company’s employees with a of them through a Corporate Social Responsibility safe work place and conserving the environment. strategy capable of generating mutual benefits This, combined with an exhaustive evaluation of in all areas, ranging from safety to conservation the work place and the innovative design of of the natural environment. methods, tools and work teams, allows us to permanently develop better and safer products, an aspect which distinguishes us in the market and is valued positively by our customers and users. The participation and training of all the employees OTIS is of basic importance in attaining the objectives February 27, SAFETY DAY and, in this respect, the Company has established programs like the suggestion program, safety Segurity depends on meetings and courses, communications on lessons LOOK, EVERYONE learnt from incidents and accidents, safety campaigns, drawing contests or Safety Day itself IDENTIFY THE RISKS (February 27), which has been taking place in the Company for the last eight years. AND PROTECT YOURSELF LINK UP FOR SAFETY! February 27, 2006 OTIS


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    The Management System, combined with the Through the suggestion program, in which all participation and efforts of all those involved the Company’s employees can participate, ideas (management, employees, Safety Committee, are received on components, processes, etc., technical Committees, etc.), means that the which contribute to improve different aspects Company’s safety culture becomes stronger each related to the environment. year and that rules in this respect are applied, Some of the most relevant actions that have not as impositions, but due to the belief that been implemented and have given rise to they are beneficial to all concerned. These actions environmental improvements have been the have made a reduction in the accident rate replacement of welded parts by parts joined in possible for a further year, meaning that the a different way, the change of materials in order favourable trend continues and showing the to reduce or eliminate painted parts, the efficiency of our Management System, clearly elimination of the paint line, the elimination of bringing us closer to the final goal of Zero several chemical products, a reduction in energy accidents. and industrial water consumption, the replacement of glue or the elimination of organic vapour emissions. Continuing with the Environment environment policy, in 2005 the Otis GeN2 Activities to improve and protect the environment Comfort elevator was launched. Thanks to its are one of the basic aspects of Environment exclusive flat-belt design, it consumes 41% less Plans of the Company and our plants. The most energy than a conventional two-speed elevator. appropriate materials, processes, products and This aspect contributes significantly to reducing packaging for each piece of equipment are CO2 emissions into the atmosphere. It also permanently being studied to improve their means a reduction of 51% in the generation of safety, quality and effect on the environment. contaminating waste in comparison with a Certification under the Standard ISO14001, conventional electric elevator and more than achieved at our three plants (Madrid, San 95% in comparison with a hydraulic elevator. Sebastián and Munguía), together with the highly These environmental practices, which began favourable reports obtained in the various audits many years ago in the plants and now form part that have been conducted, bear out the efficiency of the Company’s environmental culture, allow of Zardoya Otis’ Environment Management a significant and progressive improvement to be System and of the actions and programs that attained each year in all the parameters related have been implemented, which are developed to the environment. further each year, in order to continually improve the reduction and/or elimination of waste, pollution, etc. 29


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    Corporate Social Responsibility Smokeless Campaign Training In view of the foreseeable approval of the The purpose of our Company’s Strategic Training legislation that would prohibit smoking in work Plan, based on the prior identification of centres from January 1, 2006 onwards, Zardoya strategic needs in this area, is simply systematic Otis wanted to anticipate events and promoted support of our employees in order to have the a transition period until said law came into most highly trained, prepared and motivated force. During this period, the Company tried to personnel in the sector, thus also helping the help smokers to adapt to the future situation cultural change represented by the introduction in the best way possible. of Service Excellence, for the benefit of our For this purpose, an information campaign was customers, the society and our shareholders. launched on the need to create smoke-free We should highlight the following training spaces, given the evidence of the impact on activities in the course of 2005: Service people´s health of both active and passive Excellence seminars and courses, technical smoking. training, health and safety at work, Visual material of varius kinds was designed management development, commercial to support this campaign and was distributed management, quality, communications, to all the Company´s work centres: posters, computing, ethics and English. In the technical stickers and informational leaflets. training, the new Otis GeN2 Comfort has played This Medical Service team advised those who the leading role. were interested in stopping smoking on the A total of 387 seminars and courses were methods available to do so and the Company imparted in the aforementioned areas, most of paid for the treatment of all employees who which were attended in person, representing decided to stop. 30,000 hours, with an average of 36 hours per This iniciative fell within the framework of person in the Group. Zardoya Otis´health at work policy, which The final objective of this Plan was to develop includes the commitment to adopt the measures and reinforce the different levels of the Company necessary to attain the objective of offering its in Service Excellence, competitiveness, workers the means and training required to innovation, initiative, team work, leadership, work with a high degree of health and safety etc., thus improving the competency profiles at work and in the environment. that comprise the organization, within the strategy based on Management by Competency. OTIS


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    Educational program for employees Training program for scholarship-holders This program commenced in 1997, at the For the last 18 years, our organization has been initiative of United Technologies Corporation signing framework agreements for collaboration (UTC) and its final objective is to provide the with the most prestigious public and private maximum support for the education and universities in the country and cooperation individual development of all the people who agreements with public professional training wish to study professional training, university institutes. access, lower or higher university studies, The initiative has a clear social objective, in doctorates, masters’ degrees, etc. at public other words, it allow new promotions of institutions. These studies are fully financed by students the opportunity to undergo their first the Company and, once they have been professional training in the business world, completed, the employees are rewarded with coordinated by the aforementioned public and a certain number of shares in UTC, depending private institutions. on the qualification or postgraduate title In 2005, 112 students underwent training. In obtained. the last 12 years, 18% of all the people who A total of 33 people studied under this program have participated in this program have been in 2005, 9 of whom were studying for masters’ hired. degrees, 6 for ordinary degrees in engineering and other subjects and 16 for technical engineering degrees and diplomas, while 2 followed additional programs. 31


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    Corporate Social Responsibility Social action Zardoya Otis’ philosophy regarding its social In 2005, Zardoya Otis had a significant presence action works on the basic premise of employee in the basketball championships for the mentally participation. When there is any initiative, it is disabled that were held in November in Madrid. the employees who devote their time and More than sixty employees, family members efforts to collecting funds, organizing events and friends were present at the municipal or carrying out different activities. In exchange, facilities of the Marqués de Samaranch Sports the Company undertakes to contribute the Centre in order to help the players, collaborate same amount of money as has been previously in the organization of the adapted games or collected by the employees. Thus, the employees simply encourage the participants. are stimulated to take a really active and Zardoya Otis’ relationship with Special Olympics palpable part. seeks employee commitment and also customer As has now become traditional, Zardoya Otis’ collaboration. With regard the former, apart most important collaboration is with Special from their monetary contributions and the Olympics, an association founded in the sixties voluntary work carried out by many of them, by Eunice Kennedy Shriver and presided in there is an Otis Team composed of 50 people Spain by H.R.H. Princess Elena. Promoting sport that manages the different fund-raising events among the mentally disabled is one of Special organized. Olympics’ main objectives, helping them to Customers are involved through customer improve their quality of life and favouring their satisfaction surveys: each year almost 100,000 social integration. questionnaires are sent to the same number of customers, enquiring about their degree of satisfaction with the service provided. For each completed questionnaire returned, the company makes a monetary contribution to Special Olympics. OTIS


  • Page 33

    Other associations Other associations, such as Nantik Lum or Save This assistance is, fortunately, leading to the the Children, have also benefited from the consolidation of the micro-company among solidarity of the Zardoya Otis employees. Several these groups, which, in turn, helps to improve conventions, which have been successively the leadership of the indigenous woman. renewed, have been signed with Nantik Lum Zardoya Otis was likewise present at the 1st in order to help various groups: among them, International Campus for solidarity organized six formed by 164 women from the Lacandona by Save the Children. A group of 46 Iraqi boys Jungle (Chiapas, Mexico), representing 975 and girls travelled to Cuacos de Yuste (Caceres) families. to spend a few weeks far from the conflict that In 2005, the Chiapas women made notebooks, is taking place in their country and enjoy a which were distributed to our employees and period of leisure, education and multicultural branches in return for a donation. The amount living with Spanish boys and girls. collected was sent to the area in order to solve The Company collaborated with Save the family and community needs in the region. Children by contributing the medical services that attended to the children during the campus 33


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    OTIS


  • Page 35

    Auditor´s Report and Consolidated Annual Accounts Zardoya Otis Group


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    Audit Committee The Audit Committee has held seven meetings in 2005, at which it has deliberated and informed favourably to the Board of Directors on the following points: 1. Review of the information on the four quarterly reports sent to the Stock Market National Commission and the Stock Exchanges. 2. Reports on the payment of quarterly interim dividend charged to the profit for the fiscal year 2005. 3. Increase in share Capital. 4. Follow up of the Internal Control Plan 2005. 5. Financial Information Rules (NIIF). 6. Corporate Governance Report. 7. Review, with the external auditors, of the individual Annual Accounts and those for the consolidated group for the year 2005, later on formulated by the Board of Directors. 8. Proposals to the Board of Directors for the appointment of auditors for Zardoya Otis, S.A. and the consolidated Group for the year 2006. 9. Review of the intercompany transaction with the majority shareholder Group of Zardoya Otis, S.A. 10. Review of the application of the Technical Assistance Contract with Otis Elevator Company. The minutes of the meetings of the Audit Committee are in the possession of the Secretary to the Board of Directors.


  • Page 37

    Paseo de la Castellana, 43 28046 Madrid Tel. +34 902 021 111 Fax +34 913 083 566 A free translation of the report on the consolidated annual accounts originally issued in Spanish and prepared in accordance with generally accepted accounting principles in Spain. in the event of a discrepancy, the Spanish language version prevails. To the shareholders of Zardoya Otis, S.A. 1. We have audiied the consolidated annual accounts of Zardoya Olis, S.A. and its subsidiaries {Zardoya Otis Group) consisting of the consolidated balance sheet as at November 30, 2005, the consolidated profit and loss account and the related notes to the consolidated annual accounts for the year then ended, the preparation of which is the responsibility of the parent Company's Directors. Our responsibility is to express an opinion on the consolidated annual accounts taken as a whole, based on the work carried out in accordance with auditing standards generally accepted in Spain which require the examination, on a test basis, of evidence supporting the consolidated annual accounts and an evaluation of their overall presentation, the accounting principles applied and the estimates made. 2. in accordance with Spanish Corporate Law, the parent Company's Directors have presented, for comparative purposes only, for each tem of the consolidated balance sheet, the consolidated profit and loss account and the consolidated statement of source and application of funds,the corresponding arnounts for the previous year as well as the amounts for 2005. Our opinion refers exclusively to the consolidated annual accounts for 2605. On March 4, 2005, we issued our audit report on the 2004 consolidated annual accounts, in which we expressed an unqualified opinion. 3. in our opinion, the accompanying consolidated annual accounts for the year 2005 present fairly, in all rnaterial respects, the consolidated financial position of Zardoya Otis, S.A, andits subsidiaries (Zardoya Otis Group) af November 30, 2005 and the consolidated results of its operations and its source and application of funds for the year then ended, and contain ail the information necessary for their interpretation and comprehension in accordance with generally accepted accounting principles In Spain, applied on a basis consistent with that of the preceding year. A. The accompanying consolidated Directors’ Report for 2005 contains the information that the parent Company's Directors consider relevant to the Zardoya Otis Group's position, the evolution of its business and of other matters and does notform an integral part of the consolidated annual accounts. We have verified that the accounting information contained in the aforementioned Directors’ Report coincides with that of the consolidated annual accounts for 2005. Gur work as auditors is limited to checking the Director's Repori within the scope already mentioned in this paragraph and it does not include a review of information other than that obtained from the group companies’ accounting records. PricewaterhouseCoopers Auditores, S.L. GpHand] Partner March 3, 2006 PricewaterhouseCoopers Auditores, S. L. - RM. Madrid, hoja 87.250-1, folio 75, tomo 9.267, libro 8.054, sección 3* inscrita en el R.O.A.C. con el ntimero 50242 - CIF: B-79031230 Pwl-059


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    Consolidated Balance Sheets at November 30, 2005 and 2004 (In thousands of euros — EThs) (Before the application of the results obtained in the year) ASSETS 2005 2004 FIXED ASSETS FORMATION EXPENSES - 3 INTANGIBLE ASSETS (Note 5) 19,505 16,740 Research and development costs 2,374 2,192 Concessions and patents 8,806 8,141 Goodwill 24,585 18,690 Software 381 381 Capital leases 51 771 Amortization (16,692) (13,435) TANGIBLE FIXED ASSETS (Note 6) 15,213 13,659 Land and buildings 9,183 9,189 Technical installations and machinery 24,873 23,512 Other installations, tools and furniture 21,764 19,009 Fixed assets in progress 486 694 Other fixed assets 20,046 18,603 Depreciation (61,139) (57,348) INVESTMENTS (Note 7) 22,348 26,288 Investments in Group’s companies 815 4,991 Other investments 32 32 Long-term deposits and financial guarantees 473 519 Public Treasury long-term 21,036 20,754 Provisions (8) (8) LONG-TERM TRADE DEBTORS. (Note 10) 3,021 3,520 Long-term notes receivables 3,021 3,520 TOTAL FIXED ASSETS 60,087 60,210 GOODWILL ON CONSOLIDATION (Note 8) 13,421 3,100 Full integration method companies 13,421 3,100 DEFERRED CHARGES - 1 CURRENT ASSETS INVENTORIES 131,660 124,224 Raw materials 14,400 12,470 Products in progress 7,808 8,536 Costs of contracts in progress (Note 9) 109,452 103,218 DEBTORS 240,028 216,788 Customers (Note 10) 198,675 179,600 Sundry accounts receivable (Note 11) 15,907 15,768 Personnel 592 580 Public Treasury (Note 12) 48,726 45,695 Provisions (Note 10) (23,872) (24,855) SHORT-TERM INVESTMENTS 154,136 167,199 Short-term securities portfolio (Note 13) 62,333 55,801 Loans to affiliated companies and Othe (Note 13) 91,475 111,095 Short-term deposits and financial guarantees 328 303 CASH AND BANKS 6,073 5,609 TIMING ADJUSTMENTS 344 911 TOTAL CURRENT ASSETS 532,241 514,731 TOTAL ASSETS EThs 605,749 578,042


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    LIABILITIES 2005 2004 SHAREHOLDERS’ EQUITY (Note 14) 138,979 130,364 Capital stock 23,812 21,647 Legal Reserve 4,763 4,329 Voluntary Reserve 35,746 34,218 Reserve for subsidiary companies 33,779 30,742 Profits for the year 143,704 130,741 Interim dividends (Note 3.b) (102,825) (91,313) MINORITY INTERESTS (Note 16) 5,867 4,653 LONG-TERM CREDITORS 26,230 31,671 Debts with financial institutions 26 - Notes payable 18 - Other Long-Term Debt (Note 18) 26,186 31,671 SHORT-TERM CREDITORS DEBTS WITH FINANCIAL INSTITUTIONS (Note 19) 1,947 2,105 Loans 279 - Interest 1,668 2,105 TRADE CREDITORS 221,493 213,010 Suppliers (Note 20) 61,051 55,928 Notes payable 1,335 1,680 Billings on contracts in progress (Note 9) 159,107 155,402 OTHER NON-TRADE DEBTS 157,615 147,411 Public Treasury (Note 12) 85,908 75,824 Other payables 45,910 45,075 Accrued salaries and wages 25,797 26,512 PROVISIONS FOR TRADING OPERATIONS (Note 21) 24,104 26,581 TIMING ADJUSTMENTS (Note 22) 29,514 22,247 TOTAL CURRENT LIABILITIES 434,673 411,354 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY EThs 605,749 578,042 39


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    Consolidated Profit and Loss Accounts For the years ended November 30, 2005 and 2004 (In thousands of euros — EThs) 2005 2004 INCOME 702,997 667,789 Sales (Note 25.a) 700,740 665,532 Work carried out by the Company for fixed assets 2,245 2,192 Other income 12 65 EXPENSES Supplies (Note 25.b) (230,122) (225,812) Personnel costs (Note 25.c) (200,275) (191,270) Salaries and wages (148,484) (141,896) Social security (47,228) (44,925) Welfare commitments (Note 17) (4,563) (4,449) Depreciation of fixed assets (10,414) (9,050) Tangible (Note 6) (4,206) (3,813) Intangible (Note 5) (6,208) (5,237) Variation in the provision for doubtful debts 1,182 151 Variation in the provision for risks 1,542 - Other trading expenses (45,775) (40,891) External services (Note 25.d) (45,135) (40,313) Taxes (640) (578) TRADING PROFITS 219,135 200,917 Income from capital investments 8 8 - In associated companies - - Income from other marketable securities 595 637 Other financial interest 3,692 3,830 Positive exchange rate differences 799 814 Financial expenses (3,206) (4,286) Negative exchange rate differences (1,007) (693) FINANCIAL PROFITS 881 302 Amortization of goodwill on consolidation (Note 8) (2,224) (2,129) PROFITS FROM ORDINARY ACTIVITIES 217,792 199,090 Profit (loss) from the sale of fixed assets 67 103 Variation in provisions - - Securities portfolio - - Other extraordinary profits (Note 25.e) 3,155 4,386 Other extraordinary losses (2,232) (2,948) EXTRAORDINARY PROFITS (LOSSES) 990 1,541 PROFIT BEFORE TAX 218,782 200,631 Corporate tax (Note 23) (73,241) (68,100) Minority interests (Note 16) (1,837) (1,790) PROFIT AFTER TAX 143,704 130,741 NET PROFIT AVAILABLE FOR DISTRIBUTION EThs 143,704 130,741


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    Notes to the Consolidated Annual Accounts at November 30, 2005 and 2004 (In thousands of euros — EThs) NOTE 1. OPERATIONS The group is engaged in the manufacture and installation of elevators and their maintenance, and the export of equipment for installation abroad. The breakdown of sales is given in Note 25a). NOTE 2. BASIS OF PRESENTATION OF THE CONSOLIDATED ANNUAL ACCOUNTS The consolidated annual accounts are based on the accounting records of Zardoya Otis, S.A. and its subsidiaries and are prepared in accordance with generally accepted accounting principles in Spain under current legislation. The amounts contained in the consolidated annual accounts and which are comprised of the balance sheets, the profit and loss accounts and the notes are expressed in thousands of euros (EThs). NOTE 3. PROPOSED DISTRIBUTION OF PROFITS FOR ZARDOYA OTIS, S.A. a) The following distribution of profits is subject to approval at the Shareholders’ Annual General Meeting: Available for distribution Net profit available for distribution ........................................................................................................ 140,681 EThs 140,681 Distribution To legal reserve ...................................................................................................................................... 476 To voluntary reserve ................................................................................................................................ 471 To dividends............................................................................................................................................ 139,734 EThs 140,681 b) During 2005 Zardoya Otis, S.A., paid the following interim dividends: 1st Dividend: 0,145 Euros gross per share. Declared on June 2, 2005 and paid out on June 10, 2005. Shares: 216,473,697. Total: 31,388,686.07 Euros ............................................................................ 31,389 nd 2 Dividend: 0,150 Euros gross per share. Declared on September 2, 2005 and paid out on September 12, 2005. Shares: 238,121,066. Total: 35,718,159.90 Euros ............................................................................ 35,718 3rd Dividend: 0,150 Euros gross per share. Declared on November 3, 2005 and paid out on December 10, 2005. Shares: 238,121,066. Total: 35,718,159.90 Euros ............................................................................ 35,718 Interim dividend ...................................................................................................................... EThs. 102,825 41


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    The following table shows that sufficient profit was made during the following periods to distribute the interim dividends on the dates already mentioned. In addition, the interim financial statements demonstrate sufficient liquidity to distribute interim dividends on those dates. Interim dividends 1 2 3 April August October Gross profit from December 1, 2004 .................................................................................... 59,800 119,321 157,008 Estimated corporate tax to be paid ...................................................................................... (22,405) (36,548) (53,456) Available net profits ................................................................................................ EThs. 37,395 82,773 103,552 Total cumulative amount distributed previously.................................................................... - 31,389 67,107 Maximum quantity available for distribution............................................................ EThs. 37,395 51,384 36,445 Proposed and distributed interim dividends ............................................................ EThs. 31,389 35,718 35,718 Liquidity in cash and banks .................................................................................................. 550 482 1,102 Short-term financial investments ........................................................................................ 112,102 126,162 91,999 Short-term loans .................................................................................................................. - (834) Net liquidity .............................................................................................................. EThs. 112,652 125,810 93,101 The net liquidity available at the date of declaring each interim dividend was much higher than the gross amount of each dividend and a liquidity study was carried out on each separate occasion covering the following twelve month period, showing that the liquidity was more than sufficient on those dates. c) Subsequent to November 30, 2005 Zardoya Otis, S.A. has paid the other quarterly dividend: 4th Dividend: 0,155 Euros gross per share. Declared on February 23, 2006 and paid out on March 10, 2006. Shares: 238,121,006. Total: 36,908,765.23 Euros ............................................................................ 36,909 The total interim dividend paid out and charged to 2005 results was EThs 139,734. NOTE 4. PRINCIPAL ACCOUNTING POLICIES a) Preparation and presentation of the consolidated financial statements. The consolidated financial statements have been prepared applying the full integration method to the accounting records of Zardoya Otis, S.A., and its subsidiary companies (those in which it holds more than 50% of the capital stock), by incorporating in the consolidation all the balance sheet and profit and loss items in the accounting records. The costs of the investments in subsidiaries were eliminated, and goodwill at the time of the acquisition was determined. Certain reclassifications have been made in order to improve the presentation of the consolidated financial statements. The results and reserves of subsidiaries created between the date of their purchase and the year end are taken to the corresponding profit and loss and reserve accounts, and the related minority interests are accounted for. Intercompany transactions and balances are eliminated.


  • Page 43

    The differences between the acquisition value of investments and their book value at the purchase date is accounted for as “Consolidation Goodwill”, which is amortized on a straight line basis over a period of 10 to 20 years, the period estimated to recover the investment, except for the goodwill arising in the subsidiaries of Otis Elevadores Group (Inelda-Ind. Nacional Elevadores, Lda, Masel Otis-Elevadores de Madeira, Lda, Raul de Oliveira Elevadores, Lda and Savirel, Lda), which are being amortized over a period of 5 years. The subsidary companies which have been consolidated and the percentage participation of Zardoya Otis, S.A. are as follows: 2005 2004 Ascensores Eguren, S.A. .................................................................................................................. 100.00% 100.00% Ascensores Ingar, S.A. ...................................................................................................................... 100.00% 100.00% Elevadores del Maresme, S.A. .......................................................................................................... 80.00% 80.00% Ascensores Serra, S.A. ...................................................................................................................... 75.00% 75.00% Mototracción Eléctrica Latierro, S.A. ................................................................................................ 51.00% 51.00% Puertas Automáticas Portis, S.A. ...................................................................................................... 100.00% 100.00% Otis Elevadores, Lda. (Portugal) ...................................................................................................... 100.00% 100.00% - Inelda-Ind. Nacional Elevadores Lda.............................................................................................. 100.00% 100.00% - Masel Otis Elevadores de Madeira, Lda ........................................................................................ 60.00% 60.00% - Raul de Oliveira Elevadores, Lda. .................................................................................................. 100.00% 100.00% - Savirel, Lda .................................................................................................................................... 100.00% 100.00% Ascensores Pertor, S.L....................................................................................................................... 94.13% 94.13% Serveis de l’Ascensor, Manteniment, Reparació, Instalació i Reformes, S.L. .................................... 97.62% 97.62% Conservación de Aparatos Elevadores Express, S.L. ........................................................................ 100.00% 100.00% Admotion, S.L. .................................................................................................................................. 75.00% 75.00% Grupo Rolltore .................................................................................................................................. 81.07% - All companies have been consolidated under the full consolidation method. The main business activity carried out by the companies of the corporate group consists of the manufacturee and installation of lifts and the provision of the related maintenance services (see Note 1) except for Mototracción Eléctrica Latierro, S.A. (lift engine manufacturer), Puertas Automáticas Portis, S.A. and Grupo Rolltore (sale, installation, repair and maintenance of automatic doors) and Admotion, S.L. (development, research and manufacture of electronic equipments). b) Share capital increase expenses Expenses incurred as a result of increases in share capital are regarded as expenses of the financial year. c) Intangible assets The items which make up the intangible assets are valued at their acquisition cost or the cost of production. The following principles, in particular, are applied: - Concessions and patents The amounts correspond to the acquisition cost of elevator maintenance contract portfolios. Their amortization is carried out systematically over a period of five to twenty years except when the figures are insignificant, in which case they are charged directly to the profit and loss account for the year. 43


  • Page 44

    - Research and development costs They are regarded as expenses of the year in which they are incurred and are capitalised and fully amortized at the year end and then written-off in their entirety in the following year. - Goodwill Goodwill reflects the difference between the book value and the value of capital and reserves of these companies at the date of their incorporation in the Group. Goodwill is amortised on a straight-line basis over 10 years. - Capital Leases Capital Leases are included as intangible assets when, according to contract terms, assets can be capitalized and depreciated along their useful life. Financial costs are considered as expenses and calculated with financial criteria and the length of the lease agreement. d) Tangible fixed assets Assets included in the tangible fixed assets are valued at their acquisition cost plus revaluations made in accordance with the applicable legislation. The value of the tangible fixed assets at November 30, 2005 includes the effect of the revaluation carried out under Royal Decree Law 7/1996 of June 7. The aforementioned revaluation was carried out only in the parent company, Zardoya Otis, S.A. Renewal, enlargement or improvement costs of the fixed assets are included in the assets as a higher value of the item, only when it involves an increase in their capacity, productivity or prolonged useful life, and only if it is possible to estimate the accounting net value of the items which have been deleted from the fixed assets due to them having been replaced. Depreciation of the fixed assets is calculated systematically applying the straight-line method to the useful life of the respective items. e) Investments Long-term as well as short-term security investments, with fixed or variable interest are valued at their acquisition price at the time of subscription or purchase. If an amount of goodwill arises from the transaction, it is accounted for according to Notes 4.a) and 4.c). For securities which are officially quoted on the Stock Market, when the value of the securities based on the lower of the average quotation for the last quarter of the year and the market value at the year end is less than the acquisition cost, the necessary provisions for the depreciation suffered are made. Similarly, those securities which are not quoted are valued at their acquisition cost, decreasing those values as appropriate by the provisions which are thought to be necessary for any devaluation suffered. For presentation purposes, group companies are considered to be those which are more than 50% owned by the parent company, and associated companies are those where more than 20% of the company’s capital is held by the parent company if they are not officially quoted on the Stock Exchange, or mora than 3% if they are.


  • Page 45

    f) Non-commercial loans and debts Loans are shown based on the amount utilised. g) Inventories Inventories are valued at the lower of market value or average cost of acquisition or production, which includes costs directly and indirectly attributable to the products in question as appropriate to their period of production. h) Contracts in progress Contracts in progress are valued at the cost incurred, plus the expected profit margin, based on the stage of advancement of the contract, in proportion to the difference between the total estimated cost and the contract price. i) Billings on contracts in progress These correspond to billings issued to customers, in accordance with conditions of the contract, before the work has actually been finished. j) Welfare commitments The welfare commitment acquired with retired employees and employees on the payroll, which in all cases are complementary to those granted by the Social Security, are establlished in accordance with actuarial criteria and represent the current value of future payment commitments assumed by the Company in relation to the payment of supplements, other retirement benefits and life insurance premiums, in accordance with the benefits agreed to by the entity. At November 30, 2005, the actuarial calculations were made on the basis of actuarial -financial hypotheses which include an annual discount rate of 4.0% (4.0% in 2004), mortality tables PER 2000 (PER 2000 in 2004) and tables of growth in income in keeping with the habitual practice of the environment. Likewise, in 2005 the actuarial calculations have considered an estimated retirement age of 62 years which coincides with the age also estimated in 2004. The effect of the updating of the actuarial calculations which do not entail a change in the basic hypotheses or when they have no significant effect, is recorded in its entirety in the profit and loss accounts of the relevant years. Deficits accumulated as a result of changes in the actuarial hypotheses and the transitional provision which the company availed itself of at November 30, 1990, and which at November 30, 2005 amount to EThs 3,907 are written off systematically over a maximum period of 10 and 15 years, respectively, (see note 17), which, in any event, is less than the period established for the expiry of the financing period for the externalisation of commitments mentioned in the following paragraphs. In accordance with Royal Decree 1588/1999, whereby the Regulations on Pension Commitments between companies and employees were enacted and which lays down that pension commitments assumed by companies must be externalised and arranged through a group life insurance policy or pension plan, and in accordance with the modification introduced by Law 14/2001 concerning the transitional period for the formalisation or adaptation thereof, on November 7, 2002 and November 14, 2002, respectively, the Company signed, with both insurance companies, the framework agreements regulating the technical, economic and legal conditions of the group insurance policies in order to arrange the pension commitments assumed by the company with its employees and retired employees. These framework agreements establish single premiums which are paid annually up until January 2012, the amount of which at nominal value in relation to past services on the contracting date is EThs 31,493 (EThs 45,685 at November 2004). 45


  • Page 46

    The financial expenses related to the external funding that amount to EThs 10,973, are recorded in the profit and loss account in accordance with the sum-of-the digits method, as from the contracting date and until the expiry and payment of the obligations arising from the contracts relating to the externalisation of the commitments. The principal that will be externalised in the year finishing on November 30, 2006 and which amounts to EThs 7,544 (EThs 8,590 at November 2004) is included in current liabilities under the heading “Other debts”. The differences arising between welfare commitments calculated in accordance with the hypotheses described above and the amount of the contributions to be made to the external funds, which mainly derive from differences between the technical rate of interest used for the actuarial calculation of the commitments and the profitability guaranteed by the insurance companies on the basis of the underlying financial instruments, will be recognised in a maximum period of 10 years which is the financial externalisation period. Likewise, the invoice received by the Company for the normal cost each year will be recorded as a current cost in the relevant year as well as any possible variations in the cost of the externalised services for non-insurable items such as possible variations in the actual salary increase with respect to the forecasted. k) Extra month’s pay and vacation pay The accrued liabilites arising from the extra month’s pay and vacation pay are fully provided for. l) Debtors and creditors for trading operations Long-term as well as short-term debtors and creditors for the Company’s trading operations are registered at their nominal value. m) Corporate tax The expense for corporate income tax is calculated on the basis of the profit before tax obtained, adjusted for permanent differences in accordance with tax criteria and taking into consideration the applicable tax credits and deductions. The tax effect of the temporary timing differences is included as part of the deferred tax assets or liabilities in the balance sheet. Deferred tax assets are only recognised under assets insofar as their future realisation is reasonably assured within a maximum of ten years. n) Exchange rate differences The following procedures are followed for foreign currency operations and their associated balances: 1. Fixed assets Conversion to local currency is done by applying the exchange rate current at the date the goods are incorporated into the Company’s accounting records. 2. Inventories The acquisition price or the cost of production is converted into local currency by applying the exchange rate current at the time each item is acquired, except when forward contracts are taken out and then the rate in the contract is applied. 3. Creditors and Debtors The conversion of debits and credits in foreign currency into local currency is done by applying the exchange rate current at the moment of each operation. At the year end they are valued at an internal exchange rate which does not differ significantly from the official exchange rates then applicable. Unrealized positive exchange rate differences are not included in the results for the year, as a general rule, but are included in the balance sheet as income to be distributed over several years. On the other hand, the unrealized negative exchange differences are charged directly to expense of the year. Foreign currencies are deemed to be all those other than the Euro.


  • Page 47

    o) Income recognition Income from elevator installation and assembly contracts is recognized based on their estimated percentage of completion. Periodic corrections are made to the estimates so that the margin of profit or loss that will result at the end of the contracts will not differ substantially from the margins applied while the contracts were in progress. Income from maintenance contracts is apportioned on a straight-line basis as it accrues. Invoicing may be on a monthly, quarterly, six monthly or annual basis depending on the terms laid down in the agreements signed with the customers. The necessary entries are made to recognise advance invoicing. p) Environment Expenses resulting from company actions aimed to improve or protect environment are accounted for as expenses of the year. When said expenses include acquisition of fixed assets, used to minimise environmental effects or to improve or protect environment are considered higher value of the fixed assets. NOTE 5. INTANGIBLE ASSETS The amounts and variations experienced by the items which make upp the intangible assets are the following: 2003 Increases Decreases Other 2004 Increases Decreases Other 2005 Research and development costs ............................ 2,322 2,192 (2,322) - 2,192 2.244 (2,062) - 2,374 Concessions and patents.................. 7,143 1,107 109 - 8,141 1,707 (794) (248) 8,806 Goodwill ............................................ 16,204 2,486 - - 18,690 5,895 - - 24,585 Assets acquired through leasing contracts .............................. 771 - - - 771 29 (11) (738) 51 Software.......................................... 359 22 - - 381 - - - 381 Cost ................................................ 26,799 5,807 (2,431) - 30,175 9,875 (2,867) (986) 36,197 Research and development costs ............................ 2,322 2,192 (2,322) - 2,192 2,244 (2,062) 2,374 Concessions and patents.................. 4,183 820 (108) - 4,895 1,546 (707) (55) 5,679 Goodwill ............................................ 3,785 2,075 - - 5,860 2,399 3 8,262 Assets acquired through leasing contracts .............................. 67 90 - - 157 1 (8) (122) 28 Software.......................................... 274 57 - - 331 18 - 349 Accumulated amortization ............ 10,631 5,234 (2,430) - 13,435 6,208 (2,777) (174) 16,692 EThs. 16,168 16,740 19,505 The amount paid in relation to assets being acquired under finance leases in 2005 amounts to EThs 48 (EThs 372 at November 30, 2004). 47


  • Page 48

    At November 30, 2005, the Company’s Goodwill from merged companies (see notes 4.a) and 4.c)) is as follows: Cost Amortization Net Elevamar, S.L. ................................................................ 1,467 (675) 801 Ideal Boid, S.L. ................................................................ 9,600 (3,844) 5,756 Intedel, S.L. .................................................................... 1,717 (885) 832 Hermanos Gonzalo, S.L. .................................................. 773 (541) 232 Ascensores Artzai, S.A. .................................................... 568 (341) 227 Lorenzo Girón, S.L. .......................................................... 992 (338) 654 Molpla, S.A. .................................................................... 1,240 (424) 816 Valenciana de Ascensores, S.L. ...................................... 937 (86) 851 Sadet, S.A. ...................................................................... 1,071 (429) 642 Ascensores Huesca, S.L................................................... 417 (167) 250 Goberna, S.A. .................................................................. 3,941 (361) 3,580 Cardellach, S.A. .............................................................. 1,853 (170) 1,683 EThs 24,585 (8,262) 16,323 NOTE 6. TANGIBLE FIXED ASSETS The amounts and variations in tangible fixed assets of the consolidated group and the related accumulated depreciation were as follows: Thousand euros 2003 Increases Decreases Others 2004 Increases Decreases Others 2005 Land and buildings ................................ 9,226 - (37) - 9,189 - (6) - 9,183 Technical installations and machinery........................................ 23,130 455 (56) (17) 23,512 633 (4) 732 24,873 Other installations, tools and furniture.................................. 17,685 1,446 (122) - 19,009 2,973 (572) 354 21,764 Assets in progress.................................. 264 937 (507) - 694 1,046 (1,254) - 486 Other assets .......................................... 18,204 1,400 (1,018) 17 18,603 1,262 (894) 1,075 20,046 Restated cost ........................................ 68,509 4,238 (1,740) - 71,007 5,914 (2,730) 2,161 76,352 2003 Increases Decreases Others 2004 Increases Decreases Others 2005 Land and buildings ................................ 6,186 232 (6) - 6,412 230 (4) - 6,638 Technical installations and machinery........................................ 18,768 1,136 (52) (3) 19,849 1,155 (4) 115 21,115 Other installations, tools and furniture.................................. 14,177 1,196 (119) (21) 15,233 1,475 (515) 82 16,275 Other assets .......................................... 15,582 1,249 (1,004) 27 15,854 1,346 (278) 189 17,111 Accumulated depreciation.................... 54,713 3,813 (1,181) 3 57,348 4,206 (801) 386 61,139 Net tangible fixed assets........................ 13,796 13,659 15,213 Zardoya Otis, S.A. revalued its balance sheet at November 30, 1996 under Royal Decree Law 7/1996 of June 7, 1996, applying the criteria mentioned in Note 4d). This revaluation gave rise to a net increase of EThs 4,056 in the value of the Company’s tangible fixed assets.


  • Page 49

    In accordance with the provisions of Royal Decree Law 7/1996, the total amount of the revaluation was included in the accounts as an increase in the value of the revaluated assets, the balancing entry, net of the tax thereon, of EThs 3,934 appears in the revaluation reserve. At November 30, 2005 the effect of the aforementioned revaluation on the net book value of tangible fixed amounts to EThs 823 (EThs 938 at November 30, 2004). As a result, the effect of this revaluation on the annual depreciation charge for the year 2005 is EThs 115. The average estimated useful lives used for calculating the depreciation of the various asset groups is as follows: Useful life in years Buildings and other facilities .......................................................................................................................................................................... 50 and 33 Machinery, installations and tools .................................................................................................................................................................. 8, 10, 13 and 4 Transport equipment ........................................................................................................................................................................................ 5 and 6 Furniture and fittings ...................................................................................................................................................................................... 10 Data processing equipment ............................................................................................................................................................................ 4 Other fixed asset items .................................................................................................................................................................................... 13 At November 30, 2005 and 2004 the following elements of fixed assets were still in use and have been totally amortized: 2005 2004 Land and buildings ............................................................................................................................................ 2,645 2,645 Technical installations and machinery .............................................................................................................. 15,936 14,340 Other installations, tools and furniture .............................................................................................................. 12,436 11,738 Other assets ...................................................................................................................................................... 14,359 13,560 EThs. 45,376 42,283 At November 30. 2005 Zardoya Otis, S.A. and its subsidiaries had firm commitments to purchase fixed assets amounting to EThs 3,555 (EThs 2,661 at November 30, 2004) which will presumably be acquired through self financing and, if appropriate, under finance leases. It is the Company’s policy to take out all the insurance policies thought necessary to cover the possible risks which could affect, among other things, tangible fixed assets. 49


  • Page 50

    NOTE 7. INVESTMENTS The amount and variations experienced during the financial years in the investment items of the consolidated group are shown below: 2003 Increases Decreases Other 2004 Increases Decreases Other 2005 Investments in Group companies ................ 651 4,991 (651) - 4,991 4,347 (8,523) - 815 Other investments .............. 907 - (875) - 32 - - - 32 Deposits and financial guarantees .......... 372 152 (5) - 520 - (98) 51 473 Public Treasury long-term............................ 20,067 807 - (120) 20,754 344 (62) - 21,036 EThs. 21.997 5,950 (1,531) (120) 26,297 4,691 (8,683) 51 22,356 Provision ............................ (9) - - 1 (8) - - - (8) Net EThs. 21,988 5,950 (1,531) (119) 26,289 4,691 (8,683) 51 22,348 The amount recorded under Public Treasury long-term relates to the portion of deferred tax assets the recovery period of which exceeds one year (Note 23). Under the heading “Investment in Group Companies” the additions in 2004 represented the acquisition of Goberna, S.A. by Serveis de L’Ascensor, Manteniment, Reparació, Instalació i Reformes, S.L.. In 2005 includes also the acquisition of Cardellach, S.A. and the merge of both. Also Mantenimiento Elevadores Soler, S.L., acquired by Zardoya Otis, S.A. excluded from consolidation and in the process of liquidation. The companies included in the consolidation scope at November 30, 2004 and 2005 are as follows: November 30, 2004 Percentage Book value of Net Results Company Location of participation the participation (*) Capital Reserves of the year Ascensores Eguren, S.A. ............................ Bilbao 100.00 3,904 1,457 1,850 597 Ascensores Ingar, S.A. .............................. Granada 100.00 190 601 (222) (190) Elevadores del Maresme, S.A. .................. Barcelona 80.00 165 60 580 991 Ascensores Serra, S.A. .............................. Gerona 75.00 605 240 1,158 1,701 Mototracción Eléctrica Latierro, S.A. ........ Vitoria 51.00 493 313 1,898 1,374 Otis Elevadores, Lda. ................................ Portugal 100.00 11,742 2,110 24,703 17,987 Ascensores Pertor, S.L. .............................. Valencia 94.13 14,225 51 12,643 1,128 Serveis de L’Ascensor, Manteniment, Reparació, Instalació i Reformes, S.L. ............ Barcelona 97.62 8,315 9,948 4,302 1,583 Puertas Automáticas Portis, S.A................... Madrid 100.00 437 60 316 189 Conservación de Aparatos Elevadores Express, S.L................................................. Madrid 100.00 1,771 1,771 2,026 1,829 Admotion, S.L. .......................................... Zaragoza 75.00 292 184 346 (143) (*) Amount net of provisions.

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