Management Report & Financial Statements 2016-2017 Management Report & Financial Statements 2016-2017

Contents

Management Report & Financial Statements 2016-2017 Management Report for the year 04 ended June 30, 2017

Financial Statements for the year 22 ended June 30, 2017

Audit Report on the 130 Financial Statements

Budget 138 2017/2018 Management Report For the year ended June 30, 2017.

The Management Report for Real Madrid Club de Fútbol, including an analysis of its earnings performance in 2016-2017, is presented below. OPERATING BREAKDOWN OF OPERATING INCOME INCOME (before disposal of non-current assets) (before disposal of non-current assets)

Operating income totaled to €675 million in Club membership fees and season tickets The Club enjoys a balanced revenue mix, with This diversified stream of recurring revenues 2016/17, up €54.5 million or 8.8% from the accounted for 7.4% of total revenue, down from the three largest lines (stadium, television and lends financial stability to the Club, cushioning year before, extending the growth trend that 8.1% the year before, with the share gradually marketing) each making up around a third of the impact of potential fluctuations in revenue has kept the Club among the world’s leading decreasing over the past several years (from the total. caused by varying performance on the revenue-earning sports entity in the past 12 9.8% in 2009). sporting front or by changes in the economic years. The Club has gradually reduced the weight of environment. In the 2000–2017 period, revenue grew at an television revenue (La Liga and Champions Operating income includes revenue from the average annual rate of 11%. League matches) and increased the weight of various business lines (stadium, international and other revenue sources. friendly matches, broadcasting, and marketing), Going forward, promoting the Club’s brand but excludes revenue from player transfers, which through investment in top players and is recognized in the income statement under international expansion are still the principle “Gains/(losses) on disposal of non-current assets”. ways in which the Club can remain competitive and maintain its status as a global benchmark in Stadium revenue (+8%) and, more importantly, football. marketing revenue (+21%) were the largest 6 contributors to growth in operating income in BREAKDOWN OF OPERATING 7 2016/17. INCOME (before disposal of non-current assets) 2016/2017 OPERATING INCOME M anagement R eport (before disposal of non-current assets) 38% 24% € Million 1999/2000

750

700 675

m ent s real madrid 2016-2017 t & Financial State 650 32% 620 26% € 600 578 675 M 550 550 514 521 € 500 480 118 M

Manage m ent Repo r 442 450 407 13% 400 351 366 9% 350 11% average annual growth292 300 276

250 236 193 33% 25% 200 152 138 150 118 100

50

0 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17

Members and Stadium Members and Stadium Int. & Friendly Matches Int. & Friendly Matches Broadcasting Broadcasting Marketing Marketing OPERATING PROFIT BEFORE PERSONNEL EXPENSES/OPERATING DEPRECIATION AND AMORTIZATION INCOME: EFFICIENCY RATIO (EBITDA)

The efficiency ratio, calculated by dividing the League, La Liga, the FIFA Club World Cup and Operating profit before depreciation and Nevertheless, EBITDA after the disposal of Club’s total personnel expenses by operating the UEFA Super Cup). Stripping out this impact, amortization, or EBITDA before disposal of assets (player registrations), or simply EBITDA, income (before disposal of non-current assets), the ratio would have been around 53%. non-current assets, is the Club’s earnings from must be considered when assessing the cash is the most widely used indicator internationally operating activities after subtracting personnel flows from operating activities generated by to measure a football club’s operational Player salaries also increased in line with the and other operating expenses from the revenue the Club. Football clubs are subject to a limit efficiency. The lower the ratio, the more efficient overall market development and the staff obtained by the business lines. on player registrations. Therefore, before clubs the Club. revaluation caused by the sports successes can add new players, they must release other achieved in the last few years (three Champions EBITDA before disposal of assets totaled €86 players. As a result, player transfers among The Club’s efficiency ratio in 2016/17 was League titles in the last four years). million in 2016/17, down from €163 million the year football clubs is hardly an exception, but rather 60%. This level was due mainly to the payment before. This results an EBITDA before disposal of part of the Club’s standard practice so that it of performance bonuses arising from the Even despite its exceptional sports achievements, assets/operating income ratio of 13%. can renew staff, generating proceeds than can outstanding sports achievements, the Club’s Real Madrid’s efficiency ratio is well below the be used to self-finance part of the cost of new best ever, by the first division football team 70% maximum level recommended by the Profitability in the year reflects the impact additions. In 2016/17, gains on player transfers during the year, with four trophies (Champions European Club Association (ECA). of performance bonuses paid for sports amounted to €52 million (with average gains achievements, the increase in player salaries, in the last four years of €40 million), resulting and the trend in the Club’s operations. Sports in EBITDA of €138 million, compared to €163 successes underpin revenue growth in the million the year before. Excluding the impact of 8 medium but result in an imbalance in the short the trophies won, EBITDA in 2016/17 was €180 9 term, caused by the one-off effect of the bonuses, million. especially in a year like 2016/17 when the Club won four trophies. Excluding this impact, EBITDA The EBITDA performance in recent years is the before disposal of non-current assets would result of a financial management that pursues be around €130 million, with an EBITDA before profitability by combining efforts to boost M anagement R eport disposal of assets/operating income ratio of 20%. revenue and rein in costs. PERSONNEL EXPENSES/OPERATING INCOME m ent s real madrid 2016-2017 t & Financial State % OPERATING PROFIT BEFORE DEPRECIATION 100% AND AMORTIZATION (EBITDA) 90% € Million 90% 86% Manage m ent Repo r 220 80% 203 200 72% 180 70% 165 163 MAXIMUM LEVEL RECOMMENDED BY THE EUROPEAN CLUB ASSOCIATION 160 151 154 150 60% 146 60% 140 138 52% 52% 49% 50% 49% 120 50% 47% 48% 47% 104 105 105 46% 46% 45% 46% 100 43% 85 84 80 40% 73 60

30% 40

20 20% 5 0

-20 10% -19 -40

0% -60 -45

2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 TAX BALANCE: CONTRIBUTION INCOME STATEMENT BY REAL MADRID TO TAX REVENUE KEY HIGHLIGHTS AND SOCIAL SECURITY

Operating income in 2016/17 amounted to Finance costs in the year ended June 30, 2017 Real Madrid contributed €244.9 million directly At June 30, 2017, Real Madrid was current €675 million, up €54 million or 8.8% from the amounted to €3 million, €2 million less than to state and local taxes, and social security in on the payment of all its tax obligations, as year before. Stadium revenue (8%) and, more the year before. Finance income reached €2 2016/17. The breakdown by item is as follows: always. importantly, marketing revenue (21%) were the million, compared to €9 million in 2015/16, largest contributors to growth in revenue. which benefited from the refund of tax interest · €167.5 million of state and local taxes, and and one-off exchange gains. Accordingly, the social security contributions, equivalent to EBITDA before disposal of non-current assets net financial result was €5 million lower. 25% of the Club’s revenue; i.e. for every totaled €86 million, with gains on player transfers €100 earned, Real Madrid earmarked €25 of €52 million (2016: €0), resulting in EBITDA Profit before tax was €26 million, while net profit for payment of tax and social security of €138 million, compared to €163 million in was €21 million after deducting the income tax contributions. 2015/16. Excluding the impact of the trophies expense of €5 million. The income tax expense won, EBITDA in 2016/17 would have been €180 was calculated by applying a tax rate of 19% · €77.5 million in VAT paid to the tax authorities million. to accounting profit before tax, which is below (difference between output VAT charged to the nominal tax rate of 25% after applying customers and input VAT paid to suppliers), From the €138 million EBITDA, depreciation adjustments to taxable income and applicable arising from Real Madrid’s economic activity. and amortization expense, and interest expenses deductions in accordance with corporate 10 must be subtracted. income tax legislation in Spain. 11 Depreciation and amortization expense in The large profit obtained by the Club in 2016/17 2016/17 was €110 million, marking a decrease was marked by the most outstanding sports of €14 million from the year before due to the achievements in Club history. extension of the remaining useful lives of player contracts and the final amount of amortization M anagement R eport charged last year for the repurchase of rights carried out in 2014/15. m ent s real madrid 2016-2017 t & Financial State INCOME STATEMENT TAX KEY HIGHLIGHTS BALANCE

Manage m ent Repo r € Million 2015/2016 2016/2017 Amounts paid during the 2016/17 financial year € Thousand

OPERATING INCOME 620 675 Personal income tax withholding and non-resident income tax (deductions from staff remuneration and image rights) 155,448 Annual growth 7.4% 8.8% INCOME TAX 1,895 Business and other local taxes 2,648 OPERATING PROFIT before depreciation and amortization, and disposal of non-current assets SOCIAL SECURITY CONTRIBUTIONS (company) 6,176 (EBITDA before disposal of non-current assets) 163 86 SOCIAL SECURITY CONTRIBUTIONS (employee) 1,298 % of revenue 26% 13% TOTAL COST OF TAXES AND SOCIAL SECURITY 167,465 % of revenue 25% OPERATING PROFIT before depreciation and amortization (EBITDA) 163 138

NET VAT PAID 77,463 PROFIT BEFORE TAX 43 26

TOTAL CONTRIBUTION BY REAL MADRID TO TAX REVENUE AND SOCIAL SECURITY 244,928 PROFIT AFTER TAX 30 21 INVESTMENTS CASH AND CASH EQUIVALENTS

The Club invested €152 million in 2016/17, of · €215 million on the construction of Real Madrid The Club had a cash balance of €178 million at The Club enjoys a large cash position thanks which €25 million was spent to the upgrade and City, considered the largest sports complex June 30, 2017. to the high cash generated from operating development of facilities, and the design and ever built by a football club, with a total surface activities and restraint over investment. start-up of the IT platform supporting the Club’s area of 120 hectares, 10 times bigger than This was the second highest amount ever at the digital activity, and €127 for player acquisitions. the former complex. Ideally located in one of end of a financial year. The decrease from the The cash balance, coupled with undrawn the fastest growing areas of Madrid and with year before was caused by the performance facilities, provide Real Madrid the financial Part of the investment for players was self- excellent public transportation, Real Madrid bonuses paid for sports achievements. strength to comfortably meet its scheduled financed with proceeds from transfers, which City is a strategic enclave and a first rate payment obligations. amounted to €54 million. Net investment in the sports and entertainment center. Noteworthy year ended June 30, 2017 in sports personnel in recent years is the marked improvement (acquisitions - transfers) was €73.5 million (2016: made to the facilities, with the construction CASH AND CASH EQUIVALENTS €66 million). Average annual net investment in of the first-team and youth team residences the 2000-2017 period was €71 million. -a Club goal for many years- and a basketball € Million training arena and two new training fields. Also

In addition to investing in players, the Club spent in the 2016/17 financial year, construction 220 211 a significant amount to build and upgrade its began on the new office building, which will facilities and for technological development. In pave the way for a greater integration of the 200 12 178 13 the 2000-2017 period, Real Madrid invested: Club’s various departments, and free up space 180 174 in the stadium. 169 160 156 · €247 million on the stadium, modernizing 160 153 143 the facilities and enhancing their quality Overall, these investments have helped drive Real 140 and functionality for spectators, as well as Madrid’s economic growth, social development

120 113 M anagement R eport providing the facilities with the resources and and sports successes. 112 109 103 services to broaden the stadium’s commercial 98 98 100 93 offering and develop the Club’s IT platform. All 85 this investment has generated a considerable 80 annual financial return. 60 m ent s real madrid 2016-2017 t & Financial State 40

19 20 INVESTMENTS 10 0

Manage m ent Repo r € Million 30/06/2000 30/06/2001 30/06/2002 30/06/2003 30/06/2004 30/06/2005 30/06/2006 30/06/2007 30/06/2008 30/06/2009 30/06/2010 30/06/2011 30/06/2012 30/06/2013 30/06/2014 30/06/2015 30/06/2016 30/06/2017 340 320 314 300 280 260 240 240 220 207 200 180 173 159 161 152 160 142 128 140 126 118 117 120 109 100 91 88 83 90 80 60 40 20 0 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17

DISPOSALS: INCOME FROM PLAYER TRANSFERS, €M

2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17

67 11 6 40 24 43 36 33 56 102 20 14 41 102 114 28 54

Players Stadium Repurchase of Rights Ciudad Real Madrid WORKING CAPITAL

Working capital (i.e. the difference between current 2010 to €-132 million as at June 30, 2017. The Due to the large volume of transactions carried would not be consistent with an adequate assets and current liabilities) can be broken down reduction in the working capital/revenue ratio out by the Club at present, the only way to cash flow management and not compatible into operating working capital (€-265 million at is greater: from 41% in 2010 to 20% in 2017, offset recurring negative working capital with the not-for-profit status of the Club, which June 30, 2017), financial working capital (€128 despite the increase in 2016/17 caused by the would be to have a large positive financial invests funds obtained in the development of million) and other working capital (provisions and performance bonuses for sports achievements. working capital through a large balance of its sports and its facilities. taxes) for minor amount (€5 million). cash and cash equivalents. This negative working capital is recurring; The Club’s working capital is structurally i.e. rolled over each year due to the intrinsic Apart from exceptional requirements at negative as the nature of its operations leads nature of operations, as reflected in the trend specific moments, a large cash balance to operating working capital with large creditor in balances; figures are broadly similar from relative to the size of the Club’s balance sheet balances (between €-120 and €-260 million for year to year, with occasional variations due player registrations, net trade payables and to operating trends each season (e.g. sports upfront collection of membership fees and achievement prizes). season tickets). These balances are rolled over and, therefore, WORKING CAPITAL Significant efforts have been made in recent present similar amounts at each year-end, so trend years to lower its negative working capital, they do not represent debt, or a liquidity or 14 which has been reduced from €-182 million in business continuity problem. € Million 30/6/09 30/6/10 30/6/11 30/6/12 30/6/13 30/6/14 30/6/15 30/6/16 30/6/17 15

Operating Working Capital Trade receivables + Inventories 32 58 71 66 54 46 57 67 108 Receivables from public administrations 4 1 1 1 1 1 7 0 0

Trade payables -47 -74 -67 -75 -73 -63 -64 -66 -63 M anagement R eport WORKING CAPITAL Payables to public administrations -7 -11 -15 -13 -15 -15 -22 -15 -27 trend Salaries and wages payable (50% player registration, bonuses) -50 -56 -71 -93 -82 -114 -104 -144 -197 Accruals -48 -66 -69 -67 -60 -58 -62 -64 -85 € Million Subtotal -116 -149 -151 -181 -176 -202 -189 -222 -265 m ent s real madrid 2016-2017 t & Financial State 150

120 117 102 Financial Working Capital 90 Cash 112 93 98 113 156 174 109 211 178 60 40 Current investments 0 0 0 41 0 0 0 0 0 Manage m ent Repo r 30 10 Player transfer receivables 13 34 28 21 24 36 58 53 20 0 Bank borrowings -24 -48 -7 -43 -26 -16 0 0 0 -30 -30 Player transfer and other investments payable -146 -115 -92 -74 -76 -91 -111 -131 -70 -60

-90 Subtotal -45 -37 27 59 77 103 56 133 128 -90 -86 -120 -98 -100 -94 -123 -150 -123 -132 Other -142 -141 -135 -180 Available-for-sale financial assets 29 0 0 0 0 0 0 0 0 -210 -182 Provisions -10 -1 -1 -1 -2 -2 -3 -1 -2 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Taxes 1 4 -17 0 1 7 1 5 7 Subtotal 20 4 -18 -1 -1 5 -2 4 5 CASH ± CURRENT INVESTMENTS (€M)

Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 TOTAL WORKING CAPITAL -142 -182 -141 -123 -100 -94 -135 -86 -132 19 153 143 169 160 103 98 85 112 93 98 154 156 174 109 211 178 LIABILITIES AND GROSS DEBT NET DEBT

The Club had total liabilities at June 30, 2017 (€164 million at June 30, 2017 and €157 million Gross debt was discussed in the previous section. The Club includes as debt the balance of of €611 million (2016: €603 million) and equity at June 30, 2016). advances on income accruing in the future, of €463 million (2016: €442 million), resulting However, the Club’s key metric is its net debt; which stood at €17 million at June 30, 2017 in a total balance sheet value of €1,075 million In accordance with Spanish GAAP, the it does not make sense to discuss what one (2016: €22 million). (2016: €1,045 million). Club’s gross debt at June 30, 2017 totaled owes without factoring in what one owns. €187 million, of which €82 million are bank Net debt at June 30, 2017 amounted to €-10 Liabilities include gross debt, trade payables borrowings and €105 million are payables on Net debt is gross debt minus cash and cash million (2016: €-13 million), which is actually net (€260 million at June 30, 2017 and €210 investments in players and facilities (2016: €235 equivalents (€178 million at June 30, 2017; liquidity as the sum of cash and cash equivalents million at June 30, 2016) and other liabilities, million, of which €82 million and €153 million, 2016: €211 million), and receivables from other and receivables from transfers, exceeds composed of provisions, accruals, and taxes respectively). clubs from player transfers (in keeping with a the amounts payable on investments, bank core principle of consistency, since gross debt borrowings, and advances. Net debt represents includes amounts paid to other clubs for player the external resources which, coupled with own acquisitions and as player acquisitions/sales funds, are used to fund the capital invested by are mirror sides of the business), of €37 million the Club to carry out its activity. REAL MADRID LIABILITIES AT JUNE 30, 2016 at June 30, 2017 (2016: €59 million), recognized in “Financial assets” in the balance sheet. € Million Current Non-current total 16 17 Borrowings 132 104 235 Trade and other payables 210 210 Net Debt at June 30, 2016 Financial liabilities 342 104 445 € Million Current Non-current total Payables for player transfers, works and repurchase of rights -131 -22 -153

Provisions 1 37 38 Player transfer receivables 53 7 59 M anagement R eport Deferred taxes 14 14 Net investments/transfers -79 -16 -94 Bank borrowings 0 -82 -82 Current tax 0 0 Cash 211 0 211 Public Administrations 15 15 Cash advance -22 -22 Subtotal other net debt 211 -104 107 Accruals 67 22 90 Total net debt 133 -120 13 Total other liabilities 84 73 157 m ent s real madrid 2016-2017 t & Financial State

Total liabilities 425 177 603 Net Debt at June 30, 2017 € Million Current Non-current total Payables for player transfers, works and repurchase of rights -70 -36 -105 Manage m ent Repo r REAL MADRID LIABILITIES AT JUNE 30, 2017 Player transfer receivables 20 17 37 Net investments/transfers -50 -19 -69 € Million Current Non-current total Bank borrowings 0 -82 -82 Cash 178 0 178 Borrowings 70 118 187 Cash advance -17 -17 Trade and other payables 260 260 Subtotal other net debt 178 -99 79 Total net debt 128 -118 10 Financial liabilities 330 118 447

Provisions 2 14 15 MANAGEMENT BALANCE Deferred taxes 14 14 € Million 30/06/2016 30/06/2017 Current tax 0 0 Players, facilities and other property 683 728 Public Administrations 27 27 Provisions and other -31 -10 Accruals 90 17 107 Net operating working capital -222 -265 TOTAL NET CAPITAL INVESTED 429 453 Total other liabilities 119 45 164 EQUITY 442 463 Total liabilities 449 162 611 NET DEBT -13 -10 TOTAL FUNDING SOURCES 429 453 NET DEBT EQUITY

The Club’s net debt at June 30, 2017 was The Club has made ongoing and considerable Equity represents the Club’s own funds; i.e. the The greater the amount of equity relative to €-10 million, practically unchanged from the efforts to reduce debt over the last eight years. funds which, with borrowings, fund the Club’s debt, the higher the Club’s value, solvency year before. Rather than a debt, this actually needs to carry out its activities. and financial autonomy, as capital invested is represents net liquidity as the sum of cash Comparing debt with the Club’s payment capacity financed more by equity than debt. The debt/ and cash equivalents and receivables from represented by ordinary cash flow (measured Equity is the accounting measure of enterprise equity ratio is used as an indicator of solvency transfers, exceeds the amounts payable on using EBITDA of €138 million) yields a debt/ value. For an entity like Real Madrid, which does and financial autonomy: the lower this ratio, investments, bank borrowings, and advances. EBITDA ratio –one of the most commonly used not distribute dividends, the annual change in the higher the Club’s solvency and financial This is the second time in the last 12 years that solvency indicators– at June 30, 2017 of 0.0, equity corresponds to annual profit after tax autonomy. the Club has enjoyed a net liquidity position. which corresponds to the best possible credit (and any balance sheet revaluation). rating in front of the financial institutions. Real Madrid’s debt/equity ratio has decreased Through the profits it obtains, the Club has in recent years, to 0.0 at June 30, 2017; the increased equity each year to €463 million at value of net debt represented 0% of the value NET DEBT June 30, 2017, up €21 million from the year of equity, indicating maximum solvency and before (net profit for the year). financial autonomy. € Million

400

350 327 18 300 19 250 245

200 198 162 170 150 EQUITY 115 130 125 100 91 96 € Million 84 72 500 50 463 M anagement R eport 450 442 0 412 400 -50 -4 -13 -10 370 -38 350 -100 312 300 -94 275 -150 250 251 -141 220 -200 196 200 176 Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 m ent s real madrid 2016-2017 t & Financial State 150 141 106 100 80 86 Net debt : Bank borrowings + Payables/Receivables on acquisition/transfer of assets – Cash. 62 68 74 50 A negative sign means a net liquidity position. Debt also includes the balance of non-current advances received in 11/12. 30 0 Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17

Manage m ent Repo r net debt/EBITDA ratio

3.5 net debt/equity ratio

3.1 Net debt : Bank borrowings + Payables/Receivables on acquisition/transfer of assets – Cash. 3.0 A negative sign means a net liquidity position. Debt also includes the balance of non-current advances received in 11/12.

6.0 2.5 5.4 5.0 2.0 1.7 1.7 4.0 3.2 1.5 1.4 1.4 3.0 1.1 2.0 1.7 1.0 0.8 1.1 1.0 0.8 0.6 0.8 0.7 0.7 0.5 0.3 0.5 0.5 0.2 0.2 0.4 0 -0.1 -0.0 -0.0 0 n/a n/a n/a n/a n/a n/a 0.0 0.0 -1.0 -0.5

Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 -2.0 -1.4 -1.9 EBITDA : Operating profit before depreciation and amortization. As of 2008/09, with new Spanish GAAP, it includes gains/(losses) on -3.0 disposals and impairment of non-current assets. Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 BALANCE SHEET

ASSETS EQUITY AND LIABILITIES Assets/liabilities amounted at June 30, 2017 on new transfers and the non-current balance amounted to €1,075 million, an increase of of the previous year. Trade receivables were

€ Thousand 30/06/2017 30/06/2016 € Thousand 30/06/2017 30/06/2016 €30 million from the year before. €40 million higher as part of the increase in sponsorship revenue and income from Sports intangible assets 366,246 333,500 Entity’s fund and reserves 437,540 407,260 Non-current assets increased by €52 million: an sports achievements will be collected in the Other intangible assets 8,788 10,450 Profit/(loss) for the year 21,372 30,280 increase of €32 million in the carrying amount first months of the next reporting period. Property, plant and equipment 332,700 323,602 CAPITAL AND RESERVES 458,912 437,540 of sports intangible assets as the amount of The balance of cash and cash equivalents Investment properties 10,654 10,609 Grants received 4,564 4,708 investment was higher than amortization and decreased by €33 million due to the payment Non-current player transfers EQUITY 463,476 442,248 disposals (player transfers), and a decrease during the year of performance bonuses for receivable 16,893 6,527 of €2 million in the value of other intangible sports achievements. Deferred tax assets 12,407 15,910 assets after the final amortization charged last Other financial assets 9,784 4,665 year for the repurchase of rights carried out Highlights on the liability side: Bank borrowings TOTAL NON-CURRENT ASSETS 757,472 705,263 Provisions for liabilities and charges 13,699 36,939 Bank borrowings 81,791 81,689 the year before. The value of property, plant remained steady. Outstanding payables on Non-current payables for player and equipment increased by €9 million due investments were €48 million lower thanks acquisitions 34,528 20,973 to investment in the construction of the office to measures to prudently invest in seeking Non-current payables for stadium building, upgrades to the western facade of attractive return on investments. Salaries and 20 320 250 21 and Real Madrid City works Real Madrid City and preliminary investments wages payable, based on the related contracts, Payables for repurchase of rights/other 946 986 for the stadium remodeling project. rose by €53 million due to the increase in Deferred tax liabilities 13,891 14,397 Receivables for player transfers increased salaries and the amount payable in bonuses for Accruals 16,952 22,152 by €11 million due to transfers carried out in sports achievements. Provisions decreased by TOTAL NON-CURRENT LIABILITIES 162,127 177,386 the year. Deferred tax assets decreased by €4 €23 million, due mainly to the payment of this M anagement R eport million, mainly as a result of the recovery, of the amount to the Madrid City Council in the EU Provisions for liabilities and charges 1,745 1,350 portion corresponding to this year, of deferred case involving the land located in Las Tablas. Inventories 2,551 2,579 Bank borrowings 216 219 taxes generated by tax legislation regarding The balance of suppliers increased by €9 million Current payables for player the temporary non-deductibility of a portion Current player transfers receivable 19,754 52,626 54,845 112,963 on the back of the higher expenses assumed acquisitions of the depreciation change in tax periods until in the Club’s activity. Advances included Trade receivables 105,047 64,597 Current payables for stadium and 14,749 18,331 2014/15. Other investments increased by €5 under non-current accruals decreased by the m ent s real madrid 2016-2017 t & Financial State Real Madrid City works Current tax assets 6,726 5,473 million due to payments of wages, which are amount of the annual quota; i.e. €5 million. Trade and other payables 89,939 81,163 accrued as expenses over the long term. Current accruals increased by €23 million, Cash and cash equivalents 177,988 211,485 Wages and salaries payable 197,073 144,038 mainly from invoices issued in the year for TV Accruals 5,124 3,096 Accruals 90,492 67,421 Current assets decreased by €23 million: which are accrued in the subsequent reporting Manage m ent Repo r TOTAL CURRENT ASSETS 317,190 339,856 TOTAL CURRENT LIABILITIES 449,059 425,485 receivables for player transfers was €33 million period. Equity at the end of the reporting period lower as the amount received the previous year amounted to €463 million, up €21 million from TOTAL ASSETS 1,074,662 1,045,119 TOTAL PASIVO Y PATRIMONIO NETO 1,074,662 1,045,119 exceeded the sum of the amounts generated the year before (net profit for the year). FINANCIAL STATEMENTS For the year ended June 30, 2017.

The Financial Statements of Real Madrid Club de Fútbol is presented below. 24 Management Report & Financial Statements real madrid 2016-2017 TOTAL ASSETS Cash andcashequivalents Current accruals T Inventories CURRENT ASSETS Deferred taxassets Non-current investments Investment properties Property, plantandequipment Other intangibleassets Sports intangibleassets NON-CURRENT ASSETS € Thousand ASSETS rade andotherreceivables at June30, 2017 Balance sheet Note 8.2 8.1 10 16 9 7 6 5 4 1,074,662 177,988 131,527 332,700 366,246 317,190 757,472 30.06.17 26,677 10,654 12,407 5,124 2,551 8,788 1,045,119 211,485 122,696 323,602 333,500 339,856 705,263 30.06.16 11,192 10,609 15,910 10,450 3,096 2,579 € Thousand EQUITY ANDLIABILIIES TOTAL EQUITYANDLIABILITIES Current accruals T Current payables Current provisions CURRENT LIABILITIES Non-current accruals Deferred taxliabilities Non-current payables Non-current provisions NON-CURRENT LIABILITIES Grants, donationsandbequestsreceived Capital andreserves EQUITY rade andotherpayables Other financialliabilities Bank borrowings Other financialliabilities Bank borrowings for theyear Profit reserve Capitalization 16/2012 law reserve Revaluation RD7/96 reserve Revaluation Entity’s fundandreserves Note 14.3 14.2 13.2 14.1 13.1 15 15 16 12 11 1,074,662 287,012 449,059 117,585 162,127 458,912 463,476 404,513 30.06.17 90,492 69,594 69,810 16,952 13,891 35,794 81,791 13,699 21,372 20,277 1,745 4,564 4,202 8,548 216 1,045,119 225,200 131,294 131,513 425,485 103,898 177,386 437,540 442,248 378,435 30.06.16 67,422 22,152 14,397 22,209 81,689 36,939 30,280 20,277 1,350 4,708 8,548 219 - 25 FINANCIAL STATEMENTS 26 Management Report & Financial Statements real madrid 2016-2017 PROFIT ORTHEY EAR PROFIT ORTHEYEARROMCONTIN UING OPERATIONS Income taxexpense PROFIT BEORETAX NET FINANCEINOME/(XPENS) Finance expenses Finance income RESULTS FROMOPERATING ACTIVITIES and otherexceptional gains/(losses) Impairment, gains/(losses)ondisposalofnon-currentassets surpluses Provision Non-financial andothercapitalgrants Depreciation andamortization Other operatingexpenses Players andotherpersonnelexpenses Other operatingincome Supplies Revenue CONTINUING OPERATIONS € Thousand Marketable securitiesandotherfinancialinstruments Marketable Gains/(losses) ondisposalandother Impairment andlosses Other operating expenses Other operating Losses, impairmentandchangesintradeprovisions Raw materials and other consumables used andotherconsumables materials Raw Marketing Broadcasting matches andfriendly International Membershipfees, ticketsalesandotherstadiumrevenue Income statement forthe year endedJune30, 2017 4,5,6,7 Note 16.1 17.6 17.6 17.5 17.5 13.1 17.4 17.4 17.3 17.1 17.2 17.1 12 2016/2017 (110,157) (156,082) (406,109) (154,241) (26,347) 671,864 254,138 165,299 166,569 (4,893) (1,354) (3,011) 21,372 21,372 26,265 27,619 51,689 51,667 85,858 (1,841) 1,657 1,539 1,030 192 22 2015/2016 (123,574) (127,841) (306,877) (128,596) (13,063) (22,252) 619,710 212,364 167,577 153,730 (5,123) 30,280 30,280 43,343 39,308 86,039 (1,913) 4,035 9,158 1,633 (280) 193 755 229 - Balance atJune30, 2017 Distribution ofprioryearprofit year endedJune30, 2017 Total the incomeandexpensefor Balance atJune30, 2016 Distribution ofprioryearprofit year endedJune30, 2016 Total the incomeandexpensefor Balance atJune30, 2015 € Thousand T Total amountstransferredtotheincomestatement Amounts transferredtotheincomestatement inequity Income andexpenserecognizeddirectly for theyear Profit € Thousand B) A) otal recognizedincomeandexpense Tax effect Grants, andbequestsreceived donations ended June30,2017and2016. Statement of recognized income and expense for the years 2017 and2016. Statement oftotalchangesinequityfortheyearsJune30, for theyearendedJune30, 2017 Statement ofchangesinequity 404,513 378,435 336,417 Reserves 26,078 42,018 - - Revaluation reserve RD 7/96 8,548 8,548 8,548 - - - -

law 16/2012 Revaluation reserve 20,277 20,277 20,277 - - - -

Capitalization reserve 4,202 4,202 - - - - - Profit/(loss) for theyear (30,280) (42,018) 21,372 21,372 30,280 30,280 42,018 Note 12 12 Total equity 458,912 437,540 407,260 21,372 30,280 2016/2017 - - and bequests 21,228 21,372 (144) (192) donations received 48 Grants, 4,564 4,708 4,853 - (144) (145) - - 2015/2016 463,476 442,248 412,113 30,135 30,280 21,228 30,135 equity (145) (193) Total 48 - - -

27 FINANCIAL STATEMENTS 28 Management Report & Financial Statements real madrid 2016-2017 NET INCREASE/DE EFFCT OFXCHANGERATE FLUCTUATIONS NET C Proceeds fromandpaymentsforfinancialliabilityinstruments C NET C Proceeds fromsaleofinvestments P C NET C Other cashflowsfromoperatingactivities Working capitaladjustments Adjustments toreconcileprofitbeforetaxnetcashflows: Profit fortheyearbeforetax C € Thousand ayments forinvestments ASH FLOWSROMINANCINGTIVITIES ASH FLOWSROMINVESTINGCTIITIE ASH FLOWSROMOPERATING ACTIVITIES Property, plantandequipment assets Sports intangible Group companiesandassociates Investment properties Property, plantandequipment assets Other intangible assets Sports intangible Group companiesandassociates Income taxreceived/(paid) Interest received Interest paid Other non-currentassetsandliabilities Other currentliabilities Trade andotherpayables Other currentassets Trade andotherreceivables Inventories Other incomeandexpenses Cash and cash equivalents at endofperiod Cash andcashequivalentsat ofperiod beginning Cash andcashequivalentsat ofbankborrowings Redemptionandrepayment Issueofbankborrowings Finance expenses Finance income Proceeds fromderecognitionanddisposalsofnon-currentassets Grants recognizedintheincomestatement Change inprovisions Impairment losses andamortization Depreciation ASH FLOWSROMINANCINGTIVITIES ASH FLOWSUSEDINVESTINGCTIITIE ASH FLOWSROMOPERATING ACTIVITIES ASH ANDC for theyearendedJune30, 2017 Statement ofc ASH EQUIV ALENTS ash flows 4,5,6,7 Note 17.6 17.6 17.5 17.4 17.5 10 12 2016/2017 (124,445) (201,198) (170,611) (33,497) (33,497) 177,988 211,485 110,157 (28,910) (33,641) (43,737) (72,000) (51,667) (2,221) 76,753 23,070 61,198 76,753 90,948 72,000 62,014 26,265 (1,542) (1,777) (1,944) (2,028) (1,657) (1,841) 1,500 4,890 3,011 (135) (192) 543 (22) 28 ------2015/2016 (164,593) (135,562) (87,034) 102,619 211,485 108,866 102,619 189,653 123,574 133,663 (25,018) (72,000) (5,345) 77,197 31,946 77,559 17,992 72,000 13,614 43,343 (4,013) (8,239) (1,557) (7,290) (8,759) (9,158) (1,633) 4,451 3,173 5,123 1,913 (941) (137) (193) 362 423 ------and results ofoperations of theGroup. position financial equity, the of presentation fair the to respect in thesubsidiaryisnotmaterial,individuallyorcollectively, its interest with that It considers statements. financial consolidated regulates therelease ofcompaniesfrom theobligation topresent which statements, financial consolidated of preparation the on (Beijing) Co,Ltd,inaccordance witharticle7ofRD1159/2010 Consulting Madrid Real subsidiary, its with statements financial Real MadridClubdeFútboldoesnotprepare consolidated the expansionRealMadridinChinaandothercountriesAsia. Real MadridConsulting(Beijing)Co,Ltd.core activityistosupport five yearsfrom thedateofincorporationtopaythis amount. At June30,2017,share capital hadnotbeencalled.TheClubhas thousand US dollars (USD) and began operations on July 1, 2015. was incorporatedonMarch 24,2015withshare capital of 150 of RealMadridConsulting(Beijing)Co,Ltd.Thiscompany At June30,2017and2016,theClubheld100%ofshares levels inbothofthesesports. football andbasketball.TheClubhasteamscompetingatvarious Its sporting activities focus currently on playing and promoting general, ofallsports. principally, thepromotion offootballatalllevelsandagesand,in a sportsentitytoengagein,anduseitsassetsfor, primarilyand Real Madrid,ClubdeFútbol(the“Club”)wasformedin1902as 1. CORPRA TE INFORMA Notes tothefinancialtatements TION for theyearendedJune30, 2017 29 FINANCIAL STATEMENTS 30 Management Report & Financial Statements real madrid 2016-2017 with adisability equaltoorgreater than 33%(Note20.1). on theaveragenumber of employees,byprofessional category, the discharge of their directorships (Note18.2),or comparatives premiums of directors for damagecausedby acts or omission in forthe amount paid by the Clubfor third-party data liability insurance comparative not include do statements financial December 2, applied for the first time this year, theHowever, accompanying inaccordance withRoyalDecree 602/2016,of standard specificallystatesthatthisisnot required. anaccounting unless statements financial the to notes the in Quantitative informationfortheprevious yearisalsoincluded June 30,2017,thosefortheyearended 2016. statement of cash flows, in addition to figures for the year ended income statement,thestatementofchangesinequityand the Clubhasincluded,foreachitemofbalancesheet, In accordance withcompany law, forcomparativepurposes 2.2 have beenauthorizedforissuebytheClub’s Board ofDirectors. cash and cash equivalents. The accompanying financial statements by represented flows Club’scash the of use and source the fairly present to prepared was flows cash of statement The operation. of results and position Club’sequity,financial the fairly present to with SpanishGAAPandotherprevailing accountinglegislation prepared been have from theauxiliaryaccounting records statements oftheClubinaccordance financial accompanying The 2.1 unless statedotherwise. The figures shown herein are in thousands of euros (€ Thousand), are fortheyearendedJune30,2017. statements financial accompanying The standards. accounting deportivas) andsportsentitiesinsofarastheydonotcontradictthe to sportingpubliclimitedcompanies(sociedadesanónimas GAAP applicable in Spanish contained specifics the upholding amended partiallybyRoyalDecree 602/2016,ofDecember2, approved byRoyalDecree 1514/2007,ofNovember 16,as accordance withnewSpanishGAAP(PlanGeneralContable) in prepared been have statements financial accompanying The 2. BASIOFPRESENT Comparative information Fair presentation A TION OFHEFINACIALST A TEMENTS differences. be obtained,andtheperiod ofreversal oftaxabletemporary the amountsanddates onwhichfuture taxable profits will assets thatcanberecognized, theClub’s directors estimate assets recovered. To determinetheamount ofdeferred tax against whichtheycanbeutilizedand,accordingly, the that itisprobable thatfuture taxableprofit willbeavailable unused taxcredits andanyunusedtaxlossestotheextent Deferred taxassetsare recognized forthecarryforward of Deferred taxassets • discount rate. to begeneratedbytheassets,discountedusinganappropriate probableflowsfutureand cash estimated the of presentvalue the feasible, whenever and statements financial the of issue Club’s directors estimate,asatthedateofauthorizationfor amount where it is not possible to use a market value, the whether there isanyimpairment. To determinerecoverable determine theirrecoverable amount(Notes3.6)forassessing The measurement ofnon-current assetsrequires estimatesto Impairmentofnon-current assets • financial year, are described below. the carryingamountsofassetsandliabilitieswithinnext to adjustment material a causing of risk significant have that of estimationuncertaintyestimatesatthereporting date, thefutureKey assumptionsconcerning andotherkeysources in thesenotes. and liabilitiesinfuture periods orotherdisclosures contained result intheneedtorevise thecarryingamounts ofassets assumptions andconsiderationsdescribedherein thatcould uncertainties thatdependonthefuture outcomeofcertain estimates onanongoingbasis,there isaseriesofrisksand basis oftheseestimates.AlthoughtheClubreviews these readily apparent from othersources, were established on the carrying amountsofassetsandliabilities,whichwere not factors considered reasonable underthecircumstances. The using estimatesbasedonhistoricalexperienceandother The Club’s Board ofDirectors prepared thefinancialstatements uncertainties 2.3 Critical issuesregarding themeasurementandestimation of

31 FINANCIAL STATEMENTS 32 Management Report & Financial Statements real madrid 2016-2017 straight-line basisovertheleaseterm. are recognized asexpensesintheincomestatementona arrangements asoperatingleases.Operatingleasepayments of ownershiptheassets.Therefore, itaccountsforthese it has determined that the lessor retains all the risks and rewards on anevaluationofthetermsandconditionsarrangements, The Clubhasentered into leasestocarryoutitsbusiness.Based Operatingleasecommitments-TheClubaslessor • factors considered reasonable underthecircumstances. assumptions are basedon historicalexperienceandvariousother making well and as as theapplicablediscountrates.Theestimatesandrelated flows, cash flows the of cash amounts future the future on assumptions calculating cases, certain in Calculating fairvalue,valueinuseandpresent valueentails, Calculationoffairvalue,valueinuseandpresent value • materializing attheclose. risk the of estimate or assessment the confirms that obtained once additionalinformationanddocumentationhasbeen statements, financial the of issue for authorization the to prior occasions, thecostisdeterminedafterreporting dateand be arisingfrom theobligatingeventisestimated.Onother considered probable, inwhichcasethecost thatwould amounts. A provision is recognized onlywhen the risk is recognition ofaprovision and,where appropriate, therelated the probability ofoccurrence ofrisksthatcould require the The Clubhas made judgmentsandestimatesregarding Provisions • 27/2014, theClubsetasideareserve, calledthe“Capitalization in compliancewitharticle25oftheCorporate Income Tax Law year,specifically last legislation tax to changes of wake the In for theyeartoincrease thebalanceof“Reserves”. profit all allocated Club the 2015, 30, June ended year the Until 2.4 Distribution ofprofit Distributable profit (Note16.3) reserve Capitalization Reserves 30, 2017was€618thousand(2016:€637thousand). The impactonthedepreciation charge fortheyearendedJune statements. financial 2013/14 the in provided were equipment and plant, breakdown oftherevaluations ofthevariousitemsproperty, by the Board ofDirectors. Theadhoc balance sheetandthe were approved, alongwiththeadhocbalancesheetissued General AssemblyheldonSeptember22,2013,therevaluations and equipment of €21,344 thousand. At the Extraordinary December 27,resulting in anetincrease initsproperty, plant decided Club to availoftherevaluation provided forinLaw16/2012,of the year, financial 2013/2014 the in Similarly, thousand). the yearendedJune30,2017was€160thousand(2016: by €8,548thousand.Theimpactonthedepreciation charge for increasing thenetvalue of itsproperty, plant,andequipment sheet revaluation provided for in RD Law 7/1996, of June7, In the 1996/1997 financial year, the Club availed of the balance 2.5 financial year isasfollows: 2016/2017 the for profit of distribution proposed The year (Note16.3) previous year, up to a limit of 10% of taxable income forthe reserve,” earmarking10%oftheincrease inequity ofthe Balance sheetrevaluation € Thousand 21,372 18,989 2,383 33 FINANCIAL STATEMENTS 34 Management Report & Financial Statements real madrid 2016-2017 player’s contractexpires, since uptothatmomentthere isno either thesaleortransfer contracthasbeensigned,oruntilthe agreements, therelated gain orcostisnotrecognized until given the difficulties and uncertainties that arise before signing purpose ofnegotiatingtheirdeparture from theClub,and with otherclubs,agents,ortheplayersthemselves, forthe over theplayers.Eventhoughcontactmayhave beeninitiated cancellation ofthecontract,orexpirycontractual rights Players are derecognized atthedateofdisposal,transfer, these assets. as fairvalue, there are noactivemarketorcomparabletransactionsfor theoptions’ in estimating inherent difficulties reporting periodare measured atacquisitioncost,giventhe Unexercised purchase optionsonplayersatthe end of the financial statements, the related impairment loss is recognized. are impaired before thedateofauthorizationforissue and clearevidencethattheClub’s sportsintangibleassets are assessed for indications of impairment. If there is objective At theendofeachreporting period,theseintangibleassets player’s contract. cost andamortizedonastraightlinebasisoverthelifeof or renewals isrecognized asanincrease intheacquisition The costoftheintermediationservicesinplayeracquisitions accumulated amortizationandanyimpairment. After initialrecognition, these assetsare carriedatcostless agreement becomeseffective. are initially recognized on the date the related acquisition over the term of each player’s contract. These intangible assets from themomenttheyare acquired onastraight-linebasis These rightsare measured atacquisitioncostand amortized (“transfers”) andthecostsincurred toacquire suchrights. Sports intangible assets includes mainly player transfer rights sportsintangible assets 3.1 for theyearendedJune30,2017,are asfollows: Club in the preparation of the accompanying financial statements The mainrecognition andmeasurement standards appliedbythe 3. RECOGNITONADMSURENTST ANDARDS a periodof10years. the Club’s toregister trademark. This asset is amortized on a straight-line basis over paid amounts the reflects items This Patents,licenses,trademarks,andsimilarrights • its amortizationperiod. for useoftheconcessionoverits15-yearterm, whichisalso The amountrecognized isthepresent valueofthefeespayable for free-to-air broadcasting viaTDT through a HD TV channel. This lineitemalsoincludesthegrantofanoperator’s license The Club’s concessionassets are fullyamortized. amortized onastraight-linebasisoverperiodofsevenyears. for certainoftheClub’s activities.Thesearrangementsare This itemincludesexpenditure madetoobtaintheconcession Concessions • the related impairment. company estimatestherecoverable amountandrecognizes the exists, indication such any If end. period financial each at applicable. Intangibleassetsare testedforimpairmentatleast of each reporting period, and adjusted prospectively where Amortization methodsandperiodsare reviewed attheend accordance withtheirestimated usefullifeandresidual value. Intangible assetsare amortized onasystematicbasisin cost canbemeasured reliably anditisidentifiable. its Club, the for benefits future generate will it that probable This typeofintangibleassetisrecognized if,andonlyitis impairment losses. at cost less accumulated amortization andaccumulated Following initialrecognition, intangibleassetsare carried combination istheirfairvalueatthedateofacquisition. cost. Thecostofintangibleassetsacquired inabusiness Other intangible assets are initially recognized at acquisition otherintangible assets 3.2 of anyplayershadarisen. none oftheabovecircumstances necessaryforderecognition contractual rightsovertheClub’s players.Atthereporting date, real transferofrightsandrisksincidentaltoownershipthe 35 FINANCIAL STATEMENTS 36 Management Report & Financial Statements real madrid 2016-2017 Otherassets • expense whenincurred. three years.Software maintenancecostsare recognized asan Computer software isamortizedonastraight-linebasisover Computersoftware • b) a) This itemincludes: rights were fullyamortizedatJune30,2017and 2016. €955 thousandand€4,029 thousand,respectively. These stadium thatwere acquired bytheClubthatyearfor operated anumberofboxesintheSantiago Bernabéu Madrid EventosDeportivos,S.L.Thesetwo companies that yearwithInversionesIncas2000,S.L. andReal from thebusinesscombinationcarriedoutbyClub This item includes the rightsacquired in2002/03arising combinations Exploitation rightstostadiumboxesacquired inbusiness back totheClub;i.e.1.3and1.7years. rights are amortizedofthe periodremaining forreversal Derechos, S.L.subsidiary for€29,610thousand.These from theformerowners of theRealMadridGestiónde website and distribution rights repurchased by the Club Finally, thisitemincludesthemerchandising, image, which were fullyamortized atJune30,2017and2016. stadium from PalcosBlancos, S.L.for€9,423thousand, over several boxeslocatedin the Santiago Bernabéu exploitation rightsrepurchased bytheClubin2002/03 These rightsalsoincludeothermanagementand ranging from fourto21years. rights are amortizedona straight-linebasisoverperiods sponsorship ofthefootballandbasketballteams.These and staticdynamicin-gameadvertising broadcasting rightstomatches inEuropean competitions, facilities, andadjacentbarsrestaurants, audiovisual thousand, formerchandising, rightstousethesporting repurchased bytheClubonJune26,1998,for €80,836 Merchandising rightsincludesthevalueof Merchandising rights Other property, plantandequipment Other installations, equipment andfurniture Other buildings Sports stadiumsandpavilions and adjuststhemprospectively where applicable. depreciation methodsattheendofeachreporting yearorperiod The Clubreviews theassets’residual value,usefullivesand equipment are asfollows: The years ofestimatedusefullife property, plantand useful life. depreciated onastraight-line basisovertheirestimated When availableforuse,property, plantandequipmentare the asset. life oftheassetare capitalized asan increase in thevalueof which increase capacity orproductivity orextendtheuseful enlarge orimprove itemsofproperty, plantandequipment income statementintheyearincurred. Costsincurred to assets, aswellmaintenanceexpenses,are takentothe Expenses forrepairs that donotextendtheusefullifeof cost oftheasset. enter serviceare included inthepurchase priceorproduction one yeartobebrought intoworkingconditionare ready to Borrowing costsaccrueduntilassetsthatrequired more than accumulated impairment. carried at cost less accumulated depreciation and any After initialrecognition, property, plantandequipmentare revaluations madeinaccordance withlegislation(Note 2.5). until they are in operating condition. Cost also includes the all costsandexpensesrelated directly totheassets acquired determined asthepurchase priceorproduction cost,including Property, plant,andequipmentare measured initiallyatcost, 3.3 Property, plantandequipment Years ofusefullife 10 -38 5 -10 35 50 37 FINANCIAL STATEMENTS 38 Management Report & Financial Statements real madrid 2016-2017 period whentheassetisderecognized. the asset)isrecognized intheincomestatementforyearor between thenetdisposalproceeds andthecarryingamountof property, plant or equipment (calculated as the difference from them.Thegainorlossonderecognition expected of anitemof are benefits economic future no when or disposal Items ofproperty, plantandequipmentare derecognized on of assetsnon-current assetsheldfor sale,whichare covered controlled companies andassociatesincludedinthecategory assets financial not related toequityinvestmentsingroup and companies,jointly benefits employee from arising assets measurement provisions donot apply todeferred taxassets, of itscarryingamountandfairvaluelesscosts tosell.These Non-current assetsheldforsaleare measured atthelower that thefollowingrequirements are met: transaction ratherthanthrough continuinguseandprovided carrying amountwillberecovered principallythrough asale its if sale for held as asset non-current a classifies Club The non-currentassetsheldforsale 3.5 between eightand35years. on a straight-line basis over their estimated useful lives of are depreciated property investment as classified Properties are appliedtoinvestment properties. The criteriasetoutformeasuringproperty, plant,andequipment to third partiesare classifiedasinvestmentproperties. stadiumfacilitiesleasedof business.TheSantiagoBernabéu operations anddonotformpartoftheClub’s ordinary course capital appreciation, aswellassetsthatare notusedin Investment propertyrentals includeassetsheldtoearn orfor 3.4 •  •  •  Investment properties classification asanon-current assetheldforsale. of date the from year a within probable highly is sale the an active program to locate a buyer has been initiated; and customary forsalesofsuchassets; present its in condition subject only to terms that are usual and sale immediate for available is asset The Club carriesoutthefollowinganalysis: To determinewhetherthere are indicationsofimpairment,the impairment lossnotbeenrecognized. amount of the asset that would have been determined had the Impairment isonlyreversed uptothelimitof carrying circumstances that gave rise to the impairment cease to exist. income statement.Impairmentlossesare reversed onlyifthe Impairment andanyreversals thereof are recognized inthe recoverable amountandrecognizes animpairment. If anysuchindicationexists,theClubestimatesasset’s or, where applicable,acash-generating unit,maybeimpaired. period, whetherthere isanindicationthatanon-current asset The Club assesses, at least at the end of each financial year or 3.6 with non- current assetsheldforsale”. associated “Liabilities under classified are sold is Any related liabilities that may be cancelled when the asset costs tosell. so thatthecarryingamountdoesnotexceedfairvalueless where necessary, thecorresponding impairmentisrecognized and, depreciated not are assets These standards. specific by a)  Impairment ofnon-financialassets asset may be impaired. Ifanyclear indicationorobject to identify parameters whether there are any indicationsthata sports intangible financial and sports certain on collective) analysisofthe valueofplayers’potentialbased Nevertheless, theClub performs adetailed(individualand of theseassetsobjectivelyandreasonably untiltheirsale. others, itisnotpossibletodeterminethefairvalue ofeach buying clubs,andthestanceofplayers/agents, among the differing economiccircumstances ofthesellingand next asafunctionofplayerperformanceand/or injuries, changes inmarketvaluethatcanoccurfrom onedaytothe significant the and transactions comparable identifying difficulties the market, transparent and active an of lack value uponacquisitionofthesportsintangible asset,the to thecomplexityofnegotiationsdeterminemarket For sportsintangibleassets,theClubconsidersthat,due equipment Sports intangible assets / Sports property, plant and 39 FINANCIAL STATEMENTS 40 Management Report & Financial Statements real madrid 2016-2017

Clubaslessor • Clubaslessee • operating leases. as classified are arrangements lease other All transferred. are when the all therisksandrewards incidentaltoownershipoftheasset leases finance as economic conditionsoftheleaseindicatethat substantially classified are Arrangements 3.7 b)  Leases for thecash-generatingunittowhichassetbelongs. groups ofassets,therecoverable amountisdetermined that are largely independent of those from other assets or the to asset. For those assets that do not generate cash inflows specific risks any for adjusted and rate risk-free amarket using discounted flows, cash future expected amount. Thevalueinuseisthepresent valueofthe impaired whenitscarrying amountexceedsitsrecoverable costs to sell and value in use. The asset is considered The recoverable amountis thehigheroffairvalueless equipment andinvestmentproperty Other intangibleassets,otherproperty, plantand charges andotheroperatingexpenses. these assets is sufficient to cover the related depreciation be impaired, theClubanalyzeswhetherincomefrom may assets these whether assess To identified. be can transparent marketinwhichcomparabletransactions determine themarketvalue,asthere isnoactiveand stadiums andpavilions)present thesamechallengesto Sports property, plant,andequipment(e.g.sports impairment loss. an recognizes and statements financial the of issue for best informationavailableatthedateofauthorization estimates theasset’s recoverable amountbasedonthe evidence ofimpairmentexists,theClub’s management income statementwhen accrued. Rental incomefrom operatingleasesisrecognized inthe the incomestatementwhenaccrued. Operating leasepaymentsare recognized asexpensesin each financialyearor reporting period. of end the at classification the reviews and recognition initial The Club determines the classification of its financial assets at group companies. in investments equity and assets, financial available-for-sale purposes measurement for into oneofthefollowingcategories:loansandreceivables, classified are assets Financial Classificationandmeasurement • 3.8 a) Financial assets are recognized inthebalance sheetontheliabilitiesside or therendering ofservicesthatare deferred over time to multi-year contracts for the transfer of certain rights Amounts received orpast-dueamountsreceivable related significantly from fairvalue. measured attheamountgiven,whichdoesnotdiffer Security depositsprovided onoperatingleasesare cash flowsisnotmaterial. amount, provided thattheeffect ofnotdiscountingthe are measured initiallyandsubsequentlyattheirnominal to personnel,expectedbecollectedintheshortterm are is nocontractualinterest rate,andloansadvances category inthis trade receivables fallingdue withinoneyearforwhichthere included subsequently measured at amortized cost. Nonetheless, assets financial The costs. consideration givenplusdirectly attributabletransaction transaction price,whichisequivalenttothefairvalueof In theabsenceofevidencetocontrary, thisisthe Loans andreceivables are initiallymeasured atfairvalue. investment, forreasons other thancredit deterioration. for whichtheCompanyexpectstorecover allofitsinitial determinable payments not traded in an active market or fixed with assets financial include which receivables, The Club recognizes in thiscategory trade and non-trade Loans andreceivables 41 FINANCIAL STATEMENTS 42 Management Report & Financial Statements real madrid 2016-2017 also recognized. involvement in the financial asset. The associated liability is of thetransferred asset;thatis,totheextentofitscontinuing asset attheamountofexposure tovariabilityinthevalue retains control overtheasset,itcontinuestorecognize the when ithasnotretained control overthatasset.IftheClub all therisksandrewards, itderecognizes thefinancialasset If theClubhasneithertransferred norretained substantially rewards ofownershiphavebeentransferred. been transferred, provided thatsubstantiallyalltherisksand rights tothecashflowsfrom thefinancialassetexpire orhave Financial assetsare derecognized whenthecontractual Derecognition • financialassets b) Available-for-sale accumulated impairment. cannot beestimatedreliably are measured atcostlessany Investments inequityinstrumentsforwhichthefairvalue or impaired, andsubsequently intheincomestatement. derecognized is asset financial the until equity in directly on disposal.Changesinfairvalueare accountedfor value, withoutdeductinganytransactioncostsincurred Available-for-sale assetsare subsequentlymeasured atfair given plusdirectly attributable transactioncosts. price, whichisequivalenttothefairvalueofconsideration absence ofevidencetothecontrary, thisisthetransaction These assetsare initially measured atfairvalue.Inthe any otherfinancialassetcategory. in classified not instruments equity includes category This of settlement. or non-current (more than a year) depending on the period year) a than (less current as classified are amounts These basis overthelifeofrelated contracts. straight-line a on loss profit or to taken part, most the for under “Non-current accruals”or“Current accruals” and, Debtinstruments andotherreceivables • assets withsimilarriskexposure. assesses thepotentiallossofindividualaswellgroups of To determineimpairmentlossesonfinancialassets,theClub evidence thattheassetisimpaired. a charge to the income statement when there is objective The Clubadjuststhecarryingamountoffinancialassetswith 3.9 it arises. recognized inprofit orlossforthereporting periodinwhich amount recognized directly inequity. Thegainor loss is carrying amountofthefinancialasset,plusanyaccumulated any newassetobtainedlessliabilityassumed,andthe received netofattributabletransactioncosts,including determined asthedifference betweentheconsideration The gainorlossonderecognition ofthefinancialassetis Impairment offinancialassets recognition. at theeffective interest ratecalculateduponinitial value of estimatedfuture cash flows, discounted difference betweenthecarryingamountandpresent amount oftheimpairmentlossismeasured asthe For financialassetsmeasured atamortizedcost,the collection. total agreed-upon future cashflowsoradelayintheir and datawhichevidencethepossibleirrecoverability of unpaid balances,non-complianceissues,refinancing circumstances refers basicallyto the existenceof to classifycollectionoftheseassetsasdoubtful; impairment andwhencircumstances makeitreasonable (doubtful exposures) when there isobjectiveevidenceof The Clubclassifiesdebtinstrumentsasimpaired assets estimated future cashflows. recognition andleading toareduction ordelayin impaired asaresult ofaneventoccurringafterinitial There isobjectiveevidence thatadebtinstrumentis 43 FINANCIAL STATEMENTS 44 Management Report & Financial Statements real madrid 2016-2017 Equityinstruments • andpayables a) Debts into oneofthefollowingcategories: Financial liabilitiesare classifiedformeasurement purposes of eachfinancialyearorreporting period. at initialrecognition andreviews theclassificationatend The Club determines the classification ofitsfinancialliabilities Classificationandmeasurement • 3.10 Financialliabilities impairment lossnotbeenrecognized. would have been disclosed at the reversal date had the the limitofcarryingamountinvestmentthat income statement.Thelosscanonlybereversed upto The reversal of an impairment loss is recognized in the statement through adirect reduction inequity. The lossesare recognized intheconsolidatedincome for anyunrealized gainsexisting atthemeasurement date. the investee’s equityistakenintoconsideration,corrected impairment, estimating When investment. the from flows costs ofdisposalandthepresent valueoffuture cash The recoverable amountis thehigheroffairvalueless between thecarryingamountandrecoverable amount. The impairmentlossismeasured asthedifference decline inthefairvalue. the carryingamountduetoasignificantorprolonged after initial recognition giving rise to a failure torecover impaired as a result of one or more eventsthat occurred There isobjectiveevidencethatequityinstrumentsare reversal datehadtheimpairmentlossnotbeenrecognized. the at recorded been have would that asset financial the income statement up to the limit of the carrying amount of Reversals ofimpairmentare recognized asincomeinthe purchase ofgoodsandservicesinthecourse ofthe This categoryincludes financialliabilitiesarisingonthe is extinguished. The Clubderecognizes a financialliabilitywhentheobligation Derecognition • production costdoesnotincludeborrowing costs. than one year to be in a saleable condition, purchase price or As theClub’s inventoriesdonotrequire aperiod ofmore condition. any additionalcostsincurred tobringthegoodsasaleable deducting anydiscounts,rebates orothersimilaritems,plus price comprisestheamountinvoicedby the seller, after Inventories are measured atpurchase price.Thepurchase 3.11 b) Inventories the financialyearorreporting period. any changesinfairvaluerecognized inprofit orlossfor These liabilitiesare measured initiallyatfairvalue,with as hedginginstruments. This category includes financial derivatives not designated Liabilities atfairvaluethrough profit orloss cash flowsisimmaterial. amount, provided that the effect ofnotdiscountingthe to bepaidintheshorttermare measured at their nominal for whichthere isnocontractual interest rateexpected Nonetheless, tradepayablesfallingduewithinoneyear effective interest ratemethod. interest isrecognized intheincomestatementusing the subsequently measured atamortizedcost.Accrued The financialliabilitiesincludedinthiscategoryare attributable transactioncosts. to thefairvalueofconsideration,adjustedfordirectly contrary, thisisthetransactionprice,whichequivalent measured at fairvalue.In the absenceofevidenceto the Financial liabilitiesincludedinthiscategoryare initially not derivatives. Club’s tradeoperations,andnon-tradepayablesthatare 45 FINANCIAL STATEMENTS 46 Management Report & Financial Statements real madrid 2016-2017 income statement. the Clubrecognizes animpairmentlosswithexpenseinthe When thenetrealizable valueofinventoriesislowerthancost, value toinventories. The Clubusestheweightedaveragecostmethodtoallocate with theamortizationor depreciation charges forthoseassets. are recognized asincome for thereporting periodinproportion are incurred. Grantsawarded toacquire assetsorsettleliabilities expenses financed the which in period reporting the in income Grants awarded to finance specific expenses are recognized as no income isrecorded. then, Until non-repayable. as classification for criteria the Repayable grantsare recognized asliabilitiesuntiltheymeet directly inequity, netof therelated taxeffect. theconditions attaching tothemare met,atwhichtimetheyare recognized when non-refundable as classified are Grants awarded. Monetary grantsare measured atthefairvalueofconsideration 3.13 part oftheClub’s cashmanagement. may cash also includeoccasionaloverdrafts whentheseformanintegral flows, cash of statement the of purposes the For agreements whichmeetthefollowingcriteria: short-term depositsandpurchases ofassetsunderresale Cash andcashequivalentsincludecash,current accounts, 3.12 • • • • Government grants Cashandcashequivalents hy om at f h Cu’ uul ah management cash usual Club’s strategy. the of part form They There isnosignificantrisk ofchangesinvalue,and of acquisition, They have a maturity of three months or less from the date They are convertibletocash, likewise recognized inequity. recognized directly inequity, inwhichcasetherelated taxis the incomestatement, exceptwhenitrelates to transactions tax assets and liabilities. The tax expense is recognized in other tax and relief, andchangesduringtheperiodinrecognized deferred less deductions year, the for profit taxable to current taxresulting from applying thecorresponding taxrate Income taxexpensefortheyeariscalculated asthesumof 3.16 supplementary pensionbenefits. agreement isapplicable nor managementare entitledtoany Neither theClubemployeestowhichitscollectivelabor 3.15 statements. obligation atthedateofauthorizationforissuefinancial and adjustedtoreflect thecurrent bestestimateofthe Provisions are reviewed attheendofeachreporting period are notdiscountedwhere thefinancialeffect isnotmaterial. expense whenaccrued.Provisions expiringwithinoneyear discounting oftheprovision are recognized asafinance or transferittoathird party. Adjustmentsarisingfrom the estimate oftheamountrequired tosettletheobligation Provisions are measured atthepresent valueofthebest asset orliabilityisestimated. a particulareventishighlyprobably, theresulting contingent result inagainorlossfor theClub.Iffuture occurrence of advisors assesstheprospects ofafuture event thatcould an event(e.g.claims,appeals),theClubanditslegalortax or there is clear uncertainty with respect to the outcome of In othersituationswhere nopresent obligationexistsyet be madeoftheamountobligation. be required tosettletheobligationandareliable estimatecan or year reporting financial period, it is the probable that an outflow of of resources will end the before known is that events (legal, contractual,constructiveortacit)arisingfrom past The Clubrecognizes provisions whenithasapresent obligation 3.14 Incometax Liabilitiesarisingfromlong-term employee benefits Provisions 47 FINANCIAL STATEMENTS 48 Management Report & Financial Statements real madrid 2016-2017 current liabilities. ornon- assets non-current as classified are and discounted Deferred taxassetsanddeferred taxliabilitiesare not liabilities settled. which theassetsare reasonably expectedtoberecovered and legislation approved, and inaccordance with the manner in rates expectedtoprevail upontheirreversal, basedontax Deferred tax assets and liabilities are measured using the tax will beavailableagainstwhichitcanutilized. profittaxable future that probable is it that extent the to asset probable, orrecognizes apreviously unrecorded deferred tax recorded deferred taxassetswhenrecovery isnolonger Based onthisanalysis,theClubthenderecognizes previously recognized andpreviously unrecognized deferred taxassets. At theendofeachreporting period,theClubreassesses where disallowedbyprevailing taxlegislation. against whichthedeferred taxassetscanbeutilized,except the extent that it is probable that taxable profit will be available and anyunusedtaxlosses.Deferred assetsare recognized to temporary differences, thecarryforward ofunusedtaxcredits The Clubrecognizes deferred taxassetsforalldeductible legislation. differences, exceptwhere disallowedunderprevailing tax The Clubrecognizes deferred taxliabilitiesforalltemporary any otheradjustmentsfortaxesfrom prioryears. using thetaxratesprevailing atthereporting date, including expected toberecovered from orpaid tothetaxationauthorities Current tax assets andliabilitiesare measured at theamount as applicable. tax assets”or“Deferred taxliabilities”onthebalancesheet, The taxeffect oftemporarydifferences isincludedin“Deferred is theamountattributedtoitfortaxpurposes. and theircarryingamounts.Thetaxbaseofanassetorliability reporting datebetweenthetaxbasesofassetsandliabilities Deferred taxesare recognized fortemporarydifferences atthe met before revenue isrecognized: be also must criteria recognition specific following The Club. any trade discounts, rebates or similar items granted by the the fairvalueofconsiderationreceived orreceivable, less be incurred can be measured reliably. Revenueismeasured at the Clubandamountofrevenue andcostsincurred orto to flow will transaction the with associated or benefits economic profit the that probable is it when recognized is Revenue accruals, asappropriate. under liabilitiesinthebalancesheetascurrent ornon-current related toincomeofthe subsequentperiodare recognized payment orcollectionoccurs.Amountsreceived inaperiod represented bythemtakeplace,regardless ofwhenactual expenses are recognized whenthegoodsorservices In accordance withthe accrualsprinciple,revenue and 3.18 whose useisnotrestricted foraperiodofoveroneyear. they are heldfortrading;orare cashand equivalents expected tomature, ortobesoldrealized within oneyear; sold, consumed,realized orsettledwithinthatcycle;theyare normal operatingcycleanditisexpectedthattheywillbe classified ascurrent whentheyare associatedwith theClub’s current ornon-current. Accordingly, assetsandliabilitiesare Assets and liabilities are classified in the balance sheet as 3.17 • • • Revenueandexpenses Classification ofcurrentandnon-currentassetsliabilities Interest income:recognized astheinterest accrues. matches, friendly which theyare accrued. and international broadcasting andmarketing:recognized intheseason from Revenue revenue: stadium and recognized intheseason in whichtheyare accrued. sales ticket fees, Membership 49 FINANCIAL STATEMENTS 50 Management Report & Financial Statements real madrid 2016-2017 and theRealMadridFoundationasrelated parties. The ClubconsidersmembersoftheClub’s Board, keymanagers described above. Related partytransactionsare measured usingthesamecriteria 3.21 Related party transactions equipment ofthiskindinthebalancesheet. environmental expenditure orrecognized anyproperty, plantor At June 30, 2017 and 2016, the Club had not incurred any such as describedinNote3.3above. plant andequipment”depreciated usingthesamecriteria case theyare recognized inthecorresponding lineof“Property, equity tobeusedoveranextendedperiod.Inthiscase,inwhich unless theycorrespond to purchases ofassetsincorporatedin legislation, are recognized in the year in which they are incurred, expenses incurred tocomply withenvironmental protection contaminated areas, aswell astheeliminationofwasteandother Expenses relating todecontamination andrestoration workin 3.20 which theyoccur. in period or reporting year financial the for statement income settlement oftheseassetsandliabilitiesare recognized inthe Exchange gains or losses arising on this process and on are translatedatthespotrateprevailing atthereporting date. Monetary assetsandliabilitiesdenominatedinforeign currency spot exchangerateprevailing atthedateoftransaction. Foreign currency transactionsare translatedintoeuros atthe The Club’s functionalandpresentation currency istheeuro. 3.19 Environmental assetsandliabilities Foreigncurrency transactions Total netc Total netc et carrying amount basketball Net carrying amountbasketball Net carrying Impairment Impairment Accumulated amortization Accumulated Accumulated amortization Accumulated Cost Basketball Cost Basketball et carrying amountfootball Net carrying amountfootball Net carrying Impairment Impairment Accumulated amortization Accumulated amortization Accumulated Cost Football € Thousand 2015/2016 Cost Football € Thousand 2016/2017 The breakdown andmovementinthisitemare as follows: 4. SPORTSINT arr arr ying amount ying amount ANGIBLE SSETS (349,850) (413,228) 365,263 333,500 361,642 329,490 711,492 742,718 balance balance Opening Opening 10,918 12,850 (8,840) (7,297) 3,621 4,010 - - - - Additions and Additions and allowances allowances 126,883 (96,520) (91,099) (5,377) (5,998) 34,977 35,784 90,522 (1,165) (2,336) 2,957 (807) 621 358 - - - - Disposals Disposals (26,386) (26,154) (59,296) (2,231) (1,738) 33,142 (2,890) (1,025) (7,511) 1,152 7,018 (232) (493) 793 - - - - Transfers Transfers ------(413,228) (497,309) 333,500 366,246 329,490 364,781 862,090 742,718 balance balance Closing Closing 10,318 12,850 (8,853) (8,840) 1,465 4,010 - - - - 51 FINANCIAL STATEMENTS 52 Management Report & Financial Statements real madrid 2016-2017 professional footballandbasketballsquadsmaybeexposed. policies necessarytocoveranyriskwhich membersofits Real MadridClubdeFútbol’s policyistoarrangetheinsurance is fiveyears. Professional FootballLeague(LFPforitsinitialsinSpanish) The averagedurationofthecontractsplayers signedtothe thousand were made). €37,322 thousand,ofwhichpaymentsamountingto€7,000 commitments orpurchase optionsexercised amountingto of theaccompanyingfinancialstatements(2016:purchase for whichnodecisionhadbeenmadeattheendofperiod considered, there are repurchase rightsontransferred players 2017. Althoughnopurchase optionsonplayershavebeen There were nofirminvestmentcommitmentsatJune30, amounted to€31,320thousand(2016:€737thousand). Fully amortizedplayeracquisitionrightsatJune30,2017 otherinformation 4.2 (Note 17.5). amounted to€51,667thousand(2016:€1,633thousand) net gainfrom all disposals afterdeductingthecarryingamount the transferofrightsoverseveralplayerstootherclubs.The revenue of€53,899thousand (2016:€28,020thousand)from During theyearendedJune30,2017,Clubobtained of thefinancialstatements. of itssportsintangibleassetsuptothedateauthorization when there are clearindicationsandevidenceofimpairment As indicatedinNote3.6above,theClubrecognizes impairment costs incurred intherelated transactions. and includetheamountoftransfersotheracquisition new playersfortheprofessional footballandbasketballteams Additions ofsportsintangible assets relate to investments in 4.1 Description ofthemainmovements intheperiod Net c Net c Computer software Impairment: Computer software Impairment: T T Other intangible assets Other intangible Other assets Computer software Computer software Patents, licenses, trademarks, and similarrights Patents, licenses, trademarks, andsimilarrights Concessions Accumulated amortization: Concessions Accumulated amortization: T T Advances Advances Other intangible assets Other intangible Other assets Computer software Computer software Patents, licenses, trademarks, and similarrights Patents, licenses, trademarks, andsimilarrights Concessions Cost: € Thousand 2015/2016 Concessions Cost: € Thousand 2016/2017 The breakdown andmovementinthisitemare as follows: 5. OTHERINT otal accumulatedamortization otal accumulatedamortization otal cost otal cost arr arr ying amount ying amount ANGIBLE SSETS (122,769) (134,177) (114,127) (124,355) 139,775 144,672 125,047 125,047 balance balance Opening Opening 16,961 10,450 10,882 (5,653) (6,736) (2,103) (2,138) 4,126 4,126 7,227 1,272 1,458 2,103 3,159 (886) (948) (45) (45) Additions and Additions and allowances allowances (11,408) (10,228) (6,511) (1,662) (2,583) (1,083) (2,212) 4,897 3,523 1,056 (230) 921 683 132 170 186 (62) (71) (35) (70) 68 - - - - - Disposals Disposals ------Transfers Transfers (3,523) (3,348) 3,523 3,348 ------(134,177) (136,760) (124,355) (124,585) 144,672 145,593 125,047 125,047 balance balance Closing Closing 10,450 10,882 14,400 (6,736) (8,948) (1,019) (2,138) (2,208) 8,788 4,126 1,461 1,458 1,526 3,159 3,159 (948) (45) (45) 53 FINANCIAL STATEMENTS 54 Management Report & Financial Statements real madrid 2016-2017 Other assets Computer software Patents, licenses, trademarks, andsimilarrights Concessions € Thousand Club tohelpdevelopitsdigitalactivity. (2015/2016 season)integratedintheITplatformsetup a videoplatform(2016/2017season)andthedigital Transfers to“Computersoftware” related tothestart-upof 17, 2015. tender termsapproved bytheCouncilofMinistersonApril 2015, followingapublictenderheldinaccordance withthe Ministry forIndustryviaMinisterialOrder ofNovember19, via TDTthrough anHDTVchannelgrantedtotheClubby related toanoperator’s licenseforfree-to-air broadcasting Additions to“Concessions”inthe2015/2016financialyear significant operatingrightsheldbytheClubatJune30,2017. Note 3.2“Otherintangibleassets”describesthemost amortized otherintangibleassets: The followingtablepresents asummaryofthecostfully- otherinformation 5.1 30/06/2017 129,648 120,209 6,531 2,103 805 30/06/2016 128,269 120,209 5,188 2,103 769 Net c Net c Buildings andotherproperty, plant, andequipment Impairment Buildings andotherproperty, plant, andequipment Impairment T T Technical andother items installations Technical andotheritems installations Other buildings Other buildings Sports stadiumsandpavilions Accumulated depreciation: Sports stadiumsandpavilions Accumulated depreciation: T T Under constructionandadvances Under constructionandadvances Technical andotheritems installations Technical andotheritems installations Other landandbuildings Other landandbuildings Sports stadiumsandpavilions Cost: € Thousand 2015/2016 Sports stadiumsandpavilions Cost: € Thousand 2016/2017 The breakdown andmovementinthisitemare as follows: 6. PROPERTY, PLANTANDEQUIPMENT otal accumulateddepreciation otal accumulateddepreciation otal cost otal cost arr arr ying amount ying amount (131,973) (144,584) 319,248 323,602 462,794 479,507 340,246 345,676 (11,573) (11,321) (51,411) (57,356) (76,586) (82,809) balance balance Opening Opening 22,500 22,494 77,912 89,169 22,136 22,168 (3,976) (4,419) Additions and Additions and allowances allowances (12,883) (14,872) 18,407 24,330 15,579 21,739 (6,692) (7,097) (5,748) (7,331) 5,025 9,098 2,762 2,194 (499) (360) (443) (444) 397 66 - - Disposals Disposals (1,694) (671) (322) (974) (720) (255) 751 177 272 145 272 (67) 67 78 ------Transfers Transfers (14,611) (7,006) 4,842 8,495 6,084 2,117 (747) 747 32 47 ------(144,584) (159,311) 332,700 323,602 503,515 479,507 345,676 347,935 (11,321) (11,504) (57,356) (64,386) (90,062) (82,809) balance balance Closing Closing 22,494 37,227 96,138 89,169 22,168 22,215 (4,419) (4,863) 55 FINANCIAL STATEMENTS 56 Management Report & Financial Statements real madrid 2016-2017 must besubmitted.The Clubsubmitted€13million(Note13.3). to theappealsprocess, aguaranteefortheamounts claimed put upsurety forthistaxinthepurchase deeds.However, prior disagree, giventhattheClubassumedobligationtopayor were appealed, since boththe former owners and theClub in thevalueofrelated urbanland.Thesepaymentnotices former ownersforcapitalgainstaxarisingfrom theincrease the Madridtaxationauthoritiesissuedpayment noticestothe Project, the Reparceling of approval definitive the Following Registries 11and33. duly registered as the owner ofsaid plot in Madrid Property won thereplacement plot. RealMadridClubdeFútbolwas for theReparcelling Project, byvirtueofwhichRealMadrid received was from the Madrid City Council through administrative channels approval definite 2009, 25, November on and rights tothe“Parque de Valdebebas” CompensationBoard, Real MadridClubdeFútbolpresented thesedevelopment under theReparceling Project. development unitsandapproximately 1,200,000m earmarked forprivatesportsusageintheamountof16,401.6 establish thattheseunitswillbeappliedtotheresulting plot fact, boththepurchase deedsandtheregistry inscriptions adjudication once the Reparcelling Project is prepared. In units are ultimatelywhat generatetherighttoobtainaplot the sameconsiderationaslandcontributed,since These developmentunitshave,forallintentsandpurposes, property inscription). respective property registers (asanannotationintheoriginal in theValdebebas area. Theseunitswere registered withthe The Clubacquired urbandevelopmentunitstoexistingplots 6.2 renovation project. including installationofnewvideoscoreboards and thestadium stadium,of investments made in the Santiago Bernabéu to urbandevelopmentandaccesswork,aswellanumber and offices corporate new Club’s the of construction for City Additions intheyearrelate mainlytoinvestmentintheSports 6.1 Urban developmentunits Description ofthemainmovements intheperiod 2 ofland More than5years After oneyearbutnotmorethanfiveyears Within oneyear € Thousand capitalized (2016:€20thousand). In theyearendedJune30,2017,noborrowing costswere €14,000 thousand(2016:€10,000thousand). Stadiumamountingtoapproximatelythe SantiagoBernabéu for ongoinginvestmentsinconnectionwiththe SportsCityand At June30,2017,theClubhadcommitments withsuppliers thousand (2016:€40,483thousand). equipment, mainlytechnicalinstallations,amounted to€44,299 At June30,2017,fullydepreciated itemsofproperty, plant,and otherinformation 6.4 follows: Future minimalrentals payableunderoperatingleasesare as thousand). amounted to€1,654thousand(Note17.4)(2016:€1,804 Payments intheyearendedJune30,2017ontheseleases way encumbered byvirtueoftheseleases. years, five to updated inaccordance withtheannualCPI.TheClubisinno one from range depending ontheleasedasset.Inmostcases,leasesare terms lease The hardware. primarily buildings,technicalinstallationsandcomputer leases on certainitemsof property, plant, and equipment, At June30,2017and2016,theClubhadentered intooperating Clubaslessee • operating leases 6.3 30/06/2017 1,303 1,303 - - 30/06/2016 404 321 83 - 57 FINANCIAL STATEMENTS 58 Management Report & Financial Statements real madrid 2016-2017 Buildings € Thousand 2015/2016 Buildings € Thousand 2016/2017 thousand) (Notes3.13and16.2). and indeferred taxliabilitiesfor€1,522thousand(2016:€1,570 amount of€4,564thousand(Note12)(2016:€4,708 thousand) At June 30, 2017,thisgrant was recognized in equityfor an is asfollows: of acquisition the property, finance plantandequipment.Thebreakdown oftheseassets to thousand €9,607 to amounting In previous years,theClub received grantsrelated to assets team residences. buildings related tothebasketballpavilionandyouth- However, definitivepermitshavebeenissuedforthenew town developmentplan(PGOUforitsinitialsinSpanish). Aeroportuaria Parque deValdebebas” underthegeneral permit grantedforthedevelopmentcoded4.00.01“Ciudad Valdebebas SportsCity, basedonaprovisional construction In previous years,theClubbeganconstructionon exposed. to covertheriskswhichitsproperty, plantandequipmentare The Club’s policy is to arrange the insurance policies necessary 9,607 9,607 Cost Cost Accumulated Accumulated depreciation depreciation (3,329) (3,521) Net carrying Net carrying amount amount 6,278 6,086 Net c Net c T T Construction inprogress Construction inprogress Land Land Buildings Impairment Buildings Impairment T T Installations Installations Buildings Accumulated depreciation Buildings Accumulated depreciation T T Construction inprogress Construction inprogress Installations Installations Buildings Buildings Land Cost € Thousand 2015/2016 Land Cost € Thousand 2016/2017 The breakdown andmovementinthisitemare as follows: 7. INVESTMENTPROPERTES otal impairment otal impairment otal accumulateddepreciation otal accumulateddepreciation otal cost otal cost arr arr ying amount ying amount (10,311) (10,263) balance balance Opening Opening (8,442) (7,337) (9,884) 10,609 12,107 29,328 29,362 15,015 15,024 13,620 13,620 (5,351) (6,789) (3,091) (9,839) (548) 630 548 170 (45) (48) 63 - - Additions and Additions and allowances allowances (5,196) (4,803) (4,803) (337) (427) (438) (424) (424) 101 100 (14) 34 30 (3) 4 1 ------Disposals Disposals 3,698 3,698 3,698 382 382 382 ------Transfers Transfers (112) 103 9 ------(10,311) (10,749) (10,687) (10,263) balance balance Closing Closing (8,060) (8,442) 10,654 10,609 29,463 29,362 15,024 15,024 13,620 13,620 (5,351) (3,091) (2,709) (4,803) (548) 648 548 170 171 (62) (48) - 59 FINANCIAL STATEMENTS 60 Management Report & Financial Statements real madrid 2016-2017 More thanfiveyears After oneyearbutnotmorethanfiveyears Within oneyear € Thousand follows: Future minimalrentals receivable underoperatingleasesare as buildings. on marketvalueforlandandexpectationsregarding usefor Impairment wasrecognized onthereal estateassets,based • • Stadium: to theSantiagoBernabéu “Buildings” includesmainlythefollowinginstallationsattaching 02 189-Aplot. de Valdebebas” obtainedthrough thesegregation oftheTER. A1 tertiaryplotofthe4.01UPN“CiudadAeroportuaria parque “Mercedes Arteaga,JacintoVerdaguer” andtheTER.02.189- sale ofplots1,zones1and3,45zone2theAPI11.12 signed withtheMadridCityCouncil,andcorrespond tothe “Land” includesmainlytheplotsrelated totheagreement (2016: €1,639thousand). year endedJune30,2017amountedto€1,765thousand The direct royalty revenue generatedbythisactivityinthe operated byathird party whichpaysRealMadridaroyalty. to four premises locatedwithin theClub’s installationsthatare related thousand these facilitiesforhospitalityandcateringusage.There are €327 to restaurants, includingcapital expenditure bytheClubtoequip amounting Investments 30, 2017(2016:€576thousand). totaling approximately €499thousandintheyearendedJune assignment andoperationarrangementgeneratedrevenue June 30,2018,withpossibilityofearlycancellation.This renewed successively. Themaximumdateatpresent is executed in1992,originallyforaperiodof20yearsand to athird partyunderan operatingconcessionarrangement comprises aseriesofpremises andacarpark.Itisleasedout shopping center.“La Esquina del Bernabéu” This property Investments totaling €14,673 thousand in connection with the 30/06/2017 11,740 4,241 5,274 2,225 30/06/2016 13,521 5,205 6,097 2,219 Loans andreceivables: Non-current financialassets Non-current financialassets € Thousand 2015/2016 Loans andreceivables: Non-current financialassets Non-current financialassets € Thousand 2016/2017 Available-for-sale financialassets Available-for-sale financialassets Total financialassets Cash andcashequivalents(Note10) Loans andreceivables Current financialassets Current financialassets Total financialassets Cash andcashequivalents(Note10) Loans andreceivables Current financialassets Current financialassets (*) Doesnotinclude publicadministrations. (*) Doesnotincludepublicadministrations. The breakdown andmovementinthisitemare as follows: 8. FINACIALSSETS Non-current investments Non-current investments Non-current investments Non-current investments Trade (*) andotherreceivables Trade (*) andotherreceivables Equity instruments Equity instruments 299 299 345 345 299 345 ------financial assets financial assets Loans andother Loans andother 328,406 211,485 302,780 177,988 339,299 329,112 116,921 124,792 10,893 26,332 10,893 26,332 - - 328,406 211,485 302,780 177,988 339,598 329,457 116,921 124,792 10,893 26,332 11,192 26,677 Total Total 299 345 61 FINANCIAL STATEMENTS 62 Management Report & Financial Statements real madrid 2016-2017 T T Other financialassets Other financialassets Non-current receivables from sports entities for player transfers player fromsportsentitiesfor Non-current receivables transfers player fromsportsentitiesfor Non-current receivables 2020/2021 andbeyond 2019/2020 2018/2019 2017/2018 € Thousand Equity instruments € Thousand 2015/2016 Equity instruments € Thousand 2016/2017 • • The breakdown andmovementinthisitemare as follows: non-currentinvestments 8.1 otal non-currentinvestments otal non-currentinvestments interest. Thedetailbymaturityisasfollows: professional players.Theseamountdonotaccrueexplicit player of sportsentitiesprimarilyrelating tothesaleofrightsover for entities sports transfers” includestheamountsreceivable from anumber from receivables “Non-current sufficient at have information todeterminetheirfairvaluereliably. not does these investments it as value, fair at than has measured rather cost Club The influence. significant nor control neither exercises Club the which over the Club’s professional basketballteamparticipatesand in severalunlistedentitiesthatorganize competitionsinwhich interests Club’sownership the includes instruments” “Equity 30/06/2017 16,894 16,876 balance balance Opening Opening 16 51,388 11,192 48,469 2 - 2,620 4,366 6,527 299 299 30/06/2016 Additions Additions 6,527 6,495 10,612 26,519 21,401 1,746 5,072 8,866 15 15 2 46 - Disposals Disposals (5,340) (5,340) ------to current to current Transfers Transfers (50,808) (50,808) (5,694) (5,694) - - - -

balance balance Closing Closing 26,677 11,192 16,894 4,366 9,438 6,527 299 345 € Thousand Total tradeandother receiv T (Note16) frompublicadministrations Other receivables Current taxassetsandother(Note16) T Personnel Otherreceivables Other financialassets Other transfers Player fromsportsentities Receivables Marketingrevenues Broadcastingrights Stadiumrevenues Trade receivables The breakdown of“Trade and otherreceivables” isasfollows: tradeandotherreceivables 8.2 • the dateofaccompanyingbalancesheet. include balancesonloanswhichfallduewithinoneyearfrom transfer rightsbytheClub.Transfers tocurrent liabilities Additions duringtheyearcorresponded tothesaleofplayer (Note 17.6). 30, 2017amountedto€157thousand(2016:€579thousand) June ended year the in income finance Accrued discounting. of effect financial the includes which method, cost amortized The aforementioned amountsare recognized usingthe otal receivables frompublicadministration otal financialassets falling dueafteroneyear. bonuses accruing in the long term, and other receivables ofdeposits given oncertainoperatingleases,sportspersonnelcontract the amount includes assets” financial “Other ables 30/06/2017 131,527 124,792 25,531 19,754 96,168 89,578 6,735 6,726 3,093 3,093 5,777 5,947 643 9 - 30/06/2016 122,696 116,921 58,361 52,626 50,990 45,366 1,614 3,900 5,775 5,473 7,570 3,670 5,735 4,010 302 63 FINANCIAL STATEMENTS 64 Management Report & Financial Statements real madrid 2016-2017 Charge for theyear(Note17.4) Charge for Initial impairment € Thousand € Thousand € Thousand Initial impairment € Thousand Unused amountsreversed(Note17.4) Utilized Utilized theyear(Note17.4) Charge for Final impairment Transfer intheyear T Australian dollars US dollars T Australian dollars US dollars Unused amountsreversed(Note17.4) Transfer intheyear Final impairment presented netofimpairment: The balanceof“Current receivables from sportsentities”is Current receivables from sportsentities • item atJune30,2016isasfollows: The breakdown of foreign currency balancesincludedin this item atJune30,2017isasfollows: The breakdown of foreign currency balancesincludedin this The movementinimpairmentlossesisasfollows: The balanceof“Trade receivables” ispresented netofimpairment. Trade receivables • otal otal Foreign currency Foreign currency 30/06/2017 30/06/2017 18,689 15,711 (3,175) (1,837) amount amount 2,554 1,331 (170) (520) 283 277 164 565 37 24 - - Euro amount Euro amount 30/06/2016 30/06/2016 21,713 18,689 (1,291) (2,697) 2,316 1,237 1,223 1,199 (941) (587) (977) 283 199 513 497 24 16 - Cash equivalents € Thousand Cash andcashequivalents Demand currentaccounts Cash Fundand reserves • shown inthestatementofchangesequity. The breakdown andmovementin“Capitalreserves” are 11. EQUITY-CAPI withdrawals from demandcurrent accounts. At June30,2017and2016,there were norestrictions on The breakdown oftheseitems isasfollows: 10. CURRENTINVESTMENTS recognized ateitherJune 30,2017or2016. thousand (2016:€2,579thousand).Noimpairmentlosseswere The balanceofinventoriesatJune30,2017was€2,551 9. INVENTORIES 2017 and2016. Therewere foreign significant no 30, currency June at balances thousand). of €3,994thousandconfirmedwiththelatter(2016:€228 includes abalancewiththeProfessional FootballLeague “Other receivables from sportsentities”atJune 30,2017 accounts. as required therein, mustberecorded inunrestricted reserve Accounting PlaninSpain were recognized underthisitemwhich, In addition,theimpact of thetransitiontonewGeneral profits. of distribution the from arising contributions subsequent Fund and reserves consists mainly of the initial endowment and AL ANDRESERVES , CASHANDEQUIVALENTS 30/06/2017 177,988 117,964 24 - 30/06/2016 205,578 211,485 5,893 14 65 FINANCIAL STATEMENTS 66 Management Report & Financial Statements real madrid 2016-2017 Capitalizationreserve • Revaluationreserve law16/2012 • Revaluationreserve RD7/96 • This reserve willbeunavailableduringnextfiveyears. the requirements oftheCITtobeeligibleforthisreduction. thousand to a “Capitalization reserve” in compliance with In the 2016/2017 financial year, the Club allocated this €4,202 prior year(seeNote16.3). in equityfortheyeararisingfrom retainedfrom earnings the in taxableincomeof€4,202thousandfor10% of theincrease calculation of tax for the 2015/2016 financial year, a reduction Law 27/2014,ofNovember27,theClubincludedin In accordance witharticle 25ofCorporateIncomeTax (CIT) fully depreciated, disposedoforderecognized. indirectly or directly, when the revalued assets have either been to unrestricted reserves. Thisbalancemayonlybedistributed, balance sheetinwhichtherevaluations were made,allocated capital, orafter10yearshavetranspired from thedateof this accountmaybeusedtooffset lossesandincrease share orthe out carried period forverifyingtherevaluation hasexpired, thebalanceof been has verification the Once 2014. 25, payment (1,067thousandeuros), whichwasmadeonJanuary tax the of return corresponding to the revaluation filing andtherelated tax the from years three within place take must Verification authorities. taxation the by accepted and verified The balanceofthisaccountisrestricted untilithasbeen were recognized under “Revaluation reserve law 16/2012”. (Note 2.5).Amountsarisingfrom theaccountingrevaluations sheet revaluation provided in Law 16/2012 of December 27 balance the of availed Club the year financial 2013/2014 the In from inventories. revalued assetshavebeenfullydepreciated orderecognized the “Reserves”accountorunrestricted reserves, oncethe increase to or losses tax offset to used be may year financial The revaluation reserve allocatedbytheClubin 1996/1997

T T Non-refundable grants Non-refundable grants Non-refundable € Thousand 2015/2016 € Thousand 2016/2017 The Club’s Board believes it has fulfilled all the conditions the all attaching tothegrantsforconsiderationasnon-refundable. fulfilled has it believes Board Club’s The during the1996/1997season(Note6.4). conjunction withcertaincapitalexpenditure madebytheClub sports bodies,primarilytheProfessional FootballLeague,in The grantsawarded are mainlygrantsrelated toassetsfrom by consolidated statementofchangesinequityare asfollows: The movementsinnon-refundable capitalgrantsincludedthe 12. EQUITY-GRANTS otal non-refundablegrants otal non-refundablegrants , DONA TIONS , ANDBEQUESTSRCIV balance balance Opening Opening 4,853 4,708 4,853 4,708 Additions Additions - - - - T T ax effectof ax effectof additions additions - - - - transferred to transferred to profit orloss profit orloss (Note 17,1) (Note 17.1) Amounts Amounts (193) (192) (193) (192) T T ax effectof ax effectof transfers transfers 48 48 48 48 balance balance Closing Closing 4,708 4,564 4,708 4,564 67 FINANCIAL STATEMENTS 68 Management Report & Financial Statements real madrid 2016-2017 T T Other provisions € Thousand 2015/2016 Other provisions € Thousand 2016/2017 arising from theproceedings initiatedbytheEuropean Union. thousand (2016:€43thousand)mainlyasaresult oftheliabilities In addition,theClubutilizedprovisions amountingto€21,328 (Note 17.1). recognized in“Provision surpluses”ontheincomestatement gave risetothemnolongerexist.Therelated incomewas provisions (2016:€0thousand) sincethecircumstances that During theyear, theClubreversed €1,539thousandofunused The breakdown andthemovementinthisitemare asfollows: 13.1 13. PRO otal non-currentprovisions otal non-currentprovisions Non-currentprovisions VISIONS ANDCONTGENCIES balance balance Opening Opening 21,240 36,939 21,240 36,939 Additions Additions 16,742 16,742 - - Disposals Disposals (22,867) (22,867) (43) (43) transfers transfers (1,000) (1,000) (373) (373) Net Net

balance balance Closing Closing 36,939 13,699 36,939 13,699 T T Current provisions for liabilities andcharges liabilities Current provisionsfor € Thousand 2015/2016 andcharges liabilities Current provisionsfor € Thousand 2016/2017 2016/2017 Indefinite € Thousand T 2017/2018 competitions. of third partiesorguarantees relating toparticipationincertain 30, 2017,butrathercorrespond toeitherguaranteesofdebts These guarantees do not constitute a debt for the Club at June for different purposes. The Clubhasgrantedguaranteesanddepositstothird parties 13.3 The breakdown andthemovementinthisitemare asfollows: 13.2 otal guaranteesanddepositsgiven otal currentprovisions otal currentprovisions Guaranteesanddepositsgiven Currentprovisions 30/06/2017 26,682 27,282 600 balance balance Opening Opening - 2,680 1,350 2,680 1,350 30/06/2016 Additions Additions 26,078 26,678 600 142 420 142 420 - Disposals Disposals (2,472) (1,025) (2,472) (1,025) transfers transfers 1,000 1,000 1,000 1,000 Net Net

balance balance Closing Closing 1,350 1,745 1,350 1,745 69 FINANCIAL STATEMENTS 70 Management Report & Financial Statements real madrid 2016-2017 until the2020/2021season. until the2018/2019seasonandcollectionofmembershipfees other and institutions creditors, theClubpledgedsportssponsorshipcontract financial of number a with obligations Elsewhere, inguaranteeofcompliancewithitspayment liabilities are expectedtoarisefrom theseguarantees. grant ofalicensetobroadcast anHDchannelthrough TDT. No to aguaranteeprovided tocomplywiththecommitmentsof increase inthevalueofurbanlandValdebebas (Note6.2),and maturity relate toclaimsarisingfrom settlement of taxonthe The bulk of the amount drawn down on guarantees with indefinite of the total debt filed for creditor protection was collected was protection creditor (2008/09: 35%;2011/12: 30%;2013/14:15%).Inthe2015/2016 for filed debt total the of As aresult oftheliquidationprocess, untilJune30,2015,80% and, of thedebtthatperiod. year financial 2006/2007 consequently, theClub set asideaprovision forthe fullamount the in bankruptcy declared was thenassumedbyBenQMobileGmbH&Co. Thiscompany 2. In2005/2006acontractwassignedwithSiemens AG,which proceeding. to theClub’s appealwas issued.Thismarkedtheendofthis recognized intheprevious period,whenthefavorableruling impact on The profit for the year ended June 30, 2017, since it was interest. payment late amount reimbursed (€3,900 thousand)didnothaveany plus year, financial 2013/2014 the Clubfor€3,900thousandithadalready paid,inthe reimbursed and fine the annulled CNMC the 2016, November between theClubandMediaproducción S.L.Subsequently, in an agreement fortheassignment ofaudiovisualrightssigned the CNMCagainstClubin the proceeding initiatedover to theClub’s appealforannulmentofapenaltyimposedby indications from theSpanishcompetitionauthorities (CNMC) issued anorder notifyingthe StateCouncil’s response basedon 1. OnJune6,2016,theSpanishHighCourt(AudienciaNacional) disclosure couldbedamagingfortheClub. financial its and commercial information confidential is this as amounts, of indication any without issues different regarding For someofthefollowingagreements, informationisprovided 13.4 Commitments, contingentassets, andliabilities different levels of fixed and variable income based on the based income variable project’s twophases.The Group considered thisagreement and fixed of levels different and constructingofthe complex.Theagreement established Marjan Island Football assumed all the risks related to financing substantial amountofrevenue fortheClubandsubsidiary. Rak user rightsforaperiodof22years(upto2034) in exchangefora Al-Khaimah Emirate,licensinguseoftheClub’s nameandlogo an agreement to develop a resort on an artificial island of the Ras Football (acompanyincorporatedinLuxembourg) entered into Real Madrid Gestión de Derechos S.L., and Rak Marjan Island 4. OnFebruary17,2012,theClub,itssubsidiary atthetime would amountto€40,823thousand(2016:€24,425 thousand). over thetermofallagreements upuntiltheirexpiration all theobjectiveswere met, themaximumamounttobepaid sports objectivesinfuture seasons.Intheunlikelyeventthat agreements thatare contingentuponfulfillmentofestablished There are alsopotentialassetsrelated tosponsorship especially theChampionsLeague. than offset bytheincreased revenue from sportscompetitions, thousand). Ifpaymentwere made,theseamountswouldbemore expiration wouldamountto€18,000thousand(2016:€22,100 to bepaidoverthetermofallagreements upuntiltheir that alltheobjectiveswere tobemet,themaximumamount objectives are achievedin future seasons.Intheunlikelyevent agreements withsportsentities thatwouldbetriggered ifcertain at June30,2017,there are potentialliabilitiesarisingfrom In addition,althoughnopaymentobligationshadaccruedas €8,103 thousand(2015/2016:€7,360thousand). sponsorship contractswere alsorecognized amountingto Variable collectionrightsfrom different clubsandimage/ thousand). for performancebonusesof€4,533thousand(2016:€1,825 obligations were recognized forvariablecompensationpayable toclubs payment year, financial 2016/2017 the During 3. by theendof2017. amount of final the raising collection toover97%which,inprinciple,shouldbesettled court, the to report findings its Finally, onOctober19,2016,thebankruptcytrusteepresented trustee indicatingthatanother15%wastobeliquidated. thebankruptcy from was received notification year, financial 71 FINANCIAL STATEMENTS 72 Management Report & Financial Statements real madrid 2016-2017 Valdebebas” obtainedbysegregating plotTER.02189-A. TER. 02189-A1ofUNP 4.01“CiudadAeroportuaria parque de “Mercedes Arteaga,JacintoVerdaguer” andthetertiaryplot Plots1,zone 1and3,45Zone2ofAPI11.12 Bernabéu”, la Castellana,andConchaEspinaonAPI 05.12 “Santiago a plotoflandlocatedbetweenRafaelSalgado, Paseode The MadridCityCouncilpaidthecompensation bytransferring dated December20,2001. de la Castellana’s lateral sectionestablished in the Agreement the main obligation of the underground parking lot on the Paseo 29, 1998,aswellRealMadrid’s compensationforbreach of “Las Tablas” plotasstipulatedintheagreement signedonMay Council duetothelegalimpossibilityoftransferringentire This agreement included compensationfrom theMadridCity parties onMay29,1998andDecember20,2001. legalizing theearlieragreements entered intobetweenthetwo public deedonDecember21,2011withtheMadridCityCouncil by ratified and signed was agreement an 2011, 29, July On 5. debt claimed. the on collecting Club the without liquidation, company’sfinal being presented. This procedure wasresolved withthe court for March 10, 2017, to clarify the proposed liquidation 23, theClubwassummonedtoahearinginLuxembourg Under theframeworkofcompany’s liquidation,onFebruary Marjan wasbeingliquidated. for theaforementioned amounts,despitethefactthatRak the ClubonJune10,2015,withsubsequentclaimsmade these amounts.Theproceedings were ruledon favorablyfor guarantees. It initiated legal proceedings in 2013/14 claiming as this company defaulted on payments or did not provide On December19,2012,theClubterminatedcontract time toraisethenecessaryfundsundertakeproject. total amountaccrued,sinceRakMarjanrequired more an impairmentlosswasrecognized inprioryearsforthe 2011/12 financialyear. However, forreasons ofprudence, the project developmentphasethatbeganaccruinginthe Under thecontract,anamountwastobereceived during rights toitsnameandlogo. as alicensingagreement foruseofthecommercial operating equivalent value. at itsvaluefortaxpurposes, andreplaced by otherlandof of handingtheplotover, itwasappraisedbytheCityCouncil signed bythepartiesin1998.Duetolegal impossibility to RealMadrid,incompliancewithaland-swap agreement (Madrid), which theMadrid City Council was forced over to turn arising from theappraisalofaplotlandlocatedinLasTablas of its decision to initiate proceedings regarding Spain alleged state aid notified Commission European the part, its For 2013. final through anorganization procedure datedNovember20, the appealandupholdingsentence,whichwasruledas October 10,2013,notifiedon15,rejecting Administrative Appealscourthandeddownarulingon arising from the agreements signed in 1991 and 1998. The on register, andrequiring anewappraisaloftheobligations agreement, alongwith the related cancellationofanyfiles of theassetstotheirsituationpriorsigning signed onJuly29,2011,seekingitsannulmentandrestitution a claim was filed before the Court against the agreement Regarding themainlegal proceeding, onApril25,2012, grounds fortheinjunction. Administrative Appeals14,consideringthatthere were no the injunction issued by the Judge from the Madrid Court of the MadridSupreme Court handeddownasentencerevoking and onJuly12,2012,theAdministrativeAppealssectionof Both theClubandCityCouncilappealedinjunction, 2011, entailingsuspensionofenforcement oftheagreement. agreement the regarding filed between theCluband Madrid City Council on July 21, injunction an for request the On March 21,2012,MadridFederalCourtofAppeals14upheld related balancesheetitem(Note7). 30, 2017amountedto€2,709thousand,asrecognized inthe related impairmentlosswasrecognized. Impairment atJune appraised amountwaslowerthannetcarryingamount,the appraiser.appraisal wascarriedoutbyanexternal Where the DevelopmentandHousingArea.of theGovernment, The under theGeneralDirectorate forTown PlanningManagement Department oftheSub-Directorate GeneralofUrbanAdaptation of theagreement were appraisedbytheTechnical Services All the property, plant, andequipment included inthescope 73 FINANCIAL STATEMENTS 74 Management Report & Financial Statements real madrid 2016-2017 reporting period,theClubcommencedaprocedure toclaim estimated by the Club. In lightofthis situation, in the 2016/2017 without requiring anymaterialadjustmenttotheeconomic loss the Spanishtaxationauthorities.Thisprocedure wasresolved the Clubwassubjecttoataxauditregarding theEUcaseby addition, during the first half of the 2016/2017 reporting period, in theEuropean Commission’s decisionofJuly4,2016.In favorable economicassessmentfortheClubwas alsoincluded taxed asalimitedliabilitycompany(sociedad anónima).This the Clubwouldhavesuffered economicdamagehaditbeen Commission regarding theClub’s taxreturnsshowedthat other prejudices; to an analysisoftheyearscontemplatedby theEuropean in addition come benefits tax the since the applicationofthislegislationdoesnotconstitutestateaid, determine onacase-by-casebasis.TheClubconsidersthat the precise amountofwhich theSpanishauthoritiesneededto clubs benefited by an estimated €0 to €5,000 thousand per club, in whichitconsidered that bybeingtaxedatalowerrate,the On July 4, 2016, the European Commission issued a decision entity that,fortaxpurposes,includedalowerrate. Madrid ClubdeFútbol,forapplyinglegislationtothistypeof state aidtodifferent Spanishfootballclubs,includingReal of itsdecisiontocommenceproceedings regarding alleged 6. In December 2013, the European Commission notified Spain could ultimatelybeforced topay. Club hadalready recognized aprovision forallamountsthatit the ofprudence, with criteria inkeeping the2016/2017 for since, year loss financial or profit on impact any have not did Nevertheless, theClubmaderequired payment,butthis Union. Thisisstillbeingprocessed. beforethat itbeoverturned theGeneralCourtofEuropean In November2016,theClubrejected theresolution, seeking the decisionwouldberepealed. before the General Court of the European Union, confident that to thatwhichitwasentitledreceive, appealedthisdecision received, viathedeliveryofotherland,anamountequivalent considering thatthisdidnotconstitutestateaidsincetheClub million from theover-evaluation ofaplotland.TheClub, concluding thattheClubobtainedanadvantageof€18.4 On July 4, 2016, the European Commission issued a decision €229 thousand). of thepenalty, to240thousandSwissfrancs (approximately ban, affecting onlytheJanuary2017window, andtheamount 2016, issueditsfinalruling.Itreduced boththeplaysigning Club filedanappealwiththeFIFA, whichonDecember20, signing upanyplayersforaspecifiedperiod oftime.The of approximately €330thousand,inadditiontoabanon underage players.Thepenaltyincludedaneconomic sanction a finerelated toopenproceedings initiatedforsigningup 8. InJuly2015,theFIFA notifiedtheClubthatitwaslevying its individualcontract. amount inadditiontothatalready collectedunderthetermsof related tothe2015/2016 season,theClubwouldcollectan the agreement. Shouldthe appealbeaccepted,foritsrights ratified Council Sports High the after and agreement assembly bythe heard being Club’s injunctionproceedings proposed regarding theLFP wasstill Club Federal CourtofAppeals,subsequenttothedismissal the by filed appeal the At the date of authorization for issue of the financial statements, clubs. Real Madridproposed an evendistributionbetweenthe42LFP the 22seconddivisionclubs(aneven1.82%each).Failingthis, for 40% and each), 3% even (an clubs division first 20 the to the distributionshouldbemadebyattributing60%ofincome income (e.g.sponsorships,advertising,footballpoolrevenue), with theLFPbylawsfordistributionofremaining jointLFP LFP wasnotyetapplicable.Itconsidered that,inaccordance the overallmanagementofindividualcontractsmadeby the season, the distribution of the capital gains generated by that sincetheRoyalDecree hadnotyetentered into force during distribution oftheyear’s TVbroadcast rights,asitconsidered in itsAssemblyheldduringthe2015/2016seasonregarding the Real Madrid filed an appeal against this agreement with the LFP first year thatclubsnolongerhaveindividualrights. the marking season, 2016/2017 the in effective became joint operationofTVrightswasapproved. ThisRoyalDecree 7. OnApril30,2015,RoyalDecreethe Law5/2015governing interest. discriminatory treatment ofthelegislation,pluslatepayment reimbursement oftheamounteconomiclosscausedby 75 FINANCIAL STATEMENTS 76 Management Report & Financial Statements real madrid 2016-2017 Total financiallia bilities Debts andpayables Current financialliabilities Current financialliabilities Total financialliabilities Debts andpayables Current financialliabilities Current financialliabilities Debts andpayables: Non-current financialliabilities Non-current financialliabilities € Thousand 2015/2016 Debts andpayables: Non-current financialliabilities Non-current financialliabilities € Thousand 2016/2017 (*) Doesnotinclude payablestopublicadministrations. (*) Doesnotincludepayablestopublicadministrations. The breakdown of“Financialliabilities”isasfollows: 14. FINACIALLIABILITIES Trade (*) andotherpayables Current payables Trade (*) andotherpayables Current payables Non-current payables Non-current payables borrowings borrowings 81,908 82,007 81,689 81,689 81,791 81,791 Bank Bank 219 219 216 216 - -

liabilities liabilities financial financial 363,544 341,335 210,041 131,294 365,412 329,618 260,024 69,594 22,209 22,209 35,794 35,794 Other Other

445,452 341,554 210,041 131,513 447,419 329,834 260,024 103,898 103,898 117,585 117,585 69,810 Total Total € Thousand June 30,2016 € Thousand June 30,2017 Bank borrowings Bank borrowings Other financialliabilities Bank borrowings € Thousand Total non-currentpa The repayment schedule for theseborrowings isasfollows: rate plusamarketspread. Euribor the at interest floating bear borrowings The thousand). balance amountedto€82,000thousand(2016: with two different financial institutions. The non-current principal At June 30, 2017, theClub had one loan and two credit facilities Bankborrowings • The breakdown of“Trade andotherpayables”isasfollows: 14.1 Suppliersoffixedassets Sports entities for player transfers player Sportsentitiesfor Non-currentpayables y ables 2016/2017 2017/2018 - - 30/06/2017 117,585 81,791 18,833 35,794 16,961 2017/2018 2018/2019 42,000 - 30/06/2016 103,898 2018/2019 2019/2020 81,689 17,339 22,209 4,870 42,000 - 2019/2020 2020/2021 40,000 - Subsequent 2020/2021 40,000 years - 82,000 82,000 Total Total 77 FINANCIAL STATEMENTS 78 Management Report & Financial Statements real madrid 2016-2017 T T Sports entities for player transfers player Sports entitiesfor Sports entities for player transfers player Sports entitiesfor Suppliers offixedassets € Thousand June 30,2016 Suppliers offixedassets € Thousand June 30,2017 at June30,2017and2016. There were nonon-current payable balancesinforeign currency €480 thousand(2016:€2,550thousand). finance expenses in the year ended June 30, 2017 amounted to cost, which includes the financial effect of discounting. Accrued The aforementioned amounts were measured atamortized accrue interest annuallyat arateindexedtotheEuribor. which assets, fixed of suppliers to payables certain for except The payablesinthepreceding tabledonotbearexplicit interest, The breakdown ofthisitembyyearmaturityisasfollows: Otherfinancialliabilities • otal otal otherfinancialliabilities 2018/2019 2017/2018 26,427 15,096 11,331 9,873 3,005 6,868 2018/2019 2019/2020 6,245 4,427 1,865 4,380 4,427 - 2019/2020 2020/2021 2,274 5,131 1,865 2,274 3,266 - 2020/2021 2021/2022 1,929 1,929 59 59 - - Subsequent Subsequent years years 789 849 789 849 - - 35,794 22,209 16,961 18,833 17,339 4,870 Total Total T Pound sterling US dollars € Thousand T Yen Pound sterling US dollars € Thousand Other financialliabilities Bank borrowings € Thousand Total currentpa June 30,2016 June 30,2017 The breakdown offoreign currency balancesisasfollows: thousand (2016:€66,552thousand). linked totheEuriboratJune30,2017amounting€61,157 The Clubhadundrawncredit facilities carrying interest atrates The breakdown of“Current payables”isasfollows: 14.2 otal otal Suppliersoffixedassets Sports entities for player transfers player Sportsentitiesfor Currentpayables y ables currency amount currency amount 30/06/2017 21,099 31,368 69,810 69,594 38,226 Foreign Foreign 108 324 216 13 -

Euro amount Euro amount 30/06/2016 131,513 131,294 25,528 25,625 37,623 93,671 285 219 300 97 15 - 79 FINANCIAL STATEMENTS 80 Management Report & Financial Statements real madrid 2016-2017 First football team players andcoachingstaff teamplayers First football € Thousand Sports personnel rendered services Sports entitiesfor Trade payables € Thousand T andcoachingstaff Basketball players andcoachingstaff teamplayers Other football Other personnel T Total tradeandother pa T Current taxliabilities (Note16) topublicadministrations Other payables The breakdown of“Sports personnel”isasfollows: and coachesforsportsachievementsinthe2016/2017season. changes incontractsandtheimpactofbonusespaidtoplayers The increase inyearended June30,2017wasduemainlyto the followingseason. achievements which, under thetermsof the contracts, are paid and January. Alsoincludedare performancebonusesforsports first the which stipulatethatthesepaymentsare madegenerallyinJuly of coaches and football teaminaccordance withtheircontracts,thetermsof players to payable remuneration The amountof“Sportspersonnel”relates primarilyto The breakdown of“Trade andotherpayables”isasfollows: 14.3 otal payables tosportspersonnel otal financialliabilities otal payables topublicadministrations Tradeandotherpayables y ables 30/06/2017 187,816 189,939 1,025 1,098 30/06/2016 134,441 138,746 2,771 1,534 30/06/2017 189,939 260,024 287,012 62,168 26,988 26,988 7,134 783 - 30/06/2016 138,746 210,041 225,200 61,470 15,159 15,159 4,533 5,292 - any paymentsinceitis covered byincomethe following year. over theentire year. However, cancellationdoesnotrepresent This generatesarecurring negativebalance,whichiscanceled Membership fees are collected on June 30 of the following year. is madeintwohalf-yearlyinstallments:January andJuly. reflectsimilar amountsateachyear-end. Paymentforplayersignings will therefore and over, rolled be will balances These period. for large partofthenegative goodwillattheendofreporting performance bonusesforsportsachievements,are responsible recurring payables,except fortheone-off increase causedby dues/season tickets and other: €67 million). These current other personnel:€144million;accrualsofmembership June 30,2016(purchases andservices:€81million:signings/ tickets andother:€90millioneuros), upfrom €292millionat personnel: €197million;accrualsofmembershipdues/season thousand (purchases and services:€90million;signings/other Current recurring payablesatJune30,2017amountedto€377 renewed annually. of membershipdues/seasontickets),whichare recurring; i.e. (purchases andservices, playersignings,upfront collection of theClub,large operations-drivenaccountspayable negative workingcapitalis,inlinewiththeintrinsicworkings inherently negativeworkingcapital.Theprincipalfactor driving The effect oftheseinvestments isinadditiontotheClub’s years. all, insportsintangibleassets,boththecurrent andprevious property, plant,andequipment,intangibleassetsand,above Negative workingcapitalistheresult, partly, ofinvestmentin sports achievements. million). Theincrease thisyearwasduetothebonusesfor in linewithprevious years(2016:€-86million;2015:€-135 Working capital at June 30, 2017 was a negative €132 million, liabilities onthebalancesheet. Working capitalisthedifference current assetsandcurrent 14.4 Workingcapital 81 FINANCIAL STATEMENTS 82 Management Report & Financial Statements real madrid 2016-2017 Non-current accruals € Thousand Current accruals capital are mitigated. working negative to due position Club’sfinancial the and risk the uncertaintiesthatmayariseintermsofpotentialliquidity lines atJune30,2017of€61million(2016:€66.6million), coming seasons,andtheundrawnavailableshort-termcredit cash balancesbasedonconservativeassumptionsforthe Considering theaboveandtakingintoaccountforecast its tocover cash surplus investment commitments. significant generates Club the meeting thepaymentcommitmentsarisingfrom itsoperations, operating expenses,boththisyearandnext.Asaresult, after than higher income operating i.e., profit, operating significant In sum,whatisimportantthattheClubexpectstogenerate each month financial Club and the cash investments inhighlyliquidassets. available by plus activities, generated operating from flows cash the with amounts owedforinvestments,whichwillbepaidcomfortably The remaining current payablesatJune30,2017 related to entire season,implyingnopaymentwhatsoever. the reduction inthecreditor balanceiscarriedout overthe season, whereas therecognition inrevenue and,accordingly, from certainsponsors,were collectedpriortothe endofthe Box seatingandVIParea seasontickets,aswellamounts The breakdown oftheseitems isasfollows: 15. CURRENTANDNON-CURRACCRUALS rendered services Advances receivedfor Broadcastingrevenue Deferredincome Stadiumrevenue Marketingrevenue Competitionrevenue 30/06/2017 16,952 16,952 21,407 57,143 90,492 7,712 4,230 30/06/2016 22,152 22,152 54,895 10,322 67,422 2,050 155 revenue d) Competition Deferred income • (2016: €566thousand). advance paymentreceived andamountedto€478thousand year endedJune30,2017related tothediscountingof Finance expensesrecognized intheincomestatementfor contract extension(Note17.1). amounts received from sportssponsorshipincomearisingfrom “Advances received forservicesrendered” relates tounaccrued Advancesreceived forservicesrendered • c) b) a) matches andothersports-related income. received, mainly in respect of guarantees, for friendly Competition revenue relates primarilytoadvancepayments season. into before June30,2017, whichaccruedinthe2017/18 invoiced bytheClubunderbusinessagreements entered The balanceofthisitemrelates totheamountsreceived or Marketing revenue accrue inthe2017/18season. boxes received orinvoiced before June30,2017,which season ticketsand,toalesserextent,incomefrom stadium Stadium revenue comprises mainlymembershipfeesand Stadium revenue before June30,2017,which accrueinthe2017/18season. Club under agreements on audiovisual rights entered into This itemincludesamountscollectedorinvoicedbythe Broadcasting revenue 83 FINANCIAL STATEMENTS 84 Management Report & Financial Statements real madrid 2016-2017 VAT payable € Thousand differences deductibletemporary Deferred taxassetsfor Current taxassets(note8.2) onaccount Withholdings andpayments Other receivables frompublicadministrations(Note8.2) taxes Recoverable € Thousand Deferred taxliabilities differences temporary arisingfromtaxable Liabilities Current taxliabilities Other payables topublicadministrations(Note14.3) Social securitypayable Local incometaxpayable (IRCM) incometaxpayable Corporate (non-residentincometax) incometaxpayable Corporate Personal incometaxpayable Deferred taxassets(non-currentassets) The breakdown oftaxliabilities isasfollows: The breakdown oftaxassetsisasfollows: 16. T AXA TION 30/06/2017 30/06/2017 21,077 12,407 13,891 13,891 26,988 12,407 6,726 6,726 1,843 1,209 2,086 645 128 9 9 - 30/06/2016 30/06/2016 10,511 15,910 14,397 14,397 15,159 15,910 5,473 5,473 1,858 1,931 302 302 588 264 7 - • • • • • • tax regulations: end ofthereporting periodare theresult ofapplyingordinary Accordingly, allamountsrecognized undertaxliabilitiesatthe the taxationauthoritiesfordeferringanypayments. due amountswiththetaxationauthorities,oragreements with The Clubiscurrent withallitstaxobligationsandhasnopast- reinvestment ofprofits, accelerateddepreciation). payments, in accordance with tax deferral regulations (e.g. the differences: temporary balance ofcorporateincometaxtobesettledbydeferred taxable from arising Liabilities This gaverisetorefunds, recognized undercurrent taxassets. higher than it ultimately was required to pay in the tax return. by installment,madeprepayments foramountsthatwere years the Club,in accordance with regulations on payments payable tax recorded forthisitematJune30,2017or2016,sinceinboth income for year. the provisionprofit/(loss) for on was based amount calculated No liabilities: tax Current obligations inthemonthofJune,withsettlementonJuly30. Security Social for payable balance payable: Security Social taxes, withsettlementinNovember. June forlocaltaxes,mainlyregarding property and business to January from accrued expense payable: tax income Local paid inmonthofJune,withsettlementonJuly20. Personal income tax payable: balance payable for remuneration June, withsettlementonJuly20. VAT payable: balance payable for transactions in the month of 85 FINANCIAL STATEMENTS 86 Management Report & Financial Statements real madrid 2016-2017 T Reduction oftaxableincomearising fromtherecapitalizationreserve taxable income Preliminary T P Income andexpense fortheyearbeforetax Income tax T Reduction oftaxableincomearisingfromtherecapitalizationreserve taxableincome Preliminary T P Income andexpense fortheyearbeforetax Income tax Income and expense for theyear Income andexpensefor € Thousand 2015/2016 theyear Income andexpensefor € Thousand 2016/2017 income (taxloss)isasfollows: The reconciliation ofnetincomeandexpensewithtaxable be madetotheresulting taxliability. are subjecttoa25%taxrate.However, certaindeductionsmay profitsClub’s the legislation, tax prevailing with accordance In 16.1 Calculation ofincometax expense emporary differences emporary differences emporary axble income(ta x result for theyear) axble income(tax result fortheyear) ermanent differences ermanent differences Originating inprioryears Originating inthecurrentyear Originating Continuing operations inprioryears Originating inthecurrentyear Originating Continuing operations Continuing operations Continuing operations Profit/(loss) Profit/(loss) for theyear for theyear (16,868) (31,107) (9,663) (4,202) (6,841) (2,383) 10,027 12,955 13,063 21,444 45,255 49,457 43,343 21,445 23,828 26,265 30,280 21,372 7,226 4,893

expense recognized expense recognized directly inequity directly inequity Income and Income and ------

Effectiv inometax epens Capitalization reserve T forincometax Adjusted ofprioryearprovision Deductions Theoretical taxcharge taxrate Effective Permanent differences tax theyearbefore Income andexpensefor € Thousand 2015/2016 Effectiv inometax epens Capitalization reserve forincometax Adjusted ofprioryearprovision Deductions Theoretical taxcharge taxrate Effective Permanent differences tax theyearbefore Income andexpensefor € Thousand 2016/2017 income statement,isasfollows: applicable taxrate,differentiating theamountreported inthe of multiplyingtotalrecognized incomeandexpensesbythe Reconciliation ofincometaxexpense/(income)andtheresult ax assessments statement statement (1,050) (3,983) (2,971) 13,063 14,075 56,298 12,955 43,343 33,491 26,265 Income Income 4,942 4,893 8,373 7,226 (921) (596) 25% 25% 87

expense recognized expense recognized directly inequity directly inequity Income and Income and ------

87 FINANCIAL STATEMENTS 88 Management Report & Financial Statements real madrid 2016-2017 Current tax € Thousand Effective taxexpense incometax Adjustment ofprioryearprovisionfor Changes indeferredtaxes Current tax € Thousand 2015/2016 Effective taxexpense incometax Adjustment ofprioryearprovisionfor Changes indeferredtaxes Current tax € Thousand 2016/2017 Current taxassets onaccount Withholdings andpayments follows: The calculationofincometaxrecoverable orpayableisas The breakdown ofincometaxexpense/(income)isasfollows: Grants, andbequestsreceived donations differences deductibletemporary for Changesindeferredtaxliabilities differences deductibletemporary Changesindeferredtaxassetsfor Unusedtaxcreditsandotherrelief Recognizedtaxlosses Grants, andbequestsreceived donations differences deductibletemporary for Changesindeferredtaxliabilities differences deductibletemporary Changesindeferredtaxassetsfor Unusedtaxcreditsandotherrelief Recognizedtaxlosses 30/06/2017 (2,391) 6,726 9,117 30/06/2016 (11,532) 17,005 5,473 statement statement (11,443) 13,397 13,063 11,532 Income Income 4,893 3,503 2,391 (458) (423) (543) ------

expense recognized expense recognized directly inequity directly inequity Income and Income and (48) (48) (48) (48) ------

Liabilities for taxable temporary differences temporary taxable for Liabilities Deferred taxliabilities differences deductibletemporary Deferred taxassetsfor Deferred taxassets € Thousand 2015/2016 differences temporary taxable for Liabilities Deferred taxliabilities differences deductibletemporary Deferred taxassetsfor Deferred taxassets € Thousand 2016/2017 and “Deferred taxliabilities”are asfollows: The movementsintheitemscomposing“Deferred taxassets” 16.2 Deferredtax assetsandliabilities Tax oftransitiontonewSpanishGAAP effects anddepreciation Amortization Other Grants (Note6.4) Free depreciation gainsduetodeferred payment Deferred capital gains Deferred capital Provisions andother Other Grants (Note6.4) Free depreciation gainsduetodeferredpayment Deferred capital gains Deferred capital anddepreciation Amortization Provisions andother balance balance Opening Opening 29,307 18,611 19,648 10,353 15,910 11,118 25,888 14,397 1,618 1,312 3,060 1,570 1,242 8,357 2,978 4,792 343 250 250

Changesreflectedin Changesreflectedin statement statement (13,397) (11,443) (11,291) (3,503) (7,493) (5,561) (2,787) Income Income (458) (343) (305) (716) (70) (82) (70) (83) - - - -

Equity Equity (48) (48) (48) (48) ------balance balance Closing Closing 15,910 11,118 12,407 14,397 13,891 4,792 8,331 8,357 1,242 2,978 1,172 2,895 1,570 1,522 8,052 4,076 250 250 -

89 FINANCIAL STATEMENTS 90 Management Report & Financial Statements real madrid 2016-2017 2015/2016 2016/2017 Arising in € Thousand Investment taxcredits € Thousand 2015/2016 Investment taxcredits € Thousand 2016/2017 Other deductions Other deductions T T Deferred • recovered. be available will profit taxable against whichtheycan beutilizedand,accordingly, theassets future that probable is it that unused taxcredits andanyunusedtaxlossestotheextent Deferred taxassetsare recognized forthecarryforward of arose isasfollows: The breakdown ofinvestment taxcredits byyearinwhichthey as follows: The movement in “Unused tax credits and other tax relief” is otal unusedtaxcreditsandotherrelief otal unusedtaxcreditsandotherrelief tax assets - Unused tax Eligible 45,343 32,652 gains credits

and other Opening balance Opening balance generated T ax credit 3,174 2,286 tax

relief ------Increases Increases 3,174 2,286 3,983 2,971 809 685 T ax credit applied (3,174) (2,286)

Decreases Decreases (3,983) (2,971) (3,174) (2,286) (809) (685) Closing balance Closing balance tax credit Unused ------

of property, plant,and equipment, aswellfinancialassets. in playerfederativerights,otherintangibleassets anditems and the three years following it.These gains were reinvested within theperiodelapsingbetweenyear prior tothesale commitment toreinvest thefullsaleproceeds atsomepoint 2001/02 onthedisposalofcertainassets,thereby acquiringa to 1996/97 from years financial in generated gains the to 27) for inarticle21oftheCITLaw(Law43/1995,December tax credit for reinvestment of extraordinary gains provided The aforementioned tax treatment consistedofapplyingthe has beendeferred. former sportingcomplex,whoserecognition intaxableincome rights transferred andon aportionofthelandatClub’s as wellonmerchandising,imageanddistribution internet, capital gainsoncertaintransfersofplayers’federativerights, These liabilitiesresult from thetaxtreatment applicableto Deferred taxliabilities–deferralforreinvestment • taxable income. deduction forgainsgeneratedinprioryearsandnotappliedto on newgainsgeneratedasofthatdate.However, itkeptthe beginning onorafterJanuary1,2015,eliminatedthisdeduction Law 27/2014,ofNovember27,effective fortax periods time frames. are met,suchasreinvestments withinthelegally stipulated included inthetaxbase,provided thepertinentrequirements recognizes thetaxassetcorresponding togainsthat havebeen to falling 2006/07, year 7% thereafter. As a consequence of this regulation, the Club financial through generated gains when it is generated. This deduction was 10% for capital in whichthecredit isutilized,uptoalimitof10yearsfrom deduction from taxpayableonsuchcapitalgainsintheyear 36.ter oftheCorporateIncomeTax (CIT)Law, establishinga from thesaleofcertainassetswasamended,asperarticle In 2002/03,applicabletaxlegislationoncapitalgainsobtained 91 FINANCIAL STATEMENTS 92 Management Report & Financial Statements real madrid 2016-2017 1997/1998 1996/1997 year Financial € Thousand June 30,2016 1997/1998 1996/1997 year Financial € Thousand June 30,2017 1998/1999 1998/1999 2000/2001 1999/2000 2000/2001 1999/2000 2000/2001 2000/2001 2001/2002 2001/2002 2001/2002 2001/2002 Deferred tax(25%) T Deferred tax(25%) T following table(€Thousand): already reinvested andpendingreinvestment are setoutinthe 21 oftheCITLaw, therecognition methodandtheamounts The totalamountofdeferred incomeinaccordance witharticle otal otal rights federative Player rights federative Player rights federative Player rights federative Player rights federative Player rights federative Player Other rights rights federative Player Other rights rights federative Player rights federative Player rights federative Player Land Land Land Land sold Assets sold Assets Deferred Deferred 115,995 115,995 203,443 203,443 406,117 406,117 14,135 14,135 20,358 20,358 24,523 24,523 15,714 15,714 3,865 8,084 3,865 8,084 gain gain

reinvested reinvested 117,197 117,197 204,142 204,142 421,311 421,311 Amount Amount 11,239 11,239 17,159 17,159 25,142 25,142 25,243 25,243 15,768 15,768 5,421 5,421 to be to be

reinvested reinvested 117,197 117,197 204,142 204,142 421,311 421,311 Amount Amount 11,239 11,239 17,159 17,159 25,142 25,142 25,243 25,243 15,768 15,768 5,421 5,421 Gain included Gain included in taxable in taxable 115,995 115,995 203,443 203,443 394,206 394,536 14,135 14,135 20,358 20,358 24,523 24,523 income income 8,084 8,084 3,865 3,865 3,803 4,133 Gain pending Gain pending inclusion inclusion 11,911 11,581 11,911 11,581 2,978 2,895 ------including gains including gains 2006/2007 2006/2007 2007/2008 2007/2008 2008/2009 2008/2009 2009/2010 2009/2010 2010/2011 2010/2011 2010/2011 2010/2011 2011/2012 2011/2012 2011/2051 2011/2051 Last FYfor Last FYfor % of depreciation of of % ofdepreciation of % ofdepreciation reinvested assets reinvested assets including gain including gain Method for Method for Sevenths Sevenths Sevenths Sevenths Sevenths Sevenths Sevenths Sevenths Sevenths Sevenths Sevenths Sevenths Sevenths Sevenths applied. depreciation oftheassetstowhichfree depreciation was was canceled(2016:€70thousand)related totheaccounting In theyearendedJune30,2017,atotalof€70 thousandeuros thousand inthe2011/12financialyear. Free depreciation generatedadeferred taxamountingto€1,533 employment, whichwasaconditionintheprevious regulation. properties covered underthislaw, andisnotrequired tomaintain the for in thenewproperty, plantandequipmentinvestment time first investments its of the depreciation free the for year financial availed 2011/23 Club the 2011, 1, January measures designed to boost competitiveness, effective from Pursuant toRoyalDecree Law13/2010,ofDecember3,on Deferred taxliabilities-free depreciation • capital gainsfrom theprevious year(2016:€11,334thousand). cancellation of€8,206thousandfrom collectionofdeferred related tothedeferred capitalgainsduringtheyear, andthe thousand intheyearendedJune30,2017(2016:€43thousand) This gaverisetoadeferred taxliabilityamountingto€7,901 based onthecollectionscarriedout. on assettransfersintransactionsinvolvingdeferred payment Club decidedtorecognize, fortaxpurposes,thecapitalgains the SpanishCorporateIncomeTax Law(TRLISinSpanish),the of LegislativeRoyalDecree 4/2004oftheConsolidatedText of In the 2009/10 financial year, and in accordance with article 19.4 deferred payment Deferred • the related assetsare depreciated. case the in which income isincludedintaxablethetaxperiodswhich assets, fixed in reinvested were proceeds rule insevenequalpartsfrom yearthree, except where the These gainshavebeenincludedintaxableincomeasageneral tax liabilities - Deferral of capital gains due to 93 FINANCIAL STATEMENTS 94 Management Report & Financial Statements real madrid 2016-2017 approval ofthefinancialstatements(seeNote2.4). reserve withinthetermprovided forincompanylawthe To complywithitsrequirements, theClubsetasiderelated requirements are fulfilled. in thenexttwoyearswithsamerestrictions, provided the in capitalandreserves may beusedtoreduce taxableincome €838 thousand). The remaining amount up to the 10% increase led toareduction inincome taxexpenseof€596thousand(2016: provided forinthislegislation. Thisreduction in taxable income 10% ofthetaxbaseforyear, applyinginthiscasethelimit the yearof€2,383thousand(2016:€4,202thousand)related to the yearendedJune30,2017,areduction intaxableincomefor In this regard, the Club included in the calculation of its taxes for CIT andpriortotheoffset oftaxlosses. and theintegrationreferred toinsection12ofarticle11the 10% oftaxableincomeforthetaxperiodpriortoreduction In nocircumstance maythe reduction in taxable incomeexceed aforementioned timeperiod. as aseparateheading,whichwillbenon-distributableforthe reserve, which must appear on the face of the balance sheet b) Theamountofthereduction mustbeappropriated toa reduction relates, exceptintheeventoftaxlosses. the which to period tax the of end the from years five of period a) Theincrease incapitalandreserves mustbemaintained fora capital andreserves provided thefollowingconditionsare met: for a reduction in taxable income of10% of theincrease in provided in sections1 to 6 of Article 29 of the CIT will be eligible 27/2014, ofNovember27,taxpayersthatpaytaxattherate In accordance withArticle25ofCorporateIncomeTax (CIT)Law 16.3 Capitalization reserve 2015/2016 financialyear. was charged toprovisions already setasideattheendof it since profit, accounting 2016/2017 on impact any have not of theassessmentsinprevious year. Thispaymentdid criteria of maximum prudence, the Club paid the full amount Economic the Central Administrative Tribunal (TEAC).However, inkeepingwith with appeals filed and disagreement €6.5 millionsettlementagreement. TheClubexpressed its committed an offense. The proceedings concluded with a inspections didnotuncoveranindicationsthattheClubhad the proceedings and ofpenalty regarding the2010-2014assessments,eventhose commencement year the of financial notified Club the was 2015/2016 statements, financial the the of issue of for authorization end the After assessments withintheprevious years. Club recognized theexpense andpaidthefullamountof appeals filed However, inkeepingwithcriteriaofmaximumprudence,the and disagreement its with theCentralEconomicAdministrativeTribunal (TEAC). expressed Club The exist betweentheagentandplayer. made onbehalfofplayerswhere arelationship was deemedto Spanish tax authorities considered that these payments were for servicesrendered andinvoicedtotheClubby agents. The regarding thetaxtreatment ofpayments madebytheClub regarding theresolutions discrepancies to due arose assessments of The settlement. final 2016 May in notified was Club added taxandcorporateincomefor2010to2014.The relating topersonalincometax,non-resident income tax,value In January2016,taxassessmentswere signedunderprotest Tax assessments2010-2014 • 16.4 Otherinformation 95 FINANCIAL STATEMENTS 96 Management Report & Financial Statements real madrid 2016-2017 Withholdings onaccountofnon-residenttax onaccountofpersonal incometax Withholding/payments Value addedtax Income tax Item European Commissioncase(seeNote13.4.6). for thedifferent taxtreatment relating totheaforementioned the way, significant any amount thattheClubhasestimatedasdamage incurred in affect, not do assessments The set asideattheendof2015/2016financial year. as theywere recognized withacharge toprovisions already no impact on accounting profit for the 2016/2017 financial year had and assessments provisional the from significantly differ in agreements settlement final relation totheseassessmentswere received. Theydidnot the period, reporting the of rendered andinvoicedtotheClubbyagents.Afterend the taxtreatment ofpayments madebytheGroup forservices the 2010-2014period,thisamountwasduetodiscrepancies in approximately €1million.Aswiththeprevious taxauditsfor for thetaxesandperiodsindicatedatotalamountof In January2017,theClubsignedassessmentsunderprotest state aidwere replaced bythenewtaxaudits. 7/1/2014 to6/30/2015periodregarding theenforcement of Therefore, theaforementioned taxauditsofincomeforthe expanded toincludethefollowingtaxes: The taxauditbeganonOctober25,2016,andsubsequently purposes, includesalowertaxrate(seeNote13.4.6). for applying legislation to this type of entity that, for tax Spanish footballclubs,includingRealMadridClubdeFútbol, of July4,2016regarding allegedstateaidgranted tofour for state aid in relation totheEuropean Commission’s decision July 1,2014toJune30,2015ontheenforcement procedure of ataxauditcorporateincomefortheperiodfrom On July 22, 2016, the Club was notified of the commencement Current taxaudits • 2015 and January 2016 2015 andJanuary 2016 2015 andJanuary 7/2014 to6/2015 7/2014 to6/2015 Period Total operating income Gains/(losses) ondisposalandother(Note17.5) T Provision surpluses(Note13.1) Grants (Note12) income Other operating Revenue € Thousand items: The accompanyingincomestatementincludesthefollowing 17.1 17. REVENUANDXPENSES settlement agreements. of theamountsrequired fortheClub’s disagreement withthe be based,asusual,ontheprincipleoftaxlegality, irrespective appeal thesettlements.Inanyevent,Club’s actionswill or possiblepenalties,ithasdecidedtosettlethetaxesand criteria usedbythetaxauthorities,toprevent newassessments because eventhoughtheClubcompletelydisagreed withthe regarding thetaxtreatment ofpaymentstoagents.Thisis future taxaudits,eventhosethatcouldarisefrom discrepancies that there are nomaterialcontingenciesthatcould arisingfrom Regarding theseyearsopentoinspection,theClubconsiders corporate incometaxforthe2015/2016financialyear. income tax)from February2016,VAT from July2015and income tax(personalwithholdingandnon-resident Therefore, atJune30,2017,theClubwasopento inspectionof authorities oruntilthefour-year inspectionperiodhasexpired. considered final until they have either been inspected by the tax Under prevailing tax regulations, tax returns may not be otal operatingincomebeforedisposals Operating income 30/06/2017 726,292 674,625 671,864 51,667 1,539 1,030 192 30/06/2016 621,765 620,132 619,710 1,633 193 229 - 97 FINANCIAL STATEMENTS 98 Management Report & Financial Statements real madrid 2016-2017 By operatingsegment € Thousand € Thousand By geographicalmarket T T T T Total revenue T thousand. and theshare offootballpoolrevenue, amountingto€382 Football Association for maintenance of stadium access points Professional FootballLeagueandtheSpanish Professional “Revenue” includes the amount of subsidies from the by businesscategoryandgeographicmarketisasfollows: The breakdown oftheClub’s revenue from continuingoperations Revenue • otal boxofficeandcompetitionrevenue otal broadcastingrevenue otal stadiumrevenue otal revenuefrommembershipfeesandseasontickets otal commercializationandadvertisingrevenue Membershipfeesandstadiumrevenue La Ligarevenue International and friendly matches matches andfriendly International King’s Cup(CopadeS.M. revenue ElRey) Broadcastingrevenue Spanish Supercuprevenue Marketingrevenue revenue Champions League Spain European Supercuprevenue Other FIFA Club World Cuprevenue Revenue from friendly matches Revenue fromfriendly Basketball competitionsrevenue Other income Revenue fromstoresales Revenue fromsponsorshipsandlicenses Advertising revenue Other revenue 30/06/2017 30/06/2017 166,569 165,299 671,864 254,138 467,127 671,864 204,737 177,170 165,299 202,790 671,864 254,137 51,055 85,858 86,213 25,486 49,772 25,215 24,182 5,609 4,000 4,922 9,875 5,954 9,542 1,950 - 30/06/2016 30/06/2016 153,730 167,577 619,710 212,364 447,588 619,710 172,122 167,398 167,577 161,537 619,710 212,364 51,718 86,039 82,122 23,971 22,390 49,981 21,096 26,160 4,015 5,569 3,571 3 - - - regarding town planning. Although Real Madrid notified IPIC notified Madrid Real Although planning. town regarding must undertaketocomply withcertainlegalrequirements IPIC effect, be to right naming the For significantly. increase amounts receivable and the term ofthe agreement would naming rightsinupcoming seasons,inwhichcasethe The agreement statesthepossibilityofIPIChavingStadium period. extension hadnotbeenexecutedattheend ofthereporting the sponsorshipagreement foranothertwoseasons.This The agreement withIPICincludespossibilityofextending at June30,2017. assigned byIPICtoCEPSA.Thisassignmentwas stilleffective In December2014,thesponsorshipagreement waspartially new sponsorforthe2014/15,2015/16and2016/17seasons. PetroleumInternational InvestmentCompany(IPIC)asits 3. InOctoberof2014,theClubsignedanagreement with Real Madrid. 2021/2022 season,withanincrease inguaranteed incomefor during thereporting period andextendedtotheendof the previous sponsor’s contract.Thisagreement wasrenewed 2016/17 and 2017/18 seasons entailing higher income than with EmiratesSpainBranchforthe2013/14,2014/15,2015/16, 2. Inthe2012/13season,asponsorshipagreement wassigned in exchangeforaminimumguaranteedroyalty. rights forproducts licensedbytheClubandcertainretail rights with Adidastoassign,forthe2012/13season,exploitation Also inthe2011/12season,anumberofcontractswere signed recognized. gradually canceledasthecorresponding contractrevenue is value under“Non-current accruals”inliabilitiesandwillbe 2019/20 season.Thisadvancewasrecognized atitspresent from theamountsreceivable from the2012/13seasonto that seasonwhichwillisdiscountedonastraight-linebasis royalty percentages. Anadvancepaymentwasreceived during and raisingtheminimumamountsguaranteed,aswell season extendingthesponsorshiprightsto2019/20 rights. Anewagreement wassignedwithAdidasinthe2011/12 with Adidastoexpandandimprove thesportswearsponsorship 1. IntheyearendedJune30,2004,anagreement wassigned Agreements inforce • 99 FINANCIAL STATEMENTS 100

Management Report & Financial Statements real madrid 2016-2017 T Intra-EU Spain € Thousand used Sports materials € Thousand Other consumables used Other consumables T categories andassociations,topromote sportsingeneral. in accordance withincome obtained)tosustainotherfootball It also establishes a mandatory contribution system (expenditure tothe generation ofincomefrom themarketingofTVbroadcasts. thecontribution of share the and revenue, office box social acceptance,measured bymembershipfeesandaverage and performance division), second or (first category on based The legislationestablishesajointrevenue-sharing scheme became effective. football divisions,theKing’s CupandtheSpanishSupercup) Spanish second and (first competitions football professional jointexploitationofaudiovisualrights of April 30,governing entered into by the clubs concluded, Royal Decree Law 5/2015, 4. Inthe2016/2017season,onceindividualcontracts the parties. statements, this compliance was still being discussed between financial accompanying at the the for issue for as authorisation of date period, financial current the before compliance of The breakdown ofpurchases bygeographicarea isasfollows: consumables duringtheyearisasfollows: The detailofconsumptionrawmaterialsandother 17.2 otal otal supplies Purchases Change ininventories Purchases Change ininventories Raw materials andotherconsumablesused 30/06/2017 30/06/2017 26,066 26,319 22,423 26,347 3,896 253 103 (75) 30/06/2016 30/06/2016 22,270 22,389 19,185 22,252 3,204 (146) 119 9 Staff who can be registered intheLNFP whocanberegistered Staff € Thousand 2016/2017 football team offirst andcoachingstaff Players € Thousand 2016/2017 Staff who cannot be registered intheLNFP whocannotberegistered Staff team football ofsecond andcoachingstaff Players T teams football oflowerdivision andcoachingstaff Players Non-sports personnel T Players and coaching staff Basketball andcoachingstaff Players Non-sports personnelbasketball T Total personnelexpen (other footballandbasketballdivisions)isasfollows: 2nd divisionAplayersandcoaches)thosewhocannot below sportsstaff whocan beregistered intheLNFP(1stand The breakdown ofpersonnelexpensesinthepreceding table The breakdown of“Personnelexpenses”isasfollows: 17.3 otal sportspersonnelexpenses otal football otal basketball Personnelexpenses and wages and wages Salaries Salaries 247,148 247,148 283,212 292,913 315,620 36,064 10,834 30,742 21,041 22,707 4,189 1,666

rights rights 6,242 6,242 3,624 9,866 6,484 3,382 3,382 9,866 Image Image 188 54 - -

Termination Termination departures departures benefits/ benefits/ 1,573 2,006 2,006 433 433 337 96 - - - - - bonuses bonuses 65,044 65,044 66,482 66,562 67,857 Group Group 1,438 1,375 1,295 1,295 143 - - security security Social Social 1,700 2,136 3,998 5,701 6,237 436 436 375 892 433 103 536 employee employee benefits benefits expense expense Other Other 1,255 1,255 2,540 3,795 1,689 3,672 4,523 728 851 851 - - personnel personnel expenses expenses 320,125 320,125 365,924 377,338 406,109 45,799 11,493 38,416 27,002 28,771 7,304 1,769 Total Total 101

FINANCIAL STATEMENTS 102

Management Report & Financial Statements real madrid 2016-2017 Staff who can be registered intheLNFP whocanberegistered Staff € Thousand 2015/2016 football team offirst andcoachingstaff Players € Thousand 2015/2016 Staff who cannot be registered intheLNFP whocannotberegistered Staff team football ofsecond andcoachingstaff Players football teams football oflowerdivision andcoachingstaff Players T Non-sports personnel T Players and coaching staff Basketball andcoachingstaff Players Non-sports personnelbasketball T Total personnelexpen (other footballandbasketballdivisions)isasfollows: 2nd divisionAplayersandcoaches)thosewhocannot below sportsstaff whocan beregistered intheLNFP(1stand The breakdown ofpersonnelexpensesinthepreceding table otal sportspersonnelexpenses otal football otal basketball and wages and wages Salaries Salaries 176,189 176,189 206,695 217,547 236,696 30,506 28,380 17,528 19,149 9,204 3,774 1,621

10,460 10,460 13,730 11,057 13,730 rights rights 3,270 2,673 2,673 Image Image 496 101 - -

Termination Termination departures departures benefits/ benefits/ 5,825 5,825 6,773 6,405 6,995 250 948 108 222 590 590 - bonuses bonuses 37,511 37,511 39,321 37,571 39,521 Group Group 1,810 1,750 1,950 200 60 - - security security Social Social 1,606 1,994 3,626 5,215 5,752 388 388 363 838 405 132 537 employee employee benefits benefits expense expense Other Other 2,647 1,648 3,344 3,217 4,183 697 697 839 966 966 33 - personnel personnel expenses expenses 231,070 231,070 271,857 281,012 306,877 10,406 40,787 33,067 23,912 25,865 6,469 1,953 Total Total T Staff who cannot be registered intheLNFP whocannotberegistered Staff intheLNFP whocanberegistered Staff € Thousand 2015/2016 intheLNFP whocanberegistered Staff € Thousand 2016/2017 Reversal oflosseson fromsportsentities”“Current receivables (Note8.2) Reversal ofimpairment fromsportsentities”“Current receivables (Note 8.2) Impairment of fromsportsentities”“Current receivables (Note8.2) Reversal ofimpairment “trade receivables” (Note8.2) Impairment of “trade receivables” (Note8.2) € Thousand T intheLNFP whocannotberegistered Staff T provisions” isasfollows: The breakdown of“Losses,impairmentandchangesintrade Losses,impairmentandchangesintradeprovisions • 17.4 anónimas deportivasor“SADS”). well astheLPF’s publiclimitedsportscompanies(Sociedades based onthebudgetpreparation guidelinesoftheclubs,as The followingtablepresents thetotalsportspersonnelexpenses otal losses, impairmentand changesintradeprovisions otal sportspersonnelexpenses otal sportspersonnelexpenses Otheroperating expenses Personnel Personnel expenses expenses 231,070 320,125 365,924 271,857 40,787 45,799 amortization amortization Depreciation Depreciation 93,253 86,795 92,264 98,856 5,603 5,469 and and Impairment Impairment and losses and losses 2,284 5,409 7,693 42 42 -

expense from expense from transfers transfers 30/06/2017 (Income)/ (Income)/ (1,762) (1,762) 2,554 1,841 (200) (170) (520) 445 245 (23) - - 30/06/2016 329,532 406,920 456,468 378,651 49,548 49,119 1,237 Total Total (755) (941) (977) (74) - 103

FINANCIAL STATEMENTS 104

Management Report & Financial Statements real madrid 2016-2017 T Other leases, royaltiesandotherservices Leases ofassets(Note6.3) € Thousand T expenses Other operating transferandacquisitionexpenses Player Transport Taxes External services € Thousand Utilities Advertising, publicityandpublicrelations Insurance premiums Professional services Repairs andmaintenance event expenses,andcosts ofeditingandmailingpublications. operating fees,TVproduction expenses,catering,hostessand “Other leases,royalties andotherservices”includes, interalia, The breakdownservices”isasfollows: of“External clubs thatsignedtheagreement. must be proposed body andapproved by the governing by the calculation andthetermsforassigningsuchcompensationthat were byregulations governed establishingtheparametersfor audiovisual rights.Thefundamentaltermsforcompensation are compensatedforloss ofrevenue from league andcup which clubs demoted tolowerleagues from the2011/12season belonging to the Professional Football League (LFP) by virtue of from the agreement the Club had with the majority of clubs 17.1). Untiltheprevious year, italsoincludedexpensesarising contributions regulated by RoyalDecree 5/2015(seeNote “Other operatingexpenses”includesthemandatory The breakdown of“Otheroperatingexpenses”isasfollows: Otheroperatingexpenses • otal external services otal otheroperatingexpenses 30/06/2017 30/06/2017 123,724 123,724 154,241 65,138 16,985 23,983 24,038 1,654 9,091 3,903 1,860 3,421 3,630 538 30/06/2016 30/06/2016 128,596 87,590 34,218 30,230 21,031 21,494 87,590 1,804 7,526 2,422 1,806 3,178 4,059 828 assets andother exceptionalgains/(loss) Total impairment, gains/(losse)ondipoalofnon-current Finance expenses Finance income € Thousand Gains ondisposalandother Gains ondisposalofproperty, plantandequipment assets(Note4.1) Gains ondisposalofsportsintangible T Impairment andlossesoninvestmentproperties Impairment andlossesonproperty, plantandequipment € Thousand T Other services Review andassurancework Audit € Thousand The breakdown offinance incomeandexpensesisasfollows: 17.6 current assetsandotherexceptional gains/(losses)”isasfollows: The breakdown of“Impairment andgains/(losses)ondisposalofnon- 17.5 the auditorandothermembersofauditfirmare asfollows: Fees paidforauditandotherservicesrendered totheClubby otal impairmentandlosses otal services Finance expensesonremeasurementof financialassets(Note15) Loan interestcosts Unrealized exchangelosses Exchange losses fees Bank service Finance incomeonremeasurementoffinancialassets(Note8.1) Other financeincome Unrealized exchangegains Exchange gains Interest ontermandotherdeposits Financeincomeandexpenses Impairment andgains/(losses) ondisposalofnon-currentassets 30/06/2017 131 234 65 38 30/06/2016 131 193 16 46 30/06/2017 30/06/2017 51,689 51,667 51,667 3,011 1,003 1,657 (360) 958 376 598 157 871 106 498 382 22 76 25 - 30/06/2016 30/06/2016 (1,913) (1,105) 1,633 1,633 5,123 1,223 9,158 3,116 4,056 4,159 (280) (808) 316 467 579 305 59 1 - 105

FINANCIAL STATEMENTS 106

Management Report & Financial Statements real madrid 2016-2017 GBP USD SEK MAD BRL AUD CHF € Thousand 2015/2016 € Thousand 2016/2017 AUD CHF GBP USD CNY JPY NOK Currency Currency follows: Transactions carriedoutincurrencies otherthantheeuro are as 17.7 Foreigncurrency transactions Short-term purchasesoffixedassets Short-term purchasesoffixedassets Notional Notional 524 529 45 45 5 ------Currency Currency GBP USD SEK MAD BRL AUD CHF AUD CHF GBP USD CNY JPY NOK Sales Sales Notional Notional 24,843 24,877 21,355 21,362 21 13 7 ------Currency Currency USD GBP SEK MAD BRL CHF AUD CHF GBP USD AUD CNY Yen NOK Services received Services received Notional Notional 1,278 1,529 3,799 3,962 8,158 192 334 26 33 27 36 - - - - - Real MadridConsulting(Beijing)CoLtd Fundación RealMadrid Senior management Other operating expenses Other operating € Thousand Payables € Thousand Board ofDirectors Co Ltd 2016/2017 financialyear was€30thousand. discharge oftheirdirectorships. Theamountpaidfortheentire Club directors fordamagescausedbyactsoromission inthe The Club’s policyistoarrangethird-party liabilityinsuranceof in connectionwiththeordinary courseoftheClub’s business. former members,didnotundertakeanytransactions otherthan of authorization for issue of the annual financial statements and management positionsattheClub,boththoseserving atthedate The membersoftheBoard ofDirectors andthoseholdingother 18.2 Ltd, allofwhichwere onanarm’s lengthbasis,were asfollows: Transactions carriedoutwithRealMadridConsulting(Beijing)Co Ltd are asfollows: Balances withsubsidiaryRealMadridConsulting(Beijing)Co 18.1 are asfollows: the yearendedJune30,2017,andnature oftherelationship, Related parties with which the Club carried out transactions in 18. RELA Board ofDirectorsandseniormanagement Balancesandtransactions withRealMadridConsulting (Beijing) TED PARTY RANSACTIONS Subsidiary andtheClub Shared directorsbetweentheFoundation Directors Directors Nature oftherelationship 30/06/2017 30/06/2017 1,093 129 30/06/2016 30/06/2016 1,998 -

107

FINANCIAL STATEMENTS 108

Management Report & Financial Statements real madrid 2016-2017 Catalina Miñarro Brugarolas José LuisDelValle Pérez Nicolás Martín-SanzGarcía José ManuelOtero Lastres Raúl RondaOrtiz Gumersindo Santamaría Gil José SánchezBernal Manuel Cerezo Velázquez Enrique Pérez Rodríguez Jerónimo FarréMuncharaz Santiago AguadoGarcía Ángel LuisHerasAguado Board members Enrique SánchezGonzález Secretary Pedro LópezJiménez 3rd Vice-Chairman Eduardo deBlas Fernández 2nd Vice-Chairman Tapias Fernández Fernando 1st Vice-Chairman Florentino Pérez Rodríguez Chairman as follows: The membersoftheBoard ofDirectors atJune30,2017were 30, 2017was€11,508thousand(2016:€10,124thousand). Total compensationpaidtoexecutivesintheyearendedJune June 30,2017(2016:31). (2016: 31),ofwhich32continuedtoholdtheirdirectorships at In theyearendedJune30,2017,there were 33senior executives management 2. on theirbehalf. of pensionsorlifeinsurance,norhaditextendedanyguarantees former orcurrent membersoftheBoard ofDirectors inrespect At June30,2017and2016,theClubhadnoobligationswith compensation forservingasdirectors. The membersoftheBoard ofDirectors didnot accrueany 1. Director compensation Identification of and total compensation paid to senior Cash andcashequivalents(Note10) Trade andotherreceivables Non-current investments € Thousand The maximumexposure tocredit riskisasfollows: established timeframe. financial that possibility the assets willnotberecovered attheircarryingamountwithinthe i.e. obligations, contractual its Credit risk is the risk that a Club counterparty will not meet 19.1 Creditrisk and liquidityrisk. Financial instrumentactivityexposestheClubtocredit, market, arising from financialinstrument activity. that makeitpossibletoidentify, measure, andmanagetherisks Real Madridhasestablishedaseriesofprocedures andcontrols 19. NA thousand). and June30,2017amountedto€1,958thousand(2016:€2,311 the pursuitofitsactivities.ContributionsbetweenJuly1,2017 contributions tofundthesustainabilityofFoundationand There are commitmentswiththeFoundation regarding compensation fortheirseatsonthisboard. The membersoftheBoard ofTrustees any donotearn Directors ofRealMadridClubdeFútbol. trustees include,amongothers,themembersofBoard of Trustees. According totheFoundation’s bylaws,theFoundation’s The RealMadridFoundation’s bodyisitsBoard governing of 18.3 INSTRUMENTS Receivables from public administrations (Note8.2) frompublicadministrations Receivables Other financialassets(Note8.2) fromsportsentities(Note8.2) Current receivables Trade (Note8.2) receivables Other financialassets(Note8.1) fromsportsentities (Note8.1) Non-current receivables RealMadridFoundation TURE ANDXTENTOFRISK S ARIINGFROMFIACIAL 30/06/2017 336,192 177,988 25,531 96,168 16,894 6,735 3,093 9,783 30/06/2016 345,373 211,485 58,361 50,990 5,775 7,570 4,665 6,527 109

FINANCIAL STATEMENTS 110

Management Report & Financial Statements real madrid 2016-2017 Impairment With abalanceoflessthan€100thousand With abalancebetween€200thousandand €100 thousand With abalancebetween€500thousandand200 With abalancebetween€1,000thousandand500 Impairment With abalanceoflessthan€100thousand With abalancebetween€200thousandand100 With abalancebetween€500thousandand200 With abalancebetween€1,000thousandand500 With abalanceofmorethan€1,000thousand 2015/2016 With abalanceofmorethan€1,000thousand 2016/2017 “Group companies”isas follows: current andnon-current “Receivablesfrom sportsentities”and The breakdown, bycounterparty, ofcredit riskconcentrationof management levels. by theClub’s ITsystemandsupervisedatthecorresponding automated through asystem ofregularmanaged warnings credit limit authorization system. Subsequent control is Initial measurement andauthorizationisbasedonahierarchical monitoring oftheexposure andsubsequentcontrols. covers riskmeasurement andtheinitialauthorization,ongoing control therisksarisingfrom eachofitsloans.The procedure The Clubhasaprocedure inplacetomeasure, manageand Operatingactivities • activities andthosearisingfrom investingactivities. operating from arising assets financial between differentiates For thepurposesofcredit riskmanagement,theClub No. ofdebtors No. ofdebtors 246 166 267 190 34 24 10 30 23 10 12 14 € Thousand € Thousand 115,878 138,593 112,053 131,139 (18,972) (15,988) 4,957 8,192 7,003 4,301 7,215 7,471 2,645 4,455 Impairment Doubtful receivables P Not due € Thousand following guidelines: and AdministrationDepartmenttomakeinvestmentsunderthe The Club’s investmentpoliciesare establishedbyitsFinance Investingactivities • Club oftendemandssuitablecollateralandguarantees. In addition, in order to guarantee collection of receivables, the to enablerecovery ofamounts pastdueasquicklypossible. necessary precautions, includinglegalmeasures if warranted, identifying riskysituationsandcollectiondelays,takingthe monitors theseexposures onamonthlybasiswithviewto The Club,through its various departments,assessesand The breakdown ofthesebalancesbyageisasfollows: ast due, butnotimpaired • • • Over120days Between90and120days Between60and90days Between30and60days Lessthan30days not significantly concentratedinany oneinstitution. is risk ensure the to that diversified be should Investments clearly andexplicitlyidentified are expressly prohibited. financial products or those in which the counterparty is not inspeculative investment Specifically, products. financial institutions, interest-bearing accountsandothersimilar repos, commercial paper issued by highly solvent financial deposits, bank include products investment Acceptable in Spainandofrenowned solvencyandliquidity. They must be arranged with financial institutions domiciled 30/06/2017 (15,988) 138,593 89,042 15,988 49,551 47,903 938 685 23 2 30/06/2016 103,849 (18,972) 115,878 18,972 12,029 1,778 7,698 878 947 728 111

FINANCIAL STATEMENTS 112

Management Report & Financial Statements real madrid 2016-2017

borrowings isatavariable rate. €82,000 thousand(2016:euros). Interest onthese current andcurrent principalrepayable atJune30,2017was ofshort-term number to a non- of amount nominal The institutions. financial with facilities in addition institutions, financial non-current loanand two credit facilitieswith two different As explainedinNote14.1,atJune30,2017 the Clubhadone in Note3.6whenassessingpotentialimpairmentlosses. performs the analysis and considers the circumstances set out Regarding playersandestimates oftheirvalueinuse,theClub amounts ofassets,especiallyplayervalues. to changesinthediscountratesuseddeterminecarrying and liabilities or assets from flows cash future or value fair the fromarising loss inpotential Interestfluctuations the is risk rate 19.2 Marketrisk • • for theuseofjointandseveralsignatures basedonamount. The Club’s power of attorney policy dictates the parameters necessary. to guaranteetheirimmediateconvertibilitycashif or witharepurchase commitmentorasecondary market assets withanoriginalmaturityofthree monthsorless, liquid in made are assets financial current in Investments Trade andotherpayables Trade andotherpayables Other financialliabilities Other financialliabilities Bank borrowings € Thousand 2015/2016 Bank borrowings € Thousand 2016/2017 balance betweenreceivables andpayables. However, thekeymetricindeterminingliquidityrisk isthenet financial of liabilities isasfollows: schedule maturity contractual undiscounted The minimum liquiditylevelsrequired atalltimes. to maintain sufficient available funds. Club policies establish the meet itspaymentobligationsatalltimes.TheClub’s objectiveis funds or lack access to sufficient funds at an acceptable cost to Liquidity riskisthethatClubwillhaveashortageof 19.3 Payables to sports entities for player transfers player tosportsentitiesfor Payables Payables to sports entities for player transfers player tosportsentitiesfor Payables Payables tosuppliersoffixedassets Payables Payables tosuppliersoffixedassets Payables Liquidityrisk Less than Less than 3 months 3 months 278,421 227,144 279,951 168,120 29,396 21,665 81,916 29,696 216 219

months months 78,401 59,868 76,762 57,080 11,755 3 to12 3 to12 8,830 9,703 7,927 - -

and 5years and 5years Between 1 Between 1 116,796 103,108 16,961 18,044 81,791 16,549 81,689 4,870 - -

> 5years > 5years 789 789 790 790 ------474,407 287,012 460,611 225,200 55,187 50,201 82,007 98,541 54,962 81,908 Total Total 113

FINANCIAL STATEMENTS 114

Management Report & Financial Statements real madrid 2016-2017 Other receivables fromsportsentities Receivables Trade receivables € Thousand 2015/2016 Other receivables fromsportsentities Receivables Trade receivables € Thousand 2016/2017 Receivable frompublicadministrations Receivable frompublicadministrations Receivable in Note14.1. year, aswellbyavailablecashandthe credit linesdiscussed to bereceived incomingyearsthrough operatingincomeforthe inflows cash by covered amply are transfers player for entities sports and assets fixed of suppliers to commitments Payment business operations. i.e. renewed annuallydue totheintrinsicnature oftheClub’s of thebalance“Trade andotherpayables”isrecurring, portion significant a WorkingCapital, 14.4 Note in indicated As financial assets: Club’s the of profile maturity the summarizes below table The uiig eadn dslsrs n h nts o financial to notes the in disclosures regarding Auditing 29, 2016oftheSpanish InstituteofAccountingandAccounts period tosuppliersinaccordance withResolution ofJanuary The tablebelowprovides informationontheaverage payment transactions 19.4 Information regarding deferredpayments tosuppliersincommercial Less than3 Less than3 116,871 months months 71,794 48,273 15,649 24,461 89,308 7,570 3,093 302 9 months months 14,656 50,902 10,088 35,341 3 to12 3 to12 1,070 6,860 5,473 6,726 - -

and 5years and 5years Between 1 Between 1 16,894 11,192 16,894 6,527 4,665 - - - - -

148,421 133,888 64,888 50,990 42,425 96,168 12,235 3,093 5,775 6,735 Total Total Permanent seasonal Permanent seasonal Laborers Laborers General staff General staff Players andcoachingstaff Players Players andcoachingstaff Players Middle managers Middle managers Senior managers 2015/2016 Senior managers 2016/2017 Days € Thousand (€ Thousand) Club employeesbycategoryare asfollows: 20.1 Structureofpersonnel 20. OTHERINFORMA commercial transactions: statements inrelation totheaveragesupplierpaymentperiodin Average period supplierpayment Ratio oftransactionspaid Ratio Ratio oftransactionsoutstanding Ratio Total made payments Total outstanding payments TION Men Men 652 642 128 117 395 415 44 40 34 36 13 13 29 30 Number ofemployees June30,2016 Number ofemployees June30,2017 Women Women 122 134 116 98 8 4 5 4 2 3 6 6 2 2 30/06/2017 187,368 62,951 59 59 57 Total Total 774 776 244 215 397 418 52 44 39 40 19 19 31 32 30/06/2016 156,245 67,003 of employees inthe of employees inthe 58 58 59 Average number Average number the period the period 787 777 230 206 408 437 53 48 41 40 19 31 equal toorgreater than33% employees with a disability employees withadisability Average numberof 11 1 4 5 1 115

FINANCIAL STATEMENTS 116

Management Report & Financial Statements real madrid 2016-2017 period for which the audited financial statements were requested. monitored; i.e.T, T-1 andT-2, where Tistheannualaccounting period the in period accounting each of loss or profit for points breakeven the of sum the is loss or profit for point breakeven auditor’s the in quantified totalqualifications The any report. by relevant income and expenses, adjusted,where appropriate, difference between the is loss or profit for point breakeven The Breakeven pointindicator • Regulations 1. Indicators discussed below. Regulations andotheroftheLFP’s mandatoryregulations are The mainratiosestablishedinthebylaws,EconomicControl the RFEF. national competitions organized by the LFP in conjunction with applicable toClubsandSADsparticipatinginprofessional and number of supervisory and economic-financial control standards In this regard, bodies, the LFP has set out a via its the governing (LFP). General Regulations of the Spanish Professional Soccer League Article 41.4b)ofthislaw, andthebylawsBookXof Economic Control Committee, inparticular, inaccordance with through andmanagementbodies,ingeneral,the governing Professional Football League has carriedout the above functions and economic supervision of its associates. The National leagues exclusivejurisdictionovertheguardianship, control, Sports Law 10/1990, of October 15, grants professional 20.3 environmental specific disclosures.not include do statements financial and results. Consequently, thenotestoaccompanying position equity, financial its on effect significant a have could liabilities, expenses,assets,provisions orcontingenciesthat Given thenature ofitsactivities,theClubhasnoenvironmental 20.2 Controlratios onsportsorganizations Environmental disclosures included in the LFP’s Economic Control

Required breakevenpoint T Relevant income € Thousand Breakeven point(+surplus-deficit) Relevant expenses Relevant income € Thousand Income perfinancialstatements T Reconciling items Difference T T provided below: is statements financial accompanying the with income relevant The calculationofrelevant incomeandthereconciliation of otal breakevenpoint otal relevant income otal incomeperfinancialstatements otal reconcilingitems Revenue Less: Proceedsfromdisposalofproperty, plantandequipment/investmentproperty Less: Basketballincome Less: Incomefromyouthmemberactivities Finance income Gain ondisposalofproperty, plantandequipment/investmentproperty registrations Gains ondisposalofplayer Provision surpluses Grants recognizedintheincomestatement income Other operating Total income(Note17.1) operating Total financeincome(Note17.6) Income fromyouthmemberactivities Net lossesondisposals Proceeds fromdisposalofproperty, plantandequipment/investmentproperty Basketball income COMPLIES 30/06/2017 30/06/2017 (16,141) (16,141) 295,975 635,629 711,808 671,864 711,808 726,292 727,949 (16,027) (16,027) 76,179 51,710 1,657 1,539 1,030 1,657 (157) (157) 192 >0 43 T - - - 30/06/2016 30/06/2016 105,773 521,896 627,669 619,710 627,669 621,765 630,923 (10,873) (10,873) (3,254) (3,254) 9,158 9,326 9,158 7,693 229 193 (74) (74) T-1 - - - - 30/06/2015 30/06/2015 114,023 544,220 658,243 574,411 658,243 656,634 660,593 (10,099) (10,099) (2,350) (2,350) 86,774 2,370 3,959 3,959 7,802 689 192 (53) (53) T-2 - - - 117

FINANCIAL STATEMENTS 118

Management Report & Financial Statements real madrid 2016-2017 Relevant expenses € Thousand T Reconciling items: Difference T Expenses perthefinancialstatements T is provided below: statements financial accompanying the with expenses relevant The calculationofrelevant expensesandthereconciliation of otal reconcilingitems: otal expenses perfinancialstatements otal relevant expenses Cost directly attributable totheconstructionofproperty, attributable Cost directly plant, andequipment and equipment, andinvestmentproperty assets,Derecognition/write-down ofotherintangible property, plant Expenses fromcommunitydevelopmentactivities youthactivityexpenses Non-identifiable Finance anddividendcosts plant andequipment, andinvestmentproperty assets,Impairment lossesandderecognitionsofotherintangible property, registrations Write-down andlossesondisposalofplayer andamortization Depreciation expenses Other operating Employee benefitsexpense Cost ofsales/materials Net losses on disposals of player registrations Net lossesondisposalsofplayer Basketball expenses and equipment, andinvestmentproperty assets,Derecognition/write-down ofotherintangible property, plant Expenses fromcommunitydevelopmentactivities youthactivityexpenses Non-identifiable Finance expenses Impairment andlosses andamortization Depreciation expenses Other operating andotherpersonnelexpenses Player Supplies Other basketballexpenses 30/06/2017 (66,055) (66,055) 110,157 156,082 406,109 110,157 156,082 406,109 701,684 635,629 (17,871) (37,908) (17,871) (37,908) 26,347 26,347 (1,951) (8,368) (1,951) (8,368) 3,011 3,011 (22) (22) 43 43 T - 30/06/2016 (65,684) (65,684) 123,574 127,841 306,877 123,574 127,841 306,877 587,580 521,896 (26,631) (35,328) (26,631) (35,328) 22,252 22,252 (2,311) (9,107) (2,311) (9,107) 1,913 5,123 7,693 1,913 7,693 5,123 T-1 - 30/06/2015 (60,473) (60,473) 139,684 128,479 289,251 139,684 128,479 289,251 604,693 544,220 (24,449) (37,993) (24,449) (37,993) 10,525 24,930 11,824 10,525 24,930 11,824 (1,100) (4,733) (1,100) (4,733) 7,802 7,802 T-2 - T Non-sports football personnel expenses and overheads not related to the first football team tothefirst personnelexpensesandoverheadsnotrelated Non-sports football Basketball personnelexpenses Youth teampersonnelexpenses football football teampersonnelexpensesindicator Required first T First footballteampersonnelexpenses indicator First football teamnon-sportspersonnelexpenses First football Relevant income First football teamsportspersonnelexpenses First football € Thousand teampersonnelexpenses First football € Thousand total personnelexpensesisprovided below: The reconciliation of first football team personnel expenses and as thecalculationofbreakeven pointabove. The calculation and reconciliation of relevant income is the same financial imbalance. this is Regulations, Control considered tobeanindicationofapossiblefuture economic- Economic LFP’s the in defined and players staff, team coaches exceeds70%ofrelevant incomefortheseason,as football first SADS’ and Clubs’ with When thetotalannualamountofpersonnelexpensesassociated Firstfootballteampersonnelexpensesindicator • otal personnelexpenses perfinancialstatements otal firstfootballteampersonnel expenses COMPLIES 30/06/2017 30/06/2017 406,109 323,054 711,808 320,125 323,054 35,487 28,771 18,797 <70% 2,929 45% COMPLIES 30/06/2016 30/06/2016 306,877 232,448 627,669 231,070 232,448 31,689 25,865 16,875 <70% 1,378 37% 119

FINANCIAL STATEMENTS 120

Management Report & Financial Statements real madrid 2016-2017 Total netdebt T fromtransfers Non-current receivables Current receivables fromtransfers Current receivables Cash andcashequivalents T Other currentpayables tosportsentities Current payables Required netdebt/relevantincomeratio Net debt/relevant incomeratio Current bankborrowings Non-current advancesreceived Other non-currentpayables tosportsentities Non-current payables Non-current bankborrowings € Thousand Relevant income Net debt € Thousand The breakdown ofnetdebt isasfollows: trade or other payables. notinclude does debt Net assets. fixed of suppliers equivalents andnon-current cash investments)pluspayablesto cash, less leases finance and year, than more of period and related parties,advancedpaymentstobeaccruedina loans (i.e.bankoverdrafts andborrowings, loans from owners of receivables and payables for player transfers), net debt from net debt of amount corresponds to the sum of net debt for club transfers (i.e. net the definitions, regulation to According as definedinRegulations. be indicative of a possible future economic-financial imbalance, of theentity’s relevant incomeforthatseason,thisisconsidered When net debt at June 30of each sportsseason exceeds 100% Netdebt/relevant incomeratio • otal reconcilingassetitems otal payables andborrowings COMPLIES 30/06/2017 30/06/2017 (10,289) 214,636 177,988 204,347 711,808 (10,289) <100% 16,894 19,754 31,368 38,226 16,952 18,833 16,961 81,791 (1.4%) 216 COMPLIES 30/06/2016 30/06/2016 (13,075) 270,638 211,485 257,563 627,669 (13,075) <100% 52,626 37,623 93,671 22,152 17,339 81,689 6,527 4,870 (2%) 219 Required RATIO A:(I)>IIy40,000 (II) 25%Adjustedoutstandingliabilities<5 years Adjusted totaloutstandingliabilities <5years Cash andcashequivalents transfers toclubsfor Payables Deferred taxliabilities Total <5years outstandingliabilities Current liabilities Current liabilities Non-current liabilities Non-current liabilities (I) Equity € Thousand The followingtwoconditionsmustbesatisfied: RatioA • ratios whenitalsomeetsthefollowingtworatios: financial acceptable with complied have to considered is SAD clubs and SADs, as amended for the 2016/2017 season, a club/ According toarticle24ofthebudgetpreparation guidelinesof T, are discussedbelow. 2017/2018, thecurrent seasonthepreparation ofthe budget,as The mainratiosestablishedfortheLFPbudgetarycontrol, taking 2. LFP budgetarycontrol ratios b) a)  reference. This ratioisupdatedatJune30takingseasonT-1 as a Equity equaltoorgreater than€40,000thousand. • • • items: outstanding liabilitiesminustheamountsforfollowing Equity attheendofseasonT-2 above 25%oftotal Cash andcashequivalents. transfers offederativerightsplayersandcoaches. temporary or definitive from entities sports to Payables Deferred taxliability. COMPLIES 30/06/2017 (177,988) 382,660 611,186 449,059 162,127 463,476 (36,647) (13,891) 95,665 79,459 317,836 COMPLIES (14,397) 177,386 30/06/2016 (211,485) ( 59,153) 602,871 425,485 442,248

121

FINANCIAL STATEMENTS 122

Management Report & Financial Statements real madrid 2016-2017 Required RATIO B(I)>II (II) Adjustedrevenue Adjustment factor Revenue (I) Adjustedliabilities Cash andcashequivalents transfers toclubsfor Payables contingencies Provisions for Total <2years outstandingliabilities Current liabilities Current liabilities Non-current liabilities <2years Non-current liabilities € Thousand This ratioisupdatedatJune30takingseasonT-1 asareference. appropriate, less: as statements, financial interim the of date closing the from or a maturityoftwoyearsorlessfrom theendofreporting period “Adjusted liabilities”isunderstoodasoutstandingliabilitieswith As defined in the aforementioned budget preparation guidelines, multiple inaccordance withseasonT. specified a by T-2adjusted season of revenue than less T-1is The amount of adjusted liabilities at December 31 of season RatioB • • • • Cash andcashequivalents. rights. Receivables from clubs and SADs on transfers of federative Provisions forcontingencies. COMPLIES 30/06/2017 (177,988) 739,050 671,864 327,869 557,948 449,059 108,889 (36,647) (15,444) 1.1 (211,485) (59,153) COMPLIES 30/06/2016 681,681 619,710 195,002 503,929 425,485 (38,289) 78,444 1.1

Required ratio 1 Required ratio Total 2required Ratio Ratio 1 Ratio 2 Revenue Revenue Total adjustedliabilities Less: fromsportsentities Receivables Less: Cashandcashequivalents Less: Deferredtaxliabilities Total adjustedcurrentliabilities Less: tosportsentities Payables Less: Cashandcashequivalents Current liabilities Current liabilities Current liabilities € Thousand Non-current liabilities € Thousand • • these financialstatementswere asfollows: the reporting periodandthedateofauthorizationforissue of end the between occurred that events significant most The 21. EVENTSAFTERTHPOINGRID Ratio2 • Ratio1 • order tojoinasanaffiliate. The LFP’s bylawsstatethatthefollowingratiosmustbemetin 3. Ratios necessarytojointheLFPasanaffiliate €24,000 thousand. Sales or assignments of player transfer rights for approximately thousand. Acquisition of player transfer rights for approximately €47,000 COMPLIES COMPLIES 30/06/2017 30/06/2017 (177,988) (177,988) 671,864 671,864 376,882 228,646 449,059 449,059 162,127 (42,425) (13,891) (42,425) <2.45 <4.2 0.34 0.6 COMPLIES COMPLIES 30/06/2016 30/06/2016 (211,485) (211,485) 619,710 619,710 312,101 149,112 425,485 425,485 177,386 (64,888) (14,397) (64,888) <2.75 <4.5 0.24 0.5 123

FINANCIAL STATEMENTS 124

Management Report & Financial Statements real madrid 2016-2017 Profit beforetax profit/(loss) Ordinary Net financeincome/(expense) Operating profit/(loss) andamortization Depreciation Operating profit/(loss)beforedepreciationandamortization(EBITDA) Impairment/derecognition ofnon-currentassets Gains/(losses) ondisposalofnon-currentassets and disposalofnon-currentassets Operating profit/(loss)beforedepreciationandamortization, andcharges liabilities Provision for expenses Operating Sports andnon-sportspersonnelexpenses Supplies T Marketing revenue Broadcasting revenue matches andfriendly Revenue frominternational Membership fees, ticketsalesandotherstadiumrevenue € Thousand 22. INCOMEST otal operatingincome(beforedisposalofnon-currentassets) Finance expensesarisingoninterestloans, guaranteeexpensesandotherfinancial acquisitions onplayer Finance expensesarisingonimpliedcostofdeferredpayment Finance income A TEMENT BY ANALYTICAL SEGMENT (108,579) (146,963) (377,338) Football 158,490 109,877 661,674 251,399 163,488 162,302 (25,655) 49,911 48,591 84,485 (1,841) 22 Basketball (22,292) (20,714) (23,790) (28,771) 12,951 (1,578) (7,278) 3,076 1,373 5,308 1,811 4,459 (692) - - (406,109) (110,157) (154,241) 137,776 674,625 256,707 165,299 166,761 (26,347) (1,354) 26,265 26,265 51,667 85,858 27,619 86,087 (2,053) (1,841) 1,657 Total (958) 22 Sports andnon-sportspersonnelexpenses Supplies T Marketing revenue Broadcasting revenue matches andfriendly Revenue frominternational Membership fees, ticketsalesandotherstadiumrevenue Profit/(loss) beforetax profit/(loss) Ordinary Net financeincome/(expense) Operating profit/(loss) andamortization Depreciation Operating profit/(loss)beforedepreciationandamortization(EBITDA) Gains/(losses) ondisposalsofnon-currentassets Impairment/derecognition ofnon-currentassets Gains/(losses) ondisposalsofnon-currentassets and disposalofnon-currentassets Operating profit/(loss)beforedepreciationandamortization, T uncollectiblereceivables,Provision for andcharges liabilities andfor expenses Operating € Thousand 23. BUDGETOUT Negative: lowerrevenue, higherexpense. Positive: higherrevenue, lowerexpense. Variance otal operatingincome(beforedisposalofnon-currentassets) otal operatingexpenses beforedepreciationandamortization Finance expensesarisingoninterestloans, guaranteeexpenses andotherfinancialexpenses acquisitions onplayer Finance expensesarisingonimpliedcostofdeferredpayment Finance income - TURN FOR2016/2017SEASON

(514,198) (338,320) (108,389) (151,524) 631,306 248,262 168,037 154,226 160,797 117,107 (24,354) (2,245) 60,780 50,162 50,162 52,408 43,690 43,690 (1,545) (1,140) Budget 440 - - (588,538) (406,109) (110,157) (154,241) Out-turn 674,625 256,707 165,299 166,761 137,776 (26,347) (1,354) 85,858 26,265 26,265 27,619 51,689 51,667 86,087 (1,841) (2,053) 1,657 (958) 22 Variance (23,897) (23,897) (24,789) (23,021) (31,020) (74,340) (67,789) 43,319 25,078 12,535 (1,993) (2,738) (1,841) (1,768) (2,717) 8,445 7,999 7,977 1,217 (508) 891 182 22 125

FINANCIAL STATEMENTS 126

Management Report & Financial Statements real madrid 2016-2017 reasons explainedpreviously. €26,265 thousand,€23,898thousandlessthanbudgetedforthe In all, the 2016/2017 budget out-turn included profit before tax of The net financial result was €891 thousand better than budgeted. achievements. over budget,mostlyduetovariable payments toclubsforsports Depreciation andamortization expensewas€1,768thousand than budgeted. by €7,999thousandasaresult ofhighergainsonplayertransfers Gains ondisposalsofnon-current assetsoutstrippedthebudget achievements. higher costsarisingfrom theincrease inincomerelated tosports provisions was over budget by €6,551 thousand, due mostly to In operatingexpenses,theexpenditure forsuppliesand mostly asaresult ofperformancebonusesforsportsachievements. Personnel expenseswere overbudgetby€67,789thousand, impacted thevariousrevenue lineitems. Liga, theFIFA ClubWorld CupandtheUEFA SuperCup,which season. TheClubwonfourtitles:theChampionsLeague,La variance inincomewasthesportsachievementsduring thousand overbudget.Thekeyfactorbehindthepositivebudget Operating incomeamountedto€674,625thousand,€43,320 127

FINANCIAL STATEMENTS 128

INFORME ECONÓMICO real madrid 2016-2017 José Luisdel Valle Pérez Gumersindo Santamaría Gil José SánchezBernal Raúl RondaOrtiz Enrique PérezRodríguez José ManuelOteroLastres MiñarroBrugarolas Catalina Nicolás Martín-SanzGarcía Ángel LuisHeras Aguado Jerónimo FarréMuncharaz Cerezo Velázquez Manuel García Aguado Santiago Board members Enrique SánchezGonzález Secretary Pedro LópezJiménez Eduardo FernándezdeBlas Fernández TapiasFernando Vice-Chairmans Florentino Pérez Chairman preceding thiscertification. year endedJune30,2017,whichconsist of thedocuments the financial for report management and statements financial Directors ofRealMadridClubdeFútbolauthorizedforissuethe In ameetingheldofJuly13,2017,themembersBoard of report fortheyearendedJune30,2017 Approval ofthefinancialstatements andmanagement

129

FINANCIAL STATEMENTS

Audit Report 132

Management Report & Financial Statements real madrid 2016-2017

financial statements” under those standards are further described in the ”Auditor’s responsibilities for the audit of the carried We o Basis for opinion principles and policies contained therein. applicable financial reporting framework and the results respects, of the equity and financial position of REAL MADRID CLUB DE FÚTBOL at June 30, 2017, In our opinion, accompanying the financial statements give a true and fair view, in all material equity, the statement of cash flows comprise the balance sheet at June 30, 2017, the income statement, the statement of changes in have We audited the financial of MADRID REAL CLUB statements DE FÚTBOL (the “Club”), which Opinion DE FÚTBOL CLUB MADRID REAL To the General Assembly Delegated of Members of jeopardized the aforementioned audit of financial statements nor any situation or circumstance has concurred that, according to Spanish which are applicable to an audit financial of statements in Spain according to We are independent from the Club in conf basis for our opinion. believe We that the aud Translation of a report and financial statements originally issued in Spanish. In the event of

s tandards .

ut our audit in accordance with Spanish standards on auditing. Our responsibilities of its operations and cash flows for the year then ended, in accordance with the

on auditing standards

section. it evidence we have obtained is sufficient and appropriate to provide a discrepancy, the Spanish

. , had affected the necessary independence a way it had been in

In these regards, we have n

INDEPENDENT AUDITOR’S REPORT

and the notes thereto for year then ended. the

(identified in ormity of ethical requirements, including independence, -­‐ langua

N ote 2) ote ge version prevails either and, in particularly, the accounting

provided services different to

what is required by

Measurement Measurement of sports intangible assets matters. whole, and in forming our opinion thereon, and we do not provide a separate opinion on these period. These matters were addressed in the context of our audit of the financial statements as a significant risk of material misstatement in our au Key audit matters are those matters that, in our professional judgment, represent the most Key audit matters year i considered prepaid income as they are accrued in subsequent reporting periods (the follow membership fees and season tickets, marketing and sponsorship contracts, and friendly matches, On a recurring basis, the and the related costs, wh amortization and impairment, of €366 million, related to the acquisition of player transfer rights In its balance sheet at June 30, 2017, the Club recognized sports intangible assets, net of Accrual of current and non to obtain the related conclusions. and evaluated the reasonableness of the accounting assumptions and of information used sources followed by the Club for the recognition, amorti 3.6 to the financial statements. As part of our audit engagement, we reviewed the procedures part of the Club's management to identify potential indications of impairment, as explained in N The review of this line item was a key matter in our audit as it involves significant j intangible assets are prov recognizes the amounts related to this prepaid income under “Non accruals,” as appropriate, on the liability side of the balance n most n cases), as described in N

Club receives considerable amounts in the year in broadcasting revenue, ich are amortized on a straight ided in the accompanying N -­‐ current liabilities liabilities current

otes 3.18 and 15 to the financial statements. The Club

zation and identification of potential impairments, dit of the financial statements of the current statements dit of financial the otes 3.1 and 4 to the financial statements. -­‐ line basis. Disclosures on these sports sheet at June 30, 2017. -­‐ current accruals” and “Current udgment on the

ing

ote 2

133

Audit Report 3 4

The appropriate accounting recognition of these accruals was a key matter for our audit given the In preparing the financial statements, members of Board of Directors are responsible for assessing variety of items and terms in the underlying agreements, requiring a detailed and case-­‐by-­‐case the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to analysis of each. As part of our audit engagement, we reviewed the procedures followed by the going concern and using the going concern basis of accounting unless management either intends Club and analyzed the main agreements in order to determine whether the approach was applied to liquidate the Company or to cease operations, or has no realistic alternative but to do so. on a consistent basis and to determine the reasonableness of the calculations made. Auditor’s responsibilities for the audit of the financial statements Other information: Management report Our objectives are to obtain reasonable assurance about whether the financial statements as a The other information involves exclusively the management report for the year ended June 30, whole are free from material misstatement, whether due to fraud or error, and to issue an 2017. The management report is the responsibility of the members of Board of Directors REAL auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is MADRID CLUB DE FÚTBOL and is not an integral part of the financial statements. not a guarantee that an audit conducted in accordance with Spanish standards on audit ing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error Our opinion on the financial statements does not cover the management report. In connection and are considered material if, individually or in the aggregate, they could reasonably be expected 134 with the management report, our responsibility, as required by auditing standards, is to evaluate to influence the economic decisions of users taken on the basis of these financial statements. 135 and report on whether the management ent report is consist with the financial statements based on the knowledge obtained from the Club in the course of our audit of the financial statements, As part of an audit in accordance with Spanish standards on auditing, we exercise professional and not include other information obtained as evidence during the audit. It is also our responsibility judgment and maintain professional skepticism throughout the audit. We also:

to evaluate and report on whether the content and presentation of the management report Au dit R eport comply with applicable regulations. If, based on the work we have performed, we conclude that • Identify and assess the risks of material misstatement of the financial statements, whether there are material misstatements, we are required to report that fact. due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. Based on the rformed, work pe in accordance with the preceding paragraph, the information The risk t of no detecting a material misstatement resulting from fraud is higher than for contained in the management report is consistent with the financial statements for the year ended one resulting from error, as fraud may involve collusion, forgery, intentional omissions, June 30, 2017, and its content and presentation comply with applicable regulations. misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit Responsibilities of members of Board of Directors for the financial statements procedures that are appropriate in the circumstances, but not for the purpose of m ent s real madrid 2016-2017 t & Financial State expressing an opinion on the effectiveness Club of the ’s internal control. Members of Board of Directors are responsible for the preparation and fair presentation of the financial statements in accordance with the applicable financial reporting framework (see Note 2 ), • Evaluate the appropriateness of accounting policies used and the reasonableness of and for such internal control as they determine is necessary to enable the preparation of financial accounting estimates and related disclosures members made by of Board of Directors. statements that are free from material misstatement, whether due to fraud or error.

Manage m ent Repo r

5

• Conclude on the appropriateness of members of Board of Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Club’s ability to continue as a going concern. If we certainty conclude that a material un exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions lub may cause the C to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. 136 137 We communicate with those charged with governance regarding, among other matters, the planned scope and timing of significant the audit and audit findings, including any significant deficiencies in internal control that we identify during our audit.

From the significant matters communicated to the members of the Board of Directors the Club, Au dit R eport we determine those of most significance in the audit of the financial statements of the current period and are therefore the key audit matters.

We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter. m ent s real madrid 2016-2017 t & Financial State Manage m ent Repo r

BUDGET 2017-2018 140

Management Report & Financial Statements real madrid 2016-2017 rdinary profit/(loss) Ordinary Net financeincome/(expense) Operating profit/(loss) andamortization Depreciation Operating profit/(loss)beforedepreciationandamortization(EBITDA) Gains/(losses) ondisposalsofnon-currentassets and disposalofnon-currentassets Operating profit/(loss)beforedepreciationandamortization, T uncollectiblereceivables,Provision for andcharges liabilities andfor expenses Operating Sports andnon-sportspersonnelexpenses Supplies T Marketing revenue Broadcasting revenue matches andfriendly Revenue frominternational Membership fees, ticketsalesandotherstadiumrevenue € Thousand otal operatingexpenses beforedepreciationandamortization otal operatingincome(beforedisposalofnon-currentassets) Finance expensesarisingoninterestloans, guaranteeexpenses, andotherfinancialexpenses acquisitions onplayer Finance expensesarisingonimpliedcostofdeferredpayment Finance Income Impairment/derecognition ofnon-currentassets Gains/(losses) ondisposalsofnon-currentassets Real MadridClubdeFútbol 2017-2018 BUDGET out-turn 2016/2017 (588,538) (110,157) (154,241) (406,109) 137,776 674,625 256,707 165,299 166,761 (26,347) (1,354) 26,265 27,619 51,689 51,667 86,087 85,858 (2,053) (1,841) 1,657 (958) 22 BUDGET 2017/2018 (585,450) (102,421) (168,090) (385,022) 153,224 104,864 690,314 282,244 176,691 162,644 (26,338) (2,226) 48,576 50,803 48,361 48,361 68,735 (2,385) (6,000) (463) 622 0 €22.3 millionhigherthantheyearbefore. million, €48.6 of tax before profit shows budget the result, a As the yearbefore duetonon-recurring incomeobtainedin 2017. Net finance expense is budgeted to increase by €0.9 million from €50.8 million. profit operating expenses, and (EBIT) isbudgetedtoincrease by€23.2millionintheyear, to revenue budgeted on Based contracts. lower duetochangesinsportsstaff andtheremaining termsof The budgeteddepreciation andamortizationcharge is€7.8million is budgetedat€153.2million,€15.4higherthantheyearbefore. (EBITDA) and amortization depreciation before profit Operating division and youthfootballteamplayers. first of out carried already transfers on based million), Player transfersare budgeted at€48.4million(2017:€51.7 resulting inanincrease of€18.0million. Club’s activitiesandallowancesforpotentialcontingencies, move inlinewiththeincrease inrevenue, developmentsinthe Supplies, operatingexpensesandprovisions are expectedto €21.1 millionfrom theyearbefore. personnel expensesbudgetcallsforadecrease inexpensesof performance bonusesforsportsachievements.Overall,the contracts andthecompositionofsportsteams,aswell Personnel expensesare budgetedinaccordance withthe in 2016/17. revenue andrevenue from matchesafterthechampionshipswon Higher marketingandbroadcasting revenues offset lowerstadium budgeted at€690.3million,up€15.7millionfrom theyearbefore. Operating income(before disposalofnon-current assets)is 141

BUDGET 2017/2018 Real Madrid Club de Fútbol budget by sports segments for the 2017-2018 season

€ Thousand Football Basketball total

Membership fees, ticket sales and other stadium revenue 158,679 3,965 162,644 Revenue from international and friendly matches 67,859 876 68,735 Broadcasting revenue 174,972 1,719 176,691 Marketing revenue 276,138 6,106 282,244

Total operating income (before disposal of non-current assets) 677,648 12,665 690,314

Supplies (25,786) (552) (26,338) Sports and non-sports personnel expenses (357,554) (27,468) (385,022) Operating expenses (160,751) (7,339) (168,090) Provision for uncollectible receivables, and for liabilities and charges (6,000) 0 (6,000)

142 Total operating expenses before depreciation and amortization (550,091) (35,359) (585,450) 143

Operating profit/(loss) before depreciation and amortization, 127,557 (22,694) 104,864 and disposal of non-current assets BU DGET 2017/2018 Gains/(losses) on disposals of non-current assets 48,361 0 48,361 Impairment/derecognition of non-current assets 0 0 0

Gains/(losses) on disposals of non-current assets 48,361 0 48,361

Operating profit/(loss) before depreciation and amortization (EBITDA) 175,918 (22,694) 153,224 m ent s real madrid 2016-2017 t & Financial State

Depreciation and amortization (100,758) (1,663) (102,421)

Operating profit/(loss) 75,159 (24,357) 50,803 Manage m ent Repo r

Finance Income 622 Finance expenses arising on implied cost of deferred payment on player acquisitions (463) Finance expenses arising on interest on loans, guarantee expenses and other financial expenses (2,385)

Net finance income/(expense) (2,226)

Ordinary profit/(loss) 75,159 (24,357) 48,576 Printed in November 2017, in Madrid Published by: Real Madrid C.F.