NH INFORME ANUAL 2006 1-24 ing.QXD
Transcription
NH INFORME ANUAL 2006 1-24 ing.QXD
cubierta informe anual06 ing.qxd 13/6/07 09:53 Página 1 2006 Annual Report www.nh-hotels.com Santa Engracia, 120 28003 • Madrid • Spain T: +34 91 451 97 18 F: +34 91 451 97 69 Inks are based exclusively on vegetable oils with a minimum content in volatile organic compounds (VOCs). Varnish is mainly based on natural and renewable raw materials. Annual Report 06 Due to its commitment to Environmental Conservation, NH Hoteles has printed this Report on a paper manufactured with 50% pure cellulose (ECF), 40% pre-consumer selected recycled fibre and 10% post-consumer uncoloured recycled fibre. United Kingdom Luxembourg France United States Portugal The Netherlands Belgium Germany Switzerland Hungary Austria Spain Romania Italy Mexico Cuba Brazil Chile Uruguay South Africa Argentina 335 hotels in 21 countries in Europe, America and Africa Hotel NH Constanza Barcelona - Spain Contents 1 Letter from the President 7 2 Hotel portfolio 11 3 Accelerating growth 15 4 2006 Results 25 5 Corporate operations 31 6 Strategic Plan 35 7 Italy: a tailor made market for NH Hoteles (Jolly Hotels and Framon) 41 8 Resorts 49 9 New image 53 10 Concepts 57 Nhow 58 Nhube 60 Fast Good 62 Casino de Madrid 64 Elysium Spa 65 New products and services 67 Premium rooms 68 New NH breakfasts 69 Commercial Agreements 70 12 NH World 73 13 Brand awardness 77 14 Sotogrande 81 15 Board of Directors and Management Committee 89 16 Corporate Governance 93 11 1 NH Berlin City West Berlin - Germany 1 Letter from the President NH Annual Report 2006 7 Furthermore, NH Hoteles came to an agreement to acquire Framon, the fifth largest hotel company in Italy by the number of establishments, with a significant presence in Sicily. These two agreements place NH Hoteles as the main hotel company in the Italian market. In accordance with the Italian acquisitions, we have initiated a three-year strategic plan to double the results of the company and reach 71,000 rooms. With the initiation of this strategic plan, we will reinforce the leadership of the group in the average segment in Europe, specifically the organic growth investments in the main markets of the continent where we already have a significant presence. Gabriele Burgio Chairman & CEO of NH Hoteles Dear shareholders, It is my pleasure to address all of you yet another year to give an account of the main events that have occurred during 2006 and go into great detail on the future strategy of the company. In 2006 we took a further step in the development of growth mainly in Európe, where NH Hoteles already has more than a significant presence. Between last year and April 30, 2007, the number of rooms of the chain has grown by 25%. 81 hotels and 12,242 rooms have been added during that time, thanks in part to two important operations performed in Italy. During the past year we came to an agreement whereby NH Hoteles would take control of the first Italian hotel chain, Jolly Hotels, which has a wide presence in the main cities of the country. The integration of Jolly Hotels into the Italian subsidiary of NH Hoteles was noteworthy due to the geographical complementary nature, the product and the existing strategy between both companies. Likewise, Jolly Hotels provides NH Hoteles with the entry into two new markets such as the United States and France, through the hotels that the company has in New York and Paris. 8 NH Annual Report 2006 The Strategic Plan, which involves an investment of € 1,300 M, will be financed with the resources generated by the company's activities, as well as by the Capital Increase at a value of € 250 M that the company completed, with the unanimous support of its shareholders, in March 2007. After the latest additions to the chain, we are proud to say that as of April 2007 the company is operating 335 hotels and 48,825 rooms in 21 countries in Europe, the Americas and Africa. In addition, it has 35 portfolio projects that will mean more than 6,000 rooms, mainly in countries like Italy, The Netherlands, Spain and Mexico. In line with the European expansion carried out during the last 6 years by the chain to situate itself among the main urban hotel chains, the visibility of the firm has not stopped growing until it has become an indisputable reference in the hotel industry. Regarding the 2006 results, it has been a very satisfactory year for the group’s hotel activities, which recorded an important improvement with 30.6% net profit increase in comparison to the previous year. This result was obtained thanks to a 13.4% increase in the hotel's income, up to € 1,021.57 M. The improvement of occupancy and an increase in the ADR (average price) of 8.7% contributed to the sales’ growth. The RevPar (income per available room) rose by 9.7%. The EBITDA (operating profit) from the hotel activities rose to € 161.80 M and showed an increase of 27.2% in comparison to 2005. In 2006, not only has the company’s growth drive been obvious, but also its special attention to containing costs, which is reflected in the group's good results. The company’s sales, including the division of the Sotogrande real estate, increased to € 1,090 M, and the net profit of the consolidated group remained stable, reaching 62.45 M. The smaller contribution of the income from Sotogrande to the net profits of NH Hoteles is explained by the sale of large plot of land in 2005. One of the most representative values of the group is the more than 19,000 professionals who currently work at NH Hoteles. In the previous period, the company continued making efforts in training its employees. More than 16,000 professionals from the group participated in 233 training programs that NH Hoteles offered in 2006. One year later, we have measured the satisfaction index of the employees, since we know the repercussion this has on the quality of the service we provide. The level of satisfaction increased significantly over 2005, a characteristic of the commitment that the company has in this regard. A Corporate Responsibility Department was created last period, which concentrates the Company’s contribution into sustainable development, for facing social and environmental challenges posed by the global economy. This year, we invite you to familiarise yourself with the first Report on Corporate Responsibility of the company, which you can find in the leaflet contained in this report. We changed the company’s image in 2006 to reflect the current reality of the group. NH Hoteles is becoming a company for business and pleasure, and that is why we have defined a new colour for a new market. As far as pleasure, at NH Hoteles we have continued with the expansion in the resorts segment, where during 2006 we added vacation complexes in countries such as Cuba and Italy and currently we have more than 2,000 rooms we are planing to reach across the Dominican Republic, Mexico and Italy. At NH Hoteles, we are convinced of the importance of continuing to innovate, and with this task in mind, we opened in 2006 the first hotel of a new and exclusive category of hotels called Nhow, based on the new philosophy of living contemporaneously and creatively. Other concepts already consolidated are the developments with the collaboration of the consultant from the Ferran Adria Company. Nhube has more than 20 open spaces distributed over Spain, Germany, Austria, Holland and Mexico. In addition, Fast Good, quality fast food offer, has already seven opened restaurants and several projects in Spain. The positioning of Fast Good as a quality brand has been supported over the past year with the significant agreement that NH Hoteles signed with a top spanish airline to serve its products on flights. Another innovation has been the development of the Website, which has incorporated novel functionalities, so that users may find a more practical and useful environment when making their reservations. One of the successes of the past period is our NH World loyalty program, which exceeds 450,000 members since its beginnings two years ago. It is worth pointing out that more than half of its members have remained active over the last twelve months. Finally, with respect to Sotogrande I would like to highlight the Take-Over Bid that the Group made for the shares in the real estate company which it did not control, and which ended with an increase in the shareholding in NH Hoteles of 98%. The operation was carried out in order to proceed with a restructuring of assets to concentrate the Group’s real estate-tourism activities in Sotogrande. In 2006 we built a solid base to continue growing in the coming years. All of this would not have been possible without the trust of our partners, shareholders, customers and especially our employees who with their daily dedication have led to NH Hoteles being what it is today, a great multinational company. A final thanks to all of those who have contributed to achieving all these goals. In 2007 we want to continue to have all of your support to continue consolidating this profitable project - NH Hoteles. Thank you very much Gabriele Burgio Chairman & CEO of NH Hoteles NH Annual Report 2006 9 Façade of NH Fuenlabrada Madrid - Spain 2 2 Hotel portfolio NH Annual Report 2006 11 BREAKDOWN OF HOTEL PORTFOLIO EUROPE TOTAL LEASED MANAGED FRANCHISE Hotels Rooms Hotels Rooms Hotels Rooms Hotels Rooms Hotels 125 14,006 82 9,478 17 2,504 26 2,024 0 0 58 10,075 58 10,075 0 0 0 0 0 0 Spain Germany Rooms Italy 57 7,997 28 4,373 16 2,432 6 525 7 667 The Netherlands 32 5,964 12 1,669 19 4,215 1 80 0 0 Belgium 9 1,309 2 434 7 875 0 0 0 0 Austria 7 1,225 7 1,225 0 0 0 0 0 0 Switzerland 4 562 2 330 2 232 0 0 0 0 United Kingdom 3 596 1 121 1 275 1 200 0 0 Portugal 3 313 3 313 0 0 0 0 0 0 Romania 2 161 1 83 0 0 1 78 0 0 France 1 162 0 0 1 162 0 0 0 0 Hungary 1 160 1 160 0 0 0 0 0 0 Luxembourg 1 148 1 148 0 0 0 0 0 0 303 42,678 198 28,409 63 10,695 35 2,907 7 667 Hotels Rooms Hotels Rooms Hotels Rooms Hotels Rooms 16 3,177 4 462 6 1,261 6 1,454 Argentina 8 1128 0 0 8 1,128 0 0 Cuba 2 967 0 0 0 0 2 967 TOTAL EUROPE LATIN AMERICA TOTAL Mexico LEASED OWNED MANAGED Uruguay 1 136 0 0 1 136 0 0 Brazil 1 135 0 0 1 135 0 0 Chile 1 122 0 0 1 122 0 0 29 5,665 4 462 17 2,782 8 2,421 Hotels Rooms Hotels Rooms Hotels Rooms Hotels Rooms United States 1 242 0 0 1 242 0 0 TOTAL UNITED STATES 1 242 0 0 1 242 0 0 Hotels Rooms Hotels Rooms Hotels Rooms Hotels Rooms South Africa 2 240 1 198 1 42 0 0 TOTAL OF OTHER COUNTRIES 2 240 1 198 1 42 0 0 Hotels Rooms Hotels Rooms Hotels Rooms Hotels Rooms Hotels Rooms 335 48,825 203 29,069 82 13,761 43 5,328 7 667 TOTAL LATIN AMERICA UNITED STATES TOTAL AFRICA LEASED TOTAL NH HOTELES Note: NH Hoteles Portfolio, April 2007 NH Annual Report 2006 OWNED TOTAL TOTAL 12 OWNED LEASED LEASED MANAGED OWNED OWNED MANAGED MANAGED FRANCHISE Room of the NH Obradoiro Santiago de Compostela - Spain BREAKDOWN BY ROOMS (APRIL 2007) BREAKDOWN OF ROOMS BY COUNTRIES (APRIL 2007) 11% 2% 51% 2% 6% 16% 7% 3% 3% 28% 1% 9% • 51% Leased • 28% Owned • 11% Managed Lease with a call • 9% option • 1% Franchise 21% 28% 12% • 28% Spain • 21% Germany • 16% Italy • 12% The Netherlands • 7% Mexico • 3% Austria • 3% Belgium • 2% Argentina • 2% Cuba • 6% Other NH Annual Report 2006 13 NH Santa Fe Mexico 3 3 Accelerating growth NH Annual Report 2006 15 Room of the NH München Deutscher Kaiser Munich - Germany OPENINGS OPEN HOTELS DURING 2006 Germany Spain Italy Cuba Luxembourg Portugal United Kingdom Romania HOTELS 4 3 2 1 1 1 1 1 Argentina The Netherlands 0 1 Total 15 ROOMS 505 285 374 690 148 148 121 83 67 65 2,486 OPEN HOTELS (JANUARY-APRIL 2007) Italy Germany Spain The Netherlands United Kingdom Austria United States Belgium France Mexico HOTELS 54 2 2 2 1 1 1 1 1 1 66 ROOMS 7,247 472 440 338 275 252 242 193 162 135 9,756 • NH Hoteles has opened 15 hotels and 2,486 rooms in 2006. Total OPENINGS AND ADDITIONS EVOLUTION • In 2007 (up to April) the company has opened and added 66 hotels and 9,756 rooms. 9,756 10,000 NH HOTELES DRIVE FOR GROWTH IN ROOMS Number of rooms 8,000 75% 25% 6,000 4,000 • Openings 1978 to 2005 2,329 2,486 2005 2006 2,000 • Openings 1,008 2006 to 2007* 0 * Until April 2007 2004 2007 (until April) 16 NH Annual Report 2006 OPENED HOTELS IN 2006 LOCATION ROOMS CONTRACT CATEGORY BERLIN 140 LEASED NH NH BERLIN CITY WEST BERLIN 136 LEASED NH NH HAMBURG NORGE HAMBURG 130 LEASED NH BERLIN 99 LEASED NH GERMANY NH BERLIN KURFÜRSTENDAMM NH BERLIN-FRANKFURTER ALLEE SPAIN NH BALAGO VALLADOLID 120 LEASED NH PAMPLONA (BERRIOPLANO) 60 MANAGED NH SALAMANCA 37 LEASED COLLECTION NHOW MILANO MILAN 249 LEASED NHOW NH SANTO STEFANO TURIN 125 MANAGED COLLECTION CAYO COCO 690 MANAGED ALL INCLUDED LUXEMBOURG 148 LEASED NH LISBON 148 LEASED NH LONDON 121 LEASED NH TIMISOARA 83 LEASED NH GRONINGA 65 LEASED NH LOCATION ROOMS CONTRACT CATEGORY BARCELONA 68 LEASED NH BUENOS AIRES 67 OWNED NH NH AGUSTINOS NH PUERTA DE LA CATEDRAL ITALY CUBA NH KRYSTAL LAGUNA VILLAS & RESORTS LUXEMBOURG NH LUXEMBOURG PORTUGAL NH PARQUE LISBOA UNITED KINGDOM NH KENSINGTON ROMANIA NH TIMISOARA THE NETHERLANDS NH HOTEL DE VILLE EXTENSIONS IN 2006 SPAIN NH NUMANCIA ARGENTINA NH CITY TOWER TOTAL 2006 TOTAL OPEN HOTELS IN 2006 TOTAL EXTENSIONS IN 2006 TOTAL OPEN ROOMS IN 2006 TOTAL HOTELS ROOMS 15 2,351 135 2,486 NH Annual Report 2006 17 NH Den Haag The Hague - The Netherlands NH Hoteles is the European hotel company that grew most in 2006 RANKING OF EUROPEAN HOTEL GROUPS (December 31, 2006) Rank 2006 Rank 2005 Groups Hotels 2006 Hotels 2005 Rooms 2006 Rooms 2005 Change 06/05 1 1 ACCOR 2,205 2,197 241,046 239,279 0.7% 2 2 BEST WESTERN 1,215 1,195 80,318 78,140 2.8% 3 3 ICH GROUP 505 498 77,721 76,794 1.2% 4 5 HILTON CORP. 257 243 56,675 53,600 5.7% 5 4 LOUVRE HOTELS 823 851 56,339 59,475 -5.3% 6 7 TUI 190 170 48,843 41,508 17.7% 7 6 SOL MELIA 198 208 41,771 45,652 -8.5% 8 12 NH HOTELES * 270 217 38,466 30,553 25.9% 9 9 CARLSON / REZIDOR SAS 195 184 37,271 35,352 5.4% 10 10 STARWOOD HOTELS & RES. TOTAL 10 Companies Source: MKG Consulting (* Without including the acquisitions of Jolly Hotels and Framon) 18 NH Annual Report 2006 153 144 35,064 33,819 3.7% 6,011 5,907 713,514 694,172 2.8% OPEN HOTELS AND ADDITIONS IN 2007 LOCATION ROOMS CONTRACT CATEGORY ROME MILAN MILAN MILAN ROME PALERMO NAPLES BOLOGNA ROME ROME TURIN ISCHIA TRIESTE TURIN BOLOGNA FLORENCE GENOVA MILAN GENOVA MILAN CATANIA SIENA CAGLIARI CATANIA AGRIGENTO VICENZA FLORENCE LECCO LA SPEZIA CASERTA SALERNO MILAN MESSINA VALDERICE AGRIGENTO PISA SIRACUSA MILÁN MESSINA CALTAGIRONE ANCONA BERGAMO BRESCIA RAPALLO RAVENNA TAORMINA TAORMINA TRAPANI PARMA BRUCOLI CATANIA MESSINA MARSALA VENICE 344 284 256 255 253 237 231 209 201 201 199 194 172 169 156 152 143 143 140 134 130 129 129 123 120 115 115 112 110 107 104 103 102 102 102 100 100 100 96 91 88 88 87 86 84 83 78 70 62 59 56 51 48 44 LEASED LEASED LEASED OWNED LEASED OWNED LEASED LEASED OWNED LEASED OWNED OWNED OWNED OWNED LEASED OWNED OWNED LEASED LEASED LEASED OWNED LEASED FRANCHISE LEASED FRANCHISE LEASED LEASED LEASED OWNED OWNED FRANCHISE LEASED MANAGED LEASED LEASED OWNED FRANCHISE LEASED FRANCHISE OWNED OWNED LEASED LEASED MANAGED OWNED MANAGED MANAGED LEASED FRANCHISE LEASED FRANCHISE MANAGED LEASED LEASED JOLLY JOLLY JOLLY JOLLY JOLLY JOLLY JOLLY JOLLY JOLLY JOLLY JOLLY JOLLY JOLLY JOLLY JOLLY JOLLY JOLLY JOLLY JOLLY JOLLY JOLLY JOLLY JOLLY FRAMON JOLLY JOLLY FRAMON JOLLY JOLLY JOLLY JOLLY JOLLY FRAMON FRAMON FRAMON JOLLY JOLLY FRAMON JOLLY FRAMON JOLLY JOLLY JOLLY FRAMON JOLLY FRAMON FRAMON FRAMON JOLLY FRAMON JOLLY FRAMON FRAMON FRAMON ITALY JOLLY HOTEL MIDAS JOLLY HOTEL TOURING JOLLY MILANO PRESIDENT JOLLY HOTEL MILANO FIORI JOLLY HOTEL LEONARDO DE VINCI JOLLY HOTEL PALERMO JOLLY HOTEL NAPOLI JOLLY HOTEL VILLANOVA JOLLY HOTEL VITTORIO VENETO JOLLY HOTEL VILLA CARPEGNA JOLLY HOTEL AMBASCIATORI JOLLY HOTEL DELLE TERME JOLLY TRIESTE JOLLY HOTEL LIGURE JOLLY HOTEL DE LA GARE JOLLY HOTEL FIRENZE JOLLY HOTEL PLAZA JOLLY HOTEL MILANO 2 JOLLY HOTEL MARINA JOLLY HOTEL MILANO RESIDENCE JOLLY HOTEL BELLINI JOLLY HOTEL SIENE JOLLY HOTEL CAGLIARI HOTEL PARCO DEGLI ARAGONESI JOLLY HOTEL DELLA VALLE JOLLY HOTEL TIEPOLO ANGLO AMERICAN HOTEL JOLLY HOTEL PONTEVECCHIO JOLLY LA SPEZIA JOLLY HOTEL CASERTA JOLLY HOTEL SALERNO JOLLY HOTEL MACHIAVELLI ROYAL PALACE HOTEL TONNARA DI BONAGIA DIOSCURI BAY PALACE JOLLY HOTEL CAVALIERI JOLLY HOTEL SIRACUSA GRAND HOTEL VERDI JOLLY HOTEL MESSINA GRAND HOTEL VILLA SAN MAURO JOLLY HOTEL ANCONA JOLLY HOTEL BERGAMO JOLLY HOTEL IGEA GRAND HOTEL BRISTOL JOLLY HOTEL RAVENNA GRAND HOTEL TIMEO HOTEL VILLA SANT'ANDREA CRYSTAL HOTEL JOLLY HOTEL STENDHAL HOTEL VENUS SEA GARDEN JOLLY HOTEL OGNINA GRAND HOTEL LIBERTY RESORT BAGLIO ONETO HOTEL MANIN NH Annual Report 2006 19 OPEN HOTELS AND ADDITIONS IN 2007 LOCATION ROOMS CONTRACT CATEGORY BERLIN 255 LEASED JOLLY COLONIA 217 LEASED JOLLY GERMANY JOLLY HOTEL VIVALDI JOLLY HOTEL MEDIAPARK SPAIN NH CONSTANZA NH FUENLABRADA BARCELONA 308 LEASED CONVENTION FUENLABRADA 132 LEASED NH AMSTERDAM 218 OWNED JOLLY WAALWIJK 120 LEASED NH LONDON 275 OWNED JOLLY VIENNA 252 LEASED NH NEW YORK 242 OWNED JOLLY BRUSSELS 193 LEASED JOLLY PARIS 162 OWNED JOLLY MEXICO DF 135 OWNED NH THE NETHERLANDS JOLLY HOTEL CARLTON NH WAALWIJK UNITED KINGDOM JOLLY HOTEL ST. ERMIN`S AUSTRIA NH DANUBE CITY UNITED STATES JOLLY HOTEL MADISON TOWERS BELGIUM JOLLY HOTEL DU GRAND SABLON FRANCE JOLLY HOTEL LOTTI MEXICO NH SANTA FE TOTAL OPEN HOTELS AND ADDITIONS IN 2007 (Up to April) HOTELS ROOMS 66 9.756 BREAKDOWN OF OPENINGS BY COUNTRIES IN 2006 AND UP TO APRIL 2007 6% 2% 2% 2% 6% 5% 3% 8% 3% 63% 20 NH Annual Report 2006 • 63% Italy • 8% Germany • 6% Cuba • 6% Spain • 3% The Netherlands • 3% United Kingdom • 2% Austria • 2% Belgium • 2% United States • 5% Other Pool of the NH Parque Central Havana - Cuba HOTEL SIGNED • Organic Growth: in 2006, 3,911 rooms were signed, 40% more than the previous year. • The acquisition of Jolly Hotels and Framon involve 9,682 more. • NH Hoteles signed 5,138 rooms at the end of 2006. • Excluding the acquisition of the Jolly Hotels and Framon chains, in 2006 NH Hoteles signed rooms equivalent to 10% of all operating rooms. • In April 2007, the Group has 32 hotels and 6,139 rooms signed. HOTELS ROOMS TOTAL HOTELS SIGNED 32 5,664 TOTAL EXTENSIONS 3 475 ROOMS TOTAL SIGNED AND EXTENSIONS (UP TO APRIL 2007) 6,139 SIGNED ROOMS AND EXTENSIONS TO APRIL 2007 5% 4% 12% 14% 25% 2% 4% 5% 2% 5% 22% • 25% Italy • 22% Mexico • 14% Dominican Republic • 12% Spain • 5% Austria • 5% Czech Republic • 5% Senegal • 4% Argentina • 4% France • 2% Cuba • 2% Poland NH Annual Report 2006 21 SIGNED HOTELS UP TO APRIL 2007 LOCATION ROOMS CONTRACT MILAN 250 LEASED NH DONNAFUGATA GOLF RESORT & SPA RAGUSA (SICILY) 217 OWNED NH FRAMON GRAND HOTEL MANTEGNA PADUA 190 LEASED NH FRAMON GIUSTINIANO ROME 161 LEASED NH SEXTO SAN GIOVANNI MILAN 155 LEASED LEASED ITALY JOLLY MILANO FIERA 3* JOLLY MILANO FIERA 4* MILAN 148 BERGAMO 118 LEASED NH SAVONA SAVONA 92 OWNED NH VITTORIO EMANUELE PALERMO 88 MANAGED NH FRAMON HOTEL QUATTRO CANTI PALERMO 71 OWNED AMALFI 53 LEASED RIVIERA MAYA 550 MANAGED MANAGED NH ORIO AL SERIO NH GRAND HOTEL CONVENTO DI AMALFI MEXICO NH RIVIERA MAYA T2 MEXICO AIRPORT PROJECT MEXICO 305 NH MONTERREY MONTERREY 220 LEASED NH QUERÉTARO QUERETARO 140 OWNED GUADALAJARA 130 MANAGED NH GUADALAJARA SPAIN NH VIRGEN DEL PUERTO MADRID 224 LEASED BARCELONA 138 LEASED NH PUERTO DE SAGUNTO VALENCIA 100 LEASED NH MÁLAGA MALAGA 93 OWNED NH PALACIO DE TEPA MADRID 92 LEASED TENERIFE 65 OWNED C/ ÁLAVA PROJECT NH CIUDAD DE TENERIFE DOMINICAN REPUBLIC NH PLAYA BÁVARO BAVARO 660 MANAGED CAP CANA 200 MANAGED NH PRAGUE PRAGUE 201 LEASED NH RADLICKA PRAGUE 135 LEASED CAP CANA PROJECT CZECH REPUBLIC SENEGAL NH BAOBAB CAP MANUEL DAKAR 177 MANAGED DAKAR-DIOFF 133 MANAGED LANCASTER PROJECT BUENOS AIRES 115 OWNED 9 DE JULIO PROJECT BUENOS AIRES 106 OWNED LYON 245 LEASED POZNAN 92 MANAGED NH BAOBAB LES MAMELLES ARGENTINA FRANCE NH LYON POLAND NH POZNAN 22 NH Annual Report 2006 EXTENSIONS SIGNED UP TO 2007 LOCATION ROOMS CONTRACT VIENNA 300 LEASED LA HAVANA 150 MANAGED BERLIN 25 LEASED AUSTRIA NH CONVENTION CENTER VIENNA AIRPORT CUBA NH PARQUE CENTRAL GERMANY NH KURFURSTENDAMM SIGNED ROOMS EVOLUTION OPENINGS 12,000 10,000 9,160 9,682 8,000 6,000 3,911 4,000 8,000 By number of rooms By number of rooms 10,000 6,000 4,000 3,041 2,621 1,852 2,000 2,000 1,536 664 245 0 0 2003 • • 2004 Organic growth M&A 2005 2006 2007 • • 2008 2009 Organic growth M&A NH Annual Report 2006 23 NH Belvedere Vienna - Austria 4 4 2006 Results NH Annual Report 2006 25 The hotel activity of NH Hoteles showed significant improvement in 2006, with a 30.6% increase in the net profit over the previous year. This result was obtained thanks to a 13.4% increase in the hotel's income, up to € 1,021 M. The improvement of occupancy and an increase in the ADR (average price) of 8.7% contributed to the sales growth. The RevPar (income per available room) rose by 9.7%. The EBITDA (operating profit) of the hotel activity rose to € 161 M and recorded a rise of 27.2% over 2005. Sales for the chain increased up to € 1,090 M, including Sotogrande, and the net profit of the consolidated group remained stable at € 62 M. The net profit was diluted by a smaller contribution from Sotogrande’s income, which is explained by the sale of large plot of land in 2005. In Germany, the EBITDA showed highly positive growth in comparable hotels, reaching € 7 M against a loss of € 2 M the prior period, due to increasing demand, management, a focus on maximising ADR and lease cost control of 14 hotels. Income at comparable hotels in Germany reached € 198 M, 12% more than last year. During 2006, the RevPar improved by 12% in comparable hotels in Germany. In Spain stands out the significant recovery of the business, with increased income in comparable hotels of 6.4% and 15% in the EBITDA. The comparable RevPar in Spain grew 8.4% with an average rise in price of 6.9%. The RevPar in Benelux held positive growth in comparable hotels and grew 10.2% over the last year. The ADR contributed to 95% of that growth. The income reached in Benelux in comparable hotels P y G Hotel Activity Hotel Income sits at € 237 M and the EBITDA, with an increase of 18.7%, reaches € 78 M. The business unit of Switzerland, Austria, Hungary and Romania recorded a considerable increase in its income from 14.7% and an EBITDA of € 2 M, which shows the solidness provided by the recent additions of countries from the Eastern Europe to the NH Hoteles portfolio. Regarding the Revpar, comparable hotels recorded growth of 11.6%. It is worth noting a pronounced increase in occupancy of 5.71%, until reaching an average occupancy of 75.7% in comparable hotels. The RevPar in Latin America maintained very favourable growth the entire year, with an increase of 16.30% in comparable terms. The positive growth of the business is highlighted by the rising ADR, occupancy and RevPar in the entire business unit, which is reflected in the 32.1% increase in the EBITDA, in comparable hotels. The real estate activities of Sotogrande recorded sales of € 69 M, 16.9% less than the previous year, and an EBITDA of € 27 M. The lower contribution from the Sotogrande income is mainly due to the sale in the past year of a large plot of land for a value of € 35 M and the growing sale of houses and apartments against the plots of land. This should be taken into consideration when comparing the data to that at this year. On December 31, 2006, the confirmed pending sales to be posted amounted to € 74 M with a margin of € 29 M. The following tables show that hotel activity have evolved very favourably from January to December, in comparison to 2005. €M 2006 €M 2005 % Change 1,021.57 901.22 13.4% EBITDA of Hotel Activity 161.80 127.19 27.2% Net Profit of Hotel Activity 45.99 35.22 30.6% (*) At a constant consolidation perimeter Evolution to Dec 31/06 26 Increase in Sales Increase in EBITDA Total Comparable Hotel Activity 9.7% 26.4% B.U. Spain 6.4% 15.0% B.U. Benelux 8.1% 18.7% B.U. Switzerland, Austria & Hungary 12.2% 605.7% B.U. Germany 12.0% 428.8% B.U. Latin America 21.8% 32.1% NH Annual Report 2006 Room of the NH Puerta de la Catedral Salamanca – Spain COMPARABLE REVPAR EVOLUTION AT 2005-2006 BY BUSINESS UNIT 80 +10.1% RevPar in € 60 +8.3% +11.6% +16.3% +12% 40 +10.4% • • RevPar 2005 RevPar 2006 • RevPar Growth with 80% via ADR • ADR Growth of € 6.2 20 0 Spain Benelux Germany Austria, Switzerland, Hungary Latin America Total COMPARABLE HOTELS EBITDA EVOLUTION AT 2005-2006 BY BUSINESS UNIT +26.4% 170 • • 140 EBITDA 2005 EBITDA 2006 € million 110 80 +18% +15% 50 20 +€9m * -10 • 26.4% increase in EBITDA • Comparable Hotels +32% Spain Benelux Germany +€3m * Austria, Switzerland, Hungary Latin America Total * The Business Units of Germany and Austria, Switzerland and Hungary showed a negative EBITDA in 2005 NH Annual Report 2006 27 NH Plaza de Armas Seville - Spain PROFIT AND LOSS ACCOUNT AS A DECEMBER - NH HOTELES As of December 31, 2006 (M Euros) As of December 31, 2005 (M Euros) 06/05 Change 1,005.58 897.45 12.0% Income from Real Estate Operations 69.37 83.44 (16.9%) Other Non-Recurring Income 15.99 3.77 324.1% 1,090.94 984.66 10.8% (32.26) (16.89) 91.0% Staff cost (344.09) (316.04) 8.9% Other Operating Expenses (332.41) (299.29) 11.1% Income from Hotel Operations INCOME Real Estate cost of sales Other Non-Recurring Expenses (9.10) (2.10) 333.3% GROSS OPERATING PROFIT 373.08 350.34 6.5% Leases payments and property taxes (184.19) (169.49) 8.7% EBITDA 188.89 180.85 4.4% Depreciation (75.00) (68.82) 9.0% EBIT 113.89 112.03 1.7% Interest income (expense) (29.79) (23.13) 28.8% 1.28 (0.65) (296.9%) Income from minority equity interests EBT 85.38 88.25 (3.3%) Corporate Tax (24.09) (17.85) 35.0% INCOME before minorities 61.29 70.41 (13.0%) 1.16 (8.17) (114.2%) 62.45 62.24 0.3% Minority Interests NET INCOME 28 NH Annual Report 2006 NH Hoteles is experiencing a positive RevPar trend The RevPar growth experienced in 2006 confirms our expectations of a recovery at all Business Units RevPar RevPar 50 € Germany and Austria 70 € 45 € 65 € 40 € 60 € 35 € 55 € 30 € Benelux 50 € 2001 2002 2003 2004 2005 2006 RevPar 2001 2002 2003 2004 2005 2006 RevPar 65 € Spain 45 € 60 € 40 € 55 € 35 € 50 € Latin America 30 € 2001 2002 2003 2004 2005 2006 2001 2002 2003 2004 2005 2006 NH Annual Report 2006 29 Terrace of the NH Alicante Alicante – Spain 5 5 Corporate operations NH Annual Report 2006 31 Capital Increase Framon Acquisition In November 2006, the Board of Directors of NH Hoteles announced the approval of a Capital Increase through issuing a maximum of 16,371,971 new shares (€ 2 par value and an issue premium of € 13.27), to reinforce the Company’s strategic plan. During 2006, NH Hoteles signed an agreement to take control of the fifth largest hotel company in Italy. Framon has a strong presence in Siciliy, in addition to strategic positioning in the main cities of the Italian peninsula. Framon provided NH Hoteles with 1,254 rooms. After the subscription period, in March 2007, NH Hoteles received mass support from its shareholders in the Capital Increase and the 16,371,971 new shares were subscribed in their entirety during the Preferred Subscription Period (1st round) and the Additional Award Period (2nd round). The success of the Capital Increase is reflected in the excess demand for securities, which would have allowed an expansion 2 times greater than that proposed by NH Hoteles to be performed. Taking into consideration that the Capital Increase was done with a preferred subscription right and that demand much higher than the offer for shares took place, we must point out the great support from the shareholders, both for recent acquisitions performed in Italy (Jolly Hotels and Framon) and its strategic development plan. Public Tender Offer on the minority Shareholders of Jolly Hotels Grande Jolly, with a majority stake held by NH Hoteles, submitted the prospectus for the Public Tender Offer on the minority shareholders of Jolly Hotels before the CONSOB (Regulating Body of the Italian Stock Market) in line with what is provided for in the operations for acquisition of the Jolly Hotels Italian chain. NH Hoteles submitted the prospectus of the Public Tender Offer on the entirety of the shares in the possession of minority shareholders (5,104,578 shares that equal 25.6% of Jolly Hotels). The price for each share under the Offer was € 25, which in compliance with the European Regulations, coincides with the price paid to the partners of Grande Jolly, such that equal treatment was guaranteed for all shareholders. After completing the Public Tender Offer on March 18, 2007, NH Hoteles, through Grande Jolly held 83.11% control of Jolly Hotels. 32 NH Annual Report 2006 Public Tender Offer for 100% of Sotogrande In the last period, NH Hoteles launched a Public Tender Offer to purchase shares for 20.939% of the capital of Sotogrande that it did not control, through the swapping of securities at a ratio of one new share of NH Hoteles for each share of Sotogrande. After reaching a share swap agreement with Caja Madrid, which held 17.2% of the real estate company, and extending a swap offer to the rest of the shareholders, NH Hoteles took over 97.72% of Sotogrande. PERCENTAGE REVALUATION OF NH HOTELES AND IBEX 35 200 Source: Bloomberg 180 Securities expressed in % NH Hoteles IBEX 35 160 140 120 100 -120 2005 2006 2007 (until April) SHAREHOLDER COMPOSITION AT NH HOTELES (15/04/2007) 6.7% 5.6% 3% 10% 5% 5% 64.7% • 10% C.F. Caja Madrid • 6.7% GSS III Hurricane (Morgan Stanley) • 5.6% Bancaja • 5% Hoteles Participados • 5% Ponte Gadea • 3% NH Management Team and Employees • 64.7% Rest of the capital Those shareholders that are represented at the Board of Directors have been considered to be stable shareholders of NH Hoteles. NH Annual Report 2006 33 Façade of the NH Jousten Buenos Aires – Argentina 6 6 Strategic Growth Plan NH Annual Report 2006 35 In January 2007, NH Hoteles submitted a three-year strategic plan to double the results of the company with a total investment of € 1,300M. With the launching of this ambitious development plan, NH Hoteles plans to double its operating profits (EBITDA) for hotel activities, until exceeding € 300 M in the 2009 period. The company plans to double the number of open and signed rooms over the next three years. The goal that is set out by NH Hoteles, to be sitting with more than 70,000 rooms at the end of 2009, will consolidate its leadership position in the European hotel segment. The expansion plan considers the integration of the recent additions to the company from the Jolly Hotels and Framon chains, at their Italy Business Unit, which will mean a disbursement of more than € 700 M, between investing and assuming debt. In addition, the company is planning an additional investment of € 100 M for changes to adapt the Italian chains to the standards of NH Hoteles. The goal planned by the company at its Italy Business Unit involves doubling the current results at the end of 2009, taking advantage of the opportunity to improve the operating efficiency of the acquired hotels. Jolly Hotels and Framon stand out due to their existing complementary nature with NH Hoteles, as far as the customer profile, services offered, strategic urban locations and full geographic coverage. The strategic plan considers a major investment in countries such as Germany or Italy, where very positive growth is anticipated, which are now being consolidated as target markets in the coming years. 25-30 % of the investment from the expansion plan will be set aside for the Business Units of Germany, Switzerland and Austria, giving special attention to projects with a product quality that is homogeneous to NH Hoteles in the eight main cities of Germany. Around 20-25% of the investment from the expansion plan will be concentrated on Italy, thus consolidating the company’s leadership in the transalpine country. Focused on Europe 36 Growth in Belgium, The Netherlands and Luxembourg goes through an increase of 3,000 rooms, based upon an increased presence of the chain in secondary cities (as far as number of inhabitants), in The Netherlands and especially in Amsterdam. In Belgium and Luxembourg the expansion will be focused on strategic cities such as Amberes or Luxembourg itself. NH Hoteles plans to strengthen its leadership in the mid segment in Europe by concentrating its organic growth investments in the main markets of the continent where it already has a notable presence. The group plans to invest € 500 M in Europe, based upon the aforementioned positioning of the company in the main countries where it operates and taking advantage of the good economic outlook for the coming years. The middle hotel segment presents great growth potential in Europe, where only 25% of the hotels are operated by hotel brands. In this regard, NH Hoteles plans to take advantage of the growth opportunities of this fragmented market and consolidate its leadership in the 3 to 4 star segment. In this manner, the company will concentrate its investments on attractive real estate markets, such as Germany, and will use low risk formulas in the remaining markets where it operates, as in the case of Spain. NH Hoteles plans to accelerate its position in Poland and in the most important cities of the Eastern Europe countries. For this purpose it will set aside around 10-15% of the investment from its strategic plan. NH Hoteles is placed in a unique position to obtain high profitability for its development plan. The company has increased brand recognition in countries such as Germany, Austria, The Netherlands and Belgium, and holds a high index in Spain, according to the last study conducted by the consultancy Ikerfel in 2006. In the vacation segment, where currently NH Hoteles has several projects under development in Bavaria and Cap Cana (Dominican Republic) and Riviera Maya (Mexico), the company plans to reinforce its growth with a very limited investment that will not exceed 3% of the total investment of the plan to 2009. NH Annual Report 2006 In Spain and Portugal, NH Hoteles plans a growth of 2,000 rooms until 2009, maintaining its market share in the main cities where it already had a presence and seeking out opportunities in those cities that are not yet covered by the chain, through lease or management formulas. The growth plan in Latin America sets its main goal on raising the number of rooms in the capital of Argentina and in the main cities of Mexico, in addition to continue studying other markets of interest such as Chile, Colombia and Peru. Room of the NH Amistad de Córdoba Córdoba – Spain Financing of the Strategic Plan For the financing of the plan, in addition to the cash flow generated, the company announced a capital expansion for the value of € 250 M, where NH Hoteles has received the unanimous support of its shareholders, once the preferred subscription period has ended. The following graph shows the breakdown of the growth objective for rooms set out by NH Hoteles from last September to 2009: NH HOTELES GROWTH PLAN 2006-2009 (No. of Rooms) 18,000 71,387 Average annual composite growth = 22% 5,138 9,259 38,990 • • • • Dic ’06 Today Jolly Hotels & Framon Signed in December 2006 Goal 2009 NH Annual Report 2006 37 Room of the NH Numancia Barcelona – Spain Goal: 18,000 additional rooms The expansion include the addition of 32,000 rooms, between new openings and signings, which will be added to the 38,990 rooms that the company was operating on December 31, 2006. NH Hoteles plans an organic growth of 18,000 new rooms until 2009. In addition, to reach the goal of 32,000 rooms, NH Hoteles had 5,138 signed rooms and 9,259 recently added rooms at the beginning of 2007, thanks to the agreements reached with the Jolly Hotels and Framon chains. The following graph reflects the geographic diversification of the presence of NH Hoteles today and after completing the growth plan in 2009: DECEMBER 2006 DECEMBER 2009 6% 8% 10% Spain and • 35% Portugal 29% 35% 1% 19% 1% 8% 22% 21% Germany, Austria • 29% and Switzerland Germany, Austria • 21% and Switzerland • 19% Benelux (1) • 8% Latin America • 6% Resorts • 1% Eastern Europe • 1% Italy • 20% Italy (2) • 15% Benelux (1) • 10% Resorts • 8% Latin America • 4% Eastern Europe 4% 15% (1) South Africa and United Kingdom included (2) Recent acquisitions of Framon and Jolly Hotels included 38 NH Annual Report 2006 Spain and • 22% Portugal 20% Jolly Hotel Mediapark Cologne – Germany CONSOLIDATING OUR POSITION IN EUROPE 38,990 ROOMS - DECEMBER 2006 Germany, Austria and Switzerland 11,047 rooms Benelux 7,451 rooms 71,387 ROOMS - DECEMBER 2009 Germany, Austria and Switzerland 14,663 rooms +3,616 Eastern Europe 321 rooms Eastern Europe 2,913 rooms +2,592 Benelux 10,506 rooms +3,055 Spain and Portugal 13,890 rooms Latin America 3,022 rooms Italy 750 rooms Resorts 2,509 rooms Spain and Portugal 15,950 rooms +2,060 Latin America 6,199 rooms +3,177 Italy 14,087 rooms +13,337 Resorts 7,069 rooms +4,560 NH Annual Report 2006 39 7 Hotel Manin Venice – Italy 7 Italy: a tailor made market for NH Hoteles NH Annual Report 2006 41 During 2006, NH Hoteles signed an agreement whereby it would take control of the Jolly Hotels and Framon Italian chains, becoming the leading hotel chain in Italy. With these two operations, the Company adds 67 hotels to its portfolio with 9,682 rooms, including open and signed. in Europe and Latin America, which allows it to rapidly integrate Jolly Hotels into the NH Hoteles portfolio. Framon Jolly Hotels In November 2006, NH Hoteles came to an agreement whereby it would take control of the first Italian chain, Jolly Hotels. The integration of Jolly Hotels into the Italian subsidiary of NH Hoteles stands out due to the existing complementary nature between both companies, as far as the customer profile, services offered, strategic urban locations and full geographic coverage. For NH Hoteles, the agreement has meant the consolidation of its leadership in the business segment in Europe and being the company of reference in the Italian market. Jolly is present in 7 countries with 46 hotels and 7,555 rooms, of which 3,238 are owned. It Italy it owns 39 hotels with 5,993 rooms in the main cities of the country (Rome, Milan, Turin, etc.),which due to their tourist attraction provide a stable addition for completing the business segment. In addition, Jolly Hotels has a presence in the most important European capitals, such as: London (275 rooms), Berlin (255), Cologne (217 rooms), Amsterdam (218 rooms), Brussels (193) and Paris (162). Jolly Hotels also has a 242-room hotel in the middle of the financial and tourist district of New York. The experience and strategy of development and expansion of Jolly Hotels, a company listed in the Italian stock market, have consolidated the hotel chain as the main hotel company over the last years for the business segment of the country, with a growing development of the convention segment. In order to perform the operation, the new company "Grande Jolly" was created, with NH Hoteles holding a majority stake with 51%, and in which the company Joker Partecipazione initially also holds a stake of 42% (which held 50.1% of Jolly Hotels), and Banca Intesa Sanpaolo with 7%. Later, “Grande Jolly” launched a Public Tender Offer at € 25 per share on the 25% in hands of minority shareholders. Since January 2007, majority control of Jolly Hotels is held by NH Hoteles and its results have been moved to be consolidated with those of the Spanish Company on February 1st. NH Hoteles has broad experience in the acquisition of hotel chains 42 NH Annual Report 2006 Over the past period, NH Hoteles came to an agreement to acquire Framon, the fifth largest hotel company in Italy by the number of establishments. Framon, with 15 hotels and 1,254 rooms, has a significant presence in Sicily, one of the main tourist destinations with the greatest potential in the Mediterranean, in addition to the strategic locations in cities of the Italian Peninsula, such as Milan, Rome, Florence and Venice, among others. The Framon chain hotels are recognised for their leadership in the market segment of the areas where they are found. Many of them occupy excellent historical buildings located in strategic locations. In addition, the Italian chain has six magnificent resorts, among which is the outstanding Gran Hotel Timeo de Taormina (Sicily), a historical hotel from 1873 that enjoys wonderful views of the sea and an exceptional Greek theatre. Leadership in Italy For NH Hoteles, these operations have meant reaching a position that allows it to lead the anticipated process of concentrating the fragmented Italian hotel market, in addition to reinforcing its presence in the main European capital cities and entering into two new markets, such as New York and Paris. Aerial View of the Gran Hotel Timeo Jolly Hotel Villanova Bologna – Italy Taormina – Italy Lobby of the Hotel Parco degli Aragonesi Catania – Italy Gran Hotel Verdi Milan – Italy Hotel Crystal Trapani – Italy Pool of the Dioscuri Bay Palace Agrigento – Italy NH Annual Report 2006 43 CONTRIBUTION OF ROOMS FROM JOLLY HOTELS AND FRAMON IN ITALY: 7,247 ROOMS Jolly: 1,175 Framon: 100 Jolly: 87 Jolly: 88 Jolly: 115 Jolly: 112 Jolly: 172 Jolly: 368 Bergamo Brescia Lecco Milan Jolly: 283 Trieste Vicenza Framon: 44 Venice Turin Jolly: 62 Parma Genoa Framon: 86 Jolly: 110 Jolly: 365 Bologna Rapallo Ravenna La Spezia Pisa Jolly: 100 Jolly: 84 Jolly: 152 Framon: 115 Florence Ancona Siena Jolly: 88 Jolly: 129 Jolly: 107 Rome Jolly: 999 Jolly: 104 Caserta Naples Salerno Jolly: 231 Ischia Jolly: 194 Jolly: 129 Cagliari Jolly: 237 Framon: 102 Jolly: 96 Framon: 153 Framon: 161 Framon: 70 Trapani Framon: 48 Jolly: 120 Framon: 102 Messina Palermo Taormina Valderice Marsala Catania Agrigento Brucoli Caltagirone Syracuse Jolly: 186 Framon: 123 Framon: 59 Framon: 91 Jolly: 100 NH HOTELES IN ITALY Hotels From January 1st, 2007 TOTAL ITALY (March 2007) 44 NH Annual Report 2006 Open Rooms Internal Development 3 750 Jolly 39 5,993 Framon 15 1,254 NH Italy 57 7,997 Projects 11 Hotels; 1,543 Rooms 11 Hotels; 1,543 Rooms Jolly Hotel Ligure Turin – Italy Pool of the Hotel Tonnara Di Bonagia Valderice – Italy Gran Hotel Bristol Rapallo – Italy Lobby of the Anglo American Hotel Florence – Italy Jolly Hotel President Milan- Italy Terrace of the Venus Sea Garden Resort Brucoli – Italy NH Annual Report 2006 45 Façade of the Jolly Hotel Lotti Paris – France 46 NH Annual Report 2006 CONTRIBUTION OF ROOMS FROM JOLLY HOTELS IN EUROPE (EXCLUDING ITALY): 1,320 ROOMS Jolly: 193 Jolly: 275 Jolly: 218 Jolly: 472 United Kingdom Jolly: 162 The Netherlands Belgium Germany France CONTRIBUTION OF ROOMS FROM JOLLY HOTELS NORTH AMERICA: 242 ROOMS Jolly: 242 United States CONTRIBUTION OF ASSETS FROM JOLLY HOTELS AND FRAMON HOTELS ROOMS TOTAL CONTRIBUTION OF OPEN HOTELS - JOLLY HOTELS 46 7,555 TOTAL CONTRIBUTION OF OPEN HOTELS - FRAMON 15 1,254 TOTAL CONTRIBUTION OF OPEN HOTELS - JOLLY HOTELS AND FRAMON 61 8,809 TOTAL SIGNED HOTELS - JOLLY HOTELS AND FRAMON 6 873 TOTAL CONTRIBUTION OF OPEN AND SIGNED HOTELS FROM JOLLY HOTELS AND FRAMON 67 9,682 NH Annual Report 2006 47 NH Krystal Laguna Villas & Resort Cayo Coco – Cuba 8 8 Resorts NH Annual Report 2006 49 NH Krystal Puerto Vallarta Mexico NH Hoteles continues with its expansion in the resorts segment, where during 2006 and 2007 (up to April) it has incorporated 7 more hotels into its vacation hotel portfolio. With the opening of the 690-room NH Krystal Laguna Villas & Resort hotel in Cuba, and the integration of 6 hotels from the Italian company Framon, located mainly in Sicily, NH Hoteles has doubled its resort portfolio in 2007, reaching 2,866 rooms. The company also has another 6 projects more under construction that would mean more than 2,000 new rooms in this segment. During 2006/07 (up to April), 3 new projects located in the Dominican Republic and Italy have been incorporated. Signed projects in 2006/07 Dominican Republic In the Dominican Republic two hotels have been signed, which means more than 1,000 new rooms. The complexes will be located on the well-known Bavaro beach, situated in the middle of an excellent mangrove forest that is rated as one of the best sites on the world for its crystalline water and the white sand of its beach. One of the hotels will have 660 “all inclusive” superior rooms, and the second will be a hotel with 375 exclusive 5-star rooms, both situated on a 350 m beach front across 35 hectares of land. Amalfi (Italy) The Gran Hotel Convento of Amalfi will open in 2008 in the Gulf of Salerno. The establishment, which is a 5-star hotel, will have 53 rooms and will become one of the most exclusive tourist resorts in the area. NEW RESORTS PROJECTS Continent Country Location Rooms Contract AMERICA Dominican Republic Bávaro 660 5% Owned 375 5% Owned Cap Cana 200 25% Owned Mexico Riviera Maya 550 20% Owned Italy Sicily-Ragusa 217 51% Owned Amalfi 53 Leased Hotels Rooms 6 1,740 EUROPE TOTAL NEW RESORTS 50 NH Annual Report 2006 OPENED RESORTS Continent Country AMERICA EUROPE Location Hotel Rooms Contract Cuba Cayo Coco NH Krystal Laguna Villas and Resort 690 Managed Mexico Puerto Vallarta NH Krystal Puerto Vallarta 533 Managed Cancun NH Krystal Cancún 325 Managed Ixtapa NH Krystal Ixtapa 255 Managed Veracruz NH Krystal Veracruz 108 Leased Marbella NH Alanda 199 Leased Spain Italy (Framon) Germany TOTAL OPEN RESORTS TOTAL OPEN AND SIGNED RESORTS Sotogrande Almenara 148 Owned Rapallo Grand Hotel Bristol 148 Managed Valderice Tonnara Di Bonaggia 102 Leased Taormina Grand Hotel Timeo 83 Managed Villa Sant´Andrea 78 Managed Brucoli Hotel Venus Sea Garden 59 Leased Marsala Resort Baglio Oneto 48 Leased Baden-Baden Schlosshotel Buhlerhohe 90 Leased Hotels Rooms 14 2,866 Hotels Rooms 20 4,921 GROWTH IN THE RESORT SEGMENT OF NH HOTELES 2,866 Rooms 14 Hotels 3,000 2,500 2,000 1,658 Rooms 7 Hotels 1,500 1,000 500 0 • • 2005 2006/07* * Until April 2007 NH Annual Report 2006 51 9 9 New image NH Annual Report 2006 53 New directory of NH Hoteles NH Hoteles introduced a new image at the beginning of this year. The chain is showing a new corporate colour, sky blue, which attempts to give the brand a tone that is more in line with the company's strategy to also reach out to the leisure customer without giving up its corporate customers. Since January 2007, NH Hoteles has begun to implement the new image in practically all of the hotels, which will be finalized in an estimated period of only 6 months. The main elements are, accompanying the already classic NH initials that define its logo, the new light blue colour, the renewal of the set of all the graphic parts that make up the group’s corporate image and the creation of new communication formats within the hotels. The new group image is based on hand-drawn lines, which are superimposed over real images, and symbolise the personal labour and closeness that characterises the company, beyond management capability and professionalism. Thus, each part contributes personally to describing a new tone of communication between the company and its customers, which after all is communication between people. It is a new letter of introduction that brings together the company’s corporate values. This brand evolution goes beyond the simple renewal of the company’s graphic representation and fully commits itself to the management of the “customer experience” within the hotels. 54 NH Annual Report 2006 As a new evolution of communication formats with the customer, NH Hoteles has developed a set of different messages intended to improve the customer’s stay. New and small details, “messages” that in some way make up an authentic quiet conversation between the hotel and the customer and that contribute to creating a new NH environment within the hotels. Improving the classic uses of the hotel sector with regards to the objects and daily actions, television, check in, menus from its restaurants and cafeterias, welcome and information messages, everything, including the very keys of the rooms or the coasters, are now elements that seek out closeness with the people and transmit an authentic desire to please the customers and to make their stay a unique experience. The NH brand image has maintained a path of success that has led it to a place of leadership within the business hotel industry. Without giving up its identity and solid nature, now is the time to grow and to expand its horizons to the development of other segments such as leisure and vacations. It is also the moment to change the register and tone of communication with customers. With this new image, the brand becomes more flexible, close, leaving sobriety behind to evolve into more cheerful, personal and most of all, closer colours. New Website of NH Hoteles New Webpage The customers' stay at NH Hoteles often begins by visiting our Webpage. For this reason, the company has incorporated new functionalities that make the new Website a more friendly and useful environment, where the user can enjoy the best experience, thanks to new developments such as: different search types through an innovative system (by proximity to the address, proximity to a point of interest, services, price chart), interactive maps, personalised "à la carte" sections, or subscribing to the NH Hoteles bulletin, amongst others. Reserving through the www.nh-hotels.com Webpage is now easier and more practical than ever. NH Annual Report 2006 55 10 Nhow Milan – Italy 10 Concepts NH Annual Report 2006 57 Last September 2006, the first Nhow hotel of NH Hoteles opened in Milan. The Company has developed a new and exclusive category of contemporary hotels, a laboratory of trends that incorporates the new philosophy of modern living: technological, creative and luxurious. Nhow reinterprets spaces, times and services in such a way that they surround the customers as soon they enter in the hotel, from the hallway to the rooms. Choosing Nhow means becoming part of a community, a way of living in comfort and up to the minute. As a synthesis of a new concept of living, Nhow offers quality never seen in hotel service. This concept attempts to become the reference for the most innovative cultural, social and artistic movements of the large globalized urban centres that are in constant transformation. Milan The first Nhow hotel is born in Milan, the capital of fashion and design. The city represents the engine and pulse of the country, a city that is erected as a meeting point of trends. The city hosts some of the most representative artistic and cultural events of the international scene. All this makes Milan the emblem of contradictions, between classic and modern, between trends and the most “retro” style, a city where everything lives together, from the most avant-garde to the most underground. The hotel Nhow Milan is located on Via Tortona 35, a strategic location between main internal and external arteries of the city. The hotel represents one of the most important projects of Milan’s industrial renewal. The “Tortona & Navigli” area has become, in very few years, the fashion district of the city with a lively and fervent atmosphere, both in the day and night time, full of charming restaurants, bars, showrooms as well as design and photography studios. The hotel is located just 12 km from the Linate airport, 2 km from the neuralgic centre of the city and from the Milan Trade Fair. 58 NH Annual Report 2006 The famous designer Matteo Thun and the architect Daniele Beretta have united their efforts and talents to create a hotel where the guest is left everything but indifferent. Nhow changes the architectural and space distribution in order to make their socially model. The hotel represents an authentic container of experiences that is ready to surprise you at every glance, movement or thought, exceeding any expectation. Nhow integrates the individual into the most avant-garde movements of current society, a meeting point of the most dynamic travellers. The 249 rooms of the hotel, divided into 4 floors, are conceived as vital autonomous and modular spaces, providing solutions never seen before for the maximum enjoyment of the stay. Spaces in movement From the time they enter the hotel, customers are surprised upon finding a space that joins trends and awakens the senses. Due to the special relationship of Nhow with the world of art and fashion, the common areas of the hotel such as reception, the lobby or the exit from the elevators, among others, become environmental spaces in constant transformation due to original design objects and pieces of art. Nhow's Art Management renews the artistic and cultural offer every 3 months, creating an environment that is always new concealing new discoveries around every corner. These spaces are intended for housing the works of art from established artists and new designers, who allow their works to be displayed thanks to agreements with the main design houses and international art galleries. The hotel becomes a showroom for the most daring and avantgarde creations, where all displayed elements are for sale. Nhow - Milan – Italy Events Given the configuration and design of the building, the hotel can host all types of events such as fashion shows, company presentations, publishing events, film shootings, photography sessions or private parties. Nhow has invested in innovative cuisine based on Mediterranean culture, rich in flavours, with surprising presentations and without neglecting the health of the customers. Its cuisine is based on the most advanced culinary techniques, mixed with the most traditional flavours, is a conjunction that will not cease to surprise the customer on each new occasion. Flavours The Nhow restaurant is a space with its own philosophy, which attempts to go beyond the boundaries of taste, a true workshop of high creative cuisine. NH Annual Report 2006 59 “nhube” of the NH Stuttgart Airport Germany NH Hoteles has 20 “nhube” establishments open in Spain, Germany, Austria, The Netherlands and recently in Mexico. Since 2006, the company has incorporated 5 "nhube" spaces to the chain, investing in environments that bring together the restaurant, leisure and relaxation service of the hotels. The new “nhube” areas are located in Spain (Valladolid and Barcelona), in Germany (Stuttgart) and in Mexico (Santa Fe). “Nhube” comfortably combines a lounge, dining room, bar-cafeteria and even a library, a multifunctional space where you can enjoy while watching television, browse the Internet, play and listen to music, eat, drink and relax at the same time. 60 NH Annual Report 2006 The gastronomic offer of “nhube”, designed by the prestigious chef Ferran Adria, is based on simple food prepared with the highest quality ingredients, which are combined with a decorative surrounding that stands out for its neutral colours, natural fabrics and careful lighting in its different environments. Currently, after the success of the “nhube” concept, NH Hoteles has signed four projects to incorporate new spaces in Spain, Cuba and Mexico. NHUBE TOTAL OPEN NHUBE SPACES 20 TOTAL NHUBE SPACES PLANNED (UNTIL APRIL 2007) OPEN ABIERTOS 4 Location Opening Date Open in Spain NH BALBOA NH CARTAGENA NH SAN SEBASTIÁN DE LOS REYES NH PACÍFICO NH CENTRAL CONVENCIONES NH ALCORCÓN NH SANT BOI LLOBREGAT NH PLAZA MAYOR NH PARLA NH ALICANTE NH MERCADER NH BALAGO NH NUMANCIA NH CONSTANZA Total nhubes open in Spain MADRID CARTAGENA MADRID MADRID SEVILLE MADRID BARCELONA LEÓN MADRID ALICANTE MADRID VALLADOLID BARCELONA BARCELONA March-03 February-04 April-04 January-05 January-05 March-05 July-05 July-05 September-05 September-05 October-05 January-06 May-06 February-07 14 Open in Germany NH FRANKFURT AIRPORT NH NÜRNBERG CITY NH STUTTGART AIRPORT Total nhubes open in Germany FRANKFURT NUREMBERG STUTTGART December-04 October-05 March-07 3 Open in Austria NH VIENNA AIRPORT Total nhubes open in Austria VIENNA December-05 1 Open in The Netherlands NH DEN HAAG Total nhubes open in Holland THE HAGUE July-05 1 Open in Mexico NH SANTA FE Total nhubes open in Mexico SANTA FE February-07 1 Location Location Planned Planned Opening Opening SANTA CRUZ DE TENERIFE MADRID 2007 2008 2 HAVANA 2007 1 GUADALAJARA 2008 1 SIGNED Firmados en España Signed in Spain NH SANTA CRUZ TENERIFE NH VIRGEN DEL PUERTO Total nhubes signed in Spain Signed in Cuba NH PARQUE CENTRAL Total nhubes signed in Cuba Signed in Mexico NH GUADALAJARA Total nhubes signed in Mexico NH Annual Report 2006 61 FAST GOOD The food already well-known as the new restaurant culture created by NH Hoteles with the collaboration of Ferran Adrià, is consolidating as a gastronomic phenomenon that began in 2004. Currently, the company has 7 "Fast Good" establishments open, five in Madrid, one in Las Palmas de Gran Canaria and one in Santiago de Chile. The company is also planning to open a further 3 restaurants in Madrid, Valencia and Barcelona (Spain). The unprecedented success of the “Fast Good” phenomenon is reflected in the wide spread acceptance of the concept by consumers at all the restaurants open in 2006. In addition, during the second quarter of 2006, "Fast Good" has reached agreements with prestigious brands with whom it shares the same target market, which have helped with the positioning of "Fast Good" as a quality brand, as well as greater knowledge of the brand in different channels. Fast Good takes off “Fast Good” currently designs two sandwiches from the paid menu on IBERIA planes for mid-range flights (flights up to four hours). “Fast Good” has a significant brand presence of this menu, which has promoted the knowledge of "Fast Good" among international customers of the airline company. FAST GOOD OPEN ESTABLISHMENTS Country Spain Location Address Madrid C/ Padre Damián Fast GO Store Madrid C/ Juan Bravo YES Madrid C/ Orense YES Madrid C/ Fuencarral* Alcobendas (Madrid) C/ Anabel Segura YES Las Palmas de Gran Canaria C/ Simón Bolívar YES Santiago de Chile C/ Isidora Goyenechea Chile *Cold food point of sale only FAST GOOD SIGNED ESTABLISHMENTS (up to April 2007) Country Spain 62 NH Annual Report 2006 Location Address Madrid C/ Tetuán Fast GO Store YES Valencia Gran Vía Marqués del Turia YES Barcelona C/ Balmes YES Fast Good, C/ Juan Bravo Madrid - Spain NH Annual Report 2006 63 Casino de Madrid Madrid – Spain CASINO DE MADRID During 2006, the Casino de Madrid has continued to reap rewards with the help of the popular chef Paco Roncero. Among the awards that have been given to the Casino de Madrid or its personnel are the following: • “Best Madrid Restaurant 2006" in the 4th edition of the Luna de Metrópoli Awards (El Mundo Newspaper). • Sánchez Cotán Award 2005 to the Terrace of the Casino for the “Best Restaurant Menu Design". • Paco Roncero: Award to the “Best Future Chef” by the International Gastronomy Academy, and National Gastronomy Award to the "Best Kitchen Manager", granted by the Spanish Gastronomy Academy and the Cofradía de la Buena Mesa. 64 NH Annual Report 2006 • Award to the “Best Future Sommelier” by the International Gastronomy Academy to Maria José Huertas (Sommelier of the Casino de Madrid). Among the most relevant events in the past financial year, the Casino de Madrid has inaugurated the Taller InNHova, which attempts to research and develop new gastronomic projects. From the hand of Ferran Adria, the gastronomic consultant of the Casino, “La Terraza” has become one of the most emblematic restaurants in Madrid (Spain) over the last years. The recognition of the high quality and service of this exceptional location is currently reflected in the classification of the most prestigious gastronomic guides: Michelin Guide: 1 star; Gourmetour Guide: 9; Campsa Guide: 2 suns. Elysium Travel Spa at the airport of Madrid Madrid – Spain Elysium Travel & Beauty Spa Elysium Spa, the wellness line of the NH Hoteles, has opened two new centres in 2006 within Terminal 4 of the Airport of Barajas in Madrid (Spain). The new Elysium Travel Spa and Elysium Beauty Spa centres are pioneer establishments for these kinds of traits in airports throughout Europe. These establishments try to reconcile personal well-being with the long waiting times and tiredness brought on by going through airports. Under a unique and innovative wellness model, Elysium Travel & Beauty Spa meets the personal health needs of the travellers. On the other hand, Elysium Travel & Beauty Spa seeks to reposition “travelling habits”, by making the passing through the airport a part of the trip enjoyment. hand, the Elysium Travel Spa is located at the T4 “Satellite” terminal, just next to the Iberia VIP room. The two centres are made up of an esthetic area where a wide range of services are offered and a boutique area selling high-quality cosmetics with the most exclusive brands on the market. Elysium, Quality Guarantee The quality and exclusivity of the Elysium Spa is backed internationally by the “Conde Nast Johansens” award for excellence, granted to the first Elysium centre located at the Hotel Almenara de Sotogrande (Spain), recognised as “The Most Exclusive Hotel Spa of Europe”. In addition, NH Hoteles has another two complete Elysium Spa Centres in Madrid and Marbella (Spain). Elysium Beauty Spa is located in the billing area of the new Terminal 4 of the Airport of Barajas, in Madrid (Spain). On the other NH Annual Report 2006 65 Lobby of the NH Agustinos Pamplona – Spain 11 11 New products and services NH Annual Report 2006 67 Suite del NH Abascal Madrid – Spain Premium Rooms NH Hoteles has selected the best rooms from the chain in Spain and has put them under a new category: Premium Rooms. Designed for the customer who is looking for something different when staying at a hotel, the more than one hundred stays chosen for this new offer from the company stand out for having their own added value that makes them special. A unique view, different décor, their own history or having been used previously by someone famous are some of the seasons that make them the true stars of NH Hoteles. The Premium Rooms are spread out among 18 of the best hotels of the chain throughout the geography of Spain. The establishments are part of the NH Collection Hotels, which stand out for being unique buildings. Included among these buildings are monuments that have been restored and recovered by NH Hoteles, to newly built facilities, where the most avant-garde design and innovative and advanced services for the guest make them stand out. In addition to choosing the hotel, customers can select a specific room in which the experience of their stay will be completely different and unique. Among the rooms chosen by the chain, NH Hoteles has highlighted one per establishment, being singled out in the special catalogue edited by the company. These rooms represent the best sample of the variety of different destinations and experiences available to the traveller at the hotels of the Spanish multinational company. 68 NH Annual Report 2006 Rooms with their own charm The Premium Rooms offer the customer a wide range of sensations. In some cases, the unequalled view that is enjoyed from their windows or balconies is their main attraction. For example, room 340 of the NH Obradoiro enjoys an exclusive view of the city of Santiago de Compostela. The uniqueness of the architectural environment is the virtue of a good part of the Premium Rooms. That is the case with room 401 of the NH Palacio de la Merced in Burgos, where the building’s gargoyles are just a few metres away from the room’s windows, or room number 204 of the NH Amistad Córdoba, just in front of the Arab mural in an architectural set that has been masterfully restored. In some cases, having been used by historic personality or celebrities from the world of culture provides special interest in some of the Premium Rooms of NH Hoteles. The offer that the Premium Rooms represent for NH Hoteles provides the customer with a new way of travelling, where lodging becomes the true highlight. Premium Views In 2006, NH Hoteles has edited the Miradas book, with the collaboration of the prestigious writer Espido Freire, winner of the Planet Award, and the well-known photographer Daniel Riera. The intent of the book is to show his personal interpretation of the Premium Rooms and to also tell unique stories. New NH breakfasts NH Hoteles has ascertained that Spaniards tend to follow European trends as far as working lunches. Thus, more and more professionals are including working breakfasts in their agendas. These kinds of meeting offer innumerable advantages and it is already a general practice in a good part of Europe in the USA. This trend has been verified already by the increased demand for this service by the customers of NH Hoteles. Thus, the corresponding sales from breakfasts have increased by 7.4% on average in all of the chain’s hotels, and the company breakfasts alone have increased by 17%. In light of the new trends, and continuing with restaurant service support as one of the pillars of the company, NH Hoteles has designed its new and complete breakfast in 2006. Breakfast – important nutritional value The new breakfast of NH Hoteles has been developed with the assistance of nutritionists and under the guidance of chef Enrique Martinez, a gastronomic consultant for NH Hoteles and the head of the prestigious Maher restaurant in Cintruénigo (Navarra). The new breakfast can now be enjoyed at a wide range of hotels from the chain and will be implemented at all of their spaces gradually. Regarding the new breakfast, Enrique Martinez has increased the offer of juices and fruits, with new cuts and presentations. We have worked jointly with suppliers to ensure that they prepare handmade buns and bread following our recipes on a daily basis. other foods, such as: meat products (low fat cold meats, sausages), fats (olive oil, butter), stimulants (coffee, tea, chocolate) etc. The development of a wide variety of recipes has been included among the main new dishes for the NH breakfasts, which will be updated throughout the year, so that our customers may enjoy the latest of the current Spanish cuisine. In addition, the offer of breads has been promoted (rye, German, seeds, nuts, raisins, wholewheat), baked at the hotels. Some of the main parts to the NH Hoteles breakfast are: • Fruit is always served freshly cut and is carefully selected. • Juices are prepared on the day they are consumed, in order to avoid loss of vitamins. • New selection of handmade butters and jams prepared by our staff, which are served alongside the traditional ones. • Hot products are prepared when served according to the customer's specifications. Support from NH Hoteles for gastronomy is one of the main characteristics of the company, which has numerous agreements with food experts, such as Ferran Adrià, Enrique Martínez and Paco Roncero. A nutritionally balanced breakfast must contain milk products (provide calcium), cereals (provide carbohydrates and proteins) as well as fruits and vegetables (which contain fibre and vitamins). The NH Hoteles breakfast includes a wide and varied supply of these three main food groups. In addition, it has a selection of NH Annual Report 2006 69 Commercial Agreements During 2006 NH Hoteles signed numerous commercial agreements that provide access to new communication paths, a considerable increase in the market share and strengthen the presence of NH Hoteles as an international company. These associations are laid out within the strategic plans, who is seeking new alliances in its main target markets and on the other hand, allowing to strengthen the relationship with frequent customers. Airlines Among the most prominent agreements is the “AAdvantage” loyalty program of American Airlines, whereby customers who stay at the NH hotels will earn "miles" that can be exchanged for airline tickets, stays at hotels and promotions designed exclusively for the members of the program. “AAdvantage” is the frequent flyer program of American Airlines, one of the oldest and most influential on the international stage. Since July 2006, NH Hoteles has become part of the “Spanair Plus+” loyalty program. The “Spanair Plus+” loyalty program, created in 1996, currently has more than 500,000 members and offers a large number of partners, for both frequent leisure and business flyers. It is slowly positioning itself as one of the programs of choice for flyers in Europe. In addition, the chain has become part of the “Club Premier” loyalty program of Aeromexico. “Club Premier”, created in 1991, currently has more than 2 million affiliates. Finally, one year after the entry of NH Hoteles as an international partner in the "Flying Blue" program of KLM and Air France, the hotel chain is renewing its agreement by incorporating new advantages and promotions for the program members. “Flying Blue” program currently has more than 10 million members and is attempting to become the leading frequent flyer program in Europe. 70 NH Annual Report 2006 On-line Agencies NH Hoteles announced in February 2006 the new implementation of XML interface with Bookings, one of the leading European companies for online hotel reservations. The interface will allow NH Hoteles to send information automatically on rates and availability to Bookings, without the need for manual intervention. This way, Bookings generates reservations for the hotels through its extensive affiliate network and search facilities. The agreement reinforces the global exposure of NH Hoteles both inside and outside Europe. Rumbo.es, a leading on-line agency in Spain, since July 20006 has been offering the same rates that the hotel chain has available in its own direct distribution channels. This association has been possible through the development of an interface by both companies. SAVIA Amadeus, a leader in the distribution of tourist reservations and in providing technology for the Spanish travel industry, has reached an agreement with NH Hoteles whereby the hotel chain will offer its best rates on the reservation system, after adhering to its Best Available Rate program. The hotel chain thus pledges to provide the travel agencies, through the Amadeus reservation system, rates that are equal to those available through its own distribution channels. Thanks to the agreements signed with Grupo Transhotel, travel agents around the world can book a room at any NH establishment through the networks of Transhotel - Global Provider of Tourist Services. Pool of the NH Constanza Barcelona – Spain NH Annual Report 2006 71 Hotel NH Cornellá Spain 12 12 NH World NH Annual Report 2006 73 NH City & Tower Buenos Aires – Argentina At the moment, 12% of the NH Hoteles customers already belong to the NHW customer program, representing more than 20% of the business from individual customers from the chain. The repeating ratio of the NHW members, i.e. the number of times that a customer goes to a NH Hoteles establishment, is 2.5 times that of the average customer of the company. In addition, the average billing of a NHW customer is 30% higher than that of the average customer. More than half of the NHW members have remained active over the last year, especially in the Internet environment. Furthermore, the NHW program includes by customers of nearly 30 different nationalities, with higher percentages of Spanish, German and Dutch customers, with mainly customers in the first years of their professional life (20-40 years). 74 Currently the successful customer program of NH World (NHW) exceeds 450,000 members, two and a half years after its launch in September 2004. The launching of the Club de Privilegios was launched during 2006, a new on-line environment that brings together advantages for NHW members, with alliances with top brands that offer them exclusive benefits, prize draws, invitations to events or exclusive promotions. The most relevant customer segmenting programs already available are: customers, NH Hoteles shareholders, public officers, journalists and sport clubs, not to mention the NH Hoteles program for employees, who make up 10,000 people. Nearly 300 companies and associations are members of the NHW program, associated with its corporate agreements with NH Hoteles, which generate significant billing increases, both in the professional and leisure categories. NH Annual Report 2006 NH Annual Report 2006 75 NH Santo Stefano Turin – Italy 13 13 Brand awardness NH Annual Report 2006 77 NH Hoteles is already one of the most recognised brands in Europe. In line with the European expansion carried out during the last 5 years by the chain to position itself among the main urban hotel chains, the visibility of the firm has not stopped growing until it has become an indisputable reference company within the hotel industry. A reference company in the European hotel sector The data collected by Ikerfel analyses the movement of main indicators regarding brand recognition over the last three years. In this period, the growth of NH Hoteles has been spectacular in every sense, reflecting not only the growing presence of the firm in the European market, but also its notoriety, vivacity and dynamic nature, which have made it into one of the most recognized national companies outside of Spain. According to a full study carried out by the Ikerfel market research and strategic marketing institute, in which the brand position has been analysed in the European countries where it was present during the year 2003 (Spain, Germany, Austria, The Netherlands and Belgium), the users demonstrated a clear knowledge of the firm. For Germany, The Netherlands, Belgium and Austria, Spain is the first answer when the respondents are asked for other countries where they believe NH Hoteles is present, which shows the brand’s identification with its market of origin. Despite the fact that the European expansion of NH Hoteles began just six years ago, at this time the visibility of the firm has increased remarkably. The suggested recognition of the brand, which measures its ability to be identified amongst a broad list of hotel market companies, reflects this situation. All through in Spain and in Germany, Austria, Belgium and The Netherlands, this indicator is above 50% of the population. If in Spain it is already 97%, in Holland it has gone from 44% to 70% in just three years, and in Germany it reaches 68%, while at the end of 2003 it was only 26%. On the other hand, a large majority of those consulted are capable of recognising the company from among the rest of the hotel sector competitors, placing it among the first ones mentioned when asked about a hotel company located in their country. Total brand recognition (list of suggested brands) Country Percentage Spain Germany Austria Belgium The Netherlands 2003 2006 2003 2006 2003 2006 2003 2006 2003 2006 93% 97% 26% 68% 33% 53% 26% 54% 44% 70% As far as the spontaneous preference of the brand, i.e. the percentage of the population that names NH Hoteles as the first company when asked to list hotel sector companies in their country, the Group is among the first three options in all countries analysed. NH is the leader in Spain (43%) and in Germany (10%), and is the third most named option in Austria (5%), Belgium (6%) and The Netherlands (10%). It is worth noting the increase experienced in Germany and Belgium, where this indicator was only 3% and 2%, respectively, at the end of 2003. The results from this section show the current status of the company and its ability to be present in the minds of the users. For them, its visibility is above that of local companies and international chains with a long tradition. First top of mind mentioned Country Percentage 78 NH Annual Report 2006 Spain Germany Austria Belgium The Netherlands 2003 2006 2003 2006 2003 2006 2003 2006 2003 2006 39% 43% 3% 10% 3% 5% 2% 6% 7% 10% The results regarding the brand awareness, which indicates the percentage of respondents who name NH Hoteles spontaneously among their first options, are also very positive for the company. In Spain, NH Hoteles is the first option in the mind of the consumers (70%), way above Sol Meliá (56%) and AC Hoteles (26%), which hold the following places in this section. In The Netherlands, NH Hoteles is already holds the third place with 22%, only exceeded by large brands such as the Hilton and the local Golden Tulip, although it beats the percentage of chains such as Novotel, Mercure or Holiday Inn. The growth experienced in Belgium, where it has gone from 13% to 29% is also noteworthy, as well as the brand growth in Germany, where it is recognised spontaneously by 25% of the market. Brand awareness (spontaneous mention of the NH Hoteles brand among others) Country Percentage Spain Germany Austria Belgium The Netherlands 2003 2006 2003 2006 2003 2006 2003 2006 2003 2006 72% 70% 7% 25% 6% 14% 13% 29% 16% 22% The loyalty index, which measures the percentage of people that by preference stay at the establishments of a hotel chain that they have used previously - and choose that option before any other illustrates the ability of NH Hoteles to satisfy its customers and retain them against the offers from the competition. The chain holds the first place in this ranking in Spain (43%). NH Hoteles is also the leader in The Netherlands (58%) and Germany (32%) where the market is very fragmented. In Belgium it is second, with 50% and holds the fifth place in Austria with a significant 31%. Brand loyalty Country Percentage Spain Germany Austria Belgium The Netherlands 43% 32% 31% 50% 58% PAN-EUROPEAN INDEX OF BRAND SELECTION PREFERENCE (SEGMENT: BUSINESS) 30 25 20 • • • • • • 26% Hilton 15% Marriot 15% Sheraton/Arabella 10% NH Hoteles 9% Holiday Inn 7% Le Meridien 15 10 5 0 Davis Cup: the best platform for our brand In 2006, the International Tennis Federation and NH Hoteles signed the extension of the sponsorship agreement between the international hotel chain and the Davis Cup until 2009. NH Hoteles has been the sponsor of the Davis Cup since 2004 and since then the annual competition has been an excellent presentation of our company to more than 130 countries. Pan-European*: Belgium, Germany, The Netherlands, United Kingdom, Italy, Spain and France Source: Business Development Research Counsuelors, Pan-European Guest Survey, 2006 NH Annual Report 2006 79 Hotel Almenara Sotogrande - San Roque - Cadiz – Spain 14 14 Sotogrande NH Annual Report 2006 81 La Marina de Sotogrande San Roque - Cadiz – Spain 2006 has been fundamental for the consolidation of the tourist residential project of Sotogrande for several reasons: • In November the approval of the Urban Development Agreement was given by the Municipality of San Roque (Cadiz – Spain), which regulates the organisation of all Sotogrande’s urban development, from which the company holds its name and includes the most substantial part of its assets to this day. The approval of this agreement has been a fundamental milestone for the company, since it consolidates the quality residential development model that defines Sotogrande. URBAN DEVELOPMENT AGREEMENT La Reserva Sotogrande Beach Almenara TOTAL 82 NH Annual Report 2006 Area moved (m2) Building area (m2) Properties 1,440,662 504,873 2,083 84,480 39,465 160 342,144 136,444 762 1,867,286 680,782 3,005 Los Alcornoques Project Almenara Golf Course Sotogrande - San Roque - Cadiz – Spain NH Annual Report 2006 83 Los Alcornoques Project Sotogrande - San Roque - Cadiz – Spain • A significant restructuring of assets was carried out, underscoring the tourist/residential focus of the company. Only hotel assets were transferred to the head organisation, specifically the two Marbella hotels and the Casino de Madrid. 75% of the Retamares golf course was sold and significant shares of two residential/tourist projects were incorporated into Cap Cana (Dominican Republic) and the Isla Blanca (Mexico). • Ponte Gadea increased its collaboration by becoming a partner of Sotogrande in the development of Los Alcornoques, an ambitious residential project of 23 hectares, which will include the concepts of health promotion that are promoted by Sotogrande Health Experience. • As far as the operations are concerned, the sales have resisted the toughening of the market conditions at Costa del Sol and Sotogrande has finally displaced Marbella as the leader of residential tourism in the area. In addition, the opening of the Airport of Gibraltar to national and international traffic, located 20 minutes from the urban development, has introduced a new dynamic element into the area. The 6 remaining units from the Ribera del Obispo project were sold, with an average-price of € 1.1 M and the sales of the plots at La Reserva, Ribera del Marlin and Los Cortijos de la Reserva did well, with sales of 80 units and with an average price-raise of 12% throughout the year. 84 NH Annual Report 2006 • The organisation continued its growth until adapting its vocation as a provider of specialized services in residential/tourist projects at different locations and with partners. In this line and following the launching of Sotogrande Golf Services in 2005, as a unit specialising in engineering, construction and maintenance of golf courses, during 2006 Sotogrande Marketing Services was born, specialising in the design and execution of marketing concepts in the residential/tourist high-end segment. The idea of these divisions is to facilitate the transfer of knowledge and experience from Sotogrande in its areas of specialisation to the new projects developed with partners, and on occasions to prestigious projects of third parties. We must point out the success of the activities carried out by Sotogrande Golf Services during 2006, in the Almenara and Retamares golf courses. In Almenara it carried out an in-depth remodelling of the drainage system, which allowed the finals of the Peugeot Professional Spanish Circuit to be held successfully last November, despite the strong rains. At Retamares, a complete water management system was designed and executed, which will allow the European Circuit tournament to be held during May 2007. • Finally, it is worth mentioning out the Takeover Bid that NH Hoteles made on the Sotogrande shares, which ended in December, and allowed NH Hoteles to increase its stake from 77% to 98%. Cap Cana Dominican Republic NH Annual Report 2006 85 Isla Blanca Project Riviera Maya – Mexico PROJECTS: Cap Cana (Dominican Republic) The Cap Cana complex is the most important tourist real estate project in the Caribbean, located at Punta Cana, Dominican Republic, only 10 minutes from the International Airport. It has an exclusive beach club and will be completed with six 18-hole golf courses, with one currently in use, another under construction, and three of them designed by Jack Nicklaus. Cap Cana has already inaugurated the first phase of the marina, which in the near future will have capacity for more than 500 vessels, surrounded by luxury stores and high cuisine restaurants. The following will be built at this urban development: • A luxury boutique hotel with 88 rooms and an exclusive restaurant. 86 NH Annual Report 2006 • 408 luxury beach front apartments, which will be put on sale during 2007, some of which will enjoy hotel services, through a "Rental Program" (the owners allowing the hotel to manage their apartments while they are not using them). Isla Blanca (Riviera Maya, Mexico) The project is located to the north of Cancun, 20 minutes from the International Airport. It is a peninsula with nearly 400 hectares, where there is an important natural area. Next to it, a low-density residential project will be developed with approximately 2,000 exclusive apartments and hotel spaces. The “island” counts with over 10 kilometres of Caribbean Sea beach front. La Reserva de Sotogrande San Roque - Cadiz – Spain SOTOGRANDE SHARE PRICE EVOLUTION 22 SOTOGRANDE 20 18 16 14 12 2006 2007 (until April) NH Annual Report 2006 87 15 15 Board of Directors and Management Committee NH Annual Report 2006 89 BOARD OF DIRECTORS (April 16, 2007) Chairman & CEO: GABRIELE BURGIO Non-executive Vice-Chairman: MANUEL HERRANDO Y PRAT DE LA RIBA* Members: MATÍAS AMAT ROCA RAMÓN BLANCO BALÍN JOSÉ DE NADAL CAPARÁ JULIO C. DÍAZ-FREIJO CERECEDO** IGNACIO EZQUIAGA DOMÍNGUEZ AURELIO IZQUIERDO GÓMEZ ANDRÉ MARTINEZ*** ALFONSO MERRY DEL VAL GRACIE MIGUEL RODRÍGUEZ DOMÍNGUEZ Non-Board Member Secretary: JOSÉ MARÍA MAS MILLET Non-Board Member Vice-Secretary: IGNACIO ARANGUREN GONZÁLEZ-TARRÍO * Manuel Herrando y Prat de la Riba was appointed Non-Executive Vice-Chairman of the Board of Directors on April 16, 2007. ** Julio C. Díaz-Freijo Cerecedo replaced Alfredo Fernández Durán on February 22, 2006. *** On April 16, 2007, André Martínez was appointed by the Board as a new Board Member, representing GSS III Hurricane (Morgan Stanley), to cover the vacancy left by Gary R. Garrabrant. EXECUTIVE COMMITTEE Chairman: GABRIELE BURGIO Members: MATÍAS AMAT ROCA RAMÓN BLANCO BALÍN JULIO C. DÍAZ-FREIJO CERECEDO AURELIO IZQUIERDO GÓMEZ (REPRESENTING CAJA DE AHORROS DE VALENCIA, CASTELLÓN Y ALICANTE - BANCAJA) MANUEL HERRANDO Y PRAT DE LA RIBA Secretary: JOSÉ MARÍA MAS MILLET AUDIT AND CONTROL COMMITTEE 90 Chairman: D. RAMÓN BLANCO BALÍN Members: IGNACIO EZQUIAGA DOMÍNGUEZ (REPRESENTING HOTELES PARTICIPADOS, S.L.) MIGUEL RODRÍGUEZ DOMÍNGUEZ Secretary: ROBERTO CHOLLET IBARRA NH Annual Report 2006 NOMINATION AND REMUNERATION COMMITTEE Chairman: JOSÉ DE NADAL CAPARÁ Members: MATÍAS AMAT ROCA MANUEL HERRANDO Y PRAT DE LA RIBA Secretary: JOSÉ MARÍA MAS MILLET MANAGEMENT COMMITTEE Gabriele Burgio Chairman and CEO Ignacio Aranguren Chief Strategy and Investments Officer Roberto Chollet Chief Financial Officer Gustavo Gabarda Managing Director Sotogrande Juan Mª de Mora Corporate Officer Human Resources and Corporate Responsibility Francisco Zinser Chief Operating Officer Secretary of the Management Committee: Fernanda Matoses NH Annual Report 2006 91 Nhube of the NH Numancia Barcelona - Spain 16 16 Corporate Governance NH Informe Anual 2006 93 (*) Through: LISTED PUBLIC LIMITED COMPANIES ISSUING COMPANY’S IDENTIFYING DATA FINANCIAL YEAR 2006 Tax Identification Code: A28027944 Corporate Name: NH HOTELES S.A. Registered Office: SANTA ENGRACIA 120 MADRID 28003 SPAIN Name or Corporate Name of the direct owner of the stake Number of direct shares % of corporate capital CORPORACIÓN FINANCIERA CAJA DE MADRID, S.A. 5,976,645 4.542 GRUPO INVERSOR HESPERIA, S.A. 29,201,056 22.190 PONTEGADEA INVERSIONES, S.L. 12,273,585 9.327 SOCIEDAD DE PROMOCIÓN Y PARTICIPACIÓN EMPRESARIAL CAJA MADRID 7,232,265 5.496 Total: 54,683,551 Indicate the most significant movements in the shareholder structure during the financial year: MODEL CORPORATE GOVERNANCE ANNUAL REPORT OF LISTED PUBLIC LIMITED COMPANIES For a better understanding of the model and subsequent preparation thereof, the instructions provided at the end of this report for completing the form should be read. Shareholder’s Name or Corporate Name Date of transaction Description of transaction GRUPO INVERSOR HESPERIA, S.A. 16-06-2006 20% of corporate capital exceeded SOCIEDAD DE PROMOCIÓN Y PARTICIPACIÓN EMPRESARIAL CAJA MADRID 26-12-2006 5% of corporate capital exceeded A.3. Complete the following charts on the members of the company’s board A. OWNERSHIP STRUCTURE of directors who own shares in the company: A.1. Complete the following chart on the company’s corporate capital: Date of last modification Corporate capital (€) Number of shares 26-12-2006 263,196,974.00 131,598,487 If there are different classes of shares, this should be indicated in the following chart: Class Number of shares Unit face value A.2. Give details of the direct and indirect shareholders of significant stakes at the closing of the financial year, excluding board members: 94 Director’s Name Date of first or Corporate appointment Name Date of last appointment Number of direct shares Number of indirect shares (*) Total % of corporate capital MATÍAS AMAT ROCA 23-07-2004 28-04-2005 50 0 0.000 RAMÓN 15-01-1993 BLANCO BALÍN 05-05-2006 23,800 13,400 0.028 GABRIELE BURGIO 13-01-1993 05-05-2006 1,317,770 0 1.001 CAJA DE AHORROS DE VALENCIA, CASTELLÓN Y ALICANTE (BANCAJA) 17-06-2002 27-06-2004 7,319,698 0 5.562 JOSÉ DE 08-05-1997 NADAL CAPARÁ 05-05-2006 10,000 0 0.008 JULIO C. DÍAZ-FREIJO CERECEDO 22-02-2006 05-05-2006 100 0 0.000 MANUEL HERRANDO Y PRAT DE LA RIBA 13-07-1992 05-05-2006 4,027 0 0.003 HOTELES PARTICIPADOS, S.L. 29-04-2004 29-04-2004 6,639,194 0 5.045 18-03-1997 ALFONSO MERRY DEL VAL GRACIE 05-05-2006 100 0 0.000 29-04-2004 29-04-2004 3,000 0 0.002 Shareholder’s Name or Corporate Name Number of direct shares Number of indirect Total % of shares (*) corporate capital CAJA DE AHORROS Y MONTE DE PIEDAD DE GIPUZKOA Y SAN SEBASTIÁN 6,700,000 0 CAJA DE AHORROS Y MONTE DE PIEDAD DE MADRID 0 13,208,910 10.037 CAJA DE AHORROS Y MONTE DE PIEDAD DE ZARAGOZA, ARAGÓN Y RIOJA (IBERCAJA) 5,978,782 0 4.543 JOSÉ ANTONIO CASTRO SOUSA 0 29,201,056 22.190 CORPORACIÓN FINANCIERA CAJA DE MADRID, S.A. 5,976,645 0 4.542 GRUPO INVERSOR HESPERIA, S.A. 29,201,056 0 22.190 AMANCIO ORTEGA GAONA 0 12,273,585 9.327 PONTEGADEA INVERSIONES, S.L. 12,273,585 0 9.327 Name or Corporate Name of the direct owner of the stake SOCIEDAD DE PROMOCIÓN Y PARTICIPACIÓN EMPRESARIAL CAJA MADRID 7,232,265 0 5.496 ELENA BLANCO VILLAR 3,500 RAMÓN BLANCO VILLAR 3,500 NH Annual Report 2006 5.091 MIGUEL RODRÍGUEZ DOMÍNGUEZ (*) Through: Number of direct shares AMPARO VILLAR CANOVAS 6,400 Total: 13,400 Total % of corporate capital in possession of the Board of Directors: 11,649 Complete the following charts on those members of the company’s Board of Directors who are in possession of rights over the company’s shares: (*) Through: Name or Corporate Name of the direct owner of the stake Director’s Name or Corporate Name Number of direct option rights GABRIELE BURGIO 528,971 Number of indirect option rights Number of equivalent shares Total % of corporate capital 0 528,971 0.402 A.4. Indicate, when applicable, any relations of a family, commercial, contractual or company nature that may exist between the holders of significant stakes, to the extent that they are known by the company, except when they are of little importance or result from ordinary draft or commercial trade: Related names or corporate names Type of relationship Number of direct shares Total: Provide details of significant variations, as per the provisions of Royal Decree 377/1991, made during the financial year: Date Number of direct shares Number of indirect shares Total % of corporate capital Brief description Results obtained in the financial year from treasury stock transactions (in thousands of euros) A.5. Indicate, when applicable, any relations of a commercial, contractual or company nature that may exist between the holders of significant stakes and the company, except when they are of little importance or result from ordinary draft or commercial trade: Related names or corporate names Type of relationship Brief description A.6. Indicate any shareholders’ agreements reached between shareholders that may have been notified to the company: Intervening parties in the shareholders’ agreement % of corporate capital affected Brief description of the agreement Indicate, when applicable, agreed actions between shareholders of the company and which are known by the company: Intervening parties in the agreed action % of corporate capital affected Brief description of the agreed action In the event that there has been a change in, or severance of, such agreements or agreed actions during the financial year, this should be expressly indicated. A.7. Indicate whether or not a natural or corporate person exists which exercises or may exercise control over the company, in accordance with article 4 of Spain’s Securities Market Law: Name or corporate name Comments 4 A.9. Provide details of the conditions and term(s) of the authorization(s) of the general meeting of shareholders to the board of directors to carry out the purchases or transfers of own shares described in section A.8. The General Meeting of Shareholders held on 5th May 2006 authorized the Board of Directors, for a term of 18 months, to take as a pledge and/or to purchase, directly or indirectly, its own shares, through their purchase on an official secondary market and for a price that is neither below their nominal value nor above their quoted value at the moment of the purchase, without the face value of the purchased shares, together with that of those taken as a pledge, being able to exceed 5 per cent of the total corporate capital at any moment. The Board of Directors is expressly empowered to freely dispose of the shares purchased by virtue of the aforementioned authorization, for the purpose, as and when applicable, of complying with the commitments acquired under “Remuneration systems with the handing over of stock options” or “referenced to the stock’s quoted value”, the introduction of which in the company has been the object of the mandatory approvals. A.10. Indicate, when applicable, any legal or bylaw limitations on the exercising of voting rights and any legal limitations on the purchase or transfer of stakes in the corporate capital: In accordance with the provisions of Article 15 of the Articles of Association, each share gives the right to one vote, there being no legal or bylaw limitations on the free transfer of shares. Without prejudice to the foregoing and as established in the aforesaid Article, no shareholder, regardless of the number of shares of which it is the owner, may issue more votes than those corresponding to 10% of the issued shares with a right to vote. This limitation shall not apply in those General Meetings in which, in accordance with the list of attendees, a shareholder, whether present or represented at the Meeting, is the owner of more than 75% of the issued shares with a right to vote. For the purpose of the foregoing paragraph, companies belonging to the same group, as per the provisions of article 42 of the Commercial Code, shall have the consideration of a single shareholder. A.8. Complete the following charts on the company’s treasury stock: As at the date of the closing of the financial year: Number of direct shares Number of indirect shares (*) Total % of corporate capital 230,543 0 0.175 Taking into account the fact that the corporate capital of NH Hoteles, S.A. is made up of bearer shares, the provisions of sections 9 and following of Spain’s Securities Market Law 24/1988, of 28th July, and similar legislation shall apply for all matters relating to the transfer of shares. This is also incorporated into the Articles of Association of NH Hoteles, S.A., which, in Article 7, expressly states that “The transfer of shares and the constitution of limited real rights or any other liens and encumbrances thereon, must be the subject of an entry in the corresponding Accounting Register, as provided for in Securities Market Law”. NH Annual Report 2006 95 B.1.3. Complete the following charts on the members of the board of directors and their condition: B. THE COMPANY’S ADMINISTRATIVE STRUCTURE B.1. Board of Directors EXECUTIVE DIRECTORS B.1.1. Provide details of the maximum and minimum number of directors provided for in the Articles of Association: Maximum Number of directors 20 Minimum number of directors 5 B.1.2. Complete the following chart with the members of the board of directors: Director’s Name Representative Office on or Corporate the Board Name Date of first appointment Date of last appointment Election procedure Director’s Name or Corporate Name Committee that proposed the appointment Office on the company’s organization chart GABRIELE BURGIO BOARD OF DIRECTORS CHAIRMAN-MANAGING DIRECTOR EXTERNAL PROPRIETARY DIRECTORS Director’s Name or Corporate Name Committee that proposed the appointment Name or corporate name of the significant shareholder represented or who proposed the appointment MATÍAS AMAT ROCA DIRECTOR 23-07-2004 28-04-2005 GENERAL MEETING OF SHAREHOLDERS MATÍAS AMAT ROCA NOMINATION AND REMUNERATION COMMITTEE CORPORACIÓN FINANCIERA CAJA DE MADRID, S.A. RAMÓN BLANCO BALÍN DIRECTOR 15-01-1993 05-05-2006 G. MEETING OF SHAREHOLDERS CAJA DE AHORROS DE VALENCIA, CASTELLÓN Y ALICANTE (BANCAJA) BOARD OF DIRECTORS CAJA DE AHORROS DE VALENCIA, CASTELLÓN Y ALICANTE (BANCAJA) GABRIELE BURGIO CHAIRMAN 13-01-1993 05-05-2006 G. MEETING OF SHAREHOLDERS JULIO C. DÍAZ-FREIJO CERECEDO BOARD OF DIRECTORS PONTEGADEA INVERSIONES, S.L. HOTELES PARTICIPADOS, S.L. NOMINATION AND REMUNERATION COMMITTEE HOTELES PARTICIPADOS, S.L. CAJA DE AHORROS DE VALENCIA, CASTELLÓN Y ALICANTE (BANCAJA) AURELIO IZQUIERDO GÓMEZ DIRECTOR 17-06-2002 27-06-2004 G. MEETING OF SHAREHOLDERS EXTERNAL INDEPENDENT DIRECTORS JOSÉ DE NADAL CAPARÁ DIRECTOR 08-05-1997 05-05-2006 G. MEETING OF SHAREHOLDERS JULIO C. DÍAZ-FREIJO CERECEDO DIRECTOR 22-02-2006 05-05-2006 G. MEETING OF SHAREHOLDERS GARY GARRABRANT DIRECTOR 05-05-2006 05-05-2006 G. MEETING OF SHAREHOLDERS MANUEL HERRANDO Y PRAT DE LA RIBA DIRECTOR 13-07-1992 05-05-2006 G. MEETING OF SHAREHOLDERS HOTELES IGNACIO PARTICIPADOS, EZQUIAGA S.L. DOMÍNGUEZ DIRECTOR 29-04-2004 29-04-2004 G. MEETING OF SHAREHOLDERS ALFONSO MERRY DEL VAL GRACIE DIRECTOR 18-03-1997 05-05-2006 G. MEETING OF SHAREHOLDERS MIGUEL RODRÍGUEZ DOMÍNGUEZ DIRECTOR 29-04-2004 29-04-2004 G. MEETING OF SHAREHOLDERS Total Number of Directors: 11 Indicate the retirements/removals from the board of directors that have occurred during the period: Director’s Name or Corporate Name Termination date ALFREDO FERNÁNDEZ DURÁN 22-02-2006 LUIS FERNANDO ROMERO GARCÍA 05-05-2006 BERNARD s´JACOB 05-05-2006 Director’s Name or Corporate Name Committee that proposed the appointment Profile RAMÓN BLANCO BALÍN BOARD OF DIRECTORS BUSINESS & ECONOMICS DEGREE. TAX INSPECTOR WITH LEAVE OF ABSENCE GARY GARRABRANT BOARD OF DIRECTORS GRADUATE IN FINANCE FROM UNIVERSITY OF NOTRE DAME MANUEL HERRANDO Y PRAT DE LA RIBA BOARD OF DIRECTORS LAW DEGREE ALFONSO MERRY DEL VAL GRACIE BOARD OF DIRECTORS ECONOMICS AND COMMERCE DEGREE FROM BOCCONI UNIVERSITY OF MILAN. DOCTORATE FROM UNIVERSITY OF PAVIA. MIGUEL RODRÍGUEZ DOMÍNGUEZ NOMINATION AND REMUNERATION COMMITTEE ENTREPRENEUR OTHER EXTERNAL DIRECTORS Director’s Name or Corporate Name Committee that proposed the appointment JOSÉ DE NADAL CAPARÁ BOARD OF DIRECTORS Provide details of the reasons why they cannot be considered proprietary or independent directors: HE CANNOT BE CONSIDERED AS A PROPRIETARY DIRECTOR SINCE HE NO LONGER REPRESENTS A SIGNIFICANT SHAREHOLDER Indicate any changes that, when applicable, have occurred during the period in the type of each director: 96 NH Annual Report 2006 Director’s Name or Corporate Name Date of the change Previous status Current status JOSÉ DE NADAL CAPARÁ 25-05-2006 EXTERNAL PROPRIETARY DIRECTOR OTHER EXTERNAL DIRECTOR B.1.4. Indicate whether the classification of Directors made in the previous point coincides with the distribution provided for in the regulations of the board of directors: B.1.8. Complete the following charts relating to directors’ aggregate remuneration accrued during the financial year: a) In the company under study in this report: The composition and classification of Directors made in the previous point is respectful of and complies with the provisions of the Regulations of the Board of Directors (article 9 of the Board of Directors’ Regulations). B.1.5. Indicate, as and when applicable, the powers delegated to the managing director(s): Director’s Name or Corporate Name Brief description GABRIELE BURGIO ALL THE POWERS WHICH CORRESPOND TO THE BOARD OF DIRECTORS, EXCEPT THOSE THAT CANNOT BE DELEGATED BY LAW OR BY VIRTUE OF THE ARTICLES OF ASSOCIATION Remunerative item In thousands of euros Fixed remuneration 719 Variable remuneration 984 Per diem allowances 627 Bylaw-mandated business 0 Stock options and/or other financial instruments 262 Others 230 Total: 2,822 Other Benefits B.1.6. Identify, as and when applicable, the members of the board who hold the office of administrator or director in other companies which form part of the listed company’s group: Director’s Name or Corporate Name Corporate name of the group company Office MATÍAS AMAT ROCA SOTOGRANDE, S.A. NATURAL PERSON REPRESENTATIVE OF THE DIRECTOR PROMOCIÓN Y PARTICIPACIÓN EMPRESARIAL CAJA MADRID, S.A. In thousands of euros Payments on Account 0 Credits granted 8,305 Pension Funds or Plans: Contributions 0 Pension Funds or Plans: Obligations incurred 0 Life insurance premiums 24 Guarantees constituted by the company in favour of its directors 0 b) Resulting from the company’s directors belonging to other boards of directors and/or the top management of group companies: GABRIELE BURGIO NH ITALIA DIRECTOR Remunerative item GABRIELE BURGIO GRANDE JOLLY DIRECTOR Fixed remuneration 0 GABRIELE BURGIO NH PARTICIPATIES N.V. PRESIDENT AND DIRECTOR Variable remuneration 0 GABRIELE BURGIO NH DOMO, DISEÑO Y DECORACIÓN, S.L. JOINT ADMINISTRATOR Per diem allowances GABRIELE BURGIO JOLLY HOTELS SPA DIRECTOR GABRIELE BURGIO In thousands of euros 115 Bylaw-mandated business 0 Stock options and/or other financial instruments 0 Others 0 GRUPO FINANCIERO DE INTERMEDIACIÓN Y ESTUDIOS, S.A. NATURAL PERSON REPRESENTATIVE OF THE SOLE ADMINISTRATOR, NH HOTELES, S.A. GABRIELE BURGIO SOTOGRANDE, S.A. DIRECTOR GABRIELE BURGIO NACIONAL HISPANA HOTELES SRL DE CV DIRECTOR Payments on Account 0 GABRIELE BURGIO KRASNAPOLSKY HOTELS & RESTAURANTS, BV MEMBER OF THE SUPERVISORY BOARD Credits granted 0 MANUEL HERRANDO Y PRAT DE LA RIBA SOTOGRANDE, S.A. CHAIRMAN Pension Funds or Plans: Contributions 0 Pension Funds or Plans: Obligations incurred 0 ALFONSO MERRY DEL VAL GRACIE KRASNAPOLSKY HOTELS & RESTAURANTS, BV Life insurance premiums 0 Guarantees constituted by the company in favour of its directors 0 MEMBER OF THE SUPERVISORY BOARD B.1.7. Provide details, as and when applicable, of the company’s directors who are members of the board of directors of other companies listed in official securities markets in Spain other than its group, which have been notified to the company: Office Total: 115 Other Benefits In thousands of euros c) Total remuneration per type of director: Type of director Per company Executives Per group 2,268 15 External proprietary directors 193 15 External independent directors 287 85 Director’s Name or Corporate Name Listed company GABRIELE BURGIO GRUPO FERROVIAL, S.A. DIRECTOR Other external directors CAJA DE AHORROS DE VALENCIA, CASTELLÓN Y ALICANTE (BANCAJA) BANCO DE VALENCIA, S.A. CHAIRMAN Total: CAJA DE AHORROS DE VALENCIA, CASTELLÓN Y ALICANTE (BANCAJA) ENAGAS, S.A. DEPUTY-CHAIRMAN 74 0 2,822 115 d) In respect of the profit attributed to the holding company: Total remuneration of directors (in thousands of euros) 2,937 Total remuneration of directors as a percentage of the profit attributed to the holding company 4,170 NH Annual Report 2006 97 B.1.9. Identify the members of top management who are not at the same time executive directors and indicate the total remuneration accrued in their favour during the financial year: Name or corporate name Office JESÚS IGNACIO ARANGUREN GONZÁLEZ-TARRÍO CHIEF STRATEGIC AND INVESTMENTS OFFICER ROBERTO CHOLLET IBARRA CHIEF FINANCIAL OFFICER JUAN DE MORA NARVAEZ CORPORATE OFFICER HUMAN RESOURCES GUSTAVO GABARDA DURÁN MANAGING DIRECTOR SOTOGRANDE FERNANDA MATOSES GARCÍA-VALDÉS CORPORATE LEGAL COUNSEL FRANCISCO ALEJANDRO ZINSER CIESLIK CHIEF OPERATING OFFICER B.1.12. Indicate, as and when applicable, the identity of the members of the board who are at the same time members of the board of directors or are directors of companies which hold significant shareholdings in the listed company and/or companies within its group: Total remuneration of top management (in thousands of euros) 3,075 B.1.10. Identify in an aggregate way whether or not guarantee or protection clauses exist, for cases of dismissal or changes of control in favour of members of the top management, including the executive directors, of the company or its group. Indicate whether or not these contracts have to be notified to and/or approved by the administrative bodies of the company or its group: Number of beneficiaries Administrative body which authorizes the clauses X YES Is the General Meeting of Shareholders informed of these clauses? NO Name or Corporate Name of the significant shareholder Office MATÍAS AMAT ROCA CAJA DE AHORROS Y MONTE DE PIEDAD DE MADRID GENERAL FINANCIAL MANAGER Provide details, as and when applicable, of any relevant relations other than those contemplated in the foregoing section, of the members of the board of directors which links them to significant shareholders in the company and/or in group companies: Director’s Name or Corporate Name Name or Corporate Name of the significant shareholder Description of the relationship B.1.13. Indicate, as and when applicable, the amendments introduced in the regulations of the board of directors during the financial year. The Regulations of the Board of Directors were not amended during financial year 2006. X B.1.11. Indicate the process for establishing the remuneration of the members of the board of directors and the relevant bylaw clauses in this respect. Article 35 of the Regulations of the Board of Directors establishes that the Director shall have the right to receive the remuneration established by the Board of Directors in accordance with the legal and bylaw provisions and subject to the opinion of the Nomination and Remuneration Committee. The Board of Directors shall endeavour to ensure that the Director’s remuneration is commensurate to what is paid in the market in companies of a similar size and activity. Article 20 of the Articles of Association establishes that Directors’ remuneration shall consist of a specific annual allotment and per diem allowances for attending the meetings of the Board of Directors and its delegated and consultative Committees. The amount of the remuneration which the Company may pay to all the Directors as a whole for both concepts shall be equivalent to three per cent of the net profit obtained by the Consolidated Group during the immediately previous financial year. The establishment of the exact amount to be paid within this limit and its distribution amongst the various Directors corresponds to the Board of Directors. In addition, and irrespective of the remuneration contemplated in the foregoing paragraph, provisions exist for the establishment of remuneration systems referenced to the quoted value of the shares or that involve the awarding of shares or stock options to the Directors. For these remuneration systems to be applied, a resolution must be adopted by the General Meeting of Shareholders, which will establish the share value to be taken as the reference, the number of options, the price at which the option rights can be exercised, the term of this remuneration system and all other conditions which it deems appropriate. Likewise, and subject to prior compliance with the legal requirements, similar remuneration systems can be established for the Company’s personnel, regardless of whether or not they are directors. The remuneration as described in the foregoing sections, which results from being a member of the Board of Directors, shall be compatible with all other professional and occupational income which corresponds to the NH Annual Report 2006 Director’s Name or Corporate Name 7 Board of Directors General Meeting of Shareholders 98 Directors for whatsoever other executive or advisory functions which, as and when applicable, they may perform for the Company other than those of supervision and decision, acting as a body, corresponding to their capacity as Directors, which functions shall be subjected to whichever legal regime may be applicable. B.1.14. Indicate the procedures for the appointment, re-election, evaluation and removal of directors. Provide details of the competent bodies, the processes to be adopted and the criteria to be employed in each one of the procedures. 1. Board Member Selection Procedures Directors shall be designated by the General Meeting of Shareholders or, on a provisional basis, by the Board of Directors, in accordance with the provisions laid down in Spain’s Company Law and the Articles of Association. Proposals for the appointment of Directors submitted by the Board of Directors to the consideration of the General Meeting of Shareholders and the appointment resolutions adopted by such body by virtue of the cooption powers legally attributed to it must be in compliance with the provisions of the Board of Directors’ Regulations and must be preceded by the corresponding opinion of the Nomination and Remuneration Committee, which shall not be binding. 2. Designation of External Directors The Board of Directors’ Regulations make a special reference to the designation and appointment of external Directors, given their particularity with respect to executive Directors, as a consequence of which it is appropriate to briefly explain the basic characteristics of the designation of the aforesaid External Directors: 2.1 Proprietary Directors As far as Proprietary Directors are concerned, their appointment must fall on the persons proposed by the respective owners of significant stable shareholdings, with all other Directors having the obligation of propitiating with their vote that such appointments or proposed appointments are approved by the Board of Directors. 2.2 Independent Directors The Board of Directors and the Nomination and Remuneration Committee shall endeavour to ensure, within the scope of their respective competences, that the election of candidates to occupy the office of independent Directors falls on reputable persons of well-known competence and experience, who are willing to devote a sufficient part of their time to the Company. a.) When they reach 70 years of age. Directors in executive office shall cease to fulfil their duties when they reach 65 years of age although they can continue as Directors if so decided by the Board of Directors itself. In these cases, removal from office shall be implemented in the first meeting of the Board of Directors to take place after the General Meeting of Shareholders at which the financial statements of the year in which the Director has reached the age limit are approved. The Board of Directors may not propose or designate persons to the office of independent Director who have or have had during the last two years a stable relationship of certain relevance with the Company’s management or who are linked by family, professional or commercial reasons with any of the executive Directors or with other members of the Company’s Top Management; likewise, they must not have a stable relationship with the Proprietary Directors or with the corporations or business groups they represent. b.) When they are removed from the executive posts to which their appointment as Director was associated or when the reasons for their appointment have disappeared, it being understood that such circumstance exists in a Proprietary Director when the corporation or business group which it represents ceases to hold a significant stake in the Company’s corporate capital or when, in the case of an independent Director, it joins the executive area of the Company or of any of its subsidiary companies. In particular, the following may not be proposed or appointed as independent Directors: c.) When they are involved in any of the cases of incompatibility or prohibition legally provided for. a) Those persons who hold or have held in the last two years executive posts of the highest level within the Company; d.) Whenever they receive a serious warning by the Nomination and Remuneration Committee on the grounds of having failed to comply with any of their obligations as Directors. b) The relations, up to the fourth degree of kinship, of whoever is or has been in the last two years an executive Director or member of the Company’s Top Management; c) Persons who, directly or indirectly, have made or received relevant payments to or from the Company which could compromise their independence; d) Persons who have or have had other relations with the Company which, in the opinion of the Nomination and Remuneration Committee, could undermine their independence. 3. Re-election of Directors Proposals for the re-election of Directors which the Board of Directors decides to submit to the General Meeting must be subject to a formal preparation process, of which a report issued by the Nomination and Remuneration Committee in which the quality of work and devotion to duty of the proposed Directors during their term of office must necessarily form a part. e.) Whenever their permanence on the Board of Directors can negatively affect the credit or reputation enjoyed by the Company in the market or in any other manner can place its interests at risk. B.1.15. Indicate those cases in which directors have the obligation of resigning. Directors shall cease to hold office when the term for which they were appointed has elapsed or when the General Meeting of Shareholders adopts the corresponding resolution, making use of the attributions legally granted to it. Members of the Board of Directors must tender their resignation to the Board of Directors and shall formalize the corresponding resignation in the following cases: a.) When they reach 70 years of age. Directors in executive office shall cease to fulfil their duties when they reach 65 years of age although they can continue as Directors if so decided by the Board of Directors itself. 4. Duration of Office Directors shall hold office for a term of three years. However, Directors designated by co-option shall hold office until the date of the first meeting of the General Meeting of Shareholders. During a period of two years the Director who terminates his term of office or who for whatsoever other reason ceases to hold office may not render his services in another company with a similar or analogous corporate purpose to that of the Company or that of any of the Companies which form its Group. The Board of Directors, if it considers it appropriate, may release the outgoing Director from this obligation or shorten the period of its duration. 5. Removal of Directors Directors shall cease to hold office when the term for which they were appointed has elapsed or when the General Meeting of Shareholders adopts the corresponding resolution, making use of the attributions legally granted to it. In these cases, removal from office shall be implemented in the first meeting of the Board of Directors to take place after the General Meeting of Shareholders at which the financial statements of the year in which the Director has reached the age limit are approved. b.) When they are removed from the executive posts to which their appointment as Director was associated or when the reasons for their appointment have disappeared, it being understood that such circumstance exists in a Proprietary Director when the corporation or business group which it represents ceases to hold a significant stake in the Company’s corporate capital or when, in the case of an independent Director, it joins the executive area of the Company or of any of its subsidiary companies. c.) When they are involved in any of the cases of incompatibility or prohibition legally provided for. d.) Whenever they receive a serious warning by the Nomination and Remuneration Committee on the grounds of having failed to comply with any of their obligations as Directors. e.) Whenever their permanence on the Board of Directors can negatively affect the credit or reputation enjoyed by the Company in the market or in any other manner can place its interests at risk. Members of the Board of Directors must tender their resignation to the Board of Directors and shall formalize the corresponding resignation in the following cases: NH Annual Report 2006 99 B.1.16. Explain whether or not the function of top executive of the company falls on the office of chairman of the board of directors. When applicable, indicate the measures which have been taken to limit the risks of accumulation of powers in a single person: YES X NO B.1.17. Are reinforced majorities, other than the legal majorities, required for certain types of decision?: NO YES NO X Maximum number of years of office Article 17 of the Board of Directors’ Regulations establishes that the Executive Chairperson shall have the condition of First Executive of the Company […], with the effective direction of the Company’s business corresponding to it, always in accordance with the criteria and decisions of the Board of Directors and the General Meeting of Shareholders. Consequently, the Chairman’s decisions in all cases shall be put to and supervised by the General Meeting of Shareholders and the Board of Directors. Likewise, all resolutions and decisions of special relevance for the Company must first be submitted to the Board of Directors or corresponding control Committee, for its approval. Moreover, the adoption of certain resolutions requires the proposals and reports of the Board’s various Committees. YES B.1.21. Indicate whether or not the articles of association or the regulations of the board of directors establish a limited term of office for independent directors: X Indicate how resolutions are adopted in the Board of Directors, explaining, at least, the minimum quorum of attendance and the type of majorities for adopting resolutions: 0 B.1.22.Indicate whether or not formal processes exist for the delegation of votes in the meetings of the board of directors. If so, briefly explain. Article 22 of the Regulation of the Board of Directors establishes that Directors must personally attend Board meetings and, whenever due to exceptional circumstances they are unable to do so, they must endeavour to ensure that the representation they confer on another member of the Board shall include, as far as is possible, the appropriate instructions. These delegations can be granted by letter or by any other means which, in the Chairperson’s opinion, guarantees the delegation’s certainty and validity. Likewise, the Board of Directors may authorize the attendance of Directors via telephone or audiovisual systems, always provided that such systems enable real time interaction and intercommunication between all the attendees. B.1.23. Indicate the number of meetings held by the board of directors during the financial year. Similarly, indicate, as and when applicable, the number of times the board met without the attendance of its Chairperson: Number of Board meetings 10 Number of Board meetings without the Chairperson attending ADOPTION OF RESOLUTIONS Indicate the number of meetings held in the financial year by the various board committees: Description of the resolution Quorum Type of Majority For any type of resolution Half plus one of the members of the Board of Directors Absolute majority of the attendees B.1.18. Explain whether or not specific requirements exist, other than those relating to directors, for being appointed to the office of chairman. YES NO X Number of Executive or Delegated Committee meetings Number of Audit Committee meetings 7 Number of Nomination and Remuneration Committee meetings 4 Number of Strategy and Investment Committee meetings 0 Number of Committee meetings 0 YES NO X Identify, as and when applicable, the person(s) who has or have certified the company’s individual and consolidated annual accounts, for their formulation by the board of directors: B.1.19. Indicate whether or not the chairman has the casting vote: X 10 B.1.24. Indicate whether or not the individual and consolidated annual accounts which are submitted to the board of directors for its approval are certified beforehand: Description of the requirements YES 0 NO Name Office Subjects for which a casting vote exists Article 23 of the Articles of Association establishes that resolutions shall be adopted by an absolute majority of the Directors present at the meeting, with the vote of the Chairperson or the Vice-Chairperson who stands in for him/her being decisive. B.1.20. Indicate whether or not the articles of association or the regulations of the board of directors establish some type of limit on the age of directors: YES X NO Age limit of Chairperson 100 65 Age limit of Managing Director 65 Age limit of Directors 70 NH Annual Report 2006 B.1.25. Explain the mechanisms established by the board of directors, as and when they exist, for ensuring that the individual and consolidated accounts authorized by it are not presented to the General Meeting of Shareholders with qualifications in the audit report. Article 40.2 of the Board of Directors’ Regulations establishes that the Board of Directors must endeavour to authorize the accounts in such a way that they do not give rise to qualifications on the part of the Auditors. Nevertheless, when the Board of Directors considers that it must maintain its criterion, it shall publicly explain the content and scope of the discrepancies. B.1.26. Provide details of the measures adopted so that the information disclosed to the securities markets is transmitted in a fair and symmetrical manner. Article 39 of the Regulations of the Board of Directors of NH Hoteles, S.A. includes all aspects relating to the listed company’s relationship with the Securities Markets. In this connection, it states that “The Board of Directors shall discharge as many functions as may be imposed on it by virtue of the Company’s category as a company that issues listed securities. In particular, the Board of Directors shall discharge, in the manner laid down in this Regulation, the following specific functions in relation to the Securities Market: a) Supervision of regular financial information made available to the public. b) The performance of all the activities and the adoption of all the measures that may be necessary to guarantee the Company’s transparency before the financial markets, reporting to them, in particular, on all events, decisions and circumstances that may be of importance to the share price. c) The performance of all the activities and the adoption of all the measures that may be necessary for the correct formation of the Company’s share prices and, when applicable, those of its subsidiaries, particularly avoiding manipulations and the abuse of insider information”. Lastly, the aforesaid Article establishes that the Board of Directors shall adopt the necessary measures to guarantee that the quarterly, half-yearly and any other financial information which it is deemed prudent to make available to the markets shall be prepared in accordance with the same principles, criteria and professional practices as those with which the Annual Accounts are prepared and shall enjoy the same reliability as the latter. To this end, such information shall be reviewed by the Audit and Control Committee. In addition, the Board of Directors shall at all times enforce the due safeguarding of the data and information relating to the issued shares, without prejudice to its duty of notification and collaboration with the legal and administrative authorities, preventing such data and information from being the object of abusive or unfair use, reporting those cases in which this has occurred and immediately adopting the necessary measures within their scope to prevent, avoid and, when applicable, correct any consequences that may result. Additionally, all relevant information of interest to the Securities Markets is centralized in the Financial Department which, through its Manager, sends it on a regular basis as a Significant Event to the Securities Markets. Finally it should be pointed out that article 25.b. 4 of the Board of Directors Regulation includes the following as one of the powers attributed to this Committee: “to know the financial information process and internal control systems”. jeopardise the Auditor’s independence and any others relating to the process of carrying out the audit, and to receive information and maintain with the Auditors the communications provided for in the audit legislation and technical audit standards. Lastly, in accordance with the prevailing legal requirements, the fees paid to the Company’s external auditors, including those relating to services other than audit services, are reported in the Company’s annual report. B.1.29. Indicate whether or not the firm of financial auditors performs other tasks for the company and/or its group apart from auditing activities and, if so, indicate the amount of the fees received for such tasks and the percentage they represent of the fees invoiced to the company and/or its group. YES X NO Company Group Total 31 70 101 Amount of work other than auditing work as a percentage of the total amount invoiced by the firm of auditors 17.270 9.210 10.750 Amount of work other than auditing work (in thousands of euros) B.1.30. Indicate the number of years the current firm of financial auditors has been carrying out the audit of the annual accounts of the company and/or its group uninterruptedly. Likewise, indicate the number of years the company has been audited by its current firm of financial auditors as a percentage of the total number of years in which the annual accounts have been audited: Company Group 5 5 Company Group Number of uninterrupted years Number of years audited by the current firm of financial auditors as a percentage of the total number of years the company has been audited 25,000 25,000 B.1.31. Indicate the stakes of the members of the board of directors in the capital of companies which have the same, an analogous or complementary type of activity to that which constitutes the corporate purpose of both the company and its group and which have been notified to the company. Likewise, indicate the offices or functions which they hold or exercise in these companies: B.1.27. Is the secretary of the board of directors a director?: YES NO X B.1.28. Indicate the mechanisms established by the company, when they exist, for safeguarding the independence of the auditors, financial analysts, investment banks and rating agencies. Through the Audit and Control Committee the Board of Directors has established a stable and professional relationship with the Company’s firm of Auditors, with strict respect for its independence, with a view to complying with the recommendations of the Olivencia Code in this respect. Accordingly, the Audit and Control Committee monitors those situations which may represent a risk for the independence of the Company’s external Auditors and, in particular, supervises the percentage which the fees paid by the Company represent over the total of the Auditors’ income. In this regard, article 25.3, point e.) of the Article of Associations states that one of the powers of the Audit and Control Committee is “to maintain relations with the Auditors in order to receive information on any questions that may Director’s Name or Corporate Name Name of the investee company % stake Office or functions CAJA DE AHORROS DE VALENCIA, CASTELLÓN Y ALICANTE (BANCAJA) HOTEL ALAMEDA VALENCIA, S.L. 90.000 NONE CAJA DE AHORROS DE VALENCIA, CASTELLÓN Y ALICANTE (BANCAJA) PLAYA HOTELS &RESORTS, S.L. 6.870 NONE CAJA DE AHORROS DE VALENCIA, CASTELLÓN Y ALICANTE (BANCAJA) PROHORESA 29.930 NONE CAJA DE AHORROS DE VALENCIA, CASTELLÓN Y ALICANTE (BANCAJA) IBERDROLA INMOBILIARIA, S.A. 1.000 THE INDIVIDUAL REPRESENTING BANCAJA IS ALSO A MEMBER OF IBERDROLA INMOBILIARIA, S.A. NH Annual Report 2006 101 B.1.32. Indicate whether or not a procedure exists whereby directors can receive external advice and, if so, provide details: YES X NO DETAILS OF THE PROCEDURE Article 28 of the Board of Directors’ Regulations expressly establishes that, for the purpose of being aided in the performance of their functions, external Directors voted in by a majority or any of the Board of Directors Committees, by virtue of a majority resolution of its members, can request the hiring of legal, accounting and financial advisers or other experts, with all costs for the Company’s account. The remit must necessarily relate to specific problems of certain importance and complexity which may arise during the course of their activities. The decision to hire such services must be notified to the Company’s Chairman and shall be formalized through the Secretary of the Board of Directors, except when the Board of Directors considers that such hiring is neither necessary nor advisable. B.2. Board Committees B.2.1. List the administrative bodies: Name of the body No. of members Functions DELEGATED COMMITTEE 5 COMMITTEE WITH DECISION-MAKING CAPACITY OF A GENERAL NATURE AND, CONSEQUENTLY, WITH EXPRESS DELEGATION OF ALL THE POWERS WHICH CORRESPOND TO THE BOARD OF DIRECTORS, WITH THE EXCEPTION OF THOSE WHICH CANNOT BE DELEGATED BY VIRTUE OF THE LAW OR THE ARTICLES OF ASSOCIATION. AUDIT AND CONTROL COMMITTEE 3 TO PROPOSE THE DESIGNATION OF THE FIRM OF FINANCIAL AUDITORS AND THE CONDITIONS OF ITS HIRE; TO SUPERVISE THE INTERNAL AUDIT SERVICES; TO KNOW THE FINANCIAL INFORMATION AND INTERNAL CONTROL SYSTEM PROCESSES. NOMINATION 3 AND REMUNERATION COMMITTEE B.1.33. Indicate whether or not a procedure exists whereby directors can count on the necessary information in order to prepare the meetings of the administrative bodies in sufficient time and, if so, provide details: YES X TO REPORT ON THE PROPOSALS FOR THE PPOINTMENT OF DIRECTORS AND TOP MANAGERS; TO APPROVE THE REMUNERATION RANGES OF THE COMPANY’S TOP MANAGERS; TO APPROVE STANDARD CONTRACTS FOR HIRING TOP MANAGERS; TO ESTABLISH THE REMUNERATION REGIME OF THE CHAIRMAN AND, WHEN APPLICABLE, THE MANAGING DIRECTOR; TO PROPOSE TO THE BOARD OF DIRECTORS THE REMUNERATION REGIME OF DIRECTORS; TO REPORT ON INCENTIVE PLANS; NO DETAILS OF THE PROCEDURE B.2.2. Provide details of all the board committees and their members: Article 27 of the Board of Directors’ Regulations reflects the right and duty of the members of the Board of Directors to information. In this regard, it establishes that all Directors have the power and duty to request and obtain as much information as they may deem necessary or advisable at any given moment for the good discharge of their duties. EXECUTIVE OR DELEGATED COMMITTEE Name Office GABRIELE BURGIO CHAIRMAN To this end, the widest powers are granted to the Director to enable it to acquire information on any aspect of the Company and to examine the books, records, documents and all background details of corporate transactions to the extent that this is necessary or advisable for the due discharge of office. CAJA DE AHORROS DE VALENCIA, CASTELLÓN Y ALICANTE (BANCAJA) MEMBER JOSÉ DE NADAL CAPARÁ MEMBER JULIO C. DÍAZ-FREIJO CERECEDO MEMBER This right to information also extends to the various subsidiary companies which comprise the consolidated Group, and must always be exercised in accordance with the demands of good faith. MANUEL HERRANDO Y PRAT DE LA RIBA MEMBER JOSÉ MARÍA MAS MILLET SECRETARY NON-MEMBER Likewise, and following the Olivencia and Aldama recommendations, so as not to perturb the ordinary course of the Company’s business, the exercising of the right to information shall be channelled through the Chairman or the Secretary of the Board of Directors, who shall receive the Directors’ requests and directly provide the information or facilitate contacts with the appropriate interlocutors within the appropriate sphere of the organization. B.1.34. Indicate whether or not a liability insurance policy exists in favour of the company’s directors. YES X NO AUDIT COMMITTEE Name Office RAMÓN BLANCO BALÍN CHAIRMAN ROBERTO CHOLLET IBARRA SECRETARY NON-MEMBER HOTELES PARTICIPADOS, S.L. MEMBER MIGUEL RODRÍGUEZ DOMÍNGUEZ MEMBER NOMINATION AND REMUNERATION COMMITTEE Name Office MATÍAS AMAT ROCA MEMBER JOSÉ DE NADAL CAPARÁ CHAIRMAN MANUEL HERRANDO Y PRAT DE LA RIBA MEMBER JOSÉ MARÍA MAS MILLET SECRETARY NON-MEMBER STRATEGY AND INVESTMENT COMMITTEE Name 102 NH Annual Report 2006 Office B.2.3. Provide a description of the organization and working rules and of the responsibilities attributed to each one of the board committees. 1. Delegated Committee a) How it is formed. The Delegated Committee shall be made up of the Chairman of the Board of Directors and a number of members of not less than three or more than nine Directors, designated by the Board of Directors. In the Delegated Committee’s qualitative composition, the Board of Directors shall endeavour to ensure that the external or non-executive Directors represent a majority over the executive Directors. At any event, for the appointment or renewal of the Delegated Committee’s members to be valid the vote in favour of at least two-thirds of the members of the Board of Directors shall be required. b) How it works. The Delegated Committee shall meet as many times as it is called by its Chairman. The Delegated Committee’s Chairman and Secretary shall be the persons who hold the same offices on the Board of Directors, it also being possible to appoint one or several Vice-Chairmen and one ViceSecretary. The Delegated Committee shall be validly constituted when half plus one of its members are present or represented at the meeting. 4) To know the financial information process and internal control systems; 5) To maintain relations with the firm of financial Auditors in order to receive information on those questions which may endanger the latter’s independence and any others relating to the audit process, in addition to receiving information and maintaining with the Auditors the communications provided for in the corresponding legislation and in the technical audit standards; and 6) To exercise all other powers assigned to this Committee in these Regulations or that may be assigned to it by the Board of Directors. c) How it works. The Audit and Control Committee shall meet at least once every quarter and as many times as it may be appropriate, after the prior call by its Chairman, at its own decision or in response to the request of two of its members or of the Board of Directors. The Audit and Control Committee may require the Company’s firm of financial Auditors and the person/department responsible for the internal audit to be present at its meetings. 3. Nomination and Remuneration Committee a) How it is formed. The resolutions shall be adopted by the majority vote of the Directors present or represented at the meeting, with the Chairman having the casting vote in the event of a tie. The Nomination and Remuneration Committee shall be made up of a minimum of three and a maximum of five Directors. All the members of this Committee must be non-executive Directors. c) Relationship with the Board of Directors. The Chairman of the Nomination and Remuneration Committee shall be appointed by the Committee itself from amongst its members. The Delegated Committee shall accurately inform the Board of Directors of the items discussed and the decisions adopted in its meetings. 2. Audit and Control Committee b) Powers. Without prejudice to any other tasks which may be assigned to it by the Board of Directors, the Nomination and Remuneration Committee shall have the following powers: a) How it is formed. The Audit and Control Committee shall be made up of a minimum of three and a maximum of five Directors designated by the Board of Directors. The majority of this Committee’s members must be non-executive Directors. 1. To report on the proposals for the appointment of Directors and Top Managers of the Company and of its subsidiary companies; 2. To approve the remuneration ranges of the Company’s Top Managers; 3. To approve standard contracts for Top Managers; The Chairman of the Audit and Control Committee shall be nominated from amongst their non-executive Directors and must be replaced every four years, it being possible for the Chairman to be re-elected once a oneyear period has elapsed since their removal. b) Powers. Notwithstanding any other tasks that may be assigned to it by the Board of Directors, the Audit and Control Committee’s main function shall be that of supporting the Board of Directors in its supervisory functions and, in particular and as a minimum, it shall have the following powers: 1) To report at the General Meeting of Shareholders, through its Chairman, on the questions raised by the shareholders on the subjects that fall within the Committee’s authority; 2) To propose to the Board of Directors, for submission to the General Meeting of Shareholders, the designation of the firm of financial Auditors to which article 204 of Spain’s Company Law refers, and, when applicable, the conditions of their hire, the scope of their professional remit and the revocation or renewal of their appointment; 4. To establish the remuneration regime of the Chairman and, when applicable, the Managing Director. 5. To propose to the Board of Directors the remuneration regime of the Directors and to review it on a regular basis in order to guarantee its adaptation to the duties discharged by such Directors, in accordance with the provisions of article 35 of these Regulations; 6. To report on incentive plans; 7. To carry out an annual examination of the remuneration policy of Directors and Top Managers; 8. To report on the appointment proposals of the members of the Delegated Committee and of all the other Board Committees; 9. To draw up and keep a record of situations of the Company’s Directors and Top Managers; and 10. To exercise all other powers assigned to this Committee in these Regulations. 3) To supervise the internal audit services; NH Annual Report 2006 103 Of all the duties discharged by the Nomination and Remuneration Committee, it must inform the Board of Directors accordingly at the first meeting held by the latter, at any event making available to such Board of Directors the corresponding documentation so that it has knowledge of such activities for the exercising of its powers. B.2.7. Indicate whether or not the executive committee’s composition reflects the participation in the board of directors of the different directors on the basis of their condition: YES X NO c) How it works If negative, explain the executive committee’s composition The Nomination and Remuneration Committee shall meet as many times as may be deemed appropriate by the Chairman or when so requested by two of its members or the Board of Directors. At any event, the working rules of each and every one of the Committees are available on the Company’s web site. B.2.4. Indicate, as and when applicable, the advisory and consultation powers and, when applicable, those of delegation of each one of the committees: Name of committee Brief description DELEGATED COMMITTEE DECISION-MAKING CAPACITY OF A GENERAL SCOPE AND, CONSEQUENTLY, WITH EXPRESS DELEGATION OF ALL THE POWERS WHICH CORRESPOND TO THE BOARD OF DIRECTORS, WITH THE EXCEPTION OF THOSE WHICH BY VIRTUE OF THE LAW OR THE ARTICLES OF ASSOCIATION CANNOT BE DELEGATED. IN ADDITION, THE BOARD OF DIRECTORS MAY ENTRUST OTHER FUNCTIONS TO THE DELEGATED COMMITTEE. AUDIT COMMITTEE NOMINATION AND REMUNERATION COMMITTEE TO ACT AS SUPPORT FOR THE BOARD OF DIRECTORS IN ITS SUPERVISORY FUNCTIONS, HAVING FOR THE PURPOSE ALL THE GRANTED POWERS BOTH BY VIRTUE OF SPAIN’S COMPANY LAW (LSA) AND THE ARTICLES OF ASSOCIATION ON THE SUBJECT OF AUDIT AND CONTROL. TO REPORT ON THE PROPOSALS FOR THE APPOINTMENT OF DIRECTORS AND TOP MANAGERS OF THE COMPANY AND OF ITS SUBSIDIARY COMPANIES; TO PROPOSE TO THE BOARD OF DIRECTORS THE REMUNERATION REGIME OF DIRECTORS AND TO REVIEW IT ON A REGULAR BASIS SO AS TO GUARANTEE ITS ADAPTATION TO THE DUTIES DISCHARGED BY SUCH DIRECTORS; TO REPORT ON INCENTIVE PLANS; TO REPORT ON THE PROPOSALS FOR THE NOMINATION OF MEMBERS OF THE DELEGATED COMMITTEE AND OF ALL THE OTHER BOARD COMMITTEES. B.2.5. Indicate, as and when applicable, the existence of regulations of the board committees, the place where they are available for consultation and any amendments introduced during the financial year. At the same time, an indication should be given as to whether or not an annual report has voluntarily been drawn up on the activities of each committee. The composition, working and powers of each one of the Committees are set down in the Regulations of the Board of Directors, it having been considered neither appropriate nor necessary to develop them in greater detail in additional regulations. The aforesaid Regulations of the Board of Directors are available for consultation in the web site of NH Hoteles, S.A. The Audit and Control Committee draws up Annual Reports on its activities, which are published in the Report. B.2.6. In the event of the existence of an executive committee, explain the degree of delegation and the autonomy it enjoys in the discharge of its duties, for the adoption of resolutions on the company’s management and administration. All the powers which correspond to the Board of Directors have been delegated to the Delegated Committee, with the exception of those which, by virtue of the law or the Articles of Association, cannot be delegated. 104 NH Annual Report 2006 B.2.8. In the event of the existence of a nomination committee, indicate whether or not all its members are external directors: YES X NO C. RELATED-PARTY TRANSACTIONS C.1. Provide details of any relevant transactions which represent a transfer of resources or debentures between the company or a company in its group and the company’s significant shareholders: Name or Corporate Name of the significant shareholder Name or corporate Nature of the Type of name of the relationship operation company or a company in its group Amount (in thousands of euros) CAJA DE AHORROS DE VALENCIA, CASTELLÓN Y ALICANTE (BANCAJA) NH HOTELES, S.A. Contractual Guarantees 9,000 CAJA DE AHORROS DE VALENCIA, CASTELLÓN Y ALICANTE (BANCAJA) NH HOTELES, S.A. Contractual Financial agreements: other 500 CAJA DE AHORROS DE VALENCIA, CASTELLÓN Y ALICANTE (BANCAJA) NH HOTELES, S.A. Contractual Financial agreements: loans 17,219 CAJA DE AHORROS DE VALENCIA, CASTELLÓN Y ALICANTE (BANCAJA) NH HOTELES, S.A. Contractual Financial 6,000 agreements: Miscellaneous CORPORACIÓN FINANCIERA CAJA DE MADRID, S.A. NH HOTELES, S.A. Contractual Financial 23,500 agreements: Miscellaneous CORPORACIÓN FINANCIERA CAJA DE MADRID, S.A. NH HOTELES, S.A. Contractual Financial agreements: loans 30,144 CORPORACIÓN FINANCIERA CAJA DE MADRID, S.A. NH HOTELES, S.A. Contractual Financial agreements: loans 31,150 CORPORACIÓN FINANCIERA CAJA DE MADRID, S.A. SOTOGRANDE, S.A. Contractual 6,000 Financial agreements: Miscellaneous CORPORACIÓN FINANCIERA CAJA DE MADRID, S.A. NH HOTELES, S.A. Contractual Financial agreements: loans 4,465 DON AMANCIO ORTEGA GAONA NH HOTELES, S.A. Contractual Operating lease agreements 4,948 DON AMANCIO ORTEGA GAONA NH PAMPLONA, S.A. Contractual Operating lease agreements 2,354 C.2. Provide details of any relevant transactions which represent a transfer of resources or debentures between the company or a company in its group and the company’s administrators or managers: If the advantage is received in their capacity as a partner, it shall only be deemed to be proper if the principle of equal treatment of shareholders is respected. Name or corporate name of the administrators or managers Name or corporate name of the company or a company in its group Nature of the transaction Type of operation Amount (in thousands of euros) d) Directors must notify the Board of Directors of all situations of direct or indirect conflict which they may have with the Company’s interests. In the event of conflict, the affected Director shall abstain from taking part in the transaction to which the conflict refers. JESÚS IGNACIO ARANGUREN GONZÁLEZTARRÍO NH HOTELES, S.A. CONTRACTUAL Financial agreements: loans 3,437 e) Directors must abstain from taking part in votes which affect matters in which they or persons with whom they have ties are directly or indirectly interested. GABRIELE BURGIO NH HOTELES, S.A. CONTRACTUAL Financial agreements: loans 8,305 ROBERTO NH HOTELES, S.A. CHOLLET IBARRA CONTRACTUAL Financial agreements: loans 2,578 MANUEL HERRANDO Y PRAT DE LA RIBA SOTOGRANDE, S.A. CONTRACTUAL Operating lease agreements 20 FRANCISCO ALEJANDRO ZINSER CIESLIK NH HOTELES, S.A. CONTRACTUAL Financial agreements: loans 400 C.3. Provide details of any relevant transactions carried out by the company with other companies belonging to the same group, always provided that they are not eliminated in the process of drawing up consolidated financial statements and do not form part of the company’s normal trade as regards their object and conditions: Corporate name of the group company Brief description of transaction Amount (in thousands of euros) C.4. Identify, as and when applicable, any situations of conflict of interest in which the company’s directors may find themselves, as provided for in article 127 ter of Spain’s Company Law (LSA). f) No Director can carry out direct or indirect professional or commercial operations or transactions with the Company or any of its Group companies, when such transactions do not form part of the Company’s normal trade or are not carried out in market conditions, unless it informs the Board of Directors of them in advance and the latter, subject to the opinion of the Nomination and Remuneration Committee, approves the transactions with the vote in favour of at least 80% of the Directors present or represented at the meeting. g) Directors must communicate any stakes which they or persons with whom they have ties may hold in the capital of a company with the same, a similar or complementary type of activity to that which constitutes the corporate purpose, the offices they hold or functions they discharge in such company and the conducting for their own account or on behalf of others of the same, a similar or complementary type of activity to that which constitutes the corporate purpose. The Board of Directors, at the proposal of the Nomination and Remuneration Committee, shall prohibit the holding by Directors of relevant offices in companies that are competitors of the Company or of any of its Group companies. For the purpose of the provisions established in the foregoing section, persons with whom a Director has ties shall be deemed to be those persons to which article 127 ter.5 of Spain’s Company Law refers. Similarly, the Internal Code of Conduct establishes the duties and general loyalty obligations which the Company’s Directors and top management undertake to fulfil and which, in broad terms, refer to conflicts of interest, rules of conduct in connection with insider information, the circulation of relevant information and transactions involving securities. D. SYSTEMS FOR CONTROLLING RISKS C.5. Provide details of the mechanisms established to detect, establish and solve possible conflicts of interest between the company and/or its group and its directors, managers or significant shareholders. Article 32 of the Regulations of the Board of Directors lays down the mechanisms for detecting, establishing and solving possible conflicts of interest between the company and/or its group and the Directors. This article literally states that Directors when discharging their duties shall act with absolute loyalty to the Company’s corporate interests. To this end, Directors must comply with the following obligations and prohibitions: a) Directors may not use the Company’s name or invoke their condition as Administrators in order to carry out transactions for their own account or on behalf of persons with whom they have ties. b) No Director may make investments or carry out transactions linked to the Company’s property of which they may have obtained knowledge during the course of the discharge of their duties, either for their own benefit or that of persons with whom they have ties, when such transactions have been offered to the Company or it has interest in them, except when the Company has rejected them without the Director exerting any influence. c) Directors may not make use of the Company’s assets or take advantage of their position within it in order to obtain patrimonial advantages, unless they have paid an adequate consideration. D.1. General description of the risk policy of the company and/or its group, providing details of and evaluating the risks covered by the system, together with a justification of the adaptation of such systems to the profile of each type of risk. Systems for controlling the business risks of the NH Hoteles, S.A. Group activities can be classified as follows: 1. Control of financial type risks 2. Control of strategic development risks 3. Control of operational and environmental business risks 4. Other Preventive Procedures D.2. Indicate the control systems which have been established in order to evaluate, mitigate or reduce the main risks of the company or its group. 1. Systems for Controlling Financial Risks The Group controls its financial risks through the following mechanisms: 1.1 Procedure Manual: The transactions carried out by the NH Hotel Group are standardized through an internal procedures manual, which covers sales and procurement circuits, asset management, cash flow, processes for the monthly closing of accounts, etc. In addition, the rules applicable to accounting matters for all the Group’s national and foreign companies have been regulated. NH Annual Report 2006 105 1.2 Internal Audit: The work of the internal audit department is on-going and to a large extent is focussed on the identification of risk situations and the evaluation of their management. Thus, it has defined an annual audit plan, the object of which, inter alia, is to check the correct application of the established rules and procedures, not only at the level of corporate departments but also in the various hotels. 1.3 Audit Committee: Reporting directly to the Board of Directors, the Audit Committee is in charge of supervising the correct working of all the Group’s Internal Control Systems. Moreover, it analyses the main business risks and the systems which have been established for their management and control and is the body which is responsible for relations with the Group’s external auditors. 1.4 Centralised Management: Through its Economic-Financial General Management, the Group implements single and centralised management of its financing, interest rate and exchange rate policies based on nonspeculative criteria. 2. Systems for Controlling Strategic Risks 2.1 The NH Hotel Group has a team of professionals devoted to the analysis of strategic opportunities of all types. This team selects the alternatives that are most in line with the Group’s global strategy and submits them to the Management Committee and, subsequently, to the Delegated Committee and Board of Directors. 2.2 The Group has identified a series of employees who, in each acquisition, constitute an Integration Committee, for the purpose of homogenising policies and procedures in the main critical areas (human resources, information systems, commercial and marketing management, etc.). 4.3 Risk Map Through its Audit Committee the NH Hotel Group has drawn up a risk map, which includes a wide range of up to 14 types of risk, which vary from future income commitments to the status of the hotels’ operating licences, passing through the commitment of financial covenants in loans. This plan is updated annually so as to identify possible threats to the Group which can affect its operations. D.3. In the event that some of the risks facing the company and/or its group have materialised, indicate the circumstances which have brought this about and whether or not the established control systems have worked. The risks which affect the Company and/or its Group are those that are proper of the activity conducted by the Company, and the risk control systems explained in detail in the foregoing sections have worked at all times. D.4. Indicate whether or not a committee or other governing body exists which is responsible for establishing and supervising these control devices and provide details of their functions. The Audit and Control Committee is responsible for establishing and supervising the risk control systems. In this connection, the internal Audit Department carries out a continuous activity which, to a large extent, is focussed on the identification of risk situations and the evaluation of their management. This department has defined an Annual Audit Plan the purpose of which, inter alia, is to check the correct application of the established rules and procedures, not only at the level of corporate departments but also at that of the various hotels. This department reports directly to the Audit and Control Committee. 2.3 Reporting to the Managing Committee, the Expansion Committee analyses the proposed operations. It is made up of members taken from each one of the areas for the purpose of analysing each and every one of the business opportunities and their risks presented to the Group. D.5. Identify and describe the processes for complying with the different regulations that affect the company and/or its group. 3. Systems for Controlling Business Risks and Operational and Environmental Control The Company has implemented a series of internal rules and procedures for safeguarding at all times complete compliance with the different regulations which affect the Company. 3.1 The Management Committee meets weekly for the purpose, on the one hand, of analysing the information contained in the control charts prepared by the Corporate Management Control Department for evaluating the development of operations and, on the other, for carrying out a better follow-up of the aspects of commercial evaluation obtained via the IT system. At the same time it establishes the policy to be followed in all departments of the Company and monitors the application of the market policy for the Committee. 3.2 The Group in general, and its golf activities in particular, has adopted a policy orientated towards maximum respect for the environment and for this reason it has hired the services of an environmental consultancy company for providing diagnosis and advisory services in respect of the Group’s activities. The internal Audit Department has defined an Annual Audit Plan, the purpose of which, inter alia, is to check the correct application of the established rules and procedures, not only at the level of corporate departments but also in the various hotels. This department reports directly to the Audit and Control Committee. In addition, and without prejudice to the fact that each one of the internal Departments of NH Hoteles, S.A. (Legal, Occupational Hazard Prevention, Financial, etc.) safeguards compliance with the regulations affecting its specific area, the Company at all times receives the external advice of legal, accounting and financial advisers and other experts, who guarantee fulfilment of the different regulations relating to the activity of NH Hoteles, S.A. 4. Other Preventive Procedures E. GENERAL MEETING OF SHAREHOLDERS 4.1 In the field of occupational safety The occupational health and safety plans involve the planning of those processes which are liable to cause risks and the establishment of the appropriate safety measures. The Company provides numerous training courses, for both its direct employees and those of its subcontractors. 4.2 Insurance The NH Hotel Group follows a policy of wide coverage through the signing of insurance policies relating to all the risks which may affect the Group. In addition, a policy of continuous review of coverage has been adopted. 106 NH Annual Report 2006 E.1. Indicate the quorum for the general meeting’s constitution as established in the articles of association. Describe how this differs from the regime of minimums provided for in Spain’s Company Law (LSA). For the calling of and the quorum for the constitution of both ordinary and extraordinary General Meetings of Shareholders, Article 11 of the Articles of Association of NH Hoteles, S.A. refers to the regulations established in Spain’s Company Law. E.2. Explain the regime for the adoption of corporate resolutions. Describe how it differs from the regime provided for in the LSA. Article 15 of the Articles of Association establishes that the resolutions of General Meetings of Shareholders shall be adopted by the majority of the votes of the shares present or represented. Each share grants the right to one vote. No shareholder, regardless of the number of shares held, can issue more votes than those which correspond to 10% of the issued shares with the right to vote. This limitation shall not apply to those General Meetings at which, in accordance with the list of attendees, a shareholder present or represented at the Meeting is the owner of more than 75% of the issued shares with the right to vote. The Meeting’s Chairman shall inform of this circumstance when declaring the Meeting open. With the exception of the rule referred to above (majority of votes present or represented), Article 15 also indicates that “for the amendment of this Article, the vote in favour of at least 75% of the corporate capital shall be necessary.” E.3. Describe any rights of shareholders in connection with general meetings that differ from those established in the LSA. - Right to Information: Article 9 of the Regulations of the General Meetings of Shareholders indicates that as from the publication date of the notice of the General Meeting, the Company shall place at the disposal of its shareholders the documents and information that by virtue of the law or the Articles of Association must be made available to them in connection with the various points included on the agenda, including such documents and information in the Company’s web site as from the aforesaid date. The foregoing notwithstanding, shareholders can obtain these documents and information, immediately and free of charge, at the Company’s registered office or they can request their free delivery or shipment, in the cases and in the terms and conditions as established by Law. Likewise, as from the publication date of the notice of the General Meeting and in order to facilitate shareholders’ attendance at and participation in the General Meeting, in addition to the legally enforceable documents and information, the Company shall incorporate into its web site, to the extent that they are available, all data which the Company deems suitable for the aforesaid purposes and, in particular, merely as an example, the following: a) The full text of all the proposed resolutions that are going to be submitted to the General Meeting and at that moment have been approved by the Board of Directors, without prejudice to the fact that they may be modified by such body up until the date on which the General Meeting is to be held, whenever this is legally possible. b) Information on the place where the General Meeting is to be held, describing, as and when applicable, how to get to the room. c) Procedure for obtaining attendance cards or certificate issued by the bodies legally authorized to do so. d) Means and procedures for granting representation at the General Meeting. e) If so established, means and procedures for exercising the right to vote from a distance. f) All other aspects of interest for following the meeting, such as the existence or otherwise of simultaneous translation facilities, the possible audiovisual broadcasting of the General Meeting or information in other languages. All this information may be subject to change at any moment, in which case the pertinent modifications and clarifications shall be published on the Company’s web site. The Company shall make available, sufficiently in advance, all the information and documentation referred to in section 1 and point a) of section 2 of this Article to the Comisión Nacional del Mercado de Valores (CNMV - Spain’s National Securities Market Commission) and all other applicable securities market governing bodies. Article 10 of the aforementioned Regulations also establishes all aspects relating to shareholders’ right to information and states that as from the moment at which the announcement calling the General Meeting of Shareholders is published and up to the seventh day prior to the date set for holding the Meeting at the first call, any shareholder can request in writing to the Company’s Board of Directors all the information and clarifications that they may deem necessary or can formulate in writing all the questions they deem pertinent on the items included on the Meeting’s Agenda published together with the notice or in connection with the information accessible to the public which the Company may have made available to the Comisión Nacional del Mercado de Valores after the holding of the immediately previous General Meeting of Shareholders. The Board of Directors shall have the obligation of providing in writing up until the day on which the General Meeting is held all the requested information and clarifications and of replying in writing to the questions raised. The replies to questions raised and to the requests for information shall be transmitted through the Secretary of the Board of Directors, by any of the Board Members or by any person expressly authorized to do so by the Board of Directors for the purpose. During the holding of the General Meeting, the Company’s shareholders may verbally request all the information and clarifications that they deem appropriate on the items included on the Agenda and, whenever it is not possible to satisfy the shareholder’s right at that moment, the Administrators shall have the obligation of providing such information in writing within the seven days following the General Meeting’s termination. The Administrators shall have the obligation of providing the information requested under the foregoing two paragraphs, except in those cases in which, in the Chairman’s opinion, public knowledge of the requested information would harm the Company’s interests. Refusal to provide information when the request is backed by shareholders who represent at least one-quarter of the corporate capital is improper. - Suggestions by the Shareholders. Without prejudice to the right of shareholders to request the inclusion of certain subjects on the agenda of the General Meeting which they are requesting, in those cases, terms and conditions legally provided for, shareholders may make suggestions in respect of the organization, working and powers of the General Meeting of Shareholders at any moment and subject to proof of their identity as such. - Right of Attendance. Article 12 of the Regulations lays down all aspects relating to the right of attendance. In this connection, it establishes that shareholders who are the holders of the minimum number of shares as required by the Articles of Association registered in their name in the corresponding shareholders register five days prior to the date set for the holding of the General Meeting of Shareholders have the right to attend such Meeting, always provided that they demonstrate this through the appropriate attendance card or certificate issued in their name by one of the participating entities in the body which manages such accounting record or directly by the Company itself, or in any other manner that is acceptable by virtue of the prevailing legislation. This card or certificate may be used by shareholders as a document for the granting of their representation at the General Meeting in question. Those shareholders who are not the holders of the minimum number of shares required in order to be able to attend may delegate their representation, as indicated in the next Article, to a shareholder with the right to attend the General Meeting or they may group together with other shareholders in the same situation, until they complete the necessary number of shares, having the obligation of granting their representation to one of them. The grouping together must be carried out specifically for each General Meeting and must be placed on record in whatsoever written format. The Chairman may authorize the attendance of any person it may consider suitable, although the General Meeting shall be able to revoke such authorization. NH Annual Report 2006 107 - Right of Delegation and Representation. Article 13 of the Regulations of the General Meeting of Shareholders establishes that all shareholders with the right to attend the General Meeting can be represented at the Meeting by another person even when such person is not a shareholder. The representation must be accepted by the representative and must be conferred specifically for each General Meeting, either using the printed delegation formula on the attendance card or in any other manner accepted by Law, with the exception of what is established in article 108 of Spain’s Company Law for cases of family representation and the granting of general powers. Representation may also be conferred through electronic or remote telematic means of communication provided they duly guarantee the representation attributed and the represented party’s identity. Representation granted by these means shall be accepted when the electronic document by virtue of which it is conferred includes the recognized electronic signature used by the represented party or other class of signature with adequate guarantees of authenticity and identification of the shareholder who is granting his/her representation and it complies with all other requirements established in the legal regulations in force at any given moment. The documents placing on record the delegations or representations for the General Meeting of Shareholders shall also indicate instructions on the direction of the vote, it being understood that, should no express instructions be given, the representative shall vote in favour of the proposed resolutions formulated by the Board of Directors on the items included on the Agenda. Should there be no voting instructions because the General Meeting of Shareholders is going to decide on matters that, not appearing on the agenda and, therefore, being unknown on the date of delegation, may be put to the vote at the General Meeting, the representative must issue the vote in the direction which it considers most appropriate, in fulfilment of the interests of the Company and of the represented party. This same rule shall apply when the corresponding proposal or proposals put to the decision of the General Meeting have not been formulated by the Board of Directors. legal and bylaw essential requirements and always provided that such defects have not been remedied. E.4. Indicate, as and when applicable, the measures adopted to foster the participation of shareholders in the general meetings. So as to foster the participation of shareholders in the General Meetings of Shareholders, the Company places at the disposal of its shareholders the documents and information which must be made available to them in relation to the different points included on the Agenda, including such documents and information in the Company’s web site as from the mentioned date. The foregoing notwithstanding, shareholders can obtain these documents and information, immediately and free of charge, at the Company’s registered office or they can request their free delivery or shipment, in the cases and in the terms and conditions established by Law. Likewise, as from the publication date of the notice of the General Meeting and in order to facilitate shareholders’ attendance at and participation in the General Meeting, in addition to the legally enforceable documents and information, the Company shall incorporate into its web site, to the extent that they are available, all data which the Company deems suitable for the aforesaid purposes and, in particular, merely as an example, the following: a) The full text of all the proposed resolutions that are going to be submitted to the General Meeting and at that moment have been approved by the Board of Directors, without prejudice to the fact that they may be modified by such body up until the date on which the General Meeting is to be held, whenever this is legally possible. b) Information on the place where the General Meeting is to be held, describing, as and when applicable, how to get to the room. c) Procedure for obtaining attendance cards or certificate issued by the bodies legally authorized to do so. d) Means and procedures for granting representation at the General Meeting. If the representation or delegation document fails to indicate the specific person to whom the shareholder is granting its representation, such representation shall be deemed to have been granted in favour of the Chairman of the Company’s Board of Directors or the person designated by the latter or whoever stands in for the Chairman in the chairmanship of the General Meeting of Shareholders. In those cases in which, pursuant to the provisions of article 107 of Spain’s Company Law, a public request for representation is made, the restriction on the exercising of the right to vote as established in article 114 of Spain’s Securities Market Law for cases of conflict of interests shall be applied to the Administrator who obtains such representation. Representation is always revocable. The represented party’s personal attendance at the General Meeting of Shareholders shall have the value of revocation. - Right to Vote. Shareholders present or represented at the General Meeting of Shareholders may exercise their right to vote on the proposed resolutions put to the General Meeting. The resolutions of General Meetings shall be adopted with the legally established majorities, with one vote being recognised for every share. Shareholders who are physical persons without full capacity to act and shareholders which are corporate persons shall be represented by whoever, pursuant to the Law, may exercise such representation, duly accredited. At any event, for cases not only of voluntary representation but also of legal representation, shareholders may not have more than one representative at the General Meeting of Shareholders. The Chairman of the General Meeting of Shareholders or, by its delegation, the Secretary thereof shall settle any doubts which may arise in respect of the validity and value of the documents from which the right of attendance of whatsoever shareholder at the General Meeting may derive either individually or from the grouping together of its shares with other shareholders, as well as the delegation or representation in favour of another person, endeavouring to consider as invalid or valueless only those documents which lack the minimum 108 NH Annual Report 2006 e) If so established, means and procedures for exercising the right to vote from a distance. f) All other aspects of interest for following the meeting, such as the existence or otherwise of simultaneous translation facilities, the possible audiovisual broadcasting of the General Meeting or information in other languages. As from the moment at which the announcement calling the General Meeting of Shareholders is published and up to the seventh day prior to the date set for holding the Meeting at the first call, any shareholder can request in writing to the Company’s Board of Directors all the information and clarifications that they may deem necessary or can formulate in writing all the questions they deem pertinent on the items included on the Meeting’s Agenda published together with the notice or in connection with the information accessible to the public which the Company may have made available to the Comisión Nacional del Mercado de Valores after the holding of the immediately previous General Meeting of Shareholders. The Board of Directors shall have the obligation of providing in writing up until the day on which the General Meeting is held all the requested information and clarifications and of replying in writing to the questions raised. The replies to questions raised and to the requests for information shall be transmitted through the Secretary of the Board of Directors, by any of the Board Members or by any person expressly authorized to do so by the Board of Directors for the purpose. During the holding of the General Meeting, the Company’s shareholders may verbally request all the information and clarifications that they deem appropriate on the items included on the Agenda and, whenever it is not possible to satisfy the shareholder’s right at that moment, the Administrators shall have the obligation of providing such information in writing within the seven days following the General Meeting’s termination. At any event, and in order to facilitate communication between the Company and its shareholders, a Department for Relations with Investors and Shareholders has been placed at the disposal of the shareholders, who can address themselves to the department via e-mail or telephone in order to solve any doubts they may have in connection with the Company’s corporate governance. Apart from the foregoing, NH Hoteles, S.A. maintains a web site in which it informs shareholders and investors in general of the most important highlights occurring in connection with the Company. The corporate web site includes significant documents and information on corporate governance and its purpose is to be the communications channel with shareholders, providing them with current information on all the aspects that may be relevant. The Administrators shall have the obligation of providing the information requested under the foregoing two paragraphs, except in those cases in which, in the Chairman’s opinion, public knowledge of the requested information would harm the Company’s interests, except when the request is backed by shareholders who represent at least one quarter of the corporate capital. E.5. Indicate whether or not the office of chairman of the general meeting of shareholders coincides with the office of chairman of the board of directors. As and when applicable, provide details of the measures adopted to guarantee the independence and good working of the general meeting of shareholders: YES X NO DETAILS OF THE MEASURES The Regulations of the General Meeting of Shareholders, which regulate all aspects relating to the calling, preparation and holding of the General Meeting, in addition to the rights which correspond to the shareholders, guarantee the General Meeting’s correct working. In addition, the presence of a Commissioner for Oaths is requested in order to draw up the minutes of the Meeting and discharge the duties relating to the preparation thereof, such as participation in the organization of the order in which attendees can take the floor as provided for in the Meeting and to take note of or safeguard the literal interventions which shareholders may wish to make. E.6. Indicate, as and when applicable, any modifications made during the financial year to the regulations of the general meeting of shareholders. Since being approved by the Board of Directors on 31st March 2004, the Regulations of the General Meeting of Shareholders have not undergone any modifications. E.7. Provide details of attendance at the general meetings of shareholders held in the financial year to which this report refers: DETAILS OF ATTENDANCE Date of General Meeting % physical presence % in representation % remote voting Total % 05-05-2006 40.282 18.574 0.000 58.856 E.8. Briefly indicate the resolutions adopted at the general meetings of shareholders held in the financial year to which this report refers and the percentage of votes with which each resolution was adopted. One: Examination and approval of the Annual Accounts, Management Report, and Proposed application of profit corresponding to fiscal 2005. Percentage of votes with which the resolution was adopted: 94.962% Two: Distribution of dividends charged to voluntary reserves. Percentage of votes with which the resolution was adopted: 95.280% Three: Renewal and, where applicable, appointment of Directors. Percentage of votes with which the resolution was adopted: 90.731% Five: Appointment of financial Auditor of the Company and of its consolidated Group. Percentage of votes with which the resolution was adopted: 95.280% Six: Delegation to the Board of Directors of the power to agree on a share capital increase in one or several stages under the terms and with the limitations established in art. 153 of Spain’s Company Law. Percentage of votes with which the resolution was adopted: 93.607% Seven: Authorisation for the Board of Directors to issue securities, bonds or similar that cannot be converted into shares. Percentage of votes with which the resolution was adopted: 93.648% Eight: Share capital increase by a nominal amount of 8,500,000 Euros, through issuing and circulating 4,250,000 new ordinary shares with a nominal value of two Euros each, with an issue premium of 11.50 Euros per shares, which will be fully subscribed and paid out in full through a non-monetary contribution consisting of 1,162,439 shares from Latinoamericana de Gestión Hotelera, S.A. in order to meet the consideration established for the purchase of these shares by NH Hoteles, S.A. Total elimination of the preferential subscription right. Amendment of article 5 of the Articles of Association. Delegation to the Board of Directors of the power to substitute to the Delegated Committee or any Directors the necessary powers to establish the increase conditions not envisaged in the Meeting of Shareholders agreement, take the necessary actions to enforce it and request acceptance for the quotation of new shares on the various Securities Markets. Percentage of votes with which the resolution was adopted: 95.239% Nine: Share capital increase by a nominal amount of 17,540,260 Euros, by issuing and circulating, with the possibility of incomplete subscription, of 8,770,130 new ordinary shares with a nominal value of two Euros each, with an issue premium of 11 Euros per share, which will be fully subscribed and paid up through a non-monetary contribution consisting of 8,770,130 shares from Sotogrande, S.A. (where Sotogrande, S.A. holds a share for every share owned by NH Hoteles, S.A. issued as a result of this agreement) in order to meet the consideration established for the purchase by NH Hoteles, S.A. of these shares through a Tender Offer. Total elimination of the preferential subscription right. Amendment of article 5 of the Articles of Association. Delegation to the Board of Directors of the power to substitute to the Delegated Committee or any Directors the necessary powers to establish the increase conditions not envisaged in the Meeting of Shareholders agreement, take the necessary actions to enforce it and request acceptance for the quotation of new shares on the various Securities Markets. Efficacy of the agreement conditional on authorisation from the Comisión Nacional del Mercado de Valores of a Tender Offer made by NH Hoteles, S.A. regarding the aforementioned shares owned by Sotogrande, S.A. Percentage of votes with which the resolution was adopted: 95.239% Ten: Delegation of powers to formalise, interpret, rectify and execute the resolutions adopted by the General Meeting of Shareholders. Percentage of votes with which the resolution was adopted: 95.280% E.9. Indicate, as and when applicable, the number of shares which are necessary in order to be able to attend the General Meeting of Shareholders and whether or not there are any bylaw limitations in this respect. Article 12 of the Articles of Association states that all shareholders in possession of two or more shares, which were registered in the corresponding Register five days prior to the holding of the General Meeting of Shareholders, shall have the right to attend such General Meeting. Votes on proposals regarding points of any nature contained in the agenda of the General Meeting can be delegated or exercised by the shareholder via post, e-mail or any other form of remote communication, provided that the identity of the person exercising their right to vote is duly proven, in accordance with the terms established in the Regulations of the General Meeting. Shareholders who vote remotely shall be considered as present at the Meeting for the purposes of representation. Four: Acquisition of own shares. Percentage of votes with which the resolution was adopted: 95.279% NH Annual Report 2006 109 E.10. Indicate and justify the policies followed by the company in relation to the delegation of votes in the general meeting. All shareholders with the right to attend the General Meeting can be represented at the Meeting by another person even when that person is not a shareholder. The representation must be conferred in the terms and with the scope established in Spain’s Company Law, in writing and especially for each Meeting. This restriction shall not apply when the representative is the represented party’s spouse, ancestor or descendant, nor when the latter holds a power of attorney granted in a public document to administer all of the shareholder’s equity within national territory. The representation may also be conferred through the remote means of communication that, duly proving the represented party’s and representative’s identity, has been established. In accordance with the Regulations of the General Meeting of Shareholders, and whenever this is possible as per the Articles of Association, representation may also be conferred through electronic or remote telematic means of communication provided they duly guarantee the representation attributed and the represented party’s identity. Representation granted by these means shall be accepted when the electronic document by virtue of which it is conferred includes the recognised electronic signature used by the represented party or other class of signature with adequate guarantees of authenticity and identification of the shareholder who is granting his/her representation and it complies with all other requirements established in the legal regulations in force at any given moment. The documents placing on record the delegations or representations for the General Meeting of Shareholders shall also indicate instructions on the direction of the vote, it being understood that, should no express instructions be given, the representative shall vote in favour of the proposed resolutions formulated by the Board of Directors on the items included on the Agenda. The Chairman of the General Meeting of Shareholders or, by its delegation, the Secretary thereof shall settle any doubts which may arise in respect of the validity and value of the documents from which the right of attendance of whatsoever shareholder at the General Meeting may derive either individually or from the grouping together of its shares with other shareholders, as well as the delegation or representation in favour of another person, endeavouring to consider as invalid or valueless only those documents which lack the minimum legal and bylaw essential requirements and always provided that such defects have not been remedied. In any case, article 13 of the Articles of Association expressly state that the represented party’s personal attendance at the Meeting shall have the value of revocation. F. DEGREE OF FOLLOW-UP OF CORPORATE GOVERNANCE RECOMMENDATIONS Indicate the company’s degree of compliance with existing corporate governance recommendations or, when applicable, the non-acceptance of such recommendations. In the event of not complying with any of them, explain the rules, recommendations, practices and criteria applied by the company. Until such time as the single document referred to in ORDER ECO/3722/2003 of 26th December is drawn up, the recommendations of the Olivencia and Aldama Reports should be taken as a reference for completing this section. Since the year 2000, NH HOTELES, S.A. has been including in its Annual Report a chapter devoted to Corporate Governance, with full information on the Company’s Board of Directors and Management. The Company would like to place on record that although on 19th May 2006 the Unified Code of Good Governance (the so-called “Conthe Code”) was approved, which contains 58 Recommendations, the level of compliance with said Recommendations will be analysed in the “Corporate Governance Report” for fiscal 2007 to be submitted in 2008. Until then, the level of compliance by NH HOTELES, S.A. with the recommendations for good Corporate Governance will be briefly explained in the Olivencia and Aldama reports. - Functions of the Board of Directors With the exception of the matters reserved for the General Meeting of Shareholders, the Board of Directors is the Company’s main decision-making body, with the Company’s representation and administration being entrusted to it by virtue of the law and the Articles of Association and accepting responsibility for the general supervisory function, as recommended in the Olivencia Report. To be specific, and as already indicated, the Board accepts the undertaking of exercising the following responsibilities, which cannot be delegated: a) Approval of the Company’s general strategies; b) Hiring and, when applicable, firing of the top managers of the Company and the other entities which make up the consolidated group; c) Appointment and, when applicable, removal of Administrators in the various subsidiary companies; E.11. Indicate whether or not the company has knowledge of the policy of its institutional investors of participating or otherwise in the company’s decisions: d) Identification of the Company’s main risks and implantation and monitoring of adequate information and internal control systems; YES e) Establishment of policies for information to and communication with shareholders, the markets and public opinion; NO X Describe the policy f) Fixing of the treasury stock policy within the framework that may be established by the General Meeting of Shareholders; g) Authorization of transactions between the Company and its Directors and significant shareholders which may present conflicts of interest; and E.12. Indicate the address of the company’s web site and how to access the content on corporate governance. All information of interest to shareholders, including the Corporate Governance Reports, which have been approved annually, is available at all times in the web site of NH Hoteles, S.A. at www.nh-hoteles.com, under the section “información para el accionista” [information for shareholders]. h) In general, decision on business and financial transactions of particular importance for the Company. - Composition and Independence of the Board of Directors Following the recommendations of the Olivencia and Aldama Reports, a characteristic of the Board of Directors of NH HOTELES, S.A. is that it has an ample majority of external Directors and, amongst these, a significant participation of independent Directors, always taking into account the shareholder structure and the capital represented on the Board of Directors. Likewise, the Regulations of the Board of Directors contain an article which establishes that: 110 NH Annual Report 2006 “The Board of Directors, in the exercising of its rights of co-option and proposal of appointments to the General Meeting of Shareholders, shall endeavour to ensure that in the Body’s composition external or non-executive Directors represent an ample majority over executive Directors. To this end, executive Directors shall be understood to be the Managing Director and all other Directors who, by virtue of whatsoever other title, discharge management duties within the Company or any of its subsidiary companies. Likewise, the Board of Directors shall endeavour to ensure that the majority group of external Directors includes, on the one hand, the proposals made by the holders of significant stable shareholdings in the Company’s capital (Proprietary Directors) and, on the other, professionals of recognised prestige who have no ties with the executive team or with the significant shareholders (independent Directors). So as to establish a reasonable balance between both classes of external Director and in view of the Company’s current shareholder structure, the Board of Directors shall endeavour to ensure that there is a majority of independent Directors with respect to proprietary Directors, given the Company’s current shareholder configuration, in which the portion of floating capital is considerably greater than the sum of the significant stable shareholdings represented by the proprietary Directors. Chairman of the Board and a number of members which shall be no less than three and no greater than nine Directors, designated by the Board of Directors. The Delegated Committee has a general decision-making power, and consequently all the powers which correspond to the Board of Directors have been delegated to the former, with the exception of those which, by virtue of the law or the Articles of Association, cannot be delegated. The Board of Directors may also entrust other powers to the Delegated Committee. The Delegated or Executive Committee of NH Hoteles, S.A. was constituted on 29th June, 2004 and is currently made up of 5 members plus the Secretary. - Other Committees NH HOTELES S.A. has the following sub-committees: Audit and Control Committee Nomination and Remuneration Committee Both Committees are made up of a minimum of three and a maximum of five external Directors and their working rules have been included as separate headings in the Board of Directors’ Regulations. - Information for the Board of Directors It shall be understood that the provisions of this article are without prejudice to the shareholders’ legally recognised right of proportional representation.” During fiscal 2006 the Company’s Board of Directors was made up of 11 Directors, of whom one Director was executive and eleven Directors were external (four were proprietary Directors and six were independent Directors). - Dimension of the Board of Directors The Directors have available to them specific and accurate information on all the points to be discussed in the Board Meetings. Depending on its content, this information is provided as far in advance as possible so that the Directors can prepare their interventions on the different matters. All other information which, by virtue of being insider information or for reasons of keeping it updated right up to the last moment, cannot be made available in advance is handed out at the beginning of the meeting. When following the recommendation suggesting that the number of Board Members should be that which is reasonable to guarantee its functioning and the work of each Director, the Regulations of the Board of Directors indicate that the Board shall propose to the General Meeting of Shareholders the number of Directors which, in accordance with the circumstances governing the Company at any given moment, is most adequate for guaranteeing the body’s due representativity and efficient working, without under any circumstances the proposed number exceeding twenty. - Frequency and working of Board Meetings - Deconcentration of power In these meetings the Chairman organizes the debates, endeavouring to obtain and encouraging the participation of all the Directors in the discussions. The Board of Director’s Chairman is the Company’s top Executive although, in accordance with the provisions of the Regulations of the Board of Directors, his or her actions must at all times comply with the guidelines and criteria established by the General Meeting of Shareholders, the Board of Directors and the Committees which report thereto. Similarly, all decisions or resolutions of special relevance for the Company must first be submitted to the Board of Directors or the corresponding control Committee for its approval. Moreover, the opinions and proposals of the various Board Committees are necessary for the adoption of certain resolutions. - Regulatory guarantee The Olivencia Report stresses the need to give greater importance to the figure of the Secretary of the Board of Directors, reinforcing his/her independence and stability and highlighting the function of safeguarding the formal and material legality of the Board of Directors’ activities. In accordance with the content of the Regulations of the Board of Directors, the Board of Directors ordinarily meets once every two months and, at the initiative of the Chairman, as many times as the latter may deem necessary for the Company’s good working; with the Board having held in 2006 eight ordinary meetings and one extraordinary meeting and one non-session meeting. - Appointment of Directors Following the recommendations of the Olivencia committee, the Nomination and Remuneration Committee’s duties are to report on proposals for the appointment of Directors, to establish the Directors’ remuneration regime and to review their remuneration on a regular basis so as to ensure that it is commensurate to the tasks discharged, working in a strictly transparent way. Similarly, the proposals for re-electing Directors which the Board of Directors decides to submit to the General Meeting of Shareholders must follow a formal preparation process, of which a report issued by the Nomination and Remuneration Committee, in which the quality of work and dedication to the office during the mandate of the Directors proposed for re-election must necessarily form a part. - Non-removability of external Directors In this connection, the functions of Secretary of the Board of Directors are being discharged in the Company by a Lawyer of recognized prestige who enjoys the full backing of the Board of Directors for carrying out his functions with complete independence, thereby facilitating successful Board meetings. - Board Committees - Delegated Committee Directors hold office for a term of three years, being removed from office once the term for which they were appointed has elapsed or when so decided by the General Meeting of Shareholders, making use of the powers legally granted to it. Other than in exceptional circumstances, the Board does not propose to the General Meeting the early removal of external Directors, as recommended by all good governance practices. In accordance with the provisions of article 24 of the Regulations of the Board of Directors, the Delegated Committee shall be made up of the NH Annual Report 2006 111 - Resignation from office - Duty of loyalty of significant shareholders and top management As laid down in the Regulations of the Board of Directors, Directors must tender their resignation to the Board of Directors and formalise the corresponding resignation whenever they are involved in any of the cases of incompatibility or prohibition legally provided for, whenever they receive a serious warning from the Audit and Control Committee on the grounds of failing to fulfil any of their obligations as Directors and, in particular, when the fact of their remaining on the Board can negatively affect the credit or reputation enjoyed by the Company in the market or in any other way endanger its interests. The Regulations of the Board of Directors extend to significant shareholders the duties of loyalty to the Company, officially allotting to the knowledge and authorization of the Board of Directors whatsoever transaction between the Company and any of its significant shareholders, always subject to the prior report of the Nomination and Remuneration Committee, in which the latter must analyse and evaluate the transaction from the point of view of equal treatment of shareholders and the transaction’s market conditions. - Directors’ age As proposed in the Olivencia Report, the Regulations of the Board of Directors clearly establish the age limits for Directors which consist of the obligation of Directors to tender their resignation and formalise the corresponding resignation when they reach 70 years of age. Directors who hold executive offices shall cease to discharge such functions once they reach 65 years of age although they can continue as Directors if so established by the Board of Directors itself. During fiscal 2006 no Directors reached the age limit referred to above. - Information for Directors It is the right and obligation of all Directors to obtain as much information as they may deem necessary or advisable at any given moment for the good fulfilment of their duties. To this end, the widest powers are granted to the Director to enable it to acquire information on any aspect of the Company and to examine the books, records, documents and all background details of corporate transactions to the extent that this is necessary or advisable for the due discharge of office. This right to information also extends to the various subsidiary companies which comprise the consolidated Group, and must always be exercised in accordance with the demands of good faith. Likewise, and following the Olivencia and Aldama recommendations, so as not to perturb the ordinary course of the Company’s business, the exercising of the right to information shall be channelled through the Chairman or the Secretary of the Board of Directors, who shall receive the Directors’ requests and directly provide the information or facilitate contacts with the appropriate interlocutors within the appropriate sphere of the organization. - Directors’ remuneration As established in the Regulations of the Board of Directors, it is the Nomination and Remuneration Committee which proposes, evaluates and reviews Directors’ remuneration, for which it shall endeavour to ensure that the remuneration is commensurate to what is paid in the market in companies of a similar size and activity. In respect of remuneration consisting of shares, stock options or referenced to the share’s value, the Company complies with the Aldama recommendations, as this applies exclusively to the executive Director. At the same time, the remuneration received by each member of the Board of Directors is published annually in the Report, broken down into all its concepts. Lastly, the annual Report also includes the remuneration and total cost of top management, with the necessary breakdowns. - Directors’ duty of loyalty The Regulations of the Board of Directors specifically devote a section to an extensive description of the main rights and obligations of the Directors, regulating in detail situations of conflict of interests, the use of corporate assets, the use of insider information and the exploitation, for personal benefit, of the business opportunities to which the Director has access as a consequence of its position. None of the cases referred to above occurred during fiscal 2006. 112 NH Annual Report 2006 Similarly, the Internal Code of Conduct establishes the duties and general loyalty obligations which the Company’s Directors and top management undertake to fulfil and which, in broad terms, refer to conflicts of interest, rules of conduct in connection with insider information, the circulation of relevant information and transactions involving securities. - General Meeting of Shareholders So as to facilitate and make possible the exercise by any shareholder of its right to information, the proposed resolutions which are put to the Board of Directors for its approval and the mandatory documents and reports relating thereto are make available to the shareholders, in the terms and conditions established in Spain’s Company Law, from the very moment at which the announcement of the calling of a Board meeting is published. Similarly, the Company, to the extent that it is possible, responds to the requests for information which, in connection with the items included on the Agenda of the General Meeting of Shareholders, are made by any of the shareholders either during the days immediately prior to the holding of the Meeting or during the Meeting itself, the Agenda of which expressly includes shareholders’ interventions, during which any of the shareholders present at the Meeting who so wish can intervene and whose interventions are always the object of a reply by the Company’s Chairman. As regards attendance and voting rights at the General Meeting of Shareholders, the Company, always within the framework established by the applicable prevailing legislation and the Articles of Association, does everything possible to facilitate the exercising of such rights, particularly that of shareholders’ representation at the General Meeting of Shareholders, which can be granted in favour of any person, even when that person is not a shareholder. In accordance with the requirements of Spain’s mercantile legislation, the documentation relating to the items on the Agenda is made available to all shareholders at the Company’s registered office, although shareholders also have the possibility of requesting that such information be sent to them free of charge. In addition, this same information is made available to all shareholders via the Company’s web site. - Transparency The Regulations of the Board of Directors devote several of its articles to regulating the channels through which relations between the Board of Directors and the Company’s shareholders are established so as to guarantee the greatest possible transparency in these relations. The Board of Directors of NH HOTELES, S.A., going beyond the demands of the prevailing legislation, is responsible for supplying to the markets fast, accurate and reliable information. In particular, the regular financial information on the Company, as expressly set down in the Regulations of the Board of Directors, is drawn up on the basis of the same professional principles and practices as the Annual Accounts and, prior to being circulated, is analysed by the Audit and Control Committee, in accordance with the functions attributed to that Committee. Moreover, in line with the recommendations of the Aldama Report, the Company transmits to the market all the information that may be considered relevant for investors, in a fair and symmetrical manner. Pursuant to the obligations established by the new Financial Law, the Company will communicate relevant information to the Comisión Nacional del Mercado de Valores prior to it being circulated by any other means and as soon as the fact is known or as soon as the decision has been adopted or the agreement or contract with third parties has been signed, as applicable. The Company supervises its communications of relevant information to ensure that they are at all times true, clear and complete. - Information on the subject of corporate governance Every year, NH HOTELES, S.A. has been publishing a good governance report, which is incorporated into the Report for each financial year and is included in the Company’s web site, thereby ensuring that it is general knowledge for all shareholders and investors. - Regular financial information All the regular financial information which, in addition to the annual information, is offered to the markets is drawn up on the basis of the same principles and practices as the Annual Accounts, being analysed by the Audit and Control Committee prior to being circulated. - Information via Internet Apart from the foregoing, NH Hoteles, S.A. maintains a web site in which it informs shareholders and investors in general of the most important highlights occurring in connection with the Company. The corporate web site includes significant documents and information on corporate governance and its purpose is to be the communications channel with shareholders, providing them with current information on all the aspects that may be relevant. Anybody accessing the corporate web site can display, amongst other information, the daily and historic quotation, financial information, the Regulations of the General Meeting of Shareholders and the Board of Directors, the Company’s Articles of Association, the resolutions adopted at the last General Meeting to be held and all other contents that may be of interest to shareholders and investors. - Independence of the external firm of Auditors Through the Audit and Control Committee the Board of Directors has established a stable and professional relationship with the Company’s firm of Auditors, with strict respect for its independence, with a view to complying with the recommendations of the Olivencia Code in this respect. Accordingly, the Audit and Control Committee monitors those situations which may represent a risk for the independence of the Company’s external Auditors and, in particular, supervises the percentage which the fees paid by the Company represent over the total of the Auditors’ income. Lastly, in accordance with the prevailing legal requirements, the fees paid to the Company’s external auditors, including those relating to services other than audit services, are reported in the Company’s annual report. - Accounting quality As far as is possible, the Board of Directors of NH HOTELES, S.A. endeavours to avoid the Annual Accounts formulated by the Board being presented to the General Meeting of Shareholders with reservations and qualifications in the audit report. G. OTHER INFORMATION OF INTEREST If it is considered that other relevant principles or aspects relating to corporate governance practices are applied by the company which have not been covered in this report, they should be mentioned below with and explanation of their content. Any other information, clarification or nuance relating to the foregoing sections of the report, to the extent that it is relevant and not repetitive, can be included in this section. In particular, indicate whether or not the company is subject to legislation other than Spanish legislation on the subject of corporate governance and, when applicable, include any information which it has the obligation of supplying and which differs from that required in this report. NH Annual Report 2006 113 ADDITIONAL NOTES TO CERTAIN SECTIONS OF THE REPORT: SECTION A.3.: The table in this section A.3. shows, inter alia, the number of shares and shareholding that the members of the Board of Directors of NH Hoteles, S.A. held during fiscal 2006. Mr. Gary Garrabrant: - Per diem allowance as member of the Board in 2006: €27,616.44 - Total per diem allowances: €27,616.44 The Company would like to state that the “direct option rights” to which the present section refers, which Mr. Gabriele Burgio holds and which amount to 528,971 are not option rights in the strict sense of the word since only "cash for stocks" can be exercised. Mr. Alfonso Merry del Val i Gracie: - Per diem allowance as member of the Board in 2006: €42,000 - Total per diem allowances: €42,000 POINT B: The present Report reflects the composition of the company’s Board of Directors during fiscal 2006. Mr. Luis Fernando Romero García: - Per diem allowance as member of the Board in 2006: €14,383.56 - Total per diem allowances: €14,383.56 SECTION B.1.8.: The individual amount of per diem allowances during fiscal 2006 for attendance at the meetings of the Board of Directors, Delegated Committee, Nomination and Remuneration Committee and the Audit and Control Committee is given below. This table is shown each year in the company’s Annual Report. Mr. Miguel Rodríguez Domínguez: - Per diem allowance as member of the Board in 2006: €42,000 - Per diem allowance for attending the Audit and Control Committee: €3,205.38 - Total per diem allowances: €45,205.38 Chairman of the Board and of the Delegated Committee: Mr. Gabriele Burgio: - Per diem allowance as member of the Board in 2006: €42,000 - Per diem allowance for attending the Delegated Committee: €30,000.00 - Total per diem allowances: €72,000 Directors: TOTAL: - Per diem allowance as member of the Board in 2006: €434,383.56 - Per diem allowance for attending the Delegated Committee: €147.000 - Per diem allowance for attending the Audit and Control Committee: €29,289,11 - Per diem allowance for attending the Remuneration and Nomination Committee: €15,984.20 - TOTAL PER DIEM ALLOWANCES 2006: €626,656.87 Mr. Manuel Herrando Prat y de la Riba: - Per diem allowance as member of the Board in 2006: €42,000 - Per diem allowance for attending the Delegated Committee: €30,000.00 - Per diem allowance for attending the Remuneration and Nomination Committee: €7,397.04 - Total per diem allowances: €79,397.04 SECTION B.1.8.: The Company would like to place on record that the amount relating to the “Executive Director” includes both the amount that he/she has received as member of the Board of Directors and as Executive of the company NH Hoteles, S.A. Therefore, the total remuneration received by all of the Directors as Board Members represents 1.003% of the profit that the consolidated group has gained during the fiscal year. Mr. José de Nadal Capará: - Per diem allowance as member of the Board in 2006: €42,000 - Per diem allowance for attending the Delegated Committee: €30,000.00 - Per diem allowance for attending the Remuneration and Nomination Committee: €1,849.26 - Total per diem allowances: €73,849.26 SECTION B.1.9.: The total remuneration accrued by Top Management in fiscal 2006 is broken down into the different concepts, as follows: Mr. Alfredo Fernández Durán: - Per diem allowance as member of the Board in 2006: €6,098.63 - Total per diem allowances: €6,098.63 BANCAJA (Mr. Aurelio Izquierdo Gómez): - Per diem allowance as member of the Board in 2006: €42,000 - Per diem allowance for attending the Delegated Committee: €30,000.00 - Total per diem allowances: €73,190.12 Mr. Julio César Díaz-Freijo Cerecedo: - Per diem allowance as member of the Board in 2006: €35,901.37 - Per diem allowance for attending the Delegated Committee: €27,000 - Total per diem allowances: €62,901.37 Mr. Bernard s´Jacob: - Per diem allowance as member of the Board in 2006: €14,383.56 - Per diem allowance for attending the Audit and Control Committee: €4,808.07 - Total per diem allowances: €19,191.63 HOTELES PARTICIPADOS, S.L. (Mr. Ignacio Ezquiaga Domínguez): - Per diem allowance as member of the Board in 2006: €42,000 - Per diem allowance for attending the Audit and Control Committee: €8,330.84 - Total per diem allowances: €50,330.84 Mr. Ramón Blanco Balín (Chairman of Audit and Control Committee): - Per diem allowance as member of the Board in 2006: €42,000 - Per diem allowance for attending the Audit and Control Committee: €12,944.82 - Per diem allowance for attending the Remuneration and Nomination Committee: €5,547.78 114 - Total per diem allowances: €60,492.60 Mr. Matías Amat Roca: - Total per diem allowances: €0 NH Annual Report 2006 - Fixed remuneration: €1,738,505 - Variable remuneration: €1,169,794 - Remuneration in kind: €166,655 - Total: €3,074,954 The persons taken into account for the calculation of these amounts are those indicated in SECTION B.1.9. B.1.13: Although during fiscal 2006 no amendments were made to the NH HOTELES, S.A. Board of Directors Regulation, the Company would like to place on record that at the start of 2007, the Board of Directors of NH HOTELES, S.A. introduced both amendments to the aforementioned Regulation in order to adapt it to the new Unified Code of Good Governance, approved last 19th May 2006. B.1.30.: Virtually all of the fees received by the firm of Auditors for activities other than audit work correspond to the introduction of the International Accounting Standards. E.6.: With regard to the Meeting of Shareholders Regulation, at NH Hoteles, S.A.’s Extraordinary Meeting held past 5th March 2007, the amendment of said Regulation was approved in order to bring it into line with the recommendations of the Unified Code of Good Governance. This annual corporate governance report was approved by the Company’s Board of Directors in its meeting held on 16-04-2007. Annual Report of the Audit Committee NH Annual Report 2006 115 ANNUAL REPORT OF THE AUDIT COMMITTEE 1) Duties, competence and working of the Audit Committee The main duties of the Audit and Control Committee are to support the Board of Directors in its surveillance and control duties. The most important of these duties is to ensure that generally accepted accounting principles are properly applied and to check that the internal control systems used when drawing up the individual and consolidated Annual Accounts are adequate and complete. As a result of the enactment of the new rules on corporate transparency and governance, the rules governing the Committee are now to be included in the Bylaws. Thus, Article 25 of the Bylaws, which was included in the Bylaws as a result of a decision taken by the General Meeting of Shareholders held on 28 April 2003, is now worded as follows: 2) Members of the Audit Committee In the Audit Committee’s meeting in May 2006, Bernard s’Jacob ended his term as a result of the termination of his mandate as a Director. Miguel Rodríguez Domínguez was appointed to replace him. As a result, the Audit and Control Committee now comprises the following Directors: Chairman: Member: Member: 2. The Chairperson of the Audit and Control Committee shall be appointed by the Committee itself from among its non-executive director members, and must be replaced every four years. He/she may be re-elected once again after a year has elapsed since the end of his last term. 3. The Audit and Control Committee shall have at least the following competences: a) to report, through its Chairperson, to the General Meeting of Shareholders on the issues that are raised by the shareholders regarding matters that fall within the Committee's remit; b) to propose to the Board of Directors, for submission to the General Meeting of Shareholders, the appointment of the Auditor referred to in Section 204 of the Companies Act, as well as, whenever appropriate, the terms under which the Auditor is to be contracted, the scope of his/her professional mandate and the revocation or renewal of his/her appointment; - Independent - Independent - Shareholder 3) Relations with external Auditors The Parent company of the NH Hoteles Group has been audited since 1986. The main auditors since then are listed below: Year 1. “Inside the Board of Directors, an Audit and Control Committee shall be set up - in accordance with the requirements laid down by Section 141 of the Companies Act - made up of at least three and at most five Directors appointed by the Board of Directors. The majority of the members of this Committee must be non-executive Directors. Ramón Blanco Balín Miguel Rodríguez Domínguez Ignacio Ezquiaga Dominguez Auditor 1986 Peat Marwick 1987 Peat Marwick 1988 Peat Marwick 1989 Peat Marwick 1990 Peat Marwick 1991 Peat Marwick 1992 Peat Marwick 1993 Arthur Andersen 1994 Arthur Andersen 1995 Arthur Andersen 1996 Arthur Andersen 1997 Arthur Andersen 1998 Arthur Andersen 1999 Arthur Andersen 2000 Andersen 2001 Andersen 2002 Deloitte & Touche 2003 Deloitte & Touche 2004 Deloitte & Touche 2005 Deloitte & Touche 2006 Deloitte & Touche The 2006 Consolidated Annual Accounts were audited by two renown independent firms: c) o supervise the internal auditing services; d) to be informed about the financial information process and the internal control systems; and e) to handle relations with the Auditor for receiving information regarding any issues that may put the Auditor's independence at risk, and any other issues relating to the process of auditing the accounts, as well as to receive information and keep up the communications with the Auditor provided for under audit legislation and in the technical audit standards. 4. The Committee shall meet at least once a quarter and whenever it is deemed appropriate, after being convened by the Chairperson, on his/her own decision or in response to a request made by two of the members of the Committee or of the Board of Directors. 5. The Audit and Control Committee shall have a quorum whenever at least half of its members are either present or represented; and it shall make its decisions by a majority vote of those present or represented. The Chairperson shall have a casting vote. 6. 6. The Board of Directors may develop and complete the above rules in its Regulations, in accordance with the terms of the Bylaws and the Act.” • Deloitte & Touche is the main auditor. As such, it issues the audit opinion on the Consolidated Annual Accounts. It checked the accounts of the companies in the Spain/Portugal, Mexico, MERCOSUR and Sotogrande Business Units, which account for 67% of the assets, 51% of revenues and 58% of consolidated net profit. • PriceWaterhouse Coopers audited the Netherlands/Belgium, Germany and Austria/Switzerland Business Units, which account for 32% of assets, 48% of total revenues and 41% of consolidated net profit. Deloitte & Touche (D&T) was appointed for a one-year term, as the Group's main auditor at the General Meeting of Shareholders of NH Hoteles held on 5 May 2006 and as auditor of the various Business Units listed above at their respective General Meetings of Shareholders held during the first half of 2006. That firm has been the Group's main auditor since 2002, although the partner in charge of the audit changed in 2003 and 2005. The total fees received by the firm for its auditing services for 2006 totalled 0.66 million euros (0.59 million euros in 2005). That firm was also paid fees for providing other professional services to the NH Hoteles Group totalling 0.10 million euros (0.15 million euros in 2005). PriceWaterhouse Coopers (PWC) was appointed, also for a one-year term, as auditor of the Business Unites listed above at the respective General Meetings of Shareholders held during the first half of 2006. PWC has been the auditor of the Dutch, Belgian and Swiss Companies since 1998 and of the German and Austrian Companies since 2004. Fees for audit services for 2006 totalled 0.53 million euros (0.65 million euros in 2005). In the same way as the main auditor, Price Waterhouse Coopers was paid 0.24 million euros in fees for other professional services (0.30 million euros in 2005). 116 NH Annual Report 2006 4) Content and results of the work of the Audit Committee The Audit Committee held 6 meetings in 2006 and dealt with the following issues: a) Analysing and assessing, together with the external auditors, the Financial Statements and the Notes to the Financial Statements for 2005 and 2006, checking that their audit opinion was issued under conditions of complete independence. b) Reviewing the regular public financial information prior to its being analysed and approved by the Board of Directors so that it is reliable, transparent and drafted by applying standard accounting principles and criteria. c) Monitoring the Internal Audit Plan for 2006, examining its conclusions and the implementation, whenever applicable, of any corrective measures that are needed. d) Starting the draft of the Manual on administrative/operational processes for the hotels. One of the objectives for 2007 is to draft a Manual that includes the basic administrative and operational processes for each area within the hotels. The first phase of the Manual will be developed jointly for Spain, the Netherlands and Germany. e) Updating the different types of risk to which the activities of NH Hoteles are exposed. Designing the Group’s definitive Risk Map by hiring an external consultancy to provide support to the project. f) Monitoring and completing the work which, in collaboration with the Company’s external auditors, was carried out in order to determine the final impact of the implementation of the new International Financial Reporting Standards (IFRS) on the Financial Statements of NH Hoteles, S.A. and its Consolidated Group. The main effect of the change in the accounting standards refers to asset valuations and their consequent reflection on the Group’s Equity and to the increase in financial and accounting information supplied to the market. g) Examining the Annual Corporate Governance Report, before submitting it to the Board of Directors for study and approval, with a special emphasis on the analysis of the record of situations of Directors and Managers. h) Analysing the Reports drafted by the Auditor and Independent Expert regarding the valuations used for determining the share exchange in the capital increases proposed by NH Hoteles, S.A. for the exchange of shares of Sotogrande, S.A. and Latinoamericana de Gestión Hotelera, S.A. owned by minority shareholders. 5) Priorities for 2007 The priorities of this Committee for 2007, apart from those related to the drafting and issuing of public financial information, focus on: 1. Drafting the Manual on administrative/operational processes for all the hotels. 2. Updating the risk map drafted by Group Management jointly with external advisers. 3. Analysing and monitoring the performance of the new acquisitions in Italy: Jolly Hotels and the Framon Hotel Group. 4. Monitoring the Internal Audit Plan. To conclude this report, it should be pointed out that in order to carry out all the work mentioned above, this Committee has had access, whenever it has deemed this useful, to all the outside professionals (auditors, appraisers and consultants) and members of the economic and financial departments, internal auditors and management control it has deemed necessary. NH Annual Report 2006 117 cubierta informe anual06 ing.qxd 13/6/07 09:53 Página 1 2006 Annual Report www.nh-hotels.com Santa Engracia, 120 28003 • Madrid • Spain T: +34 91 451 97 18 F: +34 91 451 97 69 Inks are based exclusively on vegetable oils with a minimum content in volatile organic compounds (VOCs). Varnish is mainly based on natural and renewable raw materials. Annual Report 06 Due to its commitment to Environmental Conservation, NH Hoteles has printed this Report on a paper manufactured with 50% pure cellulose (ECF), 40% pre-consumer selected recycled fibre and 10% post-consumer uncoloured recycled fibre.