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ANNUAL REPORT OF THE AUDIT COMMITTE 1) Functions, competencies and functioning of the Audit Committee The Audit and Control Committee’s primary function is to provide the Board of Directors with support in its oversight and control functions, the most important of which consist of ensuring that generally accepted accounting standards are correctly applied and the integrity of the internal control systems used to draw up the individual and consolidated Annual Accounts is maintained. On 31 March 2004, the Board of Directors approved the Board of Directors Regulations which developed the Audit and Control Committee’s framework, the way it is run and its composition. One of the most significant changes has been caused by the entry into force of the following legislation: Law 12/2010 of 30 June, amending Law 19/1988 of 12 July, on the Auditing of Accounts, Law 24/1988 of 28 July on the Securities Market and the consolidated text of the Law on Limited Companies, approved by Royal Legislative Decree 1564/1989 of 22 December, for its adaptation to EU regulations, by virtue of which the Audit Committee has been given a specific legal framework regarding its functioning and powers, with the bylaw provisions and content of the Board Regulations on this matter having been appropriately modified for the purposes of adaptation to the aforementioned legal text. Consequently, both the text of the Articles of Association, as well as the regulations contained in the Board Regulations govern all matters concerning the composition, competencies and functioning of the Audit Committee, which can essentially be summarised as follows: a) Composition The Audit and Control Committee shall comprise at least three and at most five Directors appointed by the Board of Directors. All the members of said Committee must be external or non-executive Directors. The Audit and Control Committee’s members, and particularly its Chairman, shall be appointed on the basis of their knowledge and experience in accounting, auditing or risk management. The Chairman of the Audit and Control Committee shall be an independent director and shall be appointed from among the directors who hold neither management or executive responsibilities in the organisation nor maintain a contractual relationship other than the office to which they have been appointed. The Chairman shall be appointed from among the Committee’s members who are non-executive directors. The chairman shall be replaced every four years and may be re-elected one year after standing down from office. b) Competencies Notwithstanding any other tasks it may be entrusted with by the Board of Directors, the Audit and Control Committee’s primary function consists of providing support to the Board of Directors in its oversight functions and, more specifically, it holds at least the following competencies: 1) By means of its Chairman, to report, within the sphere of its competence, on any issues raised by shareholders at the General Shareholders’ Meeting. 2) Supervising the effectiveness of the company’s internal control, internal auditing, where applicable, and risk-management systems, as well as discussing any significant weaknesses in the internal control system, identified during audits, with auditors or audit companies. 3) To supervise the process of preparing and the integrity of financial reporting relating to the Company and, should it be the case, to the Group, reviewing compliance with regulations, correct scope of consolidation and the proper application of accounting standards. 4) To propose to the Board of Directors the appointment of the Auditor of Accounts referred to by Article 264 of the Capital Companies Act for submission to the General Shareholders’ Meeting, as well as, where appropriate, the conditions under which the Auditor’s services are engaged, the scope of their professional mandate and the revocation or renewal of their appointment. 5) Establishing suitable relationships with auditors or audit firms in order to receive information regarding any issues that may endanger their independence, so that these can be examined by the committee, as well as any other matters related with the process of conducting accounts auditing, as well as any other communications stipulated in the accounts auditing legislation and audit regulations. In any event, it shall receive written confirmation on an annual basis from the auditors of accounts or auditing firms of their independence from the Company or from any entities related to it either directly or indirectly, as well as information on any additional service of any kind whatsoever provided to such entities by the aforementioned auditors of accounts or by persons related to them in accordance with the provisions set forth in Act 19/1988 of 12 July on the Auditing of Accounts. 6) Issuing, once a year and prior to the release of the accounts auditing report, a report expressing an opinion regarding the independence of the auditors or audit firms. This report must, in all cases, make a statement regarding the provision of any services additional to those mentioned in the previous section. 7) To safeguard the independence and efficiency of the internal auditing area; to propose the recruitment, appointment, reappointment and removal of the person in charge of internal auditing; to propose said service’s budget; to receive periodic information about its activities; and to verify that senior management is aware of the conclusions and recommendations made in internal audit reports. 8) To set and oversee a mechanism that allows employees to report in confidence and, if appropriate, anonymously, any irregularities that could be potentially important, especially any financial and accounting irregularities they may notice within the company. 114 ANNUAL REPORT OF THE AUDIT COMMITTE
9) To supervise compliance and internal codes of conduct, as well as the rules of corporate governance. 10) To inform the Board about all matters connected with related-party transactions, which shall be construed as they are defined by the prevailing Capital Companies Act. 11) To inform the Board about the creation or acquisition of any equity investments in special purpose vehicles and companies registered in tax havens, as well as about any other transactions or operations of a similar nature which, due to their complexity, might negatively affect the group’s transparency. 12) To exercise any other competencies said Committee has been assigned by virtue of these Regulations or by the Board of Directors. c) Functioning The Audit and Control Committee shall meet at least once a quarter and as many times as may be necessary after being called by its Chairman at his/ her own initiative or upon the request of two of its members or of the Board of Directors. The Audit and Control Committee may require any of the Company’s employees or executives to attend its meetings, in addition to the Company’s Auditor of Accounts. 2) Composition of the Audit Committee The composition of the Audit and Control Committee fulfils the regulations laid down by the Board Regulations of NH Hoteles, S.A.,.which faithfully reflect the Recommendations of the Unified Code of Good Governance. In 2011 there was a change in the make-up of the Audit Committee, brought about by the resignation tendered by the independent director Mr Antonio Viana-Baptista, who was the Chair of the Audit and Control Committee, having designated Mr Carlos González Fernández as his replacement. After this change, the composition of the Audit Committee was as follows: Chairman: Mr Carlos Gonzalez Fernandez Members: Mr Iñaki Arratíbel Olaziregi Mr Ignacio Ezquiaga Domínguez (acting on behalf of Hoteles Participados, S.L.) Mr Juan Llopart Pérez Secretary: Mr Leopoldo González –Echenique Castellanos de Ubao 3) Relationships with External Auditors The parent company of NH Hoteles Group has been audited by well-renowned companies since 1986. Between 1986 and 1992 it was audited by Peat Marwick, and by Arthur Andersen between 1993 and 2001. It has been audited by Deloitte since 2002. The Consolidated Annual Accounts for financial year 2011 were audited by five independent firms. Deloitte is the principal auditor and, as such, issues an auditing opinion on the consolidated annual accounts. It verified the accounts of the companies which form part of the Spain (except Portugal), Italy, Germany, The Netherlands/Belgium, Austria, Switzerland,Mexico. MERCOSUR and Sotogrande Business Units, which account for 99,8% of consolidated assets and 99,5% of turnover. Deloitte was appointed as the Group’s principal auditor for a one-year period at the General Shareholders’ Meeting of NH Hoteles held on 29 June 2011 and the auditors of the different Business Units mentioned above were appointed at their respective General Shareholders’ Meetings held over the course of the first half of 2011. This firm has been the Group’s principal auditor since 2002, though changes occurred regarding the partner responsibility for the audit in 2003, 2005 and 2007. The total fees received by the firm for its professional auditing services for financial year 2011 amounted to 1.,46 million euros (1.01 million euros in 2010). PriceWaterhouseCoopers was appointed as auditor of the Dutch, Belgian and Swiss companies in 1998, of the Austrian companies in 2004 and of a Luxembourg company in 2009, having been replaced in this role by Deloitte in 2011. The companies in Portugal are audited by Batista, Costa y Asociados; the US companies are audited by McGladrey & Pullen, LLP and the Hungarian company by Ernst & Young. The total fees for the auditing services provided in financial year 2011 by all these auditing firms amounted to 0.04 million euros (0.50 million euros in 2010). The Audit Committee has received information about such issues as may have endangered the independence of the auditors and, after carefully reviewing this information, has issued a report expressing its opinion regarding their independence and the provision of services in addition to those of auditing. ANNUAL REPORT OF THE AUDIT COMMITTE 115
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Lamps which create a special atmosp
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ANNUAL REPORT 2011 CONSOLIDATED FIN
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10. INVESTMENTS VALUED USING THE EQ
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INDEPENDENT AUDITORS’ REPORT ON C
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End customers, who are even more de
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Revenue from Real Estate Activity,
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The level of consolidated net finan
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SUBSEQUENT DISCLOSURES The process
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) The following decisions: i) The a
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Mr Roberto Cibeira Moreiras - Annua
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APENDIX TO THE 2011 ANNUAL CORPORAT
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*Translation of consolidated financ
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