116 ANNUAL REPORT OF THE AUDIT AND CONTROL COMMITTEE OF
NH HOTEL GROUP, S.A.
1) Functions, competencies and workings of the Audit and Control 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 in ensuring appropriate internal control of the Company, and overseeing the process of drawing up and
submitting regulated financial reporting.
On 31 March 2004, the Board of Directors approved the Regulations of the Board of Directors, which developed the provisions of the Articles
of Association governing the system, functioning and composition of the Audit and Control Committee, with various subsequent amendments
having been approved. One of the most significant changes has been caused by the entry into force of 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
and Control Committee has been given a specific legal framework regarding its functioning and powers. The provisions of the company’s Articles
of Association and the content of the Board Regulations on this matter have been appropriately amended for the purposes of adaptation to the
aforementioned legal text. In view of the above-mentioned legislative changes, the Board of Directors approved, in its meeting of 24 May 2011,
various amendments to the Regulations of the Board of Directors in order to bring it into line with said changes.
Without prejudice to the foregoing and as a consequence of the latest changes in the field of corporate governance introduced by Law 31/2014 of
3 December, amending the Corporate Enterprises Act with a view to improving corporate governance, as well as some of the Recommendations
contained in the Unified Code of Good Governance approved on 24 February 2015 by the Spanish National Securities Market Commission, the
Articles of Association and the Regulations governing the Board and the General Meeting of Shareholders will be subject to further amendments
during 2015. Among these changes, the composition and the scope of competencies of the Audit and Control Committee will have to be adapted
to the legislative provisions of the new Article 529M of the Corporate Enterprises Act.
Consequently, both the text of the Articles of Association and the rules contained in the Board Regulations govern all matters concerning the
composition, competencies and functioning of the Audit and Control Committee, which can essentially be summarised as follows:
a) Composition.
The Audit and Control Committee shall comprise a minimum of three and a maximum of five directors, appointed by the Board of Directors.
All members of the Committee must be external or non-executive directors. Furthermore, as introduced by the above mentioned Article 529M
of the Corporate Enterprises Act and which is, at the time of this report’s publication, in the process of being implemented in the internal
regulations of NH Hotel Group, S.A., two members of the Committee must be independent directors.
The members of the Audit and Control Committee, and particularly its chairman, shall be appointed by taking into account their knowledge
and experience in accounting or auditing matters, or both.
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.
As of 31 December 2014, the Audit and Control Committee was governed by the functions assigned to it both by the legislation in force and by
the Company’s Articles of Association and the Regulations of its Board of Directors. The Committee’s fundamental role is to provide the Board
of Directors with support in its oversight function and, in particular, it has at least the following competencies:
1. Report to the General Meeting of Shareholders on any matters broached within the sphere of its competence.
2. Supervise the effectiveness of the company’s internal control, internal auditing, where applicable, and risk-management systems, as well as
discussing with auditors or audit companies any significant weaknesses in the internal control system identified during audits.
3. Oversee the process of drawing up and submitting regulated financial reporting.
4. Propose the appointment of the auditors or auditing firm, in accordance with legislation applicable to the company, to the company’s
governing body so that it may be brought before the General Shareholders’ Meeting or other of the company’s equivalent bodies, depending
on its legal nature.
5. Establish suitable relationships with auditors or audit firms in order to receive information regarding any issues that may jeopardise their
independence, so that these can be examined by the committee, and any other matters related with the process of conducting financial
audits, as well as any other communications stipulated in the financial auditing legislation and audit regulations. In any event, it must receive
written confirmation on an annual basis from the auditors or auditing firms of their independence from the Company or entities related to
it either directly or indirectly, as well as information on any additional service of any kind provided to such entities by the aforementioned
auditors or by persons related to them in accordance with the provisions set forth in Law 19/1988 of 12 July on Auditing.
ANNUAL REPORT OF THE AUDIT
AND CONTROL COMMITTEE OF
NH HOTEL GROUP, S.A.
Corresponding to the 2014 financial year
