ETHICS AND CORPORATE GOVERNANCE

MEMBERS OF THE BOARD AND MANAGEMENT COMMITTEE

BOARD OF DIRECTORS

The Board of Directors is charged with overseeing and controlling the main decisions adopted by the Company, defining the Company’s management strategies and guidelines and establishing the bases of its corporate organization framework in order to ensure greater efficiency and transparency to shareholders and to the markets in general. At 31 December 2017, the Board of Directors is composed of the following members:

MEMBER	POSITION	CATEGORY
Alfredo Fernández Agras	Co-Chairman (Chair)	Propietary
José Antonio Castro Sousa	Co-Chairman (Vice-chair)	Propietary
Ramón Aragonés Marín	CEO	Executive
José María Cantero Montes-Jovellar	Director	Independent
María Grecna	Director	Independent
Jordi Ferrer Graupera	Director	Propietary
Paul Johnson	Director	Independent
Fernando Lacadena Azpeitia	Director	Independent
José María López-Elola González	Director	Independent
José María Sagardoy	Director	Independent

• On 27 January 2017, Mr. Juan José Andrés Alvez tendered his resignation as a Director for personal reasons.
• As on 7 February de 2017, Mr. Francisco Javier Illa is no longer a director as a result of his passing.
• On 26 June 2017, upon expiration of his term as a member of the Baord of Directors, the Board did not propose the re-appointment of Mr. Carlos González Fernández to the General Shareholders’ Meeting held on 29 June 2017.
• On 29 June de 2017, Mr. Francisco Román Riechmann tendered his resignation as a Director for personal reasons.
• On 25 July 2017, Ms. María Grecna tendered her resignation from the post of Director. On that same date, she was re-appointed to the Board by co-optation with the category of Independent director, all the foregoing at the proposal of the Nominations, Remuneration and Corporate Governance Committee.
• On 25 July 2017, Mr. Paul Johnson tendered his resignation from the post of director. On that same date, he was re-appointed to the Board by co- optation with the category of Independent director, all the foregoing at the proposal of the Nominations, Remuneration and Corporate Governance Committee.
• On 25 July 2017, Mr. Fernando Lacadena Azpeitia tendered his resignation from the post of director. On that same date, he was re-appointed to the Board by co-optation with the category of Independent director, all the foregoing at the proposal of the Nominations, Remuneration and Corporate Governance Committee.
• On 25 July 2017, Mr. José María Cantero Montes-Jovellar tendered his resignation from the post of director. On that same date, he was re-appointed to the Board by co-optation with the category of Independent director, all the foregoing at the proposal of the Nominations, Remuneration and Corporate Governance Committee.
• On 20 October 2017, Ms. Koro Usarraga Unsain tendered her resignation as a Director for professional reasons.

SELECTION POLICY FOR DIRECTOR CANDIDATES

Compliance with the best Corporate Governance standards is part of the day-to-day behaviour of NH Hotel Group. On this matter, the Board of Directors recognizes, for its Corporate Governance strategy, that transparency in all its actions is essential, including the Director selection process. Accordingly, NH Hotel Group has a specific and verifiable selection policy for Director candidates which assures that the proposals for the appointment of Directors of the Company are based on a prior analysis of the needs of the Board.

OBJECTIVES AND CANDIDATE SELECTION PROCESS

To evaluate the candidates who participate in the selection process, the procedure takes into account the skills, experience, professionalism, suitability, gender, independence, knowledge, qualities, capacities and availability of the members of the Board of Directors from time to time, with the Nominations, Remuneration and Corporate Governance Committee taking on a relevant role in this process.

For the selection of candidates for the Board of Directors, the Nominations, Remuneration and Corporate Governance Committee may engage the services of one or several external consultants specializing in the search for and selection of candidates in order to strengthen the efficiency, effectiveness and impartiality of the identification process.

CONDITIONS THAT CANDIDATES MUST FULFIL

Candidates to the post of Director of NH Hotel Group must meet requisites of qualification and professional and personal honourability. They must therefore be suitable and prestigious individuals, of recognized professional capability, competence and experience, with sufficient qualifications, training and availability for the position. Candidates must show a commitment to their role, with a personal and professional history of respect for the law and commercial good practice, comply with the obligations established by law at all times in order to be part of the Board of Directors.

Furthermore, they must be professionals of integrity, whose conduct and career are aligned with the ethical principles and duties established in the Company’s internal regulations, and they must share the vision and values of NH Hotel Group.

PROMOTION OF GENDER DIVERSITY

NH Hotel Group is convinced that diversity in all its facets, at all levels of its professional team, is an essential factor to ensure the Company’s competitiveness and a key element of its corporate governance strategy. In the candidate selection process, discrimination is avoided, and meritocracy is the principal selection criterion, in the corporate interest, with the process designed to seek the most qualified candidates.

Thus, until the goal is reached of having 30% of the Board of Directors made up of women by the year 2020, and as contemplated in the Policy, every time a vacancy arises on the Board of Directors, and the corresponding selection process starts, at least one woman must be included in the candidates, without prejudice to the principles of merit and capability.

MANAGEMENT COMMITTEE

The Management Committee meets every week and is composed of the Chief Officers and Executive Managing Directors of the different areas:

Mr. Ramón Aragonés Marín
CEO, Chief Executive Officer

Mr. Fernando Córdova Moreno
Chief People Officer

Ms. Laia Lahoz Malpartida
Chief Assets & Development Officer

Mr. Isidoro Martínez de la Escalera Álvarez
Chief Marketing Officer

Mr. Rufino Pérez Fernández
Chief Operations Officer & Global Transformation Leader

Ms. Beatriz Puente Ferreras
Executive Managing Director of Finance & Administration

Mr. Carlos Ulecia Palacios
General Secretary

Mr. Fernando Vives Soler
Chief Commercial Officer

COMPLIANCE SYSTEM

Since 2014, NH Hotel Group has promoted the Compliance function covering the following key areas:

• Code of Conduct. It determines the principles, values and rules that must govern the conduct and behaviour of each of the professionals and executives of the Group, as well as members of the governing bodies of Group companies and stakeholders working with NH Hotel Group.
• Criminal Risk Prevention Model. It describes the principles applicable to the management and prevention of crimes within NH Hotel Group and defines the structure and operation of the control and oversight bodies established within the Company, systematizing existing controls for the purposes of preventing and mitigating the risk of crime in the different areas of the Company.
• Internal Rules of Conduct. These establish the minimum standards that apply to the purchase and sale of securities, as well as to privileged and confidential information, and how such information must be handled.
• Procedure for Conflicts of Interest. It establishes the rules to be followed in situations in which there is a conflict arising between the interests of the Company, or any company within its Group, and the direct or indirect personal interests of the Directors or a person subject to the rules governing conflicts of interest.

COMPLIANCE COMMITTEE

In 2014 NH Hotel Group set up the Compliance Committee, composed by members of the Management Committee and Senior Management. It is responsible for overseeing compliance with the Internal Rules of Conduct, the Procedure for Conflicts of Interest, the Code of Conduct and the Criminal Risk Prevention Model.

The Compliance Committee oversees the management activity carried out by the Compliance Office and submits detailed reports on its ctivities to the Audit and Control Committee. Furthermore, it can take disciplinary measures against employees in relation to matters falling within its scope of competence.

Five meetings of the Compliance Committee were held in 2017.

COMPLIANCE OFFICE

The Compliance Officer, led by the Head of Auditing of the Group, is responsible for spreading awareness and monitoring compliance with the Code of Conduct as well as for preparing the Criminal Risk Prevention Model. The Compliance Office reports directly to the Compliance Committee, and is also responsible for managing the Whistleblowing Channel and handling queries regarding the Code of Conduct.

The procedure for handling matters reported through the Whistleblowing Channel is specified in detail in the Code of Conduct.

Confidentiality, respect and non-retaliation are guaranteed at all stages of the procedure.

In 2017, there have been 45 reports of alleged breach of the Code of Conduct and the pertinent disciplinary measures have been imposed and all 61 queries received have been answered.

Furthermore, in 2017 the Criminal Risk Prevention Matrix in Spain has been rationalized, with the aim of providing the Company with a more efficient model. Throughout the year, the Compliance Office has rolled out the Criminal Risk Prevention Model in the seven most important countries where the Group operates.

AWARENESS AND TRAINING: CODE OF CONDUCT AND CRIMINAL RISK PREVENTION MODEL

CODE OF CONDUCT

In line with its ethical commitment and the best practices in relation to Corporate Governance, NH Hotel Group has conducted communication, awareness and training campaigns on Compliance since the last update of the Code of Conduct in 2015.

Responsibility for approving the Code of Conduct lies with the Board of Directors of the Group.

This document applies to all the people who work at NH Hotel Group, and is applicable not only to employees, executives and members of the Board of Directors, but also, in certain cases, to other stakeholders such as customers, suppliers, competitors or shareholders, as well to the communities where NH operates its hotels.
The Code of Conduct summarizes the professional conduct that is expected of employees of NH Hotel Group, who are committed to acting with integrity, honesty, respect and professionalism in performing their activity.

The Group is committed to complying with the laws and regulations of the countries and jurisdictions where it does business. This includes, among other matters, laws and regulations on health and safety, discrimination, taxation, data privacy, competition, anti-corruption, prevention of money laundering and environmental commitments. The key areas covered by the Code are:

• Commitment to people
• Commitment to customers
• Commitment by suppliers
• Commitment to competitors
• Commitment to shareholders
• Commitment to communities and society
• Commitment to the group’s assets, knowledge and resources
• Obligations in relation to fraudulent or unethical practice
• Commitment in relation to the securities market

The Code of Conduct is published in 6 different languages on the official website of NH Hotel Group and is available to all stakeholders. Furthermore, with effect from 2017, NH employees can access the code of conduct from their mobile devices using the “My NH” app. Staff operating under NH Hotel Group brands have also been provided with a practical Guide and a FAQ document.

In collaboration with NH University, the Compliance Office oversees on a quarterly basis the degree of completion of courses on the Code of Conduct and Criminal Risk Prevention. Online training sessions on the Code of Conduct have continued in 2017, in an effort to ensure that all Group employees are familiar with it. 75.63% of employees have adhered to the Code and have completed the training course, which represents an increase of 8.99 basic points compared to 2016.This figure includes the employees listed in the NH Talent tool (employees of NH Hotel Group).

CRIMINAL RISK PREVENTION MODEL

The Criminal Risk Prevention Model is also in place in Spain. During 2017, specific training courses have been held in the prevention of criminal risks. Thus, 82.63% of the employees of establishments that operate under the NH Hotel Group brands completed criminal risk prevention training in Spain, which represents an increase of 15.98 basic points compared to 2016. In Italy, 95% of the employees have received training, and the percentage of adhesions has remained stable compared to the previous year.

Work has also been carried out in 2017 on the roll-out of the Prevention Programme in The Netherlands, Belgium, United Kingdom, Germany, Mexico, Colombia and Argentina. This includes identifying the main risks and controls as well as providing training on criminal risk prevention, as is provided in Spain.

RELATIONS WITH GOVERNMENTS

The Company manages its business in accordance to its corporate values and its ethical and conduct framework. It also ensures strict compliance with ruling legislation in each country. At a local level, the Company always acts independently of any political party, ensuring transparency in its dealings with public and administrative institutions.