EN- GB Memoria Individual NH Hotel Group 2021 (2)

Contents

BALANCE SHEET .......................................................................................................................................

INCOME STATEMENT .............................................................................................................................

STATEMENT OF CHANGES IN EQUITY ..............................................................................

CASH FLOW STATEMENT ..................................................................................................

REPORT OF THE ANNUAL FINANCIAL STATEMENTS .......................................................

1.- NATURE, COMPANY PURPOSE AND COMPOSITION OF THE GROUP .............................

2.- PRESENTATION BASIS ....................................................................................................................

3.- PROPOSED DISTRIBUTION OF PROFITS ...................................................................................

4.- ACCOUNTING POLICIES ................................................................................................................

5.- INTANGIBLE ASSETS .......................................................................................................................

6.- PROPERTY, PLANT & EQUIPMENT .............................................................................................

7.- OPERATING LEASES ........................................................................................................................

8.- LONG TERM INVESTMENTS IN GROUP COMPANIES AND ASSOCIATES AND

FINANCIAL INVESTMENTS ....................................................................................................................

9.- CASH AND CASH EQUIVALENTS ...................................................................................................

10.- EQUITY AND OWN FUNDS .............................................................................................................

11.- PROVISION FOR RISKS AND EXPENSES ....................................................................................

12.- FINANCIAL DEBT - LONG AND SHORT TERM ..........................................................................

13.- TAX POSITION ...................................................................................................................................

14.- INFORMATION ON AVERAGE PERIOD FOR PAYMENT TO SUPPLIERS .........................

15.- THIRD PARTY GUARANTEES AND CLAIMS IN PROGRESS .................................................

16.- .- OPERATIONS AND BALANCES BETWEEN GROUP COMPANIES ...................................

17.- INCOME AND EXPENSES ................................................................................................................

18.- REMUNERATION AND OTHER STATEMENTS MADE BY THE BOARD OF

DIRECTORS AND SENIOR MANAGEMENT .......................................................................................

19.- ENVIRONMENTAL INFORMATION .............................................................................................

20.- EVENTS AFTER THE REPORTING PERIOD ..............................................................................

MANAGEMENT REPORT .........................................................................................................................

NH Hotel Group, S.A.

Annual Accounts and Management Report FY 2021

NH Hotel Group, S.A.

BALANCE SHEET AT 31 December 2021

(Thousands of euros)

ASSETS

Note

2021

2020

LIABILITIES AND SHAREHOLDERS' EQUITY

Note

2021

2020

NON‐CURRENT ASSETS:

EQUITY:

Intangible assets

Note 5

27,001

35,555

Capital

871,491

784,361

Property, plant and equipment

Note 6

64,830

104,111

Share premium

848,394

828,932

Investment property

2,905

2,950

Reserves

514,799

516,936

Non-current investments in Group companies and associates

2,633,233

2,520,537

Legal and statutory reserves

90,749

Equity instruments

Note 8.1

1,937,412

1,775,614

Other reserves

424,050

426,187

Loans to companies

Note 16.1

695,821

744,923

Prior years' losses

(226,164)

—

Non-current financial assets

Note 8.2

1,370

1,360

Treasury shares

(308)

(367)

Deferred tax assets

Note 13

33,111

34,279

Profit (Loss) for the year

168,063

(226,164)

Total non-current assets

2,762,450

2,698,792

Total Equity

Note 10

2,176,275

1,903,698

NON-CURRENT LIABILITIES

Long-term provisions

Note 11

3,094

2,281

Long-term debts

704,028

894,849

Debt instruments and other marketable securities

Note 12.1

395,020

351,991

Bank borrowings

Note 12.1

304,968

539,377

Other financial liabilities

Note 12.2

4,040

3,481

Long‐term debts with group and associate companies

Note 16.1

8,430

7,289

Deferred tax liabilities

Note 13

4,735

4,906

Total non-current liabilities

720,287

909,325

CURRENT ASSETS:

CURRENT LIABILITIES:

Inventories

147

134

Short-term provisions

Note 11

—

Trade and other receivables

5,049

21,103

Short-term debts

20,784

21,686

Trade accounts receivable for sales and services

948

797

Debt instruments and other marketable securities

Note 12.1

6,803

1,555

Sundry debtors

2,284

6,900

Bank borrowings

Note 12.1

13,981

20,131

Current tax assets

Note 13

657

7,810

Short‐term debts with group and associate companies

Note 16.1

160,668

145,163

Other tax receivables

Note 13

1,160

5,596

Trade creditors and other accounts payable

35,342

23,196

Short-term investments in group companies and associates

Note 16.1

319,276

269,584

Suppliers

Note 14.1

24,800

15,561

Short‐term financial investments

7,553

Other creditors

Note 14.1

8,294

5,939

Short‐term accruals

2,178

2,528

Personnel

611

294

Cash and cash equivalents

Note 9

16,756

10,901

Other taxes payable

Note 13

1,637

1,402

Total current assets

350,959

304,276

Total current liabilities

216,847

190,045

TOTAL ASSETS

3,113,409

3,003,068

TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES

3,113,409

3,003,068

The accompanying Notes 1 to 20 are an integral part of the balance sheet at 31 December 2021.

The balance sheet at 31 December 2020 is presented for comparison purposes only.

NH Hotel Group, S.A.

INCOME STATEMENT FOR THE YEAR ENDED

31 DECEMBER 2021

(Thousands of euros)

Note

2021

2020

Revenues

Note 17.a

20,914

15,381

Sales

20,914

15,381

Procurements

308

455

Work carried out by the company for its assets

1,533

1,825

Other operating income

Note 16.2

38,574

27,502

Non-core and other current operating income

38,574

27,502

Staff costs

Note 17.b

(26,516)

(24,800)

Wages, salaries and similar

(21,466)

(18,494)

Social security contributions

(5,050)

(6,306)

Other operating expenses

(39,253)

(35,064)

External services

Note 17.c

(22,807)

(22,751)

Taxes

(2,875)

(2,311)

Losses on, impairment of and changes in allowances for trade receivables

(83)

Other current operating expenses

(13,488)

(10,054)

Depreciation and amortisation charge

Notes 5 & 6

(18,606)

(21,181)

Impairment and gains or losses on disposals of non-current assets

87,295

208

Impairments and other losses

Notes 5 & 6

Income from disposals and other

Nota 6 y

17.e

87,243

117

PROFIT/LOSS FROM OPERATIONS

64,249

(35,674)

Financial income

24,835

19,648

From securities held for trading and other financial instruments

Group companies and associates

Note 16.2

22,985

18,755

Third parties

1,850

893

Financial expenses

(48,530)

(30,511)

On debts to Group companies and associates

Note 16.2

(2,846)

(1,282)

On debts to third parties

Note 17.f

(45,684)

(29,229)

Exchange rate differences

(616)

370

Impairment and gains or losses on disposals of financial instruments

Note 8.1

143,622

(179,757)

FINANCIAL PROFIT/LOSS

119,311

(190,250)

PROFIT/LOSS BEFORE TAX

183,560

(225,924)

Income tax

Note 13

(15,497)

(240)

PROFIT/LOSS FOR THE YEAR FROM CONTINUING OPERATIONS

168,063

(226,164)

PROFIT (LOSS) FOR THE YEAR

168,063

(226,164)

The accompanying Notes 1 to 20 are an integral part of the income statement for 2021.

The income statement for 2020 is presented for comparison purposes only.

NH Hotel Group, S.A.

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2021

A) STATEMENTS OF RECOGNISED INCOME AND EXPENSE

Thousands of euros

2021

2020

PROFIT/LOSS AS PER INCOME STATEMENT (I)

168,063

(226,164)

TOTAL INCOME AND EXPENSE RECOGNISED DIRECTLY IN EQUITY (II)

—

TOTAL TRANSFERS TO PROFIT OR LOSS (III)

—

TOTAL RECOGNISED INCOME AND EXPENSE (I+II+III)

168,063

(226,164)

The accompanying Notes 1 to 20 are an integral part of the statement of recognised income and expense for 2021.

The statement of recognised income and expense for the year ended 31 December 2020 is presented for comparison purposes only.

NH HOTEL GROUP, S.A.

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2021

B) STATEMENTS OF CHANGES IN TOTAL EQUITY

Own Funds

Share capital

(Note 10)

Share premium

(Note 10)

Reserves

(Note 10)

Treasury Shares

and Shareholdings

(Note 10)

Prior years' profits

(losses)

(Note 10)

Profit (Loss) for

the Year

(Note 10)

Total

Shareholders'

Equity (Note 10)

Balance at 01 January 2020

784,361

828,932

360,906

(1,647)

—

158,940

2,131,492

I. Total recognised income / (expense)

—

(226,164)

II. Transactions with shareholders or owners

—

1. Distribution of dividends

—

III. Other changes in equity

—

156,030

1,280

—

(158,940)

(1,630)

1. Transfers between equity items

—

158,940

—

(158,940)

—

2. Remuneration scheme in shares

—

(2,724)

1,525

—

(1,199)

3. Other movements

—

(186)

(245)

—

(431)

Balances at 31 December 2020

784,361

828,932

516,936

(367)

—

(226,164)

1,903,698

Balance at 01 January 2021

784,361

828,932

516,936

(367)

—

(226,164)

1,903,698

I. Total recognised income / (expense)

—

168,063

II. Transactions with shareholders or owners

87,130

19,462

(153)

—

106,439

1. Transactions with treasury shares (net)

87,130

19,462

(153)

—

106,439

III. Other changes in equity

—

(1,984)

(226,164)

226,164

(1,925)

1. Transfers between equity items

—

(226,164)

226,164

—

2. Remuneration scheme in shares

—

(1,942)

759

—

(1,183)

3. Other movements

—

(42)

(700)

—

(742)

Balances at 31 December 2021

871,491

848,394

514,799

(308)

(226,164)

168,063

2,176,275

The accompanying Notes 1 to 20 are an integral part of the statement of changes in total equity for the year 2021.

The statement of changes in equity for the year 2020 is presented for comparison only.

NH Hotel Group, S.A.

CASH FLOW STATEMENT FOR THE YEAR ENDED

31 DECEMBER 2021

(Miles de Euros)

Notes to the

Financial

statements

2021

2020

A) CASH FLOW FROM OPERATING ACTIVITIES

1. Profit (Loss) for the year before tax

183,560

(225,924)

2. Adjustments for:

(188,402)

212,443

a) Depreciation and amortisation charge (+)

Notes 5 & 6

18,606

21,181

b) Impairment losses (+/-)

Notes 5 & 6

(52)

(91)

c) Changes in provisions (+/-)

998

(268)

d) Gains/Losses on derecognition and disposal of non-current assets (+/-)

Note 17.e

(87,243)

(117)

e) Gains/Losses on derecognition and disposal of financial instruments (+/-)

Note 8.1

(143,622)

179,757

f) Finance income (-)

(24,835)

(19,648)

g) Finance costs (+)

48,530

30,511

h) Exchange rate differences (+/-)

616

(370)

i) Other income and expenses (-/+)

(1,400)

1,488

3. Changes in working capital

21,298

(27,812)

a) Inventories (+/-)

(13)

b) Trade and other receivables(+/-)

9,137

(1,768)

c) Other current assets (+/-)

350

(369)

d) Trade and other payables (+/-)

11,299

(20,512)

e) Other current liabilities (+/-)

—

(2)

f) Provisions for contingencies and charges (+/-)

(24)

(5,279)

g) Other non-current assets and liabilities (+/-)

549

4. Other cash flows from operating activities:

(38,142)

(23,378)

a) Interest paid (-)

(40,844)

(23,667)

b) Interest received (+)

—

547

c) Income tax refunded (paid) (+/-)

2,702

(258)

5. Cash flows from investment activities (+/-1+/- 2+/-3+/-4)

(21,686)

(64,671)

B) CASH FLOWS FROM INVESTMENT ACTIVITIES

6. Payments due to investment

(38,610)

(449,864)

a) Group companies and associates

(17,928)

(430,872)

b) Tangible fixed assets

(13,155)

(18,980)

c) Other financial assets

(7,527)

(12)

7. Proceeds from disposal (+):

154,069

2,895

a) Group companies and associates

27,285

—

b) Tangible fixed assets

126,784

2,895

8. Cash flows from investment activities (7-6)

115,459

(446,969)

C) CASH FLOWS FROM FINANCING ACTIVITIES

9. Equity instruments receivables and (payables):

5,548

(298)

a) Issue of treasury shares (-)

6,318

a) Purchase of treasury shares (-)

(770)

(298)

10. Proceeds and payments relating to financial liability instruments:

Note 12

(92,850)

517,851

a) Issue of

1. Debt instruments and other marketable securities (+)

400,000

—

2. Bank borrowings (+)

—

792,000

3. Borrowings from parent company (+)

100,000

—

b) Redemption of

1. Debt instruments and other marketable securities (-)

(356,850)

—

2. Bank borrowings (-)

(236,000)

(274,149)

12. Cash flows from financing activities (+/-9+/-10+/-11)

(87,302)

517,553

D) EFFECT OF EXCHANGE RATE VARIATIONS

(616)

268

E) NET INCREASE/DECREASE IN CASH AND CASH EQUIVALENTS (+/-5+/-8+/-12+/-

5,855

6,181

Cash and cash equivalents at the start of the financial year

10,901

4,720

Cash and cash equivalents at end of year

16,756

10,901

The accompanying Notes 1 to 20 are an integral part of the cash flow statement for the year 2021.

The cash flow statement for 2020 is presented for comparison only.

REPORT OF THE ANNUAL ACCOUNTS FOR

NH HOTEL GROUP, S.A. FOR THE YEAR

ENDED 31 DECEMBER 2021

========================================================

1.-NATURE, COMPANY PURPOSE AND COMPOSITION OF THE GROUP

NH HOTEL GROUP, S.A. (hereinafter the “Company” or “NH Hotel Group”) was incorporated as a public

limited company in Spain on 23 December 1881 under the trade name “Material para Ferrocarriles y

Construcciones, S.A.”, which was subsequently changed to “Material y Construcciones, S.A.” (MACOSA) and

later to “Corporación Arco, S.A.”

In 1992, Corporación Arco, S.A. took over Corporación Financiera Reunida, S.A. (COFIR), while at the same

time adopting the trade name of the company taken over and amending its corporate purpose to the new activity

of the Company, which focused on the management of its shareholding portfolio.

During the 1998 financial year, (COFIR) merged with Grupo Catalán, S.L. and its subsidiaries and Gestión NH,

S.A. through the absorption of these companies by the former. Subsequently, Corporación Financiera Reunida,

S.A. (COFIR) took over NH Hoteles, S.A., adopted its trade name and broadened its corporate purpose to allow

for the direct performance of hotel activities, activities in which it had already been engaged indirectly through

its subsidiaries.

Information on these mergers can be found in the financial statements of the years in which said transactions

took place.

The General Shareholders' Meeting of 21 June 2014 agreed to change the company's name from “NH Hoteles,

S.A.” to “NH Hotel Group, S.A.”

The Company is the head of a group of subsidiaries engaging in the same activities and that constitute, together

with NH Hotel Group, S.A., the NH Hotel Group (hereinafter, the “Group”). The Company is also dedicated to

operating 3 hotels in Spain (4 in 2020), as well as providing services to the Group’s subsidiary companies via its

corporate central office.

At the end of the financial year, the Group was operating hotels in 30 countries, with 353 hotels and 55,063

rooms, of which around 72% are located in Spain, Germany, Italy and the Benelux countries.

NH Hotel Group, S.A. has its registered address at Calle Santa Engracia, 120 - 7th floor, Madrid, Spain.

The consolidated annual accounts for 2021 were prepared by the Directors of the NH Hotel Group, S.A. in the

Board meeting held on 24 February 2022 in accordance with the International Financial Reporting Standards

adopted by the European Union (IFRS-EU), other provisions within the financial reporting standards framework

which are applicable and with the requirements for format and framework provided for in the Delegated

Regulation EU 2018/815 of the European Commission, Regulation (CE) No. 1606/2002 of the European

Parliament and by Law 62/2003, of 30 December on tax, administrative and social measures, as well as the

applicable rules and circulars of the National Securities Market Commission and the other Spanish accounting

regulations that may be applicable, with the purpose of showing a true image of NH Hotel Group, S.A. and its

subsidiaries’ consolidated equity and consolidated financial position at 31 December 2021, and the consolidated

financial performance, consolidated cash flows and consolidated changes in equity for the financial year ended

on that date.

Based on the contents of said consolidated annual accounts, the total volume of equity, result for the period,

assets and consolidated sales amounted to 781 million euros, 136 million euros, 4,105 million euros and 746

million euros, respectively.

Main developments in the financial year (COVID-19)

After the start of the COVID-19 pandemic in the middle of March 2020 in Europe, demand for hotels dropped

drastically due to lockdowns, travel restrictions and social distancing, which drastically affected mobility.

The gradual reopening of hotels was made possible by the flexible costing structure and began in the middle of

2020, progressively, depending on recovery of domestic demand and with a focus on optimising profitability.

With the gradual roll out of vaccines since the beginning of 2021, a turning point was beginning to be seen that

– together with the progressive lifting of restrictions in some European countries – was allowing a faster

reopening of the portfolio once again. Therefore, at the end 2021, around 90% of the Group’s hotels were open,

compared to 60% at the beginning of the year. 100% of the Company's hotels are now open.

In 2020 NH Hotel Group put “Feel Safe at NH” into place in all its hotels. This is a new plan, with measures

approved by experts, to face up to the health crisis caused by the SARS-CoV-2 coronavirus. The Company has

reviewed all its procedures and made nearly 700 adaptations to its operating standards to preserve the health and

safety of travellers and employees worldwide. Grouped into 10 main lines of action and backed by specialists in

different fields, the measures implemented cover the digitisation of hotel services, adapting sanitation processes,

including social distancing regulations in operations and the application of personal protective equipment,

among others. We also reached a collaboration agreement with SGS, the world leader in inspection, analysis and

certification, which allows us to follow up on the measurement and diagnostics protocol established to verify

that the Group's hotels are clean and safe environments.

In spite of the low level of demand, its flexible operational and financial structure has enabled the Group to

overcome the major challenges in 2020 and 2021. The Group will benefit in the first stage of recovery from

brand recognition, excellent locations and strong market positioning, once recovery accelerates in Europe.

Contingency Plan

As a result of the exceptional circumstances that occurred after the start of the pandemic (COVID-19), the

Group implemented different measures and plans to adapt the business and ensure its sustainability with the aim

of minimising costs whilst hotels are closed, preserving the Company's liquidity to meet operational needs and

ensure that the recovery of the hotel activity is carried out efficiently and under maximum guarantees in terms of

health and safety.

The following cost discipline and control measures, to ensure minimisation of operational expenses and preserve

liquidity, continue to be implemented:

•Personnel: The Group carried out adjustments, temporary lay-offs and reductions in hours and wages in

hotels and central offices caused by force majeure or production reasons. A part of these processes

continued during 2021. In addition, a collective redundancy process was carried out in Central Services

in Spain as part of a global plan pursuant to local legislation.

•Operational Costs (Note 17-c):

–Negotiations with suppliers to reduce purchase costs, seek alternative, cheaper products and

attain improvements to payment terms.

–Suspension of non-priority third party advisory services.

–Significant reduction in marketing and advertising costs despite the need to boost income.

•Leases: Temporary reduction in fixed leases continued during the first part of 2021 and, to a lesser

extent, during the second half of the year after recovery began.

•CapEx: Capex decreased by more than 50% during 2020, and during 2021 it has continued to be

limited to a figure of around 36.8 million euros at Group level.

•Strengthening liquidity: during the first part of 2021 NH Hotel Group proactively carried out a battery

of initiatives to reinforce the Group's capital structure:

•In May a €100 million capital investment was agreed by Minor International through an

unsecured subordinated loan that was drawn down in May and capitalised in September 2021

through a capital increase process directed towards all shareholders . This agreement provided

immediate liquidity and demonstrated the support of the main shareholder in the recovery. The

capital increase to offset the shareholder loan was approved at the Shareholders’ meeting held on

30 June. At the same time as the capital increase, the Board started up the cash capital increase

under the same economic conditions and with preferential subscription rights for the other

shareholders to prevent dilutive effects on the shareholdings (Note 10).

•In addition, during April, in order to continue to optimise the debt profile, the expiry of the ICO

syndicated loan of 250 million euros was extended from 2023 to 2026 (Note 12). Furthermore, the

waiver on compliance with financial covenants was extended for the whole of 2022.

•In June, NH Hotel Group successfully launched a senior bonds issue on the market, guaranteed

for the amount of 400 million euros and maturing in July 2026. The funds obtained have been

used to repay the senior bond for 357 million euros expiring in 2023. The new issue, which was

significantly oversubscribed, has an annual interest of 4% (Note 12).

•Furthermore, NH Hotel Group has agreed to extend its revolving syndicated credit facility (RCF)

for 242 million euros, which will now expire in March 2026, instead of March 2023. It is worth

pointing out the support shown by the loan institutions taking part in this financing, with the

extension of the waiver on the financial covenants during all of 2022 (Note 12).

•On 30 June 2021, the sale & leaseback transaction on the NH Collection Barcelona Gran Hotel

Calderón was announced, which was sold for 125.5 million euros with a linked 20 year lease

agreement, with NH having the option to exercise additional extensions (Note 6). With this transaction,

the Company has generated a net book gain before tax of 87.1 million euros and net cash, after paying

the taxes on the sale, of 113 million euros. (Note 17-e).

For more information on the Contingency Plan, see the section "Impacts of COVID-19 and the measures

implemented" of the Consolidated Management Report for the financial year ended 31 December 2021.

These annual accounts include the impacts arising from the situation described above, with particular relevance

to the impairment analyses and the resulting results recorded (Notes 4-d, 4-f and 8.1), and the description and

analysis carried out by the directors and their conclusion on business continuity and the corresponding

preparation of the accounts as a going concern (Note 2-h).

These annual accounts should be read taking this assessment and breakdown into account.

2.-PRESENTATION BASIS

a)Legislative reference framework

The annual accounts have been prepared using the Company’s accounting books and are presented in

accordance with current company legislation and the regulations provided for in the General Accounting

Plan, approved by Royal Decree 1514/2007, and the amendments made to it by Royal Decree 1159/2010,

Royal Decree 602/2016 and Royal Decree 1/2021 for the purpose of showing a true and fair presentation

of equity, the financial situation and the Company's results, as well as the veracity of the cash flows

included in the cash flow statement. The annual accounts have been prepared using the Company’s

accounting books and are presented in accordance with current company legislation and the regulations

provided for in the General Accounting Plan, approved by Royal Decree 1514/2007, and the amendments

made to it by Royal Decree 1159/2010, Royal Decree 602/2016 and Royal Decree 1/2021 for the purpose

of showing a true and fair presentation of equity, the financial situation and the Company's results, as well

as the veracity of the cash flows included in the cash flow statement.

b)True and fair presentation

The annual accounts have been drawn up using the Company's accounting books and have been prepared

in accordance with applicable regulatory framework for financial information to give a true and fair view

of the assets and financial situation 31 December 2021 and the results of its operations, the changes in

equity and of the cash flows corresponding to the year ended on that date.

The Company's Directors consider that the consolidated annual accounts for 2021, which were drawn up

on 24 February 2022, will be approved by the General Shareholders' Meeting without amendment.

c)Non-obligatory accounting principles

No non-obligatory accounting principles were applied. Furthermore, the Company’s directors formally

prepared these financial statements by taking into account all the obligatory accounting principles and

standards with a significant effect hereon. All obligatory accounting principles were applied.

d)Comparative information

In addition to the figures for 2021 and for comparative purposes, the annual accounts are presented with

the balance sheet, profit and loss accounts, statement of changes in equity, cash flow statement and the

report corresponding to the previous year, which were part of the annual accounts for 2020 approved by

the General Shareholders' Meeting on 30 June 2021.

e)Critical valuation and estimation aspects of relevant uncertainties and judgements in the application

of accounting policies.

In the preparation of these financial statements, estimates were made by the Company's directors in order

to quantify certain assets, liabilities, income, expenses and obligations reported herein. These estimates

relate basically to the following:

–The assessment of possible impairment losses on certain assets.

–The hypotheses used in the actuarial calculation of liabilities for pensions and other undertakings made

to the workforce;

–The useful life of the tangible and intangible assets.

–The market value of specific assets.

–The calculation of provisions.

–Recoverability of tax assets.

The Company's strategy takes into account the targets set in relation to climate change (Note 19), for which

reason they are also taken into account when preparing these annual statements. Therefore, in the context

of preparing consolidated annual statements, the effect of the commitments taken on by the Company was

taken into account when calculating the service life of assets, closing costs and analysing impairment to

non-financial assets.

Likewise, despite the fact that the estimates made by the Company's Directors have been calculated based

on the best information available at 31 December 2021, it is possible that events that may take place in the

future require their modification in upcoming years. The effect on the annual accounts of the modifications

that, where appropriate, derive from the adjustments to be made in upcoming years would be recorded

prospectively.

f)Functional currency and presentation currency

The annual accounts are presented in thousands of euros, which is the Company's functional and

presentation currency, rounded to the nearest thousand.

g)Grouping of items

Certain items in the balance sheet, income statement, statement of comprehensive income, statement of

changes in equity and cash flow statement are grouped together to make them easier to understand;

however, whenever the amounts involved are material, the information is broken down in the related notes

to the financial statements.

h)Going concern

As a consequence of the situation caused by Covid-19, government measures taken worldwide to mitigate

the spread of the pandemic have had a significant impact on the Group. These measures resulted in the

Group temporarily closing establishments in the majority of its locations for a period of time, both in 2020

and 2021 (during the year 2021 lockdowns and travel restrictions have not affected lockdowns operated by

the Company), as well as significant falls in the business's operations and the uncertainties associated with

how the situation evolves. These annual accounts have been prepared in accordance with the going

concern principle as the Group, and the Company in particular, has implemented crisis management

organisational and liquidity strengthening measures to ensure business continuity, both individually

(management of contagion or isolation situations), and collectively (Note 1).

Furthermore, in order to strengthen liquidity during 2021, NH Hotel Group proactively carried out a

battery of initiatives to reinforce the Group's capital structure. Amongst these, a highlight was the capital

increase by Minor International, with a preferential subscription right for the other shareholders; the

extension of the ICO syndicated loan for 250 million euros from 2023 to 2026; the issue of senior bonds,

guaranteed for 400 million euros and maturing in July 2026 with the relevant amortisation of the senior

bond for 357 million euros, maturing in 2023; and the extension to the revolving credit facility (RCF) for

242 million euros until March 2026, which, at the end of the 2021 financial year, is not totally drawn down

(Note 12).

Therefore, assuming a gradual reactivation of the business and scientific progress in relation to COVID-19

that facilitates a gradual return to normality during 2022 and subsequent years, the Group and, specifically,

the Company considers it has sufficient resources to meet future obligations in the next 12 months.

The Directors have prepared the Consolidated Annual Statements bearing in mind the going concern

principle as they understand that the future perspectives for the business will allow positive results and

positive cash flows to be obtained in the next financial years.

3.-PROPOSED DISTRIBUTION OF PROFITS

The proposed distribution of profits for the year prepared by the Company's Directors and that will be submitted

for approval by the Shareholders at the General Shareholders' Meeting is as follows (in thousands of euros):

2021

To legal reserve

16,806

To Prior years' profits (losses)

151,257

Total

168,063

4.-ACCOUNTING POLICIES

a)Business combinations

In business combinations, except for mergers, spin-offs and non-monetary contributions of a business

between group companies, the Company applies the acquisition method.

Mergers, spin-offs and non-monetary contributions of a business between Group companies are recorded in

accordance with the provisions for transactions between related parties.

In the case of business combinations arising from the acquisition of shares or shareholdings in a company's

capital, the Company recognises the investment in accordance with that established for investments in the

equity of group companies, multi-group and associates (Note 4-f).

The acquisition date is the date on which the Company obtains control of the acquired business.

b)Intangible assets

Intangible assets are considered to be any specifically identifiable non-monetary assets which have been

acquired from third parties or developed by the Company. Only those whose cost can be estimated in an

objective way and from which future economic profits are expected are recognised.

As a general rule, intangible assets are recognised initially at acquisition or production cost. They are

subsequently measured at cost less the related accumulated amortisation and any impairment losses.

Any intangible assets deemed to contribute indefinitely to the generation of profits are considered to have an

indefinite useful life. The remaining intangible assets are considered to have a “finite useful life”. All the

Company’s intangible assets are considered to have a “finite useful life”.

Intangible assets with a finite useful life are amortised according to the straight-line method, applying annual

amortisation percentages calculated according to the estimated years of useful life of the asset in question,

applying the amortisable amount. For these purposes, the amortisable amount is understood to be the

acquisition cost less its residual value, if applicable. The Company considers the residual value of the assets

to be zero.

The Company reviews the residual value, the useful life and the amortisation method of intangible assets at

the end of each year. Amendments to the initially established criteria are recognised as a change in estimate.

This heading in the accompanying balance sheet includes, essentially, the following:

i.Usufruct Rights: this item reflects the right to operate Hotel NH Plaza de Armas in Seville, acquired

in 1994, whose amortisation is recognised in the income statement over the 30-year term of the

agreement at a rate which increases by 4% each year.The "Computer software" acquired and

produced by the company itself, including website development expenses are recognised to the

extent that they meet the conditions set forth for development expenses. Outlays made for website

development for promotional reasons or to advertise the Company's products or services are

recognised as expenses at the time they are incurred. Computer software maintenance costs are

accounted for at the time they are incurred. The amortisation of software applications is performed

using the straight-line method at a rate of 20-25% per year.

c)Property, plant and equipment

Property, plant and equipment are initially recognised at acquisition cost and are subsequently reduced by

the related accumulated depreciation and the valuation adjustments for accumulated impairment, if any, as

indicated in Note 4-d.

Property, plant and equipment upkeep and maintenance expenses are recognised on the income statement for

the year in which they are incurred. However, the costs of improvements leading to increased capacity or

efficiency or to a lengthening of the useful lives of the assets are capitalised.

The capitalisation of the production cost occurs through the heading "Work carried out by the company for

its assets" in the profit and loss account. Ancillary income obtained during the testing and implementation

period is recognised as a reduction in the costs incurred.

For non-current assets that necessarily take a period of more than twelve months to get ready for their

intended use, the capitalised costs include such borrowing costs as might have been incurred before the

assets are ready for their intended use and which have been charged by the supplier or relate to loans or other

funds borrowed specifically or generally directly attributable to the acquisition or production of the assets.

Withdrawn assets and items, whether arising as a result of a modernisation process or due to any other cause,

are accounted for by derecognising the balances presented in the corresponding cost and accumulated

depreciation accounts.

Depreciation of property, plant and equipment is carried out by distributing its depreciable amount

systematically over its useful life. For these purposes, the depreciable amount is understood to be the

acquisition cost less its residual value. The Company determines the depreciation expense independently for

each component that has a significant cost in relation to the total cost of the item and a different useful life

from the rest of the item.

The depreciation of property, plant and equipment is determined by applying the following criteria:

Estimated years of

useful life

Buildings

Plant and machinery

10 - 12

Other plant, fixtures and furniture

4 - 10

Other Fixed assets

4 - 5

These items are depreciated based on their estimated useful life or the remaining term of the lease, if this is

less than the useful life.

The Company reviews the residual value, the useful life and the depreciation method of property, plant and

equipment at the end of each year. Amendments to the initially established criteria are recognised as a

change in estimate.

The profit or loss resulting from the disposal or retirement of an asset is calculated as the difference between

the profit on the sale and the book value of the asset, and is recognised in the income statement.

d)Impairment of non-financial assets subject to amortisation or depreciation

The Company assesses the possible existence of a loss of value each year that would oblige it to reduce the

carrying amounts of its tangible and intangible assets. A loss is deemed to exist when the recoverable value

is less than the carrying amount.

The recoverable value of the assets is the greater of their fair value less the costs of transfer or disposal by

another means and their value in use.

Moreover, and regardless of the existence of any indication of impairment, the Company, at least once a

year, checks potential impairment that may affect goodwill.

The recoverable value should be calculated for an individual asset, unless the asset does not generate cash

entries which are, by and large, independent of those relating to other assets or groups of assets. If this is the

case, the recoverable value is calculated for the Cash-Generating Unit (CGU) it belongs to. As a general rule,

the Company has defined each of the hotels it operates as cash-generating units, according to the real

management of their operations.

The operating result for each CGU is obtained at the end of the year without taking non-recurring results (if

any) or financial results into account. Once the operating result is obtained for each CGU, the impairment

test is performed for those in which there are indications of impairment. The Company considers a CGU to

show signs of impairment if it meets the following conditions, among others: it has negative operating

results and its business is stable (i.e., this does not apply to recently opened hotels until, usually, 3 years after

they open).

In addition, on each closing date the Company assesses whether there are any indications that impairment

losses recognised in previous years no longer exist, or may have decreased. Impairment losses are only

reversed if a change has occurred in the calculations used to determine the asset’s recoverable value.

Reversal of the impairment loss is recorded as a credited to profit and loss.

As an exception, given the current economic situation as a result of the pandemic caused by Covid-19,

analyses have continued to be carried out to determine if there is any impairment to the CGUs as a whole in

the 2021 financial year, in the same way as in the 2020 financial year.

In this financial year, the Company carried out a valuation of the greater part of the hotel assets in

ownership. They were valued by a global firm specialising in valuation and consultancy services. In order to

calculate the value of the assets, the most used valuation criteria was discounted cash flow, due to the fact

that the hotel investments are valued depending on their potential future income.

The value in use is calculated from the estimated future cash flows, discounted at a discount rate after tax

that reflects the current market valuation with respect to the value of money and the specific risks associated

with the asset, covering a five-year period and a perpetual value, except in the case of leased hotels that

correspond to the term of the lease, a perpetual value therefore not being considered in the latter.

The evolution of the key assumptions in the analysed hotels has taking the business knowledge of Group

Management into account as well as the expected recovery of the sector after the COVID-19 pandemic. In

this regard, the assumed projections are based on the use of the Management’s budget for 2022, which

assumes a dramatic recovery in revenues compared to 2021, but still lower than those in 2019 due to the

negative effect that the COVID-19 pandemic has had on tourism over the past two years. Recovery to pre-

COVID-19 levels is calculated in the comparable hotels over the next few years, once mobility restrictions

decrease and, therefore, consumer confidence is recovered. The Group's strong positioning, the good

locations of the portfolio and the high recognition of its brands are key factors in the assumed recovery

period. This recovery scenario calculates reaching pre-pandemic figures in the comparable hotels, which are

those for 2019, between 2023 and 2024.

There are a number of factors that are considered by the Group's Management to make the projections,

which are:

•Estimate of external sources specialising in the hotel sector, along with investment banks with

reference to the recovery of the hotel sector.

•Estimate of GDP (Gross Domestic Product) growth issued by the International Monetary Fund (IMF)

in its report published in October of each year for the next five years.

•Knowledge of the business/asset/local situation of the local Management of each Business Unit to

which each CGU belongs.

•Historical results obtained by the CGUs.

•Investments in repositioning the CGUs.

These factors are reflected in the cash flows through the following working hypotheses used to obtain the

projections:

•Income from accommodation is projected as the product of percentage occupation, and average rate per

room (“ADR” Average Daily Rate: is the ratio of the total income from rooms in a specific period

divided by the rooms sold in that specific period) and the total rooms available per year.

•The other revenues are projected based on the average of the relationship between the revenue from

accommodation and those revenues.

•Personnel expenses are calculated on the basis of the average cost for personnel plus the relevant

increase to the collective employment agreement for each year.

•Direct expenses are directly associated with each of the revenues and are projected on the basis of an

average ratio, while undistributed expenses are projected based on the average ratio between these and

direct expenses.

•Tax costs are calculated based on the tax rates.

The discount rates were calculated by a third party using the Weighted Average Cost of Capital (WACC)

methodology: Weighted Average Cost of Capital (WACC), as follows:

WACC=Ke*E/(E+D) + Kd*(1-T)*D/(E+D)

Where:

Ke: Cost of Equity

Kd: Cost of Financial Debt

E:Own Funds

D: Financial Debt

T: Tax Rate

The Capital Asset Pricing Model (CAPM) is used to estimate the cost of equity (ke).

The main variables used by a third party to calculate the discount rate are as follows:

•Risk-free rate: the WACC calculation is based on an increased risk-free rate. The risk-free rate is

standardised to show the average sustainable performance of the long-term bonds issued by

governments and considered to be “safe” (usually those classified as AAA by the main ratings

agencies). For European countries, a rate of 0% was taken into account as the performance of

German government bonds at 20 years, on the valuation date, showed negative performance from

December 2021 and a 1.5% standardisation was extended.

•Market risks premium: defined at 5.5% for rates in EUR, based on a wide range of financial

information, multiple methodologies and economic and financial market conditions at December

2021.

•Beta or systematic risk: Using a sample of listed companies whose businesses are comparable, the

sector’s risk differential is estimated in relation to the average risk on the global market. To

calculate the WACC for hotels being leased, a comparative of a sample of traditional hotel

companies is taken into account. Furthermore, to this group, and to calculate the WACC for owned

hotels, a sample of property investment funds (REITs) is also included in order to show the real

estate contribution to the business. Bloomberg’s historic betas were taken as a reference (monthly

data at 5 years). Given that these betas are leveraged, they have been de-leveraged taking into

account the average historical debt/capital structure for each company over 5 years.

•The capital structure applied was estimated on the basis of the capital structure of the comparable

companies, taking the proportion of debt with interest, preferential capital and ordinary capital of

these companies that are listed on the stock exchange into consideration. The average capital

structure applied is 59.5% Own Funds and 40.5% Debt for the group of comparables for owned

hotels, and 58.1% Own Funds and 41.9% Debt for the group of comparables for leased hotels.

•In addition, the local rate for corporation tax on the valuation date was considered.

•To calculate the Cost of the debt, a 2.9% debt differential is applied, based on the spot rate of

German bonds at 20 years and applying the credit rating differential for the comparable companies

of reference.

The discount rate after tax applied by the Company for this purpose is 5.75%-7.5% (8.14% in 2020). In this

regard, the cash flows resulting from the impairment tests were also calculated after tax. In addition, the

book value to which the value-in-use is compared does not include any deferred tax liabilities which could

be associated with the assets.

The average discount rate before tax applied by the Company for this purpose is 7,61%-9.86% (10.6% in

2020).

Using a post-tax discount rate and post-tax cash flows is consistent with the standards, as the estimated

future cash flows will reflect assumptions that are consistent with the manner of determining the discount

rate. In addition, the result of the post-tax flows updated at a post-tax discount rate would obtain the same

result with respect to the impairment test if a pre-tax rate were used and, therefore, the impairment and

reversion accounting records would be the same.

Information on impairment losses detected in the financial year appears in Notes 5 and 6 of this Annual

Report.

e)Leases

Leases are classified as financial leases whenever the terms of the lease substantially transfer all the risks

and rewards incidental to ownership of the leased asset to the lessee. All other leases are classified as

operating leases.

The Company generally classifies all leases as operating leases. Whether a lease is financial or operating

depends on the economic background and nature of the transaction, rather than the mere form of the lease

agreement.

The arguments used to classify the leases as operative are as follows:

–The ownership of the asset is transferred to the lessor at the end of the lease;

–There is no option to acquire the asset at the end of the lease;

–The term of the lease does not exceed the economic life of the asset

–The present value of the minimum lease payments does not substantially cover the market value of the

underlying asset;

–The duration of leases is always much shorter than the economic useful life of the underlying asset;

–In the event that it is decided to extend the duration of the lease, the terms of the new lease should be

renegotiated;

–The increases or decreases in the residual value of the underlying asset are not borne by the Company,

but by the lessor.

Expenses resulting from operating leases are charged to income in the year in which they are incurred.

When the Company acts as the lessor, it recognises the income from operating leases using the straight-line

method according to the terms of the agreements signed. These assets are recorded at the acquisition cost of

the leased assets under "Property, plant and equipment" and are depreciated in accordance with the policies

adopted for similar own-use tangible assets. When the Company is the lessee, the cost of leasing is charged

to the income statement on a straight-line basis , with the resulting asset or liability recorded in the

corresponding sections of the balance sheet.

In February 2021, the Accounting and Auditing Institute published a query whereby if rent concessions have

been negotiated within the framework of renegotiations due to Covid-19, it is not necessary that they be

linearised as with any other incentive and that they can be recorded as a lower rent expense in the period

they were obtained. As a result of this, the Company records the savings obtained from the renegotiations

derived from COVID-19, as a lower rent expense (Note 7).

f)Financial instruments

1)Financial assets

The financial assets held by the Company are classified into the following categories:

–Loans and receivables: financial assets arising from the sale of goods or the rendering of services in

the ordinary course of the Company’s business, or financial assets which, not having commercial

substance, are not equity instruments or derivatives, have fixed or determinable payments and are

not traded in a two-way market.

–Guarantees offered as a result of the lease contracts are basically valued following the criteria set

out in financial assets. The difference between the amount delivered and the fair value is recognised

as an advance payment that is charged to the income statement during the lease period. Advances

whose application will take place in the long term are subject to financial updating at the end of

each year based on the market interest rate at the time of their initial recognition.

–Investments in the equity of the Company’s group companies, associates and jointly controlled

entities: group companies are deemed to be those related to the Company as a result of a

relationship of control and associates are companies over which the Company exercises significant

influence. Jointly controlled entities include companies over which, by virtue of an agreement, the

Company exercises joint control with one or more other partners.

–Financial assets held for trading: those acquired with a view to disposing of them in the short term

or those that are part of a portfolio where evidence exists of recent actions with this goal. This

category also includes financial derivatives that are not finance guarantees (e.g. sureties) or those

designated as hedging instruments.

Initial measurement

Financial assets are initially recognised at the fair value of the consideration given, plus any directly

eligible transaction costs.

Subsequent measurement

Loans and receivables are measured at amortised cost.

Investments in companies of the Company, associates and multi-group are initially recognised at cost,

which is equivalent to the fair value of the consideration given, including the transaction costs incurred for

investments in associates and multi-group and are subsequently valued at cost, less the cumulative value

adjustments for impairment.

Financial assets held for trading are valued at their fair value, registering the result of changes in fair value

in the income statement.

The Company deregisters financial assets when they mature, or when the rights to the financial asset’s cash

flows have been transferred, along with the inherent risks and benefits of ownership.

Conversely, the Company does not derecognise financial assets and recognises a financial liability for an

amount equal to the consideration received in the transfers of financial assets in which the risks and

rewards inherent in its ownership are substantially all retained.

Impairment of financial assets –

A financial asset or group of financial assets is impaired and an impairment loss has occurred if there is

objective evidence of impairment as a result of one or more events that occurred after the asset was

initially recognised and the event or events causing the loss have an impact on the estimated future cash

flows of the financial asset or group of financial assets that can be reliably estimated.

The Company follows the criteria of recording the appropriate valuation corrections due to impairment of

loans and receivables, and debt instruments when there has been a reduction or delay in the estimated

future cash flows due to insolvency of the debtor.

The impairment loss on financial assets valued at amortised cost is the difference between the book value

of the financial asset and the present value of the estimated future cash flows, excluding future credit losses

that have not been incurred, discounted at the asset's original effective interest rate. For financial assets at a

variable interest rate, the effective interest rate corresponding to the valuation date based on the contractual

conditions is used. For debt instruments classified as held-to-maturity investments, the Company uses their

market value, provided that it is sufficiently reliable to be considered representative of the value that it

could recover.

The impairment loss is recognised with a charge to profit and loss and is reversible in subsequent years if

the decrease can be objectively related to an event after its recognition. However, the reversal of the loss is

limited to the amortised cost that the assets would have had, had the impairment loss not been recorded.

The valuation correction for impairment on commercial debtors implies a high level of judgment by

Management and the review of individual balances based on the credit quality of customers, current market

trends and historical analyses of bad debts at an aggregate level. In relation to the valuation correction

derived from the aggregate analysis of the historical experience of bad debts, a reduction in the volume of

balances implies a reduction of the valuation corrections and vice versa.

For Investments in group companies, associates and multi-group as well as equity instruments valued at

cost, the impairment calculation is determined by comparing the book value of the investment with its

recoverable value, understood as the greater between its value in use and its fair value less costs to sell.

In this sense, the value in use is calculated based on the Company's shareholding in the present value of the

estimated cash flows from ordinary activities and the final disposal or the estimated flows expected to be

received from the distribution of dividends and the final disposal of the investment.

However, and in certain cases, unless there is better evidence of the recoverable amount of the investment,

the equity of the investee company is taken into consideration when estimating the impairment on this

class of asset, adjusted, where appropriate, to the Spanish generally accepted accounting principles that are

applicable, corrected for the net tacit capital gains that exist on the valuation date. If the investee company

forms a subgroup of companies, the equity that arises from the consolidated annual accounts is taken into

account insofar as they are prepared and, if not, the equity of the individual annual accounts.

For these purposes, the book value of the investment includes any monetary item receivable or payable, the

settlement of which is not contemplated nor likely to occur in the foreseeable future, excluding items of a

commercial nature.

In subsequent years, impairment reversals are recognised to the extent that there is an increase in the

recoverable value, up to the limit of the book value that the investment would have had, had the

impairment had not been recognised.

The valuation correction for impairment on the investment is limited to its value, except where the

Company has assumed contractual, legal or implicit obligations, or has made payments on behalf of the

companies. In the latter case, a provision is recognised in accordance with the criteria set forth in section l

(provisions).

Impairment losses on equity instruments measured at cost are not reversible and are therefore recorded

directly against the value of the asset.

2)Equity instruments

An equity instrument represents a residual interest in the assets of the Company after deducting all of its

liabilities.

Equity instruments issued by the Company are recognised in equity as the proceeds received, net of issue

costs.

Treasury shares acquired by the Company during the year are recognised at the value of the consideration

paid and are deducted directly from equity. Gains and losses on the acquisition, sale, issue or retirement of

treasury shares are recognised directly in equity and in no case are they recognised in profit or loss.

3)Financial liabilities

Financial liabilities include accounts payable by the Company that have arisen from the purchase of goods

or services in the normal course of the Company's business and those which, not having commercial

substance, cannot be classed as derivative financial instruments.

Trade creditors and other accounts payable are initially recognised at the fair value of the consideration

received, adjusted by the directly attributable transaction costs. These liabilities are subsequently measured

at amortised cost using the effective interest rate method.

The Company has contracted confirming operations with various financial entities to manage the payment

to suppliers. Trade liabilities whose payment is managed by financial entities are shown in the trade

creditors and other accounts payable entry, in as far as the Company has only assignment payment

management to the financial entities, and remains primarily liable for payment of the debts to trade

creditors.

Debt issues are initially recognised at the fair value of the consideration received, less the costs directly

attributable to the transaction. They are subsequently valued at their amortised cost using the effective

interest rate method. Bonds with a maturity date greater than twelve months are classified under non-

current liabilities, while those with a maturity date of less than twelve months are included in current

liabilities.

Convertible bond issues are recognised at the time of their issue, distributing the fair value of the

consideration received between their equity and liability components, assigning the residual value obtained

after deducting the amount established separately for the liability component, from the fair value of these

instruments as a whole, to the equity instrument. The value of any derivative embedded in the compound

financial instrument other than the equity component will be included in the liability component.

Loans received from banking institutions are recognised at the amount received, net of costs incurred in the

transaction. They are subsequently valued at amortised cost. These transaction costs and financial expenses

are recognised on an accrual basis in the income statement using the effective interest rate method, and

their amount is added to liabilities to the extent to which they are not settled in the period they were

produced.

Valuation techniques and assumptions applying to the measurement of fair value

The fair values of financial assets and liabilities are determined as follows:

•The fair value of financial assets and liabilities under standard terms and conditions which are traded in

active liquid markets are based on market prices.

•The fair value of other financial assets and liabilities (excluding derivatives) is determined in

accordance with generally accepted valuation models on the basis of cash flow discounting using the

price of observable market transactions and contributor listings of similar instruments.

•In order to determine the fair value of interest rate derivatives, cash flow discounting is used based on

the implicit flow determined by the interest rate curve according to market conditions. In order to

determine the fair value of options, the Company uses the Black-Scholes valuation model and its

variants, using for this purpose market volatilities for the strike and maturity prices of said options.

Any financial instruments valued after their initial recognition at fair value are classified as level 1 to 3

based on the extent to which fair value can be observed:

•Level 1: includes any instruments indexed to listed prices (without adjustment) of identical assets or

liabilities in active markets.

•Level 2: includes any instruments indexed to other observable inputs (which are not the listed prices

included under Level 1) for assets or liabilities, be it directly (i.e., prices) or indirectly (i.e., derived

from prices).

•Level 3: includes any instruments indexed to valuation techniques, which include inputs for assets or

liabilities that are not based on observable market data (unobservable inputs).

g)Inventories

Inventories for restoration are valued at the lowest value of their acquisition or production cost.

The acquisition cost includes the amount invoiced by the seller after deducting any discount, reduction or

the like, as well as the interest included into the nominal amount of the debts, plus the additional expenses

that occur until the goods are placed for sale.

The production cost of inventories comprises the acquisition price of raw materials and other consumable

materials and the costs directly related to the units produced and a systematically calculated part of the

indirect, variable or fixed costs incurred during the process to transform them.

h)Cash and cash equivalents

Cash and cash equivalents include cash on hand and demand bank deposits with credit institutions. Other

highly liquid short-term investments are also included as long as they are easily convertible into specified

amounts of cash and are subject to insignificant risks of changes in value. For these purposes, investments

maturing in less than three months from acquisition date are included.

i)Foreign currency transactions

Foreign currency transactions have been converted into euros using the spot rate on the dates on which the

conversions are made.

Monetary assets and liabilities denominated in foreign currency have been converted to euros by applying

the current rate at the end of the year, while non-monetary assets, valued at historical cost, have been

converted by applying the exchange rate on the date on which the transactions took place.

In the presentation of the cash flow statements, the flows from transactions in foreign currencies have been

converted into euros by applying the spot exchange rate to the amount of foreign currency on the dates

they occur.

The effect of exchange rate on cash and cash equivalents in foreign currency is presented separately in the

cash flow statement as "Effect of exchange rate differences".

The positive and negative differences that appear in the settlement of foreign currency transactions and in

the conversion of monetary assets and liabilities denominated in foreign currency to euros, are recognised

in results.

j)Obligations to employees

The Company has not established any supplementary pension plan to the social security system

Collective agreements in the hotel industry, applicable to the Company in Spain, require a specific number

of monthly salary payments to those employees who leave the company due to retirement, permanent

disability or upon reaching a certain age and having a certain number of years of service and fulfilling

certain pre-established requirements.

In this regard and in compliance with Royal Decree-Law 16/2005, the Company has outsourced its

obligations concerning its employees' pension plans.

k)Severance payments

Under current legislation and certain employment contracts, the Company is required to make severance

payments to employees terminated under certain conditions. Therefore, severance payments that can be

reasonably quantified are recognised when the Company has an implicit obligation due to the existence of

a detailed plan and the generation of valid expectations among those affected that the process will be

carried out, either due to the plan having begun or its main characteristics having been announced.

l)Provisions

Provisions are recognised when the Company has a present obligation, whether legal, contractual, implicit

or tacit, as a result of a past event; it is probable that there will be an outflow of resources that require

future economic benefits to cancel the obligation; and a reliable estimate of the amount of the obligation

can be made.

The financial statements include all the provisions with respect to which it is considered likely that the

obligation will have to be settled. Contingent liabilities are not recognised in the financial statements but

rather are disclosed, unless the possibility of an outflow in settlement is considered to be remote.

Provisions are measured at the present value of the best possible estimate of the amount required to settle

or transfer the obligation, taking into account the information available on the event and its consequences.

Where discounting is used, adjustments made to provisions are recognised as interest cost on an accrual

basis.

The compensation to be received from a third party on settlement of the obligation is recognised as an

asset, provided that there are no doubts that the reimbursement will take place, unless there is a legal

relationship whereby a portion of the risk has been externalised as a result of which the Company is not

liable; in this situation, the compensation will be taken into account for the purpose of estimating the

amount of the related provision that should be recognised.

m)Onerous Contracts

The Company considers onerous contracts to be those in which the inevitable costs of fulfilling the

obligations they entail exceed the economic benefits expected from them.

The Company follows the principle of recording a provision at the present value of the aforementioned

difference between the costs and benefits of the contract, or the compensation foreseen for abandonment of

the contract, if such is decided.

n)Income and expenses

Revenue and expenses are recognised on an accrual basis, i.e. when the actual flow of the related goods

and services occurs, regardless of when the resulting monetary or financial flow arises. Revenue is

measured at the fair value of the consideration received, net of discounts and taxes.

Revenue from sales and services rendered is also recognised by reference to the stage of completion of the

transaction at the reporting date, provided the outcome of the transaction can be reliably estimated.

Interest income from financial assets is recognised using the effective interest method and dividend income

is recognised when the shareholder’s right to receive payment has been established. In any case, interest

from financial assets accrued after the date of acquisition is recognised as income in the income statement.

Additionally, the Company has created, developed and currently is operating hotel businesses in Spain and

in other countries under an owned unique and distinct system, called “Sistema NH”. The Company, as

creator and unique owner of “Sistema NH”, lends to its subsidiaries operating hotel establishments the use

and activity of “Sistema NH”, including its commercial brands. Likewise, the Company lends hotel

services related to booking management, marketing and advertising and services for accessing information

systems.

Sale of rooms and other related services

Income from the sale of rooms and other related services is recognised daily based on the services

provided by each hotel, including customers who are still staying at the hotel at the close of each day. In

this respect, the Company recognises the income when the service is considered to be provided and,

therefore, fulfils the obligation for performance assumed on check-in. Due to this, for example, in the case

of an accommodation service that covers several nights, the income is recognised on a daily basis for each

one of the overnight stays.

The consideration received is distributed among the contracted services. These include direct services such

as room, food, drink and other consumption, and others related to banquets, events and the rental of spaces.

Therefore, the obligations are completely separate and they are recorded at the time they occur.

In the case of the sale of several services together, such as, for example, an accommodation service with

one for breakfast, the Company, when it makes the offer, sets the price for each one of the obligations

assumed, for which reason at the time the services is considered to be provided the income is recorded at

the price set beforehand. Solely in the case of promotions where the service is provided “free-of-charge”

with the other one, the Company applies a methodology where the consideration is divided using a ratio

calculated by hotel based on the costs of the service at that hotel plus an additional margin.

o)Income tax

Tax expense (tax income) comprises current tax expense (current tax income) and deferred tax expense

(deferred tax income).

The current income tax expense is the amount payable by the Company as a result of income tax

settlements for a given year. Tax credits and other tax benefits, excluding tax withholdings and interim

payments, and tax loss carryforwards from prior years effectively offset in the current year reduce the

current income tax expense.

The deferred tax expense or income relates to the recognition and derecognition of deferred tax assets and

liabilities. These include temporary differences measured as the amount expected to be payable or

recoverable on differences between the carrying values of assets and liabilities and their tax bases, and tax

loss and tax credit carryforwards. Said amounts are recognised by applying to the relevant temporary

difference or credit the tax rate at which they are expected to be recovered or settled.

Deferred tax liabilities are recognised for all taxable temporary differences, except for those arising from

the initial recognition of goodwill or of other assets and liabilities in a transaction that is not a business

combination and affects neither accounting profit (loss) nor taxable profit (tax loss).

Deferred tax assets are recognised to the extent that it is considered likely that the Group will have taxable

profits in the future against which the deferred tax assets can be utilised.

Deferred tax assets and liabilities arising from transactions charged or credited directly to equity are also

recognised in equity.

The deferred tax assets recognised are reassessed at the end of each reporting period and the appropriate

adjustments are made, according to the extent of doubts as to their future recoverability. Also,

unrecognised deferred tax assets are reassessed at the end of each reporting period and are recognised to

the extent that it has become likely that they will be recovered through future taxable profits.

p)Environment

Environmental assets are deemed to be assets used on a lasting basis in the Company's operations whose

main purpose is to minimise environmental impact and protect and improve the environment, including the

reduction or elimination of future pollution.

Because of their nature, the Company's business activities do not have a significant environmental impact.

q)Share-based remuneration schemes

These schemes, which may be paid in shares, are valued at the time of granting, using a financial method

based on a binomial model which takes into consideration the strike price, volatility, the exercise period,

the expected dividends, the risk-free interest rate and the assumptions made concerning the financial year.

The allocation of the aforementioned valuation to profit or loss is carried out under personnel expenses on

a straight line basis over the period of time the employee is employed as a requirement for its exercise, and

a balancing entry on the Balance Sheet under Reserves.

On each subsequent closing date, the Company reviews the estimates regarding the number of options

expected to be exercisable, adjusting the equity figure if necessary.

r)Transactions between group companies

Transactions between group companies, except those related to mergers, spin-offs and non-monetary

contributions of businesses, including investments in group companies, are recognised at the fair value of

the consideration given or received. The difference between said value and the agreed amount is recorded

according to the underlying economic substance, either as a contribution or a distribution of dividends.

However, the part that does not occur on terms proportional to the shareholding in the group company is

recognised as an income or expense by donation.

The Company performs all its transactions with related parties on an arm's length basis. Also, the transfer

prices are adequately supported and, therefore, the Company's directors consider that there are no material

risks in this connection that might give rise to significant liabilities in the future.

s)Current/Non-current classification

Current assets are assets associated with the normal operating cycle, which in general is considered to be

one year; other assets which are expected to mature, be disposed of or be realised within twelve months

from the end of the reporting period; financial assets held for trading, except for financial derivatives that

will be settled in a period exceeding one year; and cash and cash equivalents. Assets that do not meet these

requirements are classified as non-current assets.

Similarly, current liabilities are liabilities associated with the normal operating cycle, financial liabilities

held for trading, except for financial derivatives that will be settled in a period exceeding one year; and, in

general, all obligations that will mature or be extinguished in the short term. All other liabilities are

classified as non-current liabilities.

t)Cash flow statement

The following terms with their corresponding explanation are used in the cash flow statements prepared

using the indirect method:

–Cash flows: inflows and outflows of cash and cash equivalents, which are short-term, highly

liquid investments that are subject to an insignificant risk of changes in value.

–Operating activities: the principal revenue-producing activities of the Company, and other

activities that are not investing or financing activities. The Company presents trade payables

confirming activities as an operating activity.

–Investing activities: the acquisition and disposal of long-term assets and other investments not

included in cash and cash equivalents.

–Financing activities: activities that result in changes in the size and composition of the equity and

liabilities that are not operating activities.

5.-INTANGIBLE ASSETS

The detail of the different items included under this heading and of the changes therein during the year are as

follows (in thousands of euros):

Balance at

01.01.21

Inclusions

Retirements

Assignments

(Note 6)

Balance at

31.12.21

COST

Rights of use

32,478

—

32,478

Concessions, patents and trademarks

1,425

155

(116)

—

1,464

Software applications

98,821

4,357

—

103,192

132,724

4,512

(116)

137,134

ACCUMULATED

AMORTISATION

Rights of use

(27,113)

(1,511)

—

(28,614)

Concessions, patents and trademarks

(631)

(210)

—

(841)

Software applications

(69,425)

(11,253)

—

(80,678)

(97,169)

(12,974)

—

(110,133)

Impairment

—

NET BOOK VALUE

35,555

27,001

Balance at

01.01.20

Inclusions

Retirements

Assignments

(Note 6)

Balance at

31.12.20

COST

Rights of use

32,478

—

32,478

Concessions, patents and trademarks

1,353

108

—

(36)

1,425

Software applications

88,899

9,930

(8)

—

98,821

122,730

10,038

(8)

(36)

132,724

ACCUMULATED

AMORTISATION

Rights of use

(25,553)

(1,558)

—

(2)

(27,113)

Concessions, patents and trademarks

(433)

(204)

—

(631)

Software applications

(56,605)

(12,828)

—

(69,425)

(82,591)

(14,590)

(97,169)

Impairment

—

NET BOOK VALUE

40,139

35,555

The most significant additions in 2021 were those arising from investments made to develop the Company's

computer applications.

The section “Usufruct Rights” recognises the total amount agreed by way of payment for the usufruct rights

over the Hotel NH Plaza de Armas.

At the end of 2021 and 2020, the Company had fully amortised intangible assets still in use, itemised as follows

(in thousands of euros):

Thousands of euros

2021

2020

Usage rights, concessions, patents and brands

2,419

2,206

Software applications

54,082

38,437

Total

56,501

40,643

6.-PROPERTY, PLANT AND EQUIPMENT

The detail of the different items of under this heading and the changes therein during the year are as follows (in

thousands of euros):

Balance at

Assignments

(Nota 5)

Balance at

01.01.21

Inclusions

Retirements

31.12.21

COST

Land and buildings

90,954

—

(32,018)

—

58,936

Plant and machinery

64,651

1,258

(15,679)

50,306

Other plant, fixtures and furniture

9,654

193

(280)

9,599

Other fixed assets and assets under

122

—

(122)

165,381

1,506

(47,977)

(14)

118,896

ACCUMULATED

AMORTISATION

Land and buildings

(17,553)

(1,612)

5,094

—

(14,071)

Plant and machinery

(37,688)

(3,105)

7,452

—

(33,341)

Other plant, fixtures and furniture,

other fixed assets and assets under

(6,029)

(815)

190

—

(6,654)

(61,270)

(5,532)

12,736

—

(54,066)

Impairment

—

NET BOOK VALUE

104,111

64,830

The main derecognition in the period relates to the sale of the NH Collection Barcelona Gran Hotel Calderón

with a sale and leaseback transaction. The hotel was sold for 125.5 million euros with a linked 20 year lease

agreement, with NH having the option of additional extensions, and a net capital gain of 87,143 thousand euros

before tax was recorded (Note 17-e).

The heading related to Land and Buildings is broken down into Land at 31,322 thousand euros (50,659 euros in

2020) and Buildings at 13,543 thousand euros (22,742 thousand euros in 2020).

Balance at

Assignments

(Nota 5)

Balance at

01.01.20

Inclusions

Retirements

31.12.20

COST

Land and buildings

90,950

—

90,954

Plant and machinery

68,000

601

(3,923)

(27)

64,651

Other plant, fixtures and furniture

11,412

489

(2,407)

160

9,654

Other fixed assets and assets under

122

185

(84)

(101)

122

170,484

1,275

(6,414)

165,381

ACCUMULATED

AMORTISATION

Land and buildings

(15,742)

(1,811)

—

(17,553)

Plant and machinery

(36,128)

(3,621)

2,057

(37,688)

Other plant, fixtures and furniture,

other fixed assets and assets under

(6,646)

(1,059)

1,684

(8)

(6,029)

(58,516)

(6,491)

3,741

(4)

(61,270)

Impairment

—

(71)

110

(39)

—

NET BOOK VALUE

111,968

104,111

At year-end, the Company had fully depreciated items of property, plant and equipment still in use, itemised as

follows:

Thousands of euros

2021

2020

Plant and machinery

14,455

18,358

Other fixtures, tools, furniture and others

2,915

2,808

Total

17,370

21,166

The Company has taken out insurance policies to cover any possible risks to which the different elements of its

tangible fixed assets are subject, and to cover any possible claims that may be filed against it in the course of its

activities. These policies sufficiently cover the risks to which the Group is exposed.

At 31 December 2021, there are no firm commitments to purchase fixed assets (2.3 thousand euros in 2020).

7.-OPERATING LEASES

At 31 December, the Company had contracted with lessors for the following minimum lease payments, based on

the leases currently in force, without taking into account the charging of common expenses, future increases in

the CPI or future contractual lease payment reviews:

Thousands of euros

Nominal value

2021

2020

Less than one year

7,656

5,676

Between two and five years

16,218

17,310

More than five years

5,966

8,442

Total

29,840

31,429

The operating lease payments recognised as an expense in the year came to 8,282 thousand euros (7,714

thousand euros in 2020), almost entirely consisting of the hotel lease payments (Note 17-c).

The term of the operating leases arranged by the Company ranges from 2 to 15 years. Also, the rental income

from said leases consists of a fixed amount tied to the CPI index which is reviewed annually.

The amount of the operating lease instalments recognised as income and expenses is as follows:

Thousands of euros

2021

2020

Minimum lease payments

8,282

7,693

Contingent expenses

—

Income from leases and subleases

3,728

3,412

8.-LONG TERM INVESTMENTS IN GROUP COMPANIES AND ASSOCIATES AND FINANCIAL INVESTMENTS

8.1-Group companies, jointly-controlled entities and associates

The most significant information in relation to Group companies, jointly controlled entities and associates is as follows:

2021 - Thousands of euros

Company/ Registered address /Activity

Direct

shareholding

Capital

Profit (Loss)

Other equity items

Total Shareholders'

Equity

Cost

Provision

Group Companies:

NH Italia, S.p.A./Valdagno/Hotel

51%

233,847

(7,408)

103,184

329,622

300,159

—

NH Europa, S.A./Madrid/Holding

100%

100,743

(2,401)

462,202

560,545

973,359

—

Latinoamericana De Gestion Hotelera, S.A./Madrid/Holding

100%

104,036

(2,128)

(15,424)

86,484

179,217

(33,780)

NH Hoteles España, S.A./Madrid/Hotel

100%

177,059

(8,904)

(101,599)

66,557

351,930

—

NH Central Reservation Office, S.L/Madrid/Call Centre

100%

7,700

(1,095)

1,644

8,249

31,671

(26,365)

NH Cash Link, S.L.U./Madrid/Financial

100%

—

82,121

82,124

82,121

—

Capredo Investments GmbH/Switzerland/Holding

100%

(58)

13,107

13,086

9,066

—

Roco Hospitality Group S.R.L./Venice/Hotel

51%

(13,190)

18,896

5,716

27,574

—

Others

—

2,295

—

Associates:

Sotocaribe S.L/Madrid/Holding

36%

61,082

(371)

114,752

175,463

49,234

(9,069)

Total

2,006,626

(69,214)

2020 - Thousands of euros

Company/ Registered address /Activity

Direct

shareholding

Capital

Profit (Loss)

Other equity items

Total Shareholders'

Equity

Cost

Provision

Group Companies:

NH Italia, S.p.A./Valdagno/Hotel

51%

233,847

(46,520)

183,224

370,551

300,139

(31,930)

NH Europa, S.A./Madrid/Holding

100%

100,743

(209,767)

671,969

562,945

973,359

—

Latinoamericana De Gestion Hotelera, S.A./Madrid/Holding

100%

104,036

(76,223)

82,053

109,866

179,217

(71,136)

NH Hoteles España, S.A./Madrid/Hotel

100%

177,059

(60,372)

14,665

131,352

351,839

(75,426)

NH Central Reservation Office, S.L/Madrid/Call Centre

100%

7,700

(1,197)

2,831

9,334

31,665

(25,275)

NH Cash Link, S.L.U./Madrid/Financial

100%

—

82,121

—

Capredo Investments GmbH/Switzerland/Holding

100%

—

12,536

12,573

9,066

—

Roco Hospitality Group S.R.L./Venice/Hotel

51%

(10,583)

(5,436)

(16,010)

9,280

—

Others

2,288

—

Associates:

Sotocaribe S.L/Madrid/Holding

36%

61,082

(1,549)

116,025

175,558

49,476

(9,069)

Total

1,988,450

(212,836)

The changes in "Investments in Group Companies" in 2021 and 2020 are as follows (in thousands of euros):

Cost

Provision

Net

Balance at

Company/ Registered address /Activity

01/01/2021

Additions

Retirements

Transfers

31/12/2021

01/01/2021

Additions

Retirements

Transfers

31/12/2021

Group Companies:

NH Italia, S.p.A./Valdagno/Hotel

300,139

—

300,159

(31,930)

—

31,930

—

300,159

NH Europa, S.A./Madrid/Holding

973,359

—

973,359

—

973,359

Latinoamericana De Gestion Hotelera, S.A./Madrid/Holding

179,217

—

179,217

(71,136)

—

37,356

—

(33,780)

145,437

NH Hoteles España, S.A./Madrid/Hotel

351,839

103

(12)

—

351,930

(75,426)

—

75,426

—

351,930

NH Central Reservation Office, S.L/Madrid/Call Center

31,665

—

31,671

(25,275)

(1,090)

—

(26,365)

5,306

NH Cash Link, S.L.U./Madrid/Financial

82,121

—

82,121

—

82,121

Capredo Investments GmbH/Switzerland/Holding

9,066

—

9,066

—

9,066

Roco Hospitality Group S.R.L./Venice/Hotel

9,280

18,294

—

27,574

—

27,574

Others

2,288

—

2,295

—

2,295

Associates:

Sotocaribe S.L/Madrid/Holding

49,476

—

(242)

—

49,234

(9,069)

—

(9,069)

40,165

Total

1,988,450

18,430

(254)

—

2,006,626

(212,836)

(1,090)

144,712

—

(69,214)

1,937,412

Cost

Provision

Net

Balance at

Company/ Registered address /Activity

01/01/2020

Additions

Retirements

Transfers

31/12/2020

01/01/2020

Additions

Retirements

Transfers

31/12/2020

Group Companies:

NH Italia, S.p.A./Valdagno/Hotel

300,245

—

(106)

—

300,139

—

(31,930)

—

(31,930)

268,209

NH Cash Link, S.L.U./Madrid/Financial

82,121

—

82,121

—

82,121

NH Europa, S.L./Madrid/Holding

973,359

—

973,359

—

973,359

Latinoamericana De Gestion Hotelera, S.A./Madrid/

179,217

—

179,217

—

(71,136)

—

(71,136)

108,081

NH Hoteles España, S.L./Madrid/Hotel

351,759

—

351,839

—

(75,426)

—

(75,426)

276,413

NH Central Reservation Office, S.L/Madrid/Call Centre

31,665

—

31,665

(24,010)

(1,265)

—

(25,275)

6,390

Capredo Investments GmbH/Switzerland/Holding

—

9,066

—

9,066

Roco Hospitality Group S.R.L./Venice/Hotel

—

9,280

—

9,280

—

9,280

Others

2,205

—

2,288

—

2,288

Associates:

Sotocaribe S.L/Madrid/Holding

—

5,939

—

43,537

49,476

—

(9,069)

40,407

Total

1,920,571

15,382

(106)

52,603

1,988,450

(24,010)

(179,757)

—

(9,069)

(212,836)

1,775,614

The main additions are:

During 2021 the Company contributed 18.3 million euros to the company Roco Hospitality Group, S.R.L. as a

capital injection.

At year-end 2020, the Company stopped recording the companies Sotocaribe, S.L. and Capredo Investments,

GmbH as non-current assets classified as held for sale. Given the uncertainty associated with these sales

processes, the Group decided to reclassify these investments to Long-term investments in group companies and

associates.

On 7 September 2020, the Company acquired 50.5% of the shares of Roco Hospitality Group, S.R.L., which is

part of the "Boscolo Hotels" Group.

8.2.- Long-term financial investments

At 31 December, this item is broken down as follows:

Thousands of

2021

2020

Guarantees

1,339

1,329

Others

Total

1,370

1,360

9.-CASH AND CASH EQUIVALENTS

"Cash and Cash Equivalents" largely includes the Company’s cash position and bank deposits maturing in three

months or less. These assets are recognised at their fair value. There are no restrictions on how cash may be

used.

The Company's liquidity position at 31 December 2021 is based on the following points:

–The Company has cash and cash equivalents amounting to 16,756 thousand euros.

–Available undrawn credit facilities of 259,000 thousand euros (Note 12). .

As a result of the enactment of Royal Decree 1558/2012 of 15 November, of Article 42 bis of Royal Decree

1065/2007 of 27 July, approving the General Regulations on tax management, inspection and procedures, and

implementing the common rules of the procedures for applying taxes, which establishes certain reporting

obligations with regard to overseas assets and rights, among others, it is disclosed that some members of the NH

Hotel Group S.A. Board of Directors have the right, as representatives or authorised officials, to dispose of bank

accounts located abroad, which are in the name of Group companies. The reason certain Board members have

the right to dispose of overseas bank accounts is that they are directors or board members of said subsidiaries.

NH Hotel Group S.A. holds other accounting documents, namely the consolidated annual accounts, from which

sufficient data can be extracted in relation to the aforementioned accounts.

10.-EQUITY AND OWN FUNDS

a)Subscribed capital

At 31 December 2021, the share capital of NH Hotel Group, S.A. was represented by 435,745,670 fully

subscribed and paid up bearer shares each with a par value of €2 (392,180,243 shares at 31 December 2020). All

these shares carry identical voting and economic rights and are traded on the Continuous Market of the Spanish

Stock Exchanges.

The Company increased its share capital and premium by 106.6 million euros in the 2021 financial year with the

offset of loans from the main shareholder and preferential subscription rights for the other shareholders, by

virtue of the resolutions of the General Shareholders’ Meeting held on 30 June 2021.

According to the most recent notifications received by the Parent Company and the communications submitted

to the Spanish National Securities Market Commission (CNMV) prior to the end of each reporting period, the

main shareholdings were as follows:

31/12/2021

31/12/2020

Minor International Public Company Limited (“MINT”)

94.13%

The aforementioned (indirect) shareholding of MINT in NH Hotel Group, S.A. is the result of the IPO made by

MHG Continental Holding (Singapore) Pte Ltd. on 11 June 2018 for 100% of the shares that were part of the

share capital of NH Hotel Group, S.A., the result of which was that MINT acquired, through its wholly owned

subsidiary MHG Continental Holding (Singapore) Pte. Ltd, shares representing 94.13% of the share capital of

NH Hotel Group, S.A.

b)Dividends

The company did not distribute dividends in 2021 or 2020

c)Share premium

The balance of the "Share Premium" account arose as a result of the capital increases carried out by the

Company.

This reserve is freely distributable.

d)Legal reserve

i) The legal reserve is allotted in accordance with article 274 of the Consolidated Text of the Capital Companies

Act, which provides that, in all cases, a figure equal to 10% of the profit for the financial year must go into it

until it reaches at least 20% of the share capital.

It may not be distributed and, if it is used to offset losses, in the event that there are no other reserves that are

sufficient for that purpose, it must be replenished with future profits.

At 31 December 2021 and 2020 the Parent Company had not allotted the minimum limit provided for in the

Consolidated Text of the Capital Companies Act to this reserve.

e)Restricted reserves

Reserves totalling 310 thousand euros at 31 December 2021 (367 thousand euros at 31 December 2020) could

not be distributed, as this figure corresponds to own shares.

f)Treasury Shares

At 31 December 2021, the Company had 96,246 own shares, compared to 103,947 own shares at 31 December

2020. The evolution in treasury shares over the period can be explained by the following movement:

•On 10 April 2019, the Group signed a liquidity contract to manage its treasury shares with Banco

Santander, which entered into force on 11 April 2019. The total number of shares allocated to the

securities account associated with the new Liquidity Contract at 31 December 2021 is 96,246 shares and

the amount allocated to the cash account is 333,543 euros. At 31 December 2020, the number of shares

assigned to the liquidity contract was 103,947 shares. The negative effect recorded in reserves for

operations carried out in 2021 was 700 thousand euros.

•In the 2021 financial year, the second cycle of the second long-term incentive plan was settled (Note 17-

b). A purchase of 189,962 treasury shares was made to settle the second cycle, with this amount

matching the total number of shares handed over. The total recorded positive impact of these

movements on equity was 759 thousand euros.

11.-PROVISIONS

The detail of the Provisions is as follows:

Thousands of euros

2021

2020

Non-current liabilities:

Provision for pensions and similar obligations

1,226

519

Provision for liabilities

1,868

1,762

3,094

2,281

Current liabilities:

Provision for other liabilities

—

Provision for pensions and similar obligations

This heading includes various awards for retirement, performance related and/or long-stay considered in the

Collective Bargaining Agreements that are applicable in Spain.

The breakdown of the main assumptions used to calculate actuarial liabilities is as follows:

2021

2020

Discount rates

0.70%

0.47%

Expected annual rate of salary rise

1.2%

Provision for liabilities

In 2021, the long-term "Provision for liabilities" account includes provisions for litigation and risks which the

Company considers probable and derecognising during the year those that have been resolved in the year. No

decision on these claims is expected in the short term (Note 15).

12.-FINANCIAL DEBT - LONG AND SHORT TERM

12.1Debt instruments and debts with credit institutions

The balances of the "Bonds and other negotiable securities" and "Debts with credit institutions" items were as

follows:

Thousands of euros

2021

2020

Long-term

Short-term

Long-term

Short-term

Guaranteed senior notes

400,000

—

356,850

—

Borrowing costs

—

8,089

—

3,308

Arrangement expenses

(4,980)

(1,286)

(4,859)

(1,753)

Debt instruments and other marketable securities

395,020

6,803

351,991

1,555

Secured credit line

—

236,000

—

Unsecured loans

265,076

2,424

260,959

6,541

Subordinated loans

40,000

—

40,000

—

Credit lines

5,000

12,000

5,000

12,000

Arrangement expenses

(5,108)

(1,350)

(2,582)

(1,675)

Borrowing costs

—

907

—

3,265

Bank borrowings

304,968

13,981

539,377

20,131

Total

699,988

20,784

891,368

21,686

For the purpose of strengthening the Group’s capital structure and liquidity, the following financing measures

were entered into during 2021:

–In April 2021 the extension for an additional period of 3 years was formalised for the syndicated loan

of 250,000 thousand euros with a partial guarantee from the Instituto de Crédito Oficial (ICO), taking

its original expiry date of 2023 to 2026. Furthermore, the waiver on compliance with financial

covenants was extended for the whole of 2022.

–In May 2021, the Company received a loan convertible into shares of 100,000 thousand euros from its

majority shareholder, Minor International, which was capitalised with a capital increase for all the

shareholders in September 2021 (Note 10).

–In June 2021, the renegotiation of the syndicated credit facility (RCF) was formalised, increasing its

total from 236,000 thousand euros to 242,000 thousand euros and extending its expiry from 2023 to

2026. Furthermore, the waiver on compliance with financial covenants was extended for the whole of

2022.

–In June 2021, the Company placed a senior bonds issue on the market, guaranteed for a total of 400,000

thousand euros maturing in 2026, the funds from which were mainly used to repay senior bonds

guaranteed for a total of 356,850 thousand euros maturing in 2023.

These transactions have strengthened capital structure and liquidity, giving the company a stable financial

position, without significant maturities until 2026, to address the recovery of its activity.

Secured senior bonds maturing in 2026

On 14 June 2021 the Company offered guaranteed senior bonds, which mature in 2026, at the nominal value of

400,000 thousand euros. The nominal annual interest rate for the issue is 4% and the cost of arranging the issue

of the bond was 6,896 thousand euros.

After the issue was paid up and closed on 28 June, using the funds received from the issue, the Parent Company

paid off the total guaranteed senior notes (the “Bonds”) in the amount of 356,850 thousand euros maturing in

2023 early, with a payment of 100.938% of the nominal value of the Bonds subject to repayment.

The outstanding nominal amount at 31 December 2021 was 400,000 thousand euros.

Secured credit line

On 22 September 2016, the Parent Company and NH Finance, S.A. entered into a revolving business credit with

credit institutions amounting to 250,000 thousand euros ("syndicated credit line") with a maturity of three years,

extendable to five years at the time of the refinancing of the guaranteed senior notes maturing in 2019. As a

consequence of the refinancing of the guaranteed senior notes maturing in 2019, which took place in 2017, the

maturity date of said financing was extended to 29 September 2021.

On 16 October 2020, the Parent Company and NH Finance, S.A. agreed the extension of the maturity of the

finance to 29 March 2023, with a limit of 236,000 thousand euros.

On 29 June 2021, the Parent Company and NH Finance, S.A. agreed an additional extension of the maturity of

the finance to 31 March 2026, with a limit of 242,000 thousand euros.

On 8 July 2021, the amount drawn down from this syndicated credit line was reduced from 236,000 thousand

euros to 36,000 thousand euros. On 8 December 2021, the 36,000 thousand euros drawn down was reduced in

its entirety.

At 31 December 2021, the total amount of 242,000 thousand euros of this financing was available.

Subordinate loan convertible into shares

On 24 May 2021, the Company received a loan convertible into shares of 100,000 thousand euros from its

majority shareholder, Minor International, which was capitalised with a capital increase for all the shareholders

in September 2021 (Note 10).

Unsecured loans

–Syndicated ICO backed loan maturing in 2026

On 29 April 2020, the Group entered into a loan for 250,000 thousand euros over 3 years, with no repayments

until maturity.

The contract, within the legal framework established by the Spanish government to mitigate the economic

impact of COVID-19, received a guarantee granted by the Spanish state.

On 29 April 2021, on the basis of Royal Decree Law 34/2020 approved in November 2020, the Parent Company

agreed the extension of this financing with the loan institutions until 2026, with no partial repayments until

maturity.

At 31 December 2021, this financing was available in full.

–Other non-guaranteed loans

In addition to the 250,000 ICO backed syndicated loan, as a result of the crisis caused by COVID-19,

throughout 2020 the Company took advantage of government aid to take out several loans and, throughout

2021, agreed an extension to their terms with the grant of a Spanish government guarantee:

–In May 2020, the Company signed a bilateral loan for 10,000 thousand euros over 2 years, within the

legal framework established by the Spanish state to mitigate the economic impact of COVID-19 and

thus receiving the ICO guarantee. In May 2021, on the basis of Royal Decree Law 34/2020, the

Company agreed the extension of the maturity of this loan for a further 3 years, with a new maturity

date of May 2025.

–In July 2020, the Company signed a bilateral loan for 7,500 thousand euros over 3 years, within the

legal framework established by the Spanish state to mitigate the economic impact of COVID-19 and

thus receiving the ICO guarantee. In April 2021, on the basis of Royal Decree Law 34/2020, the

Company agreed the extension of the maturity of this loan for a further 3 years, with a new maturity

date of July 2026.

Subordinated loan

A loan amounting to 40,000 thousand euros fully drawn at 31 December 2021 and with a single maturity and

repayment in 2037, are included in this item. The interest rate on this loan is the 3-month Euribor plus a spread.

Bilateral credit lines

At 31 December 2021, the balances under this item include the amount drawn down from credit facilities. The

joint limit of these loan agreements and credit facilities at 31 December 2021 amounted to 34,000 thousand

euros, of which 17,000 thousand euros had been drawn down at that date.

Obligations required in the senior notes contracts maturing in 2026, the syndicated credit line and the

syndicated loan with ICO guarantee maturing in 2026

The senior notes maturing in 2026, the syndicated credit line maturing in 2026 and the syndicated loan

guaranteed by ICO maturing in 2026 require the fulfilment of a series of obligations and limitations of

essentially homogeneous content as regards the assumption of additional borrowing or provision of guarantees

in favour of third parties, the granting of real guarantees on assets, the sale of assets, investments that are

permitted, restricted payments (including the distribution of dividends to shareholders), transactions between

related parties, corporate transactions and disclosure obligations. These obligations are detailed in the issue

prospectus for the aforementioned notes, as well as in the credit agreement of the syndicated credit line.

The syndicated credit line and the syndicated loan with the ICO guarantee require compliance with financial

ratios (financial covenants); in particular, (i) an interest coverage ratio of > 2.00x, (ii) a net indebtedness ratio of

< 5.50x.

Furthermore, the senior notes maturing in 2026 and the syndicated credit line require fulfilment of a Loan to

Value (“LTV”) ratio that depends on NH’s net debt level at any time as shown below:

- Net debt-to-income ratio ˃ 4.00x: LTV ratio = 70%

- Net debt-to-income ratios ≤ 4.00x: LTV ratio = 85%

- Net debt-to-income ratio ≤ 3.50x: LTV ratio = 100%

The maximum permitted LTV at 31 December 2021 is 70%.

At 31 December 2021 the Parent Company has a waiver on compliance with the financial commitments

(“financial covenants”) in the syndicated credit line and syndicated loan guaranteed by ICO for the whole of

2022.

Package of guaranteed senior bonds maturing in 2026 and syndicated credit line maturing in 2026

The guaranteed senior notes maturing in 2026 and syndicated credit line maturing in 2026 share the following

guarantees: (i) pledge of shares: 100% of the share capital of (A) Diegem, (B) Immo Hotel Brugge NV, (C)

Immo Hotel Diegem NV, (D) Immo Hotel Mechelen NV, (E) Immo Hotel Stephanie NV,(F) Onroerend Goed

Beheer Maatschappij Van Alphenstraat Zandvoort, B.V. and (G) NH Italia, S.p.A.; (ii) first-tier mortgage

guarantee on the following hotels located in the Netherlands: NH Conference Centre Koningshof owned by

Koningshof, B.V.; NH Conference Centre Leeuwenhorst owned by Leeuwenhorst Congres Center, B.V.; NH

Zoetermeer owned by Onroerend Goed Beheer Maatschappij Danny Kayelaan Zoetermeer, B.V.; NH

Conference Centre SparreNHorst owned by SparreNHorst, B.V.; NH Capelle owed by Onroerend Goed Beheer

Maatschappij Capelle aan den IJssel, B.V.; y NH Naarden owned by Onroerend Goed Beheer Maatschappij

IJsselmeerweg Naarden, B.V. and the joint guarantee on first demand of the main operating companies in the

group wholly owned by the Parent Company.

The net book value of the assets granted as mortgage security against the syndicated credit line (242,000

thousand euros full available at 31 December 2021) and guaranteed senior notes in the amount of 400,000

thousand euros, maturing in 2026, can be broken down as follows (in thousands of euros):

Net book value of

the mortgaged

Mortgaged asset

assets

NH Conference Centre Leeuwenhorst

55,871

NH Conference Centre Koningshof

39,473

NH Conference Centre Sparrenhorst

6,286

NH Zoetermeer

7,189

NH Naarden

3,854

NH Capelle

6,082

Total

118,755

Net value of assets assigned as mortgage collateral

118,755

Value of guaranteed debt

400,000

Fixed interest

400,000

Variable interest

—

Limitation on the distribution of Dividends

The guaranteed "senior" bonds maturing in 2026, the revolving syndicated credit line maturing in 2026 and the

ICO backed syndicated loan and bilateral loan maturing in 2026 described above contain clauses limiting the

distribution of dividends.

In the case of the senior bonds maturing in 2026, in general, distribution of dividends is allowed as long as (a)

there is no current non-compliance and one is not produced as a result of the distribution; (b) the interest

coverage ratio pro forma taking into account the planned distribution would be > 2,0x; and (c) the total restricted

payments (including, amongst others, certain restricted investments, early repayments of subordinated debt,

share buy-backs, payments in cash for subordinated debt to controlling shareholders, or persons associated with

them, and other forms of remuneration to shareholders in their position as such) made from the offer date (14

June 2021) must be lower than the total of, amongst other entries, (i) 50% of NH Group's consolidated net

income from the first day of the full quarter immediately prior to the offer date up to the date of the full quarter

nearest to the distribution date for which the quarterly accounts are available, although when calculating the net

income, 100% of the consolidated net losses for that period must be deducted, with the exception of losses prior

to 31 March 2022 (this is what is known as the “CNI builder basket”), and (ii) 100% of the net contributions to

NH Group's capital since the offer date.

Additionally, as an alternative and without having to be in compliance with the previous condition, NH Group

may distribute dividends and make other restricted payments without any limit on the amount as long as the

leverage ratio (gross debt/EBITDA) pro forma taking into account the intended restricted payment should not be

higher than 4.5x.

Finally, and also alternatively and without having to be concurrent with the previous ones, the notes maturing in

2026 establish a franchise to be able to make restricted payments (including dividends) without needing to

comply with any specific requirement, for a total aggregate amount of 25,000,000 euros from the issue date.

In the case of the syndicated credit line, the distribution of dividends or other forms of remuneration to

shareholders are not allowed while the waiver on complying with financial ratios (financial covenants) is in still

in force. Once the waiver ceases to be in force, according to the syndicated credit line, the distribution of a

percentage of the NH Group’s consolidated net profit from the previous year is allowed, provided that there has

been no breach of the relevant financing agreement and the net financial debt (through the dividend payment or

other type of distribution)/EBITDA ratio is less than 4.0x. The amount that may be distributed depends on the

net financial debt/EBITDA ratio (pro forma taking into account the dividend payment or other type of

distribution) in accordance with the following breakdown:

- Net Financial Debt /EBITDA ≤ 4.0x: Percentage of consolidated net profit: 75%

- Net Financial Debt /EBITDA ≤ 3.5x: Percentage of consolidated net profit: 100%

- Net Financial Debt /EBITDA ≤ 3.0x: Percentage of consolidated net profit: unlimited

All these metrics are calculated using consolidated data.

At 31 December 2021, the requirements for the distribution of dividends this year were not met.

Detail of current and non-current payables

The detail, by maturity, of the items included under “Non-Current and Current Payables” is as follows (in

thousands of euros):

A 31/12/2021

Figures in millions of euros

Limit

Available

Disposed

Year 1

Year 2

Year 3

Year 4

Year 5

Remain

Subordinated loans

40,000

—

40,000

—

40,000

Variable interest

40,000

—

40,000

—

40,000

Guaranteed senior notes

400,000

—

400,000

—

400,000

—

Fixed rate

400,000

—

400,000

—

400,000

—

Unsecured loans

267,500

—

267,500

2,424

5,172

5,205

3,572

251,127

—

Fixed rate

7,500

—

7,500

757

1,839

1,872

1,905

1,127

—

Variable interest

260,000

—

260,000

1,667

3,333

1,667

250,000

—

Secured credit line

242,000

—

Variable interest

242,000

—

Credit lines

34,000

17,000

12,000

3,000

—

2,000

—

Variable interest

34,000

17,000

12,000

3,000

—

2,000

—

Borrowing at 31/12/2021

983,500

259,000

724,500

14,424

8,172

5,205

5,572

651,127

40,000

Arrangement expenses

(12,724)

—

(12,724)

(2,636)

(2,744)

(2,861)

(2,974)

(1,212)

(297)

Borrowing costs

8,996

—

8,996

—

Adjusted total debt at 31/12/2021

979,772

259,000

720,772

20,784

5,428

2,344

2,598

649,915

39,703

Adjusted total debt at 31/12/2020

930,054

17,000

913,054

21,686

4,621

845,131

(30)

1,970

39,676

At 31 December 2021, the average cost of the gross drawdown amount of the Company was 3.5%.

12.2Other long-term financial liabilities

The balance this account at year-end is as follows (in thousands of euros):

2021

2020

Acquisition of Capredo Investment GmbH (Note 8)

3,150

Others

890

331

Total

4,040

3,481

12.3.Information on the nature of financial instruments and their level of risk

Group financial risk management is centralized in the Corporate Finance Division in accordance with the

policies approved by the Board of Directors. This Division has put the necessary measures in place to control

exposure to changes in interest and exchange rates on the basis of the Group’s structure and financial position,

as well as credit and liquidity risks. If necessary, hedges are made on a case-by-case basis. The main financial

risks faced by the Group’s policies are described below:

Credit risk

The Company’s main financial assets include cash and cash equivalents (Note 9) and trade and other

receivables. In general, the Company holds its cash and cash equivalents in institutions with a high level of

creditworthiness and part of its trade and other receivables are endorsed by guarantees, guarantors and advance

payments by tour operators.

The Company does not have a significant concentration of credit risk exposure to third parties, both due to the

diversification of its financial investments and to the distribution of trade risks with short collection periods

among a large number of customers.

The Company has formal procedures for detecting objective evidence of impairment in trade receivables for the

provision of services. As a result of these, significant delays in payment terms and the methods to be followed in

estimating the impairment loss based on individual analyses are identified.

Interest rate risk

The company’s financial assets and liabilities are exposed to fluctuations in interest rates, and this may have an

adverse effect on its results and cash flow. In order to mitigate this risk, the Company has established policies

and has part of its debt at fixed interest rates through the issuance of guaranteed senior bonds. At 31 December

2021, approximately 56% of the Parent Company's gross borrowings was tied to fixed interest rates (40% in

2020).

Liquidity risk

Exposure to adverse situations in debt or capital markets could hinder or prevent the Group from meeting the

financial needs required for its operations and for carrying out its activities.

The management of this risk focuses on monitoring the maturity schedule of the Company's financial debt in

detail, as well as on proactive management and maintaining credit lines that allow any forecast cash needs to be

met.

The Company’s liquidity position in 2021 is based on the following points:

–The Company had cash and cash equivalents amounting to 16,756 thousand euros at 31 December

2021 (see Note 9).

–Available undrawn credit facilities amounting to 259,000 thousand euros at 31 December 2021.

The Company also has 45,500 thousand euros in confirming lines that it uses to manage part of its payments to

trade creditors. These lines are distributed amongst several banks and cover trade suppliers in various countries

in Europe (Spain, Germany, Holland, Italy, Belgium, Austria and Luxembourg)

The capacity of the business units to generate positive cash flows from operations.

Lastly, the Company makes cash position forecasts on a systematic basis for each business unit and

geographical area in order to assess their needs. This liquidity policy followed by the Company ensures that

payment undertakings are fulfilled without having to request funds under onerous conditions and allows its

liquidity position to be monitored on a continuous basis.

Exchange rate risk

The Company is exposed to exchange rate fluctuations that may affect its sales, results, equity and cash flows,

arising largely from:

–Investments in foreign countries (mainly Mexico, Argentina, Colombia, Chile, Ecuador, the United

States, Switzerland, Hungary and the Czech Republic).

–Transactions made by Group companies operating in countries whose currency is other than the euro

(mainly Mexico, Argentina, Colombia, Chile, Ecuador, the United States, Switzerland, Hungary and

the Czech Republic).

The NH Group endeavours to align its borrowings with the cash flows in the different currencies.

The most significant balances in foreign currency in 2021, valued at the year-end exchange rate, is broken down

as follows:

Currency

Thousands of

Short-term investments in group companies and associates

ARS

3,322

Short-term investments in group companies and associates

BRL

151

Short-term investments in group companies and associates

CLP

1,214

Short-term investments in group companies and associates

COP

1,567

Short-term investments in group companies and associates

CZK

174

Short-term investments in group companies and associates

CHF

Short-term investments in group companies and associates

DOP

227

Short-term investments in group companies and associates

HUF

Short-term investments in group companies and associates

MXN

7,341

Short-term investments in group companies and associates

PLN

Short-term investments in group companies and associates

RON

Short-term investments in group companies and associates

USD

185

Short-term investments in group companies and associates

UYU

740

Short-term investments in group companies and associates

THB

378

Short-term investments in group companies and associates

SGD

Short‐term debts with group and associate companies

ARS

(34)

Short‐term debts with group and associate companies

COP

(116)

Short‐term debts with group and associate companies

DOP

(609)

Short‐term debts with group and associate companies

GBP

(29)

Short‐term debts with group and associate companies

MXN

(221)

Short‐term debts with group and associate companies

USD

(219)

Short‐term debts with group and associate companies

ZAR

(6)

Short‐term debts with group and associate companies

THB

(119)

Cash and cash equivalents

USD

165

The most significant balances in foreign currency in 2020, valued at the year-end exchange rate, is broken down

as follows:

Currency

Thousands of

Short-term investments in group companies and associates

ARS

2,566

Short-term investments in group companies and associates

BRL

132

Short-term investments in group companies and associates

CLP

1,607

Short-term investments in group companies and associates

COP

224

Short-term investments in group companies and associates

CZK

153

Short-term investments in group companies and associates

CHF

1,699

Short-term investments in group companies and associates

DOP

227

Short-term investments in group companies and associates

MXN

6,289

Short-term investments in group companies and associates

PLN

Short-term investments in group companies and associates

RON

Short-term investments in group companies and associates

USD

110

Short-term investments in group companies and associates

UYU

705

Short-term investments in group companies and associates

ZAR

Short-term investments in group companies and associates

THB

258

Short-term investments in group companies and associates

SGD

Short‐term debts with group and associate companies

ARS

(34)

Short‐term debts with group and associate companies

COP

(91)

Short‐term debts with group and associate companies

DOP

(589)

Short‐term debts with group and associate companies

GBP

(21)

Short‐term debts with group and associate companies

MXN

(168)

Short‐term debts with group and associate companies

ZAR

(6)

Short‐term debts with group and associate companies

THB

(245)

Cash and cash equivalents

USD

645

13.-TAX POSITION

NH Hotel Group, S.A. and the companies with tax domicile in Spain in which it held a direct or indirect stake of

at least 75% during the 2021 tax period pay subject to the tax consolidation scheme governed by Title VII,

Chapter VI of Law 27/2014 of 27 November on Corporation Tax (“Corporation Tax Law”).

The NH Hotel Group, S.A. tax group (hereinafter, “Tax Group”) comprised the following companies in 2021:

NH Hotel Group, S.A.

NH Europa, S.L.

Latinoamericana de Gestión Hotelera, S.A.

NH Atardecer Caribeño, S.L.

NH Central Reservation Office, S.L.

Gestora Hotelera del Siglo XXI, S.A.

NH Hoteles España, S.A.

Nuevos Espacios Hoteleros, S.A.

NH Hotel Ciutat De Reus, S.A.

Coperama Holding, S.L.

Gran Círculo de Madrid, S.A.

Coperama Spain, S.L.

Iberinterbrokers, S.L.

NH Las Palmas, S.A.

Wilan Ander, S.L.

NH Lagasca, S.A.

Palacio de la Merced, S.A.

Wilan Huel S.L.

NH Cash Link, S.L.U.

The companies belonging to the Tax Group have signed an agreement to share the tax burden. Hence, the Parent

Company settles any credits and debts which arise with subsidiary companies due to the negative and positive

tax bases these contribute to the Tax Group.

In previous years, the Tax Group carried out restructuring operations in which it opted for the special scheme for

business reorganisation provided in the Corporation Tax Law. The legally established items are included in the

annual report of the corresponding year.

Balances with Public Authorities

The detail of "Balances with Public Authorities" is as follows:

Tax receivables

Thousands of euros

2021

2020

Non-current receivables

Deferred tax assets

33,111

34,279

Total

33,111

34,279

Current receivables

Value Added Tax

1,136

5,572

Current tax assets

657

7,810

Others

Total

1,817

13,406

Tax payables

Thousands of euros

2021

2020

Non-current payables

Deferred tax liabilities

4,735

4,906

Total

4,735

4,906

Current payables

Retentions

524

511

Social Security

620

522

Others

493

369

Total

1,637

1,402

Reconciliation of the accounting profit to the taxable income

Corporation Tax is calculated on the basis of accounting profit or loss determined by application of the generally

accepted accounting principles, and applying the relevant adjustments in accordance with the rules set out in the

Corporation Tax Law. Therefore, the accounting profit may not necessarily coincide with the taxable income for

Corporation Tax purposes.

The reconciliation of the accounting profit and the Corporation Tax to pay or refund for the year corresponding

to the tax group is as follows (in thousands of euros):

Thousands of euros

2021

2020

Accounting profit before tax

183,560

(225,924)

Adjustments to accounting profit (loss):

Due to permanent differences

(121,900)

189,879

Due to temporary differences

(785)

(2,220)

Individual taxable base

60,875

(38,265)

Bases provided by the tax consolidated companies

(29,457)

(47,888)

Previous tax base of the Tax Group

31,418

(86,153)

Carryforwards for negative tax bases before consolidation

—

Set-off for negative tax bases

(7,854)

—

Tax base of the Tax Group

23,564

(86,153)

Settled rate (25%)

(5,891)

—

Double taxation relief

—

Non-activated deductions used in the year

1,474

—

Withholdings and payment by instalments

5,074

Current taxes to be refunded / (to pay)

657

Previous years’ taxes to be refunded

—

7,780

Total taxes to be refunded/(paid)

657

7,810

The permanent differences relate mainly to the removal of provisions in the accounting portfolio and non-

deductible financial expenses calculated in accordance with article 16 of the Corporate Income Tax Act.

The temporary differences relate mainly to provisions for accounting purposes and impairment losses not

considered a tax expense and with the recovery of 30% of the amortisation that was not deductible in 2013 and

2014 calculated in accordance with Article 7 of Law 16/2014, introducing various tax and administrative

measures aimed at consolidating public finances and driving economic activity.

Reconciliation of accounting profit and Corporate Income Tax (expense)/income

The reconciliation of accounting profit and Corporate Income Tax (expense)/income is as follows:

2021

2020

Accounting profit before tax

183,560

(225,924)

Permanent differences

(121,900)

189,879

Temporary differences

(785)

(2,220)

Adjusted tax base

60,875

(38,265)

Current tax attributable to the company

(15,219)

1,537

Deferred tax

(196)

(555)

Regularisation of tax from the previous year

(904)

Taxes paid overseas

(84)

(440)

Others

—

122

Total tax (expense)/income recognised in the income statement

(15,497)

(240)

Deferred tax assets

The changes in this account are as follows:

Deferred tax assets

Thousands of euros

2021

2020

Balance at beginning of year

34,279

35,284

Tax credit offsets

(801)

(263)

Temporary differences

(367)

(742)

Balance at end of year

33,111

34,279

Detail of the balance on deferred tax assets

Thousands of euros

2021

2020

Negative tax bases

23,386

24,187

Deductions

554

Others

9,171

9,538

Balance at end of year

33,111

34,279

The balance of deferred tax assets relates mainly to tax credit carryforwards. on losses in previous years,

temporary differences generated by the amortisation deductible limit and various provisions.

At 31 December 2021, the Company had assets resulting from tax losses and deductions amounting to 23,940

thousand euros (24,741 thousand euros in 2020). At 31 December 2021, the tax credit recovery plan that

supports the recognition of these tax credits had been updated. Given that the results of the tax credit recovery

plan are satisfactory, the Company’s Directors have decided to maintain the tax credits recognised in the balance

sheet.

Tax credits generated by the consolidated tax group

At 31 December 2021, the Tax Group had the following negative tax bases pending offsetting:

Financial year

Thousands of

euros

2009

50,806

2010

18,313

2011

25,909

2012

131,570

2013

12,763

2014

80,125

2015

14,905

2019

14,549

2020

87,202

Total

436,142

Of the previous total, 135,378 thousand euros corresponds to tax losses not recorded.

At 31 December 2021, the Tax Group has uncapitalised tax credits of 120,929 thousand euros (139,756

thousand euros at 31 December 2020) under the following concepts:

Thousands of euros

2021

2020

Finance costs and negative tax bases

Non-deductible finance costs by the Tax Group

234,234

205,337

Negative tax bases generated by the Tax Group

135,378

134,329

Negative tax bases generated by the Spanish entities before inclusion in the Tax Group

102,813

Total base

472,425

442,479

Total rate

118,106

110,620

Tax Group deductions

2,823

29,136

Total non-activated tax credits

120,929

139,756

The non-deductible finance costs for Spanish corporation tax purposes have not been capitalised because they

exceed 30% of the profit from the Tax Group's operations calculated in accordance with Article 16 of Law

27/2014 of 27 November on Corporation Tax, due to not having the required degree of certainty that sufficient

profit will be generated from operations over the next ten years to offset said result pursuant to the

aforementioned article. There is no deadline for offsetting non-deductible finance costs.

Deferred tax liabilities

The movements in deferred tax liabilities during the year are as follows:

Deferred tax liabilities

Thousands of euros

2021

2020

Balance at beginning of year:

4,906

5,077

Deferral on reinvestment

(171)

Balance at end of year:

4,735

4,906

Years open for review and tax audits

The years open for review for the Tax Group are as follows:

Tax

Tax loss

carryforwards

Corporation

2017 - 2020

VAT

2018 - 2021

IRPF (personal income tax)

2018 - 2021

Non-resident Income Tax

2018 - 2021

In relation to the years open to audit by the Tax Agency, contingent liabilities not susceptible to objective

quantification may exist but, in the opinion of the Directors, they are not material.

Deductions applicable by the Tax Group

At 31 December 2021, the Tax Group held the following tax credits carryforward (in thousands of euros):

Year

Origin

Deduction pending application

Amount

2006 to 2011

Deduction to encourage certain activities

867

2014 - 2020

Deduction for technological innovation

1,585

2019 and 2020

Deduction for investments in the Canary Islands

631

2013 to 2014

Other

925

4,008

Similarly, the Tax Group availed itself in prior years of the “Deferral for reinvestment of extraordinary profit.”

The essential characteristics of this reinvestment are as follows (in thousands of euros):

Amount offset

Year of

Revenue

subject to

deferral

Year

Amount

Last year of

origin

Prior years

2021

pending

deferral

1999

75.145

55.531

682

18.932

2049

This income was reinvested in the acquisition of buildings.

14.-TRADE AND OTHER PAYABLES

14.1 Commercial Creditors

The breakdown of this heading at 31 December is as follows (in thousands of euros):

Thousands of euros

2021

2020

Trade and other payables

24,133

15,015

Advance payments from customers

668

539

Other accounts payable

8,296

5,939

33,097

21,493

The heading "Commercial Creditors and Other Accounts Payable" covers the accounts payable derived from

commercial activity typical of the Company. This heading includes 16,354 thousand euros (13,960 thousand

euros, at31 December 2020) coming from creditors for confirming transactions.

The "Advance payments from customers" item mainly includes customer deposits arising from the Company's

hotel businesses.

14.2 Information relating to the average period for payment to suppliers

Below is the information required by the Third additional provision of Law 15/2010 of 5 July on the information

to be incorporated in the record of annual financial statements relating to the average period for payment to

suppliers in commercial transactions.

2021

2020

Days

Average period for payment to suppliers

Ratio of paid transactions

Ratio of transactions pending payment

125

Thousands of euros

Total payments made

70,631

65,006

Total payments pending

7,733

3,447

Suppliers, for the exclusive purpose of giving the information prior to this Resolution, are considered as trade

creditors for debts with suppliers of goods or services, included in the items “Suppliers” and “Sundry Creditors”

in current liabilities on the attached financial balance sheet at 31 December 2021.

The average period for payment to suppliers has been calculated using the weighted average of the two ratios

explained below:

–Ratio of paid transactions: average payment period of transactions paid weighted by the amount of each

transaction.

–Ratio of transactions pending payment: average period between the invoice date and the end of the year

weighted by the amount of each transaction.

The maximum period for payment to suppliers of the Company has been higher than the legal period stablished

of 60 days due to the impact of COVID-19 pandemic on hotel demand. This situation is remediable as long as

several measures are taken focused on temporary resizing of existing resources, such as renegotiation of rent

contracts and other different actions focused on minimizing COVID-19 impacts, which jointly with the

progressive recovery of hotel activity will contribute to meet the stablished legal ratio.

15.-THIRD-PARTY GUARANTEES AND CLAIMS IN PROCESS

At 31 December 2021, the Company had a total of 30,566 thousand euros in economic or financial bank

guarantees issued by various banks to guarantee leasing contract obligations and others related to the usual

operations of the Group in various countries. Therefore, their execution would be linked to a failure to comply

with those contractual obligations.

At 31 December 2021, the Company had taken out insurance policies to cover risks arising from damage to

material goods, loss of profits and third-party liability. The capital insured sufficiently covers the assets and

risks mentioned above.

Commitments to third parties

–Within the framework of new development projects in the normal course of business, in which Group

subsidiaries act as lessees or operators, the Group's parent company gives personal guarantees in favour

of third parties to secure its contractual obligations, often issue promissory notes in payment of said

obligations and agrees penalty clauses in case of breach of contract.

–Likewise, within the framework of the Group's financing, personal and real guarantees have been

granted to fulfil the obligations guaranteed under the financing agreements (Note 12).

Claims in process

The Company's main contingent assets and liabilities at the date of drafting these consolidated financial

statements were as follows:

–A claim has been filed against the company claiming payment in relation to the payment of a

management entity’s fees for the years 2018, 2019, et seq, which is currently being processed.

–On the occasion of the agreements reached in 2014 for the sale of the shares held by NH Hotel Group,

S.A in the company Sotogrande, S.A., the Company agreed to subrogate itself in the position of

Sotogrande, S.A. for certain claims assuming all rights and obligations relating thereto, and are

summarised as follows:

•Plaintiff in the proceedings against construction agents for construction defects in twenty-five

homes and contractual liability.

•Respondent in the process of claiming amounts from a real estate development due to

construction defects.

–A former shareholder of the Company has requested the annulment of certain resolutions adopted by

the Board of Directors, and the proceedings are currently in progress.

The Company's directors consider that the hypothetical loss of the Company incurred as a result of such actions

would not have a material effect on its equity.

16.-OPERATIONS AND BALANCES BETWEEN GROUP COMPANIES

16.1.-Balances with related parties

The detail of balances with related parties during the year is as follows (in thousands of euros):

2021

Parent

company

Other Group

companies

Other related

parties

Long-term investments:

—

695,821

—

Loans to companies

—

695,821

—

Short-term investments:

—

318,235

1,041

Loans to companies

—

318,235

10,543

Provision for impairment

—

(9,502)

Long-term debts

—

(8,430)

—

Short-term debts

(119)

(160,549)

—

Other current liabilities

—

As a result of the fair value analysis of the shareholding in Sotocaribe, S.L. there is a provision for impairment

of loans receivable with associated companies amounting to 9,502 thousand euros..

2020

Parent

company

Other Group

companies

Other related

parties

Long-term investments:

—

744,923

—

Loans to companies

—

744,923

—

Short-term investments:

—

268,972

612

Loans to companies

—

268,972

10,114

Provision for impairment

—

(9,502)

Long-term debts

—

(7,289)

—

Short-term debts

(245)

(144,918)

—

Other current liabilities

—

Long-term investments

“Loans to Companies” includes the following loans granted to the following Group companies:

Thousands of euros

2021

2020

Loans

NH Finance S.A.

263,934

325,675

NH Europa, S.L.

236,429

229,793

Latinoamericana de Gestión Hotelera, S.L.

103,215

100,471

NH Hoteles España, S.A.

57,681

56,148

NH Hungary Szallodauzemelteto KFT

20,167

19,375

NH Hoteles Czechia S.R.O.

8,585

8,291

Others

5,810

5,170

Total

695,821

744,923

The loans balance in 2021 mainly corresponds to the inter-company financing agreement that matures in 2023.

The remuneration of said loan is a variable quarterly interest rate linked to the Euribor plus a spread.

Short-term investments

“Loans to Companies” includes the following balances with Group companies:

Thousands of euros

2021

2020

NH Hoteles España, S.A.

233,525

201,723

Current payables to Group companies

85,751

67,861

Total

319,276

269,584

The balances that comprise the current accounts payable to Group companies are made up mainly of the

balances relating to the financing structure of the Group of which the Company is the Parent. The accounts

receivable or accounts payable accrue interest at a floating rate pegged to the 3-month Euribor plus a spread. In

this way, NH Hotel Group, S.A. centralises the Group's cash through a bank and in a single account.

Long-term debts

The "Long-term Debts" heading mainly consists of the loan with the Group company NH Atardecer Caribeño,

S.A., maturing in 2023. The remuneration of said loan is a variable quarterly interest rate linked to the Euribor

plus a spread.

Short-term debts

"Short-term debts" includes the following loans with Group companies:

Thousands of euros

2021

2020

Current creditor account with NH Hoteles España, S.A.

589

379

Current creditor accounts with Group companies

159,960

144,539

Current creditor accounts with the parent company

119

245

Total

160,668

145,163

The variation in short-term debts in 2021 mainly corresponds to the inter-company financing agreement that

matures in 2023. The remuneration of said loan is a variable quarterly interest rate linked to the Euribor plus a

spread.

16.2.-Transactions with related parties

The transactions with related parties during the year were as follows:

Income

Thousands of euros

2021

2020

Dividends

—

884

Group holding activity

—

884

Lease income

3,426

3,181

Group (Note 17.a)

3,426

3,181

Non-controlling

23,336

18,217

Group holding activity

22,985

17,871

Associates

351

346

Fees (Other operating Income)

38,574

27,502

Group

38,574

27,502

Expenses

Thousands of euros

2021

2020

Non-controlling

2,846

1,282

Group

2,846

1,282

17.-INCOME AND EXPENSES

a)Revenues

The revenue itemised by activity is as follows (in thousands of euros):

Thousands of euros

2021

2020

Hotel activity:

Accommodation in rooms

12,564

7,864

Leases group companies (Notes 16.2 and 7)

3,426

3,181

Other leasing (Note 7)

302

231

Catering

3,560

2,804

Rooms

624

502

Others

438

799

Revenues

20,914

15,381

Similarly, revenue corresponding to the year was distributed by geographic market was as follows (in

thousands of euros):

2021

2020

National market

20,914

15,381

20,914

15,381

b)Staff costs

The breakdown of this heading on the profit and loss account for the year was as follows (in thousands of

euros):

2021

2020

Wages, salaries and similar

17,929

18,318

Social security contributions

5,050

6,306

Severance payments

3,537

176

26,516

24,800

The average number of employees at the Company in the year, by professional category, was as follows:

2021

2020

Company's general management

Managers and heads of department

Technical staff

Sales representatives

Administrative staff

Rest of workforce

Average number of employees

296

313

In calculating the average number of employees, the Company has not taken into account employees

whose contracts have a duration of less than two days.

In calculating the average number of people employed by the Company, those furloughed (ERTEs) have

been excluded. On average, 33% of workers have been furloughed.

The workforce at 31 December, by professional category and sex, was as follows:

31/12/2021

31/12/2020

Males

Females

Males

Females

Group's general management

Managers and heads of department

Technical staff

Sales representatives

Administrative staff

Rest of workforce

Average number of employees

193

212

240

290

The decrease in the average number of people employed can be explained by the contingency plans that the

Company put in place to alleviate the fall in business due to Covid-19. The collective dismissal process

announced in February was carried out in compliance with local legislation. At the close of 2021 there are

no personnel subject to furlough. At 31 December 2020, 51% of the workforce was furloughed (44% men

and 56% women).

The average number of employees at the Company with a disability equal to or greater than 33% in the

year, by professional category, was as follows:

2021

2020

Managers and heads of department

—

Sales representatives

—

Administrative staff

—

Rest of workforce

—

Average number of employees

—

The average age of the workforce was approximately 42.3 and average seniority was 11.7 years (40 years

and 9.9 years respectively in 2020).

Long-term Share-based Incentive Plan

On 29 June 2017, the Company's General Shareholders Meeting approved a long-term share-based

incentive plan (“the plan”) for the Group. The Plan was approved retroactively from 1 January 2017, it will

have a total duration of five years, divided into three – independent of each other – three-year cycles.

The plan consisted of the grant of ordinary shares of NH Hotel Group, S.A. to the beneficiaries calculated

as a percentage of the fixed salary, according to their level of responsibility. The number of shares to be

granted was subject to the degree of fulfilment of the following objectives:

•TSR (total shareholder return) at the end of each of the Plan's cycles, comparing the

performance of NH Hotel Group, S.A. shares with the STOXX® Europe 600 Travel &

Leisure share index

•Revaluation of the Share

•Recurring Net Profit

•Recurring EBITDA

The beneficiaries must remain in the Group at the end of each cycle, notwithstanding the exceptions

deemed appropriate, as well as achieving the minimum thresholds for each of the objectives.

The Plan targeted approximately 100 beneficiaries.

The current cycles at 31 December 2021 are:

No. of Shares

Assigned at

the start of

each cycle

(Thousands)

No. of live

shares at

31.12.2021

(Thousands)

Value of the

allocation

(Euros)

The first cycle began on 1/1/2017 (delivery in 2020 (concluded))

720.87

—

3.80

The second cycle began on 01/01/2018 (delivery in 2021

(concluded))

517.96

—

5.96

The third cycle began on 01/01/2019 (delivery in 2022 (in force))

879.25

711.35

3.96

The difference between the total shares assigned at the beginning of each cycle and the live shares at 31

December 2021 correspond to beneficiaries who left between the launch up to the final third cycle (31

December 2021).The second cycle (2018-2020) of the second long-term incentive plan was settled in the

first half of 2021 with the delivery of 189,962 net shares at a fair value per unit of 4.28 euros. The

settlement of this Plan was made net of taxes.

At the date of publication of this report, all the cycles – in force or ended – had been approved by the

Board of Directors.

The maximum amount approved by the General Shareholders' Meeting for the three cycles of the second

Plan is 16,200,000 euros.

The effect of these plans on the statement of changes in equity for 2021 was (1,942) thousand euros

((2,724) thousand euros in 2020).

c)External services

Shown below is a breakdown of the items included in "External services":

Thousands of euros

2021

2020

Leasing (Note 7)

8,282

7,714

Outsourcing of services

1,007

915

Supplies

571

628

Maintenance and cleaning

782

969

Laundry and related costs

400

317

Costs associated with information technologies

11,445

11,796

Marketing and merchandising

Other external services

224

337

22,807

22,751

d)Other operating expenses

This year, the fees for account auditing and other services provided by the auditor of the Group's

consolidated annual accounts and the fees for services invoiced by the entities related to it by control,

shared ownership or management, were as follows:

Thousands of euros

2021

2020

Auditing services

548

553

Other verification services

435

214

Total auditing and related services

983

767

Tax consulting services

—

Other services

243

Total other services

243

Total professional services

1,044

1,010

Additionally, entities associated with the international network of the consolidated annual accounts auditor

have invoiced the Group for the following services:

Thousands of euros

2021

2020

Auditing services

1,244

1,170

Other verification services

209

215

Total auditing and related services

1,453

1,385

Tax consulting services

254

289

Other services

312

Total other services

566

342

Total

2,019

1,727

During 2021, other auditing firms apart from the auditor of the consolidated annual accounts or entities

associated with this company by control, shared ownership or management, have provided account

auditing services to the companies making up the Group, for fees totalling 99 thousand euros (46 thousand

euros in 2020). The fees accrued in 2021 by these firms for tax advice services were 468 thousand euros

(366 thousand euros in 2020) and for other services, 242 thousand euros (54 thousand euros in 2020).

e)Gains or losses on disposals of fixed assets

The sale of the NH Collection Barcelona Gran Hotel Calderón in Spain took place in 2021 with a sale and

leaseback transaction. The hotel was sold for 125.5 million euros with a linked 20 year lease agreement,

with NH having the option of additional extensions (Note 6), and a net capital gain of 87,143 thousand

euros before tax was recorded. A capital gain of 100 thousand euros was also recorded (117 thousand euros

in 2020).

f)Financial Expenses

The breakdown of this heading in the consolidated comprehensive income statement is as follows:

Thousands of euros

2021

2020

Expenses for interest

33,420

23,492

Financial expenses for means of payment

131

108

Amortisation of debt arrangement expenses

12,133

5,630

Financial Expenses

45,684

29,230

The increase in the “Expenses for interest” line is explained by the expenses for interest associated to the

new secured senior bond issue.

Likewise, the increase in the “Amortisation of debt arrangement expenses” line is due to early amortisation

of the debt arrangement expenses associated with the financial liabilities cancelled during the 2021

financial year (Note 12).

The expenses for interest correspond to debts valued at amortised cost.

18.-REMUNERATION AND OTHER STATEMENTS MADE BY THE BOARD OF DIRECTORS

AND SENIOR MANAGEMENT

The Management Bodies of the Parent Company have the following composition at 31 December:

–Board of Directors: 9 members (9 members at 31 December 2020),

–Audit and Control Committee: 3 members (3 members at 31 December 2020),

–Appointments and Remuneration Committee: 3 members (3 members at 31 December 2020).

18.1 Remuneration of the Board of Directors

The amount accrued during the year by the members of the Parent Company's Board of Directors in relation to

the remuneration of the Executive Directors, bylaw stipulated directors' fees and attendance fees and other

items, is as follows:

Thousands of euros

Remuneration item

2021

2020

Fixed remuneration

1,003

807

Variable remuneration

—

Parent Company: allowances

Parent Company: attendance allowances

291

221

Transactions in shares and other financial instruments

190

257

Life insurance premiums

Others

Total

1,556

1,341

At 31 December 2021, the Board of Directors had 9 members, all male (the same data as in 2020).

Due to the situation caused by COVID-19, the members of the Board voluntarily waived 20% of their

remuneration from January to April 2021 and 100% of it in May and June 2021.

Furthermore, the Executive Directors saw their fixed remuneration decrease by 20% from January to June and

their variable remuneration accrued and received for 2021 was 0.

In relation to the heading, "Transactions on shares and/or other financial instruments", consideration has been

given to the objective long-term remuneration accrued. Remuneration in kind (vehicles and health insurance) is

included under "Others".

Additional information in the Annual directors’ Remuneration Report.

18.2 Remuneration of Senior Management

The remuneration of members of the Management Committee during the year, excluding those who

simultaneously held office as members of the Board of Directors (whose remuneration has been set out above),

is detailed below:

Thousands of euros

2021

2020

Pecuniary remuneration

1,504

1,277

Remuneration in kind

120

Others

230

462

Total

1,854

1,837

There were 6 members of Senior Management at 31 December 2021 (6 members at 31 December 2020)

excluding the CEO and the Chief Operations Officer due to their status as executive directors.

During 2021, as a result of the crisis arising from COVID-19, the members of the Management Committee saw

their fixed remuneration crease by 20% from January to June 2021. Furthermore, the variable remuneration

accrued in 2021 was 0. This gives rise to a total decrease in their remuneration in 2021 vs their target

remuneration of 38%. During 2020 the members of the Management Committee saw their annual remuneration

for 2020 decrease by more than 50%.

Remuneration in kind includes the vehicle and the cost of insurance.

The heading "Other" takes the long-term objective remuneration accrued in 2021 into consideration.

18.3 Information on conflicts of interest on the part of Directors

During 2021, Minor International Public Company Limited (“Minor”), an indirect majority shareholder of the

Company (94.132%) and represented on the Board by four proprietary Directors, and the Company signed a

series of Related Party Transactions, which are broken down in the Audit and Control Committee's Annual

Report, and carried out some Related Party Transactions approved in previous years. These Related Party

Transactions have always been executed in strict compliance with the rules established in the applicable

regulations and the Procedure for Conflicts of Interest and Related Party Transactions with Significant

Shareholders, Directors and Senior Management of NH Hotel Group, S.A. approved by the Board of Directors

on 11 November 2021. All transactions signed with Minor (and/or its group of companies) have counted on a

report from the Audit and Control Committee, have been signed under market conditions and with the

participation of external advisors, and in compliance with the provisions in the Framework Agreement signed

between the parties on 7 February 2019, which regulates, among others, the scope of action of the respective

hotel groups headed by the Company and Minor through the identification of preferred geographic areas or

zones, the mechanisms necessary to prevent and deal with possible conflicts of interest, as well as to carry out

operations with related parties and develop business opportunities. The aforementioned Framework Agreement

was duly communicated to the Market via a Relevant Fact and is published in full on the Company's website.

During all Board Meetings dealing with issues related to Minor, the Proprietary Directors were absent when

dealing with said matters and therefore did not participate in the adoption of the corresponding agreement.

19.-ENVIRONMENTAL INFORMATION

The Company’s Board of Directors is the body responsible for supervision of the risk management system, and

the Audit and Control Committee supports the Board in supervising the effectiveness of the internal control,

internal audit and the risk management systems.

The governing bodies receive information about the main risks the Group is exposed to and the capital resources

available to face up to them at least every quarter, along with information about compliance with the limits set

in the risk appetite.

Therefore, as in previous years, in 2021 the Audit and Control Committee supervised and validated the Risk

Map update and the correct implementation of the action plans that fully or partially contribute to mitigating the

main risks.

An analysis was carried out on the 78 risks appearing in the Group’s risk catalogue for 2021 to identify those

relating to ESG (Environmental, Social and Governance) criteria. The result was that 35% of all the risks

identified were classified as such.

More information about the Group's risk management model in the Risk Management section of the 2021

Consolidated Non-Financial Information Statement.

The Group is committed to the well-being of its guests and to efficient management of the resources available in

the environment the hotels are in. The Group is aware of the effects of its activity on the environment and works

to prevent and anticipate possible environmental contingencies, as well as to integrate sustainability into all its

processes. It is constantly working on reducing their impact.

The Group's environmental management is based on identification and annual review of the main environmental

impacts that it may cause using the environmental and climate risk map. Although there is a specific process for

assessing environmental risks, the methodology followed is consistent with the corporate risk management

model and, in addition, it is those that are most critical, included in the risk catalogue, that become a part of the

corporate risk map update.

More information about the Group’s environmental and climate management in the NH Room4 Planet -

Commitment to the fight against Climate Change and progress towards decarbonisation section in the 2021

Consolidated Non-financial Information Statement.

NH ROOM4 Sustainable Business

The Group performs its hotel activity with the ambition of leading responsible behaviours, and creating shared

value at an economic, social and environmental level wherever it operates. This strategic vision of NH ROOM4

Sustainable Business is, in turn, based on three fundamental management levers: NH ROOM4 People, NH

ROOM4 Planet and NH ROOM4 Responsible Shared Success, all of which are framed under the same premise

of sustainable and ethical principles, responsible culture and spirit of citizenship.

Convinced it is moving in the right direction to achieve the next sustainability challenges, the Group is aligned

with the Sustainable Development Goals (SDGs) to which it can contribute and undertakes to continue creating

long-term and global value within the framework of the 2030 Agenda.

Furthermore, the Group carries out a process to determine material matters annually, with the aim of:

•Complying with the requirements of the non-financial information directive.

•Determining relevant aspects to guide the Sustainability strategy.

•Giving a response to the Global Reporting Initiative (GRI) requirements for reporting sustainability and

those of the United Nations 2030 Agenda.

Their relevance is determined by the impact that each one may have, whether on the Group’s business itself, or

on its main stakeholders, as well as the possible evolution of the impact in the medium and long term.

More information about this Model and its performance in 2021 is available in the NH ROOM4 Sustainable

Business section in the 2021 Consolidated Non-financial Information Statement.

20.- SUBSEQUENT EVENTS

The Company is planning to put the 2022-2027 Long-Term Incentive Plan (“Performance Cash Plan”) in place

in 2022. This grants a cash amount payable in the event of fulfilling the targets set for that purpose. The Plan is

explained in an annual report on listed public company directors’ remuneration, prepared by the Board of

Directors on 24 February 2021, which is presented as a separate report, forming part of the Management Report

in the Consolidated Annual Statements.

MANAGEMENT REPORT

FOR THE YEAR ENDED

31 DECEMBER 2021

EVOLUTION OF BUSINESS AND GROUP'S SITUATION

NH Hotel Group is an international hotel operator and one of the leading urban hotel companies worldwide in

terms of number of rooms. The Group operates 353 hotels and 55,063 rooms in 30 countries, and has a

significant presence in Europe.

The centralised business model allows it to offer a consistent level of service to its customers in different hotels

in different regions. The corporate headquarters and regional offices offer hotels a wide range of functions such

as sales, revenue management, reservations, marketing, human resources, financial management and systems

development.

This flexible operational and financial structure has enabled the Group to overcome the huge challenges of the

past two years. Although the challenges will continue in the first months of 2022, the Group will benefit from

brand recognition, excellent locations and strong market positioning in Europe in the medium and long term.

During 2021, as a result of the start of recovery after the economic crisis caused by the COVID-19 pandemic,

the global economy increased by +5.9%, compared to a decrease of -3.1% in the previous year (Data and

estimates from IMF “World Economic Outlook”, January 2022). GDP growth in 2021 was in line with

expectations, showing continuous adaptation of economic activity to the pandemic and its associated

restrictions, as well as continuous support from institutions in many countries. However, the continuous

recovery was weakened during the year, hindered by the increase of infections from new strains and

interruptions to the supply chains. At the end of the year, as a result of the omicron strain, many countries went

back into partial lockdown which had an impact on global economic recovery.

The four countries that bring the greatest proportion of the Group's sales and profits show rates of growth in

2021: Spain (+4.9% in 2021 vs. -10.8% in 2020), Holland (+4.5% in 2021 vs. -3.8% in 2020), Germany (+2.7%

in 2021 vs. -4.6% in 2020), and Italy (+6.2% in 2021 vs. -8.9% in 2020). On the other hand, growth in Latin

America is expected to be +6.8% in 2021 (vs. -6.9% in 2020) as all the economies as a whole have continued to

suffer the consequences created by COVID-19.

For the global economy, 2022 began with some uncertainty in the short term. As the new omicron variant of the

COVID-19 virus advances, countries have once again imposed restrictions on mobility. Due to the rising price

of energy and disruptions to supplies, inflation is higher and more generalised than forecast. The unforeseen

sluggishness of private consumption recovery has also limited the prospects for growth.

Therefore, the estimate is for +4.4% growth of world economic activity in 2022 (+5.9% in 2021 vs. -3.1% in

2020). Therefore, in the Euro zone +3.9% growth is estimated in 2022 (+5.2% in 2021 vs. -6.4% in 2020).

Global tourism experienced an increase of 4% in 2021 compared to 2020 (415 million against 400 million).

Nevertheless, international tourist arrivals (visitors who stay overnight) remained 72% lower than in 2019, the

year prior to the pandemic, according to the OMT’s preliminary estimates. These figures follow those in 2020,

the worst year in the history of tourism, when a 73% decrease in international arrivals was recorded.

The speed of recovery continues to be slow and inconsistent in the various regions of the world, due to the

different levels of mobility restrictions, the vaccination rates and traveller confidence. Europe and the Americas

recorded a significant improvement in 2021 compared to 2020 (+19% and +17%, respectively), but both are still

at 63% below pre-pandemic levels. By sub-regions, Mediterranean Southern Europe (+57%) and Central and

Eastern Europe (+18%), Central America (+54%) and North America (+17%) also surpassed 2020 levels.

The first publication of the OMT World Tourism Barometer indicates that, in 2022, the increase in the

vaccination rate, combined with the decrease in travel restrictions due to better cross border coordination and

new protocols, have helped to liberate the suppressed demand. International tourism moderately upturned in the

second half of 2021, with arrivals in the third and fourth quarters being 62% lower than those before the

pandemic. According to limited data, international tourist arrivals in December were 65% lower than in 2019.

The true impact of the omicron strain and the wave of infections with COVID-19 remains to be seen.

The recent increase in cases of COVID-19 and the omicron strain are going to disrupt recovery and affect

confidence until the beginning of 2022, as some countries have reintroduced travel prohibitions and restrictions

for certain markets. At the same time, vaccination roll outs continue to be inconsistent. A difficult economic

environment may place additional pressure on the effective recovery of international tourism, with the rises in

petrol prices, increased inflation, the possible rise in interest rates, high volumes of debt and continuous

interruption to the supply chains. However, the recovery of tourism that is occurring in many markets, above all

in Europe and the Americas, along with the general roll out of vaccinations and a significant coordinated lifting

of travel restrictions, could contribute to reinstating consumer confidence and accelerating the recovery of

international tourism in 2022.

While international tourism recovers, domestic tourism continues to drive sector recovery in an increasing

number of destinations, particularly those with a large domestic market. According to the experts, domestic

tourism and travel closer to home will continue to make up tourism in 2022.

Business traveller behaviour habits could be affected in the short and medium term. This involves less trips on

business, given the gradual adoption of digital solutions and hybrid formulas, which are affecting the evolution

of some specific segments of business tourism.

It is worth noting the Company's solid position with which to deal with the current situation after its operational

and financial transformation in previous years. The excellent performance of the group in the years prior to the

pandemic is the result of a complete transformation within the group, particularly brand segmentation, portfolio

optimisation, significant investment in repositioning and systems, the focus on efficiency and cost control, and

the reduction of financial indebtedness.

Continuous improvement to the customer experience was boosted in 2019 with the launch of various initiatives:

"Fastpass", a combination of three innovative services - Check-in Online, Choose Your Room and Check-out

Online - which gives customers full control over their stay. Also a new service, “City Connection”, where you

can enjoy the city without limits. Under the slogan “Stay in one hotel, enjoy them all”, the NH Hotel Group

offered a range of services that allow customers to enjoy them in any hotel in the city they are in, regardless of

the hotel they are staying in for the duration of their stay.

The embodiment of an NH Hotel Group value proposition based on the improvement of quality, experience and

brand architecture with the NH Collection, NH Hotel and nhow brands are a reality today in the Group. With the

integration of the Minor Hotels commercial brands, NH Hotel Group is currently operating hotels in Europe

under the Tivoli, Anatara and Avani flags.

During the first part of 2021, and in order to adapt to the new trends in business travellers, the Group launched a

series of initiatives:

•Extended Stay, with up to 35% discount on stays of more than 7 days for working away from home for

an extended period.

•Smart Spaces, a new B2B offer, with exclusive spaces for working and organising small business

meetings making the most of all the advantages of our hotels.

•Hybrid Meetings, to boost the value of events reaching a bigger audience from various destinations

with a combination of in-person and virtual attendance.

•NH+, a new corporate segment focus on SMEs, which are the first to restart their activity.

Digitisation will be key to the sector’s evolution. The customer experience is improved and efficiency increased

using technology and digitisation. The digital component will be key in responding to travellers’ security needs

and experience. Technology should be a facilitator that complements our employees’ work, freeing them up

from administrative tasks so they can give more personal attention to customers.

It is worth highlighting that the NH Hotel Group continues to be at the forefront of innovation. The Group's

Digital Transformation has allowed processes and systems to be made more efficient, increasing the capacity to

be different from the competition, and continue improving the Company's basic processes. One of the greatest

achievements therefore has been to centralise all its properties and functions into a single integrated system.

This allows the NH Hotel Group to have a fully-integrated digital platform: NH Digital Core Platform. A

pioneering technological solution in the sector that has allowed all the Group's hotel’s systems to be integrated

which has become the basis for the NH Hotel Group to expand its customer knowledge, maximise its efficiency

and innovate on a large scale in all its value areas.

For the first time, hotel businesses are experiencing difficulties finding staff, which suggests that the sector must

go back to attracting talent with attractive professional career plans that boost training and job flexibility.

In its use of quality indicators, the NH Hotel Group focuses on measuring quality using new sources of

information and surveys with a significant increase in the volume of reviews and number of assessments

received. Its average score on TripAdvisor in 2021 was 8.4, compared to 8.5 in December 2020. Additionally,

its average Google Reviews score was 8.7, compared with 8.7 in December 2020. These average scores

demonstrate the high levels of quality perceived by customers and the positive growth trend that the NH Hotel

Group has had throughout the year.

The NH Rewards loyalty programme had more than 10 million members in 2021 and is one of the most

comprehensive rewards schemes worldwide. With four categories (Blue, Silver, Gold and Platinum), the

Company’s programme recognised and rewards its habitual customers’ loyalty for each stay, with benefits from

earning points - equivalent to euros - which are redeemable, with no date restrictions, for free nights or extra

services at the hotel. NH Rewards also always gives flexibility in paying with points and cash, special pricing,

exclusive privileges when booking on the web site, etc, as well as a series of differential services enriching the

experience in all brands of the NH Hotel Group’s hotels.

NH Rewards is an important commercial lever, as members contribute 32% of the total nights at the Company,

and have been the loyal, repeat customers who, during the pandemic, contributed most to the recover of booking

numbers. The incentive of earning extra points stimulates bookings on direct channels, up to the point that more

than 69.4% of the bookings on the NH web site are made by NH Rewards members, who also spend and visit

more than guests who are not members.

During 2021, NH Hotel Group announced it was jointing the Global Hotel Alliance (GHA), which runs the

award winning Discovery loyalty programme for multi-brand hotels. As a part of the agreement, NH Rewards

will take part in GHA’s GHA Discovery programme in 2022, with it becoming one of the ten largest loyalty

programmes in the hotel sector, with more than 900 hotels taking part and accessing new source markets.

Minor's hotels are already members of this alliance.

On the other hand, in 2021, the Group started operating 3 new hotels in Hanover, Murano and Copenhagen with

589 rooms. The Group, therefore, reached a total of 353 hotels with 55,063 rooms at 31 December 2021.

The Group also signed-up 2 new hotels with 145 bedrooms in 2021. These sign ups were on an under

management basis in Santiago del Estero and in Cali. Both sign ups were under the NH brand.

Company revenues in 2021 totalled 20.9 million euros, an increase of 36.0% (15.4 million euros). Profit for the

year reached 168.1 million euros compared with the loss of 226.2 million euros in 2020. This increase is

explained by business reactivation after the impact of COVID-19.

In this year the Company’s gross borrowing was reduced from 913 million euros in December 2020 to 720.8

million euros in December 2021. At 31 December 2021, cash and cash equivalents amounted to 16.8 million

euros (10.9 million euros at 31 December 2020). This liquidity was complemented by credit lines at year end

amounting to 17 million euros. Furthermore, it has a syndicated credit line for 242 million which has not been

drawn down. At the close of the 2020 financial year it had a credit line for 17 million euros and a syndicated

credit line for 236 million euros (both drawn down).

In June 2021, the rating agencies confirmed NH Hotel Group’s rating within the issue of the new bond for 400

million euros maturing in 2026 which occurred in June. On 14 June 2021, Fitch confirmed NH Hotel Group's

rating at 'B-' with a negative outlook. On 15 June 2021, Moody's confirmed NH Hotel Group's corporate rating

at 'B3’ with a negative outlook. It should be noted that both agencies have stated that NH is managing the

recovery with satisfactory financial flexibility and deleveraging capacity, with a significant portfolio of owned

assets. In turn, Moody’s reconfirmed NH Hotel Group’s corporate rating at “B3”, with a negative outlook, in its

last publication on 29 December 2021.

As a result of the public offering on 31 October 2018, along with the capital increase in September 2021, Minor

currently owns 410,183,997 shares in NH Hotel Group, S.A. representing 94.13% of its share capital. Since

2018, both companies have begun to explore joint value creation opportunities for the coming years.

Minor Hotels and NH Hotel Group have integrated their brands under a single corporate umbrella present in

more than 50 countries around the world. In this way, a portfolio of more than 500 hotels under eight brands is

organised: NH Hotels, NH Collection, nhow, Tivoli, Anantara, Avani, Elewana and Oaks, which completes a

wide and diverse spectrum of hotel proposals connected to the needs and desires of global travellers.

Both groups currently share their knowledge base and experience in the sector in order to materialise short-term

opportunities, taking advantage of the complementarity of their hotel portfolios to define a global sales strategy,

the implementation of economies of scale with a broader customer base, explore development pathways for all

their brands in different geographical areas and access to shared talent.

COVID-19 impact and the measures implemented

After the start of the COVID-19 pandemic in the middle of March 2020 in Europe, demand for hotels dropped

drastically due to lockdowns, travel restrictions and social distancing, which drastically affected mobility.

The gradual reopening of hotels was made possible by the flexible costing structure and began in the middle of

2020, progressively, depending on recovery of domestic demand and with a focus on optimising profitability.

With the gradual roll out of vaccines since the beginning of 2021, a turning point was beginning to be seen that

– together with the progressive lifting of restrictions in some European countries – was allowing a faster

reopening of the portfolio once again. Therefore, at the end 2021, around 90% of the hotels were open,

compared to 60% at the beginning of the year.