23 SHAREHOLDERS’ EQUITY Reserves of the Consolidation Controlling Company reserves Profit/(loss) Total Share Own Share Prior-year Fully Equity Translation Shareholders’ capital Legal shares Special Voluntary Merger premium losses   consolidated method difference 2001 2002 2003 Equity BALANCE AS AT 31.12.2001 239,065.80 14,390.07 59,477.29 8,490.47 21,699.24 – 70.124,49 – 113,553.81 2,642.81 (38,013.96)   81,689.32 – – 573,119.34 Distribution of profit/(loss) 2001 – Prior-year losses – – – – – – – (11,715.07) – – –    11,715.07 – – – – Consolidation reserve – – – – – – – – 93,676.48 (272.09) –  (93,404.39) – – – Purchase of shares in the Controlling Company – – 76,295.80 – – – (76,295.80) – – – – – – – – Sale of shares in the Controlling Company – – (82,002.61) – – – 82,002.61 – – – – – – – – Transfers for merger and other – – – – 8,207.37 26,839.00 – – (39,747.20) – 4,700.83 – – – – Charge and reversal provision for own shares – – (13,306.25) – – – 10,105.20 – – – – – – – (3,201.05) Translation difference and restatement – – – – – – – – – – (68,730.82) – – – (68,730.82) 2002 profit/(loss) – – – – – – – – – – – – 85,660.02 – 85,660.02 BALANCE AS AT 31.12.2002 239,065.80 14,390.07 40,464.23 8,490.47 29,906.61 26,839.00 85,936.51   (11,715.07) 167,483.09 2,370.72    (102,043.95) –   85,660.02 – 586.847,50 Distribution of profit/(loss) 2002 – Legal reserve – 1,793.66 – – – – – – – – – – (1,793.66) – – – Voluntary reserve – – – – 6,735.37 – – – – – – – (6,735.37) – – – Consolidation reserve – – – – – – – – 77,521.65 (390.66) – –   (77,130.99) – – Purchase of shares in the Controlling Company – – 10,247.07 – – – (10,247.07) – – – – – – – – Transfers for merger and other – – – –   (10,514.87) 909.08 – 11,715.07 (2,109.28) – – – – – – Charge and reserval provision for own shares – – (13,438.14) – – – 16,146.78 – – – – – – – 2.708,64 Translation difference and restatement – – – – – – – – – – (27,144.46) – – – (27.144,46) Profit/(loss) 2003 – – – – – – – – – – – – –   50.858,84 50.858,84 BALANCE AS AT 31.12.2003 239,065.80 16,183.73 37,273.16 8,490.47 26,127.11 27,748.08 91,836.22 – 242,895.46 1,980.06    (129,188.41) – –  50.858,84 613.270,52 16. SHAREHOLDERS’ EQUITY Set out below is an analysis of movements in the Shareholders' Equity accounts of the Group (thousand euros): A) SHARE CAPITAL As at 31 December 2003 and 2002, the Controlling Company’s share capital was represented by 119,532,898 fully subscribed and paid-in bearer shares, each with a par value of 2 euros. All the shares have the same voting and dividend rights and are listed on the Continuous Market of the Madrid Stock Exchange and on Euronext Amsterdam.

24 According to the latest notifications the Controlling Company has received, and to the notifications made to the Spanish Securities  Exchange  Commission  before  the  year  end,  the  most  significant  shareholdings  were  the  following  as  at December 31: 2003 2002 Finaf 92, S.A. 5.24% 5.24% Corporación Financiera Caja de Madrid, S.A. 5.00% 5.00% Caja de Ahorros de Valencia, Castellón y Alicante 5.00% 5.00% Shares related to the Emplyees Options Plans plus Management Team holding 5.85% 4.12% Holding companies of Amancio Ortega Gaona 10.27% 5.02% Hoteles Participados, S.L. 5.00% – At the end of 2003 and 2002, the different members of the Board of Directors held or were the stable representatives of shareholdings representing approximately 27.69% and 22.44% of the share capital, respectively. B) RESERVES OF THE CONTROLLING COMPANY i)     Legal reserve The current Spanish Companies Act stipulates that 10% of the net profits of the year must be appropriated to the Legal reserve until it attains at least 20% of share capital.  The Legal reserve may be used to increase capital to the extent that its balance exceeds 10% of the capital already increased.  Except for this purpose, and whenever its balance does not exceed  20%  of  share  capital,  this  reserve  may  only  be  used  to  offset  losses  whenever  there  are  no  other  reserves available. ii)   Reserve for shares of the Controlling Company At the end of 2002, the Group held 989,730 shares of the Controlling Company representing 0.83% of its share capital. In compliance with Section 79.3 of the current Spanish Companies Act, had set up a reserve not available for distribution of 40.46 million euros. During 2003, the Group has carried out a number of operations to buy (1,314,782 shares) and sell (2,100,000 shares) for the purpose of meeting the Employee Option Plan set up in the year (see note 30ii) within the limits laid down by law and making the required notifications to the National Securities Exchange Commission and the Governing Companies of the Stock Exchanges.   At the year end, the Group held 204,512 of the shares of NH Hoteles, S.A., representing 0.17% of the share capital, at a cost of 1.54 million euros.  As at 31 December 2003, the Group had set up a reserve of 37.27 million euros, not available for distribution.  As has been explained in note 5n) the Group has stated its own shares at the lowest of cost, year-end listed price (or average for the quarter, if lower) or theoretical consolidated book value, which has led to the reversal of provisions amounting to 4.96 million euros. iii)   Special reserve This caption records the appropriation made in 2001 of 8.49 million euros to the reserve not available for distribution as a result of reducing the par value of the shares by 0.103542 euros. iv)  Other reserves not available for distribution Until such time as formation expenses and goodwill (not including goodwill on consolidation) have been written off, no dividends  may  be  distributed,  unless  the  amount  of  reserves  available  for  distribution  is  at  least  equal  to  the unamortised balances. v)   Merger reserve In  2002,  this  reserve  consisted  of  the  difference  between  the  cost  for  the  Group  of  the  shares  of  Promociones Eurobuilding, S.A. and the real value for the purposes of consolidating them in the NH Hoteles, S.A. Group, according to the Balance Sheet of Promociones Eurobuilding, S.A. as at 31 December 2001. As a result of the dissolution of AHORA, S.L. in which all its assets and liabilities were assigned to NH Hoteles, S.A., in 2003 this reserve records the difference between the cost for NH Hoteles, S.A. and the value of said shares for the purposes of NH Hoteles Group Consolidated Annual Accounts.

25 C) RESERVES IN FULLY CONSOLIDATED COMPANIES These   reserves   record   the   profits   contributed   to   the   Controlling   Company   in   prior   years   by   each   of   the   fully consolidated  companies.  Set  out  below  is  company-by-company  analysis  of  the  "Reserves  in  fully  consolidated companies" (thousand euros): RESERVES IN FULLY CONSOLIDATED COMPANIES Company 2003 2002 NH Hotel Albar Ciudad de Albacete, S.L. 150.29 146.43 NH University, S.L. 57.16 79.34 NH Las Palmas, S.A. 1,576.90 1,139.64 NH Numancia, S.A. 13.75 261.63 NH Sarriá, S.A. 800.97 773.11 NH Hotel Rallye, S.A. 6,305.69 6,613.33 Explotaciones Hoteleras Condor, S.L. 426.97 411.30 NH Ciutat de Mataró, S.A. 305.32 52.37 NH Marín, S.A. (66.88) (59.69) NH Lagasca, S.A. 505.38 1,239.82 NH Logroño, S.A. 172.81 60.11 Hoteles Express, S.L. 22,676.80 23,201.52 Aránzazu Donosti, S.A. 3,351.17 3,108.29 NH Málaga, S.A. 1,463.30 1,020.16 Grufir, S.A. 3,158.41 2,558.25 Ingesa, S.A. 787.27 496.39 Retail Invest, S.A. (165.81) (192.38) NH Pamplona, S.A. 5,036.79 1,389.99 Shuaa Hotels, B.V. and subsidiaries 23,606.00 17,272.21 Latinoamericana de Gestión Hotelera, S.A. and subsidiaries 55,742.34 22,849.32 Ahora, S.L. and subsidiaries – 9,497.10 Sotogrande, S.A. and subsidiaries 48,863.13 30,174.72 NH Participaties, N.V. and subsidiaries 48,794.31 44,318.11 Toralo, S.A. 6,061.74 1,107.77 NH Private Equity, B.V. and subsidiaries 46.95 (35.75) NH Ciutat de Reus, S.A. (*) 374.53 – NH Santander, S.A. (*) 2,829.62 – Hoteles Palacio de Castilla, S.A. (*) 6,200.97 – Hotelera Onubense, S.A. (*) (669.00) – Lenguados Vivos, S.L. (0.54) – NH Cental Europe GmbH & Co.K.G., Berlin and subsidiaries 4,489.12 – 242,895.46 167,483.09 (*) The change with regard to 2002 relates to what has been mentioned in note 2b. D) RESERVES IN COMPANIES CONSOLIDATED USING THE EQUITY METHOD. This item includes the profits, net of dividends, contributed to the Controlling Company in prior years by the companies consolidated using the equity method.  Set out below is an analysis (thousand euros): RESERVES IN COMPANIES CONSOLIDATED USING THE EQUITY METHOD 2003 2002 Fonfir 1, S.L. (5.22) (94.22) Jolly Hotels, S.p.A. 2,464.94 2,464.94 Palacio de la Merced, S.A. (479.66) – 1,980.06 2,370.72

26 OUTSIDE SHAREHOLDERS 2003 2002 Nuevos Espacios Hoteleros, S.A. 1,676.59 – Ahora, S.L. (via its subsidiaries) (*) – 1,314.50 Sotogrande, S.A. and subsidiaries 26,590.44 6,227.30 Latinoamericana de Gestión Hotelera, S.A. and subsidiaries 132,404.31 137,415.05 NH Las Palmas, S.A. 6,654.31 6,445.47 NH Marín, S.A. 1,280.15 1,359.76 NH Lagasca, S.A. 1,400.53 962.38 NH Ciutat de Mataró, S.A. 773.38 1,377.43 NH Participaties, N.V. and subsidiaries 73,546.35 70,915.27 NH Deutschland GmbH – 1.943,94 Other 2,150.31 1,779.86 246,476.37 229,740.96 (*) The change with regard to 2002 can be explained by what has been mentioned in note 3. E) TRANSLATION DIFFERENCES The caption "Translation differences" records the exchange difference arising as a result of using the criterion explained in note 5a. 17. OUTSIDE SHAREHOLDERS The balance included under this heading on the accompanying Consolidated Balance Sheets records, on the one hand, the value of the holding of outside shareholders in the  fully consolidated companies and, on the other, the balance included in   the   accompanying   Consolidated   Profit   and   Loss   Accounts   under   the   heading   "Profit/Loss   attributed   to   outside shareholders" which represents the share of these minority shareholders in the results for the year. The  movement  in  2003  and  2002  in  this  item  of  the  accompanying  Consolidated  Balance  Sheets  is  set  out  below (thousand euros): 2003 2002 OPENING BALANCE 229,740.96 251,766.43 Change in the scope of consolidation 1,926.60 1,855.36 Profits for the year attributable to outside shareholders 4,766.80 15,259.34 Dividends (9,364.07) (5,368.93) Changes in holding 19,383.65 (33,731.43) Other movements 22.43 (39.81) CLOSING BALANCE 246,476.37 229,740.96 i) The line "Change in the scope of consolidation" records, in 2003 and 2002, the balances of certain companies which were included for the first time in the scope of consolidation of the Group in those years (see note 2b). In 2002, this line essentially recorded the outside shareholders that have appeared as a result of bringing the Astron Hotels Group into the Group (see note 2b) . In  2003,  this  line  essentially  records  the  increase  in  the  balance  of  outside  shareholders  as  a  result  of  including  the company Nuevos Espacios Hoteleros, S.A. in the Group. ii) In 2002, the line "Changes in holding" essentially recorded the elimination of the interests of outside shareholders as a result of acquiring 49% of the capital of company Actividades de Hostelería, Ocio, Restauración y Afines, S.L. from the Caja de Madrid Group.  This line also recorded the increase in "Outside Shareholders" resulting from the dilution of the holding of the company Latinoamericana de Gestión Hotelera, S.A. in Nacional Hispana Hoteles, S.R.L. de C.V. (NH Mexico). In  2003  the  line  "Changes  in  holding"  essentially  records  the  increase  in  outside  shareholders  in  the  company Sotogrande, S.A. as a result of the dilution of the Controlling Company's holding in that company (see note 3). The balance of this item as at 31 December 2003 and 2002 records the interests of outside Shareholders in the following companies or consolidated sub-groups (thousand euros):

27 PROVISIONS FOR CHARGES AND LIABILITIES AND TRADE PROVISIONS 2003 2002 Provision for guarantees 1,202.02 1,202.02 Provision for liabilities 57,439.75 33,717.13 Provision for restating Balance Sheets (see note 2b) 23,760.89 23,760.89 82,402.66 58,680.04 18. DEFERRED INCOME As  at  31  December  2003,  this  caption  essentially  records  a  total  of  3.74  million  euros  for  the  grants  received  for  the construction of the golf courses of Sotogrande. As at 31 December 2003, this caption also records an amount of 1.28 million euros in deferred income on the sales of Time- Shares in the Hotel NH Krystal Cancun. 19. PROVISIONS FOR CHARGES AND LIABILITIES AND TRADE PROVISIONS Set out below is an analysis of the "Provisions for liabilities and charges" as at 31 December 2003 and 2002 (thousand euros): The provision for guarantees covers against eventual risks of contracts that have already been completed relating to the Controlling Company's previous industrial activity. The "Provision for liabilities" records the estimated amount of contingent liabilities of the Group where the exact amount or the date of payment cannot be determined. As at 31 December 2003, this caption records a total of 39.35 million euros (see note 27d) for the provision set up in 2003 to hedge against exposure deriving from the current economic situation in Germany and Austria. 20. DEBENTURE AND BOND ISSUES Set out below is an analysis of bonds and debentures outstanding as at 31 December (thousand euros): This 1955 series B bond issue pays interest at 6.75% a year and is being redeemed in increasing payments and shall be fully redeemed by 2009. This issue is secured by a bank guarantee. 21. OTHER LONG-TERM TRADE CREDITORS Set out below is an analysis of this item as at 31 December 2003 and 2002 (thousand euros): DEBENTURE AND BOND ISSUES 2003 2002 Class Long Term Short Term Long Term Short Term Serie B debentures 130.58 21.37 151.95 20.03 Bond and debenture interest – 2.99 – 3.87 130.58 24.36 151.95 23.90 The  "Long-term  leasing"  line  essentially  records  the  long-term  portion  payable  on  the  finance  lease  on  the  land  and building of the Hotel NH Dusseldorf (see note 7). OTHER LONG-TERM TRADE CREDITORS 2003 2002 Right of beneficial use of Hotel Plaza de Armas (see note 7) 14,950.53 16,445.59 Long-term leasing 24,114.75 24,028.73 Other creditors 5,067.03 7,191.57 44,132.31 47,665.89