39 29. CONTRIBUTION OF THE COMPANIES THAT ARE IN THE SCOPE OF CONSOLIDATION TO NET CONSOLIDATED PROFIT Contribution Profit/(Loss) Profit/(Loss) to net consolidatet Individual Consolidation Attributalble Profit/(loss) 2004 Adjustments Minority Shareholders 2004 2003 NH Hoteles, S.A. 20,856.09 18,515.00 - 39,371.09 55,333.32 Hotel Subsidiaries 10,355.74 (24,254.35) (4,696.19) (5,439.60) 39,535.08 Latinoamericana de Gestión Hotelera, S.A. (715.02) - 461.57 (253.45) (1,780.68) and subsidiaries Shuaa Hotels, B.V. 3,065.14 (99.72) - 2,965.43 57,996.39 NH Participaties, B.V. and subsidiaries 23,966.97 (10,999.44) (5,405.18) 7,562.35 (3,227.46) NH Central Europe GmbH & Co KG and subsidiaries (14,712.09) - - (14,712.09) (13,453.17) Other Companies (1,249.26) (13,155.19) 247.42 (1,001.84) - Non-hotel Subsidiaries 31,590.71 - (9,684.99) 8,750.53 (44,692.28) Sotogrande, S.A. 31,371.33 - (8,517.72) 22,853.61 (16,539.30) Other Companies 219.38 - (1,167.27) (14,103.08) (28,152.98) Contribution of the fully consolidated companies 62.802,54 (5,739.35) (14,381.18) 42,682.02 50,176.12 Palacio de la Merced, S.A. 48.07 - - 48.07 13.42 Fonfir 1, S.L. (0.22) - - (0.22) 1.59 Jolly, S.A. (597.61) - - (597.61) 667.71 Contribution of the fully consolidated (549.76) - - (549.76) 682.72 using the equity method 42,132.26 50,858.84 30. TRANSITION TO INTERNATIONAL FINANCIAL INFORMATION STANDARDS In accordance with Regulation (EC) Nº 1606/2002 of the European Parliament and the Council, dated 19^th July 2002, all companies governed by the Law of a Member State of the European Union and whose securities are listed on an official market of any Member State must submit Consolidated Annual Accounts for the financial years starting as from 1^st January 2005 in accordance with the International Financial Reporting Standards (IFRS) that have been convalidated by the European Union beforehand. The Group must, therefore, present its consolidated accounts for the year ending on 31^st December 2005 in accordance with the IFRS that have been convalidated by the European Union on said date. IFRS Nº 1 - First Adoption of the International Financial Reporting Standards - provides that the Consolidated Accounts of the Group for 2005 must include, for the purposes of comparison, a Consolidated Balance Sheet as at 31^st December 2004 and a Consolidate Profit and Loss account for the year then ended drawn up in accordance with the IFRS that are in force on 31^st December 2005. The Group is carrying out a transition plan for complying with the IFRS which includes, inter alia, an analysis of the differences in accounting criteria, the selection of accounting criteria to be applied in those cases where alternative treatments are allowed and an assessment of the changes in the information procedures and systems. However, as at the date these Consolidated Annual Accounts were drawn up, there was not enough information available to be able to estimate with any reasonable objectivity the extent to which the Consolidated Balance Sheet and Profit and Loss account for 2004 that are part of these Consolidated Accounts will differ from the Consolidated Balance Sheet and Profit and Loss account that will eventually be drawn up in accordance with the accounting criteria set out in the IFRS in forced as at 31^st December 2005. CONSOLIDATED FINANCIAL STATEMENTS 2004

40 31. GUARANTEES GIVEN TO THIRD PARTIES AND OTHER CONTINGENCIES i)   Guarantees given -  NH Hoteles, S.A. set up, together with all the other shareholders of Parque Temático de Madrid, S.A. (PTM, S.A.) a real right of pledge for the benefit of Caja de Ahorros y Monte de Piedad de Madrid on 8,789 registered shares it owns, as security for the bridging loan granted to PTM, S.A. The pledge is security for the full, timely fulfilment of the obligations entered into by the Borrower and is set up on each and every one of the shares. In January 2005 this pledge has been extended by a further 6,020 shares, as a result of which the pledge is now for a total of 14,809 shares (10% of all the shares it holds). -  In December 2002, NH Hoteles, S.A. issued a comfort letter for the benefit of the company Nacional Hispana Hoteles, S.R.L. de C.V. for an initial amount of 62.8 million dollars (46.41 million dollars as at 31^st December 2004), in which it undertakes to provide financial support, whenever it’s needed, to said company for the benefit of the banks granting the Syndicated Loan (see note 22). It also undertakes to keep a controlling majority while said loan is in force. ii)  Commitments with regard to third parties -  The outside shareholder of the Consolidated Company Latinoamericana de Gestión Hotelera, S.A, shall be entitled to put on NH Hoteles, S.A. 100% of its holding. This option to sell to NH may be taken up as from 1^st January 2004, and shall lapse after four years. The price to be paid for this option shall be as determined by an independent third party of recognised international repute based on the EBITDA generated by the company. Payment may be made in cash or shares, as NH Hoteles, S.A. chooses. -  The external shareholder of the Consolidated Company Nacional Hispana Hoteles, S.R.L. de C.V. has an option to sell to NH its shares between January 2005 and July 2006. The price is set on the basis of fair market value, as determined by a bank based on a multiple applied to the company's EBITDA. The price shall be paid in cash or NH Hoteles, S.A. shares, as NH Hoteles, S.A. chooses (see note 34). -  As  at  31^st  December  2004  the  Group,  after  approval  by  the  Controlling  Company's  General  Meeting  of  Shareholders,  has granted its employees share option plans, as analysed below: Year Granted Number of shares Exercice price (in euros) Exercice year 2001 1,700,000 11.17 2004 - 2006 2003 2,700,000 7.68 2007 - 2008 4,400,000 The  Controlling  Company  has  instrumented  the  cover  for  these  plans  by  selling  the  aforementioned  shares  to  a  financial institution, with the commitment to make up any financial loss suffered by said institution, in the event that the share price were to fall and not all the options are taken up at the end of the plans. -  The minority shareholder in NH Deutschland GmbH (formerly the Astron Group GmbH) and NH Hoteles Austria GmbH (formerly the Astron-Austria Group) shall be entitled to put on NH Hoteles, S.A. the remaining 20% of the shares (see note 2b). 32. REMUNERATION AND OTHER DECLARATIONS OF THE BOARD OF DIRECTORS a) REMUNERATION OF THE BOARD OF DIRECTORS The amount earned in 2004 by the members of the Board of Directors of the Controlling Company for attending statutory meetings and for attending the meetings of the Board of Directors totalled, taken together, 421.00 thousand euros (432.73 thousand euros in 2003). The average number of members of the Board of Directors was 12.75 in 2004 compared to 12 the year before. In  addition  to  said  remuneration,  the  Directors  who  are  members  of  the  Audit  and  Control  Committee  (3  members)  and  the Appointments and Remunerations Committee (3 members) have jointly received 26.00 and 18.36 thousand euros, respectively, during 2004 (18.57 and 31.44 thousand euros, respectively, in 2003). During 2004 the Executive Committee of the Board has been set up with 5 members who are also members of the Company's Board of  Directors.  It  met  for  the  first  time  in  September  2004.  Fees  paid  during  the  year  for  attending  meetings  of  this  Committee amounted to 57.00 thousand euros. CONSOLIDATED FINANCIAL STATEMENTS 2004

41 A further 72.00 thousand euros was paid to certain members of the Board of Directors for professional services. The amounts earned under these headings by the Directors of the Controlling Company in fully and proportionally consolidated companies and companies consolidated using the equity method during 2004 totalled 86.39 thousand euros (111.40 thousand euros in 2003). b)  INFORMATION IN ACCORDANCE WITH SECTION 127 TER. 4 OF THE COMPANIES ACT BROUGHT IN BY LAW 26/2003 DATED 17 JULY. During 2004, the Directors of the Controlling Company have held no holdings in the share capital of companies with the same, similar or complementary types of activity as the corporate object of the company. Furthermore, the Directors of the Controlling Company do not hold and have not held any position whatsoever in any company outside the Consolidated Group with the same, similar or complementary types of activity as the corporate object of the Companies in the NH Hoteles Group. Furthermore, the Directors do not engage and have not engaged in any activities as self-employed or salaried work with the same, similar or complementary types of activity as the corporate object of the Companies in the Consolidated NH Hoteles Group. 33. INFORMATION ABOUT ENVIRONMENTAL POLICY The activities carried on by the Group through the company Sotogrande, S.A. include managing the integrated water cycle in the area covered by the Sotogrande Estate and its surroundings. This management includes draining and purifying sewerage. The aim of these two latter activities is to reduce the damage to the environment. The Group's assets associated with its drainage and purification activity include 2 sewerage purification plant, capable of meeting the needs of a population of up to 20,000 inhabitants, connected to one another so that the cleaned affluent flows into the sea through an undersea outlet. In some purifying plants, the Group has also built a tertiary treatment system aimed at purifying the water even more so that they may be used partially for watering the Real Club de Golf Sotogrande with which a contract has been signed to this effect. The tertiary treatment plant is now operational as it came into service in July 2003. The introduction of this tertiary system will make for a reduction in the consumption of drinking water of between 200,000 and 300,000 m³/year. Furthermore, the Group, as part of its activity to promote and develop the Sotogrande Estate, is now focusing its attention on urban land with partial plans that have been approved. It therefore has no need to carry out any environmental impact studies prior to carrying out its property or tourist developments. However, the Group's policy is aimed at respecting the environment to the utmost. It has therefore contracted the services of an environmental consultancy to diagnose and provide advice on environmental matters in its actions, whose fees are not significant. The assets of an environmental nature described total, net of depreciation as at 31^st December 2004, amount to 1.02 million euros (1.01 million euros in 2003). The Group had set up no provision at the end of 2004 and 2003 for environmental contingencies or claims. Neither does it know of any liabilities relating to such contingencies or claims. 34. POST BALANCE SHEET EVENTS During January 2005 the outside shareholder of the consolidated company Nacional Hispana Hoteles, S.R.L. de C.V. exercised its put option and sold its shareholding, representing 38% of the share capital of said Company (see note 31ii). All these shares have been acquired by NH Rallye, S.A., paying a cash price of 45.5 million dollars (33 million euros). Because this operation was carried out very close to the date these Annual Accounts were drawn up the effect it will have on the Consolidated Financial Statements of NH Hoteles, S.A. and dependent companies has not been analysed. In any case, it has no impact on the Shareholders’ equity. 35. EXPLANATION ADDED FOR TRANSLATION TO ENGLISH These Consolidated Financial Statements are presented on the basis of accounting principles generally accepted in Spain. Certain accounting practices applied by the Group that conform with generally accepted accounting principles in Spain may not conform with generally accounting principles in other countries. This Notes to the Accounts are a traslation of a Notes originally issued is spanish. In the event of a discrepancy, the spanish language version prevails. CONSOLIDATED FINANCIAL STATEMENTS 2004

42 CONSOLIDATED STATEMENT OF SOURCE AND APPLICATION OF FUNDS APPLICATIONS 2004 2003 Purchases of fixed assets Formation expenses 2,688.79 8,599.50 Intangible assets 11,466.39 7,948.48 Tangible fixed assets 110,495.70 122,841.22 Investments 18,662.96 2,888.69 Change in scope of consolidation - 3,403.74 Deferred expense 1,855.85 1,700.00 Outside shareholders 22,952.92 - Dividends 29,660.05 - Cancellation or transfer to short-term of creditors. amounts falling due after more than one year 15,877.30 218,422.84 Funds used in operations Provisions for charges and liabilities 23,305.68 - Deferred income 260.65 - Net profit on disposals of fixed asset - 62,100.59 Profit/(loss) in companies consolidated using the equity method (549.76) 682.72 236,676.53 428,587.78 Surplus of sources over applications (Increase in working capital) 82,108.22 14,073.82 318,784.75 442,661.60 Set out below are the changes that have occurred in working capital 2004 Increases Decreases Inventories 5,771.48 - Accounts receivable - 15,808.66 Accounts payable 101,558.86 - Own shares - 792.91 Current asset investments 21,727.71 - Cash and banks - 28,946.13 Accrued expenses - 1,821.18 Provisions 419.05 - Total 129,477.10 47,368.88 Change in working capital - 82,108.22 129,477.10 129,477.10 CONSOLIDATED FINANCIAL STATEMENTS 2004 36. CONSOLIDATED STATEMENTS OF SOURCE AND APPLICATION OF FUNDS FOR THE YEARS ENDED ON 31^st DECEMBER 2004 AND 2003 (in euros)

43 CONSOLIDATED FINANCIAL STATEMENTS 2004 CONSOLIDATED STATEMENT OF SOURCE AND APPLICATION OF FUNDS SOURCES 2004 2003 Proceeds from disposals of fixed assets Intangible assets 917.87 17,206.37 Tangible fixed assets 21,702.75 212,668.02 Investments 2,008.39 12,834.90 Change in scope of consolidation 22,411.24 - Translation difference 7,159.12 22,877.06 Outside shareholders - 14,808.81 Deferred income - 452.39 Debts falling due after one year 133,828.62 - Funds generated from operations Profit for the year 42,132.26 50,858.84 Fixed-asset deprec. and write-offs 82,186.82 77,903.24 Provisions for charges and liabilities - 26,431.26 Deferred expense 2,960.27 1,090.00 Net loss on disposals of fixed assets 2,454.03 - Changes in provisions for investments 761.81 2,822.05 Changes in provision for own shares 261.57 2,708.66 318,784.75 442,661.60 Surplus of applications over sources of funds (Decrease in working capital) - - 318,784.75 442,661.60 2003 Increases Decreases Inventories - 2,034.98 Accounts receivable - 13,414.26 Accounts payable - 26,970.92 Own shares - 3,854.68 Current asset investments 14,592.81 - Cash and banks 31,846.98 - Accrued expenses 6,735.73 - Provisions 7,173.14 - Total 60,348.66 46,274.84 Change in working capital - 14,073.82 60,348.66 60,348.66