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Risk Management Plan for Corruption and Related Infractions

1 – Scope

The Plan for Management of Risks of Corruption and Related Infringements complies with the recommendations of the Council for Prevention of Corruption regarding the need for public entities to have plans for management of risks and related infractions, as well as mechanisms for monitoring and managing conflicts of interest.

2 – Enatur's Mission, Company Policies

ENATUR's mission is the concession to private enterprise and the supervision of the exploration of the hotel establishments of the Pousadas de Portugal network, as defined in the applicable legislation, as well as the conservation and recuperation of monuments and other buildings of historical and cultural value with a view to their tourist use, as long as they are integrated or to be integrated in the aforementioned network, and the prospection and recommendation for tourist use in the context of the Pousadas de Portugal network of available spaces belonging to the State.

ENATUR seeks in its lines of action to adopt the most adequate policies that allow for the best results in the fulfilment of the defined objectives.

With the transfer of the Pousadas de Portugal network in 2003, the entire internal operating environment of ENATUR underwent profound changes resulting from the transfer of almost all existing work contracts, with the reduction of the organisational structure of ENATUR to its simplest and most essential expression to ensure the exercise of its activity, consisting of the respective Management and Supervisory Bodies and workers assigned to the financial department, the only one that remains and with attributions to support the Administration.

Despite the small size of its organisational structure, ENATUR remains committed to adopting corporate governance policies according to ethical standards, such as (i) high professional standards, (ii) the contribution and involvement of its employees in improving the company's activity, (iii) transparency in the company's activities and compliance with the law and its statutes (iv) achieving good levels of the obligations set out in the Operating Assignment Agreement.

3 – Company Principles

ENATUR has adopted a Code of Ethics that establishes a set of structuring and guiding principles for the conduct of its collaborators, considering as such the members of the Corporate Bodies and the employees.

ENATUR's fundamental ethical principles of action are

a) Integrity and compliance with the law, by carrying out the activity in an ethical and legal manner, reflecting the option for integrity and justice.

b) Truthfulness in the preparation of data and in its reporting, through the preparation of complete, accurate and reliable business records.

c) Protection of resources, with ENATUR's resources and material and intellectual property being treated with honesty and no inappropriate use or use based on theft, fraud or other situations of falsity being tolerated.

d) Protection of confidential information, through the duty of confidentiality of information concerning ENATUR or others.

e) Non-existence of conflicts of interest, with decisions taken exclusively serving the interests of ENATUR to the exclusion of the interests of others.

f) Integrity in negotiations, by negotiating with third parties with integrity and in good faith, without taking unfair advantage

g) Loyalty, resulting from the prohibition of taking personal advantage of any business opportunity belonging to ENATUR;

h) Individual responsibility, inherent to the fact that each person is responsible for the appropriateness and consequences of their actions, from a legal and ethical standpoint.

4 – Conflicts of Interest

As stated by the Prevention of Corruption Council, the Portuguese legal system has normative instruments that contemplate the control of conflicts of interest directly applicable to ENATUR, the members of its Corporate Bodies and its employees, namely regarding the applicable provisions of the Commercial Companies Code and the Public Manager Statute, approved by Dec-Lei 71/2007, of 27 March, as amended.

5 – Identification and Prevention Plan for the Main Risks

5.1 Internal Control System

Considering the activity currently performed by ENATUR, focused on the supervision of the Contract for the Cession of Operation of the Pousadas de Portugal Network signed with the shareholder Grup Pestana Pousadas, SA, as well as the reduced organisational structure, the internal control and risk management system of the company appears to be quite simple, appropriate to its size and complexity, and results from the application of the relevant provisions of its Statutes and the applicable law.

At a first level, it can be seen that the company's current organizational structure does not foresee the attribution, to its workers, of functions that may involve relevant risks in the area of corruption and conflicts of interest, since all decisions taken, namely regarding the execution of the Network Operation Assignment Agreement, as well as in contracting matters, depend on the approval by the Executive Board or by the Managing Director, in the latter case only when they fall within the limits of the delegated competences.

Two of these are appointed by the shareholder Turismo de Portugal, who holds 51% of the company's share capital, two by the shareholder Grupo Pestana Pousadas, SA, who holds 49% of the company's share capital, and the last one, who chairs, by agreement between the two shareholders.

Under the terms foreseen in article 410 of the Commercial Companies Code, the Executive Board cannot deliberate unless the majority of its members are present or represented; this legal provision determines that, in practice, any deliberations of the Executive Board of ENATUR can only be taken when members designated by both shareholders are present or represented or, in the worst case scenario, by one shareholder (two members) and the Chairman (chosen by agreement between both shareholders).

On the other hand, pursuant to paragraph 3 of Article 13 of the Articles of Association, given the current composition of the Executive Board, any resolutions relating to the sale or encumbrance of real estate, the assumption of others obligations, the dismissal of auditors, significant changes in accounting practice or in the criteria for preparing reports and accounts require the approval of four of its five members, acquisition of shares in other companies (by subscription or transfer) or acquisition of any assets from another natural or legal person, capital increases and approval of proposals to amend the articles of association, including increase or reduction of share capital, merger, de-merger, transformation, dissolution or liquidation, appointment of the executive committee or the delegated directors, as well as the respective delegation of powers, hiring of employees to occupy the positions of chief executive officer and chief financial officer.

The deliberative quorum established in said Article 13 of the Articles of Association ensures an adequate level of internal risk control resulting from the need for mandatory approval by the members designated by both shareholders whenever deliberations on matters of importance to the company's activity are relevant

In addition, pursuant to paragraph 4 of Article 13 of the Articles of Association, any resolutions on the sale or encumbrance of real estate or the acquisition of shares in other companies (by subscription or transfer) or the acquisition of any assets from others require the approval of the General Meeting when they involve amounts in excess of twenty per cent of the share capital, i.e. when values in excess of EUR 1,600,000.00 (one million, six hundred thousand euros) are involved.

The Bylaws thus impose a reinforced control mechanism when high-value asset acquisition or disposal transactions are involved, because of the need for approval by the General Meeting itself.

A final risk control mechanism derives from Article 13-A of the Articles of Association, which states that, in addition to other matters for which it is empowered by law or the Articles of Association, prior authorisation is required from Turismo de Portugal, IP, to be taken in the form of a resolution of the General Meeting, (a) the provision of guarantees for the benefit of another entity; and (b) the signing of any legal act or business from which the company has actual or contingent financial liabilities exceeding the annual budget or not resulting from the approved investment plan.

Finally, the authorisation of expenditure in the pursuit of ENATUR's activities falls within the competence of the Executive Board, with delegated powers having been given to the Chief Executive Officer with regard only to matters of current management of the company.

It appears that, in practice, the provisions of the Articles of Association with regard to the quorum required for the passing of resolutions by the Executive Board, requiring, in certain cases and due to their importance, the intervention of the General Meeting, constitute an effective model for the internal control of risks of corruption and related infractions

5.2 Conflicts of Interest

The Code of Ethics in force imposes on the employees and members of the Governing Bodies of ENATUR the obligation of confidentiality about information relating to the company's activity, the adoption of behaviour based on loyalty to the company, acting professionally and in accordance with instructions received, and forbids the acceptance of gifts or favours, from suppliers or other entities, which condition impartiality in the taking of any decisions.

About a possible conflict of interest, of particular relevance is the fact, already indicated, that ENATUR's activity is currently focused on the supervision of the Network Operation Assignment Contract entered into with the shareholder Grupo Pestana Pousadas, SA, holder of 49% of the company's share capital.

Article 390 of the Commercial Companies Code allows any shareholder to be designated as a manager, and, in the case of legal persons, a natural person must be designated to exercise the position in their own name; the accumulation of functions by any member of the Executive Board of ENATUR with those of a member of the Executive Board of the shareholder is also admissible.

In the specific case, the possibility of appointing any shareholder as a director or the accumulation of functions can generate situations of conflict of interest, particularly when resolutions are at stake that relate to the execution of the Network Operation Assignment Agreement in force with the shareholder Pestana Pousadas Group.

However, it is noted that the prevention of such conflicts of interest arises from the application of the law in conjunction with the provisions of ENATUR's Statutes.

Firstly, as we have seen, whenever acts of disposal or encumbrance of real estate or the acquisition of shares in other companies (by subscription or transfer) or the acquisition of any assets of third parties are involved that involve values greater than EUR 1,600,000.00 (one million, six hundred thousand euros), paragraph 4 of Article 13 of the Articles of Association requires the approval of the General Meeting.

Regarding the resolutions of this body, article 384 of the Portuguese Companies Code establishes that a shareholder may not vote, either in his own name or in representation of another, when the resolution concerns any relationship, established or to be established, between the company and the shareholder that is foreign to the articles of association; "foreign to the articles of association" means any relationship that does not concern the rights and duties of the company in relation to the shareholders and vice-versa, in these respective capacities.

In the case of resolutions on any other matters within the competence of the Executive Board, the regime provided for in paragraph 3 of Article 13 of the Articles of Association (referred to above) shall apply, requiring approval by a qualified majority of four of the five members of the Executive Board, and the provisions of Article 397 of the Commercial Companies Code, which establishes that contracts entered into between the company and its directors, directly or through a third party, are null and void unless previously authorised by a resolution of the Executive Board, in which the interested party cannot vote, and with the favourable opinion of the Supervisory Board.

6 – Control and Monitoring of the Plan

Although the survey carried out shows a low risk of corruption and related infractions, particularly about conflicts of interest, as a result of the application of the relevant legal and statutory mechanisms, ENATUR remains committed to monitoring in order to validate the existing solutions and their suitability for the intended prevention objectives.