Mount Logan Capital
Annual Report 2022

Plain-text annual report

Registered number: 03004377 MILLENNIUM & COPTHORNE HOTELS LIMITED ANNUAL REPORT & ACCOUNTS For the Year Ended 31 December 2022 MILLENNIUM & COPTHORNE HOTELS LIMITED CONTENTS 2 - 4 5 - 8 9 Strategic Report Directors’ Report Statement of Directors' Responsibilities in Respect of the Annual Report and Financial Statements 10 - 12 Independent Auditor’s Report to the Member of Millennium & Copthorne Hotels Limited 13 14 15 16 17 Consolidated Income Statement Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows 18 - 73 Notes to the Consolidated Financial Statements 74 75 Company Statement of Financial Position Company Statement of Changes in Equity 76 - 77 Notes to the Company Financial Statements 1 MILLENNIUM & COPTHORNE HOTELS LIMITED STRATEGIC REPORT The Directors present the Strategic Report for Millennium & Copthorne Hotels Limited (the "Company") and its subsidiaries (together the "Group") for the year ended 31 December 2022. Business Review Total revenue generated, in reported currency, for the year, was £844m (2021: £540m). This improvement has been the continued recovery from the COVID-19 pandemic and the continued relaxation of remaining travel restrictions in different jurisdictions. This has been reflected in the increase in total hotel revenue in the reported currency of £753m (2021: £418m), which has been driven by the increase in average room rates to £126 (2021: £80) and occupancy increase to 65% (2021: 52%). Pre-tax profit for the year increased by £790m, to £840m (2021: £50m). This has been driven by the gain on disposal of Millennium Hilton Seoul and the on going recovery from COVID 19 and resultant increased appetite for travel. The net asset value (NAV) for the Group increased to £3,845m (2021: £3,275m). This has been driven by the gain on the disposal of Millennium Hilton Seoul and the deconsolidation of CDLHT. Key Performance Indicators We use a set of carefully selected key performance indicators (“KPIs”) to monitor our success. These KPIs are used to measure the Group’s progress year-on-year against those strategic priorities: n Growth n Financial Leverage n Cost Control To achieve profitable growth and improved asset returns for our hospitality business. To ensure a sound financial base in order to provide a solid platform for the development and growth of the Group. To ensure costs remain in line with revenue movements through a decentralised model, technological enhancements to drive efficiencies and rigorous monitoring of spending. Measure Revenue per available room Occupancy 2022 £81 65% Hotel revenue £753m £418m Average room rate Gearing £126 (1%) 2021 Basis for calculation £42 52% £80 Average room rate x Annual occupancy percentage. Percentage of rooms available for sale that were actually sold to our guests for the year. Includes room, events for the year. Revenue for sales divided by the number of room nights sold for the year. food & beverage and meetings & 25% Net cash/(debt) over total equity for the year. Net Cash/(Debt) £50m £(824)m Total cash and cash equivalents less the interest- bearing loans, bonds and borrowings. Refer to note 19 for further details. Operating Profit £788m £56m Operating profit for the year. Profit before tax £840m £50m Profit before tax for the year. Principal risks and uncertainties The Group recognises that risk management is crucial in order for management to make well informed business decisions, minimising impact of various risks and optimising opportunities. The Group is committed to maintaining risk management practices as an integral part of the business and operations. The Group will continue to proactively monitor developments, the prevailing risk, exposure and adapt accordingly. The Group’s Enterprise Risk Management (ERM) framework has been developed by reference to and alignment with global best practices including International Organisation for Standardisation (ISO) 31000:2018, ISO 27001 Information Security Management System, Payment Card Industry Data Security Standard (PCI DSS), OSHA standards, the EU General Data Protection Regulation, the UK Bribery Act 2010 and other similar guidelines. The framework consists of four key pillars that serve as the foundation of the Group’s execution and implementation of its ERM programme. These pillars include risk strategy, risk culture, risk governance and risk appetite, all of which are further supported by systematic risk processes. The directors look to adopt a proactive risk management approach that aims to safeguard the interests of the business and our stakeholders through the early identification and management of risks to minimise their impact and reduce uncertainties. Market risk – Competition and sector evolution Competition in the hotel industry is increasing as the sector continues to consolidate and the growth of alternative business models, such as sharing economy platforms like Airbnb, also are impacting supply and demand dynamics within the industry. Online travel agencies, such as Booking.com and Expedia.com, which compete against direct booking channels, are taking market share and influence consumer preference. 2 MILLENNIUM & COPTHORNE HOTELS LIMITED STRATEGIC REPORT (continued) To mitigate these risks, the Group is aggressively managing its portfolio of distribution channel partners, including established online travel agencies and new, niche or local players, to optimise revenue, gain access to new customers and minimise commission costs. This is coupled with the diverse nature of the portfolio, both geographically and in respect of its breadth of brands. The Group maintains a flexible operating structure that allows it to align its sales and marketing activities and adapt to changing hospitality trends. Finance risk – Foreign currency and borrowing The Group operates in numerous jurisdictions and trades in various international currencies and the reporting currency is pound sterling. Fluctuations in currency exchange rates and interest rates may be either accretive or dilutive to the Group’s reported trading results and net asset value. Hotels generally require significant capital expenditure at regular intervals in order to remain competitive and real estate assets, labour and other operating expenses can be significant. The Group may need to borrow funds from time to time to cover these capital expenditures and working capital requirements, where unhedged or rising interest rates may result in increased borrowing costs and impact the Group’s profits. Foreign exchange risk is mitigated as the exposure is primarily managed through the funding of purchases and repayment of borrowings from income generated in the same currency creating a natural hedge. The Group’s Treasury team monitor and address treasury matters, including the Group’s borrowing headroom and borrowing requirements, in accordance with the Group’s treasury policy and conducts business with a diversified set of lenders. The Group generally does not borrow on a secured basis, its real estate assets could serve as significant collateral should secured borrowings be required in the future. Health and safety risk – Non-compliance and risk of injury The health, safety and security of guests, visitors and employees is a fundamental expectation and there is a breadth of regulatory requirements across different jurisdictions relating to health and safety matters. Failure to implement and maintain sufficient controls regarding health and safety issues could result in serious injury or loss of life, lead to regulatory investigations and expose the Group to significant claims, sanctions or fines, as well as reputational damage. To ensure the health and safety of our key stakeholders, the Group has a health, safety and environmental management system in place, which include policies, procedures, testing, self and third-party audits, training and reporting. Management proactively seeks to identify emerging risks at the earliest opportunity to ensure clear roles and responsibilities are defined and internal controls function to mitigate risk. The well-being of the Group’s guests, colleagues and other stakeholders is one of its top priorities. Robust precautionary measures, including an enhanced cleaning and sanitisation programme, help ensure that Group’s hotels and corporate offices remain safe places to visit. IT infrastructure risk – infrastructure, process and data Increasing reliance on transactions over the internet and mobile applications, and the aggregation and storage of guest and other information electronically present heightened risks of attacks affecting the operation of our systems and a potential loss or misuse of for confidential, personal and/or proprietary information. The hospitality sector in particular is becoming a more frequent cyberattacks as hotel companies often handle large volumes of customer’s personal data. The occurrence of a cyber attack or loss of customers personal data could result in litigation, reputational damage, monetary damages and disruption to the normal course of business. target The Group’s regional IT teams conduct periodic security and penetration testing. The Group’s software systems are regularly updated with the latest security updates and patches to be installed. In the event of an IT security event, regional IT teams have developed disaster recovery plans for their high-priority systems and tests are conducted on select mission-critical systems annually to verify their recoverability offsite. Where the Group outsources critical information technology systems, it is ensured that suppliers exceed industrial standards to ensure maximum effectiveness and safety is maintained. Statement under section 172(1) of the Companies Act 2006 In accordance with Section 172(1)(a) to (f) of the Companies Act 2006 (“Section 172(1) Statement”), the directors set out their Section 172(1) Statement below. The directors understand their duties under Section 172 of the Companies Act 2006 and more specifically, their duty to act in the way each director considers, in good faith, would be most likely to promote the success of the Group for the benefit of its members as a whole. This is defined under Section 172 of the Companies Act 2006 by the following areas which have been reviewed individually: (a) the likely consequences of any decision in the long term; (b) the interests of the Company's employees; (c) the need to foster the Company's business relationships with suppliers, customers and others; (d) the impact of the Company's operations on the community and the environment; (e) the desirability of the Company maintaining a reputation for high standards of business conduct; and (f) the need to act fairly as between members of the Company. 3 MILLENNIUM & COPTHORNE HOTELS LIMITED STRATEGIC REPORT (continued) Consequences of any decision in the long term The Directors are committed to the significance of the views and opinions of the key stakeholders of the Group when making decisions for the long-term strategy and success of the Group. This is shown through the value and engagement placed on the key stakeholders of the Company and Group to ensure synergy between the Group and the key stakeholders. Interests of the Group's employees The Directors recognise that the company’s employees are a valued asset of the Group as they serve as key brand ambassadors, are critical to front-line service delivery and have the ability to create a unique and memorable experience of customers. To ensure good employee engagement and build a collaborative and supportive environment, the company ensures that good training and development is provided, good internal communications are maintained through periodic newsletters and employee intranet and good recruitment and induction. This is at the forefront of the Group’s ethos. The Group’s business relationships with suppliers, customers and others The Directors understand that nurturing and maintaining good relationships with key stakeholders, customers, and suppliers is a key driver to sustainable growth and long-term success. Customers are the lifeblood of the business and are valued very highly and the Group endeavours to provide the customer with a unique experience in a friendly, clean and accommodating environment. By doing this it is recognised that maintaining good relations with suppliers is critical so that quality products and services provided to customers are maintained. This is done by engaging with suppliers and ensuring the development of good business relationships, meeting sustainable sourcing requirements and fair price and payment terms. Impact of the Group's operations on the community and the environment The Directors recognise the role of the Group in the community and the surrounding environment by ensuring that there is a continued and concerted effort to ensure processes are efficient, sustainable and with the least impact on the environment as possible. The Group participates in support for charitable organisations, and participation in local outreach programs to ensure that the Group acts as a good corporate citizen. Desirability of the Group to maintain a reputation for high standards of business conduct The Directors value the reputation and high standards that are required to operate in this business sector. It is recognised that maintaining the Group’s reputation for high standards and corporate responsibility. This is done through ensuring complete compliance with legal requirements, developing a respectful culture and leading by example through good corporate governance. To act fairly as between members of the Group The directors are committed to ensuring a fair, transparent, and accountable relationship with the members of the Group, This is achieved through clear investor communication, general meeting and clear financial data in the form or audited financial statements. The Strategic Report was approved by the Board of Directors of the Group on 02 August 2023 and signed on its behalf by Kwek Eik Sheng Director 4 MILLENNIUM & COPTHORNE HOTELS LIMITED DIRECTORS’ REPORT The Directors present their annual report and financial statements for the Group and Company for the year ended 31 December 2022. Strategic report The Strategic Report is found on pages 2 to 4. Pursuant to the Companies Act 2006, that report must provide a fair review of the Group's business, together with a description of the principal risks and uncertainties facing the Group. It includes an analysis of the development and performance of the Group's business during the year and the position of its business at the end of the year, as well as description of the Group's strategy and business model. Board of Directors The names of those who served as a Director of the Company during the course of the 2022 financial year, up to the date of this report, include: Kwek Leng Beng Kwek Eik Sheng Jonathon Grech Jonathan David Ashcroft Catherine Wu Ali Hamad Ali Lakhraim Alzaabi David Kien Hassan Alexander Richard Jason Wade Anthony Grahame Potter (resigned 23 June 2023) (appointed 11 July 2022) (appointed 11 July 2022) (appointed 11 July 2022) (appointed 11 July 2022) (appointed 12 July 2023) Going Concern The measures adopted by the Directors in 2022 in order to further reduce costs and optimise the Group’s cash flow and liquidity have enabled the Group to offset the impact of rising inflation. Despite the uncertainty caused by high levels of inflation and associated risks, the Group continues to prepare its accounts on a going concern basis given that trading has improved significantly in recent months across the global estates with many hotels returning to pre- pandemic levels. Having reviewed cash forecasts and the available committed debt facilities, the Directors have a reasonable expectation that the Group and Company have adequate resources including external credit facilities to continue in operational existence up to at least 31 December 2024. Accordingly, they continue to adopt the going concern basis in preparing the financial statements of the Group and the Company. Please refer to note 2.1 for further information. Dividends The directors do not recommend the payment of a dividend in respect of the year ended 31 December 2022 (2021: £Nil). Political donations and expenditure No donations were made by the Group for political purposes and the Group did not incur any political expenditure during the year (2021: £Nil). The Group operates a politically neutral policy with regard to any political donations and expenditures it may elect to make. Financial instruments An indication of the Group’s financial risk management objectives and policies in respect of the use of financial exposure of the Group to price risk, credit risk, liquidity risk and cash flow risk are set out below. instruments and Credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers and investment securities. Exposure to credit risk is monitored on an ongoing basis, with credit checks performed on all clients requiring credit over certain amounts. Credit is not extended beyond authorised limits, established where appropriate through consultation with a professional credit vetting organisation. Credit granted is subject to regular review, to ensure it remains consistent with the client’s current creditworthiness and appropriate to the anticipated volume of business. Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s income or the value of its holdings of financial instruments. The primary objectives of the treasury function are to provide secure and competitively priced funding for the activities of the Group and to identify and manage financial risks. 5 MILLENNIUM & COPTHORNE HOTELS LIMITED DIRECTORS’ REPORT (continued) Foreign currency risk The Group is exposed to foreign currency risk on revenue, purchases, borrowings and cash deposits denominated in currencies other than the functional currencies of the respective Group entities. The Group’s principal policy, wherever possible, is to maintain a natural hedge whereby liabilities are matched with assets denominated in the same currency. Foreign currency investment exposure is also minimised by borrowing in the currency of the investment. To mitigate foreign currency translation exposure, an appropriate proportion of net assets are designated as hedged against corresponding financial liabilities in the same currency. Interest rate risk and interest rate swaps The Group adopts a policy of ongoing review of its exposure to changes in interest rates on its borrowings, taking into account market expectations with regard to the perceived level of risk associated with each currency, the maturity profile and cash flows of the underlying debt, and the extent to which debt may potentially be either prepaid prior to its maturity or refinanced at reduced cost. The Group’s policy is to maintain a mixture of its financial liabilities on a fixed and floating-rate basis with a greater emphasis on floating rates presently as this flexibility is considered to be appropriate in the context of the Group’s overall geographical diversity, investment and business cycle and the stability of the income streams, cash balances and loan covenants. Employment of disabled persons We highly value the rich diversity of our colleagues around the world. As of the end of 2022, the Group operated in over 25 countries and employed approximately 6,441 employees worldwide. The Group is an equal opportunity employer and has an objective to ensure that no employee or other worker or job applicant receives less favourable treatment, directly or indirectly, on the grounds of age, disability, gender reassignment, marital or civil partner status, pregnancy or maternity, race, colour, nationality, ethnic or national origin, religion or belief, sex or sexual orientation. Engagement with suppliers, customers and others in a business relationship with the Group As a Group operating in the hospitality industry, the directors are aware of the need for the Group to remain competitive and for our hotels to address the wants and needs of our customers. To this end, the Group is continually looking for ways to engage with and better understand our guests. Indeed, several of the Group’s principal risks-including the risks pertaining to hotel demand, operational efficiency and health and safety-focus in part on the relationship of the Group with its customers and other stakeholders. Employee involvement and engagement with employees As a Group, we highly value our employees as the driving force behind every aspect of our business, including guest-facing roles, ancillary and supporting roles, and administration roles. Our employees play a crucial role in delivering exceptional services to our guests, guaranteeing a memorable and consistently high standard of service. Moreover, they contribute to cultivating a professional, efficient, inclusive, and friendly environment for guests and colleagues alike. The Group’s aims to maximise employee engagement by keeping employees informed about matters of concern to them, through management presentations, updates from regional and functional heads, regional intranet sites and other communication. Over the course of the year, these efforts included regular meetings at the regional, functional and hotel levels, as well as exit interviews with departing colleagues. These meetings allowed the management team to communicate important updates throughout the workforce, provide training on existing and new policies and procedures and hear from colleagues around the world. We are fully committed to supporting our employees by providing them with the necessary resources, continuous training, and benefits to ensure their satisfaction and well-being. Through our employee benefit schemes and tailored training programs, the Group strives to enhance their skills and knowledge, allowing them to excel in their specific roles within our organisation and the broader Group community. Central to our approach is the instillation of our core values, shown below, into every employee, guiding their actions and decision- making. By upholding these values, we foster a sense of unity, purpose, and integrity throughout our workforce, promoting a positive and productive work culture. • Will to win - The will to be successful both personally and as a Group as a whole in the pursuit of targets and objectives. • Guest focus - Unparalleled service and guest experience provided by our employees and services. • Openness in communication - Clear and supportive communication between all levels of the Group. • Teamwork - Collaborative and coherent working between all teams within the group. • Innovation and creativity - Tailor made solutions and the ability to introduce new ideas, processes and methods into practice. • Think blue ocean behaviour - Innovative, anticipative and divergent thinking approach to targets, performance, growth and teamwork. 6 MILLENNIUM & COPTHORNE HOTELS LIMITED DIRECTORS’ REPORT (continued) Streamlined energy and carbon reporting This section discloses our UK operational energy consumption, carbon footprint, and energy efficiency initiatives for the year ended 31 December 2022 in line with the UK Government’s Streamlined Energy and Carbon Reporting (‘SECR’) legislation. GHG Emissions and Energy Use 2022 2021 Energy consumption used to calculate emissions in Kilowatt-hours (kWh) Gas: 54,488,636 kWh Diesel: Nil kWh Electricity: 36,561,390 kWh District Heating: 751,589 kWh Company-Owned Transport: Nil kWh Employee-Owned Transport: 114,925 kWh Gas: 36,214,810 kWh Diesel: 3,946 kWh Electricity: 21,072,238 kWh District Heating: Nil kWh Company-Owned Transport: 6,394 kWh Employee-Owned Transport: 13,132 kWh Total: 91,916,541 kWh Total: 57,310,520 kWh Emissions from combustion of gas in tCO2e (Scope 1) Emission from combustion of diesel in tCO2e (Scope 1) Emissions from business travel in company owned vehicles in tCO2e (Scope 1) Emissions from purchased electricity in tCO2e (Scope 2, location-based) Emissions from purchased district heating in tCO2e (Scope 2, location-based) Emissions from business travel in rental cars or employee-owned vehicles where company is responsible for purchasing the fuel in tCO2e (Scope 3) 9,946.4 tCO2e 6,633 tCO2e N/A N/A 0.9 tCO2e 1.5 tCO2e 7,070.2 tCO2e 4,474 tCO2e 128.3 tCO2e N/A 26.9 tCO2e 3.2 tCO2e Total gross tCO2e based on above Intensity ratio: gross tCO2e / room 17,171.8 tCO2e 4.2 tCO2e 11,113 tCO2e 2.6 tCO2e Methodology The methodology used to calculate our GHG emissions and energy use is the GHG Protocol Corporate Accounting and Reporting Standard, using the operational control approach on reporting boundaries. The data has been calculated using v2.0 DEFRA conversion factors for each reporting year. As the data was collected in December 2022, data for quarter 4 of 2022 was based on actual data for quarter 4 of 2021, it has been assumed that there were similar emissions in each quarter as there were no significant changes to hotel operation between quarter 4 2021 and quarter 4 2022. This enabled us to report verifiable data for the 2022 calendar year in advance of our reporting deadlines. For any estimates included in our totals, we have used the emissions per room average for the UK region. Energy efficient actions This year we have continued efforts to reduce energy consumption across our UK estate. Progress in 2022 included: n Installation of new boilers n Ongoing LED installation n Upgrading of Air Handling Units n Upgrading of belt driven pumps to direct drive pumps n Upgrading of pumps to more efficient models The Group’s greenhouse gas emissions and energy consumption will continue to be reported in its Corporate Responsibility Report, located at https://investors.millenniumhotels.com/corporate-responsibility. 7 MILLENNIUM & COPTHORNE HOTELS LIMITED DIRECTORS’ REPORT (continued) Future developments The Group will build upon its performance by increasing the efficiency of the internal processes and functions. Research and development Whilst the management team continues to review ways to improve the Group’s service, brand and product offerings, and regularly invest in our people and assets, the Group did not conduct significant research and development activities during the year. Statement of corporate governance The Group is indirectly wholly owned and controlled by CDL, through various CDL subsidiary companies. CDL, which is listed on the Singapore Exchange, is, in turn, considered to be controlled by Hong Leong Investment Holdings Pte. Ltd. As at 31 December 2022, the Board comprised of 8 directors, consisting of 3 executive directors and five non-executive directors. Mr Kwek Leng Beng has served as the Chairman of the Group since it was initially listed in 1996, and as an executive director since 2020. Mr Kwek Eik Sheng served as an executive director, while Mr Jonathon Grech and Mr David Ashcroft served as non-executive directors in 2022. On 11 July 2022, Mr Alexander Wade, Dr Catherine Wu and Mr Ali Alzaabi were appointed as non-executive directors, while Mr David Hassan was appointed as an executive director. Mr. David Ashcroft resigned from the Board on 23 June 2023. Following a vetting process, Dr. Anthony Potter was appointed to the Board on 12 July 2023. The vision of the Directors is to be the leading global hospitality real estate ownership group for gateway cities, with effective, in-built and unique asset management skills. Our commitment is to hospitality and creating memorable experiences in distinctive environments. We strive to recognize not only the faces of our guests but also their individual needs and desires. To do this, we will need to deliver outstanding service, quality, originality and value to our customers by employing and developing the best people and by having a challenging and forward-thinking business culture. Fundamentally, we treat our guests, employees and other stakeholders with respect and integrity. In 2023, the Board intends to review the ways in which the purpose and values are embedded throughout the organisation. As part of this review, the Board will continue to examine the culture of the Group and will seek to reinforce a culture of accountability where employees take into account the views of, and are responsible to, the Group’s stakeholders, including our guests and customer, other employees, suppliers, the communities in which we operate. When assessing a potential business opportunity, in addition to assessing whether it is aligned with the strategic priorities of the Group and its impact on the Group’s stakeholders, the Board members and executive management team also consider the risks associated with the opportunity and whether it is likely to create and preserve value over the long term. The directors understand that whilst the Group must remain nimble and entrepreneurial to tackle the challenges facing the Group and industry more generally, the directors also are keenly aware that the Group must operate in a sustainable manner in order to be successful. Company Branches The Company did not have any branches operating outside of the UK during the year. Statement of the directors as to disclosure of information to the auditor In accordance with Section 418 of the Companies Act 2006, each Director who held office at the date of approval of this Directors’ Report confirms that: · So far as they are aware, there is no relevant audit information of which the Company’s auditor is unaware; and · They have taken all the steps that they ought to have taken as a director in order to make himself or herself aware of any relevant audit information and to establish that the Group’s auditor is aware of that information. Auditor Pursuant to Section 487 of the Companies Act 2006, the auditor will be deemed to be reappointed and KPMG LLP will therefore continue in office. The Directors’ Report was approved by the Board of Directors of the Company on 02 August 2023. On behalf of the Board Kwek Eik Sheng Director Corporate Headquarters Scarsdale Place Kensington London W8 5SY 8 MILLENNIUM & COPTHORNE HOTELS LIMITED STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT AND FINANCIAL STATEMENTS The directors are responsible for preparing the strategic report, the director’s report and the group and parent company financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare Group and parent Company financial statements for each financial year. Under that law they have elected to prepare the Group financial statements in accordance with UK-adopted international accounting standards and applicable law and have elected to prepare the parent Company financial statements in accordance with UK accounting standards and applicable law (UK Generally Accepted Accounting Practice), including FRS 101 Reduced Disclosure Framework. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and parent Company and of the Group’s profit or loss for that period. In preparing each of the Group and parent Company financial statements, the directors are required to: ·         Select suitable accounting policies and then apply them consistently; ·         Make judgements and estimates that are reasonable, relevant, reliable and prudent; ·         For the Group financial statements, state whether they have been prepared in accordance with UK-adopted international accounting standards; ·         For the parent company financial statements, state whether applicable UK accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; ·        Assess the group and parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and ·         Use the going concern basis of accounting unless they either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so. The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent company’s transactions and disclose with reasonable accuracy at any time the financial position of the parent company and enable them to ensure that its financial statements comply with the Companies Act 2006. They are responsible for such internal controls as they determine are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the group and to prevent and detect fraud and other irregularities. The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. On behalf of the Board Kwek Eik Sheng Director 9 MILLENNIUM & COPTHORNE HOTELS LIMITED INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF MILLENNIUM & COPTHORNE HOTELS LIMITED Opinion We have audited the financial statements of Millennium & Copthorne Hotels Limited (“the Company”) for the year ended 31st December 2022 which comprise the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Financial Position, the Consolidated Statement of Changes in Equity, the Consolidated Statement of Cash Flows, the Company Statement of Financial Position, the Company Statement of Changes in Equity and related notes, including the accounting policies in note 2.2 of the Group Financial Statements and Note B of the Company Financial Statements. In our opinion: • The financial statements give a true and fair view of the state of the Group’s and of the parent Company’s affairs as at 31 December 2022 and of the Group’s profit for the year then ended; • The Group financial statements have been properly prepared in accordance with UK-adopted international accounting standards; • The parent Company financial statements have been properly prepared in accordance with UK accounting standards, including FRS 101 Reduced Disclosure Framework; and • The financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities are described below. We have fulfilled our ethical responsibilities under, and are independent of the Group in accordance with, UK ethical requirements including the FRC Ethical Standard. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion. Going Concern The directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Group or the Company or to cease their operations, and as they have concluded that the Group and the Company’s financial position means that this is realistic. They have also concluded that there are no material uncertainties that could have cast significant doubt over their ability to continue as a going concern for at least a year from the date of approval of the financial statements (“the going concern period”). In our evaluation of the directors’ conclusions, we considered the inherent risks to the Group’s business model and analysed how those risks might affect the Group and Company’s financial resources or ability to continue operations over the going concern period. Our conclusions based on this work: • We consider that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. • We have not identified, and concur with the directors’ assessment that there is not, a material uncertainty related to events or conditions that, individually or collectively, may cast significant doubt on the Group or the Company's ability to continue as a going concern for the going concern period. However, as we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were made, the above conclusions are not a guarantee that the Group or the Company will continue in operation. Fraud and breaches of laws and regulations – ability to detect To identify risks of material misstatement due to fraud ("fraud risks") we assessed events or conditions that could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud. Our risk assessment procedures included: • Inquiry of directors, management and key personnel along with inspection of policy documentation in relation to the Group's entity-level policies and procedures to prevent and detect fraud. This included inspection of the Group's Whistleblowing report, as well as direct inquiry whether they have knowledge of any actual, suspected or alleged fraud. • Review of the internal audit reports. • Review of Board minutes. • Performing walkthroughs and obtaining understanding of key processes. • Consideration of remuneration incentive schemes and performance targets for directors. • Using analytical procedures to identify any usual movements or unexpected relationships. We communicated identified fraud risks throughout the audit team and remained alert to any indications of fraud throughout the audit. This included communication of the relevant fraud risks identified at the Group level to all in-scope audit teams, and a request to these teams to report back to the Group audit team should any instances of fraud that could give rise to a material misstatement at group. 10 MILLENNIUM & COPTHORNE HOTELS LIMITED INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF MILLENNIUM & COPTHORNE HOTELS LIMITED (continued) As required by auditing standards, we perform procedures to address the risk of management override of controls. We performed procedures including: • Testing the design and implementation of controls relating to manual journal entry postings. • Test high risk journal entries (as determined by the engagement team), including select entries made throughout the period. On this audit we do not believe there is a fraud risk related to revenue recognition because Revenue transactions are typically not complex and revenue recognition, which in most cases is linked directly to bookings through various channels, requires minimal judgement. Identifying and responding to risks of material misstatement due to non-compliance with laws and Regulations The Group is subject to laws and regulations that directly affect the financial statements including financial reporting legislation and taxation legislation and we assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items. In addition, the Group is subject to many other laws and regulations where the consequences of non-compliance could have a material effect on amounts or disclosures in the financial statements, for instance through the imposition of fines or litigation. We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our general and sector experience, and through discussion with the directors and other management (as required by auditing standards), and discussed with the directors and other management the policies and procedures regarding compliance with laws and regulations. We identified the following areas where non-compliance could have a more material effect: health and safety regulations, employment law and anti-bribery and corruption legislation acknowledging the Group's business activities. We communicated identified laws and regulations throughout our team and remained alert to any indications of non-compliance throughout the audit. This included communication from the group to full-scope component audit teams of relevant laws and regulations identified at the Group level, and a request for full scope component auditors to report to the group team any instances of noncompliance with laws and regulations that could give rise to a material misstatement at group. The potential effect of these laws and regulations on the financial statements varies considerably. Auditing standards limit the required audit procedures to identify non-compliance with these laws and regulations to enquiry of the directors and other management and inspection of regulatory and legal correspondence, if any. Therefore, if a breach of operational regulations is not disclosed to us or evident from relevant correspondence, an audit will not detect that breach. Context of the ability of the audit to detect fraud or breaches of law or regulation Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it. In addition, as with any audit, there remained a higher risk of non-detection of fraud, as these may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. Our audit procedures are designed to detect material misstatement. We are not responsible for preventing non-compliance or fraud and cannot be expected to detect non-compliance with all laws and regulations. Strategic report and directors’ report The directors are responsible for the strategic report and the directors’ report. Our opinion on the financial statements does not cover those reports and we do not express an audit opinion thereon. Our responsibility is to read the strategic report and the directors’ report and, in doing so, consider whether, based on our financial the information therein is materially misstated or inconsistent with the financial statements or our audit statements audit work, knowledge. Based solely on that work: • We have not identified material misstatements in the strategic report and the directors’ report; • In our opinion the information given in those reports for the financial year is consistent with the financial statements; and • In our opinion those reports have been prepared in accordance with the Companies Act 2006. 11 MILLENNIUM & COPTHORNE HOTELS LIMITED INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF MILLENNIUM & COPTHORNE HOTELS LIMITED (continued) Matters on which we are required to report by exception Under the Companies Act 2006, we are required to report to you if, in our opinion: • Adequate accounting records have not been kept by the parent Company, or returns adequate for our audit have not been received from branches not visited by us; or • The parent Company financial statements are not in agreement with the accounting records and returns; or • Certain disclosures of directors’ remuneration specified by law are not made; or • We have not received all the information and explanations we require for our audit; or We have nothing to report in these respects. Directors’ responsibilities As explained more fully in their statement set out on page 5, the directors are responsible for: the preparation of the financial statements and for being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Group and parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the Group or the parent Company or to cease operations, or have no realistic alternative but to do so. Auditor's responsibility Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities. The purpose of our audit work and to whom we owe our responsibilities This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed. Andrew Simpson (Senior Statutory Auditor) for and on behalf of KPMG LLP, Statutory Auditor Chartered Accountants 15 Canada Square London E14 5GL 02 August 2023 12 MILLENNIUM & COPTHORNE HOTELS LIMITED CONSOLIDATED INCOME STATEMENT For the year ended 31 December 2022 Revenue Cost of sales Gross profit Administrative expenses Other operating income Other operating expense Operating profit Share of profit of joint ventures and associates Finance income Finance expense Net finance expense Profit before tax Income tax (charge)/credit Profit for the year Attributable to: Equity holders of the parent Non-controlling interests The financial results above derive from continuing activities. The notes on pages 18 - 73 are an integral part of these consolidated financial statements. Notes 5 6 7 7 13 9 5 10 2022 £m 844 (365) 479 (406) 712 3 788 53 58 (59) (1) 840 (286) 554 533 21 554 2021 £m 540 (255) 285 (308) 65 14 56 17 15 (38) (23) 50 39 89 73 16 89 13 MILLENNIUM & COPTHORNE HOTELS LIMITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the year ended 31 December 2022 Profit for the year Other comprehensive income: Items that are not reclassified subsequently to income statement: Remeasurement of defined benefit plan actuarial net gains, net of tax 21 NOTE Items that may be reclassified subsequently to income statement: Foreign currency translation differences – foreign operations Foreign currency translation differences – equity accounted investees Net gain on hedge of net investments in foreign operations Exchange differences reclassified to profit or loss on disposal of business of foreign operations Other comprehensive income/(expense) for the year, net of tax Total comprehensive income for the year, net of tax Total comprehensive income attributable to: Equity holders of the parent Non-controlling interests Total comprehensive income for the year, net of tax The notes on pages 18 - 73 are an integral part of these consolidated financial statements. 2022 £m 554 8 8 166 34 (6) 90 284 292 846 804 42 846 2021 £m 89 2 2 (44) 12 (1) - (33) (31) 58 31 27 58 14 MILLENNIUM & COPTHORNE HOTELS LIMITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 31 December 2022 Non-current assets Property, plant and equipment Investment properties Investment in joint ventures and associates Other financial assets Deferred tax assets Current assets Inventories Development properties Trade and other receivables Cash and cash equivalents Assets held for sale Total assets Non-current liabilities Interest-bearing loans, bonds and borrowings Employee benefits Provisions Other non-current liabilities Lease liabilities Deferred tax liabilities Current liabilities Interest-bearing loans, bonds and borrowings Trade and other payables Provisions Lease liabilities Income taxes payable Total liabilities Net assets Equity Issued share capital Share premium Translation reserve Treasury share reserve Fair value reserve Retained earnings Total equity attributable to equity holders of the parent Non-controlling interests Total equity NOTES 11, 36 12, 36 13 14 24 15 16 17 18 35 19 21 22 23 36 24 19 25 22 36 27 28 28 28 2022 £m 2021 £m 2,624 3,287 551 797 477 - 700 465 26 5 4,449 4,483 4 119 176 561 860 9 869 5 109 83 390 587 17 604 5,318 5,087 (227) (674) (4) (10) (15) (410) (190) (856) (284) (217) (51) (12) (53) (13) (9) (38) (131) (77) (942) (540) (262) (43) (4) (21) (617) (1,473) 3,845 (870) (1,812) 3,275 97 843 655 (4) - 2,029 3,620 225 3,845 97 843 392 (4) - 1,364 2,692 583 3,275 The notes on pages 18 - 73 are an integral part of these consolidated financial statements. These financial statements were approved by the Board of Directors on 02 August 2023 and were signed on its behalf by: Kwek Eik Sheng Director Registered No: 03004377 15 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2022 MILLENNIUM & COPTHORNE HOTELS LIMITED Balance at 1 January 2022 Profit Other comprehensive income Total comprehensive income Transactions with owners, recorded directly in equity Contributions by and distributions to owners Dividends – non-controlling interests Revaluation gain on property, plant and equipment Changes in ownership interests Change in interests in subsidiaries without loss of control Disposal of interest in subsidiary Return of capital to non-controlling interests Total transactions with owners Balance at 31 December 2022 Balance at 1 January 2021 Profit Other comprehensive (expense)/income Total comprehensive (expense)/income Transactions with owners, recorded directly in equity Contributions by and distributions to owners Dividends – equity holders Dividends – non-controlling interests Changes in ownership interests Change in interests in subsidiaries without loss of control Return of capital to non-controlling interests Total transactions with owners Balance at 31 December 2021 SHARE CAPITAL SHARE PREMIUM TRANSLATION RESERVE TREASURY SHARE RESERVE RETAINED EARNINGS TOTAL EXCLUDING NON- CONTROLLING INTERESTS NON- CONTROLLING INTERESTS TOTAL EQUITY £m 97 - - - - - - - - £m 843 - - - - - - - - - £m 392 - 263 263 - - - - - - £m (4) - - - - - - - - - 97 843 655 (4) £m 1,364 533 8 541 - 123 1 - - 124 2,029 £m 2,692 533 271 804 - 123 1 - - 124 3,620 £m 583 21 21 42 (10) - (1) (384) (5) (400) 225 £m 3,275 554 292 846 (10) 123 - (384) (5) (276) 3,845 SHARE CAPITAL SHARE PREMIUM TRANSLATION RESERVE TREASURY SHARE RESERVE RETAINED EARNINGS TOTAL EXCLUDING NON- CONTROLLING INTERESTS NON- CONTROLLING INTERESTS TOTAL EQUITY £m 97 - - - - - - - - £m 843 - - - - - - - - £m 436 - (44) (44) - - - - - £m (4) - - - - - - - - £m 1,287 73 2 75 - - 2 - 2 £m 2,659 73 (42) 31 - - 2 - 2 97 843 392 (4) 1,364 2,692 £m 579 16 11 27 - (14) (2) (7) (23) 583 The notes on pages 18 - 73 are an integral part of these consolidated financial statements. £m 3,238 89 (31) 58 - (14) – (7) (21) 3,275 16 MILLENNIUM & COPTHORNE HOTELS LIMITED CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended 31 December 2022 Cash flows from operating activities Profit for the year Adjustments for: Depreciation Share of profit of joint ventures and associates Other operating income Other operating expense Finance income Finance expense Income tax charge/(credit) Operating profit before changes in working capital and provisions Movement in inventories, trade and other receivables Movement in development properties Movement in trade and other payables Cash generated from operations Interest paid Interest received Income tax paid Net cash (used in)/generated from operating activities Cash flows from investing activities Dividends received from joint ventures and associates Proceeds from sale of property, plant and equipment and investment properties (net of expenses) Proceeds from disposal of subsidiary (net of expenses) Acquisition of subsidiaries Acquisition and additions of property, plant and equipment and investment properties Net cash generated from/(used in) investing activities Cash flows from financing activities Loan to intermediate holding company Repayment of borrowings Drawdown of borrowings Payment of lease liabilities Dividends paid to non-controlling interests Return of capital to non-controlling interests Net (used in)/generated from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of the year Effect of exchange rate fluctuations on cash held Cash and cash equivalents at end of the year Reconciliation of cash and cash equivalents Cash and cash equivalents shown in the consolidated statement of financial position Bank overdrafts included in borrowings Cash and cash equivalents for consolidated statement of cash flows The notes on pages 18 - 73 are an integral part of these consolidated financial statements. NOTES 11 13 7 7 9 9 10 15,17 16 25 13 11, 12 14 36 18 18 18 2022 £m 554 69 (53) (712) (3) (58) 59 286 142 (50) (8) 58 142 (18) 14 (148) (10) 10 762 53 (22) (41) 762 (486) (375) 250 (20) (10) (5) (646) 106 390 65 561 561 - 561 2021 £m 89 75 (17) (65) (14) (15) 38 (39) 52 (21) (7) 102 126 (19) 2 (16) 93 2 30 - - (88) (56) - (467) 501 (10) (15) (7) 2 39 350 1 390 390 - 390 17 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Reporting entity 1 Millennium & Copthorne Hotels Limited (the “Company”) is a private company incorporated in England and Wales. The registered office is located at Corporate Headquarters, Scarsdale Place, Kensington, London W8 5SY, United Kingdom. These consolidated financial statements comprise the Company and its subsidiaries (collectively the “Group”). The consolidated financial statements of the Group for the year ended 31 December 2022 were authorised for issue in accordance with a resolution of the Directors on 02 August 2023. Basis of preparation 2.1 The consolidated financial statements are prepared on the historical cost basis except for investment properties, derivative financial instruments, equity investments at fair value through other comprehensive income (“FVOCI”) and equity investments at fair value through profit and loss (“FVTPL”) which are stated at their fair values. Hotel properties are stated at cost or deemed cost. Deemed cost is calculated based on the hotel’s frozen valuation as at 1 January 2004. Non-current assets held for sale are stated at the lower of carrying amount and fair value less costs to sell. The Group’s income statement and segmental analysis separately identifies operating profit and other operating income and expense. This is in accordance with IAS 1 ‘Presentation of Financial Statements’ and is consistent with the way that financial performance is measured by management and assists in providing a meaningful analysis of the trading results of the Group. The financial statements are presented in the Company’s functional currency of sterling, rounded to the nearest million. The Company has elected to prepare its parent company’s financial statements in accordance with Financial Reporting Standard 101 ‘Reduced Disclosure Framework’. Basis of accounting The Group's financial statements have been prepared and approved by the directors in accordance with international accounting standards and in accordance with UK-adopted international accounting standards (“UK-adopted IFRS”). The Company has elected to prepare its financial statements in accordance with FRS 101; these are presented on pages 74 to 77. Adoption of new and revised standards There were no new accounting standards issued and adopted by the Group during the current year. Subsidiaries Basis of consolidation (i) Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. (ii) The Group’s interests in equity-accounted investees comprise interests in joint ventures and associates. Interests in equity-accounted investees An associate is an entity in which the Group has significant influence but not control or joint control, over the financial and operating policies. A joint venture is an arrangement in which the Group has joint control, and where the Group has rights to the net assets of the arrangement, rather than rights to its assets and obligations for its liabilities. Interests in joint ventures and associates are accounted for using the equity method. They are initially recognised at cost, which includes transaction costs. Subsequent to initial recognition, the consolidated financial statements include the Group’s share of the profit or loss and other comprehensive income of equity-accounted investees, until the date on which significant influence or joint control ceases. Transactions eliminated on consolidation (iii) Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated. Unrealised gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. Going concern The Group’s business activities, together with the factors likely to affect its future development, performance and position are set out in the Strategic Report on page 2 to 4. Note 20 of the financial statements includes the Group’s objectives, policies and processes for instruments and hedging activities and its managing its capital; its financial risk management objectives; details of its financial exposures to credit risk and liquidity risk. 18 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) The measures adopted by the directors in 2022 in order to further reduce costs and optimise the group’s cash flow and liquidity have enabled the group to offset the impact of rising inflation. These mitigating actions include reducing capital expenditure through postponing or pausing refurbishment and property development activities, tight monitoring of manpower planning, monitoring of controllable variable expenses and negotiation of discounts with suppliers. These initiatives will continue to support the Group’s recovery. It is noted that the Group has a limited fixed cost based due to owning the majority of its hotel properties which is a major advantage in this industry. Despite the uncertainty caused by high levels of inflation and associated risks, the Group continues to prepare its accounts on a going concern basis given that trading has improved significantly in recent months across the global estates with many hotels returning to pre- pandemic levels. Cashflow forecasts have been prepared for a period of eighteen months from the date of approval of the financial statements. The directors continue to review and adapt these cashflow forecasts in the light of the changing circumstances associated with the high levels of inflation and other business risks. These forecasts include downside scenario assumptions such as restrictions on the renewal of loan facilities during the period or failure to dispose of assets held for sale whilst still incurring significant capital improvement costs. Having reviewed the forecasts and the available committed debt facilities, the Directors have a reasonable expectation that the Group and Company have adequate resources including external credit facilities to continue in operational existence up to at least 31 December 2024. Accordingly, they continue to adopt the going concern basis in preparing the financial statements of the Group and the Company. 2.2 Summary of significant accounting policies The Group has consistently applied the following accounting policies to all periods presented in these consolidated financial statements. Business combinations and goodwill A Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the acquirer measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition costs incurred are expensed and identifiable net assets acquired are measured at the acquisition date fair value. When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value as at that date through the income statement. Any contingent consideration is measured at fair value at the date of acquisition. If an obligation to pay contingent consideration that meets the definition of a financial instrument is classified as equity, then it is not remeasured, and settlement is accounted for within equity. Otherwise, other contingent consideration is remeasured at fair value at each reporting date and subsequent changes in the fair value of the contingent consideration are recognised in profit or loss. Goodwill is initially measured at cost, being the excess of the consideration transferred over the fair value of the Group’s net identifiable assets acquired and liabilities assumed and is allocated to each of the Group’s cash-generating units that are expected to benefit from the combination. If the consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in the income statement. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Where goodwill has been allocated to a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the disposed operation is included in the carrying amount of the operation when determining the gain or loss on disposal. Goodwill disposed in these circumstances is measured based on the relative values of the disposed operation and the portion of the cash-generating unit retained. B Foreign currency The financial statements of each of the Group’s businesses are prepared in the functional currency applicable to that business. 19 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Foreign currency translation (i) Transactions in foreign currencies other than the functional currency are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated into sterling at the foreign exchange rate at that date. Foreign exchange differences arising on translation are recognised in the income statement. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated at the date of the transaction. Non‑monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated into sterling at foreign exchange rates ruling at the date the fair value was determined. (ii) Financial statements of foreign operations On consolidation, the assets and liabilities of foreign operations, including fair value adjustments arising on consolidation, are translated to sterling at foreign exchange rates ruling at the balance sheet date. The revenues and expenses of foreign operations are translated to sterling at rates approximating to the foreign exchange rates ruling at the dates of the transactions. Foreign exchange differences arising on retranslation are recognised directly in equity in the foreign currency translation reserve. When a foreign operation is disposed of, in part or in full, the relevant amount in the translation reserve is transferred to the income statement. (iii) Net investment in foreign operations Exchange differences arising from the translation of the net investment in foreign operations, and of related hedges are taken to translation reserve. They are released into the income statement upon disposal or partial disposal of the foreign operation. C Derivative financial instruments The Group holds derivative financial instruments to hedge its foreign currency and interest rate risk exposures. Derivatives are initially measured at fair value; any directly attributable transaction costs are recognised in profit or loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are generally recognised in profit or loss. D (i) Hedges Cash flow hedges When a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability, or a highly probable transaction, the effective part of any gain or loss on the derivative financial instrument is recognised directly in equity. When the forecast transaction subsequently results in the recognition of a non-financial asset or non-financial liability, the associated cumulative gain or loss is removed from equity and included in the initial cost or other carrying amount of the non-financial asset or liability. If a hedge of a forecast transaction subsequently results in the recognition of a financial asset or a financial liability, then the associated gains and losses that were recognised directly in equity are reclassified to the income statement in the same period or periods during which the asset acquired or liability assumed affects the income statement (i.e. when interest income or expense is recognised). For cash flow hedges, other than those covered by the above policy, the associated cumulative gain or loss is removed from equity and recognised in profit or loss in the same period or periods during which the hedged forecast transaction affects profit or loss. The ineffective part of any gain or loss is recognised immediately in the income statement. When a hedging instrument expires or is sold, terminated or exercised, or the entity revokes designation of the hedge relationship but the hedged forecast transaction is still expected to occur, the cumulative gain or loss at that point remains in equity and is recognised in accordance with the above policy when the transaction occurs. If the hedged transaction is no longer expected to take place, then the cumulative unrealised gain or loss recognised in equity is recognised immediately in the income statement. (ii) Hedge of monetary assets and liabilities When a derivative financial instrument is used as an economic hedge of the foreign exchange exposure of a recognised monetary asset or liability, hedge accounting is not applied and any gain or loss on the hedging instrument is recognised in the income statement. Hedge of net investment in foreign operations (iii) The portion of the gain or loss on an instrument used to hedge a net investment in a foreign operation that is determined to be an effective hedge is recognised directly in equity within the translation reserve. The ineffective portion is recognised immediately in the income statement. 20 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) E (i) Property, plant and equipment and depreciation Recognition and measurement Land and buildings (other than investment properties) are stated at cost, except as allowed under IFRS 1 transition rules, less depreciation and any provision for impairment. All other property, plant and equipment is stated at cost less depreciation and any provision for impairment. Any impairment of such properties below depreciated historical cost is charged to the income statement. Under the transition provisions of IFRS 1, land and buildings which were previously revalued under UK GAAP were measured on the basis of their deemed cost, being their UK GAAP carrying value, including revaluations, as at 1 January 2004 being the effective date of the Group’s conversion to IFRS. Depreciation (ii) Freehold land is not depreciated. All other assets are depreciated to their residual values on a straight-line basis over their estimated useful lives as follows: Building core Building surface, finishes and services Plant and machinery Furniture and equipment Soft furnishings Computer equipment Software Motor vehicles 50 years or lease term if shorter 30 years or lease term if shorter 10 – 20 years 10 years 5 – 7 years 5 years up to 8 years 4 years No residual values are ascribed to building surface finishes and services. Residual values ascribed to building core depend on the nature, location and tenure of each property. (iii) Subsequent costs Capital expenditure on major projects is recorded separately within property, plant and equipment as capital work in progress. Once the project is complete the balance is transferred to the appropriate fixed asset categories. Capital work in progress is not depreciated. Interest attributable to funds used to finance the construction or acquisition of new hotels or major extensions to existing hotels is capitalised net of tax relief and added to the cost of the hotel core. Operating supplies, which include China, linen, glass and silverware, were stated at their deemed costs as at 1 January 2008 and subsumed into the costs of the hotel buildings. Subsequent renewals and replacements of such stocks and new supplies upon initial hotel opening are written off as incurred to the income statement. Leases F Effective 1 January 2019, the Group adopted IFRS 16 ‘Leases’ using the modified retrospective approach allowed under which the cumulative effect of initial application is recognised in accumulated profits as at 1 January 2019. The details of the current and prior years accounting policies are disclosed separately below. Further information on the adoption and initial application of IFRS 16 can be found in Note 36. Policy applicable prior to 1 January 2019 Rentals payable under operating leases were charged to the income statement on a straight-line basis over the term of the relevant lease. Benefits received and receivable (and costs paid and payable) as an incentive to enter into an operating lease were also spread on a straight-line basis over the lease term. Policy applicable from 1 January 2019 For contracts entered into on or after 1 January 2019, the Group assesses at inception whether the contract is, or contains, a lease. A lease exists if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Group assessment includes whether: ·         the contract involves the use of an identified asset; ·         the Group has the right to obtain substantially all of the economic benefits from the use of the asset throughout the contract period; and ·         the Group has the right to direct the use of the asset. (i) At the commencement of a lease, the Group recognises a right-of-use asset along with a corresponding lease liability. the Group as a lessee 21 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) The lease liability is initially measured at the present value of the remaining lease payments, discounted using the applicable incremental borrowing rate (single discount rate applied to a portfolio of leases with similar characteristics). The lease term comprises the non-cancellable period of the contract, together with periods covered by an option to extend the lease where the Group is reasonably certain to exercise that option based on operational needs and contractual terms. Subsequently, the lease liability is measured at amortised cost by increasing the carrying amount to reflect interest on the lease liability, and reducing it by the lease payments made. The lease liability is remeasured either when the Group changes its assessment of whether it will exercise an extension or termination option (if expected to be terminated early then any applicable penalties due will also be factored in the remeasurement) or if there is a change in the Group’s estimate of the amount expected to be payable under the residual value guarantee. Right-of-use assets are initially measured at cost, comprising the initial measurement of the lease liability adjusted for any lease payments made at or before the commencement date, estimated asset retirement obligations, lease incentives received and initial direct costs. Subsequently, right-of-use assets are measured at cost, less any accumulated depreciation and any accumulated impairment losses, and are adjusted for certain remeasurements of the lease liability. Depreciation is calculated on a straight-line basis over the length of the lease. The Group has elected to apply exemptions for short-term leases (less than 12 months) and leases for which the underlying asset is of low value (£5,000 or less). For these leases, payments are charged to the income statement on a straight-line basis over the term of the relevant lease. Right-of-use assets are presented within non-current assets on the face of the balance sheet, and lease liabilities are shown separately on the balance sheet in current liabilities and non-current liabilities depending on the length of the lease term. Leases where the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. The leased asset is initially recorded at the lower of fair value and the present value of minimum lease payments. The equivalent liability, categorised as appropriate, is included within current or non-current liabilities. Assets are depreciated over the shorter of the lease term and their useful economic lives. Finance charges are allocated to accounting periods over the period of the lease to produce constant rates of return on the outstanding balance. (ii) the Group as a lessor When the Group acts as a lessor, it determines at lease inception whether each lease is a finance lease or operating lease. Rents receivable by the Group as lessor under operating leases, including the sub-letting of retail outlets within hotel properties, are credited to the income statement on a straight-line basis over the lease term even if the receipts are not made on such basis. Costs, including depreciation incurred in earning the lease income, are recognised as an expense. Rents receivable under a finance lease are recognised on the statement of financial position as a finance lease receivable and the corresponding asset is subsequently disposed of with a profit or loss if applicable recognised in the income statement. Impairment G The carrying amounts of the Group’s assets, other than investment properties, inventories, employee benefit assets and deferred tax assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. The recoverable amount of assets is the greater of their net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment is recognised in the income statement whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are reversed if there has been a change in the estimates used to determine the recoverable amount. Where permissible under IFRS, an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment had been recognised. In the case of equity investments, a significant or prolonged decline in fair value of the asset below its cost is considered in determining whether the asset is impaired. If any such evidence exists for these assets, the cumulative loss – measured as the difference between acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in the income statement – is removed from equity and recognised in the income statement. The Group recognises loss allowances for expected credit losses (ECL) on: ·         financial assets measured at amortised cost; ·         debt investments measured at FVOCI or FVTPL; and ·         contract assets. 22 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Loss allowances of the Group are measured on either of the following bases: ·         12-month ECL: these are ECL that result from default events that are possible within the 12 months after the reporting date (or for a shorter period if the expected life of the instrument is less than 12 months); or ·          Lifetime ECL: these are ECL that result from all possible default events over the expected life of a financial instrument or contract asset. Simplified approach The Group applies the simplified approach to provide for ECL for all trade receivables and contract assets. The simplified approach requires the loss allowance to be measured at an amount equal to lifetime ECL. General approach The Group applies the general approach to provide for ECL on all other financial instruments. Under the general approach, the loss allowance is measured at an amount equal to 12-month ECL at initial recognition. At each reporting date, the Group assesses whether the credit risk of a financial instrument has increased significantly since initial recognition. When credit risk has increased significantly since initial recognition, loss allowance is measured at an amount equal to lifetime ECL. When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECL, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group’s historical experience and informed credit assessment and includes forward-looking information. If credit risk has not increased significantly since initial recognition or if the credit quality of the financial instruments improves such that there is no longer a significant increase in credit risk since initial recognition, loss allowance is measured at an amount equal to 12- month ECL. The Group considers a financial asset to be in default when the borrower is unlikely to pay its credit obligations to the Group in full, without recourse by the Group to actions such as realising security (if any is held). The Group considers a contract asset to be in default when the customer is unlikely to pay its contractual obligations to the Group in full, without recourse by the Group to actions such as realising security (if any is held). The maximum period considered when estimating ECLs is the maximum contractual period over which the Group is exposed to credit risk. Measurement of ECLs ECLs are probability-weighted estimates of credit losses. Credit losses are measured at the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive). ECLs are discounted at the effective interest rate of the financial asset. Credit-impaired financial assets At each reporting date, the Group assesses whether financial assets carried at amortised cost and debt investments at FVOCI or FVTPL are credit impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial asset is credit-impaired includes the following observable data: · Significant financial difficulty of the borrower or issuer; · A breach of contract such as a default; · The restructuring of a loan or advance by the Group on terms that the Group would not consider otherwise; · It is probable that the borrower will enter bankruptcy or other financial reorganisation; or · The disappearance of an active market for a security because of financial difficulties. Presentation of ECL in the statement of financial position Loss allowances for financial assets measured at amortised cost and contract assets are deducted from the gross carrying amount of these assets. Write-off The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. This is generally the case when the Group determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Group’s procedures for recovery of amounts due. 23 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) H Investment properties Investment properties held by the Group are properties which are held either to earn rental income or for capital appreciation or both. Investment properties are stated at fair value. Any gain or loss in the fair value on annual revaluation is recognised in the income statement in accordance with IAS 40 Investment Property. In limited circumstances, the determination of fair value is uncertain, and these properties are carried at cost. Impairment analysis over these properties is carried out annually. An external independent valuer, having an appropriate recognised professional qualification and recent experience in the location and category of the property being valued, values the portfolio annually. The fair values are based on market values, being the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. Inventories I Inventories are recorded at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. Development properties J Development properties are stated at the lower of cost and net realisable value. They are held for sale in the short term and are therefore classified as current assets. The cost of development properties includes interest and other related expenditure incurred in order to get the asset ready for its intended use. Borrowing costs payable on loans funding a development property are also capitalised, on a specific identification basis, as part of the cost of the development property until the completion of development. Payments received from purchasers arising from pre-sales of the property units prior to the completion are included as deferred income under other financial liabilities in the statement of financial position. Cash and cash equivalents K Cash and cash equivalents comprise cash balances and call deposits with an original maturity of three months or less. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents. Borrowings L Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost: any difference between proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method. Taxation M Income tax on profit or loss comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date and any adjustment to tax payable in respect of previous years. Deferred tax is provided for using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: (i) the initial recognition of assets or liabilities that affect neither accounting nor taxable profit; and (ii) differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the benefit will be realised. Deferred tax assets and liabilities are offset only to the extent that: (i) the Group has a legally enforceable right to offset current tax assets against current tax liabilities; (ii) the Group intends to settle net; and (iii) the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority. N (i) Obligations for contributions to defined contribution pension plans are recognised as an expense in the income statement. Employee benefits Defined contribution plans 24 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Defined benefit plans (ii) The Group operates a number of defined benefit pension plans. As set out in Note 21, the calculation of the present value of the Group’s defined benefit obligations at each period end is subject to significant estimation. An appropriately qualified, independent actuary is used to undertake this calculation. The assumptions made by the actuary are the best estimates chosen from a range of possible actuarial assumptions, which due to the timescale covered may not necessarily be borne out in practice. The valuation of scheme assets is based on their fair value at the balance sheet date. As these assets are not intended to be sold in the short term, their values may be subject to significant change before they are realised. In reviewing the work of the independent actuary, management is required to exercise judgement to satisfy themselves that appropriate weight has been afforded to macro-economic factors. Details of the assumptions used are set out in Note 21. The Group’s net obligation in respect of defined benefit post-employment plans, including pension plans, is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value, and the fair value of any plan assets is deducted. The calculation is performed by a qualified actuary using the projected unit credit method. When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees is recognised immediately as an expense in the income statement. The Group recognises remeasurement gains and losses within the consolidated statement of comprehensive income in the period in which they occur. The Group determines the net interest expense (income) on the net defined benefit liabilities (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the net defined benefit liability (asset), taking into account any changes in the net defined benefit liability (asset) during the period as a result of contributions and benefit payments. Net interest expense and other expenses related to defined benefit plans are recognised in the income statement. (iii) Long-term service benefits The Group’s net obligation in respect of long-term service benefits, other than post-employment plans, is the amount of future benefit that employees have earned in return for their service in the current and prior periods. The obligation is calculated using the projected unit credit method and is discounted to its present value and the fair value of any plan assets is deducted. Share-based payment transactions (iv) The share-based incentive schemes previously allowed the Group’s employees to acquire shares of Millennium & Copthorne Hotels plc (now Millennium & Copthorne Hotels Limited). The cost of equity-settled transactions with employees for awards granted after 7 November 2002 is measured by reference to the fair value at the date on which they are granted. The fair value is determined by using an appropriate pricing model, further details of which are given in Note 21. The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled. The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group’s best estimate of the number of equity instruments that will ultimately vest. The income statement expense or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period. No expense is recognised for awards that do not ultimately vest, except for equity-settled transactions where vesting is conditional upon a market or non-vesting condition, which are treated as vesting irrespective of whether or not the market or non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied. Where the terms of an equity-settled transaction award are modified, the minimum expense recognised is the expense as if the terms had not been modified, if the original terms of the award are met. An additional expense is recognised for any modification that increases the total fair value of the share-based payment transaction, or is otherwise beneficial to the employee as measured at the date of modification. Where an equity-settled award is cancelled, it is treated as if it vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. This includes any award where non-vesting conditions within the control of either the entity or the employee are not met. However, if a new award is substituted for the cancelled award and designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph. All cancellations of equity-settled transaction awards are treated equally. 25 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) O Provisions A provision is recognised on the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, when appropriate, the risks specific to the liability. Further details on provisions are given in Note 22. Revenue and its recognition P Revenue comprises: •        Income from the ownership and operation of hotels – recognised at the point at which the accommodation and related services are provided; •        Measurement and recognition of refunds and other obligations - This is recognised at the point at which a complaint is made. The obligation is measured based on the severity of the complaint received and the discretion of management to determine the amount. This can be up to the full amount of the accommodation and/or services provided; •        Management fees – earned from hotels managed by the Group, usually under long-term contracts with the hotel owner. Management fees include a base fee, which is generally a percentage of hotel revenue, and/or an incentive fee, which is generally based on the hotel’s profitability; recognised when earned on an accrual basis under the terms of the contract; •        Franchise fees – received in connection with licensing of the Group’s brand names, usually under long-term contracts with the hotel owner. The Group charges franchise royalty fees as a percentage of room revenue; recognised when earned on an accrual basis under the terms of the agreement; •        Income from property rental – recognised on a straight-line basis over the lease term, lease incentives granted are recognised as an integral part of the total rental income; and •        Development property sales – recognised when the transfer of control of the property has passed to the buyer, which is usually when legal title transfers depending on jurisdictions. The trigger for revenue recognition depends on the laws within each jurisdiction. Dividend distribution Q Dividend distribution to the shareholders is recognised as a liability in the Group’s financial statements in the period in which the dividends are appropriately authorised and approved for payment and are no longer at the discretion of the Company. Unpaid dividends that do not meet these criteria are disclosed in the notes to the financial statements. Operating segment information R Disclosure of segmental information is principally presented in respect of the Group’s geographical segments. The segments reported reflect the operating information included in internal reports that the Chief Operating Decision Maker (“CODM”), which is the Board, regularly reviews. Further details are given in Note 5. An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. Discrete financial information is reported to and is reviewed by the CODM on a geographical basis. Operating segments have Chief Operating Officers (“COOs”) or equivalent who are directly accountable for the functioning of their segments and maintain regular contact with the Group Chief Executive Officer and Chairman of the CODM to discuss the operational and financial performance. The CODM makes decisions about allocation of resources to the regions managed by the COOs. No operating segments have been aggregated to form the reportable operating segments. Segment results that are reported to the CODM include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items principally comprise interest-bearing loans, borrowings, cash and cash equivalents, net finance expense, taxation balances and corporate expenses. S Non-current assets held-for-sale A non-current asset or a group of assets containing a non-current asset (a disposal group) is classified as held for sale if it’s carrying amount will be recovered principally through sale rather than through continuing use, it is available for immediate sale and sale is highly probable within one year. On initial classification as held for sale, non-current assets and disposal groups are measured at the lower of previous carrying amount and fair value less costs to sell with any adjustments taken to profit or loss. Any impairment loss on a disposal group is first allocated to property, plant and equipment and lease premium prepayment, and then to remaining assets and liabilities on a pro rata basis, except that no loss is allocated to inventories, financial assets, deferred tax assets, employee benefit assets and investment property, which continue to be measured in accordance with the Group’s accounting policies. Impairment losses on initial classification as held-for-sale and subsequent gains or losses on remeasurement are recognised in the income statement. Gains are not recognised in excess of any cumulative impairment loss. Other financial assets and liabilities T Trade investments are classified as either equity instruments at FVOCI or fair value through profit and loss (“FVTPL”) and are included under non-current assets within ‘other financial assets’. They are recorded at market value with movements in value taken to equity. Any impairment to value is recorded in the income statement. 26 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Trade and other receivables are stated at their nominal amount (discounted if material) less any impairment. Trade and other payables are stated at their nominal amount (discounted if material). Related parties U For the purpose of these financial statements, parties are considered to be related to the Group if the Group has the ability, directly or indirectly, to control the party or exercise significant influence over the party making financial and operating decisions, or vice versa, or where the Group and the party are subject to common control or common significant influence. Related parties may be individuals or other entities. V Government grants The Group recognises an unconditional government grant related to an asset in profit or loss as other income when the grant becomes receivable. Other government grants related to assets are initially recognised as deferred income at fair value if there is reasonable assurance that they will be received and the Group will comply with the conditions associated with the grant; they are then recognised in profit or loss as other income on a systematic basis over the useful life of the asset. Grants that compensate the Group for expenses incurred are offset against the particular expense in profit or loss on a systematic basis in the periods in which the expenses are recognised, unless the conditions for receiving the grant are met after the related expenses have been recognised. In this case, the grant is recognised when it becomes receivable. 3 Accounting Estimates and Judgements The preparation of financial statements under IFRS requires the Group to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingencies and the reported amount of revenue and expenses during the year. The Group evaluates its estimates and assumptions on an ongoing basis. Such estimates and judgements are based upon historical experience and other factors it believes to be reasonable under the circumstances, which form the basis for making judgements about the carrying value of assets and liabilities that are not readily apparent from other sources. Certain critical accounting policies, among others, affect the Group’s more significant estimates and assumptions used in preparing the consolidated financial statements. Actual results could differ from the Group’s estimates and assumptions. 3.1 Judgements The key judgements are: Classification of investment properties The Group holds a number of investment properties and accounts for such properties in accordance with the accounting policy set out in Note 2.2H. The Group owns assets which are leased to external third parties with lease rentals and related charges varying according to the agreement involved. The Group accounts for such assets in its financial statements in accordance with the accounting policy set out in Note 2.2H. Where the indicators are such that on balance the Group is shown to be a passive investor, the relevant property is accounted for in accordance with IAS 40 and the Group accounts for the fair value change through the income statement as other operating income or expense. Indicators considered include (1) party that has the power to make the significant operating and financing decisions regarding the operations of the property in a management contract, (2) calculation of the lessor’s return, (3) lessor’s power of intervention under the management contract, and (4) duration of the contract. Consolidation of entities in which the Group holds less than a majority of voting rights (de facto control) In 2014, the new consolidation accounting standard, IFRS 10 Introduced a new control model that focuses on whether the Group has power over an investee, exposure or right to variable return from its involvement with the investee and ability to use its power to affect those returns. This required the Group to consider whether it has de facto control over its investees, particularly when it owned less than 50% of the voting rights. In 2014, in accordance with the transitional provisions of IFRS 10, the Group reassessed the control conclusion for its investees and changed its control conclusion in respect of its investment in CDLHT, which was previously accounted for as an associate using the equity method. Although the Group owns less than half of the voting power of the investee, management determined that under IFRS 10, the Group has had control over the investee since its inception. This is because a 100% owned subsidiary of the Group, M&C REIT Management Limited acts as REIT manager with its fees having a performance-based element and therefore the Group has exposure to variable returns from its involvement with the investee. Accordingly, in 2014, the Group applied acquisition accounting to the investment from the year it was first established in 2006, and restated the relevant amounts as if the investee had been consolidated from that year. During the financial year 2022, the Group sold part of the CDLHT units that it held to the holding company, thereby reducing its interest in CDLHT to 27% (2021: 39%). The Group has assessed that the reduction in interest in CDLHT has resulted in the Group no longer having control of CDLHT. Accordingly, CDLHT was deconsolidated and accounted for as an associate thereafter, this is detailed in note 34. 27 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Business combination For each acquisition, the Group has to make a judgement whether to account the transaction as an asset purchase or a business combination, which results in a different accounting treatment. In particular, under business combination accounting, goodwill and additional intangible assets may arise and the valuation of acquired assets is complex. In addition, transaction costs can be capitalised in an asset acquisition, but have to be charged through the income statement for a business combination. The classification of each acquisition and related accounting is highly judgmental. There were no acquisitions undertaken by the Group during 2022. Land leases classification The Group holds a number of hotels with leases of land that are determined to have an indefinite economic life. The judgement prior to 1 January 2019 was that these were classified as a finance lease even if at the end of the lease term title does not pass to the lessee. Subsequent to 1 January 2019 and the adoption of IFRS 16 ‘Leases’, these assets have been reclassified as right-of-use assets. 3.2 The key estimates are: Estimates Impairment of tangible assets The Group determines whether tangible fixed assets are impaired when indicators of impairments exist or based on the annual impairment assessment. The annual assessment requires an estimate of the recoverable value of the cash generating units to which the tangible fixed assets are allocated, which is predominantly at the individual hotel site level. Where appropriate, external valuations are also undertaken. Estimation of the recoverable value of the hotel assets is done with the reference to fair value less cost to sell, using income approach, which requires estimation of future cash flows of a third-party efficient operator, the time period over which they will occur, an appropriate discount rates, terminal capitalization rates and growth rates. The Directors consider that the assumptions made represent their best estimate, and that the discount rate and terminal capitalisation rate used are appropriate given the risks associated with the specific cash flows. A sensitivity analysis has been performed over the estimates (see Note 11). New standards and interpretations not yet adopted 4 The following standards and interpretations, which have been issued by the IASB, become effective after the current year end and have not been early adopted by the Group: • IFRS 17 Insurance Contracts (effective date 1 January 2023). The Group is in the process of assessing the impact of these new standards, amendments and interpretations on the financial statements. 5 Disclosure of segmental information is principally presented in respect of the Group’s geographical segments. Operating segment information Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items principally comprise: interest-bearing loans, borrowings, cash and cash equivalents, net financial expense, taxation balances and corporate expenses. Geographical segments The hotel and property operations are managed on a worldwide basis and operate in seven principal geographical areas as follows: •   New York •   Regional US •   London •   Rest of UK/EU •   Singapore •   Rest of Asia •   Australasia The segments reported reflect the operating segment information included in the internal reports that the Chief Operating Decision Maker (“CODM”), which is the Board, regularly reviews. The reportable segments are aligned with the structure of the Group’s internal organisation which is based according to geographical region. Discrete financial information is reported to and is reviewed by the CODM on a geographical basis. Operating segments have Chief Operating Officers (“COOs”) or equivalent who are directly accountable for the functioning of their segments and who maintain regular contact with the Group Chief Executive Officer and Chairman of the CODM to discuss the operational and financial performance. The CODM makes decisions about allocation of resources to the regions managed by the COOs. The results of CDLHT were incorporated within the existing geographical regions and CDLHT operations are reviewed separately by its board on a monthly basis. During the financial year, CDLHT was deconsolidated and accounted for as an associate thereafter, see note 34 for more details. 28 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Segment results NEW YORK REGIONAL US LONDON £m £m 157 - - 157 31 (49) (18) - - - - 6 (12) Revenue Hotel Property operations REIT4 Total revenue Hotel gross operating profit Hotel fixed charges1 Hotel operating profit/(loss) Property operating profit REIT operating profit/(loss) Central costs Other operating income2 Other operating expense2 Operating profit/(loss) Share of joint ventures and associates’ profit Add: Depreciation and amortisation Add: Net revaluation gain/deficit & impairment EBITDA3 Less: Depreciation, amortisation, net revaluation gain/deficit & impairment 105 10 - 115 26 (19) 7 4 - - - (3) 8 (4) (1) 13 11 9 - - - £m 141 - - 141 65 (22) 43 - - - - - 43 - 9 (6) 46 REST OF UK/EU £m 76 - 11 87 23 (7) 16 - 3 - - 5 24 8 5 2 39 2022 SINGAPORE REST OF ASIA AUSTRALASIA £m 126 2 11 139 58 (28) 30 1 (4) - 156 (7) 176 29 14 (12) 207 £m 107 4 9 120 14 (35) (21) 2 2 - 543 6 532 15 16 (9) 554 £m 41 41 3 85 14 (5) 9 25 (1) - 13 (4) 42 1 3 (9) 37 Net finance expense Profit before tax 1 Hotel fixed charges include depreciation, property rent, taxes and insurance, and management fees. 2 See Note 7 for details of other operating income and expense. 3 EBITDA is earnings before interest, tax, depreciation and amortisation. 4 CDLHT operates the REIT business. Segment results NEW YORK REGIONAL US LONDON £m £m 68 - - 68 (18) (30) (48) - - - - 26 - - (22) Revenue Hotel Property operations REIT4 Total revenue Hotel gross operating profit/(loss) Hotel fixed charges1 Hotel operating profit/(loss) Property operating profit REIT operating (loss) Central costs Other operating income2 Other operating expense2 Other operating income – REIT2 Other operating expense – REIT2 Operating profit/(loss) Share of joint ventures and associates’ profit Add: Depreciation and amortisation Add: Net revaluation gain/deficit & impairment EBITDA3 Less: Depreciation, amortisation, net revaluation gain/deficit & impairment 70 4 - 74 19 (17) 2 1 - - 46 15 - - 64 (11) (4) 69 11 9 - - - £m 59 - - 59 22 (12) 10 - - - - - - - 10 - 9 (26) (7) REST OF UK/EU £m 36 - 19 55 7 (6) 1 - 5 - 4 5 - (2) 13 4 6 (61) (38) 2021 SINGAPORE REST OF ASIA AUSTRALASIA £m 54 2 19 75 22 (5) 17 (1) (11) - 1 (2) 1 3 8 - 15 (2) 21 £m 83 4 13 100 10 (27) (17) 3 1 - 4 (28) 1 4 (32) 13 18 (22) (23) £m 48 56 5 109 23 (6) 17 26 (1) - 8 (5) - (2) 43 - 4 7 54 Net finance expense Profit before tax 1 Hotel fixed charges include depreciation, property rent, taxes and insurance, and management fees. 2 See Note 7 for details of other operating income and expense. 3 EBITDA is earnings before interest, tax, depreciation and amortisation. 4 CDLHT operated the REIT business. CENTRAL COSTS £m - - - - - - - - - (25) - - (25) - 2 - (23) CENTRAL COSTS £m - - - - - - - - - (28) - - - - (28) - 3 - (25) TOTAL GROUP £m 753 57 34 844 231 (165) 66 32 - (25) 712 3 788 53 69 (38) 872 (31) (1) 840 TOTAL GROUP £m 418 66 56 540 85 (103) (18) 29 (6) (28) 63 11 2 3 56 17 75 (108) 40 33 (23) 50 29 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) segmental assets and liabilities 2022 Hotel operating assets Hotel operating liabilities Investment in joint ventures and associates Total hotel operating net assets Property operating assets Property operating liabilities Investment in joint ventures and associates Total property operating net assets Deferred tax liabilities Income taxes payable Net debt Net assets Segmental assets and liabilities Hotel operating assets REIT operating assets Hotel operating liabilities REIT operating liabilities Investment in joint ventures and associates Total hotel operating net assets Property operating assets Property operating liabilities Investment in joint ventures and associates Total property operating net assets Deferred tax liabilities Income taxes payable Net debt Net assets Geographic information Revenue from external customers United States United Kingdom Singapore New Zealand Taiwan South Korea France Australia China Malaysia Maldives Italy Philippines Indonesia Other Total revenue per consolidated income statement NEW YORK REGIONAL US LONDON £m 640 (67) - 573 - - - - £m 313 (48) - 265 188 (1) - 187 £m 546 (37) - 509 - - - - REST OF UK/EU £m 211 (36) 70 245 - - 123 123 SINGAPORE REST OF ASIA AUSTRALASIA TOTAL GROUP £m 379 (361) 39 57 168 (13) 115 270 £m 1,003 (125) 135 1,013 174 (3) 267 438 £m 185 (26) 12 171 153 (2) 36 187 £m 3,277 (700) 256 2,833 683 (19) 541 1,205 (190) (53) 50 3,845 2021 NEW YORK REGIONAL US LONDON £m 568 - (55) - - 513 - - - - £m 269 - (38) - - 231 179 (1) - 178 £m 559 - (35) - - 524 - - - - REST OF UK/EU £m 200 256 (44) (15) 13 410 - - 101 101 SINGAPORE REST OF ASIA AUSTRALASIA TOTAL GROUP £m 36 705 (42) (43) - 656 92 (1) - 91 £m 669 121 (182) (15) 122 715 172 (3) 228 397 £m 177 100 (19) (3) - 255 124 (4) 1 121 2022 £m 272 208 139 76 48 31 12 9 9 9 8 6 4 4 9 844 £m 2,478 1,182 (415) (76) 135 3,304 567 (9) 330 888 (72) (21) (824) 3,275 2021 £m 142 105 76 95 29 26 1 14 14 4 11 3 5 2 13 540 The revenue information above is based on the location of the business. The £844m (2021: £540m) revenue is constituted of £753m (2021: £418m) of hotel revenue, £57m (2021: £66m) of property operations revenue and £34m (2021: £56m) of REIT revenue. The property operations revenue comprises £41m (2021: £56m) from Australasia, £2m (2021: £2m) from Singapore, £10m (2021: £4m) from the regional US and £4m (2021: £4m) from Japan. 30 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Non-current assets United States United Kingdom Singapore South Korea China Taiwan New Zealand Japan Netherlands Hong Kong Malaysia Italy Germany France Maldives Philippines Australia Indonesia Total non-current assets per consolidated statement of financial position 2022 £m 1,094 714 664 458 344 301 245 179 112 107 62 52 27 23 23 18 14 12 4,449 2021 £m 988 804 822 174 331 311 241 217 101 102 50 71 101 22 79 10 42 12 4,478 Non-current assets for this purpose consist of property, plant and equipment, investment properties, investment in joint ventures and associates and other non-current financial assets. 31 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 6 The following items are included within administrative expenses: Administrative expenses Included in administrative expenses is the auditor’s remuneration, for audit and non-audit services as follows: Auditor’s remuneration Statutory audit services: – Annual audit of the Company and consolidated financial statements – Audit of subsidiary companies Non-audit related services: – Tax advisory Total Repairs and maintenance Depreciation – property, plant and equipment – right-of-use assets Rental paid/payable under operating leases* – land and buildings – plant and machinery 2022 £m 2021 £m 1 2 3 - 3 2022 £m 57 55 14 15 1 1 2 3 - 3 2021 £m 45 67 8 - 1 * Under IFRS 16 ‘Leases’, which the Group adopted in 2019, payments under operating leases are not charged to the income statement except for those where a recognition exemption has been applied. 7 Other operating income and expense Revaluation gain/(deficit) of investment properties – REIT properties – Biltmore Court & Tower – Sunnyvale – CDL Land New Zealand Limited – Millennium Mitsui Garden Hotel Tokyo – Reversionary interest on freehold land Reversal of property, plant & equipment Gain on disposal of property, plant and equipment Gain on disposal of investment property Gain on disposal of subsidiary Fair value loss from FSGL's warrant Other operating income / (expense) relating to disposal Other operating income Notes (A) (B) (C) (D) (E) (F) (G) (H) 2022 £m - (7) (7) 13 1 12 26 38 501 59 84 (8) 41 - 715 2021 £m (2) 19 27 - - - 64 108 12 - - - (44) 3 79 Revaluation gain/(deficit) of investment properties (A) At the end of the financial year, in accordance with the Group’s policy its investment properties were subject to external professional valuation on an open-market existing use basis. Based on these valuations, the revaluation gain or deficit was recorded as considered appropriate by the Directors. Further details on these valuations are provided in Note 12. Reversal of impairment losses of property, plant & equipment (B) The Directors undertook their annual review of the carrying value of hotels and property assets for indication of impairment and where appropriate, external valuations were also obtained. As a result of this review, the total reversal of impairment for the year was £26m consisting of £6m in New York, £11m in the regional US, £5m in the rest of UK/EU and £8m in the rest of Asia. A net impairment charge of £(4)m was recognised in Australasia. For 2021, a total impairment reversal of £64m consisting of £26m in New York, £15m in regional US, £7m in Rest of UK/EU, £3m in Singapore and £21m in the rest of Asia. This was offset by charge of £7m in Australasia and £1m in Singapore. 32 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Gain on disposal of property, plant & equipment (C) The disposal of Millennium Hilton Seoul was completed in February 2022 and was included in the 'Rest of Asia' segment and recognised a gain on disposal of £501m and net proceeds of £611m. For the year ended 31 December 2021, there were two disposals of property plant and equipment resulting in a gain on disposal. The Copthorne Hotel Birmingham was sold on 19 August 2021 for £17m with a gain on disposal of £4m. Christchurch Land was disposed in May 2021 by New Zealand Group with sales proceeds of NZD18m (£9m) realising a gain of NZD16m (£8m). Gain on disposal of investment property (D) For the year ended 31 December 2022, there was a gain of £59m (2021: £nil) and net proceeds of £152m on the disposal of the investment property relating to the collective sale of Tanglin Shopping Centre. Gain on disposal of subsidiary (E) On 24 May 2022, the Group disposed of part of the CDLHT units that it held to the holding company, which reduced the Group's interest in CDLHT from 38.89% to 27.30% resulting in the Group losing control over CDLHT. CDLHT was deconsolidated to become an associate of the Group. The Group recognised a gain on disposal of £84m. (F) For the year ended 31 December 2022, a fair value loss of £8m (2021:£ nil) was recorded by the Group from the holding of warrants. Fair value loss from FSGL's warrant (G) Other operating income/(expense) relating to disposal The Group had entered into the Sales & Purchase Agreement (SPA) with YD427 PFV Co. Ltd. on 10 December 2021. In this regard, it is expected that the management agreement with Hilton International Co. (HIC) entered on 1 September 2019 were no longer continue. As it is highly probable that the Group will pay a penalty from the early termination on this agreement, and the amount can be reliably estimated, the Group recognised KRW 16b (£10m) of provision for the year ended 31 December 2021. The Group had entered into the Master Lease Agreement (MLA) with YD427 PFV Co. Ltd. on 10 December 2021. The hotel operation continued until 31 December 2022 and succession and compensation of the employment (the compensation) will be preceded accordingly. As it is highly probable that the Company will pay the compensation and the amount can be reliably estimated, the Group recognised KRW 46b (£29m) of provision for the year ended 31 December 2021. Due to the expiration of the building permit scheduled in January 2022 and the SPA with YD427 PFV Co. Ltd., the construction-in-progress amounting to KRW 7b (£5m) that has been accounted for incurred costs relating to building design and government licences for a new hotel extension project was written off during the year. The sale of Millennium Hilton Seoul was completed during the current financial year. As at 31 December 2022, further provisions were provided as the amount was finalised. The Group would receive from the buyer of Millennium Hilton Seoul the amounts incurred in respect of its obligations under the relevant contracts. The Group has recognised the reimbursement amount of KRW 61b (£39m) and compensated losses of KRW 4b (£2m) as other operating income. Other operating income (H) The agreement entered for the sale of Copthorne Orchid Penang was terminated in December 2021. The deposit and the deferment fee of MYR18m (£3m) was recognised as other operating income. 8 Personnel expenses Wages and salaries Compulsory social security contributions Contributions to defined contribution schemes Defined benefit pension (gain) – recorded in the statement of comprehensive income Defined benefit pension cost – recorded in the income statement The number of employees employed by the Group as at year end analysed by category was as follows: Hotel operating staff Management/administration Sales and marketing Repairs and maintenance 2022 £m 258 42 15 (9) 4 310 2021 £m 171 25 11 (2) 1 206 2022 NUMBER 4,823 952 231 435 6,441 2021 NUMBER 4,744 962 211 441 6,358 33 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Directors’ remuneration Directors’ remuneration Amounts receivable under long term incentive plans Company contributions to money purchase pension plans 2022 2021 £m - - - - £m - - - - The above table shows directors’ remuneration for directors remunerated by the Group. No allocation has been made for directors remunerated through a related company, not part of the Group, as it is impractical to allocate their time for services to the Group. The aggregate of remuneration and amounts receivable under long term incentive schemes of the highest paid director was £ nil (2021: £ nil), and Company pension contributions of £ nil (2021: £nil) were made to a money purchase scheme on his/her behalf. They are a member of a defined benefit scheme, under which their accrued pension at the year-end was £ nil (2021: £ nil), and their accrued lump sum was £nil (2021: £nil). Retirement benefits are accruing to the following number of directors under: – Money purchase schemes The number of directors who exercised share options was The number of directors in respect of whose qualifying services shares were received or receivable under long term incentive schemes was 9 Net finance expense Interest income Foreign exchange gain Finance income Interest expense – Overdrafts, bank and other loans – Recognised under IFRS 16 ‘Leases’ Foreign exchange loss Finance expense Net finance expense 10 Income tax Current tax Corporation tax charge for the year Adjustment in respect of prior years Total current tax charge Deferred tax (Note 24) Origination and reversal of timing differences Benefits of tax (profits)/losses recognised Over provision in respect of prior years Total deferred tax charge/(credit) Total income tax charge/(credit) in the consolidated income statement UK Overseas Total income tax charge/(credit) in the consolidated income statement 2022 £m - - - 2021 £m - - - 2022 2021 £m 18 40 58 (24) (12) (23) (59) (1) 2022 £m 181 (3) 178 93 15 - 108 286 28 258 286 £m 2 13 15 (24) (5) (9) (38) (23) 2021 £m 16 1 17 25 (31) (50) (56) (39) - (39) (39) The effective tax rate relating to the tax charge of £286m is 34.0% (2021:tax credit of £39m, -52.2%). The effective tax rate has been affected primarily by the mix of Group's regional profits and tax adjustments in respect of previous years. For the year ended 31 December 2022, a charge of £10m (2021: £12m) relating to joint ventures and associates is included in the profit before tax. 34 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Adjustments in respect of settlement of prior years’ tax liabilities The Group’s tax charge on ordinary activities is the sum of the total current and deferred tax charges. The calculation of the Group’s total tax charge necessarily involves a degree of estimation and judgement in respect of certain items whose tax treatment cannot be finally determined until resolution has been reached with the relevant tax authority or, as appropriate, through a formal legal process. The final resolution of some of these items may give rise to material profit and loss and/or cash flow variances. The geographical complexity of the Group’s structure makes the degree of estimation and judgement more challenging. The resolution of issues is not always within the control of the Group and it is often dependent on the efficacy of the legal processes in the relevant tax jurisdictions in which the Group operates. Income tax reconciliation Profit before income tax in consolidated income statement Less share of profits of joint ventures and associates Profit on ordinary activities excluding share of joint ventures and associates Income tax on ordinary activities at the standard rate of UK tax of 19.00% (2021: 19.00%) Tax exempt income Non-deductible expenses Unrecognised tax losses arising during the year Origination of temporary differences Other effect of tax rates in foreign jurisdictions Other adjustments to tax charge in respect of prior years Income tax charge/(credit) per consolidated income statement 2022 £m 840 (53) 787 150 (32) 12 13 88 41 14 286 2021 £m 50 (17) 33 6 (33) 27 2 - 7 (48) (39) 35 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 11 Property, plant and equipment LAND AND BUILDINGS CAPITAL WORK IN PROGRESS PLANT AND MACHINERY £m £m £m FIXTURES, FITTINGS, EQUIPMENT AND VEHICLES £m RIGHT OF USE ASSETS TOTAL £m £m Cost Balance at 1 January 2021 Additions – Others Reclassification between asset categories Transfer to assets from investment property Disposals Written off Foreign exchange adjustments Balance at 31 December 2021 Balance at 1 January 2022 Additions Reclassification between asset categories Transfer to investment property Transfer from assets held for sale Disposal of subsidiary Disposals Revaluation recognised through other comprehensive income Written off Foreign exchange adjustments Balance at 31 December 2022 Accumulated depreciation and impairment Balance at 1 January 2021 Charge for the year Impairment Disposals Reclassification between asset categories Written off Foreign exchange adjustments Balance at 31 December 2021 Balance at 1 January 2022 Charge for the year Impairment Disposal of subsidiary Disposals Transfer from assets held for sale during the year Written off Foreign exchange adjustments Balance at 31 December 2022 Carrying amounts 3,384 3 1 34 - (8) (24) 3,390 3,390 3 4 (126) 6 (817) (178) 123 (12) 152 2,545 676 22 (62) – 21 (8) (3) 646 646 19 (26) (82) (16) 1 (12) 38 568 32 12 (4) - - (5) - 35 35 13 (4) - - (1) - - - 2 45 - - - - - - - - - - - - - - - - - At 31 December 2022 At 31 December 2021 1,977 2,744 45 35 364 6 - 7 - - (1) 376 376 3 (3) - 3 (197) (9) - (2) 19 190 149 14 (2) - - - (1) 160 160 11 - (101) (2) - (1) 9 76 114 216 432 7 3 - (2) (2) (2) 436 436 7 3 - 2 (153) (43) - (10) 20 262 356 31 - (2) (21) (2) (3) 359 359 25 - (129) (41) 2 (10) 16 222 40 77 237 4 - - (5) - 1 237 237 327 - - - (112) (1) - (2) 27 476 16 8 - (2) - - - 22 22 14 - (7) (1) - (1) 1 28 448 215 4,449 32 - 41 (7) (15) (26) 4,474 4,474 353 - (126) 11 (1,280) (231) 123 (26) 220 3,518 1,197 75 (64) (4) - (10) (7) 1,187 1,187 69 (26) (319) (60) 3 (24) 64 894 2,624 3,287 The carrying value of property, plant and equipment held under finance leases at 31 December 2022 was £nil (2021: £nil). a Impairment Property, plant and equipment are reviewed for impairment based on each cash generating unit (“CGU”). The CGUs are individual hotels. The carrying value of individual hotels was compared to the recoverable amount of the hotels, which was derived with the reference to fair value through creation of discount cash flow models. Under this methodology, the fair value measurement reflects current market expectations about the third-party efficient operator’s is future cash flows, discounted to their present value. The underlying basis for the impairment model involves each hotel’s projected cash flow for the financial year ending 31 December 2022, extrapolated to incorporate individual assumptions in respect of revenue growth (principally factoring in room rate and occupancy growth) and major expense lines. The future cash flows are based on assumptions about competitive growth rates for hotels in that area, as well as internal business plans. These plans and forecasts include management’s most recent view of trading prospects for the hotel in the relevant market. Where appropriate, the Directors sought guidance on value from a registered independent appraiser with an appropriately recognised professional qualification and recent experience in the location and category of the hotel being valued. 36 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) On the basis of external valuations in 2022, the Group recorded an impairment charge of £6m (2021: £8m) and an impairment reversal of £32m (2021: £72m), resulting in a net impairment reversal of £26m (2021: £64m) on individual hotels across all operating regions. This consists of an impairment reversal of £11m in the regional US, £7m in the rest of the UK/EU, £8m in the rest of Asia and £6m in New York. This was offset by impairment charges of £4m in New Zealand and £2m in the rest of UK/EU. Circumstances and events that led to impairment are largely due to the performance of the hotels as a result of the recovery from the COVID 19 pandemic and current macro economic conditions. The fair values assumed through the impairment assessment are considered to fall within level 3 of the fair value hierarchy. Refer to Note 20(D) for more detail. Key assumptions used by the external appraisers b The key assumptions used were as follows: Pre-tax discount rate – The discount rate used is based on the country in which the hotel is located and is adjusted for risks associated with the hotel. Discount rates ranged from 8.25% to 10.50% in the US (2021: 7.50% - 11.75%), 7.50% to 12.19% in the rest of Asia (2021: 6.10% to 11.82%), 7.25% to 11.38% in the rest of UK/EU (2021: 6.60% to 12.5%) and 8.25% to 10.25% in New Zealand (2021: 6.50% to 7.75%). The forecasts cover a five to ten year period, and cash flows beyond this period are extrapolated using a growth rate ranging between 1.98% and 3.00% (2021: 1.70% to 3.12%), which is based upon the expected trading growth for each hotel and inflation in the country. Sensitivities c The Group’s impairment review is sensitive to changes in the key assumptions used. An increase in occupancy rate and/or average room rate growth in isolation would result in a higher recoverable amount. An increase in discount rate, terminal rate or capitalisation rate in isolation would result in a lower recoverable amount. d The interest of £nil (2021: £nil) was capitalised within land and buildings during the year. Land and buildings Pledged assets e At year-end, the net book value of assets pledged as collateral for secured loans was £254m (2021: £662m). The security for the loans is by way of charges on the properties of the Group companies concerned. 37 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 12 Investment properties During 2022, the Group disposed of certain investment properties arising from the deconsolidation of CDLHT. Completed investment properties comprise Biltmore Court & Tower, Millennium Mitsui Garden Hotel Tokyo, retail shops at Stonebrook, retail shops at Prestons Park, commercial warehouse at Roscommon Road and Lakeside Apartments, Sunnyvale. Movements in the year analysed as: Balance at 1 January 2021 Additions Reclassification Transfer to property, plant and equipment Transfer from development properties Net revaluation gain Written off Foreign exchange adjustment Balance at 31 December 2021 Balance at 1 January 2022 Additions Reclassification Acquisition of subsidiary Transfer from property, plant and equipment during the year Disposal Disposal of subsidiary Net revaluation gain Foreign exchange adjustments Balance at 31 December 2022 COMPLETED INVESTMENT PROPERTIES £m 589 16 103 (41) 2 44 (2) (28) 683 683 8 17 25 126 (98) (257) 12 34 550 INVESTMENT PROPERTIES UNDER CONSTRUCTION £m 68 43 (103) - - - - 2 10 10 7 (17) - - - - - - - RIGHT OF USE ASSETS £m 7 - - - - - - - 7 7 1 - 20 - - (27) - - 1 TOTAL £m 664 59 - (41) 2 44 (2) (26) 700 700 16 - 45 126 (98) (284) 12 34 551 In general, the carrying amount of investment property other than those under construction is the fair value of the property as determined by a registered independent appraiser having an appropriate recognised professional qualification and recent experience in the location and category of the property being valued. Fair values were determined having regard to recent market transactions for similar properties in the same location as the Group’s investment property. The Group’s investment properties were subject to external professional valuation on an open market existing use basis by the following accredited independent valuers: PROPERTIES Biltmore Court & Tower, Los Angeles Lakeside Apartments, Sunnyvale, California Millennium Mitsui Garden Hotel, Tokyo Rollerston, New Zealand Prestons road, New Zealand Roscommon Road, New Zealand M Hotel reversionary interest, Singapore Orchard Hotel reversionary interest, Singapore VALUERS 2022 Colliers International Valuation & Advisory Services Colliers International Valuation & Advisory Services JLL Morii Valuation & Advisory K.K Extensor Advisory Limited Extensor Advisory Limited Extensor Advisory Limited CBRE PTE Limited CBRE PTE Limited Claymore Connect reversionary interest, Singapore CBRE PTE Limited REVALUATION DEFICIT SURPLUS £m £m (7) (7) - - - - - - - (14) - - 1 - 1 12 3 8 1 26 Based on these valuations together with such considerations as the Directors consider appropriate, there was a recorded revaluation surplus of £26m and a revaluation deficit of £14m, resulting in a net revaluation surplus of £12m during 2022 (2021: net revaluation surplus of £44m). 38 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Fair value hierarchy The fair value measurement for investment properties not under construction of £551m (2021: £683m) has been categorised as a Level 3 fair value based on inputs to the valuation technique used. Valuation technique and significant unobservable inputs The following table shows the valuation technique used in measuring the fair value of investment property, as well as significant unobservable inputs used. VALUATION TECHNIQUES SIGNIFICANT UNOBSERVABLE INPUTS Biltmore Court & Tower, Los Angeles Discount rate of 7.25% and capitalisation rate of 6.25%. INTER-RELATIONSHIP BETWEEN KEY UNOBSERVABLES INPUTS AND FAIR VALUE MEASUREMENT The estimated fair value would increase/(decrease) if: Biltmore Court & Tower, Los Angeles The property was valued using the income approach which is based on the potential income a property can produce. The methods used by the valuers was the discounted cash flow method which analyses a property's performance over an investment horizon. Net cash flows from property operations are discounted at a rate reflective of the property’s economic and physical risk profile. Lakeside Apartments, Sunnyvale, California The property was valued using the income approach which is based on the potential income a property can produce. The methods used by the valuers was the Direct capitalisation method This estimates the value of a property by analysing the relationship between its stabilised net operating income and total property value. The net operating income is capitalised at a rate that considers expected growth in cash flow and property value over the investor's investment horizon. Millennium Mitsui Garden Hotel, Tokyo The property was valued using a discounted cash flow technique based on expected rental income and discount rate appropriate for the property. Investment properties held by the REIT were valued using the discounted cash flow technique, capitalisation or comparison techniques. Lakeside Apartments, Sunnyvale, California Capitalisation rate of 4.00% Expected market rental growth were higher/(lower); and Millennium Mitsui Garden Hotel, Tokyo Discount rate of 3.7% and capitalisation rate of 3.9%. Risk adjusted discount (higher), capitalisation rate was higher/ (lower) and terminal yield was lower/ (higher). rate was lower/ 13 Investments in joint ventures and associates The Group has the following investments in joint ventures and associates: Joint ventures New Unity Holdings Limited (“New Unity”) Fergurson Hotel Management Limited New York Sign LLC Associate First Sponsor Group Limited (“First Sponsor”) Prestons Road Limited CDL Hospitality Trust ("CDLHT") CDL Hotels Japan Pte. Ltd. PRINCIPAL PLACE OF BUSINESS FAIR VALUE OF OWNERSHIP INTEREST £m Hong Kong Hong Kong New York People’s Republic of China New Zealand Singapore Singapore - - - 257 - 260 - EFFECTIVE GROUP INTEREST 2022 2021 50% 50% 50% 50% 50% 50% 35% 35% 17% 27% 40% 17% 39% 40% On 24 May 2022, the Group disposed of part of the CDLHT units that it held to the holding company, which reduced the Group's interest in CDLHT from 38.89% to 27.30% resulting in the Group losing control over CDLHT. CDLHT was deconsolidated to become an associate of the Group. The Group has 50% in New Unity which operates the Group’s hotel business in Hong Kong. First Sponsor is a property company which is listed on the Singapore Exchange and has interests in China, the Netherlands, Germany, Italy and Australia. It is also involved in the Chinese property financing business which carries additional risk of recoverability of certain assets. 39 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Share of net assets/cost Balance at 1 January 2021 Share of (loss)/profit for the year Disposals Dividends received Foreign exchange adjustments Balance at 31 December 2021 Balance at 1 January 2022 Additions Share of (loss)/profit for the year Disposals Dividends received Foreign exchange adjustments Balance at 31 December 2022 JOINT VENTURES ASSOCIATES TOTAL £m 106 (7) - - 1 100 100 - (6) - - 11 105 £m 334 24 (1) (2) 10 365 365 257 59 (1) (10) 22 692 £m 440 17 (1) (2) 11 465 465 257 53 (1) (10) 33 797 The following is summarised financial information for CDL Hospitality Trust, First Sponsor and New Unity based on their respective financial statements prepared in accordance with IFRS. These are considered to be the most significant investments in joint ventures and associates. Non-current assets Current assets Non-current liabilities Current liabilities Total assets less total liabilities Less: Non-controlling interest Net assets (100%) Group’s share Revenue Operating profit/(loss) Interest (expense) Income tax (expense)/credit Profit/(Loss) for the year Non-controlling interests Profit/(loss) for the year after non-controlling interests Other comprehensive income Profit/(loss) and total comprehensive income/(expense) (100%) Group’s share of profit/(loss) and total comprehensive income/(expense) Dividends received by the Group CDL HOSPITALITY TRUST 2022 £m 1,811 78 (614) (188) 1,087 (4) 1,083 296 87 102 (3) (1) 98 - 98 2 100 27 4 2021 £m - - - - - - - - - - - - - - - - - - - FIRST SPONSOR 2022 £m 1,568 1,099 (659) (824) 1,184 (71) 1,113 396 2021 £m 1,256 1,109 (579) (698) 1,088 (64) 1,024 365 NEW UNITY 2022 £m 400 36 (118) (37) 281 (70) 211 105 250 121 (7) (34) 80 (4) 76 (95) (19) (7) 6 319 140 (30) (39) 71 (5) 66 46 112 40 2 68 (17) (2) 4 (15) 4 (11) - (11) (6) - 2021 £m 372 36 (113) (29) 266 (67) 199 100 50 (23) (1) 5 (19) 5 (14) - (14) (7) - At 31 December 2022, the Group’s share of the total capital commitments of joint ventures and associates amounted to £124m (2021: £73m) and the Group's share of the non-cancellable operating leases receivable was £112m (2021: £35m). The Group’s joint ventures and associates had no contingent liabilities (2021: £Nil). 40 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 14 Other financial assets Equity investments Derivative financial assets Deposits receivable Amounts due from intermediate holding company 2022 £m 12 - 7 458 477 The amounts due from the intermediate holding company are non-trade in nature, unsecured and bear interest at 2.8% per annum. 15 Inventories Consumables 16 Development properties Development properties comprise: Development land for resale – New Zealand residential sections Development properties – Zenith Residences 17 Trade and other receivables Trade receivables Other receivables Prepayments and accrued income Amounts due from holding and associate companies 2022 £m 4 2022 £m 107 12 119 2022 £m 64 65 39 8 176 2021 £m 21 3 2 - 26 2021 £m 5 2021 £m 95 14 109 2021 £m 39 25 19 - 83 Trade receivables are shown net of an impairment allowance of £6m (2021: £8m) relating to the likely insolvencies of certain customers and non-recoverability of debts. The Group’s exposure to credit and currency risks and impairment losses related to trade and other receivables are disclosed in Note 20. 18 Cash and cash equivalents Cash at bank and in hand Short-term deposits Cash pool overdrafts Cash and cash equivalents on the statement of financial position Overdrafts included in borrowings Cash and cash equivalents shown in the cash flow statement 2022 £m 353 401 (193) 561 - 561 2021 £m 325 157 (92) 390 - 390 The Group’s exposure to interest rate risk and a sensitivity analysis for financial assets are disclosed in Note 20. As at 31 December 2022, £3m (2021: £72m) of the cash balance was restricted. 41 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 19 Interest-bearing loans, bonds and borrowings Included within non-current liabilities: Bank loans Bonds payable Included within current liabilities: Bank loans and overdrafts Bonds payable 2022 £m 165 62 227 284 - 284 2021 £m 590 84 674 540 - 540 Net cash of £50m (2021: net debt of £(824)m) is the total of the cash and cash equivalents of £561m (2021: £390m) less the interest-bearing loans, bonds and borrowings of £511m (2021: £1,214m). Further details in respect of financial liabilities are given in Note 20. 20 Financial instruments Overview The Group has exposure to the following risks from its use of financial instruments: • credit risk; • liquidity risk; and • market risk. This note presents information about the Group’s exposure to each of the above risks, and the Group’s policies and processes for measuring Credit risk (a) Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers and investment securities. Exposure to credit risk is monitored on an ongoing basis, with credit checks performed on all clients requiring credit over certain amounts. Credit is not extended beyond authorised limits, established where appropriate through consultation with a professional credit vetting organisation. Credit granted is subject to regular review, to ensure it remains consistent with the client’s current creditworthiness and appropriate to the anticipated volume of business. Investments are allowed only in liquid short-term instruments within approved limits, with investment counterparties approved by the Board, such that the exposure to a single counterparty is minimised. The maximum exposure to credit risk is represented by the carrying value of each financial asset on the balance sheet, these being spread across the various currencies and jurisdictions in which the Group operates. The maximum exposure to credit risk at the reporting date was: Amounts due from holding and associate companies (see Note 14 and Note 17) Short-term deposits (see Note 18) Cash at bank and in hand (see Note 18) Other current receivables (see Note 17) Trade receivables (see Note 17) Equity investments (see Note 14) Deposits receivable (see Note 14) Derivative financial assets (see Note 14) Cash pool overdrafts (see Note 18) The maximum exposure to credit risk for trade receivables at the reporting date by geographic region was: Singapore New York Rest of UK/EU Rest of Asia Regional US Australasia CARRYING VALUE 2022 £m 466 401 353 65 64 12 7 - (193) 1,175 CARRYING VALUE 2022 £m 27 16 6 6 5 4 64 2021 £m - 157 325 25 39 21 2 3 (92) 480 2021 £m 4 5 14 9 3 4 39 42 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) The ageing of trade receivables at the reporting date was: Not past due Past due 0 – 30 days Past due 31 – 60 days Past due 61 – 90 days More than 90 days GROSS RECEIVABLE 2022 £m 28 15 7 9 11 70 2021 £m 17 8 1 1 20 47 2022 £m (4) - - - (2) (6) 2021 £m - - - - (8) (8) The movement in the allowance for impairment in respect of trade receivables during the year was as follows: IMPAIRMENT ALLOWANCE CARRYING VALUE 2022 £m 24 15 7 9 9 64 2022 £m 8 (1) (1) 6 2021 £m 17 8 1 1 12 39 2021 £m 12 (1) (3) 8 Balance at 1 January Impairment losses(reversal)/recognised Bad debts written off Balance at 31 December Financial Assets Fixed Rate  US dollar  Korean won  Singapore dollar  Australian dollar  New Zealand dollar  Malaysian Ringgit  Chinese Renminbi  Philippine Peso  Taiwan Dollar Non-Interest Bearing  US dollar  Sterling  Korean won  Singapore dollar  Chinese Renminbi  New Zealand Dollar  Malaysian Ringgit  Euro  Japanese Yen  Philippine Peso  Indonesian Rupiah  Taiwan Dollar  Others Interest Bearing Cash Pool deposits  Sterling  Japanese Yen  Singapore dollar Total cash and other financial assets Interest Bearing Cash Pool Overdrafts  Euro  Hong Kong Dollar  US dollar  Sterling Total overdrafts (Note 18) Represented by: Cash and cash equivalents (Note 18) Financial assets (Note 14) CONTRACTUAL MATURITIES OF FINANCIAL ASSETS 2022 TOTAL 6 MONTHS OR LESS 6 MONTHS - 1 YEAR 1 - 5 YEARS MORE THAN 5 YEARS £m £m £m £m £m - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 463 - - - - - - - - - 12 - - - - - - - 2 - - - - 477 - - - - - 477 4 58 220 29 58 4 1 2 25 62 5 3 35 3 6 3 9 8 3 3 - 1 35 1 176 754 (40) (16) (116) (21) (193) 561 4 58 683 29 58 4 1 2 25 62 5 3 47 3 6 3 9 8 3 3 2 1 35 1 176 1,231 (40) (16) (116) (21) (193) 1,038 561 477 1,038 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 43 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) CONTRACTUAL MATURITIES OF FINANCIAL ASSETS 2021 Financial Assets Fixed Rate  US dollar  Korean Won  Singapore dollar  New Taiwan dollar  Australian dollar  New Zealand dollar  Malaysian Ringgit  Euro  Other Non-Interest Bearing  US dollar  Sterling  Korean won  Singapore dollar  Australian dollar  New Zealand dollar  Malaysian Ringgit  Chinese Renminbi  Euro  Japanese Yen  Others Interest Bearing Cash Pool deposits  Singapore dollar Non-Interest Bearing Cash Pool deposits  Sterling US dollar Total cash and other financial assets Interest Bearing Cash Pool Overdrafts  US dollar  Euro  Hong Kong dollar Non-Interest Bearing Cash Pool Overdrafts  Sterling Total overdrafts (Note 18) Represented by: Cash and cash equivalents (Note 18) Financial assets (Note 14) TOTAL £m 6 MONTHS OR LESS £m 6 MONTHS - 1 YEAR £m - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 4 - 31 21 23 74 2 - 2 33 17 71 31 25 11 3 5 10 10 5 97 7 - 482 (41) (37) (14) - (92) 390 4 - 55 21 23 74 2 2 2 33 17 71 31 25 11 3 5 10 10 5 97 7 - 508 (41) (37) (14) - (92) 416 390 26 416 1 - 5 YEARS £m - - 24 - - - - 2 - - - - - - - - - - - - - - - 26 - - - - - 26 MORE THAN 5 YEARS £m - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Liquidity risk (b) Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. The following are the contractual maturities of financial liabilities, including estimated interest payments using the interest rates prevailing as at the reporting date. 44 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) CONTRACTUAL MATURITIES OF FINANCIAL LIABILITIES CARRYING AMOUNT CONTRACTUAL CASH FLOWS 6 MONTHS OR LESS 6 -12 MONTHS 1 - 2 YEARS 2 - 5 YEARS £m 4 445 17 - - - 45 - 35 58 15 619 £m 4 459 17 - - - 46 - 35 58 15 634 £m 4 98 - - - - - - 30 57 - 189 £m - 192 - - - - - - 5 1 £m - 169 - - - - - - - - - 198 - 169 £m - - 17 - - - 46 - - - 1 64 MORE THAN 5 YEARS £m - - - - - - - - - - 14 14 CONTRACTUAL MATURITIES OF FINANCIAL LIABILITIES CARRYING AMOUNT CONTRACTUAL CASH FLOWS 6 MONTHS OR LESS 6 -12 MONTHS 1 - 2 YEARS 2 - 5 YEARS £m 38 740 17 - 314 38 67 37 49 £m 38 759 18 - 327 40 68 37 49 38 1,338 39 1,375 £m 38 119 - - 3 1 - 37 49 - 247 £m - 314 - - 114 - - - - - 428 £m - 60 - - 70 1 - - - 2 133 £m - 266 18 - 140 38 68 - - 26 556 MORE THAN 5 YEARS £m - - - - - - - - - 11 11 31 DECEMBER 2022 Floating rate financial liabilities Secured loans Unsecured loans Secured bonds Unsecured bonds Fixed rate financial liabilities Secured loans Unsecured loans Secured bonds Unsecured bonds Trade and other payables Trade payables Other creditors Non-current liabilities Other non-current liabilities 31 DECEMBER 2021 Floating rate financial liabilities Secured loans Unsecured loans Secured bonds Unsecured bonds Fixed rate financial liabilities Unsecured loans Secured loans Secured bonds Trade and other payables Trade payables Other creditors Non-current liabilities Other non-current liabilities Undrawn committed borrowing facilities At 31 December 2022, credit facilities which provide the Group with financial flexibility. the Group had £23m (2021: £258m) of undrawn and committed facilities available, comprising committed revolving Maturity of these facilities are set out in the following table. The conditions precedent to the availability of these facilities are all satisfied at the balance sheet date. Expiring in one year or less Expiring after more than one year but not more than two years Expiring after more than two years but not more than five years Expiring after more than five years Total undrawn committed borrowing facilities Total undrawn uncommitted borrowing facilities Total undrawn borrowing facilities Security 2022 £m 23 - - - 23 276 299 2021 £m 119 45 94 - 258 365 623 Included within the Group’s total bank loans and overdrafts of £449m (2021: £1,130m) are £4m (2021: £76m) of secured loans and overdrafts. Total bonds and notes payable of £62m (2021: £84m) consist of £Nil unsecured (2021: £Nil). Loans, bonds and notes are secured on land and buildings with a carrying value of £254m (2021: £662m) and an assignment of insurance proceeds in respect of insurances over the mortgaged properties. 45 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Of the Group’s total facilities of £811m, £573m matures within 12 months comprising of £149m committed revolving credit facilities, £309m uncommitted facilities and overdrafts subject to annual renewal, £108m unsecured term loans and £7m secured term loans. Market risk (c) Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s income or the value of its holdings of financial instruments. The primary objectives of the treasury function are to provide secure and competitively priced funding for the activities of the Group and to identify and manage financial risks, including exposure to movements in interest and foreign exchange rates arising from those activities. If appropriate, the Group uses financial instruments and derivatives to manage these risks, as set out below. Foreign currency risk (i) The Group is exposed to foreign currency risk on revenue, purchases, borrowings and cash deposits denominated in currencies other than the functional currencies of the respective Group entities. The currencies giving rise to this risk are primarily US dollars, Singapore dollars, New Zealand dollars, New Taiwan dollars, Chinese renminbi, Japanese yen and Euro. The Group’s principal policy, wherever possible, is to maintain a natural hedge whereby liabilities are matched with assets denominated in the same currency. Foreign currency investment exposure is also minimised by borrowing in the currency of the investment. To mitigate foreign currency translation exposure, an appropriate proportion of net assets are designated as hedged against corresponding financial liabilities in the same currency. Net investment hedging The Group has US$210m (2021: US$283m) US dollar loans and €45m (2021: €45m) Euro loans designated as hedges of corresponding respective proportions of its net investment in foreign operations whose functional currencies are US dollars and Euros. The risk being hedged is the foreign currency exposure on the carrying amount of the net assets of the foreign operation upon consolidation. The fair value of the hedging instruments as at 31 December 2022 was £213m (2021: £231m). An analysis of borrowings by currency and their fair values as at 31 December 2022 is given below: Sterling Singapore dollar US dollar New Zealand dollar Chinese renminbi Japanese yen Korean Won Euro 31 DECEMBER 2022 31 DECEMBER 2021 BOOK VALUE £m 50 - 395 - 4 62 - - 511 FAIR VALUE £m 50 - 395 - 4 62 - - 511 BOOK VALUE £m 240 221 570 1 6 105 31 40 1,214 FAIR VALUE £m 240 221 570 1 6 105 31 40 1,214 Exchange differences arising on foreign currency loans during each accounting period are recognised as a component of equity, to the extent that the hedge is effective. The foreign exchange exposure arising on the Group’s net investment in its subsidiaries is expected to be highly effective in offsetting the exposure arising on the Group’s foreign currency borrowings. However, during the year an immaterial amount (2021: immaterial) was recognised in the consolidated income statement that arose from hedges of net investments in foreign operations that were considered to be ineffective. Foreign currency transaction exposure is primarily managed through funding of purchases from operating income streams arising in the same currency. Hedging of transaction exposure is undertaken with approved counterparties and within designated limits, using spot or short-term forward contracts to buy or sell the currency concerned, once the timing and the underlying amount of exposure have been determined. Foreign exchange derivatives may also be used to hedge specific transaction exposure where appropriate. 46 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) The following significant exchange rates applied during the year: US dollar Singapore dollar New Taiwan dollar New Zealand dollar Malaysian ringgit Korean won Chinese renminbi Euro Japanese yen AVERAGE RATE CLOSING RATE 2022 1.242 1.709 36.823 1.944 5.452 1590.875 8.347 1.173 161.189 2021 1.375 1.847 38.389 1.946 5.696 1570.153 8.882 1.162 150.122 2022 1.209 1.627 37.135 1.918 5.346 1538.789 8.423 1.136 160.721 2021 1.344 1.820 37.139 1.973 5.617 1596.316 8.560 1.187 154.351 Sensitivity analysis With respect to the Group’s foreign currency exposure, and assuming that all other variables, in particular interest rates, remain constant, it is estimated that a 10% strengthening of sterling against the following currencies at 31 December 2022 (31 December 2021: 10%) would have increased/(decreased) equity and profit before tax by the amounts shown below: US dollar Australian dollar Singapore dollar New Taiwan dollar New Zealand dollar Euro Chinese renminbi Korean won Hong Kong dollar Japanese yen Philippine Peso 31 DECEMBER 2022 31 DECEMBER 2021 EQUITY £m 43 - (38) - - 4 (4) - - - - 5 PROFIT BEFORE TAX £m (2) - 18 - 3 - (6) 50 (1) - 1 63 EQUITY £m 35 (4) 6 - (1) (3) (4) - - 4 - 33 PROFIT BEFORE TAX £m (3) - - 1 (3) - (2) 4 - - - (3) A 10% weakening of sterling against the above currencies at 31 December 2022 (31 December 2021: 10%) would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant. (ii) Interest rate risk and interest rate swaps The Group adopts a policy of ongoing review of its exposure to changes in interest rates on its borrowings, taking into account market expectations with regard to the perceived level of risk associated with each currency, the maturity profile and cash flows of the underlying debt, and the extent to which debt may potentially be either prepaid prior to its maturity or refinanced at reduced cost. The Group’s policy is to maintain a mixture of its financial liabilities on a fixed and floating-rate basis with a greater emphasis on floating rates presently as this flexibility is considered to be appropriate in the context of the Group’s overall geographical diversity, investment and business cycle and the stability of the income streams, cash balances and loan covenants. Interest rate derivatives are used to manage interest rate risk, to the extent that the perceived cost is considered to outweigh the benefit from the flexibility of variable rate borrowings, and the Group actively monitors the need and timing for such derivatives. Where used, interest rate derivatives are classified as cash flow hedges and stated at fair value within the Group’s consolidated statement of financial position. Further details of interest rate derivatives in place at 31 December 2021 are provided hereafter. Fair value d) Set out below is a comparison of the fair and book values of all the Group’s financial instruments by category. Fair values are determined by reference to market values, where available, or calculated by discounting cash flows at prevailing interest rates. 47 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Financial assets Cash and cash equivalents Cash at bank and in hand Short-term deposits Cash pool overdrafts Loans and receivables Trade receivables Amounts due from holding and associate companies Other receivables Other financial assets Equity investments Derivative financial assets Deposits receivable Financial liabilities Overdrafts and borrowings Trade payables Other creditors Other non-current liabilities 2022 2022 2021 2021 BOOK VALUE FAIR VALUE BOOK VALUE FAIR VALUE £m £m £m £m 353 401 (193) 64 466 65 12 - 7 1,175 (511) (35) (58) (15) (619) 353 401 (193) 64 466 65 12 - 7 1,175 (511) (35) (58) (15) (619) 325 157 (92) 39 - 25 21 3 2 480 325 157 (92) 39 - 25 21 3 2 480 (1,214) (37) (49) (38) (1,338) (1,214) (37) (49) (38) (1,338) Estimation of fair values The following summarises the major methods and assumptions used in estimating the fair values of financial instruments reflected in the table. Derivatives Forward exchange contracts are either marked to market using listed market prices or by discounting the contractual forward price and deducting the current spot rate. For interest rate swaps, bank valuations are used. Interest-bearing loans and borrowings Fair value is calculated based on discounted expected future principal and interest cash flows. Finance lease liabilities The fair value is estimated as the present value of future cash flows, discounted at market interest rates for similar lease agreements. The estimated fair values reflect changes in interest rates. Trade and other receivables/payables For receivables/payables with a remaining life of less than one year, the notional amount is deemed to reflect the fair value. All other receivables/payables are discounted to determine the fair value. Interest rates used for determining fair value Prevailing market interest rates are used to discount cash flows to determine the fair value of financial assets and liabilities. Fair value hierarchy As at 31 December 2022, the Group held certain financial instruments measured at fair value. The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique: Level 1 Quoted (unadjusted) prices in active markets for identical assets or liabilities. Level 2 Level 3 Other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly. Techniques that use inputs which have a significant effect on the recorded fair value that are not based on observable market data. The table below provides a hierarchy analysis of financial instruments carried at fair value: 48 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 2022 LEVEL 1 £m LEVEL 2 £m LEVEL 3 £m TOTAL £m LEVEL 1 £m 2021 LEVEL 2 £m LEVEL 3 £m TOTAL £m Equity investment at FVOCI Equity investment at FVTPL Cross-currency interest rate swaps Assets Cross-currency interest rate swaps Interest rate swap Liabilities - - - - - - - - 12 12 - - - - - - - - - - - 12 - 12 - - - - - - - - - - - 18 2 20 - - - - - - - - - - - 18 2 20 - - - During the year ended 31 December 2022 there were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into and out of Level 3 fair value measures. Capital management The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Company’s objective for managing its capital is to ensure that Group entities will be able to continue as a going concern while maximising the return to shareholders, as well as sustaining the future development of its business. In order to maintain or adjust the capital structure, the Group may alter the total amount of dividends paid to shareholders, return capital to shareholders, issue new shares, draw down additional debt or reduce debt. The Group’s capital structure consists of debt, which includes the loans and borrowings disclosed in Note 19, cash and cash equivalents disclosed in Note 18 and the equity attributable to the parent, comprising share capital, reserves and retained earnings, as disclosed in the consolidated statement of changes in equity. The Group seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position. 49 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 21 Employee benefits Pension arrangements The Group operates various funded pension schemes which are established in accordance with local conditions and practices within the countries concerned. The most significant funds are described below. United Kingdom The pension arrangements in the United Kingdom operate under the ’Millennium & Copthorne Pension Plan’, which was set up in 1993. The plan operates a funded defined benefit arrangement together with a defined contribution plan, both with different categories of membership. The defined benefit section of the plan was closed to new entrants in 2001 and at the same time rights to a Guaranteed Minimum Pension (”GMPs“) under the defined contribution scheme also ceased. The plan entitles a retired employee to receive an annual pension payment. The contributions required are determined by a qualified actuary on the basis of triennial valuations using the projected unit credit method. The last full actuarial valuation of this scheme was carried out by a qualified independent actuary as at 5 April 2020 and this has been updated on an approximate basis to 31 December 2022. The contributions of the Group during the year were about 36.30% (2021: 11%) of pensionable salary. As the defined benefit section is closed to new entrants, the current service cost, as a percentage of pensionable payroll is likely to increase as the membership ages, although it will be applied to a decreasing pensionable payroll. The assumptions which have the most significant effect on the results of the valuation are those relating to the discount rate and the rates of increase in salaries and pensions. The total pension obligation for the UK pension plan has decreased from the prior year to £50m (2021: £76m). This has been driven by the rise in bond yields in the UK and as a result of this, the value of the bonds and liability-driven investment instruments held, £48m (2021: £67m), has decreased. This is due to the increased bond yield/cost of borrowing, resulting in a lack of willingness among investors to own debt. Due to the current period of high inflation experience across the global economy, this could be a significant actuarial assumption when computing financial data for the plan. Despite the high level of inflation as at 31 December 2022 it is assumed as that future impacts of the high inflation environment are currently minimal as it is assumed that Inflation will return to a rate closer to the Bank of England target of approximately 2% per annum in future periods. During the current year there has been significant events in the UK and global economy which have had an adverse effect on pension funds liquidity as a whole . The plan was not significantly affected by these events and liquidity is not envisioned to be a significant area of risk because of the sufficient liquidity of assets held by the plan and the sufficient liquidity of the group if required. The plan’s assets are mainly composed of bonds and liability driven Investments (LDI). This forms a natural hedge between the plan’s assets and obligations against interest rates and bond market movements similar to events seen in 2022. The plan does not employ any more complex forms of hedging arrangements of specific instruments. South Korea The group sold its South Korean Hotel resulting in the closure of its defined benefit pension scheme and payment being made to the new owners of the scheme. Taiwan The Group operates a defined benefit pension plan for its employees in Taiwan. The contributions required are determined by an external qualified actuary using the projected unit credit method. The most recent valuation was carried out on 31 December 2022. The contributions of the Group were no less than 6% (2021: 6%) of the employees’ earnings. The assumptions which have the most significant effect on the results of the valuations are those relating to the discount rate and rate of increase in salaries. The defined benefit plans are administered by pension funds that are legally separated from the Group. The boards of the pension funds are required by law to act in the best interests of the plan participants. These defined benefit plans expose the Group to actuarial risks, such as longevity risk, currency risk, interest rate risk and market investment risk. The above plans are substantially funded by the Group’s subsidiaries. The funding requirements are based on the pension funds’ actuarial measurement framework set out in the funding policies of the plans. The assets of each scheme have been taken at market value and the liabilities have been calculated using the following principal assumptions: Inflation rate Discount rate Rate of salary increase Rate of pension increases Rate of revaluation 2022 2022 2022 2021 2021 2021 UK SOUTH KOREA TAIWAN UK SOUTH KOREA TAIWAN 3.30% 4.90% 3.80% 3.10% 2.75% - - - - - - 1.50% 3.00% - - 3.50% 1.70% 4.00% 3.30% 2.95% - 2.75% 0.00% - - - 0.50% 3.00% - - The methodology for computing the discount rate is the yield range method. The assumptions used by the actuaries are the best estimates chosen from a range of possible actuarial assumptions, which due to the timescale covered, may not necessarily be borne out in practice. The present values of the schemes’ liabilities are derived from cash flow projections over long periods and are inherently uncertain. Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions consistent, would have altered the defined benefit obligation by the amounts shown below: 50 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Discount rate (25 bps movement) Rate of salary increase (25 bps movement) Price inflation rate (25 bps movement) Post retirement mortality assumption (25 bps movement) DEFINED BENEFIT OBLIGATIONS 2022 2022 2021 2021 INCREASE DECREASE INCREASE DECREASE £m 2 - (1) 2 £m (1) - 1 (2) £m 3 - (1) 4 £m (3) - 1 (4) Although the analysis does not take account of the full distribution of cash flows expected under the plans, it does provide an approximation of the sensitivity of the assumptions shown. Amounts recognised on the balance sheet are as follows: 2022 2022 2022 2022 2022 2021 2021 2021 2021 2021 UK SOUTH KOREA TAIWAN OTHER TOTAL UK SOUTH KOREA TAIWAN OTHER TOTAL Present value of funded obligations Fair value of plan assets Plan deficit £m 50 (48) 2 £m - - - £m 5 (4) 1 £m 1 - 1 £m 56 (52) 4 £m 77 (67) 10 £m 3 (3) - £m 5 (3) 2 £m 1 – 1 Changes in the present value of defined benefit obligations are as follows: 2022 2022 2022 2022 2022 2021 2021 2021 2021 UK SOUTH KOREA TAIWAN OTHER TOTAL UK SOUTH KOREA TAIWAN OTHER Balance at 1 January Current service cost Past service cost Interest cost Benefits paid, death in service insurance premiums and expenses £m 77 - - 1 (2) £m 3 - - - (1) Remeasurement losses/ (gains) arising from: – Financial assumptions – Experience adjustment (30) 4 - - – Demographic assumptions Balance at 31 December - 50 (2) - Changes in the fair value of plan assets are as follows: Balance at 1 January Interest income Group contributions Benefits paid Remeasurement gains arising from: – Return/(loss) on plan assets excluding interest income Balance at 31 December Actual return/(loss) on plan assets Quoted equities Bonds Liability driven investment Cash and cash equivalents £m 5 £m 1 - - - - - - - - - - - - - - 5 1 2022 UK £m 67 1 2 (2) (20) 48 (19) 2022 UK £m 24 6 12 6 48 2022 SOUTH KOREA £m 3 - - (3) - - - 2022 SOUTH KOREA £m - - - - - £m 86 (73) 13 2021 TOTAL £m 91 - (1) 1 (3) (3) - 1 86 2021 TOTAL £m 75 1 - (3) - 73 1 £m 86 - - 1 (3) (30) 4 (2) 56 £m 79 - - 1 £m 4 - - - £m 6 - - - (1) (1) (1) (3) - 1 77 - - - 3 - - - 5 £m 2 - (1) - - - - - 1 2022 2022 2021 2021 2021 TAIWAN TOTAL UK SOUTH KOREA TAIWAN £m 3 - - - 1 4 1 £m 73 1 2 (5) (19) 52 (18) £m 67 1 - (1) - 67 1 £m 4 - - (1) - 3 – £m 4 - - (1) - 3 – 2022 2022 2021 2021 2021 2021 TAIWAN TOTAL UK SOUTH KOREA TAIWAN TOTAL £m - - - 4 4 £m 24 6 12 10 52 £m 9 11 - 47 67 £m - 3 - - 3 £m - - - 3 3 £m 9 14 - 50 73 51 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) The Group values plan assets in accordance with IAS 19 as follows: • Quoted equities listed on recognised stock exchanges are valued at closing bid prices; • Bonds are measured using pricing models making assumptions for credit risk, market risk and market yield curves; • Properties are valued on the basis of the open market value; and • Liability driven investments are measured based on the present value of the fixed liability. The expense recognised in the income statement is as follows: 2022 2022 2022 2022 2022 2021 2021 2021 2021 2021 UK SOUTH KOREA TAIWAN OTHER TOTAL UK SOUTH KOREA TAIWAN OTHER TOTAL Current service cost Interest cost Interest income £m - 1 (1) - £m £m £m - - - - - - - - - - - - £m - 1 (1) - £m - 1 (1) - Total cost is recognised within the following items in the income statement: Administrative expenses The gains or losses recognised in the consolidated statement of comprehensive income are as follows: £m £m £m - - - - - - - - - - - - 2022 £m - £m - 1 (1) - 2021 £m - 2022 2022 2022 2022 2022 2021 2021 2021 2021 2021 UK SOUTH KOREA TAIWAN OTHER TOTAL UK SOUTH KOREA TAIWAN OTHER TOTAL £m £m £m £m £m £m £m £m £m Actual return less expected return on plan assets Remeasurement (losses)/ gains arising from: (20) - – Financial assumptions – Experience adjustment – Demographic assumptions Defined benefit plan remeasurement gains 30 (4) - 6 - - 2 2 - - - - - £m 1 - - - 1 (19) 30 (4) 2 9 - 3 - (1) 2 - - - - - - - - - - Actuarial losses recognised directly in equity are as follows: Cumulative as at 1 January Remeasurement gains recognised during the year Cumulative as at 31 December The life expectancies underlying the value of the accrued liabilities for the UK Plan, based on retirement age of 65, are as follows: Males Females - - - - - 2022 £m 19 (9) 10 2022 Years 22 24 - 3 - (1) 2 2021 £m 21 (2) 19 2021 Years 22 24 The weighted-average duration of the defined benefit obligations as at 31 December 2022 was 12 years (2021: 17 years). The Group expects about £5.2m in contributions to be paid to the defined benefit plans in 2023. The decreased weighted-average duration has reduced over in comparison to the prior year due to market conditions, higher bond yields and the ageing of the members and has resulted in the movement in discount, 4.90% (2021: 1.70%), and inflation rate, 3.30% (2021: 3.50%) assumptions. The Group monitors the deficit of the fund and believes any risk associated with the deficit is mitigated by the Group’s strong balance sheet position. Share-based payments The Group used to operate a number of share option schemes; a majority being designed to link remuneration to the future performance of the Group. In accordance with the Group’s accounting policy 2.2N(iv) on share-based payment transactions, the fair value of share options and long-term incentive awards is recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the period during which the employees become unconditionally entitled to the share options and long-term incentive awards. The charge to the income statement for the year was £nil (2021: £nil). 52 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) The Group has applied IFRS 2 to its active employee share-based payment arrangements from 1 January 2005 except for arrangements granted before 7 November 2002. There were no options granted during 2021 in line with the Final Offer made by CDL in 2019 and any outstanding options are to close out per the final vesting dates. Millennium & Copthorne Hotels Limited 2006 Long-Term Incentive Plan (“LTIP”) (i) There were no options outstanding at the end of the current or previous year in line with the Final Offer executed by CDL in 2019. (ii) There were no options outstanding at the end of the current or previous year in line with the Final Offer executed by CDL in 2019. MILLENNIUM & COPTHORNE HOTEL LIMITED 2006 and 2016 SHARESAVE SCHEMES ANNUAL BONUS PLAN (“ABP”) (iii) Under the ABP, deferred share awards were granted annually to selected employees of the Group. Shares in Millennium & Copthorne Hotels plc (now a cash settlement made by Millennium & Copthorne Hotels Limited subsequent to delisting) are transferred to participants as follows if they continue to be employed by the Group: •   25% after years one and two; and •   50% after three years. DATE OF AWARDS 13.05.2016 14.12.2018 13.08.2019 13.06.2022 AWARDS OUTSTANDING AS AT 01-JAN-22 AWARDS AWARDED DURING THE YEAR AWARDS VESTED DURING THE YEAR AWARDS FORFEITED/ EXPIRED DURING THE YEAR AWARDS OUTSTANDING AS AT 31- DEC- 2022 CREDITED TO SHARE CAPITAL £m CREDITED TO SHARE PREMIUM £m VESTING DATES 196 12,990 17,551 10,040 30,737 - - - - - - (12,599) (6,816) (9,171) (196) (391) (695) (869) (28,586) (2,151) - - 10,040 - - - - - - - - - - - - 13.05.2017/18/19 14.12.2019/20/21 13.08.2020/21/22 13.08.2022 (iv) The ESP was approved by the Company on 18 February 2016 to replace participation in the LTIP by senior executive management. These awards will vest over a three-year period (25% after years one and two, 50% after three years), subject to the rules of the ESP. Executive Share Plan (“ESP”) DATE OF AWARDS 04.12.2018 09.08.2019 09.08.2022 AWARDS OUTSTANDING AS AT 01-JAN- 2022 AWARDS AWARDED DURING THE YEAR AWARDS VESTED DURING THE YEAR AWARDS FORFEITED DURING THE YEAR AWARDS EXPIRED DURING THE YEAR AWARDS OUTSTANDING AS AT 31- DEC- 2022 CREDITED TO SHARE CAPITAL £m CREDITED TO SHARE PREMIUM £m VESTING DATES 7,341 9,367 2,080 18,788 - - - - (7,341) (7,287) (2,080) (2,080) - - - - - - - - - 2,080 - 16,708 - - - - - 14.12.2019/20/21 - 09.08.2020/21/22 09/08/2022 - – At the year end, options of 10,040 and 2,080 ordinary shares were settled with cash under the ABP and ESP respectively. Holders of these options received a cash payment for a fixed price of £6.85 in line with the Final Offer executed by CDL on the date of exercise, as such no shares were awarded in year. Awards/options granted The following awards/options were granted in the year ended 31 December 2022: 2019 AWARDS Executive Share Plan Executive Share Plan Executive Share Plan Sharesave Scheme (3 year) Sharesave Scheme (5 year) Deferred Share Awards Deferred Share Awards Deferred Share Awards 09.08.2019 09.08.2019 09.08.2019 09.04.2019 09.04.2019 13.08.2019 13.08.2019 13.08.2019 AWARD/OPTIONS GRANTED DIRECTOR NON- DIRECTOR SHARE PRICE PREVAILING ON DATE OF GRANT £ EXERCISE PRICE £ FAIR VALUE £ EXPECTED TERM (YEARS) EXPECTED VOLATILITY EXPECTED DIVIDEND YEILD REISK FREE INTEREST RATES – – – – – – – – 7,538 7,538 15,075 93,436 1,040 8,931 8,931 17,862 6.8 6.8 6.8 4.44 4.44 6.8 6.8 6.8 – – – 3.75 3.75 – – – 6.85 6.85 6.85 1.11 1.28 6.85 6.85 6.85 1 2 3 – – – – – – – – – 3.31 26.00% 0.95% 0.72% 5.31 26.00% 0.95% 0.82% 1 2 3 – – – – – – – – – Measurement of fair value The Sharesave awards in 2019 were valued using the Black-Scholes valuation method. 53 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 22 Provisions Balance at 1 January 2022 Provisions made Provisions utilised Disposal of subsidiary Foreign exchange adjustments Balance at 31 December 2022 Analysed as: Non-current provision Current provision Total provision LEGAL BEIJING INDEMNITY KOREA PROVISION CAPITAL EXPENDITURE TOTAL £m 5 8 - - 1 14 - 14 14 £m 9 - - - 1 10 10 - 10 £m 38 7 (11) - 2 36 - 36 36 £m - 9 (3) (5) - 1 - 1 1 £m 52 24 (14) (5) 4 61 10 51 61 Provision for legal fees as at 31 December 2022 of £14m (2021: £5m) relates to disputes in several hotels. The Beijing indemnity of £10m (2021: £9m) relates to the tax indemnity to the former shareholders of Grand Millennium Hotel Beijing in which the Group acquired an additional 40% interest in 2010. The Korea provision relates to the Group’s obligations under certain contracts in respect of Millennium Hilton Seoul and represents the estimated costs to be incurred arising from the proposed sale of Millennium Hilton Seoul. As at 31 December 2021, the provision was based on management’s best estimate of the expenditure required to settle its obligations under the relevant contracts based on its negotiations with the counterparties to-date. The estimated amount might be revised upon the finalisation of negotiations. The sale of Millennium Hilton Seoul was completed during the current financial year. As at 31 December 2022, further provision was provided as the amount was finalised. The Group has settled part of the costs in 2022 and has settled the remaining amount subsequent to the reporting date. The Group would be fully reimbursed by the buyer of Millennium Hilton Seoul for the amount incurred in respect of its obligations under the relevant contracts. The estimated additional costs recognised during the year of £7m (2021: £39m) has been netted against the corresponding reimbursement from the buyer of £41m in the consolidated income statement. The provision for capital expenditure relates to the Group’s obligations to incur capital expenditures under the terms of the certain hotel operating agreements. 23 Other non-current liabilities Amount owing to intermediate holding company Other liabilities Total non-current liabilities 2022 £m - 15 15 2021 £m 25 13 38 24 Movements in deferred tax liabilities and assets (prior to offsetting balances) during the year are as follows: Deferred taxation Deferred tax liabilities Property assets1 Unremitted earnings Deferred tax assets Tax losses Others Net deferred tax liabilities CHARGED/(CREDITED) TO INCOME STATEMENT AT 1 JANUARY 2022 CHANGE IN TAX RATE ACQUISITION /DISPOSAL OF SUBSIDIARIES CURRENT YEAR MOVEMENT EXCHANGE ON TRANSLATION AT 31 DECEMBER 2022 £m 220 - 220 (142) (6) (148) 72 £m - - - - - - - £m (10) - (10) 5 3 8 (2) £m (3) 87 84 24 - 24 108 £m 18 - 18 (6) - (6) 12 £m 225 87 312 (119) (3) (122) 190 1 Property assets comprise plant, property and equipment and investment properties. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when deferred taxes relate to the same taxation authority. The amounts determined after appropriate offsetting, are as follows: 54 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Deferred tax assets Deferred tax liabilities 2022 £m - (190) (190) 2021 £m 5 (77) (72) Deferred tax assets have not been recognised in respect of the following items because it is not probable that future taxable profit will be available against which the Group can utilise the benefits. Tax losses Adjustments due to: – Deductible temporary differences in respect of prior year – Tax losses in respect of prior year 2022 £m 74 14 - 88 2021 £m (32) - 62 30 The deductible temporary differences do not expire under current tax legislation. The tax losses are subject to agreement by the tax authorities and compliance with tax regulations in the respective countries in which certain subsidiaries operate. The gross tax losses with expiry dates are as follows: Expiry dates: – within 1 to 5 years – after 5 years – no expiry date 2022 £m 20 7 221 248 2021 £m 42 3 100 145 At 31 December 2022, a deferred tax liability of £13m (2021: £4m) relating to undistributed reserves of overseas subsidiaries and joint ventures of £1,370m (2021: £888m) has not been recognised because the Group determined that the distributions will not be made and the liability will not be incurred in the foreseeable future. 25 Trade and other payables Trade payables Other creditors including taxation and social security: – Social security and other taxes – Value added tax and similar sales taxes – Other creditors Accruals Deferred income Contract liabilities Rental and other deposits Amounts owing to holding and associates companies 2022 £m 35 15 24 11 104 5 15 3 5 217 2021 £m 37 16 5 24 85 7 84 4 - 262 The Group’s exposure to currency and liquidity risks related to trade and other payables are disclosed in Note 20. 26 Dividends No dividend was paid during 2022 (2021: Nil). Subsequent to 31 December 2022, the Directors have not declared any dividends that have been provided for previous periods. 27 Share capital Balance at 1 January 2022 Issue of ordinary shares on exercise of share options Balance at 31 December 2022 Number of 30p shares allotted, called up and fully paid 324,950,812 – 324,950,812 55 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) All of the share capital is equity share capital. Holders of these shares are entitled to dividends as declared from time to time and are entitled to one vote per share at general meetings of the Company. All rights attached to the Company’s shares held by the Group are suspended until those shares are reissued. At the year end, options of 10,040 and 2,080 ordinary shares were settled with cash under the ABP and ESP respectively. Holders of these options received a cash payment on the date of exercise, as such no shares were awarded in year. 28 Reserves Cash flow hedge reserve The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow instruments related to the hedged transactions that have not yet occurred (net of tax). Translation reserve The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations, as well as from the translation of liabilities that hedge the Group’s net investment in foreign operations (net of tax). Treasury share reserve No shares were held by the employee benefit trust at 31 December 2022 (2021: Nil). Fair value reserve The fair value reserve includes the cumulative change in the fair value of equity investments at FVOCI. 29 Financial commitments (a) Capital commitments at the end of the financial year which are contracted but not provided for 2022 £m 38 2021 £m 97 (b) The Group leases out certain of its properties under operating leases. The future minimum lease rentals receivable by the Group under non-cancellable leases are as follows: – less than one year – one to two years – two to three years – three to four years – four to five years – more than five years 2022 £m 9 9 8 7 6 12 51 2021 £m 17 13 12 12 11 68 133 The Group’s share of capital commitments and non cancellable lease commitments of joint ventures and associates is shown in Note 13. Future minimum lease rentals receivable under non-cancellable leases includes all future rentals receivable up to the period when those leases expire or become cancellable. income in the income statement and During the year ended 31 December 2022, £24m (2021: £22m) was recognised as rental £2m (2021: £2m) in respect of repairs and maintenance was recognised as an expense in the income statement relating to investment properties. Contingencies and subsequent events 30 In the course of its operations the Group is routinely exposed to potential liabilities for claims made by employees and contractual or tortious claims made by third parties. No material losses are anticipated from such exposures. There were no contingent liabilities or guarantees other than those arising in the ordinary course of business and on these no material losses are anticipated. The Group has insurance cover up to certain limits for major risks on property and major claims in connection with legal liabilities arising in the course of its operations. Otherwise the Group generally carries its own risk. The Group believes that the accruals and provisions carried on the balance sheet are sufficient to cover these risks. 56 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) in Brisbane, Australia, On 22 March 2023, the Group entered into a property sale agreement and business asset sale agreement with a third party to acquire a hotel together with its existing business assets for a combined consideration of approximately £99.4m (A$177.7m). The completion of the acquisition, which is subject to the fulfilment of several conditions precedents as stipulated in the agreement, is expected in the second half of 2023. This acquisition will be funded through internal cash resources and credit facilities. On 28 June 2023, the Group entered into a real property sale and purchase agreement with a third party to acquire the freehold interest in a hotel in Seoul, South Korea for a consideration of approximately £84.1m (KRW140billion). The acquisition was funded by internal cash resources and completed on 3 July 2023. On 30 June 2023, the Group entered into a real property purchase and sale agreement with a third party to acquire the freehold interest in a hotel in Osaka, Japan for a consideration of approximately £46.6m (JPY8.5billion). The completion of the acquisition is expected in the third quarter of 2023. This acquisition will be funded through internal cash resources and credit facility. 31 Related parties Identity of related parties Transactions between the Company and its subsidiaries have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below. All transactions with related parties were entered into in the normal course of business and at arm’s length. The Group has a related party relationship with its joint ventures, associates and with its directors and executive officers. Transactions with ultimate holding company and other related companies The Group has a related party relationship with certain subsidiaries of Hong Leong Investment Holdings Pte. Ltd (“Hong Leong”) which is the ultimate holding and controlling company of Millennium & Copthorne Hotels Limited and holds 100% (2021: 100%) of the Company’s shares via CDL, the intermediate holding company of the Group . Transactions with related companies of shared directorship. A related party relationship exists between Millennium & Copthorne International Limited (“MCIL”), a subsidiary company, and Millennium & Copthorne Middle East Holdings Limited (“MCMEHL”), a related party. This relationship is defined by the shared directorship of the Company's director, Mr. Ali Alzaabi. During the current financial year, fees have been payable under a License and Services Agreement between MCIL and MCMEHL, this agreement has existed since 31 December 2016 and was renewed on 20 April 2021. During the year ended 31 December 2022, the Group had the following transactions with those subsidiaries and related companies. Interest income received and receivable from: - Intermediate holding company Management services fee received and receivable from: - fellow subsidiaries - associates Maintenance services fees paid and payable to: - fellow subsidiaries Rental expenses paid and payable to: - associates Surplus cash deposited to: - fellow subsidiaries Cash repayment for licence fees from: - companies of shared directorship Outstanding licence fees from: - companies of shared directorship 2022 £m (9) (1) (5) (6) 2 2021 £m - - - - 1 26 - - 4 1 - 8 9 57 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Transactions with key management personnel In addition to their salaries, the Group also provides non-cash benefits to Directors and executive officers and contributes to a post- employment defined contribution plan depending on the date of commencement of employment. The defined contribution plan does not have a specified pension payable on retirement and benefits are determined by the extent to which the individual’s fund can buy an annuity in the market at retirement. The key management personnel compensation is as follows: Short-term employee benefits Directors Executives 2022 2021 £m 1 - 1 1 £m 2 - 2 2 58 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 32 Related undertakings The full list of the Company’s related undertakings as at 31 December 2022 are set out below: Full Name Aircoa Equity Interests Inc. Aircoa GP Corporation Aircoa, LLC All Seasons Hotels & Resorts Limited Anchorage-Lakefront Limited Partnership Archyield Limited ATOS Holding GmbH Aurora Inn Operating Partnership L.P. Avon Wynfield Inn, Ltd. Avon Wynfield LLC Beijing Fortune Hotel Co. Ltd. Biltmore Place Operations Corp. Bostonian Hotel Limited Partnership Buffalo Operating Partnership L.P. Buffalo RHM Operating LLC CDL (New York) LLC CDL (NYL) Limited CDL Entertainment & Leisure Pte Ltd CDL Hospitality Trusts1 Shareholding percentage Type Country of incorporation Registered office address Principal Activities 100% Indirect subsidiary 100% Indirect subsidiary 100% Indirect subsidiary USA USA USA 76% Indirect subsidiary New Zealand 100% Indirect subsidiary USA 100% Indirect subsidiary United Kingdom 100% 100% Direct subsidiary Indirect subsidiary 100% Indirect subsidiary 100% Indirect subsidiary Austria USA USA USA 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 Level 13, 280 Queen Street, Auckland 1010, New Zealand 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 Corporate Headquarters, Scarsdale Place, Kensington, London W8 5SY Schulhof 6/1st fl , 1010 Vienna, Austria 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 Holding Company Hotel ownership Holding Company Dormant Hotel owner Hotel owner and operator Investment holding Hotel ownership Hotel ownership Hotel owner 70% Indirect subsidiary People’s Republic of China Building No. 5, 7 DongSanHuan Middle Road, Chaoyang District, Beijing, P.R.China 100020 Hotel owner and operator 100% Indirect subsidiary 100% Indirect subsidiary 100% Indirect subsidiary 100% Indirect subsidiary 100% Indirect subsidiary 100% Indirect subsidiary USA USA USA USA USA USA 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 Liquor licence holder Hotel owner Previously hotel owner Hotel owner Hotel owner Investment holding 100% 27% Indirect subsidiary Republic of Singapore Associated undertakings Republic of Singapore 9 Raffles Place #12- 01 Republic Plaza Singapore 048619 Provision of management services and investment holding See note below1 See note below1 59 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Full Name CDL Hotels (Chelsea) Limited CDL Hotels (Korea) Ltd. CDL Hotels (Labuan) Limited Shareholding percentage Type Country of incorporation Registered office address Principal Activities 100% Indirect subsidiary United Kingdom 100% Indirect subsidiary Republic of Korea Corporate Headquarters, Scarsdale Place, Kensington, London W8 5SY 3F, Seoul Finance Centre, 136 Sejongdae-ro, Jung- gu, Seoul, Korea 04520. Hotel owner and operator Hotel owner and operator 100% Indirect subsidiary Malaysia Tiara Labuan, Jalan Tanjung Batu, 87000 F.T. Labuan, Malaysia Hotel owner and operator CDL Hotels (Malaysia) Sdn. Bhd. 100% Indirect subsidiary Malaysia CDL Hotels (U.K.) Limited 100% Indirect subsidiary United Kingdom CDL Hotels Holdings Japan Limited CDL Hotels Holdings New Zealand Limited CDL Hotels Japan Pte. Ltd. CDL Hotels USA, Inc. CDL Investments New Zealand Limited CDL Land New Zealand Limited CDL West 45th Street LLC Chicago Hotel Holdings, Inc. Cincinnati S.I. Co. City Century Pte. Ltd. City Elite Pte Ltd City Hotels Pte Ltd. Context Securities Limited Copthorne (Nominees) Limited 100% Indirect subsidiary Hong Kong 100% 40% Indirect subsidiary New Zealand Associated undertakings Republic of Singapore 100% Indirect subsidiary USA 50% 50% Indirect subsidiary Indirect subsidiary 100% Indirect subsidiary 100% Indirect subsidiary 100% Indirect subsidiary New Zealand New Zealand USA USA USA 100% 100% 100% 76% Indirect subsidiary Republic of Singapore Indirect subsidiary Republic of Singapore Indirect subsidiary Republic of Singapore Indirect subsidiary New Zealand 100% Indirect subsidiary United Kingdom 12th Floor, Menara Symphony, No.5, Jalan Prof. Khoo Kay Kim, Seksyen 13, 46200 Petaling Jaya, Selangor Darul Ehsan, Malaysia Corporate Headquarters, Scarsdale Place, Kensington, London W8 5SY 2803 Great Eagle Centre, 23 Harbour Road, Wanchai, Hong Kong Level 13, 280 Queen Street, Auckland 1010, New Zealand 9 Raffles Place, #12- 01 Republic Plaza, Singapore 048619 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 Level 13, 280 Queen Street, Auckland 1010, New Zealand Level 13, 280 Queen Street, Auckland 1010, New Zealand 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 9 Raffles Place #12- 01 Republic Plaza Singapore 048619 9 Raffles Place #12- 01 Republic Plaza Singapore 048619 9 Raffles Place #12- 01 Republic Plaza Singapore 048619 Level 13, 280 Queen Street, Auckland 1010, New Zealand Corporate Headquarters, Scarsdale Place, Kensington, London W8 5SY Hotel owner and operator Hotel owner and operator Investment holding Investment holding Investment holding Hotel investment holding Company Investment and property management company Property investment and Development Hotel owner Hotel ownership Previously hotel owner Restaurateur Restaurateur Hotel operator and investment holding Investment holding Investment holding 60 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Full Name Copthorne Aberdeen Limited Shareholding percentage Type Country of incorporation Registered office address Principal Activities 83% Indirect subsidiary United Kingdom Copthorne Hotel (Birmingham) Limited 100% Indirect subsidiary United Kingdom Copthorne Hotel (Cardiff) Limited 100% Indirect subsidiary United Kingdom Copthorne Hotel (Effingham Park) Limited 100% Indirect subsidiary United Kingdom Copthorne Hotel (Gatwick) Limited 100% Indirect subsidiary United Kingdom Copthorne Hotel (Manchester) Limited 100% Indirect subsidiary United Kingdom Copthorne Hotel (Merry Hill) Construction Limited 100% Indirect subsidiary United Kingdom Copthorne Hotel (Merry Hill) Limited 100% Indirect subsidiary United Kingdom Copthorne Hotel (Newcastle) Limited 96% Indirect subsidiary United Kingdom Copthorne Hotel (Plymouth) Limited 100% Indirect subsidiary United Kingdom Copthorne Hotel (Slough) Limited 100% Indirect subsidiary United Kingdom Copthorne Hotel Holdings Limited 100% Direct subsidiary United Kingdom Copthorne Hotels Limited Copthorne Orchid Hotel Singapore Pte. Ltd. 100% Indirect subsidiary United Kingdom 100% Indirect subsidiary Republic of Singapore Copthorne Orchid Penang Sdn. Bhd. 100% Indirect subsidiary Malaysia Corporate Headquarters, Scarsdale Place, Kensington, London W8 5SY Corporate Headquarters, Scarsdale Place, Kensington, London W8 5SY Corporate Headquarters, Scarsdale Place, Kensington, London W8 5SY Corporate Headquarters, Scarsdale Place, Kensington, London W8 5SY Corporate Headquarters, Scarsdale Place, Kensington, London W8 5SY Corporate Headquarters, Scarsdale Place, Kensington, London W8 5SY Corporate Headquarters, Scarsdale Place, Kensington, London W8 5SY Corporate Headquarters, Scarsdale Place, Kensington, London W8 5SY Corporate Headquarters, Scarsdale Place, Kensington, London W8 5SY Corporate Headquarters, Scarsdale Place, Kensington, London W8 5SY Corporate Headquarters, Scarsdale Place, Kensington, London W8 5SY Corporate Headquarters, Scarsdale Place, Kensington, London W8 5SY Corporate Headquarters, Scarsdale Place, Kensington, London W8 5SY 9 Raffles Place #12- 01 Republic Plaza Singapore 048619 Hotel management Hotel owner and operator Hotel owner and operator Hotel owner and operator Hotel owner and operator Hotel owner and operator Hotel owner and operator Hotel owner and operator Hotel owner and operator Hotel owner and operator Hotel owner and operator Investment holding Hotel investment holding Property owner and Developer 12th Floor , Menara Symphony , No. 5, Jalan Prof. Khoo Kay Kim, Seksyen 13, 46200 Petaling Jaya, Selangor Darul Ehsan, Malaysia Hotel owner 61 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Shareholding percentage Type Country of incorporation Registered office address Principal Activities Full Name Diplomat Hotel Holding Limited Durham Operating Partnership L.P. Elite Hotel Management Services Pte. Ltd. Fergurson Hotel Management Limited First 2000 Limited 100% Indirect subsidiary United Kingdom 100% Indirect subsidiary USA 100% Indirect subsidiary Republic of Singapore 50% Associated undertakings Hong Kong 100% Indirect subsidiary Hong Kong First Sponsor Group Limited 35% Associated undertakings Cayman Islands Five Star Assurance, Inc. Four Peaks Management Company Gateway Holdings Corporation I Gateway Hotel Holdings, Inc. Gateway Regal Holdings LLC 100% Indirect subsidiary 100% Indirect subsidiary 100% Indirect subsidiary 100% Indirect subsidiary 100% Indirect subsidiary USA USA USA USA USA Grand Plaza Hotel Corporation 66% Indirect subsidiary Philippines Harbour Land Corporation Harbour View Hotel Pte. Ltd. Harrow Entertainment Pte Ltd Hong Leong Ginza TMK Hong Leong Hotel Development Limited Hong Leong Hotels Pte Ltd. Hong Leong International Hotel (Singapore) Pte. Ltd. Hospitality Group Limited 41% Associated undertakings Philippines 100% 100% 70% 84% Indirect subsidiary Republic of Singapore Indirect subsidiary Republic of Singapore Indirect subsidiary Indirect subsidiary Japan Taiwan 100% Indirect subsidiary Cayman Islands 97% 76% Indirect subsidiary Republic of Singapore Indirect subsidiary New Zealand Corporate Headquarters, Scarsdale Place, Kensington, London W8 5SY 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 9 Raffles Place #12- 01 Republic Plaza Singapore 048619 Unit 606, 6th Floor, Alliance Building,133 Connaught Road Central, Hong Kong 2803 Great Eagle Centre, 23 Harbour Road, Wanchai, Hong Kong P.O.Box 31119, Grand Pavilion, Hibiscus Way, 802 West Bay Road, Grand Cayman, KY1- 1205 Cayman Islands. Investment holding Hotel ownership Hotel management consultancy services Investment holding Investment holding Investment Holding 1401 Eye St., NW, Suite 600, Washington D.C. 20005 Captive insurance Company 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 10 Floor, Heritage Hotel Manila, EDSA corner Roxas Boulevard, Pasay City, Philippines 1300 10 Floor, Heritage Hotel Manila, EDSA corner Roxas Boulevard, Pasay City, Philippines 1300 9 Raffles Place #12- 01 Republic Plaza Singapore 048619 9 Raffles Place #12- 01 Republic Plaza Singapore 048619 4-1 Nihonbashi 1- chome, Chuo-ku, Tokyo, Japan 2 Song Shou Road, Xinyi District, Taipei 11051, Taiwan PO Box 309 Ugland House, Grand Cayman, KY1-1104 Cayman Islands 9 Raffles Place #12- 01 Republic Plaza Singapore 048619 Level 13, 280 Queen Street, Auckland 1010, New Zealand. Arizona condominium Management Holding company Hotel ownership Hotel owner and operator Hotel owner and operator and investment holding company Land owner Hotel operator Investment holding Property owner Hotel owner and operator Investment holding Investment holding Holding company and property owner 62 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Shareholding percentage Type Country of incorporation Registered office address Principal Activities Full Name Hospitality Holdings Pte. Ltd. Hospitality Leases Limited Hospitality Services Limited Hospitality Ventures Pte. Ltd. Hotel Liverpool Limited 100% Indirect subsidiary Republic of Singapore 76% 76% Indirect subsidiary Indirect subsidiary New Zealand New Zealand 100% Indirect subsidiary Republic of Singapore 100% Indirect subsidiary United Kingdom Hotel Liverpool Management Limited 100% Indirect subsidiary United Kingdom Hotelcorp New Zealand Pty. Ltd. KIN Holdings Limited King’s Tanglin Shopping Pte. Ltd. Kingsgate Holdings Pty. Ltd. Kingsgate Hotel Pty. Ltd. Kingsgate Hotels and Resorts Limited Kingsgate Hotels Limited Kingsgate International Corporation Limited Kingsgate Investments Pty. Ltd. 76% Indirect subsidiary Australia 76% 100% Indirect subsidiary New Zealand Indirect subsidiary Republic of Singapore 76% Indirect subsidiary Australia 76% 76% 76% 76% 76% Indirect subsidiary Australia Indirect subsidiary Indirect subsidiary Indirect subsidiary New Zealand New Zealand New Zealand Indirect subsidiary Australia Lakeside Operating Partnership L.P. 100% Indirect subsidiary USA London Britannia Hotel Limited 100% Indirect subsidiary United Kingdom London Tara Hotel Limited 100% Indirect subsidiary United Kingdom M&C Asia Finance (UK) Limited 100% Direct subsidiary United Kingdom 9 Raffles Place #12- 01 Republic Plaza Singapore 048619 Level 13, 280 Queen Street, Auckland 1010, New Zealand. Investment holding Lessee company Level 13, 280 Queen Street, Auckland 1010, New Zealand. Hotel operation/ Management Investment holding 9 Raffles Place #12- 01 Republic Plaza Singapore 048619 Corporate Headquarters, Scarsdale Place, Kensington, London W8 5SY Corporate Headquarters, Scarsdale Place, Kensington, London W8 5SY Suite 7B, Zenith Residences, 82-94 Darlinghurst Road, Potts Point, Sydney 2011, Australia Level 13, 280 Queen Street, Auckland 1010, New Zealand. 9 Raffles Place #12- 01 Republic Plaza Singapore 048619 Suite 7B, Zenith Residences, 82-94 Darlinghurst Road, Potts Point, Sydney 2011, Australia Suite 7B, Zenith Residences, 82-94 Darlinghurst Road, Potts Point, Sydney 2011, Australia Level 13, 280 Queen Street, Auckland 1010, New Zealand. Level 13, 280 Queen Street, Auckland 1010, New Zealand. Level 13, 280 Queen Street, Auckland 1010, New Zealand. Suite 7B, Zenith Residences, 82-94 Darlinghurst Road, Potts Point, Sydney 2011, Australia 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 Corporate Headquarters, Scarsdale Place, Kensington, London W8 5SY Corporate Headquarters, Scarsdale Place, Kensington, London W8 5SY Corporate Headquarters, Scarsdale Place, Kensington, London W8 5SY Investment holding Property letting Operating company Holding company Holding company Property owner Holding company Dormant Franchise holder (Kingsgate) Dormant Investment holding Investment company Hotel ownership Hotel owner Hotel owner and operator Finance company 63 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Full Name M&C Asia Holdings (UK) Limited M & C (CB) Limited M & C (CD) Limited Shareholding percentage Type Country of incorporation 100% Direct subsidiary United Kingdom 100% Indirect subsidiary United Kingdom 100% Indirect subsidiary United Kingdom M & C Management Services (USA) Inc. 100% Indirect subsidiary USA M & C NZ Limited 100% Indirect subsidiary United Kingdom M & C Reservations Services Limited 100% Indirect subsidiary United Kingdom M&C Business Trust Management Limited M&C Capital Pte. Ltd. M&C Colorado Hotel Corporation M&C Crescent Corporation M&C Crescent Interests, LLC M&C Finance (1) Limited 100% 100% Indirect subsidiary Republic of Singapore Indirect subsidiary Republic of Singapore 100% Indirect subsidiary 100% Indirect subsidiary 100% Indirect subsidiary USA USA USA 100% Indirect subsidiary United Kingdom M&C Holdings (Thailand) Ltd. 100% Indirect subsidiary Thailand M&C Holdings Delaware Partnership M&C Holdings, LLC M&C Hotel Enterprises (Asia) Limited M&C Hotel Interests, Inc. M&C Hotel Investments Pte. Ltd. 100% Indirect subsidiary 100% Indirect subsidiary USA USA 100% Indirect subsidiary Hong Kong 100% Indirect subsidiary USA 100% Indirect subsidiary Republic of Singapore Registered office address Corporate Headquarters, Scarsdale Place, Kensington, London W8 5SY Corporate Headquarters, Scarsdale Place, Kensington, London W8 5SY Corporate Headquarters, Scarsdale Place, Kensington, London W8 5SY 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 Corporate Headquarters, Scarsdale Place, Kensington, London W8 5SY Corporate Headquarters, Scarsdale Place, Kensington, London W8 5SY 9 Raffles Place #12- 01 Republic Plaza Singapore 048619 9 Raffles Place #12- 01 Republic Plaza Singapore 048619 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 Corporate Headquarters, Scarsdale Place, Kensington, London W8 5SY 99/1, 11th Floor, BJC Tower, Soi Saeng Chan-Rubia, Phrakanong Klongtoey, Bangkok, Thailand 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 2803 Great Eagle Centre, 23 Harbour Road, Wanchai, Hong Kong 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 9 Raffles Place #12- 01 Republic Plaza Singapore 048619 Principal Activities Investment holding Investment company Investment holding Management services company Holding company Provider of reservation services to hotel owners and operators Provision of property fund management services Investment holding Holding company Investment holding Property owner Finance company Hotel Management Services Property investment Holding company Investment holding Hotel management services company Inve Investment holding 64 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Shareholding percentage Type Country of incorporation Registered office address Principal Activities Full Name M&C Hotels France Management SARL M&C Hotels France SAS M&C Hotels Holdings Japan Pte. Ltd. M&C Hotels Holdings Limited M&C Hotels Holdings USA Limited M&C Hotels Partnership France SNC M&C Hospitality Holdings (Asia) Limited M&C Hospitality International Limited M&C REIT Management Limited M&C New York (Times Square), LLC 100% 100% 100% Indirect subsidiary Indirect subsidiary France France Indirect subsidiary Republic of Singapore 100% Direct subsidiary United Kingdom 100% Direct subsidiary Cayman Islands 100% Indirect subsidiary France 100% Indirect subsidiary Hong Kong 100% Indirect subsidiary Hong Kong 100% Indirect subsidiary Republic of Singapore 100% Indirect subsidiary USA M&C New York Finance (UK) Limited 100% Indirect subsidiary United Kingdom M&C New York (Times Square) EAT II LLC 100% Indirect subsidiary USA M&C Singapore Finance (UK) Limited 100% Direct subsidiary United Kingdom M&C Singapore Holdings (UK) Limited 100% Direct subsidiary United Kingdom M&C Sponsorship Limited 100% Indirect subsidiary United Kingdom McCormick Ranch Operating Partnership L.P. MHM, Inc. Millennium Bostonian, Inc. 100% Indirect subsidiary 100% Indirect subsidiary 100% Indirect subsidiary USA USA USA Millennium & Copthorne (Austrian Holdings) Limited 100% Direct subsidiary United Kingdom 12 Boulevard Haussmann, 75009 Paris, France 12 Boulevard Haussmann, 75009 Paris, France 9 Raffles Place, #12- 01 Republic Plaza, Singapore 048619 Corporate Headquarters, Scarsdale Place, Kensington, London W8 5SY PO Box 309 Ugland House, Grand Cayman, KY1- 1104 Cayman Islands 12 Boulevard Haussmann, 75009 Paris, France 2803 Great Eagle Centre, 23 Harbour Road, Wanchai, Hong Kong 2803 Great Eagle Centre, 23 Harbour Road, Wanchai, Hong Kong 9 Raffles Place #12- 01 Republic Plaza Singapore 048619 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 Corporate Headquarters, Scarsdale Place, Kensington, London W8 5SY 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 Corporate Headquarters, Scarsdale Place, Kensington, London W8 5SY Corporate Headquarters, Scarsdale Place, Kensington, London W8 5SY Corporate Headquarters, Scarsdale Place, Kensington, London W8 5SY 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 Corporate Headquarters, Scarsdale Place, Kensington, London W8 5SY Management company Hotel owner Investment holding Investment holding Investment holding Investment holding Investment holding Investment holding REIT investment management services Investment holding Finance company Hotel owner Finance company Investment holding Other service activities Hotel ownership Hotel management Holding company Investment holding 65 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Full Name Shareholding percentage Type Country of incorporation Registered office address Principal Activities Millennium & Copthorne (Jersey Holdings) Limited 100% Indirect subsidiary United Kingdom Millennium & Copthorne Hotel Holdings (Hong Kong) Limited 100% Indirect subsidiary Hong Kong Millennium & Copthorne Hotels (Hong Kong) Limited Millennium & Copthorne NZ Limited Millennium & Copthorne Hotels Management (Shanghai) Limited Millennium & Copthorne Hotels New Zealand Limited Millennium & Copthorne Hotels Pty. Ltd. Millennium & Copthorne International Limited Millennium & Copthorne Pension Trustee Limited 100% Indirect subsidiary Hong Kong 76% 100% 76% Indirect subsidiary Indirect subsidiary Indirect subsidiary New Zealand People’s Republic of China New Zealand 76% Indirect subsidiary Australia 100% Indirect subsidiary Republic of Singapore 100% Direct subsidiary United Kingdom Millennium & Copthorne Share Trustees Limited 100% Direct subsidiary United Kingdom Corporate Headquarters, Scarsdale Place, Kensington, London W8 5SY 2803 Great Eagle Centre, 23 Harbour Road, Wanchai, Hong Kong 2803 Great Eagle Centre, 23 Harbour Road, Wanchai, Hong Kong Level 13, 280 Queen Street, Auckland 1010, New Zealand #1205, No. 511 Wei Hoi Road, Shanghai 200041, P.R. China Level 13, 280 Queen Street, Auckland 1010, New Zealand Suite 7B, Zenith Residences, 82-94 Darlinghurst Road, Potts Point, Sydney 2011, Australia 9 Raffles Place #12- 01 Republic Plaza Singapore 048619 Corporate Headquarters, Scarsdale Place, Kensington, London W8 5SY Corporate Headquarters, Scarsdale Place, Kensington, London W8 5SY Holding company Investment and development of hotels and hotel management Provision of hotel management and consultancy services Name-holding Hotel management Hotel investment holding Company Name holding Hotels and resorts Management Pension trust acting on behalf of company trustees Share trustee company Millennium CDG Paris SAS 100% Indirect subsidiary France 2 Allée du Verger, 95700 Roissy, France Hotel operator Millennium Hotel Holdings EMEA Limited 100% Direct subsidiary United Kingdom Millennium Hotels & Resorts Services Limited 100% Indirect subsidiary United Kingdom Millennium Hotels Europe Holdings Limited 100% Direct subsidiary United Kingdom Corporate Headquarters, Scarsdale Place, Kensington, London W8 5SY Corporate Headquarters, Scarsdale Place, Kensington, London W8 5SY Corporate Headquarters, Scarsdale Place, Kensington, London W8 5SY Investment holding Management contract holding company Investment holding Millennium Hotels Italy Holdings S.r.l. 100% Indirect subsidiary Italy Via Vittorio Veneto, n. 70, Roma 00187, Italy Holding company Millennium Hotels Limited 100% Indirect subsidiary United Kingdom Corporate Headquarters, Scarsdale Place, Kensington, London W8 5SY Investment holding Millennium Hotels Palace Management S.r.l. Millennium Hotels Property S.r.l. 100% 100% Indirect subsidiary Indirect subsidiary Italy Italy Via Vittorio Veneto, n. 70, Roma 00187, Italy Hotel operator Via Vittorio Veneto, n. 70, Roma 00187, Italy Property owner Millennium Hotels (West London) Limited 100% Indirect subsidiary United Kingdom Corporate Headquarters, Scarsdale Place, Kensington, London W8 5SY Property letting 66 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Full Name Shareholding percentage Type Country of incorporation Registered office address Principal Activities Millennium Hotels (West London) Management Limited 100% Indirect subsidiary United Kingdom Millennium Hotels London Limited Millennium Opera Paris SAS New Unity Holdings Ltd New York Sign LLC Newbury Investments Pte Ltd Park Plaza Hotel Corporation Prestons Road Limited PT. Millennium Sirih Jakarta Hotel QINZ (Anzac Avenue) Limited QINZ Holdings (New Zealand) Limited Quantum Limited Regal Grand Holdings Corporation I Regal Harvest House LP Regal Hotel Management Inc. Republic Hotels & Resorts Limited Republic Iconic Hotel Pte. Ltd. RHH Operating LLC RHI Boston Holdings Corporation I RHI Boston Holdings Corporation II RHM Aurora LLC 100% Direct subsidiary United Kingdom 100% Indirect subsidiary France 50% Associated undertakings BVI 50% Associated undertakings USA 100% Indirect subsidiary Republic of Singapore 100% Indirect subsidiary USA 17% 100% 76% 76% 76% Indirect Associate Indirect subsidiary Indirect subsidiary Indirect subsidiary Indirect subsidiary New Zealand Indonesia New Zealand New Zealand New Zealand 100% Indirect subsidiary 100% Indirect subsidiary 100% Indirect subsidiary USA USA USA 100% 100% Indirect subsidiary Republic of Singapore Indirect subsidiary Republic of Singapore 100% Indirect subsidiary 100% Indirect subsidiary 100% Indirect subsidiary 100% Indirect subsidiary USA USA USA USA Corporate Headquarters, Scarsdale Place, Kensington, London W8 5SY Corporate Headquarters, Scarsdale Place, Kensington, London W8 5SY 12 Boulevard Haussmann, 75009 Paris, France Vistra Corporate Service Centre, Wickhams Cay II, Road Town, Tortola, VG1110, British Virgin Islands 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 9 Raffles Place #12- 01 Republic Plaza Singapore 048619 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 167 Main North Road, Christchurch 8140, New Zealand Jalan Fachrudin 3, Jakarta 10250, Indonesia Level 13, 280 Queen Street, Auckland 1010, New Zealand Level 13, 280 Queen Street, Auckland 1010, New Zealand Level 13, 280 Queen Street, Auckland 1010, New Zealand 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 9 Raffles Place #12- 01 Republic Plaza Singapore 048619 9 Raffles Place #12- 01 Republic Plaza Singapore 048619 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 Hotel operator Investment holding Hotel operator Investment holding To lease, manage, and otherwise deal with certain advertising signage space at the Novotel hotel Investment holding Holding company Service provider Hotel owner Hotel owner Holding company Holding company Holding company Hotel ownership Holding company Hotel operator and investment holding company Hotel operator Hotel owner Holding company Holding company Hotel ownership 67 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Shareholding percentage Type Country of incorporation Registered office address Principal Activities Full Name RHM Holdings Corporation I RHM Management LLC RHM Ranch LLC RHM Wynfield LLC RHM-88, LLC Richfield Holdings Corporation I Richfield Holdings Corporation II Richfield Holdings, Inc Rogo Investments Pte. Ltd. Rogo Realty Corporation S.S. Restaurant Corporation St. Louis Operating, Inc. Sunnyvale Partners, Ltd. 100% Indirect subsidiary 100% Indirect subsidiary 100% Indirect subsidiary 100% Indirect subsidiary 100% Indirect subsidiary 100% Indirect subsidiary 100% Indirect subsidiary 100% Indirect subsidiary USA USA USA USA USA USA USA USA 100% Indirect subsidiary Republic of Singapore 24% Associated undertakings Philippines 100% Indirect subsidiary 100% Indirect subsidiary 100% Indirect subsidiary USA USA USA 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 9 Raffles Place #12- 01 Republic Plaza Singapore 048619 10 Floor, Heritage Hotel Manila, EDSA corner Roxas Boulevard, Pasay City, Philippines 1300 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 Registered at the Trade register at the local court of Hannover with the legal form of Private limited company (number HRB 209133). C/o Coson Corporate Services Limited, Cumberland House 9th Floor, 1 Victoria Street Hamilton HM 11, Bermuda 9 Raffles Place #12- 01 Republic Plaza Singapore 048619 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 Holding company Hotel ownership Hotel owner Hotel ownership Hotel owner and operator Holding company Holding company Holding company Investment holding Real estate owner Liquor license holder Dormant Hotel ownership Hotel investment holding Company Investment holding Investment holding Hotel owner and operator Hotel owner and operator 68 Tara Hotels Deutschland GmbH 100% Indirect subsidiary Germany The Philippine Fund Limited 60% Indirect subsidiary Bermuda TOSCAP Limited Trimark Hotel Corporation WHB Biltmore LLC 100% Indirect subsidiary Republic of Singapore 100% Indirect subsidiary 100% Indirect subsidiary USA USA MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Full Name WHB Corporation Wynfield GP Corporation Wynfield One, Ltd. Zatrio Pte Ltd Zillion Holdings Limited Shareholding percentage Type Country of incorporation Registered office address Principal Activities 100% Indirect subsidiary 100% Indirect subsidiary 100% Indirect subsidiary USA USA USA 100% Indirect subsidiary Republic of Singapore 100% Indirect subsidiary Barbados 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 7900 East Union Avenue, Suite 500, Denver, Colorado, 80237 9 Raffles Place #12- 01 Republic Plaza Singapore 048619 Suite 1, Ground Floor, The Financial Services Centre, Bishops Court Hill, St Michael, Barbados, BB14004 Holding company Hotel ownership Holding company Investment holding Investment holding 1 2 CDL Hospitality Trusts (CDLHT) is a stapled group comprising CDL Hospitality Real Estate Investment Trust (H-REIT), a real estate investment trust, and CDL Hospitality Business Trust (HBT), a business trust. H-REIT has an investment strategy of investing directly or indirectly, in a diversified portfolio of income- producing real estate which is primarily used for hospitality, hospitality-related and other accommodation and/or lodging purposes, whether wholly or partially, and real-estate related assets in relation to the foregoing. HBT is a business trust which currently acts as master lessee, asset owner and hotel operator. HBT may also undertake certain hospitality, hospitality related and other accommodation and/or lodging development projects, acquisition and investments which may not be suitable for H-REIT. Prior to 24 May 2022, although the Group owned less than half of the ownership interest and voting power in CDLHT, management had determined that the Group had control over CDLHT. The activities of H-REIT and HBT are managed by the Group’s subsidiaries, M&C REIT Management Limited (the “H-REIT Manager”) and M&C Business Trust Management Limited (the “HBT Trustee-Manager”), respectively. The H-REIT Manager has decision-making authority over H-REIT, subject to oversight by the trustee of H-REIT. The HBT Trustee-Manager has dual responsibility of safeguarding the interests of the HBT unitholders and decision-making authority over HBT. The Group’s overall exposure to variable returns, both from H-REIT Manager’s and HBT Trustee-Manager’s remuneration from H-REIT and HBT, respectively, together with its interest in CDLHT, was significant and any decisions made by H-REIT Manager and HBT Trustee-Manager affect the Group’s overall exposure. On 24 May 2022, the Group sold part of the CDLHT units that it held, to the holding company, thereby reducing its interest in CDLHT to 27%. The Group has assessed that the reduction in interest in CDLHT has resulted in the Group no longer having control of CDLHT. Accordingly, CDLHT was deconsolidated and accounted for as an associate thereafter. The registered office address of M&C REIT Management Limited, Manager of H-REIT and M&C Business Trust Management Limited, Trustee-Manager of HBT, is 9 Raffles Place #12-01 Republic Plaza Singapore 048619. The Group has assessed the classification of its investments in First Sponsor Group Limited and New Unity Holdings Limited in accordance with IFRS10 and concluded that it does not have control. 69 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Exemption from statutory audit Certain subsidiaries of the Group can take an exemption from having an audit completed. Strict criteria must be met for this exemption Listed below are subsidiaries controlled and consolidated by the Group, where the Directors have elected to take the exemption from having an audit of their financial statements for the year ended 31 December 2022. This exemption is taken in accordance with Companies Act s479A. Archyield Limited (1747079) CDL Hotels (Chelsea) Limited (2845022) CDL Hotels (U.K.) Limited (2729520) Copthorne Hotel (Birmingham) Limited (1816493) Copthorne Hotel (Cardiff) Limited (2411296) Copthorne Hotel (Effingham Park) Limited (1423861) Copthorne Hotel (Gatwick) Limited (994968) Copthorne Hotel Holdings Limited (627049) Copthorne Hotels Limited (759611) Copthorne Hotel (Manchester) Limited (1855800) Copthorne Hotel (Merry Hill) Construction Limited (2649367) Copthorne Hotel (Merry Hill) Limited (2590620) Copthorne Hotel (Plymouth) Limited (3253120) Copthorne Hotel (Slough) Limited (2300992) Copthorne (Nominees) Limited (2574042) Diplomat Hotel Holding Limited (1927463) Hotel Liverpool Limited (9636541) Hotel Liverpool Management Limited (9638688) London Britannia Hotel Limited (0744379) London Tara Hotel Limited (1005559) M&C Asia Finance (UK) Limited (8391037) M&C Asia Holdings (UK) Limited (8382946) M&C (CB) Limited (3846711) M&C (CD) Limited (3846704) M&C Finance (1) Limited (6783896) M&C Hotels Holdings Limited (4407581) M&C Management Holdings Limited (5832248) M&C New York Finance (UK) Limited (9060415) M&C NZ Limited (5159722) M&C Reservation Services Limited (6754684) M&C Singapore Finance (UK) Limited (8391052) M&C Singapore Holdings (UK) Limited (8382985) M&C Sponsorship Limited (11349185) Millennium & Copthorne (Austrian Holdings) Limited (3757378) Millennium & Copthorne (Jersey Holdings) Limited (5846574) Millennium & Copthorne Pension Trustee Limited (6662791) Millennium & Copthorne Share Trustees Limited (3320990) Millennium Hotel Holdings EMEA Limited (4592877) Millennium Hotels Limited (3141048) Millennium Hotels Europe Holdings Limited (8844747) Millennium Hotels London Limited F(3691885) Millennium Hotels (West London) Limited (8599282) Millennium Hotels (West London) Management Limited (8891908) Millennium Hotels & Resorts Services Limited (4601112) Each company’s registered number is shown in brackets after its name. 70 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 33 Non-controlling interests (“NCI”) The following subsidiaries have material NCI. NAME Millennium & Copthorne Hotels New Zealand Limited (“MCHNZ”) PRINCIPAL PLACE OF BUSINESS/ COUNTRY OF INCORPORATION New Zealand CDL Hospitality Trusts (“CDLHT”) Singapore OWNERSHIP INTERESTS HELD BY NCI PRINCIPAL ACTIVITY 2022 2021 Hotel investment holding company Real estate investment trust 24% 73% 24% 62% CDLHT was deconsolidated and became an associate of the Group during the year. The following is summarised financial information for MCHNZ and CDLHT, prepared in accordance with local accounting standards. The information is before inter-company eliminations with other companies in the Group. Revenue Profit after tax Profit attributable to NCI Other comprehensive income/(expense) Total comprehensive income Total comprehensive income attributable to NCI Current assets Non-current assets Current liabilities Non-current liabilities Net assets Net assets attributable to NCI Cash inflow from operating activities Cash inflow/(outflow) from investing activities Cash outflow from financing activities Net increase in cash and cash equivalents Dividends paid to NCI during the year1 1 34 Included in cash flows from financing activities. Loss of control and deconsolidation of CDLHT MCHNZ Subgroup CDLHT Subgroup 2022 2021 £m 74 17 4 - 17 4 111 259 (16) (18) 336 80 14 (58) (7) 1 2 £m 85 26 6 - 26 6 113 232 (19) (13) 313 75 15 26 (22) 19 (2) 2022 £m - - - - - - - - - - - - - - - - - 2021 £m 85 37 23 (2) 35 21 94 1,511 (262) (441) 902 555 34 (24) (4) 6 - The control over CDLHT was reviewed and considered it has de facto control over its investees when it owned less than 50% of the voting rights. During the financial year 2022, the Group sold part of the CDLHT units that it held to the holding company, thereby reducing its interest in CDLHT to 27.3% (2021: 38.89%). The Group has assessed that the reduction in interest in CDLHT has resulted in the Group no longer having control of CDLHT. Accordingly, CDLHT was deconsolidated from 24 May 2022 and accounted for as an associate thereafter, resulting in a gain of £84m. Gain on disposal of units in CDLHT Proceed NCI, based on their proportionate interest in the net assets distributed Fair value of retained equity interest Total consideration Carrying amount of net assets distributed Realisation of translation reserve Gain on disposal of subsidiary £m 108 384 252 744 (570) (90) 84 As a result of deconsolidation of CDLHT, the Group has lost control over net assets of £570m attributable to CDLHT, this is measured at the carrying value as at 24 May 2022 when the entity was been deconsolidated. 71 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Net assets as at 24 May 2022 Non Current Assets Current Assets Current Liabilities Non Current Liabilities Net assets 35 Assets held for sale £m 1,265 70 (225) (540) 570 The following were classified as assets held for sale in the statement of financial position as at 31 December 2022: Assets held for sale relates to the proposed disposal of Millennium Harvest House Boulder. The property has a total carrying value of US$ 10m (£9m) and is held under the "Regional US" Segment as disclosed in the note 5. The following were classified as assets held for sale in the statement of financial position as at 31 December 2021: · The above mentioned proposed disposal of Millennium Harvest House Boulder. · The disposal of Copthorne Orchid Penang was expected to be completed during Q2 2021. The property has a total carrying value of MYR48m (£9m) and is held under the “Rest of Asia” segment as disclosed in Note 5. However, the agreement entered into for the sale of Copthorne Orchid Penang was terminated in December 2021 and the Group continues to explore the sale of the property with other prospective buyers. During 2022, the Group ceased to explore further sale opportunities and the property has been reclassified to property, plant and equipment. 36 The Group adopted IFRS 16 with an initial application date of 1 January 2019 Adoption of IFRS 16 ‘leases’ The Group as a lessee The Group’s leases consist primarily of land & buildings and plant & machinery. Information about leases for which the Group is a lessee is presented below. Amounts recognised in the income statement Depreciation – Land and buildings – Plant and machinery Interest on lease liabilities Total Right-of-use assets Carrying amount on 1 January 2021 Additions Depreciation Disposals Foreign exchange adjustments Carrying amount at 31 December 2021 Additions Acquisition of subsidiary Depreciation Disposal of subsidiary Written off Foreign exchange adjustments Carrying amount at 31 December 2022 NOTES 6, 11 9 FIXTURES, FITTINGS, EQUIPMENT AND VEHICLES £m - - - - - - - - - - - - - NOTES LAND AND BUILDINGS PLANT AND MACHINERY £m 220 4 (7) (3) 1 215 327 - (14) (105) (1) 26 448 £m 1 - (1) - - - - - - - - - - 11, 12 2022 £m 2021 £m 13 1 12 26 INVESTMENT PROPERTIES £m 7 - - - - 7 1 20 - (27) - - 1 7 1 5 13 TOTAL £m 228 4 (8) (3) 1 222 328 20 (14) (132) (1) 26 449 72 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Lease liabilities Current Non-current Total 2022 £m 12 410 422 2021 £m 4 131 135 The total cash outflow for leases during the current year was £20m (2021: £10m). As part of the adoption in 2019, lease liabilities were determined by discounting the relevant lease payments at the Group’s incremental borrowing rate of between 0.9% and 14.6% in Asia, 1.9% to 3.5% in UK/EU and 3.0% to 5.5% in the US. 73 MILLENNIUM & COPTHORNE HOTELS LIMITED COMPANY STATEMENT OF FINANCIAL POSITION As at 31 December 2022 Non-current assets Investments and other financial assets Deferred tax asset Current assets Amounts owed by subsidiary undertakings falling due within one year Other receivables Cash and cash equivalents Other current liabilities Net current liabilities Other non-current liabilities Net assets Equity Called up share capital Share premium Retained earnings Treasury share reserve Total equity Notes (E) (F) (G) (H) 2022 £m 2,378 2 2,380 126 15 9 150 (530) (380) (572) 1,428 97 843 492 (4) 1,428 2021 £m 2,281 2 2,283 144 16 7 167 (353) (186) (685) 1,412 97 843 476 (4) 1,412 The notes on pages 75 to 77 are an integral part of these Company’s financial statements. These financial statements were approved by the Board of Directors on 02 August 2023 and were signed on its behalf by: Kwek Eik Sheng Director Registered No: 03004377 74 MILLENNIUM & COPTHORNE HOTELS LIMITED COMPANY STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2022 Balance at 1 January 2021 Profit Other comprehensive income Total comprehensive income Dividends Balance at 31 December 2021 Balance at 1 January 2022 Profit Other comprehensive Income Total comprehensive income Dividends Balance at 31 December 2022 SHARE CAPITAL SHARE PREMIUM TREASURY SHARE RESERVE RETAINED EARNINGS TOTAL EQUITY £m 97 - - - - 97 97 - - - - 97 £m 843 - - - - 843 843 - - - - 843 £m (4) - - - - (4) (4) - - - - (4) £m 467 7 2 9 - 476 476 10 6 16 - 492 £m 1,403 7 2 9 - 1,412 1,412 10 6 16 - 1,428 The notes on pages 75 - 76 are an integral part of these Company’s financial statements. 75 MILLENNIUM & COPTHORNE HOTELS LIMITED NOTES TO THE COMPANY FINANCIAL STATEMENTS Authorisation of financial statements and statement of compliance with FRS 101 A. The parent company financial statements of Millennium and Copthorne Hotels Limited (“the Company”) for the year ended 31 December 2022 were authorised for issue by the board of Directors and signed on its behalf on 02 August 2023. The Company is incorporated and domiciled in England and Wales. These financial statements were prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101) . The financial statements are prepared under the historical cost convention. As permitted by Section 408 of the Companies Act 2006, the income statement of the Company is not presented as part of the financial statements. The Company’s results are included in the consolidated financial statements of Millennium and Copthorne Hotels Limited which are available from the Group’s website www.millenniumhotels.com. The accounting policies which follow set out those policies which apply in preparing the financial statements for the year ended 31 December 2022. The financial statements are prepared in Sterling and are rounded to the nearest million except when otherwise indicated. B. Accounting policies In preparing these financial statements of the parent company financial statements of Millennium and Copthorne Limited, the Company applies the recognition, measurement and disclosure requirements of international accounting standards in accordance with UK-adopted international accounting standards (“UK-adopted IFRS”). Making amendments where necessary in order to comply with Companies Act 2006 and has set out below where advantage of the FRS 101 disclosure exemptions has been taken. In these financial statements, the Company has applied the exemptions available under FRS 101 in respect of the following disclosures: • Cash Flow Statement and related notes; • Disclosures in respect of the compensation of Key Management Personnel; • Equity settled share-based payments • Financial instruments The Company early adopted FRS 101 amendments before the effective date of 1 January 2016 regarding the presentation of financial statements in compliance with the IAS 1 format. The accounting policies adopted for the parent company been applied consistently to all periods presented and with those used for the Group. C. Details of dividends paid and proposed in the current and prior year are given in Note 26 to the consolidated financial statements. Dividends D. The profit dealt with in the financial statements of the Company is £10m (2021: profit of £7m) . Profit attributable to members of the parent company E Investments and other Financial Assets Cost and net book value at 1 January 2022 Additions Foreign exchange adjustments Cost and net book value at 31 December 2022 F. Other current liabilities Bank loans and overdrafts Amounts owed to subsidiary undertakings Other payables Accruals and deferred income SHARES IN SUBSIDIARY UNDERTAKINGS LOANS TO SUBSIDIARY UNDERTAKINGS GROUP SETTLED ARRANGEMENTS £m £m £m £m 1,887 - 14 1,901 387 8 75 470 7 - - 7 2022 £m 443 79 7 1 530 TOTAL 2,281 8 89 2,378 2021 £m 270 73 9 1 353 76 MILLENNIUM & COPTHORNE HOTELS LIMITED Millennium & Copthorne Hotels Limited As at 31 December 2022 G. Other non-current liabilities Bank loans Amounts owed to subsidiary undertakings Net employee defined benefit liabilities Other non-current liabilities are repayable as follows: - Between one and two years Between two and five years 2022 £m 165 397 10 572 2022 £m 165 407 572 2021 £m 317 360 8 685 2021 £m 60 646 706 H. Details of the Company’s share capital are given in Note 27 to the consolidated financial statements. Share capital I. Related parties For the year ended 31 December 2022, fees paid/payable by the Company to Hong Leong Management Services, a subsidiary of Hong Leong Investment Holdings Pte. Ltd. amounted to £nil (2021: £nil) . At 31 December 2022, £nil (2021: £nil) of fees payable was outstanding. 77 

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