2010 Annual Report - Millennium & Copthorne Hotels/media/Files/M/Millennium... · December 2010...

2010 Annual ReportMILLENNIUM & COPTHORNE HOTELS NEW ZEALAND LIMITED

Head OfficeInternational SalesCorporate Sales – AucklandLevel 13, 280 Centre, 280 Queen StreetPO Box 5640, Wellesley St, Auckland

Head Office Phone: (09) 309 4411International Sales Phone: (09) 913 8075Corporate Sales Auckland Phone: (09) 913 8070

Corporate Sales – WellingtonCopthorne Hotel Wellington Oriental Bay100 Oriental Parade, Oriental BayPO Box 9555, Wellington Phone: (04) 385 0279

Corporate Sales – ChristchurchMillennium Hotel Christchurch14 Cathedral SquarePO Box 1445, ChristchurchPhone: (03) 374 4862

Corporate SalesAuckland, Wellington and ChristchurchEmail: [email protected]

National Conference OfficeMillennium Hotel Christchurch14 Cathedral SquarePO Box 1445, ChristchurchPhone: 0800 4 MEETINGS (0800 4 633 846)Email: [email protected]

Central ReservationsPhone: 0800 808 228Email: [email protected]

For online bookings and hotel information Visit www.millenniumhotels.co.nz

AUDITORSKPMG, Auckland

BANKERSANZ Banking Group (New Zealand) LimitedHong Kong & Shanghai Banking Corporation Limited

SOLICITORSBell Gully

SHARE REGISTRARComputershare Investor Services Limited,Level 2, 159 Hurstmere Road, Takapuna,Private Bag 92119, Auckland 1142, New ZealandTelephone: +64 9 488 8700Facsimile: +64 9 488 8787email: [email protected]

STOCK EXCHANGE LISTING:New Zealand Exchange (NZX)Company Code: MCK

BOARD OF DIRECTORSWong Hong Ren (Chairman)BK Chiu (Managing Director)Vincent Yeo (Non-Executive Director)Richard Bobb (Independent Director)Graham McKenzie (Independent Director)

SENIOR MANAGEMENTGreg Borrageiro (Director, Information Technology)Brendan Davies (Director, International Sales & Marketing)Kieran Davis (Director, Property Management)Kim Ibberson (Director, Human Resources)Takeshi Ito (Group Company Secretary)Karl Luxon (Director of Sales, New Zealand)Gavin Mascarenhas (Marketing Manager, New Zealand)Boon Pua (Vice President Finance)Alison Rogers (National Director of Sales, Conferences and Incentives)Matt Taplin (Vice President Operations)

REGISTERED OFFICE & CONTACT DETAILSLevel 13, 280 Queen Street, Auckland, New ZealandPO Box 5640, Wellesley Street, Auckland 1141Telephone: (09) 309 4411Facsimile: (09) 309 3244Website: www.millenniumhotels.come-mail: [email protected]

Dollars in thousands (unless otherwise stated) 2006 2007 2008 2009 2010 (NZ IFRS) (NZ IFRS) (NZ IFRS) (NZ IFRS) (NZ IFRS) Total revenue 187,264 168,047 123,680 107,951 115,886

Profit before income tax 47,322 46,071 27,519 20,536 14,566

Profit/(loss) attributable to equity 26,907 24,208 17,770 12,372 (10,123) holders of the parent

Earnings per share (cents per share) 7.70c 6.93c 5.09c 3.54c (2.90c)

Ordinary dividends per share (cents per share) 2.50c 2.50c 1.20c 1.20c 1.20c

Net asset backing per share 101.7cps 113.3cps 124.3cps 121.6cps 118.0cps (excluding non-controlling interests) (cents per share)

Total assets 560,929 604,854 631,896 610,759 630,757

Group equity 355,412 396,054 434,506 425,082 412,604

Financial Summary For the year ended 31 December 2010

This booklet is printed using vegetable inks on certified forest paper.

The report is dated 25 March 2011 and is signed on behalf of the Board of Millennium & Copthorne Hotels New Zealand by:

HR Wong BK ChiuChairman Managing Director

CALENDAR:

Annual Report issued 25 March 2011Dividend paid 13 May 2011Annual Meeting late May 2011Half Year End 30 June 2011Interim Results August 2011Financial Year End 31 December 2011

Chairman's Review 1Managing Director's Review 4Board of Directors 9Hotel Ownership / Operational Structure 10Corporate Governance 11Financial Statements FIN 1 - 35Audit Report FIN 36-37Regulatory Disclosures FIN 38 - 40 Cover: The view from the recently refurbished Kingsgate Hotel Terraces, Queenstown

Contents

Millennium & Copthorne Hotels New Zealand Limited Annual Report 2010 | 1

Financial PerformanceFor the year ended 31 December 2010, Millennium & Copthorne Hotels New Zealand Limited (“MCHNZ”) has reported a loss attributable to equity holders of the parent of $10.1 million (2009: $12.4 million profit).

The disappointing result was directly attributable to two factors – the first being a one-off, non-cash adjustment of $24.6 million required to be made under International Financial Reporting Standards as a result of the Government’s announcement in May 2010 of the removal of the ability to depreciate buildings for tax purposes, with effect from 1 January 2011. This was reported in the half-year report. The second related to First Sponsor Capital Limited, the Group’s joint venture vehicle in China in respect of which the Group recorded a net loss of $0.3 million. More detailed commentary on both matters appears below. Due to the negative result, earnings per share were a negative 2.90 cents per share (2009: 3.54 cents positive earnings).

MCHNZ did record a profit before tax, non-controlling interests and associates of $14.9 million (2009: $18.9 million) with the New Zealand hotel operations contributing 62.8 percent, CDL Investments New Zealand Limited contributing 27.0 percent and the Australian operations contributing 10.2 percent.

Putting aside the impact of the Chinese Joint Venture and the impact of the Canterbury Earthquake in September 2010, the New Zealand hotel operations themselves were mostly in line with targets set in terms of revenue and gross profit. It is disappointing that this fact is not able to be reflected in the overall results. Both revenue and gross profit were above 2009 levels and Group revenue (excluding finance income) for the period under review was $115.9 million, an increase of 7.4 percent on the previous year (2009: $108.0 million). Gross profit increased by 6.5 percent to $66.1 million (2009: $62.0 million).

Financial PositionShareholders’ funds excluding non-controlling interests as at 31 December 2010 totaled $412.6 million (2009: $425.1 million) with total assets at $630.8 million (2009: $610.8 million). Net asset backing (with land and building revaluations and before distributions) as at 31 December 2010 was 118.0 cents per share (2009: 121.6 cents per share).

Effect of the Government’s tax changes on the Group’s financial positionAs advised in the half-year report, in May 2010, the New Zealand Government announced the removal of the ability to depreciate buildings for tax purposes, with effect from 1 January 2011. The Company released a statement to the NZX in July 2010 outlining the effect of these changes, notably an increase in its deferred tax liability.

The key impact from these changes is a one-off, non-cash

adjustment required under International Financial Reporting Standards. This is shown in Note 5 of the Notes to the Financial Statements. The adjustment and the corresponding deferred tax liability has dramatically reduced the Group’s profitability by $24.6 million. As previously stated, the reason that the changes have impacted on the Group so heavily is because of the Group’s policy of favouring ownership of its core assets rather than leasing of same. The change made by the International Accounting Standards Board (IASB) in December 2010 to International Accounting Standard 12 (IAS 12) does not apply to the hotels in the Group.

Therefore, from 1 January 2011 the net impact of the removal of building depreciation together with the reduction in the corporate tax rate will be to increase the total tax paid by the MCK Group by an estimated $750,000 per annum.

The Government also announced in May 2010 that it would undertake a review of the definition of “building structure” for tax purposes. Of particular concern at that time to the Group was the treatment of building fit-out and what was to be included and excluded. The outcome of this review was positive in that Inland Revenue classified hotels as non-residential buildings and also further clarified the definition of “building structure” and what constituted the building itself and what constituted fit-out. The revised definitions will allow refurbishments undertaken by the Group to be depreciable for tax purposes.

New Zealand Hotel Operations Revenue for the New Zealand hotel operations (17 owned / leased / operated hotels excluding 12 franchised properties) for the period under review was $103.6 million (2009: $100.1 million). Hotel occupancy for the period was 66.3 percent across the Group (2009: 62.4%).

During 2010, the most significant event was the Canterbury Earthquake on 4 September 2010. This affected the Group’s three Christchurch CBD hotels Millennium Hotel Christchurch [leased], Copthorne Hotel Christchurch, Central [owned], and Copthorne Hotel Christchurch, Durham Street [leased]. While both Millennium Hotel Christchurch and Copthorne Hotel Christchurch, Central remained open for business throughout, both hotels suffered some minor damage as a result of the earthquake. Copthorne Hotel Christchurch, Durham Street was closed to effect repairs to guest rooms and public areas and these repairs, together with a refurbishment of same. It had been scheduled to reopen in March 2011.

The effects of the second Canterbury Earthquake in February 2011 have been more severe. All three of the Group’s hotels in the Christchurch CBD have been damaged. We have announced that the Millennium Hotel Christchurch has been assessed as safe for reentry but it is currently within the police cordon and therefore inaccessible. Copthorne Hotel Christchurch, Central is also in the cordoned area and has been issued with a Restricted Use

Chairman’s Review

2 | Millennium & Copthorne Hotels New Zealand Limited Annual Report 2010

notice. It will require further structural engineering inspections before the extent of repairs can be assessed. Copthorne Hotel Christchurch, Durham Street suffered new damage and has been assessed as being unsafe for occupation and is likely to be demolished.

The overall impact caused by the September 2010 earthquake in terms of insurance costs and repair costs recognized in 2010 totalled approximately $3.1 million. The effect of the February 2011 earthquake is yet to be quantified, but it is clear that with all three Christchurch CBD hotels out of commission for some considerable period of time, there will be a substantial impact on the Group’s revenues and profits for 2011. The Group is insured for the building damage and for business interruption and claims have been filed. Management is working with the insurers and loss adjusters to determine the extent of the repairs necessary to each of the hotels and minimise the impact on our guests and staff where it is practicable to do so.

The Board would like to acknowledge the efforts of all our Christchurch-based staff after both the September 2010 and the February 2011 earthquakes – we express our sympathies and condolences to those who may have lost family members and friends as a result of the February 2011 quake. We have some very difficult decisions to make regarding our Christchurch operations in the near future once the picture is clearer and we know what can and what needs to be done.

CDL Investments New Zealand Limited (“CDLI”) CDLI announced an operating profit after tax for the year ended 31 December 2010 of $2.9 million (2009: $1.3 million). While this is a welcome improvement from the previous year, slow trading conditions and a weak economy continue but CDLI managed to increase its section sales in 2010 to 54 sections from 34 in 2009. CDLI’s focus for 2011 will be on increasing sales in selected subdivisions.

CDLI has declared an ordinary dividend of 1.2 cents per share. MCHNZ’s stake in CDLI is currently 65.74%.

Australian Operations In November 2010, the Company received the funds held on trust in respect of the sale of the Birkenhead Point Marina after agreement was reached on the marina lease between NSW Maritime (previously Waterways) and the purchaser.

Short term leasing of the units at the Zenith Residences continued during the year with occupancy of over 95% recorded.

Joint Venture in China (First Sponsor / i-Vale)

First Sponsor Capital Limited (“FSCL”), the Group’s associated company, reported a net attributable profit of USD 0.7 million for the 2010 financial year. The Group’s exposure to FSCL was reduced from 34% to 30% as at 31 December 2010 as the Group did not fully participate in shareholder funding of FSCL that was undertaken in the same month. Due to the applicable accounting rules and the dilution of its equity interests in FSCL, the Group therefore recorded a net loss of $0.3 million in connection with its investment in FSCL for the full year. This was a significant improvement over the $5.3 million loss that was recorded as at 30 June 2010.

The asset recovery efforts made by FSCL during 2010 in relation to its Guangdong investments held through Idea Valley Investment Holdings Limited (“IVIHL”) and its Chinese subsidiaries (together “the Idea Valley Entities”) have been successful. On 5 January 2011, MCHNZ announced that a Settlement Agreement had been entered into on 31 December 2010 between MCHNZ, Tai Tak Industries Pte. Limited (“Tai Tak), Cheung Ping Kwong (“Cheung”) and his related company Guangdong Huiying Group Limited. Under the terms of the Settlement Agreement, completion of certain transactions would result in full and final settlement of all outstanding issues between FSCL and Cheung in relation to the Idea Valley Entities. The key transactions under the Settlement Agreement included:

1. Cheung transferring his entire shareholding interest in IVIHL (approximately 20%) to FSCL. This was completed on 31 December 2010.

Spring blossoms in Hagley Park, Christchurch

Chairman's Review continued


2. IVIHL regaining the following interests previously disposed of by Cheung:

(a) 80% equity interest and its associated intercompany balances in the Idea Valley Entity which owns a mixed use development project in Humen Town, Dongguan City, Guangdong Province (“Humen Equity Interest”); and

(b) 85% equity interest and its associated intercompany balances in the Idea Valley Entity which owns two parcels of development land in Huizhou City, Guangdong Province (“Huizhou Entity Interest”).

The relevant agreements were executed on 31 December 2010. The intercompany balances were acquired on 31 December 2010. The acquisition of the equity interest in Humen Equity Interest and Huizhou Equity Interest were completed on 18 January 2011 and 26 January 2011 respectively.

3. Payment by Cheung and his related company of RMB23.96 million (equivalent to NZD 4.73 million, based on a RMB/NZD exchange rate of 5.07 as at 5 January 2011) to the IVIHL group. This payment was made on 6 January 2011 and was applied to reduce the acquisition cost of a 49% equity interest in a Dongguan company (“Dongguan Entity Interest”) committed by Cheung on behalf of the IVIHL group.

On completion of the above transactions, FSCL then transferred to Cheung the Dongguan Entity Interest, and will be transferring to Cheung the entire equity interest in an Idea Valley Entity which owns an industrial property in Xi’an City by 31 March 2011, all bought by Cheung on behalf of the IVIHL group with the proceeds from the various sales transactions which he had previously undertaken.

The Strategic Co-operation Agreement signed between MCHNZ, Tai Tak, Cheung and his related company on 27 September 2007 was terminated on 26 January 2011. Litigations commenced by the FSCL group against Cheung and corresponding counterclaims have been withdrawn.

The settlement results in Cheung no longer having any further interest in the IVIHL group. We thank our shareholders for their understanding and patience as the Group sorted out the various complex issues. We would also like to express our gratitude to the Chinese, New Zealand and Singaporean governments and diplomatic officials for their assistance in the asset recovery exercise.

FSCL’s operations in Chengdu, Sichuan Province have remained secure throughout the year. The development of the Cityspring project in Chengdu is progressing well. Since June 2010, 5 out of 6 residential blocks have been formally launched with 569 sale and purchase agreements in excess of US$80 million and 25 option agreements signed as at 27 January 2011. This represents a sale rate of 98% out of the total 608 units formally launched. Revenue and profit recognition for the residential portion of Cityspring Chengdu is expected by the end of 2011. The project also includes a hospitality-related component which is expected to be completed

in 2012. The Chengdu operations constitute approximately 41% of the FSCL Group’s net assets as at 31 December 2010.

MCHNZ remains committed to its investment in FSCL and is confident that China is and will be a source of good returns over the medium term.

Dividend AnnouncementThe Company has resolved to pay a fully imputed ordinary dividend of 1.2 cents per share payable on 13 May 2011 (2009: 1.2 cents per share). The record date will be 6 May 2011.

The level of the dividend reflects the current profitability of the Company as well as the Board’s cautious and prudent approach in response to the ongoing difficult economic climate.

Outlook

From the hotel operating point of view, 2011 will be an exciting year as New Zealand as a whole gets ready to hold the 2011 Rugby World Cup in September and October. The tournament will provide the New Zealand tourism industry with a much-needed boost which will be reflected in the last quarter of the year. However, a recovery in domestic spending is yet to be seen and is still some time away. On the international front, the recent catastrophic earthquake and tsunami in Japan will have negative ramifications for the global travel market given that Japan is the world’s third largest economy. The uncertain outcome of the political crisis in the Middle East and the attendant impact on energy prices could also affect travel patterns.

Our approach in 2011 will be to build on what we have been doing operationally in 2009 and 2010: to watch our costs, to increase our online presence and marketing and to target growing market segments. With our strong network across New Zealand and globally, we are well-placed to do this.

Having now resolved the disputes with Cheung Ping Kwong, our focus in China is to ensure that the gains that we have made in both Guangdong and Sichuan Provinces are able to be realized within the next one to two years. With the muted general economic outlook in New Zealand, our strategic diversification into China should assist in providing the growth impetus as the underlying fundamentals of the Chinese investment assert themselves.

Management and staffOn behalf of the Board, I thank the Company’s management and staff for their work and commitment during a very challenging 2010.

Wong Hong Ren Chairman25 March 2011


Managing Director’s Review

2010 TRADINGAs the Chairman mentioned in his review, the Company’s trading results for 2010 were close to group targets. We anticipated better results in 2010 and, up until the first Canterbury Earthquake in September, we were on track to fulfilling our targets. Considering the disruption to business from September onwards, the 2010 results from a pre-tax profit point of view were a credit to our staff at all of our hotels.

We again saw very good growth through our main domestic “Moments to Treasure” winter / spring campaign with increased bookings across our New Zealand network. In the second half of 2010 we began to see an increase in some Asian markets as visitor numbers began to pick up again. The number of air services both into the main airports but also into regional centres has also contributed to increased occupancies and revenue in areas such as Queenstown but other centres such as the Bay of Islands and Rotorua are still to see a meaningful increase in numbers.

HUMAN RESOURCESTraining programmes are an important part of our organization and our achievements in the field were recognized in June when we were privileged to win a number of awards at the National Hospitality Training Awards organized by the Hospitality Services Institute (HSI):

HSI Supreme Award for Excellence in Training and Innovation: Millennium Hotels & Resorts, New Zealand

Excellence in Training: Organisation:Millennium Hotels & Resorts, New Zealand

Excellence in Training - Workplace (accommodation):Millennium Hotel Christchurch

Workplace Trainer of the Year:Joanne Simpson of Millennium Hotels & Resorts

Millennium Hotel Christchurch took home the Excellence in Training: Organisation for the third year in a row, a remarkable achievement against increasingly stiff competition.

Our Business Basics literacy and numeracy education programme started in 2009 is now well established and delivering positive results across our hotel network. Feedback internally and externally is a very positive and the results of the programme are evident.

CANTERBURY EARTHQUAKEWe extend our deepest sympathies to our staff and their families affected by both the September 2010 and February 2011 earthquakes in the Canterbury Region. We were very fortunate that none of our staff or guests were badly injured by either event. Christchurch is the gateway to the South Island and welcomes over 20 percent of all visitors to New Zealand. As New Zealanders, we know how important it is as an agricultural hub, a focus for business and tourism in the South Island.

The September 2010 earthquake caused minor damage to all of our Christchurch CBD Hotels (Millennium Hotel Christchurch,

We were privileged to win a number of awards in 2010 at the National Hospitality Training Awards including the HSI Supreme Award for Excellence in Training and Innovation.


SUSTAINABILITY AT OUR HOTELS:

As part of the Qualmark rating process, our hotels participate in the Qualmark Green programme which looks at how they use resources, minimize waste and have regard for the environment generally. Nearly all of our hotels have been given a rating and it was pleasing to see three hotels improve from EnviroBronze to EnviroSilver and one hotel improve from EnviroSilver to EnviroGold. Millennium Hotel Queenstown EnviroGold Millennium Hotel Rotorua EnviroGold Copthorne Hotel & Resort Bay of Islands EnviroGold Copthorne Hotel & Resort Queenstown, Lakefront EnviroGold Copthorne Hotel & Resort Solway Bay, Wairarapa EnviroGold Millennium Hotel Christchurch EnviroSilver Copthorne Hotel Auckland City EnviroSilver Copthorne Hotel Auckland, Harbour City EnviroSilver Copthorne Hotel Christchurch, Central EnviroSilver Copthorne Hotel Christchurch, Durham St EnviroSilver Copthorne Hotel Wellington, Oriental Bay EnviroSilver Kingsgate Hotel Hamilton EnviroSilver Kingsgate Hotel Wellington EnviroSilver Kingsgate Hotel Rotorua EnviroSilver Kingsgate Hotel Te Anau EnviroSilver Kingsgate Hotel Terraces, Queenstown EnviroSilver Millennium Hotel Taupo EnviroBronze Kingsgate Hotel Autolodge Paihia EnviroBronze Kingsgate Hotel Brydone, Oamaru EnviroBronze Kingsgate Hotel Dunedin EnviroBronze Kingsgate Hotel Greymouth EnviroBronze Kingsgate Hotel Parnell, Auckland EnviroBronze Kingsgate Hotel The Avenue, Wanganui EnviroBronze Kingsgate Hotel Whangarei EnviroBronze

Copthorne Hotel Christchurch, Central and Copthorne Hotel Christchurch City [formerly known as Copthorne Hotel Christchurch, Durham Street]). However, we were able to continue trading at both Millennium Hotel Christchurch and Copthorne Hotel Christchurch, Central while Copthorne Hotel Christchurch City underwent repairs. Most of our full-time staff at Copthorne Hotel Christchurch City were able to be redeployed to our other hotels and in some cases to our competitors as well in order to assist where we could. While there were a few redundancies, we did our best to ensure that our staff continued to have work wherever possible.

Repair and refurbishment work was commenced at Copthorne Hotel Christchurch, Durham Street in September 2010. Up until

22 February 2011, the works were proceeding as planned and the hotel was about two weeks away from a full re-opening having taken its first guests the week prior.

The earthquake on 22 February 2011 took everyone by surprise and the effects were clearly much more severe. At time of writing, all three of our Christchurch CBD Hotels are still closed as they remain within areas which are cordoned off and we do not have a clear indication as to when we will be able to regain access to any of them. Regardless, the February earthquake will affect our Christchurch business both within the current year and for the medium term as we look to assess and restore our hotels where possible as well as our Christchurch businesses to the levels we had previously experienced.

We extend our deepest sympathies to everyone affected by both the September 2010 and February 2011 earthquakes in the Canterbury Region.


Managing Director’s Review continued

All our hotels within our New Zealand network are insured with insurers who are internationally recognized and financially sound. We also have business interruption cover which is allowing us to continue to meet our obligations in respect of our employees and suppliers. We are liaising with the insurers, structural engineers and loss adjusters to understand what we are able to do at each site in order to resume trading where possible in the shortest space of time. We will continue to update the market with any developments.

PROMOTING NEW ZEALAND AROUND THE WORLDOur business is not just about selling hotel rooms, it is also about promoting New Zealand as an unique and attractive destination. New Zealand competes with the world to secure conferences, meetings and group tours. Each year our International Sales team and Conference & Incentives team together with industry partners and other stakeholders showcase New Zealand at international events like Incentive Travel Exchange in the USA, IMEX in Frankfurt, EIBTM in Europe, Asia-Pacific Incentives and Meetings Expo in Australia, Kiwilink in the USA, UK, Asia and India. There are others including the MICE road show with Air New Zealand, Tourism New Zealand and Conventions and Incentives New Zealand (CINZ) in China. It does not end by just attending these events. Again, together with industry partners, we host familiarization tours in New Zealand for representatives of potential conferencing groups and independent travellers. The successful ski season in Queenstown is one result of a combined industry effort into the east coast of Australia. These

“Our business is not just about selling hotel rooms, it is also about promoting New Zealand as an unique and attractive destination.

Left: Our Queenstown team hosts a joint Australian and New Zealand famil visit. Right: We showcase New Zealand at events internationally and at home such as the MEETINGS trade show.


collaborative industry efforts also benefit a far reaching range of other businesses in the economy from the different means of transport to the corner dairy, restaurants, souvenir shops and the enjoyment of New Zealand’s agricultural and horticultural produce.

With the events affecting Canterbury now, this work will become even more important in the years ahead as we look to promote New Zealand including Christchurch as safe, attractive and competitive tourism and incentive venues.

2011 OUTLOOK Two events will dominate our trading results this year – the ongoing effects of the Canterbury Earthquake and the Rugby World Cup tournament in September and October 2011. We expect the tournament to provide a positive boost to New Zealand tourism generally from late August as teams, officials and supporters start to arrive. The information from the official accommodation bureau suggests that bookings in the main centres for the quarter finals, semi-finals and the final together with key main games are strong. We look forward to welcoming everyone to New Zealand and we believe that it will be a successful tournament.

The hospitality industry continues to face challenges particularly with regard to the cost of doing business and compliance. These costs still remain high despite talk of regulatory reform. Key inputs and suppliers, such as electricity, keep increasing their prices year on year well above the CPI. The deferred tax changes implemented by the Government in May 2010 has impacted an asset intensive and genuine long term investor like MCK. New

rules on depreciation will result in the company paying more tax and not less per annum despite the welcomed reduction in the corporate tax rate. The hospitality industry is an open and competitive industry. It competes in tough international markets to bring visitors a long way to New Zealand. Having done that, it then has to deal with the ever escalating cost of doing business in New Zealand every year from oligopolies.

All of these factors point to challenges which the hospitality industry in New Zealand will have to address to remain competitive. However there is enough technology, knowledge and experience of good hospitality practice without the need for further research. These will help overcome the tyranny of the status quo and cost-plus mentality to achieve breakthroughs in our productivity. We must cut through the complexity to find solutions in an engaging and collaborative way. The ultimate goal is guest satisfaction and MCK’s aspiration is that “Everyone Recommends Us” – everyone, including our suppliers, industry partners and other stakeholders. We must earn it.

At the time of writing, the situation in Christchurch remains fluid and uncertain. We welcome the Government’s commitment to rebuild the city of Christchurch and to provide assistance to the wider Canterbury region. For us, our highest priority is to support our staff to the extent we are able to do so, then commence repair work when it is appropriately safe. As the scale of the damage and destruction was very wide, we recognize that the work that will be required will be immense and will also take a considerable length of time to complete. The interruption to business in Christchurch and the time required to rehabilitate it as a destination will have an affect on our earnings and profitability

A good turn out at the sales open day for CitySpring Chengdu (China) - September 2010.



over the next several years. However, as we are a national chain, we are not solely reliant on Christchurch and we will be working to improve our results from our other hotels in an effort to make up for some of the lost earnings.

THANK YOUThank you to all of our guests and stakeholders for their support of our Millennium, Copthorne and Kingsgate hotels in 2010. We look forward to seeing you again in the near future.

Thank you also to our staff, particularly our Christchurch teams, for their work and their support of their colleagues not only during 2010 but also after the February 2011 earthquake.

BK Chiu

Managing Director25 March 2011

“Two events will dominate our trading results this year – the ongoing effects of the Canterbury Earthquake and the Rugby World Cup tournament in September and October 2011.


We look forward to welcoming rugby supporters from around the world to New Zealand in September and October 2011.


WONG HONG REN (Chairman and Non-Executive Director)

Mr. Wong is an Executive Director of Millennium & Copthorne Hotels plc and Chairman of CDL Investments New Zealand Limited and M&C REIT Management Limited. He is the Executive Vice President (Group Investment) of Hong Leong Management Services Pte Limited in Singapore.

Mr. Wong was last re-elected to the Board at the 2008 annual meeting of shareholders.

B K CHIU (Managing Director & Member of Audit Committee)

Mr. Chiu is also the Managing Director of CDL Investments New Zealand Limited. Prior to joining the company, Mr. Chiu was Regional Vice - President and Managing Director, Asia of Merisant Company. He holds a Masters degree in agricultural economics and marketing from Massey University, Palmerston North.

Mr. Chiu was last re-elected to the Board at the 2009 annual meeting of shareholders.

VINCENT YEO (Non-Executive Director)

Mr. Yeo is Chief Executive Officer and Executive Director of M&C REIT Management Limited. From 1993 to 1998, he was Managing Director of CDL Hotels New Zealand Limited (now Millennium & Copthorne Hotels New Zealand Limited) and CDL Investments New Zealand Limited. He previously also served as an Executive Director of Millennium & Copthorne Hotels plc in London and President, Millennium & Copthorne Hotels Asia Pacific Region.

Mr. Yeo was last re-elected to the Board at the 2010 annual meeting of shareholders.

RICHARD BOBB (Independent Director & Chair of the Audit Committee)

Mr. Bobb is a Chartered Accountant with over thirty years experience. He is currently a member of the Professional Conduct Tribunal of the Institute of Chartered Accountants in Australia and was a member of New South Wales Joint State Taxes Committee of the Institute of Chartered Accountants in Australia and the CPA Australia. He is admitted as a Barrister in New South Wales.

Mr. Bobb was last re-elected to the Board at the 2010 annual meeting of shareholders.

GRAHAM MCKENZIE (Independent Director & Member of the Audit Committee)

Mr. McKenzie is a Barrister and Solicitor with over thirty years experience in corporate and commercial law and is a former Partner and Consultant to Bell Gully, a leading New Zealand law firm. He is currently a member of the New Zealand Law Society Disciplinary Tribunal. Mr. McKenzie is a member of the New Zealand Law Society and the Queensland Law Society, Australia and holds a Bachelor of Laws degree from Victoria University, Wellington and a Master of Laws degree from Warwick University, England. Mr. McKenzie was a Director of CDL Investments New Zealand Limited from 2005 to 2006.

Mr. McKenzie was last re-elected to the Board at the 2009 annual meeting of shareholders.

Board of Directors



MANAGED / FRANCHISED

• Copthorne Hotel & Resort Hokianga • Kingsgate Hotel Hamilton • Kingsgate Hotel Brydone, Oamaru

OWNED

• Millennium Hotel Rotorua • Copthorne Hotel & Resort, Bay of Islands (49%) • Copthorne Hotel Auckland, Harbourcity • Copthorne Hotel Christchurch, Central • Copthorne Hotel & Resort Queenstown, Lakefront • Kingsgate Hotel Greymouth • Kingsgate Hotel Te Anau

LEASED

• Millennium Hotel Christchurch

ROOMS (BY ENTITY) (as at 31/12/2008)

MCK Owned 1169 MCK Leased 179

Quantum Owned 875 Quantum Leased 275

Franchised 817

Managed 218

ROOMS (BY BRAND) (as at 31/12/2010)

Millennium 677 Copthorne 1539

Kingsgate 1317

MILLENNIUM & COPTHORNE HOTELS NEW ZEALAND

LIMITED

HOSPITALITY SERVICESLIMITED

Hotel Ownership and Operational Structureas at 31 December 2010

OWNED

• Millennium Hotel Queenstown • Copthorne Hotel Auckland, Anzac Avenue • Copthorne Hotel Oriental Bay, Wellington • Kingsgate Hotel Rotorua • Kingsgate Hotel Palmerston North • Kingsgate Hotel Terraces, Queenstown • Kingsgate Hotel Dunedin

LEASED

• Copthorne Hotel Christchurch, Durham Street • Kingsgate Hotel Parnell, Auckland

FRANCHISED

• Millennium Hotel & Resort Manuels, Taupo • Copthorne Hotel Grand Central, New Plymouth • Copthorne Hotel & Resort Solway Park, Wairarapa • Copthorne Hotel Marlborough • Copthorne Hotel Commodore Christchurch, Airport • Kingsgate Hotel Autolodge, Paihia • Kingsgate Hotel Whangarei • Kingsgate Hotel The Avenue, Wanganui • Kingsgate Hotel Wellington

QUANTUM LIMITED

70.00%

100.00%

OWNED

• MillenniumHotelRotorua• CopthorneHotel&ResortBayof

Islands (49%)• CopthorneHotelAuckland,

Harbourcity• CopthorneHotelChristchurch,

Central• CopthorneHotel&Resort

Queenstown, Lakefront• KingsgateHotelGreymouth• KingsgateHotelTeAnau

LEASED

• MillenniumHotelChristchurch


Millennium 677Copthorne 1503Kingsgate 1327


• CopthorneHotel&ResortHokianga

• KingsgateHotelHamilton• KingsgateHotelBrydone,Oamaru

OWNED

• MillenniumHotelQueenstown• CopthorneHotelAucklandCity• CopthorneHotelWellington,

Oriental Bay• KingsgateHotelRotorua• KingsgateHotelPalmerstonNorth• KingsgateHotelTerraces,

Queenstown• KingsgateHotelDunedin

LEASED

• CopthorneHotelChristchurchCity [Durham Street]• KingsgateHotelParnell,Auckland

FRANCHISED

• MillenniumHotel&ResortManuels Taupo

• CopthorneHotelGrandCentralNew Plymouth

• CopthorneHotel&ResortWairarapa [Solway Park]

• CopthorneHotelMarlborough• CopthorneHotelCommodore

Christchurch Airport• KingsgateHotelAutolodgePaihia• KingsgateHotelWhangarei• KingsgateHotelTheAvenue

Wanganui• KingsgateHotelWellington



• Copthorne Hotel & Resort Hokianga • Kingsgate Hotel Hamilton • Kingsgate Hotel Brydone, Oamaru

OWNED

• Millennium Hotel Rotorua • Copthorne Hotel & Resort, Bay of Islands (49%) • Copthorne Hotel Auckland, Harbourcity • Copthorne Hotel Christchurch, Central • Copthorne Hotel & Resort Queenstown, Lakefront • Kingsgate Hotel Greymouth • Kingsgate Hotel Te Anau

LEASED

• Millennium Hotel Christchurch

ROOMS (BY ENTITY) (as at 31/12/2008)

MCK Owned 1169 MCK Leased 179

Quantum Owned 875 Quantum Leased 275

Franchised 817

Managed 218


Millennium 677 Copthorne 1539

Kingsgate 1317

MILLENNIUM & COPTHORNE HOTELS NEW ZEALAND

LIMITED

HOSPITALITY SERVICESLIMITED

Hotel Ownership and Operational Structureas at 31 December 2010

OWNED

• Millennium Hotel Queenstown • Copthorne Hotel Auckland, Anzac Avenue • Copthorne Hotel Oriental Bay, Wellington • Kingsgate Hotel Rotorua • Kingsgate Hotel Palmerston North • Kingsgate Hotel Terraces, Queenstown • Kingsgate Hotel Dunedin

LEASED

• Copthorne Hotel Christchurch, Durham Street • Kingsgate Hotel Parnell, Auckland

FRANCHISED

• Millennium Hotel & Resort Manuels, Taupo • Copthorne Hotel Grand Central, New Plymouth • Copthorne Hotel & Resort Solway Park, Wairarapa • Copthorne Hotel Marlborough • Copthorne Hotel Commodore Christchurch, Airport • Kingsgate Hotel Autolodge, Paihia • Kingsgate Hotel Whangarei • Kingsgate Hotel The Avenue, Wanganui • Kingsgate Hotel Wellington

QUANTUM LIMITED

70.00%

100.00%

Millennium & Copthorne Hotels New Zealand Limited (MCK) is committed to maintaining high standards of corporate governance in line with best practice. As an NZSX-listed company, MCK has had regard to the NZX Corporate Governance Best Practice Code in Appendix 16 to the NZSX Listing Rules (‘NZX Code’) and the Corporate Governance Principles and Guidelines from the Securities Commission. These are MCK’s Corporate Governance policies and processes.

ROLE AND FUNCTION OF THE BOARD OF DIRECTORSMCK’s Board has overall control and oversight of the business activities, the strategic direction and the governance of MCK and the Group. The Board’s role includes control and oversight of the company’s businesses, risk management and compliance, the performance of management, approving and monitoring financial and other reports and capital expenditure and reporting to shareholders. It also approves the Group’s budgets and business plans as well as significant projects.

The Board has statutory obligations for certain matters, such as the payments of distributions and the issue of shares.

Attendances of DirectorsDirector Meetings AttendedH R Wong (Chair) 5/5

B K Chiu 5/5

VWE Yeo 5/5

R Bobb 5/5

G A McKenzie 4/5

ATTENDANCES OF DIRECTORSThe Board meets on a regular basis each quarter. Additional meetings are convened when required. Papers are circulated in advance to enable informed deliberation at meetings and decisions are made by consensus.

Certain powers are delegated to Board Committees. Day-to-day management is delegated to the Managing Director and senior management. The levels of authority are approved by the Board.

BOARD COMPOSITIONAs at 31 December 2010, MCK’s Board consisted of Messrs. H R Wong (Chairman / Non-Executive Director), B K Chiu (Managing Director), V W E Yeo (Non-Executive Director), R Bobb (Independent Director) and G A McKenzie (Independent Director). MCK’s Constitution requires a minimum number of 3 directors with a requirement that at least 2 be ordinarily resident in New Zealand.

All directors, whether independent or not, must act in the best interests of the company and exercise independent and unfettered judgement. All directors carry out their duties with

integrity and honesty and participate in open and constructive discussions.

The Board does not impose a restriction on the tenure of any Director as it considers that such a restriction may lead to the loss of experience and expertise from the Board.

In line with NZSX Listing Rules, MCK is required to have at least two Independent Directors and the Board is also required to determine who the Independent Directors are (NZSX Listing Rules 3.3.1 and 3.3.2). The Board has determined that Messrs Bobb and McKenzie are both Independent Directors as neither have a Disqualifying Relationship with MCK. Messrs Wong, Chiu, and Yeo are not considered to be Independent Directors.

BOARD COMMITTEESThe Board has one formally constituted Committee and constitutes other ad-hoc committees as required:

Audit CommitteePursuant to NZSX Listing Rule 3.6, MCK maintains an Audit Committee. Its responsibilities include monitoring accounting policies and financial reporting, internal controls, risk management and corporate governance. The Committee also engages MCK’s external auditors and monitors their independence. The Committee has a written charter outlining its role and responsibilities.

During 2010, the members of this Committee were Messrs. Bobb (Chair), McKenzie and Chiu.

Attendance at Audit CommitteeDirector Meetings Attended

R Bobb (Chair) 2/2B K Chiu 2/2GA McKenzie 2/2

Nomination Committee MCK does not have a Nominations Committee. All nominations for the Board are considered by the Board as a whole. All Directors are involved in the selection and appointment process for any new Board members. The Board periodically reviews its composition to ensure that it is equipped with appropriate experience and skills.

Remuneration Committee The Board does not have a Remuneration Committee. The Board considers its current level of remuneration sufficient to meet its current requirements. The Board last recommended to shareholders an increase in the total amount available for Directors fees in 1996.

The remuneration of the Managing Director and Senior Management is reviewed annually by the Board. The Group has a performance-based approach to remuneration and remuneration reviews are linked to and carried out after performance reviews.

Corporate Governance


CONTINUOUS DISCLOSURE COMMITTEE MCK is committed to its obligations to inform shareholders and market participants of all material information that might affect the price of its listed securities in accordance with the NZSX Listing Rules and the Securities Markets Act 1988.

MCK’s Board has adopted a continuous disclosure policy which applies to MCK, its subsidiaries (“Group”), and all their respective directors and employees. The Board has appointed the Chairman, the Chairman of the Audit Committee, the Managing Director, the Group Company Secretary and the Vice President Finance to act as MCHNZ’s Disclosure Committee. A quorum of the Committee shall consist of no less than three (3) of these persons.

The Disclosure Committee is responsible for:

• Determining what information amounts to materialinformation and must be disclosed;

• Determining the timingofdisclosureofany information inaccordance with the Policy;

• Approving thecontentofanydisclosure toNZX(includingmatters not directly covered by this policy);

• EnsuringthatallemployeesanddirectorswithintheGroupwhom the Committee considers appropriate receive a copy of this policy and appropriate training with respect to it; and

• Developing mechanisms designed to identify potentialmaterial information (e.g. agenda item on management meetings).

• Liaisingwith legaladvisers in respectofMCK’scompliancewith its continuous disclosure obligations.

The key points of the continuous disclosure policy are:

No person may release material information concerning MCK to any person who is not authorised to receive it without the approval of the Disclosure Committee.

The Board will also consider at each Board meeting whether there is any information that may require disclosure in accordance with the policy, and will note any disclosures made subsequent to the prior meeting. Any employee or director of MCK must inform a member of the Disclosure Committee as soon as practicable after that person becomes aware of any material information.

The Policy includes list of incidents which should be disclosed to a member of the Disclosure Committee. The Disclosure Committee must confer, decide whether disclosure is required, and coordinate disclosure of any material information in a form specified by the NZSX Listing Rules as soon as practicable after it becomes aware of the existence of material information, unless it determines:

a a reasonable person would not expect the information to be disclosed; and

b the information is confidential and its confidentiality is maintained; and

c one or more of the following applies:

i it would breach the law to disclose the information; or

ii the information concerns an incomplete proposal or negotiation; or

iii the information comprises matters of supposition or is insufficiently definite to warrant disclosure; or

iv the information is generated for internal management purposes of MCK or its subsidiaries; or

v the information is a trade secret.

The Disclosure Committee will ensure that all Board members, not already aware of the information, are promptly provided with it.

The Disclosure Committee is responsible for MCK’s obligations under the NZSX Listing Rules to release material information to NZSX necessary to prevent development or subsistence of a market for its listed securities which is materially influenced by false or misleading information emanating from the issuer or any associated person of the issuer; or other persons in circumstances in each case which would give such information substantial credibility.

All employees of MCK, as soon as practicable after becoming aware of a rumour or speculation that is “generally available to the market” must disclose the existence of that rumour or speculation to a member of the Disclosure Committee.

The Disclosure Committee is also responsible for co-ordinating MCK’s responses to leaks and inadvertent disclosures. Even in the event that the leaked or inadvertently disclosed information is not price sensitive, the Disclosure Committee should consider whether the information should be released to NZX via its market announcement platform in order to provide investors with equal access.

All external Communications by MCK must comply with this Policy, any media policy and the Company’s rules with respect to confidential information. No material information is to be disclosed to such persons before it is released to NZX.

Slides and presentations used in briefings should be released to NZX for immediate release to the market.

MCK requires all of its directors and employees to comply with the Policy. The Disclosure Committee is responsible for ensuring that the Policy is complied with and for investigating any breach of the Policy. A deliberate or reckless breach of the Policy may result in the summary dismissal of the employee who deliberately or recklessly breaches the Policy, and a breach of the Policy or any relevant law may also attract civil or criminal legal penalties.

ETHICAL STANDARDS MCK is committed to conducting its business in accordance with the highest standards of ethical behaviour. MCK has policies and procedures to maintain confidence in the company’s integrity and to ensure compliance with its various obligations. To this end, the board has a Code of Ethics. This states that:

• All Directors shall undertake their duties with care anddiligence at all times and will conduct themselves honestly

Corporate Governance continued


and with integrity. All Directors shall not do or cause anything to be done anything which may or does bring the Company or the Board into disrepute.

• To thebestof their ability, allDirectorswilluse reasonableendeavours to ensure that the Company’s records and documents (including its financial reports) are true and complete and comply with the requisite reporting standards and controls.

• SothattheBoardmaydetermineaDirector’sindependenceand to ensure that there are no conflicts of interest, all Directors shall disclose all relevant business and / or personal interests they may have to the Board as well as any relationships they may have with the Company.

• All Directors shall ensure that they do not support anyorganisation other than in a personal capacity without the prior approval of the Chairman.

• Directors shall not accept gifts or personal benefits fromexternal parties if it could be perceived that this could compromise or influence any decision by the Board or by the Company.

• All Directors shall maintain and protect the confidential-ity of all information about MCK at all times except where disclosure is permitted or required by law.

• All Directors shall ensure that they do not use CompanyInformation and Property for personal gain or profit. All Directors shall use and / or retain Company Information and Property only for business purposes in their capacity as Directors of the Company or to meet legal obligations.

• AllDirectorsshallcomplywiththelawsandregulationsthatapply to MCK including any disclosure requirements.

• AllDirectorsshallreportanyillegalorunethicalbehaviourofwhich they become aware to the Chairman of the Board and to the Chairman of the Audit Committee.

All employees of MCK are expected to act in the best interests of MCK and to enhance the reputation of the Company, its brands and its hotels. Guidance is provided to management and employees by way of code of conduct policies. The Company has a current Insider Trading Policy and a Whistleblowing Policy. The Whistleblowing Policy facilitates the disclosure and impartial investigation of any serious wrongdoing.

EXTERNAL AUDITORS AND AUDITOR INDEPENDENCEMCK has a written policy regarding auditor independence. The policy covers:

• provisionofservicesbyMCK’sexternalauditors;

• externalauditorrotation;

• thehiringofstafffromtheexternalauditfirm;and

• relationshipsbetweentheexternalauditorandMCK.

The policy states that:

The Audit Committee shall only recommend to the Board a firm to be external auditor if that firm:

• would be regarded by a reasonable investor, with fullknowledge of all relevant facts and circumstances, as capable of exercising objective and impartial judgment on all issues encompassed within the auditor’s engagement;

• auditpartner’saremembersoftheNewZealandInstituteofChartered Accountants (NZICA);

• has not, within two years prior to the commencement ofthe audit, had as a member of its audit engagement team MCK’s Managing Director, Vice President Finance, Financial Controller, or any member of the Company’s management who act in a financial oversight role.

• doesnotallowthedirectcompensationofitsauditpartnersfor selling non-audit services to MCK.

The general principles to be applied in assessing non-audit services are as follows:

a) the external auditor should not have any involvement in the production of financial information or preparation of financial statements such that they might be perceived as auditing their own work. This includes the provision of bookkeeping and payroll services as well as valuation services where such valuation forms an input into audited financial information;

b) the external auditor should not perform any function of management, or be responsible for making management decisions;

c) the external auditor should not be responsible for the design or implementation of financial information systems; and

d) the separation between internal audit and external audit should be maintained.

MCK’s Audit Committee shall pre-approve all audit and related services that are to be provided by the auditor.

Aside from core external audit services, it is appropriate for the MCK’s auditors to provide the following services:

• duediligence(butnotvaluations)onproposedtransactions;

• reviewoffinancialinformationwherethirdpartyverificationis required or deemed necessary (outside the normal audit process);

• completionaudits/reviews;

• financialmodelpreparationorreview;

• accountingpolicyadvice(includingopinionsoncompliancewith New Zealand and international Generally Accepted Accounting Practice);

• listingadvice;

• accounting/technicaltraining;and

• taxation services of an assurance nature (e.g. review of taxcomputations and returns prior to filing and advice on interpretation and application of Inland Revenue’s rulings and policies)


It is not considered appropriate for MCK’s external auditors to provide:

• book keeping services related to accounting records orfinancial statements;

• taxplanningandstrategyservicesunlessspecificallyapprovedby the Audit Committee;

• appraisal/valuationservicesincludingopinionsastofairness;

• provisionofpayrollservices;

• the design or implementation of financial informationsystems;

• outsourcedinternalauditandriskmanagementservices;

• legalservices(theseareservicesthatcouldonlybeprovidedby a person who is qualified in law);

• managementfunctions;

• broker/dealer/investmentadviser/investmentbankingservices;

• advocacyfortheCompany;

• actuarialservices;and

• assistanceintherecruitmentofseniormanagement.

These prohibitions apply to all offices of the audit firm, including overseas offices and affiliates.

The billing arrangements for services provided by the MCK’s external auditors should not include any contingent fees.

It is expected that the MCK’s external auditors will rigorously comply with their own internal policies on independence and all relevant professional guidance, including independence rules and guidance issued by NZICA.

While this policy does not prescribe any particular ratio of non-audit service fees to audit fees, this ratio will be monitored by the Audit Committee. Accordingly, the nature of services provided by MCK’s auditors and the level of fees incurred should be reported to the Audit Committee Chairman semi-annually (or sooner where requested) to enable the Committee to perform its oversight role and report back to the Board.

Development of local and overseas practice with regard to auditor independence shall be monitored by the Audit Committee to ensure that this policy remains consistent with best practice and meets the Company’s needs.

The continued appointment of MCK’s external auditors is to be confirmed annually by the Board on recommendation from the Audit Committee.

Rotation of the lead audit partner or firm will be required every five years. Lead audit partners who are rotated will be subject to a 2 year cooling off period (i.e. 2 years must expire between the rotation of an audit partner and that partner’s next engagement with the Company). Accordingly it is expected that such a policy will be adopted by MCK’s auditors.

The hiring by MCK of any former lead audit partner or audit manager must first be approved by the Chairman of the Audit Committee. There are no other restrictions on the hiring of other staff from the audit firm.

KPMG were appointed as external auditors to MCK in 1985. The lead external audit engagement partner was last rotated in 2008. The role of the external auditor is to plan and carry out an audit of MCK’s annual financial reports and review the half-yearly reports. The Audit Committee reviews the performance and independence of the external auditors.

MCK’s external auditors attend the Company’s Annual Meeting to answer any questions from shareholders as to the audit and the content of the report.

INTERNAL CONTROLS AND RISK MANAGEMENTMCK has a series of internal controls in place covering such areas as financial monitoring and reporting, human resources and risk management. The primary responsibility for monitoring and reporting against internal controls and remedying any deficiencies lies with Management. MCK has an internal audit function to conduct audits and reviews of the Company’s operations. MCK also keeps current insurances appropriate to its business with global insurers with a high prudential rating.

SHAREHOLDER COMMUNICATIONSMCK is committed to providing shareholders and stakeholders with information on its activities and performance. MCK does this through a number of channels including:

• announcements of all matters requiring disclosure inaccordance with continuous disclosure as required under the NZSX Listing Rules; and

• publication and distribution of the company’s annual andinterim reports which are sent to all shareholders and also made available through the company’s website www.millen-niumhotels.co.nz; and

• encouragingshareholderstoattendtheannualgeneralmeetingwhich is the main opportunity for shareholders to hear the Chairman and the Managing Director provide updates on the company’s performance, ask questions of the Board and vote on the resolutions to be determined at the meeting.

OCCUPATIONAL HEALTH AND SAFETYWe are tertiary accredited under the Workplace Safety Management Programme (WSMP) with ACC (Accident Compensation Corporation) and have been since 2001. Tertiary accreditation recognises best practice across all aspects of workplace health and safety.

Corporate Governance continued


Financial Statements – ContentsIncome Statement FIN 1

Statement of Comprehensive Income FIN 1

Statement of Changes in Equity FIN 2-4

Statement of Financial Position FIN 5

Statement of Cash Flows FIN 6-7

Notes to the Financial Statements FIN 8-35

Audit Report FIN 36-37

Regulatory Disclosures and Statutory Information – ContentsShareholder Information FIN 38

Waivers from NZX Limited FIN 38

Statutory Information FIN 39 - 40

The accompanying notes form part of, and should be read in conjunction with these financial statements.

FIN 1 | Millennium & Copthorne Hotels New Zealand Limited Annual Report 2010

Millennium & Copthorne Hotels New Zealand Limited Annual Report 2010 | FIN 2

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FIN 4


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R BoBB, DiRecToR

16 February 2011

BK chiu, Managing DiRecToR

16 February 2011


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FIN 28

Notes to the Financial Statements for the year ended 31 December 2010


Independent Auditor’s Report To the Shareholders of Millennium & Copthorne Hotels New Zealand Limited Report on the Company and Group Financial Statements

We have audited the accompanying financial statements of Millennium & Copthorne Hotels New Zealand Limited (''the company'') and the group, comprising the company and its subsidiaries, on pages FIN 1 to FIN 35. The financial statements comprise the statement of financial position of the company and the consolidated statement of financial position of the group as at 31 December 2010, the income statement and statements of comprehensive income, changes in equity and cash flows of the company and the consolidated income statement and consolidated statements of comprehensive income, changes in equity and cash flows of the group for the year then ended, and a summary of significant accounting policies and other explanatory information.

Directors' Responsibility for the Company and Group Financial Statements

The directors are responsible for the preparation of company and group financial statements in accordance with generally accepted accounting practice in New Zealand and International Financial Reporting Standards that give a true and fair view of the matters to which they relate, and for such internal control as the directors determine is necessary to enable the preparation of company and group financial statements that are free from material misstatement whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these company and group financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing (New Zealand). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the company and group financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the company and group financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the company and group’s preparation of the financial statements that give a true and fair view of the matters to which they relate in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company and group's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates, as well as evaluating the presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Our firm has also provided other services to the company and group in relation to taxation and general accounting services. Partners and employees of our firm may also deal with the company and group on normal terms within the ordinary course of trading activities of the business of the company and group. These matters have not impaired our independence as auditors of the company and group. The firm has no other relationship with, or interest in, the company and group.

Opinion

In our opinion the financial statements of Millennium & Copthorne Hotels New Zealand Limited and its subsidiaries (''the company and group'') on pages FIN 1 to FIN 35:

comply with generally accepted accounting practice in New Zealand;

comply with International Financial Reporting Standards;

give a true and fair view of the financial position of the company and the consolidated financial position of the group as at 31 December 2010 and of the financial performance and cash flows of the company and the consolidated financial performance and consolidated cash flows of the group for the year ended on that date.

Report on Other Legal and Regulatory Requirements

In accordance with the requirements of sections 16(1)(d) and 16(1)(e) of the Financial Reporting Act 1993, we report that:

we have obtained all the information and explanations that we have required; and

in our opinion, proper accounting records have been kept by Millennium & Copthorne Hotels New Zealand Limited and its subsidiaries as far as appears from our examination of those records.

16 February 2011

Auckland


II

STATUTORY INFORMATION DIRECTORS (section 211 (1)(i) Companies Act 1993)

As at 31 December 2010, the Company’s Directors were Messrs. HR Wong, BK Chiu, VWE Yeo, R Bobb and GA McKenzie. No new directors were appointed

during 2010.

INTERESTS REGISTER (sections 189 (1) (c) and 211(1)(e) Companies Act 1993)

The Company maintains an Interests Register as required under the Companies Act 1993. For the period under review, the following entries were recorded:

USE OF COMPANY INFORMATION (section 145 Companies Act 1993)

During 2010, the Board did not receive any notices from any Directors of the Company requesting the use of company information which they would have received

in their capacity as Directors which would not otherwise have been available to them.

SHARE DEALING (section 148, Companies Act 1993)

No share dealings by Directors occurred during 2010.

DIRECTORS’ AND ASSOCIATED PERSONS SHAREHOLDINGS (as at 31 December 2010)

Director 2009 2010 HR Wong 2,000,000 2,000,000

B K Chiu Nil Nil

VWE Yeo 500,000 500,000

R Bobb Nil Nil

GA McKenzie n/a Nil

REMUNERATION (section 161 and 211(1)(f), Companies Act 1993)

The total remuneration and value of other benefits earned received by each of the Directors of the Company for the year ending 31 December 2010 was:

Director Remuneration HR Wong 32,500

B K Chiu (*) 393,958

VWE Yeo 32,500

R Bobb 38,500

GA McKenzie 34,250

(*) Mr. B K Chiu is an employee of the Company and did not receive remuneration as a director of the Company or of any of the Company’s subsidiaries.

INDEMNITY AND INSURANCE (section 162, Companies Act 1993)

In accordance with the Company’s constitution, the Company has insured all its Directors and the Directors of its subsidiaries against liabilities to other parties

(except the Company or a related party of the Company) that may arise from their positions as Directors. The insurance does not cover liabilities arising from

criminal actions.

GENERAL DISCLOSURES OF INTEREST (section 140(2), Companies Act 1993)

As at 31 December 2010, the Directors of the Company have made general disclosures of interest in the following companies:

HR WONG Chairman /President/ Director of: CDL Hotels (Phils) Corporation Grand Plaza Hotel Corporation Chairman / Director of: Beijing Fortune Hotel Co. Ltd. CDL Investments New Zealand Limited

M&C Business Trust Management Limited M&C REIT Management Limited Director / President of: The Philippine Fund Ltd Executive Director of: Millennium & Copthorne Hotels plc Director of: Birkenhead Holdings Pty Ltd Birkenhead Investments Pty Ltd

Birkenhead Services Pty Ltd CDL Hotels Holdings New Zealand Limited CDL Land New Zealand Limited

Hotelcorp New Zealand Ltd KIN Holdings Limited Kingsgate Holdings Pty Ltd

Kingsgate Hotel Pty Ltd Kingsgate International Corporation Limited Kingsgate Investments Pty. Ltd

Millennium & Copthorne Hotels Pty Ltd Quantum Limited

CDL Entertainment & Leisure Pte Ltd CDL Hotels (Korea) Ltd CDL Hotels (Labuan) Limited

CDL Hotels (Singapore) Pte Ltd CDLHT MTN PTE. LTD Chancery Ltd

City Hotels Pte Ltd Copthorne Orchid Hotel Singapore Pte Ltd First Sponsor Capital Limited

Hainan Junxuan Hotel Limited Harbour Land Corporation Harrow Entertainment Pte Ltd

Hospitality Holdings Pte Ltd Idea Valley Group Limited Idea Valley Investment Holdings Ltd

International Design Link Pte Ltd London Britannia Hotel Limited M&C (India) Holdings Pte Ltd

M&C (Mauritius) Holdings Limited M&C Holdings (Thailand) Limited M&C Hotels Holdings Ltd

M&C Hotels Holdings USA Limited Millennium & Copthorne (Jersey) Limited

Millennium & Copthorne Hotel Holdings (Hong Kong) Ltd Millennium & Copthorne Hotels (Hong Kong) Ltd Millennium & Copthorne International Limited

Millennium & Copthorne Middle East Holdings Limited Newbury Investments Pte Ltd Republic Hotels Suzhou Pte Ltd

Republic Iconic Hotel Pte Ltd Rogo Realty Corporation TOSCAP Limited

Zatrio Pte Ltd. Zillion Holdings Ltd

Member of Board of / Commissioner of: PT. Millennium Sirih Jakarta Hotel

Member of Management Board: ATOS Holding AG

Member of Investment Committee:: Hong Leong Finance Ltd

VWE YEO Executive Director / Chief Executive Officer of: M&C Business Trust Management Limited M&C REIT Management Limited Director of: CDL Hotels Holdings New Zealand Limited CDL Investments New Zealand Limited

KIN Holdings Ltd Kingsgate International Corporation Ltd CDLHT (BVI) One Ltd

CDLHT MTN PTE. LTD CDLHT Sunshine Limited CES Education Holdings Pte Ltd

CES Hospitality Holdings Limited Fena Estate Company Limited Hospitality Holdings Pte Ltd

Hospitality Ventures Pte Ltd Sun Four Investments Limited Sun One Investments Limited

Sun Three Investments Limited Sun Two Investments Limited Sunshine Hotels Australia Pty Ltd

BK CHIU Chairman / Director of: Quantum Ltd Waitangi Resort Joint Venture Committee

Director of: All Seasons Hotels & Resorts Ltd CDL Land New Zealand Ltd

CDL Land New Zealand Ltd Context Securities Ltd Hospitality Group Ltd

Hospitality Leases Ltd Hospitality Services Ltd Kingsgate Hotels & Resorts Ltd

MCHNZ Investments Limited Millennium & Copthorne Hotels Ltd QINZ Holdings (New Zealand) Ltd

QINZ (Anzac Avenue) Ltd

R BOBB Director of: Bobb Management Pty Ltd Birkenhead Holdings Pty Ltd

Birkenhead Investments Pty Ltd Birkenhead Services Pty Ltd Bobb Nominees Pty Ltd

Continental Investments Pty Ltd Furscarbo Pty Ltd Hotelcorp New Zealand Pty Ltd

Kingsgate Hotel Pty Ltd Kingsgate Holdings Pty Ltd Kingsgate International Pty Ltd

Kingsgate Investments Pty Ltd Melmark Securities Pty Ltd. Millennium & Copthorne Hotels Pty Ltd.

RAB Capital Pty Ltd

Consultant to: Richard A Bobb Chartered Accountants



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AUDITORSKPMG, Auckland

BANKERSANZ Banking Group (New Zealand) LimitedHong Kong & Shanghai Banking Corporation Limited

SOLICITORSBell Gully

SHARE REGISTRARComputershare Investor Services Limited,Level 2, 159 Hurstmere Road, Takapuna,Private Bag 92119, Auckland 1142, New ZealandTelephone: +64 9 488 8700Facsimile: +64 9 488 8787email: [email protected]

STOCK EXCHANGE LISTING:New Zealand Exchange (NZX)Company Code: MCK

BOARD OF DIRECTORSWong Hong Ren (Chairman)BK Chiu (Managing Director)Vincent Yeo (Non-Executive Director)Richard Bobb (Independent Director)Graham McKenzie (Independent Director)

SENIOR MANAGEMENTGreg Borrageiro (Director, Information Technology)Brendan Davies (Director, International Sales & Marketing)Kieran Davis (Director, Property Management)Kim Ibberson (Director, Human Resources)Takeshi Ito (Group Company Secretary)Karl Luxon (Director of Sales, New Zealand)Gavin Mascarenhas (Marketing Manager, New Zealand)Boon Pua (Vice President Finance)Alison Rogers (National Director of Sales, Conferences and Incentives)Matt Taplin (Vice President Operations)

REGISTERED OFFICE & CONTACT DETAILSLevel 13, 280 Queen Street, Auckland, New ZealandPO Box 5640, Wellesley Street, Auckland 1141Telephone: (09) 309 4411Facsimile: (09) 309 3244Website: www.millenniumhotels.come-mail: [email protected]

Contents

2010 Annual ReportMILLENNIUM & COPTHORNE HOTELS NEW ZEALAND LIMITED

Head OfficeInternational SalesCorporate Sales – AucklandLevel 13, 280 Centre, 280 Queen StreetPO Box 5640, Wellesley St, Auckland

Head Office Phone: (09) 309 4411International Sales Phone: (09) 913 8075Corporate Sales Auckland Phone: (09) 913 8070

Corporate Sales – WellingtonCopthorne Hotel Wellington Oriental Bay100 Oriental Parade, Oriental BayPO Box 9555, Wellington Phone: (04) 385 0279

Corporate Sales – ChristchurchMillennium Hotel Christchurch14 Cathedral SquarePO Box 1445, ChristchurchPhone: (03) 374 4862

Corporate SalesAuckland, Wellington and ChristchurchEmail: [email protected]

National Conference OfficeMillennium Hotel Christchurch14 Cathedral SquarePO Box 1445, ChristchurchPhone: 0800 4 MEETINGS (0800 4 633 846)Email: [email protected]

Central ReservationsPhone: 0800 808 228Email: [email protected]

For online bookings and hotel information Visit www.millenniumhotels.co.nz

2010 Annual Report - Millennium & Copthorne Hotels/media/Files/M/Millennium... · December 2010...

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Transcript of 2010 Annual Report - Millennium & Copthorne Hotels/media/Files/M/Millennium... · December 2010...