The acquisitions made by Millennium  Copthorne Hotels during 1999 set the Group on the path to becoming a truly global player in the consolidating hotel industry.

The Group entered 1999 with 7,000 bedrooms in 24 hotels located in only four countries and was predominantly United Kingdom based. We entered the new Millennium with 31,000 bedrooms in 117 hotels, located in 13 countries. This was a significant move for the Group following three years of concentrating on organic growth in the then existing portfolio.

The key assets within the three acquisitions made during the year are of high quality. Where necessary and, particularly within the Regal Group acquired in the United States, we intend to pursue our successful policy of investing in the properties to maximise their potential. We will achieve this through a combination of revenue generation, profit conversion, effective operational control and, in the small number managed by other international hotel operators, by effective asset management.  The acquisitions were partly funded by two significant issues of shares on the London Stock Exchange within a nine month period. I am pleased to report that these issues were taken up almost entirely by existing shareholders and have been satisfactorily completed. Our thanks go to all our shareholders who demonstrated their confidence in Millennium Copthorne�s ability to provide significant earnings growth in the coming years by applying our managerial and investment skills into these assets.  We have undoubtedly acquired scale, skills and a geographical spread that affords protection from economic fluctuations throughout the world.

The Group�s pre tax profit increased by 43% to 86.1m pounds with the growth mainly coming from the benefit gained from the Asia Pacific properties which were under our ownership for a little over half of the financial year. Turnover for the Group increased 55% to 343.1m pounds (1998: 221.9m pounds). Operating Profit increased 32% to 98.5m pounds (1998: 74.9m pounds) producing a Profit before Tax of 86.1m pounds up 43% (1998: 60.4m pounds).

Earnings per share were 29.8p, an increase of 8% on a restated 1998 figure. The directors are recommending a final dividend of 7.5p per share (1998: 6.9p) giving a total dividend of 11.3p per share (1998: 10.2p). The dividend calculation, which is complicated by the two equity issues, is more fully explained in the attached notes.

Shareholders� funds at the close of the year were 1,320.0m pounds (1998: 633.8m pounds) with a gearing of 50% (1998: 43%). This is after taking account of the independent revaluation of seven hotels from the original Group, being approximately one third of the owned properties, in accordance with our declared accounting policy, which resulted in an upward restatement of our fixed assets of 54.8m pounds (1998: 61.4m pounds). All of the properties revalued this year are owned 100% by the Group. At the end of the 2000 financial year, our policy of revaluing one third of our portfolio will include the properties acquired in 1999.

Corporate highlights

During 1999 our focus was concentrated on two main areas, namely, continuing to ensure the operational growth of existing properties and, at the same time, developing the Group by significant acquisitions.  The pre tax profit from continuing operations was up by 9% to 65.7m pounds (1998: 60.4m pounds), at a time when the operating performance from the United Kingdom in particular reflected some lessening in demand in the marketplace.

The first of the three acquisitions during the year was the 43 hotels located in Asia and Australasia, purchased from CDL Hotels International for a total consideration of 556m pounds, including the assumption of net outstanding debt of the Asia Pacific companies. The transaction was substantially completed in June 1999 with the two remaining entities, being shareholdings in companies owning assets in Malaysia and Hong Kong, completed in December 1999 and January 2000 respectively.

The second transaction was the purchase of the 673 bedroom Hilton in Seoul, South Korea for US $228m (US $213m net of working capital adjustments) from the Daewoo Corporation of Korea. It was one of the most competitive hotel deals we had ever concluded, in the face of strong interest from major international funds and big groups who were also vying for the rare opportunity of acquiring a hotel in Seoul. This deluxe property is managed by Hilton International under an agreement which expires in 2003, unless renewed by mutual consent. The purchase was completed at the end of November 1999.

The third transaction was the acquisition of Regal Hotels USA in mid December from Regal Hotels International of Hong Kong for US $640m. The acquisition included 12 first class Regal branded properties, located in critical gateway cities including New York, Chicago, Los Angeles, Minneapolis and St. Louis. A further 16 properties, mostly smaller hotels, operate under different brands and are located in feeder cities such as Santa Fe, Sacramento and Salt Lake City. Also acquired, as part of the package, were management contracts in a further 19 North American hotels. Discussions over the acquisition of the shareholding in the Regal Bostonian Hotel in Boston are in the final stages and we hope to come to an agreement soon. In the meantime, Millennium Copthorne is managing the property.

There was no goodwill arising on the three acquisitions.

Prospects

The outlook for the Group is very positive.  We look forward to a full 12 month contribution from the acquired assets.  In the United Kingdom the year has started well.  The newly-constructed ballroom and the bedroom extension at the Millennium Britannia, which have both been very well received by the market, will contribute further to Group revenue.  We have also commenced a reconfiguration and refurbishment programme at the Copthorne Glasgow.  After the expected completion of the programme in early summer, the hotel will be rebranded as the Millennium Glasgow.  We are pleased to have secured the management contract for Millennium Madjeski Reading which is opening in May this year.  The Millennium Glasgow and Millennium Madjeski Reading will become the first two Millennium-branded properties outside London in the United Kingdom.

On the Continent there is still economic growth to come and the renamed Millennium Opera, formerly Millennium Commodore, situated in the heart of Paris, will continue to grow. In Asia and Australasia, the economies continue to record growth as the area recovers faster than anticipated from the deep recession in 1998.

The US economy shows no signs of a downturn in business in key cities. Our New York properties, including the Regal UN Plaza, have started the year very well. We are currently completing a study of the Regal portfolio which will result in a disposal of hotels that do not meet our brand objectives or return on investment criteria. Where real estate values and returns on investment justify it, we will upgrade the properties. Inadequate capital investment in the Regal Group properties prior to our acquisition had contributed towards its under performance relative to their competitors in the United States. We intend to invest US $60m-US $70m over the next two years in these properties, predominantly in the 12 first class hotels which will be rebranded as �Millennium� as part of this process. In view of the significant amount of capital expenditure work to be carried out during the year, it will, undoubtedly, take a little time for any material positive impact to be made on Regal hotels� results. Nonetheless, we still expect the Regal hotels to record good revenue growth this year as well as benefiting from more effective cost control.  We will continue to review expansion opportunities that will enhance our leading global hotel group profile and produce good profit growth.

The Internet is having an increasing impact on all our lives and the hotel industry will, without doubt, be one of the main beneficiaries. The use of the Internet could potentially lead to lower distribution costs and hence higher profit margins for hotel owners and operators. On line bookings, which represented less than 2% of demand in 1999, are expected to expand to nearly 8% by 2003. The Internet will allow hotels to use customised direct marketing and customer databases to increase market share. Brand loyalty would also be strengthened as a result of direct contact with preferred guest programme members through corporate websites. The Group is studying ways of reaping maximum advantage from the many revenue-gain and productivity-improvement opportunities created by the Internet.

Management and Board

During the year we strengthened the management structure in each of our four main regions�UK  Europe, USA, Australasia and Asia.  I am happy to report that the integration of the acquired businesses is progressing well.

During the year there have been some changes to your Board that take into account the requirements of the enlarged Group.  Tony Potter, formerly at Friendly Hotels and Hilton, joined us as Chief Operating Officer.  We announced the appointment of a new non-executive director, Miguel Ko, with immediate effect.  Miguel Ko is Deputy Chairman and Chief Executive Officer of CDL Hotels International.  He brings with him a wealth of international experience, having been in senior positions with PepsiCo and ITT Sheraton Corporation.

Peter Taylor, who has been associated with our business for 15 years, and Vincent Yeo, have resigned from the Board. We thank them both for their valuable contribution. In April this year Fred Brown will retire from his position as an executive director but will remain on the Board as a non-executive director.

The last 12 months have been truly exciting for us. Our transformation from being a predominantly UK-based group to one of the largest global hotel owner and operator groups came about when we seized the business opportunities to make three major acquisitions in 1999. We outperformed the industry by successfully penetrating the highly sought-after US market and created critical mass with just one acquisition. In Asia, in the current environment of improving economic fundamentals, investments made today are less likely to secure attractive prices than those concluded at the bottom of the market last year. Against this backdrop, we believe our Asia Pacific acquisition to be well-timed and that we will stand to benefit from the continuing recovery in Asian economies.

I would like to thank my co-directors, management and staff for their dedication and hard work and our shareholders for their unstinting support during the last exciting year. I look forward to their continued enthusiasm as we enter this first year of the new Millennium.

Kwek Leng Beng, Chairman
14 March 2000

The past 12 months have, without a doubt, been an exciting period in the development of the Group.  For the last three years, we have provided our shareholders with good profit growth from enhanced hotel products, demonstrating the benefits to be gained as a result of sound capital investment.  In 1999 we moved from being predominantly a United Kingdom based group to becoming a major international player.

Over the next few years Millennium Copthorne Hotels will achieve significant additional earnings from the acquisitions made during 1999. This will come primarily from the continuing economic recovery in Asia and Australasia together with the repositioning, refurbishing and introduction of our management style and control into the under performing assets acquired in the USA Regal Group. To this can be added the benefit to be gained from enhanced brand recognition and global sales and marketing activities.

It is an important point to note, however, that significant growth will not come overnight but be gained over a period of months and years. Providing comparative statistics and financial information that remain meaningful is difficult to achieve for a Group that has so fundamentally changed at different times during 1999. The information referred to below is, in the main, from continuing operations to which are added separately, the Asian and Australasian statistics from assets which were in our ownership for a little over half the financial year and, the matter of a few weeks in respect of the Seoul, Kuala Lumpur and Regal properties.

Group summary

The results of the Group from continuing operations reflect the fact that, as had been well reported, there was some lessening in demand throughout the United Kingdom for a large part of the financial year.  Consistent growth only returned in the last quarter.  New York remained strong throughout the year and, on the Continent, steady growth was recorded, particularly in France.

The nascent upturn in the Asian economies during 1999 is expected to have a delayed impact on hotel revenues, as lead time is needed for recovery to be felt. However, the Group�s efforts at improving customer mix showed signs of yield recovery as the year progressed. Taiwan recorded strong growth over the previous year until the country was rocked last September by a massive earthquake. Business levels fell dramatically for a time, albeit they have now substantially recovered. In Australasia, Occupancy improved upon the corresponding period in 1998 and was coupled with a small increase in average room rate.  Bedroom Occupancy from continuing operations for the year was 77.2% (1998: 79.4%), 2.2 percentage points down on last year the shortfall mainly due to the United Kingdom properties. Importantly, average room rate grew by 5% to 94.30 pounds resulting in a growth in yield per available room of over 2%. The Gross Operating Profit from continuing operations, which excludes a hotel�s fixed expenses over which individual hotel management has limited control (being rent, property taxes, insurance, depreciation, amortisation, operating lease rentals and external management fees) increased by over 3m pounds on last year, producing a Gross Operating Profit margin of 46.1% (1998: 47.7%), down 1.6 percentage points on 1998. The lower profit margin is, in part, due to the change in revenue mix, particularly in London, where the food and beverage areas, which convert at a lower profit margin, improved during the year whilst room revenue in the region was down a little overall.

Occupancy for the total Group, including acquisitions, was 70.6%, at an average room rate of 74.08 pounds, producing a yield per available room of 52.30 pounds.

London

The lessening demand in London was highlighted in our interim announcement and this position continued until mid September.  The following quarter recorded good growth on the corresponding period last year, followed by a five week period over the Millennium when business in many parts of the world took a holiday.  Despite the softer market in the region, we took the conscious decision that we did not wish to get into �rate cutting�.  Our view on the London and Regional United Kingdom markets was that this was going to be a short term downswing and, as business returned, it would be easier to recover lost occupancy than to raise rates.  The early indications in 2000 confirm this policy as being correct.  Our Occupancy, therefore, dropped a little in the short term achieving 81.7% (1998: 84.7%) for the year, but our average room rate rose by 2% to 88.34 pounds (1998: 86.99 pounds), producing a yield per available room only 2% down for the year at 72.17 pounds (1998: 73.68 pounds).  The resulting small shortfall in room revenue was recovered by gains in the food and beverage area, the change in business mix converting at different profit margins accounting for some of the reduction in the Gross Operating Profit margin to 53.5% (1998: 55.4%).

During the year some disruption was experienced at the Millennium Knightsbridge (formerly the Millennium Chelsea), where the lobby was renovated during the first quarter making access to the hotel difficult. At the Millennium Britannia, the construction of the ballroom and bedroom extension was completed in late August. The ballroom, which can accommodate 800 guests theatre style and 400 banquet style, has been very well received and we will benefit even more in 2000. The noise and disruption during construction undoubtedly affected business in both mix and volume. In the Summer and on into the Autumn we refurbished another 122 bedrooms in this property leaving only 82 which were completed during January and February 2000. Bedroom refurbishments continued at both the Millennium Gloucester (168) and Copthorne Tara (159) in the early part of 1999. Both properties are currently undergoing further bedroom refurbishments.

Regional UK

The economic position and the action we took in London was mirrored in a number of the provincial properties.  In a few locations additions to competitor hotel stock, particularly at Slough, Manchester and Cardiff have resulted in the supply temporarily outstripping demand.  The oil industry sector experienced a slowdown which particularly affected Aberdeen for a large part of the year, although it is now showing signs of recovery.  Elsewhere, our two properties at Gatwick, for example, recorded growth over the year. Like London, the position improved in the final quarter and the early indications for 2000 are positive.

Overall Occupancy for the Regional UK properties was still a creditable 73.3% (1998: 76.5%) and, whilst a little over 3 percentage points down on last year, the deficit reduced marginally in the second half of the year. At the same time, we still protected our average room rate, up a little to 66.39 pounds (1998: 66.00 pounds), the resultant yield per available room of 48.66 pounds (1998: 50.49 pounds) being less than 4% down on 1998.

In November we commenced a major restructuring and renovation programme at the Copthorne Glasgow. The programme encompasses all bedrooms and public areas and will be completed in May this year. The hotel has continued to operate whilst these major works are being carried out but it is, naturally, having an effect on the hotel and region�s performance. Once completed, the hotel will be rebranded a Millennium. In the Autumn of 1999 we completed the construction of an extension to the Conference Centre facility at the Copthorne Merry Hill and the enlarged facility has been well received.  The disruption to the properties contributed towards the lower Gross Operating Profit margin at 40.4% (1998: 43.3%), down 2.9 percentage points.

Continental Europe

The results from our Continental Europe region reflect the effect from the still maturing Millennium Opera (formerly the Millennium Commodore) in the heart of the commercial district of Paris.  Following its reopening in October 1998 the hotel, like any new property, has taken time to gain recognition in the local marketplace and it has steadily improved over the year.  The strength of the market in France is demonstrated by the Copthorne Paris Charles de Gaulle which, yet again, has achieved its best ever year by a significant margin.  In Germany, the properties continue to record little or no growth; however, Hannover will benefit during this year from Expo 2000 which will take place less than one mile from the hotel.
 

Occupancy for the region was 63.7% (1998: 64.8%), down 1.1 percentage points due to the effect of the reopening of the Millennium Opera Paris. In contrast, average room rate for the year was 72.35 pounds (1998: 57.60 pounds), up nearly 26%, resulting in an increase of over 23% in yield per available room. Principally as a result of the still

MILLENNIUM OPERA PARIS

USA

The Regal Hotels acquisition was not completed until 17 December 1999 and, with an effective ownership of only two weeks, the financial statistics exclude the effect of this acquisition.

Demand in our New York properties remained very strong with Occupancy, average room rate and Gross Operating Profit margin all increasing from an already high base achieved in 1998. Occupancy increased by 1.5 percentage points to 81.5% (1998: 80.0%) even after taking into account the extra 40,000 room nights available at the Millennium Broadway, being the inclusion of the 125 bedroom Millennium Premier extension which was fully opened in January 1999.

The average room rate for the region grew nearly 6% to 145.71 pounds (1998: 137.85 pounds) producing an 8% increase in yield per available room. In US dollars the average room rate grew by 3% to US $235.67 and yield per available room by 5% to US $192.07.  The Gross Operating Profit margin improved 1.3 percentage points to 46.2% (1998: 44.9%).  In the coming year we are going to convert 14,000 sq. ft. storage space at the Millennium Broadway into additional conference and meeting facilities, further enhancing this property�s reputation as the premier hotel conference venue in New York.  In The Plaza, following the completion of the bedroom refurbishment, the attention has been on improving the average room rate and the property finished the year with an average of US $335, up over US $20 on 1998, achieving well over US $400 in the closing months. During 1999 the in-house leisure facility opened and a refurbishment of the suites was commenced, for completion in 2000.

A substantial amount of time is going to be spent on integrating and refurbishing, in particular, the first class hotels that form part of the acquired properties. The works necessary are expected to take at least two years, possibly three, to complete. As the initial works are completed during the year and we introduce profit conversion practices, we expect to see revenue and profit enhancement.

Asia

Ownership of a substantial part of the hotel interests previously owned by CDL Hotels International Limited throughout Asia became effective from 9 June 1999.  The last two parts of the transaction, being shareholdings in companies holding assets in Malaysia and Hong Kong, were completed in December 1999 and January 2000 respectively.

Our properties, located in six countries in Asia, experienced mixed fortunes during the period that they were under our ownership.  Economically there is substantial evidence to show that, generally, all the countries are steadily climbing out of recession with the exception of Indonesia where we still await full political stability. Like all recoveries, there is a lag before being able to see the recovery in hotel performances. The largest revenue and profit producer amongst the acquired assets, the Grand Hyatt Taipei, was performing very well with significant growth on the previous year when the area was hit by a massive earthquake in early September 1999. Our hotel did receive some damage and resultant loss of revenue, but the business market generally for the area was more materially hit and this affected rooms and food and beverage business levels. It is now showing signs of substantial recovery. The Seoul Hilton was acquired by the Group at the end of November and the performance statistics have been consolidated into the region for the few weeks until 31 December, but have little impact on the numbers for that short period.  In Singapore we have taken advantage of the market lull and tax incentives to undertake major refurbishment programmes at the Orchard and Copthorne Harbour View hotels. These commenced in 1999 for completion in stages during 2000. In total 746 bedrooms representing 40% of the Group�s inventory in Singapore will have been refurbished. The hotels are expected to improve room rates and command a higher yield as the refurbishments are completed.

Overall Occupancy for the region was 64.9%, marginally down on 1998, with the average room rate steady at 48.30 pounds. The outlook looks stronger as the whole region continues to recover from recession and the service industry benefits from the business confidence in the area. In terms of profitability and profit conversion, under our management it is beginning to yield positive results, producing a Gross Operating Profit margin of 37.1%, for the period, a good improvement on last year.

Australasia

Our ownership of the mainly hotel interests previously owned by CDL Hotels International Limited, became effective from 9 June 1999.  The performance of the hotels in New Zealand and one property in Sydney, Australia, have, as expected, recorded some growth over 1998 as the economies recover and there is every sign that the growth will continue in 2000, aided by the Olympic Games and Americas Cup yacht racing.  Occupancy for the region was 62.3% with an average room rate of 31.63 pounds, both a little up on the corresponding period last year.  In monetary terms the Gross Operating Profit improved for the period and the profit margin was 32.9%.  The cost base is still under review and the profit margin is projected to improve in 2000.

Outlook

The Group has, by the timing of the acquisitions in Asia and Australasia, positioned itself to take advantage of the continuing economic recovery in the region.  By acquiring the Regal Group in the United States we have now given ourselves market presence in a number of major international and feeder cities.  Focused capital expenditure in the Regal Group, coupled with a more directed approach to cost control and profit conversion, will bring significant improvements to the results of these under performing assets.  We recognise that some of the acquired assets are not core to our business and we will dispose of all or some of these properties.  Within continuing operations, the United Kingdom has recovered from the softer market conditions experienced during 1999 and we will benefit from a full year of enhanced facilities at the Millennium Britannia; and the restructured Millennium Glasgow will provide added benefit from early Summer.  On the Continent there is continued growth from the Millennium Opera and the New York hotels are showing no sign of any slowing in their growth.

To assist the Group�s growth objectives in Asia, a management company has been formed, Millennium Copthorne International Limited, which will be granted business headquarter status in Singapore.

With the enlarged Group now operating in 13 countries, we continue to invest in information and other technologies to enhance our operations. These include the benefit from the dedicated central reservations system called RezUlt which is tailored to our needs as a global operator. We are investing in up to date yield management techniques across the Group and we are in the process of launching new loyalty programmes. In April we will complete an upgrade to our website which will encompass access to detailed information about our properties and an on line booking facility.

The fact that we are now becoming a genuinely global player means that we are attracting greater interest from high calibre recruits.

As a result our management will grow in ability and depth of experience at both local and international levels.  Finally, I can report that this year has begun strongly and I am confident that the Group has all the ingredients to achieve further significant growth.

John Wilson, Chief Executive Officer
14 March 2000