Report TO MEMBERS 2020FROM THE TRUSTEE OF THE HILTON UK PENSION PLAN

Welcome 3 A MESSAGE FROM THE CHAIR OF THE TRUSTEE BOARD, MARY NELL THOMPSON.

Money matters 4GIVING A SUMMARY OF THE PLAN’S ACCOUNTS AND AN UPDATE ON ITS FINANCIAL WELLBEING.

Investment update 7AN UPDATE ON THE PERFORMANCE OF THE PLAN’S INVESTMENTS.

Finding help 8A LIST OF TRUSTED RESOURCES FOR FINDING HELP OR ADVICE.

In the news 10FIND OUT MORE ABOUT RECENT DEVELOPMENTS AND HOW THEY MIGHT AFFECT YOU.

The team 11THE PEOPLE BEHIND THE SCENES WORKING ON YOUR BEHALF.

CONTENTS

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WELCOME TO OUR LATEST EDITION OF REPORT TO MEMBERS, UPDATING YOU ON THE PLAN’S FINANCES AND THE WORLD OF PENSIONS. WE HOPE YOU FIND IT INTERESTING AND USEFUL.First and foremost, I would like to send my personal best wishes to each and every one of you in these difficult times. The COVID-19 pandemic has touched almost every aspect of our lives and the hospitality industry will be feeling the effects of the current crisis for some time to come.

We would like to reassure you that the payment of your pensions and the security of your future benefits remains our utmost priority as a Trustee Board, and we have been working collaboratively with the Company and the Plan’s advisers to minimise any impact of the pandemic on the Plan. The Plan’s administrators and all of their advisers have strong business continuity plans in place and the ongoing management of the Plan, including the payment of pensions, is continuing as usual from our ‘home offices’.

One of the advantages of Plan membership is all the risk is taken on by the Company and the Trustee. We have had another busy year of improvements to the Plan behind-the-scenes. The Plan has completed its triennial actuarial valuation in which we agreed with the Company, a revised timetable of contribution payments into the Plan. Following completion of the valuation, we also took the opportunity to review the Plan’s long-term investment strategy and implemented changes which reduce the level of risk whilst retaining the same expected level of return. See inside for further details on the Plan’s financial wellbeing, accounts and the positive changes that have been made to the Plan’s investment strategy.

We are always looking to improve, and it would help us a great deal if you could take some time to give us your feedback on our communications with you. Pensions can be a complicated matter, and we work hard to make our communications interesting and engaging, keeping you informed and helping you to understand what’s going on in the pensions world that could have an impact on you. Do you find our Report to Members

useful? Could we improve any other aspects of our communications with you, such as any correspondence you have had with our Plan administrator? Giving feedback is easy: simply email us at hukpp@hymans.co.uk or click on the ‘Contact us’ tab on the Plan’s website www.hiltonukpensions.co.uk .

I would like to draw your attention to page 10 of this Report, where we address the increased risk of pension scams in the current environment. We don’t want you to become a victim of fraud, so please do read our advice on how to become ‘scam smart’. It is worth noting that all genuine communications from the Plan will come with the Hilton logo or a logo from the Plan’s administrators, Hymans Robertson. You can also sign up for access to details of your benefits on the Plan’s website by going to www.hiltonukpensions.co.uk and clicking on ‘Register’.

Finally, I would like to share with you that John Burns FIA, your Plan Actuary, has recently retired from XPS Pensions. On behalf of the whole Trustee Board, we would like to thank John for his valued advice and continued support and wish him the very best for his retirement. The Trustee Board has appointed Lisa Whitby FIA, also of XPS Pensions, as his successor. We are also sad to see Fred Schacknies leave Hilton and his role as Chair of the Plan’s Investment sub-committee (ISC). Fred’s enthusiasm and insights have been invaluable in developing our current investment strategy. Justin Wallace, Hilton’s Director for Financial Risk Management, will soon be stepping in as a Company representative on the ISC, bringing with him 18 years of experience in financial markets. We look forward to welcoming both Lisa and Justin to the Plan.

The Plan is very fortunate to have such a strong team of Trustees and advisers working together at this time, and always, for the benefit of its members.

Mary Nell Thompson Chair – Trustee Board

Welcome

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Money MATTERS

ACCOUNTSWhen you retire, the payments you receive from the Hilton UK Pension Plan (the Plan) will depend on your membership history and pensionable pay. It is up to the Trustee Board and the Company to make sure there is enough money in the Plan to meet this commitment to all Plan members.

Here is a summary of the Plan’s accounts as at 31 December 2019.

Members who are no longer working for the Company, but haven’t retired

VALUE AT 31 DECEMBER 2018 £272,721,870

Payments received

Company contributions £7,052,661

Other income £93.480

Total received £7,146,141

Payments made

Benefits paid to members (£9,751,758)

Leavers (£1,600,418)

Administration expenses (£1,779,948)

Total paid out during the year (£13,132,124)

Net returns on investments £44,311,803

VALUE AT 31 DECEMBER 2019 £311,047,690

OUR MEMBERS

2018

2019

as at 31 December

288 1,295 1,990

1,327 1,927258

Current employees

Pensioners, including spouses and dependants

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FINANCIAL WELL-BEINGThe Trustee Board and the Company have been working with the Plan’s actuary, John Burns FIA of XPS Pensions Group, to understand the Plan’s financial wellbeing and we can now publish the results.

LAST FULL VALUATION OF THE PLAN AS AT 31 DECEMBER 2018

Value of the Plan’s investments: £272.7 .million

Estimated costs of providing benefits: £312.1 million

Shortfall: £39.4 .million

Funding level: 87%

In other words, the Plan had 87% of the money it needed at that time to meet its commitments in full.

The previous full valuation of the Plan, carried out as at 31 December 2015, had revealed a shortfall of £23.4m and a funding level of 92%.

A number of events had a negative impact on the funding level of the Plan between the 2015 and 2018 valuations. The estimated cost of providing retirement benefits increased over the period as a result of:

• a fall in investment yields; and

• updating the life expectancy assumptions used to reflect the results of a longevity analysis carried out for the Plan.

This was offset, to some extent, by higher than expected returns on the Plan’s investments and the additional contributions paid by the Company over the period to repay the shortfall in funding (known as deficit reduction contributions).

PAYING OFF THE SHORTFALLThe Trustee Board has agreed a formal recovery plan with the Company which includes a commitment to pay a total of £31.9 million into the Plan, in annual instalments, through to 31 December 2024. This recovery plan was agreed in November 2019 and incorporated allowance for some of the improvements in the funding level since the valuation date.

FULL VALUATION 31 DECEMBER 2018

LATEST POSITION 31 DECEMBER 2019

£0m

£50m

£100m

£150m

£200m

£250m

£300m

£350m

Assets£313.1m

Liabilities£332.5m

Shortfall£19.4m

£0m

£50m

£100m

£150m

£200m

£250m

£300m

£350m

Assets£272.7m

Liabilities£312.1m

Shortfall£39.4m

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HOW HAS THIS PROGRESSED SINCE THE LAST FULL VALUATION?

Full valuations are undertaken every three years and so annual checks are carried out in between. The last annual check as at 31 December 2019 showed the following results:

Value of the Plan’s investments:

£313.1 million

Estimated costs of providing benefits:

£332.5 million

Shortfall: £19.4 million

Funding level: 94%.

The results show that over the period from 31 December 2018 to 31 December 2019, the Plan’s funding position improved from a shortfall of £39.4 million to a shortfall of around £19.4 million. This improvement was due to a combination of:

• deficit reduction contributions paid by the Company;

• a small reduction in expected future inflation rates; and

• a significant increase in the value of the Plan’s assets.

These were in part offset by an increase in the estimated cost of providing retirement benefits over the same period. This was mainly due to lower prevailing investment yields which reduced the discount rates used to value members’ benefits.

The outbreak of COVID-19 has had a significant impact on global investment markets, as well as the Plan’s assets, leading to volatility in the funding position since the start of the year.

The Trustee Board, with support from the Company, takes a long-term view to pension scheme funding rather than focusing on short-term volatility. However, the Trustee Board is keeping the situation under close review and is working with its advisers to monitor the position, and to ensure the security of Plan members’ benefits.

WHAT PROTECTIONS ARE IN PLACE?

As long as the Company continues to support the Plan, your benefits are expected to be paid in full when they become due. If the Company is unable to support the Plan, several things could happen which we explain simply as part of our annual reporting to you.

1. The Plan could continue with reduced reliance on future support from the CompanyIf this happened pensions would still be paid, but the Trustee Board would immediately review its investment and funding strategies and operating budget.

2. The Plan could wind upIf a pension scheme winds up, the trustees must secure members’ benefits by buying an insurance policy. If the Plan had wound up on 31 December 2018, it would have cost the Trustee Board £543.6 million to secure this insurance policy. As the Plan’s investments at the same date were valued at £272.7 million, the Company would have had to make up the difference.

3. The Pension Protection Fund (PPF) could step in

The PPF may step in where a company goes out of business and doesn’t have the money to pay the benefits promised. There’s more information on the PPF’s website at www.ppf.co.uk .

There’s a binding agreement in place between the Company and the Trustee Board which aims to make the Plan self-sufficient by 31 December 2034. This will mean the Plan is much less likely to need to rely on financial support from the Company in future. As part of this agreement the Company could be required to pay extra contributions to meet the agreed target. The agreement allows for the deadline for reaching the target to be extended by five years to 31 December 2039 if needed.

We’re happy to confirm, that the Company has not taken any payments out of the Plan in the last 12 months, and that The Pensions Regulator has not intervened to change the way that benefits build up, how valuations are calculated, or the way the funding shortfall is met. 6

Following the finalisation of the actuarial valuation of the Plan’s liabilities, the Trustee Board carried out a review of the Plan’s investment strategy in August 2019. As a result of this review, the Trustee Board decided to maintain the overall expected return, while reducing the level of risk for the portfolio, which we show on the left.

The key changes to the Plan’s investment strategy include:

• A 10% allocation to Infrastructure Equity and a 10% allocation to Infrastructure Debt, funded through a full disinvestment from the Diversified Growth mandate.

• An increase in the Plan’s hedging level through the Liability Driven Investment (LDI) mandate.

The reduction in risk in the new strategy is largely due to:

• The long-term and stable revenue provided by the Infrastructure asset class, which replaces the Diversified Growth mandate.

• Increasing the Plan’s hedge within the LDI mandate means the Plan is better protected against movements in interest rates and inflation, therefore achieving a more stable funding level.

Despite the significant market downturn in Q1 2020 due to the impact of COVID-19, the Plan’s funding level had only worsened by around 4% during this period. By contrast, equity markets had fallen by approximately 23% in the same period.

The Plan’s Synthetic Equity mandate suffered the worst during Q1, however the gains in the Plan’s LDI mandate were able to offset a significant portion of these losses.

InvestmentUPDATE

15% Direct Lending

10% Absolute Return Bonds

15% Property

10% Infrastructure Equity

10% Infrastructure Debt

25% Liability Driven Investments

2% Liquidity

13% Synthetic Equity

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HERE ARE SOME TRUSTED RESOURCES TO HELP YOU IF YOU ARE LOOKING FOR A FINANCIAL ADVISER, OR WANT TO CHECK THE CREDENTIALS OF A FIRM YOU ARE THINKING OF APPOINTING.

Some organisations are experiencing high volumes of calls, and struggling with sickness levels, or staff adjusting to home working, so wait times may be longer than normal. Please use email rather than the telephone if you can.

FINANCIAL CONDUCT AUTHORITY (FCA)The FCA regulates all financial advisers and maintains a directory of authorised firms.

You can find the FCA’s directory of authorised financial advisers listed on its website in the ‘Know your rights’ link under the ‘Consumer’ tab. There is also a dedicated area supporting consumers during the COVID-19 pandemic – click on the links in the green box on the home page.

Website: www.fca.org.uk

Email: consumer.queries@fca.org.uk

Telephone: 0800 111 6768 (freephone) or 0300 500 8082 Monday to Friday, 8am to 6pm and Saturday 9am to 1pm. The number to call if you live overseas is: +44 207 066 1000.

If you use next generation text relay, please ring (18001) 0207 066 1000.

FINDING HELP YOU CANtrust

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THE PENSIONS ADVISORY SERVICE (TPAS)A government backed organisation, TPAS can help you with any questions you have about your pension, either generally, or more specifically because of COVID-19.

Website: www.pensionsadvisoryservice.org.uk

Telephone: 0800 011 3797. If you are calling from overseas, the number to ring is +44 207 932 5780.

TPAS also has a webchat facility and details are available on their website.

VOUCHEDFORThis website helps you to search for qualified financial advisers, accountants, and solicitors and allows you to read client reviews. Every adviser on VouchedFor’s register is vetted and continually monitored. VouchedFor’s website also has some tips to help you if you have not used a financial adviser before.

Website: www.vouchedfor.co.uk

Email: enquiries@vouchedfor.co.uk

Telephone: 0203 111 0580

THE MONEY ADVICE SERVICESet up by government, MAS offers give free and impartial guidance on all money matters. The MAS website has a link into the FCA’s directory of authorised financial advisers, along with help choosing an adviser and understanding the advice process. Choose the ‘Financial Advice’ link under the ‘Pensions & Retirement’ tab on the yellow bar on the home page.

Website: www.moneyadviceservice.co.uk

As an alternative to email, MAS offers a WhatsApp service. Add +44 7701 342744 to your WhatsApp and send a message.

Telephone: 0800 138 7777 Monday to Friday, 8am to 6pm

The Typetalk number, for those with hearing loss or who are deaf, is (18001) 0800 915 4622 .

WWW.HILTONUKPENSIONS.CO.UKFor trusted information about the Plan and your options, go to our own Plan website. You can view and model your benefits, view your pension payslip, and request quotations and information. You can also find Plan documents and up to date news and information.

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IN THE

NewsPROTECT YOUR PENSION SAVINGSThe coronavirus (COVID-19) emergency is a challenging time for us all, and everyone on the Trustee Board sends our best wishes to all Plan members and their families.

Sadly, organised criminals are taking advantage of the concerns and anxieties some pension savers have about the security of their benefits. The Financial Conduct Authority (FCA), who is responsible for authorising financial advisers, has said that protecting consumers against serious and organised crime is a top priority because, on average, a scammed pension saver loses 22 years of pension savings which is typically three times their annual earnings. *

The Pensions Regulator has expressed its own concerns that scammers could target savers to lure them to ‘safe havens’.

PROTECTING YOUR HARD-EARNED PENSION SAVINGS • Ignore all unsolicited emails, texts and social media posts

about moving your pension. These messages typically include words like ‘savings advance’ ‘cash incentive’ ‘bonus’ ‘free pension review’ etc. If it sounds too good to be true, it probably is.

• Never disclose any personal information such as your name, contact details or bank details over the telephone.

• Your bank or building society will NEVER ask you to click on a link to confirm your bank or personal details.

• A professional financial adviser will never rush you into making a decision.

• Unless you have the Trustee Board’s agreement to take ill-health early retirement, any attempt to access your benefits before age 55 will result in cash from your benefits in the fraudsters’ hands and a large tax bill for you. There are no “loopholes”.

More information on how to be ‘scam smart’ is on the FCA’s website. Type www.fca.org.uk/scamsmart into your browser.

*Financial Conduct Authority Business Plan 2020/21.

BUDGET 2020 – CHANGES TO PENSION TAXATION FOR HIGH EARNERSThe government has a limit on the amount of money you can save towards retirement in a tax efficient way, which is known as the Annual Allowance. For most members, the Annual Allowance for 2020/2021, is £40,000 a year and the Plan administrator will write to you if your benefits in the Plan exceed this.

The Annual Allowance becomes less generous for people earning more than £110,000 a year but in his March budget, the Chancellor of the Exchequer, Rishi Sunak, announced the government’s intention to increase this income cap from £110,000 a year to £150,000 a year.

Please speak to your financial adviser if you think you may be affected by the Annual Allowance, or you can check out the government’s guidance on its website: www.gov.uk . Type ‘Tapered Annual Allowance’ in the search bar.

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HERE’S A REMINDER OF THE TEAM WORKING BEHIND THE SCENES TO MAKE SURE THE PLAN IS RUN EFFICIENTLY, AND BENEFITS ARE PAID ON TIME.

Since our last Report to Members, there has been a change to our investment advisers. Towards the end of 2019, ISIO acquired KPMG’s pensions arm as part of a management buyout. Happily, the people the Trustee Board work with on a day to day basis have moved across to the new organisation.

PLAN ADMINISTRATORThe Plan administrator is Hymans Robertson who can help you with any general questions you have about your Plan benefits. In line with government guidelines, the team is currently working from home. The team has implemented plans to ensure they fully support all member services, including paying pensions and setting up new benefits. You can find out more on their website www.hymans.co.uk/information/coronavirus

To ensure a prompt reply, if you can, please contact the Plan administrator by email, rather than in writing, even if you’ve already been in contact by post. Email: hukpp@hymans.co.uk

THE PLAN’S TRUSTEE BOARDCOMPANY APPOINTED TRUSTEESMary Nell Thompson (Chair)

Kay Harriman

Michael Shepherd

MEMBER NOMINATED TRUSTEESKarl Turner

Christopher Newbery

Eric Brown

OUR ADVISERSThe Trustee Board works with a team of expert advisers to help us carry out our duties.

PLAN ACTUARYJohn Burns, FIA of XPS Pensions (retired on 31 May 2020, and replaced by Lisa Whitby FIA). Lisa is a Data Controller for the purposes of the General Data Protection Regulations . A copy of XPS’ privacy notice can be viewed at www.xpsgroup.com/legal-regulatory/your-privacy by scrolling down to the “Scheme Actuary for pension schemes” section.

CUSTODIANState Street Custodial Services (Ireland) Limited

AUDITORErnst & Young LLP

SECRETARY TO THE TRUSTEE BOARDHymans Robertson LLP

INVESTMENT ADVISERISIO (formerly KPMG pensions arm)

BANKERBarclays Bank

LEGAL ADVISERLinklaters LLP

THEteam

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COPIES OF ANY OF THE FOLLOWING DOCUMENTS ARE AVAILABLE ON REQUEST FROM THE PLAN ADMINISTRATORS HYMANS ROBERTSON:

Schedule of Contributions showing how much money is being paid into the Plan.

Statement of Investment Principles outlining the Trustee Board’s investment strategy.

Annual Report and Accounts which is the full report detailing the Plan’s income and expenditure.

The Hilton UK Pension Plan Booklet giving details of how the Plan works.

The full Actuarial Valuation Report, a financial review of the Plan prepared every three years.