M andarin Oriental
Inter national Limited
Annual Report 2016

Mandarin Oriental Hotel Group is an international hotel investment and management groupwith deluxe and first class hotels, resorts and residences in sought-after destinations around the world.
Having grown from its Asian roots into a global brand, the Group now operates 29 hotels and eightresidences in 19 countries and territories, with each property reflecting the Group’s oriental heritage
and unique sense of place. Mandarin Oriental has a strong pipeline of hotels and residences underdevelopment with the next hotel opening planned in Doha. The Group has equity interests in a numberof its properties and adjusted net assets worth approximately US$3.9 billion as at 31st December 2016.
Mandarin Oriental’s aim is to be recognized as the world’s best luxury hotel group. This will beachieved by investing in the Group’s exceptional facilities and its people, while maximizing profitability
and long-term shareholder value. The Group regularly receives recognition and awards for outstanding
service and quality management. The Group is committed to exceeding its guests’ expectations
through exceptional levels of hospitality, while maintaining its position as an innovative leader inthe hotel industry. The strategy of the Group is to open the hotels currently under development,
while continuing to seek further selective opportunities for expansion around the world.
The parent company, Mandarin Oriental International Limited, is incorporated in Bermuda and has
a standard listing on the London Stock Exchange, with secondary listings in Bermuda and Singapore.
Mandarin Oriental Hotel Group International Limited, which operates from Hong Kong, manages
the activities of the Group’s hotels. Mandarin Oriental is a member of the Jardine Matheson Group.

2 Mandarin Oriental International Limited

Contents

1

Corporate Overview

3

Corporate Information

4

Highlights

6

Chairman’s Statement

8Group Chief Executive’s Review

12

Operating Summary

14

Development Portfolio

15

International Recognition

17

Financial Review

22

Directors’ Profiles

24

Financial Statements

76

Principal Subsidiaries, Associates, Joint Ventures and Managed Hotels

78

Independent Auditors’ Report

80

Five Year Summary

81

Responsibility Statement82

Corporate Governance89

Principal Risks and Uncertainties

91

Shareholder Information

92

Mandarin Oriental Hotel Group Contact Addresses

95

Sales and Reservations Offices

Annual Report 2016

Corporate Information

Directors
Ben Keswick Chairman and Managing Director
James Riley Group Chief Executive
Stuart Dickie
Edouard Ettedgui
Mark Greenberg
Julian Hui
Adam Keswick
Sir Henry Keswick
Simon Keswick
Dr Richard Lee
Lincoln K.K. Leong
Anthony Nightingale
Y.K. Pang
Jeremy Parr
Lord Powell of Bayswater, kcmg
Lord Sassoon, kt
James Watkins
Percy Weatherall
Company Secretary
Neil M. McNamara
Registered Office
Jardine House
33-35 Reid Street
Hamilton
BermudaMandarin Oriental Hotel GroupInternational Limited
Directors
Ben Keswick Chairman
James Riley Group Chief Executive
Stuart Dickie Chief Financial Officer
R.D. Baker
K.J. Barry
P.J. Clark
J.D. Goessing
Mark Greenberg
M.H. Hobson
C.J.W. Mares
V.F.J. Marot
Y.K. Pang
Jeremy ParrJohn WittCorporate Secretary
Neil M. McNamara

3

4 Mandarin Oriental International Limited

Highlights

Mandarin Oriental International Limited• Weak demand persists in key cities• Underlying earnings 37% lower• Phased renovation of London hotel commenced• New management contract in Hawaii

Results
Year ended 31st December
2015		
20161
US$m		
US$m		

Change%1,323.7		

1,335.3		

(1)

158.2		

188.4		

(16)

57.3		

90.3		

(37)

55.2		

89.3		

(38)

US¢

US¢		

%

Underlying earnings per share 4

4.56		

7.53		

(39)

Earnings per share

4.40		

7.44		

(41)

Dividends per share

4.00		

5.00		

(20)

US$		

US$		

%

Net asset value per share

0.93		

0.98		

(5)

Adjusted net asset value per share5

3.10		

2.84		

9

Net debt/shareholders’ funds

25%		

11%		

Net debt/adjusted shareholders’ funds5

8%		

4%		

Combined total revenue of hotels under management 2
Underlying EBITDA (Earnings before interest, tax,
depreciation and amortization) 3
Underlying profit attributable to shareholders

4

Profit attributable to shareholders

1

Per share numbers reflect the Company’s rights issue in March 2015.

2

Combined revenue includes turnover of the Group’s subsidiary hotels in addition to 100% of revenue from associate,joint venture and managed hotels.

3

EBITDA of subsidiaries plus the Group’s share of EBITDA of associates and joint ventures.

4

The Group uses ‘underlying profit’ in its internal financial reporting to distinguish between ongoing business performanceand non-trading items, as more fully described in note 7 to the financial statements. Management considers this to be a key
measure which provides additional information to enhance understanding of the Group’s underlying business performance.

5

The adjusted net asset value per share and net debt/adjusted shareholders’ funds have been adjusted to include the market valueof the Group’s freehold and leasehold interests which are carried in the consolidated balance sheet at amortized cost.

Annual Report 2016

Combined total revenue

Combined total revenue

US$m

US$m

by geographical area

1,360.8
1,283.3

285.8

by type of business

1,389.9

1,335.3

1,323.7

277.6

264.6

410.9

411.9

368.6

349.7

349.8

287.9

297.1

297.4

290.9

277.5

450.7

442.5

438.3

360.0

324.8

264.3

242.7

2012

2013

2014

2016

2015

1,389.9

1,360.8
1,283.3

755.1

743.7

689.2

1,335.3

1,323.7

709.9

700.0

471.2

481.9

508.6

503.2

501.5

122.9

135.2

126.2

122.2

122.2

2012

2013

2014

2015

2016

Hong Kong

The Americas

Rooms

Other Asia

EuropeFood and beverage

OthersUnderlying EBITDA andnet interest expense

Net debt/adjusted
shareholders’ funds

US$m

US$m

3,888.3

217.3

3,568.9

208.7
188.4

3,152.4

3,061.2

172.6

2,876.2
158.2

15.6%

15.5

2012

20.8

19.3

2013

2014

478.5
15.3

2015

Underlying earnings before interest, tax,
depreciation and amortization (EBITDA)
Net interest expense

14.5

2016

4.7%

12.8%
403.1

136.5

2012

7.6%
3.7%
131.8

2013

2014

Adjusted shareholders’ funds
Net debt

2015

297.3

2016

5

6 Mandarin Oriental International Limited

Chairman’s Statement

Overview
Weak demand in a number of key cities during the year led to a decrease in underlying profit.

Performance
Underlying profit of US$57 million was US$33 million lower than the US$90 million reported in the prior year,
and underlying earnings per share were US¢4.56 compared with US¢7.53 in 2015. Profit attributable to shareholders
was US$55 million, compared to US$89 million in 2015, after deducting non-trading items in each year.
Following an independent valuation of the Group’s hotel properties, the net asset value per share was US$3.10
at 31st December 2016, compared with US$2.84 per share at the end of 2015.
The Directors recommend a final dividend of US¢2.50 per share. This, together with the interim dividend ofUS¢1.50 per share, will make a total annual dividend of US¢4.00 per share, compared to US¢5.00 per share in 2015.

Group review
The Group experienced softer demand in many of its key markets throughout the year, particularly Hong Kong,
London and Paris. Mandarin Oriental Hyde Park, London was impacted further by the start in September of
its phased renovation programme, which is expected to complete in the second quarter of 2018.
The Group was able to benefit from a positive trading environment in Tokyo, a return to normal operationsin Munich following a public area renovation, and a contribution from the newly acquired equity interest in
Mandarin Oriental, Boston. This was partly offset by weaker performances in Washington D.C. and Jakarta.

Business developments
In April, the Group completed its US$140 million acquisition of Mandarin Oriental, Boston, a hotel it has
managed since opening in October 2008. In July, the Group announced that it will brand and manage 30 luxury
Residences at Mandarin Oriental adjacent to Mandarin Oriental, Bali, both of which are due to open in mid-2018.
In February 2017, the Group announced a management contract for a 125-room luxury hotel and 107 residencesin Honolulu, Hawaii, which are expected to open in 2020.
Mandarin Oriental currently operates 29 hotels and eight residences in 19 countries and territories. The Group
has a strong pipeline of hotels and residences under development, with the next hotel opening in Doha expected
to be in the second half of this year.

Annual Report 2016

PeopleOn behalf of the Directors, I would like to acknowledge the contribution of our colleagues throughout the world
for continuing to provide the exceptional service for which the brand is renowned.
James Riley took over as Group Chief Executive on 1st April 2016, replacing Edouard Ettedgui who remains on
the Board as a non-executive Director. Y.K. Pang joined the Board on 1st August.
We were saddened by the death in June of Lord Leach. He made a significant contribution to the Group and his
wise counsel will be greatly missed.

Outlook
Challenging market conditions are expected to continue to impact the Group, and earnings will also be disrupted
by the renovation of the London hotel. Nevertheless, the Group’s strong brand position, healthy balance sheet andcontinued portfolio development will underpin its future performance.

Ben Keswick
Chairman
2nd March 20177

8 Mandarin Oriental International Limited

Group Chief Executive’s Review

Strategy
Mandarin Oriental Hotel Group is the award-winning owner and operator of some of the world’s most luxurious
hotels, resorts and residences. Having grown from its Asian roots into a global brand, the Group currently
operates 29 hotels and eight residences in 19 countries and territories.
The Group holds equity interests in a number of its hotels, and had adjusted net assets of approximately
US$3.9 billion as at 31st December 2016. Capitalizing on the strength of its brand, Mandarin Oriental also
manages hotels on behalf of third party owners that require limited or no equity investment by the Group.
Mandarin Oriental is focused on becoming recognized as the world’s best luxury hotel group by expanding its
geographical presence and creating hotels that are positioned amongst the leaders in their local markets, deliveringcontemporary luxury and a unique sense of place, while reflecting the Group’s oriental heritage. It will continue
to invest in its core brand attributes of creative hotel design and architecture, award winning restaurants, bars andwellness facilities, and legendary service delivery. At the same time, the Group remains alert to new trends andopportunities, ensuring the brand remains relevant to today’s multi-generational audience.
Mandarin Oriental’s strategy is to operate both managed and owned hotels. The Group is focused on becoming
the brand of choice for owners and developers in order to further build its portfolio of managed properties in key
city centres and resort destinations around the world. At the same time, the Group’s strong balance sheet allows
for reinvestment in existing flagship properties as well as selectively investing in opportunities in strategic locations
that offer attractive returns.
Expansion of the Residences at Mandarin Oriental portfolio also remains a key focus, with the associated branding
fees and ongoing management fees from these projects providing a growing return for the Group.
The long-term potential for growth of the Group’s portfolio is significant.

Hotel overview
While each hotel focused on maintaining or enhancing its leadership position against primary competitors in its
individual market, the Group encountered challenging conditions in many of its destinations in 2016. This resulted
in a 3% decline in Revenue Per Available Room (RevPAR) across the Group’s 29 hotels in US dollar terms on a
like-for-like basis1. Highlights of the Group’s regional performance, focusing on subsidiary and significantly owned
associate hotels are as follows, with all references to RevPAR being in US dollar terms, unless otherwise stated:

Asi aOverall, RevPAR for Asia in 2016 on a like-for-like basis was down 1%, with the region generally experiencing
softer demand, particularly in Hong Kong and Jakarta.
Mandarin Oriental, Hong Kong was affected by a decline in visitor arrivals to the city as well as a softening in thecorporate sector. As a result, RevPAR was down 7% over the previous year. Food and beverage performance wasalso impacted, with revenue down 6% year-on-year.

1

Like-for-like comparison excludes hotels without a full year of operation in either 2015 or 2016.

Annual Report 2016

The Excelsior, the Group’s other wholly-owned hotel in Hong Kong, was also impacted by the city-wide decline
in leisure demand, particularly from mainland China, combined with an oversupply in its competitive set. As aconsequence, RevPAR was down 4%. Similar to Mandarin Oriental, Hong Kong, the hotel’s food and beveragerevenue declined by 5%.
Mandarin Oriental, Tokyo maintained RevPAR in-line with the previous year in local currency terms. As a resultof a stronger yen, however, RevPAR was up 10% in US dollar terms. Food and beverage performed well and thehotel was once again awarded a Michelin star for each of its three restaurants, the only hotel in the city to achieve
this accolade.
Mandarin Oriental, Jakarta maintained its competitive position but was negatively impacted by lower demand
as a result of ongoing security concerns. Occupancy was down 18% leading to a decline in RevPAR of 23%.
Mandarin Oriental, Bangkok performed well, benefiting from the completion in April 2016 of the renovation of
the historic Authors’ and Garden Wings including Le Normandie restaurant.
Despite softer demand in the luxury sector, Mandarin Oriental, Singapore did well to maintain performance inline with the previous year and increase its market share.

EuropeWhile the Group’s hotels performed well against their respective competition during 2016, weaker demand in
London and Paris put pressure on occupancy and rates city-wide, with the Group’s overall RevPAR for the region
down 15% on a like-for-like basis.
A decline in demand in the London luxury hotel segment in the first half impacted Mandarin Oriental Hyde Park’s
performance. The hotel was further affected by the renovation which began in September. Consequently, RevPAR
was down 29%, or 19% in local currency terms. The renovation of the guestrooms and facilities, which is expected
to be completed by the second quarter in 2018, will ensure the property remains one of the best luxury hotels in thecity. It will remain open throughout this period with reduced facilities and room inventory.
Mandarin Oriental, Munich saw a 20% increase in RevPAR as the hotel’s performance benefited from thecompletion in May 2016, of a 14-month public area renovation. The hotel remained the undisputed market leader
and the new facilities, which include a Matsuhisa restaurant by chef Nobu, a bar and a rejuvenated lobby lounge,
have reinforced its appeal in the city.
Mandarin Oriental, Paris was impacted by weaker city-wide demand due to ongoing travel security concerns.
This, in addition to increased supply in the luxury sector following the completion of renovations by competitor
hotels, led to a decline in RevPAR of 22%. The hotel’s food and beverage operations, led by chef Thierry Marx,
continued to perform well.
In Geneva, the hotel maintained its competitive position, however a drop in average rate led to a 5% decrease in
RevPAR over the previous year.
Hotel Ritz, Madrid improved its rates and market share, as a result of increased visitor arrivals. The hotel will
undergo a comprehensive renovation, which is currently scheduled to commence in the first quarter of 2018.

9

10 Mandarin Oriental International Limited

Group Chief Executive’s Review Continued

The A mer ic as
Trading conditions in The Americas were generally positive during 2016, especially at the Group’s associate
and managed hotels, with overall RevPAR for the region up 3% on a like-for-like basis.
Mandarin Oriental, Boston maintained its position as market leader, however softer city-wide demand led toa drop in RevPAR of 6%.
The performance of Mandarin Oriental, Washington D.C. was impacted by a room renovation programme during
the year, leading to a 6% decline in RevPAR.
In New York, the Group’s flagship hotel performed well and improved its competitive position.

Financial performance
Earnings were lower in 2016, mainly as a result of weaker demand in the Group’s key cities of Hong Kong, London
and Paris.
Underlying earnings before interest, tax, depreciation and amortization for 2016 were US$158 million, comparedwith US$188 million in 2015. Underlying profit of the Group of US$57 million was US$33 million down on the
US$90 million achieved in 2015.
Reflecting the lower earnings, cash flow generated from operations during the year was US$108 million, and total
net cash outflow for the Group in 2016 was US$125 million, after paying dividends of US$57 million, capital
expenditure of US$77 million across the Group’s portfolio, and investing US$90 million of Group cash reservesto acquire Mandarin Oriental, Boston. In comparison, cash flow generated from operations during 2015 was
US$140 million, whilst total net cash outflow for the Group was US$16 million, after paying dividends of
US$75 million, hotel capital expenditure of US$50 million, and using net proceeds received of US$314 million
from a 1 for 4 rights issue to repay US$262 million of bank debt and invest US$73 million to acquire the Group’s
50% interest in Hotel Ritz, Madrid.
At 31st December 2016, the Group’s net debt was US$297 million, compared to US$132 million at the end of 2015.
Gearing as a percentage of adjusted shareholders’ funds at 31st December 2016, after taking into account the market
value of the Group’s property interests and the US$140 million Boston acquisition was 8% compared to 4% at theend of 2015.

Brand awarenessThe recognition of Mandarin Oriental as one of the world’s best luxury hotel groups, has steadily grown during
the 17-year tenure of Edouard Ettedgui, who stepped down as Group Chief Executive on 31st March 2016.
During the year, this continued to be reflected in the awards received from respected travel associations andpublications worldwide. Highlights include Condé Nast Traveler, US ‘Readers’ Choice Awards’ 2016 featuring
13 Mandarin Oriental hotels. In addition, Mandarin Oriental, Hong Kong was voted ‘Best Overseas Business
Hotel’ in the Condé Nast Traveller, UK 2016 awards and Mandarin Oriental, Bangkok received the highest
accolade in the 2016 Tatler Travel Guide for ‘Enduring Excellence’.

Annual Report 2016

In China, Mandarin Oriental was listed in the top five ‘Best Luxury Hotel Brands’ in the Hurun Report.
In the 2017 Michelin guides, a total of 12 restaurants were honoured with 18 stars being granted across the Group.
The Group’s spa operations were also acknowledged as being among the best, with a record 12 hotels gaining theprestigious Forbes ‘Five Star Spa’ award.

GrowthThe Group has 11 hotels under development which are expected to open in the next five years. All are management
contracts with no equity interest. The Group continues to review new opportunities around the world and expects
to see a steady growth in its portfolio over the coming years.
In April, the Group acquired the equity interest in Mandarin Oriental, Boston for US$140 million. The Grouphas managed the 148-room hotel on Boylston Street since its opening in 2008, and also manages 85 privately
owned Residences at Mandarin Oriental connected to the hotel.
In July, the Group announced that it will brand and manage 30 luxury Residences at Mandarin Oriental
adjacent to Mandarin Oriental, Bali, both of which are due to open in mid-2018.
In February 2017, the Group announced a management contract for a 125-room luxury hotel and
107 Residences at Mandarin Oriental in Honolulu, Hawaii, which are expected to open in 2020.
In the second half of 2017, Mandarin Oriental expects to open its first hotel in the Middle East, in a new city
centre development in the heart of Doha, Qatar.

The future
Challenging conditions are expected to continue to impact performance in a number of key markets in 2017, andearnings will be disrupted by the renovation of the London property. Looking further ahead however, the Group’s
results should benefit from the increasing demand of high net worth individuals from both traditional andemerging markets, travelling to our key destinations. The Group’s results will also be supported by enhanced
contributions from renovated flagship properties and from new hotel openings.

James Riley
Group Chief Executive
2nd March 201711

12 Mandarin Oriental International Limited

Operating Summary

Total portfolio RevPAR
US dollar

Constant currency
2016		
US$		2015		 % ChangeUS$2016		
US$		2015		 % Change
US$

Asia

177

179		

(1)

Asia

178

179		

(1)

Europe

425

502		

(15)

Europe

442

502		

(12)

The Americas

324

314		

3

The Americas

324

314		

3

Total

240

248		

(3)

Total

242

248		

(2)

The like-for-like RevPAR presented in the table above shows RevPAR for all of the Group’s hotels across the world,
except for those not fully operational throughout both years.

Group’s subsidiary hotels RevPAR
ASIA
Mandarin Oriental, Hong Kong 100% ownership

Mandarin Oriental, Tokyo 100% leasehold2016		

2015		 % Change

2016		

2015		 % Change

Available rooms

501

501		

0

Available rooms

179

178		

1

Average occupancy (%)

62

66		

(6)

Average occupancy (%)

79

80		

(1)

Average room rate (US$)

509

518		

(2)

Average room rate (US$)

578

520		

11

RevPAR (US$)

317

341		

(7)

RevPAR (US$)

459

417		

10

The Excelsior, Hong Kong 100% ownership

Mandarin Oriental, Jakarta 96.9% ownership2016		

2015		 % Change

2016		

2015		 % Change

Available rooms

869

883		

(2)

Available rooms

272

272

0

Average occupancy (%)

75

78		

(4)

Average occupancy (%)

45

55

(18)

Average room rate (US$)

196

194		

1

Average room rate (US$)

175

186

(6)

RevPAR (US$)

146

152		

(4)

RevPAR (US$)

79

103

(23)

Annual Report 2016

EUROPETHE AMERICAS

Mandarin Oriental Hyde Park, London 100% ownership

Mandarin Oriental, Boston 100% ownership2016		

2015		 % Change

Available rooms

193

193		

0

Average occupancy (%)

64

80		

(20)

Average room rate (US$)

760

861		

(12)

RevPAR (US$)

490

690		

(29)

(acquired on 27th April 2016)2016		

2015		 % Change

Available rooms

148

148		

0

Average occupancy (%)

68

69		

(1)

Average room rate (US$)

593

614		

(3)

RevPAR (US$)

401

425		

(6)

Mandarin Oriental, Munich 100% ownership2016		

2015		 % Change

Available rooms

73

73		

0

Average occupancy (%)

67

62		

8

Average room rate (US$)

878

804		

9

RevPAR (US$)

593

495		

20

Mandarin Oriental, Paris 100% ownership2016		

2015		 % Change

Available rooms

138

138		

0

Average occupancy (%)

52

57		

(9)

Average room rate (US$)

956

1,122		

(15)

RevPAR (US$)

493

635		

(22)

Mandarin Oriental, Geneva 92.6% ownership2016		

2015		 % Change

Available rooms

189

189		

0

Average occupancy (%)

58

58		

0

Average room rate (US$)

632

669		

(6)

RevPAR (US$)

367

388		

(5)

Mandarin Oriental, Washington D.C. 80% ownership2016		

2015		 % Change

Available rooms

397

397		

0

Average occupancy (%)

56

60		

(7)

Average room rate (US$)

320

316		

1

RevPAR (US$)

180

191		

(6)

13

14 Mandarin Oriental International Limited

Development Portfolio

The following 11 hotels and 5 Residences at Mandarin Oriental are expected to open in the next five years.
Asia
Mandarin Oriental, Bali
An 88-room resort and 91 Residences at Mandarin Oriental located on Bali’s southern Bukit peninsula. Perched on a cliffside plateau, the resort will offer
dramatic and spectacular views with direct access to a secluded and protected white-sand beach.

The Residences at Mandarin Oriental, Bangkok
146 luxury residences located across the Chao Phraya River from Mandarin Oriental, Bangkok, part of an iconic mixed-use riverfront development.

Mandarin Oriental, Beijing
A 241-room hotel located in the central business district, and part of the iconic headquarters of China Central Television (CCTV).

Mandarin Oriental Wangfujing, Beijing
A 74-room hotel located in a premier mixed-use development WF CENTRAL, with impressive views overlooking the Forbidden City.

Mandarin Oriental, Chengdu
A 327-room hotel with 18 serviced apartments located on the top 33 floors of an iconic tower, on a prime riverfront site in Jinjiang District, across fromthe ancient Wang-jiang Park.

Mandarin Oriental, Manila
A 275-room hotel located within the Ayala Triangle in Makati central business district.

Mandarin Oriental, Shenzhen
A 191-room hotel situated on the top of an impressive 400-metre tower with outstanding views of the city skyline and the surrounding city parks.

Europe, Middle East and North Africa
Mandarin Oriental, DohaA 158-room hotel with 91 serviced apartments located in Msheireb Downtown Doha, adjacent to Doha’s cultural gem, Souk Waqif, and the city’sbusiness centre in West Bay.

Mandarin Oriental, Dubai
A 264-room urban resort located on Jumeirah Beach Road, one of the most sought-after waterfront locations in the city.

Mandarin Oriental, Bosphorus, Istanbul
A 130-room hotel prominently located on the banks of the Bosphorus, with panoramic vistas of the famed strait, surrounding hills and the city’s historical sites.

The Residences at Mandarin Oriental, Munich
19 luxury Residences at Mandarin Oriental located in a mixed-use complex being developed opposite Mandarin Oriental, Munich, which will include
51 additional hotel rooms.

The Americas
Mandarin Oriental, Boca Raton
A 164-room hotel and 85 Residences at Mandarin Oriental as part of a mixed-use complex, surrounded by Boca Raton’s most affluent, residential
neighbourhoods and a short walk from miles of pristine beaches.

Mandarin Oriental, Honolulu
A luxury 125-room hotel and 107 Residences at Mandarin Oriental, located on the Hawaiian island of Oahu, in the heart of the Ala Moana district.
Opening dates are determined by each project’s owner/developer. All of the above projects will be managed by Mandarin Oriental Hotel Group with no equity
investment from the Group.
Room numbers reflect the latest estimate from each project’s owner/developer, and may therefore differ from the original announcements and the final
number once the project is completed.

Annual Report 2016

International Recognition

Mandarin Oriental Hotel Group

Mandarin Oriental, Macau

When it comes to hospitality, Hong Kong sets the bar
high: The city is the birthplace of Mandarin Oriental,
a legend that has since been developed into a global
hotel chain synonymous with comfort and luxury.

Mandarin Oriental, Macau offers pronounced“style”, simply first-rate beds and food to matchin an exclusive location.
The Telegraph

Travel + LeisureThough all of their properties are reliably beautiful,none of their 29 hotels around the world feel standard.
Town & Country

Mandarin Oriental, Bangkok
Mandarin Oriental, Bangkok is now, in my view, thebest hotel in the world. The historic areas of the hotel
now better reflect the original splendour of this urban
oasis on the River of Kings. This hotel is simply too
good for a mere-two-night stopover. You need at least
five days to sample even a fraction of its offerings.
The Gallivanter’s Guide

A renovation of Bangkok’s most storied luxury hotel
reflects a riverfront rebirth in the Venice of the East.
Condé Nast Traveler – US

Mandarin Oriental, Hong Kong
It continues to be everyone’s favourite address whenit comes to rooms, restaurants and especially service,
which is flawless.

Mandarin Oriental Pudong, Shanghai
Chic sharp contemporary Shanghai. It will comeas no surprise to fans of Mandarin Oriental thatthe service here is flawless. The facilities too arenear impossible to fault; a seductive 25-metre indoor
swimming pool, a sprawling tech-savvy gym,
a comprehensive business centre and luxurious
Club Lounge.
The Telegraph

Mandarin Oriental, Singapore
Mandarin Oriental is Singapore’s ultimate retreat.
And simply said, is luxury at its best.
Forbes Travel Guide

Mandarin Oriental, Tokyo
A sleek, skyscraper-hotel with superlative service,
Japanese-inspired design, and some of the best views
across the capital, located in the Nihonbashi district.
The TelegraphCondé Nast Traveller – UK

Mandarin Oriental, Barcelona

Unparalleled views of the Victoria Harbour andan award-winning spa are just a few of the factors that
contributed to its world-class reputation. With 10
different restaurants and bars, choosing where to dinecan be an agonizing decision.

One for avid shoppers, aficionados of Antoni Gaudíand lovers of all things stylish. The rooms are smart
and bright, and the staff is excellent, but where thehotel really shines is in the communal areas, withterrific eating and drinking options, a leafy first-floor
terrace and a rooftop with pool and a wonderful view.

Travel + Leisure

The Telegraph

The Landmark Mandarin Oriental, Hong Kong
In the midst of a gut renovation helmed by renowned
interior designer Joyce Wang, the new look of thiscentrally located hotel defines modern luxury. The
custom-made furniture is rife with thoughtful details
that transform the space into a stylish home awayfrom home.
Travel + Leisure

Mandarin Oriental, Bodrum
Paradise Bay is the aptly named setting for Mandarin
Oriental, Bodrum. Sitting on the north coast of the
Bodrum peninsula in south-west Turkey; 30 minutes
from the town, the hotel is the ultimate in escapism,
yet there is local culture at hand if and when you feellike venturing outside.
Vogue

15

16 Mandarin Oriental International Limited

International Recognition Continued

Mandarin Oriental Hyde Park, London

Mandarin Oriental, Atlanta

You can’t ask for a better London locale. Tucked inbustling Knightsbridge, bordering Royal Hyde Parkand the fashionable boutiques of Sloane Street,
Mandarin Oriental is the only hotel in a royal park.

Think Luxury. Sense spaciousness. Feel renewed.
A single step through the doors of Mandarin Oriental,
Atlanta, transports the traveller from the hustle, heatand bustle of the city into a tranquil environment
unparalleled by any other hotel in Atlanta.

Watch! CBS Magazine

The Huffington Post

Mandarin Oriental, Marrakech
The first Mandarin Oriental to open in Africa is pure,unadulterated bliss. Consisting of nine suites and
54 private villas all set against a jaw-dropping view of
the Atlas Mountains. Riad-inspired villas are adorned
with chic white furnishings, and all include gargantuan
bathrooms and dark-tiled private pools.

Mandarin Oriental, Boston
Mandarin Oriental is located in Back Bay and with its
first class service, excellent dining and a stunning spa,
it is without a doubt one of Boston’s most luxurious
hotels. First class all the way, Mandarin Oriental
doesn’t do anything by half measures.

British Airways Highlife

The Telegraph

Mandarin Oriental, Milan

Mandarin Oriental, Las Vegas

The most recent addition to Milan’s luxury hotel
scene is big news for style-conscious travellers to Italy’s
fashion capital. Milan’s new Mandarin Oriental offers,
as you would expect, levels of comfort the Romans
wouldn’t turn their noses up at, and interiors that area mix of tradition and modernity.

Mandarin Oriental is without doubt the classiest broadin Vegas. Its Asian-accented, non-gaming environment
provides a Zen oasis away from all those bright lights
and slot machines, and rooms have floor-to-ceilingwindows proffering knockout views.
The Independent

EsquireMilan oozes fashion-fabulous hotels, but it’s Mandarin
Oriental that’s currently up there at No.1.
The Times

Mandarin Oriental, Munich
The elegant Mandarin Oriental, Munich, now strikingly
renovated, with a rooftop pool, is the perfect, centrally
located base; a residential-style oasis with good service
and some beautiful suites.
The Gallivanter’s Guide

Mandarin Oriental, Paris
The most unabashedly modern of Paris’s eight Palais
hotels (a cut above five-star), Mandarin Oriental has
an offering as haute couture as its designer neighbours
on the Rue Saint-Honore.
National Geographic

Mandarin Oriental, Prague
In the quiet, cobblestoned Mala Strana district, this
Gothic-Baroque beauty feels like an urban oasis hiddenin plain sight.
CNN

Mandarin Oriental, Miami
Mandarin Oriental, Miami is an urban yet quiet resort.
It is internationally known for its highest standards
and a sophisticated feel that is the epitome of modern
five-star luxury. With a private beach, gourmet fusion
restaurants and an exotic day spa, the resort offers
a taste of Asian serenity in sun and art-kissed Miami.
Forbes Travel Guide

Mandarin Oriental, New YorkThis is our home-away-from-home in Manhattan.
The views over Central Park are breathtaking, no matter
what the season. We spend every New York fashion
week here, and the staff is like our own family. The spa
makes a perfect city getaway and the bedrooms are
spacious and elegant.
Condé Nast Traveller – UK

A place in New York City where you can watch all of
it unfold, while still relaxing in exquisite, luxurious
surroundings. That is Mandarin Oriental, New York,an escape located directly in the center of it all. The
Modern Asian-influenced décor provides the perfecturban oasis.
Pursuitist

Annual Report 2016

Financial Review

Accounting policies
The Directors continue to review the appropriatenessof the accounting policies adopted by the Group
having regard to developments in International
Financial Reporting Standards (‘IFRS’).
The accounting policies adopted are consistent withthose of the previous year, except that the Group has
adopted several amendments to IFRS effective on
1st January 2016, as more fully detailed in the ‘Basisof preparation’ note in the financial statements. The
adoption of these amendments did not have a material
impact on the Group’s financial statements.

Results
Overall
The Group uses earnings before interest, tax,
depreciation and amortization (‘EBITDA’) to analyze
operating performance. Total underlying EBITDA
including the Group’s share of underlying EBITDA
from associates and joint ventures is shown below:

Subsidiaries

2016		
US$m		

2015
US$m

129.6		

160.7Associates and joint ventures

28.6		

27.7

Underlying EBITDA

158.2		

188.42016		
US$m		

2015
US$m

Underlying EBITDA from subsidiaries

129.6		

160.7Non-trading items:
Less: acquisition costs related to
Mandarin Oriental, Boston(1.8 )–    acquisition costs related to    Hotel Ritz, Madrid–		(0.5 )

Subsidiaries

EBITDA from subsidiaries

127.8		

160.2Less: depreciation and amortization(59.8 )

(52.9 )

Operating profit

68.0		

107.3

In 2016, underlying EBITDA from subsidiaries
decreased by US$31.1 million, or 19%, toUS$129.6 million, primarily due to weak market
conditions in Hong Kong, London and Paris. After
deducting US$1.8 million of non-trading expenses
related to the acquisition of Mandarin Oriental,
Boston, EBITDA from subsidiaries in 2016 was
US$127.8 million, compared to US$160.2 million
in 2015 after deducting US$0.5 million of non-trading
expenses related to the acquisition of the Group’s
50% interest in Hotel Ritz, Madrid.
A decline in visitor arrivals and softer corporate
demand in Hong Kong resulted in lower EBITDA
contributions from both Mandarin Oriental,
Hong Kong and The Excelsior. In Tokyo, performancein local currency terms was in-line with that achievedin 2015, however a stronger Japanese yen meant thatwhen translated into US dollars, the hotel’s contribution
was higher than the prior year. The results of the
Jakarta hotel were negatively impacted by ongoingsecurity concerns, leading to lower demand andearnings compared to 2015.
In Europe, the results of Mandarin Oriental
Hyde Park, London were negatively impacted bya decline in luxury demand during the first half ofthe year, followed by commencement of the hotel’smajor renovation in September 2016. The renovationof the guestrooms and facilities is expected to becompleted by the second quarter of 2018. Earningsof the Group’s hotel in Paris were also lower than theprior year, due to weak city-wide demand combinedwith an increase in supply of luxury hotel rooms.
In Munich, however, EBITDA generated by the hotel
was double that achieved in 2015, due to the completionin May 2016 of a 14-month renovation of the publicareas and food and beverage facilities. In Geneva,
a drop in average rate led to a lower EBITDA
contribution from the hotel.

17

18 Mandarin Oriental International Limited

Financial Review Continued

Subsidiaries continued
In The Americas, the impact of a room renovation
programme resulted in a lower contribution from
Washington D.C. The Group’s results did, however,benefit from a new EBITDA contribution from
Mandarin Oriental, Boston following the Group’s
acquisition of the equity interest in the hotel in
April 2016.

In Bangkok, the completion in April 2016 of the
Authors’ and Garden Wings renovation resulted
in improved earnings, while the performances in
Singapore and Kuala Lumpur remained stable,with EBITDA at each hotel broadly in-line withthe prior year.
An increase in market share for Hotel Ritz, Madridtranslated into a slight increase in earnings, while
generally improved conditions in The Americas led tohigher contributions from the Group’s 25% owned
hotels in Miami and New York, which also benefited
from its suite renovation completed in 2015.

In 2016, the contribution from management
activities decreased by US$3.9 million, or 15%,
to US$22.4 million, from US$26.3 million in 2015,reflecting weaker earnings across the hotel portfolio.

Associates and joint ventures
The Group’s share of results from associates and joint
ventures was as follows:				2016		
US$m		

2015
US$m

Underlying EBITDA fromassociates and joint ventures

28.6		

27.7

Non-trading items:
Less: provision for litigation(0.3 )––(0.5 )EBITDA from associates andjoint ventures

28.3		

27.2

Less: depreciation and amortization(11.5 )

(10.8 )

Operating profit

16.8		

16.4

Less: net financing charges(3.7 )(3.5 )   tax(2.2 )(2.4 )

Share of results of associates
and joint ventures

10.9

10.5

    acquisition costs related to    Hotel Ritz, Madrid

In total, the Group’s share of underlying EBITDA
from associates and joint ventures increased by
US$0.9 million, or 3%, to US$28.6 million in 2016.
The increase was primarily due to improved
performances in Bangkok and New York following
the completion of their respective renovations.

Depreciation and amortization of associates andjoint ventures was 6% higher in 2015, reflecting thecompletion of renovations, while the Group’s shareof net financing charges and tax from associates andjoint ventures was broadly in-line with the prior year.

Non-trading items
In 2016, there was a total of US$2.1 million of
non-trading items, of which US$1.8 million related
to transaction costs associated with the acquisitionof Mandarin Oriental, Boston, and US$0.3 million
related to the Group’s share of a provision for litigation
at one of the Group’s associate hotels. This compares
to US$1.0 million of non-trading items in 2015
relating to transaction costs associated with theacquisition of the Group’s 50% interest in Hotel Ritz,
Madrid, which was disclosed as US$0.5 million
attributable to the Group itself and the Group’s
US$0.5 million share of costs incurred by thejoint venture.
Net financing charges
Net financing charges for the Group’s subsidiaries
decreased to US$10.8 million in 2016, from
US$11.8 million in 2015. The decrease is mainly due
to the repayment of bank debt following the Group’s
rights issue during 2015.

Annual Report 2016

Interest cover
EBITDA is used as an indicator of the Group’s
ability to service debt and ﬁnance its future capital
expenditure. Interest cover in 2016, calculated asunderlying EBITDA (including the Group’s shareof underlying EBITDA from associates and joint
ventures) over net financing charges (including theGroup’s share of net financing charges from associates
and joint ventures), was 10.9 times compared with
12.3 times in 2015.
Tax
The tax charge for 2016 of US$13.7 million was lower
than the US$16.6 million charge in 2015, reflecting
lower profitability. The underlying effective tax rate for2016 was 20%, broadly in line with the prior year.
Cash flow
The Group’s consolidated cash ﬂows are summarized
as follows:
2016		
US$m		

2015
US$m

Operating activities

108

140

Investing activities:• Capital expenditure on	  existing properties

(77 )

(50 )

• Acquisition of	  Mandarin Oriental, Boston(140 )–• Acquisition of 50% interest
	  in Hotel Ritz, Madrid

–		

(73 )

• Advances to joint ventures

(3 )

–

• Repayment of loans to associates

1		

1• Purchase of intangible assets

(3 )

(2 )

Financing activities:• Issue of shares• Net drawdown/(repayment)
	  of borrowings

–		

314
(262 )• Dividends paid

(57 )

(75 )

Net decrease in cash

(121 )(7 )Cash and cash equivalents
at 1st January

308

324

(4 )

(9 )

183		

308

Cash and cash equivalents
at 31st December

Under investing activities, capital expenditure on
existing properties was US$77 million in 2016,
compared to US$50 million in 2015, with the
US$27 million increase primarily due to thecommencement of the major hotel renovationin London.
In April 2016, the Group acquired the equity interest
in Mandarin Oriental, Boston for US$140 million.
This compares to the US$73 million paid in 2015 toacquire a 50% interest in Hotel Ritz, Madrid.
In order to fund the Boston acquisition, the Groupdrew US$50 million from existing bank facilities
during 2016. In 2015, the Group completed a 1 for 4
rights issue, raising gross proceeds of US$316 million,
which were then used to fund the Group’s investment
in Hotel Ritz, Madrid and to repay US$262 millionof existing bank debt.
Looking ahead, the Group is committed to investing
more than US$250 million into previously announced
significant capital projects planned over the next
five years:
Significant capital commitments, as previously announced

50		

Effect of exchange rate changes

The Group’s cash flows from operating activities were
US$108 million in 2016, a decrease of US$32 million
from the US$140 million inflow in 2015.

US$m		

TimingLondon renovation*79		

2017-18

Madrid renovation (Group’s 50% share)47		

2018-19

Munich extension**132		

2017-21

Total

258

* Excludes US$41 million already spent up to 31st December 2016.
** Excludes US$17 million already spent up to 31st December 2016.

These projects will be funded through an appropriate
mixture of external debt and existing cash reserves.

19

20 Mandarin Oriental International Limited

Financial Review Continued

Dividends
The Board is recommending a final dividendof US¢2.50 per share for a full-year dividend ofUS¢4.00 per share (2015: US¢5.00 per share).
No scrip alternative is being offered in respectof the dividend. The final dividend is payable on
11th May 2017 to shareholders on the register ofmembers at the close of business on 17th March 2017.

Supplementary information
Although the Group’s accounting policy in respectof its freehold land and buildings and the building
component of owner-occupied leasehold properties
is based on the cost model, the Directors continue
to review the fair market values in conjunction withindependent appraisers on an annual basis. The fairmarket value of both freehold and leasehold land andbuildings is used by the Group to calculate adjusted
net assets, which the Directors believe gives important
supplementary information regarding net asset value
per share and gearing as outlined below:
2016

2015

On an IFRS basis, the Group’s consolidated net debt
of US$297 million at 31st December 2016 was 25%of shareholders’ funds, compared with consolidated
net debt of US$132 million at 31st December 2015
which was 11% of shareholders’ funds. Taking into
account the fair market value of the Group’s interests
in freehold and leasehold land, gearing was 8% ofadjusted shareholders’ funds at 31st December 2016,
compared with 4% at 31st December 2015.

Treasury activities
The Group manages its exposure to ﬁnancial risk using
a variety of techniques and instruments. The main
objective is to manage exchange and interest rate risks
and to provide a degree of certainty in respect of costs.
The Group has ﬁxed or capped interest rates on 49%
of its gross borrowings.
In respect of specific hotel financing, borrowings
are normally taken in the local currency to hedge
partially the investment and the projected income.
At 31st December 2016, the Group’s net assets/(liabilities) were denominated in the following currencies:

			Per share		Per share
		
US$m
US$
US$m
US$

Shareholders’ funds/net
assets at amortized cost
Add: surplus for fairmarket value offreehold and leasehold
land and buildings
Adjusted shareholders’funds/net assets

Net assets/(liabilities)
		

1,169

2,719
3,888

0.93

2.17
3.10

1,227

2,342
3,569

0.98

1.86
2.84

US$m		

Adjusted
net assets*%		

US$m		%

Hong Kong dollar

(73 )

(6 )

2,193		

56

Euro

470		

40		

590		

15

United States dollar

330		

28		

371		

10

United Kingdom sterling

192		

17		

265		

7

Singapore dollar

47		

4		

176		

5

Swiss franc

111		

10		

111		

3

Thai baht

26		

2		

87		

2

Indonesian rupiah

27		

2		

51		

1

Others

39		

3		

44		

1

1,169		

100		

3,888		

100		

* See supplementary information section above.

Annual Report 2016

The Group, excluding associates and joint ventures,
had committed borrowing facilities totalling
US$556 million, of which US$480 million was drawn
at 31st December 2016. The principal amounts due
for repayment are as follows:
		
		
		

Facilities
Facilities		
committed		drawn		US$m		
US$m		

Unusedfacilities
US$mWithin one year

3		

3		

–

Between one and two years

–		

–		

–

Between two and three years

550		

474		

76

Between three and four years

–		

–		

–

Between four and five years

–		

–		

–

Beyond ﬁve years

3		

3		

–

556		

480		

76

		

At 31st December 2016, the Group had US$76 millionof committed, undrawn facilities in addition to its net
cash balances of US$183 million. The average tenor of
the Group’s borrowings was 2.6 years (2015: 3.6 years),with only US$3 million of committed facilities due tomature before the end of 2017.

Principal risks and uncertainties
A review of the principal risks and uncertainties facing
the Group is set out on pages 89 and 90.

Stuart Dickie
Chief Financial Officer
2nd March 201721

22 Mandarin Oriental International Limited

Directors’ Profiles

Ben Keswick* Chairman and Managing Director
Mr Ben Keswick joined the Board as Managing
Director in 2012 and became Chairman in 2013.
He has held a number of executive positions sincejoining the Jardine Matheson group in 1998, including
finance director and then chief executive officer
of Jardine Pacific between 2003 and 2007 and,
thereafter, group managing director of Jardine Cycle &Carriage until 2012. He has an MBA from INSEAD.
Mr Keswick is chairman of Jardine Matheson Limited
and Jardine Cycle & Carriage and a commissionerof Astra. He is also chairman and managing directorof Dairy Farm and Hongkong Land, managing
director of Jardine Matheson and Jardine Strategic,
and a director of Jardine Pacific and Jardine Motors.
James Riley * Group Chief Executive
Mr Riley joined the Board as Group Chief Executive
in April 2016. He has previously held a number ofsenior executive positions in the Jardine Matheson
group since joining from Kleinwort Benson in 1993.
A Chartered Accountant, he was group finance directorof Jardine Matheson from 2005 to March 2016. He has
been a director of Mandarin Oriental Hotel GroupInternational since 2005.
Stuart Dickie* Chief Financial Officer
Mr Dickie joined the Board as Chief Financial
Officer in 2010. He was director of Corporate
Finance of the Group from 2000. Prior to joining
the Group, Mr Dickie was a senior manager at
PricewaterhouseCoopers in Hong Kong from 1994
to 2000. He is a Chartered Accountant and a Memberof the Association of Corporate Treasurers.
Edouard Ettedgui
Mr Ettedgui joined the Board in 1998 and wasGroup Chief Executive until he stepped down fromexecutive office in March 2016. He was formerly groupfinance director of Dairy Farm, prior to which he wasbusiness development director of British American
Tobacco. He is also a director of Yum China Holdings.

* Executive Director

Mark Greenberg
Mr Greenberg joined the Board in 2006. He isgroup strategy director of Jardine Matheson. He had
previously spent 16 years in investment banking with
Dresdner Kleinwort Wasserstein in London. He is alsoa director of Jardine Matheson Limited, Dairy Farm,
Hongkong Land and Jardine Cycle & Carriage, anda commissioner of Astra and Bank Permata.
Julian Hui
Mr Hui joined the Board in 1994. He is an executive
director of Owens Company, and a director ofCentral Development and Jardine Strategic.
Adam Keswick
Mr Adam Keswick joined the Board in 2012.
Having joined Jardine Matheson in 2001, he wasappointed to the board in 2007 and was deputy
managing director from 2012 to 2016. Mr Keswick
is also deputy chairman of Jardine Lloyd Thompson
and a director of Dairy Farm, Hongkong Land,
Jardine Matheson and Jardine Strategic. He is alsoa director of Ferrari, and a supervisory board memberof Rothschild & Co.
Sir Henry Keswick
Sir Henry joined the Board in 1988. He is chairmanof Jardine Matheson, having first joined the group in
1961, and is also chairman of Jardine Strategic. He isa director of Dairy Farm and Hongkong Land. He is
also vice chairman of the Hong Kong Association.
Simon Keswick
Mr Simon Keswick joined the Board in 1986 andwas Chairman of the Company from 1986 to 2013.
He joined the Jardine Matheson group in 1962 andis a director of Dairy Farm, Hongkong Land, Jardine
Matheson and Jardine Strategic.
Dr Richard Lee
Dr Lee joined the Board in 1987. Dr Lee’s principal
business interests are in the manufacturing of textiles
and apparel in Southeast Asia, and he is the honorary
chairman of TAL Apparel. He is also a director of
Jardine Matheson and Hongkong Land.

Annual Report 2016

Lincoln K.K. Leong
Mr Leong joined the Board in 2012. He is a Chartered
Accountant and has extensive experience in theaccountancy and investment banking industries.
Mr Leong is also chief executive officer of MTR
Corporation.
Anthony Nightingale
Mr Nightingale joined the Board in 2006 and was
Managing Director of the Company from 2006 to
2012. He is also a director of Dairy Farm, HongkongLand, Jardine Cycle & Carriage, Jardine Matheson,
Jardine Strategic, Prudential, Schindler, Shui On
Land and Vitasoy, and a commissioner of Astra.
Mr Nightingale also holds a number of senior public
appointments, including acting as a non-official
member of the Commission on Strategic Development,a Hong Kong representative to the Asia Pacific
Economic Cooperation (APEC) Business Advisory
Council and a director of the UK-ASEAN BusinessCouncil. He is chairman of The Sailors Home andMissions to Seamen in Hong Kong.
Y.K. Pang
Mr Pang joined the Board in August 2016. He is
deputy managing director of Jardine Matheson,
chairman of Jardine Pacific, and chairman andchief executive of Jardine Motors. He previously
held a number of senior executive positions in the
Jardine Matheson group, which he joined in 1984,
including chief executive of Hongkong Land between
2007 and 2016. Mr Pang is also deputy chairmanof Jardine Matheson Limited, and a director of
Dairy Farm, Hongkong Land, Jardine Matheson(China), Jardine Strategic, Yonghui Superstoresand Zhongsheng Group Holdings. He is chairmanof the Employers’ Federation of Hong Kong anda past chairman of the Hong Kong General Chamberof Commerce.
Jeremy Parr
Mr Parr joined the Board in 2015. He is general
counsel of the Jardine Matheson group. He waspreviously a senior corporate partner with Linklaters,
where he was the global head of the firm’s corporate
division, based in London. Mr Parr is also a directorof Jardine Matheson Limited, Dairy Farm andJardine Matheson.

Lord Powell of Bayswater, kcmg
Lord Powell joined the Board in 1992. He waspreviously Private Secretary and adviser on foreign
affairs and defence to British Prime Ministers,
Baroness Thatcher and Rt Hon John Major.
He is a director of Hongkong Land, LVMH MoëtHennessy Louis Vuitton, Matheson & Co, Northern
Trust Corporation and Textron Corporation.
Previously president of the China-Britain BusinessCouncil and chairman of the Singapore-British
Business Council, he is currently a British Business
Ambassador. He is an independent member ofthe House of Lords.
Lord Sassoon, kt
Lord Sassoon joined the Board in 2013. He began
his career at KPMG, before joining SG Warburg(later UBS Warburg) in 1985. From 2002 to 2006
he was in the United Kingdom Treasury as a civil
servant, where he had responsibility for financial
services and enterprise policy. Following this,he chaired the Financial Action Task Force; andconducted a review of the UK’s system of financial
regulation. From 2010 to 2013 Lord Sassoon was
the first Commercial Secretary to the Treasury andacted as the Government’s Front Bench Treasury
spokesman in the House of Lords. He is a directorof Dairy Farm, Hongkong Land, Jardine Lloyd
Thompson and Jardine Matheson. He is alsochairman of the China-Britain Business Council.
James Watkins
Mr Watkins joined the Board in 1997. He wasa director and group general counsel of Jardine
Matheson from 1997 to 2003. Mr Watkins qualified
as a solicitor in 1969 and was formerly a partnerof Linklaters. He is also a director of Asia Satellite
Telecommunications Holdings, Hongkong Land,
IL&FS India Realty Fund II and Jardine Cycle& Carriage.
Percy Weatherall
Mr Weatherall joined the Board in 2000 and was
Managing Director from 2000 to 2006. He first joined
the Jardine Matheson group in 1976 and retired fromexecutive office in 2006. He is also a director of Dairy
Farm, Hongkong Land, Jardine Matheson and Jardine
Strategic. He is chairman of Corney & Barrow and
the Nith District Salmon Fishery Board.

23

24 Mandarin Oriental International Limited

Consolidated Profit and Loss Accountfor the year ended 31st December 2016

2016

2015

Note

Underlying						business		
performance		
US$m		

1

597.4		–

597.4607.3		

–		

607.3

Cost of sales		(383.4)–(383.4)(362.1)–(362.1)Gross profit		

214.0		–

214.0245.2		

–		

245.2

Selling and distribution costs		

(39.7)–		(39.7)(37.0)–(37.0 )

Administration expenses		(104.5)(1.8)(106.3)(100.4)(0.5)(100.9 )69.8		

(1.8)

68.0

107.8		

(0.5)

107.3

Financing charges		(12.1)–		(12.1)(13.7)–(13.7 )

Interest income		

1.3		

–		

1.3

1.9		

–		

1.9

Revenue

Operating profit

2

Non-trading				items		US$m		

Underlying
business		Total		 performance		
US$m		
US$m		

Non-trading
items		US$m		Total
US$m

Net financing charges

3(10.8)–		(10.8)(11.8)–(11.8 )

Share of results of associates
and joint ventures4

11.2		

(0.3)

10.9

11.0		

(0.5)

10.5

70.2		

(2.1)

68.1

107.0		

(1.0)

106.0

(13.7)–		(13.7)(16.6)–(16.6 )

56.5		

(2.1)

54.4

90.4		

(1.0)

89.4

57.3		

(2.1)

55.2

90.3		

(1.0)

89.3

(0.8)

–		

(0.8)

0.1		

–		

0.1

		
56.5		
(2.1)
54.4

90.4		

(1.0)

89.4

Profit before tax		
Tax

5

Profit after tax		
Attributable to:Shareholders of the Company

6&7

Non-controlling interests		

US¢				

US¢		

US¢				

US¢

– basic

4.56				4.407.53				7.44– diluted

4.54				4.387.50				7.41Earnings per share

6

Annual Report 201625

Consolidated Statement of Comprehensive Income
for the year ended 31st December 2016		
2016		
2015
Note
US$m		
US$m

Profit for the year		

54.4

89.4

Other comprehensive (expense)/income
Items that will not be reclassified to profit or loss:
Remeasurements of defined benefit plans

12

(3.1)

(5.4 )Tax on items that will not be reclassified

5

0.5

0.9

		
(2.6)
(4.5 )
Items that may be reclassified subsequently to profit or loss:
Net exchange translation differences(56.1)(43.3 )–

(0.6 )– net gains arising during the year		

2.5–

Tax relating to items that may be reclassified

5

(0.4)

–

Share of other comprehensive expense of associates and joint ventures		(1.7)(11.7 )– net losses arising during the year		
Revaluation of other investments– transfer to profit and loss		Cash flow hedges		(55.7)(55.6 )
Other comprehensive expense for the year, net of tax		

(58.3)(60.1 )

Total comprehensive (expense)/income for the year		

(3.9)

29.3

Shareholders of the Company		

(3.0)

29.3

Non-controlling interests		

(0.9)

–

Attributable to:

		
(3.9)
29.3

26 Mandarin Oriental International Limited

Consolidated Balance Sheetat 31st December 2016		
2016		
2015
Note
US$m		US$m

Net assets
Intangible assets

8

44.3

44.1

Tangible assets

9

1,352.1

1,255.0

Associates and joint ventures

10

163.8

164.4

Other investments		

10.7

10.2

Loans receivable

11

–

–

Deferred tax assets

13

2.6

2.8

Non-current assets		

1,573.5

1,476.5

Stocks		
5.9
6.0
14

94.2

89.9

Current tax assets		

5.2

1.8

15

182.6

308.6

Current assets		

287.9

406.3

Creditors and accruals

16(140.1)(138.6 )Current borrowings

17

(2.5)

(4.2 )

Current tax liabilities		(8.7)(9.3 )

Current liabilities		

(151.3)(152.1 )Net current assets		

136.6

254.2

Long-term borrowings

17(477.4)(436.2 )Deferred tax liabilities

13(56.1)(59.8 )

Pension liabilities

12

(3.2)

–

Other non-current liabilities

25–(3.0 )

Debtors and prepayments

Bank and cash balances		
1,173.4
1,231.7
Total equity
Share capital

20

62.8

62.8

Share premium

21

490.4

490.3

Revenue and other reserves		

616.2

673.6

Shareholders’ funds		

1,169.4

1,226.7

Non-controlling interests		

4.0

5.0

		
1,173.4
1,231.7

Approved by the Board of Directors
Ben Keswick
James Riley
Directors
2nd March 2017

Annual Report 2016

Consolidated Statement of Changes in Equity
for the year ended 31st December 2016

Attributable to Attributable to
Exchange shareholders of non-controlling
reserves the Company
interests
US$m
US$m
US$m

Share
capitalUS$m

Sharepremium
US$m

Capitalreserves
US$m

Revenue
reserves
US$m

Hedging
reserves
US$m

62.8

490.3

284.5

504.7

(2.7 )(112.9 )1,226.7

5.0

1,231.7

–

–

–

52.6

2.1

(57.7 )

(3.0 )(0.9 )(3.9 )

23

–

–

–

(56.5 )––

(56.5 )–

(56.5 )

Dividends paid to
non-controlling interests

–

–

–

–

–

–

–

(0.1 )(0.1 )

Share-based long-term
incentive plans

–

–

2.2

–

–

–

2.2

–

2.2

Transfer–

0.1(0.5 )

0.4

–

–

–

–

–

62.8

490.4

286.2

501.2

(0.6 )(170.6 )1,169.4

4.0

1,173.4

50.2

188.2

283.1

495.6

(2.7 )(58.0 )

956.4

5.0

961.4

–

–

–

84.2

–

(54.9 )

29.3

–

29.3

–

–

–

(75.3 )––

(75.3 )–

(75.3 )

12.6

301.4

–

–

–

–

314.0

–

314.0

Share-based long-term
incentive plans

–

–

2.3

–

–

–

2.3

–

2.3

Transfer–

0.7(0.9 )

0.2

–

–

–

–

–

62.8

490.3

284.5

504.7

(2.7 )(112.9 )1,226.7

5.0

1,231.7

Note

Total
equityUS$m2016
At 1st January
Total comprehensive
incomeDividends paid by
the Company

At 31st December
2015
At 1st January
Total comprehensive
incomeDividends paid by
the Company
Issue of shares

At 31st December

23

Total comprehensive income included in revenue reserves comprises profit attributable to shareholders of the Company
of US$55.2 million (2015: US$89.3 million) and net actuarial loss on employee defined benefit plans of US$2.6 million(2015: US$4.5 million). In addition, in 2015, total comprehensive income included in revenue reserves was also statedafter deducting a US$0.6 million fair value gain on other investments which was transferred to the profit and loss account.

27

28 Mandarin Oriental International Limited

Consolidated Cash Flow Statement
for the year ended 31st December 2016		
2016		
2015
Note
US$m		
US$m

Operating activities
Operating profit

2

68.0

107.3

Depreciation

9

57.7

50.6

Amortization of intangible assets

8

2.1

2.3

Other non-cash items

24a

2.7

2.2

Movements in working capital

24b

(3.8)

(1.6 )

Interest received		

1.3

2.0

Interest and other financing charges paid		

(10.4)(12.1 )Tax paid		

(19.0)(18.5 )

		
98.6
132.2
Dividends and interest from associates and joint ventures		

9.1

8.0

Cash flows from operating activities		
107.7
140.2
Investing activities
Purchase of tangible assets		(77.0)(50.0 )

Purchase of intangible assets		(2.7)(1.5 )

Acquisition of Mandarin Oriental, Boston

26(140.0)–Acquisition of Hotel Ritz, Madrid

27–(73.3 )

Purchase of other investments		

(1.3)(0.9 )

Advance to joint ventures

24c

(2.8)

(0.1 )

Repayment of loans to associates

24d

0.9

0.6

Sale of tangible assets		

0.1–

Sale of other investments		–

0.8

Cash flows from investing activities		
(222.8)(124.4 )Financing activities
24e

–

314.0

Drawdown of borrowings		

51.5

–

Repayment of borrowings		

(1.6)(261.5 )Dividends paid by the Company

23(56.5)(75.3 )

Dividends paid to non-controlling interests		

(0.1)

–

Issue of shares

Cash flows from financing activities		(6.7)(22.8 )Net decrease in cash and cash equivalents		

(121.8)(7.0 )Cash and cash equivalents at 1st January		

308.6

324.3

Effect of exchange rate changes		(4.3)(8.7 )

182.5

308.6

Cash and cash equivalents at 31st December

24f

Annual Report 2016

Principal Accounting Policies

A Basis of preparation
The financial statements have been prepared in accordance with International Financial Reporting Standards (‘IFRS’),
including International Accounting Standards (‘IAS’) and Interpretations adopted by the International AccountingStandards Board. The financial statements have been prepared on a going concern basis and under the historical costconvention except as disclosed in the accounting policies below.

Amendments effective in 2016 which are relevant to the Group’s operations:
Amendments to IFRS 11
Amendments to IAS 1
Amendments to IAS 16 and IAS 38
Annual Improvements to IFRSs

Accounting for Acquisitions of Interests in Joint Operations
Disclosure Initiative: Presentation of Financial Statements
Clarification of Acceptable Methods of Depreciation and Amortization2012 – 2014 Cycle

The adoption of these amendments does not have a significant effect on the Group’s accounting policies and disclosures.

New standards and amendments effective after 2016 which are relevant to the Group’s operations
and yet to be adopted:
Certain new standards and amendments, which are effective after 2016, have been published and will be adopted by
the Group from their effective dates. The Group is currently assessing the potential impact of these standards andamendments but expects their adoption will not have a significant effect on the Group’s consolidated financial
statements except as set out below.
IFRS 9 ‘Financial Instruments’ (effective for accounting periods beginning on or after 1st January 2018), which
replaces IAS 39 ‘Financial Instruments: Recognition and Measurement’, addresses the classification and measurementof financial assets and liabilities and includes a new expected credit losses model for financial assets that replaces theincurred loss impairment model used today. A substantially-reformed approach to hedging accounting is introduced.
It also carries forward the guidance on recognition and derecognition of financial instruments from IAS 39. The Group
does not expect the new guidance to have a significant impact on the classification and measurement of its financial
assets and financial liabilities. While the Group is still assessing the impact of how its impairment provisions would be
affected by the new impairment model, it may result in an earlier recognition of credit losses. The new hedge accounting
rules will align the accounting for hedging instruments closely with the Group’s risk management practices. Nevertheless,the Group does not expect a significant impact on the accounting for its hedging relationships.
IFRS 15 ‘Revenue from Contracts with Customers’ (effective for accounting periods beginning on or after 1st January2018), establishes a comprehensive framework for determining when to recognize revenue and how much revenue torecognize. lFRS 15 replaces IAS 11 ‘Construction Contracts’ and IAS 18 ‘Revenue’ which covers contracts for goods
and services. The core principle in that framework is that revenue is recognized when control of a good or service
transfers to a customer. The new standard will also result in new disclosure requirements on revenue, provide guidance
for transactions that were not previously addressed comprehensively (for example, service revenue and contract
modifications) and improve guidance for multiple-element arrangements. A preliminary review was completed andthe Group is undertaking a detailed assessment of the impact of the new rules on the Group’s financial statements.

2930 Mandarin Oriental International Limited

Principal Accounting Policies Continued

A Basis of preparation continued
IFRS 16 ‘Leases’ (effective for accounting periods beginning on or after 1st January 2019) replaces IAS 17 ‘Leases’ andrelated interpretations. It will result in lessees bringing almost all their leases onto the balance sheet as the distinction
between operating leases and finance leases is removed. The model requires a lessee to recognize a right-of-use asset(the right to use the underlying leased asset) and a lease liability (the obligation to make lease payments) except forleases with a term of less than 12 months or with low-value. The accounting for lessors will not change significantly.
IFRS 16 will affect primarily the accounting for the Group’s operating leases. A preliminary review was completed
and the Group is yet to undertake a detailed assessment on how the new lease model will affect the Group’s profit,
classification of cash flows and balance sheet position.
The principal operating subsidiaries, associates and joint ventures have different functional currencies in line with theeconomic environments of the locations in which they operate. The functional currency of the Company is UnitedStates dollars. The consolidated financial statements are presented in United States dollars.
The Group’s reportable segments are set out in note 1.

B Basis of consolidationi) The consolidated financial statements include the financial statements of the Company, its subsidiaries, and theGroup’s interests in associates and joint ventures.
ii) A subsidiary is an entity over which the Group has control. The Group controls an entity when the Group is
exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those
returns through its power over the entity.
The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost ofan acquisition includes the fair value at the acquisition date of any contingent consideration. The Group recognizes
the non-controlling interest’s proportionate share of the recognized identifiable net assets of the acquired subsidiary.
In a business combination achieved in stages, the Group remeasures its previously held interest in the acquiree
at its acquisition-date fair value and recognizes the resulting gain or loss in profit and loss. Changes in a parent’s
ownership interest in a subsidiary that do not result in the loss of control are accounted for as equity transactions.
When control over a previous subsidiary is lost, any remaining interest in the entity is remeasured at fair value andthe resulting gain or loss is recognized in profit and loss.
All material intercompany transactions, balances and unrealized surpluses and deficits on transactions between
Group companies have been eliminated. The cost of and related income arising from shares held in the Company
by subsidiaries are eliminated from shareholders’ funds and non-controlling interests, and profit, respectively.
iii) An associate is an entity, not being a subsidiary or joint venture, over which the Group exercises significant
influence. A joint venture is a type of joint arrangement whereby the parties that have joint control of thearrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharingof control of an arrangement, which exists only when decisions about the relevant activities require unanimous
consent of the parties sharing control.
Associates and joint ventures are included on the equity basis of accounting.
Profits and losses resulting from upstream and downstream transactions between the Group and its associates andjoint ventures are recognized in the consolidated financial statements only to the extent of unrelated investor’sinterests in the associates and joint ventures.

Annual Report 2016

B Basis of consolidation continuediv) Non-controlling interests represent the proportion of the results and net assets of subsidiaries and their associates
and joint ventures not attributable to the Group.
v) The results of subsidiaries, associates and joint ventures are included or excluded from their effective dates ofacquisition or disposal, respectively. The results of entities other than subsidiaries, associates and joint ventures
are included to the extent of dividends received when the right to receive such dividend is established.

C Foreign currencies
Transactions in foreign currencies are accounted for at the exchange rates ruling at the transaction dates.
Assets and liabilities of subsidiaries, associates and joint ventures, together with all other monetary assets and liabilities
expressed in foreign currencies, are translated into United States dollars at the rates of exchange ruling at the year end.
Results expressed in foreign currencies are translated into United States dollars at the average rates of exchange ruling
during the year, which approximate the exchange rates at the dates of the transactions.
Exchange differences arising from the retranslation of the net investment in foreign subsidiaries, associates and joint
ventures, and of financial instruments which are designated as hedges of such investments, are recognized in othercomprehensive income and accumulated in equity under exchange reserves. On the disposal of these investments,
such exchange differences are recognized in profit and loss. Exchange differences on available-for-sale investments
are recognized in other comprehensive income as part of the gains and losses arising from changes in their fair value.
Exchange differences relating to changes in the amortized cost of monetary securities classified as available-for-saleand all other exchange differences are recognized in profit and loss.
Goodwill and fair value adjustments arising on acquisition of a foreign entity after 1st January 2003 are treatedas assets and liabilities of the foreign entity and translated into United States dollars at the rate of exchange rulingat the year end.

D Impairment of non-financial assets
Assets that have indefinite useful lives are not subject to amortization and are tested for impairment annually andwhenever there is an indication that the assets may be impaired. Assets that are subject to amortization are reviewed
for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
For the purpose of assessing impairment, assets are grouped at the lowest level for which there is separately identifiable
cash flows. Cash-generating units or groups of cash-generating units to which goodwill has been allocated are tested
for impairment annually and whenever there is an indication that the units may be impaired. An impairment loss isrecognized for the amount by which the carrying amount of the asset exceeds its recoverable amount, which is thehigher of an asset’s fair value less costs to sell and value in use. Non-financial assets other than goodwill that sufferedan impairment are reviewed for possible reversal of the impairment annually.

31

32 Mandarin Oriental International Limited

Principal Accounting Policies Continued

E Intangible assetsi) Goodwill represents the excess of the sum of the consideration transferred, the amount of any non-controllinginterests in the acquiree, and the acquisition-date fair value of any previously held equity interest in the acquiree
over the acquisition-date fair value of the Group’s share of the net identifiable assets acquired. Non-controllinginterests are measured at their proportionate share of the net identifiable assets at the acquisition date. If the costof acquisition is less than the fair value of the net assets acquired, the difference is recognized directly in profit
and loss. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisitions ofassociates and joint ventures is included in investment in associates and joint ventures. Goodwill is allocatedto cash-generating units or groups of cash-generating units for the purpose of impairment testing and is carriedat cost less accumulated impairment loss.
The profit or loss on disposal of subsidiaries, associates and joint ventures is stated after deducting the carrying
amount of goodwill relating to the entity sold.
ii) Leasehold land represents payments to third parties to acquire short-term interests in property. These payments arestated at cost and are amortized over the useful life of the lease which includes the renewal period if the lease can be
renewed by the Group without significant cost.
iii) Computer software represents acquired computer software licences which are capitalized on the basis of the costs
incurred to acquire and bring to use the specific software and are stated at cost less accumulated amortization.
Amortization is calculated on the straight line basis to allocate the cost over their estimated useful lives.
iv) Development costs directly attributable to hotel projects under development, including borrowing costs, which
are capitalized to the extent that such expenditure is expected to generate future economic benefits and uponcompletion of the project are included in non-current assets. Capitalized development costs are amortized over
the term of the management contracts.

F Tangible fixed assets and depreciation
Freehold land and buildings, and the building component of owner-occupied leasehold properties are stated at costless any accumulated depreciation and impairment. Long-term interests in leasehold land are classified as finance leases
and grouped under tangible assets if substantially all risks and rewards relating to the land have been transferred to theGroup, and are amortized over the useful life of the lease. Grants related to tangible assets are deducted in arriving at
the carrying amount of the assets. Other tangible fixed assets are stated at cost less amounts provided for depreciation.
Depreciation of tangible fixed assets is calculated on the straight line basis to allocate the cost or valuation of each asset
to its residual value over its estimated useful life. The residual values and useful lives are reviewed at each balance sheet
date. The estimated useful lives are as follows:
Freehold and long leasehold buildings
Properties on leases with less than 20 years
Surfaces, finishes and services of hotel properties
Leasehold improvements
Leasehold land
Plant and machinery
Furniture, equipment and motor vehicles

21 years to 150 years
over unexpired period of lease
20 years to 30 years
10 years or period of the lease
period of the lease
5 years to 15 years
3 years to 10 years

No depreciation is provided on freehold land as it is deemed to have an indefinite life.
Where the carrying amount of a tangible fixed asset is greater than its estimated recoverable amount, it is written down
immediately to its recoverable amount.
The profit or loss on disposal of tangible fixed assets is recognized by reference to their carrying amount.

Annual Report 2016

G Loans receivable
Loans receivable are non-derivative financial assets with fixed or determinable payments that are not quoted inan active market and are carried at amortized cost using the effective interest method.
Loans receivable are classified as non-current assets unless their maturities are within 12 months after the balance
sheet date.

H Investmentsi) Investments are classified by management as available for sale or held to maturity on initial recognition.
Available-for-sale investments are shown at fair value. Gains and losses arising from changes in fair value arerecognized in other comprehensive income and accumulated in equity. On the disposal of an investment or when
an investment is determined to be impaired, the cumulative gain or loss previously deferred in equity is recognizedin profit and loss. Held-to-maturity investments are shown at amortized cost. Investments are classified under
non-current assets unless they are expected to be realized within 12 months after the balance sheet date.
ii) At each balance sheet date, the Group assesses whether there is objective evidence that an investment is impaired.
In the case of equity securities classified as available for sale, a significant or prolonged decline in the fair value ofthe security below its cost is considered as an indicator that the securities are impaired and are recognized in profit
and loss.
iii) All purchases and sales of investments are recognized on the trade date, which is the date that the Group commits
to purchase or sell the investment.

I Leases
Leases are classified as finance leases when the terms of the lease transfer substantially all the risks and rewards ofownership to the lessee. All other leases are classified as operating leases.
i) Amount due from lessees under finance leases are recorded as receivables at the amount of the Group’s net
investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic
rate of return on the Group’s net investment outstanding in respect of the leases.
ii) Payments made under operating leases (net of any incentives received from the lessor) are charged to profit and loss
on a straight line basis over the period of the lease. When a lease is terminated before the lease period has expired,any payment required to be made to the lessor by way of penalty is recognized as an expense in the year in which
termination takes place.

J Stocks
Stocks, which principally comprise beverages and consumables, are stated at the lower of cost and net realizable value.
Cost is determined by the first-in, first-out method.

K Debtors
Debtors, excluding derivative financial instruments, are measured at amortized cost except where the effect of
discounting would be immaterial. Provision for impairment is established when there is objective evidence that theoutstanding amounts will not be collected. Significant financial difficulties of the debtor, probability that the debtor
will enter bankruptcy or financial reorganization, and default or delinquency in payments are considered indicatorsthat the debtor is impaired. The carrying amount of the asset is reduced through the use of an allowance account andthe amount of the loss is recognized in arriving at operating profit. When a debtor is uncollectible, it is written off
against the allowance account. Subsequent recoveries of amount previously written off are credited to profit and loss.
Debtors with maturities greater than 12 months after the balance sheet date are classified under non-current assets.

33

34 Mandarin Oriental International Limited

Principal Accounting Policies Continued

L Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents comprise deposits with banks and financial
institutions and bank and cash balances, net of bank overdrafts. In the balance sheet, bank overdrafts are includedin current borrowings.

M Provisions
Provisions are recognized when the Group has present legal or constructive obligations as a result of past events,
it is probable that an outflow of resources embodying economic benefits will be required to settle the obligations,and a reliable estimate of the amount of the obligations can be made.

N Borrowings and borrowing costs
Borrowings are initially recognized at fair value, net of transaction costs incurred. In subsequent periods, borrowings
are stated at amortized cost using the effective interest method.
Borrowing costs relating to major development projects are capitalized until the asset is substantially completed.
Capitalized borrowing costs are included as part of the cost of the asset. All other borrowing costs are expensed
as incurred.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of
the liability for at least 12 months after the balance sheet date.

O Government grants
Grants from governments are recognized at their fair value when there is reasonable assurance that the grant will bereceived and the Group will comply with all attached conditions.
Grants relating to the development of hotel property are deducted in arriving at the carrying amount of thehotel property.

P Current and deferred tax
The tax expense for the year comprises current and deferred tax. Tax is recognized in profit and loss, except to theextent that it relates to items recognized in other comprehensive income or direct in equity. In this case, the tax is
also recognized in other comprehensive income or directly in equity, respectively.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance
sheet date in the countries where the Group operates and generates taxable income. Management periodically evaluates
positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation.
It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred tax is provided, using the liability method, for all temporary differences arising between the tax bases of assets
and liabilities and their carrying values. Deferred tax is determined using tax rates and laws that have been enacted or
substantially enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realized
or the deferred tax liability is settled.

Annual Report 2016

P Current and deferred tax continued
Provision for deferred tax is made on the revaluation of certain non-current assets and, in relation to acquisitions, on
the difference between the fair value of the net assets acquired and their tax base. Deferred tax is provided on temporary
differences associated with investments in subsidiaries, associates and joint ventures, except where the Group is able tocontrol the reversal of the temporary difference and it is probable that the temporary difference will not reverse in theforeseeable future. Deferred tax assets relating to the carry forward of unused tax losses are recognized to the extent
that it is probable that future taxable profit will be available against which the unused tax losses can be utilized.

Q Employee benefitsi) Pension obligations
The Group operates a number of defined benefit and defined contribution plans, the assets of which are held in
trustee administered funds.
Pension accounting costs for defined benefit plans are assessed using the projected unit credit method. Under thismethod, the costs of providing pensions are charged to profit and loss spreading the regular cost over the service
lives of employees in accordance with the advice of qualified actuaries, who carry out a full valuation of majorplans every year. The pension obligations are measured as the present value of the estimated future cash outflows
by reference to market yields on high quality corporate bonds which have terms to maturity approximating theterms of the related liability. Plan assets are measured at fair value.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognizedin other comprehensive income in the year in which they occur.
Past service costs are recognized immediately in profit and loss.
The Group’s total contributions relating to the defined contribution plans are charged to profit and loss in the year
to which they relate.

ii) Share-based compensation
Share-based long-term incentive plans have been set up to provide incentives for selected executives. Awards cantake the form of share options with an exercise price based on the then prevailing market prices or such other priceset by the Directors or they can be share awards which will vest free of payment. Awards normally vest after thethird anniversary of the date of grant and may be subject to the achievement of performance conditions.
The fair value of the employee services received in exchange for the grant of the share options or the share awards
is recognized as an expense. The total amount to be expensed over the vesting period is determined by reference
to the fair value of the share options or the share awards granted as determined on the grant date. At each balance
sheet date, the Group revises its estimates of the number of share options that are expected to become exercisable
and the number of share awards which will vest free of payment. The impact of the revision of original estimates,
if any, is recognized in profit and loss.

35

36 Mandarin Oriental International Limited

Principal Accounting Policies Continued

R Derivative financial instruments
The Group only enters into derivative financial instruments in order to hedge underlying exposures. Derivative
financial instruments are initially recognized at fair value on the date a derivative contract is entered into and aresubsequently remeasured at their fair value. The method of recognizing the resulting gain or loss is dependent on thenature of the item being hedged. The Group designates certain derivatives as a hedge of a forecasted transaction or of
the foreign currency risk on a firm commitment (‘cash flow hedge’), or a hedge of a net investment in a foreign entity.
Changes in the fair value of derivatives that are designated and qualify as cash flow hedges and that are highly effective,
are recognized in other comprehensive income and accumulated in equity under hedging reserves. Changes in the fairvalue relating to the ineffective portion is recognized immediately in profit and loss. Where the forecasted transaction
or firm commitment results in the recognition of a non-financial asset or of a non-financial liability, the gains and losses
previously deferred in hedging reserves are transferred from hedging reserves and included in the initial measurementof the cost of the asset or liability. Otherwise, amounts deferred in hedging reserves are transferred to profit and loss
in the same periods during which the hedged firm commitment or forecasted transaction affects profit and loss.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting,any cumulative gain or loss existing in hedging reserves at that time remains in the hedging reserves and is recognizedwhen the committed or forecasted transaction ultimately is recognized in profit and loss. When a committed or
forecasted transaction is no longer expected to occur, the cumulative gain or loss that was reported in hedging reserves
is immediately transferred to profit and loss.
Certain derivative transactions, while providing effective economic hedges under the Group’s risk management policies,
do not qualify for hedge accounting under the specific rules in IAS 39. Changes in the fair value of any derivative
instruments that do not qualify for hedge accounting under IAS 39 are recognized immediately in profit and loss.
Hedges of net investments in foreign entities are accounted for on a similar basis to that used for cash flow hedges.
Any gain or loss on the hedging instrument relating to the effective portion of the hedge is recognized in othercomprehensive income and accumulated in exchange reserves; the gain or loss relating to the ineffective portionis recognized immediately in profit and loss.
The fair value of derivatives which are designated and qualify as effective hedges are classified as non-current assets
or liabilities if the remaining maturities of the hedged assets or liabilities are greater than 12 months after the balance
sheet date.

S Financial guarantee contracts
Financial guarantee contracts under which the Group accepts significant risk from a third party by agreeing tocompensate that party on the occurrence of a specified uncertain future event are accounted for in a manner similar
to insurance contracts. Provisions are recognized when it is probable that the Group has obligations under suchguarantees and an outflow of resources embodying economic benefits will be required to settle the obligations.

T Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally
enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset
and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must
be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the company
or the counterparty.

Annual Report 2016

U Non-trading items
Non-trading items are separately identified to provide greater understanding of the Group’s underlying businessperformance. Items classified as non-trading items include gains and losses arising from the sale of businesses,
investments and properties; impairment of non-depreciable intangible assets and other investments; provisions forthe closure of businesses; acquisition-related costs in business combinations; provisions against asset impairment andwritebacks; and other credits and charges of a non-recurring nature that require inclusion in order to provide additional
insight into underlying business performance.

V Earnings per share
Basic earnings per share are calculated on profit attributable to shareholders and on the weighted average number ofshares in issue during the year. For the purpose of calculating diluted earnings per share, the weighted average numberof shares is adjusted for the number of shares which are deemed to be issued for no consideration under the share-based
long-term incentive plans based on the average share price during the year.

W Dividends
Dividends proposed or declared after the balance sheet date are not recognized as a liability at the balance sheet date.

X Revenue recognition
Revenue is measured at the fair value of the consideration received and receivable and represents amounts receivablefor goods and services provided in the normal course of business, net of discounts and sales related taxes.
i) Revenue from hotel ownership comprises amounts earned in respect of services, facilities and goods supplied by thesubsidiary hotels. Revenue from the rendering of services is recognized when services are performed, provided thatthe amount can be measured reliably. Revenue from the sale of goods is recognized on the transfer of significant
risks and rewards of ownership, which generally coincides with the time when the goods are delivered to customers
and title has passed.
ii) Revenue from hotel management comprises gross fees earned from the management of all the hotels operated by
the Group. Management fees are recognized when earned as determined by the management contract.
Management fees charged to the subsidiary hotels are eliminated upon consolidation.
iii) Receipts under operating leases are accounted for on an accrual basis over the lease terms.
iv) Interest income is recognized on a time proportion basis taking into account the principal amounts outstanding
and the interest rates applicable.
v) Dividend income is recognized when the right to receive payment is established.

Y Pre-operating costs
Pre-operating costs are expensed as they are incurred.

37

38 Mandarin Oriental International Limited

Financial Risk Management

A Financial risk factors
The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk andinterest rate risk), credit risk and liquidity risk.
The Group’s treasury function co-ordinates, under the directions of the board of Mandarin Oriental Hotel GroupInternational Limited, financial risk management policies and their implementation on a group-wide basis. The
Group’s treasury policies are designed to manage the financial impact of fluctuations in interest rates and foreignexchange rates and to minimize the Group’s financial risks. The Group uses derivative financial instruments, principallyinterest rate swaps and caps, and forward foreign exchange contracts as appropriate for hedging transactions andmanaging the Group’s assets and liabilities in accordance with the Group’s financial risk management policies.
Financial derivative contracts are executed between third party banks and the Group entity that is directly exposed to
the risk being hedged. Certain derivative transactions, while providing effective economic hedges under the Group’s
risk management policies, do not qualify for hedge accounting under the specific rules in IAS 39. Changes in the fairvalue of any derivative instruments that do not qualify for hedge accounting under IAS 39 are recognized immediately
in the profit and loss account. It is the Group’s policy not to enter into derivative transactions for speculative purposes.
The notional amounts and fair values of derivative financial instruments at 31st December 2016 are disclosed innote 25.

i) Market risk
Foreign exchange risk
Entities within the Group are exposed to foreign exchange risk from future commercial transactions, net
investments in foreign operations and net monetary assets and liabilities that are denominated in a currency
that is not the entity’s functional currency.
Group entities are required to manage their foreign exchange risk against their functional currency. To manage
their foreign exchange risk arising from future commercial transactions, entities in the Group use forward foreignexchange contracts in a consistent manner to hedge firm and anticipated foreign exchange commitments. The
Group does not usually hedge its net investments in foreign operations except in circumstances where there is amaterial exposure arising from a currency that is anticipated to be volatile and the hedging is cost effective.
Currency risks as defined by IFRS 7 arise on account of monetary assets and liabilities being denominated in acurrency that is not the functional currency. In 2016 and 2015, the Group’s principal foreign exchange exposure
was with the Euro. At 31st December 2016, if the United States dollar had strengthened/weakened by 10%
against Euro with all other variables unchanged, the Group’s profit after tax would have been US$0.1 million
lower/higher (2015: US$0.1 million lower/higher), arising from foreign exchange losses/gains taken on
translation. The impact on amounts attributable to the shareholders of the Company would be US$0.1 million
lower/higher (2015: US$0.1 million lower/higher). This sensitivity analysis ignores any offsetting foreignexchange factors and has been determined assuming that the change in foreign exchange rates had occurredat the balance sheet date. The stated change represents management’s assessment of reasonably possible changes
in foreign exchange rates over the period until the next annual balance sheet date. There are no other significant
monetary balances held by Group companies at 31st December 2016 that are denominated in a non-functional
currency. Differences resulting from the translation of financial statements into the Group’s presentation currency
are not taken into consideration.

Annual Report 2016

A Financial risk factors continuedi) Market risk continued
Interest rate risk
The Group is exposed to interest rate risk through the impact of rate changes on interest bearing liabilities andassets. These exposures are managed partly by using natural hedges that arise from offsetting interest rate sensitive
assets and liabilities, and partly through fixed rate borrowings and the use of derivative financial instruments suchas interest rate swaps and caps. The Group monitors interest rate exposure on a monthly basis by currency andbusiness unit, taking into consideration proposed financing and hedging arrangements. The Group’s guideline is
to maintain 40% to 60% of its gross borrowings, in fixed rate instruments. At 31st December 2016, the Group’s
interest rate hedge was 49% (2015: 56%), with an average tenor of 2.0 years (2015: 3.1 years). The interest rate
profile of the Group’s borrowings after taking into account hedging transactions are set out in note 17.
Cash flow interest rate risk is the risk that changes in market interest rates will impact cash flows arising fromvariable rate financial instruments. Borrowings at floating rates therefore expose the Group to cash flow interest
rate risk. The Group manages this risk by using forward rate agreements to a maturity of one year, and by entering
into interest rate swaps and caps for a maturity of up to seven years. Forward rate agreements and interest rate
swaps have the economic effect of converting borrowings from floating rate to fixed rate, caps provide protection
against a rise in floating rates above a pre-determined rate.
At 31st December 2016, if interest rates had been 100 basis points higher/lower with all other variables held
constant, the Group’s profit after tax would have been US$1.9 million lower/higher (2015: US$0.5 million
lower/higher), and hedging reserves would have been US$1.5 million (2015: US$2.5 million) higher/lower,
as a result of fair value changes to cash flow hedges. The sensitivity analysis has been determined assumingthat the change in interest rates had occurred at the balance sheet date and had been applied to the exposure tointerest rate risk for both derivative and non-derivative financial instruments in existence at that date. There isno significant sensitivity resulting from interest rate caps. The 100 basis point increase or decrease represents
management’s assessment of a reasonably possible change in those interest rates which have the most impact on
the Group, specifically the United States, Hong Kong, United Kingdom and European rates, over the period
until the next annual balance sheet date. Changes in market interest rates affect the interest income or expenseof non-derivative variable-interest financial instruments, the interest payments of which are not designated ashedged items of cash flow hedges against interest rate risks. As a consequence, they are included in the calculationof profit after tax sensitivities. Changes in the market interest rate of financial instruments that were designated as
hedging instruments in a cash flow hedge to hedge payment fluctuations resulting from interest rate movements
affect the hedging reserves and are therefore taken into consideration in the equity-related sensitivity calculations.

3940 Mandarin Oriental International Limited

Financial Risk Management Continued

A Financial risk factors continuedii) Credit risk
The Group’s credit risk is primarily attributable to deposits with banks, credit exposures to customers andderivative financial instruments with a positive fair value. The Group has credit policies in place and theexposures to these credit risks are monitored on an ongoing basis.
The Group manages its deposits with banks and financial institutions and transactions involving derivative
financial instruments by monitoring credit ratings and capital adequacy ratios of counterparties, and limiting
the aggregate risk to any individual counterparty. The utilization of credit limits is regularly monitored. At
31st December 2016, 83% (2015: 89%) of deposits and balances with banks and financial institutions were madeto institutions with credit ratings of no less than A- (Fitch). Similarly transactions involving derivative financial
instruments are with banks with sound credit ratings and capital adequacy ratios. In developing countries it may
be necessary to deposit money with banks that have a lower credit rating, however the Group only enters into
derivative transactions with counterparties which have credit rating of at least investment grade. Management
does not expect any counterparty to fail to meet its obligations.
In respect of credit exposures to customers, the Group has policies in place to ensure that sales on credit without
collateral are made principally to travel agents and corporate companies with an appropriate credit history. Sales
to other customers are made in cash or by major credit cards.
The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance
sheet after deducting any impairment allowance.

iii) Liquidity risk
Prudent liquidity risk management includes managing the profile of debt maturities and funding sources,
maintaining sufficient cash and marketable securities, and ensuring the availability of funding from an adequate
amount of committed credit facilities and the ability to close out market positions. The Group’s ability to fund its
existing and prospective debt requirements is managed by maintaining diversified funding sources with adequate
committed funding lines from high quality lenders, and by monitoring rolling short-term forecasts of the Group’s
cash and gross debt on the basis of expected cash flows. In addition, long-term cash flows are projected to assist
with the Group’s long-term debt financing plans.
At 31st December 2016, total available borrowing facilities amounted to US$556 million (2015: US$578 million)of which US$480 million (2015: US$440 million) was drawn down. Undrawn committed facilities, in the formof revolving credit and term loan facilities totalled US$76 million (2015: US$138 million), in addition to cash
balances of US$183 million (2015: US$308 million).

Annual Report 2016

A Financial risk factors continuediii) Liquidity risk continued
The table below analyzes the Group’s non-derivative financial liabilities and net settled derivative financial
liabilities at 31st December 2016 and 2015 into relevant maturity groupings based on the remaining period atthe balance sheet date to the contractual maturity date. Derivative financial liabilities are included in the analysis
if their contractual maturities are essential for an understanding of the timing of the cash flows. The amounts
disclosed in the table are the contractual undiscounted cash flows.
Within		one		
year		
US$m		

Between		
one and		
two years		
US$m		

Between		
two and		
three years		
US$m		

Between		
three and		
four years		
US$m		

Between		four and		
five years		
US$m		

Beyond		Totalfive		 undiscounted
years		cash flows
US$m		
US$m

Borrowings

14.0		

11.3		

479.7		

0.2		

0.3		

4.0		

509.5

Creditors

134.1		

–		

–		

–		

–		

–		

134.1

0.8		

–		

–		

–		

–		

–		

0.8

Borrowings

14.0		

11.1		

8.4		436.7		

0.2		

2.1		

472.5

Creditors

133.5		

–		

–		

–		

–		

–		

133.5

2.0		

0.9		

0.1		

–		

–		

–		

3.0

2016

Net settled derivative
financial instruments
2015

Net settled derivative
financial instruments

B Capital management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern
whilst seeking to maximize benefits to shareholders and other stakeholders. Capital is equity as shown in the
consolidated balance sheet plus net debt.
The Group actively and regularly reviews and manages its capital structure to ensure optimal capital structure andshareholder returns, taking into consideration the future capital requirements of the Group and capital efficiency,
prevailing and projected profitability, projected operating cash flows, projected capital expenditures and projectedstrategic investment opportunities. In order to maintain or adjust the capital structure, the Group may adjust theamount of dividends paid to shareholders, purchase Group shares, return capital to shareholders, issue new sharesor sell assets to reduce debt.
The Group monitors capital on the basis of the Group’s consolidated gearing ratio and consolidated interest cover.
The gearing ratio is calculated as net debt divided by shareholders’ funds on an IFRS basis, where the Group’s
freehold and leasehold interests are carried in the consolidated balance sheet at amortized cost, or alternatively onan adjusted shareholders’ funds basis which takes into account the fair market value of the Group’s freehold andleasehold interests. Net debt is calculated as total borrowings less bank and cash balances. Interest cover is calculated
as underlying operating profit and the Group’s share of underlying results of associates and joint ventures divided by
net financing charges. The Group does not have a defined gearing or interest cover benchmark or range.
The ratios at 31st December 2016 and 2015 are as follows:
2016		

2015

– based on shareholders’ funds

25%		

11%

– based on adjusted shareholders’ funds

8%		

4%

7.5 times		

10.1 times

Gearing ratio

Interest cover41

42 Mandarin Oriental International Limited

Financial Risk Management Continued

C Fair value estimationi) Financial instruments that are measured at fair value
For financial instruments that are measured at fair value in the balance sheet, the corresponding fair value
measurements are disclosed by level of the following fair value measurement hierarchy:a) Inputs other than quoted prices in active markets that are observable for the asset or liability, either directly
or indirectly (‘observable current market transactions’)
The fair values of derivative financial instruments are determined using rates quoted by the Group’s bankers
at the balance sheet date. The rates for interest rate swaps and caps and forward foreign exchange contracts arecalculated by reference to market interest rates and foreign exchange rates.
The fair value of unlisted investments, which are classified as available-for-sale and mainly include club andschool debentures, are determined using prices quoted by brokers at the balance sheet date.
b) Inputs for assets or liabilities that are not based on observable market data (‘unobservable inputs’)
The fair value of other unlisted securities, which are classified as available-for-sale, is determined using
valuation techniques by reference to observable current market transactions (including price-to earnings
and price-to book ratios of listed securities of entities engaged in similar industries) or the market pricesof the underlying investments with certain degree of entity specific estimates.
There were no changes in valuation techniques during the year.
The table below analyzes financial instruments carried at fair value at 31st December 2016 and 2015,
by the levels in the fair value measurement hierarchy.
			
			
			
			

Observablecurrent market		transactions		
US$m		

Unobservable
inputs		
US$m		

Total
US$m

2.1		

8.6		

10.7

(0.6)

–		

(0.6 )

2.1 		

8.1		

10.2

(3.0)

–		

(3.0 )

2016
AssetsAvailable-for-sale financial assets– unlisted investments			
Liabilities
Derivatives designated at fair value– through other comprehensive income			2015
AssetsAvailable-for-sale financial assets– unlisted investments 			Liabilities
Derivatives designated at fair value– through other comprehensive income			

There were no transfers among the two categories during the year ended 31st December 2016 and 2015.
Movements of financial instruments which are valued based on unobservable inputs during the year ended
31st December are as follows:
Available-for-salefinancial assets
2016 		2015US$m 		US$m

At 1st January

8.1		

7.6

Additions0.5 		

0.5

At 31st December

8.6 		

8.1

Annual Report 2016

C Fair value estimation continuedii) Financial instruments that are not measured at fair value
The fair values of current debtors, bank and cash balances, current creditors and current borrowings are assumed
to approximate their carrying amounts due to the short-term maturities of these assets and liabilities.
The fair values of long-term borrowings are based on market prices or are estimated using the expected future
payments discounted at market interest rates.

D Financial instruments by category
The fair values of financial assets and financial liabilities, together with carrying amounts at 31st December 2016 and2015 are as follows:							Other							financial			
Derivatives				 instruments		
Loans and		
used for		
Available-		 at amortized		
receivables		hedging		
for-sale		
cost		
US$m		
US$m		
US$m		
US$m		

Total
carrying		
amount		
US$m		

Fair
value
US$m

2016
Assets–		–		10.7		

–		10.7		

10.7

Debtors

65.8		

–		

–		

–		

65.8		

65.8

Bank and cash balances

182.6		

–		

–		

–		

182.6		

182.6248.4		

–		10.7		

–		259.1		

259.1Borrowings

–		

–		

–		

(479.9)(479.9)(479.9 )Trade and other payables excluding
non-financial liabilities

–		

(0.6)

–		

(134.1)(134.7)(134.7 )

–		

(0.6)

–		

(614.0)(614.6)(614.6 )–		–		

10.2		

–		10.2		

10.2

Other investments

Liabilities

2015
AssetsOther investments
Debtors61.2		

–		

–		

–		

61.2		

61.2

Bank and cash balances

308.6		

–		

–		

–		

308.6		

308.6369.8		

–		10.2		

–		

380.0		

380.0Liabilities
Other non-current liabilities

–		

(3.0)

–		

–		

(3.0)

(3.0 )

Borrowings

–		

–		

–		

(440.4)(440.4)(440.3 )Trade and other payables excluding
non-financial liabilities

–		

–		

–		

(133.5)(133.5)(133.5 )

–		

(3.0)

–		

(573.9)(576.9)(576.8 )43

44 Mandarin Oriental International Limited

Critical Accounting Estimates and Judgements

Estimates and judgements used in preparing the financial statements are continually evaluated and are based on historicalexperience and other factors, including expectations of future events that are believed to be reasonable. The resulting
accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that havea significant effect on the carrying amounts of assets and liabilities are discussed below.

A Acquisition of subsidiaries, associates and joint ventures
The initial accounting on the acquisition of subsidiaries, associates and joint ventures involves identifying anddetermining the fair values to be assigned to the identifiable assets, liabilities and contingent liabilities of the acquired
entities. The fair values of leasehold land and tangible assets are determined by independent valuers by reference tomarket prices or present value of expected net cash flows from the assets. Any changes in the assumptions used andestimates made in determining the fair values, and management’s ability to measure reliably the contingent liabilitiesof the acquired entity will impact the carrying amount of these assets and liabilities.

B Impairment of assets
The Group tests annually whether goodwill and other assets that have indefinite useful lives suffered any impairment.
Other assets such as development costs are reviewed for impairment whenever events or changes in circumstancesindicate that the carrying amount of the asset exceeds its recoverable amount. The recoverable amount of an asset ora cash generating unit is determined based on the higher of its fair value less cost to sell and its value in use, calculatedon the basis of management’s assumptions and estimates. Changing the key assumptions, including the discountrates or the growth rate assumptions in the cash flow projections, could materially affect the value-in-use calculations.

C Tangible fixed assets and depreciation
Management determines the estimated useful lives and related depreciation charges for the Group’s tangible fixed
assets. Management will revise the depreciation charge where useful lives are different to those previously estimated,or it will write off or write down technically obsolete or non-strategic assets that have been abandoned.

D Income taxes
The Group is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining
the worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax
determination is uncertain during the ordinary course of business. Where the final tax outcome of these matters isdifferent from the amounts that were initially recorded, such differences will impact the income tax and deferred tax
provisions in the period in which such determination is made.
Provision of deferred tax follows the way management expects to recover or settle the carrying amount of therelated assets or liabilities, which the management may expect to recover through use, sale or combination of both.
Accordingly, deferred tax will be calculated at income tax rate, capital gains tax rate or combination of both.
Recognition of deferred tax assets, which principally relate to tax losses, depends on the management’s expectationof future taxable profit that will be available against which the tax losses can be utilized. The outcome of their actual
utilization may be different.

Annual Report 2016

E Pension obligations
The present value of the pension obligations depends on a number of factors that are determined on an actuarial basis
using a number of assumptions. The assumptions used in determining the net cost/income for pensions include thediscount rate. Any changes in these assumptions will impact the carrying amount of pension obligations.
The Group determines the appropriate discount rate at the end of each year. This is the interest rate that should be
used to determine the present value of estimated future cash outflows expected to be required to settle the pension
obligations. In determining the appropriate discount rate, the Group considers the interest rates of high-quality
corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms tomaturity approximating the terms of the related pension obligation.
Other key assumptions for pension obligations are based in part on current market conditions.

F Non-trading items
The Group uses underlying business performance in its internal financial reporting to distinguish between
the underlying profits and non-trading items. The identification of non-trading items requires judgementby management, but follows the consistent methodology as set out in the Group’s accounting policies.

45

46 Mandarin Oriental International Limited

Notes to the Financial Statements

1 Revenue
2016		
US$m		

2015
US$m

– Hong Kong

224.5

238.6

– Other Asia

106.4

100.1

– Europe

177.8

204.9

– The Americas

88.7

63.7

597.4

607.3

– Hotel ownership

565.4

574.0

– Hotel & Residences branding and management

60.7

63.6

– Less: intra-segment revenue(28.7)(30.3 )

597.4

607.3

Analysis by geographical area

Analysis by activity

Operating segments are identified on the basis of internal reports about components of the Group that are regularly
reviewed by the executive Directors of the Company for the purpose of resource allocation and performance assessment.
The Group is operated on a worldwide basis in four regions: Hong Kong, Other Asia, Europe and The Americas which
form the basis of its reportable segments. No operating segments have been aggregated to form the reportable segments.
In addition, the Group has two distinct business activities: Hotel ownership and Hotel & Residences branding andmanagement. The Group’s segmental information for non-current assets is set out in note 19.

Annual Report 2016

2 EBITDA (earnings before interest, tax, depreciation and amortization)
	  and operating profit from subsidiaries
2016		
US$m		

2015
US$m

– Hong Kong

69.3

83.2

– Other Asia

29.2

27.8

– Europe

25.2

44.5

– The Americas

5.9

5.2

129.6

160.7

(1.8)

(0.5 )EBITDA from subsidiaries

127.8

160.2

Less: depreciation and amortization(59.8)(52.9 )

Operating profit

68.0

107.3

– Hotel ownership

105.4

133.9

– Hotel & Residences branding and management

22.4

26.3

EBITDA from subsidiaries

127.8

160.2

– Hotel ownership

48.5

84.0

– Hotel & Residences branding and management

19.5

23.3

Operating profit

68.0

107.3

22.5

22.9

Analysis by geographical area

Underlying EBITDA from subsidiaries
Non-trading items– acquistion-related costs (refer note 7)

Analysis by activity

The following items have been credited/(charged) in arriving at operating profit:
Rental income (refer note 9)
Amortization of intangible assets (refer note 8)(2.1)(2.3 )

Depreciation of tangible assets (refer note 9)(57.7)(50.6 )

(239.5)(228.4 )– share options and share awards granted(2.2)(2.3 )– defined benefit pension plans (refer note 12)(4.9)(4.0 )– defined contribution pension plans(1.2)(1.1 )(247.8)(235.8 )0.5(0.6 )– minimum lease payments(9.0)(8.0 )– contingent rents(5.6)(4.9 )– subleases

0.3

0.3

(14.3)(12.6 )

– audit(1.5)(1.4 )– non-audit services(1.0)(1.2 )(2.5)(2.6 )

Employee benefit expense– salaries and benefits in kindNet foreign exchange gains/(losses)
Operating leases

Auditors’ remuneration

47

48 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

3 Net financing charges
2016		
US$m		

2015
US$m

– bank loans(10.0)(11.0 )

Commitment and other fees

(2.1)

(2.7 )

Financing charges(12.1)(13.7 )

Interest income

1.3

1.9

(10.8)(11.8 )

Interest expense

Net financing charges

4 Share of results of associates and joint ventures
			 Depreciation				
			
and		
Operating		
EBITDA		 amortization		
profit		
US$m		
US$m		
US$m		Net				financing				charges		Tax		
US$m		
US$m		

Net
profit/(loss)
US$m

2016
Analysis by geographical area
– Other Asia

20.9		

(7.8)

13.1		

(1.5)

(2.3)

9.3

– Europe

1.8		

(0.7)

1.1		

–		

–		

1.1

– The Americas

5.9		

(3.0)

2.9		

(2.2)

0.1		

0.8

28.6		

(11.5)

17.1		

(3.7)

(2.2)

11.2

(0.3)

–		

(0.3)

–		

–		

(0.3 )

28.3		

(11.5)

16.8		

(3.7)

(2.2)

10.9

– Hotel ownership27.4		

(11.0)

16.4		

(3.6)

(2.1)

10.7

– Other

0.9		

(0.5)

0.4		

(0.1)

(0.1)

0.2

28.3		

(11.5)

16.8		

(3.7)

(2.2)

10.9

– Other Asia

21.1		

(7.7)

13.4		

(1.4)

(2.2)

9.8

– Europe

1.5		

(0.3)

1.2		

–		

(0.3)

0.9

– The Americas

5.1		

(2.8)

2.3		

(2.1)

0.1		

0.3

27.7		

(10.8)

16.9		

(3.5)

(2.4)

11.0

Non-trading items– provision for litigation (refer note 7)

Analysis by activity

2015
Analysis by geographical area

Non-trading items– acquisition-related costs (refer note 7)

(0.5)

–		

(0.5)

–		

–		

(0.5 )

27.2		

(10.8)

16.4		

(3.5)

(2.4)

10.5

26.2		

(10.3)

15.9		

(3.4)

(2.3)

10.2

Analysis by activity– Hotel ownership– Other

1.0		

(0.5)

0.5		

(0.1)

(0.1)

0.3

27.2		

(10.8)

16.4		

(3.5)

(2.4)

10.5

Annual Report 2016

5 Tax
2016		
US$m		

2015
US$m

(14.9)(17.9 )

1.2

1.3

(13.7)(16.6 )

– Hong Kong

(8.8)

(10.7 )– Other Asia

(3.5)

(1.7 )– Europe(0.9)(4.1 )– The Americas(0.5)(0.1 )(13.7)(16.6 )

– Hotel ownership(8.1)(12.0 )

– Hotel & Residences branding and management(5.6)(4.6 )(13.7)(16.6 )Tax at applicable tax rate

(3.6)

(10.3 )

Income not subject to tax

0.6

0.4

Expenses not deductible for tax purposes(3.8)(2.4 )Tax losses and temporary differences not recognized(9.7)(5.7 )

Utilization of previously unrecognized tax losses and temporary differences

3.9

2.6

Withholding tax(1.8)(1.9 )

Over provision in prior years

0.7

0.9

Tax (charged)/credited to profit and loss is analyzed as follows:– current tax– deferred tax (refer note 13)

Analysis by geographical area

Analysis by activity

Reconciliation between tax expense and tax at the applicable tax rate*:–(0.2 )(13.7)(16.6 )

Remeasurements of defined benefit plans

0.5

0.9

Cash flow hedges

(0.4)

–

0.1

0.9

Other

Tax relating to components of other comprehensive income is analyzed as follows:

Share of tax charge of associates and joint ventures of US$2.2 million (2015: US$2.4 million) is included in share of
results of associates and joint ventures (refer note 4).
* The applicable tax rate for the year was 6% (2015: 11%) and represents the weighted average of the rates of taxation prevailing in the

territories in which the Group operates. The decrease in applicable tax rate was mainly caused by a change in the geographic mix of theGroup’s profits.

49

50 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

6 Earnings per share
Basic earnings per share are calculated on the profit attributable to shareholders of US$55.2 million(2015: US$89.3 million) and on the weighted average number of 1,255.9 million (2015: 1,199.6 million)
shares in issue during the year.
Diluted earnings per share are calculated on profit attributable to shareholders of US$55.2 million(2015: US$89.3 million) and on the weighted average number of 1,261.5 million (2015: 1,204.5 million)
shares in issue after adjusting for the numbers of shares which are deemed to be issued for no consideration
under the share-based long-term incentive plans based on average share price during the year.
The weighted average number of shares is arrived at as follows:
Ordinary shares in millions
2016		
2015

Weighted average number of shares for basic earnings per share calculation

1,255.9

1,199.6

5.6

4.9

1,261.5

1,204.5

Adjustment for shares deemed to be issued for no consideration
under the share-based long-term incentive plans
Weighted average number of shares for diluted earnings per share calculation

Additional basic and diluted earnings per share are also calculated based on underlying profit attributable
to shareholders. A reconciliation of earnings is set out below:

US$m		

2016
Basic		earnings		
per share		
US¢		

Profit attributable to shareholders

55.2		

4.40		

Non-trading items (refer note 7)

2.1

Underlying profit attributable
to shareholders

57.3		

Diluted				earnings				per share				
US¢		

4.38

US$m		

2015
Basic		earnings		
per share		US¢		

Dilutedearnings
per shareUS¢

89.3		

7.44		

7.41

7.53		

7.50

1.0
4.56		

4.54

90.3		

7 Non-trading items
An analysis of non-trading items after interest, tax and non-controlling interests is set out below:
2016		
US$m		

2015
US$m

1.8

0.5

–

0.5

1.8

1.0

Acquisition-related costs– administration expenses– share of results of associates and joint ventures

Provision for litigation– share of results of associates and joint ventures

0.3

–

2.1

1.0

Annual Report 2016

8 Intangible assets
			Goodwill		
US$m		

Leasehold		land		
US$m		

Computer		software		
US$m		Development
costs		US$m		

Total
US$m

23.9		

6.3		

20.5		

16.1		

66.8

Amortization and impairment

–		

(2.1)

(18.2)(2.4)(22.7 )Net book value at 1st January

23.9		

4.2		

2.3		

13.7		

44.1

Exchange differences

–		

–		

–		

(0.1)

(0.1 )

Additions

–		

–		

2.0		

0.7		

2.7

Amortization charge–		(0.1)

(1.6)

(0.4)

(2.1 )

Impairment charge

–		

–		

(0.3)

(0.3 )

2016
Cost

–		

Net book value at 31st December

23.9		

4.1		

2.7		

13.6		

44.3

Cost

23.9		

6.3		

17.8		

16.3		

64.3

–		

(2.2)

(15.1)(2.7)(20.0 )

23.9		

4.1		

2.7		

13.6		

44.3

23.9		

6.4		

19.4		

16.2		

65.9

Amortization and impairment

–		

(2.0)

(16.4)(1.9)(20.3 )Net book value at 1st January

23.9		

4.4		

3.0		

14.3		

45.6

–		(0.3)(0.4 )

Amortization and impairment

2015
Cost

Exchange differences–		(0.1)

Additions

–		

–		

1.1		

1.0		

2.1

Amortization charge–		(0.1)

(1.8)

(0.4)

(2.3 )

Impairment charge

–		

–		

–		

(0.9)

(0.9 )Net book value at 31st December

23.9		

4.2		

2.3		

13.7		

44.1

Cost

23.9		

6.3		

20.5		

16.1		

66.8

–		

(2.1)

(18.2)(2.4)(22.7 )

23.9		

4.2		

2.3		

13.7		

44.1

Amortization and impairment

Management has performed an impairment review of the carrying amount of goodwill at 31st December 2016.
For the purpose of impairment review, goodwill acquired has been allocated to the respective hotels and is reviewed
for impairment based on individual hotel forecast operating performance and cash flows. Cash flow projections forthe impairment reviews are based on updated individual hotel forecasts (including the following year’s individual
hotel budgets) with assumptions updated for the prevailing market conditions, and are discounted appropriately.
Key assumptions used for value-in-use calculations include average growth rates of between 5% to 7% to extrapolate
cash flows over a five-year period after which the growth rate is assumed up to 5% in perpetuity, which may vary acrossthe Group’s geographical locations, and are based on management expectations for the market development; and pre-tax
discount rates of around 8% to 13% applied to the cash flow projections. The discount rates used reflect business specificrisks relating to the business life-cycle and geographical location. On the basis of these reviews, management concluded
that no impairment is required.
The amortization charges are all recognized in arriving at operating profit and are included in cost of sales, selling anddistribution costs and administration expenses.
The amortization periods for intangible assets are as follows:
Leasehold land

10 to 30 years

Computer software

3 to 5 years

Development costs

15 to 40 years

5152 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

9 Tangible assets
			Freehold		
properties		
US$m		

Leasehold				Furnitureproperties &		
Plant &		
equipment &improvements		
machinery		 motor vehicles		
US$m		
US$m		
US$m		

Total
US$m

2016
Cost

650.0		

720.8		

140.2		

257.6		

1,768.6

Depreciation(80.5)(171.1)(74.6)(187.4)(513.6 )Net book value at 1st January

569.5		

549.7		

65.6		

70.2		

1,255.0

Exchange differences(38.7)(19.3)

(2.3)

(1.2)

(61.5 )

Additions125.6		

50.3		

8.5		

32.5		

216.9

Disposals

–		

–		

–		

(0.6)

(0.6 )(8.5)(20.0)(7.5)(21.7)(57.7 )Net book value at 31st December

647.9		

560.7		

64.3		

79.2		

1,352.1

Cost

733.3		

743.3		

139.4		

260.2		

1,876.2

Depreciation(85.4)(182.6)(75.1)(181.0)(524.1 )647.9		

560.7		

64.3		

79.2		

1,352.1

Depreciation charge

2015
Cost

695.8		

734.7		

144.6		

255.4		

1,830.5

Depreciation(72.9)(175.8)(73.1)(193.6)(515.4 )Net book value at 1st January

622.9		

558.9		

71.5		

61.8		

1,315.1

Exchange differences(46.7)

(6.2)

(4.3)

(1.9)

(59.1 )

Additions

1.5		

12.6		

5.1		

30.7		

49.9

Disposals

(0.1)

–		

–		

(0.2)

(0.3 )

Depreciation charge(8.1)(15.6)(6.7)(20.2)(50.6 )Net book value at 31st December

569.5		

549.7		

65.6		

70.2		

1,255.0

Cost

650.0		

720.8		

140.2		

257.6		

1,768.6

Depreciation(80.5)(171.1)(74.6)(187.4)(513.6 )569.5		

549.7		

65.6		

70.2		

1,255.0

Freehold properties include a property of US$111.6 million (2015: US$104.6 million), which is stated net oftax increment financing of US$22.2 million (2015: US$23.0 million) (refer note 18).
Net book value of leasehold properties acquired under finance leases amounted to US$183.0 million(2015: US$183.5 million).
Rental income from properties and other tangible assets amounted to US$22.5 million (2015: US$22.9 million)(refer note 2).

Annual Report 2016

9 Tangible assets continued
Future minimum rental payments receivable under non-cancellable leases are as follows:
2016		
US$m		

2015
US$mWithin one year

19.1

19.0

Between one and two years

14.9

13.2

Between two and five years

28.9

17.5

Beyond five years

4.4

8.0

67.3

57.7

– Hong Kong

15.0

7.8

– Other Asia

4.0

2.4

– Europe

46.0

27.1

– The Americas

151.9

12.6

216.9

49.9

216.0

48.9

0.9

1.0

216.9

49.9

Certain of the hotel properties are pledged as security for bank borrowings as shown in note 17.
Analysis of additions by geographical area

Analysis of additions by activity– Hotel ownership– Hotel & Residences branding and management

Analysis of depreciation charge by geographical area
– Hong Kong

(17.0)(16.7 )– Other Asia

(4.0)

(5.8 )– Europe(29.4)(23.9 )– The Americas(7.3)(4.2 )(57.7)(50.6 )

– Hotel ownership(56.7)(49.6 )

– Hotel & Residences branding and management(1.0)(1.0 )(57.7)(50.6 )

Analysis of depreciation charge by activity

53

54 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

10 Associates and joint ventures
2016		
US$m		

2015
US$m

Listed associate – OHTL

17.0

17.1

Unlisted associates

71.0

71.0

Share of attributable net assets

88.0

88.1

Notional goodwill

5.5

5.5

93.5

93.6

Share of attributable net assets of unlisted joint ventures

64.5

64.7

Goodwill on acquisition

5.8

6.1

70.3

70.8

163.8

164.4

Associates

Joint ventures

2016		
US$m		

Associates2015		
US$m		

Joint ventures
2016		
2015
US$m		
US$m

93.6

101.6		

70.8

–

–

–		

(2.6)

(0.8 )

9.8

10.1		

1.1

0.4

Movements of associates andjoint ventures during the year:
At 1st January
Exchange differences
Share of results after tax andnon-controlling interests
Share of other comprehensive income
after tax and non-controlling interests

(1.7)

(9.5)

–

(2.2 )

Dividends received

(7.3)

(8.0)

–

–

Interest received

–

–		

(1.8)

–

Repayment of loans to associates (refer note 24d)

(0.9)

(0.6)

–

–

Acquisition of Hotel Ritz, Madrid (refer note 27)

–

–		

–

73.3

Advance to joint ventures (refer note 24c)

–

–		

2.8

0.1

At 31st December

93.5

93.6		

70.3

70.8

Fair value of listed associate

193.2

190.1		N/A

N/Aa) Investment in associates
The material associates of the Group are listed below. These associates have share capital consisting solely of ordinary
shares, which are held directly by the Group.
Nature of investments in material associates in 2016 and 2015:
				Name of entity
Nature of businessCountry of incorporationand principal place ofbusiness/place of listing

OHTL PCL (‘OHTL’)
Owner of Mandarin Oriental,
	 Bangkok

Thailand/Thailand

47.6%

44.9%

Marina Bay Hotel Private Ltd.
Owner of Mandarin Oriental,(‘Marina Bay Hotel’)	  Singapore

Singapore/Unlisted

50.0%

50.0%

% of ownership interest
2016
2015

At 31st December 2016, the fair value of the Group’s interest in OHTL, which is listed on the Thailand Stock Exchange,
was US$193.2 million (2015: US$190.1 million) and the carrying amount of the Group’s interest was US$22.6 million(2015: US$22.6 million).

Annual Report 2016

10 Associates and joint ventures continueda) Investment in associates continued
Summarized financial information for material associates
Summarized balance sheet at 31st December
OHTL

Non-current assets

2016		
US$m		

2015		
US$m		

Marina Bay Hotel2016		
2015		
US$m		
US$m		

2016		
US$m		

Total
2015
US$m

65.8

62.4		

118.7		

122.5		

184.5		

184.9

5.1

3.5		

6.2

5.2		

11.3

8.7

Current assets
Cash and cash equivalents
Other current assets

4.3

4.1		

2.8

2.9		

7.1

7.0

Total current assets

9.4

7.6		

9.0

8.1		

18.4

15.7

(11.7)(9.7)(20.1)(23.3)(31.8)(33.0 )

Non-current liabilities
Financial liabilities*
Other non-current liabilities*

(3.5)

(3.6)

(2.7)

(2.8)

(6.2)

(6.4 )

Total non-current liabilities(15.2)(13.3)(22.8)(26.1)(38.0)(39.4 )

(21.0)(17.9)

(8.7)

(9.6)

(29.7)(27.5 )

Current liabilities
Financial liabilities*
Other current liabilities*

(3.1)

(2.8)

(5.5)

(5.7)

(8.6)

(8.5 )

Total current liabilities(24.1)(20.7)(14.2)(15.3)(38.3)(36.0 )Net assets

35.9

36.0		

90.7

89.2		

126.6

125.2

* Financial liabilities excluding trade and other payables and provisions, which are presented under other current and non-current liabilities.

Summarized statement of comprehensive income for the year ended 31st December
2016		
US$m		

OHTL
2015		
US$m		

Marina Bay Hotel2016		
2015		
US$m		
US$m		

2016		
US$m		

Total
2015
US$m

Revenue

58.0

55.7		

73.3

74.3		

131.3

130.0

Depreciation and amortization

(6.2)

(4.5)

(5.8)

(6.9)

(12.0)(11.4 )

Interest income

–

0.1		

–

–		

–

0.1

Interest expense

(0.5)

(0.3)

(0.6)

(0.6)

(1.1)

(0.9 )

Profit from underlying
business performance

7.1

7.7		

16.2

15.2		

23.3

22.9

Income tax expense

(1.4)

(1.2)

(3.0)

(2.2)

(4.4)

(3.4 )

Profit after tax from underlying
business performance

5.7

6.5		

13.2

13.0		

18.9

19.5

Non-trading items

(0.6)

–		

–

–		

(0.6)

–

Profit after tax

5.1

6.5		

13.2

13.0		

18.3

19.5

Other comprehensive income/(expense)

0.4

(3.9)

(2.6)

(7.6)

(2.2)

(11.5 )

Total comprehensive income

5.5

2.6		

10.6

5.4		

16.1

8.0

Dividends received from associates

5.6

6.1		

9.1

10.0		

14.7

16.1

The information contained in the summarized balance sheet and statement of comprehensive income reflects theamounts presented in the financial statements of the associates adjusted for differences in accounting policies between
the Group and the associates, and fair value of the associates at the time of acquisition.

55

56 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

10 Associates and joint ventures continueda) Investment in associates continued
Reconciliation of the summarized financial information
Reconciliation of the summarized financial information presented to the carrying amount of the Group’s interests
in its material associates for the year ended 31st December:2016		
US$m		

OHTL
2015		
US$m		

Marina Bay Hotel2016		
2015		
US$m		
US$m		

2016		
US$m		

Total
2015
US$m

Net assets at 1st January

36.0

39.5		

89.2

93.8		

125.2

133.3

Profit for the year

5.1

6.5		

13.2

13.0		

18.3

19.5

Other comprehensive income/(expense)

0.4

(3.9)

(2.6)

(7.6)

(2.2)

(11.5 )

Dividends paid

(5.6)

(6.1)

(9.1)

(10.0)(14.7)(16.1 )Net assets at 31st December

35.9

36.0		

90.7

89.2		

126.6

125.2

Effective interest in associates (%)*

47.6

47.6		

50.0

50.0Group’s share of net assets in associates

17.0

17.1		

45.4

44.6		

62.4

61.7

Notional goodwill*

5.5

5.5		

–

–		

5.5

5.5

Carrying value

22.5

22.6		

45.4

44.6		

67.9

67.2

Fair value

193.2

190.1		

N/A

N/A		

193.2

190.1

The Group has interests in a number of individually immaterial associates. The following table analyzes, in aggregate,
the share of profit and other comprehensive expense and carrying amount of these associates.
2016		
US$m		

2015
US$m

Share of profit

0.8

0.5

Share of other comprehensive expense(0.6)(3.8 )

Share of total comprehensive income/(expense)

0.2(3.3 )

Carrying amount of interests in these associates

25.6

26.4

* During 2013, OHTL repurchased some of its own shares which were subsequently classified on its balance sheet as treasury shares.

The number of OHTL shares held by the Group remained unchanged. As a result of the share repurchase, notional goodwill of
US$5.5 million was recognized and the Group’s effective interest increased to 47.6%. In September 2016, OHTL registered thedecrease of its authorized and paid-up share capital with the Ministry of Commerce of Thailand by cancellation of the treasury shares
which were unsold at the expiration of the share resale period. Accordingly, the Group’s attributable interest also increased to 47.6%
after such treasury shares cancellation.

Contingent liabilities relating to the Group’s interest in associates

Financial guarantee in respect of facilities made available to an associate2016		
US$m		

2015
US$m

20.8

21.2

The guarantee in respect of facilities made available to an associate is stated at its contracted amount. The Directors areof the opinion that it is not probable that this guarantee will be called upon.

Annual Report 2016

10 Associates and joint ventures continuedb) Investment in joint ventures
The material joint venture of the Group is listed below. This joint venture has share capital consisting solely of ordinary
shares, which are held directly by the Group.
Nature of investment in material joint venture in 2016 and 2015:
		Name of entity
Nature of businessCountry of incorporation andprincipal place of business% of ownership interest
2016
2015

Ritz Madrid, S.A.
(‘Ritz Madrid’)

Spain

50%

Owner of Hotel Ritz, Madrid

50%

Summarized financial information for material joint venture
Summarized balance sheet at 31st December
Ritz Madrid2016		
US$m		

2015
US$m

162.4

165.1

Cash and cash equivalents

4.6

1.8

Other current assets

2.0

2.3

Total current assets

6.6

4.1

Financial liabilities*(133.8)(133.0 )Other non-current liabilities*(34.2)(35.8 )

Total non-current liabilities(168.0)(168.8 )Other current liabilities*(5.8)(3.9 )

Total current liabilities(5.8)(3.9 )Net liabilities(4.8)(3.5 )

Non-current assets
Current assets

Non-current liabilities

Current liabilities* Financial liabilities excluding trade and other payables and provisions, which are presented under other current and non-current liabilities.

57

58 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

10 Associates and joint ventures continuedb) Investment in joint ventures continued
Summarized financial information for material joint venture continued
Summarized statement of comprehensive income for the year ended 31st December 2016 and for the period from22nd May 2015 to 31st December 2015
Ritz Madrid2016		
US$m		

2015
US$m

Revenue

27.0

17.0

Depreciation and amortization(1.3)(0.7 )

Profit from underlying business performance

2.2

2.5

–

(0.6 )

2.2

1.9

Income tax expense
Profit after tax from underlying business performance–(1.0 )

Profit after tax

2.2

0.9

Other comprehensive income/(expense)

0.1(4.4 )

Total comprehensive income/(expense)

2.3(3.5 )

Interest received from joint venture

3.6–

Non-trading items

The information contained in the summarized balance sheet and statement of comprehensive income reflects theamounts presented in the financial statements of the joint ventures adjusted for differences in accounting policies
between the Group and the joint ventures, fair value of the joint ventures at the time of acquisition, and eliminationof interest on shareholders’ loan.
Reconciliation of the summarized financial information
Reconciliation of the summarized financial information presented to the carrying amount of the Group’s interests
in its material joint venture for the year ended 31st December 2016 and for the period from 22nd May 2015 to
31st December 2015:
Ritz Madrid2016		
US$m		

2015
US$m

Net liabilities at 1st January

(3.5)

–

Profit for the year/period

2.2

0.9

Other comprehensive income/(expense)

0.1(4.4 )

Interest paid

(3.6)

–

Net liabilities at 31st December(4.8)(3.5 )

Effective interest in joint venture (%)*

50.0

50.0

Group’s share of net liabilities in joint venture(2.4)(1.8 )

Goodwill on acquisition

5.8

6.1

Shareholders’ loans

66.9

66.5

Carrying value

70.3

70.8

The Group has no other joint venture other than Ritz Madrid.
* In May 2015, the Group completed its acquisition of the Hotel Ritz, Madrid in a 50/50 joint venture with The Olayan Group(refer note 27).

Annual Report 2016

10 Associates and joint ventures continuedb) Investment in joint ventures continued
Commitments and contingent liabilities in respect of joint ventures
The Group has the following commitments relating to its joint ventures as at 31st December:Commitment to provide funding if called

2016		
US$m		

2015
US$m

36.6

40.6

There were no contingent liabilities relating to the Group’s interest in its joint ventures at 31st December 2016(2015: nil).

11 Loans receivable
At 31st December 2016 and 2015, the loans receivable comprised (i) a loan of US$2.4 million, bearing interest at
EURO LIBOR + 2%; and (ii) a loan of US$1.5 million, bearing interest at 10%; on which full provisions have been made.

12 Pension plans
The Group operates defined benefit pension plans in the main territories in which it operates, with the majority ofthe plans in Hong Kong. Most of the pension plans are final salary defined benefit plans calculated based on a members’length of service and their salaries in the final years leading up to retirement. In Hong Kong, the pension benefits arepaid in one lump sum. With the exception of certain plans in Hong Kong, all the defined benefit plans are closed to
new members. In addition, although all plans are impacted by the discount rate, liabilities are driven by salary growth.
The Group’s defined benefit plans are either funded or unfunded, with the assets of the funded plans held independentlyof the Group’s assets in separate trustee administered funds. Plan assets held in trusts are governed by local regulations
and practice in each country. Responsibility for governance of the plans, including investment decisions and contribution
schedules, lies jointly with the Company and the boards of trustees. The Group’s major plans are valued by independentactuaries annually using the projected unit credit method.
The amounts recognized in the consolidated balance sheet are as follows:
2016		
US$m		

2015
US$m

Fair value of plan assets

65.6

66.1

Present value of funded obligations(68.8)(66.1 )Net pension liabilities

(3.2)

–

(3.2)

–

Analysis of net pension liabilities
Pension liabilities

59

60 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

12 Pension plans continued
The movement in the net pension liabilities is as follows:
Fair value		of plan		assets		
US$m		

Present
value ofobligation		
US$m		

Total
US$m

66.1		

(66.1)–

Current service cost–		(4.3)(4.3 )

Past service cost-plan amendments–		(0.3)(0.3 )

2016
At 1st January

Interest income/(expense)

1.8		

(1.8)

–

Administration expenses

(0.3)

–		

(0.3 )

1.5		(6.4)(4.9 )

67.6		

(72.5)(4.9 )–		(0.1)(0.1 )

Exchange differences
Remeasurements– return on plan assets, excluding amounts
included in interest income/(expense)

0.6		

–		

0.6

– change in financial assumptions

–		

1.9		

1.9

– experience losses–		(3.2)(3.2 )– demographic assumption changes

Contributions from employers–		(2.4)(2.4 )

0.6		(3.7)(3.1 )

4.9		

–		

4.9

0.8		

(0.8)

–

(12.0)

12.0		–

Transfer from other plans

3.7		

(3.7)

–

At 31st December

65.6		

(68.8)(3.2 )

69.4		

(62.1)

7.3

–		

(4.1)

(4.1 )

Interest income/(expense)

2.3		

(1.9)

0.4

Administration expenses(0.3)

Contributions from plan participants
Benefit payments

2015
At 1st January
Current service cost–		

(0.3 )

2.0		(6.0)(4.0 )

71.4		

(68.1)

3.3

(4.7)

–		

(4.7 )– change in financial assumptions

–		

(1.3)

(1.3 )– experience gains

–		

0.6		

0.6

Remeasurements– return on plan assets, excluding amounts
included in interest income/(expense)

(4.7)

(0.7)

(5.4 )

Contributions from employers

2.1		

–		

2.1

Contributions from plan participants

0.7		

(0.7)

–

Benefit payments

(3.3)

3.3		

–

Transfer to other plans

(0.1)

0.1		

–

At 31st December

66.1		

(66.1)–

Annual Report 2016

12 Pension plans continued
The weighted average duration of the defined benefit obligation at 31st December 2016 is 5.3 years (2015: 5.0 years).
Expected maturity analysis of undiscounted pension benefits at 31st December is as follows:
2016		
US$m		

2015
US$mLess than a year

9.5

16.0

Between one and two years

11.3

8.1

Between two and five years

20.6

22.3

Beyond five years

94.6

76.5

136.0

122.9

The principal actuarial assumptions used for accounting purposes at 31st December are as follows:
Hong Kong
2016		
%		

2015%

Discount rate

3.30

3.00

Salary growth rate

4.75

5.00

As participants of the plans relating to Hong Kong usually take lump sum amounts upon retirement, mortality is nota principal assumption for these plans.
The sensitivity of the defined benefit obligation to changes in the weighted principal assumptions is:Change in		
assumption					

Increase/(decrease) on defined
benefit obligation
Increase in		
Decrease inassumption		assumption
US$m		
US$m

Discount rate

1%		

(3.4)

3.7

Salary growth rate

1%		

3.3		

(3.1 )

The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant.
In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating thesensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of thedefined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been
applied when calculating the pension liability recognized within the balance sheet.

6162 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

12 Pension plans continued
The analysis of the fair value of plan assets at 31st December is as follows:
Asia				Pacific		Europe		US$m		
US$m		

North
America		
US$m		

Global		
US$m		

Total
US$m

2016
Quoted investments
Equity instruments

5.0		

–		

–		

–		

5.0

Investment funds

10.1		

4.1		

11.3		

7.5		

33.0

15.1		

4.1		

11.3		

7.5		

38.0

0.6		

0.3		

0.3		

21.8		

23.0

15.7		

4.4		

11.6		

29.3		

61.0

Cash and cash equivalents									4.6									65.6Unquoted investments
Investment funds
Total investments

2015
Quoted investments
Equity instruments

6.6		

–		

–		

–		

6.6

–		

–		

0.1		

–		

0.1

5.8		

4.4		

10.5		

1.9		

22.6

12.4		

4.4		

10.6		

1.9		

29.3

1.4		

3.4		

1.5		

0.3		

6.6

0.3		

1.7		

2.5		

–		

4.5

–		

0.1		

0.6		

–		

0.7

0.3		

1.8		

3.1		

–		

5.2

1.7		

5.2		

4.6		

0.3		

11.8

0.6		

0.2		

0.2		

20.7		

21.7

2.3		

5.4		

4.8		

21.0		

33.5

14.7		

9.8		

15.4		

Debt instruments– government
Investment funds

Unquoted investments
Debt instruments– government– corporate bonds   – investment grade   – non-investment grade

Investment funds

Total investments

22.9		

62.8

Cash and cash equivalents									3.3									66.1The defined benefit plans in Hong Kong have strategic asset allocation for its closed plans. The closed plans havean equity/debt allocation of 55/45 split.
The strategic asset allocation is derived from the asset-liability modeling (‘ALM’) review, done triennially to ensure
the plans can meet future funding and solvency requirements. The last ALM review was completed in 2015, with the
new strategic asset allocations adopted in 2015. The next ALM review is scheduled for 2018.

Annual Report 2016

12 Pension plans continued
At 31st December 2016, the Hong Kong plans had assets of US$65.6 million (2015: US$66.1 million). These assets were
invested 26% in Asia Pacific, 7% in Europe, 19% in North America and the rest of 48% in Global (2015: 23%, 16%,
25% and 36%, respectively). Within Asia Pacific, 39% was invested in Hong Kong equities. In 2016, 62% and 38% of
the investments were in quoted and unquoted instruments respectively. In 2015, the split was 47% and 53% respectively.
The high percentage of quoted instruments provides liquidity to fund drawdowns and benefit payments. Within thequoted equity allocation, the plan is well diversified in terms of sectors, with the top three being financials, technology
and industrials with a combined fair value of US$3.4 million. In 2015, the top three sectors were financials, industrials
and technology with a combined fair value of US$4.6 million.
Through its defined benefit pension plans, the Group is expected to be exposed to a number of risks such as asset
volatility changes in bond yields and inflation risk, the most significant of which are detailed below:
Asset volatility
The plan liabilities are calculated using a discount rate set with reference to corporate bond yields; if plan assets
underperform this yield, this will create a deficit. The Group’s defined benefit plans hold a significant proportion ofequities, which are expected to outperform corporate bonds in the long term while generating volatility and risk in the
short term.
In Hong Kong, where the Group has closed plans, the assets and liabilities mix are distinct to reduce the level ofinvestment risk to the plan. In 2016, the closed plans exited from commodities and increased allocations to hedge funds.
The plans also reduced their allocations to global fixed income by holding cash and investing a portion to Asian fixedincome to reduce volatility risks. Management believes the long-term nature of the plan liabilities and the strength of
the Group supports a level of equity investment as part of the Group’s long term strategy to manage the plans efficiently.
Change in bond yields
A decrease in corporate bond yields will increase plan liabilities, although this will be partially offset by an increase in
the value of the plans’ bond holdings.
Inflation risk
The majority of the Group’s plan assets are unaffected by inflation.
The Group ensures that the investment positions are managed within an ALM framework that is developed to achieve
long-term returns that are in line with the obligations under the pension schemes. Within the ALM framework, theGroup’s objective is to match assets to the pension obligations by investing in a well-diversified portfolio that generates
sufficient risk-adjusted returns that match the benefit payments. The Group also actively monitors the duration and the
expected yield of the investments to ensure it matches the expected cash outflows arising from the pension obligations.
Investments across the plans are well diversified, such that the failure of any single investment would not have a material
impact on the overall level of assets.
The Group maintains an active and regular contribution schedule across all the plans. The contributions to all its plans
in 2016 were US$4.9 million and the estimated amount of contributions expected to be paid to all its plans in 2017is US$4.6 million.

6364 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

13 Deferred tax assets/(liabilities)									 Unremitted		Accelerated								earnings in		tax		
Fair value				Employee		
associates/		depreciation		 gains/(losses)		
Losses		benefits		 joint ventures		
US$m		
US$m		
US$m		
US$m		
US$m		

Provisions
and other
temporarydifferences		
US$m		

Total
US$m

2016
(56.4)

0.5		

1.1		

–		

(1.4)

(0.8)

(57.0 )

Exchange differences

2.2		

–		

–		

–		

–		

–		

2.2

Credited/(charged) to
profit and loss

1.6		

–		

–		

–		

–		

(0.4)

1.2

At 1st January(Charged)/credited to othercomprehensive income

–		

(0.4)

–		

0.5		

–		

–		

0.1

At 31st December(52.6)

0.1		

1.1		

0.5		

(1.4)

(1.2)

(53.5 )

Deferred tax assets

0.1		

0.1		

1.1		

1.2		

–		

0.1		

2.6

Deferred tax liabilities(52.7)

–		

–		

(0.7)

(1.4)

(1.3)

(56.1 )

(52.6)

0.1		

1.1		

0.5		

(1.4)

(1.2)

(53.5 )

(58.1)

0.4		

1.1		

(1.2)

(1.6)

(0.7)

(60.1 )

Exchange differences

0.7		

0.1		

–		

–		

0.1		

–		

0.9

Credited/(charged) to
profit and loss

1.0		

–		

–		

0.3		

0.1		

(0.1)

1.3

–		

–		

–		

0.9		

–		

–		

0.9

2015
At 1st January

Credited to othercomprehensive income
At 31st December(56.4)

0.5		

1.1		

–		

(1.4)

(0.8)

(57.0 )

Deferred tax assets

0.2		

0.5		

1.1		

0.9		

–		

0.1		

2.8

Deferred tax liabilities(56.6)

–		

–		

(0.9)

(1.4)

(0.9)

(59.8 )

(56.4)

0.5		

1.1		

–		

(1.4)

(0.8)

(57.0 )

Deferred tax balances predominantly comprise non-current items. Deferred tax assets and liabilities are netted when
the taxes relate to the same taxation authority and where offsetting is allowed.
Deferred tax assets of US$48.7 million (2015: US$43.1 million) arising from unused tax losses of US$186.7 million(2015: US$171.7 million) have not been recognized in the financial statements. Included in the unused tax losses,
US$139.2 million have no expiry date and the balance will expire at various dates up to and including 2036.
Deferred tax assets of US$3.4 million (2015: US$3.6 million) have not been recognized in relation to temporary
differences in subsidiaries.
The Group has no unrecognized deferred tax liabilities arising on temporary differences associated with investments
in subsidiaries at 31st December 2016 and 2015.

Annual Report 201614 Debtors and prepayments
2016		
US$m

2015
US$m

– third parties

38.5

35.1

– associates and joint ventures

4.0

4.1

42.5

39.2

(1.8)

(1.6 )

40.7

37.6– third parties*

53.6

52.5

– associates and joint ventures

2.1

2.2

55.7

54.7

(2.2)

(2.4 )

53.5

52.3

94.2

89.9

– Hong Kong

20.1

21.0

– Other Asia

17.0

17.1

– Europe

39.6

39.7

– The Americas

17.5

12.1

94.2

89.9

Trade debtors– provision for impairment

Other debtors– provision for impairment

Analysis by geographical area

* Included deposit of US$12.1 million (2015: US$12.5 million) in respect of the expansion project of Mandarin Oriental, Munich,pending transfer of title in the underlying land.

Trade and other debtors are stated at amortized cost. The fair values of short-term debtors approximate theircarrying amounts.
Fair value– trade debtors

40.7

37.6

– other debtors**

25.1

23.6

65.8

61.2

** Excluding prepayments, rental and other deposits.

The average credit period on provision of services varies among Group businesses and is generally not more than 30 days.
Before accepting any new customer, individual Group business assesses the potential customer’s credit quality and setscredit limits by customer using internal credit scoring systems. These limits and scoring are reviewed periodically.
Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganization,and default or delinquency in payment are considered indicators that the debtor is impaired. An allowance for impairmentof trade debtors and other debtors is made based on the estimated irrecoverable amount.

65

66 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

14 Debtors and prepayments continued
At 31st December 2016, trade debtors of US$2.3 million (2015: US$1.7 million) and other debtors of US$2.5 million(2015: US$2.8 million) were impaired. The amounts of the provision were US$1.8 million (2015: US$1.6 million)
and US$2.2 million (2015: US$2.4 million), respectively. It was assessed that a portion of the debtors is expected tobe recoverable. The ageing analysis of these debtors is as follows:
Trade debtors
2016		
2015		
US$m		
US$m		

Other debtors
2016		
2015
US$m		
US$m

0.7

0.1		

0.3

0.2

Between 31 and 60 days

–

–		

–

–

Between 61 and 90 days

–

–		

–

–

1.6

1.6		

2.2

2.6

2.3

1.7		

2.5

2.8

Below 30 days

Over 90 days

At 31st December 2016, trade debtors of US$13.9 million (2015: US$7.9 million) and other debtors of US$2.1 million(2015: US$2.1 million), respectively, were past due but not impaired. The ageing analysis of these debtors is as follows:
Trade debtors
2016		
2015		
US$m		
US$m		

Other debtors
2016		
2015
US$m		
US$m

Below 30 days

7.9

4.9		

1.0

1.6

Between 31 and 60 days

1.9

0.8		

0.5

0.3

Between 61 and 90 days

0.8

0.6		

0.2

0.1

Over 90 days

3.3

1.6		

0.4

0.1

13.9

7.9		

2.1

2.1

The risk of trade debtors and other debtors that are neither past due nor impaired at 31st December 2016 becoming
impaired is low as they have a good track record with the Group. Based on past experience, management believes thatno impairment allowance is necessary in respect of these balances as there has not been a significant change in credit
quality and the balances are still considered fully recoverable.
Movements in the provisions for impairment are as follows:
Trade debtors
2016		
2015		
US$m		
US$m		

Other debtors
2016		
2015
US$m		US$m

At 1st January

(1.6)

(1.4)

(2.4)

(2.5 )

Additional provisions

(0.6)

(0.7)

–

(0.1 )

Unused amounts reversed

0.3

0.4		

0.2

0.2

Amounts written off

0.1

0.1		

–

–

At 31st December

(1.8)

(1.6)

(2.2)

(2.4 )

Annual Report 201614 Debtors and prepayments continued
Other debtors are further analyzed as follows:
2016		
US$m		

2015
US$m

Other amounts due from associates and joint ventures

2.1

2.2

Other receivables

23.0

21.4

Financial assets

25.1

23.6

Prepayments

12.1

12.0

Rental and other deposits

16.2

16.6

Other

0.1

0.1

53.5

52.3

2016		
US$m		

2015
US$m

Deposits with banks and financial institutions

96.7

208.9

Bank balances

84.9

98.7

Cash balances

1.0

1.0

182.6

308.6

– Euro12.2

31.2– Hong Kong dollar

16.9

18.2

– Indonesian rupiah

13.8

14.6

– Japanese yen

16.7

15.0

– Swiss franc

3.1

5.1

– United Kingdom sterling

25.6

24.3

– United States dollar

89.0

192.4

No debtors and prepayments have been pledged as security.

15 Bank and cash balances

Analysis by currency– Other

5.3

7.8

182.6

308.6

The weighted average interest rate on deposits with banks and financial institutions is 0.9% (2015: 0.7%) per annum.

6768 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

16 Creditors and accruals
2016		
US$m		

2015
US$m

Trade creditors

32.9

33.7

Accruals

64.8

60.4

Rental and other refundable deposits

12.1

13.0

Derivative financial instruments (refer note 25)

0.6–

Other creditors

24.3

26.4

Financial liabilities

134.7

133.5

3.4

2.3

Rental income received in advance

2.0

2.8

140.1

138.6

– Euro16.6

15.2– Hong Kong dollar

47.6

50.5

– Japanese yen

11.9

11.9

– Swiss franc

5.1

6.2

– United Kingdom sterling

8.6

12.7

– United States dollar

46.0

37.0

– Other

4.3

5.1

140.1

138.6

Other income received in advance

Analysis by currency

Creditors and accruals are stated at amortized cost. Their fair values approximate their carrying amounts.

17 Borrowings
2016		
Carrying		
amount		
US$m		

2016		
Fair		
value		US$m		

2015		
Carrying		
amount		
US$m		

2015
Fair
value
US$m

Current
0.1		

0.1

–		

–

– bank loans

0.6		

0.6

1.4		

1.4

– other borrowings

0.1		

0.1

2.8		

2.8

– tax increment financing (refer note 18)

1.7		

1.7

–		

–

2.4		

2.4

4.2		

4.2

2.5		

2.5

4.2		

4.2

473.3		

473.3432.7		

432.6

4.1		

4.1

1.8		

1.8

–		

–

1.7		

1.7

477.4		

477.4436.2		

436.1479.9		

479.9440.4		

440.3– bank overdrafts
Current portion of long-term borrowings

Current borrowings
Long-term borrowings– bank loans– other borrowings– tax increment financing (refer note 18)
Long-term borrowings

The fair values are estimated using the expected future payments discounted at market interest rate less than 0.1%
(2015: less than 0.1%) per annum. This is in line with the definition of ‘observable current market transactions’ under
the fair value measurement hierarchy. The fair value of current borrowings approximates their carrying amount, as theimpact of discounting is not significant.

Annual Report 201617 Borrowings continued
2016		
US$m		

2015
US$m

Secured

475.6

436.0

Unsecured

4.3

4.4

479.9

440.4

Borrowings of US$475.6 million (2015: US$436.0 million) are secured against the tangible fixed assets ofcertain subsidiaries. The book value of these tangible fixed assets at 31st December 2016 was US$457.9 million(2015: US$499.2 million).
The borrowings at 31st December are further summarized as follows:
Fixed rate borrowings
Weighted		Weighted
average		 average period				interest rates		
outstanding				%		Years		US$m		

Floating rateborrowings		
US$m		

Total
US$m

2016
Euro

2.0		

0.4		

0.6		

–		

0.6

Hong Kong dollar
Swiss franc

2.5		

1.5		

119.3		

305.0		

424.3

2.6		

15.0		

1.7		

2.5		

4.2

United Kingdom sterling

1.4		

–		

–		

49.1		

49.1

United States dollar

6.0		

0.3		

1.7		

–		

1.7

					

123.3		

356.6		

479.9

1.4		

2.0		

–		

2.0

2015
Euro

2.0		

Hong Kong dollar

2.5		

2.5		

119.3		

253.5		

372.8Swiss franc

2.8		

16.0		

1.9		

2.7		

4.6

United Kingdom sterling

1.6		

–		

–		

59.3		

59.3

United States dollar

6.0		

1.3		

1.7		

–		

1.7

					

124.9		

315.5		

440.4The weighted average interest rates and period of fixed rate borrowings are stated after taking into account of hedging
transactions (refer note 25).
The exposure of the Group’s borrowings to interest rate changes and the contractual repricing dates at 31st December
after taking into account hedging transactions are as follows:
2016		
US$m		

2015
US$m

413.8

315.5

Between one and two years

–

58.5

Between two and three years

64.4

–

Between three and four years

–

64.5

Within one year

Between four and five years
Beyond five years

–

–

1.7

1.9

479.9

440.4

69

70 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

18 Tax increment financing
2016		
US$m		

2015
US$m

Netted off against the net book value of the property (refer note 9)

22.2

23.0

Loan (refer note 17)

1.7

1.7

23.9

24.7

A development agreement was entered into between one of the Group’s subsidiaries and the District of Columbia(‘District’), pursuant to which the District agreed to provide certain funds to the subsidiary out of the net proceeds
obtained through the issuance and sale of certain tax increment financing bonds (‘TIF Bonds’) for the development
and construction of Mandarin Oriental, Washington D.C.
The District agreed to contribute to the subsidiary US$33.0 million through the issuance of TIF Bonds in addition to
US$1.7 million issued in the form of a loan, bearing simple interest at an annual rate of 6.0%. The US$1.7 million loan
plus all accrued interest will be due on the earlier of 10th April 2017 or the date of the first sale of the hotel.
The receipt of the TIF Bonds has been treated as a government grant and netted off against the net book value in respectof the property. The loan of US$1.7 million (2015: US$1.7 million) is included in current (2015: long-term) borrowings.

19 Segment information
Set out below is an analysis of the Group’s non-current assets, excluding other investments and deferred tax assets,
by reportable segment.
2016		
US$m		

2015
US$m

– Hong Kong

380.8

383.6

– Other Asia

105.5

105.0

– Europe

810.3

856.4

Analysis by geographical area

– The Americas

263.6

118.5

1,560.2

1,463.5

20 Share capital
Ordinary shares in millions
2016		
2015		
					2016		
US$m		

2015
US$m

Authorized
Shares of US¢5.00 each

1,500.0

1,500.0		

75.0

75.0

Issued and fully paid
1,255.9

1,003.7		

62.8

50.2

Rights issue (refer note 24e(i))–

250.9		–

12.5Issued under share-based long-term
incentive plans (refer note 24e(ii))

–

1.3		

–

0.1

1,255.9

1,255.9		

62.8

62.8

At 1st January

At 31st December

Annual Report 2016

21 Share premium
2016		
US$m		

2015
US$m

490.3

188.2

Rights issue (refer note 24e(i))

–

303.7

Share issue expenses (refer note 24e(i))–(3.6 )

At 1st January

Issued under share-based long-term incentive plans (refer note 24e(ii))
Transfer from capital reserves
At 31st December

–

1.3

0.1

0.7

490.4

490.3

22 Share-based long-term incentive plans
Share-based long-term incentive plans have been set up to provide incentives for selected executives. Awards can takethe form of share options with an exercise price based on the then prevailing market prices or such other price set by
the Directors or share awards which will vest free of payment. Awards normally vest on or after the third anniversaryof the date of grant and may be subject to the achievement of performance conditions.
i) The Mandarin Oriental Share-based Long-term Incentive Plan (the ‘2014 Plan’) was adopted by the Company
on 6th March 2014. During 2016, conditional awards of 1,976,000 (2015: 1,600,000) shares were awarded underthe 2014 Plan. Under these awards, the free shares are received by the participants to the extent the award vests.
Conditions, if any, are at the discretion of the Directors. The fair value of the share awards granted during the year
was US$2.2 million (2015: US$2.3 million). The inputs into the discounted cash flow valuation model were shareprice of US$1.30 (2015: US$1.63) per share at the grant date, dividend yield of 4.6% (2015: 4.4%), and annual
risk-free interest rate of 1.2% (2015: 2.1%).
Movements of the outstanding conditional awards during the year:
Conditional awards in millions
2016		

2015

At 1st January

3.5

1.9

Adjustments*–

0.1

Granted

2.0

1.6

Cancelled(0.2)(0.1 )At 31st December

5.3

3.5

Outstanding conditional awards at 31st December:
Ordinary shares in millions
2016		

2015

2017

1.8

1.9

2018

1.6

1.6

Awards vest date

2019

1.9

–

Total outstanding

5.3

3.5

* In 2015, adjustments were made to the number of outstanding conditional awards as a result of the 1 for 4 rights issue effective on

9th March 2015 and approved by the Share Incentive Scheme Committee on 24th March 2015.

71

72 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

22 Share-based long-term incentive plans continuedii) Prior to the adoption of the 2014 Plan, The Mandarin Oriental International Share Option Plan 2005 provided
selected executives with options to purchase ordinary shares in the Company. The exercise price of the granted
options was based on the average market price for the five trading days immediately preceding the date of grantof the options. Options are vested over a period of up to three years and are exercisable for up to ten years following
the date of grant.
Movements of the outstanding options during the year:
2016
Weighted average
exercise price		
US$

2015
		
Weighted average
Options		
exercise price		
in millions		
US$		

Optionsin millions

At 1st January

1.61		

32.5

1.69		

32.4

Adjustments*

–		

–

–		

1.9

Exercised1.20		

(0.3)

1.21		

(1.6 )

Cancelled

1.82		

(0.8)

1.70		

(0.2 )At 31st December

1.61		

31.4

1.61		

32.5

The average share price during the year was US$1.36 (2015: US$1.63) per share.
Outstanding options at 31st December:
Ordinary shares in millions
Expiry date

Exercise price*
US$		

2016		

2015

2016

1.20		

–

0.3

2017

1.77		

3.6

3.7

2018

1.08-1.63		

6.8

6.9

2019

0.66		

1.2

1.2

2020

1.36		

3.0

3.0

2021

1.99		

4.3

4.8

2022

1.61		

6.7

6.8

2023

1.57		

5.8

5.8

Total outstanding			

31.4

32.5

of which exercisable			

31.4

27.4

* In 2015, adjustments were made to the exercise price and the number of outstanding options as a result of the 1 for 4 rights issue

effective on 9th March 2015 and approved by the Share Incentive Scheme Committee on 24th March 2015.

23 Dividends
2016
US$m		

2015
US$mFinal dividend in respect of 2015 of US¢3.00 (2014: US¢5.00) per share

37.7

50.2

Interim dividend in respect of 2016 of US¢1.50 (2015: US¢2.00) per share

18.8

25.1

56.5

75.3

A final dividend in respect of 2016 of US¢2.50 (2015: US¢3.00) per share amounting to a total of US$31.4 million(2015: US$37.7 million) is proposed by the Board. The dividend proposed will not be accounted for until it has been
approved at the 2017 Annual General Meeting. The amount will be accounted for as an appropriation of revenue reservesin the year ending 31st December 2017.

Annual Report 201624 Notes to consolidated cash flow statementa) Other non-cash items
2016
US$m		

2015
US$m

Share-based payment

2.2

2.4

Others0.5(0.2 )

2.7

2.2

Increase in stocks(0.2)(0.3 )

Increase in debtors and prepayments(8.2)(0.6 )

Increase/(decrease) in creditors and accruals

4.6(2.6 )

–

1.9

(3.8)

(1.6 )b) Movements in working capital

Increase in pension obligationsc) The Group provided shareholder loans to Hotel Ritz, Madrid of US$2.8 million in 2016 (2015: US$0.1 million).
d) The Group received repayment on its shareholder loan previously provided to Mandarin Oriental, Miami
of US$0.9 million in 2016 (2015: US$0.6 million).
e) i) In April 2015, the Group completed a 1 for 4 rights issue with 250.9 million new ordinary shares issued at
US$1.26 per share, raising US$316.2 million of gross proceeds. The proceeds of the issue were used to pay
down debt in advance of the refurbishment of Mandarin Oriental Hyde Park, London and to fund the Group’s
acquisition of a 50% interest in the Hotel Ritz, Madrid. The Group paid expenses of US$3.6 million inconnection with the rights issue in 2015.
ii) The Group issued 1.3 million new ordinary shares under the share-based long-term incentive plans with proceedsof US$1.4 million in 2015.
f ) Analysis of balances of cash and cash equivalents

Bank and cash balances (refer note 15)
Bank overdrafts (refer note 17)2016		
US$m		

2015
US$m

182.6

308.6

(0.1)

–

182.5

308.6

2015
Positive		
fair value		
US$m		

Negative
fair value
US$m

25 Derivative financial instruments
The fair values of derivative financial instruments at 31st December are as follows:
2016
Positive		
fair value		
US$m		

Negative		
fair value
US$m		

Designated as cash flow hedges– interest rate swaps and caps

–		

0.6

–		

3.0

At 31st December

–		

0.6

–		

3.0

Current (refer note 16)

–		

0.6

–		

–

Non-current

–		

–

–		

3.0

At 31st December

–		

0.6

–		

3.0

73

74 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

25 Derivative financial instruments continued
The notional principal amounts of the outstanding interest rate swap and cap contracts at 31st December 2016 were
US$232.9 million (2015: US$243.1 million).
At 31st December 2016, the fixed interest rates relating to interest rate swaps and caps varied from 1.9% to 2.9%
(2015: 1.9% to 2.9%) per annum.
The fair values of interest rate swaps are based on the estimated cash flows discounted at market rates ranging from 0.7%
to 1.9% (2015: 0.2% to 1.3%) per annum.

26 Acquisition of Mandarin Oriental, Boston
On 27th April 2016, the Group completed its US$140.0 million acquisition of Mandarin Oriental, Boston, a hotel that
the Group has managed since its opening in 2008. The consideration of US$140.0 million represented the fair values of
the tangible assets acquired at the acquisition date. There was no goodwill arising on acquisition.

27 Acquisition of Hotel Ritz, Madrid
In May 2015, the Group acquired a 50% interest in the Hotel Ritz, Madrid for €65 million (US$73.3 million)
in a joint venture with The Olayan Group, with Mandarin Oriental managing the hotel under a long-term managementagreement. The hotel is to undergo a comprehensive renovation in 2018 and 2019, currently estimated to cost a totalof some €90 million, of which the Group’s share will be €45 million (US$47 million).

28 Commitments
2016		
US$m		

2015
US$m

134.4

263.9

– joint ventures

36.6

40.6

– other

99.9

16.9

136.5

57.5

270.9

321.4

– due within one year

7.0

5.9

– due between one and two years

6.6

5.7

– due between two and three years

6.5

5.5

– due between three and four years

6.3

5.5

Capital commitments
Authorized not contracted– other
Contracted not provided

Operating lease commitments
Total commitments under operating leases– due between four and five years

6.2

5.5

– due beyond five years

81.7

82.0

114.3

110.1

No future sublease payments are receivable relating to the above operating leases (2015: nil).
Operating lease commitments principally include payments in respect of the Group’s hotel in Tokyo.
In addition, the Group has operating lease commitments with rentals determined in relation to sales. It is not possible toquantify accurately future rentals payable under such leases.

Annual Report 2016

29 Related party transactions
The parent company of the Group is Jardine Strategic Holdings Limited (‘JSH’) and the ultimate holding company of
the Group is Jardine Matheson Holdings Limited (‘JMH’). Both companies are incorporated in Bermuda.
In the normal course of business, the Group undertakes a variety of transactions with its associates and joint ventures
and with JMH and its subsidiaries, associates and joint ventures. The more significant of these transactions aredescribed below:
During 2016, the Group managed six (2015: six) associate and joint venture hotels and received management fees of
US$13.2 million (2015: US$13.2 million) based on long-term management agreements on normal commercial terms.
The Group uses Jardine Lloyd Thompson (‘JLT’), an associate of JMH, to place certain of its insurance. Brokerage fees
and commissions, net of rebates, paid by the Group in 2016 to JLT amounted to US$0.9 million (2015: US$0.8 million).
The Group provides hotel management services to Hongkong Land (‘HKL’), a subsidiary of JSH. Total management
fees received from HKL in 2016 amounted to US$2.1 million (2015: US$2.5 million), based on long-term managementagreements on normal commercial terms.
In addition, the Group paid a management fee of US$0.3 million (2015: US$0.5 million) to Jardine Matheson Limited(‘JML’), a subsidiary of JMH, being a fee of 0.5% of the Group’s net profit in consideration for certain management
consultancy services provided by JML. The Group did not have any amount payable to JML as at 31st December 2016(2015: nil).
The outstanding balances with associates and joint ventures are set out in debtors and prepayments in note 14.
Details of Directors’ emoluments (being the key management personnel compensation) are shown on page 84 under
the heading of ‘Directors’ appointment, retirement, remuneration and service contracts’.

30 Summarized balance sheet of the Company
Included below is certain summarized balance sheet information of the Company disclosed in accordance with
Bermuda Law.

Subsidiaries
Net current liabilities
Net assets

2016		
US$m		

2015
US$m

949.3

959.2

(1.9)

(3.1 )

947.4

956.1

Share capital (refer note 20)

62.8

62.8

Share premium (refer note 21)

490.4

490.3

Revenue and other reserves

394.2

403.0

Shareholders’ funds

947.4

956.1

Subsidiaries are shown at cost less amount provided.

75

76 Mandarin Oriental International Limited

Annual Report 2016

Principal Subsidiaries, Associates,
Joint Ventures and Managed Hotels
at 31st December 2016
Proportion of ordinary sharesand voting powers
at 31st December 2016 held by			non-controlling
Principal place
Attributable interest %the Groupinterestsof business
Name of entity
Nature of business
2016
2015
%
%

Hotel profile

Subsidiaries
Hong Kong

Mandarin Oriental Hotel Group International Limited

Management

100

100

100

–

–

Hong Kong

Mandarin Oriental Hotel Group Limited

Management

100

100

100

–

–

Hong Kong

Mandarin Oriental, Hong Kong Limited

Owner: Mandarin Oriental, Hong Kong

100

100

100

–

501 rooms. Lease expiry 2895

Hong Kong

Excelsior Hotel (BVI) Limited

Owner: The Excelsior, Hong Kong

100

100

100

–

869 rooms. Lease expiry 2842

Japan

Mandarin Oriental Tokyo KK

Owner: Mandarin Oriental, Tokyo

100

100

100

–

179 rooms. Lease expiry 2035

Indonesia

P.T. Jaya Mandarin Agung

Owner: Mandarin Oriental, Jakarta

96.9

96.9

96.9

3.1

272 rooms. Lease expiry 2023

United Kingdom

Mandarin Oriental Hyde Park Limited

Owner: Mandarin Oriental Hyde Park, London

100

100

100

–

Switzerland

Société Immobilière de Mandarin Oriental (Genèva) SA

Owner: Mandarin Oriental, Geneva

85.3

85.3

85.3

14.7

Switzerland

Société pour l’ Exploitation de Mandarin Oriental (Genèva) SA		

100

100

100

–

–

Germany

Dinavest International Holdings B.V.

Owner: Mandarin Oriental, Munich

100

100

100

–

73 rooms. Freehold

FranceMOHG Hotel (Paris) Sarl

Owner: Mandarin Oriental, Paris

100

100

100

–

138 rooms. Freehold

United States

Boylston Street Hotel LLC

Owner: Mandarin Oriental, Boston

100

–

100

–

148 rooms. Freehold (refer note 26)

United States

Portals Hotel Site LLC

Owner: Mandarin Oriental, Washington D.C.

80

80

80

20

397 rooms. Freehold

527 rooms. Lease expiry 2079

193 rooms. Freehold
189 rooms. Lease expiry 2040

Associates and joint ventures
Singapore

Marina Bay Hotel Private Limited

Owner: Mandarin Oriental, Singapore

50

50

50

50

ThailandOHTL PCL

Owner: Mandarin Oriental, Bangkok

47.6

44.9

47.6

52.4

Malaysia

Asas Klasik Sdn Bhd

Owner: Mandarin Oriental, Kuala Lumpur

25

25

25

75

632 rooms. Freehold

Thailand

Chaophaya Development Corporation Limited

Owner: River City Shopping Complex

49

49

49

51

–

Spain

Ritz Madrid, S.A.

Owner: Hotel Ritz, Madrid

50

50

50

50

162 rooms. Freehold (refer note 27)

United States

ICD Columbus Centre Hotel LLC

Owner: Mandarin Oriental, New York

25

25

25

75

244 rooms. Freehold

United States

Swire Brickell Key Hotel Limited

Owner: Mandarin Oriental, Miami

25

25

25

75

326 rooms. Freehold

368 rooms. Various freehold/leasehold (refer note 10)

Managed hotels
Hong Kong

The Landmark Mandarin Oriental, Hong Kong		

–

–

–

–

109 rooms

Macau

Mandarin Oriental, Macau		

–

–

–

–

213 rooms

China

Mandarin Oriental, Sanya		

–

–

–

–

296 rooms

China

Mandarin Oriental, Guangzhou		

–

–

–

–

263 rooms

China

Mandarin Oriental Pudong, Shanghai		

–

–

–

–

362 rooms

TaiwanMandarin Oriental, Taipei		

–

–

–

–

296 rooms

Czech Republic

Mandarin Oriental, Prague		

–

–

–

–

99 rooms

Spain

Mandarin Oriental, Barcelona		

–

–

–

–

120 rooms

TurkeyMandarin Oriental, Bodrum		

–

–

–

–

129 rooms

Italy

Mandarin Oriental, Milan		

–

–

–

–

104 rooms

MoroccoMandarin Oriental, Marrakech		

–

–

–

–

63 rooms

United States

Mandarin Oriental, Las Vegas		

–

–

–

–

392 rooms

United States

Mandarin Oriental, Atlanta		

–

–

–

–

127 rooms

77

78 Mandarin Oriental International Limited

Independent Auditors’ Report

To the members of Mandarin Oriental International Limited
Report on the consolidated financial statements
Our opinion
In our opinion, Mandarin Oriental International Limited’s consolidated financial statements (the ‘financial statements’):• present fairly, in all material respects, the financial position of the Group as at 31st December 2016 and its financial
performance and its cash flows for the year then ended; and• have been properly prepared in accordance with International Financial Reporting Standards (‘IFRSs’) and theCompanies Act 1981 (Bermuda).
What we have audited
The financial statements, included within the Annual Report, comprise:• the Consolidated Balance Sheet as at 31st December 2016;• the Consolidated Profit and Loss Account and the Consolidated Statement of Comprehensive Income for the year
then ended;• the Consolidated Cash Flow Statement for the year then ended;• the Consolidated Statement of Changes in Equity for the year then ended; and• the notes to the financial statements, which include a summary of significant accounting policies and otherexplanatory information.
The financial reporting framework that has been applied in the preparation of the financial statements is applicable law
in Bermuda and IFRSs as issued by the International Accounting Standards Board (IASB).
In applying the financial reporting framework, the Directors have made a number of subjective judgements, for example
in respect of significant accounting estimates. In making such estimates, they have made assumptions and considered
future events.

Responsibilities for the financial statements and the audit
Our responsibilities and those of the Directors
As explained more fully in the Responsibilities Statement on page 81, the Directors are responsible for the preparationand fair presentation of the financial statements in accordance with IFRSs and the Companies Act 1981 (Bermuda).
Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law andInternational Standards on Auditing (UK and Ireland) (‘ISAs (UK & Ireland)’). Those standards require us to comply
with the Auditing Practices Board’s Ethical Standards for Auditors.
This report, including the opinion, has been prepared for and only for the Company’s members as a body in accordancewith Section 90 of the Companies Act 1981 (Bermuda) and for no other purpose. We do not, in giving this opinion,
accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose
hands it may come, including without limitation under any contractual obligations of the Company, save where expressly
agreed by our prior consent in writing.
What an audit of financial statements involves
We conducted our audit in accordance with ISAs (UK & Ireland). An audit involves obtaining evidence about theamounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or error. This includes an assessment of:• whether the accounting policies are appropriate to the Group’s circumstances and have been consistently applied andadequately disclosed;• the reasonableness of significant accounting estimates made by the Directors; and• the overall presentation of the financial statements.

Annual Report 2016

We primarily focus our work in these areas by assessing the Directors’ judgements against available evidence, forming
our own judgements, and evaluating the disclosures in the financial statements.
We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary
to provide a reasonable basis for us to draw conclusions. We obtain audit evidence through testing the effectiveness ofcontrols, substantive procedures or a combination of both.
In addition, we read all the financial and non-financial information in the Annual Report to identify materialinconsistencies with the audited financial statements and to identify any information that is apparently materiallyincorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit.
If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

PricewaterhouseCoopers LLP
Chartered Accountants
LondonUnited Kingdom
2nd March 2017a) The maintenance and integrity of the Mandarin Oriental International Limited website is the responsibility of
the Directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly,
the auditors accept no responsibility for any changes that may have occurred to the financial statements since they
were initially presented on the website.
b) Legislation in Bermuda governing the preparation and dissemination of financial statements may differ fromlegislation in other jurisdictions.

79

80 Mandarin Oriental International Limited

Five Year Summary

Consolidated Profit and Loss AccountRevenue2012		
US$m		

2013		
US$m		

2014		
US$m		

2015		
US$m		

2016
US$m

648.3		

668.6		

679.9		

607.3		

597.4Operating profit

83.9		

111.8		

120.8		

107.3		

68.0Net financing charges(11.1)(15.8)(17.3)(11.8)(10.8)

Share of results of associates and joint ventures

15.5		

20.6		

12.3		

10.5		

10.9

Profit before tax

88.3		

116.6		

115.8		

106.0		

68.1Tax

(17.3)(19.8)(19.0)(16.6)(13.7)

Profit after tax

71.0		

96.8		

96.8		

89.4		

54.4

Profit attributable to shareholders

70.7		

96.3		

97.0		

89.3		

55.2

Underlying profit attributable to shareholders

69.2		

93.2		

97.0		

90.3		

57.3

Earnings per share (US¢)*

6.80		

9.23		

9.29		

7.44		

4.40

Underlying earnings per share (US¢)*6.66		

8.93		

9.29		

7.53		

4.56

Dividends per share (US¢)

7.00		

7.00		

7.00		

5.00		

4.00

Intangible assets

42.1		

42.6		

45.6		

44.1		

44.3

Tangible assets

1,055.5		

1,440.5		

1,315.1		

1,255.0		

1,352.1

108.6		

110.8		

101.6		

164.4		

163.8Other investments

7.2		

9.3		

10.5		

10.2		

10.7

Loans receivable

–		

–		

–		

–		

–

Pension assets

11.2		

14.4		

7.3		

–		

–

Deferred tax assets

4.7		

3.1		

2.2		

2.8		

2.6

Net current assets/(liabilities)

382.8		

(317.7)55.1		

254.2		

136.6Long-term borrowings(580.5)(238.7)(510.7)(436.2)(477.4)

Deferred tax liabilities(64.3)(65.5)(62.3)(59.8)(56.1)

Pension liabilities

(0.6)

(0.6)

–		

–		

(3.2)

Consolidated Balance Sheet

Associates and joint ventures

Other non-current liabilities(15.5)

(3.5)

(3.0)

(3.0)

–

Net assets

951.2		

994.7		

961.4		

1,231.7		

1,173.4

Share capital

50.0		

50.2		

50.2		

62.8		

62.8

Share premium

182.1		

186.6		

188.2		

490.3		

490.4Revenue and other reserves

713.8		

752.2		

718.0		

673.6		

616.2Shareholders’ funds

945.9		

989.0		

956.4		

1,226.7		

1,169.4

5.3		

5.7		

5.0		

5.0		

4.0

Total equity

951.2		

994.7		

961.4		

1,231.7		

1,173.4

Net asset value per share (US$)*0.91		

0.95		

0.92		

0.98		

0.93

Non-controlling interests

Consolidated Cash Flow Statement
Cash flows from operating activities

126.0		

156.9		

159.5		

140.2		

107.7Cash flows from investing activities(87.0)(422.3)(45.6)(124.4)(222.8)Net cash flow before financing activities

39.0		

(265.4)113.9		

15.8		

(115.1)

Cash flow per share from operating activities (US¢)*12.11		

15.04		

15.27		

11.69		

8.58

* The comparative figures from 2012 to 2014 have been adjusted in 2015 to reflect the effect of the rights issue completed in April 2015.

Annual Report 2016

Responsibility Statement

The Directors of the Company confirm to the best of their knowledge that:a) the consolidated financial statements have been prepared in accordance with International Financial ReportingStandards, including International Accounting Standards and Interpretations adopted by the International
Accounting Standards Board; andb) the sections of this Report, including the Chairman’s Statement, Group Chief Executive’s Review and Principal Risks
and Uncertainties, which constitute the management report include a fair review of all information required to bedisclosed by the Disclosure Guidance and Transparency Rules 4.1.8 to 4.1.11 issued by the Financial Conduct
Authority in the United Kingdom.

For and on behalf of the Board

James Riley
Stuart Dickie
Directors
2nd March 201781

82 Mandarin Oriental International Limited

Corporate Governance

Mandarin Oriental International Limited is incorporated in Bermuda. The Company was established as an Asian-based
hotel group and has since extended its operations to key locations around the world. The Company’s equity shares havea standard listing on the Main Market of the London Stock Exchange, and secondary listings in Bermuda and Singapore.
The Disclosure Guidance and Transparency Rules (the ‘DTRs’) issued by the Financial Conduct Authority in the
United Kingdom (the ‘FCA’) require that this Report address all relevant information about the corporate governancepractices applied beyond the requirements under Bermuda law.
The Company attaches importance to the corporate stability and opportunities that result from it being part of
the Jardine Matheson Holdings Limited (‘Jardine Matheson’) group, which is considered to be fundamental to theCompany’s ability to pursue its long-term development strategy. By coordinating objectives, establishing common values
and standards, and sharing experience, contacts and business relationships, the Jardine Matheson group companies aim
to optimize their opportunities across countries where they operate, particularly in Asia.
The Group is committed to high standards of governance. The system of governance it has adopted is based ona well-tried approach to oversight and management that has been developed over many years by the members of theJardine Matheson group. It enables the Company to benefit from Jardine Matheson’s strategic guidance and professional
expertise, while at the same time the independence of the Board is respected and clear operational accountability rests
with the Company’s executive management team.

The Management of the GroupThe Company has its dedicated executive management under the Group Chief Executive. The Memorandum of
Association of the Company, however, provides for the chairman of Jardine Matheson to be, or to appoint, the Managing
Director of the Company. Reflecting this, and the Jardine Matheson group’s 77% interest in the Company’s share capital,
the Group Chief Executive and the Managing Director meet regularly. Similarly, the board of the Hong Kong-basedGroup management company, Mandarin Oriental Hotel Group International Limited (‘MOHG’), and its financecommittee are chaired by the Managing Director and include Group executives as well as Jardine Matheson’s deputy
managing director, group finance director, group strategy director and group general counsel.
The presence of Jardine Matheson representatives on the Board and on the board of MOHG, as well as on its audit
and finance committees, provides an added element of stability to the Company’s financial planning and supervision,
enhancing its ability to raise finance and take a long-term view of business development. It also eases the ability ofmanagement to work effectively together in exploiting the full range of the Jardine Matheson group’s commercial strengths.
The Directors of the Company retain full power to manage the business affairs of the Company, other than mattersreserved to be exercised by the Company in general meeting under Bermuda legislation or the Company’s Bye-laws.
Among the matters on which the Board decides are the Group’s business strategy, its annual budget, dividends andmajor corporate activities.

Annual Report 2016

The Board
The Company currently has a Board of 18 Directors. Their names and brief biographies appear on pages 22 and 23of this Report. The Chairman has been appointed in accordance with the provisions of the Bye-laws of the Company,
which provide that the chairman of Jardine Matheson, or any Director nominated by him, shall be the Chairman of theCompany. The Board composition and operation helps to provide the Company with the necessary stability as it seeks
to grow its business.
The role of the Chairman is to lead the Board as it oversees the Group’s strategic and financial direction, while theprincipal role of the Managing Director is to act as chairman of MOHG and of its finance committee. Ben Keswick iscurrently appointed to both positions. The responsibility for running the Group’s business and all the executive mattersaffecting the Group rests with the Group Chief Executive, James Riley. The implementation of the Group’s strategy
is delegated to the Company’s executive management, with decision-making authority within designated financial
parameters delegated to the MOHG finance committee.
The Board is scheduled to hold four meetings in 2017 and ad hoc procedures are adopted to deal with urgent matters.
In 2016 one meeting was held in Bermuda and three were held in Asia. The Board receives high quality, up to date
information for each of its meetings. In addition, certain Directors of the Company who do not serve on the boardof MOHG and who are based outside Asia regularly visit Asia and Bermuda to discuss the Group’s business, as well as
to participate in the four strategic reviews that precede the regular Board meetings. These Directors are not directly
involved in the operational management of the Group’s business activities, but their knowledge and close oversightof the Group’s affairs reinforces the process by which business is reviewed before consideration at Board meetings.

Directors’ appointment, retirement, remuneration and service contracts
Candidates for appointment as executive Directors of the Company, as executive directors of MOHG or as senior
executives elsewhere in the Group may be sourced internally, or from the Jardine Matheson group or externally,
including by using the services of specialist executive search firms. The aim is to appoint individuals who combine
international best practice with familiarity of or adaptability to Asian markets. When appointing non-executive
Directors, the Board pays particular attention to the Asian business experience and relationships that they can bring.
Each new Director is appointed by the Board and, in accordance with the Company’s Bye-laws, each new Director
so appointed is subject to retirement at the first annual general meeting after appointment. Thereafter, Directors are
subject to retirement by rotation under the Bye-laws whereby one-third of the Directors retire at the annual general
meeting each year. These provisions apply to both executive and non-executive Directors, but the requirement toretire by rotation does not extend to the Chairman or Managing Director.
On 31st March 2016 Edouard Ettedgui stepped down as Group Chief Executive and James Riley joined the Boardin his place on 1st April 2016. Edouard Ettedgui remains as a non-executive Director. Y.K. Pang joined the Boardon 1st August 2016.

83

84 Mandarin Oriental International Limited

Corporate Governance Continued

In accordance with Bye-law 85, Mark Greenberg, Julian Hui, Simon Keswick, Dr Richard Lee and James Watkins retireby rotation at this year’s Annual General Meeting and, being eligible, offer themselves for re-election. In accordancewith Bye-law 92, Y.K. Pang will also retire and, being eligible, offers himself for re-election. None of the Directors
proposed for re-election has a service contract with the Company or its subsidiaries.
Lord Leach of Fairford, who had been a Director of the Company since 1987, passed away on 12th June 2016.
The Company’s policy is to offer competitive remuneration packages to its senior executives. It is recognized that,
due to the nature of the Group and its diverse geographic base, a number of its senior executives are required to beoffered international terms and the nature of the remuneration packages is designed to reflect this. Executive Directors
joining from outside the Group may be offered an initial fixed-term service contract to reflect any requirement forthem to relocate.
Recommendations and decisions on remuneration and other benefits payable or made available to executive Directors
result from consultations between the Chairman and other Directors as he considers appropriate. Directors’ fees, which
are payable to all Directors other than the Group Chief Executive and the Chief Financial Officer, are decided upon byshareholders in general meeting as provided for by the Company’s Bye-laws. A motion to increase the Directors’ fees toUS$50,000 each per annum and the fee for the Chairman and Managing Director to US$60,000 per annum with effectfrom 1st January 2017 will be proposed at the forthcoming Annual General Meeting.
For the year ended 31st December 2016, the Directors received from the Group US$8.2 million (2015: US$7.3 million)
in Directors’ fees and employee benefits, being US$0.7 million (2015: US$0.7 million) in Directors’ fees, US$6.9 million(2015: US$5.9 million) in short-term employee benefits including salary, bonuses, accommodation and deemed benefits
in kind, US$0.2 million (2015: US$0.2 million) in post-employment benefits and US$0.4 million (2015: US$0.5 million)in share-based payments. The information set out in this paragraph forms part of the audited financial statements.
Share-based long-term incentive plans have also been established to provide incentives for executive Directors and senior
managers. Share options and share awards are granted by the scheme trustee after consultation between the Chairman
and the Group Chief Executive as well as other Directors as they consider appropriate. Share options are granted at thethen prevailing market prices, while share awards will vest free of payment. The share options and share awards normallyvest on or after the third anniversary of the date of grant. Grants may be made in a number of instalments. Share options
and share awards are not granted to non-executive Directors.
The Company purchases insurance to cover its Directors against their costs in defending themselves in civil proceedings
taken against them in that capacity and in respect of damages resulting from the unsuccessful defence of any proceedings.
To the extent permitted by law, the Company also indemnifies its Directors. Neither the insurance nor the indemnity
provides cover where the Director has acted fraudulently or dishonestly.

Annual Report 2016

Audit Committee
The Board has established within MOHG an audit committee (the ‘Audit Committee’), the current members of which
are Y.K. Pang, Mark Greenberg, Jeremy Parr and John Witt; they have extensive knowledge of the Group while at thesame time not being directly involved in operational management. The chairman, group chief executive and chief
financial officer of MOHG, together with representatives of the internal and external auditors, also attend the Audit
Committee meetings by invitation. The Audit Committee meets and reports to the Board semi-annually.
Prior to completion and announcement of the half-year and year-end results, a review of the financial informationand of any issues raised in connection with the preparation of the results, including the adoption of new accounting
policies, is undertaken by the Audit Committee with the executive management and a report is received from theexternal auditors. The external auditors also have access to the full Board, in addition to the Group Chief Executive,
Chief Financial Officer and other senior executives.
The Audit Committee keeps under review the nature, scope and results of the audits conducted by the internal audit
function. The Audit Committee’s responsibilities extend to reviewing the effectiveness of both the internal and external
audit functions; considering the independence and objectivity of the external auditors; and reviewing and approving
the level and nature of non-audit work performed by the external auditors.
The terms of reference of the Audit Committee can be found on the Company’s website at www.mandarinoriental.com.

Risk management and internal control
The Board has overall responsibility for the Group’s systems of risk management and internal control. The Board
has delegated to the Audit Committee responsibility for providing oversight in respect of risk management activities.
The Audit Committee considers the Group’s principal risks and uncertainties and potential changes to the risk profile,and reviews the operation and effectiveness of the Group’s systems of internal control and the procedures by whichthese risks are monitored and mitigated. The Audit Committee considers the systems and procedures on a regular basis,and reports to the Board semi-annually. The systems of internal control are designed to manage, rather than eliminate,business risk; to help safeguard the Group’s assets against fraud and other irregularities; and to give reasonable, but not
absolute, assurance against material financial misstatement or loss.
Executive management is responsible for the implementation of the systems of internal control throughout the Group.
The internal audit function also monitors the effectiveness of the systems of internal control and the approach taken by
the business units to risk. The internal audit function is independent of the operating businesses and reports its findings,
and recommendations for any corrective action required, to the Audit Committee.
The Group has in place an organizational structure with defined lines of responsibility and delegation of authority.
There are established policies and procedures for financial planning and budgeting; for information and reporting
systems; for assessment of risk; and for monitoring the Group’s operations and performance. The information systems
in place are designed to ensure that the financial information reported is reliable and up to date.
The Company’s policy on commercial conduct underpins the Group’s internal control process, particularly in the areaof compliance. The policy is set out in the Group’s Code of Conduct, which is a set of guidelines to which every employee
must adhere, and is reinforced and monitored by an annual compliance certification process.
The Audit Committee has also been given the responsibility to oversee the effectiveness of the formal procedures for
employees to raise any matters of serious concern, and is required to review any reports made under those proceduresthat are referred to it by the internal audit function.
The principal risks and uncertainties facing the Company are set out on pages 89 and 90.

85

86 Mandarin Oriental International Limited

Corporate Governance Continued

Directors’ responsibilities in respect of the financial statements
The Directors are required under the Bermuda Companies Act to prepare financial statements for each financial year
and to present them annually to the Company’s shareholders at the annual general meeting. The financial statements
are required to present fairly in accordance with International Financial Reporting Standards (‘IFRS’) the financial
position of the Group at the end of the year and the results of its operations and its cash flows for the year then ended.
The Directors consider that applicable accounting policies under IFRS, applied on a consistent basis and supported
by prudent and reasonable judgements and estimates, have been followed in preparing the financial statements.
The financial statements have been prepared on a going concern basis.

Code of Conduct
The Group conducts business in a professional, ethical and even-handed manner. Its ethical standards are clearly set out
in its Code of Conduct, which is modelled on the Jardine Matheson group’s code of conduct. The Code of Conduct
requires that all Group companies comply with all laws of general application, all rules and regulations that are industry
specific and proper standards of business conduct. The Code of Conduct prohibits the giving or receiving of illicit
payments, and requires all employees to be treated fairly, impartially and with respect. It also requires that all managers
must be fully aware of their obligations under the Code of Conduct and establish procedures to ensure complianceat all levels within their organizations. The Group has in place procedures by which employees can raise, in confidence,
matters of serious concern in areas such as financial reporting or compliance.

Directors’ share interests
The Directors of the Company in office on 2nd March 2017 had interests (within the meaning of the EU Market
Abuse Regulation (‘MAR’), which applies to the Company as it is listed on the London Stock Exchange) as set out below
in the ordinary share capital of the Company. These interests include those notified to the Company in respect of the
Directors’ closely associated persons (as that term is used under MAR).
James Riley
Stuart Dickie
Edouard Ettedgui

180,450
341,083
13,507,229

Julian Hui

10,294

Lincoln K.K. Leong

129,756

In addition, Edouard Ettedgui held share options in respect of 8,693,974 ordinary shares, and Stuart Dickie held
share options in respect of 2,385,540 ordinary shares and share awards in respect of 734,156 ordinary shares,
issued pursuant to the Company’s share-based long-term incentive plans.

Substantial shareholders
As a non-UK issuer, the Company is subject to the DTRs pursuant to which a person must in certain circumstances
notify the Company of the percentage of voting rights attaching to the share capital of the Company that he holds. The
obligation to notify arises if that person acquires or disposes of shares in the Company which results in the percentage ofvoting rights which he holds reaching, exceeding, or falling below, 5%, 10%, 15%, 20%, 25%, 30%, 50% and 75%.
The Company has been informed of the holding of voting rights of 5% or more attaching to the Company’s issued ordinary
share capital by Jardine Strategic Holdings Limited (‘Jardine Strategic’), which is directly interested in 972,087,226
ordinary shares carrying 77.37% of the voting rights. By virtue of its interest in Jardine Strategic, Jardine Matheson is
also interested in the same ordinary shares. Apart from this shareholding, the Company is not aware of any holders ofvoting rights of 5% or more attaching to the issued ordinary share capital of the Company as at 2nd March 2017.
There were no contracts of significance with corporate substantial shareholders during the year under review.

Annual Report 2016

Governance principles
The Company’s primary listing on the London Stock Exchange is a standard listing on the Main Market. Undera standard listing, the Company is subject to the UK Listing Rules (other than those which apply only to companies
with a premium listing), the DTRs, the UK Prospectus Rules and MAR. The Company, therefore, is bound by the rules
in relation to continuous disclosure, periodic financial reporting, disclosure of interests in shares and market abuse,including the rules governing insider dealing, market manipulation and the disclosure of inside information. The
Company is also subject to regulatory oversight from the FCA, as the Company’s principal securities regulator, and isrequired to comply with the Admission and Disclosure Standards of the Main Market of the London Stock Exchange.
When shareholders approved the Company’s move to a standard listing from a premium listing in 2014, the Company
stated that it intended to maintain certain governance principles on the same basis as was then applicable to the Company’s
premium listing, as follows:
1. When assessing a significant transaction, being a larger transaction which would be classified as a class 1 transaction
under the provisions of the UK Listing Rules, the Company will engage an independent financial adviser to provide
a fairness opinion on the terms of the transaction.
2. In the event of a related party transaction, being a transaction with a related party which would require a sponsor
to provide a fair and reasonable opinion under the provisions of the UK Listing Rules, the Company will engage
an independent financial adviser to confirm that the terms of the transaction are fair and reasonable as far as theshareholders of the Company are concerned.
3. Further, as soon as the terms of a significant transaction or a related party transaction are agreed, an announcement
will be issued by the Company providing such details of the transaction as are necessary for investors to evaluate
the effect of the transaction on the Company.
4. At each annual general meeting, the Company will seek shareholder approval to issue new shares on a non-pre-emptivebasis for up to 33% of the Company’s issued share capital, of which up to 5% can be issued for cash consideration.
5. The Company will continue to adhere to its Securities Dealing Rules. These rules, which were based on the UK
Model Code, have since been revised to follow the provisions of MAR with respect to market abuse and disclosureof interests in shares.
6. The Company will continue its policies and practices in respect of risk management and internal controls.

Related party transactions
Details of transactions with related parties entered into by the Company during the course of the year are included innote 29 to the financial statements on page 75.

87

88 Mandarin Oriental International Limited

Corporate Governance Continued

Securities purchase arrangements
The Directors have the power under the Bermuda Companies Act and the Company’s Memorandum of Association
to purchase the Company’s shares. Any shares so purchased shall be treated as cancelled and, therefore, reduce theissued share capital of the Company. When the Board reviews the possibility for share repurchases, it will take into
consideration the potential for the enhancement of earnings or asset values per share. When purchasing such shares,
the Company is subject to the provisions of MAR.

Takeover Code
The Company is subject to a Takeover Code, based on London’s City Code on Takeovers and Mergers. The Takeover
Code provides an orderly framework within which takeovers can be conducted and the interests of shareholders protected.
The Takeover Code has statutory backing, being established under the Acts of incorporation of the Company in Bermuda.

Annual General Meeting
The 2017 Annual General Meeting will be held at Rosewood Tucker’s Point, Bermuda on 3rd May 2017. The fulltext of the resolutions and explanatory notes in respect of the meeting are contained in the Notice of Meeting whichaccompanies this Report. A corporate website is maintained containing a wide range of information of interest toinvestors at www.mandarinoriental.com.

Power to amend Bye-laws
The Bye-laws of the Company can be amended by the shareholders by way of a special resolution at a general meetingof the Company.

Annual Report 2016

Principal Risks and Uncertainties

The Board has overall responsibility for risk management and internal control. The process by which the Group identifies
and manages risk is set out in more detail on page 85 of the Corporate Governance section of this Report. The following
are the principal risks and uncertainties facing the Company as required to be disclosed pursuant to the Disclosure
Guidance and Transparency Rules issued by the Financial Conduct Authority in the United Kingdom and are in
addition to the matters referred to in the Chairman’s Statement and Group Chief Executive’s Review.

Economic and financial risk
The Group’s business is exposed to the risk of negative developments in global and regional economies and financial
markets, either directly or through the impact on the Group’s investment partners, third-party hotel owners anddevelopers, bankers, suppliers or customers. These developments can result in recession, inflation, deflation, currency
fluctuations, restrictions in the availability of credit, business failures, or increases in financing costs. Such developments
may increase operating costs, reduce revenues, lower asset values or result in the Group being unable to meet in full its
strategic objectives. These developments could also adversely affect travel patterns which would impact demand for theGroup’s products and services.
The steps taken by the Group to manage its exposure to financial risk are set out in the Financial Risk Management
section in the Financial Statements on pages 38 to 43.

Commercial and market risk
Risks are an integral part of normal commercial practices, and where practicable steps are taken to mitigate such risks.
The Group operates within the global hotel industry which is highly competitive. Failure to compete effectively in termsof quality of product, levels of service or price can have an adverse effect on earnings. Significant competitive pressure or
the oversupply of hotel rooms in a specific market can lead to reduced margins. Advances in technology creating new or
disruptive competitive pressures might also negatively affect the trading environment.
The Group competes with other luxury hotel operators for new opportunities in the areas of hotel management,
residences management and residences branding. Failure to establish and maintain relationships with hotel owners
or developers could adversely affect the Group’s business. The Group also makes investment decisions in respect ofacquiring new hotel properties and undertaking major renovations at hotels in which it has an ownership interest.
The success of these investments is measured over the longer term and as a result is subject to market risk.
Mandarin Oriental’s continued growth depends on the opening of new hotels and branded residences. Most of theGroup’s new developments are controlled by third-party owners and developers and can be subject to delays due toissues attributable to planning and construction, sourcing of finance, and the sale of residential units. In extreme
circumstances, such factors might lead to the cancellation of a project.

Pandemic, terrorism and natural disasters
The Group’s business would be impacted by a global or regional pandemic as this would impact travel patterns, demand
for the Group’s products and services and could also affect the Group’s ability to operate effectively. The Group’s hotels
are also vulnerable to the effects of terrorism, either directly through the impact of an act of terrorism or indirectly
through the impact of generally reduced economic activity in response to the threat of or an actual act of terrorism.
In addition, a number of the territories in which the Group operates can experience from time to time natural disasters
such as typhoons, floods, earthquakes and tsunamis.

89

90 Mandarin Oriental International Limited

Principal Risks and Uncertainties Continued

Key agreements
The Group’s business is reliant upon joint venture and partnership agreements, property leasehold arrangements,
management, license, branding and services agreements or other key contracts. Cancellation, expiry or termination,or the renegotiation of any of these key agreements and contracts, could have an adverse effect on the financial
performance of individual hotels as well as the wider Group.

Reputational risk and value of the brand
The Group’s brand equity and global reputation is fundamental in supporting its ability to offer premium products andservices and to achieving acceptable revenues and profit margins. Any damage to the Group’s brand equity or reputation,
including as a result of negative effects relating to health and safety, acts or omissions by Group personnel, information
system breaches, and any allegations of socially irresponsible policies and practices, might adversely impact theattractiveness of the Group’s properties or the loyalty of the Group’s guests.

Regulatory and political risk
The Group’s business is subject to a number of regulatory environments in the territories in which it operates. Changes
in the regulatory approach to such matters as employment legislation, tax rules, foreign ownership of assets, planning
controls and exchange controls have the potential to impact the operations and profitability of the Group’s business.
Changes in the political environment, including prolonged civil unrest, could also affect the Group’s business.

Annual Report 2016

Shareholder Information

Financial calendar
2016 full-year results announced
Shares quoted ex-dividend on the Singapore Exchange
Shares quoted ex-dividend on the London Stock Exchange
Share registers closed
Annual General Meeting to be held
2016 final dividend payable
2017 half-year results to be announced
Shares quoted ex-dividend on the Singapore Exchange
Shares quoted ex-dividend on the London Stock Exchange
Share registers to be closed
2017 interim dividend payable

2nd March 201715th March 2017
16th March 2017
20th to 24th March 2017
3rd May 201711th May 2017
3rd August 2017*
23rd August 2017*24th August 2017*28th August to 1st September 2017*19th October 2017** Subject to change

Dividends
Shareholders will receive their cash dividends in United States dollars, unless they are registered on the Jersey branchregister where they will have the option to elect for sterling. These shareholders may make new currency elections for the2016 final dividend by notifying the United Kingdom transfer agent in writing by 21st April 2017. The sterling equivalentof dividends declared in United States dollars will be calculated by reference to a rate prevailing on 26th April 2017.
Shareholders holding their shares through CREST in the United Kingdom will receive their cash dividends in sterling
only. Shareholders holding their shares through The Central Depository (Pte) Limited (‘CDP’) in Singapore will receive
their cash dividends in United States dollars unless they elect, through CDP, to receive Singapore dollars.

Registrars and transfer agent
Shareholders should address all correspondence with regard to their shareholdings or dividends to the appropriate
registrar or transfer agent.

Principal Registrar
Jardine Matheson International Services Limited, P.O. Box HM 1068, Hamilton HM EX, Bermuda

Jersey Branch Registrar
Capita Registrars (Jersey) Limited, 12 Castle Street, St Helier, Jersey JE2 3RT, Channel Islands

Singapore Branch Registrar
M & C Services Private Limited, 112 Robinson Road #05-01, Singapore 068902

United Kingdom Transfer Agent
Capita Asset Services, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU, United Kingdom

Press releases and other financial information can be accessed through the internet at www.mandarinoriental.com.

9192 Mandarin Oriental International Limited

Mandarin Oriental Hotel Group Contact Addresses

Hong Kong Corporate Office
281 Gloucester Road
Causeway Bay, Hong Kong
Telephone +852 2895 9288
mandarinoriental.com

Asi a-PacificMandarin Oriental, Bangkok
48 Oriental Avenue
Bangkok 10500
Thailand
Telephone +66(2) 659 9000
Emailmobkk-reservations @mohg.com

The Excelsior, Hong Kong
281 Gloucester Road
Causeway Bay, Hong Kong
Telephone +852 2894 8888
Emailexhkg-reservations @mohg.com
Mandarin Oriental, Jakarta
Jalan M H Thamrin
PO Box 3392
Jakarta 10310
Indonesia
Telephone +62(21) 2993 8888
Emailmojkt-reservations @mohg.com

Mandarin Oriental, Guangzhou
389 Tianhe Road, Tianhe District
Guangzhou 510620, China
Telephone +86(20) 3808 8888
Emailmogzh-reservations @mohg.com

Mandarin Oriental, Kuala Lumpur
Kuala Lumpur City Centre
50088 Kuala Lumpur
Malaysia
Telephone +60(3) 2380 8888
Emailmokul-reservations @mohg.com

Mandarin Oriental, Hong Kong
5 Connaught Road
Central, Hong Kong
Telephone +852 2522 0111
Emailmohkg-reservations @mohg.com

Mandarin Oriental, Macau
Avenida Dr Sun Yat Sen
NAPE, Macau
Telephone +853 8805 8888
Emailmomac-reservations @mohg.com

The Landmark Mandarin Oriental, Hong Kong
The Landmark
15 Queen’s Road Central
Central, Hong Kong
Telephone +852 2132 0188
Emaillmhkg-reservations @mohg.com

Mandarin Oriental, Sanya
12 Yuhai Road
Sanya 572000
Hainan, China
Telephone +86(898) 8820 9999
Emailmosan-reservations @mohg.com

Annual Report 2016

Mandarin Oriental Pudong, Shanghai
111 Pudong Road (S), Pudong
Shanghai 200120, China
Telephone +86(21) 2082 9888
Emailmopud-reservations @mohg.com
Mandarin Oriental, Singapore
5 Raffles Avenue, Marina Square
Singapore 039797
Telephone +65 6338 0066
Emailmosin-reservations @mohg.com
Mandarin Oriental, Taipei
158 Dunhua North Road
Taipei 10548, Taiwan
Telephone +886(2) 2715 6888
Emailmotpe-reservations @mohg.com
Mandarin Oriental, Tokyo
2-1-1 Nihonbashi Muromachi, Chuo-ku
Tokyo 103-8328, Japan
Telephone +81(3) 3270 8800
Emailmotyo-reservations @mohg.com

Europe, Middle E ast & North A fr ic a
Mandarin Oriental, Barcelona
Passeig de Gràcia, 38-40
08007 Barcelona, Spain
Telephone +34 93 151 8888
Emailmobcn-reservations @mohg.com

Mandarin Oriental, Bodrum
Cennet Koyu Çomça Mevkii
314. Sokak No. 10, Göltürkbükü Mahallesi
48400, Bodrum, Mugla, Turkey
Telephone +90(252) 311 1888
Emailmobod-reservations@mohg.com
Mandarin Oriental, Geneva
Quai Turrettini 1
1201 Geneva, Switzerland
Telephone +41(22) 909 0000
Emailmogva-reservations @mohg.com
Mandarin Oriental Hyde Park, London
66 Knightsbridge
London, SW1X 7LA
United Kingdom
Telephone +44(0) 20 7235 2000
Emailmolon-reservations @mohg.com
Hotel Ritz, Madrid
Plaza de la Lealtad 528015 Madrid
Spain
Telephone +34(91) 701 67 67
Email
rzmad-reservations@mohg.com
Mandarin Oriental, Marrakech
Route du Golf Royal
40000 Marrakech, Morocco
Telephone +212 524 298 888
Emailmomrk-reservations@mohg.com

9394 Mandarin Oriental International Limited

Mandarin Oriental Hotel Group Contact Addresses Continued

Mandarin Oriental, Milan
Via Andegari 920121 Milan, Italy
Telephone +39 02 8731 8888
Emailmomln-reservations@mohg.com

Mandarin Oriental, Boston
776 Boylston Street
Boston, Massachusetts 02199, USA
Telephone +1(617) 535 8888
Emailmobos-reservations @mohg.com

Mandarin Oriental, Munich
Neuturmstrasse 180331 Munich, Germany
Telephone +49(0) 89 290 980
Emailmomuc-reservations @mohg.com

Mandarin Oriental, Las Vegas
3752 Las Vegas Boulevard SouthLas Vegas, Nevada 89158, USA
Telephone +1(702) 590 8888
Emailmolas-reservations @mohg.com

Mandarin Oriental, Paris251 rue Saint-Honoré
75001 Paris, France
Telephone +33(1) 7098 7888
Emailmopar-reservations @mohg.com

Mandarin Oriental, Miami
500 Brickell Key Drive
Miami, Florida 33131, USA
Telephone +1(305) 913 8288
Emailmomia-reservations @mohg.com

Mandarin Oriental, Prague
Nebovidská 459/1
11800 Prague 1, Czech Republic
Telephone +420(2) 33 088 888
Emailmoprg-reservations @mohg.com

Mandarin Oriental, New York80 Columbus Circle at 60th Street
New York, New York 10023, USA
Telephone +1(212) 805 8800
Emailmonyc-reservations @mohg.com

The A mer ic as

Mandarin Oriental, Washington D.C.
1330 Maryland Avenue, SW
Washington, District of Columbia 20024, USA
Telephone +1(202) 554 8588
Emailmowas-reservations @mohg.com

Mandarin Oriental, Atlanta
3376 Peachtree Road NE
Atlanta, Georgia 30326, USA
Telephone +1(404) 995 7500
Emailmoatl-reservations @mohg.com

Annual Report 2016

Sales and Reservations Offices

Mandarin Oriental
Hotel Group
Sales Offices

Germany
8th floor, Dreieichstrasse 59
60594 Frankfurt, Germany
Telephone +49(69) 610 631

Representative Offices
China
Room 529, China World Office 1
No. 1 Jian Guo Men Wai Avenue
Chaoyang District
Beijing 100004, China
Telephone +86(10) 6505 2806

Hong Kong
5/F, 281 Gloucester Road,
Causeway Bay, Hong Kong
Telephone +852 2895 9278

United Kingdom
Kings Court, 2-16 Goodge Street
London W1T 2QA
United Kingdom
Telephone +44(0) 20 7908 7817

Australia
Suite 108, 1 Cassins Avenue
North Sydney, NSW 2060
Australia
Telephone +61(2) 8920 1871

United States
900 North Kingsbury #1131
Chicago, IL 60610, USA
Telephone +1(312) 661 1887

Chengdu Square One Centre
Office 1109, 11/F, Square One
No. 18 Dongyu Street
Jinjiang District
Chengdu 610016, China
Telephone +86(28) 6466 3823

1625 S Federal Highway, Suite 406
Fort Lauderdale, FL 33062, USA
Telephone +1(954) 941 6151

389 Tianhe Road, Tianhe District
Guangzhou 510620, China
Telephone +86(20) 3808 8733

3249 Breckenridge Way
Riva, MD 21140, USA
Telephone +1(410) 956 2842

Room 1109B, Bund Center
222 Yan An Road East
Huang Pu District
Shanghai 200002, China
Telephone +86(21) 6335 1800

Singapore
5 Raffles Avenue
Marina Square, Singapore 039797
Telephone +65 6335 1800
Dubai
PO Box 500717, Office No. 5
Floor No. 7, Al Thuraya Tower No. 2
Dubai Media City, Dubai
United Arab Emirates
Telephone +971(4) 428 0721
France21 rue Cambon, 75001 Paris, France
Telephone +33(1) 7098 7053

315 South Beverly Drive, Suite 215
Beverly Hill, CA 90212, USA
Telephone +1(424) 354 1714
250 West 57th Street, Suite 1917
New York, NY 10107, USA
Telephone +1(212) 207 8880

95

96 Mandarin Oriental International Limited

Sales and Reservations Offices Continued

Reservations Offices

Europe & Middle E ast

Asi a-Pacific

Austria
Tollfree 00 800 2828 3838

Australia
Tollfree 1 800 123 693
China
Tollfree 4001 205 314
Hong Kong
Tollfree 800 961 632
Indonesia
Tollfree 001 803 65 6520

BahrainTollfree 800 00 403
Belgium
Tollfree 00 800 2828 3838
FranceTollfree 00 800 2828 3838
Germany
Tollfree 00 800 2828 3838

Japan
Tollfree 00531 650 487
Tollfree 0120 663 230

Italy
Tollfree 00 800 2828 3838

Malaysia
Tollfree 00 800 2828 3838

Netherlands
Tollfree 00 800 2828 3838

New ZealandTollfree 00 800 2828 3838

Saudi Arabia
Tollfree 800 865 6043

Singapore
Telephone +65 6222 4722

Spain
Tollfree 00 800 2828 3838

TaiwanTollfree 00 800 2828 3838

Switzerland
Tollfree 00 800 2828 3838
United Arab Emirates
Tollfree 800 065 0539
United Kingdom
Tollfree 00 800 2828 3838
For other European countries
Telephone +1(817) 567 9774

United States, C a na da& Centr a l A mer ic a
MexicoTollfree 001 800 526 6566
USA / Canada
Tollfree 1 800 526 6566

South A mer ic a
Argentina
Tollfree 0800 444 2659
BrazilTollfree 0800 891 3578

Mandarin Oriental International Limited
mandarinoriental.com