M andarin Oriental
Inter national Limited
Annual Report 2014

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 a well-respected Asian hotel company into a global brand, the Group now
operates, or has under development, 44 hotels representing almost 11,000 rooms in 24 countries,
with 20 hotels in Asia, ten in The Americas and 14 in Europe, Middle East and North Africa.
In addition, the Group operates, or has under development, 15 Residences at Mandarin Oriental
connected to its properties. The Group has equity interests in a number of its properties andadjusted net assets worth approximately US$3.2 billion as at 31st December 2014.
Mandarin Oriental’s aim is to be recognized widely as the best global luxury hotel group, providing
21st century luxury with oriental charm in each of its hotels. This will be achieved by investingin 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 andquality management. 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 andhas a standard listing on the London Stock Exchange as its primary listing, with secondary listingsin 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

16

Operating Summary

18

Development Portfolio

19International Recognition

21

Financial Review

26

Directors’ Profiles

28

Financial Statements

84

Principal Subsidiaries, Associates and Managed Hotels

86

Independent Auditors’ Report

88

Five Year Summary

89

Responsibility Statement

90

Corporate Governance97

Principal Risks and Uncertainties

99

Shareholder Information

100

Mandarin Oriental Hotel Group Contact Addresses

103

Sales and Reservations Offices

Annual Report 2014

Corporate Information

Directors
Ben Keswick Chairman and Managing Director
Edouard Ettedgui Group Chief Executive
Stuart Dickie
Mark Greenberg
Julian Hui
Adam Keswick
Sir Henry Keswick
Simon Keswick
Lord Leach of Fairford
Dr Richard Lee
Lincoln K.K. Leong
Anthony Nightingale
Lord Powell of Bayswater, kcmg
Lord Sassoon, kt
James Watkins
Percy Weatherall
Giles White

Mandarin Oriental Hotel GroupInternational Limited
Directors
Ben Keswick Chairman
Edouard Ettedgui 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
Adam Keswick
C.J.W. MaresJames Riley
T.L. Stinson
Giles White

Company Secretary and Registered Office

Corporate Secretary

John C. Lang
Jardine House
33-35 Reid Street
Hamilton, Bermuda

N.M. McNamara

3

4 Mandarin Oriental International Limited

Highlights

Mandarin Oriental International Limited• Record underlying profit of US$97 million• New hotels opened in Taipei and Bodrum• Four new management contracts, including Bangkok Residences• Major renovation of London hotel announced• 1 for 4 rights issue to raise US$316 million

Results
Year ended 31st December
2014		
2013		
US$m		
US$m		

Change%1,389.9

1,360.8		

2

217.3

208.7		

4

Underlying profit attributable to shareholders3

97.0

93.2		

4

Profit attributable to shareholders

97.0

96.3		

1

US¢		

US¢		

%

Underlying earnings per share3

9.67		

9.30		

4

Earnings per share

9.67

9.61		

1

Dividends per share

7.00

7.00		

–

US$		

US$		

%

Net asset value per share

0.95

0.99		

(4)

Adjusted net asset value per share 4

3.14

3.05		

3

Net debt/shareholders’ funds

42%

48%

Net debt/adjusted shareholders’ funds4

13%

16%

Combined total revenue of hotels under management1
Underlying EBITDA (Earnings before interest, tax,
depreciation and amortization) 2

1

Combined revenue includes turnover of the Group’s subsidiary hotels in addition to 100% of revenue from associate andmanaged hotels.

2

EBITDA of subsidiaries plus the Group’s share of EBITDA of associates.

3

Underlying profit attributable to shareholders and underlying earnings per share exclude non-trading items such as gains on
disposals, provisions against asset impairment and writeback thereof.

4

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 2014

Combined total revenue

Combined total revenue

US$m

US$m

by geographical areaby type of business

1,389.9

1,360.8
1,283.3
1,196.4

1,389.9

1,360.8

290.9

285.8

1,283.3
1,196.4

277.5

755.1

743.7

689.2

641.3

267.2
1,025.5

442.5

450.7

231.4

1,025.5
545.6

438.3
401.8

351.3

324.8

312.6

368.6

360.0

438.6

242.7

214.8

2010

481.9

508.6

374.1

287.0

155.8

471.2

2012

2011

287.9

264.3

2014

2013

105.8

116.5

122.9

135.2

126.2

2010

2011

2012

2013

2014

Hong Kong

The Americas

Rooms

Other Asia

EuropeFood and beverage

EBITDA andnet interest expense

OthersNet debt/adjusted
shareholders’ funds

US$m

US$m
217.3
208.7

3,152.4

3,061.2
2,876.2
2,691.7

172.6
163.0

2,315.5

136.4

15.6%
478.5
19.5

2010

18.3

2011

15.5

2012

19.3

6.2%
144.3

2013

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

20.8

2014

2010

4.2%

4.7%

112.4

136.5

2011

2012

Adjusted shareholders’ funds
Net debt

2013

12.8%
403.1

2014

5

6 Mandarin Oriental International Limited

Chairman’s Statement

Overview
Against the background of challenging conditions in some markets, Mandarin Oriental did well to achieve
an improvement in underlying profit in 2014. The Group benefited from resilient demand from the leisure sector,
the geographic diversification of its portfolio and the receipt of US$15 million of branding fees in relation tothe ongoing sales of The Residences at Mandarin Oriental in Bodrum.

Performance
Underlying earnings before interest, tax, depreciation and amortization for 2014 were US$217 million, an increaseof US$8 million from 2013. Underlying profit of US$97 million was US$4 million higher than the prior year,
which benefited from a US$7 million profit recognized on acquisition of the freehold rights of the Paris hotel,
while underlying earnings per share were US¢9.67 compared with US¢9.30 in 2013.
Profit attributable to shareholders was US$97 million in 2014, compared to US$96 million in the prior year,with the 2013 results including the writeback of a US$3 million asset impairment provision.
Following an independent valuation of the Group’s hotel properties, the adjusted net asset value per share was
US$3.14 at 31st December 2014, compared with US$3.05 per share at the end of 2013.
The Directors recommend a final dividend of US¢5.00 per share. This, together with the interim dividend ofUS¢2.00 per share, will make a total annual dividend of US¢7.00 per share, unchanged from 2013.

Group review
In Hong Kong, the Group’s two wholly-owned hotels performed well compared to last year, although theirresults were impacted by demonstrations in the city during the final quarter. Mandarin Oriental, Tokyo benefited
from improved visitor arrivals to the city, while occupancy at the Bangkok property continued to be affected by theongoing political uncertainty in the country. The performances of the Group’s other Asian hotels were broadly stable.
The results in Europe benefited from further stabilization of the Paris hotel and an improvement in Geneva,
which more than offset weaker demand in London.
In The Americas, while the majority of the Group’s hotels reported higher revenue per available room, the overall
result was impacted by lower demand in Washington D.C. when compared to the prior year, which included the2013 Presidential Inauguration.

Business developments
The Group’s development projects remained active during the year with hotels opening in Taipei, Taiwan
and Bodrum, Turkey, while management contracts were announced for new hotels under development in Bali,
Manila and Dubai.
In October, the Group also announced it is to brand and manage 146 Residences at Mandarin Oriental in Bangkok.
The Residences will be developed as part of a large mixed-use project located diagonally across the Chao Phraya
River from Mandarin Oriental, Bangkok, and are expected to complete in 2018.
In the first quarter of 2014, the Group ceased management of two unbranded hotels, the Grand Lapa in Macauand the Elbow Beach in Bermuda. Following the announcement of a management contract for a new luxury hotel

Annual Report 2014

in Manila scheduled to open in 2020, the Group’s existing hotel in the city was closed in September. The hotel
project in Moscow will also no longer proceed.
The Group is to expand its Munich property with 51 additional guest rooms, hotel facilities and 19 branded
Residences in a mixed-use complex being developed opposite the hotel, which is due to open in 2021. The Groupwill own the freehold of the hotel component. The Group’s total investment is estimated to be €124 million(US$150 million) in today’s terms, which includes a refurbishment of the hotel’s existing rooms. The Group
is to undertake a major renovation of Mandarin Oriental Hyde Park in London, scheduled to commence in 2016
which will take 18 months to complete at an estimated cost of £85 million (US$130 million). The hotel will stay
open throughout the renovation period with reduced facilities and room inventory.
Mandarin Oriental now operates 27 hotels, and has a further 17 under development. Together these represent close
to 11,000 rooms in 24 countries. In addition, the Group operates eight Residences at Mandarin Oriental connected
to its properties, with a further seven under development.
Within the next 18 months, four new hotels are scheduled to open, in Marrakech, Milan, Beijing and Doha.

Corporate developments
Following shareholder approval at a Special General Meeting held in April, the transfer of the Company’s listing on
the Main Market of the London Stock Exchange to the standard listing category was completed on 27th May 2014.
The Group has announced its intention to raise US$316 million through a 1 for 4 rights issue of new ordinary
shares. The proceeds of the rights issue will be used to pay down debt, thereby providing the Group with thecapacity to finance the £85 million (US$130 million) renovation of Mandarin Oriental Hyde Park, London
and make further investments in line with its development strategy. Jardine Strategic, the Company’s principal
shareholder, has committed to take up its entitlement and fully underwrite the offer.

PeopleOn behalf of the Directors, I would like to acknowledge the contribution of all employees throughout the Groupfor continuing to provide the exceptional service for which the brand is renowned.
Giles White will be retiring as a Director on 31st July 2015 and we would like to thank him for his contribution.

Outlook
While trading conditions in a number of markets are expected to remain challenging, the Group is in a strong
competitive position. Over the longer term, Mandarin Oriental will benefit from the strength of its brand, theincreasing number of travellers from emerging markets, particularly mainland China, the limited new supply of
luxury hotels in its key mature markets, and the phased opening of new hotels and Residences under development.

Ben Keswick
Chairman
13th March 2015

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8 Mandarin Oriental International Limited

Group Chief Executive’s Review

Strategy
Mandarin Oriental Hotel Group is an award-winning international hotel investment and management groupwith deluxe and first class hotels, resorts and residences in sought-after destinations around the world. The Group
operates, or has under development, 44 hotels representing almost 11,000 rooms in 24 countries, with 20 hotels
in Asia, ten in The Americas and 14 in Europe, Middle East and North Africa. In addition, the Group operates,or has under development, 15 Residences at Mandarin Oriental connected to its properties.
The Group holds equity interests in a number of its hotels, and had adjusted net assets of approximately
US$3.2 billion as at 31st December 2014. Capitalizing on the strength of its brand, Mandarin Oriental
also operates properties on behalf of third party owners that require no equity investment by the Group.
The Group aims to be recognized widely as the world’s best luxury hotel group, which it will achieve by investing
in its exceptional facilities and its people while continuing to seek further selective opportunities for expansion
around the world. This approach, combined with a strong balance sheet, is designed to achieve long-term growthin both earnings and net asset value.

Progress achieved
The Group benefited from the growing recognition of the Mandarin Oriental brand internationally,
which attracted an increasing number of high net worth travellers, allowing most of our hotels to raise theirrates in local currency terms during 2014. While there was a softening of corporate demand in some markets,
the Group experienced improved demand from the leisure sector and from its successful development of newmarkets, predominantly China. Overall, the Group benefited from the resilience that comes with a broad
portfolio of hotels and residences across many destinations.
In Asia, our hotels performed well against their competition, although ongoing political uncertainty in Bangkok
and the demonstrations in Hong Kong during the last quarter of the year affected overall results. In Europe,
the Group benefited from further progress in Paris and an improved performance in Geneva, which more thanoffset softer demand in London. In The Americas most of our hotels experienced strong demand. The exception
was in Washington D.C. where visitor arrivals were down compared to the previous year, which included the 2013
Presidential Inauguration.
Mandarin Oriental’s growing presence in top tier destinations was enhanced further in 2014 with the successful
launch of two new luxury hotels in Taipei, Taiwan and Bodrum, Turkey in May and July, respectively. During
the year, three hotel management contracts were announced for new properties in Bali, Manila and Dubai,
while the Group also entered an agreement to expand its wholly-owned property in Munich. Finally, in October,
the Group signed a contract to brand and manage new luxury Residences at Mandarin Oriental in Bangkok.
The recognition of the Mandarin Oriental brand internationally, together with our financial strength, places theGroup in a strong position to take advantage of further growth opportunities.

Annual Report 2014

Performance in 2014
Set out below is a review of the Group’s performance in 2014, with reference to the following strategic objectives:• Being recognized as the world’s best luxury hotel group• Strengthening our competitive position• Increasing the number of rooms under operation to 10,000• Achieving a strong financial performance

1) Being recognized as the world’s best luxury hotel group
Mandarin Oriental is consistently recognized for creating some of the world’s most sought-after properties,
delivering 21st century luxury with oriental charm. Each of our hotels ensures its position as one of the best in its
market through a combination of tradition, quality and innovation. Throughout the portfolio, the Group invests
behind its core brand attributes of creative hotel design, architecture and technology, excellent dining experiences
and holistic spa operations. Above all, the delivery of legendary service to our guests remains at the core ofeverything we do.
The Group’s increasing global recognition in 2014 is evidenced by the achievement of many significant awards fromrespected travel associations and publications worldwide. Highlights include a record 14 hotels being recognized in
the 2015 Forbes Travel Guide, with 11 properties around the world gaining the top ‘Five Star Hotel’ status, and fiveproperties gaining the rare ‘triple crown’ for hotel, spa and restaurant. Mandarin Oriental, Hong Kong is the only
city hotel in the world to achieve five ‘Five Star’ Awards, for the hotel, spa, and three of its restaurants. Furthermore,
four of the Group’s hotels in the United States achieved the coveted ‘Five Diamond Lodging Award’ for 2015 fromthe American Automobile Association. These two listings are amongst the most prestigious awards in the hotelindustry, and are given to very few hotels in recognition of service excellence.
Condé Nast Traveler, US ‘Readers’ Choice Awards’ 2014 featured 13 Mandarin Oriental hotels, with three
hotels being listed as one of the top three in their respective cities. In addition, ‘The World’s Best 2014’ from
Travel + Leisure included winning entries for eight hotels. The Group was also well represented in Institutional
Investor 2014 ‘World’s Best Hotels’ with a record 12 hotels listed, four of which were voted ‘Best in the City’.
In China, the well-respected Hurun Report’s annual ‘Best of the Best Awards’, voted Mandarin Oriental HotelGroup as the ‘Best Luxury Hotel Brand in China’.
The Group’s reputation for excellent and innovative dining experiences was again acknowledged in the mostrecent 2015 Michelin guides with 11 restaurants being honoured and a total of 16 stars being granted, including
four at Mandarin Oriental, Hong Kong alone. This is more than any other hotel group in the world. Once again,
both Amber at The Landmark Mandarin Oriental, Hong Kong and Dinner at Mandarin Oriental Hyde Park,
London were voted as two of the ‘Top 50 Restaurants’ in the world in the prized San Pellegrino listings.
The Group’s spa operations were acknowledged as being among the best, with a record 13 hotels gaining theprestigious Forbes ‘Five Star Spa’ award. Again, this is more than any other hotel group in the world. In addition,
three of the Group’s hotels in The Americas were honoured in Condé Nast Traveler, US ‘Readers’ Poll’ of‘Top US Spas’, and the Group was voted ‘Most Trusted Global Spa Brand’ by SpaChina in the 2014 awards.

910 Mandarin Oriental International Limited

Group Chief Executive’s Review Continued

The Group’s commitment to working with some of the best architects and designers was also recognized in 2014.
In particular, the Group’s latest hotel in China, Mandarin Oriental Pudong, Shanghai was included in Condé Nast
Traveler’s US ‘Hot List 2014 Best Design Hotels’. In London, Mandarin Oriental Hyde Park received the ‘Interior
Design Award’ for its new tea and champagne lounge, The Rosebery, in the European Hotel Design Awards 2014.
The Group’s global recognition is further enhanced by our award-winning international advertising campaign
which now features 28 celebrity ‘fans’, who regularly stay in our hotels. During the last 12 months, the Groupwelcomed the Academy Award winning American actor and director, Morgan Freeman and Hollywood actress,
Lucy Liu to the campaign. The Group’s relationship with its celebrity fans goes far beyond their appearance inthe advertisements alone. They frequent the Group’s hotels regularly, and further enhance brand recognition byattending events and meeting with guests.
The Group also continues to invest in its award-winning website and in digital marketing across all devices andin multiple languages. Compared to the previous year, online revenues have improved by 8% on a like-for-likebasis and now represent 13% of total transient room revenue. Furthermore, the Group actively encourages a global
conversation with consumers through its social media strategy, and now has a larger and more connected global
digital network than ever before, reaching consumers in all corners of the globe, including a growing following
on China’s most important social media platforms.
Mandarin Oriental’s goal, to be recognized as the world’s best luxury hotel group, will be further accomplishedas we increase the number of hotels we operate in new and exciting travel destinations.

2) Strengthening our competitive position
Critical to the Group’s success is the focus of every hotel on maintaining or enhancing their leadership positions
against primary competitors in their individual markets. Strong brand recognition, combined with the strengthof our hotel management teams, plus the added support provided by an established corporate structure, allows
our properties to compete effectively and to achieve premium rates. In 2014, our position was further supported
by limited new supply in many of the key markets in which we operate.
The Group’s strategy is to create quality services and facilities which attract individuals who will pay a premiumfor genuine luxury experiences. This creates demand, which allows the hotels to increase average rates across theportfolio. Demographic trends support this strategy, with higher spending leisure customers now making up close
to 50% of the Group’s room nights. These high net worth individuals continue to originate from the Group’s
traditional markets, but increasingly, the Group is attracting additional customers from emerging markets. This isparticularly true of China, which is now the second largest source of business after the United States accounting for
15% of our total visitor arrivals. The contribution from China will continue to grow as the total number of hotels
that the Group now operates, or has under development in mainland China, has increased to seven.

Annual Report 2014

The highlights of each region are as follows:

Asi a
The Group’s hotels in the region competed effectively in 2014, while most achieved higher average rates in local
currency terms. Recognition of the Group was further enhanced with the well-publicized hotel opening in Taipei.
Overall, Revenue per Available Room (‘RevPAR’) for Asia increased by 1% in local currency terms over 2013,
on a like-for-like basis.
Mandarin Oriental, Hong Kong performed well despite the impact of the political demonstrations in the cityin the last quarter, achieving an overall revenue increase which was 3% above the previous year.
The property received the ‘Five Star’ rating in the 2015 Forbes Travel Guide for the hotel, the spa and three of its
restaurants, Pierre, The Krug Room and The Mandarin Grill. The Landmark Mandarin Oriental, Hong Kong
achieved the same accolade for the hotel, spa and Amber restaurant.
The Excelsior, the Group’s other wholly-owned hotel in Hong Kong also performed well competitively, however,
RevPAR was down 4% mainly due to the impact of the political demonstrations in the last quarter. Despite the
RevPAR decrease, food and beverage performance was robust, improving by 5% over 2013.
In Tokyo, our hotel’s performance benefited from a further increase in visitor arrivals, resulting in a 13%
improvement in the average rate which led to an overall uplift in RevPAR of 16% in local currency terms and 7%
in US dollar terms. The hotel was listed as the ‘Top Hotel in Japan’ in the 2014 Condé Nast Traveler, US ‘Readers’
Choice Awards’, while three of its restaurants were awarded Michelin stars in the 2015 guide, the only hotel in thecity to achieve this accolade.
Mandarin Oriental, Singapore was impacted by weaker city-wide corporate demand which was partially offset
by an increase in leisure demand, resulting in a similar RevPAR to 2013. The hotel also achieved Forbes ‘Five Star’
status in the annual 2014 Forbes Travel Guide for both the hotel and its spa, and was voted one of the top city hotels
in Asia in Travel + Leisure’s ‘World’s Best Awards’ 2014.
Mandarin Oriental, Bangkok was adversely affected by the ongoing political uncertainty in Thailand, which
continued to suppress visitor arrivals. The hotel did well to increase its average rate, however overall RevPAR was
down 14% in local currency terms compared to 2013. The hotel remains the market leader in the city and wasonce again recognized in the most important travel awards, including being voted ‘The World’s Number 1’ inCondé Nast Traveller, UK ’s ‘Readers’ Choice Awards’ 2014. It was also listed as an ‘Enduring Classic’ in Fodor’s‘World’s Best Hotels’ 2014 listings. Moreover, the hotel also achieved Forbes ‘Five Star’ status in the 2015 inaugural
Forbes Travel Guide in Thailand for both the hotel and its spa.

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12 Mandarin Oriental International Limited

Group Chief Executive’s Review Continued

Mandarin Oriental, Jakarta maintained its market share and benefited from the strong local economy, achieving
an overall increase in RevPAR of 5% in local currency terms. The weakening Indonesian rupiah, however, led to
RevPAR decreasing 7% year-on-year when translated into US dollars. The hotel was voted one of the ‘Top 25
Hotels in Indonesia’ in TripAdvisor’s 2015 ‘Traveler’s Choice’, and was one of the top five hotels in Indonesia toreceive the ASEAN ‘Green Hotel Award’ 2014 for its corporate responsibility initiatives.
Performances of the Group’s remaining hotels in the region were resilient, and include the first full-year
management fees from our hotels in Guangzhou and Shanghai which opened in 2013. Both are achieving
recognition for their exceptional services and facilities. Mandarin Oriental Pudong, Shanghai was named oneof the ‘Best New Hotels of The Year’ in Condé Nast Traveller UK ’s ‘Hot List’, as well as Travel + Leisure’s ‘It List’.
Mandarin Oriental, Guangzhou was voted one of the most ‘Glamorous Hotels in China’ in the China Hotel
Starlight Awards, which is one of the most prominent award listings in mainland China. Finally, the new Mandarin
Oriental hotel in Taipei, which opened to great acclaim in May, is establishing itself as one of the best hotels in thecity and is achieving high average rates.

EuropeIn Europe, the Group’s hotels were successful in maintaining their positions at the top end of their markets, andmost continued to benefit from resilient demand in the leisure sector. Across the region, RevPAR increased by 3%
in local currency terms, on a like-for-like basis with 2013.
Mandarin Oriental Hyde Park, London was impacted by weaker demand, which reduced RevPAR by 5% in local
currency terms, although RevPAR was flat in US dollar terms. Food and beverage performed well, with the hotel’saward-winning restaurants, Dinner and Bar Boulud, being nominated as two of the UK’s ‘Top 100 Restaurants’in the 2014 National Restaurant Awards. During the year, the hotel introduced its new swimming pool and fitness
centre, and launched The Rosebery, a luxurious afternoon tea and champagne lounge which has achieveda strong following.
The Group has also announced that it will invest £85 million (US$130 million) to renovate the London hotel.
The project, which will commence in 2016 and take approximately 18 months to complete, will comprisea full renovation of the existing guestrooms, restaurants, bars, meeting facilities and lobby. In addition, two
new penthouse suites overlooking Hyde Park will be created as well as an expansion of the spa facilities andimprovements to core buildings services. The hotel will remain open during the renovation period with
reduced facilities and room inventory.
Mandarin Oriental, Munich continued to perform well as a result of strong demand in the high-end leisure market,
and maintained 2013 RevPAR levels in local currency terms. The hotel remains the undisputed market leader andwas one of the ‘Top Twenty Hotels in North Europe’ in Condé Nast Traveler’s, US ‘Readers’ Choice Awards’ 2014.
In 2015, the property will be introducing a new lobby lounge, bar and restaurant concept to further extend its appeal
as the best hotel in the city.
In Geneva, the hotel’s performance improved as a result of stronger corporate and leisure demand. Occupancy
was up 16% leading to an overall RevPAR increase of 14% in local currency terms. The hotel was singled out as‘Switzerland’s Leading Business Hotel’ in the World Travel Awards 2014, as well as being voted one of the ‘Top 10
City Hotels in Switzerland’ in the well regarded Swiss business publication, Bilanz.

Annual Report 2014

Mandarin Oriental, Paris has been further recognized as one of the best luxury hotels in the city and continues toimprove its performance. The property increased both occupancy and average rate, leading to a RevPAR uplift of
5% in local currency terms. The hotel’s food and beverage operations, led by renowned chef Thierry Marx, haveattained many accolades, and the signature restaurant, Sur Mesure, was once again awarded two Michelin stars in
the 2015 listing. Importantly, the hotel was also granted an official ‘Palace Distinction’ in 2014 – one of only eight
hotels in the city to receive this honour.
Elsewhere in the region, our hotels in Barcelona and Prague successfully maintained their top competitive positions.
Both properties received further global recognition for excellence, and were featured in Condé Nast Traveler’s, US‘Readers’ Choice Awards’ 2014 as two of the top hotels in their respective cities. In addition, Mandarin Oriental,
Barcelona was voted ‘Best Urban Hotel’ in Condé Nast Traveler’s 2014 Spanish edition, and also gained top honours
in the SpaFinder ‘Country Wellness Awards’ 2014. The Group’s recognition was further enhanced with the arrivalof its first European resort in Bodrum which has achieved high average rates and was listed as one of the ‘World’s
Best Hotels’ in the 2015 Tatler UK ‘Travel Guide’.

The A mer icas
The trading environment in The Americas continued to strengthen in 2014, leading to increased demand for most of
the Group’s hotels in the region with an overall RevPAR increase of 5% on a like-for-like basis over the previous year.
Four Mandarin Oriental hotels in the US were voted ‘Top Ten’ properties in their respective cities in the Condé Nast
Traveler US ‘Readers’ Choice Awards’ 2014, with three hotels attaining the number one spot for ‘Best Business Hotel’in Travel + Leisure’s ‘World’s Best Business Hotels’ 2014.
Mandarin Oriental, Washington D.C. largely maintained its competitive position in the market, but as a resultof a drop in overall visitor arrivals to the city, RevPAR was down 5% over the prior year. The hotel appearedin numerous reader surveys in prestigious publications and was voted ‘Best Business Hotel’ in the city in theTravel + Leisure ‘World’s Best Business Hotels’ 2014.
Mandarin Oriental, New York successfully maintained its competitive position as the market leader during
the year, achieving a 3% increase in RevPAR. The hotel’s international recognition as one of the world’s mostluxurious properties was further reinforced by the retention of both the prestigious Forbes ‘Five Star’ rating and
the American Automobile Association’s ‘Five Diamond Lodging Award’.
At Mandarin Oriental, Miami, stable market conditions led to an uplift in RevPAR of 3%. The hotel continues toreceive positive media attention, and achieved a triple Forbes ‘Five Star’ rating in 2015 for the hotel, the spa and its
restaurant Azul – the only hotel in Florida to so do. In 2014, the hotel introduced a new restaurant and bar, La Mar,by celebrity Peruvian chef Gaston Acurio, which was voted one of the ‘Fifteen Hottest Restaurant Openings
Around the US’ in the latest Zagat dining guide.
Mandarin Oriental, Boston maintained its position as market leader, improving its RevPAR by 7%, while theGroup’s hotels in Atlanta and Las Vegas increased their RevPAR by 14% and 15% respectively. All three hotels
were recognized with the Forbes ‘Five Star’ rating in 2015 for hotel and spa, with the hotel in Las Vegas being
awarded a further ‘Five Star’ rating for its restaurant Twist, operated by Pierre Gagnaire.

13

14 Mandarin Oriental International Limited

Group Chief Executive’s Review Continued

3) Increasing the number of rooms under operation to 10,000
Mandarin Oriental has achieved strong geographic diversification with a well-balanced portfolio across the globe
and is on track to meet its mid-term goal of operating 10,000 rooms in key global locations within the next few
years. Today, the Group operates close to 8,000 rooms in 27 hotels around the world, and by including the hotels
under development, the total portfolio now extends to almost 11,000 rooms in 44 hotels located in 24 countries.
Three new hotel management contracts, a hotel expansion and one new residential project were announced in 2014:• In January, the Group announced a new management contract for a luxury resort in Bali, Indonesia, scheduled
to open in 2018. Located southwest of Nusa Dua, this 114-room hotel includes 88 expansive pool villas, and issituated on a cliffside with panoramic views and direct access to a secluded beach.
• In March, the Group entered into an agreement with a local development partner to expand its wholly owned
property in Munich through the construction of a new mixed-use complex opposite the hotel, scheduled to open
in 2021. The new development will comprise two buildings that will jointly house 51 new hotel rooms, 19 luxury
branded Residences at Mandarin Oriental, a restaurant and bar, a spa, a swimming pool and fitness centre andhotel back of house facilities, as well as retail units, commercial offices and underground car parking. Mandarin
Oriental will own 100% of the freehold interest in the land and buildings of the hotel component. The Group’s
total investment in the project, which will also include a refurbishment of the existing hotel’s 73 rooms,
is estimated at €124 million (US$150 million) in today’s terms.
• In June, the Group announced a new management contract for a 275-room hotel in the heart of Metro Manila,
which is scheduled to open in 2020. It will replace the Group’s original property on Makati Avenue, which closed
in September 2014.
• In September, a new management contract for a luxury 255-room urban resort in Dubai was announced.
The hotel will feature exclusive over-water villas with direct access to the Arabian Gulf, and is scheduled toopen in 2017.
• Finally in October, the Group announced an agreement to brand and manage 146 Residences at Mandarin Oriental
that will be developed as part of a mixed-use project located on the Chao Phraya River diagonally opposite
Mandarin Oriental, Bangkok.
During 2014, the Group ceased management of the Grand Lapa hotel in Macau and the Elbow Beach hotel inBermuda. Also, the project in Moscow will no longer proceed.
In total, Mandarin Oriental has 17 new hotels currently under development, all of which are long-term
management contracts requiring no capital investment by the Group. Four of these properties will be operational
within the next 18 months, including a 104-room luxury hotel in Milan and an exclusive resort comprising
63 private villas in Marrakech, both of which are due to open in the second quarter of 2015. Mandarin Oriental,
Beijing, located within the iconic CCTV development in the heart of the city, and Mandarin Oriental, Doha,
the Group’s first hotel in the Middle East, are both scheduled to open in 2016.
In addition to the Group’s portfolio of hotels, a total of 15 Residences at Mandarin Oriental projects are open
or under development. Since the first Residences launched in 2004 in New York, the associated branding of theseprojects has, on average, resulted in fees of approximately US$5 million per annum over the decade. These fees,
as well as ongoing revenues from management fees and the use of hotel facilities by the home owners, should
provide a growing return for the Group in future years.

Annual Report 2014

The Group’s strategy of operating both owned and managed hotels remains in place. Mandarin Oriental is well
positioned to take advantage of selective investment opportunities in strategic locations that offer attractive returns,
while at the same time our strong brand continues to be sought after by developers of luxury hotels. The long-term
potential for growth is significant, and the Group has in the pipeline many opportunities for additional luxurious
hotels and residences in important or unique locations around the world.

4) Achieving a strong financial performance
The Group’s overall financial performance improved in 2014, as strong competitive performances were maintained
across the majority of the portfolio. Underlying profit in 2014 was US$97 million, a record level for the Group,compared to the previous record underlying profit of US$93 million reported in 2013.
The Group’s financial well-being remains fundamental to its success. At 31st December 2014, gearing was 13% ofadjusted shareholder funds.
The Board has recommended a final dividend of US¢5.00 per share, which, when combined with the interim
dividend of US¢2.00 per share, makes a full year dividend of US¢7.00 per share.
The Group has announced its intention to raise US$316 million through a 1 for 4 rights issue of new ordinary
shares. The proceeds of the rights issue will be used to pay down debt, thereby providing the Group with thecapacity to finance the £85 million (US$130 million) renovation of Mandarin Oriental Hyde Park, London
and make further investments in line with its development strategy.

The future
While challenging conditions are expected to continue in some markets, demand for the Mandarin Oriental
brand remains strong. Moreover, the Group’s results will benefit from the further stabilization of its recently
opened hotels, as well as from the continued growth of its global portfolio as new properties open in diverse
locations. In addition, the Group will be supported by the increasing number of high net worth travellers fromboth traditional and emerging markets, as well as the limited supply of competitive luxury hotels in our key
mature markets.
The geographical broadening of the Group’s hotel portfolio and the increasing opportunities for branded Residences
projects internationally, underlie the strength of the brand and the growing recognition of Mandarin Oriental as
one of the best luxury hotel groups in the world.

Edouard EttedguiGroup Chief Executive
13th March 201515

16 Mandarin Oriental International Limited

Operating Summary

There are 27 hotels in operation, but the operating summary includes only hotels in which the Group has
an equity interest and were operating throughout 2014.

ASIA
Mandarin Oriental, Hong Kong 100% ownership

Mandarin Oriental, Singapore 50% ownership					
%2014		 2013		 Change					%2014		 2013		 Change

Available rooms

501 		

501 		

0

Available rooms

527 		

527 		

0

Average occupancy (%)

68 		

70 		

(3)

Average occupancy (%)

82 		

83 		

(1)

Average room rate (US$)

545 		

523 		

4

Average room rate (US$)

307 		

311 		

(1)

RevPAR (US$)

370 		

366 		

1

RevPAR (US$)

251 		

259 		

(3)

The Excelsior, Hong Kong 100% ownership

Mandarin Oriental, Bangkok 44.9% ownership					
%2014		 2013		 Change					%2014		 2013		 Change

Available rooms

884 		

884 		

0

Available rooms

374 		

393 		

(5)

Average occupancy (%)

85 		

89 		

(4)

Average occupancy (%)

41 		

51 		

(20)

Average room rate (US$)

212 		

211 		

0

Average room rate (US$)

386 		

377 		

2

RevPAR (US$)

180 		

188 		

(4)

RevPAR (US$)

159 		

193 		

(18)

Mandarin Oriental, Tokyo 100% leasehold

Mandarin Oriental, Kuala Lumpur 25% ownership					
%2014		 2013		 Change					%2014		 2013		 Change

Available rooms

178 		

178 		

0

Available rooms

632 		

632 		

0

Average occupancy (%)

76 		

74 		

3

Average occupancy (%)

63 		

62 		

2

Average room rate (US$)

520 		

499 		

4

Average room rate (US$)

198 		

202 		

(2)

RevPAR (US$)

397 		

371 		

7

RevPAR (US$)

124 		

126 		

(2)

Mandarin Oriental, Jakarta 96.9% ownership					
%2014		 2013		 Change

Available rooms272 		

272 		

0

Average occupancy (%)

59 		

63 		

(6)

Average room rate (US$)

184 		

185 		

(1)

RevPAR (US$)

109 		

117 		

(7)

Annual Report 2014

EUROPETHE AMERICAS

Mandarin Oriental Hyde Park, London 100% ownership

Mandarin Oriental, Washington D.C. 80% ownership					
%2014		 2013		 Change					%2014		 2013		 Change

Available rooms

194 		

194 		

0

Available rooms

397 		

397 		

0

Average occupancy (%)

78 		

80 		

(3)

Average occupancy (%)

57 		

60 		

(5)

Average room rate (US$)

872 		

857 		

2

Average room rate (US$)

324 		

326 		

(1)

RevPAR (US$)

682 		

682 		

0

RevPAR (US$)

185 		

195 		

(5)

Mandarin Oriental, Munich 100% ownership

Mandarin Oriental, New York 25% ownership					
%2014		 2013		 Change					%2014		 2013		 Change

Available rooms

73 		

73 		

0

Available rooms

244 		

244 		

0

Average occupancy (%)

76 		

77 		

(1)

Average occupancy (%)

74 		

75 		

(1)

Average room rate (US$)

983 		

976 		

1

Average room rate (US$)

986 		

947 		

4

RevPAR (US$)

751 		

753 		

0

RevPAR (US$)

732 		

706 		

3

Mandarin Oriental, Paris 100% ownership with effect from

Mandarin Oriental, Miami 25% ownership

8th February 2013 (previously 100% leasehold)					%
2014		 2013		 Change					%2014		 2013		 Change

Available rooms

138 		

138 		

0

Available rooms

326 		

326 		

0

Average occupancy (%)

68 		

66 		

3

Average occupancy (%)

70 		

70 		

0

Average room rate (US$)

1,303 		1,283 		

2Average room rate (US$)

371 		

362 		

2890 		

849 		

5

RevPAR (US$)

261 		

253 		

3

RevPAR (US$)

Mandarin Oriental, Geneva 92.6% ownership					
%2014		 2013		 Change

Available rooms

196 		

197 		

(1)

Average occupancy (%)

58 		

50 		

16

Average room rate (US$)

701 		

708 		

(1)

RevPAR (US$)

408 		

356 		

1517

18 Mandarin Oriental International Limited

Development Portfolio

Mandarin Oriental Hotel Group currently has 17 hotels and 7 Residences at Mandarin Oriental under development.
Asia
Mandarin Oriental, Bali
A 114-room resort located on Bali’s southern Bukit peninsula. Perched on a cliffside plateau, the resort will offer dramatic and spectacular views withdirect 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 new headquarters of China Central Television (CCTV).

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, Chongqing
A 213-room hotel with 18 serviced apartments situated in the heart of the central business district with panoramic views of the city skyline.

Mandarin Oriental, Maldives
An exclusive hideaway retreat located on a pristine private island, featuring 114 spacious stand-alone villas, including 20 water villas in a stunning
natural setting.

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

Mandarin Oriental, Shenzhen
A 190-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, Abu Dhabi
A 153-room resort and 66 Residences at Mandarin Oriental located on Saadiyat Island, set to become a leading leisure and cultural destination.

Mandarin Oriental, DohaA 158-room hotel with 91 serviced apartments located in Musheireb, adjacent to Doha’s cultural gem, Souk Waqif, and the city’s business centre inWest Bay.

Mandarin Oriental, Dubai
A 255-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.

Mandarin Oriental, Marbella
A 114-room hotel and 94 Residences at Mandarin Oriental located on a hill top in southern Spain, with spectacular views overlooking theMediterranean Sea.

Mandarin Oriental, Marrakech
A 63-room hideaway resort comprising 54 spacious villas and 9 luxurious suites located in the heart of the Palmeraie, surrounded by Marrakech’s
three premium golf courses.

Mandarin Oriental, Milan
A 104-room hotel housed in the redevelopment of three elegant 19th century buildings, ideally located on Via Monte di Pietà, one of Milan’s mostprestigious addresses.

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, Costa Rica
A 130-room beach resort and 92 Residences at Mandarin Oriental located at Playa Manzanillo, on Costa Rica’s northern Pacific coast.

Mandarin Oriental, Grand Cayman
An intimate 114-room hideaway resort, set on an unspoiled 10-acre beachfront site with 42 Residences at Mandarin Oriental.

Mandarin Oriental Dellis Cay, Turks & Caicos
A secluded 150-room hideaway resort including a variety of Residences at Mandarin Oriental, located on an unspoilt 35-acre beachfront site.

Opening dates are determined by each project’s owner/developer. All of the above projects will be managed by Mandarin Oriental Hotel Group withno equity investment from the Group.

Annual Report 2014

International Recognition

Mandarin Oriental Hotel Group has been recognizedconsistently by global influential publications as an
outstanding hotel company. Below are quotes froma selection of these publications in the last year thathighlight individual properties and the Group.

“I’ve been going to Mandarin Oriental, Hong Kong for
30 years. Everyone knows me. I travel every week, andthis hotel has the best service in the world. Nothing is
too much trouble.”

Mandarin Oriental Hotel Group

The Landmark Mandarin Oriental, Hong Kong

This clever group is managing to shine both in hotels
and resorts, which is a rarity.

Staff are super helpful with everything taken care of insignature Mandarin Oriental style.

The Gallivanter’s Guide

BA High Life Online

With a storied history that began in Hong Kong in
the 1960s, and with thanks to its flagship property,
Mandarin Oriental hotels have since become
synonymous with Asian-inspired luxury.

Its intimate size combined with chic décor and great
service makes The Landmark Mandarin Oriental,
Hong Kong a must visit. Even though it’s part of the
Mandarin Oriental brand, the Forbes Travel Guide
Five-Star property also gives you all the perks ofa boutique hotel, including personalized service
and exclusivity.

American Spa

Mandarin Oriental, Bangkok

Wall Street Journal

For more than 135 years, travelers have dropped theirbags at the legendary and timeless Mandarin Oriental,
Bangkok. Situated on the banks of the Chao Phraya
River, this hotel is the place to be if you’re a president,monarch, or celebrity or if you want to experience thebest service in all of Thailand.

Forbes

Fodor’s Travel

TatlerLuxury accommodation with fancy restaurants andspas abound here but it’s the 138-year-old Mandarin
Oriental, Bangkok that sets the bar. The service issilky-smooth, the vibe classy and cosmopolitan….
You can still revel in the beautiful old Authors’ Wing,
where the likes of Noel Coward and Joseph Conrad
once languished.
National Geographic Traveller

Mandarin Oriental, Hong Kong
There’s something about this hotel which stays withyou long after you have left. It weaves its way into
your heart until your memories of it become a placeof refuge, calm amidst the storm. Perhaps it is theomnipresent service – how wonderful to return tothat childlike state of being looked after, where you
know that everything is right with the world while
you are here.
Condé Nast Traveler

Mandarin Oriental Pudong, Shanghai
It’s Shanghai incarnate – cutting-edge, confident,
sparkly on the surface, but with a deep bow to traditionon the inside.

Mandarin Oriental, Taipei
Located in the heart of the city, Mandarin Oriental,
Taipei offers the perfect fusion of classically inspired
design and contemporary luxury.
Travel + Leisure

Mandarin Oriental, Tokyo
The Mandarin Oriental manages to feel bothtraditional and modern at the same time, with oneof the most efficient concierge desks in the city.
GQ

Mandarin Oriental, Barcelona
One of the best hotels in the Catalan capital is evenbetter now thanks to the additional of 17 spacious andelegant suites designed by the award-winning architect
Patricia Urquiola.
Spectator Life19

20 Mandarin Oriental International Limited

International Recognition Continued

Mandarin Oriental, Bodrum
Snuggled away across 60 hectares of its own private
bay at Cennet Koyu on the northern side of Turkey’s
Bodrum Peninsula, it’s hard to imagine a more serene
and laid back, hideaway than the Mandarin Oriental.
Once you arrive at the tranquil resort all your worries
woes and reality will simply melt away.
Quintessentially

Mandarin Oriental Hyde Park, London
The bedrooms are traditionally furnished and you
can see why the Queen is said to feel at home here but
the Mandarin Oriental certainly doesn’t feel stuffy:
it’s got the buzzing Bar Boulud in the basement,
and charming doormen who wave you off to the Tube
as you leave for work in the morning, and greet you
with a smile when you return home again at night.
Harper’s Bazaar

The Mandarin Oriental chain has clearly upped theante for luxury in the hotel industry, in the case of theirLondon property by taking over a fanciful Victorianbuilding whose 169 rooms overlook Knightsbridge
and which is very convenient to the V&A Museum,Harrods, Harvey Nichols and Green Park. The rooms
are, in a word, sumptuous.
Huffpost Taste

Fiercely fashionable, Mandarin Oriental, Paris attracts
glamorous French couples and impeccably groomed
families from around the world. Despite the property’s
slick finish, rooms manage to remain plush and warm;
their huge bathrooms, with marble-clad feature andspacious wet rooms, are the highlights.
The Telegraph Luxury Online

Mandarin Oriental, Boston
Spacious and elegant rooms have silk accents in warm
buttery colors or cool teal tones. Friendly staff areattentive, efficient, and gracious.
Condé Nast Traveler

Mandarin Oriental, Las Vegas
It doesn’t get more secluded than the tranquil,
non-gaming Mandarin Oriental, featuring abamboo-shaded entry and renowned for its service.
The Hollywood Reporter

Mandarin Oriental, Miami
Mandarin Oriental is the perfect balance of tranquil
and exciting, and completely altered my take on thecity. Every part of my stay seemed designed to relax.
The rooms were specious and bright with glistening
water views and when the sunshine poured in, I felt
I could have happily lost hours sitting on the balcony.

Mandarin Oriental, Munich

Saveur

The Mandarin Oriental, Munich – five star glamour
hidden down a central city side street. Every time
you order a drink, pass reception or encounter thedoorman, expect to be greeted with your name.

Mandarin Oriental, New York

BridesMandarin Oriental, Paris
Situated on the extra fabulous rue Saint Honore,
Mandarin Oriental, Paris is a favorite among culinary
insiders, international shopping addicts, and those
who simply love luxury travel.

Mandarin Oriental, New York is located just across thestreet from the lively Columbus Circle. With decadent,
yet sleek décor and sweeping views of Central Park, theMandarin Oriental is a wise choice for guests seeking
a modern upscale twist.
Huffington Post

This place is a tranquil oasis in the heart of
New York City.
Travel Pulse

GothamMandarin Oriental, Washington D.C.
The hotel features beautifully appointed rooms, excellent
restaurants, a peaceful spa and courteous hospitality.
CBS DCAnnual Report 2014

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 (‘IFRSs’).
The accounting policies adopted are consistent withthose of the previous year, except that the Group has
adopted several new standards, amendments andinterpretations to IFRSs effective on 1st January 2014,
as more fully detailed in the ‘Basis of preparation’note in the financial statements. The adoption ofthese new standards, amendments and interpretations
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 is shown below:
				2014		
US$m		

2013
US$m

Subsidiaries

185.8

171.8

Associates

31.5

36.9

Underlying EBITDA

217.3

208.7

		
		

2014		
US$m		2013
US$m

EBITDA from subsidiaries

185.8

171.8

Depreciation and amortization(65.0 )

(60.0 )

Operating profit

120.8

111.8

Subsidiaries

In 2014, underlying EBITDA from subsidiaries
increased by US$14.0 million or 8%, toUS$185.8 million. Excluding the US$7.5 millionof one-off credits recorded in 2013 related to theGroup’s acquisition of the Paris freehold interest,2014 EBITDA increased by US$21.5 million or
13%, of which US$14.9 million was due to branding
fees received in relation to the ongoing sales of
The Residences at Mandarin Oriental in Bodrum.
In Hong Kong, while political demonstrations in thecity impacted performance during the last quarter ofthe year, Mandarin Oriental, Hong Kong maintained
its RevPAR in line with the record levels achievedin 2013 and reported an increase in both revenue
and EBITDA. The Group’s other wholly-owned
Hong Kong hotel, The Excelsior, which was also
impacted by the political demonstrations in the city,
maintained overall revenue and EBITDA in line withprior year, despite a 4% decline in RevPAR due toa robust performance in Food and Beverage. In Tokyo,
the continued recovery in visitor arrivals resulted
in a strong improvement in operating performance,
although a weaker Japanese yen meant that performancegains were not fully reflected in the US dollar results.
While the Jakarta hotel reported improved performancein local currency terms, a weaker Indonesian rupiah
meant that its EBITDA contribution was lower
when translated into US dollars. In Manila, despitea decline in trading following the announcement of
the hotel’s pending closure in June, and payment ofassociated closure costs, the hotel’s contribution during
the nine months until its closure in September was
broadly in line with 2013.

21

22 Mandarin Oriental International Limited

Financial Review Continued

Subsidiaries continued
Softer demand in London led to a lower contribution
from the hotel, while further stabilization of the Paris
hotel operation resulted in both higher revenue and
EBITDA, after excluding the one-off credits related
to the acquisition of the building’s freehold interestin 2013. In Munich, the hotel maintained RevPAR
and EBITDA broadly in line with the prior year, while
improved performance in Geneva led to an increased
contribution from the hotel.
In The Americas, softer city-wide demand resulted ina lower contribution from Washington D.C. hotel.
In 2014, the contribution from management
activities increased by US$15.8 million, or 73%,
to US$37.3 million, from US$21.5 million in theprior year, primarily due to the US$14.9 millionof branding fees received from the ongoing sale of
The Residences at Mandarin Oriental in Bodrum.

In Singapore, a city-wide softening in demand led
to a slightly lower EBITDA contribution from theGroup’s 50% owned hotel during the year, while
contribution from the Group’s 25% owned hotelin Kuala Lumpur was in line with the prior year.
In The Americas, both the Group’s 25% owned hotels
in New York and Miami maintained their respective
competitive positions, with EBITDA contributions
in line with the prior year.
Depreciation and amortization of associates were ata similar level as 2013, as were the Group’s share of
net financing charges from associates and share of tax.

Associates
The Group’s share of results from associates was
as follows:				2014		
US$m		

2013
US$m

Underlying EBITDA from associates

31.5

36.9

–

3.1

Non-trading items:
Writeback of provision   against asset impairment

In total, the Group’s share of underlying EBITDA
from associates decreased by US$5.4 million or 15%
to US$31.5 million in 2014, primarily due to weakerperformance in Bangkok as a result of the ongoing
political uncertainty.

EBITDA from associates

31.5

40.0

Depreciation and amortization(12.1 )

(12.2 )

Operating profit

19.4

27.8

Less: net financing charges(3.5 )(3.5 )   tax(3.6 )(3.7 )

Share of results of associates

12.3

20.6

Non-trading items
In 2013, there was a non-trading gain of
US$3.1 million reflecting a writeback of a provision
for asset impairment made by an associate.
Net financing charges
Net financing charges for the Group’s subsidiaries
increased to US$17.3 million in 2014 from
US$15.8 million in 2013. This increase is principally
due to the upfront hedging and transaction costs
associated with the refinancing of the Group’s London
and Hong Kong facilities during the year.

Annual Report 2014

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 2014 calculated as
EBITDA (including the Group’s share of EBITDA
from associates) over net financing charges (including
the Group’s share of net financing charges fromassociates), was 10.4 times compared with 10.8 times
in 2013.
Tax
The tax charge for 2014 of US$19.0 million wasslightly lower than US$19.8 million in 2013. The
underlying effective tax rate for the year was 21%,unchanged from the prior year.
Cash flow
The Group’s consolidated cash flows are summarized
as follows:2014		
US$m		

2013
US$m

Operating activities

160

157

Investing activities:• Capital expenditure on	  existing properties

(29 )

(36 )

–

(382 )• Payment for Munich expansion

(17 )

–

• Repayment of loans to associates

4

–

		
		

• Acquisition of Paris	  freehold interest• Purchase of intangible assets

(3 )

(3 )

• Other

(1 )

(1 )

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

(29 )

199

• Dividends paid

(70 )

(70 )

–

3

Net increase/(decrease) in cash

15(133 )Cash and cash equivalents
at 1st January

316

453

(7 )

(4 )

324

316

• Other

Effect of exchange rate changes
Cash and cash equivalents
at 31st December

The Group’s cash flows from operating activities were
US$160 million in 2014, an increase of US$3 million
from the US$157 million inflow in 2013.
Under investing activities, capital expenditure on
existing properties was US$29 million in 2014,
compared to US$36 million in 2013.
In March 2014, the Group entered into an agreement
to expand the Munich hotel through the constructionof a mixed-use complex on an adjacent site that will
include new hotel rooms and other facilities estimatedto open in 2021. The Group’s total investment in the
project, which will also include a refurbishment of theexisting hotel’s 73 rooms, is estimated at €124 million(US$150 million) in today’s terms. Total costs paidby the Group during the year in relation to the projectamounted to US$17 million.
In 2013, the Group paid US$382 million to complete
the acquisition of the freehold rights of the building
housing Mandarin Oriental, Paris and two prime
street-front retail units. The Paris acquisition was
funded by US$201 million of new debt facilities,
with the remainder paid from Group cash reserves.

Dividends
The Board is recommending a final dividend ofUS¢5.00 per share for a full-year dividend ofUS¢7.00 per share (2013: US¢7.00 per share).
No scrip alternative is being offered in respect ofthe dividend. The final dividend is payable on
13th May 2015 to shareholders on the register ofmembers at the close of business on 20th March 2015.

23

24 Mandarin Oriental International Limited

Financial Review Continued

Supplementary information

Treasury activities

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 toreview their 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:

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 43%
of its gross borrowings.

2014

2013

			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

956

0.95

989

0.99

In respect of specific hotel financing, borrowings
are normally taken in the local currency tohedge partially the investment and the projected
income. At 31st December 2014, the Group’s
net assets/(liabilities) were denominated in thefollowing currencies:
Net assets/(liabilities)		Hong Kong dollar

2,196
3,152

2.19
3.14

2,072
3,061

2.06
3.05

On an IFRS basis, the Group’s consolidated net debt
of US$403 million at 31st December 2014 was 42%
of shareholders’ funds, compared with consolidated
net debt of US$479 million at 31st December 2013
which was 48% of shareholders’ funds. Taking into
account the fair market value of the Group’s interests
in freehold and leasehold land, gearing was 13% ofadjusted shareholders’ funds at 31st December 2014,
compared with 16% at 31st December 2013.

Adjusted
net assets*

US$m		

%		

US$m		

%

(14 )

(1 )

1,704		

54

Euro

287		

30		

393		

12

United States dollar

322		

34		

371		

12

United Kingdom sterling

120		

13		

205		

7

Singapore dollar

48		

5		

183		

6

Thai baht

28		

3		

95		

3

Swiss franc

111

11

111

3

Others

54		

5		

90		

3

		

956		

100		

3,152		

100

* see supplementary information section above.

Included on the Group’s consolidated balance
sheet is cash at bank of US$324.6 million(2013: US$316.4 million) which, after the deductionof US$0.3 million (2013: US$0.7 million) of
bank overdraft facilities, is shown in the Group’s
consolidated cash flow as cash and cash equivalentsof US$324.3 million (2013: US$315.7 million).

Annual Report 2014

The Group, excluding associates, had committed
borrowing facilities totalling US$861 million,of which US$728 million was drawn at
31st December 2014. The principal amounts
due for repayment are as follows:
		
		
		

Within one year

Facilities
Facilities		
committed		drawn		US$m		
US$m		

Unusedfacilities
US$m

217		

217		

–

Between one and two years

2

2

–

Between two and three years

3

3

–

Between three and four years

–

–

–

Between four and five years

638

505

133

1		

1		

–

861		

728		

133

Beyond ﬁve years		

At 31st December 2014, the Group had
US$133 million of committed, undrawn
facilities in addition to its net cash balances of
US$324 million. During the year, the Grouprefinanced US$638 million of secured committed
facilities (US$187 million in London andUS$451 million in Hong Kong) for five years.
The average tenor of the Group’s borrowings was
3.7 years (2013: 1.1 years), with US$217 millionof committed facilities due to mature before
the end of 2015.

On 5th March 2015, the Group announced its plan
to raise US$316 million through a 1 for 4 rights issueof new ordinary shares. Maintaining a strong balance
sheet is important for the execution of the Group’s
development strategy, which includes maintaining
the quality of its properties and taking advantage offurther investment opportunities. In line with theGroup’s strategy, the additional capital being raised
through the Rights Issue will enable the Group to
retire debt and reduce gearing towards the levels
that prevailed before the acquisition of the freeholdof the Paris hotel, and provide the Group with thecapacity to finance the £85 million (US$130 million)
renovation of Mandarin Oriental Hyde Park, London,
also announced on 5th March. Specifically, the funds
will be used to fully repay the 2013 debt facilities
associated with the Group’s Paris acquisition, which
are due to mature at the end of 2015, and to part repay
the London facility.

Principal risks and uncertainties
A review of the principal risks and uncertainties facing
the Group is set out on pages 97 and 98.

Stuart Dickie
Chief Financial Officer
13th March 201525

26 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.
Edouard Ettedgui* Group Chief Executive
Mr Ettedgui joined the Board in 1998 and ismanaging director of Mandarin Oriental HotelGroup International. He was formerly group financedirector of Dairy Farm, prior to which he was businessdevelopment director of British American Tobacco.
He has extensive international experience in bothfinancial and general management.
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.
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.

* Executive Director

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.
He is deputy managing director of Jardine Matheson,
chairman of Jardine Pacific, and chairman and chief
executive of Jardine Motors. He has held a number of
executive positions since joining the Jardine Matheson
group from N M Rothschild & Sons in 2001, includinggroup strategy director and, thereafter, group managing
director of Jardine Cycle & Carriage between 2003
and 2007. Mr Keswick is also deputy chairman of
Jardine Matheson Limited, and a director of
Dairy Farm, Hongkong Land, Jardine Strategicand Zhongsheng Group Holdings.
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.
Lord Leach of Fairford
Lord Leach joined the Board in 1987. He is deputy
chairman of Jardine Lloyd Thompson, and a directorof Dairy Farm, Hongkong Land, Jardine Matheson
and Jardine Strategic. He is also a member of thesupervisory board of Paris Orléans. He joined theJardine Matheson group in 1983 after a careerin banking.

Annual Report 2014

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.
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 acting chief executive officer of
MTR Corporation and a non-executive director ofHong Kong Aircraft Engineering Company.
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, China Xintiandi, Prudential andSchindler, and a commissioner of Astra. Mr Nightingale
also holds a number of senior public appointments,
including acting as a non-official member of theCommission on Strategic Development, a Hong Kong
representative to the Asia Pacific Economic Cooperation(APEC) Business Advisory Council and a memberof the UK ASEAN Business Council Advisory Panel.
He is chairman of The Sailors Home and Missions
to Seamen in Hong Kong.
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 Advanced
Semiconductor Manufacturing Corporation, Asia
Satellite Telecommunications Holdings, Global
Sources, 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.
Giles WhiteMr White joined the Board in 2009. He is the Jardine
Matheson group general counsel. He was previously
Asia managing partner of Linklaters based in Hong
Kong, prior to which he was the firm’s head of global
finance and projects in London. Mr White is alsoa director of Jardine Matheson Limited, Dairy Farmand Jardine Matheson.

2728 Mandarin Oriental International Limited

Consolidated Profit and Loss Accountfor the year ended 31st December 2014						
Underlying 		
Note
US$m 		

2014Non-trading 						items 		Total		Underlying		
US$m 		US$m		
US$m		

2013
Non-trading
items		US$m		

Total
US$m

668.6

1

679.9		

–		

679.9

668.6		

–		

Cost of sales		(410.0)–		(410.0)(408.4)–		(408.4 )Gross profit		

269.9		

–		

269.9

260.2		

–		

Selling and distribution costs		(44.7)–		(44.7)(45.2)–		(45.2 )Administration expenses		(104.4)–		(104.4)(103.2)–		(103.2 )Operating profit

2

120.8		

–		

120.8

111.8		

–		

Financing charges		(19.9)–		(19.9)(17.5)–		(17.5 )Interest income		

2.6		

–		

2.6

1.7		

Revenue

–		

260.2

111.8

1.7

Net financing charges

3(17.3)–		(17.3)(15.8)

Share of results of associates4

12.3		

–		

12.3

17.5		

3.1		

20.6

Profit before tax		

115.8		

–		

115.8

113.5		

3.1		

116.6

5

(19.0)–		(19.0)(19.8)

Profit after tax		

96.8		

–		

96.8

93.7		

3.1		

96.8

6&7

97.0		

–		

97.0

93.2		

3.1		

96.3

Non-controlling interests		

(0.2)

–		

(0.2)

0.5		

–		

0.5

		
96.8		
–		
96.8

93.7		

3.1		

96.8

		
US¢ 				US¢		US¢ 				US¢Tax

–		(15.8 )–		(19.8 )Attributable to:Shareholders of the Company

Earnings per share

6– basic		

9.67				9.679.30				9.61– diluted		

9.63				9.639.28				9.59Annual Report 201429

Consolidated Statement of Comprehensive Income
for the year ended 31st December 2014		2014		
2013
Note
US$m		
US$m

96.8

96.8

Remeasurements of defined benefit plans		

(5.6)

5.5

Tax on items that will not be reclassified

0.9(0.9 )

Profit for the year		
Other comprehensive (expense)/income
Items that will not be reclassified to profit or loss:

5

		
(4.7)
4.6
Items that may be reclassified subsequently to profit or loss:
Net exchange translation differences– net (loss)/gain arising during the year		(57.0)

4.9

Fair value (losses)/gains on other investments		

(0.1)

0.4

Fair value gains on cash flow hedges		

4.0

8.5

5

(0.7)

(1.6 )

Share of other comprehensive expense of associates		

(4.0)(5.4 )Tax relating to items that may be reclassified		(57.8)
6.8
Other comprehensive (expense)/income for the year, net of tax		

(62.5)

11.4

Total comprehensive income for the year		

34.3

108.2

Shareholders of the Company		

35.0

107.8

Non-controlling interests		

(0.7)

0.4

Attributable to:

		
34.3
108.2

30 Mandarin Oriental International Limited

Consolidated Balance Sheetas at 31st December 2014		2014		
2013
Note
US$m		US$m

Net assets
Intangible assets

8

45.6

42.6

Tangible assets

91,315.1

1,440.5

Associates

10

101.6

110.8

Other investments		

10.5

9.3

Loans receivable

11

–

–

Pension assets

12

7.3

14.4

Deferred tax assets

13

2.2

3.1

Non-current assets		

1,482.3

1,620.7

Stocks		
5.9
6.5
14

94.5

73.7

Current tax assets		

1.3

1.0

15

324.6

316.4

Current assets		

426.3

397.6

Creditors and accruals

16(144.6)(147.0 )Current borrowings

17(217.0)(556.2 )Current tax liabilities		(9.6)(12.1 )

Current liabilities		

(371.2)(715.3 )Net current assets/(liabilities)		

55.1(317.7 )Debtors and prepayments

Cash at bankLong-term borrowings

17(510.7)(238.7 )Deferred tax liabilities

13(62.3)(65.5 )

Pension liabilities

12–(0.6 )

Other non-current liabilities

25

(3.0)

(3.5 )

		
961.4
994.7
Total equity
Share capital

20

50.2

50.2

Share premium

21

188.2

186.6

Revenue and other reserves		

718.0

752.2

Shareholders’ funds		

956.4

989.0

Non-controlling interests		

5.0

5.7

		
961.4
994.7

Approved by the Board of Directors
Ben Keswick
Edouard Ettedgui
Directors
13th March 2015

Annual Report 2014

Consolidated Statement of Changes in Equity
for the year ended 31st December 2014													Attributable to		Attributable to
Share		Share		Capital		
Revenue		Hedging		Exchange		shareholders of		non-controlling		
capital		premium		
reserves		
reserves		
reserves		
reserves		 the Company		interests		
US$m		
US$m		
US$m		
US$m		
US$m		
US$m		
US$m		
US$m		

Total
equityUS$m

201450.2		

186.6		

282.1		

473.6		

(6.0 )

2.5		

989.0		

5.7		

994.7

Total comprehensive
income

–		

–		

–		

92.2		

3.3		(60.5 )

35.0		

(0.7 )

34.3

Dividends paidby the Company

–		

–		

–		

(70.2 )

–		–		(70.2 )

–		(70.2 )

Issue of shares

–		

–		

–		

–		

–		

–		

–		

–		

–

Employee shareoption schemes

–		

–		

2.6		

–		

–		

–		

2.6		

–		

2.6

Transfer

–		

1.6		

(1.6 )

–		

–		

–		

–		

–		

–

50.2		

188.2		

283.1		

495.6		

(2.7 )(58.0 )

956.4		

5.0		

961.4

50.0		

182.1		

281.3		

442.6		

(12.9 )

2.8		945.9		

5.3		

951.2

Total comprehensive
income

–		

–		

–		

101.2		

6.9		

(0.3 )

107.8		

0.4		

108.2

Dividends paidby the Company

–		

–		

–		

(70.2 )

–		–		(70.2 )

–		(70.2 )

Issue of shares

0.2		

2.7		

–		

–		

–		

–		

2.9		

–		

2.9

Employee shareoption schemes

–		

–		

2.6		

–		

–		

–		

2.6		

–		

2.6

Transfer

–		

1.8		

(1.8 )

–		

–		

–		

–		

–		

–

50.2		

186.6		

282.1		

473.6		

(6.0 )

2.5		

989.0		

5.7		

994.7

At 1st January

At 31st December
2013
At 1st January

At 31st December

Total comprehensive income included in revenue reserves comprises profit attributable to shareholders of the Company
of US$97.0 million (2013: US$96.3 million) and net fair value loss on other investments of US$0.1 million (2013: net
fair value gain on other investments of US$0.2 million).

31

32 Mandarin Oriental International Limited

Consolidated Cash Flow Statement
for the year ended 31st December 2014		2014		
2013
Note
US$m		
US$m

Operating activities
Operating profit

2

120.8

111.8

Depreciation

9

62.4

57.4

Amortization of intangible assets

8

2.6

2.6

Other non-cash items

24a

1.5

(2.7 )

Movements in working capital

24b

2.2

9.6

Interest received		

2.6

1.7

Interest and other financing charges paid		

(24.4)(17.9 )Tax paid		

(21.4)(18.6 )

		
146.3
143.9
Dividends and interest from associates		

13.2

13.0

Cash flows from operating activities		
159.5
156.9
Investing activities
Purchase of tangible assets		(29.4)(35.9 )

Purchase of intangible assets		(2.9)(2.9 )

Payment on Munich expansion

31(16.9)–

Acquisition of Paris freehold interest

28–(381.7 )Purchase of other investments		(1.0)(1.8 )

Repayment of loans to associates

24c

4.3

–

Sale of tangible assets		

0.3–

Cash flows from investing activities		
(45.6)(422.3 )Financing activities
Issue of shares		–

2.8

Drawdown of borrowings		

512.5

202.5

Repayment of borrowings		

(540.8)(3.1 )

Dividends paid by the Company(70.2)(70.2 )

23

Cash flows from financing activities		(98.5)
132.0
Net increase/(decrease) in cash and cash equivalents		

15.4(133.4 )Cash and cash equivalents at 1st January		

315.7

453.4

Effect of exchange rate changes		(6.8)(4.3 )

324.3

315.7

Cash and cash equivalents at 31st December

24dAnnual Report 2014

Principal Accounting Policies

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

Amendments and interpretation effective in 2014 which are relevant to the Group’s operations:
Amendments to IAS 32
Amendments to IAS 36
Amendments to IAS 39
IFRIC 21

Offsetting Financial Assets and Financial Liabilities
Recoverable Amount Disclosures for Non-Financial Assets
Novation of Derivatives and Continuation of Hedge Accounting
Levies

The adoption of these amendments and interpretation does not have a material impact on the Group’s accounting
policies and disclosures.
Amendments to IAS 32 ‘Offsetting Financial Assets and Financial Liabilities’ are made to the application guidancein IAS 32 and clarify some of the requirements for offsetting financial assets and financial liabilities on the balance
sheet. Specifically, the amendments clarify the meaning of ‘currently has a legally enforceable right of offset’ and‘simultaneous realization and settlement’.
Amendments to IAS 36 ‘Recoverable Amount Disclosures for Non-Financial Assets’ set out the changes to thedisclosures when recoverable amount is determined based on fair value less costs of disposal. The key amendmentsare (a) to remove the requirement to disclose recoverable amount when a cash generating unit (CGU) contains
goodwill or indefinite lived intangible assets but there has been no impairment, (b) to require disclosure of therecoverable amount of an asset or CGU when an impairment loss has been recognized or reversed, and (c) to requiredetailed disclosure of how the fair value less costs of disposal has been measured when an impairment loss has beenrecognized or reversed.
Amendments to IAS 39 ‘Novation of Derivatives and Continuation of Hedge Accounting’ provide relief
from discontinuing hedge accounting when novation of a hedging instrument to a central counterparty meetsspecified criteria.
IFRIC 21 ‘Levies’ sets out the accounting for an obligation to pay a levy that is not income tax. The interpretation
clarifies that the obligating event that gives rise to a liability to pay a levy is the activity described in the relevant
legislation that triggers the payment of the levy.

33

34 Mandarin Oriental International Limited

Principal Accounting Policies Continued

A Basis of preparation continued
The following standards and amendments which are effective after 2014, are relevant to the Group’s operations andyet to be adopted:
		
		
		

Effective for accounting
periods beginningon or after

IFRS 9Financial Instruments
IFRS 15
Revenue from Contracts with Customers
Amendments to IAS 1
Presentation of Financial Statements
Amendments to IFRS 10 and IAS 28
Sale or Contribution of Assets between
	  an Investor and its Associate or Joint Venture
Amendments to IFRS 11
Accounting for Acquisitions of	  Interests in Joint Operations
Amendments to IAS 16 and IAS 38
Clarification of Acceptable Methods	  of Depreciation and Amortization
Amendments to IAS 19
Defined Benefit Plans: Employee Contributions
Annual Improvements to IFRSs
2010 – 2012 Cycle
2011 – 2013 Cycle
2012 – 2014 Cycle

1st January 2018
1st January 2017
1st January 2016
1st January 2016
1st January 2016
1st January 2016
1st July 2014
1st July 2014
1st July 2014
1st January 2016

The Group is currently assessing the impact of these new standards and amendments. The Group will adopt these newstandards and amendments from their respective effective dates.
A complete set of IFRS 9 ‘Financial Instruments’ has been published which replaces IAS 39 ‘Financial Instruments:
Recognition and Measurement’. This complete version includes new guidance on the classification and measurementof financial assets and liabilities. It also includes an expected credit losses model that replaces the incurred loss
impairment model used today. A substantially-reformed approach to hedging accounting is also introduced.
There are three categories for financial assets under IFRS 9: amortized cost, fair value through other comprehensive
income and fair value through profit or loss. The measurement principles of each category are similar to the current
requirements under IAS 39. The basis of classification depends on the entity’s business model and the contractual
cash flow characteristics of the financial asset. Classification determines how financial assets and financial liabilities
are accounted for in financial statements and, in particular, how they are measured on an ongoing basis.
IFRS 9 introduces a new expected-loss impairment model which replaces the ‘incurred loss’ model in IAS 39. A loss
event will no longer need to occur before an impairment allowance is recognized. In practice, the new rules mean that
entities will have to record a day one loss equal to the 12-month expected credit loss on initial recognition of financial
assets that are not credit impaired (or lifetime expected credit loss for trade receivables). IFRS 9 contains a ‘three stage’approach which is based on the change in credit quality of financial assets since initial recognition. Assets movethrough the three stages as credit quality changes and the stages dictate how an entity measures impairment losses
and applies the effective interest rate method.
Where there has been a significant increase in credit risk, impairment is measured using lifetime expected credit
loss rather than 12-month expected credit loss. The model also applies to certain loan commitments and financial
guarantees, and includes operational simplifications for lease and trade receivables.

Annual Report 2014

A Basis of preparation continued
IFRS 9 introduces a substantially-reformed model for hedge accounting that aligns the accounting treatment with risk
management activities, enabling entities to better reflect in their financial statements how they manage risks associatedwith financial instruments. Additional disclosures about risk management activity and the effect of hedge accounting
on the financial statements are required.
IFRS 15 ‘Revenue from Contracts with Customers’ is a new standard which contains a single model that applies tocontracts with customers and two approaches to recognizing revenue, that is at a point in time or over time. lFRS 15
replaces IAS 11 ‘Construction Contracts’, IAS 18 ‘Revenue’, IFRIC 13 ‘Customer Loyalty Programmes’, IFRIC 15‘Agreements for the Construction of Real Estate’, IFRIC 18 ‘Transfers of Assets from Customers’ and SIC-31‘Revenue – Barter Transactions Involving Advertising Services’.
The core principle of IFRS 15 is for companies to recognize revenue to depict the transfer of goods or services tocustomers in amounts that reflect the consideration (that is, payment) to which the company expects to be entitledin exchange for those goods or services. 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.
Amendments to IAS 1 ‘Presentation of Financial Statements’ are part of the International Accounting Standards
Board’s initiatives to improve the effectiveness of disclosure in financial reporting. Amendments to IAS 1 clarify
that companies shall apply professional judgements in determining what information to disclose and how to structure
it in the financial statements. The amendments include narrow-focus improvements in the guidance on materiality,
disaggregation and subtotals, note structure, disclosure of accounting policies and presentation of items of othercomprehensive income arising from equity accounted investments.
Amendments to IFRS 10 ‘Consolidated Financial Statements’ and IAS 28 ‘Investments in Associates and Joint
Ventures’ clarify the accounting treatment for sales or contribution of assets between an investor and its associates
or joint ventures. The accounting treatment depends on whether the non-monetary assets sold or contributed toan associate or joint venture constitute a ‘business’. Full gain or loss will be recognized by the investor where thenon-monetary assets constitute a ‘business’. If the assets do not meet the definition of a business, the gain or loss
is recognized by the investor to the extent of the other investors’ interests.
Amendments to IFRS 11 ‘Joint Arrangements’ introduce new guidance on the accounting for the acquisition of aninterest in a joint operation that constitutes a business. Acquirers of such interests shall apply all of the principles on
business combinations accounting in IFRS 3 ‘Business Combinations’, and other IFRSs, that do not conflict with theguidance in IFRS 11 and disclose the information that is required in those IFRSs in relation to business combinations.
Amendments to IAS 16 ‘Property, Plant and Equipment’ and IAS 38 ‘Intangible Assets’ clarify that the use ofrevenue-based methods to calculate the depreciation or amortization of an asset is not appropriate because revenue
generated by an activity that includes the use of an asset generally reflects factors other than the consumption of theeconomic benefits embodied in the asset. The amendments to IAS 38 further clarify that revenue is generally presumed
to be an inappropriate basis for measuring the consumption of the economic benefits embodied in an intangible asset.
This presumption however, can be rebutted in certain limited circumstances.
Amendments to IAS 19 ‘Employee Benefits’ regarding defined benefit plans apply to contributions from employees or
third parties to defined benefit plans. The objective of the amendments is to simplify the accounting for contributions
that are independent of the number of years of employee service, for example, employee contributions that arecalculated according to a fixed percentage of salary.

3536 Mandarin Oriental International Limited

Principal Accounting Policies Continued

A Basis of preparation continued
Annual Improvements to IFRSs 2010 – 2012 Cycle, 2011 – 2013 Cycle and 2012 – 2014 Cycle comprise a numberof non-urgent but necessary amendments. None of these amendments is likely to have a significant impact on the
consolidated financial statements of the Group.
The principal operating subsidiaries, associates and joint ventures have different functional currencies in line withthe economic environments of the locations in which they operate. The functional currency of the Company is
United States 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 include 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 recognized 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.
iv) 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.

Annual Report 2014

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.

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.

37

38 Mandarin Oriental International Limited

Principal Accounting Policies Continued

E Intangible assets continuedii) 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
over the respective lease term
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.

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

Annual Report 2014

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) Plant and machinery under finance leases are capitalized at the commencement of the lease at the lower of thefair value of the leased asset and the present value of the minimum lease payments. Lease payments are allocatedbetween the liability and finance charges so as to achieve a constant rate on the finance balance outstanding.
iii) 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.

3940 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.
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.

Annual Report 2014

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 (‘LTIP‘) have been set up to provide longer-term incentives for selected
executives. Awards can take the form of share options with an exercise price based on the then prevailing market
prices or such other price set by the Board or they can be conditional rights to receive free shares. Awards normallyvest after the third 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 options in respect of options
granted after 7th November 2002 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 options granted as determined on the grant date. At eachbalance sheet date, the Group revises its estimates of the number of options that are expected to become exercisable.
The impact of the revision of original estimates, if any, is recognized in profit and loss.

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.

41

42 Mandarin Oriental International Limited

Principal Accounting Policies Continued

R Derivative financial instruments continued
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.

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 include items such as gains on disposals, provisions against asset
impairment and other material items which are non-recurring in nature that require disclosure 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 numberof shares in issue during the year. The weighted average number excludes the Company shares held by the Trustee
under the Share-based Long-term Incentive Plans. For the purpose of calculating diluted earnings per share,
profit attributable to shareholders is adjusted for the effects of the conversion of dilutive potential ordinary sharesof subsidiaries, associates or joint ventures, and the weighted average number of shares is adjusted for the numberof shares which are deemed to be issued for no consideration under the Share-based Long-term Incentive Plans basedon the average share price during the year.

Annual Report 2014

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.
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 that theamount can be measured reliably. Revenue from the sale of goods is recognized on the transfer of significant risks andrewards of ownership, which generally coincides with the time when the goods are delivered to customers and title has
passed. Receipts under operating leases are accounted for on an accrual basis over the lease terms.
Revenue from hotel management comprises gross fees earned from the management of all the hotels operated by theGroup. Management fees are recognized when earned as determined by the management contract.
Interest income is recognized on a time proportion basis taking into account the principal amounts outstanding andthe interest rates applicable.
Management fees charged to the subsidiary hotels are eliminated upon consolidation.
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.

Z Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing
performance of the operating segments, has been identified as the committee that makes strategic decisions.

4344 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. The Group’s treasury policies
are designed to manage the financial impact of fluctuations in interest rates and foreign exchange rates and tominimize the Group’s financial risks. The Group uses derivative financial instruments, principally interest rate swaps
and caps, and forward foreign exchange contracts as appropriate for hedging transactions and managing 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 fair value 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 2014 are disclosed in note 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 and foreign currency options in a consistent manner to hedge firm and anticipated foreignexchange commitments.
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 2014 and 2013, the Group’s principal foreign exchange exposure
was with the Euro. At 31st December 2014, 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$0.7 million
lower/higher (2013: US$0.2 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$0.7 million
lower/higher (2013: US$0.2 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 2014 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 2014

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 2014 the Group’s
interest rate hedge was 43% (2013: 41%), with an average tenor of 3.3 years (2013: 1.3 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 2014, 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$2.6 million lower/higher (2013: US$2.4 million
lower/higher), and hedging reserves would have been US$3.5 million (2013: US$2.2 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. In the case of effective fair value hedges, changes in the fair value ofthe hedged item caused by interest rate movements balance out in the profit and loss account against changes
in the fair value of the hedging instruments. 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.

4546 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 2014, 98% (2013: 96%) 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. At 31st December 2014, there
was no positive fair value of derivative financial instruments (2013: nil). Management does not expect any
counterparty to fail to meet its obligations.
In respect of credit exposures to customers and corporate companies, the Group has policies in place to ensurethat sales on credit without collateral are made principally to travel agents and corporate companies with anappropriate 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 2014, total available borrowing facilities amounted to US$861 million (2013: US$882 million)of which US$728 million (2013: US$795 million) was drawn down. Undrawn committed facilities, in the formof revolving credit and term loan facilities totalled US$133 million (2013: US$87 million), in addition to cash
balances of US$325 million. There was no undrawn uncommitted facilities (2013: nil).

Annual Report 2014

A Financial risk factors continuediii) Liquidity risk continued
The table below analyzes the Group’s non-derivative financial liabilities and derivative financial liabilities into
relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity
date. Derivative financial liabilities are included in the analysis if their contractual maturities are essential foran 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

231.1		

12.5		

12.3		

9.5		

510.0		

2.3		

777.7

Creditors

139.9		

–		

–		

–		

–		

–		

139.9

2.2		

1.2		

0.3		

–		

–		

–		

3.7

Borrowings

568.3		

236.7		

2.0		

2.7		

0.2		

2.7		

812.6

Creditors

136.8		

–		

–		

–		

–		

–		

136.8

4.5		

1.3		

0.8		

0.2		

–		

–		

6.8

At 31st December 2014

Net settled derivative
financial instruments
At 31st December 2013

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 total equity. Net debt is calculated as total borrowings less bankbalances and other liquid funds. Interest cover is calculated as underlying operating profit and share of results ofassociates 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 2014 and 2013 based on IFRS balance sheets are as follows:2014		

2013

Gearing ratio

42%		

48%

Interest cover

7.7

8.2

47

48 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) Quoted prices (unadjusted) in active markets for identical assets or liabilities (‘quoted prices in
active markets’)
The fair value of listed securities, which are classified as available-for-sale, is based on quoted prices in active
markets at the balance sheet date. The quoted market price used for listed investments held by the Group is
the current bid price.
b) 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 forward foreign exchange contracts are calculated
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.
c) 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, by the levels in the fair value
measurement hierarchy.
Quoted		
prices in		
active markets		
US$m		

Observablecurrent market		transactions		
US$m		

Unobservable		
inputs		
US$m		

Total
US$m

–		

2.9		

7.6		

10.5

–		

(3.0)

–		

(3.0 )

–		

3.1		

6.2		

9.3

–		

(7.0)

–		

(7.0 )

2014
AssetsAvailable-for-sale financial assets– unlisted investments
Liabilities
Derivatives designated at fair value– through other comprehensive income
2013
AssetsAvailable-for-sale financial assets– unlisted investments
Liabilities
Derivatives designated at fair value– through other comprehensive income

There were no transfers among the three categories during the year ended 31st December 2014.

Annual Report 2014

C Fair value estimation continuedi) Financial instruments that are measured at fair value continued
Movements of financial instruments which are valued based on unobservable inputs during the year ended
31st December are as follows:
Available-for-salefinancial assets
2014		
2013
US$m 		US$m

At 1st January

6.2

4.8

Additions

1.4

1.4

At 31st December

7.6

6.2

ii) Financial instruments that are not measured at fair value
The fair values of current debtors, bank balances and other liquid funds, 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 2014
and 2013 are as follows:									Other							Other		financial							financial		 instruments
			 Derivatives				 instruments		 at fair value		
Loans and		
used for		
Available-		 at amortized		through profit		
receivables		hedging		
for-sale		
cost		and loss		
US$m		
US$m		
US$m		
US$m		
US$m		

2014
AssetsOther investments
Debtors
Bank balances andother liquid funds

Totalcarrying		
amount		
US$m		

Fair
value
US$m

–		

–		

10.5		

–		–		10.5		

10.5

63.2		

–		

–		

–		

–		

63.2		

63.2

324.6		

–		

–		

–		

–		

324.6		

324.6387.8		

–		10.5		

–		–		398.3		

398.3Liabilities
Other non-current liabilities

–		

(3.0)

–		

–		

–		

(3.0)

(3.0 )

Borrowings

–		

–		

–		

(727.7)–		(727.7)(727.6 )Trade and otherpayables excluding
non-financial liabilities

–		

–		

–		

(139.9)–		

(139.9)(139.9 )

–		

(3.0)

–		

(867.6)–		(870.6)(870.5 )2013
AssetsOther investments

–		

–		

9.3		

–		

–		

9.3		

9.3

Debtors

61.1		

–		

–		

–		

–		

61.1		

61.1

Bank balances andother liquid funds

316.4		

–		

–		

–		

–		

316.4		

316.4377.5		

–		

9.3		

–		

–		

386.8		

386.8Liabilities
Other non-current liabilities

–		

(3.5)

–		

–		

–		

(3.5)

(3.5 )

Borrowings

–		

–		

–		

(794.9)–		

(794.9)(794.9 )Trade and otherpayables excluding
non-financial liabilities

–		

(3.5)

–		

(136.8)–		

(140.3)(140.3 )

–		

(7.0)

–		

(931.7)–		(938.7)(938.7 )49

50 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 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.

B 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.

C 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 2014

D 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.

E 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.

51

52 Mandarin Oriental International Limited

Notes to the Financial Statements

1 Revenue
2014		
US$m		

2013
US$m

– Hong Kong

249.5

245.9

– Other Asia

118.9

131.6

– Europe

249.6

226.0

– The Americas

61.9

65.1

679.9

668.6

– Hotel ownership

634.2

637.8

– Hotel & Residences branding and management

77.1

62.7

– Less: Intra-segment revenue(31.4)(31.9 )

679.9

668.6

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.
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 2014

2 EBITDA (earnings before interest, tax, depreciation and amortization)
	  and operating profit from subsidiaries
2014		
US$m		

2013
US$mAnalysis by geographical area
– Hong Kong

85.1

83.0

– Other Asia

29.9

30.1

– Europe

67.6

54.8

– The Americas

3.2

3.9

EBITDA from subsidiaries

185.8

171.8

Less depreciation and amortization(65.0)(60.0 )

Operating profit

120.8

111.8

– Hotel ownership

148.5

150.3

– Hotel & Residences branding and management

37.3

21.5

EBITDA from subsidiaries

185.8

171.8

– Hotel ownership

86.7

92.8

Analysis by activity– Hotel & Residences branding and management

34.1

19.0

Operating profit

120.8

111.8

The following items have been (credited)/charged in arriving at operating profit:(22.8)(19.3 )

Amortization of intangible assets (refer note 8)

2.6

2.6

Depreciation of tangible assets (refer note 9)

62.4

57.4

Impairment of debtors

0.1

0.4

246.8

245.4

– Share options granted

2.6

2.6

– Defined benefit pension plans (refer note 12)

3.7

4.8

Rental income (refer note 9)

Employee benefit expense– Salaries and benefits in kind

1.1

0.6

254.2

253.4

0.2

(2.7 )– Minimum lease payments

8.7

6.3

– Contingent rents

5.6

6.1

– Subleases(0.3)(0.3 )

14.0

12.1– Audit

1.6

1.5– Non-audit services

0.8

1.1

2.4

2.6

– Defined contribution pension plans

Net foreign exchange losses/(gains)
Operating leases

Auditors’ remuneration

The impact of Manila closure in 2014 on EBITDA mainly included lease termination fee (US$10 million); partly offset
by loss from operations (US$1 million) and retrenchment costs (US$5 million). Including the write-off of remaining
fixed assets through depreciation (US$7 million), total impact of Manila closure on underlying profit was negative
US$3 million.

53

54 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

3 Net financing charges
2014		
US$m		

2013
US$m

– Bank loans(18.0)(16.1 )

Commitment and other fees

(1.9)

(1.4 )

Financing charges(19.9)(17.5 )

Interest income

2.6

1.7

(17.3)(15.8 )

Interest expense

Net financing charges

4 Share of results of associates
			 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

2014
Analysis by geographical area
– Other Asia

25.9		

(9.2)

16.7		

(1.4)

(2.9)

12.4

– The Americas

5.6		

(2.9)

2.7		

(2.1)

(0.7)

(0.1 )

31.5		

(12.1)

19.4		

(3.5)

(3.6)

12.3

–		

–		

–		

–		

–		

–

31.5		

(12.1)

19.4		

(3.5)

(3.6)

12.3

– Hotel ownership30.4		

(11.5)

18.9		

(3.4)

(3.4)

12.1

– Other

1.1		

(0.6)

0.5		

(0.1)

(0.2)

0.2

31.5		

(12.1)

19.4		

(3.5)

(3.6)

12.3

31.3		

(9.2)

22.1		

(1.5)

(3.6)

17.0

Non-trading item
– Writeback of provisions against
asset impairment (refer note 7)

Analysis by activity

2013
Analysis by geographical area
– Other Asia
– The Americas

5.6		

(3.0)

2.6		

(2.0)

(0.1)

0.5

36.9		

(12.2)

24.7		

(3.5)

(3.7)

17.5

Non-trading item
– Writeback of provisions against
asset impairment (refer note 7)

3.1		

–		

3.1		

–		

–		

3.1

40.0		

(12.2)

27.8		

(3.5)

(3.7)

20.6

38.7		

(11.5)

27.2		

(3.4)

(3.6)

20.2

Analysis by activity– Hotel ownership– Other

1.3		

(0.7)

0.6		

(0.1)

(0.1)

0.4

40.0		

(12.2)

27.8		

(3.5)

(3.7)

20.6

Annual Report 2014

5 Tax
2014		
US$m		

2013
US$m

– Current tax

18.8

19.7

– Deferred tax (refer note 13)

0.2

0.1

19.0

19.8

– Hong Kong

11.6

11.7

– Other Asia

3.0

1.7

Tax charged to profit and loss is analyzed as follows:

Analysis by geographical area

– Europe

6.5

6.3– The Americas

(2.1)

0.1

19.0

19.8

– Hotel ownership

14.6

14.8

– Hotel & Residences branding and management

4.4

5.0

19.0

19.8

Tax at applicable tax rate

11.5

12.5

Expenses not deductible for tax purposes

1.5

3.4

Tax losses not recognized

2.7

2.1

Analysis by activity

Reconciliation between tax expense and tax at the applicable tax rate*:

Withholding tax

4.0

1.3

Over provision in prior years(0.1)(0.1 )

Other

(0.6)

0.6

19.0

19.8

0.9

(0.9 )–(0.1 )(0.7)(1.5 )

0.2(2.5 )Tax relating to components of other comprehensive income is analyzed as follows:Remeasurements of defined benefit plans
Revaluation of other investment
Cash flow hedges

Share of tax charge of associates of US$3.6 million (2013: US$3.7 million) is included in share of results of associates(refer note 4).
* The applicable tax rate for the year was 11% (2013: 13%) and represents the weighted average of the rates of taxation prevailingin the territories in which the Group operates. The decrease in applicable tax rate was caused by a change in the geographic mixof the Group’s profitability.

55

56 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$97.0 million(2013: US$96.3 million) and on the weighted average number of 1,003.4 million (2013: 1,002.0 million)
shares in issue during the year (refer principal accounting policy (V)).
Diluted earnings per share are calculated on profit attributable to shareholders of US$97.0 million(2013: US$96.3 million), which is after adjusting for the effects of the conversion of dilutive potential
ordinary shares of subsidiaries, associates or joint ventures, and on the weighted average number of 1,007.4 million(2013: 1,003.9 million) shares in issue during the year (refer principal accounting policy (V)).
The weighted average number of shares is arrived at as follows:
Ordinary shares in millions
2014		
2013

1,003.4

1,002.0

Shares held by the Trustee under the Share-based Long-term Incentive Plans––

Weighted average number of shares for basic earnings per share calculation

1,003.4

1,002.0

Weighted average number of shares in issue

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

4.0

1.9

1,007.4

1,003.9

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		

2014
Basic		earnings		
per share		
US¢		

Profit attributable to shareholders

97.0		

9.67		

9.63

96.3		

9.61		

9.59

Non-trading items (refer note 7)

–		

–		

–

(3.1)

(0.31)(0.31 )

97.0		

9.67		

9.63

93.2		

9.30		

9.28

Underlying profit attributable
to shareholders

2013
Basic		earnings		
per share		US¢		

Diluted				earnings				per share				US¢		
US$m		

Dilutedearnings
per share
US¢

7 Non-trading items
An analysis of non-trading items after interest, tax and non-controlling interests is set out below:
2014		
US$m		

Writeback of provisions against asset impairment

–

2013
US$m

3.1

Annual Report 2014

8 Intangible assets
			Goodwill		
US$m		

Leasehold		land		
US$m		

Computer		software		
US$m		Development
costs		US$m		

Total
US$m

23.9		

6.5		

18.0		

12.8		

61.2

Amortization and impairment

–		

(1.9)

(14.4)(2.3)(18.6 )Net book value at 1st January

23.9		

4.6		

3.6		

10.5		

42.6

Exchange differences

–		

–		

(0.1)

(0.2)

(0.3 )

Additions

–		

–		

1.5		

4.4		

5.9

Amortization

–		

(0.2)

(2.0)

(0.4)

(2.6 )Net book value at 31st December

23.9		

4.4		

3.0		

14.3		

45.6

Cost

23.9		

6.4		

19.4		

16.2		

65.9

–		

(2.0)

(16.4)(1.9)(20.3 )

23.9		

4.4		

3.0		

14.3		

45.6

2014
Cost

Amortization and impairment

2013
Cost

23.9		

6.5		

16.7		

11.9		

59.0

Amortization and impairment

–		

(1.7)

(12.7)(2.5)(16.9 )Net book value at 1st January

23.9		

4.8		

4.0		

9.4		

42.1

–		

–		

1.7		

1.4		

3.1

–		(0.2)

Additions

(2.1)

(0.3)

(2.6 )Net book value at 31st December

23.9		

4.6		

3.6		

10.5		

42.6

Cost

23.9		

6.5		

18.0		

12.8		

61.2

–		

(1.9)

(14.4)(2.3)(18.6 )

23.9		

4.6		

3.6		

10.5		

42.6

Amortization

Amortization and impairment

Management has performed an impairment review of the carrying amount of goodwill at 31st December 2014.
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 individual hotel budgets prepared on the basis of assumptions reflective of theprevailing market conditions, and are discounted appropriately. Key assumptions used for value-in-use calculations
include average growth rates of between 2% to 14% to extrapolate cash flows over a five-year period after which thegrowth rate is assumed up to 5% in perpetuity, which may vary across the Group’s geographical locations, and are basedon management expectations for the market development; and pre-tax discount rates of around 10% applied to the cash
flow projections. The discount rates used reflect business specific risks relating to the business life-cycle and geographicallocation. 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 remaining 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

5758 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

2014
Cost

755.5		

751.5		

152.2		

272.8		

1,932.0

Depreciation and impairment(66.8)(163.4)(68.1)(193.2)(491.5 )Net book value at 1st January

688.7		

588.1		

84.1		

79.6		

1,440.5

Exchange differences(60.4)(21.5)

(6.0)

(3.9)

(91.8 )

Additions–		

13.1		

1.7		

14.4		

29.2

Transfers

2.6		

1.3		

–		

(3.9)

–

Disposals

–		

–		

(0.1)

(0.3)

(0.4 )(8.0)(22.1)(8.2)(24.1)(62.4 )Net book value at 31st December

622.9		

558.9		

71.5		

61.8		

1,315.1

Cost

695.8		

734.7		

144.6		

255.4		

1,830.5

Depreciation and impairment(72.9)(175.8)(73.1)(193.6)(515.4 )622.9		

558.9		

71.5		

61.8		

1,315.1

Cost

366.7		

756.3		

98.9		

272.3		

1,494.2

Depreciation and impairment(55.1)(146.1)(60.4)(177.1)(438.7 )Net book value at 1st January

311.6		

610.2		

38.5		

95.2		

1,055.5

Depreciation charge

2013

Exchange differences

16.5		

(1.2)

0.5		

(1.8)

14.0

Additions343.5		

23.3		

43.1		

18.7		

428.6

Transfers

25.1		

(25.1)

9.3		

(9.3)

–

Disposals–		(0.1)–		(0.1)(0.2 )(8.0)(19.0)(7.3)(23.1)(57.4 )Net book value at 31st December

688.7		

588.1		

84.1		

79.6		

1,440.5

Cost

755.5		

751.5		

152.2		

272.8		

1,932.0(66.8)(163.4)(68.1)(193.2)(491.5 )688.7		

588.1		

84.1		

79.6		

1,440.5

Depreciation charge

Depreciation and impairment

Freehold properties include a property of US$96.2 million (2013: US$98.6 million), which is stated net of tax increment
financing of US$23.9 million (2013: US$24.7 million) (refer note 18).
Net book value of leasehold properties acquired under finance leases amounted to US$183.7 million(2013: US$184.1 million).
Rental income from properties and other tangible assets amounted to US$22.8 million (2013: US$19.3 million)(refer note 2).
During 2013, leasehold properties of US$25.1 million had been transferred to freehold properties pursuant to theacquisition of Paris freehold interest.

Annual Report 2014

9 Tangible assets continued
Future minimum rental payments receivable under non-cancellable leases are as follows:2014		
US$m		

2013
US$mWithin one year

21.0

20.0

Between one and two years

16.9

20.4

Between two and five years

21.9

36.7

Beyond five years

12.8

18.8

72.6

95.9

– Hong Kong

9.4

10.1

– Other Asia

1.6

2.0

– Europe

16.5

413.5

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

– The Americas

1.7

3.0

29.2

428.6

28.1

427.3

Analysis of additions by activity– Hotel ownership

1.1

1.3

29.2

428.6

– Hong Kong

(16.5)(15.7 )– Other Asia

(13.2)(10.2 )– Europe(28.6)(27.3 )– The Americas(4.1)(4.2 )(62.4)(57.4 )

– Hotel ownership(61.4)(56.4 )

– Hotel & Residences branding and management(1.0)(1.0 )(62.4)(57.4 )

– Hotel & Residences branding and management

Analysis of depreciation by geographical area

Analysis of depreciation by activity

59

60 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

10 Associates2014		
US$m		

2013
US$m

Listed associate – OHTL

18.8

19.6

Unlisted associates

77.3

85.7

Share of attributable net assets

96.1

105.3

5.5

5.5

101.6

110.8

At 1st January

110.8

108.6

Share of results after tax and non-controlling interests

12.3

20.6

Notional goodwill

Movements of associates during the year:

Share of other comprehensive income after tax and non-controlling interests(4.0)(5.4 )

Dividends received(13.2)(13.0 )

Repayment of loans to associates (refer note 24c)

(4.3)

–

101.6

110.8

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 2014 and 2013:						
Nature of business
Name of entity

Country ofincorporation/
principal placeof business

OHTL PCL (‘OHTL’)

Owner of Mandarin Oriental, Bangkok

Thailand

44.9%

44.9%

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

Singapore

50.0%

50.0%

% of ownership interest
2014
2013

As at 31st December 2014, the fair value of the Group’s interest in OHTL, which is listed on the Thailand Stock
Exchange, was US$82.4 million (2013: US$77.2 million) and the carrying amount of the Group’s interest was
US$24.3 million (2013: US$25.1 million).
The Group’s associates had capital commitments of US$9.3 million as at 31st December 2014 (2013: US$8.6 million).
There were no contingent liabilities relating to the Group’s interest in associates as at 31st December 2014.

Annual Report 2014

10 Associates continued
Summarized financial information for material associates
Summarized balance sheet at 31st December
2014		
US$m		

OHTL
2013		
US$m		

Marina Bay Hotel2014		
2013		
US$m		
US$m		

2014		
US$m		

2013
US$m

59.2

60.7		

132.8

141.0		

192.0

201.7

Cash and cash equivalents

6.4

8.3		

3.9

8.4		

10.3

16.7

Other current assets

4.0

4.8		

3.8

3.9		

7.8

8.7

Total current assets

10.4

13.1		

7.7

12.3		

18.1

25.4

Non-current assets

Total

Current assets

Non-current liabilities
Financial liabilities*(10.6)–		(25.0)(34.8)(35.6)(34.8 )

Other non-current liabilities*

(3.9)

(4.0)

(3.3)

(3.7)

(7.2)

(7.7 )

Total non-current liabilities(14.5)(4.0)(28.3)(38.5)(42.8)(42.5 )

Financial liabilities*(11.1)(23.1)(10.5)(10.8)(21.6)(33.9 )

Other current liabilities*

(4.5)

(5.5)

(7.9)

(9.2)

(12.4)(14.7 )

Total current liabilities(15.6)(28.6)(18.4)(20.0)(34.0)(48.6 )

Current liabilities

Non-controlling interests
Net assets

–

–		

–

–		

–

–

39.5

41.2		

93.8

94.8		

133.3

136.0

* 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
2014		
US$m		

OHTL
2013		
US$m		

Marina Bay Hotel2014		
2013		
US$m		
US$m		

2014		
US$m		

Total
2013
US$m

Revenue

58.9

73.9		

84.4

85.8		

143.3

159.7

Depreciation and amortization

(5.7)

(6.3)

(7.8)

(7.7)

(13.5)(14.0 )

Interest income

0.1

0.2		

–

–		

0.1

0.2

Interest expense

(0.6)

(0.5)

(0.7)

(0.9)

(1.3)

(1.4 )

Profit from underlying business performance

7.9

17.9		

18.8

20.3		

26.7

38.2

Income tax expense

(1.2)

(2.2)

(3.0)

(3.7)

(4.2)

(5.9 )

Profit after tax from business performance

6.7

15.7		

15.8

16.6		

22.5

32.3

–

6.8		

–

–		

–

6.8

6.7

22.5		

15.8

16.6		

22.5

39.1

Other comprehensive income

–

(2.8)

(5.0)

(3.7)

(5.0)

(6.5 )

Total comprehensive income

6.7

19.7		

10.8

12.9		

17.5

32.6

Dividends received from associates

8.4

9.1		

11.8

12.5		

20.2

21.6

Profit after tax from non-trading items
Profit after tax

The information above reflects the amounts presented in the financial statements of the associates adjusted for differencesin accounting policies between the Group and the associates, and fair value of the associates at the time of acquisition.

61

62 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

10 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:2014		
US$m		

OHTL
2013		
US$m		

Marina Bay Hotel2014		
2013		
US$m		
US$m		

2014		
US$m		

2013
US$m

Operating net assets at 1st January

41.2

45.1		

94.8

94.4		

136.0

139.5

Profit for the year

6.7

22.5		

15.8

16.6		

22.5

39.1

–

(2.8)

(5.0)

(3.7)

(5.0)

(6.5 )

Other movements(8.4)(23.6)(11.8)(12.5)(20.2)(36.1 )

Closing net assets

39.5

41.2		

93.8

94.8		

133.3

136.0

Effective interest in associates (%)*

47.6

47.6		

50.0

50.0Group’s share of net assets in associates

18.8

19.6		

46.9

47.4		

65.7

67.0

Notional goodwill*

5.5

5.5		

–

–		

5.5

5.5

Carrying value

24.3

25.1		

46.9

47.4		

71.2

72.5

Other comprehensive income

Total

The Group has interests in a number of individually immaterial associates. The following table analyzes, in aggregate,
the share of profit and other comprehensive income and carrying amount of these associates.
2014		
US$m		

2013
US$m

Share of profit

1.2

2.0

Share of other comprehensive income(1.4)(2.2 )

Carrying amount of interests in these associates

30.4

38.3

* During 2013, OHTL repurchased some of its own 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%.

Annual Report 201411 Loans receivable
As at 31st December 2014, 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:2014		
US$m		

2013
US$m

Fair value of plan assets

69.4

71.9

Present value of funded obligations(62.1)(58.1 )

7.3

13.8

Pension assets

7.3

14.4

Pension liabilities–(0.6 )

7.3

13.8

Net pension assets
Analysis of net pension assets

6364 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

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

Present
value ofobligation		
US$m		

Total
US$m

71.9		

(58.1)

13.8

2014
At 1st January
Current service cost
Interest income/(expense)
Past service cost and losses on settlements

Exchange differences
Administration expenses

–		

(4.0)

(4.0 )

3.1		

(2.5)

0.6

–		

(0.1)

(0.1 )

75.0		

(64.7)

10.3

–		

–		

–

(0.2)

–		

(0.2 )

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

(1.3)

–		

(1.3 )– change in financial assumptions

–		

(3.1)

(3.1 )– experience losses

–		

(1.2)

(1.2 )

(1.3)

(4.3)

(5.6 )

Contributions from employers

1.9		

–		

1.9

Contributions from plan participants

0.7		

(0.7)

–

Benefit payments

(6.6)

7.5		

0.9

Transfer (to)/from other plans

(0.1)

0.1		

–

At 31st December

69.4		

(62.1)

7.3

68.5		

(57.9)

10.6

2013
At 1st January
Current service cost

–		

(4.1)

(4.1 )

2.4		

(2.0)

0.4

–		

(0.9)

(0.9 )

70.9		

(64.9)

6.0

Exchange differences

(0.2)

0.2		

–

Administration expenses

(0.2)

–		

(0.2 )

Interest income/(expense)
Past service cost and losses on settlements

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

3.6		

–		

3.6

– change in financial assumptions

–		

3.1		

3.1

– experience losses

–		

(1.2)

(1.2 )

3.6		

1.9		

5.5

Contributions from employers

2.5		

–		

2.5

Contributions from plan participants

1.0		

(1.0)

–

Benefit payments

(5.6)

5.6		

–

Transfer (to)/from other plans

(0.1)

0.1		

–

At 31st December

71.9		

(58.1)

13.8

Annual Report 201412 Pension plans continued
The weighted average duration of the defined benefit obligation at 31st December 2014 is 5.3 years.
Expected maturity analysis of undiscounted pension benefits at 31st December is as follows:2014		
US$m		

2013
US$mLess than a year

6.6

5.4

Between one and two years

14.1

9.0

Between two and five years

23.5

27.7

Beyond five years

80.5

92.4

124.7

134.5

The principal actuarial assumptions used for accounting purposes at 31st December are as follows:
Hong Kong
2014		
%		

2013%

Discount rate

3.4

4.4

Salary growth rate

5.0

5.0

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					

Impact on defined
benefit obligation
Increase in		
Decrease inassumption		assumption
US$m		
US$m

Discount rate

1%		

(3.1)

3.4

Salary growth rate

1%		

3.0		

(2.8 )

The above sensitivity analyzes 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.

65

66 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

2014
Quoted investments
7.4		

–		

–		

–		

7.4

–		

–		

–		

–		

–

   – investment grade

–		

–		

–		

–		

–

   – non-investment grade

–		

–		

–		

–		

–

–		

–		

–		

–		

–

–		

–		

–		

–		

–

0.4		

6.5		

11.3		

2.8		

21.0

7.8		

6.5		

11.3		

2.8		

28.4

–		

–		

–		

–		

–

2.3		

6.4		

2.9		

0.6		

12.2

0.3		

1.0		

1.5		

–		

2.8

–		

2.0		

3.2		

–		

5.2

0.3		

3.0		

4.7		

–		

8.0

2.6		

9.4		

7.6		

0.6		

20.2

0.1		

–		

–		

20.1		

20.2

2.7		

9.4		

7.6		

20.7		

40.4

10.5		

15.9		

18.9		

23.5		

68.8

Equity instruments
Debt instruments– government– corporate bonds

Investment funds

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

Investment funds

Total investments

Cash and cash equivalents									0.6									69.4Annual Report 201412 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

2013
Quoted investments
Equity instruments

12.5		

0.1		

–		

–		

12.6

–		

–		

–		

–		

–

   – investment grade

–		

–		

–		

–		

–

   – non-investment grade

–		

–		

–		

–		

–

–		

–		

–		

–		

–

–		

–		

–		

–		

–

1.5		

8.0		

15.0		

1.1		

25.6

14.0		

8.1		

15.0		

1.1		

38.2

–		

–		

–		

–		

–

1.6		

5.2		

2.0		

1.0		

9.8

0.3		

1.7		

3.8		

–		

5.8

–		

0.1		

0.5		

–		

0.6

0.3		

1.8		

4.3		

–		

6.4

1.9		

7.0		

6.3		

1.0		

16.2

0.1		

–		

–		

16.8		

16.9

2.0		

7.0		

6.3		

17.8		

33.1

16.0		

15.1		

21.3		

18.9		

71.3

Debt instruments– government– corporate bonds

Investment funds

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

Investment funds

Total investments

Cash and cash equivalents									0.6									71.9The 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 theplans can meet future funding and solvency requirements. The last ALM review was completed in 2012, with the newstrategic asset allocations adopted in last quarter of 2014. The next ALM review is scheduled for 2015.

67

68 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

12 Pension plans continued
As at 31st December 2014, the Hong Kong plans had assets of US$69.4 million (2013: US$71.9 million). These assets
were invested 15% in Asia Pacific, 23% in Europe and 27% in North America (2013: 22%, 21% and 30%, respectively).
Within Asia Pacific, 71% was invested in Hong Kong equities. In 2014, 41% and 59% of the investments were in quoted
and unquoted instruments respectively. In 2013, the split was 54% and 46% respectively. The high percentage of quoted
instruments provides liquidity to fund drawdowns and benefit payments. Within the quoted equity allocation, the planis well diversified in terms of sectors, with the top three being financials, industrials and consumer goods with a combined
fair value of US$5.1 million. In 2013 the top three sectors were financials, properties and technology with a combined
fair value of US$7.0 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, inflation risk and life expectancy, 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 proportionof equities, which are expected to outperform corporate bonds in the long term while generating volatility and riskin 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. The closed plans reduced their equity exposure and increased investments in governmentand corporate bonds in the fourth quarter of 2014. Management believe the long-term nature of the plan liabilities andthe 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 asset-liability modeling (‘ALM’) frameworkthat is developed to achieve long-term returns that are in line with the obligations under the pension schemes. Within
the ALM framework, the Group’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 arisingfrom 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 2014 was US$1.9 million and the estimated amount of contributions expected to be paid to all its plans in 2015is US$2.3 million.

Annual Report 201413 Deferred tax (assets)/liabilities											Accelerated								 Unremitted		tax		
Fair value				Employee		
earnings in		
depreciation		 gains/losses		
Losses		benefits		
associates		
US$m		
US$m		
US$m		
US$m		
US$m		

Provisions
and other
temporarydifferences		
US$m		

Total
US$m

2014
At 1st January

60.3		

(1.1)

(1.4)

2.2		

1.7		

0.7		

62.4

Exchange differences

(2.4)

–		

0.2		

–		

–		

(0.1)

(2.3 )

Charged/(credited) to
profit and loss

0.2		

–		

0.1		

(0.1)

(0.1)

0.1		

0.2

Charged/(credited) to othercomprehensive income

–		

0.7		

–		

(0.9)

–		

–		

(0.2 )At 31st December

58.1		

(0.4)

(1.1)

1.2		

1.6		

0.7		

60.1

Deferred tax assets

(0.1)

(0.5)

(1.1)

(0.3)

–		

(0.2)

(2.2 )

Deferred tax liabilities

58.2		

0.1		

–		

1.5		

1.6		

0.9		

62.3

58.1		

(0.4)

(1.1)

1.2		

1.6		

0.7		

60.1

At 1st January

59.9		

(2.7)

(1.6)

1.6		

1.7		

0.7		

59.6

Exchange differences

0.3		

–		

(0.1)

0.1		

(0.2)

0.1		

0.2

Charged/(credited) to
profit and loss

0.1		

–		

0.3		

(0.4)

0.2		

(0.1)

0.1

–		

1.6		

–		

0.9		

–		

–		

2.5

At 31st December

60.3		

(1.1)

(1.4)

2.2		

1.7		

0.7		

62.4

Deferred tax assets

(0.1)

(1.2)

(1.4)

(0.2)

–		

(0.2)

(3.1 )

Deferred tax liabilities

60.4		

0.1		

–		

2.4		

1.7		

0.9		

65.5

60.3		

(1.1)

(1.4)

2.2		

1.7		

0.7		

62.4

2013

Charged to othercomprehensive income

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$42.4 million (2013: US$47.5 million) arising from unused tax losses of US$170.8 million(2013: US$200.0 million) have not been recognized in the financial statements.
Expiry dates for deferred tax assets not recognized in relation to unused tax losses:
2014		
US$m		

2013
US$mWithin one year

1.0

1.5

Between one and five years

9.0

9.2

Over five years

3.5

6.3

With no expiry dates

28.9

30.5

42.4

47.5

Deferred tax assets of US$3.6 million (2013: US$3.8 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 as at 31st December 2014. In 2013, deferred tax liabilities of US$0.4 million arising on temporary
differences associated with investments in subsidiaries of US$3.8 million had not been recognized as there is no current
intention of remitting the retained earnings of these subsidiaries to the holding companies in the foreseeable future.

69

70 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

14 Debtors and prepayments
2014		
US$m		

2013
US$m

– third parties

36.9

38.0

– associates

4.3

4.2

41.2

42.2

(1.4)

(0.8 )

39.8

41.4– third parties*

55.0

33.3

– associates

2.2

2.6

57.2

35.9

(2.5)

(3.6 )

54.7

32.3

94.5

73.7

Hong Kong

22.1

21.7

Other Asia

17.5

12.5

Europe

39.6

24.1

The Americas

15.3

15.4

94.5

73.7

Trade debtors– provision for impairment

Other debtors– provision for impairment

Analysis by geographical area of operation* Includes prepayments of US$13.9 million in respect of Munich expansion incurred in 2014 (refer note 31).

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

39.8

41.4

Other debtors**

23.4

19.7

63.2

61.1

**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.
An allowance for impairment of trade debtors is made based on the estimated irrecoverable amount. 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.

Annual Report 201414 Debtors and prepayments continued
At 31st December 2014, trade debtors of US$1.6 million (2013: US$1.0 million) and other debtors of US$2.7 million(2013: US$3.7 million) were impaired. The amounts of the provision were US$1.4 million (2013: US$0.8 million)
and US$2.5 million (2013: US$3.6 million), respectively. It was assessed that a portion of the debtors is expected tobe recoverable. The ageing analysis of these debtors is as follows:
Trade debtors
2014		
2013		
US$m		
US$m		

Other debtors
2014		
2013
US$m		
US$m

0.1

–		

0.2

0.1

Between 31 and 60 days

–

–		

–

–

Between 61 and 90 days

–

–		

–

–

1.5

1.0		

2.5

3.6

1.6

1.0		

2.7

3.7

Below 30 days

Over 90 days

At 31st December 2014, trade debtors of US$9.5 million (2013: US$7.0 million) and other debtors of US$3.6 million(2013: US$1.7 million), respectively, were past due but not impaired. The ageing analysis of these debtors is as follows:
Trade debtors
2014		
2013		
US$m		
US$m		

Other debtors
2014		
2013
US$m		
US$m

Below 30 days

2.6

2.3		

1.9

0.9

Between 31 and 60 days

2.9

2.6		

0.6

0.2

Between 61 and 90 days

2.8

1.2		

0.5

0.2

Over 90 days

1.2

0.9		

0.6

0.4

9.5

7.0		

3.6

1.7

The risk of trade debtors and other debtors that are neither past due nor impaired at 31st December 2014 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
2014		
2013		
US$m		
US$m		

Other debtors
2014		
2013
US$m		US$m

At 1st January

(0.8)

(1.4)

(3.6)

(3.9 )

Additional provisions

(0.7)

(0.1)

(0.4)

(0.5 )

–

0.1		

1.0

0.1

Amounts written off

0.1

0.6		

0.5

0.7

At 31st December

(1.4)

(0.8)

(2.5)

(3.6 )

Unused amounts reversed

71

72 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

14 Debtors and prepayments continued
Other debtors are further analyzed as follows:2014		
US$m		

2013
US$m

Other amounts due from associates

2.2

2.6

Other receivables

21.2

17.1

Financial assets

23.4

19.7

Prepayments

12.6

7.3

Rental and other deposits

18.1

3.9

Other

0.6

1.4

54.7

32.3

2014		
US$m		

2013
US$m

Deposits with banks and financial institutions

227.4

213.9

Bank balances

96.1

101.3

Cash balances

1.1

1.2

324.6

316.4

Euro

33.4

24.3

Hong Kong dollar

15.3

25.9

Indonesian rupiah

13.4

9.5

Japanese yen

14.0

12.1

Swiss franc

2.4

1.9

United Kingdom sterling

17.3

13.1

United States dollar

221.3

221.4

No debtors and prepayments have been pledged as security.

15 Cash at bankAnalysis by currency

Other

7.5

8.2

324.6

316.4

The weighted average interest rate on deposits with banks and financial institutions is 0.9% (2013: 0.6%) per annum.

Annual Report 2014

16 Creditors and accruals
2014		
US$m		

2013
US$m

Trade creditors

34.3

33.8

Accruals

71.0

75.3

Rental and other refundable deposits

13.4

12.1

–

3.5

Other creditors

21.2

15.6

Financial liabilities

139.9

140.3

2.2

2.2

Derivative financial instruments (refer note 25)

Rental income received in advance

2.5

4.5

144.6

147.0

Euro

15.0

17.3

Hong Kong dollar

55.4

56.4

Japanese yen

12.7

12.0

Swiss franc

7.5

8.1

United Kingdom sterling

14.0

14.5

United States dollar

34.1

32.2

Other

5.9

6.5

144.6

147.0

Other income received in advance

Analysis by currency

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

73

74 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

17 Borrowings
2014		
Carrying 		amount		
US$m		

2014		
Fair		
value		US$m		

2013		
Carrying 		amount		
US$m		

2013
Fair
value
US$m

Current
0.3		

0.3

0.7		

0.7

211.0		

211.0549.0		

549.0– Other borrowings

5.7		

5.7

6.5		

6.5

216.7		

216.7555.5		

555.5Current borrowings

217.0		

217.0556.2		

556.2507.1		

507.0234.9		

234.9– Other borrowings

1.9		

1.9

2.1		

2.1

– Tax increment financing (refer note 18)

1.7		

1.7

1.7		

1.7

510.7		

510.6238.7		

238.7727.7		

727.6794.9		

794.9– Bank overdrafts
Current portion of long-term borrowings– Bank loans

Long-term borrowings– Bank loans

Long-term borrowings

The fair values are estimated using the expected future payments discounted at market interest rate of 0.2%
(2013: 0.9%) per annum.
2014		
US$m		

2013
US$m

Secured

516.6

555.3

Unsecured

211.1

239.6

727.7

794.9

Borrowings of US$516.6 million (2013: US$555.3 million) are secured against the tangible fixed assets of certain
subsidiaries. The book value of these tangible fixed assets as at 31st December 2014 was US$521.6 million(2013: US$644.0 million).

Annual Report 201417 Borrowings continued
The borrowings 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

2014
Euro

1.6		

2.4		

3.6		

182.5		

186.1Hong Kong dollar

2.2		

3.5		

119.3		

253.6		

372.9Swiss franc

1.8		

17.0		

1.9		

11.7		

13.6

United Kingdom sterling

1.6		

–		

–		

132.4		

132.4United States dollar

6.0		

2.3		

1.7		

–		

1.7

Japanese yen

1.0		

–		

–		

21.0		

21.0

					

126.5		

601.2		

727.7

2013
Euro

1.8		

3.4		

5.8		

206.9		

212.7Hong Kong dollar

2.2		

0.6		

183.8		

184.7		

368.5Swiss franc

1.2		

18.0		

2.2		54.3		

56.5

United Kingdom sterling

2.7		

0.5		

32.9		

98.8		

131.7

United States dollar

6.0		

3.3		

1.7		

–		

1.7

Japanese yen

1.1		

–		

–		

23.8		

23.8

					

226.4		

568.5		

794.9The 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 account into hedging transactions are as follows:2014		
US$m		

2013
US$m

601.2

785.2

Between one and two years––

Between two and three years

60.2

–

Between three and four years

–

7.5

64.4

–

Within one year

Between four and five years
Beyond five years

1.9

2.2

727.7

794.9

75

76 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

18 Tax increment financing
2014		
US$m		

2013
US$m

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

23.9

24.7

Loan (refer note 17)

1.7

1.7

25.6

26.4

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 andconstruction 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%. 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 (2013: US$1.7 million) is included in long-term borrowings.

19 Segment information
Set out below is an analysis of the Group’s non-current assets, excluding financial instruments, other investments,
deferred tax assets and pension assets, by reportable segment.
2014		
US$m		

2013
US$m

– Hong Kong

392.9

400.6

– Other Asia

118.5

139.4

– Europe

840.5

939.6

Analysis by geographical area

– The Americas

110.4

114.3

1,462.3

1,593.9

Annual Report 2014

20 Share capital
Ordinary shares in millions
2014		
2013		
					2014		
US$m		

2013
US$m

Authorized:
Shares of US¢5.00 each

1,500.0

1,500.0		

75.0

75.0

1,003.0

1,000.4		

50.2

50.0

0.7

2.6		

–

0.2

1,003.7

1,003.0		

50.2

50.2

2014		
US$m		

2013
US$m

186.6

182.4

Issued and fully paid:
At 1st January
Issued under Share-based Long-term
Incentive Plans
At 31st December

21 Share premium
At 1st January
Issued under Share-based Long-term Incentive Plans
Transfer
At 31st December

–

2.4

1.6

1.8

188.2

186.6

22 Share-based Long-term Incentive Plan
Share-based Long-term Incentive Plans (‘LTIP’) have been set up to provide incentives for selected executives.
Awards can take the form of share options with an exercise price based on the then prevailing market prices or suchother price set by the Directors or share awards which will vest free of payment. Awards normally vest on or after
the third anniversary of the date of grant and may be subject to the achievement of performance conditions.
i) The 2014 LTIP was adopted by the Company on 6th March 2014. During 2014, conditional awards of
1,890,000 shares (2013: nil) were awarded under the 2014 LTIP. 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 fairvalue of the share awards granted during the year was US$2.8 million (2013: nil). The inputs into the discounted
cash flow valuation model were share price of US$1.715 at the grant date, dividend yield of 4.3%, and annual
risk-free interest rate of 2.0%.
ii) Prior to the adoption of the 2014 LTIP, The Mandarin Oriental International Share Option Plan 2005 (the ‘2005
Plan’) provided selected executives with options to purchase ordinary shares in the Company. The exercise price ofthe granted options was based on the average market price for the five trading days immediately preceding the dateof grant of 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.

77

78 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

22 Share-based Long-term Incentive Plan continued
Movements of the outstanding options during the year:
2014
Weighted average 			exercise price		
Options		
US$		
in millions		

At 1st January
Granted2013
Weighted average
exercise price		
US$		

Optionsin millions

1.68		

36.5

1.62		

35.0

–		

–

1.67		

5.6

Exercised

1.44		

(3.1)

1.09		

(3.9 )

Repurchased and cancelled

2.03		

(1.0)

1.53		

(0.2 )At 31st December

1.69		

32.4

1.68		

36.5

The average share price during the year was US$1.77 (2013: US$1.65) per share.
Outstanding at 31st December:
Ordinary shares in millions
Expiry date

Exercise price		US$		2014		

20132016

1.0-1.4		

0.3

1.0

2017

1.9		

3.6

3.6

2018

1.1-1.7		

6.8

7.6

2019

0.7		

1.5

1.7

2020

1.4		

3.8

4.7

2021

2.1		

4.5

5.3

2022

1.7		

6.4

7.1

2023

1.7		

5.5

5.5

Total outstanding			

32.4

36.5

of which exercisable			

21.2

19.5

In 2013, the fair value of the options granted under the 2005 Plan was US$2.4 million, which was determined using
the Trinomial valuation model. The significant inputs into the model, based on the weighted average number of options
issued, were share price of US$1.66 at the grant date, exercise price shown above, expected volatility based on the last
seven years of 34%, dividend yield of 4.3%, option life disclosed above, and annual risk-free interest rate of 2.0%.
Options are assumed to be exercised at the end of the seventh year following the date of grant.

Annual Report 2014

23 Dividends
2014		
US$m		

2013
US$mFinal dividend in respect of 2013 of US¢5.00 (2012: US¢5.00) per share

50.1

50.1

Interim dividend in respect of 2014 of US¢2.00 (2013: US¢2.00) per share

20.1

20.1

70.2

70.2

A final dividend in respect of 2014 of US¢5.00 (2013: US¢5.00) per share amounting to a total of US$50.2 million(2013: US$50.1 million) is proposed by the Board. The dividend proposed will not be accounted for until it has been
approved at the Annual General Meeting. The amount will be accounted for as an appropriation of revenue reservesin the year ending 31st December 2015.

24 Notes to consolidated cash flow statementa) Other non-cash items
2014		
US$m		

2013
US$m

Share-based payment

2.6

2.6

Operating lease adjustments(0.1)(4.2 )

Others(1.0)(1.1 )

1.5(2.7 )

Decrease/(increase) in stocks

0.3(0.2 )

Increase in debtors and prepayments(4.9)(6.3 )

Increase in creditors and accruals

5.9

13.8

Increase in pension obligations

0.9

2.3

2.2

9.6

b) Movements in working capitalc) The Group received repayment on its shareholder loans previously provided to Mandarin Oriental, Kuala Lumpurand Mandarin Oriental, New York of US$3.3 million and US$1.0 million, respectively.
d) Analysis of balances of cash and cash equivalents
Cash at bank (refer note 15)

324.6

316.4

Bank overdrafts (refer note 17)(0.3)(0.7 )

324.3

315.7

79

80 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

25 Derivative financial instruments
The fair values of derivative financial instruments at 31st December are as follows:
2014
Positive		
fair value		
US$m		

Negative		
fair value		
US$m		

2013
Positive		
fair value		
US$m		

Negative
fair value
US$m

Designated as cash flow hedges– interest rate swaps and caps

–		

3.0

–		

7.0

At 31st December

–		

3.0

–		

7.0

Non-current

–		

3.0

–		

3.5

Current (refer note 16)

–		

–

–		

3.5

At 31st December

–		

3.0

–		

7.0

The notional principal amounts of the outstanding interest rate swap and cap contracts at 31st December 2014 were
US$306.8 million (2013: US$318.6 million).
At 31st December 2014, the fixed interest rates relating to interest rate swaps and caps vary from 1.0% to 2.9%
(2013: 1.0% to 7.0%).
The fair values of interest rate swaps are based on the estimated cash flows discounted at market rates ranging from
0.2% to 1.7% (2013: 0.2% to 1.1%) per annum.

26 Financial guarantee
Guarantee in respect of facilities made available to an associate2014		
US$m		

2013
US$m

21.6

21.3

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 201427 Commitments
2014		
US$m		

2013
US$m

Authorized not contracted

139.8

9.2

Contracted not provided

26.7

11.9

166.5

21.1

– due within one year

6.9

8.9

– due between one and two years

6.4

7.5

– due between two and three years

6.2

6.8

– due between three and four years

5.8

6.7

– due between four and five years

5.5

6.6

87.6

112.7

118.4

149.2

Capital commitments:

Operating lease commitments:
Total commitments under operating leases– due beyond five years

No future sublease payments are receivable relating to the above operating leases (2013: 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.

28 Acquisition of Paris freehold interest
On 8th February 2013, the Group completed the acquisition of the freehold interest in the building housing
Mandarin Oriental, Paris and two prime street-front retail units from Société Foncière Lyonnaise for €290.0 million(US$388.9 million). The Group had paid €10.0 million (US$13.1 million) advance deposit in late 2012; and theremaining balance together with transaction expenses of US$5.9 million was paid in 2013.
The acquisition was partly funded by new five-year €150.0 million (US$201.1 million) debt facilities, with the balancefrom the Group’s cash reserves.
Pursuant to this acquisition, gains totalling US$7.5 million were recognized in the profit and loss account in
February 2013. These included an exchange gain arising on acquisition (US$1.9 million), the capitalization of
acquisition costs (US$1.5 million), as well as the release of lease accrual of €3.1 million (US$4.1 million) as thehotel operation was previously a leasehold tenant of the freehold interest acquired.

81

82 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

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 with JMH andits subsidiaries and associates. In addition, the Group paid a management fee of US$0.5 million (2013: 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 2014 (2013: US$0.2 million).
During 2014, the Group managed five (2013: five) associate hotels and received management fees of US$14.3 million(2013: US$15.2 million) based on long-term management agreements on normal commercial terms. The outstandingbalances with associates are set out in debtors and prepayment in note 14.
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 2014 to JLT amounted to US$0.8 million (2013: US$0.6 million).
The Group has no outstanding balance with JLT as at 31st December 2014 (2013: nil).
The Group provides hotel management services to Hongkong Land (‘HKL’), a subsidiary of JSH. Total management
fees received from HKL in 2014 amounted to US$3.5 million (2013: US$3.0 million), based on long-term managementagreements on normal commercial terms.
Details of Directors’ emoluments (being the key management personnel compensation) are shown on page 92 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:2014		
US$m		

2013
US$m

721.4

794.3

Net current liabilities(1.4)(1.3 )Net operating assets

720.0

793.0

Subsidiaries

Share capital (refer note 20)

50.2

50.2

Share premium (refer note 21)

188.2

186.6

Revenue and other reserves

481.6

556.2

Shareholders’ funds

720.0

793.0

Subsidiaries are shown at cost less amount provided.

Annual Report 201431 Munich expansion
On 26th March 2014, the Group announced that it had entered into an agreement with a developer for the expansion of
Mandarin Oriental, Munich. The expansion will include new hotel rooms and facilities as part of a mixed-used complex
estimated to open in 2021. The Group’s total investment in the project, which will also include a refurbishment of theexisting hotel’s 73 rooms, is estimated at €124 million (US$150 million) in today’s terms. As at 31st December 2014,
cumulative costs paid by the Group in relation to the expansion project amounted to US$16.9 million, the majority ofwhich have been included within Other Debtors pending transfer of title in the underlying land.

32 Post balance sheet events
Subsequent to the year end, the Group announced that it will invest £85 million (US$130 million) to renovate
Mandarin Oriental Hyde Park, London. The project will commence in 2016 and take approximately 18 months
to complete. The hotel will remain open during the renovation period with reduced facilities and room inventory.
In addition, the Group also announced its intention to raise US$316 million through a 1 for 4 rights issue of new
ordinary shares. The proceed of the rights issue will be used to pay down debt, thereby providing the Group withthe capacity to finance the renovation of the London hotel and make further investments in line with its development
strategy. Jardine Strategic Holdings Limited, the Company’s principal shareholder, has committed to take up its
entitlement and fully underwrite the offer.

83

84 Mandarin Oriental International Limited

Annual Report 2014

Principal Subsidiaries, Associates and Managed Hotels
as at 31st December 2014

Proportion of ordinary sharesand voting powers
at 31st December 2014 held by			non-controlling
Attributable interest %the Groupinterests
Company nameMain activities

2014

2013

%

Mandarin Oriental Hotel Group International Limited

Management

100

100

100

–		–

Mandarin Oriental Hotel Group Limited

Management

100

100

100

–		–

Mandarin Oriental, Hong Kong Limited

Owner: Mandarin Oriental, Hong Kong

100

100

100

–		 501 rooms. Lease expiry 2895

Excelsior Hotel (BVI) Limited

Owner: The Excelsior, Hong Kong

100

100

100

–		 884 rooms. Lease expiry 2842

Japan

Mandarin Oriental Tokyo KK

Owner: Mandarin Oriental, Tokyo

100

100

100

–		 178 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

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

United States

Portals Hotel Site LLC

Owner: Mandarin Oriental, Washington D.C.

80

80

80

Singapore

Marina Bay Hotel Private Limited

Owner: Mandarin Oriental, Singapore

50

50

50

ThailandOHTL PCL

Owner: Mandarin Oriental, Bangkok

44.9

44.9

44.9

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		–

United States

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

Principal country%

Hotel profile

Subsidiaries
Hong Kong–		 194 rooms. Freehold
14.7		 196 rooms. Lease expiry 2040

–		 138 rooms (refer note 28)20		 397 rooms. Freehold

Associates
50		 527 rooms. Lease expiry 2079
55.1		 374 rooms. Various freehold/leasehold

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		

–

–

–

–		 303 rooms

Czech Republic

Mandarin Oriental, Prague		

–

–

–

–		 99 rooms

Spain

Mandarin Oriental, Barcelona		

–

–

–

–		 120 rooms

TurkeyMandarin Oriental, Bodrum		

–

–

–

–		 106 rooms

United States

Mandarin Oriental, San Francisco		

–

–

–

–		 158 rooms

United States

Mandarin Oriental, Boston		

–

–

–

–		 148 rooms

United States

Mandarin Oriental, Las Vegas		

–

–

–

–		 392 rooms

United States

Mandarin Oriental, Atlanta		

–

–

–

–		 127 rooms85

86 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 2014 and its financial
performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards(‘IFRSs’) and The Companies Act 1981 (Bermuda).
What we have audited
Mandarin Oriental International Limited’s financial statements comprise:• the Consolidated Balance Sheet as at 31st December 2014;• 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 89, 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 opinions, 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 these opinions,
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 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 2014

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 and Statutory Auditors
London13th March 2015a) 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.

8788 Mandarin Oriental International Limited

Five Year Summary

Consolidated Profit and Loss AccountRevenue2010		
US$m		

2011		
US$m		

2012		
US$m		

2013		
US$m		

2014
US$m

513.2		

614.2		

648.3		

668.6		

679.9Operating profit

63.3		

87.3		

83.9		

111.8		

120.8Net financing charges(13.1)(12.0)(11.1)(15.8)(17.3)

Share of results of associates and joint ventures

4.3		

9.8		

15.5		

20.6		

12.3

Profit before tax

54.5		

85.1		

88.3		

116.6		

115.8

Tax

(11.7)(18.7)(17.3)(19.8)(19.0)

Profit after tax

42.8		

66.4		

71.0		

96.8		

96.8

Profit attributable to shareholders

43.1		

66.0		

70.7		

96.3		

97.0

Underlying profit attributable to shareholders

43.1		

57.5		

69.2		

93.2		

97.0

Earnings per share (US¢)

4.35		

6.63		

7.08		

9.61		

9.67

Underlying earnings per share (US¢)

4.35		

5.77		

6.93		

9.30		

9.67

Dividends per share (US¢)

5.00		

6.00		

7.00		

7.00		

7.00

Intangible assets

67.4		

40.1		

42.1		

42.6		

45.6

Consolidated Balance Sheet
Tangible assets

985.6		

1,038.0		

1,055.5		

1,440.5		

1,315.1

Associates

77.9		

78.4		

108.6		

110.8		

101.6Other investments

4.9		

6.0		

7.2		

9.3		

10.5

Loans receivable

4.7		

–		

–		

–		

–

Pension assets

19.3		

12.5		

11.2		

14.4		

7.3

Deferred tax assets

15.0		

8.5		

4.7		

3.1		

2.2

Net current assets / (liabilities)

385.3		

394.9		

382.8		

(317.7)

55.1

Long-term borrowings(574.5)(578.5)(580.5)(238.7)(510.7)

Deferred tax liabilities(64.1)(64.9)(64.3)(65.5)(62.3)

Pension liabilities

(0.1)

(0.2)

(0.6)

(0.6)

–

Other non-current liabilities(17.5)(19.2)(15.5)

(3.5)

(3.0)

Net operating assets

903.9		

915.6		

951.2		

994.7		

961.4Share capital

49.8		

49.8		

50.0		

50.2		

50.2

Share premium

178.3		

179.7		

182.1		

186.6		

188.2Revenue and other reserves

671.2		

681.2		

713.8		

752.2		

718.0Shareholders’ funds

899.3		

910.7		

945.9		

989.0		

956.4

4.6		

4.9		

5.3		

5.7		

5.0

Total equity

903.9		

915.6		

951.2		

994.7		

961.4Net asset value per share (US$)

0.90		

0.91		

0.95		

0.99		

0.95

Cash flows from operating activities

114.2		

146.3		

126.0		

156.9		

159.5Cash flows from investing activities(81.4)(65.0)(87.0)(422.3)(45.6)

Non-controlling interests

Consolidated Cash Flow Statement

Net cash flow before financing activities

32.8		

81.3		

39.0		

(265.4)

113.9

Cash flow per share from operating activities (US¢)

11.53		

14.69		

12.61		

15.66		

15.90

Annual Report 2014

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; and(b) 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 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

Edouard Ettedgui
Stuart Dickie
Directors
13th March 201589

90 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.
At a Special General Meeting held on 8th April 2014 shareholders approved the transfer of the Company’s shares to a
standard listing from a premium listing on the London Stock Exchange, and this transfer took effect on 27th May 2014.
The Disclosure 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 governance practices 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 teams.
At the time of the Company’s transfer from a premium listing to a standard listing the Company advised that it intended
to maintain certain governance principles, including in relation to significant transactions, related party transactions,pre-emption rights over the issue of new shares and securities dealing rules, that would otherwise no longer apply to theCompany. These are more fully described in ‘Further Governance Principles’ below.

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 73% 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 2014

The Board
The Company currently has a Board of 17 Directors. Their names and brief biographies appear on pages 26 and 27of 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, Edouard Ettedgui. The implementation of the Group’s
strategy is delegated to the Company’s executive management, with decision-making authority within designatedfinancial parameters delegated to the MOHG finance committee.
The Board is scheduled to hold four meetings in 2015 and ad hoc procedures are adopted to deal with urgent matters.
In 2014 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
is subject to retirement at the first annual general meeting after appointment. Thereafter, Directors are subject toretirement by rotation under the Bye-laws whereby one-third of the Directors retire at the annual general meeting eachyear. These provisions apply to both executive and non-executive Directors, but the requirement to retire by rotation
does not extend to the Chairman or Managing Director. At this year’s Annual General Meeting Edouard Ettedgui,
Adam Keswick, Sir Henry Keswick, Lincoln K.K. Leong and Percy Weatherall retire by rotation and, being eligible,
offer themselves for re-election. Edouard Ettedgui has a service contract with a subsidiary of the Company that has
a notice period of six months. None of the other Directors proposed for re-election has a service contract with theCompany or its subsidiaries.
Giles White is to retire from the Board on 31st July 2015.

91

92 Mandarin Oriental International Limited

Corporate Governance Continued

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 are normally offered an initial fixed-term service contract to reflect any requirement
for them 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$45,000 each per annum and the fee for the Chairman and Managing Director to US$55,000 per annum with effectfrom 1st January 2015 will be proposed at the forthcoming Annual General Meeting.
For the year ended 31st December 2014, the Directors received from the Group US$7.2 million (2013: US$6.4 million)
in Directors’ fees and employee benefits, being US$0.6 million (2013: US$0.7 million) in Directors’ fees, US$5.7 million(2013: US$5.1 million) in short-term employee benefits including salary, bonuses, accommodation and deemed benefits
in kind, US$0.2 million (2013: US$0.1 million) in post-employment benefits and US$0.7 million (2013: 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.

Audit Committee
The Board has established within MOHG an audit committee (the ‘Audit Committee’), the current members ofwhich are Adam Keswick, Mark Greenberg, James Riley and Giles White; they have extensive knowledge of the Group
while at the same 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.

Annual Report 2014

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 reviewing areas of risk and uncertainty, the operation andeffectiveness of the Group’s systems of internal control and the procedures by which these are monitored. 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 97 and 98.

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.

9394 Mandarin Oriental International Limited

Corporate Governance Continued

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 13th March 2015 had interests (within the meaning of the DTRs) as set out
below in the ordinary share capital of the Company. These interests include those notified to the Company in respectof the Directors’ connected persons (as that term is used in the DTRs in relation to companies incorporated outside theUnited Kingdom).
Edouard Ettedgui
Stuart Dickie

10,000,000
216,867

Simon Keswick

19,858Lincoln K.K. Leong103,806

In addition, Edouard Ettedgui held share options in respect of 9,150,000 ordinary shares, and Stuart Dickie held
share options in respect of 2,250,000 ordinary shares and share awards in respect of 235,000 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 737,275,281
ordinary shares carrying 73.45% 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 13th March 2015.
There were no contracts of significance with corporate substantial shareholders during the year under review.

Annual Report 2014

Further governance principles
In May 2014 the Company’s primary listing on the London Stock Exchange was transferred from a premium listing
to a standard listing on the Main Market. Under a 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 andthe market abuse provisions of the UK Financial Services and Markets Act. The Company, therefore, is bound by therules 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 price sensitive information.
The Company is also subject to regulatory oversight from the FCA, as the Company’s principal securities regulator, andis required to comply with the Admission and Disclosure Standards of the Main Market of the London Stock Exchange.
The main areas of the UK Listing Rules that no longer apply to the Company are in respect of significant transactions,related party transactions, pre-emption rights over the issue of new shares, share repurchases and the need to comply
or explain non-compliance with the UK Corporate Governance Code. At the time of the move to a standard listing,however, the Company stated that it intended to maintain certain governance principles in the following areas:
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 (having regard to the basis on which such provisions were applied to
the Company on the date of transfer to a standard listing), 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 (having regard to the basis onwhich such provisions were applied to the Company on the date of transfer to a standard listing), the Company will
engage an independent financial adviser to confirm that the terms of the transaction are fair and reasonable as far as
the shareholders 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, which follow the UK Model Code as applied
to the Company on the date of transfer to a standard listing.
6. The Company will continue its policies and practices in respect of risk management and internal controls.

95

96 Mandarin Oriental International Limited

Corporate Governance Continued

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 82.

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. When the Board reviews thepossibility for share repurchases, it will take into consideration the potential for the enhancement of earnings or asset
values per share.
At the Annual General Meeting held on 7th May 2014, shareholders renewed the approval of a general mandate
authorizing the Directors to effect purchases by the Company or its subsidiaries of the Company’s own ordinary sharesof less than 15% in aggregate of its issued share capital in accordance with the UK Listing Rules applicable to theCompany’s premium listing status at the time. As such an authority is no longer required by the Company’s standard
listing obligations, its renewal is not being sought at the forthcoming Annual General Meeting. The Company will,
however, remain subject to the UK market abuse regime.

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 2015 Annual General Meeting will be held at Rosewood Tucker’s Point, Bermuda on 6th May 2015. 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 2014

Principal Risks and Uncertainties

The Board has overall responsibility for risk management and internal control. The process by which the Groupidentifies and manages risk is set out in more detail on page 93 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 and Transparency Rules issued by the Financial Conduct Authority in the United Kingdom and arein 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 44 to 49.

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 interms of quality of product, levels of service or price can have an adverse effect on earnings. Significant pressure fromcompetition or the oversupply of hotel rooms in any given market may also lead to reduced margins.
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. The success of these investments is measured over the longer term and as a result issubject 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.

9798 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.

Intellectual property and value of the brand
Brand recognition is important to the success of the Group and significant resources have been invested in protecting its
intellectual property in the form of trade marks, logos and domain names. Any material act or omission by any person
working for or representing the Group’s operations which is contrary to its standards could impair Mandarin Oriental’s
reputation and the equity value of the brand, as could any negative publicity regarding the Group’s product or services.

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 2014

Shareholder Information

Financial calendar
2014 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
2014 final dividend payable2015 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
2015 interim dividend payable

5th March 2015
18th March 2015
19th March 2015
23rd to 27th March 2015
6th May 2015
13th May 2015
30th July 2015*
19th August 2015*
20th August 2015*
24th to 28th August 2015 *14th October 2015** Subject to change

Dividends
Shareholders will receive their dividends in United States dollars, unless they are registered on the Jersey branch register
where they will have the option to elect for sterling. These shareholders may make new currency elections for the 2014
final dividend by notifying the United Kingdom transfer agent in writing by 24th April 2015. The sterling equivalentof dividends declared in United States dollars will be calculated by reference to a rate prevailing on 29th April 2015.
Shareholders holding their shares through The Central Depository (Pte) Limited (‘CDP’) in Singapore will receive
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, EnglandPress releases and other financial information can be accessed through the internet at www.mandarinoriental.com.

99

100 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
Facsimile +852 2837 3500
www.mandarinoriental.com

Asi a-PacificMandarin Oriental, Bangkok
48 Oriental Avenue
Bangkok 10500
Thailand
Telephone +66(2) 659 9000
Facsimile +66(2) 659 0000
Emailmobkk-reservations @mohg.com

The Excelsior, Hong Kong
281 Gloucester Road
Causeway Bay, Hong Kong
Telephone +852 2894 8888
Facsimile +852 2895 6459
Emailexhkg-reservations @mohg.com
Mandarin Oriental, Jakarta
Jalan M H Thamrin
PO Box 3392
Jakarta 10310
Indonesia
Telephone +62(21) 2993 8888
Facsimile +62(21) 2993 8889
mojkt-reservations @mohg.com
Email

Mandarin Oriental, Guangzhou
389 Tianhe Road, Tianhe District
Guangzhou 510620, China
Telephone +86(20) 3808 8888
Facsimile +86(20) 3808 8889
Emailmogzh-reservations @mohg.com

Mandarin Oriental, Kuala Lumpur
Kuala Lumpur City Centre
50088 Kuala Lumpur
Malaysia
Telephone +60(3) 2380 8888
Facsimile +60(3) 2380 8833
mokul-reservations @mohg.com
Email

Mandarin Oriental, Hong Kong
5 Connaught Road
Central, Hong Kong
Telephone +852 2522 0111
Facsimile +852 2810 6190
Emailmohkg-reservations @mohg.com

Mandarin Oriental, Macau
Avenida Dr Sun Yat Sen
NAPE, Macau
Telephone +853 8805 8888
Facsimile +853 8805 8899
Emailmomac-reservations @mohg.com

The Landmark Mandarin Oriental, Hong Kong
15 Queen’s Road Central
The Landmark
Central, Hong Kong
Telephone +852 2132 0188
Facsimile +852 2132 0199
Emaillmhkg-reservations @mohg.com

Mandarin Oriental, Sanya
12 Yuhai Road
Sanya 572000
Hainan, China
Telephone +86(898) 8820 9999
Facsimile +86(898) 8820 9393
Emailmosan-reservations @mohg.com

Annual Report 2014

Mandarin Oriental Pudong, Shanghai
111 Pudong Road (S), Pudong
Shanghai 200120, China
Telephone +86(21) 2082 9888
Facsimile +86(21) 2082 9000
Emailmopud-reservations @mohg.com
Mandarin Oriental, Singapore
5 Raffles Avenue, Marina Square
Singapore 039797
Telephone +65 6338 0066
Facsimile +65 6339 9537
Emailmosin-reservations @mohg.com
Mandarin Oriental, Taipei
158 Dunhua North Road
Taipei 10548, Taiwan
Telephone +886(2) 2715 6888
Facsimile +886(2) 2715 6699
motpe-reservations @mohg.com
Email
Mandarin Oriental, Tokyo
2-1-1 Nihonbashi Muromachi, Chuo-ku
Tokyo 103-8328, Japan
Telephone +81(3) 3270 8800
Facsimile +81(3) 3270 8828
motyo-reservations @mohg.com
Email

Mandarin Oriental, Bodrum
Cennet Koyu Comca Mevkii, 314 Sokak
No. 10 Golturkbuku Mahallesi
48400, Bodrum, Mugla, Turkey
Telephone +90(252) 311 1888
Facsimile +90(252) 311 1889
Emailmobod-reservations@mohg.com
Mandarin Oriental, Geneva
Quai Turrettini 1
1201 Geneva, Switzerland
Telephone +41(22) 909 0000
Facsimile +41(22) 909 0010
Emailmogva-reservations @mohg.com
Mandarin Oriental Hyde Park, London
66 Knightsbridge
London, SW1X 7LA
United Kingdom
Telephone +44(0) 20 7235 2000
Facsimile +44(0) 20 7235 2001
Emailmolon-reservations @mohg.com

Europe & Middle E ast

Mandarin Oriental, Munich
Neuturmstrasse 180331 Munich, Germany
Telephone +49(0) 89 290 980
Facsimile +49(0) 89 222 539
Emailmomuc-reservations @mohg.com

Mandarin Oriental, Barcelona
Passeig de Gràcia, 38-40
08007 Barcelona, Spain
Telephone +34 93 151 8888
Facsimile +34 93 151 8889
mobcn-reservations @mohg.com
Email

Mandarin Oriental, Paris251 rue Saint-Honoré
75001 Paris, France
Telephone +33 1 7098 7888
Facsimile +33 1 7098 7887
mopar-reservations @mohg.com
Email

101

102 Mandarin Oriental International Limited

Mandarin Oriental Hotel Group Contact Addresses Continued

Mandarin Oriental, Prague
Nebovidská 459/1
11800 Prague 1, Czech Republic
Telephone +420 233 088 888
Facsimile +420 233 088 668
Emailmoprg-reservations @mohg.com

Mandarin Oriental, Las Vegas
3752 Las Vegas BoulevardSouth Las Vegas, Nevada 89158, USA
Telephone +1(702) 590 8888
Facsimile +1(702) 590 8880
Emailmolas-reservations @mohg.com

Mandarin Oriental, Marrakech (2015)
Route du Golf Royal
40000 Marrakech, Morocco
Telephone +212 524 298 888
Facsimile +212 524 298 889

Mandarin Oriental, Miami
500 Brickell Key Drive
Miami, Florida 33131, USA
Telephone +1(305) 913 8288
Facsimile +1(305) 913 8300
Emailmomia-reservations @mohg.com

Mandarin Oriental, Milan (2015)
Via Andegari 920121 Milan
Telephone +39 02 8731 8888
Facsimile +39 02 8731 8881

The A mer ic as

Mandarin Oriental, New York80 Columbus Circle at 60th Street
New York, New York 10023, USA
Telephone +1(212) 805 8800
Facsimile +1(212) 805 8888
Emailmonyc-reservations @mohg.com

Mandarin Oriental, Atlanta
3376 Peachtree Road NE
Atlanta, GA 30326, USA
Telephone +1(404) 995 7500
Facsimile +1(404) 995 7501
Emailmoatl-reservations @mohg.com

Mandarin Oriental, Washington D.C.
1330 Maryland Avenue, SW
Washington D.C. 20024, USA
Telephone +1(202) 554 8588
Facsimile +1(202) 554 8999
Emailmowas-reservations @mohg.com

Mandarin Oriental, Boston
776 Boylston Street, Boston
Massachusetts 02199, USA
Telephone +1(617) 535 8888
Facsimile +1(617) 535 8889
mobos-reservations @mohg.com
EmailAnnual Report 2014

Sales and Reservations Offices

Mandarin Oriental
Hotel Group
Sales Offices
Hong Kong
5/F, 281 Gloucester Road,
Causeway Bay, Hong Kong
Telephone +852 2895 9278
Facsimile +852 2837 3518
Australia
Suite 108, 1 Cassins Avenue
North Sydney, NSW 2060
Australia
Telephone +61(2) 8920 1871
Facsimile +61(2) 8920 2542
Japan
2-1-1 Nihonbashi Muromachi
Chuo-ku, Tokyo 103-8328 Japan
Telephone +81(3) 3231 2920
Facsimile +81(3) 3231 2925
Singapore
5 Raffles Avenue
Marina Square, Singapore 039797
Telephone +65 6339 8811
Facsimile +65 6339 0597
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 0724
Facsimile +971(4) 429 3236
France21 rue Cambon, 75001 Paris, France
Telephone +33(1) 7098 7053
Facsimile +33(1) 7098 7304

Germany
8th floor, Dreieichstrasse 59
60594 Frankfurt, Germany
Telephone +49(69) 610 631
Facsimile +49(69) 610 635
United Kingdom /Southern Europe
Kings Court, 2-16 Goodge Street
London W1T 2QA
United Kingdom
Telephone +44(0) 20 7908 7889
Facsimile +44(0) 20 7908 7880
United States
540 North State Street, Suite 1805E
Chicago, IL 60654, USA
Telephone +1(312) 661 1887
Facsimile +1(312) 962 8853

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
Facsimile +86(10) 6505 5205
Chengdu Square One Centre
Office 1109, 11/F, Square One
No. 18 Dongyu Street
Jinjiang District
Chengdu 610016, China
Telephone +86(28) 6466 3823
Facsimile +86(28) 6466 3999

3300 North Port Royale Drive #306
Fort Lauderdale FL 33308 USA
Telephone +1(954) 489 9250
Facsimile +1(954) 489 9256

Office 1267, World Trade Centre
No. 25 Tongxing Street
Zhongshan District
Dalian 116001, China
Telephone +86(411) 3966 9178
Facsimile +86(411) 3966 9001

3249 Breckenridge Way
Riva MD 21140, USA
Telephone +1(410) 956 2842
Facsimile +1(443) 458 1324

389 Tianhe Road, Tianhe District
Guangzhou 510620, China
Telephone +86(20) 3808 8730
Facsimile +86(20) 3808 8733

315 South Beverly Drive, Suite 215
Beverly Hill, California 90212, USA
Telephone +1(424) 777 3955
Facsimile +1(310) 557 3032

Room 1109B, Bund Center
222 Yan An Road East
Huang Pu District
Shanghai 200002, China
Telephone +86(21) 6335 1800
Facsimile +86(21) 6335 2567

250 West 57th Street, Suite 1917
New York, NY 10107, USA
Telephone +1(212) 207 8800
Facsimile +1(212) 207 8886
345 California Street Suite 1250
San Francisco, CA 94104, USA
Telephone +1(415) 772 8831
Facsimile +1(415) 782 3778

Room 3107(B), 31 Panglin Square2002 Jiabin Road
Luohu District
Shenzhen 518005, China
Telephone +86(755) 8238 6502
Facsimile +86(755) 2518 5232

103

104 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 10 800 852 0241
Tollfree 4001 203 323
Facsimile free 10 800 852 0242
Hong Kong
Telephone +852 2881 1288
Facsimile +852 2577 7543
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
Italy
Tollfree 00 800 2828 3838

Japan
Tollfree 00531 650 487
Tollfree 0120 663 230

Netherlands
Tollfree 00 800 2828 3838

Malaysia
Tollfree 00 800 2828 3838

Saudi Arabia
Tollfree 800 865 6043

New ZealandTollfree 00 800 2828 3838

Spain
Tollfree 00 800 2828 3838

Singapore
Telephone +65 6222 4722
Facsimile +65 6227 1087

Switzerland
Tollfree 00 800 2828 3838

TaiwanTollfree 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 ica
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
www.mandarinoriental.com