Mandarin Oriental International Limited - Mandarin Oriental Hotel ...

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NOTES TO THE FINANCIAL STATEMENTS CONTINUED
16 Borrowings continued
b) Finance lease
Minimum lease payments
MANDARIN ORIENTAL INTERNATIONAL LIMITED
2005 2004
US$m US$m
Within one year – 1.4
Between two and five years – 6.6
Beyond five years – 314.4
– 322.4
Less: Future finance charges on finance lease – (314.4)
Present value of finance lease liabilities – 8.0
The present value of finance lease liabilities may be analysed as follows:
Within one year – 0.1
Between two and five years – 0.3
Beyond five years – 7.6
– 8.0
Lease liabilities are effectively secured as the rights to the leased asset revert to the lessor in the event of default.
17 Tax increment financing
At 1st January 34.1 34.7
Amortization in the year (0.9) (0.6)
At 31st December 33.2 34.1
Netted off against the net book value of the property (refer note 9) 31.5 32.4
Loan (refer note 16) 1.7 1.7
33.2 34.1
A development agreement was entered into between one of the Group’s subsidiaries with the District of Columbia
(‘District’), pursuant to which the District agreed to provide certain funds to the subsidiary out of the net proceeds
obtained through the issuance and sale of certain tax increment financing bonds (‘TIF Bonds’) for the
development and construction of Mandarin Oriental,Washington D.C.
The District agreed to contribute to the subsidiary US$33.0 million through the issuance of TIF Bonds in
addition to US$1.7 million issued in the form of a loan, bearing simple interest at an annual rate of 6.0%.The
US$1.7 million loan plus all accrued interest will be due on the earlier of 10th April 2017 or the date of the first
sale of the hotel.
The receipt of the TIF Bonds has been treated as a government grant and netted off against the net book value in
respect of the property (refer note 9).The loan of US$1.7 million (2004: US$1.7 million) is included in long-term
borrowings (refer note 16).