Mandarin Oriental International Limited - Mandarin Oriental Hotel ...

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66 NOTES TO THE FINANCIAL STATEMENTS CONTINUED 27 Financial instruments The Group manages its exposure to financial risks using a variety of techniques and instruments. Entering into speculative transactions is specifically prohibited. Foreign exchange risk Material foreign currency transaction exposures are covered by forward contracts and options. Interest rate risk The Group is exposed to interest rate risk through the impact of rate changes on interest bearing liabilities and assets.These exposures are managed partly by using natural hedges that arise from offsetting interest rate sensitive assets and liabilities, and partly through the use of derivative financial instruments such as interest rate swaps and caps. 69% of Group borrowings (2004: 78%) are either fixed rate or hedged by qualifying interest rate swaps and caps. Credit risk The Group has no significant concentrations of credit risk. It has policies in place to ensure that sales are made principally to travel agents and corporate companies with an appropriate credit history. Sales to other customers are made in cash or via major credit cards. Derivative counterparties and cash transactions are limited to highcredit-quality financial institutions.The Group has policies that limit the amount of credit exposure to any financial institution. Funding risk The Group’s ability to fund its existing and prospective debt requirements is managed by maintaining adequate cash or adequate committed funding lines from high quality lenders. Counterparty risk The Group’s ownership of financial assets involves the risk that counterparties may be unable to meet the terms of their agreements.The Group manages these risks by monitoring credit ratings and limiting the aggregate risk to any individual counterparty. Fair values The fair value of listed investments is based on market prices. Unlisted investments have been valued by reference to the market prices of the underlying investments, or by reference to the current market value of similar investments or by reference to the discounted cash flows of the underlying net assets. The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows. The fair values of debtors, bank balances, creditors and accruals and short term borrowings are assumed to approximate their carrying amount due to short-term maturities of these assets and liabilities. The fair values of long term borrowings are estimated using the expected future payments discounted at market interest rates. MANDARIN ORIENTAL INTERNATIONAL LIMITED
27 Financial instruments continued The positive/(negative) fair values of derivative financial instruments at 31st December are as follows: Interest rate swaps and caps – designated as cash flow hedges 2005 2004 US$m US$m At 1st January (6.0) (4.1) Changes in fair value in the year 11.5 (1.9) At 31st December 5.5 (6.0) The notional principal amounts of the outstanding derivative financial instruments at 31st December 2005 were US$313.8 million (2004: US$362.3 million). The due dates of outstanding derivative financial instruments at 31st December were as follows: – Within one year 59.5 117.1 – Between two and five years 179.3 195.0 – Over five years 75.0 50.2 313.8 362.3 At 31st December 2005, the fixed interest rates relating to interest rate swaps and caps ranged from 3.2% to 6.0% (2004: 3.2% to 6.0%). 28 Contingent liabilities Guarantees in respect of facilities made available to associates and joint ventures 71.1 68.5 Guarantees in respect of facilities made available to associates and joint ventures are stated at their respective contracted amounts.The Directors are of the opinion that it is not probable that such guarantees will be called upon. ANNUAL REPORT 2005 67
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MANDARIN ORIENTAL INTERNATIONAL LIM
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2 CONTENTS 01 Corporate Overview 03
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4 HIGHLIGHTS MANDARIN ORIENTAL INTE
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6 CHAIRMAN’S STATEMENT OVERVIEW M
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8 GROUP CHIEF EXECUTIVE’S REVIEW
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14 OPERATING SUMMARY The operating
Page 18 and 19: 16 OPERATING SUMMARY CONTINUED EURO
Page 20 and 21: 18 INTERNATIONAL RECOGNITION Mandar
Page 22 and 23: 20 FINANCIAL REVIEW A CCOUNTING POL
Page 24 and 25: 22 FINANCIAL REVIEW CONTINUED Cash
Page 26 and 27: 24 FINANCIAL REVIEW CONTINUED TREAS
Page 28 and 29: 26 DIRECTORS’ PROFILES Simon Kesw
Page 30 and 31: 28 CONSOLIDATED PROFIT AND LOSS ACC
Page 32 and 33: 30 CONSOLIDATED STATEMENT OF RECOGN
Page 34 and 35: 32 PRINCIPAL ACCOUNTING POLICIES A
Page 36 and 37: 34 PRINCIPAL ACCOUNTING POLICIES CO
Page 42 and 43: 40 NOTES TO THE FINANCIAL STATEMENT
Page 72 and 73: 70 PRINCIPAL SUBSIDIARIES, ASSOCIAT
Page 74 and 75: 72 INDEPENDENT AUDITORS’ REPORT T
Page 76 and 77: 74 CORPORATE GOVERNANCE The Group
Page 78 and 79: 76 CORPORATE GOVERNANCE CONTINUED D
Page 80 and 81: 78 CORPORATE GOVERNANCE CONTINUED D
Page 82 and 83: 80 SHAREHOLDER INFORMATION Financia
Page 84 and 85: 82 MANDARIN ORIENTAL HOTEL GROUP CO
Page 86 and 87: 84 SALES AND RESERVATIONS OFFICES C
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