Mandarin Oriental International Limited - Mandarin Oriental Hotel ...

Financial Review Continued
Treasury activities continued
The Group, excluding associates and joint venture,
had committed borrowing facilities totaling
US$804 million, of which US$661 million was drawn
at 31st December 2008. The principal amounts are
due for repayment as follows:
Facilities Facilities Unused
committed drawn Facilities
US$m US$m US$m
Within one year 12 7 5
Between one and two years 120 117 3
Between two and three years 39 3 36
Between three and four years 4 4 –
Between four and five years 10 10 –
Beyond five years 619 520 99
804 661 143
At 31st December 2008, the Group had
US$143 million of committed, undrawn facilities in
addition to its cash balances of US$515 million. The
average tenor of the Group’s borrowings was 5 years
(2007: 5.9 years).
Following major refinancings in 2007, no significant
financings were undertaken in 2008, nor are any
significant financings required in 2009.
Principal risks and uncertainties
A review of the principal risks and uncertainties facing
the Group is set out on pages 83 to 84.
Supplementary information
The Group’s policy is to revalue all hotel properties
regularly as it considers these properties to be long-term
investments. Prior to 2003, all property investments,
whether freehold or leasehold, were revalued and carried
at fair market value. However, IFRS no longer permits
the carrying of leasehold owner-occupied land at fair
market valuation. The Group considers that the IFRS
treatment does not reflect the economic substance of
the underlying investments, particularly the Group’s
999 year leases in respect of Mandarin Oriental,
Hong Kong and The Excelsior.
24 Mandarin Oriental International Limited
In its financial statements, the Group has presented
leasehold land payments at cost less accumulated
amortization over the period of the lease, which is the
recommended IFRS treatment. However, as there is a
significant difference between the fair market value of
the Group’s two Hong Kong properties and their value
as presented in the financial statements, the Group has
also presented supplementary financial information
which takes into account the fair market value of all its
leasehold interests.
The two key measurements affected by the recognition
of the fair market value of these leasehold interests are
net asset value per share and gearing. The necessary
adjustment to shareholders’ funds/net assets is set
out below:
2008 2007
Per share Per share
US$m US$ US$m US$
Shareholders’ funds/
net assets 1,006 1.02 1,152 1.18
Add revaluation
surplus relating
to leasehold land 1,043 1.06 1,127 1.16
Adjusted shareholders’
funds/net assets 2,049 2.08 2,279 2.34
Net debt of US$146 million at 31st December 2008
was 7% of adjusted shareholders’ funds, compared with
net debt of US$185 million at 31st December 2007
which was 8% of adjusted shareholders’ funds. On an
IFRS basis, gearing was 15% at 31st December 2008
(2007: 16%).
John R Witt
Chief Financial Officer
5th March 2009