ANNUAL 2015 REPORT www.sandschinaltd.com This annual report is printed on recycled paper using soy ink Annual Report 2015 From Luxury Duty Free Shopping, Exciting Entertainment and Fabulous Dining to World-Class Hotel Suites and MICE, Come and Discover Everything at Sands China. SANDS CHINA LTD. CONTENTS 1. OVERVIEW 4 1.1 Financial Highlights 4 1.2 Highlights of 2015 5 1.3 Directors and Senior Management 11 2. BUSINESS REVIEW 19 2.1 Chairman’s Statement 19 2.2 Business Overview and Outlook 21 2.3 Our Properties 28 2.4 Management Discussion and Analysis 35 2.5 Risk Factors 47 2.6 Stakeholder Information 61 2.6.1 Our Shareholders 61 2.6.2 Our Lenders 63 2.6.3 Our Customers 64 2.6.4 Our Suppliers 64 2.6.5 Our Employees 65 2.6.6 Our Commitment to the Community 67 2.6.7 Preserving the Environment 71 3. CORPORATE GOVERNANCE REPORT 77 3.1 Chairman’s Introduction 77 3.2 Good Governance 78 3.3 The Board 79 3.4 Key Roles 83 3.5 Activity 85 3.6 The Committees 87 3.7 Risk and Internal Control 91 3.8 Shareholders 92 3.9 Compliance Disclosures and Other Matters 94 3.10 Directors’ Report 96 4. FINANCIAL STATEMENTS 113 4.1 Independent Auditor’s Report 113 4.2 Financial Statements 115 4.3 Notes to the Consolidated Financial Statements 121 4.4 Financial Summary 206 5. CORPORATE INFORMATION 207 6. CONTACT US 208 7. GLOSSARY 209 In case of any inconsistency between the English version and the Chinese version of this annual report, the English version shall prevail. SANDS CHINA LTD. 1.1 FINANCIAL HIGHLIGHTS our Luxurious Hotel Rooms and Suites await you. INTRODUCTION Sands China operates the largest collection of integrated resorts in Macao. As at December 31, 2015, we had 9,782 hotel rooms and suites, 124 restaurants, 1.5 million square feet of retail, 1.6 million square feet of meeting space, 2 permanent theaters, a 15,000-seat arena and some of the world’s largest casinos. 2 ANNUAL REPORT 2015 SANDS CHINA LTD. 1.1 FINANCIAL HIGHLIGHTS 3 ANNUAL REPORT 2015 SANDS CHINA LTD. 1.1 FINANCIAL HIGHLIGHTS • Net revenues were US$6,820.1 million (HK$52,861.2 million) for the year ended December 31, 2015, a decrease of US$2,685.1 million (HK$20,882.0 million), or 28.2%, compared to US$9,505.2 million (HK$73,743.2 million) for the year ended December 31, 2014. • Operating expenses were US$5,301.3 million (HK$41,089.3 million) for the year ended December 31, 2015, a decrease of US$1,579.7 million (HK$12,294.9 million), or 23.0%, compared to US$6,881.0 million (HK$53,384.2 million) for the year ended December 31, 2014. • Adjusted EBITDA for the year ended December 31, 2015 was US$2,223.0 million (HK$17,230.0 million), a decrease of US$1,038.0 million (HK$8,069.5 million), or 31.8%, compared to US$3,261.0 million (HK$25,299.5 million) for the year ended December 31, 2014. • Profit for the year ended December 31, 2015 was US$1,459.4 million (HK$11,311.5 million), a decrease of US$1,088.3 million (HK$8,454.1 million), or 42.7%, compared to US$2,547.7 million (HK$19,765.6 million) for the year ended December 31, 2014. Note: The translation of US$ amounts into HK$ amounts has been made at the rate of US$1.00 to HK$7.7508 (2014: US$1.00 to HK$7.7582) for the purposes of illustration only. 4 ANNUAL REPORT 2015 SANDS CHINA LTD. 1.2 HIGHLIGHTS OF 2015 Business • We garnered over 2.5 billion media impressions throughout China with our Venetian David Beckham brand advertising campaign in 2015. • We participated in trade shows and launched VIP dinners to educate the Travel Trade and Meetings sectors about Sands Resorts Cotai Strip Macao and new developments, visiting eight cities across Asia including Taipei, Shanghai, Beijing, Guangzhou, Seoul, Tokyo, Osaka and Singapore. These events introduced the brand positioning of Sands Resorts Cotai Strip Macao, our integrated product offerings of The Venetian Macao, Sands Cotai Central and The Plaza Macao, highlighting the retail and entertainment offering of our integrated resorts. A strong emphasis continued in 2015 with the positioning of luxury retail shopping, live entertainment and the extensive meeting space available at Sands Resorts Cotai Strip Macao. • Destination events continued to drive increased visitation with some 670,000 visitors experiencing the diversified events across our integrated resorts. These events included Chinese New Year celebrations, Carnevale, Macau Wine & Dine Festival, 19th China Music Awards, Monopoly World Championship, DreamWorks Experience, Showdown at Sands, 15th Hua Ding Awards and 4th Master in Paintings. • Sands China continued to leverage the DreamWorks Experience, including Shrekfast, All Stars Daily Parade, Kung Fu Panda Training Academy, King Juliens New Year’s Eve Countdown and hosting film premieres including Penguins at the Madagascar and Return of the Cuckoo. • Sands Resorts Cotai Strip Macao hosted 384 travel industry and meeting planner familiarization events in order to showcase the integrated resorts under a common destination umbrella. Such familiarization events were held with buyers from Asia, emphasizing China, Taiwan, Hong Kong, Japan, Korea and Thailand, highlighting the increased demand for Macao as an ideal meetings and leisure tourism destination. • Cooperative marketing agreements with 38 travel agents across seven Asian countries generated promotional package in excess of 217,000 room nights. • Sales managed 2,019 group enquires in 2015 converting 31%, or 628, bookings resulting in a 1% conversion increase compared to 2014. • The Venetian Macao and Sands Cotai Central together hosted 688 events including exhibitions, trade shows, conferences and social and government events, as well as incentive groups, attracting 1,380,000 visitors. • The Company hosted 73 live international entertainment events attracting more than 331,000 visitors. Major entertainment events held during the year included concerts by top stars such as Big Bang, Eason Chan, Katy Perry, Sammi Cheng, Bon Jovi, Joey Yung, Backstreet Boys and Super Junior, as well as hosting the boxing event Showdown at Sands, The Voice of China, CATS and Beauty and the Beast. • CotaiJet ferry services carried 7.6 million passengers in 2015 (an average of 21,000 per day), providing an average of 45 daily round trip sailings in 2015. 5 ANNUAL REPORT 2015 SANDS CHINA LTD. 1.2 HIGHLIGHTS OF 2015 Attendance Sands China’s properties are among the most visited destinations in Macao, attracting families, business visitors and entertainment seekers from around the world. More than 30% of our hotel guests are families with children and business travelers attending corporate meetings, conventions and exhibitions. In 2015, all four of our properties, The Venetian Macao, Sands Cotai Central, The Plaza Macao and Sands Macao, attracted a combined total of 68.1 million (2014: 69.7 million) visitors or approximately 186,500 (2014: 191,000) visitors per day. Entertainment Entertainment is at the heart of our business. Since opening in 2007, our 15,000-seat Cotai Arena has established itself as one of the top live-entertainment venues in Southern China. It is the only venue in Asia ranked in Pollstar’s Top 100 Arena Venues worldwide, based on ticket sales. The live entertainment program at our properties, from concerts to sporting events to awards ceremonies, is a key traffic and revenue driver and has established the Company as the leader in the field of tourism and leisure activities. The diversity of entertainment offered by the Company sets it apart from other gaming destinations. Our entertainment offerings include lounge acts, dancers, singers, gondoliers and street performers, all of whom contribute to the overall customer experience at our properties. Cotai Arena, The Venetian Theatre, Sands Theatre and The Venetian Macao and Sands Cotai Central ballrooms hosted a total of 73 different live entertainment events over 200 event days in 2015. Taken together, these events attracted more than 331,000 visitors. Major entertainment events held during the year included concerts by top stars such as Big Bang, Eason Chan, Katy Perry, Sammi Cheng, Bon Jovi, Joey Yung, Backstreet Boys and Super Junior, as well as hosting the boxing event Showdown at Sands, The Voice of China, CATS and Beauty and the Beast. Meetings, Incentives, Conventions and Exhibitions As at December 31, 2015, Sands China’s properties boasted 1.6 million square feet of MICE space specifically designed to meet the needs of meeting planners and corporate events and trade show organizers from around the world. The CotaiExpo at The Venetian Macao is one of the largest exhibition centers in Asia and has hosted some of the region’s biggest exhibitions. Our experience and expertise in this industry continues to drive business and leisure tourism to Macao. With the opening of Sands Cotai Central in 2012, our meeting and convention capabilities continued to expand and we were proud to provide the same guaranteed expertise and service in our new facilities that has made CotaiExpo the region’s MICE leader. With hotel brands Conrad, Holiday Inn, Sheraton and St. Regis, MICE organizers now have an expanded selection of accommodation choices to satisfy a wider demographic of event attendees. With the implementation of our “Green Meetings” initiative through the global ECO360° program, we will be pursuing our goal of having one of the most sustainable and environmentally-friendly conference centers in Asia. The Venetian Macao and Sands Cotai Central together attracted 1,380,000 visitors to Macao for MICE events throughout the year, compared to 1,685,000 visitors in 2014, with 1,234,000 visitors attending our 51 exhibitions and trade shows and 146,000 conference and corporate visitors attending 637 meeting and incentive events.