8 Dec 2016 06:03
TUI AG / Annual Financial ReportTUI AG: Annual Financial Report - Part 2 08-Dec-2016 / 08:01 CET/CESTDissemination of a Regulatory Announcement, transmitted by EQS Group AG.The issuer is solely responsible for the content of this announcement. --------------------------------------------------------------------------- financial highlights EUR million 2013 / 14 5 2014 / 15 2015 / 16 Var. % restated restated Turnover 18,536.8 17,515.5 17,184.6 - 1.9 Underlying EBITA1 Northern Region 404.9 538.4 460.9 - 14.4 Central Region 162.8 103.5 88.5 - 14.5 Western Region 83.3 68.7 86.1 + 25.3 Hotels & Resorts 202.9 234.6 287.3 + 22.5 Cruises 9.7 80.5 129.6 + 61.0 Other Tourism 29.0 8.4 4.6 - 45.2 Tourism 892.6 1,034.1 1,057.0 + 2.2 All other segments - 114.1 - 80.8 - 56.5 + 30.1 TUI Group 778.5 953.3 1,000.5 + 5.0 Discontinued operations 88.7 107.2 92.9 - 13.3 Total 867.2 1,060.5 1,093.4 + 3.1 EBITA2 778.54 794.6 898.1 + 13.0 Underlying EBITDA 1,068.64 1,344.1 1,379.6 + 2.6 EBITDA 1,095.34 1,214.7 1,305.1 + 7.4 Net profit for the period 332.04 407.6 464.9 + 14.1 (continuing operations) Earnings per share 0.484 0.66 0.61 - 7.6 (continuing operations)EUR Equity ratio% 18.1 17.2 22.5 + 5.33 Net capex and investments 637.1 659.0 691.0 + 4.9 Net financial position - 292.4 4 213.7 - 31.8 n. a. Employees 77,028 76,036 66,779 - 12.2 Differences may occur due to rounding.1 In order to explain and evaluate the operating performance by thesegments, EBITA adjusted for one-off effects (underlying EBITA) ispresented. Underlying EBITA has been adjusted for gains / losses ondisposalof investments, restructuring costs according to IAS 37, ancillaryacquisition costs and conditional purchase price payments under purchaseprice allocations and other expenses for and income from one-off items.2 EBITA comprises earnings before net interest result, income tax andimpairment of goodwill excluding losses on container shipping and excludingthe result from the measurement of interest hedges.3 Equity divided by balance sheet total in %, variance is given inpercentage points.4 Excl. LateRooms, Hotelbeds Group and Specialist Group5 Pro forma data, unaudited: Hotelbeds Group and Specialist Group weretreated as discontinued operations since 2013 / 14.Dear Shareholders,We are delighted to report that TUI Group recorded an excellent developmentin the completed financial year 2015 / 16. Despite continued majorgeopolitical challenges, we managed to increase our operating result againby 14.5 per cent. Our positive performance underpins the great resilienceofour strategic positioning as a vertically integrated tourism group. Thanksto our access to all elements of the value chain, we are very flexible inresponding to changes in our customers' travel preferences. Your Company istherefore in an excellent state of health. Let me thank you all for yourinterest and support in the completed year.And yet we will not rest on our laurels but will press ahead with ourgrowthroadmap. In the cruise business, we have expanded our fleet to 14 shipswiththe launch of Mein Schiff 5 in the German market and TUI Discovery in theUK. We are aiming to become one of Europe's leading cruise liners. That iswhy we will continue to invest in new ships in the next few years, at bothTUI Cruises and Thomson Cruises and in our luxury cruise subsidiaryHapag-Lloyd Cruises.We are also pursuing an ambitious growth roadmap in Hotels & Resorts. Inearly summer, we opened the first two hotels of our new hotel brand TUIBlue. Overall, our hotel portfolio for our core brands Riu, Robinson, TUIBlue and TUI Magic Life and our hotel concepts Sensatori, Sensimar andFamily Life grew by nine hotels in the completed financial year. Inexpanding our portfolio of Group-owned hotels, we find year-rounddestinations offering 365 days of sunshine particularly attractive. Ourinvestments focus on the Caribbean, a destination for customers from bothEurope and the United States.The consistent expansion of the cruise and hotel segment will graduallychange the structure of your Company. We are steadily transforming from agroup with a strong trading business to a content provider with strongmarket positions in the cruise and hotel sector, which already contributearound half of our profits today. Our transformation will take us from atour operator to a hotel and cruise group, further reducing the strongseasonality of our business, which currently still impacts the valuation byrating agencies.To build TUI Group further, we are relying on a mix of centrally managedareas and our strong local companiesin the individual markets. This will enable us to benefit from economies ofscale on a global level without losing customer centricity and our focus ontheir individual needs and expectations. We have identified six areas inwhich we can benefit from the strength of a global player: brand, IT,aviation, hotels and product purchasing, cruises, and destination services.We have exited or are planning to sell business operations that will notdeliver synergies under the umbrella of TUI. In the completed financialyear, we sold Hotelbeds Group, world market leader for bedbanks, to theBritish investor Cinven Capital Management and the Canada Pension PlanInvestment Board for 1.2 billion euros. This very successful transaction isgood for the future of Hotelbeds and good for you, TUI Group'sshareholders.The proceeds from the sale will be used to promote our growth roadmap inhotels and cruises and strengthen our balance sheet.Following the successful sale of Hotelbeds Group, we initiated thedivestment of Travelopia, a collection of specialist tour operation brandsthat had already been managed as an independent entity since the mergerbetween TUI AG and TUI Travel PLC at the end of December 2014. Travelopiacombines more than 50 great brands and successful companies. However, thereis limited linkage to our core tourism business and limited ability toachieve any economies of scale. Due to the potential impact on ourprofitability and the large number of brands, this business will notcontinue under our master brand TUI. I am therefore convinced that the bestway to maximise the value of this business for you, our shareholders, is todispose the specialists as a whole.The portfolio of specialists will be disposed in one transaction infinancial year 2016 / 17, with the exception of the two tour operationbrands Crystal Ski and Thomson Lakes & Mountains, which we have transferredinto TUI UK & Ireland. These two vertically integrated brands deliverstrongsynergies with our core tourism business. Both Crystal Ski and ThomsonLakes& Mountains play a major role in securing the load factor for our aircraftfleet in the UK, in particular in winter, and therefore generate thesynergypotential the other specialist providers lack.In the completed financial year, we have taken major steps to move towardsthe structure and strategic positioning our Group is aiming to achieve. Ourintegrated business model has proven robust and future-proof, so that wearein a very good position to tackle the next few years.In the framework of the merger with TUI Travel at the end of 2014, wepromised you, our shareholders, that we will deliver EBITA CAGR of at least10 per cent over the three years to 2017 / 18. We maintain that guidance,and we are delivering the results we had promised you.TUI Group's positive economic performance is also reflected in theattractive dividend we will again be distributing. We have submitted aproposal to the Annual General Meeting to increase the dividend forfinancial year 2015 / 16 to 63 cents per share, up by around 13 per cent onthe prior year.TUI Group has demonstrated its strength once more in year two. As theworld's leading tourism group, we are pursuing a clear strategic roadmap inorder to create maximum value for you, our shareholders.Let me thank you for your confidence, support and loyalty to TUI.Sincerely yours,Friedrich JoussenCEO of TUI AG key figures Target 2015 target achievement outlook Target / 16 1 Actual 2015 / 16 2016 / 17 Turnover in EUR bn at least 3 % 2 17.2 + 1.4 % 2 approximately + 3 % 2 EBITA (underlying) in EUR m at least 10 % 2 1,001 + 14.5 % 2 at least + 10 % 2 Adjustments in EUR m 1362, 3 costs 103 costs 80 costs Net capex and investments in EUR bn 0.8 0.7 1.04 Net debt in EUR bn broadly neutral 2, 3 broadly neutral approximately 0.8 net debt 1 As published on 10 December 2015, the outlook was updated during the year2 Variance year-on-year assuming constant foreign exchange rates areappliedto the result in the current and prior period and based on the currentgroupstructure; guidance relates to continuing operations and excludes anydisposal proceeds for Travelopia and Hapag-Lloyd AG.3 Target adjusted treating Hotelbeds Group and Specialist Group asdiscontinued operations4 Excluding aircraft orderbook financeReport of theSupervisory BoardLadies and Gentlemen,We have successfully completed financial year 2015 / 16. Our employees,Executive Board and Supervisory Boardhave jointly achieved many objectives and exceeded some targets. Keyprojects for the future of the Company have been completed or are well ontrack. In the Report of the Supervisory Board presented below, I wouldlike,on behalf of the entire Supervisory Board, to tell you about the keyactivities of our various committees in financial year 2015 / 16.Two years after the merger between TUI AG and TUI Travel PLC, theintegration of the two companies is almost complete. The synergies we hadpromised were delivered. The merger and the integration have created theconditions for the future growth of the Company that had been sought by theExecutive Board and Supervisory Board. Apart from close monitoring of thesynergies, the focus of the work by the Supervisory Board and IntegrationCommittee in the financial year under review was on cultural integration.Our declared goal is and remains not to be a German or British but aninternational company. The Supervisory Board itself is a good example: onlythree of the ten shareholder representatives elected by you have a Germanpassport. The successful work performed by the Executive Board in theintegration process is also demonstrated by the results of our TUIgetheremployee survey, performed for the second time in the past financial year.Due to the clear corporate strategy defined by the Executive Board andsupported by the Supervisory Board, but also the expansion of career anddevelopment opportunities, the identification and satisfaction of theemployees of your Company have improved substantially.Overall, the completed financial year was characterised by the continuedvolatility of the external framework. With the attack on Brussels AirportinMarch 2016, terrorism reached a key source market. Our employees andmanagement have delivered an impressive performance in the interests of ourcustomers: they have given a face to customers' trust in the TUI Smile. Wewere also challenged by changes in customer demand for travel to Turkey andNorth Africa: our debates focused on shifting capacity to alternativedestinations, initiated and successfully implemented by the ExecutiveBoard,and the organisation of Group-wide crisis management. We likewise addressedthe decision taken in the UK in June 2016 to be the first country to leavethe European Union since its inception. Long before and directly after theBrexit vote, the Executive Board and Supervisory Board discussed potentialconsequences and an action plan, and this remains a matter of attention.Thanks to its flexible business model, TUI AG managed to increase itsearnings year-on-year in financial year 2015 / 16, despite the challenginggeopolitical framework. That is a remarkable achievement, as numerouscompetitors and peers had to correct their earnings guidance downward, insome cases quite substantially.The Supervisory Board and its Committees discussed many technical issuesandbusiness transactions requiring its approval. Apart from monitoringcompliance with the German Corporate Governance Code (DCGK) and regularlydiscussing questions related to the UK Corporate Governance Code (UK CGC),our work focused on reviewing anddebating the financial statements of TUI AG and the Group. We also closelymonitored the focussing of the business model and the associateddivestments. Both the completed divestment of Hotelbeds Group and theplanned sale of Specialist Group are prerequisites for investments ingrowthduring the next few years. The Strategy Committee formed after the 2016Annual General Meeting provides a key platform for engaging in an even moreintensive exchange with the Executive Board about strategically relevantdecisions and preparing the debates of the Supervisory Board.Although the forthcoming financial year 2016 / 17 entails uncertaintyregarding the geopolitical situation and the further Brexit process, wehaveevery reason to look ahead with confidence. TUI AG is on a growth path. Ourbusiness model continues to progress consistently and systematically fromdistribution towards production with integrated control of value creation.Our clear strategic direction makes TUI AG an attractive and promisinginvestment.On behalf of the entire Supervisory Board, let me express warm gratitude toour employees and the Executive Board for an excellent job done infinancialyear 2015 / 16.Cooperation between the Executive Board and the Supervisory BoardIn a stock corporation under German law, there is a mandatory strictseparation of management of a company and oversight over management. Whilethe management of the company is the exclusive task of the executive board,the supervisory board is in charge of advising and overseeing the executiveboard. As the oversight body, the Supervisory Board provided ongoing adviceand supervision for the Executive Board in managing the Company infinancialyear 2015 / 16, as required by the law, the articles of association and ourown terms of reference. Its actions were guided by the principles of goodand responsible corporate governance. Our monitoring activities essentiallyserved to ensure that the management of business operations and themanagement of the Group were lawful, orderly, fit for purpose andcommercially robust. The individual advisory and oversight tasks of theSupervisory Board are set out in terms ofreference. Accordingly, the Supervisory Board is, for instance, closelyinvolved in entrepreneurial planning processes and the discussion ofstrategic issues. Moreover, there is a defined list of specific ExecutiveBoard decisions requiring the consent of the Supervisory Board, some ofwhich call for detailed review in advance and require the analysis ofcomplex facts and circumstances from a supervisory and consultantperspective.TUI AG falls within the scope of the German Industrial Co-Determination Act(MitbestG). Its Supervisory Board is therefore composed of an equal numberof shareholder representatives and employee representatives. Employeerepresentatives within the meaning of the Act include a senior manager(section 5 (3) of the German Works Council Constitution Act) and threetradeunion representatives. All Supervisory Board members have the same rightsand obligations and they all have one vote in voting processes. In theeventof a tie, a second round of voting can take place according to the terms ofreference for the Supervisory Board, in which case the Chairman of theSupervisory Board has the casting vote.In written and verbal reports, the Executive Board provided us withregular,timely and comprehensive information at our meetings and outside ourmeetings. The reports encompassed all relevant facts about strategicdevelopment, planning, business performance and the position of the Groupinthe course of the year, the risk situation, risk management and compliance,but also reports from the capital markets (e. g. from analysts). TheExecutive Board discussed with us all key transactions of relevance to theCompany and the further development of the Group. Any deviations inbusinessperformance from the approved plans were explained in detail. TheSupervisory Board was involved in all decisions of fundamental relevance tothe Company in good time. We fully discussed and adopted all resolutions inaccordance with the law, the Articles of Association and our terms ofreference. We were comprehensively and speedily informed about specific andparticularly urgent plans and projects, including those arising between theregular meetings. As Chairman of the Supervisory Board, I was regularlyinformed about current business developments and key transactions in theCompany between Supervisory Board meetings.Deliberations in the Supervisory Board and its CommitteesPrior to Supervisory Board meetings, the shareholder representatives on theSupervisory Board and the employees' representatives met in separatemeetings, which were regularly also attended by Executive Board members.In financial year 2015 / 16, we again recorded a gratifyingly high meetingattendance, as we have done for several years. Average attendance was 96.6%(previous year 95.1 %) at plenary meetings and 90.7 % (previous year 96.9%)at Committee meetings. No Supervisory Board member attended fewer than halfof the Supervisory Board meetings in financial year 2015 / 16. Membersunable to attend a meeting usually participated in the voting throughproxies. Preparation of all Supervisory Board members was greatlyfacilitated by the practice of distributing documents in advance in therun-up to the meetings and largely dispensing with handouts at meetings. Attendance at meetings of the Supervisory Board 2015/16 Name Super- Presi- Audit Nomina- Integra- Galaxy visory ding Com- tion tion Commit- Board Commit- mit- Commit- Commit- tee tee tee tee tee Prof. Dr Klaus 8 (8) 7 (7) 1 6 (6) 3 (3) 1 3 (3) 1 2 (2) Mangold (Chairman) 1 1 Frank Jakobi (Deputy 8 (8) 6 (7) 2 3 (3) 2 (2) Chairman) 2 2 Sir Michael 8 (8) 7 (7) 2 3 (3) 3 (3) 2 Hodgkinson (Deputy 2 Chairman) 2 Andreas Barczewski 8 (8) 4 (4) 6 (6) Peter Bremme 8 (8) 3 (3) Prof. Dr Edgar Ernst 8 (8) 6 (6) 3 (3) 1 Wolfgang Flintermann 2 (2) (since 13 June 2016) Angelika Gifford 4 (5) 1 (2) (since 9 February 2016) Valerie Gooding 7 (8) 1 (2) 1 (2) Dr Dierk Hirschel 8 (8) 3 (3) Janis Kong 8 (8) 2 (3) Peter Long (since 9 4 (5) 2 (2) February 2016) 1 Coline McConville 8 (8) 3 (3) 2 (2) Alexey Mordashov 4 (5) 2 (3) 0 (0) 2 (2) (since 9 February 2016) Michael Pönipp 8 (8) 6 (6) Timothy Powell 3 (3) 3 (3) 1 (1) (until 9 February 2016) Wilfried Rau 4 (4) (deceased on 30 March 2016) Carmen Riu Güell 7 (8) 5 (7) 3 (3) Carola Schwirn 8 (8) Maxim Shemetov 3 (3) 4 (4) 3 (3) (until 9 February 2016) Anette Strempel 8 (8) 7 (7) Prof. Christian 3 (3) 3 (3) 0 (1) Strenger (until 9 February 2016) Ortwin Strubelt 8 (8) 3 (3) 6 (6) Stefan Weinhofer 5 (5) (since 9 February 2016) Marcel Witt (until 9 3 (3) February 2016) 1 Chairman of Committee2 Deputy Chairman of Committee(In brackets: number of meetings held)Key topics discussed by the Supervisory Board1. At our meeting on 21 October 2015, we discussed the replacement ofvariable pay for the Supervisory Board members. In line with therecommendations of the Corporate Governance Codes in Germany and the UK, aproposal for a resolution to be submitted to the Annual General Meeting2016was adopted setting out a transformation to purely fixed compensation. Wealso defined the personal performance factors for the annual performancebonuses for members of the Executive Board in financial year 2014 / 15 andthe relevant reference indicators for financial year 2015 / 16. Followingdue deliberation, we established the appropriateness of the remunerationandpensions for Executive Board members. The Supervisory Board also approvedthe budget for financial year 2015 / 16 and took note of the planning forthe two subsequent years. We resolved the annual capital increase inconjunction with the issue of employee shares in 2015 and obtainedinformation about the status of the IPO of Hapag-Lloyd AG.2. At its meeting on 9 December 2015, the Supervisory Board discussed indetail the annual financial statements of TUI Group and TUI AG, each havingreceived an unqualified audit opinion from the auditors, the combinedmanagement report for TUI Group and TUI AG and the Report by theSupervisoryBoard, the Corporate Governance Report and the Remuneration Report. Thediscussions were also attended by representatives of the auditors.Followingcomprehensive debate of these reports and its own review carried out on theprevious day by the Audit Committee, the Supervisory Board endorsed thefindings of the auditors and approved the financial statements prepared bythe Executive Board and the combined management report for TUI AG and theGroup. The annual financial statements for 2014 / 15 were thereby adopted.Moreover, the Supervisory Board approved the Report by the SupervisoryBoard, the Corporate Governance Report and the Remuneration Report. It alsoadopted the invitation to the ordinary AGM 2016 and the proposals forresolutions to be submitted to the AGM.We also decided to adjust our targets for the composition of theSupervisoryBoard (see Corporate Governance Report) and considered the HR and SocialReports, our TUIgether employee survey, the implementation of the femaleandgender quotas in Germany, the IT strategy and safety. We took a carefullookat the results of the efficiency review of the Supervisory Board conductedat the end of financial year 2014 / 15 and decided on the next steps. Wealso resolved the 2015 declaration of compliance with the German CorporateGovernance Code and the Corporate Governance Declaration required by UKCGC.After intensive deliberations, we also approved the launch of thedivestmentprocess for Hotelbeds Group.3. On 8 February, the Supervisory Board mainly discussed TUI AG's interimstatement and report for the quarter ended 31 December 2015 and preparedthe2016 Annual General Meeting. Our deliberations also focused onthe disposal process for Hotelbeds Group and the turnaround in Germany. TheSupervisory Board approved the construction of two expedition newbuilds forHapag-Lloyd Cruises. We also agreed measures resulting from the SupervisoryBoard's efficiency review, developed in the framework of a workshop on 21January 2016.4. On 9 February 2016, the Supervisory Board met for its first meeting inits new composition directly after the 2016 AGM. Following the election ofthe Supervisory Board chairman and two deputy chairmen, we elected themembers of the Presiding Committee, Audit Committee, Nomination Committee,Integration Committee, Strategy Committee and Mediation Committee.5. At its extraordinary meeting on 27 April 2016, convened at short noticedue to its urgency, the Supervisory Board approved the sale of HotelbedsGroup following comprehensive information from the Executive Board andexternal advisors and intensive reviews carried out by the SupervisoryBoarditself. Our deliberations focused on the appropriateness of the sale price,the key terms and conditions of the transaction, transaction security,financing and safeguarding of employee interests.6. On 10 May 2016, we debated TUI AG's interim report for the secondquarterended on 31 March 2016 and the half-year financial report. The SupervisoryBoard also discussed the organisational Health & Safety structure, themeasures launched by the Executive Board as a result of the TUIgetheremployee survey, the OneShare employee share programme and the impact of apotential Brexit. The Supervisory Board also approved a large number oftransactions (e. g. acquisition of all shares in atraveo GmbH, acquisitionof the cruise ship Legend of the Seas and Transat France SA, launch of adivestment process for Specialist Group). The Supervisory Board furthermorehad to again adopt a resolution regarding the newbuild of two expeditionships for Hapag-Lloyd Cruises, as the shipyard envisaged at the meeting inFebruary was no longer available due to a change in ownership. We alsoapproved the issue of employee shares in financial year 2015 / 16.7. By written circulation on 30 June 2016, the termination agreement withMrWilliam Waggott was adopted with effect from 30 June 2016.8. At an extraordinary meeting on 4 July 2016, convened at short notice dueto its urgency (conference call), the Supervisory Board intensivelydiscussed the outcome of the Brexit referendum and its potential impacts onTUI AG.9. By written circulation on 17 August 2016, we approved the increase inTUIAG's capital stock for the issue of employee shares in 2016. Following thecompletion of a tender process for a change in auditors and based on therecommendation of its Audit Committee, the Supervisory Board also resolvedto propose the appointment of Deloitte GmbH Wirtschaftsprüfungsgesellschaftas auditors for TUI AG's consolidated and individual financial statementsand all relevant interim reports for financial year 2016 / 17.10. Supplementing the resolution adopted on 30 June 2016, we resolved bywritten circulation on 19 August 2016 the cash settlement of entitlementsstill held by Mr Waggott from the Share Awards taken over from TUI TravelPLC as at 31 August 2016. (for further details: see Remuneration Reportpage127).11. During a strategy offsite meeting on 14 and 15 September 2016, weintensively debated various key topics: apart from IT-supported customerrelationship management, TUI's business model, and growth strategies forHotels & Resorts and Cruises, we addressed challenges in source marketGermany and approaches for solutions. Further topics included the sale ofSpecialist Group, potential business in China, the airline platformOneAviation and the impact of Brexit. On the second day, we comprehensivelydebated the five-year plan submitted by the Executive Board. We alsodiscussed crisis management, the Security, Health & Safety structure, andwere given a report on the potential impact of the revision of the EuropeanPackage Tour Directive. The Supervisory Board then approved the acquisitionof three Boeing 787-9s for Northern Region and the refinancing of theexisting 2014 / 19 high-yield bond worth EUR 300.0 m. The Supervisory Boardmoreover debated Executive Board matters and D&O insurance.In addition to the Supervisory Board meetings, a further workshop withinternal and external experts on 6 November 2015 was devoted to selectedissues of German and British corporate governance.Meetings of the Presiding CommitteeThe Presiding Committee is in charge of various Executive Board issues(including succession planning, new appointments, terms and conditions ofservice contracts, proposals regarding the remuneration system). It alsoprepares the meetings of the Supervisory Board.Members of the Presiding Committee:Until 9 February 2016: * Prof. Klaus Mangold (Chairman) * Andreas Barczewski * Carmen Riu Güell * Sir Michael Hodgkinson * Frank Jakobi * Maxim Shemetov * Anette Strempel From 9 February 2016: * Prof. Klaus Mangold (Chairman) * Peter Bremme * Carmen Riu Güell * Sir Michael Hodgkinson * Frank Jakobi * Alexey Mordashov * Anette Strempel * Ortwin Strubelt 1. At a joint meeting of the Presiding Committee and Nomination Committeeon20 October 2015, we discussed the determination of the personal performancefactors for the annual performance bonus for financial year 2014 / 15 andthe reference indicators for the Executive Board's annual performance bonusfor financial year 2015 / 16. The Presiding Committee also discussed theappropriateness of Executive Board remuneration and pensions. The Committeefurthermore prepared the Supervisory Board's proposal to the AGM for a newsystem of Supervisory Board remuneration.2. At a meeting on 27 October 2015, convened at short notice due to theurgency of the issue (conference call), the Presiding Committee intensivelydebated the status of preparations and the latest developments regardingtheIPO of Hapag-Lloyd AG in the light of the current situation in containershipping.3. At its meeting on 9 December 2015, the Presiding Committee discussedtarget achievement for the Executive Board's annual performance bonus forfinancial year 2014 / 15 and the appropriateness of Executive Boardremuneration and pensions. It also debated adjustment of the targets forthecomposition of the Supervisory Board.4. At its meeting on 8 February 2016, the Presiding Committee discussed inparticular Executive Board matters, the activities of the Supervisory Boardand its committees after the 2016 AGM and the status proceedings Erzbergerversus TUI AG on EU conformity of the German Industrial Co-DeterminationAct.5. At its meetings on 9 May 2016, the Presiding Committee debated businessallocation for the Executive Board following the sale of Hotelbeds Groupandthe potential early redemption of the share awards rolled over from TUITravel PLC to TUI AG.6. At an extraordinary meeting on 29 June 2016, convened at short noticedueto the urgency of the issue, the Presiding Committee discussed the impactofthe Brexit vote of 23 June 2016. It also prepared the extraordinarySupervisory Board meeting on 4 July 2016, dealing with the same issue, anddiscussed Executive Board matters.7. On 16 August 2016, using the written circulation process and based onrelevant documents, the Presiding Committee adopted a recommendation for aresolution to be adopted by the Supervisory Board about the early cashsettlement of Mr Waggott's entitlements from the share awards rolled overfrom TUI Travel PLC as at 31 August 2016.8. On 14 September 2016, we prepared, inter alia, the resolution to beadopted by the Supervisory Board on the cash settlement of the entitlementsstill held by Mr Long and Mr Burling from the share awards rolled over fromTUI Travel PLC as at 30 September 2016.Audit CommitteeMembers of the Audit Committee:Until 9 February 2016: * Prof. Edgar Ernst (Chairman) * Andreas Barczewski * Prof. Klaus Mangold * Michael Pönipp * Minnow Powell * Prof. Christian Strenger * Ortwin Strubelt From 9 February 2016: * Prof. Edgar Ernst (Chairman) * Andreas Barczewski * Dr Dierk Hirschel * Janis Kong * Prof. Klaus Mangold * Coline McConville * Michael Pönipp * Ortwin Strubelt The Audit Committee held six ordinary meetings in the financial year underreview. It elected Prof. Edgar Ernst as Chairman of the Audit Committee on19 February 2016 using the written circulation procedure. For the tasks andthe advisory and resolution-related issues discussed by the AuditCommittee,we refer to the comprehensive report on page 20.Nomination CommitteeThe Nomination Committee proposes suitable shareholder candidates to theSupervisory Board for its election proposals to the Annual General Meetingor appointment by the district court.Members of the Nomination Committee:Until 9 February 2016: * Prof. Klaus Mangold (Chairman) * Carmen Riu Güell * Sir Michael Hodgkinson * Maxim Shemetov From 9 February 2016: * Prof. Klaus Mangold (Chairman) * Carmen Riu Güell * Sir Michael Hodgkinson * Alexey Mordashov 1. Regarding the joint meeting of the Nomination Committee and PresidingCommittee on 20 October 2015, we refer to the above notes in the section onthe Presiding Committee.2. At its meeting on 8 December 2015, the Nomination Committee discussedthefuture composition of the Supervisory Board and the composition of theshareholder side.3. At its meeting on 8 February 2016, the Nomination Committee reflected onthe work of the Supervisory Board and its committees after the AGM 2016.Strategy CommitteeThe Strategy Committee was established on 9 February 2016 by resolution ofthe Supervisory Board. Its task is to advise the Executive Board indeveloping and implementing the corporate strategy. Apart from theCommitteemembers, the meetings of the Strategy Committee are regularly attended bySir Michael Hodgkinson, and by Ms Riu Güell on hotel issues.The members of the Strategy Committee are: * Peter Long (Chairman) * Angelika Gifford * Valerie Gooding * Frank Jakobi * Prof. Klaus Mangold * Alexey Mordashov 1. At its first meeting on 6 May 2016, the Strategy Committee planned itsmode of operation and defined the scope and topics for further meetings. Italso discussed potential focus areas for the Supervisory Board's strategyoffsite meeting in September. Detailed consideration included a strategyforcustomer growth and options for Specialist Group. 2. At its meeting on 30 June 2016, the Strategy Committee devoted fullattention to the possible repercussions of the Brexit vote and itspotentialimpacts on TUI AG and its competitors. In a joint discussion with theExecutive Board, the Strategy Committee furthermore discussed the proposedtopics for the Supervisory Board's strategy offsite meeting in September2016 and opportunities to re-invest the proceeds from the sale of HotelbedsGroup. Apart from the strategic measures relating to the turnarounds inGermany and France, the debate also focused on TUI AG's customerrelationship management.Integration CommitteeThe Integration Committee was established by the Supervisory Board for aperiod of two years after the completion of the merger (until December2016). Its task is to advise and oversee the Executive Board during theintegration process required after the merger. In this regard, theSupervisory Board had resolved to additionally seek external advice, aboveall in monitoring the synergies, from Deloitte auditors whose experts alsoregularly attended the meetings of the Integration Committee.Members of the Integration Committee:Until 9 February 2016: * Prof. Klaus Mangold (Chairman) * Sir Michael Hodgkinson (Deputy Chairman) * Prof. Edgar Ernst * Frank Jakobi * Minnow Powell * Prof. Christian Strenger From 9 February 2016: * Prof. Klaus Mangold (Chairman) * Sir Michael Hodgkinson (Deputy Chairman) * Prof. Edgar Ernst * Valerie Gooding * Frank Jakobi * Coline McConville 1. At its meeting on 8 December 2015, the Integration Committee initiallydiscussed a sharpening of its focus on aspects of cultural integration. Italso reviewed the status of synergy effects and the progress ofimplementation of the global brand strategy oneBrand towards unifiedbranding. The debate also focused on the results of the TUIgether employeesurvey and measures to be derived from the survey.2. On 10 May 2016, the Integration Committee discussed a report onintegration progress and the status ofthe synergy effects. It also intensively debated a presentation by Deloitteon best practices in following up on merger synergies. Following acontinuation of the debate about ways to culturally embed the measuresderived from the TUIgether employee survey, the Committee's deliberationsfocused on the remuneration structurefor the Group's top management level. The Committee also obtainedinformation about the successful brand migration in the Netherlands.3. At its meeting on 13 September 2016, the Integration Committee discussedthe report on integration progress and the status of synergy effects aswellas TUI Group's new unified HR strategy. It also received reports about thestatus of numerous HR activities that had been initiated or planned.Corporate GovernanceDue to the primary quotation of the TUI AG share on the London StockExchange and the constitution of the Company as a German stock corporation,the Supervisory Board naturally also regularly and comprehensively dealswith German and British corporate governance. Apart from the mandatoryobservance of the rules of the German Stock Corporation Act (AktG),MitbestG, the Listing Rules and the Disclosure and Transparency Rules, TUIAG had announced in the framework of the merger that the Company was goingto make every practicable effort to observe both the German CorporateGovernance Code (DCGK) and - as far as practicable - the UK GCG.For the DCGK - conceptually founded, inter alia, on the German StockCorporation Act - we issued an unqualified declaration of compliance for2016 pursuant to section 161 of the German Stock Corporation Act, togetherwith the Executive Board. By contrast, there are some deviations from theUKCGC due for the most part to the different concepts underlying a one-tiermanagement system for a public listed company in the UK (one-tier board)andthe two-tier management system comprised of Executive Board and SupervisoryBoard in a stock corporation based on German law.More detailed information on corporate governance, the declaration ofcompliance for 2016 pursuant to section 161 of the German Stock CorporationAct and the declaration on deviations from the UK CGC is provided in theCorporate Governance Report in the present Annual Report, prepared by theExecutive Board and the Supervisory Board (page 117), as well as on TUIAG'swebsite.Audit of the annual and consolidated financial statements of TUI AG and theGroupPricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft,Hanover, audited the annual financial statements of TUI AG prepared inaccordance with the provisions of the German Commercial Code (HGB), as wellas the joint management report of TUI AG and TUIGroup, and the consolidatedfinancial statements for the 2015 / 16 financial year prepared inaccordancewith the provisions of the International Financial Reporting Standards(IFRS), and issued their unqualified audit certificate. The abovedocuments,the Executive Board's proposal for the use of the net profit available fordistribution and the audit reports by the auditors had been submitted ingood time to all members of the Supervisory Board. They were discussed indetail at the Audit Committee meeting of 6 December 2016 and theSupervisoryBoard meeting of 7 December 2016, convened to discuss the annual financialstatements, where the Executive Board provided comprehensive explanationsofthese statements. At those meetings, the Chairman of the Audit Committeeandthe auditors reported on the audit findings, having determined the keyauditareas for the financial year under review beforehand with the AuditCommittee. Neither the auditors nor the Audit Committee identified anyweaknesses in the early risk detection and internal control system. On thebasis of our own review of the annual financial statements of TUI AG andTUIGroup and the joint management report, we did not have any grounds forobjections and therefore concur with the Executive Board's evaluation ofthesituation of TUI AG and TUI Group. Upon the recommendation of the AuditCommittee, we approve the annual financial statements for financial year2015 / 16; the annual financial statements of TUI AG are thereby adopted.Wecomprehensively discussed the proposal for the appropriation of profitswiththe Executive Board and approved the proposal in the light of the currentand expected future financial position of the Group.Executive Board, Supervisory Board and committee membershipThe composition of the Executive Board and Supervisory Board as at 30September 2016 is presented in the tables on pages 114 for the SupervisoryBoard and 116 for the Executive Board.In financial year 2015 / 16, the composition of the boards changed asfollows:Supervisory BoardUpon the close of the 2016 Annual General Meeting, Prof. ChristianStrenger,Maxim Shemetov and Minnow Powell stepped down from the Supervisory Board.Atthe same Annual General Meeting, Angelika Gifford, Peter Long and AlexeyMordashov were elected for a term of five years. Members re-elected for aterm of five years were Carmen Riu Güell, Prof. Edgar Ernst, Sir MichaelHodgkinson and Prof. Klaus Mangold.The term of all employee representatives on the Supervisory Board alsoendedat the close of the 2016 Annual General Meeting. Rüdiger Witt stepped downfrom the Supervisory Board at that date. Apart from Mag. Stephan Weinhofer,replacing Rüdiger Witt on the Supervisory Board in his first term ofoffice,all previous employee representatives were re-elected for a five-year termon 10 February 2016.We were shocked and saddened by the sudden passing of Wilfried Rau on 30March 2016. Wilfried Rau had been an employee representative on ourSupervisory Board, representing senior managers, since December 2014. WithMr Rau, we have lost a highly esteemed, circumspect colleague who knew theCompany in many different facets. Mr Rau had earned great merit in manydifferent managerial positions at TUI AG and in the Group. We miss hisexperience, his advice and his sense of humour even in turbulent times. TheSupervisory Board, the Executive Board and the employees of TUI AG willhonour his memory.With effect from 13 June 2016, Wolfgang Flintermann was appointed as amember of the Supervisory Board by the court of registration to representemployees in senior management.Presiding CommitteeMr Shemetov stepped down from the Supervisory Board and therefore also thePresiding Committee at the close of the Annual General Meeting 2016. Inaddition to re-electing the remaining previous shareholder representatives,the Supervisory Board elected Mr Mordashov as the fourth shareholderrepresentative on the Presiding Committee. The new employee representativeson the Presiding Committee are Mr Strubelt and Mr Bremme, alongside there-elected employee representatives Ms Strempel and Mr Jakobi. MrBarczewskihas no longer been a member of the Presiding Committee since it was newlyformed on 9 February 2016.Audit CommitteeAt the close of the Annual General Meeting 2016, Prof. Strenger and MrPowell also stepped down from the Audit Committee. Apart from re-electingthe previous Audit Committee members, the Supervisory Board elected MsMcConville, Ms Kong and Dr Hirschel as new members after the close of theAGM 2016.Integration CommitteeAfter the close of the 2016 AGM, the Supervisory Board re-elected theexisting Integration Committee members and elected Ms Gooding and MsMcConville to replace Prof. Strenger and Mr Powell, who stepped down fromthe Integration Committee at the close of the 2016 AGM.Nomination CommitteeApart from re-electing the previous members of the Nomination Committee,theshareholder representatives on the Supervisory Board elected Mr Mordashovasa new Nomination Committee member after the close of the 2016 AGM.Executive BoardWith effect from 15 October 2015, Dr Elke Eller was appointed as a memberofthe Executive Board and Labour Director. The term of office of Peter Long,Joint-CEO on the Executive Board, ended at the close of the 2016 AGM. Sincethat date, Friedrich Joussen has been sole Chairman of the Executive Board.With effect from 30 June 2016, William Waggott also stepped down from theExecutive Board.The Supervisory Board thanks all Executive Board and Supervisory Boardmembers who left in financial year 2015 / 16 for their cooperation in aspirit of constructive confidence.Hanover, 7 December 2016On behalf of the Supervisory Board:Prof. Klaus MangoldChairman of the Supervisory BoardAudit Committee ReportDear Shareholders,as the Audit Committee, it is our job to assist the Supervisory Board incarrying out its monitoring function during the financial year,particularlyin relation to accounting and financial reporting for the TUI Group, asrequired by legal provisions, the German Corporate Governance Code and theSupervisory Board Terms of Reference.In addition to these core functions, we are responsible in particular formonitoring the effectiveness and proper functioning of internal controls,the risk management system, the Group Auditing department and the legalcompliance system.The Audit Committee's sphere of responsibility was extended substantiallyfollowing the introduction of the Audit Reform Act (AReG) in Germany. Amongother things, this means that the Audit Committee is now responsible forselecting external auditors within the framework of a public invitation totender. The selected auditors are then required to be put forward by theSupervisory Board to the Annual General Meeting for appointment. Followingthe appointment by the Annual General Meeting, the Supervisory Boardformally commissions the external auditors with the task of auditing theannual financial statements and consolidated financial statements andreviewing the quarterly interim reports.The Audit Committee is elected by the Supervisory Board directly after theannual general meeting and consists currently of the following eightSupervisory Board members: * Prof. Edgar Ernst (Chairman) * Andreas Barczewski * Dr Dierk Hirschl * Janis Kong * Prof. Klaus Mangold * Coline McConville * Michael Pönipp * Ortwin Strubelt There are no personnel changes to report in the composition of thiscommittee since the last election.Both the Chairman of the Audit Committee and the remaining members of theAudit Committee are seen by the Supervisory Board as meeting the criterionof being independent. In addition to the Chairman of the Audit Committee,atleast one other member has expertise in the field of accounting andexperience in the use of accounting principles and internal controlsystems.The Audit Committee has six regular meetings a year; additional meetingscanalso be held on specific topics. No extraordinary meetings were held duringthe period under review. The meeting dates and agendas are based both ontheGroup's reporting cycle and on the Supervisory Board agendas.The Chairman of the Audit Committee reports on the work of the AuditCommittee and the proposals it has to make in the Supervisory Board meetingthat follows each Audit Committee meeting.Apart from the Audit Committee members, the meetings have been attended bythe Chairman of the Executive Board, the CFO and the following managementmembers, based on the topics covered: * Director of Group Financial Accounting * Director of Group Audit * Director of Group Compliance & Risk * Director of Corporate Finance Auditors PricewaterhouseCoopers AG Wirtschaftsprüfungsgesellschaft (PwC)have also been invited to meetings on relevant topics. Wherever required,additional members of TUI Group senior management and operationalmanagementhave been asked to attend Audit Committee meetings, as have externalconsultants.Where it was deemed necessary to go into further detail on specific topicsor cases, the Chairman of the Audit Committee held - in addition to AuditCommittee meetings - individual meetings with the relevant Executive Board,senior management or auditor representatives. The Chairman of the AuditCommittee reported on the key findings and conclusions from these meetingsin the next Audit Committee meeting.The members took part in the Audit Committee meetings as shown in the tableon page 11. One Audit Committee resolution was taken by circular decision.Selection of a new auditor for TUI AG and the TUI GroupIn order to implement the regulations of the AReG governing the rotation ofauditors, a public invitation to tender was conducted in the period underreview in order to select a new auditor for TUI AG and the TUI Group.Determining the key process steps and the key decisions was theresponsibility of the Audit Committee Chairman. In its planned meetings,theentire Audit Committee received regular reports on the progress of theprocess by its Chairman and discussed the further steps to be taken.Assistance in implementing the process at an operational level was providedby the company.In keeping with EU regulations on public invitations to tender, the entireprocess was fair, transparent and non-discriminatory.By announcing the planned invitation to tender in the Federal Gazette,German and international auditing firms were initially requested tocommunicate their interest in participating in the selection process. Fromthese initial applicants, a number of minimum criteria were then used toreduce the remaining applicants to a shortlist of five.In the following stage, these remaining five applicants were provided withextensive documentation to enable them to submit a comprehensive writtenoffer. In addition, all competitors were given the opportunity to clarifyany remaining questions in a joint questions and answers session withvarious Group representatives. Of the five applicants, four ultimatelysubmitted written offers which were made available to the Audit Committee.All written offers were then analysed and evaluated by the Audit CommitteeChairman and by representatives of the main business areas and Groupfunctions in order to ensure maximum objectivity during the selectionprocess. Based on this analysis, the fourth-ranked applicant waseliminated.On the basis of the written offer, the evaluation found the remaining threeapplicants to be virtually of equal merit, so that all three applicantswereinvited by the Audit Committee to present their offer and the key teammembers in person. In addition to the Audit Committee Chairman, thesepresentations were attended by the aforementioned representatives of themain business areas and Group functions, and by the CFO as a guest. Theevaluation of the presentations established a clear ranking of theapplicants, leading the third-ranked candidate to be eliminated.Up to this point, the quality of the service offered took clear precedenceover any cost aspects. With the final two applicants, the cost-relatedaspects of the offer were then discussed. In their final form, the offersdid not vary significantly as regards cost.Accordingly, at the end of the procedure, the Audit Committee recommendedtothe Supervisory Board that it put forward Deloitte GmbHWirtschaftsprüfungsgesellschaft to the Annual General Meeting as the newGroup auditors. As well as this preference, the second-placed applicant waspresented to the Supervisory Board as an alternative. The Supervisory Boardsubsequently resolved to accept this recommendation.Reliability of financial reporting and monitoring of accounting processThe Executive Board of a German stock corporation (Aktiengesellschaft) issolely responsible for preparing its Annual Report & Accounts (ARA).Section243(2) of the German Commercial Code (HGB) requires the ARA to be clearlystructured and to give a realistic overview of the company's financialsituation. This is equivalent to the requirement of the UK Code for the ARAto be fair, balanced and understandable. Even though the evaluation of thisrequirement has not been transferred to the Audit Committee, the ExecutiveBoard is comfortable that the submitted ARA satisfies the requirements ofboth legal systems.In order to be sure ourselves of the reliability of both the annualfinancial statements and interim (quarterly) reporting, we have requestedthat the Executive Board inform us in detail about the Group's businessperformance and its financial situation. This was done in the four AuditCommittee meetings that took place directly before the financial statementsin question were published. In these meetings, the relevant reports werediscussed and the auditors also reported in detail on key aspects of thefinancial statements and on the findings of their audit or review.In order to monitor accounting, we examined individual aspects in greatdetail. In addition, the accounting treatment of key balance sheet itemswere reviewed, in particular goodwill, advance payments for tourismservices, pension provisions and other provisions.In consultation with the auditors, we made certain that the assumptions andestimates underlying the balance sheet were appropriate. In addition, anymaterial legal disputes and key accounting issues arising from theoperatingbusinesses were assessed by the Audit Committee.In the period under review, we concerned ourselves above all with thefollowing individual subjects:Owing to the existing geopolitical risks, we stipulated that each of thequarterly financial statements be accompanied by a report on the effects onearnings, the risks from guarantee and advance payment mechanisms relatedtoGroup and third-party hotels in Turkey and North Africa and about thecountermeasures being undertaken.The status of the introduction of a new ERP system in the UK was alsoassessed in detail during our meetings. In this connection, we receivedregular reports on the progress of the implementation and asked pointedquestions about any delays and, in particular, risks with regards to Groupreporting.Another aspect of our work was OneAviation, a project for optimising theoperational efficiency and cost-base of the Group-owned airlines. Given thestrategic importance of the airline in the tourism value chain, we receivedan explanation of the key factors driving cost advantages for certaincompetitors compared with TUI airlines and about the intended measures foroptimising these. In a further meeting, we also had the managementrepresentatives in question inform us about the legal and operationalorganisational structure Technology.In addition to the operational flight business, however, we also examinedTUI's investing activity in the following areas: Airlines, Hotels &Resorts,Cruises and IT. We were given an explanation of how the investments wereprioritised, including how they were distributed throughout the Groupareas.One particular point in connection with the investment analysis was thedisposal of the Hotelbeds Group in September 2016.The valuation logic with regard to the Hapag-Lloyd AG shares was alsodiscussed in detail on numerous occasions in the course of the financialyear. Here, particular attention was given to the impairment booked in thefinancial year owing to the price performance of Hapag-Lloyd shares.The Audit Committee also discussed the going concern and viabilitystatementanalysis prepared by the company to support the statements made in thehalf-year report and the ARA.In addition, the consistency of the reconciliation from profit before taxtothe key figure 'underlying earnings' and the material adjustments werediscussed for all quarterly reports and for the annual financialstatements.Our evaluation of all discussed aspects of accounting and financialreporting has been in line with that of both management and the Groupauditors.Effectiveness of internal controls and the risk management system The Audit Committee recognises that a robust and effective system ofinternal control is critical to achieving reliable and consistent businessperformance.To fulfil its legal obligation to examine the effectiveness of internalcontrols and the risk management system, the Audit Committee is informedregularly about their current status and also about the further developmentof them.The Group has continued to evolve its internal control framework which isunderpinned by the COSO concept. In recent years the larger businesses inthe Group have completed documentation of their main financial processesandregular testing by management of the key financial controls as a matter ofroutine is the next area of development. Some initial testing was conductedin 2016 and management intend to increase the volume of testing in 2017.Within the Group, the compliance function is further broken down into threeareas: Finance, Legal and IT. These teams play a crucial role in improvingcontrols across the Group and identifying areas where more focus isrequired. The Group auditors also report to us on any weaknesses they findin the internal control system of individual Group companies, andmanagementtracks these items to ensure that they are addressed on a timely basis.As stated on page 49 of the risk report, the Audit Committee receivesregular reports on the performance and effectiveness of the risk managementsystem. The Risk Oversight Committee is an important management committeewithin the Group and we are satisfied that there is appropriate, activemanagement of risk throughout the Group.The Group Auditing department ensures the independent monitoring ofimplemented processes and systems and reports directly to the AuditCommittee in each regular meeting. In the period under review, the AuditCommittee was not provided with any audit findings indicating materialweaknesses in internal controls or the risk management system. As well asthis, talks are held regularly between the Chairman of the Audit Committeeand the Director of Group Audit for the purposes of closer consultation.The main aspects of the audits planned by the Group Auditing department forthe following year were presented to the Audit Committee in detail,discussed and approved. The Audit Committee feels that the effectiveness ofthe Group Audit department is ensured through this regular consultation.For added comfort, the effectiveness of the Group Audit department wasexamined by third-party experts during the current financial year. Thisreview concluded that the Group Audit department has already reachedleading-edge maturity.The legal compliance system was also examined by third-party experts whichconfirmed the suitability of the compliance approach. The Groupwide,uniformly implemented system was presented to us and we received a reportabout the conducted risk analysis and the measures derived from it. Inaddition to the core elements of the internal control and risk managementsystem, the Group's hedging policy and transactions and certain areas ofinsurance management were part of the reporting to us during the year.Whistleblower systems for employees in the event of compliance breachesWhistleblower systems have been set up across the Group to enable employeesto draw attention to potential breaches of compliance guidelines.Reporting on the legal compliance system included information about thegroupwide standardisation of these whistleblower systems and we were alsoshown the main findings during the current financial year from this system.Examination of auditor independence and objectivityIn December 2015, the Audit Committee recommended to the Supervisory Boardthat it propose the existing auditors PwC to the Annual General Meeting asauditors for financial year 2015 / 16 as well.Following the commissioning of PwC as auditors by the Annual GeneralMeetingin February 2016, the Supervisory Board appointed PwC with the task ofauditing the 2015 / 16 annual financial statements and reviewing theinterimfinancial statements.The Chairman of the Audit Committee discussed with PwC in advance the auditplan for the annual financial statements as at 30 September 2016, includingthe key areas of focus for the audit and the main companies to be auditedfrom the Group's perspective. Based on this, the Audit Committee firmlybelieves that the audit has taken into account the main financial risks toan appropriate degree and is satisfied that the auditors are independentandobjective in how they conduct their work. The audit fees were discussed andwe are confident that the amount in question is justified.Based on the regular reporting by the auditors, we have every confidence inthe effectiveness of the external audit. This outlook is confirmed by aninternal efficiency review, conducted during the period under review, ofthecollaboration with PwC. In addition to the positive outcome of this review,all participants declared that, were it not for the obligation to rotateauditors, they would have been able to envisage continuing to work with PwCwithout any restrictions.Owing to the rotation requirement, PwC will no longer serve as auditors.PwChas been the external auditor for the TUI Group for over 20 years and theAudit Committee has always held their work to be of high quality. We wouldlike to take this opportunity to thank PwC for their many years of trustedservice.In order to ensure the independence of the auditors, any non-audit servicesto be performed by the auditors must be submitted to the Audit Committeeforapproval before commissioning. Depending on the amount involved, the AuditCommittee makes use of the option of delegating the approval to thecompany.The Audit Committee Chairman is only involved in the decision once aspecified cost limit has been reached. Insofar as the auditor has performedservices that do not fall under the Group audit, the nature and extent ofthese have been explained to the Audit Committee. This process complieswiththe guideline regarding the approval of non-audit services which came intoeffect at the beginning of financial year 2015 / 16, and it also takes intoaccount the requirements from the AReG regulations on prohibited non-auditservices and on limitations of the scope of non-audit services.In financial year 2015 / 16, these non-audit services accounted for 37 % ofthe auditor's overall fee of EUR 19.5 million. These non-audit servicesprimarily include services in connection with the preparation of theHotelbeds Group disposal, the Travelopia Group disposal and the issue of abond.I would like to take this opportunity to thank the Audit Committee members,the auditors and the management for their hard work over the past financialyear.Hanover, 6 December 2016Prof. Edgar ErnstChairman of the Audit CommitteeGoals and strategyOur StrategyAs the world's leading integrated tourism group, we operate in all stagesofour customers' holiday experience, from marketing and sales to aviation,destination services and accommodation.The core of our offering will be our own hotel and cruise brands.Growth in our hotel and cruise brands is enabled and de-risked by ourstrength in direct distribution and our direct customer relationships,creating a virtuous circle for sustainable growth.We have a resilient model, prepared for current and future changes.The strength of our integrated model is the monitoring and selectivecontrolof all stages in the value chain. This allows us to mitigate capacityrisks,respond quickly and flexibly to market changes and actively shape overallsituations and markets.We take advantage of global economies of scale resulting from our size andinternational scope to deliver competitive advantages and have defined sixscaling platforms as a framework: TUI Brand, Aviation, Hotels, Cruises,Destination Services, IT.We use our local strength at crucial points in the competitive arena, to beclose to customers and their individual needs.We believe a clear focus on sustainability differentiates us from thecompetition and generates value.We have a common vision and values to achieve our goals.Marketing & Sales * Scale - over 20 million* customers per annum, over 13 million customers flying on Group airlines * Strength in direct distribution and direct customer relationships -over 70 % of holidays distributed directly to the customer through our websites, shops and call centres * Flexibility - approx. 75 % of our source market accommodation requirement sourced from third parties Destination Services * Scale - over 11 million customers per annum with operations in over 100 destinations * Unique destination services bring the TUI brand alive and bring us even closer to our customers * Including Canada and Russia joint venturesHow we do it - our Business ModelWe have a leading position as anintegrated tourism company.Aviation * Scale - approx. 150 aircraft, transporting our customers to their destination * Flexibility - approx. 95 % of aircraft are leased, current average remaining lease life of approx. 4 years, with additional capacity from third party airlines * Efficiency - OneAviation programme to develop one virtual airline, short haul fleet renewal commences 2018 Accommodation * Scale - growing portfolio of Group hotels and cruise ships (currently over 7 million customers per annum) with a further 10 million customers staying in third party hotels, which are mostly exclusive to our source markets * Wide distribution funnel - over 50 % of our hotel customers purchasevia our source markets, with significant incremental volumes from other markets * Flexibility - balanced ownership model, with around half of our hotels being managed or franchised, utilisation of joint venture partnerships to reduce investment risk, and a balanced destination portfolio Customer perspective * Easy & convenient * Seamless customer experience * Unique & exclusive products * TUI as most trusted travel partner * Mobile service and inspiration Integration benefits our customersand our performance, and gives us astrong competitive advantage.Growth in our hotel and cruise brands is enabledby our strength in direct distribution andby our direct customer relationships, creatinga virtuous circle for sustainable growth.TUI performance perspective * Growth in differentiated hotels and cruises enabled and de-risked by direct customer relationship * Superior occupancy rates, yield management & risk mitigation * Local freedom to actively shape markets * Flexibility to respond to changing environment We have a flexible model with a balancedportfolio of businesses, which further enhancesour resilience.We combine local relevancewith global scale. * Ability to remix flight and hotel capacity and adapt cruise itineraries * Balanced source market & destination portfolio * Strong long-term supplier relationships * Risk assessed ownership / management model, including joint venture partners We believe a clear focus onsustainability differentiates us from thecompetition and generates value.The ambitious 2020 sustainability strategy 'Better Holidays, Better World'is built around three core pillars to help shape the future of sustainabletourism.We have a common vision and valuesto achieve our goals.Our vision, values and customer proposition form the basis of our actionandour attitude - both inside and outside.Discovering the world's diversity, exploring new horizons, experiencingforeign countries and cultures: travel broadens people's minds. At TUI wecreate unforgettable moments for customers across the world and make theirdreams come true. We are mindful of the importance of travel and tourismformany countries in the world and people living there. We partner with thesecountries and help shape their future - in a committed and sustainablemanner.What we want to achieve -roadmap for growth1. GROWTH IN HOTEL AND CRUISE BRANDSAccommodation (hotels and cruise ships) is the key differentiator in thecustomer holiday experience and the key driver of satisfaction andretentionrates. We will therefore deliver growth through scaling up our unique hoteland cruise brands.Growth will be focused on our core, unique brands - these brands have beenselected due to their strong resonance with their respective customersegments (and therefore competitive advantage) and their ability to befurther scaled.Following the merger with TUI Travel PLC in December 2014 we targeted circa60 additional hotels by 2018 / 19. Having delivered 18 openings and tworepositioned hotels to date (30 September 2016), we expect approximately 40to 45 further openings by the end of 2018 / 19 plus further repositionedhotels. Taking into account the different ownership models and our currentportfolio, we expect each new hotel on average to deliver an additional EUR2 m underlying EBITA.Riu3 to 5 star hotels at the best beach destinations in the world, offeringholidays from family all inclusive fun to romance and luxuryCurrent Portfolio (2015/16) * 94 hotels delivering EUR 318 m underlying EBITA * Occupancy 90 % * ROIC 26 % (excl. goodwill) Openings/Launches * 2014 / 15: Aruba, Mauritius, Bulgaria, Berlin * 2015 / 16: Dominican Republic, Sri Lanka, New York, Dublin * Winter 2016 / 17: Jamaica * 2017 / 18: Mexico (Costa Mujeres) RobinsonPremium clubs in excellent beach or mountain locationsCurrent Portfolio (2015/16) * 24 clubs delivering EUR 39 m underlying EBITA * ROIC 13 % Openings/Launches * 2014 / 15: Tunisia * 2015 / 16: Greece, Turkey * Summer 2017: South East Asia TUI SENSATORIModern luxury holidays designed to fuel the sensesCurrent Portfolio (2015/16) * 10 resorts with 5 in Group hotels Openings/Launches in group hotels * 2014 / 15: Cyprus, Turkey * 2015 / 16: Dominican Republic * Summer 2017: Rhodes TUI BluePremium hotels in first class locations with strong regional influencesCurrent Portfolio (2015/16) * TUI Blue launched with two repositioned hotels this year Openings/Launches * 2015 / 16: Turkey (repositioned) * Winter 2016 / 17: Tenerife (new), Germany and Austria (repositioned) * Summer 2017: Croatia (new), Italy (new), (repositioned), Germany (repositioned) TUI MAGIC LIFEAll inclusive club holidays in top beachside locationsCurrent Portfolio (2015/16) * 13 clubs Openings/Launches * 2014 / 15: Ibiza, Rhodes TUI SENSIMARStylish 4 to 5 star hotels designed for adults with space and relaxation inmindCurrent Portfolio (2015/16) * 48 resorts with 20 in Group hotels Openings/Launches * In Group hotels - 2014 / 15: Portugal, Croatia * In third party hotels - Winter 2016 / 17: Lanzarote, Cape Verde, Mauritius * In third party hotels - Summer 2017: Sardinia, Greece, Tunisia TUI FAMILY LIFEThe ultimate environment for a family holiday to rememberCurrent Portfolio (2015/16) * 29 resorts with 17 in Group hotels Openings/Launches Inthird party hotels * Winter 2016 / 17: Thailand, Spain * Summer 2017: Sardinia, Croatia, Spain, Bulgaria thomson CRUISESUK leader in all inclusive fly cruiseCurrent Portfolio (2015/16) * Five ships * Underlying EBITA EUR 61 m Openings/Launches * Summer 2016: TUI Discovery * Summer 2017: TUI Discovery 2 * Summer 2018: additional ship from TUI Cruises (Mein Schiff 1) * Summer 2019: additional ship from TUI Cruises (Mein Schiff 2) Cruise growth will continue to focus on the underpenetrated European cruisemarket, with capacity expansion in TUI Cruises and modernisation of our UKand luxury / expedition cruise brands. * The European cruise market remains underpenetrated relative to the US, but has the right demographics - age, wealth, leisure time available - for future growth * TUI Cruises successfully launched Mein Schiff 5 in July 2016 and will add three further newbuilds over the next three years, deliveringaround EUR 25 m to EUR 30 m share of earnings after tax for each new ship. * Thomson Cruises is continuing its path of modernisation, with thelaunch of TUI Discovery in Summer 2016 and the delivery of TUI Discovery 2 in Summer 2017. In addition, Mein Schiff 1 and Mein Schiff 2 will move to the UK from the TUI Cruises fleet in 2018 and 2019. We expect each new ship to deliver around EUR 25 m of underlying EBITA per annum, at constant currency rates. * Following the successful turnaround of Hapag-Lloyd Cruises to profitability this year, we have announced the modernisation and expansion of the expedition cruise fleet, with two newbuilds arrivingin 2019, delivering around EUR 15 m additional EBITA per annum per ship. Growth will focus on destinations with strong margin and ROICcharacteristics, and where we deliver a competitive advantage. * Year round destinations deliver higher occupancy, less seasonality in earnings and therefore higher returns. * Year round destinations also add the opportunity to sell to othersource markets outside TUI Group - for example, a significant proportion of Riu's revenues in the Caribbean come from the US. * We can leverage off our existing strong presence in long haul and other year round destinations - on a hotel basis, over 50 % of our current Hotels & Resorts portfolio is in year round destinations, and around 40 % of our source market customers travel to year round destinations (defined as Canaries, Cape Verde, North Africa and long haul). * Our 787 fleet enables us to take more customers, more efficiently to long haul destinations. In our source markets in 2015 / 16, around 15 % of our accommodated customers stayed in long haul destinations. We expect our long haul package holiday customers to grow by over 500,000 over the next three years. We will continue to build on our direct relationship with the customer inresort.Our unique Destination Services bring the TUI brand alive, operating inmorethan 100 destinations with access to over 11 million customers, managingairport transfers, excursions and resort services. In 2015 / 16 wecompletedthe separation of our Destination Services business from Hotelbeds Group(which has subsequently been sold) and have so far delivered synergiesworthEUR 10 m as a result of service integration and cost efficiency measures.Growth in Destination Services will be driven by an increase in theproportion of differentiated excursions (currently around 20 %) and insalesof excursions through online and mobile channels. In addition, we arecontinuing to expand our network, with the launch of a destinationmanagement company in the USA in November 2016, and exploring the potentialfor launches in other countries.Balanced ownership model for new and existing hotels and cruise ships, withclear investment hurdle rates. * We have a balanced ownership model for hotels, with just under 50 % of our hotels under management or franchise. * Investments will be made in differentiating products where there are pockets of growth and scarcity of supply. * Our strong joint venture relationships bring significant operational benefits for our hotels and cruises, as well as reducing levels of invested capital on a consolidated basis. * We target ROIC (based on our Group definition) of at least 15 % on average for our new investments (compared with our Group weighted average cost of capital of 7.5 %). * Our Hotels & Resorts and Cruises segments deliver ROIC significantly in excess of their cost of capital. In 2015 / 16 our Hotels & Resorts segment delivered ROIC of 12.3 % (versus segment weighted average cost of capital of 6.5 %) whilst Cruises delivered ROIC of 21.3 % (versus segment weighted average cost of capital of 7.5 %). 2. DIRECT CUSTOMER RELATIONSHIPSGrowth in our hotel and cruise brands is enabled and de-risked through thestrength of our direct distribution and customer relationships, creating avirtuous circle for sustainable growth. This also gives us a competitiveadvantage compared with other hotel and cruise companies with lower levelsof direct distribution.Capitalising on the strength of the TUI brand on a global scale - Oneglobaldistribution brand offers significant opportunities in terms of growthpotential, consistency of customer experience, digital presence,operationalefficiency and competitive strength. In the long run, it is our objectivethat there will be one distribution brand wherever it is reasonable, but wewill still ensure that we maintain our local roots. We launched our brandmigration successfully in the Netherlands in October 2015, achieving strongunaided awareness within weeks of the TUI brand in this source market. TheTUI brand roll-out has also taken place in France, with Belgium and Nordicsfollowing in Autumn 2016 and the UK to follow in late 2017. Brand migrationwill be funded from ongoing operational efficiency and additional revenues.More direct, more online sales - Having a direct relationship with thecustomer enables delivery of a more personalised experience and gives us astrong competitive advantage. In 2015 / 16, 72 % of our source marketcustomers booked through our direct channels (up two percentage points onprior year), with 43 % booking online (up two percentage points on prioryear). In Northern Region (UK and Nordics) we now sell over 60 % of ourholidays online. Further progress has also been made in Central Region (47%controlled, 15 % online) and Western Region (70 % controlled, 52 % online).Leveraging our direct relationship with the customer using our global ITplatforms - IT is at the heart of TUI, providing the technology solutionsrequired to deliver the TUI Group strategy and help our customers createunforgettable moments. Internet and mobile use among our customers hasincreased rapidly, so at TUI we're using technology to create ever-moreinnovative and engaging ways to showcase our great destinations and inspirepeople's holiday choices, with best in class, more personal digitalexperiences. * Customer App - The 'MyTUI App' is at the heart of our mobile vision. Through this inspirational, effortless technology, we will drive customer behaviour change that will lead to the creation of our biggest digital sales channel of holidays, flights and ancillaries. It will be key to customer acquisition and retention, winning new customers and bringing back old customers time after time. In three years, we have moved from a standing start to multiple awards for our TUI App, which has been rolled out to ten European countries and has had over 3.5 million downloads. The App provides a rich, immersive experience andnot only helps customers find and pay for the holiday they want, but allows them to explore their destination, discover places to visit and book unforgettable trips and excursions. We have built the App in such a way that it needs only minimal development to amend it to suit each new country as it is rolled out. This also makes it easier to enhance and update functionality as customers' expectations develop. The roadmap is always evolving due to fast paced technology driving product innovation and business requirements. Currently in development we have inspirational video content, hotel check in, live travel information, social feed, transfer times, native ancillary sales, interactive maps, restaurant booking, and virtual reality, to mention just a few. * Group Marketing Platform - We are investing in transformational capabilities that improve how we interact with our customers, by using what we know about them to provide more timely and personalisedcustomer service and marketing. This is aimed at delivering a better customer experience, driving higher levels of engagement and conversion, and creating business value from every customer interaction by encouraging up-selling, cross-selling and rebooking. We have made significant progress to date, and have rolled out a common marketing platform and programmes to a number of key source markets, aimed at supporting customers through their holiday search and their post-booking holiday countdown. In addition we are trialling other innovations such as a Concierge Service in the UK, providing an enhanced level of service for selected customer segments. * Yield Management - We have developed our own bespoke yield solution to automate the management and pricing of holidays in response to changes in demand and costs throughout the day, seven days a week. Thissolution contains forecasting algorithms and business logic tailored for the dynamics of the tour operating industry, where flights and hotels are sold simultaneously. It also includes a sophisticated user interface which provides high levels of transparency and control to support the yield process. Following success in the UK, where the first phase went live in 2013 with full rollout in 2014, the solution was rolled out to France in 2015 and to the Nordic market in 2016. We are now targeting a rollout in further markets including Germany over the next 24 months. Driving operational efficiency improvements - We will continue to driveefficiency improvements across our source markets, including the following: * In Germany, we remain focused on further increasing market sharethrough a wider holiday offering, further increasing controlled and online distribution, and delivering operational efficiency improvements. * In France we have completed the acquisition of Transat's French tour operations for an enterprise value of EUR 55 m. The acquisition will enhance our existing turnaround plans for this source market, through market consolidation and significant margin potential. It is expectedto bring underlying EBITA margin in France to around 2.5 %. * In addition, we are continuing to deliver our efficiencies through our OneAviation programme, through the central control of configuration, purchasing, finance, maintenance and ground handling. Enhancing top line growth by adding further flexibility for our customers -We utilise technology to deliver additional top line growth with minimalcapacity commitment, such as third party flying and dynamic packaging.Market leading positions which we will continue to grow - Based on thegrowth levers outlined above, we target profitable top line growth ahead ofthe market, or around 3 % CAGR Group turnover growth, at constant currencyrates. In 2015 / 16 we delivered brand turnover growth (including turnoverfrom our Canadian and TUI Cruises joint ventures) of 2.4 % and turnovergrowth of 1.4 % at constant currency rates, with underlying growth offsetpartly by the impact of the lower demand for Turkey within some of oursource markets. Customer volumes from our source markets (excluding Canadaand Russia) were broadly flat in the year at 19.2 million, with stronggrowth in the UK and Netherlands offset by volume declines in Germany andthe Nordics, mainly as a result of lower demand for Turkey not being fullyoffset by increased demand to other destinations.3. BALANCE SHEET STRENGTH & FLEXIBILITYWe have a strong and flexible balance sheet, which enables and supportsfurther growth. We will maintain our rigorous focus on financialdiscipline,to deliver optimal allocation of capital.Strong operating cash flow provides finance for investments and dividend -We generate a significant level of operating cash flow. Together with theproceeds from the Hotelbeds Group disposal, the high level of operatingcashgeneration will help to finance future investments in growth as well ascontinuing to generate an attractive dividend yield.Focus on meaningful investments aligned with our strategy - Our capitalexpenditure reflects the reinvestment of proceeds in transformationalgrowthfollowing the disposal of Hotelbeds Group. Our priorities for capitalallocation are investments in unique hotel and cruise brands. We alsocontinue to allocate capital to strengthen the core of our business - forexample, through synergetic acquisitions such as Transat - as well asmaintaining a strong and flexible balance sheet to support further growth.We have clear ROIC hurdle rates for new investments, as outlined above, andmaterial investments are approved at Board level.Deliver merger synergies - At the time of the merger with TUI Travel PLC weoutlined EUR 100 m of merger synergies to be delivered by the end of 2016 /17 from corporate streamlining (EUR 50 m), occupancy improvement in Grouphotels (EUR 30 m) and the integration of Destination Services with ourTourism businesses (EUR 20 m). By the end of 2015 / 16 we delivered EUR 80mof these synergies, and we are on track to deliver the remaining EUR 20 mtobe delivered by the end of 2016 / 17. In addition, we targeted a reductionin our underlying effective tax rate as a result of the more efficient taxgrouping in Germany. This was achieved immediately after the merger, withthe Group's underlying effective rate now at 25 %.Deliver against financial targets with a view to achieving re-rating - Ourfocus on rating will allow us to obtain advantageous financing conditionsand continue to ensure access to debt capital markets. This has alreadydelivered benefits. Moody's upgraded TUI to Ba2 in April 2016, and Standard& Poor's revised its outlook on TUI from Stable to Positive in February2016. We have delivered against our financial targets for 2015 / 16 with aleverage ratio of 3.3 times (target 3.5 to 2.75 times), and an interestcoverage ratio of 4.8 times (target 4.5 to 5.5 times interest). For 2016 /17 our financial targets have been tightened - leverage ratio target is3.25to 2.5 times, and interest cover target is 4.75 to 5.75 times.Committed to paying an attractive dividend - We are committed to deliveringsuperior returns for our shareholders. Our growth strategy will enablethis.We will propose a dividend to our shareholders of 63 cents in respect of2015 / 16, reflecting 14.5 % growth in the base dividend (in line withunderlying EBITA growth at constant currency) plus the additional 10 %outlined at the time of the merger in 2014. For 2016 / 17 we expect to payadividend based on growth in underlying EBITA at constant currency(calculated off the base dividend of 58 cents in 2015 / 16).Continue to maximise value of non-core businesses - We successfullycompleted the disposal of Hotelbeds Group for a total cash consideration ofEUR 1.2 bn in September 2016, realising significant value for this non-corebusiness. We are in the process of disposing Travelopia and continue toholdour investment in Hapag-Lloyd AG for sale.TUI CRUISESGerman speaking, premium all inclusive cruisesCurrent Portfolio (2015/16) * Five ships * Share of underlying EAT EUR 100 m * ROIC 9 % / ROE 36 % Openings/Launches * Summer 2016: Mein Schiff 5 * Three newbuild ships launched in each of the next three years (2017 to 2019) Hapag LLoydLuxury and expedition cruisesCurrent Portfolio (2015/16) * Four ships * Underlying EBITA EUR 30 m Openings/Launches * Two new expedition ships launch in Spring and Autumn 2019 Principles underlying TUI GroupStructure and business model tourism All other segment- s* Source markets * Hotels & Cruises * Other Tourism * Northern Region * Resorts * Riu TUI Cruises * Central Corpora- Central Region * * Robinson * * tourism te Western Region Other Hotels Hapag-Lloyd functions * Center * Cruises Corsair Real Estate * As at 30 September 2016 and the financial stake in Hapag-Lloyd AG(Container shipping) are held for saleTUI Group is the world's leading tourism business, consisting of a largeportfolio of strong tour operators, 1,600 travel agencies and leadingonlineportals, five tour operator airlines with around 150 aircraft, more than300hotels with around 214,000 beds, 14 cruise liners and incoming agencies inall major holiday destinations around the globe. This integrated offeringenables us to provide our 20 million customers with an unparalleled holidayexperience.TUI AG parent companyTUI AG is TUI Group's parent company with registered offices in Hanover andBerlin. It holds directly, via its affiliates, indirect interests in theprincipal Group companies conducting the Group's operating business inindividual countries. Overall, TUI AG's group of consolidated companiescomprised 417 direct and indirect subsidiaries at the balance sheet date. Afurther 13 affiliated companies and 27 joint ventures were included in TUIAG's consolidated financial statements on the basis of at equitymeasurement.Organisation and managementTUI AG is a stock corporation under German law, whose basic principle isdual management by two boards, the Executive Board and the SupervisoryBoard. The Executive and Supervisory Boards cooperate closely in governingand monitoring the Company. The Executive Board is responsible for theoverall management of the Company.The appointment and removal of Board members is based on sections 84 etseq.of the German Stock Corporation Act in combination with section 31 of theGerman Co-Determination Act. Amendments to the Articles of Association areeffected on the basis of the provisions of sections 179 et seq. of theGerman Stock Corporation Act in combination with section 24 of TUI AG'sArticles of Association.Executive Board and Group Executive CommitteeAs at the balance sheet date, the Executive Board of TUI AG consisted oftheCEO and four other Board members.A Group Executive Committee was set up in order to manage TUI Groupstrategically and operationally. As at 30 September 2016, the Committeeconsisted of eleven members who meet under the chairmanship of CEOFriedrichJoussen.TUI Group structureTUI Group's tour operating business is clustered into three regions, eachwith a source market alignment. The three regions make up the TourismDivision together with Hotels & Resorts, Cruises and Other Tourism.Northern RegionThe Northern Region segment comprises the tour operators, airlines andcruise business in the UK, Ireland and the Nordics. In addition, theCanadian strategic venture Sunwing and the joint venture TUI Russia havebeen included within this segment. In preparation for the disposal of alarge part of Specialist Group, Ski has been reclassified from the segmentto Northern Region. The prior year's numbers have been restatedaccordingly.Central RegionThe Central Region segment comprises the tour operators and airlines inGermany and the tour operator activities in Austria, Switzerland andPoland.Western RegionThe tour operators and airlines in Belgium and the Netherlands and the touroperators in France are included within the segment Western Region.Hotels & ResortsThe Hotels & Resorts segment comprises all Group-owned hotels and hotelcompanies in TUI Group. The hotel activities of the former TUI TravelSectorhave also been allocated to Hotels & Resorts. The segment comprisesmajorityparticipations in hotels, joint ventures with local partners, stakes incompanies giving TUI a significant influence, and hotels operated undermanagement contracts.In financial year 2015 / 16, Hotels & Resorts comprised a total of 303hotels with 213,503 beds. 279 hotels, i.e. the majority, are in the four-orfive-star category. 44 % were operated under management contracts, 38 %wereowned by one of the hotel companies, 15 % were leased and 3 % of the hotelswere managed under franchise agreements. Categories of Hotels & Resorts Hotel brand 3 4 5 Total Beds Main sites sta- sta- sta- ho- rs rs rs tels Riu 4 48 42 94 86,184 Spain, Mexico, Caribbean, Cape Verdes, Portugal, Morocco Robinson - 20 4 24 15,342 Spain, Greece, Turkey, Switzerland, Austria Other hotel 20 114 51 185 111,977 Spain, Greece, Turkey, companies Egypt Total 24 182 97 303 213,503 As at 30 September 2016Riu Riu is the largest hotel company in the portfolio of Hotels & Resorts. TheMajorca-based enterprise has a high proportion of repeat customers andstands for professionalism and excellent service. Most of the hotels are inthe premium and comfort segments and they are predominantly located inSpain, Mexico and the Caribbean.RobinsonRobinson, the leading provider in the premium club holiday segment, ischaracterised by its professional sport, entertainment and event portfolio.Moreover, the clubs offer high-quality hotel amenities, excellent serviceand spacious architecture. Most of the hotels are located in Spain, Greeceand Turkey. The facilities also meet ambitious standards in terms ofpromoting sustainable development and meeting specific environmentalstandards.Other hotel companiesOther hotel companies include TUI Blue Hotels as well as the brandsGrupotel, Iberotel, Magic Life and the other hotels previously managed inthe former TUI Travel sector. Many of the hotels are operated as touroperator concepts, e. g. Sensatori, Sensimar and Family Life.CruisesThe Cruises segment consists of Hapag-Lloyd Cruises and the joint ventureTUI Cruises.Hapag-Lloyd CruisesHamburg-based Hapag-Lloyd Cruises holds a leading position in theGerman-speaking market with a fleet of four ships in the luxury andexpedition cruise segments.Its flagships are the five-star-plus vessels Europa and Europa 2. They wereawarded this category by the Berlitz Cruise Guide and are the world's onlyships to be recognised in this way, in the case of Europa for theseventeenth time in succession, and in the case of Europa 2 for the fourthconsecutive time. Europa primarily cruises on world tours, while her sistership Europa 2 takes shorter but combinable routes. The Hanseatic is used,among other destinations, for expedition cruises to the Arctic andAntarctic. It is the world's only five-star passenger vessel in the highestPolar class. The Bremen, a four-star vessel − also awarded the highestPolarclass - is another expedition ship travelling to similar destinations.Threeof the ships are owned and one is chartered.TUI CruisesHamburg-based TUI Cruises is a joint venture formed in 2008 between TUI AGand the US shipping company Royal Caribbean Cruises Ltd., in which eachpartner holds a 50 % stake. With five ships so far, TUI Cruises istop-ranked in the German-speaking premium market for cruises. The BerlitzCruise Guide rated Mein Schiff 3, Mein Schiff 4 and Mein Schiff 5 among theworld's five best liners in the category 'Large Ships'.Other TourismOther Tourism comprises central functions such as destination services, IT,aviation control and the French airline Corsair.All Other SegmentsApart from the segments described above, the accounts include the categoryAll other segments. This includes, in particular, the corporate centrefunctions of TUI AG and the interim holdings, as well as the Group's realestate companies.The financial stake in Hapag-Lloyd Container Shipping has been carriedsinceDecember 2014 under financial assets available for sale as defined by IFRS5. The IPO of Hapag-Lloyd AG took place in November 2015. As TUI did nottake part in the associated cash capital increase and Hapag-Lloyd shareswere sold in the framework of the IPO, TUI's stake in Hapag-Lloyd AGdeclined from 13.9 % to 12.3 % as at 30 September 2016.Discontinued operationsFollowing the divestments made in financial year 2015 / 16 - the sale ofLateRooms Group in October 2015 and Hotelbeds Group in September 2016 - TUIGroup also intends to sell Specialist Group. The Specialist Group wasreclassified as discontinued operation. The sector pools the activities ofspecialist tour operators and had been managed as a separate entity sincethe merger between TUI AG and TUI Travel PLC at the end of December 2014.The portfolio of Specialist Group is to be sold in one transaction from theautumn of 2016 with the exception of two tour operator brands. Crystal Skiand Thomson Lakes & Mountains will not be included in the sale as they havestrong synergies and are closely associated with core business Tourism.Theyhave been integrated into TUI UK's business.Research and developmentAs a tourism service provider, the TUI Group does not engage in researchanddevelopment activities comparable with manufacturing companies. Thissub-report is therefore not prepared.Value-oriented Group managementManagement system and Key Performance IndicatorsAs the world's number one tourism group with one global brand, anattractivehotel portfolio, a growing cruise business, a modern and efficient aircraftfleet and direct access to more than 20 million customers, we aim to secureour vertically integrated business model by means ofprofitable growth andachieve a sustainable increase in the value of the TUI Group.A standardised management system has been created to implement value-drivenmanagement across the Group as a whole and in its individual businesssegments. The value-oriented management system is an integral part ofconsistent Group-wide planning and controlling processes.Key management variables used for regular value analysis are Return OnInvested Capital (ROIC) and absolute value added. ROIC is compared with thesegment-specific cost of capital. ROIC is calculated as the ratio ofunderlying earnings before interest, taxes and amortisation of goodwill(underlying EBITA) to average invested interest-bearing invested capital(invested capital) for the segment.Our definition of EBITA is earnings before net interest result, income taxand impairment of goodwill excluding losses on container shipping andexcluding the result from the measurement of interest hedges. While EBITAincludes amortisation of intangible assets, it does not carry the result ofour investment in container shipping as our stake in Hapag-Lloyd AG is apure equity investment without an operating character.In order to explain and measure TUI Group's operating performance, we useunderlying EBITA adjusted for gains on disposal of investments,restructuring expenses, primarily scheduled amortisation of intangibleassets from purchase price allocations and other expenses for and incomefrom one-off effects.In the framework of our growth strategy, we aim to achieve an underlyingEBITA CAGR of at least 10 % over the years to financial year 2018 / 19 (onaconstant currency basis).In order to follow the development of the business performance of oursegments in the course of the year, we monitor the financial indicatorsturnover and EBITA, but also key non-financial performance indicators, suchas customer numbers in our tour operators, and capacity or passenger days,occupancy and average prices in TUI Hotels & Resorts and Cruises. In theframework of our sustainability reporting, we have also defined a targetindicator for specific CO2 emissions per passenger kilometre for ourairlines. We measure achievement of that indicator on an annual basis.Cost of capital Cost of capital (WACC) Tour Hotels Cruises TUI operator Group % 2015 / 16 2015 / 2015 / 2015 / 16 16 16 Risk-free interest rate 0.50 0.50 0.50 0.50 Risk adjustment 9.40 6.03 6.35 8.42 Market risk premium 6.00 6.00 6.00 6.00 Beta factor1 1.5659 1.0042 1.0591 1.4025 Cost of equity after taxes 9.90 6.53 6.85 8.92 Cost of debt capital before 4.18 2.20 2.72 3.63 taxes Tax shield 1.00 0.55 0.85 0.89 Cost of debt capital after 3.18 1.65 1.87 2.74 taxes Share of equity 2 42.65 70.11 68.54 50.70 Share of debt capital 2 57.35 29.89 31.46 49.30 WACC after taxes3 6.00 5.00 5.25 5.75 Tax rate 24.00 25.00 31.00 24.62 Cost of equity before taxes 12.55 8.46 9.61 11.50 Cost of debt capital before 4.18 2.20 2.72 3.63 taxes Share of equity 2 42.65 70.11 68.54 50.70 Share of debt capital 2 57.35 29.89 31.46 49.30 WACC before taxes3 7.75 6.50 7.50 7.50 1 Segment beta based on peer group, group beta based on weighted segmentbetas2 Segment share based on peer group, group share based on weighted segmentshares3 Rounded to 1/4 percentage pointsThe cost of capital is calculated as the weighted average cost of equityanddebt capital (WACC). While the cost of equity reflects the return expectedby investors from TUI shares, the cost of debt capital is based on theaverage borrowing costs of the TUI Group. The cost of capital always showspre-tax costs, i.e. costs before corporate and investor taxes. The expectedreturn determined in this way corresponds to the same tax level as theunderlying earnings included in ROIC.ROIC and economic value addedROIC is calculated as the ratio of underlying earnings before interest,taxes and amortisation of goodwill (underlying EBITA) to the average forinvested interest-bearing capital (invested capital) for the relevantsegment or sector. Given its definition, this performance indicator is notinfluenced by any tax or financial factors and has been adjusted forone-offeffects. From a Group perspective, invested capital under the financingapproach is derived from liabilities, comprising equity (includingnon-controlling interests) and the balance of interest-bearing liabilitiesand interest-bearing assets. The cumulative amortisations of purchase priceallocations are then factored in to invested capital.Apart from ROIC as a relative performance indicator, economic value addedisused as an absolute value-oriented performance indicator. Economic valueadded is calculated as the product of ROIC less associated capital costsmultiplied by interest-bearing invested capital. ROIC and Value added TUI Group EUR million 2015 / 2014 / 15 16 restated Equity 3,248.2 2,417.4 plus interest bearing financial 3,769.1 3,500.0 liability items less financial assets 3,137.2 2,522.3 plus purchase price allocation 300.5 572.9 Invested Capital 4,180.6 3,968.1 Invested Capital Prior year 3,968.1 3,544.7 Seasonal adjustment1 500.0 500.0 Ø Invested capital 2 4,574.4 4,256.4 Underlying EBITA 1,000.5 953.3 ROIC% 21.87 22.40 Weighted average cost of capital (WACC)% 7.50 10.00 Value added 657.4 527.7 1 Adjustment to net debt to reflect a seasonal average cash balance2 Average value based on balance at beginning and year-endFor TUI Group, ROIC was down by 0.5 percentage points on the previous yearat 21.9 %. With the cost of capital at 7.5 %, this meant positive economicvalue added of EUR 657.4 m (previous year EUR 527.7 m).Risk ReportSuccessful management of existing and emerging risks is critical to thelong-term success of our business and to the achievement of our strategicobjectives. In order to seize market opportunities and leverage thepotential for success, risk must be accepted to a reasonable degree. Riskmanagement is therefore an integral component of the Group's CorporateGovernance.The current financial year has seen the risk management framework whichevolved last year after the merger become further embedded in theorganisation and within the business planning cycle. The major enhancementin the current financial year was the upgrade of the risk and controlsoftware and unification of the two previous legacy systems into a singleapplication, which has made reporting processes more efficient as a result.Our risk governance framework is set out below.Risk governance frameworkStrategic direction and risk appetiteThe Executive Board, with oversight by the Supervisory Board, determinesthestrategic direction of the TUI Group and agrees the nature and extent oftherisks it is willing to take to achieve its strategic objectives.To ensure that the strategic direction chosen by the business representsthebest of the strategic options open to it, the Executive Board is supportedby the Group Strategy function. This function exists to facilitate andinform the Executive Board's assessment of the risk landscape anddevelopment of potential strategies by which it can drive long-termshareholder value. On an annual basis the Group Strategy function developsan in-depth fact base in a consistent format which outlines the marketattractiveness, competitive position and financial performance by divisionand source market. These are then used to facilitate debate as to the leveland type of risk that the Executive Board finds appropriate in the pursuitof its strategic objectives. The strategy, once fully defined, consideredand approved by the Executive Board, is then incorporated into the Group'sthree-year roadmap and helps to communicate the risk appetite andexpectations of the organisation both internally and externally.Ultimate responsibility for the Group's risk management rests with theExecutive Board. Having determined and communicated the appropriate levelofrisk for the business, the Executive Board has established and maintains arisk management system to identify, assess, manage and monitor risks whichcould threaten the existence of the company or have a significant impact onthe achievement of its strategic objectives: these are referred to as theprincipal risks of the Group. This risk management system includes aninternally-published risk management policy which helps to reinforce thetone set from the top on risk, by instilling an appropriate risk culture inthe organisation whereby employees are expected to be risk aware, controlminded and 'do the right thing'. The policy provides a formal structure forrisk management to embed it in the fabric of the business. Each principalrisk has assigned to it a member of the Executive Committee as overall risksponsor to ensure that there is clarity of responsibility and to ensurethateach of the principal risks are understood fully and managed effectively.The Executive Board regularly reports to the Audit Committee of theSupervisory Board on the overall risk position of the Group, on theindividual principal risks and their management, and on the performance andeffectiveness of the risk management system as a whole.The Risk Oversight Committee (ROC) ensures on behalf of the Executive Boardthat business risks are identified, assessed, managed and monitored acrossthe businesses and functions of the Group. Meeting on at least a quarterlybasis, the ROC's responsibilities include considering the principal riskstothe Group's strategy and the risk appetite for each of those risks,assessing the operational effectiveness of the controls in place to managethose risks and any action plans to further improve controls, and reviewingthe bottom-up risk reporting from the businesses themselves to assesswhether there are any heightened areas of concern. The ROC helps to ensurethat risk management is embedded into the planning cycle of the Group andhas oversight of the stress-testing of cash flow forecasts.Senior executives from the Group's major businesses are required to attendthe ROC on a rotational basis and present on the risk and control frameworkin their business, so that the members of the ROC can ask questions on theprocesses in place, the risks present in each business and any new orevolving risks which may be on their horizon, and also to seek confirmationthat the appropriate risk culture continues to be in place in each of themajor businesses.Chaired by the Chief Financial Officer, other members of the Committeeinclude the Group Director Controlling and Finance Director Tourism, thedirectors of Compliance & Risk, Financial Accounting, Treasury & Insurance,Group Reporting & Analysis, Assurance, M&A, Investor Relations andrepresentatives from the IT and Legal Compliance functions. The director ofGroup Audit attends without having voting rights to maintain theindependence of their function. The ROC reports quarterly to the ExecutiveBoard to ensure that it is kept abreast of changes in the risk landscapeanddevelopments in the management of principal risks, and to facilitateregularquality discussions on risks and risk management at the Executive Board.The Executive Board has also established a Group Risk team to ensure thatthe risk management system functions effectively and that the riskmanagement policy is implemented appropriately across the Group. The GroupRisk team supports the risk management process by providing guidance,support and challenge to management whilst acting as the central point forco-ordinating, monitoring and reporting on risk across the Group. The GroupRisk team is responsible for the administration and operation of the riskand control software which underpins the Group's risk reporting and riskmanagement process.Each division and source market within the Group is required to adopt theGroup Risk Management policy. In order to do this, each either has theirownRisk Committee or includes risk as a regular agenda item at their Boardmeetings to ensure that it receives the appropriate senior managementattention within their business. In addition, the divisions and sourcemarkets each appoint a Risk Champion, who promotes the risk managementpolicy within their business and ensures its effective application. TheRiskChampions are necessarily in close contact with the Group Risk team andtheyare critical both in ensuring that the risk management system functionseffectively and in implementing a culture of continuous improvement in riskmanagement and reporting.Risk management processThe Group Risk team applies a consistent risk methodology across all keyareas of the business. This is underpinned by risk and control softwarewhich reinforces clarity of language, visibility of risks, controls andactions and accountability of ownership. Although the process of riskidentification, assessment and response is continuous and embedded withinthe day-to-day operations of the divisions and source markets, it isconsolidated, reported and reviewed at varying levels throughout the Groupon at least a quarterly basis.Risk identification: On a quarterly basis, line management closest to therisks identify the risks relevant to the pursuit of the strategy withintheir business area in the context of four types of risk: * longer-term strategic and emerging threats; * medium-term challenges associated with business change programmes; * short-term risks triggered by changes in the external and regulatory environment; and * short-term risks in relation to internal operations and control. A risk owner is assigned to each risk, who has the accountability andauthority for ensuring that the risk is appropriately managed.Risk descriptions: The nature of the risk is articulated, stating theunderlying concern the risk gives arise to, identifying the possible causalfactors that may result in the risk materialising and outlining thepotential consequences should the risk crystallise. This allows thedivisions /source markets and the Group to assess the interaction of risks andpotential triggering events and / or aggregated impacts before developingappropriate mitigation strategies to target causes and / or consequences.Risk assessment: The methodology used is to initially assess the grossrisk.The gross risk is essentially the worst case scenario, being the product ofthe impact together with the likelihood of the risk materialising if therewere no controls in place to manage, mitigate or monitor the risk. The keybenefit of assessing the gross risk is that it highlights the potentialriskexposure if controls were to fail completely or not be in place at all.Bothimpact and likelihood are scored on a rating of 1 to 5 using the criteriaoutlined below.The next step in the process is to assess the controls which are currentlyin place and which help to reduce the likelihood of the risk materialisingand / or its impact if it does. The details of the controls including thecontrol owners are documented. Consideration of the controls in place thenenables the current or net risk score to be assessed, which is essentiallythe reasonably foreseeable scenario. This measures the impact andlikelihoodof the risk with the current controls identified in operation. The keybenefit of assessing the current risk score is that it provides anunderstanding of the current level of risk faced today and the relianceplaced on the controls currently in operation. im- pa- ct as- se- ss- me- nt insignifi- minor moderate major catastrophic cant qu- = 15 % an- (= ti- - < EUR 50 < EUR 105 m) - < EUR 160 EUR 160 m) ta- m) m) ti- ve Qu- Minimal Limited Short term Medium term Detrimental al- impact on impact on impact on impact on impact on it- at- iv- e * Global * Global * Global * Global *Global reputation * reputation * reputation * reputation * reputation * Programme Programme Programme Programme Programme delivery * delivery * delivery * delivery * delivery * Technology Technology Technology Technology Technology reliability reliability reliability reliability reliability * Health & * Health & * Health & * Health & *Health & Safety Safety Safety Safety Safety standards standards standards standards standards* Budgeted underlying EBITA for the financial year ended 30 September 2016 Like- lihood Assess- ment rare < unlikely 10 possible 30 likely 60 - almost 10 % - = 80 Chance Chance Chance Chance %ChanceRisk response: If management are comfortable with the current risk score,then the risk is accepted and therefore no further action is required. Thecontrols in place continue to be operated and management monitor the risk,the controls and the risk landscape to ensure that the risk score staysstable and in line with management's tolerance of the risk.If, however, management assesses that the current risk score is too high,then an action plan will be drawn up with the objective of introducing newor stronger controls which will reduce the impact and / or likelihood oftherisk to an acceptable, tolerable and justifiable level. This is known asthetarget risk score and is the parameter by which management can ensure therisk is being managed in line with the Group's overall risk appetite. Therisk owner will normally be the individual tasked with ensuring that thisaction plan is implemented within an agreed timetable.Each division / source market will continue to review their risk registeronan ongoing basis through the mechanism appropriate for their business e. g.local Risk Committee. The risk owner will be held to account if actionplansare not implemented within the agreed delivery timescales.This bottom-up risk reporting is considered by the ROC alongside theGroup'sprincipal risks. New risks are added to the Group's principal risk registerif deemed to be of a significant nature so that the ongoing status and theprogression of key action plans can be managed in line with the Group'stargets and expectations.Ad hoc risk reportingWhilst there is a formal process in place aligned to reporting on risks andrisk management on a quarterly basis, the process of risk identification,assessment and response is continuous and therefore if required risks canbereported to the Executive Board outside of the quarterly process if eventsdictate that this is necessary and appropriate. Ideally such ad hocreporting is performed by the business or function which is closest to therisk, but it can be performed by the Group Risk team if necessary. The bestexample of ad hoc risk reporting in the year was an early assessment aheadof the UK referendum of the possible risks posed by a vote in favour of theUK leaving the EU ('Brexit'). A Brexit Steering Committee has now beencreated to monitor developments in this area.Risk maturity & cultureDuring the current financial year, the Risk Champions and the Group Riskteam have continued to work together on risk management actions plans forthe businesses as part of the culture of continuous improvement.Periodically we ask the businesses to formally assess the risk maturity andculture of their business, primarily through the Risk Champions completingself-assessment questionnaires, validating this with their local boards andthen discussing their responses with the Group Risk team.Entity scopingA robust exercise is conducted each year to determine the specific entitiesin the Group which need to be included within the risk and control softwareand therefore be subject to the full rigour of the risk management process.The scoping exercise starts with the entities included within the Group'sconsolidation system, and applies materiality thresholds to a combinationofrevenue, profit and asset benchmarks. From the entities this identifies,thecommon business management level at which those entities are managed isidentified to dictate the entities which need to be set in the risk andcontrol software itself to facilitate completeness of bottom-up riskreporting across the Group. This ensures that the risks and controls areable to be captured appropriately at the level at which the risks are beingmanaged.Effectiveness of risk management systemThe Executive Board regularly reports to the Audit Committee of theSupervisory Board on the performance and effectiveness of the riskmanagement system, supported by the ROC and the Group Risk team.Additionally, the Audit Committee receives assurance from Internal Auditthrough its programme of audits over a selection of principal risks andbusiness transformation initiatives most critical to the Group's continuedsuccess. Finally, the Group's auditor assess the risk management system inaccordance with section 317 (4) of the German Commercial Code.The conclusion from all of the above assurance work is that the riskmanagement system has functioned effectively throughout the year and therehave been no significant failings or weaknesses identified. Of course thereis always room for improvement and as noted earlier, the Risk Champions andthe Group Risk team have continued to work together on risk managementactions plans for the businesses. Broadly this concerns ensuringconsistencyof approach in assessing risk scores, clearer identification of controlscurrently in place as well as any action plans to introduce furthercontrols, and ensuring that risk identification has considered the fourriskcategories.Principal risksThere are some principal risks which are inherent to the tourism sector andnecessarily face all businesses in the sector. For these inherent risks wehave controls, processes and procedures in place as a matter of coursewhichserve to mitigate each risk to either minimise the likelihood of the eventoccurring and / or minimise the impact if it does occur. These risks are onour risk radar and we regularly monitor the risk, the controls and the risklandscape to ensure that the risk score stays stable and in line with ourrisk appetite in each case.Furthermore, the tourism industry is fast-paced and competitive, with theemergence of new market participants operating new business models,combinedwith consumer tastes and preferences evolving all the time. As a result asabusiness we always have to adapt to the changing environment, and it isthisprocess of constant change which generally gives rise to a number ofprincipal risks which we have to actively manage in order to bring the riskinto line with our overall risk appetite. We have action plans in place toincrease controls around each of these risks and reduce the current netriskscore to the target level indicated in the heat map overleaf.In the heat map the assessment criteria used are shown on page 52 below.Note that the quantitative impact assessment is based on the budgetedunderlying EBITA for the financial year ended 30 September 2016.If the risk detail in the subsequent tables does not suggest otherwise, therisks shown below relate to all segments of the Group. The risks listed arethe principal risks to which we are exposed and are not exhaustive. Theywill necessarily evolve over time due to the dynamic nature of ourbusiness.Risks with no impact on underlying EBITAImpairment risk related to the investment in container shipping(Hapag-LloydAG).TUI Group continues to hold a substantial investment in the containershipping company, Hapag-Lloyd AG. Significant deterioration in the marketvalue of the investment will require an impairment to be booked in theincome statement of the TUI Group - as has occurred in the financial yearended 30th September 2016. Whilst this risk has been reduced by theimpairment already taken in the current and prior years, the value of theinvestment on our balance sheet is still material and therefore the riskcontinues to exist. We are committed to our plan to fully exit thisinvestment in the medium term.German trade tax risk.As noted in prior years, the German tax authorities have issued guidance onhow certain items of expenditure should be treated for the purposes ofGerman trade tax. The Group continues to disagree with the German taxauthorities' interpretation of this matter and it is possible that theissuewill have to be litigated through the German tax courts which could take aconsiderable amount of time to bring it to a resolution. However due to ajudgement from the fiscal court Munster on 4 February 2016, a reassessmentof the trade tax risk for the purchase of hotel accommodation wasundertakenin the current financial year, resulting in a separately recognised taxexpense of EUR 37 m in the income statement.Overall risk assessmentDestination disruption is an inherent risk to which all providers ofholidayand travel services are exposed. This disruption can take place in manyforms such as natural catastrophes, outbreaks of diseases, social unrest,terrorist attacks and the implications of war in countries close to oursource markets and destinations. Whilst thankfully we did not directlyexperience a tragic event like the Tunisia incident of June 2015, incidentsin various destinations (e. g. Sharm el-Sheikh in October 2015) continue tokeep the risk of disruption in some North African destinations at a highlevel. Furthermore, general customer concerns over safety and security ineastern Mediterranean destinations (particularly Turkey) has led to ageneral decline in demand across all our source markets for thesedestinations. Due to our geographic reach, we have been able to respond tothis shift in demand by remixing capacity away from North Africa and theeastern Mediterranean towards destinations customers are currentlyfavouringsuch as Spain, Canary Islands, Cape Verde etc. Despite this current shiftindemand, Turkey remains an important destination for our Group. Our generalpolicy in respect of destinations remains to follow foreign office adviceineach of our source markets relating to non-essential travel to specificdestinations. It is noted that in January 2017 there will be an inquest inthe UK into the Tunisia incident of June 2015 and we await any industryrecommendations that may arise as a result.One of the biggest events in 2015 / 16 which has the potential tosignificantly alter the risk landscape of the Group is the UK referendum atthe end of June which resulted in a vote for the UK to leave the EU('Brexit'). The exchange rate volatility seen earlier in the year hascontinued as a result, which has an immediate impact on the translation ofthe sterling results from our UK business into euros, the reportingcurrencyof the Group. The depreciation of sterling against the euro means that each£ of profit translates into a smaller euro value. The outcome of thereferendum has led to a greater degree of uncertainty over the futureeconomic performance of the UK economy. Whilst we have not seen anyapparentslow-down in bookings in our UK business to date, there is a greaterpotential for this to occur in the medium term. Therefore for both of thesereasons we see our macroeconomic risk as having increased compared to thistime last year, although the strength and differentiation of our customeroffering means that we are well positioned to deal with the changingmacroeconomic environment. The depreciation of sterling also has a costimpact through making foreign denominated input costs in the UK businessmore expensive in sterling terms. Whilst the standard hedging policy wefollow means that for the 2015 / 16 financial year the UK business waslargely immune to these cost pressures, the risk crystallises to a greaterextent in 2016 / 17, as S17 was partially hedged (c. 40 %) at the time ofthe referendum, if sterling stays at current levels. Normal businesspractice is to increase holiday prices to offset these higher input costsand protect margins, however competitive pressures may prevent prices fromrising to the full extent required. The other immediate impact of theBrexitvote has been the reduction in UK interest rates and therefore discountfactors applied to UK pension liabilities, which has resulted in asignificant increase in the pension liability at the year-end. Whilst thisdoes not of itself present a risk at the moment, it may do so when the nextactuarial valuation is performed on the UK pension scheme if it then leadsto a requirement to make higher cash pension contributions over a sustainedperiod of time. Please see note Pension provisions and similar obligationsof the financial statements for further details on the pension deficit.The Group has created a Brexit Steering Committee to monitor developmentsasthe political negotiations take place concerning the specifics of the termsof the UK exit from and future trading relationship with the EU and howthismay affect the TUI Group's business model. At this stage it is too early toassess whether there will be any impact on areas such as flying rights,customer visa requirements or employee contracts and therefore we viewBrexit as being an emerging risk around which more clarity will be gainedinthe future once Article 50 is triggered by the UK government and exitnegotiations begin.The completion in December 2014 of the merger between TUI AG and TUI TravelPLC has had an impact on our risk landscape by opening up new businessopportunities but also introducing new risks in the pursuit of thoseopportunities (e. g. brand change) and in the context of the delivery ofspecific merger synergies. We are pleased that the post-merger integrationof the Group has progressed well and at a faster pace than originallyanticipated. We are on track to deliver our specific merger synergytargets,integration-related restructuring programmes are ongoing as expected, andwehave successfully navigated our way through the initial period ofpost-merger concern with regards to retaining key talent. We thereforeperceive these risks to be at a lower level than they were 12 months ago.In the course of the restructuring of our tourism activities, we havecompleted the disposal in September 2016 of Hotelbeds Group and commencedthe marketing of Travelopia (formerly part of Specialist Group). Such largedisposal transactions have inherent risks associated with them due to theamount of management time they require to bring them to a successfulconclusion, combined with continuing obligations and customaryrepresentation and warranties.Finally, the risk of a deterioration in the valuation of our containershipping investment crystallised again during the year and a furtherimpairment has been taken. Whilst this has therefore reduced the risk forfuture periods, the value of the investment on our balance sheet is stillmaterial and therefore the risk continues to exist.Other than the items noted above, the Executive Board is of the opinionthatthere has been no other significant change to the risk landscape of theGroup.Viability statementIn accordance with provision C2.2 of the 2014 revision of the UK CorporateGovernance Code, the Executive Board has assessed the prospect of theCompany over a longer period than the 12 months required by the 'GoingConcern' provision. The Executive Board considers annually and on arolling-basis a three year strategic plan for the business as outlinedearlier in the 'Strategic direction and risk appetite' section. The latestthree year plan was approved in October 2016 and covers the period to 30thSeptember 2019. A three year horizon is considered appropriate for afast-moving competitive environment such as tourism, and it is noted thatthe Group's current EUR 1,535.0 m revolving credit facility, which is usedto manage the seasonality of the Group's cash flows and liquidity, maturesin December 2020 which is beyond the timeframe of the three year horizon.The three year plan considers cash flows as well as the financial covenantswhich the credit facility requires compliance with. A key assumptionunderpinning the three year plan and the associated cash flow forecast isthat aircraft and cruise ship finance will continue to be readilyavailable.The Executive Board has conducted a robust assessment of the principalrisksfacing the company, including those that would threaten its business model,future performance, solvency or liquidity. Sensitivity analysis is appliedto the cash flow to model the potential effects should certain principalrisks actually occur, individually or in unison. This includes modellingtheeffects on the cash flow of significant disruption to a major destinationinthe summer season.Taking account of the company's current position, principal risks and theaforementioned sensitivity analysis, the Executive Board has a reasonableexpectation that the company will be able to continue in operation and meetits liabilities as they fall due over the three year period of theassessment.Key features of the internal control and risk management system in relationto the Group accounting process (sections 289 (5) and 315 (2) no 5 of theGerman Commercial Code HGB)1. Definition and elements of the internal control and risk managementsystem in the TUI GroupThe TUI Group's internal control system comprises all the principles,processes and measures that are applied to secure effective, efficient andaccurate accounting which is compliant with the necessary legalrequirements.In the completed financial year, the TUI Group's existing internal controlsystem was further developed, drawing on the internationally recognisedframework of COSO (Committee of Sponsoring Organizations of the TreadwayCommission), which forms the conceptual basis for the internal controlsystem.The TUI Group's internal control system consists of internal controls andthe internal monitoring system. The Executive Board of TUI AG, inexercisingits function of managing business operations, has entrusted responsibilityfor the internal control system in the TUI Group to specific Groupfunctions.The elements of the internal monitoring system in the TUI Group compriseboth measures integrated into processes and measures performedindependently. Besides manual process controls, e. g. the 'four-eyesprinciple', another key element of the process-related measures areautomated IT process controls. Process-related monitoring is also securedbybodies such as the Risk Oversight Committee of TUI AG and by specific Groupfunctions.The Supervisory Board of TUI AG, in particular its Audit Committee, as wellas the Group Auditing department at TUI AG and the decentralized auditdepartments within Group companies, are incorporated into the TUI Group'sinternal monitoring system through their audit activities performedindependently from business processes. On the basis of section 107 (3) ofthe German Stock Corporation Act, the Audit Committee of TUI AG dealsprimarily with the auditing of the annual financial statements, monitoringthe accounting process and the effectiveness of the internal control andrisk management system.The Group's auditors have oversight of the TUI Group's control environmentthrough their non-process-related activities. The audit of the consolidatedfinancial statements by the Group auditor and the audit of the individualfinancial statements of Group companies included in the consolidatedfinancial statements, in particular, constitute a key non-process-relatedmonitoring measure with regard to Group accounting.In relation to Group accounting, the risk management system, introduced asan Enterprise Risk Management System (ERM System) as a component of theinternal control system, also addresses the risk of misstatements in Groupbookkeeping and external reporting. Apart from operational risk management,which includes the transfer of risks to insurance companies by creatingcover for damage and liability risks and also hedging transactions to limitforeign currency and fuel price risks, the TUI Group's risk managementsystem embraces the systematic early detection, management and monitoringofrisks across the Group. A more detailed explanation of the risk managementsystem is provided in the section on the Risk Governance Framework in theRisk Report.2. Use of IT systemsBookkeeping transactions are captured in the individual financialstatementsof the subsidiaries of TUI AG, through local accounting systems such as SAPor Oracle. As part of the process of preparing their individual financialstatements, subsidiaries complete standardized reporting packages in theGroup's Oracle Hyperion Financial Management 11.1.2.3 (HFM) reportingsystem. HFM is used as the uniform reporting and consolidation systemthroughout the Group so that no additional interfaces exist for thepreparation of the consolidated financial statements.All consolidation processes used to prepare the consolidated financialstatements of TUI AG, e. g. capital consolidation, assets and liabilitiesconsolidation and expenses and income elimination including at equitymeasurement, are generated and fully documented in HFM. All elements of TUIAG's consolidated financial statements, including the disclosures in theNotes, are developed from the HFM consolidation system. HFM also providesvarious modules for evaluation purposes in order to prepare complementaryinformation to explain TUI AG's consolidated financial statements.The HFM reporting and consolidation system has an in-built workflow processwhereby when businesses promote their data within the system, to signalthattheir reporting package is complete, they are then locked out from makingany further changes to that data. This ensures data integrity within thesystem and also facilitates a strong audit trail enabling changes to areporting package to be identified. This feature of the HFM system has beenchecked and validated by the TUI AG Group Audit department on severaloccasions since the system was introduced.At their own discretion, TUI AG's Group auditors select certain individualfinancial statements from the financial statements entered in the HFMreporting and consolidation system by the Group companies, which are thenreviewed for the purposes of auditing the consolidated financialstatements.3. Specific risks related to Group accountingSpecific risks related to Group accounting may arise, for example, fromunusual or complex business transactions, in particular at critical timestowards the end of the financial year. Business transactions not routinelyprocessed also entail special risks. The discretion necessarily granted toemployees for the recognition and measurement of assets and liabilities mayresult in further Group accounting-related risks. The outsourcing andtransfer of accounting-specific tasks to service companies may also giverise to specific risks. Accounting-related risks from derivative financialinstruments are outlined in the Notes to the consolidated financialstatements.4. Key regulation and control activities to ensure proper and reliableGroupaccountingThe internal control measures aimed at securing proper and reliable Groupaccounting ensure that business transactions are fully recorded in a timelymanner in accordance with legal requirements and the Articles ofAssociation. This also ensures that assets and liabilities areproperlyrecognised, measured and presented in the consolidated financialstatements. The control operations also ensure that bookkeeping recordsprovide reliable and comprehensive information.Controls implemented to secure proper and reliable accounting include, forinstance, analysis of facts and developments on the basis of specificindicators. Separation of administrative, execution, settlement andauthorisation functions and the implementation of these functions bydifferent persons reduces the potential for fraudulent operations.Organisational measures also aim to capture any corporate or Group-widerestructuring or changes in sector business operations rapidly andappropriately in Group accounting. They also ensure, for instance, thatbookkeeping transactions are correctly recognised in the period in whichthey occur in the event of changes in the IT systems used by the accountingdepartments of Group companies. The internal control system likewiseensuresthat changes in the TUI Group's economic or legal environment are mappedandthat new or amended accounting standards are correctly applied.The TUI Group's accounting policies together with the InternationalFinancial Reporting Standards (IFRS) in compliance with EU legislation,govern the uniform accounting and measurement principles for the German andforeign companies included in TUI's consolidated financial statements. Theyinclude general accounting principles and methods, policies concerning thestatement of financial position, income statement, notes, managementreport,cash flow statement and segment reporting.The TUI Group's accounting policies also govern specific formalrequirementsfor the consolidated financial statements. Besides defining the group ofconsolidated companies, they include detailed guidance on the reporting offinancial information by those companies via the group reporting system HFMon a monthly, quarterly and year end basis. TUI's accounting policies alsoinclude, for instance, specific instructions on the initiating,reconciling,accounting for and settlement of transactions between group companies ordetermination of the fair value of certain assets, especially goodwill.At Group level, specific controls to ensure proper and reliable Groupaccounting include the analysis and, where necessary, correction of theindividual financial statements submitted by the Group companies, takingaccount of the reports prepared by the auditors and meetings to discuss thefinancial statements which involve both the auditors and local management.Any further content that requires adjusting can be isolated and processeddownstream.The control mechanisms already established in the HFM consolidation systemminimize the risk of processing erroneous financial statements. Certainparameters are determined at Group level and have to be applied by groupcompanies. This includes parameters applicable to the measurement ofpensionprovisions or other provisions and the interest rates to be applied whencash flow models are used to calculate the fair value of certain assets.Thecentral implementation of impairment tests for goodwill recognized in thefinancial statements secures the application of uniform and standardizedevaluation criteria.5. DisclaimerWith the organisational, control and monitoring structures established bythe TUI Group, the internal control and risk management system enablescompany-specific facts to be captured, processed and recognised in full andproperly presented in the Group's accounts.However, it lies in the very nature of the matter that discretionarydecision-making, faulty checks, criminal acts and other circumstances, inparticular, cannot be ruled out and will restrict the efficiency andreliability of the internal control and risk management systems, so thateven Group-wide application of the systems cannot guarantee with absolutecertainty the accurate, complete and timely recording of facts in theGroup's accounts.Any statements made relate exclusively to subsidiaries according to IFRS 10included in TUI AG's consolidated financial statements.Overall assessment by the Executive Board and Report on expecteddevelopmentComparison of actual business performance 2015 / 16 with the forecastIn the second post-merger financial year, TUI Group's performance againexceeded our original forecast, despite a challenging geopoliticalframework. TUI Group's underlying EBITA rose by 5.0 % to EUR 1,000.5 m infinancial year 2015 / 16. Excluding the negative foreign exchange effectsincluded in these earnings due to the decline of sterling against the euroin the period under review, this corresponds to an improvement of 14.5 %.Wehave thus outperformed our guidance of achieving an increase in ouroperating result of at least 10 % on a constant currencybasis.Due to the sound operating performance and lower net one-off charges, theGroup also achieved an increase in its reported EBITA, which grew by 13.0 %to EUR 898.1 m.Brand turnover and TUI Group turnover grew less than expected, butdeliveredgrowth of 2.3 % and 1.4 % respectively on the prior year on a constantcurrency basis.At EUR 691.0 m, the Group's net capital expenditure on property, plant andequipment and financial investments fell slightly short of the target ofEUR750.0 m. These amounts include the investments and capital expenditure ofHotelbeds Group and Specialist Group, which were sold in the period underreview. The net debt of EUR 31.8 m carried at the end of financial year2015/ 16 also reflected the broadly neutral net finance position for TUI Groupwe had expected after the agreement to sell Hotelbeds Group.Expected changes in the economic framework Expected development of gross domestic product Var. % 2017 2016 World + 3.4 + 3.1 Eurozone + 1.5 + 1.7 Germany + 1.4 + 1.7 France + 1.3 + 1.3 UK + 1.1 + 1.8 US + 2.2 + 1.6 Russia + 1.1 - 0.8 Japan + 0.6 + 0.5 China + 6.2 + 6.6 India + 7.6 + 7.6 Source: International Monetary Fund (IMF), World Economic Outlook, October2016Macroeconomic situationThe International Monetary Fund (IMF, World Economic Outlook, October 2016)expects gross domestic product to grow 3.1 % in calendar year 2016, aseconomic momentum has declined in the developed economies following the UKvote to exit the European Union and growth inthe United States has beenweaker than expected. For 2017, the IMF expects the global economy to growby 3.4 %. The experts believe the economy will gain some momentum again dueto several factors, including an increase in investments and a betteroutlook for the emerging markets.Market trend in tourismUNWTO expects international tourism to continue growing globally in thisdecade. For the next few years, average weighted growth of around 3 % perannum has been forecast (source: UNWTO, Tourism Highlights, 2016 edition).In the first six months of 2016, international arrivals grew by 4.0 %.UNWTOexpects growth of 3.5 % to 4.5 % for calendar year 2016 (source: UNWTO,World Tourism Barometer, September 2016).Effects on TUI GroupAs a leading provider of tourism services, TUI Group depends on thedevelopment of consumer demand in the large source markets in which weoperate with our tour operator and hotel brands. Our budget is based on theassumptions used as a basis by the IMF to predict the future development ofthe global economy.Apart from the development of consumer sentiment, political stability inthedestinations is a further crucial factor affecting demand for holidayproducts. In our view, our business model is sufficiently flexible tocompensate for the currently identifiable challenges.The expected turnover growth assumed for our tour operators in our budgetfor financial year 2016 / 17 is in line with UNWTO's long-term forecast.Ourstrategic focus is to create unified branding in our source markets,broadenour portfolio of Group-owned hotels and expand our cruise business.Expected development of Group turnover and earningsTUI GroupThe translation of the income statements of foreign subsidiaries in ourconsolidated financial statements is based on average monthly exchangerates. TUI Group generates a considerable proportion of consolidatedturnover and large earnings and cash flow contributions in non-eurocurrencies, in particular GBP, USD and SEK. Taking account of theseasonality in tourism, the development of these currencies against theeuroin the course of the year therefore strongly impacts the financialindicators carried in TUI Group's consolidated financial statements.Thecomments on the expected development of our Group in financial year 2016/ 17 provided below are based on the assumption of constant currencies forthe completed financial year 2015 / 16. Expected development of Group turnover, underlying EBITA and adjustments Expected Development vs. PY EUR million 2015 / 16 2016 / 17* Turnover 17,185 around 3 % growth Underlying EBITA 1,001 at least 10 % growth Adjustments 103 approx. EUR 80 m cost * Variance year-on-year assuming constant foreign exchange rates areappliedto the result in the current and prior period and based on the currentgroupstructure;guidance relates to continuing operations and excludes any disposalproceedsfor Travelopia and Hapag-Lloyd AG.TurnoverWe expect turnover to grow by around 3 % in financial year 2016 / 17 on aconstant currency basis, primarily due to an expected increase in customernumbers and higher average prices for our large tour operators, driven bythe delivery of our growth roadmap.Underlying EBITATUI Group's underlying EBITA in financial year 2016 / 17 is expected togrowby at least 10 % at constant currency as we deliver our growth roadmap.Risks relate to the development of customer numbers against the backdrop ofcontinued volatility in the economic environment in our key source markets,demand for Group-owned hotels and cruise ships and the delivery of allmerger synergies.AdjustmentsFor financial year 2016 / 17, we expect purchase price allocations and netone-off costs of around EUR 80 m, to be carried as adjustments.ROIC and Economic Value AddedDue to the enhanced operating result, we expect ROIC to improve slightly infinancial year 2016 / 17; depending on the development of TUI Group'scapital costs, this is also expected to result in an increase in economicvalue added.Development in the segmentsThe expected development outlined below is based on current trading, ourgrowth roadmap and the relative performance of our segments duringfinancialyear 2015 / 16. Future development depends on demand in our source marketsand customer segments and on input cost curves. In our view, the benefit ofour diversified business model is that developments in individual segmentscan be offset by opposite trends in other segments.Source marketsBased on current trading and assuming constant currency exchange rates, wewould expect the source markets to deliver at least 10 % underlyingearningsgrowth at constant currency. Besides a continuous good development in UKanda further improvement in Nordics we expect and increase of our touroperating result in France which should also benefit from the recentTransatacquisition. In addition, Germany should benefit from efficiency measures.Hotels & ResortsWe expect that the result improvement following the delivery of our growthstrategy should more than offset the non-recurring gain on disposal of aRiuhotel in the past financial year. Taking into account the non-recurringgainon disposal of a Riu hotel in financial year 2015 / 16 we expect growth inHotels & Resorts above our Group underlying EBITA guidance of at least 10%.CruisesDue to first-time full-year operation of Mein Schiff 5 and the plannedlaunch of Mein Schiff 6 in financial year 2016 / 17, we expect growth inunderlying EBITA in Cruises to considerably exceed our Group guidance of atleast 10 %.Expected development of financial position Expected development of Group financial position Expected development vs. PY in % EUR million 2015 / 16 2016 / 17 Net cash capex and investments* 642.3 around EUR 1.0 bn Net financial position - 31.8 around EUR 0.8 bn * Excl. aircraft orderbook financingNet capex and investmentsIn the light of investment decisions already taken and projects in thepipeline, we expect TUI Group's net funding requirements to be around EUR1.0 bn for financial year 2016 / 17 excluding aircraft orderbook finance.Capex mainly relates to the launch of new production and booking systemsforour tour operators, maintenance and expansion of our hotel portfolio andtheacquisition of the cruise ship Legend of the Seas. Planned investmentsmainly include the acquisition of the French Transat tour operationbusiness.Net financial positionAt the balance sheet date, the Group's net financial position amounted toEUR 31.8 m net cash. Due to the planned increase in net cash capex andinvestments, we expect TUI Group's net debt to increase to around EUR 0.8bnin financial year 2016 / 17.Sustainable developmentClimate protection and emissionsGreenhouse gas emissions and the impact of these emissions on climatechangepose one of the major global challenges for the tourism sector. The goalsweset ourselves in our sustainability strategy 'Better Holidays, BetterWorld', launched in September 2015, include operating Europe's mostcarbon-efficient airlines by 2020 and defending this top position. Specificcarbon emissions (g CO2 / PKM) are to be reduced by 10 % by 2020. We alsoaim to reduce the carbon intensity of our global operations by 10 % by 2020(against the baseline of 2013 / 14).Overall Executive Board assessment of TUI Group's current situation andexpected developmentAt the date of preparation of the Management Report (6 December 2016), weuphold our positive assessment of TUI Group's economic situation andoutlookfor financial year 2016 / 17. With its finance profile, strong brand andservices portfolio, TUI Group is well positioned in the market. In thefirstfew weeks of the new financial year 2016 / 17, the overall businessperformance has matched expectations.As against the prior year reference period, we expect TUI Group'sunderlyingoperating result to grow by at least 10 % year-on-year on a constantcurrency basis, driven by improved operating performance in the segments.In the light of our growth strategy, we have updated our medium-termguidance, aiming to deliver at least 10 % underlying EBITA CAGR in thethreeyears to 2018 / 19. Our long-term target for TUI Group's gross capex(excluding aircraft orderbook finance) is at 3.5 % of consolidatedturnover.Opportunity ReportTUI Group's opportunity management follows the Group strategy for corebusiness Tourism. Responsibility for systematically identifying and takingup opportunities rests with the operational management of the sourcemarketsand the TUI Hotels & Resorts and Cruises segments. Market scenarios andcritical success factors for the individual sectors are analysed andassessed in the framework of the Group-wide planning and control process.The core task of the Group's Executive Board is to secure profitable growthfor the TUI Group by optimising the shareholding portfolio and developingthe Group structure over the long term.Overall, TUI Group is well positioned to benefit from opportunitiesresulting from the main trends in its markets.Opportunities from the development of the overall frameworkShould the economy perform better than expected, the TUI Group and itssectors would benefit from the resulting increase in demand in the travelmarket. Moreover, changes in the competitive environment could createopportunities for the TUI Group in individual markets.Corporate strategyWe see opportunities for further organic growth in particular by expandingour hotel portfolio and cruise business. As market leader, we also intendtobenefit in the long term from demographic change and the resulting expectedincrease in demand for high-quality travel at an attractive price /performance ratio.Operational opportunitiesWe intend to improve our competitive position further by offering uniqueproduct and further expanding controlled distribution in the sourcemarkets,in particular online distribution. We also see operational opportunitiesarising from stronger integration of our content and touroperationbusiness.Other opportunitiesWe also regard a potential sale of Specialist Group and our remaining stakein container shipping as an opportunity to further improve TUI Group's keyfinancial ratios.Principal risks - Inherent to the sectorNature of RiskDESTINATION DISRUPTION RISKProviders of holiday and travel services are exposed to the inherent riskofincidents affecting some countries or destinations within their operations.This can include natural catastrophes such as hurricanes or tsunamis;outbreaks of disease such as Ebola; political volatility as has been seeninEgypt and Greece in recent years; the implications of war in countriescloseto our source markets and destinations; and terrorist events such as thetragic incident in Tunisia last year and in Turkey in January 2016.There is the risk that if such an event occurs which impacts on one or moreof our destinations that we could potentially suffer significantoperationaldisruption and costs in our businesses. We may possibly be required torepatriate our customers and / or the event could lead to a significantdecline in demand for holidays to the affected destinations over anextendedperiod of time. MACROECONOMIC RISKSSpending on travel and tourism is discretionary and price sensitive. Theeconomic outlook remains uncertain with different source markets atdifferent points in the economic cycle. Furthermore, terrorist incidents insource markets can influence the overall demand for overseas travel inthosemarkets. Consumers are also waiting longer to book their trips in order toassess their financial situation.There is the risk that fluctuations in macroeconomic conditions in oursource markets will impact on the spending power of our customers whichcould impact on our short-term growth rates and lead to margin erosion.Furthermore, changes in macroeconomic conditions can have an impact onexchange rates which, particularly for the £ / EUR rate, has a directimpacton the translation of non-euro source market results into euros, thereporting currency of our Group.COMPETITION & CONSUMER PREFERENCESThe tourism industry is fast-paced and competitive with the emergence ofnewmarket participants operating new business models, combined with consumertastes and preferences evolving all the time.In recent years there has been an emergence of successful substitutebusiness models such as web-based travel and hotel portals which allow endusers to combine the individual elements of a holiday trip on their own andbook them separately.Consumer tastes and preferences have evolved in recent years as well, withmore consumers booking their holidays online and via mobiles and tablets,and booking closer to the time of travel.There is the risk that if we do not respond adequately to such businessmodel disruption or if our products and services fail to meet changingcustomer demands and preferences, that our turnover, market share andprofitability will suffer as a result.INPUT COST VOLATILITYA significant proportion of operating expenses are in non-local currencyand/ or relate to aircraft fuel which therefore exposes the business tochangesin both exchange rates and fuel prices.There is the risk that if we do not manage adequately the volatility ofexchange rates, fuel prices and other input costs, then this could resultinincreased costs and lead to margin erosion, impacting on our ability toachieve profit targets.There is also the risk that if our hedging policy is too rigid, we may findourselves unable to respond to competitive pricing pressures during theseason without it having a direct detrimental impact on our market positionand / or profitability.SEASONAL CASHFLOW PROFILETourism is an inherently seasonal business with the majority of profitsearned in the European summer months. Cash flows are similarly seasonalwiththe cash high occurring in the summer as advance payments and finalbalancesare received from customers, with the cash low occurring in the winter asliabilities have to be settled with many suppliers after the end of thesummer season.There is the risk that if we do not adequately manage cash balances throughthe winter low period this could impact on the Group's liquidity andabilityto settle liabilities as they fall due whilst ensuring that financialcovenants are maintained. LEGAL & REGULATORY COMPLIANCEMost providers of holiday and travel services operate across a number ofeconomies and jurisdictions which therefore exposes them to a range oflegal, tax and other regulatory laws which must be complied with.As the TUI Group is the world's leading tourism business operating from 31source markets and providing holidays in 180 destinations, we are exposedtoa range of laws and regulations with which we must comply or else riskincurring fines or other sanctions from regulatory bodies. HEALTH & SAFETYFor all providers of holiday and travel services, ensuring the health andsafety of customers is of paramount importance. This is especially so forTUI as we are the world's leading tourism business selling holidays to over20 million customers per annum.There is the risk of accidents or incidents occurring causing illness,injury or death to customers or colleagues whilst on a TUI holiday. Thiscould result in reputational damage to the business and / or financialliabilities through legal action being taken by the affected parties.SUPPLY CHAIN RISKProviders of holiday and travel services are exposed to the inherent riskoffailure in their key suppliers, particularly hotels. This is furtherheightened by the industry convention of paying in advance ('prepayment')tosecure a level of room allocation for the season.There is the risk that we do not adequately manage our financial exposureshould demand drop either for individual hotels and / or for thedestinationin which the hotels are located and to which the tour operator still has alevel of prepayment outstanding which could result in financial losses.JOINT VENTURE PARTNERSHIPSIt is common for tourism groups to use joint venture partnerships in someoftheir operations in order to reduce the risk of new ventures or to gainaccess to additional expertise. TUI has four significant joint ventures -Riu; TUI Cruises; Sunwing; TUI Russia & Ukraine.There is the risk that if we do not maintain good relations with our keypartners that the ventures' objectives may not remain consistent with thatof the Group which could lead to operational difficulties and jeopardisetheachievement of financial targets.Actively managed principal risks - Strategic & emerging and business changeIT DEVELOPMENT & STRATEGYOur focus is on enhancing customer experience by providing engaging,intuitive, seamless and continuous customer service through delivery ofleading digital solutions, core platform capabilities, underlying technicalinfrastructure and IT services required to support the Group's overallstrategy for driving profitable top-line growth.There is a risk that we fail to keep up with or outpace the market andevolving consumer preferences, we do not concentrate our activities on thecorrect areas for overall business success, do not address legacyinefficiencies and complexities of our existing infrastructure, do notensure continuity of service for critical IT systems and / or do notexecuteour strategy and developments in line with expectations.If we are ineffective in our strategy or technology development this couldimpact on our ability to provide leading technology solutions in ourmarketsthereby impacting on our competitiveness, our ability to provide a superiorcustomer experience and associated impact on quality and operationalefficiency. This would ultimately impact on our customer numbers, revenueand profitability.BRAND CHANGEOur long term strategy is to migrate our many local tour operating brandsinto one global brand, with the aim of strengthening and enhancing ourcompetitive position, particularly in the online world. We are aiming tocapitalise on the strength of the TUI brand on a global scale whilstensuring we maintain local roots.There is an inherent risk when executing such a large scale global brandstrategy that we may not be able to maintain the benefits of local brandequity throughout the process and we recognise that such a large programmeshould take place with respect for the interests of all our stakeholdersandexisting contractual obligations.If we do not successfully deliver against our strategy this could result ina decline in brand awareness and loyalty with associated decline incustomerdemand or it could impact on our ability to maximise on the opportunitiesfacilitated by having one brand on a global scale. GROWTH STRATEGYWe have set ourselves a short-term target of achieving underlying EBITACAGRof at least 10 % (see page 66). The achievement of this target is likely torequire us to achieve growth in revenues of c. 3 % pa. Our focus is onachieving growth in accommodation by: * opening new hotels; * growing our powerful and exclusive international hotel concepts; * continuing to expand the Cruise fleet Additionally, we are looking to broaden our offering to customers byintroducing extra flexibility into our packages, and to expand ourlong-hauloffering by taking advantage of the capabilities of the Boeing 787Dreamliners which we have and are due to receive via our order book.Notethat availability of aircraft finance is a key assumption of our businessmodel.Whilst managing this expansion, we must continue to adapt to changes inconsumer tastes and booking profiles, and we must continue to match ourcapacity to consumer demand. Asset utilisation - of aircraft, cruise shipsand hotels - is critical to our financial success particularly when in agrowth phase.There is a risk that we could be unsuccessful in maximising opportunitiestoexecute our expansion strategy. This could mean that we fail to achievesomeof the initiatives we have embarked upon, which could result in us fallingshort against the overall growth targets we have set for the business.INTEGRATION & RESTRUCTURING OPPORTUNITIESOur key rationale for the merger of TUI AG and TUI Travel PLC was growthanddelivery of significant synergies and to act 'as one' wherever it makessense to do so, maintaining local differences where the benefit of thatdifferentiation is greater than that of harmonisation.There are a number of restructuring projects underway across the Group as aresult to enable us to achieve these opportunities. There is an inherentrisk with any large restructuring programme that we face challenges inmanaging the complexities associated with further integrating our business,and reducing overlapping activities in order to develop a more lean andstreamlined operating model.Furthermore, the strategic review of the Group has identified businesseswhich would be better positioned outside of the TUI Group. One disposal(Hotelbeds Group) was successfully completed in the year, one disposal isunderway (Travelopia) and further restructuring opportunities may presentthemselves in the future.If we are not successful in leveraging and optimising the identifiedopportunities this could have a significant impact on our ability todeliverthe identified benefits in line with expectations and enhance shareholdervalue.SUSTAINABLE DEVELOPMENTOur focus is to reduce the environmental impact of our holidays, creatingpositive change for people and communities and being a pioneer ofsustainable tourism across the world.There is a risk that we are not successful in driving forecastenvironmentalimprovements across our operations, that our suppliers do not uphold oursustainability standards and we fail to influence destinations to managetourism more sustainably.If we do not maximise our positive impact on destinations and minimise thenegative impact on the environment to the extent that our stakeholdersexpect, this could result in a decline in stakeholder confidence,reputational damage, reduction in demand for our products and services andloss of competitive advantage.Furthermore, if TUI Group falls short of achieving its sustainabledevelopment targets and at the same time the objectives of the UN ParisClimate Change Agreement (December 2015) are not met, this could lead tosustained long-term damage to certain of the TUI Group's current and futuredestinations, which could also have a material adverse effect on demand forour products and services.INFORMATION SECURITYOur responsibility is to protect the confidentiality, integrity andavailability of the data we have and the services we provide to ourcustomers, our employees, our suppliers and service delivery teams.There is a risk that our increasing dependence on online sales and customercare channels (web / mobile) increases our exposure and susceptibility tocyber-attacks and hacks.If we do not ensure we have the appropriate level of security controls inplace across the Group, this could have a significant negative impact onourkey stakeholders, associated reputational damage and potential forfinancialimplications.TALENT MANAGEMENTOur success depends on the ability to attract and retain key talent and itrelies on having good relations with colleagues.There is a risk that we are unable to attract and retain key talent, buildfuture leadership capability and maintain the commitment and trust of ouremployees. This risk is enhanced in periods of uncertainty and in areas ofthe business impacted by restructuring programmes.As we approach the second anniversary of the merger which created TUIGroup,our view is that we have successfully navigated our way through the initialperiod of post-merger concern with regards to retaining key talent. Theheightened risk we perceived in this area has now gone back to normal'business as usual' levels.If we face challenges in managing and maintaining our talent pipeline inorder to deliver against our strategy, drive competitiveness and maximiseonour operating performance, this could impact on our ability to future proofthe Group and the associated potential for negative impact on shareholderconfidence. CORPORATE STREAMLININGThe merger of TUI AG and TUI Travel PLC has presented us with theopportunity to reduce Corporate overheads by eliminating duplicate costs.If we do not deliver the targeted savings of EUR 50 m this may impact onourability to achieve our overall underlying EBITA growth target.Mitigating Factors * Whilst we are unable to prevent such events from occurring, we havewell defined crisis management procedures and emergency response plans which are implemented when an event of this nature occurs, with the focus being on the welfare of our customers. * Where the appropriate course of action is to bring customers home immediately, our significant fleet of aircraft allows us to do this smoothly and efficiently. * Our policy is to follow foreign office advice in each of our source markets with regards to non-essential travel. This serves to minimise the exposure of our customers to turbulent regions. * Due to our presence in all key holiday regions, when a specific destination has been impacted by an external event, we are able tooffer alternative destinations to our customers and to remix our destination portfolio away from the affected area in future seasons if necessary. * We always assume some level of destination disruption each year when setting financial plans and targets, so that we are able to cope with a 'normal' level of disruption without it jeopardising achievement of our targets. * Many consumers prioritise their spending on holidays above other discretionary items. * Creating unique and differentiated holiday products which match the needs of our customers. * Leveraging our scale to keep costs down and prices competitive. * Having a range of source markets so that we are not over exposed to one particular economic cycle. * Expressing our key profit growth target in constant currency terms so that short term performance can be assessed without the distortion caused by exchange rate fluctuations. * Promoting the benefits of travelling with a recognised and leading tour operator to increase consumer confidence and peace of mind. * Our outstanding market position as a leading tourism group, thestrength of our brands and our vertically integrated business model enables usto respond robustly to competitive threats. * The TUI Group is characterised by the continuous development of unique and exclusive holidays, developing new concepts and services whichmatch the needs and preferences of our customers. * Our vertically integrated business model offers end-to-end customer services, from consultation and booking of holidays via flights withthe Group's own airlines through to Group-owned or operated hotels, resorts and cruise ships. Vertical integration thus facilitates the development and marketing of individual, tailored holiday offerings for customers which it is difficult for competitors to replicate. * Building strong and lasting relationships with our key hotel partners, which further reinforces our ability to develop new concepts exclusive to the TUI Group which competitors struggle to match. * Focusing on being online throughout the whole of the customer journey - from inspiration, to booking, to the holiday itself, as well as returning and sharing experiences through social media. * Ensuring that the appropriate derivative financial instruments are used to provide hedging cover for the underlying transactions involving fuel and foreign currency. * Maintaining an appropriate hedging policy to ensure that this hedging cover is taken out ahead of source market customer booking profiles. This provides a degree of certainty over input costs when planning pricing and capacity, whilst also allowing some flexibility in pricesso as to be able to respond to competitive pressures if necessary. * Tracking the foreign exchange and fuel markets to ensure the most up-to-date market intelligence and the ongoing appropriateness of our hedging policies. * Detailed information on currency and fuel hedges can be found in Note Financial Instruments of the consolidated financial statements. * As our business is spread across a number of source markets within the Tourism division there are some counter-cyclical features e. g. winter is a more important season for the Nordic and Canadian source markets. Some brands, such as the UK ski brand Crystal Ski, have a different seasonality profile which helps to temper the overall profile. * The business produces regularly both short term and long term cash forecasts during the year which the Treasury team use to manage cash resources effectively. * Existing credit facilities are considered to be more than sufficientfor our requirements and provide ample headroom. * We continue to maintain high-quality relationships with the Group's key financiers and monitor compliance with the covenants contained within our financing facilities. * Raising additional finance from the Capital Markets, should it be required, remains an option. * Communication and strong tone from the top concerning compliance with laws and regulations. * Legal Compliance Committee established to ensure appropriate oversight, monitoring and action plans and to further drive the compliance culture across the Group. * Embedded legal and tax expertise in all major businesses responsiblefor maintaining high quality relationships with the relevant regulators and authorities. * Ongoing review conducted by the Group Legal Compliance team tocentrally monitor compliance with regulations and provide expert advice to local teams on specific areas. * Health and safety functions are established in all businesses in order to ensure there is appropriate focus on health and safety processes as part of the normal course of business. * Ongoing monitoring is conducted by the Group Health & Safety functionto ensure compliance with minimum standards. * Appropriate insurance policies are in place for when incidents dooccur. * Owned and joint venture partner hotels form a substantial part of our programme which reduces our inherent risk in this area. * Established and embedded a robust prepayment authorisation process to both limit the level of prepayments made and ensure that they are only paid to trusted, credit-worthy counterparties. * Where prepayments are made to external hoteliers this is to secure access to unique and differentiated product for which demand is inherently higher and more resilient to external events than for commodity product. * Prepayments are monitored on a timely and sufficiently granular basisto manage our financial exposure to justifiable levels. * Good working relationships exist with all of our main joint venture partners and they are fully aligned with and committed to the growth strategy of TUI Group. * Developed and communicated (in conjunction with Executives, Business & IT Leadership Teams) the Group's IT Strategy which is clearly alignedto our overall business objectives and considers external factors such as the pace of technology change and internal factors such as the underlying quality required throughout IT * Continuing to implement our online platform in order to enhancecustomer experience and drive higher conversion rates * Implementing a SAP-based central customer platform to collate all information on our customers across their journey to provide a single view of the customer alongside an eCRM platform which will support strategic marketing * Placing increased focus on ensuring continuity plans for critical IT systems are in place and regularly tested * Defined and implemented a programme and project management frameworkand software delivery lifecycle management methodologies, including associated training and coaching * Cascaded clear technology standards and associated delivery roadmaps which are linked to Group wide and source market objectives * Undertaken detailed market research in each source market to assess current brand positioning and likely impact of the brand change * Approved incremental marketing spend to raise the profile of the TUI brand locally in order to promote the benefits and to manage the expectations of our customers in relation to the future of our enhanced products and services * Established a 'One Brand' programme team responsible for coordinating and monitoring the brand change activity across all source markets,with KPIs identified and tracked on a regular basis by both local and group colleagues and prompt corrective action taken to address issues as they arise * Taking a phased and focussed approach to the brand change by implementing in one source market at a time. This minimises the risk at a given point in time and allows us to gain learnings from the source markets undergoing transition and implement those learnings in the next source market. Our first brand transition successfully occurred in the Netherlands in the current financial year 2015 / 16, with Nordics and Belgium source markets due to transition in financial year 2016 / 17. * Communicating both internally & externally across multiple media channels to drive brand awareness, with further plans to increase awareness through consistent marketing in key destination airports and changing of the livery on our aircraft in order to support greater awareness of the TUI Brand * The Executive Board is very focussed on the strategy and mindful of the risks, so there is strong direction and commitment from the top. * The Group Tourism Board plays an important role in co-ordinating, executing and monitoring the various growth initiatives. * There are a number of initiatives underway to achieve growth which reduces the risk through diversification. * Each of the business teams tasked with achieving an element of the growth strategy are still required to maintain sound financial discipline. The Group's investment criteria and authorisation processes must still be adhered to as we are not prepared to be reckless in the pursuit of growth. * We continue to maintain strong relationships with the providers of aircraft finance. * Monitoring of overall market conditions continues to occur so thatplans can be adapted or contingency plans invoked if required. * Strong project management structures exist for all of the major restructuring and disposal programmes which are underway to ensure that they are managed effectively. * Project reporting tool ensures enhanced visibility of the progress of major projects as a matter of routine. * Regular reporting by the major projects to the Executive Board toensure swift resolution of any issues or to enhance co-ordination across the Group where required. * Developed and launched in 2015 the 'Better Holidays, Better World' 2020 sustainability strategy framework which includes specific targets for key sustainability indicators * Established a dedicated sustainability team to work closely with the business and other stakeholders to implement the sustainabilitystrategy * Operating the most carbon efficient airlines in Europe with continued investment in new, more efficient aircraft (e. g. Boeing 787Dreamliner) and cruise ships * Implemented an environmental management system with 5 of our airlines having achieved ISO 14001 certification * Increased measures to influence accommodation suppliers to achievethird party sustainability certification recognised by the Global Sustainable Tourism Council (GSTC) * TUI Care Foundation expanded to focus on the achievement of 2020 target for charitable donations and sustainability projects, with particular emphasis on sustainable tourism, environmental protection and the welfare of children * Renewed commitment from the Executive Board in support of key initiatives to ensure all existing and future IT systems are secure by design, that exposure to vulnerability is managed effectively, user access is sufficiently controlled and colleagues are made aware of information security risks through appropriate training * Continuous review and testing of all external devices and ongoing monitoring of logs in order to identify any potential threats as and when they arise * Continuing to extend and embed our established talent management framework across the Group in order to engage and empower people whilst delivering results and managing performance * Assessing our current organisational competence and capability against that required to maximise current and future shareholder value * Ensuring succession plans are in place for all identified business critical roles, in particular emergency successors for all senior management roles, and that these plans are reviewed every six months * Developed a structured and standard approach to be applied where necessary to key individuals during periods of uncertainty and / or organisational change in order to retain top talent in businesscritical roles * Implemented a process to identify and deliver programmes targeted at high potential talent in order to drive competiveness and maximise operating performance * Building our pipeline of leadership talent through our International Graduate Leadership Programme which attracts, develops and retains high quality graduates to become our future senior Commercial Leaders * Driving high performance and engagement through our performance review, development plans and career planning process * Close monitoring of the delivery of corporate streamlining cost savings to ensure that they have been achieved in line with expectations. * To date 80 % of the target savings had been achieved by the end of the current financial year, with the remainder set to be achieved during financial year 2016 / 17. The Integration Committee which has overseen the achievement of these savings met for the last time in September 2016. Business ReviewMacroeconomic industry and market frameworkMacroeconomic development Development of gross domestic product Var. % 2016 2015 World + 3.1 + 3.2 Eurozone + 1.7 + 2.0 Germany + 1.7 + 1.5 France + 1.3 + 1.3 UK + 1.8 + 2.2 US + 1.6 + 2.6 Russia - 0.8 - 3.7 Japan + 0.5 + 0.5 China + 6.6 + 6.9 India + 7.6 + 7.6 Source: International Monetary Fund (IMF), World Economic Outlook,September2016In calendar year 2016, the global economy continued to grow moderately. Inits most recent outlook (IMF, World Economic Outlook, October 2016), theInternational Monetary Fund forecasts growth of 3.1 % for 2016, which isless than the previous year. With Britain voting to leave the EuropeanUnionand growth in the United States weaker than expected, the experts expecteconomic momentum in the advanced economies to decline overall.Key exchange rates and commodity pricesTUI Group companies operate on a worldwide scale. This presents financialrisks for TUI Group, arising from changes in exchange rates and commodityprices.The essential financial transaction risks from operations relate to eurosand US dollars. They mainly result from foreign exchange items in theindividual Group companies, for instance aircraft fuel and bunker oilinvoices, ship handling costs or products and services sourced by hotels.The parity of sterling against the euro is of relevance for the translationof results generated in the UK market in TUI's consolidated financialstatements.Following the UK referendum at the end of June 2016, which resulted in avote for Brexit, the currency fluctuations already described in ourHalf-Year Financial Report 2015 / 16 continued. They impacted thetranslation of results from our UK business. Thanks to our consistenthedging policy, input costs in foreign currencies incurred for our UKbusiness in financial year 2015 / 16 remained largely unaffected by theweakness of sterling. Although the Brexit vote has caused growinguncertainty about the future performance of the UK economy there is noapparent decline in bookings in our UK business to date.In financial year 2015 / 16, the average exchange rate of the US dollaragainst the euro rose by around 3.5 % from 1.15 $ / EUR to 1.11 $ / EUR.Theaverage exchange rate of sterling against the euro fell by around 16.2 %from 0.74 £ / EUR to 0.86 £ / EUR in the period under review.Sterlingsignificantly depreciated against the euro, especially after theUK's Brexit decision.Changes in commodity prices affect TUI Group, in particular when procuringfuels such as aircraft fuel and bunker oil. Following relatively moderatefluctuations, the price of Brent oil stood at $ 49.06 per barrel as at 30September 2016, which all in all reflects the low level recorded at thebeginning of the financial year.In Tourism, most risks relating to changes in exchange rates and pricerisksfrom fuel sourcing are hedged by derivatives. Information on hedgingstrategies and risk management as well as financial transactions and thescope of such transactions at the balance sheet date is provided in thesections Financial Position and Risk Report in the Management Report andthesection Financial Instruments in the Notes to the consolidated financialstatements.Market environment and competition in tourismSince the merger between TUI AG and TUI Travel PLC in December 2014, TUIGroup has been the world's number one leisure tourism business. Thedevelopment of the international leisure tourism market impacts allbusinesses of TUI Group.Tourism continues global growthAccording to the United Nations World Tourism Organization (UNWTO), tourismcomprises the activities of persons travelling to and staying in placesoutside their usual environment for not more than one consecutive year forleisure, business and other purposes. The key tourism indicators to measuremarket size are the number of international tourist arrivals, andinternational tourism receipts. With international tourism receiptsamounting to $ 1,260 bn and international arrivals amounting to 1.2 m in2015, the tourism industry is one of the most important sectors in theworldeconomy. International tourist arrivals worldwide are expected to increaseby around 3 % a year between 2010 and 2030, reaching 1.8 bn per annum by2030 (UNWTO Tourism Highlights 2016). Change of international tourist arrivals vs. prior year Var. % 2016- 2015 * World + + 4.0 4.6 Europe + + 2.6 4.7 Asia and the Pacific + + 8.8 5.6 Americas + + 4.2 5.9 Africa + - 5.4 3.1 Middle East - + 8.6 1.7 Source: UNWTO World Tourism Barometer, September 2016* Period January till JuneIn calendar year 2015, international tourist arrivals grew by 4.6 %worldwide to 1.19 bn. This trend continued in the first half of calendaryear 2016 at a growth rate of 4.0 %. Travel for leisure, recreation andholidays accounted for 53 %, i.e. just over half of all internationaltourist arrivals (UNWTO, Tourism Highlights, 2016 Edition).At minus 0.7 %, TUI Group customer numbers did not match this growth trendin financial year 2015 / 16; strong growth in customer numbers in the UKandthe Netherlands was offset by the impact of lower demand for Turkey and asaresult of other geopolitical events.Europe remained the largest and most mature tourism market in the world,accounting for 51 % of international tourist arrivals and 36 % of receiptsin 2015. Five European countries (France, Spain, Italy, Germany and theUnited Kingdom) figured in the top ten international tourism destinationsin2015. Our three main source markets UK, Germany and France were in the topfive of all source markets worldwide measured by international tourismexpenditure.Germany continues to be the third largest source market in the world withinternational tourism expenditure of approximately $ 77.5 bn in 2015, afterChina (approximately $ 292.2 bn) and the US (approximately $ 112.9 bn). Interms of expenditure per capita, Germany ranks second globally, withapproximately $ 946 spent by the average German tourist in 2015 (Source:UNWTO, Tourism Highlights, 2016 Edition). Key operators in the Germantourism market are TUI Deutschland, Thomas Cook, DER Touristik, FTI andAlltours (FVW, Dossier, Deutsche Veranstalter, December 2015).The United Kingdom is the fourth largest source market in the world, withapproximately $ 63.3 bn spent on tourism activities in 2015 and on average$972 spent per capita over the same period (source: UNWTO, TourismHighlights, 2016 Edition), the highest amount worldwide. The Britishtourismmarket is characterised by a high degree of concentration around two keyoperators TUI Group and Thomas Cook (Euromonitor, Intermediaries in theUnited Kingdom, August 2016).France was the fifth largest source market in 2015, with internationaltourism expenditure of approximately $ 38.4 bn (source: UNWTO, TourismHighlights, 2015 Edition). With its main tour operator brands NouvellesFrontières and Marmara, TUI has a strong position in the French tourismmarket, which has been highly fragmented in the past but has undergoneconsolidation in recent months. TUI France will continue to expand itsmarket position with the purchase of the French tour operator in thetourismgroup Transat completed in October 2016. The merger is to enable TUI Franceto achieve robust profitability. In 2015, France was the largestdestinationmarket in the world with 84.5 million arrivals.Hotel marketThe total worldwide hotel market for business and leisure travel was worthEUR 440 bn in 2015. By 2020, average annual growth (CAGR) is expected toamount to 3.1 % (Euromonitor; September 2016). The hotel market is dividedbetween business and leisure travel. A number of characteristicsdifferentiate leisure travel hotels from business hotels, including longeraverage lengths of stay for guests in leisure hotels. Locations, amenitiesand service requirements also differ. From a demand perspective, theleisurehotel market in Europe is divided into several smaller submarkets whichcater to the individual needs and demands of tourists. These submarketsinclude premium, comfort, budget, family / apartment, and club- orresort-style hotels. Hotel companies may offer a variety of hotels fordifferent submarkets, often defined by price range, star ratings,exclusivity, or available facilities.Consumers in our three main source markets prefer the followingdestinations: the most popular leisure hotel destinations for consumers insource market Germany are Spain, Italy, Turkey, Austria, France, Croatia,Greece and the Netherlands. The most popular leisure hotel destinations forconsumers in source market United Kingdom are Spain, France, Italy, theUnited States, Portugal, Greece and Turkey. The most popular leisure hoteldestinations for consumers in source market France are Spain, Italy, theUnited Kingdom, Belgium and Luxembourg (Mintel, European Leisure TravelIndustry, September 2015).Hotel operations can generally be divided into the following models: assetowners whose primary business is to own real estate assets; brand ownersandoperators who typically manage hotel assets themselves or enter intofranchising arrangements with independent operators who, in turn, managethehotel property assets; and independent operators combining the roles ofasset owners, brand owners and operators by managing diverse assets underdifferent brands, often through franchise agreements.The upper end of the leisure hotel market is characterised by a high degreeof sophistication and specialisation, with the assets managed by largeinternational companies and investors. There are also many small, oftenfamily-run businesses, particularly in Europe, not quite so upscale andwithfewer financial resources. Most family-owned and -operated businesses arenot branded and customers cannot typically access these hotels throughglobal distribution systems. Given the variety of models for owning andoperating leisure hotels and the fragmented competitive landscape which, atleast in Europe, is not dominated by large hotel chains, conditions differgreatly between locations.Cruise marketThe global cruise industry estimates that it generated approximately $ 39.6bn of revenue in 2015 (Cruise Market Watch website,www.cruisemarketwatch.com/market-share, September 2016). The North Americanmarket is by far the largest and most mature cruise market in the world,with approximately 12.1 million guests in 2015 and a strong penetrationrateof 3.8 % of the total population taking a cruise in 2015. By contrast, theEuropean cruise markets recorded approximately 6.6 million Europeanpassengers, with penetration rates varying significantly from country tocountry, but considerably lower overall (Mintel, Cruises − International,June 2016; CLIA Statistics & Markets, March 2016). In 2015, the globalcruise market grew by around 2.4 %.Germany, the United Kingdom & Ireland and France are among the five largestcruise markets in Europe (CLIA Statistics & Markets, March 2016). GermanyisEurope's largest cruise market, with 1.8 million passengers in 2015.Germanyhas thus witnessed average passenger growth of 8.3 % over the past fiveyears. At 2.2 %, its penetration rate was lower than in the United Kingdom&Ireland in 2015.The United Kingdom & Ireland is the second largest cruise market in Europe,with approximately 1.8 million cruise passengers in 2015. The market hasthus grown by 2.1 % on average over the past five years. It shows thestrongest penetration rate in Europe: in 2015, 2.7 % of the total Britishpopulation took a cruise. (Mintel, Cruises - International, June 2016).The European cruise market is divided into submarkets that cater to avariety of customers: budget, discovery / expedition, premium and luxury.Cruise operators utilise different cruise formats to target thesesubmarketsand the specific demands of their customers. In addition to traditionalformats, operators offer club ship cruises and also more contemporary-stylecruises in the premium submarket. As a cruise ship is often perceived as adestination in itself, cruise companies, especially in the luxury andpremium cruise submarkets, compete with other destinations such as leadinghotels and resorts.BrandStrong master brand TUIOur brand with the 'smile' - the smiling logo formed by the three lettersofour brand name TUI - stands for a consistent customer experience, digitalpresence and competitive strength. In 2016, TUI (or the local power brand)was one of the best-known travel brands in core European countries with abrand awareness rate of almost 90 %. The red 'TUI smile' is a clearrecognition feature and plays in the 'Champions League' of internationalbrands in almost all markets.We are aiming to create one global branding and a consistent brandexperience in order to further leverage the appeal and strength of our corebrands and tap the associated growth potential. To achieve that goal, ourcore brand TUI will be rolled out in our European source markets to replacethe big local tour operator brands. At the beginning of financial year 2015/ 16, the TUI brand was introduced in the Netherlands, where it hassuccessfully replaced the previous world of Arke brands for tour operator,distribution and flight activities. TUI has rapidly become one of thestrongest travel markets in the Netherlands in terms of brand awareness andpreference. In October 2016 , our rebranding campaign was launched inBelgium, with the Nordics to follow in Winter 2016 / 17. Brand migration inthe UK will follow at the end of 2017.In Germany, travel products have been offered under the TUI brand for morethan 45 years. In a survey carried out in 2016, TUI was again rated asGermany's most trusted travel brand (Source: Reader's Digest Trusted Brands2016).Changes in the legal frameworkIn financial year 2015 / 16, there were no changes in the legal frameworkwith material impacts on TUI Group's business performance.Group earningsComments on the consolidated income statementFinancial year 2015 / 16 brought a markedly positive development in the TUIGroup's earnings position. The operating result (underlying EBITA) of TUIGroup's continuing operations improved by 5.0 % to EUR 1,000.5 m in theperiod under review, or by 14.5 % year-on-year on a constant currencybasis.This growth was driven in particular by the continued good performance ofNorthern Region and in the segments Hotels & Resorts and Cruises. Income Statement of the TUI Group for the period from 1 Oct 2015 to 30 Sep 2016 EUR million 2015 / 2014 / 15 Var. 16 restated % Turnover 17,184.6 17,515.5 - 1.9 Cost of sales 15,278.1 15,549.5 - 1.7 Gross profit 1,906.5 1,966.0 - 3.0 Administrative expenses 1,216.9 1,352.6 - 10.0 Other income 36.3 42.9 - 15.4 Other expenses 7.4 5.7 + 29.8 Financial income 58.5 35.8 + 63.4 Financial expenses 345.9 364.5 - 5.1 Share of result of joint ventures and 187.2 143.9 + associates 30.1 Earnings before income taxes 618.3 465.8 + 32.7 Income taxes 153.4 58.2 + 163.6 Result from continuing operations 464.9 407.6 + 14.1 Result from discontinued operations 687.3 - 28.0 n. a. Group profit for the year 1,152.2 379.6 + 203.5 Group profit for the year attributable to 1,037.4 340.4 + shareholders of TUI AG 204.8 Group profit for the year attributable to 114.8 39.2 + non-controlling interest 192.9 Turnover and cost of sales Turnover EUR million 2015 / 16 2014 / 15 Var. % restated Northern Region 7,001.5 7,348.4 - 4.7 Central Region 5,566.6 5,600.9 - 0.6 Western Region 2,869.9 2,847.0 + 0.8 Hotels & Resorts 618.6 574.8 + 7.6 Cruises 296.7 273.3 + 8.6 Other Tourism 665.5 704.8 - 5.6 Tourism 17,018.8 17,349.2 - 1.9 All other segments 165.8 166.3 - 0.3 TUI Group 17,184.6 17,515.5 - 1.9 Discontinued operations 2,321.6 2,565.8 - 9.5 Total 19,506.2 20,081.3 - 2.9 In financial year 2015 / 16, turnover by TUI Group declined by 1.9 % to EUR17.2 bn due to foreign exchange effects. On a constant currency basis,turnover grew by 1.4 % despite the year-on-year decline in customer numbersof 0.7 %. Turnover is presented alongside the cost of sales, which was down1.7 % in the period under review.Gross profitGross profit, i.e. the difference between turnover and the cost of sales,decreased by EUR 59.5 m to around EUR 1.9 bn in financial year 2015 / 16.Administrative expensesAdministrative expenses declined by EUR 135.7 m year-on-year to EUR 1,216.9m. The decrease was driven by the synergies delivered in the period underreview and higher one-off expenses incurred in the previous year.Other income/Other expensesIn financial year 2015 / 16, other income of EUR 36.3 m comprised gainsfromthe sale of a Riu Group hotel, a joint venture, a cruise ship, commercialreal estate and vehicles of incoming agencies. Other expenses in 2015 / 16totalled EUR 7.4 m, primarily for the disposal of aircraft spare parts.Financial resultThe financial result improved by EUR 41.3 m to EUR - 287.4 m. The increasewas essentially due to the year-on-year decline in expenses resulting fromthe measurement of the stake in Hapag-Lloyd AG.Share of results of joint ventures and associatesThe result from joint ventures and associates comprises the proportionatenet profit for the year of these companies measured at equity and whereappropriate impairments of goodwill for these companies. In the periodunderreview, the at equity result totalled EUR 187.2 m. The significant increaseof EUR 43.3 m partly resulted from the improvement in the operatingperformance of Riu hotels and a higher profit contribution by TUI Cruises.Income taxesThe year-on-year increase in income taxes in financial year 2015 / 16 ismainly attributable to the one-off effect recognised in the previous yearofthe revaluation of deferred tax assets for loss carryforwards following themerger between TUI AG and TUI Travel PLC.Result from discontinued operationThe result from discontinued operation shows the after-tax result ofSpecialist Group, classified as a discontinued operation, as well asLateRooms Group and Hotelbeds Group until these operations were sold.Group profitGroup profit increased by EUR 772.6 m year-on-year to EUR 1,152.2 m infinancial year 2015 / 16.Share in Group profit attributable to TUI AG shareholdersThe share in Group profit attributable to the TUI AG shareholders improvedfrom EUR 340.4 m in the prior year to EUR 1,037.4 m in financial year 2015/16. Apart from the sound operating performance of the Group, the increaseisattributable to the gain on disposal from the sale of Hotelbeds Group.Non-controlling interestsNon-controlling interests in Group profit for the year totalled EUR 114.8m.They related to companies in Hotels & Resorts and, in the prior year, theexternal shareholders of TUI Travel PLC until the completion of the mergerwith TUI AG. The share in Group results attributable tonon-controllinginterests in Hotels & Resorts mainly derives from the RIUSA II Group.Earnings per shareThe interest in Group profit for the year attributable to TUI AGshareholders after deduction of non-controlling interests totalled EUR1,037.4 m (previous year EUR 340.4 m) in 2015 / 16. Basic earnings persharetherefore amounted to EUR 1.78 (previous year EUR 0.64) in financial year2015 / 16.EBITA, underlying EBITA und underlying earningsper shareKey indicators used to manage the TUI Group are EBITA and underlying EBITA.We consider EBITA to be the most suitable performance indicator forexplaining the development of the TUI Group's operating performance. EBITAcomprises earnings before interest, taxes and goodwill impairments; it doesnot include the results from container shipping operations nor the resultsfrom the measurement of interest hedging instruments. Reconciliation to underlying earnings EUR million 2015 / 2014 / 15 Var. 16 restated % Earnings before income taxes 618.3 465.8 + 32.7 less: Profit on Container Shipping measured - - 0.9 n. at equity a. plus: Loss on measurement of financial 100.3 147.1 - investment in Container Shipping 31.8 plus: Net Interest expense and expense from 179.5 182.6 - the measurement of interest hedges 1.7 EBITA 898.1 794.6 + 13.0 Adjustments: plus: Loss on disposals / less: Gain on 0.8 - 3.3 n. disposals a. plus: Restructuring expense 12.0 59.4 - 79.8 plus: Expense from purchase price allocation 41.9 42.1 - 0.5 plus: Expense from other one-off items 47.7 60.5 - 21.2 Underlying EBITA 1,000.5 953.3 + 5.0 Reported earnings (EBITA) of TUI Group rose by EUR 103.5 m to EUR 898.1 mdue to the very good operating performance in financial year 2015 / 16. EBITA EUR million 2015 / 16 2014 / 15 Var. % Northern Region 440.4 513.4 - 14.2 Central Region 67.3 72.9 - 7.7 Western Region 72.1 57.7 + 25.0 Hotels & Resorts 285.1 195.7 + 45.7 Cruises 129.6 80.5 + 61.0 Other Tourism - 6.2 - 4.1 - 51.2 Tourism 988.3 916.1 + 7.9 All other segments - 90.2 - 121.5 + 25.8 TUI Group 898.1 794.6 + 13.0 Discontinued operations 14.7 2.6 + 465.4 Total 912.8 797.2 + 14.5 In order to explain and evaluate the operating performance of the segments,earnings adjusted for special one-off effects (underlying EBITA) arepresented below. Underlying EBITA has been adjusted for gains on disposaloffinancial investments, restructuring expenses according to IAS 37, alleffects from purchase price allocations, ancillary acquisition costs andconditional purchase price payments and other expenses for and income fromone-off items.One-off items carried here include adjustments for income and expense itemsthat reflect amounts and frequencies of occurrence rendering an evaluationof the operating profitability of the segments and the Group more difficultor causing distortions. These items include in particular majorrestructuring and integration expenses not meeting the criteria of IAS 37,material expenses for litigation, gains and losses from the sale ofaircraftand other material business transactions with a one-off character.TUI Group's underlying EBITA rose by EUR 47.2 m to EUR 1,000.5 m infinancial year 2015 / 16. Underlying EBITA EUR million 2015 / 16 2014 / 15 Var. % Northern Region 460.9 538.4 - 14.4 Central Region 88.5 103.5 - 14.5 Western Region 86.1 68.7 + 25.3 Hotels & Resorts 287.3 234.6 + 22.5 Cruises 129.6 80.5 + 61.0 Other Tourism 4.6 8.4 - 45.2 Tourism 1,057.0 1,034.1 + 2.2 All other segments - 56.5 - 80.9 + 30.2 TUI Group 1,000.5 953.3 + 5.0 Discontinued operations 92.9 107.3 - 13.4 Total 1,093.4 1,060.5 + 3.1 In financial year 2015 / 16, adjustments worth EUR 3.2 m were carried forincome, compared with adjustments on underlying expenses amounting to EUR63.8 m, without taking account of the expenses for purchase priceallocations. Overall, net one-off expenses worth EUR 11.1 m were incurredinconnection with the merger between TUI AG and the former TUI Travel PLC.They included an amount of EUR 4.2 m for restructuring the corporate centreand EUR 6.9 m for integrating the incoming agencies into Tourism.The adjustments primarily related to the following facts and circumstances:Gains on disposalIn financial year 2015 / 16, gains on disposal worth EUR 0.8 m had to beadjusted for. They related in particular to capital reductions insubsidiaries.Restructuring costsIn financial year 2015 / 16 ,restructuring costs of EUR 12.0 m had to beadjusted for. They related to smaller reorganisations in Northern, Centraland Western Regions and the restructuring of the corporate centre as wellasthe transfer of incoming agencies to the source market organisations.Expenses for purchase price allocationsIn financial year 2015 / 16, expenses for purchase price allocations worthEUR 41.9 m were adjusted for; they related in particular to scheduledamortisation of intangible assets from acquisitions made in previous years.One-off itemsNet expenses for one-off items of EUR 47.7 m included in particular anamount of EUR 17.9 m relating to reorganisation in Central and WesternRegions and at Corsair, an amount of EUR 5.7 m for consultancy costs forplanned corporate transactions, and EUR 4.7 m for the restructuring of thecorporate centre and the transfer of incoming agencies to the source marketorganisations.Pro forma underlying earnings per shareIn order to provide a comparable basis for TUI Group's underlying earningsper share going forward, a pro forma calculation is included below. Thecalculation is based on the issued share capital at the balance sheet dateand therefore adjusts for the impact of bond conversions in 2014 / 15. Pro forma underlying earnings per share TUI Group EUR million 2015 / 2014 / 15 16 restated EBITA (underlying) 1,000.5 953.3 less: Net interest expense - 179.5 - 182.6 plus: Interest expense on convertible bonds - 19.0 Underlying profit before tax 821.1 789.7 Income taxes (underlying) 205.3 197.4 Underlying Group profit 615.8 592.3 Minority interest 111.5 90.0 Hybrid interest expense - 11.0 Underlying Group profit attributable to TUI 504.3 491.3 shareholders of TUI AG Number of shares (pro forma)No. million 587.0 587.0 Pro forma underlying earnings per share 0.86 0.84 Segmental performanceCurrent and future trading in TourismIn Tourism, travel products are booked on a seasonal basis with differentlead times. The release of bookings for individual seasons takes place atdifferent points in time, depending on the design of the booking andreservation systems in each source market. Moreover, load factor managementensures that the tour operator capacity available for bookings isseasonallyadjusted to actual and expected demand.At the end of financial year 2015 / 16, current trading by source marketforWinter 2016 / 17 compared as follows with the previous year: Current Trading1 Winter season 2016 / 17 Var. % Average selling Total Total customers price2 sales2 2 Northern Region + 3 + 14 + 11 UK + 6 + 26 + 18 Nordics - 3 - 6 - 3 Central Region + 7 + 4 - 3 Germany + 7 + 2 - 5 Western Region + 3 + 7 + 4 Benelux + 3 + 4 + 1 Total source + 5 + 9 + 4 markets 1 As at 20 November 2016 (on a constant currency basis)2 These statistics relate to all customers whether risk or non-risk.For the 2017 Summer season, already available for bookings in the UK,bookedrevenues were around 15 % ahead of the prior year in November 2016.Trading by the Hotels & Resorts segment largely mirrors customer volumes inthe source markets, as a high proportion of the Group-owned hotel beds aretaken up by TUI tour operators. In the Cruises segment, advance bookingswere up year-on-year at the balance sheet date with sound demand levels,primarily due to continued fleet expansion by TUI Cruises in the periodunder review.Disclosures on current trading are regularly published on TUI's website inthe framework of TUI Group's quarterly reporting.See www.tuigroup.com/en-en/investorsOur key operating indicators developed as follows in our source markets:Source markets Direct Online Customer- distribution mix2 in % s3 in miX1 in % '000 Var. Var. Var. % percentage percentage points points 2015 / 16 2015 / 16 2015 /16 (2014 / (2014 / (2014 / 15) 15) 15) Source markets + 2 % points 72 (70) + 2 % 43 (41) - 0.7 % 19,231 points (19,361) Northern Region4 + 1 % point 92 (91) + 4 % 62 (58) + 2.0 % 7,388 points (7,240) Central Region + 3 % points 47 (44) - 15 (15) - 4.7 % 6,828 (7,168) Western Region + 2 % points 70 (68) + 4 % 52 (48) + 1.3 % 5,016 points (4,953) 1 Share of sales via own channels (retail and online)2 Share of online sales3 Previous year's figures included Italy which has been transferred to Allother Segments.4 Customer numbers of Northern Region now include Crystal Ski and ThomsonLakes & Mountains (formerly Specialist Group)Northern RegionNorthern Region comprises TUI's tour operators and airlines and the cruisebusiness in the UK, Ireland and the Nordics. In the run-up to the sale oflarge parts of Specialist Group, the skiing tour operators previouslyforming part of Specialist Group were allocated to source market UK. Thesegment also comprises the strategic stake held in Sunwing in Canada, andTUI Russia, which operates in the CIS countries. Northern Region - Key figures EUR million 2015 / 16 2014 / 15 Var. % restated Turnover 7,001.5 7,348.4 - 4.7 Underlying EBITA 460.9 538.4 - 14.4 EBITA 440.4 513.4 - 14.2 In financial year 2015 / 16, the Northern Region tour operators continuedtheir positive development. In particular due to the increase in TUI UKcustomers, customer volumes rose by 2.0 % year-on-year in Northern Region.Due to the year-on-year weakening of the exchange rate for sterling duringthe key travel months, turnover by Northern Region declined by 4.7 % to EUR7,001.5 m. By contrast, turnover rose by 2.6 % on a constant currencybasis.Northern Region underlying EBITA declined by EUR 77.5 m year-on-year to EUR460.9 m due to foreign exchange effects. By contrast, earnings by NorthernRegion improved by 3.3 % year-on-year on a constant currency basis.In the UK, tour operators again delivered a sound business performance,driven in particular by the strength of customer demand for TUI's uniqueholidays with growth across short-, medium- and long-haul destinations. Thecruise business benefited from the launch of TUIDiscovery in June 2016.Customer volumes, adjusted for the skiing tour operator customers duringthereporting periods, rose by 4.0 % overall in 2015 / 16. We continued todrivegrowth in online bookings, with that channel accounting for 58 % of allholidays, up around 4 percentage points year-on-year.In the Nordics, our performance in the financial year was impacted bygrowing price pressure in the lates market and lower demand for Turkey.Thisimpact was not fully mitigated by the increase in the proportion of theprogramme remixed to alternative destinations and the inclusion of Riuhotels in the long-haul segment. Upfront costs were also incurred for theTUI brand migration in the Nordics. The online channel accounted for around75 % of all bookings, up by around three percentage points.Sunwing recorded an increase in direct costs driven by the small decline inthe Canadian dollar against the US dollar. Despite a good Summer season, ittherefore posted an overall decline year-on-year. On the other hand, therewas a positive impact from the continued expansion of our differentiatedhotel portfolio in the Caribbean and Mexico.Central RegionCentral Region comprises the TUI tour operators in Germany, Austria,Switzerland and Poland and the TUI fly airline. Central Region - Key figures EUR million 2015 / 16 2014 / 15 Var. % restated Turnover 5,566.6 5,600.9 - 0.6 Underlying EBITA 88.5 103.5 - 14.5 EBITA 67.3 72.9 - 7.7 With customer volumes down by 4.7 % year-on-year, turnover by CentralRegionwas almost flat on the prior year on a slight decline of 0.6 % in financialyear 2015 / 16. Central Region underlying EBITA was also broadly stable. Inthe period under review, a major adverse effect was caused by thegeopolitical events in Egypt and Turkey and the resulting subdued demandforthese important destinations and an intensification of price competitionforflights to Spain. In Germany, market conditions therefore remainedchallenging in a highly competitive environment. The result includes theimpact of a court ruling in November regarding airport services andmarketing agreements with an Austrian airport, and the partial impact onholidays commenced in September of unexpectedly high levels of sicknessamong TUI fly flight crew. However, TUI Deutschland continued to strengthenits core brand TUI through stronger marketing measures and managed tofurther grow its market share.Western RegionWestern Region combines TUI tour operators and Group-owned airlines inBelgium and the Netherlands as well as tour operators in France. Western Region - Key figures EUR million 2015 / 16 2014 / 15 Var. % restated Turnover 2,869.9 2,847.0 + 0.8 Underlying EBITA 86.1 68.7 + 25.3 EBITA 72.1 57.7 + 25.0 With customer volumes up by 1.3 % in Western Region, turnover grew by 0.8 %in financial year 2015 / 16. Underlying EBITA grew by EUR 17.4 m to EUR86.1m. The French tour operating business improved year-on-year due to theexpansion of its offering to EU destinations and positive effects fromrestructuring measures. Business in the Netherlands benefited from the TUIbrand migration in Autumn 2015 and a 3.0 % increase in customer volumes.These positive effects were partly offset by the weaker performance of theBelgian market, which was adversely impacted by the aftermath of theterrorist attacks in Brussels in March 2016.Hotels & ResortsThe Hotels & Resorts segment comprises all TUI Group hotels and hotelcompanies, including the hotel business of former TUI Travel. They includesubsidiaries, joint ventures with local partners, associates over whichsignificant influence is held, and hotels operated under managementcontracts. Hotels & Resorts - Key figures EUR million 2015 / 16 2014 / 15 Var. % Total turnover 1,278.4 1,252.2 + 2.1 Turnover 618.6 574.8 + 7.6 Underlying EBITA 287.3 234.6 + 22.5 EBITA 285.1 195.7 + 45.7 Total turnover by the Hotels & Resorts segment rose by 2.6 % to EUR 1,278.4m year-on-year in 2015 / 16. Capacity declined overall; the expandedoffering of our core brands Riu and Robinson was offset by cuts in hotelcapacities in North Africa and Turkey driven by geopolitical events.Occupancy of TUI hotels was slightly down year-on-year, while averagerevenues per bed grew considerably in the period under review. Turnoverwiththird parties grew to EUR 618.6 m in 2015 / 16, up by 7.6 % year-on-year.Underlying EBITA amounted to EUR 287.3 m, up by EUR 52.7 m on the prioryear. This significant increase was mainly driven by the sustained positivebusiness development of hotel brand Riu, which benefited in particular fromits strong market position in the western Mediterranean and in thelong-haulsegment.Hotels & Resorts Capaci- Occupancy Average ty1 in rate2 in % revenue per '000 bed3 in EUR Var. % Var. Var. % percentage points 2015 / 16 2015 / 16 2015 / 16 (2014 / (2014 / (2014 / 15) 15) 15) Hotels total4 - 1.9 % 35,031 - 1.2 % 77.5 + 5.5 % 58.00 (35,706) points (78.7) (55.00) Riu + 0.7 % 17,396 + 3.7 % 89.6 + 5.6 % 60.34 (17,272) points (85.9) (57.13) Robinson + 6.3 % 3,081 - 5.5 % 67.1 - 0.6 % 90.10 (2,898) points (72.6) (90.67) 1 Group owned or leased hotel beds multiplied by opening days per annum2 Occupied beds dividied by capacity3 Arrangement revenue divided by occupied beds4 Incl. former TUI Travel hotelsRiuRiu, one of Spain's leading hotel chains, operated a total of 94 hotels(prior year: 104) with 86,184 beds at the end of financial year 2015 / 16.The year-on-year decline was driven by the termination of managementcontracts in Tunisia following the terrorist attacks in Summer 2015.Capacity increased slightly by 0.7 % year-on-year. Average occupancy of Riuhotels rose slightly by 3.7 percentage points to 89.6 %. This increaseaboveall reflects strong demand for hotels in Spain and Portugal, and for theCape Verde Islands, Mauritius and St Martin in the long-haul segment.Average revenues per bed rose by 5.6 %. The individual regions developed asfollows in the period under review:Riu hotels in the Canaries recorded strong demand and benefited from theshift in demand driven by geopolitical events in the eastern Mediterranean.Occupancy of hotel beds rose by 4.7 percentage points to 97.2 %. Moreover,average revenues per bed also increased by 9.3 %.Riu hotels in the Balearics also recorded a very positive performance intheperiod under review. At 84.7 %, occupancy was 2.1 percentage points upyear-on-year. Average revenues per bed rose by 8.3 % in the period underreview.At 90.5 %, average occupancy of Riu hotels in mainland Spain was 5.0percentage points up year-on-year, with average revenues per bed up by 7.8%.Riu hotels in long-haul destinations reported average occupancy of 84.7 %.This was an increase of 2.3 percentage points on the prior year, driven byhigher occupancy in the hotels in St Martin, Mauritius and the Cape VerdeIslands. Average revenues per bed posted for long-haul destinations grew by5.4 % year-on-year, driven partly by exchange rate fluctuations.RobinsonRobinson, market leader in the premium club holiday segment, operated atotal of 24 club facilities with 15,342 beds in twelve countries at the endof the financial year under review, as in the prior year. Capacity rose by6.3 % year-on-year. This growth was mainly driven by the additional clubfacility Kyllini Beach in Greece and the first-time full-year inclusion ofthe club resort in Tunisia. Occupancy of Robinson Group was 5.5 percentagepoints down year-on-year in financial year 2015 / 16, with the club resortsin Turkey, Morocco and Tunisia, in particular, falling short of the prioryear's levels. Average revenues per bed were slightly down at 0.6 % underthe prior year's level.Other hotelsOther hotels mainly comprise the hotel brands TUI Blue, Grupotel, Iberoteland Magic Life and the further hotel activities by former TUI Travel. Theindicators for Other hotels were also impacted by the aftermath of thegeopolitical situation.The first two hotels to operate under our new hotel brand TUI Blue openedinTurkey in May 2016. The portfolio has been further expanded for the currentfinancial year; a total of seven hotels are now available in six countries(Germany, Austria, Italy, Spain, Croatia and Turkey). They offer ourcustomers a consistent TUI holiday experience with a premium all-inclusiveconcept.CruisesThe Cruises segment comprises Hapag-Lloyd Cruises and the joint venture TUICruises. Cruises - Key figures EUR million 2015 / 16 2014 / 15 Var. % Turnover 296.7 273.3 + 8.6 Underlying EBITA 129.6 80.5 + 61.0 EBITA 129.6 80.5 + 61.0 At EUR 296.7 m, turnover by Hapag-Lloyd Cruises was 8.6 % up on the prioryear in financial year 2015 / 16. No turnover is carried for TUI Cruises asthe joint venture is measured at equity in the consolidated financialstatements.Cruises underlying EBITA increased to EUR 129.6 m in 2015 / 16, up by EUR49.1 m year-on-year. On a persistently sound operating performance for thetwo companies, this was also driven by the expansion of the TUI Cruisesfleet. With the successful market launch of Mein Schiff 4 in June 2015 andMein Schiff 5 in July 2016, TUI Cruises continued to build on itscompetitive position. In the period under review, Hapag-Lloyd Cruises alsobenefited from lower financing costs due to the acquisition of Europa 2 inthe prior year.Cruises Occupancy Passenger Average in % days in daily rates* '000 in EUR Var. Var. % Var. % percentage points 2015 / 16 2015 / 16 2015 / 16 (2014 / (2014 / (2014 / 15) 15) 15) Ha- pag-Lloyd Cruises + 0.6 % 76.8 + 1.9 % 355 (348) + 8.0 % 579 (536) points (76.2) TUI Cruises - 0.1 % 102.6 + 30.0 % 3,482 + 1.2 % 171 (169) point (102.7) (2,679) * Per day and passengerHapag-Lloyd CruisesIn financial year 2015 / 16, the sound operating performance of Hapag-LloydCruises benefited from the successful realignment of the brand, which hadresulted in a turnaround in the previous year. Occupancy of its fleet wasstable at 76.8 %, a slight increase of 0.6 percentage points versus theprior year. The average daily rate grew substantially by 8.0 % to EUR 579.In the period under review, passenger days grew by 1.9 % year-on-year to354,611.TUI CruisesIn financial year 2015 / 16, occupancy of TUI Cruises' ships was 102.6 %(based on the double occupancy calculation conventionally used in thesector), maintaining the very high level recorded in the prior year. Due tothe successful expansion of the TUI Cruises fleet to include Mein Schiff 4in June 2015 and Mein Schiff 5 in July 2016, capacity grew to 3.5 mpassenger days in financial year 2015 / 16, considerably up year-on-year.The average daily rate rose by 1.2 % to EUR 171 year-on-year. In November2015, cruises in South East Asian lanes were newly included in theprogrammeserved by TUI Cruises' fleet.At the end of financial year 2015 / 16, the fleet consisted of five ships.The maiden voyage of Mein Schiff 6 is expected for Summer 2017. In 2018 and2019, two further newbuilds will be launched. They will then replace MeinSchiff 1 and Mein Schiff 2, currently still in service, as part of thefleetmodernisation programme.All other segmentsThe category 'All other segments' refers, in particular, to the corporatecentre functions of TUI AG and the intermediate holdings as well as theGroup's real estate companies. All other segments - Key figures EUR million 2015 / 16 2014 / 15 Var. % restated Turnover 165.8 166.3 - 0.3 Underlying EBITA - 56.5 - 80.9 + 30.2 EBITA - 90.2 - 121.5 + 25.8 All other segments underlying EBITA cost declined by 30.1 % year-on-year toEUR 56.5 m in the period under review. The improvement was driven by thedelivery of corporate streamlining synergies worth EUR 30 m, higherproceedsfrom sales of land, and positive impacts of foreign exchange translation.Net assets Development of the Group's asset structure EUR million 30 Sep 30 Sep Var. 2016 2015 % Fixed assets 8,345.0 8,902.7 - 6.3 Non-current receivables 786.8 711.3 + 10.6 Non-current assets 9,131.8 9,614.0 - 5.0 Inventories 105.2 134.5 - 21.8 Current receivables 2,218.2 2,623.1 - 15.4 Cash and cash equivalents 2,072.9 1,672.7 + 23.9 Assets held for sale 929.8 42.2 n. a. Current assets 5,326.1 4,472.5 + 19.1 Assets 14,457.9 14,086.5 + 2.6 Equity 3,248.2 2,417.3 + 34.4 Liabilities 11,209.7 11,669.2 - 3.9 Equity and liabilities 14,457.9 14,086.5 + 2.6 The Group's balance sheet total increased by 2.6 % as against 30 September2015 to EUR 14.5 bn.Vertical structural indicatorsNon-current assets accounted for 63.2 % of total assets, compared with 68.2% in the previous year. The capitalisation ratio (ratio of fixed assets tototal assets) decreased from 63.2 % to 57.5 %.Current assets accounted for 36.8 % of total assets, compared with 31.8 %inthe previous year. The Group's cash and cash equivalents increased by EUR400.2 m year-on-year to EUR 2,072.9. They thus accounted for 14.3 % oftotalassets, as against 11.9 % in the previous year.Horizontal structural indicatorsAt the balance sheet date, the ratio of equity to non-current assets was35.6 %, as against 25.1 % in the previous year. The ratio of equity tofixedassets was 38.9 % (previous year 27.2 %). The ratio of equity plusnon-current financial liabilities to fixed assets was 56.9 %, compared with48.3 % in the previous year. Structure of the Group's non-current assets EUR million 30 Sep 30 Sep Var. 2016 2015 % Goodwill 2,853.5 3,220.4 - 11.4 Other intangible assets 545.8 911.5 - 40.1 Investment property - 7.2 n. a. Property, plant and equipment 3,714.5 3,636.8 + 2.1 Companies measured at equity 1,180.8 1,077.8 + 9.6 Financial assets available for sale 50.4 56.2 - 10.3 Fixed assets 8,345.0 8,902.7 - 6.3 Receivables and assets 442.1 380.6 + 16.2 Deferred tax claims 344.7 330.7 + 4.2 Non-current receivables 786.8 711.3 + 10.6 Non-current assets 9,131.8 9,614.0 - 5.0 Development of the Group's non-current assetsGoodwillGoodwill declined by EUR 366.9 m to EUR 2,853.5. The decrease in thecarrying amount is essentially due to the translation of goodwill notmanaged in the TUI Group's functional currency into euros. It was alsodriven by the disposal of Hotelbeds Group and recognition of SpecialistGroup as a discontinued operation. In the period under review, noadjustments were required as a result of impairment tests.Property, plant and equipmentProperty, plant and equipment increased to EUR 3,714.5 m in the periodunderreview, primarily driven by the acquisition of a cruise ship in NorthernRegion and the capitalisation of one aircraft as well as down payments onaircraft orders, partly offset by the reclassification of the segmentsHotelbeds Group and Specialist Group to assets held for sale. Property,plant and equipment also comprised leased assets in which Group companiesheld economic ownership. At the balance sheet date, these finance leaseshada carrying amount of EUR 1,230.0 m, up 21.8 % year-on-year. Development of property, plant and equipment EUR million 30 Sep 30 Sep Var. 2016 2015 % Real estate with hotels 978.9 971.2 + 0.8 Other land 155.4 170.2 - 8.7 Aircraft 1,202.0 1,166.0 + 3.1 Ships 674.3 706.7 - 4.6 Machinery and fixtures 335.5 391.9 - 14.4 Assets under construction, payments on 368.4 230.8 + accounts 59.6 Total 3,714.5 3,636.8 + 2.1 Companies measured at equityThirteen associated companies and 27 joint ventures were measured atequity.At EUR 1,180.8 m, their value increased by 9.6 % year-on-year as at thebalance sheet date. Structure of the Group's current assets EUR million 30 Sep 30 Sep Var. 2016 2015 % Inventories 105.2 134.5 - 21.8 Financial assets available for sale 265.8 334.9 - 20.6 Trade accounts receivable and other 1,864.7 2,229.7 - assets* 16.4 Current tax assets 87.7 58.5 + 49.9 Current receivables 2,218.2 2,623.1 - 15.4 Cash and cash equivalents 2,072.9 1,672.7 + 23.9 Assets held for sale 929.8 42.2 n. a. Current assets 5,326.1 4,472.5 + 19.1 * incl. receivables from derivative financial instrumentsDevelopment of the Group's current assetsFinancial assets available for saleFinancial assets available for sale comprised the remaining interests inHapag-Lloyd AG as at 30 September 2016.Current receivablesCurrent receivables comprise trade accounts receivable and otherreceivables, current income tax assets and claims from derivative financialinstruments. At EUR 2,218.2 m, current receivables decreased by 15.4 %year-on-year.Cash and cash equivalentsAt EUR 2,072.9 m, cash and cash equivalents increased by 23.9 %year-on-year.Assets held for saleAssets held for sale increased by EUR 887.6 m to EUR 929.8 m. The increaseis primarily attributable to the reclassification of Specialist Group toassets held for sale.Unrecognised assetsIn the course of their business operations, Group companies used assets ofwhich they were not the economic owner according to the IASB rules. Most ofthese assets were aircraft, hotel complexes or ships for which operatingleases, i.e. rental, lease or charter agreements, were concluded under theterms and conditions customary in the sector. Operating rental, lease and charter contracts EUR million 30 Sep 30 Sep Var. 2016 2015 % Aircraft 1,886.3 2,144.7 - 12.0 Hotel complexes 731.9 793.6 - 7.8 Travel agencies 229.1 263.7 - 13.1 Administrative buildings 271.2 327.5 - 17.2 Ships, Yachts and motor boats 204.6 195.0 + 4.9 Other 114.3 118.8 - 3.8 Total 3,437.4 3,843.3 - 10.6 Fair value 3,319.6 3,540.6 - 6.2 The fair value of financial liabilities from operating rental, lease andcharter agreements declined by EUR 221.0 m to EUR 3,319.6 m. At 54.9 %,aircraft accounted for the largest portion, with hotel complexes accountingfor 21.3 %.Further explanations as well as the structure of the remaining terms of thefinancial liabilities from operating rental, lease and charter agreementsare provided in the section Other financial liabilities in the Notes to theconsolidated financial statements.Information on other intangible, non-recognised assets in terms of brands,customer and supplier relationships and organisational and process benefitsis provided in the section on TUI Group fundamentals; relationships withinvestors and capital markets are outlined in the section on TUI shareperformance.Financial position of the GroupPrinciples and goals of financial managementPrinciplesTUI Group's financial management is centrally operated by TUI AG, whichactsas the Group's internal bank. Financial management covers all Groupcompanies in which TUI AG directly or indirectly holds an interest of morethan 50 %. It is based on policies covering all cash flow-oriented aspectsof the Group's business activities. In the framework of a cross-nationaldivision of tasks within the organisation, TUI AG has outsourced some oftheoperating finance operations to First Choice Holidays Finance Ltd, TUITravel's former financing company. However, the operating financeoperationsare carried out on a coordinated and centralised basis.GoalsTUI's financial management goals include ensuring sufficient liquidity forTUI AG and its subsidiaries and limiting financial risks from fluctuationsin currencies, commodity prices and interest rates.Liquidity safeguardsThe Group's liquidity safeguards consist of two components: * In the course of the annual Group planning process, TUI draws up a multi-annual finance budget, which forms the basis to determine the long-term financing and refinancing requirements. Using thisinformation and observing the financial markets in order to identify refinancing opportunities create a basis for decision-making to enable appropriate financing instruments for the long-term funding of the Company to be adopted early on. * TUI uses syndicated credit facilities and bilateral bank loans as well as its liquid funds to secure sufficient short-term cash reserves. Through intra-Group cash pooling, the cash surpluses of individualGroup companies are used to finance the cash requirements of other Group companies. Planning of bank transactions is based on a monthly rolling liquidity planning system. Limiting financial risksThe Group companies operate on a worldwide scale. This gives rise tofinancial risks for the TUI Group, mainly from changes in exchange rates,commodity prices and interest rates.The key operating financial transaction risks relate to the euro, US dollarand pound sterling and changing fuel prices. They mainly result from costitems in foreign currencies held by individual Group companies, e. g. hotelsourcing, aircraft fuel and bunker oil invoices or ship handling costs.The Group has entered into derivative hedges in various foreign currenciesin order to limit its exposure to risks from changes in exchange rates forthe hedged items. Changes in commodity prices affect the TUI Group, inparticular in procuring fuels such as aircraft fuel and bunker oil. Theseprice risks related to fuel procurement are largely hedged with the aid ofderivative instruments. Where price increases can be passed on to customersdue to contractual agreements, this is also reflected in our hedgingbehaviour. In order to control risks related to changes in interest ratesarising on liquidity procurement in the international money and capitalmarkets and investments of liquid funds, the Group uses derivative interesthedges on a case-by-case basis as part of its interest management system.The use of derivative hedges is based on underlying transactions; thederivatives are not used for speculation purposes.More detailed information on hedging strategies and risk management as wellas financial transactions and the scope of such transactions at the balancesheet date is provided in the Risk Report within the Management Report andthe section Financial instruments in the Notes to the consolidatedfinancialstatements.Capital structure Capital structure of the Group EUR million 30 Sep 30 Sep Var. 2016 2015 % Non-current assets 9,131.8 9,614.0 - 5.0 Current assets 5,326.1 4,472.5 + 19.1 Assets 14,457.9 14,086.5 + 2.6 Subscribed capital 1,500.7 1,499.6 + 0.1 Reserves including net profit available for 1,174.4 413.8 + distribution 183.8 Non-controlling interest 573.1 503.9 + 13.7 Equity 3,248.2 2,417.3 + 34.4 Non-current financial liabilities 2,213.3 1,860.8 + 18.9 Current provisions 415.4 495.8 - 16.2 Provisions 2,628.7 2,356.6 + 11.5 Non-current liabilities 1,503.4 1,653.3 - 9.1 Current financial liabilities 537.7 233.1 + 130.7 Financial liabilities 2,041.1 1,886.4 + 8.2 Other non-current financial liabilities 272.7 456.1 - 40.2 Other current financial liabilities 5,794.9 6,938.6 - 16.5 Other financial liabilities 6,067.6 7,394.7 - 17.9 Debt related to assets held for sale 472.3 31.5 n. a. Liabilities 14,457.9 14,086.5 + 2.6 Capital ratios EUR million 30 Sep 30 Sep Var. 2016 2015 % Non-current capital 7,237.6 6,387.5 + 13.3 Non-current capital in relation to balance 50.1 45.3 + sheet total 4.7* Equity ratio 22.5 17.2 + 5.3* Equity and non-current financial liabilities 4,751.6 4,070.6 + 16.7 Equity and non-current financial liabilities in 32.9 28.9 + relation to balance sheet total 4.0* Gearing 41.9 48.7 - 6.8* * percentage pointsOverall, non-current capital increased by 13.3 % to EUR 7,237.6 m. As aproportion of the balance sheet total it amounted to 50.1 % (previous year45.3 %).The equity ratio was 22.5 % (previous year 17.2 %). Equity and non-currentfinancial liabilities accounted for 32.9 % (previous year 28.9 %) of thebalance sheet total at the reporting date.The gearing, i.e. the ratio of average net debt to average equity, moved to41.9 %, down from the previous year (48.7 %).equity Composition of equity EUR million 30 Sep 2016 30 Sep 2015 Var. % Subscribed capital 1,500.7 1,499.6 + 0.1 Capital reserves 4,192.2 4,187.7 + 0.1 Revenue reserves - 3,017.8 - 3,773.9 + 20.0 Non-controlling interest 573.1 503.9 + 13.7 Equity 3,248.2 2,417.3 + 34.4 Subscribed capital and the capital reserves rose slightly year-on-year. Theincrease of 0.1 % each was driven by the issue of employee shares. Revenuereserves rose by EUR 756.1 m to EUR- 3,017.8 m. Non-controlling interestsaccounted for EUR 573.1 m of equity.ProvisionsProvisions mainly comprise provisions for pension obligations, current anddeferred tax provisions and provisions for typical operating risksclassified as current or non-current, depending on expected occurrence. Atthe balance sheet date, they accounted for a total of EUR 2,628.7 m, up byEUR 272.1 m or 11.5 % year-on-year.Financial liabilities Composition of liabilities EUR million 30 Sep 2016 30 Sep 2015 Var. % Bonds 306.5 293.7 + 4.4 Liabilities to banks 410.8 494.1 - 16.9 Liabilities from finance leases 1,231.7 982.0 + 25.4 Other financial liabilities 92.1 116.6 - 21.0 Financial liabilities 2,041.1 1,886.4 + 8.2 Structural changes in financial liabilitiesThe Group's financial liabilities rose by a total of EUR 154.7 m to EUR2,041.1 m, in particular due to the increase in finance leases. The changewas driven in particular by the acquisition of a new Boeing B787-9aircraft,which was refinanced by means of a sale-and-lease-back arrangement viafinance leases as well as a cruise ship financed by a finance leasearrangement. Apart from that, the structure of financial liabilities wasbasically retained.Overview of TUI's listed bondsThe tables below list the maturities, nominal volumes and annual interestcoupon of listed bonds.On 26 October 2016, TUI AG issued bonds with a nominal value of EUR 300.0 mwith a 5-year team. On 18 November 2016, the proceeds from this bondissuance were used to repay the five-year bonds issued in September 2014with a nominal value of EUR 300.0 m. Listed Bonds Capital Issuan- Matu- Nominal value Nominal value Interest measures ce rity initial EUR outstanding EUR rate % p. million million a. Senior Septem- Octo- 300.0 300.0 4.500 Notes ber ber 2014 1 2014 2019 Senior Octo- Octo- 300.0 300.0 2.125 Notes ber ber 2016 2 2016 2021 1 Early termination and repayment on 18 November 20162 Not included in the consolidated financial statementsBank loans and other liabilities from finance leasesApart from the bonds worth EUR 300.0 m, used for general corporatefinancing, the Hotels & Resorts segment, in particular, incurred separatebank loans, primarily in order to finance investments by these companies.Most liabilities from finance lease contracts are attributable to aircraftleases.More detailed information, in particular on the remaining terms, isprovidedunder Financial liabilities in the Notes to the consolidated financialstatements.Other financial liabilitiesOther liabilities totalled EUR 6,067.6 m, down by EUR 1,327.1 m or 17.9 %year-on-year.Off-balance sheet financial instruments and key credit facilitiesOperating LeasesThe development of operating rental, leasing and charter contracts ispresented in the section Net assets in the Management Report.More detailed explanations and information on the structure of theremainingterms of the associated financial liabilities are provided in the sectionOther financial liabilities in the Notes to the consolidated financialstatements. There were no contingent liabilities related to special-purposevehicles.Syndicated credit facilities of TUI AGTUI AG signed a syndicated credit facility worth EUR 1.75 bn in September2014. This syndicated credit facility is available for general corporatefinancing purposes (in particular in the winter months). It carries afloating interest rate which depends on the short-term interest rate level(EURIBOR or LIBOR) and TUI's credit rating plus a margin. This syndicatedcredit facility was originally to mature in June 2018, but in the financialyear under review, its maturity was extended ahead of the due date toDecember 2020. At the balance sheet date, an amount of EUR 120.5 m fromthiscredit facility had been utilised in the form of bank guarantees.Bilateral guarantee facilities of TUI AG with insurance companiesIn September 2015 and in the completed financial year, TUI AG concludedseveral bilateral guarantee facilities with various insurance companieswitha total volume of £ 98.5 m and EUR 100.0 m. These guarantee facilities arerequired in the framework of the delivery of tourism services in order toensure that Group companies are able to meet, in particular, therequirements of European oversight and regulatory authorities on theprovision of guarantees and warranties. The guarantees granted usually havea term of 12 to 18 months. The guarantees granted give rise to a commissionin the form of a fixed percentage of the maximum guarantee amount. At thebalance sheet date, an amount of £ 48.6 m and EUR 43.0 m from theseguarantee facilities had been utilised.Commitments in financing instrumentsThe EUR 300.0 m bond from October 2016 (and the bond worth EUR 300.0 m fromSeptember 2014, repaid in November 2016) and the credit and guaranteefacilities of TUI AG contain a number of obligations.TUI AG has a duty to comply with certain financial covenants (as defined inthe respective contracts) from its syndicated credit facility worth EUR1.75bn and a number of bilateral guarantee lines. These require (a) compliancewith an EBITDAR-to-net interest expense ratio measuring TUI Group'srelativecharge from the interest result and the lease and rental expenses; and (b)compliance with a net debt-to-EBITDA ratio, calculating TUI Group'srelativecharge from financial liabilities. The EBITDAR-to-net interest expenseratiomust have a coverage multiple of at least 1.5; net debt must not exceed 3.0times EBITDA. The financial covenants are determined every six months. Theyrestrict, inter alia, TUI's scope for encumbering or selling assets,acquiring other companies or shareholdings and effecting mergers.The bond worth EUR 300.0 m from October 2016 (and the bond worth EUR 300.0mfrom September 2014, repaid in November 2016) and the credit and guaranteefacilities of TUI AG also contain additional contractual clauses typical offinancing instruments of this type. Non-compliance with these obligationsawards the lenders the right to call in the facilities or terminate thefinancing schemes for immediate repayment.Ratings by Standard & Poor's and Moody's TUI AG Ratings 2011 / 2012 / 2013 / 2014 / 2015 / Outlook 12 13 14 15 16 Standard & B - B B+ BB - BB - positi- Poor's ve Moody's B3 B3 B2 Ba3 Ba2 stable Due to the level of certain metrics relevant for the credit rating infinancial year 2014 / 15 and the Company's goal to further improve thesemetrics, Standard & Poor's assigned a 'positive' outlook to the corporaterating ('BB -') in February 2016. In the light of improved metrics and theresilience shown in facing negative geopolitical events, Moody's alsoupgraded its corporate rating from 'Ba3' to 'Ba2' in April 2016.TUI AG's bonds worth EUR 300.0 m from September 2014 was and TUI AG's bondsworth EUR 300.0 m from October 2016 are assigned a 'BB -' rating byStandard& Poor's and a 'Ba2' rating by Moody's. TUI AG's syndicated credit facilityworth EUR 1.75 bn is assigned a 'BB -' rating by Standard & Poor's.Financial stability targetsTUI considers a stable credit rating to be a prerequisite for the furtherdevelopment of the business. In response to the merger between TUI AG andTUI Travel and the operating performance observed over the past few years,Standard & Poor's and Moody's both lifted their TUIratings. Apart fromadvantageous financing conditions, we are seeking further improvements soasto ensure better access to the debt capital markets even in difficultmacroeconomic situations. The financial stability ratios we have definedareleverage ratio and coverage ratio, based on the following basicdefinitions:Leverage ratio = (gross financial liabilities + fair value of financialcommitments from lease, rental and leasing agreements + pension provisionsand similar obligations) / (reported EBITDA + long-term leasing and rentalexpenses)Coverage ratio = (reported EBITDA + long-term leasing and rental expenses)/(net interest expense + ⅓ of long-term leasing and rental expenses)These basic definitions are subject to specific adjustments in order toreflect current circumstances.For the completed financial year, the leverage ratio was 3,3(x), while thecoverage ratio was 4,8(x). We aim to achieve a leverage ratio between3.25(x) and 2.50(x) and a coverage ratio between 4.75(x) and 5.75(x) forfinancial year 2016 / 17.Interest and financing environmentIn the period under review, short-term interest rates remained at anextremely low level compared with historical rates. In some currency areas,the interest rate was even negative, with corresponding impacts on returnsfrom money market investments but also on reference interest rates forfloating-rate debt.Quoted credit margins (CDS levels) for corporates in the sub-investmenttrade area remained almost flat year-on-year. On overall weak demand forCDStitles, quotations were on a very low level for TUI AG. Refinancing optionswere available against the backdrop of the receptive capital marketenvironment, and TUI AG took advantage of this towards the end of thefinancial year by preparing for issuing bonds worth EUR 300.0 m whichoccurred in October 2016.TUI also took advantage of the sound condition of the syndicated creditmarket in order to extend the maturity of TUI AG's syndicated creditfacility worth EUR 1.75 bn to December 2020 ahead of the due date.In the completed financial year, no major new large-volume financingschemeswere incurred apart from a refinancing of a collateralised aircraftfinancing scheme and finance lease contracts.Liquidity analysisLiquidity reserveIn the completed financial year, the TUI Group's solvency was secured atalltimes by means of cash inflows from operating activities, liquid funds, andbilateral and syndicated credit agreements with banks.At the balance sheet date, cash and cash equivalents of TUI AG, TUI Group'sparent company, totalled EUR 637.0 m.Restrictions of the transfer of liquid fundsAt the balance sheet date, there were restrictions worth around EUR 0.1 bnon the transfer of liquid funds within the Group that might significantlyimpact the Group's liquidity, such as restrictions on capital movements andrestrictions due to credit agreements concluded.Change of controlSignificant agreements taking effect in the event of a change of controldueto a takeover bid are outlined in the chapter on Information required undertakeover law.Cash flow statement Summary cash flow statement EUR million 2015 / 2014 / 16 15 Net cash inflow from operating activities + + 790.5 1,034.7 Net cash in/ outflow from investing activities + 239.0 - 216.8 Net cash outflow from financing activities - 662.1 - 1,116.7 Change in cash and cash equivalents with cash + 611.6 - 543.0 effects The cash flow statement shows the flow of cash and cash equivalents withcash inflows and outflows presented separately for operating, investing andfinancing activities. The effects of changes in the group of consolidatedcompanies are eliminated.Net cash inflow from operating activitiesIn the financial year under review, the cash inflow from operatingactivities amounted to EUR 1,034.7 m (previous year EUR 790.5 m). Itincluded interest of EUR 21.1 m and dividends of EUR 84.7 m in thereportingperiod. A cash outflow of EUR 186.4 m resulted from income tax payments.Taxpayments of EUR 94.9 m in connection with the sale of Hotelbeds Group wereincluded in the cash inflow from investing activities.Net cash outflow/inflow from investing activitiesIn the financial year under review, the cash inflow from investingactivities including the payments received for the sale of Hotelbeds Grouptotalled EUR 239.0 m (previous year cash outflow of EUR 216.8 m). The cashoutflow of EUR 605.6 m for capital expenditure related to property, plantand equipment and intangible assets primarily included 243.1 m for touroperators and airlines and EUR 262.3 m for Hotels & Resorts. The cashinflowfrom the disposal of property, plant and equipment and intangible assetstotalled EUR 72.2 m. The cash outflows for capital expenditure on property,plant and equipment and intangible assets and the corresponding cashinflowsdo not match the additions and disposals shown in the development of fixedassets, as these also include the non-cash investments and disposals.Net cash outflow from financing activitiesIn the period under review, the cash outflow from financing activitiesdeclined by EUR 454.6 m year-on-year to EUR 662.1 m.Major cash outflows resulted from the repayment of finance leaseobligations(EUR 78.1 m) and other financial liabilities (197.3 m), interest payments(EUR 92.3 m) and dividend payments to TUI AG shareholders (EUR 327.0 m). Change in cash and cash equivalents EUR million 2015 / 2014 / 16 15 Cash and cash equivalents at the beginning of + + period 1,682.2 2,258.0 Changes due to changes in exchange rates + 105.8 - 33.1 Change in cash and cash equivalents due to + 4.0 + 0.3 changes in the group of consolidated companies Cash changes + 611.6 - 543.0 Cash and cash equivalents at the end of period + + 2,403.6 1,682.2 Cash and cash equivalents comprise all liquid funds, i. e. cash in hand,bank balances and cheques.The detailed cash flow statement and additional explanations are providedinthe consolidated financial statements and in the section Notes to the cashflow statement in the Notes to the consolidated financial statements.Analysis of investmentsThe development of fixed assets, including property, plant and equipment,intangible assets and shareholdings and other investments is presented inthe section on Net assets in the Management Report. Additional explanatoryinformation is provided in the Notes to the consolidated financialstatement.Additions to property, plant and equipmentThe table below lists the cash investments in intangible assets andproperty, plant and equipment. This indicator does not include financingprocesses such as the taking out of loans and finance leases. Net capex and investments EUR million 2015 / 2014 / 15 Var. 16 restated % Northern Region 86.4 69.9 + 23.6 Central Region 20.6 23.6 - 12.7 Western Region 21.6 23.5 - 8.1 Hotels & Resorts 262.3 173.3 + 51.4 Cruises 10.7 88.5 - 87.9 Other Tourism 101.0 102.2 - 1.2 Tourism 502.6 481.0 + 4.5 All other segments 20.8 45.7 - 54.5 TUI Group 523.4 526.7 - 0.6 Discontinued operations 82.2 75.3 + 9.2 Sum of the segments 605.6 602.0 + 0.6 Net pre delivery payments on aircraft 48.7 - 11.9 n. a. Financial investments 132.0 158.0 - 16.5 Divestments (without proceeds from - 95.3 - 89.1 - Hotelbeds sale) 7.0 Net capex and investments 691.0 659.0 + 4.9 Investments in other intangible assets and property, plant and equipmenttotalled EUR 605.6 m in the period under review, up 0.6 % year-on-year.In the period under review, investments mainly related to the constructionof hotels in the Caribbean, Mexico and the Mediterranean, the developmentand launch of new booking and reservation systems and down payments onordered aircraft. Investments were also effected for renovation andmaintenance in all areas.The table below shows a reconciliation of investments to additions to TUIGroup's other intangible assets and property, plant and equipment. Reconciliation of capital expenditure EUR million 2015 2014 / 15 / 16 restated Capital expenditure 605.6 602.0 Debt financed investments - 211.0 Finance leases 315.5 477.4 Advance payments 91.8 224.4 Additions to the group of consolidated 2.7 8.6 companies Additions to discontinued operations - - 20.6 Additions to other intangible assets and 995.0 1,523.4 property, plant and equipment Amortisation (+)/write-backs (-) of other intangible assets and depreciation (+)/write-backs (-) of property, plant and equipment EUR million 2015 2014 Var. / 16 / 15 % Northern Region 94.2 105.9 - 11.0 Central Region 22.7 28.2 - 19.5 Western Region 25.8 20.3 + 27.1 Hotels & Resorts 95.0 113.0 - 15.9 Cruises 19.3 17.1 + 12.9 Other Tourism 60.7 64.7 - 6.2 Tourism 317.7 349.2 - 9.0 All other segments 89.3 71.0 + 25.8 TUI Group 407.0 420.2 - 3.1 Discontinued operations 70.9 132.5 - 46.5 Sum of the segments 477.9 552.7 - 13.5 Investment obligationsOrder commitmentsDue to agreements concluded in financial year 2015 / 16 or in prior years,order commitments for investments totalled EUR 4,786.7 m; this totalincludes an amount of EUR 657.1 m for scheduled deliveries in financialyear2016 / 17.At the balance sheet date, order commitments for aircraft comprised 73planes (3 B787s and 70 B737s), to be delivered by the end of financial year2022 / 23. Delivery of one aircraft has been scheduled for financial year2016 / 17.More detailed information is provided in the section Other financialliabilities in the Notes to the consolidated financial statements.Sustainable developmentCommitment to sustainability: responsibility for the environment, societyand our peopleFor TUI Group, economic, environmental and social sustainability is afundamental management principle and a cornerstone of our strategy forcontinually enhancing the value of our Company. This is the way we createthe conditions for long-term economic success and assume responsibility forsustainable development in the tourism sector.Better Holidays, Better WorldIn 2015, TUI Group presented its sustainability strategy for the perioduntil 2020. The strategy was devised with the involvement of managers fromacross the business operations and fine-tuned in cooperation withinternational stakeholders (e. g. non-governmental organisations,partners,customers and academics).More on TUI's sustainability strategy at www.tui-sustainability.comUnder the title 'Better Holidays, Better World', TUI's sustainabilityefforts comprise three major ambitions: 'step lightly', 'make a difference'and 'lead the way'.Our goal is to make positive contributions towards sustainableenvironmentaland social development, both in the host countries and at our home markets.We also consistently work to prevent and minimise any negative impacts fromour business activities on our natural and social environment. To play ourpart in shaping the future of sustainable tourism, TUI invests in youngpeople, skills and tourism training programmes, and works in partnershipwith the destination markets.In the period under review, our strategy was implemented more broadlywithinour Group, and the first results were measured. In July 2016, TUI Grouppublished its first status report on 'Better Holidays, Better World'. Thereport is available for download on the Group's website. It offerscomprehensive information about our goals, activities, progress and metricsin the field of sustainability.Report online at www.tuigroup.com/en-en/sustainability/reporting-downloadsTUI Care FoundationA further key milestone was the Group-wide launch of TUI Care Foundation inthe period under review. It pools and expands the social commitmentexpressed across TUI Group. TUI Care Foundation operates globally butalwaysfocuses on the local situation. It thus builds on strong partnerships withregional and international organisations in order to create sustainable,positive change. The non-profit foundation has committed to transparencyandan efficient use of funds. 100 % of the donations go to projects andprojectpartnerships, with all overhead costs for the foundation covered by TUI.More on TUI Care Foundation in the Magazine on page 58 and on the Internetat www.tuicarefoundation.comThe TUI Care Foundation supports projects for children and young people,nature conservation and environmental protection, and development fordestinations, e. g. through education and training.Current projects and initiatives are regularly published on our website. Inaddition, many TUI Group companies describe their sustainability activitiesin detail on their local websites and integrate sustainability informationinto customer communication.Current projects and initiatives at www.tui-sustainability.comSustainability indicesIn September 2016, TUI AG was once again listed in the renowned Dow JonesSustainability Index (DJSI) for the eleventh time in succession. TUI is theonly tourism group admitted to the World and Europe indices. TUI is alsolisted as industry leader. At this year's review of the composition of theindex, TUI achieved particularly high scores in the categories CorporateCitizenship, Climate Strategy and Eco-Efficiency.TUI AG is also represented in the sustainability indexes FTSE4Good, STOXXGlobal ESG Leaders Index, Ethibel Excellence Index and ECPI Ethical IndexEURuro. TUI is listed in the Climate Disclosure Leadership Index (CDLI) inthe UK and in Germany.The environmentRespecting the environment in our products, services and processes is anessential feature of our quality standards. Conserving natural resourcesandmitigating negative environmental impacts secure TUI's success. We placepriority on climate protection, resource efficiency and biodiversity.Group-wide environmental monitoringGroup-wide processes to monitor environmental performance and determinemeaningful indicators were further pursued in financial year 2015 / 16.These are based on internationally acknowledged standards such as theGreenhouse Gas Protocol. Group-wide monitoring focuses on businessactivities impacting the environment and is used as a control parameter toimprove environmental performance.To establish the relevant indicators, our businesses use an internal systemto report their consumption and activities on an annual basis. Thequantitative data is then consolidated at Group level and aggregated intometrics. A web-based system is used to further enhance data quality andincrease the efficiency of the data capture process for the companiesconcerned.Focus on climate protection and emissionsOur special focus is on improving carbon emissions, in particular by theTUIGroup's airlines, which account for more than 80 % of our CO2 emissions.Details about our carbon footprint can be found in TUI Group'sSustainability Report at www.tui-sustainability.com Carbon dioxide emissions (CO2) tons 2015 / 16 2014 / 15 Var. % Airlines & Aviation 5,842,427 5,615,386 + 4.0 Hotels & Resorts 510,719 510,492 + 0.0 Cruises 686,791 639,119 + 7.5 Major Premises / Shops 32,617 38,115 - 14.4 Ground Transport 17,751 17,761 - 0.1 Scope 3 (Other) 71,713 68,403 + 4.8 Group 7,162,018 6,889,276 + 4.0 In financial year 2015 / 16, TUI Group's total emissions rose year-on-yearin absolute terms, primarily due to growth in its airlines and aviationsegment. The increase in absolute carbon emissions in Cruises of 7.5 % ismainly driven by the launch of Mein Schiff 5, operated by TUICruises, andthe inclusion of Mein Schiff 4 for a full financial year. Emissions fromoffices and retail shops declined significantly, driven partly by moreefficient energy use.Climate protection by TUI airlinesWe already operate one of Europe's most carbon-efficient airlines. CO2emissions by TUI airlines are 30 % below the average for the entire sector.TUI Airlines have launched numerous measures to secure our top position andfurther enhance the efficiency of aircraft.Apart from continuous renewal of our aircraft fleet, we have launched thefollowing measures to support our efficiency goals: * Fitting our aircraft with split scimitar winglets and blended winglets to save fuel * Process optimisation, e. g. single-engine taxiing * Weight reduction, e. g. by means of lighter trolleys and seats, use of iPads, introduction of carbon brakes and optimisation of on-board water and goods volumes * Washing engines, using lighter paint and surface sealants to prevent soiling and further improving aircraft aerodynamics * Replacing fluorescent lamps in aircraft cabins by LEDs TUI's airlines play a pioneering role in introducing environmentalmanagement systems based on the internationally recognised ISO 14001standard. In the period under review, each of our five tour operatorairlines and hence 95 % of our aircraft achieved ISO 14001 certification.In the Atmosfair Airline Index 2015 TUI fly Germany was named 'mostclimate-efficient airline in the world' for the third consecutive time.Thomson Airways took second place as the 'most climate-efficient airline inthe world in the medium- and long-haul segment'.The ecoDemonstrator project carried out in collaboration with Boeing andNASA to test new technologies aimed at reducing CO2 and noise emissions wassuccessfully completed in the period under review. The tests includedspecial coatings for aircraft wings to protect the leading edge from insectsoiling. This reduces the aerodynamic drag of the aircraft. After the endofthe series of test flights, the aircraft was dismantled and 90 % of itsparts recycled by means of new methods.In our sustainability strategy 'Better Holidays, Better World', we setourselves the goal to defend our position as Europe's mostemission-efficient airline fleet. We also aim to reduce the CO2 intensityofour global operations, including TUI's airlines, by 10 % by 2020: We aim toreduce specific CO2 emissions (g CO2 / PKM) by 10 % (baseline 2013 / 14). TUI Airlines - Fuel consumption and related emissions 2015 / 16 2014 / 15 Var. 2 % Specific fuel consumption l / 100 2.65 2.62 + rpk1 1.2 Carbon dioxide (CO2) - total t 5,277,065 5,034,264 + 4.8 Carbon dioxide (CO2) - specific kg / 100 6.68 6.60 + rpk1 1.2 Nitrogen oxide (NOX) - total t 29,417 30,754 - 4.3 Nitrogen oxide (NOX) - specific g / 100 37.34 41.38 - rpk1 9.8 Carbon monoxide (CO) - total t 1,583 1,523 + 3.9 Carbon monoxide (CO) - specific g / 100 2.00 2.05 - rpk1 2.4 Hydrocarbon (HC) - total t 142 130 + 9.2 Hydrocarbon (HC) - specific g / 100 0.18 0.17 + rpk1 5.9 1 rpk = Revenue Passenger Kilometer2 Presentation of the nitrogen oxide, carbon monoxide and hydrocarbonemissions for financial year 2014 / 15 is based on total fuel burn.Specific fuel consumption and specific emissions rose slightly in theperiodunder review. This is attributable to changes in the fleet's load factoranda higher frequency of short-haul flights. TUI Airlines - Carbon intensity 2015 / 2014 / Var. g CO2e / 16 15 % rpk* TUI Airline fleet g CO2 / 66.8 66.0 + 67.5 rpk* 1.2 Corsair International g CO2 / 82.4 79.8 + 83.2 rpk* 3.3 Thomson Airways g CO2 / 63.8 63.7 + 64.4 rpk* 0.2 TUI fly Belgium g CO2 / 71.4 69.6 + 72.1 rpk* 2.6 TUI fly Germany g CO2 / 64.4 63.4 + 65.0 rpk* 1.6 TUI fly Netherlands g CO2 / 64.1 63.8 + 64.7 rpk* 0.5 TUI fly Nordic g CO2 / 61.4 60.6 + 62.0 rpk* 1.3 * rpk = Revenue Passenger KilometerWe have requested PwC, TUI Group's auditors, to provide assurance on thecarbon intensity metrics displayed in the table 'TUI Airlines - Carbonintensity' above. To read our airline carbon data methodology document andPwC's Assurance Report in full, please visitwww.tuigroup.com/en-en/sustainability/reporting-downloadsTo enhance the information content, specific emissions are also shown intheform of CO2 equivalents (CO2e). Apart from carbon dioxide (CO2), theyinclude the other five greenhouse gases impacting the climate as listed inthe Kyoto Protocol: methane (CH4), nitrous oxide (N2O), hydro-fluorocarbons(HFCs), perfluorocarbons (PFCs) and sulphur hexafluoride (SF6).Climate protection in CruisesIn 2016, TUI Cruises launched Mein Schiff 5. Like her sister ships MeinSchiff 3 and Mein Schiff 4, the newbuild is 30 % more energy efficient thancomparable vessels. The ships save fuel through a combination of the latesttechnologies. A smart energy management system, efficient air conditioning,innovative lighting controls and the use of waste heat from the engines allcontribute to a significantly reduced carbon footprint. Sulphur emissionsfrom the newbuilds in the fleet are also 90 % lower thanks to new systemsthat treat exhaust fumes before releasing them. Moreover, the averagesulphur content of fuel was considerably reduced year-on-year. In theperiodunder review, it stood at 1.16 %.More in the TUI Cruises Environment Report:www.tuicruises.com/nachhaltigkeit/umweltbericht/The ships are fitted with advanced emission purification systems, whichoperate around the clock worldwide - even outside Emission Control Areas,where use of scrubbers when using heavy fuel oil has been required since2015.At Hapag-Lloyd Cruises, the expedition ships Hanseatic and Bremen werefitted with new zodiacs in the period under review. These motor-drivenrubber boats are equipped with Torqueedo electric motors in order to reduceair and noise emissions. Hapag-Lloyd Cruises is the first provider ofexpedition cruises to use this environmentally friendly technology.Human resourcesWe successfully operate in a dynamic, challenging environment with around67,000 employees worldwide. In financial year 2015 / 16, the new Group HRStrategy was developed in conjunction with the global HR Leadership Team inorder to ensure lasting achievement of our goal - long-term success. Apartfrom anchoring joint corporate values, the focus is on the five strategickey areas Engagement, Leadership, People Development, OrganisationalEffectiveness and HR Function Development. For each of these pillars,specific projects have been defined so that TUI Group's culturaltransformation can be experienced by managers and employees. The 15projectsare all in different implementation stages and will be the focus of ouractivities in the next few years.One of the key cornerstones in the strategic HR process and towardsculturalintegration is our employee survey TUIgether. Our first survey was carriedout in September 2015. We invited our employees in more than 100 countrieswith 18 languages to give us their feedback. The response rate was 66 %. Inour first employee survey, we achieved an Engagement Index of 73. Wefollowed up on the results in a well-defined process and agreed toimplementaround 5,000 measures across all levels. In the second employee survey,carried out in September 2016, the response rate rose by around 10percentage points to 77 %, while the Engagement Index climbed to 77.Changes in headcountAt the balance sheet date, TUI Group's worldwide headcount was 66,779, down12.2 % 0year-on-year. This is primarily due to the disposal of HotelbedsGroup.In the period under review, the headcount strongly reflected the seasonalemployment structures, in particular in hotels and incoming agencies.Tourism continues to employ the largest number of Group employees. Personnel by segment 30 Sep 2016 30 Sep 2015 Var. % restated Northern Region 14,943 14,518 + 2.9 Central Region 11,741 12,167 - 3.5 Western Region 5,631 5,431 + 3.7 Hotels & Resorts 24,363 24,373 - 0.0 Cruises 246 232 + 6.0 Other Tourism 4,573 4,806 - 4.8 Tourism 61,497 61,527 - 0.0 All other segments 1,744 1,322 + 31.9 TUI Group 63,241 62,849 + 0.6 Discontinued operations 3,538 13,187 - 73.2 Total 66,779 76,036 - 12.2 TourismAt the end of financial year 2015 / 16, the headcount in Tourism was almostflat year-on-year at 61,497. The individual segments recorded differenttrends.Northern RegionNorthern Region reported a year-on-year increase in headcount of 2.9 % to14,943. This increase mainly resulted from recruitment in tour operationandthe UK airline. On the other hand, Crystal Ski reported a slight reduction.Central RegionAt the balance sheet date, Central Region recorded a headcount of 11,741,down 3.5 % year-on-year. The decline was driven by lower staffing numbersinAustria, Switzerland and Poland and in tour operation in Germany. Inaddition, 375 employees were transferred from TUICustomer Operations to TUIBusiness Services GmbH, a wholly owned subsidiary of TUI AG, in the periodunder review in order to further develop an international, sourcemarket-independent shared service platform. On the other hand, theheadcountincreased in the retail segment in Germany and at TUI Service AG.Western RegionWestern Region saw an increase in headcount of 3.7 % to 5,631, primarilydueto the increase in staffing numbers in tour operation in France, theNetherlands and Belgium.Hotels & ResortsAt the balance sheet date, Hotels & Resorts reported 24,363 employees, flatyear-on-year. At 10,775, Riu Group, the largest hotel company in theportfolio, maintained its staffing number roughly at the prior year'slevel.The increase in staff numbers driven by the opening of new hotel facilitieswas almost offset by the closure of hotels in Tunisia. Robinson reported anincrease in its headcount of 5.9 % to 3,586 due to new acquisitions.CruisesThe Cruises segment recorded a year-on-year increase in headcount of 6.0 %to 246, driven by the newbuild projects.Other TourismOther Tourism reported a decline in headcount of 4.8 % to 4,573,essentiallydriven by the falling headcount for the TUI Destination Services platforminTurkey, Tunisia and Morocco. The headcount in IT was 434, up 12.7 %year-on-year.All other segmentsAll other segments recorded an increase in headcount of 31.9 % to 1,744year-on-year. In the Corporate Centre, the headcount rose by 86.5 % to 235,mainly due to the integration of Group functions and the creation of newfunctions. The headcount growth in All other segments was also driven bythefirst-time inclusion of TUI Business Services GmbH and growth in thelongtail platform.Discontinued operationAt the balance sheet date, the headcount in discontinued operations was73.2% down versus the prior year from 13,187 to 3,538. This was driven by thesale of Hotelbeds Group and LateRooms Group and the associatednon-inclusionof around 9,000 employees. Specialist Group recorded a decline in itsheadcount of 8.1 % to 3,538, primarily due to the sale of companies such asthe language tour operations, not forming part of the Specialist Groupcompanies to be sold in one deal.Global headcount Personnel by region* 30 Sep 2016 30 Sep 2015 Var. % restated Germany 10,170 10,047 + 1.2 Great Britain 13,409 13,036 + 2.9 Spain 8,967 9,115 - 1.6 Other EU 19,895 19,301 + 3.1 North and South America 3,768 3,428 + 9.9 Other regions 7,032 7,922 - 11.2 TUI Group 63,241 62,849 + 0.6 Discontinued operations 3,538 13,187 - 73.2 Total 66,779 76,036 - 12.2 * By domicile of companyAs a global player, TUI Group operates in around 180 destinations worldwidewith its employees. The number of employees working in Germany rose by 1.2%to 10,170. The Group's headcount in Europe increased by 1.8 % to 52,441, or82.9 % of the Group's overall headcount. Due to a reduction in the numberofemployees working in other regions, the headcount in non-European countriesdeclined by 4.8 % to 10,800, or 17.1 % of the overall headcount. Theyear-on-year change is primarily driven by staff reductions in thedestinations Tunisia, Morocco and Egypt.Mixed leadershipAs at 30 September 2016, the balance sheet date, the share of women as aproportion of the overall headcount was almost flat year-on-year at 56.0 %.The proportion of women in leadership positions decreased slightly from31.3% to 29.4 %.The proportion of women on our German supervisory bodies continued to risein the period under review. On 30 September 2016, women accounted overallfor around 38 % of members, up 8 percentage points year-on-year. At TUI AG,the share of women on the Supervisory Board was already 35 %. The statutoryrequirements were therefore met.In Germany, advantage was taken of the self-commitment mechanism providedfor under the German Stock Corporation Act (AktG) and the Act on LimitedLiability Companies (GmbHG) to fix specific targets for TUI AG, TUIDeutschland and TUI fly in financial year 2014 / 15. In financial year 2015/ 16, implementation of these targets made good progress. At the ExecutiveBoard and Management Board levels, the roles of Labour Director within TUIAG and TUI Deutschland were filled with female candidates. In the periodunder review, additional measures were initiated to promote femaleexecutives, in particular at the two management levels below the ExecutiveBoard, in the framework of the HR strategy. proportion of women in managerial positions 30 September 2016 TUI TUI TUI AG Deutsch- fly land % Actu- Target Actual Tar- Ac- Tar- al get tu- get al Executive Board one at least 20 20 0 20 fema- one le female First management level below 10 20 36 30 40 30 Executive Board Second management level below 22 30 40 40 44 40 Executive Board Other staff indicators TUI Germany Group % 30 Sep 30 Sep 30 Sep 30 Sep 2016 2015 2016 2015 Employment structure Number of employees 66,779 76,036 10,170 10,047 Employees - female 56.0 56.2 68.5 68.2 Females in managerial positions 29.4 31.3 32.8 32.6 Employees in part-time, total 18.8 19.7 36.4 35.8 Employees in part-time, female 28.8 28.7 46.1 44.7 Employees - fixed-term employment 33.1 30.8 15.5 16.0 contract Age structure Employees up to 20 years 5.3 5.4 2.9 3.0 Employees 21 - 30 years 30.1 29.3 20.1 19.6 Employees 31 - 40 years 27.1 28.1 24.2 25.5 Employees 41 - 50 years 23.9 23.0 31.4 31.8 Employees more than 50 years 13.6 14.2 21.4 20.1 Average company affiliation up to 5 years 54.3 56.9 33.2 33.0 6 - 10 years 15.8 17.0 13.3 14.5 11 - 20 years 20.2 17.8 31.8 32.5 21 - 30 years 7.6 6.6 16.9 15.2 more than 30 years 2.1 1.7 4.8 4.8 Vocational training in Germany Number of trainees 569 576 Trainees - female 79.3 80.6 Training rate 5.7 5.8 Number of trainees gained 183 171 certification in finanical year Hiring rate 70.5 67.8 Personnel costsThe pay package offered by the TUI Group reflects the appropriateness ofcompensation and customary market rates. It varies in its composition, asitis influenced by framework conditions in different countries and companies.Depending on the function concerned, a fixed basic salary may go hand inhand with variable components. TUI Group uses these variable factors tohonour individual performance and to enable employees to participate in theCompany's strategic and long-term success. Moreover, senior management haveshare options and are thus able to benefit directly when the Company growsin value.In the period under review, the TUI Group's personnel costs declined by 1.4% to EUR 2,272.0 m. The year-on-year decrease in expenses for wages andsalaries was mainly attributable to foreign exchange effects and higherexpenses incurred in the prior year in connection with restructuringmeasures. Moreover, expenses for share-based payments carried inadministrative expenses declined year-on-year due to changes in thestructure of remuneration models and the development of the share price. Anopposite trend was reported by the operating areas, in particular airlinesand hotels, some of which recorded a year-on-year increase in personnelcosts. This trend is reflected in a slight overall increase in the cost ofsales. Personnel costs EUR million 2015 / 16 2014 / 15 Var. % restated Wages and salaries 1,846.7 1,869.7 - 1.2 Social security 425.3 435.7 - 2.4 contributions Total 2,272.0 2,305.4 - 1.4 Pension schemesThe companies in the TUI Group offer their employees benefits from thecompany-based pension schemes funded by the employer. Options for theemployees include pension schemes, direct insurance contracts andindividualor direct commitments to build up a private pension. These schemes weredevised so as to take advantage of fiscal and social securityco-sponsorshipopportunities. To enable their employees to convert their gross pay intopension contributions, TUI AG has concluded advantageous collectivecontracts with an established insurance undertaking, and all our Germanemployees can sign up to these.Part-time early retirementIn order to further increase the flexibility of their company HR andsuccession planning, Group companies in Germany are able to make use of theopportunities provided under the German Part-Time Early Retirement Act toshift gradually from employment to retirement. At the balance sheet date,EUR 9.6 m was provided through a capital investment model for the 180employees working under part-time early retirement contracts in order tohedge their accrued assets against employer insolvency.Security, Health & SafetyIn the framework of the integration process, Security, Health & Safety hasbeen integrated across all companies and further expanded. The goal of thenew structure is to guarantee comprehensive Group-wide safety managementbased on common safety standards, and coordinated workflows ensuringnetworked, aligned action. The analyses performed under this Group-widesafety management system provide the basis for the definition of preventionmeasures, framework concepts and guidelines for action in Security, Health&Safety, which are used across the Group. The effectiveness of thesemeasuresis continually evaluated.In addition, well-coordinated event and crisis management ensures thatrapid, structured and comprehensive support is provided to our customersandemployees if needed, drawing on the resources and experience of a globallyoperating tourism group. To this end, TUI has established a structureincluding crisis centres that coordinate all measures required in the eventof an incident, emergency care teams to support our guests locally inemergency and crisis situations, and close contacts with the foreignofficesin the source markets and foreign ministries worldwide. TUI benefits fromthe interdisciplinary networking of expertise in different areas. Ouremployees contribute the experience they have gained in tourism, crisismanagement and security agencies to TUI Group's integrated Group-widesafetymanagement concept.Annual financial statements of TUI AGCondensed version according to German Commercial Code (HGB)Earnings position of TUI AGThe annual financial statements of TUI AG were prepared in accordance withthe provisions of the German Commercial Code (HGB), taking account of thecomplementary provisions of the German Stock Corporation Act (AktG), andaudited by the auditors PricewaterhouseCoopers AktiengesellschaftWirtschaftsprüfungsgesellschaft, Hanover. They are published in theelectronic federal gazette. The annual financial statements have been madepermanently available on the Internet at www.tuigroup.com and can berequested in print from TUI AG.Annual financial statements TUI AG 2015 / 16 online atwww.tuigroup.com/en-en/investorsIn the present Annual Report, the Management Report of TUI AG has beencombined with the Management Report of TUI Group. Income statement of TUI AG EUR million 2015 / 16 2014 / 15 Var. % Other operating income 637.0 508.8 + 25.2 Personnel costs 50.3 37.8 + 33.1 Depreciation 0.5 0.6 - 16.7 Other operating expenses 762.9 568.6 + 34.2 Net income from investments 353.4 1,420.0 - 75.1 Write-downs of investments 3.7 24.6 - 85.0 Net interest - 24.6 - 28.9 + 14.9 Profit on ordinary activities 148.4 1,268.3 - 88.3 Taxes 8.5 11.6 - 26.7 Net profit / loss for the year 139.9 1,256.7 - 88.9 The earnings position of TUI AG, the Group's parent company, is primarilydetermined by the appropriation of profits by its Group companies, eitherdirectly associated with TUI AG via profit and loss transfer agreements ordistributing their profits to TUI AG based on appropriate resolutions.Other operating incomeThe increase in other operating income was mainly driven by a significantyear-on-year increase in gains on exchange. This income was offset byexpenses for exchange losses of a similar amount, carried in Otheroperatingexpenses. Apart from the gains on exchange, Other operating incomeprimarilyincluded income from the elimination of intercompany services, carriedalongside expenses of almost the same amount passed on to TUI AG from otherGroup companies, also shown in Other Operating expenses.Personnel costs and other operating expensesPersonnel costs rose in financial year 2015 / 16, mainly due to higherexpenses for members of the management body. Personnel costs also rose dueto transfers to pension provisions, recruitment of new staff and thetransfer of staff from a subsidiary to TUI AG.Other operating expenses comprise, in particular, the cost of financial andmonetary transactions, charges, fees, services, transfers to impairmentsandother administrative costs as well as expenses for exchange losses and theintercompany elimination of services. Other operating expenses rose inparticular due to the increase in expenses for exchange losses.Net income from investmentsIn the financial year under review, TUI AG'S net income from investmentswasdriven, in particular, by the distribution of pre-fiscal unity profits ofLeibniz-Service GmbH and the distribution of profits by TUI Cruises GmbH.Net income from investments also included income from profit transfers fromhotel companies and companies allocable to central operations. It alsocomprised expenses for loss transfers from Group companies, resulting in acorresponding reduction in net income from investments. A negative effectwas driven in particular by the loss taken over by TUI-Hapag BeteiligungsGmbH from the impairment of the interests in Hapag-LloydAktiengesellschaft.In the prior year, net income from investments had been impacted inparticular by the high amount of profits distributed by TUI Travel Ltd.Write-downs of investmentsIn the period under review, write-downs of investments exclusively relatedto write-downs of hotel investments.Interest resultThe interest result improved as a result of lower interest expenses drivenby the redemption of bonds. Interest expenses also declined due to changesin the parameters used to calculate pension provisions. An opposite trendwas driven by charges in connection with the syndicated credit facility.TaxesIn the period under review, taxes related to income taxes and other taxes.They did not include deferred taxes.Net profit for the yearFor financial year 2015 / 16, TUI AG posted a net profit for the year ofEUR149.9 m.Net assets of TUI AGTUI AG's net assets and financial position as well as its balance sheetstructure reflect its function as the TUI Group's parent company. Thebalance sheet total rose by 23.5 % to EUR 9.2 bn in financial year 2015 /16. Abbreviated balance sheet of TUI AG (financial statement according to German Commercial Code) EUR million 30 Sep 30 Sep Var. 2016 2015 % Intangible assets / property, plant and 17.5 13.7 + equipment 27.7 Investments 6,784.8 5,662.1 + 19.8 Fixed assets 6,802.3 5,675.8 + 19.8 Inventories / Receivables / Trade securities 1,724.4 912.7 + 88.9 Cash and cash equivalents 637.0 833.7 - 23.6 Current assets 2,361.4 1,746.4 + 35.2 Prepaid expenses 0.8 0.8 - Assets 9,164.5 7,423.0 + 23.5 Equity 4,812.1 4,995.4 - 3.7 Special non-taxed items 0.1 0.5 - 80.0 Provisions 480.8 405.6 + 18.5 Bonds 306.7 300.0 + 2.2 Other liabilities 3,564.8 1,721.5 + 107.1 Liabilities 3,871.5 2,021.5 + 91.5 Liabilities 9,164.5 7,423.0 + 23.5 Fixed assetsAt the balance sheet date, fixed assets almost exclusively consisted ofinvestments. The increase in investments was mainly attributable to theacquisition of TUI Belgium N. V., TUI Holding Spain SLU and Tantur TurizmSeyahat Ltd. Financial investments also rose due to loans toGroupsubsidiaries.Current assetsIn the framework of the restructuring of a cash pool, former TUI Travelsubsidiaries were directly included in TUI AG's cash pooling structure inthe period under review, causing an increase in receivables in financialyear 2015 / 16.Moreover, liquid funds were invested in short-term money market funds intheperiod under review.TUI AG's capital structureEquityTUI AG's equity decreased by EUR 183.3 m to EUR 4,812.1 m. The subscribedcapital of TUI AG consists of no-par value shares, each representing anequal portion in the capital stock. The proportionate share in the capitalstock per share is around EUR 2.56. At the end of financial year 2015 / 16,the subscribed capital of TUI AG rose due to the issue of employee shares.At the end of the financial year under review, subscribed capital comprised587,038,187 shares.In financial year 2015 / 16, the capital reserve rose by a total of EUR 2.7m due to the issue of employee shares. Revenue reserves exclusivelyconsisted of other revenue reserves. The Articles of Association do notcontain any provisions concerning the formation of reserves.The profit for the year amounted to EUR 139.9 m. Taking account of theprofit carried forward of EUR 682.4 m, net profit available fordistributiontotalled EUR 822.3 m. A proposal will be submitted to the Annual GeneralMeeting to use the net profit available for distribution for the financialyear under review to distribute a dividend of EUR 0.63 per no-par valueshare and to carry the amount of EUR 452.5 m, remaining after deduction ofthe dividend total of EUR 369.8 m, forward on new account. The equity ratiodeclined to 52.5 % (previous year 67.3 %) in financial year 2015 / 16.ProvisionsProvisions increased by EUR 75.2 m to EUR 480.8 m. They consisted ofpensionprovisions worth EUR 134.8 m (previous year EUR 139.0 m) and otherprovisions worth EUR 346.0 m (previous year EUR 266.6 m).Other provisions increased year-on-year, in particular due to the use ofprovisions formed for the assumptions of risks in the framework of the saleof Hotelbeds Group and an increase in provisions for invoices outstanding.An opposite effect arose from the decline in provisions for onerous lossesfrom derivative financial instruments.LiabilitiesTUI AG's liabilities totalled EUR 3,871.5 m, up by EUR 1,850.0 m or 91.5 %.In September 2014, TUI AG issued an unsecured bond worth EUR 300.0 mmaturing on 1 October 2019. Due to the issue of bonds with a lower interestcoupon, TUI AG cancelled the bond on 18 November 2016 and repaid it aheadofits maturity date.The increase in other liabilities was also associated with therestructuringof a cash pool of former TUI Travel subsidiaries, which were included inTUIAG's cash pool. Moreover, Group companies fed their gains from the disposalof stakes in Hotelbeds Group into TUI AG's cash pooling system, resultingina considerable increase in liabilities to Group companies.TUI's net financial position (funds and marketable securities less bonds)improved year-on-year, amounting to a clearly positive position of EUR630.2m in the period under review.Capital authorisation resolutionsInformation on new or existing resolutions concerning capitalauthorisation,adopted by Annual General Meetings, is provided in the next chapter onInformation Required under Takeover Law.TUI shareTUI share price performance reflects challenging market environment thisyearThe TUI share performed well at the start of the financial year, but wassubsequently impacted by the challenging market environment. The terroristattacks in Paris on 13 November 2015, in particular, resulted in a slump inequity prices on international stock exchanges.Supported by the best business results in the history of the Company, theTUI share price climbed during December, before the attacks in Istanbul inearly 2016 again impacted tourism shares. In February 2016, marketparticipants were unsettled by the slump in oil prices, which droveinternational lead indices further into losses.In the course of the financial year, the TUI share was caught, time andagain, between sound operating results and macroeconomic as well asgeopolitical turbulence. While the TUI share was supported by a strongoverall trading performance and half-year results in March and May 2016,theterrorist attacks in Ankara, Brussels and Nice impacted the financialmarkets.Major stock market distortions also followed the British decision on 23June2016 to leave the EU, and concerns about the consequences of Brexitimpactedshare prices, in particular for shares exposed to the UK source market.In August and September 2016, the TUI share recovered again, benefitingfromsound interim results and a good trading performance. This once againdemonstrated the strength of the integrated business model and the successof the Group's content-centric strategy. TUI share data 30 September 2016 WKN TUAG00 ISIN DE000TUAG000 Stock exchange centres London, Xetra, Hannover Reuters / Bloomberg TUIGn.DE/TUI1.GR (Frankfurt); TUIT.L/TUI:LN (London) Stock category Registered ordinary shares Capital stockEUR 1,500,739,295 Number of shares 587,038,187 Market capitalisationbn EUR 7.4 Market capitalisationbn £ 6.4 Long-term development of the TUI share (Xetra) EUR 2011 / 2012 / 2013 / 2014 / 2015 / 12 13 14 15 16 High 9.05 10.86 6.97 17.71 17.21 Low 4.69 3.68 3.14 9.84 10.17 Year-end share price 8.98 3.88 6.70 16.35 12.69 Quotations, indices and tradingThe TUI share has its primary listing in the Premium segment of the MainMarket of the London Stock Exchange and is listed in the FTSE UK Indexseries including FTSE 100, the UK's major share index. It also has asecondary listing in the electronic trading system Xetra and at the HanoverStock Exchange.Among the sustainability indices, TUI was listed for the eleventh timerunning in the renowned Dow Jones Sustainability Index (DJSI) in September2016. TUI was, moreover, the only tourism group to feature in both theWorldand Europe indices. TUI Group is furthermore recognised as industry leader.At this year's review of the composition of the index, the Company achievedtop scores in the categories Corporate Citizenship, Climate Strategy andEco-Efficiency. TUI is likewise listed in the sustainability indicesFTSE4Good, STOXX Global ESGLeaders Index and ECPI Ethical Index EURuro andis a member of the CDP Climate Disclosure Leadership Index in the UK andGermany.In financial year 2015 / 16, the average daily trading volume at the LondonStock Exchange was around 1.1 million shares, while around 0.7 millionshares were traded on Xetra. Both the sterling and the euro line thereforerecorded strong liquidity in trading by institutional and privateinvestors.Analyst recommendationsFor institutional and private investors, analyses and recommendations byfinancial analysts are a key decision-making factor. In the financial yearunder review, more than 20 analysts regularly published studies on TUI. InSeptember 2016, 82 % of analysts issued a recommendation to 'buy' the TUIshare, with 18 % recommending 'hold'. None of the analysts recommended'sell'.Shareholder structureAt the end of financial year 2015 / 16, around 81 % of TUI shares were infree float. Around 6 % of all TUI shares were held by private shareholders,around 72 % by institutional investors and financial institutes and around22 % by strategic investors. Analysis of the share register shows that mostshares were held by investors from EU countries.The current shareholder structure and the voting right notificationspursuant to section 26 of the German Securities Trading Act are availableonline atwww.tuigroup.com/en-en/investorsDividend Development of dividends and earnings of the TUI share EUR 2011 2012 2013 2014 2015 / 12 / 13 / 14 / 15 / 16 Earnings per share - - + + + 0.16 0.14 0.26 0.64 1.78 Dividend - 0.15 0.33 0.56 0.63 TUI AG's profit for the year amounted to EUR 139.9 m. Taking account of theprofit carried forward of EUR 682.4 m, net profit available fordistributiontotaled EUR 822.3 m. A proposal will be submitted to the Annual GeneralMeeting to use the net profit available for distribution for the financialyear under review to distribute a dividend of EUR 0.63 per no-par valueshare and to carry the amount of EUR 452.5 m, remaining after deduction ofthe dividendtotal of EUR 369.8 m, forward on new account.Investor RelationsOpen and continuous dialogue and transparent communication form the basisfor confidence in our dealings with shareholders, institutional investors,equity and credit analysts and lenders. Many discussions were held with TUIshareholders and bondholders; they centred on Group strategy and thedevelopment of business in the various Sectors, enabling stakeholders tomake a realistic assessment of TUI's future development.More details about Investor Relations online atwww.tuigroup.com/en-en/investorsApart from the development of business operations in Tourism, InvestorRelations activities in the period under review focused in particular onexogenous impacts on the business model and the growth strategies of theintegrated tourism group. TUI's management team commented on these centralissues at roadshows in London, Frankfurt, Paris, Edinburgh, Stockholm,Copenhagen, Zurich, Milan, Amsterdam, Brussels, New York, Philadelphia andBoston.Questions from analysts and investors were also discussed at the conferencecalls held upon publication of interim reports, during analysts' meetings,at many investor conferences in Europe and the US and at numerousone-on-ones. Many of these meetings were personally attended by management.Investor Relations also makes every effort to engage in direct contact withprivate investors. The IR team sought dialogue with this target group onmany occasions, such as events organised by shareholder associations.Another key platform for exchanges with private shareholders was the IRstall at TUI's Annual General Meeting. TUI also uses a new website toaddress its private investors. Apart from the comprehensive informationthatis made available, online, quarterly updates are hosted via conferencecellsand can be listened live through our Investor Relations website.Information required under takeover lawpursuant to sections 289 (4) and 315 (4) of the German Commercial Code(HGB)and explanatory reportComposition of subscribed capitalThe subscribed capital of TUI AG consists of no-par value shares, eachrepresenting an equal share of the capital stock. As a proportion of thecapital stock, the value of each share is around EUR 2.56.The subscribed capital of TUI AG, registered in the commercial registers ofthe district courts of Berlin-Charlottenburg and Hanover, consisted of587,038,187 shares at the end of financial year 2015 / 16 (previous year586,603,217 shares) and totalled EUR 1,500,739,294.83. Each share confersone vote at the Annual General Meeting.Restrictions on voting rights and share transfersThe Executive Board of TUI AG is not aware of any restrictions on votingrights or the transfer of shares.Equity interests exceeding 10 % of the voting rightsThe Executive Board of TUI AG has been notified of the following direct orindirect equity interests reaching or exceeding 10 % of the voting rights:Alexey Mordashov, Russia, notified us on 25 November 2015 pursuant tosection 21 (1) of the German Securities Trading Act that the voting sharesin TUI AG, Hanover, Germany, attributable to him exceeded the 15 %thresholdon 20 November 2015. As per that date, voting shares totalling 15.02 % (or88,146,961 voting rights) were attributable to Alexey Mordashov pursuant tosection 22 sentence 1 no. 1 of the German Securities Trading Act.At the end of financial year 2015 / 16, around 81 % of TUI shares were infree float. Around 6 % of all TUI shares were held by private shareholders,around 72 % by institutional investors and financial institutions, andaround 22 % by strategic investors. According to an analysis of the shareregister, most shares are held by investors in the European Union.Shares with special control rightsThere have not been any shares, nor are there any shares, with specialcontrol rights.System of voting right control of any employee share scheme where thecontrol rights are not exercised directly by the employeesWhere TUI AG grants shares to employees under its employee share programme,the shares are directly transferred to the employees with a lock-up period.Beneficiaries are free to directly exercise the control rights to whichemployee shares entitle them, in just the same way as other shareholders,inline with legal requirements and the provisions of the Articles ofAssociation.Appointment and removal of Executive Board members and amendments to theArticles of AssociationThe appointment and removal of Executive Board members is based on sections84 et seq. of the German Stock Corporation Act in combination with section31 of the German Codetermination Act. Amendments to the Articles ofAssociation are based on the provisions of sections 179 et seq. of theGerman Stock Corporation Act in combination with section 24 of the Articlesof Association of TUI AG.Powers of the Executive Board to issue or buy back sharesThe Annual General Meeting of 9 February 2016 authorised TUI AG's ExecutiveBoard to acquire own shares of up to 5 % of the capital stock. Theauthorisation will expire on 8 August 2017. To date, the option to acquireown shares has not been used.Conditional capital of EUR 150.0 m was resolved by the Annual GeneralMeeting of 9 February 2016. Bonds with conversion options or warrants aswell as profit-sharing rights and income bonds (with or without fixedterms)of up to a nominal amount of EUR 2.0 bn may be issued up to 8 February2021.The Annual General Meeting of 13 February 2013 adopted a resolution tocreate authorised capital for the issue of employee shares worth EUR 10.0m.The Executive Board of TUI AG is authorised to use this approved capital by12 February 2018 in one or several transactions by issuing employee sharesagainst cash contribution. In the completed financial year, 434,970 newemployee shares were issued, resulting in authorised capital of around EUR8.3 m at the balance sheet date.The Annual General Meeting of 28 October 2014 adopted a resolution tocreateauthorised capital for the issue of new shares against cash contributionworth EUR 18.0 m in order to be able to fulfil claims for shares in TUITravel granted by TUI Travel to its employees in the form of new shares inTUI AG. The authorisation for this approved capital ends on 27 October2019.The Annual General Meeting of 9 February 2016 adopted a resolution tocreateauthorised capital for the issue of new registered shares against cashcontribution worth a maximum of EUR 150.0 m. The authorisation will expireon 8 February 2021.The Annual General Meeting on 9 February 2016 also resolved to createconditional capital to issue new shares of EUR 570.0 m against cashcontributions or contributions in kind. The issue of new shares againstcontributions in kind has been limited to EUR 300.0 m. The authorisationforthis conditional capital will expire on 8 February 2021.Significant agreements taking effect in the event of a change of control ofthe Company following a takeover bid, and the resulting effectsSome of TUI AG's outstanding financing instruments contain change ofcontrolclauses. A change of control occurs in particular if a third partlydirectlyor indirectly acquires control over at least 50 % or the majority of thevoting shares in TUI AG.In the event of a change of control, the holders of the fixed-interest bondworth EUR 300.0 m from October 2016 (and the bond worth EUR 300.0 m fromSeptember 2014 repaid in November 2016) must be offered a buyback.For the syndicated credit line worth EUR 1.75 bn, of which EUR 120.5 m hadbeen used via bank guarantees as at the balance sheet date, a right oftermination by the lenders has been agreed in the event of a change ofcontrol. This also applies to several bilateral guarantee lines with atotalvolume of £ 98.5 m, concluded with various insurance companies. At thebalance sheet date, an amount of 48.6 m pounds had been used.Beyond this, there are no agreements in guarantee, leasing, option or otherfinancial contracts that might cause material early redemption obligationsthat would be of significant relevance for the Group's liquidity.Apart from the financing instruments mentioned above, a framework agreementbetween the Riu family and TUI AG includes a change of control clause. Achange of control occurs if a shareholder group represents a predefinedmajority of AGM attendees or if one third of the shareholderrepresentativeson the Supervisory Board are attributable to a shareholder group. In theevent of a change of control, the Riu family is entitled to acquire atleast20 % and at most all shares held by TUI in RIUSA II S. A.A similar agreement concerning a change of control at TUI AG has beenconcluded with the El Chiaty Group. Here, too, a change of control occursifa shareholder group represents a predefined majority of AGM attendees or ifone third of the shareholder representatives on the Supervisory Board areattributable to a shareholder group. In that case, the El Chiaty Group isentitled to acquire at least 15 % and at most all shares held by TUI in thejoint hotel companies in Egypt and the United Arab Emirates.A change of control agreement has also been concluded for the joint ventureTUI Cruises between Royal Caribbean Cruises Ltd and TUI AG for the eventthat a change of control occurs in TUI AG. The agreement gives the partnerthe right to demand termination of the joint venture and to purchase thestake held by TUI AG at a price which is lower than the selling price oftheir own stake.Compensation agreements between the Company and Executive Board members oremployees in the event of a takeover bid have not been concluded.Report onsubsequent eventsOn 26 October 2016, TUI AG issued a fixed-interest bond with a coupon of2,125 % p.a. and a nominal volume of EUR 300.0 m. The bond was issued at aprice of 99,415 % in denominations with nominal values of EUR 100,000. Itwill mature on 26 October 2021.On 18 November 2016, TUI AG redeemed the fixed-interest bond issued on 26September 2014, originally maturing on 1 October 2019, ahead of maturity.The bond was redeemed at a price of 102.25 % plus accrued interest. Thecashinflow of EUR 298.2 m received by TUI AG from issuing the bond on 26October2016 was used to redeem the bond.On 21 June 2016, TUI had concluded an agreement with Transat A.T. Inc. toacquire tour operator Transat France S. A., France, and its subsidiariesfora purchase price of EUR 64.9 m. Following regulatory approvals, theacquisition was completed on 31 October 2016. For further details on theacquisition, reference is made to the section on Acquisitions - Divestments- Discontinued Operations.On 23 November 2016, the supervisory board of TUI AG approved the agreementof a term sheet with Etihad Aviation Group. This agreement is the basis forthe acquisition of a minority share in a company through the contributionofthe shares in TUIfly GmbH. The Etihad Group will also invest in thiscompany. The minority share is likely to be accounted for at equity. It isexpected that the contractual negotiations will be finalised within thenextfew weeks. The transaction is subject to approval of the relevant aviationand competition authorities.Executive Board and Supervisory Board Superviso- ry Board Name Function Lo- Ini- Ap- Other Number / ca- tial poin- Board ofTUI Occupati- ti- Ap- ted Member- AGshares on on poin- un- ships 2 (direct tmen- til and t AGM indirect- )on 30 Septem- ber2016 /Date of withdra- wal Prof. Dr Chairman St- 7 2021 a) b) Alstom 0 Klaus of the ut- Jan Continen- S. A. Mangold Superviso- tg- 2010 tal AG Baiterek ry Board ar- Holding of TUI AG t JSC Ernst Chairman & Young of the Roth- Superviso- schild ry Board GmbH 3 of Roth- schild GmbH Frank Deputy Ha- 15 2021 590 Jakobi 1 Chairman mb- Aug of the ur- 2007 Superviso- g ry Board of TUI AG Travel Agent Sir Deputy Lo- 11 2021 b) Keolis 7,980 Michael Chairman nd- Dec (UK) Hodgkin- of the on 2014 Limited 3 son Superviso- Keolis ry Board Amey of TUI AG Docklands Ltd. World Airport Partners GmbH Andreas Aircraft Ha- 10 2021 a) TUIfly 0 Barczew- Captain no- May GmbH ski 1 ve- 2006 r Peter Regional Ha- 2 2021 a) TÜV 0 Bremme1 Head of mb- Jul Nord AG the ur- 2014 Special g Division of ver.di - Vereinte Dienst- leistungs- gewerk- schaft Prof. Dr President Be- 9 2021 a) 0 Edgar of rl- Feb Deutsche Ernst Deutsche in 2011 Postbank Prüfstel- AG DMG le für Mori AG Rechnungs- VONOVIA SE legung (DPR) Wolfgang Director Gr- 13 2021 a) TUI 0 Flinter- Financial oß- Jun Deutsch- mann Accoun- bu- 2016 land GmbH (since 13 ting rg- Deutscher June Group at we- Reise- 2016)1 TUI AG de- preisSiche- l rungsver- ein V. V. a. G. Angelika Vice Kr- 26 2021 a) b) 4,100 Gifford President an- Mar ProSie- Roth- (since 9 Hewlett zb- 2012 benSat1 schild & February Packard er- Media SE Co 2016) Enterpri- g se and Director Software Germany Valerie Member of We- 11 2020 b) Premier 994 Gooding superviso- yb- Dec Farnell 3 ry bodies ri- 2014 Vodafone in dg- PLC different e companies Dr Dierk Business Be- 16 2021 a) DZ-Bank 0 Hirschel unit rl- Jan AG 1 manager in 2015 of the trade-uni- tion ver.di - Vereinte Dienst- leistungs- gewerk- schaft Janis Member of Lo- 11 2020 b) Bristol Portmeiri- 5,985 Kong superviso- nd- Dec Airport on Group ry bodies on 2014 Ltd. PLC South in Copenhagen West different Airport Airports companies Ltd. Peter Chairman Lo- 9 2021 b) Royal Parques 1,207,31- Long Royal nd- Feb Mail Group Reunidos 7 (since 9 Mail on 2016 PLC3 Servicios February Group PLC Countrywi- Centrales 2016) de PLC S. A. Coline Member of Lo- 11 2020 b) Travis 0 McCon- superviso- nd- Dec Fevertree Perkins ville ry bodies on 2014 Drinks PLC PLC in Inchape different PLC companies Alexey Chairman Mo- 9 2021 b) AO ZAO 113,790,- Mordashov Board of sc- Feb 'Severstal SVEZA3 116 (since 9 Directors ow 2016 Manage- Nordgold February of PAO ment' 3 N. V. 2016) Severstal OAO 'Power Machines' 3 Michael Hotel Ha- 17 2021 a) TUI b) TUI 292 Pönipp1 Manager no- Apr Deutsch- BKK ve- 2013 land GmbH r MER-Pensi- onskasse V. V. a. G. Timothy Member of Lo- 11 b) 2,749 Powell superviso- nd- Dec Computacen- (until 9 ry bodies on 2014 ter PLC February in Supergroup 2016) different PLC companies Wilfried Director Ha- 3 a) TUI H. Rau1 Group no- Dec Deutsch- (deceased Audit ve- 2014 land GmbH on 30 r March 2016) Carmen Managing Pa- 14 2021 b) Hotel Riu 19,854,6- Riu Güell Director lm- Feb San Hotels S. 16 RIUSA II a 2005 Francisco A. RIUSA S. A. de S. A. II S. A. Ma- Producto- ll- res or- Hoteleros ca Reunidos S. A. Carola Depart- Be- 1 2021 0 Schwirn1 ment rl- Aug Coordina- in 2014 tor in the Transpor- tation Division of ver.di - Vereinte Dienst- leistungs- gewerk- schaft Maxim Head of Mo- 14 0 Shemetov Invest- sc- Mar (until 9 ment ow 2014 February Manage- 2016) ment, Travel Sector, ZAO Sever Group Anette Travel He- 2 2021 1,280 Strempel Agent mm- Jan 1 in- 2009 ge- n Prof. Member of Fr- 9 a) b) The 0 Christian superviso- an- Feb Deutsche Germany Strenger ry bodies kf- 2011 Asset & Funds, (until 9 in ur- Wealth Inc.3 February different t Management 2016) companies / Investment Ma- GmbH ItN in Nanovation AG Ortwin Travel Ha- 3 2021 3,355 Strubelt1 Agent mb- Apr ur- 2009 g Stefan Interna- Wi- 9 2021 b) TUI 0 Weinho- tional en Feb Austria fer1 Employee 2016 Holding (since 9 Relations GmbH February Coordina- 2016) tor at TUI AG Marcell Referee Ha- 16 1,850 Witt1 of Group no- Jan and ve- 2015 European r works council of TUI AG 1 Representative of the employees2 Information refers to 30 September 2016 or date of resignation from theSupervisory Board of TUI AG in financial year 2015 / 16.3 Chairmana) Membership in supervisory boards within the meaning of section 125 oftheGerman Stock Corporation Act (AktG)b) Membership in comparable German and non-German bodies of companieswithinthemeaning of section 125 of the German Stock Corporation Act (AktG) Executive Board1 Name De- Other Board Number of part- Memberships TUI AG ment shares (direct and indirect) on 30 Sep 2016 / Date of withdra- wal Friedrich Joussen CEO 278,081 (Age 53) Member of the Executive Board since Oct 2012, CEO of the Executive Board from Feb 2013, Joint-CEO since December 2014 CEO since February 2016 Current appointment until October 2020 Peter Long (Age 64) Joint- b) Royal Mail 1,207,317 Member of the -CEO Group PLC 2 Executive Board since 2007, Joint-CEO December 2014 until February 2016 Horst Baier (Age Fi- a) TUI b) RIUSA II S. 40,717 59) Member of the nance Deutschland A.2 TUI Canada Executive Board GmbH 2 Holdings Inc. since 2007 Current Sunwing Travel appointment until Group Inc. November 2018 David Burling (Age Nor- b) TUI Travel TUI Travel 18,300 48) Member of the thern Holdings Ltd. Overseas Executive Board Regi- TUI Travel Ltd. Holdings Ltd. since June 2015 on First Choice TUI Canada Current appointment Airli- Holidays Ltd. Holdings Inc. until May 2018 nes Sunwing Travel TUI Northern Hotel Group Inc. Europe Ltd. TUI Purch- Thomson Travel Travel Group asing Group Management (Holdings) Ltd. Services Ltd. TTG (Jersey) TUI UK Ltd. TUI Ltd. UK Transport Ltd. Sebastian Ebel (Age Cen- a) TUI Cruises b) RIUSA II S. 250 53) Member of the tral GmbH TUIfly A. TUI Spain S. Executive Board Regi- GmbH BRW A. since December 2014 on Beteiligungs AG Current appointment Ho- Eintracht until November 2017 tels Braunschweig Crui- GmbH & Co KG2 ses Eves TUI Information Desti- Technology AG2 nati- on Ser- vices IT Dr Elke Eller (Age Human a) Nord LB TUI 12,545 54) Member of the Re- Deutschland Executive Board sourc- GmbH TUIfly since October 2015 es GmbH TUI Current appointment Per- Nederland N. V. until October 2018 son- nel Direc- tor William Waggott Spe- b) TUI 1,089 (Age 53) Member of cia- Nederland N. V. the Executive Board list TUI Nederland December 2014 until Group Holding N. V. June 2016 Ho- tels- beds Group 1 Information refers to 30 Sep 2016 or date of resignation from theExcecutive Boardin financial year 2015 / 16.2 Chairmana) Membership in Supervisory Boards required by law within the meaning ofsection 125 of the German Stock Corporation Act (AktG)b) Membership in comparable Boards of domestic and foreign companies withinthe meaning of section 125 of the German Stock Corporation Act (AktG)Corporate GovernanceCorporate Governance Report / Statement on Corporate Governance(as part of the Management Report)The actions of TUI AG's management and oversight bodies are determined bythe principles of good and responsible corporate governance.The Executive Board and the Supervisory Board comprehensively discussedCorporate Governance issues in financial year 2015 / 16. In this chapter,the Executive Board and the Supervisory Board provide their report onCorporate Governance in the Company pursuant to sub-section 3.10 of theGerman Corporate Governance Code (the German Code, DCGK) and section 289aofthe German Commercial Code (HGB) as well as Disclosure and TransparencyRule(DTR) 7.2 and Listing Rule (LR) 9.8.7R.1. Declaration of Compliance pursuant to section 161 of the German StockCorporation Act (AktG)In December 2016, the Executive Board and the Supervisory Board jointlysubmitted the declaration of compliance for 2016 pursuant to section 161 ofthe German Stock Corporation Act. The declaration was made permanentlyaccessible to the general public on TUI AG's website in December 2016.www.tuigroup.com/de-de/investoren/corporate-governanceWording of the declaration of compliance for 2016'In accordance with section 161 of the German Stock Corporation Act, theExecutive Board and Supervisory Board of TUI AG hereby declare:The recommendations of the German Corporate Governance Code in its versionof 5 May 2015 have been fully observed since the last annual declaration ofcompliance was submitted in December 2015.'2. Declaration of Compliance pursuant to DTR 7.2and LR 9.8.7RAs a stock corporation company under German law, TUI AG's Executive Boardand Supervisory Board are obliged to submit a declaration of compliancewiththe German Corporate Governance Code pursuant to section 161 of the GermanStock Corporation Actwww.dcgk.de/en/code.htmlAt the time of the merger TUI AG had announced it would comply with the UKCorporate Governance Code (the UK Code) to the extent practicable. In many respects, the requirements of the GermanCode and the UK Code are similar. However, there are certain aspects whichare not compatible (in some cases due to the different legal regimes forGerman and UK companies). Therefore some deviations from best practice inthe UK have been necessary.Under the German Stock Corporation Act, the legislation applicable to TUIAG, a two-tier board system is mandatory (as explained in the mergerdocumentation; see below section Functioning of the Executive andSupervisory Board). The two-tier board structure is different to the UKunitary board structure on which the UK Code is based. Some of theprinciples of composition and operation of the boards of a German stockcorporation also differ from those of a UK company (for example, there isnoCompany Secretary). For this reason, TUI AG has set out below circumstanceswhere it considers not to comply with the UK Code. TUI AG has alsoexplainedthose instances where it considers not to be compliant with the UK Code inthe literal or legal sense but where TUI AG is convinced that it complieswith the spirit and meaning of the UK Code. Sub-headings refer to sectionsof the UK Code for ease of reference for investors.Pursuant to DTR 7.2 and LR 9.8.7R, the Executive Board and the SupervisoryBoard therefore declare as follows:Wording of the UK Corporate Governance Statement'Throughout the reporting period, TUI AG has complied with the provisionsofthe UK Code, including its main principles, except as set out and explainedbelow.Identification of Senior Independent Director(A1.2, A4.1)Under German law and the German Code, there is no concept of a 'SeniorIndependent Director'. Instead, shareholders may raise any issues at theAnnual General Meeting (AGM). In this forum, the Executive Board and, withrespect to certain matters, the Chairman of the Supervisory Board areavailable to address any issues and are legally obliged to provide adequateresponses.Outside the AGM, shareholders may approach the Executive Board, inparticular the CEO or the CFO, or, in exceptional cases, the Chairman oftheSupervisory Board or any of his Deputies. Sir Michael Hodgkinson, who wasthe Deputy Chairman and Senior Independent Director of TUI Travel PLCbeforethe merger, was re-elected as Second Deputy Chairman of the SupervisoryBoard of TUI AG in February 2016 alongside Frank Jakobi (First DeputyChairman who, under the German Co-Determination Act, must be an EmployeeRepresentative).Division of Responsibilities - Chairman & Chief Executive (A2.1)The separation of the roles of the Chairman of the Supervisory Board (Prof.Klaus Mangold) and the CEO (Friedrich Joussen) is clearly defined underGerman law as part of the two-tier board structure. Therefore, no furtherdivision of responsibilities is required and both the Executive Board andthe Supervisory Board consider that TUI AG complies with the spirit of theUK Code.Independence of Supervisory Board Members (B1.1)Under the UK Code, the Board must identify in the annual report eachnon-executive director it considers to be 'independent' for the purposes ofthe UK Code. As explained above, the members of the Supervisory Board areconsidered to be non-executive directors for the purposes of the UK Code.Under the UK Code, persons are 'independent' if they are independent incharacter and judgement and if there are no relationships or circumstanceswhich are likely to affect, or could appear to affect, their judgement. TUIAG does not, however, extend its independence disclosures to employeerepresentatives on the Supervisory Board (for a detailed explanation ofshareholder and employee representations and the underlying considerations,please see below).The Supervisory Board has determined that six of its nine shareholderrepresentative members (excluding the Chairman, as required by the UK Code)are independent for the purposes of the UK Code. The shareholderrepresentatives of the Supervisory Board considered to be independent are:Prof. Edgar Ernst, Valerie Gooding, Sir Michael Hodgkinson, Janis Kong,Coline McConville and Angelika Gifford. The Chairman was independent onelection in 2011 and re-election in February 2016 and is still consideredindependent (Prof. Mangold also was independent when he was elected to theSupervisory Board in January 2010).The members of the Supervisory Board not considered to be independent forthe purposes of the UK Code are Carmen Riu Güell, Alexey Mordashov andPeterLong.In reaching its determination, the Supervisory Board has considered, inparticular, the factors set out below.Performance-related payUntil the end of financial year 2014, all Supervisory Board membersreceiveda performance-related pay element in addition to their fixed pay, asapproved by shareholders at the 2013 AGM and in line with a specificrecommendation of the German Code at that time.This recommendation in the German Code has meanwhile been withdrawn, and atthe 2016 AGM shareholders approved the replacement of theperformance-related pay element with a fixed fee with retroactive effectfrom the beginning of financial year 2015 / 16.Shareholder and Employee RepresentativesThe Supervisory Board of TUI AG consists of ten members who are elected byshareholders at AGMs (the 'Shareholder Representatives') and ten memberswhorepresent the employees of TUI AG (the 'Employee Representatives'). Thisdiffers from UK practice where only those board members representing majorshareholders are typically referred to as 'Shareholder Representatives' andare not considered independent under the UK Code because of their link to asignificant shareholder.In TUI AG, only Carmen Riu-Güell and Alexey Mordashov are connected tosignificant shareholders, namely Riu Hotels (approx. 3.4 %) and AlexeyMordashov (approx. 19.3 %), respectively. It should also be noted thatjointventures exist between TUI AG and both Riu Hotels S. A. and TUI Russia &CIS(in which a majority controlling interest is held by Mr Mordashov) (forfurther details see page 109 of the Annual Report). Until his election tothe Supervisory Board in February 2016, Peter Long was Co-CEO of TUI AGfromDecember 2014 to February 2016. Prior to that, he was a member of theExecutive Board of TUI AG from 2007 and CEO of TUI Travel PLC. Therefore,neither Ms Riu-Güell nor Mr Mordashov nor Mr Long are consideredindependentfor the purposes of the UK Code.Therefore, excluding the Chairman (as required by the UK Code), six of thenine shareholder representatives are considered independent for thepurposesof the UK Code.Seven of the ten employee representatives of the Supervisory Board areelected by the employees of TUI Group entitled to vote. Three employeerepresentatives are nominated by a German trade union (ver.di).Under the UK Code, directors who are or have been employees of the Group inthe last five years or who participate in the Group's pension arrangementswould generally not be considered independent. In the UK, directors with anemployment relationship are normally current or former executives. Bycontrast, under German law, employee representatives of the SupervisoryBoard must be employees of the Group, and must be elected by the employeeswithout any involvement of the Executive or Supervisory Boards. Inaddition,the employment agreementof employee representatives may only be terminatedin exceptional circumstances.The employee representatives may also participate in Group pension schemesas is normal for employees and in their capacity as employees.Union representatives are nominated, and employed by, the trade union butare still classified as employee representatives. The trade unionrepresentatives are nominated, and may only be removed from the SupervisoryBoard, by their respective union and neither the Executive nor theSupervisory Board has any role in their appointment or removal.Half the board should be independent non-executive directors (B1.2)Since, for the purpose of the UK Code, only the shareholder representativeson the Supervisory Board are taken into account, more than half of itsmembers are considered independent with six independent members (excludingthe Chairman of the Supervisory Board).Nomination Committee - composition and responsibilities (B2.1)The role of the Nomination Committee in a typical UK company is fulfilledinTUI AG by two Committees of the Supervisory Board: Under the Rules ofProcedure for the Supervisory Board and its Committees (which areequivalentto the Terms of Reference in the UK) the Nomination Committee considers andproposes suitable candidates for election as shareholder representatives onthe Supervisory Board by the shareholders at the AGM. The PresidingCommittee determines the requirements and remuneration for any newappointments to the Executive Board and recommends suitable candidates tothe Supervisory Board. On that basis, the Supervisory Board appointsExecutive Board members. This approach is different from the UK where alldirector appointments are approved by shareholders at the AGM.However, as is common practice in Germany, at each AGM shareholders areasked to decide whether they approve the actions of the Executive Board andSupervisory Board members during the past financial year. Since the AGM2015, in the lightof UK practice TUI AG has changed its procedure to allow a separate vote oneach individual Executive Board and Supervisory Board member, as customaryin the UK. This approach was also used at the AGM in February 2016. TUI AGintends to continue this practice. Accordingly, the Supervisory Boardconsiders that TUI AG complies with the spirit of the UK Code to the extentpracticable.There is no requirement under German law or the German Code for themajorityof the Nomination Committee members to be independent. Of the four membersof the Nomination Committee, two are representatives of significantshareholders (Carmen Riu Güell and Alexey Mordashov) and therefore notindependent for the purposes of the UK Code. The remaining two members areSir Michael Hodgkinson and Prof. Klaus Mangold (Chairman) who are bothindependent. Therefore TUI AG is not compliant with the UK Code whichrequires a majority of the Nomination Committee to be independent. However,TUI AG considers that the current membership of the Nomination Committeeprovides a strong and experienced pre-selection of Supervisory Boardshareholder representation members, while keeping the Committee to amanageable size.The Rules of Procedure for the Supervisory Board and its Committees(including the Audit Committee) are not made available for the public.Therefore TUI AG is not compliant with this provision of the UK Code.Length of tenure for Non-Executive Directors (B2.3)In accordance with German law and common practice, shareholderrepresentatives are generally elected for five-year terms. Employeerepresentatives are also generally appointed for five years. Therefore,neither Executive nor Supervisory Board members are re-elected orre-appointed annually by shareholders. TUI AG therefore does not complywiththis provision of the UK Code.Under the UK Code, any term beyond six years should be subject to rigorousreview and no term should extend beyond nine years (as it could affect theindependence of the Non-Executive Director). However, in the GermanCorporate Governance context, a longer length of service is quite normal asSupervisory Board members are usually elected for five years andre-electionis common.Nomination Committee section in the AnnualReport & Accounts (B2.4)For the activities of the Nomination Committee, see page 15 which is partofthe Chairman's letter to shareholders.During the year, neither a personnel consultancy nor externaladvertisementswere used to search any potential Supervisory Board members. Successionplanning for management members below Executive Board level is carried outby the Executive Board. The Presiding Committee is only responsible forsuccession planning for the Executive Board.Terms & Conditions of appointments of Non-Executive Directors (B3.2)The terms and conditions of Supervisory Board members' appointments followthe provisions of the German Stock Corporation Act and the Articles ofAssociation of TUI AG. The Articles of Association are available on thewebsite at www.tuigroup.com/en-en/investors/corporate-governance.External Non-Executive/Chairman Roles (B3.3)Peter Long was Joint-CEO of TUI AG since the merger from 1 October 2015until the close of the AGM 2016 on 9 February 2016. From 1 September 2015,Peter Long was also Chairman of Royal Mail PLC. This appointment led to ashort period of overlap during which TUI AGwas not compliant with the UKCode.Advice and services of the Company Secretary (B5.2)There is no specific role of Company Secretary in German companies.However,Executive and Supervisory Board members have access to the Board Office ofTUI AG if they need any advice or services. The Board Office acts as aninterface in corporate matters for the Executive and Supervisory Boardmembers and is responsible for ensuring that the requisite processes andprocedures are in place governing all Executive and Supervisory Boardmeetings (i.e. preparation of agendas, minuting of meetings and ensuringcompliance with German and UK law, as appropriate, and with recommendationsfor corporate governance). The Board Office also supports the Chairman, theCEO, the CFO and the Chairmen of the Audit Committee and the StrategyCommittee. Executive and Supervisory Board members also have access tolegaladvice via the Group Legal Director and the Board Office. The SupervisoryBoard can also approach the Executive Board directly for specific advice onany matters. Accordingly, the Executive Board and the Supervisory Boardconsider that TUI AG complies with the spirit of the UK Code.Board performance evaluation (B6)The performance of each individual Executive Board member is evaluatedannually by the Supervisory Board for the annual performance-basedremuneration. In this context, the Supervisory Board also reviews theindividual member's overall performance as part of the Executive Board.However, no external performance evaluation is done for the ExecutiveBoard.It is not customary to conduct annual reviews of the Supervisory Board'sefficiency. Each Supervisory Board member can give feedback to theChairman,the Deputy Chairmen or the Supervisory Board as a whole as and whenappropriate or required.External evaluation is limited to Supervisory Board members and isperformedby means of individual interviews and anonymous reviews. Consolidatedresults are shared with the entire Supervisory Board and appropriateactionsare suggested and discussed as appropriate. The last external review of theSupervisory Board was undertaken during 2015 by Board ConsultantsInternational (Hamburg / Germany). The results were presented during themeeting of the Supervisory Board in December 2015. Board ConsultantsInternational has no other connection withTUI AG.The appraisal of the Chairman of the Supervisory Board is covered duringtheexternal evaluation process and Executive Board members are invited tocontribute to the process.Annual re-election by Shareholders at the AGM (B7.1)None of the Executive or Supervisory Board members is re-elected annually.However, as noted above, in light of the UK Code and UK best practice, TUIAG voluntarily puts individual resolutions approving the actions of eachExecutive and Supervisory Board member to the AGMresolving on the annualfinancial statements for the previous year, and TUI AG intends to continuethis practice.The end of appointment periods for Supervisory Board members are disclosedin the table following the Chairman's letter on page 114. In respect of theshareholder representatives, the Supervisory Board - based on therecommendations of its Nomination Committee - proposed the re-election ofProf. Klaus Mangold, Sir Michael Hodgkinson, Carmen Riu Güell and Prof.Edgar Ernst to the AGM 2016. Peter Long, Angelika Gifford and AlexeyMordashov were also proposed for election by the shareholders. Biographicaldetails were included in the invitation to the AGM to enable awell-informeddecision by the shareholders. Additionally, the curricula vitae of allExecutive and Supervisory Board members are published atwww.tuigroup.com/en-en/investors/corporate-governance.Wolfgang Flintermann was appointed as member of the Supervisory Board ofTUIAG by the court of registration with effect from 13 June 2016 to replaceWilfried Rau, who had passed away on 30 March 2016.Fair, balanced and understandable Annual Report and Accounts (C1.1)In a German stock corporation the Executive Board is responsible fordrafting the Annual Report & Accounts (ARA). According to section 243 (2)ofthe German Commercial Act (HGB) the ARA must be clearly arranged and shouldpresent a realistic picture of the Company's economic situation. This isequivalent to the UK Code requirement for the ARA to be fair, balanced andunderstandable. Although this assessement has not been delegated to theAudit Committee (C3.4), the Executive Board is convinced that this ARAsatisfies both requirements.Establishment and operation of Remuneration Committee (D2), Remuneration(D1)In the German governance structure there is no separate RemunerationCommittee. The remuneration of the Executive Board is under involvement ofthe employee representatives monitored and agreed by the Supervisory Boardbased on recommendations from the PresidingCommittee, which is governed bythe Supervisory Board Rules of Procedure, as referred to above.Supervisory Board remuneration and the remuneration of Board Committeemembers is governed by the Articles of Association as resolved on by theshareholders at the AGM.There are no clawback or malus provisions in the service contracts ofExecutive Board members. Such provisions would be unusual (and probablyunenforceable) in Germany. However, there are different contractual andstatutory provisions that may allow for a reduction or forfeiture ofremuneration components or allow TUI AG to claim damages from ExecutiveBoard members. First, the service contracts of Executive Board membersprovide for forfeiture of the annual bonus and the LTIP if TUI AGterminatesthe service contract for cause without notice before the end of the oneyearperformance period in the case of the annual bonus or before the end of therespective performance period of the LTIP. Second, the Supervisory Boardmay, under certain exceptional circumstances, reduce Executive Boardcompensation in case of a deterioration of the economic situation of TUIAG.Third, Executive Board members may be liable for damages under the GermanStock Corporation Act in case of a breach of their duties of care orfiduciary duties.See the Directors' Remuneration Report for full details on Executive andSupervisory Board member's remuneration.Compensation commitments in Executive Directors' Service Contracts (D1.4)The principles that apply for departing Executive Directors are detailed inthe Directors' Remuneration Report (see page 136). The terms are set out inthe Executive Directors' contracts of employment as approved by theSupervisory Board and take into account the various circumstances in whichadirector may leave. These include maximum limits on the amounts payable ontermination. Given that in Germany contracts are issued for a fixed term,termination payments may be greater than the one year recommended in the UKCode. In no case is the amount payable on early termination higher than theamount that would be payable for the outstanding term of the servicecontract at the time of termination.Notice periods for Executive Directors (D1.5)Executive Board appointments are normally for a fixed term of three to fiveyears and therefore do not comply with the UK Code which stipulates thatnotice or contract periods should be set at one year or less. However, thecontracts include maximum limits on the amounts payable on termination.Dialogue with shareholders (E1)It is not common practice in German companies for Supervisory Board membersto make themselves available for meetings with major shareholders. Thispreserves the separation of duties between the Supervisory and ExecutiveBoards. The AGM is considered the appropriate forum for shareholders toraise any topics for discussion. Nevertheless, there is a move in Germanytoallow under the German Code for an appropriate exchange on SupervisoryBoardmatters between the Chairman of the Supervisory Board and shareholders.There have meetings between the Chairman and the Deputy Chairman(shareholder representative) of the Supervisory Board and shareholders andinvestors in the past (most recently in September 2015).The Supervisory Board receives feedback from the Chairman and DeputyChairman (shareholder representative) and Executive Board members followingmeetings with major shareholders or investors. Additionally, a monthlyInvestor Relations Report and event-driven assessmants of brokers areforwarded to the Executive and the Supervisory Board. They contain updateson the share price development, analyses by sellers and feedback andassessments from investors.The following meetings between management and investors (attended by theChief Executive Officer and / or the Chief Financial Officer and members ofthe Investor Relations team, where appropriate) took place during the yearended 30 September 2016: dialogue with shareholders Date Event Attende- es November 2015 Global Income Corporate Day London HB December 2015 Roadshow Edinburgh FJ, HB Roadshow London FJ, HB January 2016 German Investment Seminar HB German Corporate Conference HB March 2016 Roadshow Amsterdam HB April 2016 Barclays Leisure and Transport HB Conference Investor Dinner London FJ, HB MS Roundtable FJ May 2016 Roadshow UK FJ, HB Roadshow Copenhagen HB Barclays Select Corporate Day HB Stockholm Roadshow Zurich HB June 2016 Roadshow Frankfurt HB Roadshow Paris HB Roadshow US FJ, HB dbAccess German, Swiss and Austrian HB Conference July 2016 Investor Meeting - Invesco FJ, HB August 2016 Coba Sector Conference 2016 HB September 2016 Berenberg & Goldman Sachs GCC HB Conference Key: Friedrich Joussen (FJ), Horst Baier (HB)Key topics discussed at meetings between shareholders and Executive Boardmembers included: * Development of business operations in Tourism * Exogenous impacts on the business model * Growth strategy of the integrated tourism group Accordingly, TUI AG considers that it complies with the spirit of the UKCode.AGM Resolution on Financial Statements and Consolidated FinancialStatements(E2.1)It is not common practice in Germany to pass a resolution at the AGM toapprove the financial statements and consolidated financial statements.Therefore, this was not done at the AGM in 2016 and it is not intended todoso at the AGM in 2017. However, as required by German law the first item onthe agenda of TUI AG's AGM is the presentation of the financial statementsand consolidated financial statements to the AGM. Under this item, theExecutive Board will explain the financial statements and consolidatedfinancial statements and the Chairman will explain, in particular, thereport of the Supervisory Board (including this UK Corporate GovernanceStatement). Shareholders will have the opportunity to raise questions.Questions are typically raised, as is normal in the AGMs of Germancompanies, and, as a general rule, answers must be provided under Germanlaw.This is the standard practice for a German company and is in fullcompliancewith the German Code. While the lack of a resolution to approve the AnnualReport & Accounts is not in compliance with the UK Code, TUI AG considersthat the arrangements afford shareholders with sufficient opportunity toraise any questions or concerns that they may have in relation to theAnnualReport & Accounts, and to receive answers, in the AGM. Accordingly, theExecutive Board and the Supervisory Board consider that TUI AG complieswiththe spirit of the UK Code to the extent practicable.Circulation of AGM documentation to shareholders (E.2.4)The 2016 AGM of TUI AG was held on 9 February 2016. As required by Germanlaw, the notice convening TUI AG's 2016 AGM (including the agenda and thevoting proposals of the Executive Board and the Supervisory Board) waspublished in the Federal Gazette in Germany on30 December 2015.Shareholdersthen had the right under German law to request additional agenda items atany time up to 30 days before the AGM. In accordance with German practice,once this deadline had expired the combined invitation and explanatorynotesrelating to theAGM were sent to shareholders on 14 January 2016, which wasless than the 20 working days before the AGM recommended in the UK Code(butmore than the 21 days' notice required by German law). However, in additionto the original publication of the Invitation in the Federal Gazette inGermany, the combined invitation and explanatory notes relating to the AGMwas published on TUI AG's website on 30 December 2015. As no additionalagenda items were requested by shareholders, this was in the same form asthe final combined invitation and explanatory notes relating to the AGMlater sent to shareholders. Further, TUI AG's Annual Report and Accountsforthe financial year to 30 September 2015 was published on 10 December 2015,significantly more than 20 working days before the 2016 AGM. Accordingly,TUI AGconsiders that it complied with the spirit of the UK Coderequirements. A similar timetable will be followed in relation to the 2017AGM.'3. Further information on Corporate GovernanceFunctioning of the Executive and Supervisory BoardsTUI AG is a company under German law. One of the fundamental principles ofGerman stock corporation law is the dual management system involving twobodies, the Executive Board in charge of managing the company and theSupervisory Board in charge of monitoring the company. TUI AG's ExecutiveBoard and Supervisory Board cooperate closely and in a spirit of trust inmanaging and overseeing the Company, with strict separation between the twobodies in terms of their membership and competences. Both bodies areobligedto ensure the continued existence of the Company and sustainable creationofadded value in harmony with the principles of the social market economy.TUI AG's Executive Board comprised five members as at the closing date 30September 2016. The Executive Board is responsible for managing theCompany's business operations in the interests of the Company. Theallocation of functions and responsibilities to individual Board members ispresented in a separate section.In accordance with the law and the Articles of Association, the SupervisoryBoard had 20 members at the balance sheet date, i. e. 30 September 2016.TheSupervisory Board advises and oversees the Executive Board in themanagementof the Company. It is involved in strategic and planning decisions and alldecisions of fundamental importance to the Company. When the ExecutiveBoardtakes decisions on major transactions, such as the annual budget, majoracquisitions or divestments, it is required by its terms of reference toseek the approval of the Supervisory Board. The Chairman of the SupervisoryBoard coordinates the work in the Supervisory Board, chairs its meetingsandrepresents the concerns of the body externally. The Supervisory Board andthe Audit Committee have adopted terms of reference for their own work. Inthe run-up to the Supervisory Board meetings, the representatives ofshareholders and employees meet separately.The Executive Board provides the Supervisory Board at regular meetings andin writing with comprehensive, up-to-date information about the strategy,the budget, business performance and the situation of the Group, includingrisk management and compliance. The Executive Boardworks on the basis ofterms of reference issued by the Supervisory Board.TUI AG has taken out a D&O insurance policy with an appropriate deductiblefor all members of the Executive Board and Supervisory Board. Thedeductibleamounts to 10 % of the loss up to the amount of one and a half times thefixed annual compensation.Composition of the Supervisory BoardAs at the balance sheet date, 30 September 2016, the Supervisory Board ofTUI AG comprised 20 members. The composition of the Supervisory Board infinancial year 2015 / 16 ensured that its members as a group had theknowledge, ability and expert experience required to properly completetheirtasks. The goals set by the Supervisory Board itself for its compositioninclude in particular comprehensive industry knowledge, at least fiveindependent shareholder representatives, at least five members withinternational experience, and diversity.Twelve members of the Supervisory Board had considerable internationalexperience. Due to the different professional experiences of its members,the composition of the Supervisory Board overall reflects a great diversityof relevant experience, ability and industry knowhow. None of theshareholder representatives on the Supervisory Board had any commercial orpersonal relationship with the Company, its Executive Board or thirdpartiesthat might cause a material clash of interests. Seven shareholderrepresentatives are independent.In accordance with the recommendations of the German Corporate GovernanceCode, the original shareholder representatives were individually electedforfive-year terms of office during elections to the Supervisory Board at therelevant General Meetings (October 2014, February 2016). Only Prof. KlausMangold and Sir Michael Hodgkinson were older than 68 years when they wereelected as members of the Supervisory Board. In both cases, the SupervisoryBoard deemed it appropriate to deviate from the regular age limit in orderfor the Company to benefit from Prof. Klaus Mangold's and Sir MichaelHodgkinson's extensive experience in order to complete the integrationprocess and in order to ensure continuity. With Peter Long, a former memberof the Executive Board has been a Supervisory Board member since the AnnualGeneral Meeting 2016 held on 9 February 2016.Committees of the Supervisory Board and their compositionAt 30 September 2016, the balance sheet date, the Supervisory Board hadestablished five committees from among its members to support its work: thePresiding Committee, the Audit Committee, the Nomination Committee, theIntegration Committee (until December 2016) and the Strategy Committee(since 9 February 2016).A Mediation Committee was furthermore established in accordance withsection27 (3) of the German Co-Determination Act.The Presiding Committee and Audit Committee have eight members each, withanequal number of shareholder representatives (including the respectivechairpersons of the committees) and employee representatives. The PresidingCommittee prepares, in particular, the appointment of Executive Boardmembers, including the terms and conditions of service contracts andremuneration proposals. The Audit Committee's task is to support theSupervisory Board in exercising its oversight function. The Chairman of theAudit Committee is an independent financialexpert and has particularknowledge and experience in the application of accounting principles andinternal control methods from his own professional practice.The Nomination Committee consists exclusively of shareholderrepresentatives, in keeping with the recommendation in the German CorporateGovernance Code. The task of its four members is to suggest suitablecandidates for the Supervisory Board to propose to the Annual GeneralMeeting.The Integration Committee was set up to advise and supervise the ExecutiveBoard in the integration process following the merger for two years afterthe merger's completion. It prepares proposals for resolutions for theSupervisory Board but does not have a mandate to take anydecisions onbehalfof the Supervisory Board. It comprises five shareholder representatives andone employee representative.The Strategy Committee began its work after the Annual General Meeting2016.Its task is to comprehensively advise and oversee the Executive Board indeveloping and implementing the corporate strategy. It prepares the annualstrategy offsite meeting for the Supervisory Board, but does not have amandate to take any decisions on behalf of the Supervisory Board. Itcomprises five shareholder representatives and one employee representative.Conflicts of interestExecutive and Supervisory Board members have a duty to act in TUI AG's bestinterests. In the completed financial year 2015 / 16, there were noconflicts of interest requiring disclosure to the Supervisory Board. Noneofthe Executive Board or Supervisory Board members has a board role or aconsultancy contract with one of TUI's competitors. Peter Long did not takepart in the Supervisory Board resolution regarding payment of remunerationentitlements still arising from his Executive Board role adopted on 15September 2016.Specifications pursuant to sections 76 (4), 111 (5)of the German Stock Corporation ActAt least 30 % of the Supervisory Board members were women and at least 30 %were men at the balance sheet date. The Supervisory Board was thereforecompliant with section 96 (2) sentence 1 of the German Stock CorporationAct. Neither the shareholder nor the employee representatives on theSupervisory Board objected to overall compliance in accordance with section96 (2) sentence 2 of the German Stock Corporation Act.The Supervisory Board resolved, in keeping with section 111 (5) of theGerman Stock Corporation Act, that a woman should be recruited to theExecutive Board. This objective has been implemented with Dr Elke Ellerjoining the Executive Board as at 15 October 2015.In turn, the Executive Board resolved, in keeping with section 76 (4) oftheGerman Stock Corporation Act, that women should account for 20 % ofexecutives at the level immediately below the Executive Board and 30 % atthe level below this. Both targets are to be achieved by 30 June 2017.Shareholders and Annual General MeetingTUI AG shareholders exercise their co-determination and monitoring rightsatthe Annual General Meeting, which takes place at least once a year. The AGMtakes decisions on all statutory matters, and these are binding on allshareholders and the Company. For voting on resolutions, each share confersone vote.All shareholders registering in due time are entitled to participate in theAnnual General Meeting. Shareholders who are not able to attend the AGM inperson are entitled to have their voting rights exercised by a bank, ashareholder association, one of the representatives provided by TUI AG andacting on the shareholders' behalf in accordance with their instructions,orsome other proxy of their own choosing. Shareholders also have theopportunity of authorising the representative provided by TUI AG via thewebin the run-up to the AGM. Shareholders can, moreover, register forelectronic dispatch of the AGM documents.The invitation to the AGM and the reports and information required forvoting are published in accordance with the provisions of the German StockCorporation Act and provided in German and English on TUI AG's website.During the AGM, the presentations by the chairman of the Supervisory Boardand the Executive Board members can be followed live over the Internet.Risk managementGood corporate governance entails the responsible handling of commercialrisks. The Executive Board of TUI AG and the management of the TUI Grouphave comprehensive general and company-specific reporting and monitoringsystems available to identify, assess and manage these risks. These systemsare continually developed, adjusted to match changes in overall conditionsand reviewed by the auditors. The Executive Board regularly informs theSupervisory Board about existing risks and changes to these risks. TheAuditCommittee deals in particular with monitoring the accounting process,including reporting, the effectiveness of the internal control and riskmanagement systems and the internal auditing system, compliance and auditofthe annual financial statements.More detailed information about risk management in the TUI Group ispresented in the Risk Report. It also contains the report on theaccounting-related internal control and risk management system required inaccordance with the German Commercial Code (sections 289 (5), 315 (2) no. 5HGB).TransparencyTUI provides immediate, regular and up-to-date information about theGroup'seconomic situation and new developments to capital market participants andthe interested public. The Annual Report and the Interim Reports arepublished within the applicable timeframes. TheCompany publishes pressreleases and ad hoc announcements, if required, on topical events and anynew developments. Moreover, the company website at www.tuigroup.comprovidescomprehensive information on TUI Group and the TUI share.The scheduled dates for the principal regular events and publications -suchas the AGM, Annual Report and Interim Reports - are set out in a financialcalendar. The calendar is published well in advance and made permanentlyaccessible to the public on TUI AG's website.Directors' dealingsThe Company was informed by Prof. Klaus Mangold, Alexey Mordashov,FriedrichJoussen, Horst Baier, Dr Elke Eller and William Waggott of notifiablepurchase and sale transactions of TUI AG shares or related financialinstruments by directors (directors' dealings or managers' transactions)concerning financial year 2015 / 16. Details are provided on the Company'swebsite.Purchase and sales transactions by members of the boards were governed bythe TUI Share Dealing Code, adopted by the Executive Board on 16 December2014 for TUI Group, alongside corresponding statutory provisions. The TUIShare Dealing Code will be adjusted as Regulation (EU) 596 / 2014 ('MarketAbuse Regulation') has entered into force.Apart from Alexey Mordashov (share ownership: approx. 19.3 %), no member ofthe Executive Board or Supervisory Board holds shares in TUI AG, relatedoptions or other derivatives representing 1 % or more of the capital stock.Details regarding share ownership of individualmembers are presented in thetable on the Supervisory Board and Executive Board.Accounting and auditingTUI AG prepares its consolidated financial statements and consolidatedinterim financial statements in accordance with the provisions of theInternational Financial Reporting Standards (IFRS) as applicable in theEuropean Union. The statutory annual financial statements of TUI AG, whichform the basis for the dividend payment, are prepared in accordance withtheGerman Commercial Code (HGB). The consolidated financial statements areprepared by the Executive Board, audited by the auditors and approved bytheSupervisory Board. The interim reports are discussed between the AuditCommittee and the Executive Board prior to publication. The consolidatedfinancial statements and the financial statements of TUI AG were audited byPricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft,Hanover, the auditorselected by the 2016 Annual General Meeting. The auditwas based on German auditing rules, taking account of the generallyacceptedauditing standards issued by the German Auditors' Institute as well as theInternational Standards on Auditing. It also covered risk management andcompliance with reporting requirements on corporate governance pursuant tosection 161 of the German Stock Corporation Act and Listing Rules 9.8.7 Rand 9.8.10.The condensed consolidated interim financial statements and managementreports as at 31 December 2015, 31 March and 30 June 2016 were examined bythe auditors.In addition, a contractual agreement was concluded with the auditors to theeffect that the auditors will immediately inform the Supervisory Board ofany grounds for disqualification or partiality as well as of all findingsand events of importance arising during the performance of the audit. Therewere no grounds to provide such information in the framework of the auditoffinancial year 2015 / 16.ComplianceTUI Group's Compliance Management System is a fundamental element of ourcommitment to commercial, environmental and socially responsible activityand operations. It is underlined by our membership in the UN Global Compactand therefore forms an indispensable part of TUI Group's corporate cultureand our corporate governance activities.The strategic goal of TUI Group's Compliance Management System is topreventmisconduct and avoid liability risks for the Company, its legalrepresentatives, executives and employees and protect the reputation of theCompany.Compliance Management SystemTUI Group's Compliance Management System is based on three pillars:prevention, discovery and response, which, in turn, comprise a large numberof internal measures and processes. Compliance Management Processes Prevention Expos- Reaction ure * Compliance Policies and Group * * Implementationof Policies * Compliance Training * Repor- Process Controls* Compliance Communication * ting * Exchange with Compliance Information * Leads * Management andlocal Compliance Risk Identification Investi- ComplianceOfficers * and Risk Assessment gations DisciplinaryMeasuresIn the completed financial year, TUI Group's Compliance Management Systemwas subjected to a design audit by a leading auditing firm in accordancewith auditing standard PS 980 of the German Institute of Auditors. Theauditconfirmed that TUI Group's Compliance Management System has been designedsoas to meet the requirements of that certification standard. In the run-uptothe audit, the Group-wide Compliance Management System had been readjustedand compliance processes had been harmonised aross the Group.Compliance cultureThe compliance culture forms the basis for the appropriateness andeffectiveness of the Compliance Management System. It reflects management'sfundamental attitude and conduct and the role of the supervisory body.It is expressed in our corporate value 'Trusted', appealing to ouremployees' personal responsibility and their honesty and sincerity inhandling customers, stakeholders and employees.Code of Conduct/Suppliers' Code of ConductThe Code of Conduct, drawn up for the entire TUI Group, is a furtherembodiment of our compliance culture and enshrines guiding principles foreveryone to follow, from executives and senior management to every Groupemployee. It defines minimum standards aimed at assisting our employees intheir everyday work and providing orientation in conflict situations.Compliance online: www.tuigroup.com/en-en/about-us/complianceThe Suppliers' Code of Conduct forms the counterpart to TUI's Code ofConduct. It details our ethical, social and legal expectations of ourbusiness partners. All business partners are required by contract toobserveall national and international anti-corruption laws applicable to thesupplier relationship. This places our business relationship with ourpartners on a solid legal and social basis.Compliance RulesIn addition, the principles set out in the Code of Conduct are detailed invarious policies and rules reflecting the legal requirements. This issupported by our Group-wide policy management, developing the standards forGroup-wide policies and coordinating incorporation of the relevant internalstakeholder groups, e. g. other departments or the works council. Thisapproach is designed to provide TUI Group with a set of policies which areas complete and comprehensible as possible without seeking overregulation.TUI Group's Compliance Rules offer guidance on appropriate conductregardinggifts and invitations, data protection and trade sanctions. All groups ofemployees have thus been acquainted with the policies of relevance to theireveryday work.Compliance ProgrammeIn the period under review, the Compliance Programme focused on variousissues including anti-corruption measures, protecting free and faircompetition, data protection and the handling of trade sanctions includinganti-money laundering.In the completed financial year, a software was used to facilitate riskidentification based on self-disclosure by TUI Group companies, above allfor the above topics: it was evaluated on the basis of the criteria oflikelihood of occurrence and potential damage (including reputationaldamage). The results of identified compliance risks are used to derivecorresponding risk-minimising measures, which are agreed with the relevantbodies, and implementation of the measures is automated.Moreover, TUI Group focused even more strongly on data protection, whichhadalready played a major role. Numerous measures were initiated, e. g.structured coordination of all technical functions in the Company relatingto data protection law. As an international organisation,TUI Group willtherefore be prepared for future European changes in the overall frameworkfor data protection law.Compliance trainingCompliance training is a key element of TUI's Compliance Management System,with its focus on preventing misconduct, and a crucial component of TUIGroup's Compliance culture. It is carried out according to a gradedconcept:managers and staff at TUI have all benefited from face-to-face teaching andonline programmes. This enables all our employees to acquaint themselveswith Compliance and the underlying corporate values, regardless of theirposition in the company hierarchy and their geographical location. In thecompleted financial year, the online training programme was extended so asto include a refresher course on TUI's Code of Conduct. It has now beenrolled out in the Group companies. In addition, TUI companies and sectorsoffered training schemes with their own specific focus to raise awarenessofchallenges they might face.WhistleblowingIn agreement with various stakeholder groups, TUI offers its managers andemployees a Group-wide whistleblower system to enable serious infringementsof the corporate values anchored in TUI's Code of Conduct to be reportedanonymously and without reprisals. This whistleblowing system is currentlyavailable to staff in 47 countries. All reports are followed up in theinterests of all stakeholders and the Company. Our top priority is toensureconfidentiality and handle information discreetly. Any incidents resultingfrom the use of the whistleblower system are reviewed by Group LegalCompliance in conjunction with Group Audit. Infringements are fullyinvestigated in the interests of all our staff and the Company itself.Compliance structureTUI Group's Compliance structure supports those responsible in the task ofcommunicating the values and rules and anchoring them in the Group. Itensures that Compliance requirements are implemented throughout the Groupindifferent countries and cultures. The decentralised Compliance structurewasreinforced by additional staff resources in recent months in order torespond to the requirements resulting from structural change andinternationalisation. Under the aegis of the Chief Legal ComplianceOfficer,Group Legal Compliance work with the decentralised Compliance Officers toperform the following tasks at different management levels: * Raising awareness of Compliance and the technical issues allocated to Legal Compliance * Achieving the goals of the Code of Conduct and the Compliance Rules * Providing training * Advising managers and employees * Securing the necessary exchange of information * Monitoring national and international legislative initiatives * Providing regular reports Remuneration ReportThe remuneration report outlines the remuneration of the members of theExecutive Board of TUI AG as well as the remuneration of the members of itsSupervisory Board in accordance with the articles of association. Theremuneration report is based, in particular, on therecommendations of theGerman Corporate Governance Code ('GCGC'), the requirements of the GermanCommercial Code (Handelsgesetzbuch) and the German Stock Corporation Act(Aktiengesetz) and, to the extent practicable, the requirements of the UKCorporate Governance Code ('UK-CGC').TUI AG is a German stock corporation that is also listed on the LondonStockExchange. Where mandatory provisions regarding the governance of or legalrequirements for a German stock corporation are affected these aredisclosedin this report and placed in context with the UK-CGC, as required.Remuneration of the Executive BoardI. Approval of the remuneration scheme by shareholdersA new remuneration scheme was proposed for Executive Board members infinancial year 2009 / 10 and approved by the shareholders of TUI AG at theAnnual General Meeting on 17 February 2010. The scheme is designed tocreateincentives for sustained growth and robust financial performance in the TUIGroup.Although common practice at many of the companies applying the UK-CGC, theshareholders of TUI AG do not currently vote on the remuneration policy onan annual basis. However, the approach adopted by TUI AG reflects thepractice at most German stock corporations and is in compliance with theGerman Stock Corporation Act.II. General principlesFollowing a recommendation from the Presiding Committee and according tosection 87(1) sentence 1 German Stock Corporation Act, the SupervisoryBoarddetermines the remuneration of the individual Executive Board members. Italso regularly reviews the remuneration scheme for the Executive Board.The following principles, in particular, are taken into account in thisregard: * Clarity and transparency. * Appropriateness and conformity with tasks, responsibilities and success of each individual Executive Board member, including in the relevant environment of comparable international firms, and taking into account standard practice at other major German companies. * Economic position, performance and sustainable development of the company. * Appropriate correlation between the levels of fixed remuneration and performance-based remuneration. * Tying a material portion of total remuneration to the achievement of ambitious, long-term performance targets. * Appropriateness in horizontal and vertical comparison (see page 141). * Ability to be competitive on the market for highly qualified Executive Board members. * Tying shareholder interest to value increase and distribution ofprofits (e. g. total shareholder return indicator) with correspondingincentives for Executive Board members. The remuneration scheme currently does not contain any malus or clawbackterms. This position will continue to be monitored.III. Remuneration of the Executive Board in financial year 2015/16In financial year 2015 / 16, the remuneration for the Executive Boardcomprises: (1) a fixed remuneration; (2) an annual performance-basedremuneration (Jahreserfolgsvergütung - 'JEV'); (3) virtual shares of TUI AGin accordance with the Long-Term Incentive Plan ('LTIP'); (4) fringebenefits; (5) pension entitlements; and (6) a potential additionalremuneration in cash or in virtual shares (Additional Remuneration).Details are set out in the following tables:1. Fixed remunerationPurpose and link to company strategyHighly-qualified Executive Board members who are needed to develop andimplement company strategy are to be attracted and retained.The remuneration should be commensurate with the abilities, experience andtasks of the individual Executive Board member.ProcedureIn determining the fixed remuneration the Supervisory Board takes intoaccount, in particular, the relevant general principles.The fixed remuneration is paid in twelve equal instalments at the end ofeach month. If the service contract begins or ends in the course of theyearrelevant for payment of the remuneration, the fixed annual remunerationwillbe paid pro-rata for that year.The remuneration is generally reviewed when service contracts of ExecutiveBoard members are extended, and fixed for the term of the new servicecontract. A review of the remuneration can also take place during the termof a service contract in particular if there is a change with respect tothetasks or responsibility of an Executive Board member.2. Annual performance-based remuneration (Jahreserfolgsvergütung - 'JEV')Purpose and link to company strategyThe JEV is intended to motivate Executive Board members to achieveambitiousand challenging financial and strategic performance targets throughout thefinancial year. The performance targets are reflective of the companystrategy and aimed at increasing corporate value.ProcedureThe JEV is calculated on the basis of a group performance indicator and theindividual performance of the Executive Board member. The performancereference period is the financial year of TUI AG.An individual target amount ('Target Amount') is agreed for each ExecutiveBoard member in their service contract. Since 1 October 2010 theperformancetarget has been the reported earnings before interest, tax and amortisationof goodwill ('Reported Group EBITA'). The target value for the one-yearperformance reference period for the reported group EBITA performancetargetwill be set each year by the Supervisory Board.To measure performance, the expected reported group EBITA will be comparedwith the corresponding actual value of the reported group EBITA as reportedin the audited consolidated accounts of TUI AG to be prepared in accordancewith the accounting rules in force at the time. The degree of targetachievement is determined as follows: * If the value achieved is below the target value by 50 % or more, thisis equivalent to a target achievement of 0 %. * If the value achieved corresponds to the target value, this is equivalent to a target achievement of 100 %. * If the value achieved exceeds the target value by 50 % or more, this is equivalent to a target achievement of 187.5 %. In the event of a reported group EBITA of between 50 % below target valueand target value, any award will be based on a linear interpolation between0 % and 100 % and in the event of a reported group EBITA of between targetvalue and 50 % above target value linear interpolation between 100 % and187.5 % will be used to determine the degree of target achievement. Thedegree of target achievement will be rounded to two decimal places, as iscustomary in commercial practice.At the discretion of the Supervisory Board, the degree of targetachievementfor the performance target can be multiplied by a factor of between 0.8 and1.2, based on the Executive Board member's achievement of individualperformance targets and other performance indicators such as customersatisfaction and / or employee satisfaction metrics.The figure resulting from the multiplication of the target amount by thedegree of target achievement for the reported group EBITA and thediscretionary multiplier will be paid out in cash in the month followingtheapproval by the Supervisory Board of the annual accounts of TUI AG for therespective financial year. If the service contract begins or ends in thecourse of the financial year relevant for the grant of the JEV, the claimsfor payment of the same will generally be pro-rata.CapThe JEV is capped annually and individually for each Executive Boardmember;for the figures, see the table on page 132.In accordance with section 87(1) sentence 3 German Stock Corporation Act,the Supervisory Board is entitled to limit the amount of the JEV to allowfor extraordinary circumstances (e. g. takeover of the company, sale ofparts of the company, uncovering of hidden reserves, external influences).3. Virtual Shares according to the Long-Term Incentive Plan ('LTIP')3.1 Calculation methodPurpose and link to company strategyThe long-term objective is to increase corporate and shareholder value bydefining ambitious goals that are closely linked to the company's earnings,share price performance and dividends.ProcedureThe LTIP is a performance share plan based on virtual shares and isassessedover a period of four years ('Performance Reference Period'). Payments aregranted in annual tranches.For Executive Board members, an individual target amount ('Target Amount')is agreed in the service contract. At the beginning of each financial yearaprovisional number of virtual shares, commensurate with the target amount,will be set. This will constitute the basis for the determination of thefinal performance-based payment for the tranche in question at the end ofthe respective performance reference period. To set this number, the targetamount will be divided by the average Xetra price of TUI AG shares over the20 prior trading days. The claim to a payment only arises upon expiry oftheperformance reference period and depends on whether or not the respectiveperformance target is achieved.The performance target for determining the amount of the final payout attheend of the performance reference period is the development of the totalshareholder return ('TSR') of TUI AG relative to the development of the TSRof the Dow Jones Stoxx 600 Travel & Leisure ('Index'), whereby the rankingof the TUI AG TSR in relation to the index companies will be monitored overthe entire performance reference period. The TSR is the aggregate of allshare price increases plus the gross dividends paid over the performancereference period. Data from a reputable data provider (e. g. Bloomberg,Thomson Reuters) will be used for the purpose of establishing the TSRvaluesfor TUI AG and the index. The reference for the purpose of determining therankings is the composition of the index on the last day of the performancereference period. The values for companies that were not listed over theentire performance reference period will be factored in on a pro-ratabasis.The level of target achievement is established as follows depending on theranking of the TSR of TUI AG relative to the TSR values of the indexcompanies: * a TSR value of TUI AG equivalent to the bottom and second to bottom value of the index corresponds to a target achievement of 0 %. * a TSR value of TUI AG equivalent to the third to bottom value of the index corresponds to a target achievement of 25 %. * a TSR value of TUI AG equivalent to the median of the index corresponds to a target achievement of 100 %. * a TSR value of TUI AG equivalent to the third to top value of the index corresponds to a target achievement of 175 %. For performance between the third to bottom and the third to top rank,linear interpolation will be used to determine the level of targetachievement at between 25 % and 175 %. The degree of target achievementwillbe rounded to two decimal places, as is customary in commercial practice.To determine the final number of virtual shares, the degree of targetachievement will be multiplied by the provisional number of virtual shareson the final day of the performance reference period ('Final Number OfVirtual Shares'). The payout is determined by multiplying the final numberof virtual shares by the average Xetra price of TUI AG shares over the 20trading days prior to the end of the performance reference period. Thepayout which is calculated in this way will be due in the month followingthe approval of the annual accounts of TUI AG for the fourth financial yearof the performance reference period and the resulting amount is paid out incash. If the service contract begins or ends in the course of the financialyear relevant for the grant of the LTIP, the claims for payment of the samewill generally be pro-rata.CapThe LTIP is capped annually and individually for each Executive Boardmember; for the figures, see the table on page 132.3.2 Development of aggregate virtual shares of current Executive Boardmembers (LTIP model) Number Balance as at 30 Sep 2015 1,072,420 Virtual shares granted for financial year 2015 / 16* 291,933 Decrease in virtual shares - 378,708 Balance as at 30 Sep 2016 985,645 * William Waggott's LTIP tranche for financial year 2015 / 16 included infull, since LTIP granted in full at the beginning of the financial yearOn 30 September 2016, former Executive Board members held no virtual sharesin TUI AG (previous year: no virtual shares) that were granted after themerger of TUI AG and TUI Travel PLC ('TUI Travel') in December 2014 (the'Merger').There are provisions totalling EUR 6,693.1 thousand and liabilities worthEUR 1,896.0 thousand (previous year: EUR 1,530.0 thousand) to coverentitlements under TUI AG's LTIP for current Executive Board members. Thoseprovisions only cover liabilities arising from the LTIP of TUI AG.4. Fringe benefitsPurpose and link to company strategyFringe benefits offered should be competitive on the market for highlyqualified Executive Board members.ProcedureExecutive Board members receive the following fringe benefits: * Reimbursement of business travel expenses in accordance with TUI AG's general business travel guidelines. * Twice a year, free of charge, a holiday from within the World of TUI range, without any limitation as to tour operator, type of holiday, category or price. Spouses / partners are granted a 50 % discount onthe catalogue price for the aforementioned vacations, and children still in education or training a 100 % discount. Apart from that, a reduction of 75 % (spouses / partners) / 50 % (children still in education or training) is granted for flights. * A suitable company car with driver or alternatively a car allowance of EUR 1.5 thousand gross per month. Insurance cover is provided in line with the agreements applicable inGermany and the United Kingdom. This is offered as follows:TUI AG provides insurance cover for accidents to the customary extent forMrJoussen, Dr Eller, Mr Baier and Mr Ebel and will pay the correspondinginsurance contributions for the terms of their service contracts. Thecoverage amounts to EUR 1,500.0 thousand for death and EUR 3,000.0 thousandfor disablement. Furthermore, Mr Joussen, Dr Eller, Mr Baier and Mr Ebelreceive an allowance towards health and long-term care insurance in theamount payable if the respective Executive Board member were an employee,but no more than half of each insurance premium.Insofar as this is permitted by law, Mr Burling will remain a beneficiary,at the expense of TUI AG, of the UK term life, vocational disability andhealth insurance programmes. Mr Long and Mr Waggott received the fringebenefits on a pro-rata basis up to the time at which they left theExecutiveBoard.TUI AG also takes out criminal law protection insurance that provides coverfor the Executive Board members regarding criminal and misdemeanourproceedings, if these proceedings are based on an act or a failure to actinthe exercise of their duties for TUI AG. TUI AG also takes out suitable D&Oinsurance coverage for the Executive Board members to cover possible claimsbrought under private law on the basis of statutory liability provisionsagainst one or more of the Executive Board members by a third party or theCompany for damages for a breach ofduty committed in the exercise of theirduties. The D&O insurance provides for a deductible of 10 % of the damageupto 150 % of the fixed annual remuneration.AmountThe value of the company car, free holidays and insurance benefits receivedannually by an individual Executive Board member normally does not exceedEUR 100.0 thousand.5. Pension benefitsPurpose and link to company strategyHighly-qualified Executive Board members who are needed to develop andimplement company strategy are to be acquired and retained.The pension entitlements should be competitive on the market for highlyqualified Executive Board members and should provide them with acorresponding pension in their retirement.ProcedurePensions are paid to former Executive Board members if they reach thepredefined age limit or are permanently incapacitated. The Executive Boardmembers are not entitled to receive transition payments upon leaving theExecutive Board, with the exception of Mr Ebel who has an acquired right toreceive transition payments under a legacy contract.With regard to pension entitlements, different principles apply to MrJoussen, Dr Eller, Mr Baier and Mr Ebel on the one hand and Mr Long, MrBurling and Mr Waggott on the other hand due to the legacy systems inGermany and the UK.Mr Joussen, Dr Eller, Mr Baier and Mr Ebel are entitled to pension benefitsaccording to the pension commitments granted to Executive Board members ofTUI AG ('TUI AG Pension Scheme'). These Executive Board members receive, onan annual basis, a contractually agreed amount that is paid into anexistingpension scheme for the respective Executive Board member. The contributionsto the company pension scheme carry an interest rate established in thepension commitment. The interest rate currently stands at 5 % p.a. Thebeneficiary may choose between a one-off payment, payment by instalments orpension payments.The amounts agreed on in the service contracts of the aforementionedExecutive Board members are: * Mr Joussen: EUR 454.5 thousand per year. Mr Joussen becomes eligiblefor payment of the pension upon reaching the age of 62. * Dr Eller: EUR 230.0 thousand per year. The amount will be provided on a pro-rata basis in connection with Dr Eller having taken up office on 15 October 2015. Dr Eller becomes eligible for payment of the pension upon reaching the age of 63. * Mr Baier: EUR 267.75 thousand per year. Mr Baier becomes eligible for payment of the pension upon reaching the age of 60. * Mr Ebel: EUR 207.0 thousand per year. Mr Ebel becomes eligible for payment of the pension upon reaching the age of 62. Should Mr Joussen, Dr Eller, Mr Baier and Mr Ebel retire from TUI AG beforethe normal retirement date due to an ongoing occupational disability, theywill receive an occupational disability pension until they are able to workagain, but at most until they reach the normal retirement date.Under certain circumstances, spouses, partners or cohabitants of theExecutive Board members will, should the respective Executive Board memberdie, receive a survivor's pension worth 60 % of the pension for theirlifetime or until remarriage. Children of Executive Board members will,should the respective Executive Board member die, receive an orphan'spension, paid as a maximum until they reach the age of 27. Children whohavelost one parent will receive 20 % of the pension, and those who have lostboth parents will receive 25 %. This claim is subject to the prerequisitethat the child meets the requirements set out in section 32(3), (4),sentence 1 nos. 1 to 3 and (5) German Income Tax Act(Einkommensteuergesetz).Mr Burling receives a fixed annual amount of EUR 225.0 thousand for hispension. This amount may be paid into a company pension scheme wherepossible or where the tax arrangements prevent payment into a pensionschemewill be payable as cash for this specific purpose. Mr Waggott and Mr Longreceived the pension contribution on a pro-rata basis in each case up tothetime at which they left the Executive Board: * Mr Long: EUR 164.1 thousand. * Mr Waggott: EUR 177.2 thousand. Pensions of current Executive Board members under the TUI AG Pension Scheme Addition to / Net reversal of present pension provisions value as at EUR '000 2015 / 16 2014 / 30 Sep 16 30 Sep 15 15 Friedrich Joussen 1,130.2 1,876.7 3,006.9 1,876.7 Horst Baier 966.8 1,193.1 9,020.1 8,053.3 Sebastian Ebel 490.7 784.7 1,275.4 784.7 Dr Elke Eller 435.6 0.0 435.6 0.0 Total 3,023.3 3,854.5 13,738.0 10,714.7 At 30 September 2016, pension obligations for current Executive Boardmembers totalled EUR 13,738.0 thousand (previous year balance sheet date:EUR 10,714.7 thousand) according to IAS 19 and EUR 10,745.2 thousand(previous year balance sheet date: EUR 9,233.1 thousand) according tocommercial law provisions. In the period under review, the provisionaccording to IAS 19 was increased by an amount of EUR 3,023.3 thousand(previous year: increase of EUR 3,854.5 thousand), with an increase of EUR1,512.1 thousand (previous year: increase of EUR 2,861.2 thousand)accordingto the provisions of the German Commercial Code.Where the above table shows a corresponding amount, the pension obligationsfor beneficiaries are funded via the conclusion of pledged reinsurancepolicies. As the reinsurance policy fully covers the pension obligationsforformer and current Executive Board members, the insurance was deducted asanasset from the pension obligations.6. Potential additional remuneration in cash or in virtual shares('Additional Remuneration')Purpose and link to company strategyThe additional remuneration is intended to compensate exceptionalperformance by Executive Board members.ProcedureThe Supervisory Board may grant an additional remuneration in cash or invirtual shares in exceptional circumstances such as an extraordinarilyheavyworkload in connection with the merger between TUI AG and TUI Travel or arealization of synergies that exceeds the planned level by more than 20 %over budget. The Supervisory Board determines whether and to what amountsuch additional remuneration will be paid.CapThe additional remuneration is capped annually and individually for eachExecutive Board member; for the figures, see the table below.7. Remuneration capsThe following caps apply to the remuneration (remuneration components andtotal remuneration) payable to Executive Board members for a financialyear: Remunerati- on caps EUR '000 Fixed JEV LTIP Additional Maximum total remunera- remunerati- remuneration3 tion2 on Friedrich 1,100.0 2,070.0 4,440.0 920.0 7,500.0 Joussen Peter Long 1,100.0 2,070.0 4,440.0 920.0 7,500.0 1 Horst 740.0 1,012.5 2,025.0 450.0 4,200.0 Baier David 600.0 900.0 1,500.0 400.0 3,450.0 Burling Sebastian 680.0 720.0 1,500.0 320.0 3,380.0 Ebel Dr Elke 680.0 675.0 1,260.0 300.0 3,100.0 Eller 1 William 720.0 810.0 2,100.0 360.0 4,080.0 Waggott 1 1 Amount for the whole year (12 months), possibly pro rated caps: see frompage 1382 Fixed amount, no cap applied3 Contractually agreed cap for total remuneration (including fixedremuneration, JEV, LTIP, company pension, additional remuneration andfringebenefits)IV. Rolled-over TUI Travel shares ('Share Awards')During their period of service as Executive Directors of TUI Travel, MrLongand Mr Waggott received long-term incentives in annual tranches in the formof share awards with a vesting period of three years. Mr Burling, who wasnot an Executive Director of TUI Travel, likewise received these shareawards on the basis of his employment relationship with TUI Travel. Theconditions of the share awards were laid down by TUI Travel's RemunerationCommittee and approved by the shareholders.Because of the three-year vesting period, some tranches were not yet dueandpayable at the time of the merger. Following the completion of the mergerand the subsequent delisting of TUI Travel, it was agreed that theoutstanding share awards would be rolled over to TUI AG. On the due date,all share awards were converted into a corresponding number of TUI AGshares. On the one hand, the share awards result from a Deferred AnnualBonus Scheme ('DABS'). This comprises deferred annual bonus amounts thatwere earned during periods prior to the merger.On the other hand, share awards arise under the Performance Share Plan('PSP'). The performance conditions applicable to the PSP are as follows:The conversion is carried out on the basis of the earnings per share (EPS),the total shareholder return (TSR) and the return on invested capital(ROIC)over a three-year period. The EPS is weighted at 50 %, the TSR at 25 % andthe ROIC at 25 %.After the merger, the Supervisory Board agreed that the performance wouldbemeasured up to the date of the merger on the basis of TUI Travel'sperformance and from the date of the merger onwards on the basis of TUIAG'sperformance. The aggregate performance would then be assessed for theunderlying assessment period in each case.Because Mr Long and Mr Waggot left the Executive Board during the course offinancial year 2015 / 16, the Supervisory Board agreed with them that theiroutstanding claims to the share awards would be paid out prematurely. MrLong received an amount of EUR 5,695.1 thousand as compensation for all ofhis outstanding share awards; the payment became due on 30 September 2016.Mr Long did not take part in the passing of the resolution by theSupervisory Board on 15 September 2016 on the redemption of any shareawardsstill existing at that time. Mr Waggot received an amount of EUR 2,520.0thousand as compensation for all of his outstanding share awards; thepayment became due on 31 August 2016.In the context of paying out the rolled-over share awards of Messrs. Longand Waggot, the Supervisory Board also agreed with Mr Burling that all ofhis outstanding claims to the share awards would be paid out. In thisconnection, Mr Burling received a compensation payment of EUR 1,741.0thousand; this payment became due on 30 September 2016.The share awards of Messrs. Long, Burling and Waggot that became due andpayable and / or were paid out prematurely during financial year 2015 / 16as well as the share awards of Johan Lundgren, who left the Executive Boardduring financial year 2014 / 15, that have become dueand payable and thatare still outstanding are shown in the following table. For- mer Exe- cuti- ve Di- rec- tors of TUI Tra- vel PLC Out- stan- ding DABS- /DAB- LIS sha- re awar- ds at 30 Sep- tem- ber 2016 (awa- rded by TUI Tra- vel PLC) TUI AG clo- sing sha- re pri- ce at 30 Sep 2016 (EUR- ): 12.6- 9 Exe- TUI AG Aw- Market T- Market Ma- Pl- TUI AG Maxi- Maxi- cuti- shares ar- price U- price rk- an- shares mummum ve / d (TUI I (TUI et ne- / TUIvalue Di- nil-- da- AG) A- AG) va- d nil-- AG based rec- cost te per G per lu- / cost sha- on TUI tor opti- share s- share e Ac- opti- res/ AGsha- ons at h- at at tu- ons nil-- re held award a- ves- ve- al lapsed cost price at 1 (EUR) r- ting st- ve- during opti- of EUR Octo- e- (EUR) in- st- the ons12.69 ber s g in- year held at 30 2015 / (E- g ended at30 Septem- n- UR- an- 30 Sep- ber i- ) d Septem- tem- 2016(E- l re- ber berUR) c- le- 2016 2016 o- as- (see s- e Note t da- 5) o- te p- t- i- o- n- s v- e- s- t- e- d a- n- d r- e- l- e- a- s- e- d d- u- r- i- n- g t- h- e y- e- a- r e- n- d- e- d 3- 0 S- e- p- t- e- m- b- e- r 2- 0- 1- 6 Pe- D- 102,40- 1 6 8.773 1- 16,289 1,- 6 0 0 0 ter A- 1 De- 0- 66- De- Long B- c 2- 8,- c S 12 ,- 01- 15 4- 0 0- 1 D- 409,60- 2 6 8.773 3- 16,289 5,- 6 55,543 0 0 A- 7 De- 5- 76- De- B- c 4- 7,- c S 12 ,- 34- 15 0- 8 6- 4 P- 238,83- 3 6 8.773 2- 16.289 3,- 6 32,386 0 0 S- 7 De- 0- 36- De- P c 6- 2,- c 12 ,- 88- 15 4- 0 5- 1 D- 72,436 1 12 11.249 7- 12.500 90- 30 0 0 0 A- De- 2- 5,- Se- B- c ,- 46- p S 13 4- 3 16 3- 6 D- 289,74- 2, 12 11.249 2- 12.500 2,- 30 72,437 0 0 A- 7 4 De- 1- 71- Se- B- c 7- 6,- p S 13 ,- 37- 16 3- 8 1- 0 P- 134,97- 3 12 11.249 1- 12.500 1,- 30 33,744 0 0 S- 6 De- 0- 26- Se- P c 1- 5,- p 13 ,- 40- 16 2- 0 3- 2 D- 64,626 1, 8 14.376 6- 12.500 80- 30 0 0 0 A- 5 De- 4- 7,- Se- B- c ,- 83- p S 14 6- 8 16 2- 6 To- 1,312,- 1- 16- 194,11- 0 0 tal 630 ,- ,4- 0 1- 93- 1- ,3- 8- 18 ,- 5- 2- 0 Wil- D- 53,548 1 6 8.773 5- 16.289 87- 6 0 0 0 liam A- De- 3- 2,- De- Wag- B- c ,- 24- c gott S 12 5- 3 15 4- 8 D- 214,19- 2 6 8.773 1- 16.289 3,- 6 29,045 0 0 A- 4 De- 8- 01- De- B- c 5- 5,- c S 12 ,- 89- 15 1- 2 4- 9 P- 92,725 3 6 8.773 8- 16.289 1,- 6 12,574 0 0 S- De- 0- 30- De- P c ,- 5,- c 12 1- 58- 15 5- 0 1 D- 39,127 1 12 11.249 3- 11.600 45- 31 0 0 0 A- De- 9- 3,- Au- B- c ,- 87- g S 13 1- 3 16 2- 7 D- 156,50- 2, 12 11.249 1- 11.600 1,- 31 39,127 0 0 A- 8 4 De- 1- 36- Au- B- c 7- 1,- g S 13 ,- 62- 16 3- 0 8- 1 P- 58,224 3 12 11.249 4- 11.600 50- 31 14,556 0 0 S- De- 3- 6,- Au- P c ,- 54- g 13 6- 9 16 6- 8 D- 17,068 1, 8 14.376 1- 11.600 19- 31 0 0 0 A- 5 De- 7- 7,- Au- B- c ,- 98- g S 14 0- 9 16 6- 8 To- 631,39- 5- 7,- 95,302 0 0 tal 4 3- 71- 6- 3,- ,- 74- 0- 5 9- 2 Da- D- 16,858 1 6 8.773 1- 16.289 27- 6 0 0 0 vid A- De- 6- 4,- De- Bur- B- c ,- 60- c ling S 12 8- 0 15 5- 8 D- 67,435 2 6 8.773 5- 16.289 94- 6 9,144 0 0 A- De- 8- 9,- De- B- c ,- 50- c S 12 2- 2 15 9- 1 P- 42,147 3 6 8.773 3- 16.289 59- 6 5,708 0 0 S- De- 6- 3,- De- P c ,- 55- c 12 4- 5 15 3- 9 D- 16,077 1 12 11.249 1- 12.500 20- 30 0 0 0 A- De- 6- 0,- Se- B- c ,- 96- p S 13 0- 3 16 7- 7 D- 64,310 2, 12 11.249 4- 12.500 60- 30 16,077 0 0 A- 4 De- 8- 2,- Se- B- c ,- 90- p S 13 2- 6 16 3- 3 P- 31,758 3 12 11.249 2- 12.500 29- 30 7,939 0 0 S- De- 3- 7,- Se- P c ,- 73- p 13 8- 1 16 1- 9 D- 9,975 1, 8 11.278 9- 12.500 12- 30 0 0 0 A- 5 De- ,- 4,- Se- B- c 9- 68- p S 14 7- 8 16 5 P- 54,902 3, 8 14.376 4- 12.500 51- 30 13,725 0 0 S- 5 De- 1- 4,- Se- P c ,- 70- p 14 1- 6 16 7- 7 To- 248,56- 2- 3,- 38,868 0 0 tal 0 0- 04- 9- 3,- ,- 94- 6- 5 9- 2 Joha- D- 68,152 1 6 8.773 6- 16.289 1,- 6 0 0 0 n A- De- 8- 11- De- Lund- B- c ,- 0,- c gren S 12 1- 12- 15 5- 8 2 D- 272,61- 2 6 8.773 2- 16.289 3,- 6 36,966 0 0 A- 1 De- 3- 83- De- B- c 5- 8,- c S 12 ,- 42- 15 6- 1 4- 5 P- 118,01- 3 6 8.773 1- 16.289 1,- 6 16,002 0 0 S- 3 De- 0- 66- De- P c 2- 1,- c 12 ,- 65- 15 0- 7 1- 1 D- 47,723 1 12 11.249 0 0 12 0 47,72- 605,60- A- De- De- 3 5 B- c c S 13 16 D- 190,89- 2, 12 11.249 0 0 12 0 190,8- 2,422,- A- 2 4 De- De- 92 419 B- c c S 13 16 P- 74,104 3 12 11.249 0 0 12 0 74,10- 940,38- S- De- De- 4 0 P c c 13 16 D- 21,723 1, 8 14.376 0 0 8 0 21,72- 275,66- A- 5 De- De- 3 5 B- c c S 14 17 To- 771,49- 4- 6,- 52,968 312,7- 3,968,- tal 5 0- 61- 19 404 5- 0,- ,- 20- 8- 7 0- 8 GRAN- 2,964,- 2- 33- 52,968 312,7- 3,968,- DTOT- 079 ,- ,8- 19 404 AL 2- 61- 7- ,2- 0- 15 ,- 1- 1- 2 All outstanding share awards shown were made over TUI Travel PLC shares. Atvest / exercise, shares will convert to TUI AG shares at the mergerconversion ratio of 0.399.1 DABS deferred award: The deferred element of annual bonus, subject toforfeiture for gross misconduct, bankruptcy or certain other circumstancesin accordance with the scheme rules.2 DABS matching award: A multiple of the deferred award, subject toperformance conditions over the three-year vesting period.3 PSP award: Subject to performance conditions over the three-year vestingperiod.4 Change to remuneration structure with effect from 1 October 2014 - lastmatching awards made in December 2013.5 All awards made in December 2014 are phantom awards and will therefore besettled in cash on vesting.V. Payments/benefits in case of premature termination of Executive Boardmembership1. General contractual frameworkThe payments to be made to an Executive Board member on the prematuretermination of his service contract without good cause have in principlebeen limited in the service contracts of Messrs. Joussen and Baier to anamount equal to twice their annual remuneration. It has been agreed in theservice contracts of Dr Eller, Mr Ebel, Mr Long, Mr Burling and Mr Waggottthat payments to be made on the premature termination of their ExecutiveBoard membership without good cause may not - in the case of prematuretermination during the first year after the coming into force of theservicecontract - exceed an amount equal to twice their annual remuneration and -in the case of premature termination after the end of the first year afterthe coming into force of the service contract - an amount equal to theirannual remuneration ('Severance Pay Cap'). In each case, no more than theremaining term will be compensated. The severance pay cap is calculated onthe basis of the target direct remuneration (fixed remuneration, target JEVand target LTIP) for the last expired financial year and, if relevant, theexpected target direct remuneration for the current financial year. If theservice contract is terminated for cause without notice, no payments willbemade to Executive Board members.In cases of premature termination of the service contract, the JEV andpayments under the LTIP will be governed as follows: * JEV: * If the company terminates the service contract without noticebefore the end of the one-year performance reference period for good cause attributable to the beneficiary or if the beneficiary terminatesthe service contract without good cause, the claim to the JEV for the performance reference period in question will be forfeited and no alternative remuneration or compensation will be paid. * In all other cases of premature termination of the service contract before the end of the one-year performance reference period, theJEV will generally be paid on a pro-rata basis. * LTIP: * If the company terminates the service contract without noticebefore the end of the respective performance reference period for good cause attributable to the Executive Board member, or if the Executive Board member terminates the service contract without good cause, all claims under the LTIP will lapse for all tranches notyet paid and no alternative remuneration or compensation will be paid. * If the service contract ends before the expiry of the performance reference period for other reasons, the claims under the LTIP will be maintained for tranches not yet paid. The tranche for thecurrent financial year will generally be reduced on a pro-rata basis. The pay-out will be calculated in the same way as in the case of the continuation of the service contract. The service contracts of the Executive Board members do not contain changeof control clauses.2. Payments/benefits in financial year 2015/16on account of the premature termination of Executive Board membershipThe Supervisory Board and Mr Waggott agreed that Mr Waggott would resign asa member of the Executive Board with effect from 30 June 2016. In thisrespect, the Supervisory Board and Mr Waggott agreed that their servicerelationship would end by mutual agreement with effect from 30 June 2016.MrWaggott received his fixed remuneration, the fringe benefits, the JEV(assumption: 100 % target achievement, individual performance factor of1.0)and the amount for pension purposes on a pro-rata basis up to thetermination date. Because of the premature termination of his servicecontract, Mr Waggott also received a severance payment of EUR 3,681.4thousand that became due and payable on 31 August 2016. This includesclaimsunder the LTIP of TUI AG for financial year 2014 / 15 and part of financialyear 2015 / 16 in the amount of EUR 1,075.0 thousand.Mr Lundgren, who left the Executive Board during financial year 2014 / 15,was subject to a post-contractual covenant not to compete that was validuntil 30 September 2016. For the duration of the post-contractual covenantnot to compete (1 June 2015 until 30 September 2016),TUI AG paid MrLundgrencompensation in the amount of EUR 144.9 thousand per month or EUR 1,739.1thousand for financial year 2015 / 16 as a whole. This includes thesettlement of claims under the LTIP of TUI AG for financial year 2014 / 15and part of financial year 2015 / 16 in the amount of EUR 1,075.0 thousand.VI. Other payments/benefits for Executive Board members who left the Boardin financial year 2015/16Mr Long left the Executive Board as planned with effect from the end of theAnnual General Meeting 2016 held on 9 February 2016. At the same AnnualGeneral Meeting, Mr Long was elected by the shareholders as a member of theSupervisory Board of TUI AG. The shareholders also passed a resolutionduring this Annual General Meeting to change the remuneration of themembersof the Supervisory Board to fixed remuneration only (cf. page 142). Againstthis background, the Supervisory Board deemed it appropriate to agree withMr Long that his claims under the variable remuneration components JEV andLTIP would be paid out prematurely and on a pro-rata basis. As such, MrLongreceived EUR 396.6 thousand as JEV (assumption: 100 % target achievement,individual performance factor of 1.2) and a compensation payment of EUR1,618.6 thousand under the LTIP for financial year 2014 / 15 and acompensation payment of EUR 404.7 thousand under the LTIP for part offinancial year 2015 / 16 on 30 September 2016. Furthermore, the SupervisoryBoard granted Mr Long additional pro-rata remuneration of EUR 179.6thousandfor exceeding the merger synergies planned for financial year 2015 / 16 andfor his heavy workload connected to the successful post-merger integration.Mr Long did not take part in the passing of the resolution by theSupervisory Board on the premature payment of the variable remunerationcomponents on 15 September 2016.VII. Pension payments made to past Executive Board membersIn financial year 2015 / 16, the pension payments to former Executive Boardmembers and their surviving dependants totalled EUR 4,933.2 thousand(previous year: EUR 4,891.1 thousand).Pension provisions for former members of the Executive Board and theirdependants amounted as at the balance sheet date to EUR 84,294.2 thousand(previous year: EUR 79,754.3 thousand) as measured according to IAS 19 andto EUR 65,505.9 thousand (previous year: EUR 68,170.1 thousand) as measuredaccording to commercial law provisions. In financial year 2015 / 16, theobligations for this group of persons increased by EUR 4,539.9 thousand (infinancial year 2014 / 15 they decreased by EUR 610.1 thousand) according toIAS 19 and decreased by EUR 2,664.2 thousand (increased in the previousyearby EUR 3,088.6 thousand) according to commercial law provisions.VIII. Overview: Remuneration of individual Executive Board members1. Remuneration of individual Executive Board members for financial year2015/16 Remuneration of individual Executive Board members for financial year 2015/16 (pursuant to section 314(6)(a) German Commercial Code) EUR '000 Fixed JEV Additio- LTIP Total Total remune- nal 2015 / 2014 / ration1 Remune- 16 15 ration Friedrich 1,145.4 970.2 920.0 0.0 3,035.6 11,867.9 Joussen Peter Long 2 404.0 396.6 179.6 0.0 980.2 5,734.3 Horst Baier 3 821.7 618.8 450.0 0.0 1,890.5 5,492.7 David Burling 642.1 421.8 400.0 0.0 1,463.9 2,077.8 Sebastian Ebel 698.0 337.5 320.0 0.0 1,355.5 3,162.6 Dr Elke Eller 678.0 304.4 300.0 1,269.9 2,552.3 0.0 4 William 553.5 270.0 0.0 0.0 823.5 3,270.1 Waggott 5 Total 4,942.8 3,319.2 2,569.6 1,269.9 12,101.4 Previous year 4,642.7 5,079.6 1,640.0 24,219.0 35,581.4 6 1 Incl. fringe benefits (without insurances under Group coverage).2 Pro rated disclosure of all remuneration components until 9 February2016.3 Fixed remuneration includes EUR 63 k received for his seat on thesupervisory board of Hapag Lloyd AG that is not counted towards fixedremuneration of TUI AG.JEV includes cash deferral of EUR 144.2 k from financial year 2013 / 14.4 Pro rated disclosure of all remuneration components from 15 October 2015on.5 Pro rated disclosure of all remuneration components until 30 June 2016.6 Previous year's values include remuneration of Johan Lundgren.The discretionary multiplier of between 0.8 and 1.2 used to calculate theJEV (procedure description see above) and the additional remuneration(procedure description see above) were resolved under executing discretionin the framework of the service agreements of the members of the ExecutiveBoard. In terms of the discretionary multiplier the Supervisory Board,amongst others, considered the significantly increased employeesatisfaction(engagement index on Group level) on the basis of a global employee surveyconducted in financial year 2015 / 16 (comparison to survey results infinancial year 2014 / 15). The defined discretionary multipliers alsoreflect the strong engagement of each member of the Executive Board indelivering results even though financial year 2015 / 16 has probably beenthe most challenging one in the tourism industry in the last decade due toterrorism and geopolitical events (Turkey demand slump, Brexit decision,GBPweakness). Against this background the Supervisory Board also consideredthat TUI AG strongly outperformed its key competitors in the industry.Furthermore, amongst others, the successful implementation of a seniorleadership team, the beneficial disposal of the Hotelbeds Group, the hugeprogress in delivering a Group airline platform and the successful effortsto initiate a solution for the German airline were taken into account.In terms of the Additional Remuneration the Supervisory Board consideredtheachievements of economic and cultural integration of the merged businesses.The merger synergies budgeted for financial year 2015/16 were exceeded bymore than 20 % and each member of the Executive Board faced an enormousadditional workload to drive the integration (e. g. intensive strategycommunication, completing the organisational integration, establishing acommon TUI culture).The LTIP amount disclosed in this table corresponds to the fair value atgrant date (acc. to IFRS 2). This amount takes into account all allocationsaccumulated over the entire contract period. The table of the 'remunerationawarded' according to the GCGC shows the amount allocated in the respectivefinancial year.As in the prior year, the members of the Executive Board did not receiveanyloans or advances in financial year 2015 / 16.Dr Eller received EUR 11.6 thousand from Nord / LB and Mr Long received £108.3 thousand from Royal Mail PLC for their activities - which wereapproved by the Supervisory Board during their Executive Board membershipinfinancial year 2015 / 16 - in supervisory boards or comparable domestic andforeign corporate supervisory bodies to be set up in accordance withsection125 German Stock Corporation Act, which activities were not carried out onthe basis of a shareholding of TUI AG in the companies concerned. Thisremuneration was not counted towards the remuneration of Executive Boardmembers paid by TUI AG.Pursuant to 4.2.5, attachment tables 1 and 2 GCGC, the two tables below(remuneration awarded and remuneration paid) show the benefits granted byTUI AG and the payments received.2. Remuneration awarded Remune- ration awarded Fried- Peter rich Long Joussen Joint Joint CEO, 12 CEO, Decem- since ber 14 2014 Februa- until 9 ry 2013 Februa- 1 ry 2016 2 EUR 2014 / 2015 2015 2015 / 2014 / 2015 2015 / 2015/ '000 15 / 16 / 16 16 15 / 16 16 16 (min.- (max.) (min.) (max.) ) Fixed 1,080.4 1,100- 1,100- 1,100.0 884.8 397.- 397.2 397.2 remune- .0 .0 2 ration Fringe 51.6 45.4 45.4 45.4 33.7 6.8 6.8 6.8 bene- fits Total 1,132.0 1,145- 1,145- 1,145.4 918.4 404.- 404.0 404.0 .4 .4 0 JEV 920.0 920.0 - 2,070.0 920.0 332.- - 747.5 2 Additio- 500.0 920.0 - 920.0 500.0 179.- - 332.2 nal 6 Remune- ration LTIP 1,805.6 1,494- - 4,440.0 1,805.6 539.- - 1,603.3 .8 7 LTIP 1,805.6 1,805.6 (2014 / 15 - 2017 / 18) LTIP 1,494- - 4,440.0 - 539.- - 1,603.3 (2015 / .8 7 16 - 2018 / 19) Total 4,357.6 4,480- 1,145- 8,575.4 4,144.0 1,45- 404.0 3,087.1 .2 .4 5.6 Pension 648.9 726.0 726.0 726.0 365.6 164.- 164.1 164.1 / 1 service costs5 Total 5,006.5 5,206- 1,871- 7,500.0 4,509.6 1,61- 568.1 2,708.3 remune- .2 .4 9.7 ration 6 Remune- ration awarded Horst David Baier 3 Bur- CFO, ling since 8 Member Novem- of ber Execu- 2007 tive Board, since 1 June 2015 EUR 2014 / 2015 2015 / 2015 / 2014 / 2015 2015 / 2015 / '000 15 / 16 16 16 15 / 16 16 16 (min.) (max.) (min.) (max.) Fixed 791.9 803.- 803.0 803.0 200.0 600.- 600.0 600.0 remune- 0 0 ration Fringe 20.1 18.7 18.7 18.7 15.3 42.1 42.1 42.1 bene- fits Total 811.9 821.- 821.7 821.7 215.3 642.- 642.1 642.1 7 1 JEV 450.0 450.- - 1,012.5 133.3 400.- - 900.0 0 0 Additio- 320.0 450.- - 450.0 - 400.- - 400.0 nal 0 0 Remune- ration LTIP 823.5 681.- - 2,025.0 203.3 505.- - 1,500.0 8 0 LTIP 823.5 203.3 (2014 / 15 - 2017 / 18) LTIP - 681.- - 2,025.0 - 505.- - 1,500.0 (2015 / 8 0 16 - 2018 / 19) Total 2,405.4 2,40- 821.7 4,309.2 552.0 1,94- 642.1 3,442.1 3.5 7.1 Pension 401.2 22.3 22.3 22.3 75.0 225.- 225.0 225.0 / 0 service costs5 Total 2,806.7 2,42- 844.0 4,200.0 627.0 2,17- 867.1 3,450.0 remune- 5.8 2.1 ration 6 Remune- ration awar- ded Sebasti- Dr an Ebel Elke Member Eller of Mem- Executi- ber ve of Board, Execu- since tive 12 Board Decem- / ber Human 2014 Re- sourc- es, since 15 Octo- ber 2015 EUR 2014 / 2015 / 2015 2015 / 2014 201- 2015 / 2015/ '000 15 16 / 16 16 / 15 5 / 16 16 (min.- (max.) 16 (min.) (max.) ) Fixed 547.0 680.0 680.0 680.0 - 654- 654.2 654.2 remune- .2 ration Fringe 14.3 18.0 18.0 18.0 - 23.- 23.8 23.8 bene- 8 fits Total 561.2 698.0 698.0 698.0 - 678- 678.0 678.0 .0 JEV 257.4 320.0 - 720.0 - 288- - 649.4 .6 Addi- 320.0 320.0 - 320.0 - 300- - 300.0 tional .0 Remune- ration LTIP 490.7 505.0 - 1,500.0 - 408- - 1,212.3 .1 LTIP 490.7 - (2014 / 15 - 2017 / 18) LTIP - 505.0 - 1,500.0 - 408- - 1,212.3 (2015 .1 / 16 - 2018 / 19) Total 1,629.3 1,843.0 698.0 3,238.0 - 1,6- 678.0 2,839.7 74.- 8 Pensi- 279.2 328.5 328.5 328.5 - 405- 405.0 405.0 on / .0 ser- vice costs5 Total 1,908.5 2,171.5 1,026- 3,380.0 - 2,0- 1,083.0 2,982.6 remune- .5 79.- ration 8 6 Remuneration awarded William Waggott4 Member of Executive Board, 12 December 2014 until 30 June 2016 EUR '000 2014 / 15 2015 / 2015 / 2015 / 16 16 16 (min.) (max.) Fixed 555.0 540.0 540.0 540.0 remuneration Fringe 28.5 13.5 13.5 13.5 benefits Total 583.5 553.5 553.5 553.5 JEV 360.0 360.0 - 810.0 Additional - - - 360.0 Remuneration LTIP 671.0 707.0 - 2,100.0 LTIP (2014 / 671.0 15 - 2017 / 18) LTIP (2015 / - 707.0 - 2,100.0 16 - 2018 / 19) Total 1,614.5 1,620.5 553.5 3,823.5 Pension / 190.0 177.2 177.2 177.2 service costs5 Total 1,804.5 1,797.7 730.7 4,000.7 remuneration 6 1 Joint CEO until 9 February 2016; Member of the Executive Board since 15October 20122 Member of the Executive Board since 3 September 20073 Fixed remuneration includes EUR 63 k received for his seat on thesupervisory board of Hapag Lloyd AG that is not counted towards fixedremuneration of TUI AG.4 Pro rated calculation of fixed remuneration, fringe benefits and pensioncontribution; disclosure of full-year values for variable remunerationcomponents.5 For Mr Joussen, Mr Baier, Mr Ebel and Dr Eller service costs acc. to IAS19; for Mr Long, Mr Burling and Mr Waggott payments for pensioncontribution.6 When contractually agreed cap for total remuneration to be paid isexceeded, LTIP is reduced proportionally.3. Remuneration paid Remunera- tion paid Friedrich Peter Horst Baier Joussen Long CFO, since Joint CEO, Joint 8 November since 14 CEO, 12 2007 February December 2013 1 2014 until 9 February 2016 2 EUR '000 2014 / 15 2015 / 2014 / 2015 / 2014 / 15 2015 / 16 15 16 16 Fixed 1,080.4 1,100.0 884.8 397.2 791.9 803.0 remunera- tion Fringe 51.6 45.4 33.7 6.8 20.1 18.7 benefits Total 1,132.0 1,145.4 918.4 404.0 812.0 821.7 JEV 1,326.3 970.2 1,326.3 396.6 648.7 474.6 Additio- 500.0 920.0 500.0 179.6 320.0 450.0 nal Remunera- tion LTIP - 820.0 - 2,023.2 1,853.6 1,220.2 Cash 152.4 deferral (FY 2012 / 13) Cash - 171.2 144.2 deferral (FY 2013 / 14) Cash deferral (FY 2014 / 15) LTIP 1,530.0 (2011 / 12 - 2014 / 15) LTIP 820.0 1,076.0 (2012 / 13 - 2015 / 16) LTIP - 1,618.6 (2014 / 15 - 2017 / 18) LTIP - - 404.7 - (2015 / 16 - 2018 / 19) Others - - Total 2,958.3 3,855.6 2,744.8 3,003.4 3,634.3 2,966.5 Pension 648.9 726.0 365.6 164.1 401.2 22.3 / service costs5 Total 3,607.2 4,581.6 3,110.3 3,167.5 4,035.5 2,988.8 remunera- tion Remune- ration paid David Burling Sebastian Dr Elke Member of Ebel Eller Executive Member of Member of Board, since Executive Executive 1 June 2015 Board, Board / since 12 Human December Re- 2014 sources, since 15 October 2015 EUR 2014 / 15 2015 / 2014 / 15 2015 / 2014 / 15 2015 / '000 16 16 16 Fixed 200.0 600.0 547.0 680.0 654.2 remune- ration Fringe 15.3 42.1 14.3 18.0 23.8 bene- fits Total 215.3 642.1 561.2 698.0 678.0 JEV 192.2 421.8 371.1 337.5 304.4 Addi- - 400.0 320.0 320.0 300.0 tional Remune- ration LTIP - Cash defer- ral (FY 2012 / 13) Cash defer- ral (FY 2013 / 14) Cash defer- ral (FY 2014 / 15) LTIP (2011 / 12 - 2014 / 15) LTIP (2012 / 13 - 2015 / 16) LTIP (2014 / 15 - 2017 / 18) LTIP - (2015 / 16 - 2018 / 19) Others Total 407.5 1,463.9 1,252.3 1,355.5 1,282.4 Pensi- 75.0 225.0 279.2 328.5 405.0 on / ser- vice costs5 Total 482.5 1,688.9 1,531.5 1,684.0 1,687.4 remune- ration Remuneration paid William Waggott 4 Member of Executive Board, 12 December 2014 until 30 June 2016 EUR '000 2014 / 15 2015 / 16 Fixed remuneration 555.0 540.0 Fringe benefits 28.5 13.5 Total 583.5 553.5 JEV 475.7 270.0 Additional Remuneration - - LTIP - 1,075.0 Cash deferral (FY 2012 / 13) Cash deferral (FY 2013 / 14) - Cash deferral (FY 2014 / 15) LTIP (2011 / 12 - 2014 / 15) LTIP (2012 / 13 - 2015 / 16) LTIP (2014 / 15 - 2017 / 18) - 550.0 LTIP (2015 / 16 - 2018 / 19) - 525.0 Others Total 1,059.2 1,898.5 Pension / service costs5 190.0 177.2 Total remuneration 1,249.2 2,075.7 1 Joint CEO until 9 February 2016; Member of the Executive Board since 15October 20122 Member of the Executive Board since 3 September 20073 Fixed remuneration includes EUR 63 k received for his seat on thesupervisory board of Hapag Lloyd AG that is not counted towards fixedremuneration of TUI AG4 Remuneration paid acc. to termination agreement, LTIP for financial year2014 / 15 and 2015 / 16 (pro rated) corresponds to target amount and ispartof severance payment.5 For Mr Joussen, Mr Baier, Mr Ebel and Dr Eller service costs acc. to IAS19; for Mr Long, Mr Burling and Mr Waggott payments for pensioncontribution.The remuneration paid for the last expired financial year shows the cashpayment for the performance reference period 'LTIP 2012 / 13 - 2015 / 16'for Mr Baier and Mr Joussen, the early redemption of Mr Long's LTIPentitlements contractually agreed between Mr Long and TUI AG as well as theredemption of Mr Waggott's LTIP entitlements contained in the severancepayment.In his service contract of 30 July 2012, a contractual advance payment ofEUR 1,280.0 thousand was agreed with Mr Joussen for the performancereference period 'LTIP 2012 / 13 - 2015 / 16' and paid. The payment wasdeducted from the entitlement for the entire performance reference period'LTIP 2012 / 13 - 2015 / 16' that actually arose upon expiry of financialyear 2015 / 16. In this respect, only the remaining difference of EUR 820thousand is shown in the aforementioned table as remuneration paid.IX. Review of appropriateness of the remuneration of Executive Boardmembersand of the pensionFollowing the end of financial year 2015 /16, the Supervisory Board carriedout the annual review of the remuneration of Executive Board members andthepensions for financial year 2015 / 16. It concluded that these areappropriate in accordance with section 87(1) German Stock Corporation Act.The Supervisory Board also regularly makes use of external advisors whenassessing the appropriateness of the remuneration of Executive Boardmembersand of the pension. Firstly, from an outside perspective, the level andstructure of the remuneration of Executive Board members is assessed inrelation to the remuneration of senior management and the workforce as awhole (vertical comparison). In addition to a status quo review, thevertical comparison also takes into account how this relationship changesover time. Secondly, the remuneration level and structure are assessed onthe basis of a positioning of TUI AG in a peer market made up of acombination of DAX and MDAX companies that are similar to TUI AG in termsofsize and complexity of business (horizontal comparison). In addition to thefixed remuneration, the horizontal comparison also covers the short andlong-term remuneration components as well as the amount of the companypension. For financial year 2015 / 16, the Supervisory Board commissioned aconsultancy company, hkp Group AG, to prepare an expert report on theappropriateness of the remuneration level for Executive Board members. Thepartner of hkp Group AG commissioned by the Supervisory Board andresponsible for carrying out the assessment is independent of the ExecutiveBoard of TUI AG and the company. The finding of the external advisorsupported the judgment of the Supervisory Board that the level ofremuneration of Executive Board members complies with section 87 (1) GermanStock Corporation Act as well as the recommendations of the GCGC.X. Remuneration of the Supervisory BoardOn 9 February 2016 the Annual General Meeting of TUI AG passed a resolutionto change the remuneration of the Supervisory Board to fixed remunerationonly as well as to adjust the amount of the fixed remuneration components.The new remuneration model applies retroactively as of 1 October 2015. As aresult, the variable remuneration that is granted in accordance with theprovisions of the Articles of Association applicable until 9 February 20016and based on the long-term success of the company will no longer be paid.The aforementioned provisions and remuneration of members of theSupervisoryBoard follow from section 18 of TUI AG's Articles of Association, which hasbeen made permanently accessible to the public on the internet [insert linkhere]. The remuneration of the Supervisory Board is reviewed at appropriateintervals. In this regard the expected time required for the performance oftheir duties and the practice in companies of a similar size, industry andcomplexity are taken into account.Articles of Association online www.tuigroup.com/en-en/investors/corporate-governancePurpose and link to company strategyHighly-qualified Supervisory Board members should be acquired and retained.ProcedureThe members of the Supervisory Board receive fixed remuneration of EUR 90.0thousand per financial year, payable upon completion of the financial year,besides reimbursement of their expenses. The Chairman of the SupervisoryBoard receives three times, the deputy chairs twice the fixed remunerationof an ordinary member.An additional fixed remuneration of EUR 42.0 thousand is paid formembershipin committees of the Supervisory Board (the Presiding Committee, AuditCommittee, Integration Committee and the Strategy Committee, which wasnewlyformed in financial year 2015 / 16, with the exception of the NominationCommittee). The chairman of the audit committee receives three times andthechairman of the strategy committee twice this remuneration. Thisremuneration is also paid out upon completion of the respective financialyear.In the course of the aforementioned change of the remuneration model, themembers of the Supervisory Board will still be entitled to the long-termvariable remuneration component granted in the past financial years 2012 /13, 2013 / 14 and 2014 / 15. This is calculated according to the averageundiluted earnings per share for the respective last three financial years.The entitlements from financial years 2013 / 14 and 2014 / 15 acquiredpriorto the change to fixed remuneration only were redeemed on the basis ofplanned values for the earnings per share. Since reducing the remunerationof the members of the Supervisory Board for past and current financialyearsis not permitted under stock corporation law, it is needs to be checked -upon completion of financial years 2015 / 16 and 2016 / 17 - whether thishas taken place as a result of the change to the remuneration model. Ifusing the average earnings per share actually achieved were to lead tohigher long-term incentives than taking into account the planned valueswould, the corresponding difference is to be paid to the relevant membersofthe Supervisory Board upon the close of the Annual General Meeting thatwillvote on the ratification of the acts of the Supervisory Board for therespective financial year. Regarding the remuneration granted in financialyear 2015 / 16, it will be reviewed - upon completion of financial year2017/ 18 - whether applying the remuneration model valid until 9 February 2016would have resulted in higher remuneration than applying the new modelwouldhave. If this is the case, the corresponding difference has to be paid tothe members of the Supervisory Board upon the close of the Annual GeneralMeeting 2019.The members of the Supervisory Board do not receive any other remunerationcomponents or fringe benefits. In all cases the remuneration relates to afull financial year. For parts of a financial year or short financialyears,the remuneration is paid on a pro rata basis.The members of the Supervisory Board and the committees receive anattendance fee of EUR 1.0 thousand per meeting, regardless of the form ofthe meeting.The members of the Supervisory Board are included in a financial liabilityinsurance policy (D&O insurance) taken out in an appropriate amount by thecompany and in its interest. The relevant insurance premiums are paid bythecompany. In line with the recommendation of the German Corporate GovernanceCode, there is a deductible for which the Supervisory Board members cantakeout their own private insurance.CapDue to the change to fixed remuneration only, it is no longer necessary todetermine a maximum total remuneration of the members of the SupervisoryBoard.XI. Remuneration of the Supervisory Boardas a whole Total remuneration of Supervisory Board EUR '000 2015 / 2014 / 16 15 Fixed remuneration 2,141.8 1,081.6 Long-term variable remuneration 1 1,108.7 628.3 Fixed remuneration for committee membership 1,166.6 797.6 Attendance fee 283.0 306.0 Remuneration for TUI AG Supervisory Board 4,700.0 2,813.5 mandate Remuneration for Supervisory Board mandates in 20.5 15.5 the Group Total 4,720.6 2,829.0 1 Due to a resolution passed in the Annual General Meeting 2016 thevariableremuneration of the Supervisory Board was replaced in financial year 2015 /16.In addition, travel and other expenses totalling EUR 461.0 thousand(previous year: EUR 421.0 thousand) were reimbursed. Total remuneration ofthe Supervisory Board members thus amounted to EUR 5,181.6 thousand(previous year: EUR 3,250.6 thousand).XII. Remuneration of individual Supervisory Board members for the financialyear 2015/16 Remunerati- on of individual Superviso- ry Board members for financial year 2015/16 EUR '000 Fixed Long-te- Fixed Atten- Remuneration Total remune- rm remunerati- dance for ration varia- on for fee Supervisory ble committee Board remune- membership memberships ration in the Group Prof. Dr 270.0 207.6 153.0 29.0 659.6 Klaus Mangold (Chairman) Frank 180.0 98.2 111.0 19.0 408.2 Jakobi (Deputy Chairman) Sir 180.0 46.9 84.0 21.0 331.9 Michael Hodgkinson (Deputy Chairman) Andreas 90.0 69.2 57.1 18.0 5.0 239.3 Barczewski Peter 90.0 51.7 27.0 11.0 179.7 Bremme Prof. Dr 90.0 69.2 168.0 17.0 344.2 Edgar Ernst Wolfgang 26.8 0.0 0.0 2.0 28.8 Flinter- mann (since 13 June 2016) Angelika 57.8 0.0 27.0 5.0 89.8 Gifford (since 9 February 2016) Valerie 90.0 31.9 53.9 9.0 184.8 Gooding Dr Dierk 90.0 30.8 27.0 11.0 158.8 Hirschel Janis Kong 90.0 31.9 27.0 10.0 158.9 Peter Long 57.8 0.0 53.9 6.0 117.7 (since 9 February 2016) Coline 90.0 31.9 53.9 13.0 188.8 McConville Alexey 57.8 0.0 53.9 8.0 119.7 Mordashov (since 9 February 2016) Michael 90.0 67.1 42.0 14.0 15.5 228.6 Pönipp Timothy 32.3 0.0 30.1 7.0 69.4 Powell (until 9 February 2016)* Wilfried 45.0 32.1 0.0 4.0 81.1 Rau (deceased on 30 March 2016) Carmen Riu 90.0 69.2 42.0 15.0 216.2 Güell Carola 90.0 51.1 0.0 8.0 149.1 Schwirn Maxim 32.3 28.0 15.1 10.0 85.4 Shemetov (until 9 February 2016) Anette 90.0 69.2 42.0 15.0 216.2 Strempel Prof. 32.3 43.2 30.1 6.0 111.6 Christian Strenger (until 9 February 2016) Ortwin 90.0 69.2 69.0 17.0 245.2 Strubelt Stefan 57.8 0.0 0.0 5.0 62.8 Weinhofer (since 9 February 2016) Marcell 32.3 10.3 0.0 3.0 45.6 Witt (until 9 February 2016) Total 2,141.8 1,108.7 1,166.6 283.0 20.5 4,720.6* Mr Powell declared to waive his long-term variable remuneration.Apart from the work performed by the employees' representatives pursuant totheir contracts, none of the members of the Supervisory Board provided anypersonal services such as consultation or agency services for TUI AG or itssubsidiaries in financial year 2015 / 16 and thus did not receive anyadditional remuneration arising out of this.CONSOLIDATED FINANCIAL STATEMENTS Income Statement of the TUI Group for the period from 1 Oct 2015 to 30 Sep 2016 EUR million No- 2015 / 2014 / 15 tes 16 restated Turnover (1) 17,184.6 17,515.5 Cost of sales (2) 15,278.1 15,549.5 Gross profit 1,906.5 1,966.0 Administrative expenses (2) 1,216.9 1,352.6 Other income (3) 36.3 42.9 Other expenses (3) 7.4 5.7 Financial income (5) 58.5 35.8 Financial expenses (6) 345.9 364.5 Share of result of joint ventures and (7) 187.2 143.9 associates Earnings before income taxes 618.3 465.8 Income taxes (8) 153.4 58.2 Result from continuing operations 464.9 407.6 Result from discontinued operations (9) 687.3 - 28.0 Group profit for the year 1,152.2 379.6 Group profit for the year attributable to (10) 1,037.4 340.4 shareholders of TUI AG Group profit for the year attributable to (11) 114.8 39.2 non-controlling interest Earnings per share EUR No- 2015 2014 / tes / 16 15 restated Basic earnings per share (12) 1.78 0.64 from continuing operations 0.61 0.66 from discontinued operations 1.17 - 0.02 Diluted earnings per share (12) 1.77 0.63 from continuing operations 0.60 0.65 from discontinued operations 1.17 - 0.02 Statement of Comprehensive Income of TUI Group for the period from 1 Oct 2015 to 30 Sep 2016 EUR million No- 2015 / 2014 tes 16 / 15 Group profit 1,152.2 379.6 Remeasurements of pension - 593.3 82.2 provisions and related fund assets Changes in the measurement of - 0.1 companies measured at equity Income tax related to items that (13) 157.9 - will not be reclassified 24.2 Items that will not be - 435.4 58.1 reclassified to profit or loss Foreign exchange differences 52.4 - 221.7 Foreign exchange differences 32.7 - 220.2 Reclassification / adjustments 19.7 - 1.5 Financial instruments available 31.8 - for sale Changes in the fair value 31.8 7.1 Reclassification / adjustments - - 7.1 Cash flow hedges 546.1 - 221.0 Changes in the fair value 505.7 360.1 Reclassification / adjustments 40.4 - 581.1 Changes in the measurement of - 32.0 22.0 companies measured at equity Changes in the measurement outside - 32.0 21.6 profit or loss Reclassification / adjustments - 0.4 Income tax related to items that (13) - 80.9 27.1 may be reclassified Items that may be reclassified to 517.4 - profit or loss 393.6 Other comprehensive income 82.0 - 335.5 Total comprehensive income 1,234.2 44.1 attributable to shareholders of 1,141.8 9.5 TUI AG attributable to non-controlling 92.4 34.6 interest Allocation of share of shareholders of TUI AG of total comprehensive income Continuing operations 404.2 - 76.4 Discontinued operations 737.6 85.9 Financial Position of the TUI Group as at 30 Sep 2016 EUR million No- 30 Sep 30 Sep tes 2016 2015 Assets Goodwill (14) 2,853.5 3,220.4 Other intangible assets (15) 545.8 911.5 Property, plant and equipment (16) 3,714.5 3,636.8 Investments in joint ventures and associates (17) 1,180.8 1,077.8 Financial assets available for sale (18) 50.4 56.2 Trade receivables and other assets (19) 315.3 332.5 Derivative financial instruments (20) 126.8 48.1 Deferred tax assets (21) 344.7 330.7 Non-current assets 9,131.8 9,614.0 Inventories (22) 105.2 134.5 Financial assets available for sale (18) 265.8 334.9 Trade receivables and other assets (19) 1,320.1 1,948.7 Derivative financial instruments (20) 544.6 281.0 Income tax assets (21) 87.7 58.5 Cash and cash equivalents (23) 2,072.9 1,672.7 Assets held for sale (24) 929.8 42.2 Current assets 5,326.1 4,472.5 14,457.9 14,086.5 Financial Position of the TUI Group as at 30 Sep 2016 EUR million No- 30 Sep 30 Sep tes 2016 2015 Equity and liabilities Subscribed capital (25) 1,500.7 1,499.6 Capital reserves (26) 4,192.2 4,187.7 Revenue reserves (27) - 3,017.8 - 3,773.9 Equity before non-controlling interest 2,675.1 1,913.4 Non-controlling interest (30) 573.1 503.9 Equity 3,248.2 2,417.3 Pension provisions and similar obligations (31) 1,410.3 1,114.5 Other provisions (32) 803.0 746.3 Non-current provisions 2,213.3 1,860.8 Financial liabilities (33) 1,503.4 1,653.3 Derivative financial instruments (35) 27.5 78.5 Income tax liabilities (36) 22.2 115.7 Deferred tax liabilities (36) 62.9 125.7 Other liabilities (37) 160.1 136.2 Non-current liabilities 1,776.1 2,109.4 Non-current provisions and liabilities 3,989.4 3,970.2 Pension provisions and similar obligations (31) 40.6 32.4 Other provisions (32) 374.8 463.4 Current provisions 415.4 495.8 Financial liabilities (33) 537.7 233.1 Trade payables (34) 2,476.9 3,224.2 Derivative financial instruments (35) 249.6 388.2 Income tax liabilities (36) 196.0 78.9 Other liabilities (37) 2,872.4 3,247.3 Current liabilities 6,332.6 7,171.7 Liabilities related to assets held for sale (38) 472.3 31.5 Current provisions and liabilities 7,220.3 7,699.0 14,457.9 14,086.5 Sta- te- ment of Chan- ges in Grou- p Equi- ty of the TUI Grou- p for the peri- od from 1 Oct 2015 to 30 Sep 2016 EUR Subs- Capi- Ot- Fo- Finan- C- Reva- R- Hy- Equi- N-Total mil- cri- tal he- re- cial a- lua- e- brid ty o- lion bed reser- r ig- in- s- tion v- capi- befo- n- capi- ves re- n stru- h re- e- tal re -- tal (26) ve- ex- ments f- ser- n- (29) non-- c- (25) nu- ch- avail- l- ve u- con- o- e an- able o- e trol- n- re- ge for w r- ling t- se- di- sale h- e- inte- r- rv- ff- e- s- rest o- es er- d- e- l- en- g- r- l- ce- e- v- i- s s e- n- s g (- i- 2- n- 7- t- ) e- r- e- s- t (- 3- 0- ) Bala- 732.- 1,056- 1,- - - 7- 20.5 3- 294.8 2,41- 1-2,530.2 nce 6 .3 04- 74- .- 3- 9.8 1- as 9.- 1.- 0 6- 0- at 1 6 0 .- .- Oct 1 4 2014 Divi- - - - - - - - - - - - - 291.6 dend- 94- 9- 94.5 1- s .5 4- 9- .- 7- 5 .- 1 Hy- - - - - - - - - - - - - 10.9 brid 10- 1- 10.9 capi- .9 0- tal .- divi- 9 dend Sha- - - 24- - - - - 2- - 24.2 1-26.1 re .2 4- .- ba- .- 9 sed 2 pay- ment sche- mes Con- 146.- 453.4 - - - - - - - 599.- - 599.5 ver- 1 5 sion of con- ver- ti- ble bond- s Is- 0.3 1.2 - - - - - - - 1.5 - 1.5 sue of em- ploy- ee sha- res Capi- 620.- 2,676- - - - - - - - 3,29- - 3,297.4 tal 6 .8 7.4 in- crea- se De- - - - - - - - - - - - - 9.5 con- 9- soli- .- dati- 5 on Ef- - - - - - 3- 0.2 - - - 5-- fect- 3,- 26- .- 4- 4,03- 6-3,469.5 s on 77- 0.- 2 ,- 3.1 3- the 6.- 2 0- .- ac- 3 3- 6 qui- 3- siti- .- on 1 of non-- con- trol- ling inte- rest- s Red- - - - - - - - - - - - - 300.0 emp- 5.- 5- 294.8 300.- tion 2 .- 0 hy- 2 brid capi- tal Grou- - - 34- - - - - 3- - 340.- 3-379.6 p 0.- 4- 4 9- pro- 4 0- .- fit .- 2 for 4 the year For- - - - - - - - - - - - - 221.7 eign 67- 12- 1- 0.9 2- 209.- 1- ex- .7 8.- 2- 0- 4 2- chan- 0 .- 9- .- ge 8 .- 3 dif- 4 fe- renc- es Cash - - - - - - - - - - 1-- 221.0 flow 2- 2- 231.- 0- hed- 3- 3- 0 .- ges 1- 1- 0 .- .- 0 0 Re- - - 82- - - - - 8- - 82.1 0-82.2 mea- .1 2- .- sure- .- 1 ment- 1 s of pen- sion pro- visi- ons and rela- ted fund as- sets Chan- - - 22- - - - - 2- - 22.1 - 22.1 ges .1 2- in .- the 1 mea- sure- ment of com- pa- nies mea- su- red at equi- ty Ta- - - - - - 2- - 5- - 5.3 - 2.9 xes 24- 9- .- 2- at- .2 .- 3 .- tri- 5 4 buta- ble to othe- r com- pre- hen- sive inco- me Othe- - - 12- - - - - - - - - - 335.5 r .3 12- 2- 0.9 3- 330.- 4- com- 8.- 1- 3- 9 .- pre- 0 4- 0- 6 hen- .- .- sive 3 9 inco- me To- - - 35- - - - - 9- - 9.5 3-44.1 tal 2.- 12- 2- 0.9 .- 4- com- 7 8.- 1- 5 .- pre- 0 4- 6 hen- .- sive 3 inco- me Bala- 1,49- 4,187- - - - - 19.8 - - 1,91- 5-2,417.3 nce 9.6 .7 2,- 1,- 2- 3- 3.4 0- as 46- 12- 0- ,- 3- at 0.- 9.- 4- 7- .- 30 4 2 .- 7- 9 Sep 1 3- 2015 .- 9 Divi- - - - - - - - - - - - - 340.6 dend- 32- 3- 327.- 1- s 7.- 2- 0 3- 0 7- .- .- 6 0 Sha- - - 4.- - - - - 4- - 4.3 - 4.3 re 3 .- ba- 3 sed pay- ment sche- mes Is- 1.1 4.5 - - - - - - - 5.6 - 5.6 sue of em- ploy- ee sha- res Ac- - - - - - - - - - - - - 56.3 qui- 56- 5- 56.3 siti- .3 6- on .- of 3 own sha- res De- - - - - - - 0.2 0- - 0.2 - - 9.8 con- .- 1- soli- 2 0- dati- .- on 0 Ef- - - - - - - - - - - 0-- 6.5 fect- 6.- 6- 6.9 .- s on 9 .- 4 the 9 ac- qui- siti- on of non-- con- trol- ling inte- rest- s Grou- - - 1,- - - - - 1- - 1,03- 1-1,152.2 p 03- ,- 7.4 1- pro- 7.- 0- 4- fit 4 3- .- for 7- 8 the .- year 4 For- - - 61- 34- - - - 7- - 75.0 - 52.4 eign .0 .0 1- 0.6 5- 2- ex- 9- .- 2- chan- .- 0 .- ge 4 6 dif- fe- renc- es Fi- - - - - 31.8 - - 3- - 31.8 - 31.8 nan- 1- cial .- In- 8 stru- ment- s avai- la- ble for sale Cash - - - - - 5- - 5- - 545.- 0-546.1 flow 4- 4- 8 .- hed- 5- 5- 3 ges .- .- 8 8 Re- - - - - - - - - - - - - 593.3 mea- 59- 5- 593.- sure- 3.- 9- 3 ment- 3 3- s of .- pen- 3 sion pro- visi- ons and rela- ted fund as- sets Chan- - - - - - - - - - - - - 32.0 ges 32- 3- 32.0 in .0 2- the .- mea- 0 sure- ment of com- pa- nies mea- su- red at equi- ty Ta- - - 15- - - - - 7- - 77.1 - 77.0 xes 7.- 8- 7- 0- at- 9 0- .- .- tri- .- 1 1 buta- 8 ble to othe- r com- pre- hen- sive inco- me Othe- - - - 34- 31.8 4- - 1- - 104.- - 82.0 r 40- .0 4- 0.6 0- 4 2- com- 6.- 5- 4- 2- pre- 4 .- .- .- hen- 6 4 4 sive inco- me To- - - 63- 34- 31.8 4- - 1- - 1,14- 9-1,234.2 tal 1.- .0 4- 0.6 ,- 1.8 2- com- 0 5- 1- .- pre- .- 4- 4 hen- 6 1- sive .- inco- 8 me Bala- 1,50- 4,192- - - 31.8 2- 19.4 - - 2,67- 5-3,248.2 nce 0.7 .2 2,- 1,- 4- 3- 5.1 7- as 21- 09- 1- ,- 3- at 5.- 5.- .- 0- .- 30 3 2 5 1- 1 Sep 7- 2016 .- 8 Cash Flow Statement EUR million No- 2015 / 2014 / Var. tes 16 15 Group profit 1,152.2 379.6 + 772.6 Depreciation, amortisation and 578.5 700.5 - 122.0 impairments (+) / write-backs (-) Other non-cash expenses (+) / income - 164.6 - 118.7 - 45.9 (-) Interest expenses 202.3 207.7 - 5.4 Dividends from joint ventures and 82.2 81.3 + 0.9 associates Profit (-) / loss (+) from disposals - 802.5 - 23.3 - 779.2 of non-current assets Increase (-) / decrease (+) in - 9.5 - 6.1 - 3.4 inventories Increase (-) / decrease (+) in 324.7 - 233.6 + 558.3 receivables and other assets Increase (+) / decrease (-) in - 234.2 - 85.3 - 148.9 provisions Increase (+) / decrease (-) in - 94.4 - 111.6 + 17.2 liabilities (excl. financial liabilities) Cash inflow from operating activities (45) 1,034.7 790.5 + 244.2 Payments received from disposals of 115.3 341.6 - 226.3 property, plant and equipment, investment property and intangible assets Payments from disposals of 876.7 - 27.6 + 904.3 consolidated companies (excl. disposals of cash and cash equivalents due to divestments) Payments received from the disposals 12.1 325.5 - 313.4 of other non-current assets Payments made for investments in - 697.4 - 826.4 + 129.0 property, plant and equipment, investment property and intangible assets Payments made for investments in - 10.5 - 5.1 - 5.4 consolidated companies (excl. cash and cash equivalents received due to acquisitions) Payments made for investments in - 57.2 - 24.8 - 32.4 other non-current assets Cash inflow / outflow from investing (46) 239.0 - 216.8 455.8 activities Payments made for capital increases - 54.2 - 9.8 - 44.4 Payments made for interest increase - 8.0 - 128.2 + 120.2 in consolidated companies Dividend payments TUI AG - 327.0 - 109.3 - 217.7 subsidiaries to non-controlling - 14.1 - 197.0 + 182.9 interest Payments received from the issue of 108.8 79.3 + 29.5 bonds and the raising of financial liabilities Payments made for redemption of - - 300.0 + 300.0 hybrid capital Payments made for redemption of loans - 275.3 - 359.7 + 84.4 and financial liabilities Interest paid - 92.3 - 92.0 - 0.3 Cash outflow from financing (47) - 662.1 - + 454.6 activities 1,116.7 Net change in cash and cash 611.6 - 543.0 + equivalents 1,154.6 Development of cash and cash (48) equivalents Cash and cash equivalents at 1,682.2 2,258.0 - 575.8 beginning of period Change in cash and cash equivalents 105.8 - 33.1 + 138.9 due to exchange rate fluctuations Change in cash and cash equivalents 4.0 0.3 + 3.7 due to changes in the group of consolidated companies Change in cash and cash equivalents 611.6 - 543.0 + with cash effects 1,154.6 Cash and cash equivalents at end of 2,403.6 1,682.2 + 721.4 period of which included in the balance 330.7 9.5 + 321.2 sheet as assets held for sale NotesPrinciples and methods underlying theconsolidated financial statementsGeneralThe TUI Group with its major subsidiaries and shareholdings operates intourism.TUI AG, based in Karl-Wiechert-Allee 4, Hanover is the TUI Group's parentcompany and a listed corporation under German law. The Company isregisteredin the commercial registers of the district courts of Berlin-Charlottenburg(HRB 321) and Hanover (HRB 6580). The shares in the company are traded onthe London Stock Exchange and the Hanover and Frankfurt Stock Exchanges.These consolidated financial statements of TUI AG were prepared for thebusiness year from 1 October 2015 to 30 September 2016. Where any of TUI'ssubsidiaries have different financial years, financial statements wereprepared as at 30 September in order to include these subsidiaries in TUIAG's consolidated financial statements.The Executive Board and the Supervisory Board have submitted a Declarationof Compliance with the German Corporate Governance Code required pursuanttosection 161 of the German Stock Corporation Act (AktG) and made itpermanently available to the general public on the Company's website(www.tuigroup.com).The consolidated financial statements are prepared in euros. Unless statedotherwise, all amounts are indicated in million euros (EUR m).The consolidated financial statements were approved for publication by TUIAG's Executive Board on 6 December 2016.Accounting principlesDeclaration of compliancePursuant to Regulation EEC No. 1606 / 2002 of the European Parliament andCouncil, TUI AG's consolidated financial statements as at 30 September 2016were prepared in accordance with the International Financial ReportingStandards (IFRS) as applicable in the European Union. Moreover, thecommercial-law provisions listed in section 315a (1) of the GermanCommercial Code (HGB) and the Disclosure and Transparency Rules of the UKFinancial Conduct Authority were also observed in preparing theconsolidatedfinancial statements.The accounting and measurement methods and the explanatory information andNotes to these annual financial statements for financial year 2015 / 16 areconsistent in every respect with those followed in preparing the previousconsolidated financial statements for financial year 2014 / 15.Going concern reporting according to the UK Corporate Governance CodeThe Executive Board remains satisfied with the Group's funding andliquidityposition. At 30 September 2016 the main sources of debt funding included: * An external revolving credit facility of EUR 1,535.0 m maturing in December 2020, used to manage the seasonality of the Group's cash flows and liquidity, * a bond 2014 / 19 with a nominal value of EUR 300.0 m, issued by TUI AG and originally maturing in October 2019, * EUR 1,231.7 m of drawn finance lease obligations and * Bank liabilities of EUR 410.8 m, being mainly loans used to acquire property, plant and equipment. The revolving credit facility requires compliance with certain financialcovenants and these covenants were all complied with at the balance sheetdate.The bond 2014 / 19 with a nominal value of EUR 300.0 m was called on 19October 2016 and redeemed in full on18 November 2016. New senior notes with the same nominal amount weresuccessfully issued on 26 October 2016 with a more favourable interestcoupon. The notes will mature on 26 October 2021.In accordance with provision C1.3 of the 2016 revision of the UK CorporateGovernance Code, the Executive Board confirms that it is consideredappropriate to prepare the financial statements on the going concern basis.Restatement of prior reporting periodThe following restatements were made for financial year 2014 / 15:Restatement caused by Discontinued operationsDue to the planned sale of the Hotelbeds Group segment in financial year2015 / 16, the segment was reported as a discontinued operation in Q2 2015/16 in line with IFRS 5. The Hotelbeds Group was sold on 12 September 2016.Additionally, the Specialist Group segment is reported as a discontinuedoperation as at 30 September 2016, due to its planned sale in the course offinancial year 2016 / 17.In the consolidated income statement for financial year 2015 / 16, theresult generated by the Hotelbeds Group until its sale as well as theresultof the Specialist Group is shown separately as result from discontinuedoperations. The prior year consolidated income statement was restated asfollows. For further explanations please refer to the section 'Acquisitions- Divestments - Discontinued operations'. Restated items of the Income statement of the TUI Group for the period from 1 Oct 2014 to 30 Sep 2015 EUR million Before Restate- Restate- Restated restate- ment ment ment Specialist Hotelbeds Group Group Turnover 20,011.6 - 1,502.1 - 994.0 17,515.5 Cost of sales 17,616.3 - 1,305.4 - 761.4 15,549.5 Gross profit 2,395.3 - 196.7 - 232.6 1,966.0 Administrative expenses 1,715.4 - 170.2 - 192.6 1,352.6 Other income 51.2 - 8.3 - 42.9 Other expenses 8.0 - 2.1 - 0.2 5.7 Financial income 37.9 - 1.0 - 1.1 35.8 Financial expenses 370.1 - 2.1 - 3.5 364.5 Share of result of joint 144.5 - - 0.6 143.9 ventures and associates Earnings before income taxes 535.4 - 31.6 - 38.0 465.8 from continuing operations Income taxes 87.0 - 17.6 - 11.2 58.2 Result from continuing 448.4 - 14.0 - 26.8 407.6 operations Result from discontinued - 68.8 14.0 26.8 - 28.0 operations Group loss for the year 379.6 0.0 - 379.6 Principles and methods of consolidationPrinciplesThe consolidated financial statements include all significant subsidiariesdirectly or indirectly controlled by TUI AG. Control exists where TUI AGhaspower over the relevant activities, is exposed to variable returns or hasrights to the returns, and has the ability to affect those variable returnsthrough its power over the investee.As a rule, the control is exercised by means of a direct or indirectmajority of voting rights. If the TUI Group holds less than the majority ofvoting rights in a shareholding, it may exercise control due to contractualagreements or similar arrangements.In assessing control, the existence and effect of potential voting rightsthat are currently exercisable or convertible are taken into account.Consolidation of subsidiaries starts from the date TUI gains control. WhenTUI ceases to control the corresponding companies, they are removed fromthegroup of consolidated companies.The consolidated financial statements are prepared from the separate orsingle-entity financial statements of TUI AG and its subsidiaries, drawn upon the basis of uniform accounting, measurement and consolidation methodsand usually exclusively audited or reviewed by auditors.Associates for which the TUI Group is able to exert significant influenceover the financial and operating policy decisions within these companiesareaccounted for using the equity method. As a rule, significant influence isassumed if TUI AG directly or indirectly holds voting rights of 20 to lessthan 50 per cent.Stakes in joint ventures are also measured using the equity method. A jointventure is a company managed jointly by the TUI Group with one or severalpartners based on a contractual agreement, in which the parties thatjointlyexercise control have rights to the company's net assets. Joint venturesalso include companies in which the TUI Group holds a majority or minorityof voting rights but in which decisions about the relevant activities mayonly be taken on an unanimous basis due to contractual agreements.The dates as of which associates and joint ventures are included in orremoved from the group of companies measured at equity are determined in amanner consistent with that applied to subsidiaries. At equity measurementin each case is based on the last annual financial statements available orthe interim financial statements as at 30 September if the balance sheetdates differ from TUI AG's balance sheet date. This affects 28 companieswith a financial year from 1 January to 31 December and two companies withafinancial year from 1 April to 31 March of the following year.Group of consolidated companiesIn financial year 2015 / 16, the consolidated financial statements includeda total of 417 subsidiaries besides TUI AG.62 subsidiaries were not included in the consolidated financial statements.Even when taken together, these companies are not significant for thepresentation of a true and fair view of the net assets, financial positionand results of operations of the Group. Development of the group of consolidated companies* and the Group companies measured at equity Balance Ad- Dis- Balance 30 Sep di- po- 30 Sep 2015 ti- sal- 2016 ons s Consolidated subsidiaries 532 19 134 417 Associates 19 4 10 13 Joint ventures 33 - 6 27 * excl. TUI AGA total of 19 companies have been newly included as consolidatedsubsidiaries since 1 October 2015, with 12 companies newly established,three companies added due to the purchase of additional stakes and fourcompanies included in consolidation due to an expansion of their businessoperations.Since 1 October 2015, a total of 134 companies have been removed fromconsolidation. 97 of the companies were removed from consolidation due todivestment, 21 companies due to liquidation, and ten companies due tomergers. In addition, three companies were removed from consolidation duetosales of stakes and the associated loss of control. Moreover, two companieswere removed from consolidation due to the discontinuation of theirbusinessoperations, and one company due to a loss of control. The divestmentsinclude 91 companies of the Hotelbeds Group. For more detailed informationabout the sale of the Hotelbeds Group, please refer to the section'Acquisitions - Divestments - Discontinued operations'.13 associated companies and 27 joint ventures are measured at equity as atthe balance sheet date. The number of companies measured at equity hasdeclined by ten since 1 October 2015, with five disposals, one merger andtwo companies transferred to the Sunwing Group. Moreover, one company isnowconsolidated due to the acquisition of further stakes, and one company isnolonger measured at equity due to a loss of joint control. Parallel to theseremovals, four associated companies were added in the current financialyeardue to further acquisitions of stakes, and in one case a newly establishedoperation, so that the number of associated companies declined by sixoverall in financial year 2015 / 16. The number of joint ventures measuredat equity has declined by a total of six since 1 October 2015 due to themerger of five companies and the divestment of one company.The major direct and indirect subsidiaries, associates and joint venturesofTUI AG are listed under 'Other Notes - TUI Group Shareholdings'.The effects of the changes in the group of consolidated companies infinancial year 2015 / 16 on financial years 2015 / 16 and 2014 / 15 areoutlined below. While the value of companies deconsolidated in financialyear 2015 / 16 posted in the statement of financial position is carried asper the closing date for the previous period, items in the income statementare also shown for a part year period of financial year 2015 / 16. Itemswhich are already presented in the result from discontinued operations, theassets held for sale or liabilities related to assets held for sale are notinculded in the tables below but in the section 'Discontinued operations'. Impact of changes in the group of consolidated companies on the statement of financial position Additi- Dispo- ons sals EUR million 30 Sep 30 Sep 2016 2015 Non-current assets 23.5 430.9 Current assets 13.4 812.2 Non-current financial liabilities - 0.2 Current financial liabilities - 7.3 Non-current other liabilities - 54.9 Current other liabilities 10.2 774.6 Impact of changes in the group of consolidated companies on the consolidated income statement Addi- Dispo- tions sals EUR million 2015 2015 2014 / 16 / 16 / 15 Turnover with third parties 32.4 0.2 3.0 Turnover with consolidated Group companies 19.6 0.1 0.7 Cost of sales and administrative expenses 50.7 0.4 6.1 Other income / other expenses - 0.6 - Share of result of joint ventures and associates - 0.1 0.8 Financial expenses (+) / income (-) - 0.8 - 0.4 Earnings before income taxes 2.1 0.6 - 2.0 Income taxes 0.3 1.7 - 1.7 Group profit for the year 1.8 - 1.1 - 0.3 Acquisitions - divestments - discontinued operationsAcquisitionsIn financial year 2015 / 16, 18 travel agencies were acquired in the formofasset deals. Moreover, further interests were acquired in the Aelos Group,previously measured at equity. Following these acquisitions, the TUI Groupnow holds 100 % of the shares in each of these companies. The considerationfor these acquisitions consisted of payments totalling EUR 7.9 m.The acquisitions did not have a material effect on turnover or the Groupresult for the reporting period.The purchase price allocations of the following companies and businessesacquired in financial year 2014 / 15 were finalised within the twelve-monthperiod provided under IFRS 3 in the present annual financial statementswithout having a major impact on the consolidated statement of financialposition: * 11 travel agencies in Germany * aQi Hotel Schladming GmbH * aQi Hotel Management GmbH Acquisitions after the balance sheet dateOn 31 October 2016 TUI AG acquired 99.99 % of the shares in Transat FranceS. A., Ivry-sur-Seine, France. The aim of that acquisition is to increasethe market presence in France. This acquisition also included the purchaseof the majority stake in Transat Développement SAS, Ivry-sur-Seine, Franceand Tourgreece Tourism Enterprise A.E., Athen, Greece.The consideration transferred consisted of payments totalling EUR 64.9 msubject to contractual purchase price amendments.The table below provides an overview of the fair values of the TransatGroupas at the date of first-time consolidation: Statements of financial position of the Transat Group as at the date of first-time consolidation EUR million Fair value at date of first-time consolidation Other intangible assets 11.9 Property, plant and equipment 21.2 Investments 7.0 Fixed assets 40.1 Trade receivables 146.8 Other assets (including prepaid expenses) 31.6 Cash and cash equivalents 13.9 Liabilities and deferred income 211.9 Net assets 20.5 At the reporting date, accounting for the business combination, inparticular fair value measurement of assets and liabilities, was not yetcompleted. The preliminary goodwill out of this acquisition is EUR 44.4 m.DivestmentsThe disposal of LateRooms Ltd. and the Hotelbeds Group is explained in the'Discontinued Operations' section. The effects of the other divestments onthe TUI Group's net assets, financial position and results of operationswere immaterial.Discontinued operationsSpecialist GroupTUI AG has decided to exit the Specialist Group as it is not closelyalignedwith TUI Group's remaining business and thus offers very little potentialfor integration into the Group's operation. Specialist Group consists oftwosegments. The tour operators combined under the Travelopia brand offerexpedition travel, luxury tours, sporting events, student travels andsailing trips. Travelopia is expected to be sold within the forthcomingfinancial year. Specialist tour operators of Specialist Group not managedunder Travelopia comprise adventure tours and language schools already soldby the end of the financial year under review.The result from this discontinued operation is reported separately from theincome and expenses of continuing operations in the consolidated incomestatement, shown in a separate line as 'Result from discontinuedoperations'together with the profit contributions of the other discontinuedoperations.The consolidated income statement of the prior year was restatedaccordingly. Income statement of the discontinued operation Specialist Group for the period from 1 Oct 2015 to 30 Sep 2016 EUR million 2015 / 2014 / 16 15 Turnover 1,371.4 1,502.1 Cost of sales 1,217.1 1,305.4 Gross profit 154.3 196.7 Administrative expenses 177.0 170.2 Other income 7.0 8.3 Other expenses 20.7 2.1 Financial income 0.6 1.0 Financial expenses 1.1 2.1 Earnings before income taxes from the - 36.9 31.6 discontinued operation Income taxes - 2.7 17.6 Result from the discontinued operation - 34.2 14.0 Specialist Group Result from the discontinued operation - 34.1 28.2 Specialist Group attributable to shareholders of TUI AG Result from the discontinued operation - 0.1 - 14.2 Specialist Group attributable to non-controlling interest The income statement for the discontinued operation Specialist Groupreflects the sale of specialist tour operators not forming part ofTravelopia, which has already been effected. This has in particular driventhe decline in turnover and cost of sales. Moreover, administrativeexpensesand other expenses for the establishment of an independent organisation andfor the preparation for the sale of Travelopia were incurred in the currentfinancial year.In the prior year, the result from discontinued operations attributable tonon-controlling shareholders also comprised shares in the resultattributable to TUI Travel PLC's non-controlling shareholders untilDecember2014.The assets and liabilities are shown separately in the consolidatedstatement of financial position under 'Assets held for sale' and'Liabilities related to assets held for sale'. The table below presents thekey asset and liability groups of the discontinued operation SpecialistGroup. Assets and liabilities of the discontinued operation Specialist Group as at 30 Sep 2016 EUR million 30 Sep 2016 Assets Goodwill 53.1 Other intangible assets 132.1 Property, plant and equipment 220.9 Trade receivables from third parties and other assets 0.8 Trade receivables from continuing operations 3.1 Derivative financial instruments 0.5 Deferred tax assets 7.6 Non-current assets 418.1 Inventories 37.6 Trade receivables from third parties and other assets 121.2 Trade receivables from continuing operations 80.6 Derivative financial instruments 6.8 Current tax assets 17.6 Cash and cash equivalents 330.7 Current assets 594.5 1,012.6 EUR million Equity and liabilities Revenue reserves 302.7 Equity before non-controlling interest 302.7 Non-controlling interest - 1.8 Equity 300.9 Other provisions 14.7 Non-current provisions 14.7 Financial liabilities against third parties 6.0 Financial liabilities against continuing operations 236.1 Derivative financial instruments 0.1 Deferred tax liabilities 33.5 Other liabilities 1.2 Non-current liabilities 276.9 Non-current provisions and liabilities 291.6 Other provisions 1.9 Current provisions 1.9 Financial liabilities against third parties 6.7 Trade payables to third-parties 93.9 Trade payables to continuing operations 3.3 Derivative financial instruments 0.7 Current tax liabilities 17.7 Other liabilities 295.9 Current liabilities 418.2 Current provisions and liabilities 420.1 1,012.6 Receivables from and payables to the Group's continuing operations areeliminated in the consolidated statement of financial position and aretherefore not included in the items 'Assets held for sale' and 'Liabilitiesrelated to assets held for sale'. Reconciliation to assets held for sale in the financial position of the TUI AG as at 30 Sep 2016 EUR million 30 Sep 2016 Current and non-current assets of the Specialist Group 1,012.6 Elimination of receivables from continuing operations - 83.7 Assets held for sale of the Specialist Group 928.9 Reconciliation to liabilities related to assets held for sale in the financial position of the TUI AG as at 30 Sep 2016 EUR million 30 Sep 2016 Current and non-current liabilities of the Specialist Group 711.7 Elimination of liabilities against continuing operations - 239.4 Liabilities related to assets held for sale 472.3 The consolidated cash flow statement shows the cash flows of the overallGroup including the discontinued operations. The table below provides aseparate presentation of the cash flows of the discontinued operationSpecialist Group. Cash flows from intercompany relationships, in particularfinancing schemes, dividends, business transfers and sales of companies,arenot taken into account. In the financial year under review, the cashoutflowfrom investing activities includes an inflow of EUR 29.1 m reflecting apartof the purchase price for Hotelbeds Group and an amount of EUR 80.4 m fortax payments directly associated with the sale. Condensed cash flow statement of the discontinued operation Specialist Group EUR million 2015 / 2014 / 16 15 Cash inflow from operating activities 42.1 53.1 Cash outflow from investing activities - 80.6 - 47.3 Cash outflow from financing activities - 3.9 - 3.1 Hotelbeds GroupIn the second quarter of the completed financial year, TUI AG had decidedtoexit its Hotelbeds Group segment. Hotelbeds Group comprises B2B portals tosell hotel bed capacity and destination services to wholesale customerssuchas travel agencies and tour operators worldwide. This segment alsocomprisesincoming agencies whose services are not directly aligned with TUI Group'stour operators and services for the cruise industry.The sale of Hotelbeds Group to GNVA Acquisitions Ltd was completed on 12September 2016. GNVA Acquisitions Ltd is a company owned by the fundmanagedand advised by Cinven Capital Management and Canada Pension Plan InvestmentBoard. The result from the sale is calculated as follows: Result from the sale of the Hotelbeds Group EUR million 2015 / 16 Cash received 1,233.1 Fair Value of investment retained 0.9 Total Consideration 1,234.0 Carrying amount of net assets sold - 355.4 Carrying amount of non-controlling interest 10.0 Reclassification of fx differences - 18.4 Reclassifications of hedging reserves 1.4 Costs of disposal, additional charges and guarantees - 95.8 Profit on sale before income taxes 775.8 Income taxes on disposal 94.9 Profit on sale after tax 680.9 The profit on sale includes contractual guarantees disclosed as otherliabilities.TUI Group continues to hold an indirect stake in an incoming agency ofHotelbeds Group after the sale. The agency is now included in TUI AG'sconsolidated financial statements as a joint venture. Fair valuemeasurementof the remaining stake resulted in a profit of EUR 0.5 m. Taxes on the gainon disposal only reflect taxes directly associated with the sale. Thesetaxes have already been paid.The result from this discontinued operation Hotelbeds Group generated untilthe date of disposal is carried separately from the income from andexpensesfor continuing operations in the consolidated income statement. It is shownin a separate line as 'Result from discontinued operations' together withthe profit contributions of other discontinued operations. The consolidatedincome statement for the prior year was restated accordingly. Income statement of the discontinued operation Hotelbeds Group for the period from 1 Oct 2015 to 12 Sep 2016 EUR million 2015 2014 / 16 / 15 Turnover 950.2 994.0 Cost of sales 735.4 761.4 Gross profit 214.8 232.6 Administrative expenses 156.9 192.6 Other income 0.4 - Other expenses 4.9 0.2 Financial income 0.1 1.1 Financial expenses 1.7 3.5 Share of result of joint ventures and associates 0.3 0.6 Earnings before income taxes from the discontinued 52.1 38.0 operation Income taxes 10.7 11.2 Operating result from the discontinued operation 41.4 26.8 Result from the disposal of the discontinued 775.8 - operation before income taxes Income taxes on the profit on disposal 94.9 - Result from the disposal of the discontinued 680.9 - operation Hotelbeds Group Result from the discontinued operation Hotelbeds 722.3 26.8 Group Result from discontinued operation Hotelbeds Group 718.9 28.1 attributable to shareholders of TUI AG Result from discontinued operation Hotelbeds Group 3.4 - 1.3 attributable to non-controlling interest The turnover with the continuing operations of EUR 108.9 m in financialyear2015 / 16 (previous year EUR 64.8 m) was eliminated against the cost ofsales of the Hotelbeds Group.The decline in turnover and cost of sales is driven by the sale ofHotelbedsGroup as at 12 September 2016 as therefore the income statement does notreflect the total year. Adjusted for that effect, the hotel bed portals, inparticular, posted an increase in turnover. Administrative expenses andother expenses rose due to the costs incurred in connection with theestablishment of a separate organisation for Hotelbeds Group. This increasein costs was offset by the sale prior to the close of the financial year.In the prior year, the result from discontinued operation attributable tonon-controlling shareholders also comprised the share of resultsattributable to the non-controlling shareholders of TUI Travel PLC untiltheend of December 2014.The Group's consolidated Cash Flow Statement presents the cash flows fortheoverall Group including the discontinued operations. A separatepresentationof the cash flows for the discontinued operation Hotelbeds Group isprovidedin the following table. Cash flows from intercompany financing schemes andintercompany dividends, business transfers and company sales are not takeninto account. The cash flows from operating activities are negative, as thesecond half of the month of September is not included in the cash flowstatement for the financial year. As the cash flows associated with thesaleof Hotelbeds Group are shown in TUI Group's segments in which they havebeenincurred, the cash outflows from investing activities only comprise theamount of the cash and cash equivalents transferred on the sale of theHotelbeds Group but do not include the selling prices paid. Condensed cash flow statement of the discontinued operation Hotelbeds Group EUR million 2015 / 2014 / 16 15 Cash outflow / inflow from operating activities - 24.5 8.5 Cash outflow from investing activities - - 31.9 289.4 Cash inflow / outflow from financing activities 10.4 - 6.0 LateRooms GroupIn the previous year, TUI AG had decided to exit its LateRooms Groupsegment. While AsiaRooms and Malapronta were discontinued in the prioryear,LateRooms Ltd. was sold on 6 October 2015.The result of this discontinued operation is carried separately from theincome from and expenses for continuing operations in the consolidatedincome statement. It is shown in a separate line as 'Result fromdiscontinued operations' together with the profit contributions of theotherdiscontinued operations. As the LateRooms Group was already classified asdiscontinued operation in the prior year, there is no restatement of theprior year income statement for the LateRooms Group. Income statement of the discontinued operation LateRooms Group for the period from 1 Oct 2015 to 30 Sep 2016 EUR million 2015 2014 / 16 / 15 Turnover - 69.7 Cost of sales - 51.4 Gross profit - 18.3 Administrative expenses - 43.2 Other income 0.1 - Other expenses - 7.3 Financial expenses - 0.7 Earnings before income taxes from the discontinued 0.1 - operation 32.9 Income taxes - - 1.3 0.1 Result from the discontinued operation 1.4 - 32.8 Result from the disposal / measurement of the - - discontinued operation 2.2 36.0 Result from the discontinued operation LateRooms Group - - 0.8 68.8 Result from the discontinued operation LateRooms Group - - attributable to shareholders of TUI AG 0.8 67.0 Result from the discontinued operation LateRooms Group - - attributable to non-controlling interest 1.8 The loss on disposal of the LateRooms Group comprises the cumulativeforeignexchange translation differences that were reclassified to profit and lossupon removal from equity, and the ancillary divestment costs.The Group's Cash Flow Statement presents the cash flows for the overallGroup including the discontinued operations. A separate presentation of thecash flows for the discontinued operation LateRooms Group is provided inthefollowing table. Cash flows from intra-Group financing schemes andintra-Group dividends and business disposals are not taken into account. Condensed cash flow statement of the discontinued operation LateRooms Group EUR million 2015 / 2014 / 16 15 Cash outflow from operating activities - - 13.6 Cash outflow from investing activities - - 8.3 Cash inflow from financing activities - 16.3 Foreign exchange translationTransactions in foreign currencies are translated into the functionalcurrency at the foreign exchange rates at the date of the transaction. Anygains and losses resulting from the execution of such transactions and thetranslation of monetary assets and liabilities denominated in foreigncurrencies at the foreign exchange rate at the date of the transaction areshown in the income statement, with the exception of gains and losses to berecognised in equity as qualifying cash flow hedges.The annual financial statements of companies are prepared in the respectivefunctional currency. The functional currency of a company is the currencyofthe primary economic environment in which the company operates. With theexception of a small number of companies, the functional currencies of allsubsidiaries correspond to the currency of the country of incorporation ofthe respective subsidiary.Where subsidiaries prepare their financial statements in functionalcurrencies other than the Euro, being the Group's reporting currency, theassets, liabilities and notes to the statement of financial position aretranslated at the rate of exchange applicable at the balance sheet date(closing rate). Goodwill allocated to these companies and adjustments ofthefair value arising on the acquisition of a foreign company are treated asassets and liabilities of the foreign company and also translated at therate of exchange applicable at the balance sheet date. The items of theincome statement and hence the result for the year shown in the incomestatement are translated at the average rate of the month in which therespective transaction takes place.Differences arising on the translation of the annual financial statementsofforeign subsidiaries are reported outside profit and loss and separatelyshown as foreign exchange differences in the consolidated statement ofchanges in equity. When a foreign company or operation is sold, any foreignexchange differences previously included in equity outside profit and lossare recognised as a gain or loss from disposal in the income statementthrough profit and loss.Translation differences relating to non-monetary items with changes intheirfair values eliminated through profit and loss (e. g. equity instrumentsmeasured at their fair value through profit and loss) are included in theincome statement. In contrast, translation differences for non-monetaryitems with changes in their fair values taken to equity (e. g. equityinstruments classified as available for sale) are included in revenuereserves.The TUI Group did not hold any subsidiaries operating in hyperinflationaryeconomies in the financial year under review, nor in the previous year.The translation of the financial statements of foreign companies measuredatequity follows the same principles for adjusting carrying amounts andtranslating goodwill as those used for consolidated subsidiaries.Net investment in a foreign operationMonetary items receivable from or payable to a foreign operation, thesettlement of which is neither planned nor likely in the foreseeablefuture,essentially constitute part of a net investment in this foreign operation.Foreign exchange differences from the translation of these monetary itemsare recognised in other comprehensive income. Exchange rates of currencies of relevance to the TUI Group Closing Annual rate average rate 1 EUR equivalent 30 Sep 30 Sep 2015 / 16 2014 2016 2015 / 15 Sterling 0.86 0.74 0.78 0.74 US dollar 1.12 1.12 1.11 1.15 Swiss franc 1.09 1.09 1.09 1.10 Swedish krona 9.62 9.41 9.35 9.35 Consolidation methodsThe recognition of the net assets of acquired businesses is based on theacquisition method. Accordingly all identifiable assets and all liabilitiesassumed are measured at fair value as of the acquisition date.Subsequently,the consideration for the stake is measured at fair value and eliminatedagainst the acquiree's revalued equity attributable to the acquired share.As in the prior year, the option to measure the non-controlling interestsattheir fair value (full goodwill method) was not used.Any excess of acquisition costs over net assets acquired is capitalised asgoodwill and recognised as an asset for the acquired subsidiary inaccordance with the provisions of IFRS 3. Any negative goodwill isrecognised immediately in profit and loss and presented as other income.When additional shares are purchased after obtaining control, thedifferencebetween the purchase price and the carrying amount of the stakes acquiredisrecognised directly in equity. The effects from sales of stakes notentailing a loss of control are also recognised directly in equity. Bycontrast, when control is obtained or lost, gains or losses are recognisedin profit and loss. In the case of business combination achieved in stages(where the acquirer held an equity interest before he obtained control),theequity stake previously held in the acquired company is revalued at thefairvalue applicable at the acquisition date and the resulting gain or loss isrecognised in profit or loss. For transactions involving a loss of control,the profit or loss does not only comprise the difference between thecarrying amounts of the disposed stakes and the consideration received butalso the result from the revaluation of the remaining shares.On loss of control of a subsidiary the gain or loss on derecognition willbecalculated as the difference of the fair value of the consideration plusthefair value of any investment retained in the former subsidiary less theshare of the book value of the net assets of the subsidiary. Any gains orlosses previously recognised in other comprehensive income from currencytranslations or the valuation of financial assets and liabilities will bereclassified to the profit or loss statement. When a subsidiary is sold,anygoodwill allocated to the respective subsidiary is taken into account inthecalculation of the profit or loss of disposal.The Group's associates and joint ventures are measured at equity andincluded at the cost to purchase as at the acquisition date. The Group'sstake in associates and joint ventures includes the goodwill arising fromthe respective acquisition.The Group's share in profits and losses of associates and joint ventures iscarried in the income statement as from the date of acquisition (Share ofresult from joint ventures and associates), while the Group's share inchanges in reserves is shown in its revenue reserves. The accumulatedchanges arising after the acquisition are shown in the carrying amount ofthe participation. When the share in the loss of an associated company orjoint venture equals or exceeds the Group's original stake in this company,including other unsecured receivables, no further losses are recognised.Anylosses exceeding that stake are only recognised to the extent thatobligations have been assumed or payments have been made for the associatedcompany or joint venture.Where the accounting and measurement methods applied by associates andjointventures differ from the uniform accounting rules applied in the Group, thedifferences are adjusted.Intercompany receivables and payables or provisions are eliminated.Intercompany turnover and other income as well as the correspondingexpensesare eliminated. Intercompany results from intercompany deliveries andservices are reversed through profit and loss, taking account of deferredtaxes. However, intercompany losses are an indicator that an asset may beimpaired. Intercompany profits from transactions with companies measured atequity are eliminated in relation to the Group's stake in the company.Intercompany transactions are provided at arm's length.Accounting and measurement methodsThe consolidated financial statements were prepared according to thehistorical cost principle, with the exception of certain financialinstruments such as financial assets and derivatives held for trading oravailable for sale as well as plan assets from externally fundeddefined-benefit obligations held at fair value at the balance sheet date.The financial statements of the consolidated subsidiaries are prepared inaccordance with uniform accounting and measurement principles. The amountsrecognised in the consolidated financial statements are not determined bytax regulations but solely by the commercial presentation of the netassets,financial position and results of operations as set out in the rules of theIASB.Turnover recognitionTurnover comprises the fair value of the consideration received or to bereceived for the sale of products and services in the course of ordinarybusiness activities. Turnover is stated excluding value-added tax, returns,discounts and price rebates and after elimination of intra-Group sales.Turnover and other income is recognised upon delivery of the service orassets and hence upon transfer of the risk.The commission fees received by travel agencies for package tours arerecognised once the travel agencies have performed their contractualobligations towards the tour operator. As a rule, this condition is metuponpayment by the customers or, at the latest, at the date of departure. Theservices of tour operators mainly consist in organising and coordinatingpackage tours. Turnover from the organisation of tours is thereforerecognised in full when the customer departs. Turnover from individualtravel modules booked by the customer directly with airlines, hotelcompanies or incoming agencies is recognised when the customers use theservices concerned. Income from non-completed cruises is recognisedaccording to the proportion of contract performance at the balance sheetdate. The percentage of completion is determined as the ratio betweentraveldays completed by the balance sheet date and overall travel days.Interest income is reported on a prorated basis according to the effectiveinterest method. Dividends are recognised when the legal entitlement hasarisen.Goodwill and other intangible assetsAcquired intangible assets are carried at cost. Self-generated intangibleassets, primarily software for use by the Group itself, are capitalised atcost where an inflow of future economic benefits for the Group is probableand can be reliably measured. The cost to produce comprises direct costsanddirectly allocable overheads. Intangible assets with a finite service lifeare amortised over the expected useful life.Intangible assets acquired as a result of business combinations, such asorder book, customer base or trademark rights, are included at their fairvalue as at the date of acquisition and are amortised on a straight-linebasis. Useful lives of intangible assets Useful lives Concessions, property rights and similar rights up to 20 years Trademarks at acquisition date 15 to 20 years Order book as at acquisition date until departure date Software 3 to 10 years Customer base as at acquisiton date up to 15 years If there are any events or indications suggesting potential impairment, theamortised carrying amount of the intangible asset is compared with therecoverable amount. Any losses in value going beyond wear-and-teardepreciation are taken into account through the recognition of impairments.Depending on the functional area of the intangible asset, depreciation,amortisation and impairments are included under cost of sales oradministrative expenses. If the original cause of a prior year impairmentnolonger applies, the impairment is written back to other income.Intangible assets with indefinite useful lives are not amortised but aretested for impairment at least annually. In addition, impairment tests areconducted if there are any events or indications suggesting potentialimpairment. The TUI Group's intangible assets with an indefinite usefullifeconsist exclusively of goodwill.Impairment tests for goodwill are conducted on the basis of cash generatingunits. According to the IASB rules, cash generating units are the smallestidentifiable group of assets that generates cash inflows from continuingusethat are largely independent of the cash inflows from other assets orgroupsof assets.Impairments are recognised where the carrying amount of the tested unitsplus the allocated goodwill exceeds the recoverable amount. The recoverableamount is the higher of fair value less costs of disposal and the presentvalue of future cash flows based on continued use (value in use). The fairvalue less costs of disposal corresponds to the amount that could begenerated between knowledgeable, willing, independent business partnersafter deduction of the costs of disposal. Due to the restrictionsapplicableto the determination of cash flows when deriving the value in use, e. g.therequirement not to account for earnings effects from investments inexpansions or from restructuring activities for which no provision wasformed according to IAS 37, the fair value less costs of disposal usuallyexceeds the value in use and therefore represents the recoverable amount.Impairments of goodwill required are shown separately in the consolidatedincome statement. In accordance with IAS 36, reversals of goodwillimpairment losses is prohibited.Property, plant and equipmentProperty, plant and equipment are measured at amortised cost. The costs topurchase include costs to bring the asset to a working condition. The coststo produce are determined on the basis of direct costs and directlyattributable indirect costs and depreciation.Borrowing costs directly associated with the acquisition, construction orproduction of qualifying assets are included in the costs to acquire orproduce these assets until the assets are ready for their intended use. Thecapitalisation rate is 3.25 % for the current financial year and 4.00 % forthe previous year. In financial year 2015 / 16, borrowing costs of EUR 2.1m(previous year EUR 8.8 m) were capitalised as part of the costs to purchaseand costs to produce. Other borrowing costs are recognised as currentexpenses.To the extent that funds are borrowed specifically for the purpose ofobtaining a qualifying asset, the underlying capitalisation rate isdetermined on the basis of the specific borrowing cost; in all other casesthe weighted average of the borrowing costs applicable to the borrowingsoutstanding is applied.Depreciation of property, plant and equipment is based on the straight-linemethod, based on the customary useful lives. The useful economic lives areas follows: Useful lives of property, plant and equipment Useful lives Hotel buildings 30 to 40 years Other buildings up to 50 years Cruise ships 20 to 30 years Yachts 5 to 15 years Motorboats 15 to 24 years Aircraft Fuselages and engines up to 18 years Engine overhaul depending on intervals, up to 5 years Major overhaul depending on intervals, up to 5 years Spare parts 12 years Other machinery and fixtures up to 40 years Operating and business equipment up to 10 years Moreover, the level of depreciation is determined by the residual amountsrecoverable at the end of the useful life of an asset. The residual valueassumed in first-time recognition for cruise ships and hotel complexes is30% of the acquisition costs. The determination of the depreciation ofaircraft fuselages, aircraft engines and spare parts in first-timerecognition is based on a residual value of 20 % of the cost ofacquisition.Both the useful lives and residual values are reviewed on an annual basiswhen preparing the annual financial statements. The review of the residualvalues is based on comparable assets at the end of their useful lives as atthe current point in time. Any adjustments required are recognised as acorrection of depreciation over the remaining useful life of the asset. Theadjustment of depreciation is recognised retrospectively for the entirefinancial year in which the review has taken place. Where the reviewresultsin an increase in the residual value so that it exceeds the remaining netcarrying amount of the asset, depreciation is suspended. In this case, theamounts are not written back.Any losses in value going beyond wear-and-tear depreciation are taken intoaccount through the recognition of impairment losses. If there are anyevents or indications suggesting impairment, the required impairment testisperformed to compare the carrying amount of an asset with the recoverableamount. The recoverable amount is the higher of an asset's fair value lesscosts of disposal and the value of future cash flows attributable to theasset (value in use).Investment grants received are shown as reductions in the costs to purchaseor produce items of property, plant or equipment where these grants aredirectly allocable to individual items. Where a direct allocation of grantsis not possible, the grants and subsidies received are included as deferredincome under other liabilities and reversed in accordance with the use ofthe investment project.LeasesFinance leasesIn accordance with IAS 17, leased property, plant and equipment in whichtheTUI Group assumes substantially all the risks and rewards of ownership iscapitalised. Capitalisation is based on the fair value of the asset or thepresent value of the minimum lease payments, if lower. Depreciation ischarged over the useful life or the lease term, if shorter, on the basis ofthe depreciation method applicable to comparable purchased or manufacturedassets. Payment obligations arising from future lease payments aredisclosedas liabilities, excluding future interest expenses. Every lease payment isbroken down into an interest portion and a redemption portion so as toproduce a constant periodic rate of interest on the remaining balance oftheliability. The interest portion is disclosed in the income statementthroughprofit or loss.Where companies of the TUI Group are lessors in finance leases, receivablesequivalent to the net investment value are included for the leases. Theperiodic distribution of the income from finance leases results in constantinterest payments on the outstanding net investment volume of the leasesover the course of time.Operating leasesBoth expenses incurred and income received under operating leases arerecognised in the income statement on a straight-line basis over the termofthe corresponding leases.Sale-and-lease-back transactionsGains from sale-and-lease-back transactions resulting in a finance leasearerecognised in income over the term of the lease.If a sale-and-lease-back transaction results in an operating lease, a gainor loss is recognised immediately if the transaction has demonstrably beencarried out at fair value. If a loss is compensated for by future leasepayments at below-market price, this loss is deferred and amortised overtheterm of the lease agreement. If the agreed purchase price exceeds fairvalue, the gain arising from the difference between these two values isalsodeferred and amortised.Investment propertyProperty not occupied for use by subsidiaries and exclusively held togenerate rental income and capital gains is recognised at amortised cost.This property is amortised over a period of up to 50 years.Financial instrumentsFinancial instruments are contractual rights or obligations that will leadto an inflow or outflow of financial assets or the issue of equity rights.They also comprise derivative rights or obligations derived from primaryassets.In accordance with IAS 39, financial instruments are broken down intofinancial assets or liabilities to be measured at fair value through profitand loss, loans and receivables, financial assets available for sale,financial assets held to maturity and other liabilities.In terms of financial instruments measured at fair value through profit andloss, the TUI Group holds derivative financial instruments mainly to beclassified as held for trading as they do not meet the balancesheet-relatedcriteria as hedges in the framework of a hedging relationship. The fairvalue option is not exercised. Moreover, the TUI Group holds financialassets in the loans and receivables and available for sale categories.However, the present financial statements do not include any assets held tomaturity.In financial year 2015 / 16 as well as in the prior year, no significantreclassifications were made within the individual measurement categories.Primary financial assets and financial liabilitiesPrimary financial assets are recognised at the value as at the trading dateon which the Group commits to buy the asset. Primary financial assets areclassified as loans and receivables or as financial assets available forsale when recognised for the first time. Loans and receivables as well asfinancial assets available for sale are initially recognised at fair valueplus transaction costs.Loans and receivables are non-derivative financial assets with fixed orfixable contractual payments not listed in an active market. They are shownunder trade accounts receivable and other assets in the statement offinancial position and classified as current receivables if they maturewithin twelve months of the balance sheet date.For subsequent measurement, loans and receivables are valued at amortisedcost based on the effective interest method. Value adjustments are made toaccount for identifiable individual risks. Where objective informationindicates that impairments are required, e. g. substantial financialdifficulties of the counterparty, payment delays or adverse changes inregional industry conditions expected to impact the Group's borrowers inthelight of past experience, impairments are recognised at an amountcorresponding to the expected loss. Impairments and reversals ofimpairmentsare included under cost of sales, administrative expenses or financialexpenses, depending on the nature of the transaction.Financial assets available for sale are non-derivative financial assetseither individually expressly allocated to this category or not allocabletoany other category of financial assets. Within the TUI Group, they consistof stakes in companies and securities. They are allocated to non-currentassets unless management intends to sell them within twelve months of thebalance sheet date.Financial assets available for sale are measured at their fair value uponinitial recognition. Changes in the fair value are included in equityoutside profit or loss until the disposal of the assets. If there isobjective evidence of impairment, an impairment loss is taken throughprofitand loss. Objective evidence may, in particular, be substantial financialdifficulties of the counterparty and significant changes in thetechnological, market, legal or economic environment. Moreover, for equityinstruments held, a significant or prolonged decline in the fair valuebelowits cost is also objective evidence of impairment. The TUI Group concludesthat a significant decline exists if the fair value falls by more than 20 %below cost. A decline is assessed as prolonged if the fair value remainsbelow cost for more than twelve months. In the event of subsequent reversalof the impairment, the impairment included in profit or loss is notreversedfor equity instruments but recognised in other comprehensive income. Wherealisted market price in an active market is not available for shares held incompanies and other methods to determine an objective market value are notapplicable, these equity instruments are measured at cost.A derecognition of assets is primarily recognised as at the date on whichthe rights for payments from the asset expire or are transferred andtherefore as at the date essentially all risks and rewards of ownership aretransferred.Primary financial liabilities are included in the consolidated statement offinancial position if an obligation exists to transfer cash and cashequivalents or other financial assets to another party. First-timerecognition of a primary liability is recognised at its fair value. Forloans taken out, the nominal amount received is reduced by discountsobtained and borrowing costs paid. In the framework of follow-upmeasurement, primary financial liabilities are measured at amortised costbased on the effective interest method.Derivative financial instruments and hedgingAt initial measurement, derivative financial instruments are measured atthefair value attributable to them on the date the contract is entered into.Subsequent re-measurement is also recognised at the fair value applicableatthe respective balance sheet date. Where derivative financial instrumentsare not part of a hedge in connection with hedge accounting, they have tobeclassified as held for trading in accordance with IAS 39.The method used to recognise profits and losses depends on whether thederivative financial instrument has been classified as a hedge and on thetype of underlying hedged item. Changes in the fair values of derivativefinancial instruments are recognised in profit and loss unless they areclassified as a hedge in accordance with IAS 39. If they are classified asan effective hedge in accordance with IAS 39, the transaction is recognisedas a hedge.The TUI Group applies the hedge accounting provisions relating to hedgingofbalance sheet items and future cash flows. Depending on the nature of theunderlying transaction, the Group classifies derivative financialinstruments either as fair value hedges against exposure to changes in thefair value of assets or liabilities or as cash flow hedges againstvariability in cash flows from highly probable future transactions.Upon conclusion of the transaction, the Group documents the hedgerelationship between the hedge and the underlying item, the risk managementgoal and the underlying strategy. In addition, a record is kept of theassessment, both at the beginning of the hedge relationship and on acontinual basis, as to whether the derivatives used for the hedge arehighlyeffective in compensating for the changes in the fair values or cash flowsof the underlying transactions.Changes in the fair value of derivatives used as fair value hedges for therecognised assets or liabilities are recognised through profit and loss.Moreover, the carrying amounts of the underlying transactions are adjustedthrough profit and loss for the gains or losses resulting from the hedgedrisk.The effective portion of changes in the fair value of derivatives formingcash flow hedges is recognised in equity. Any ineffective portion of suchchanges in the fair value, by contrast, is recognised immediately in theincome statement through profit and loss. Amounts taken to equity arereclassified to the income statement and included as income or expenses inthe period in which the hedged item has an effect on results.If a hedge expires, is sold or no longer meets the criteria for hedgeaccounting, the cumulative gain or loss remains in equity and is onlyrecognised in the income statement through profit and loss when theoriginally hedged future transaction occurs. If the future transaction isnolonger expected to take place, the cumulative gains or losses recogniseddirectly in equity are recognised immediately through profit and loss.InventoriesInventories are measured at the lower of cost or net realisable value. Netrealisable value is the estimated selling price less the estimated costincurred until completion and the estimated variable costs required tosell.All inventories are written down individually where the net realisablevalueof inventories is lower than their carrying amounts. Where the originalcauses of inventory write-downs no longer apply, the write-downs arereversed. The measurement method applied to similar inventory items is theweighted average cost formula.Cash and cash equivalentsCash and cash equivalents comprise cash, call deposits, other currenthighlyliquid financial assets with an original term of a maximum of three monthsand current accounts. Overdrawn current accounts are shown as liabilitiestobanks under current financial liabilities.Non-current assets held for saleNon-current assets and disposal groups are classified as held for sale ifthe associated carrying amount will be recovered principally through salerather than through continued use.The reclassification is made at the lower of carrying amount and fair valueless cost of disposal. Depreciation and at equity measurements aresuspended. Impairment charges are recognised in profit and loss, with anygains on subsequent remeasurement resulting in the recognition of profitsofup to the amount of the cumulative impairment cost.EquityOrdinary shares are classified as equity. Costs directly allocable to theissue of new shares or conversion options are taken to equity on a netafter-tax basis as a deduction from the issuance proceeds.Own sharesThe group's holdings in its own equity instruments are shown as deductionsfrom shareholders' equity at cost, including directly attributabletransaction costs. Own equity instruments are held by an employee benefittrust of TUI Travel Ltd. No gain or loss is recognised in the incomestatement on the purchase or sale of shares by the employee benefit trust.Any difference between the proceeds from sale and the original cost aretaken to reserves.ProvisionsOther provisions are formed when the Group has a current legal orconstructive obligation as a result of a past event and where in additionitis probable that assets will be impacted by the settlement of theobligationand the level of the provision can be reliably determined. Provisions forrestructuring comprise severance payments to employees and payments for theearly termination of rental agreements. Provisions for environmentalprotection measures, in particular the disposal of legacy industry waste,are recognised if future cash outflows are likely due to legal and publicobligations to implement safeguarding or restoration measures, if the costof these measures can be reliably estimated and the measures are notexpected to lead to a future inflow of benefits.Provisions for onerous losses are formed if the unavoidable costs ofmeetingcontractual obligations exceed the expected economic benefit. Any assetsconcerned are impaired, if necessary, prior to forming the appropriateprovision. No provisions are recognised for future operating losses.Where a large number of similar obligations exist, the probability of acharge over assets is determined on the basis of this group of obligations.A provision is also recognised if the probability of a charge over assetsislow in relation to an individual obligation contained in this group.Provisions are measured at the present value of the expected expenses,taking account of a pre-tax interest rate, reflecting current marketassessments of the time value of money and the risks specific to theliability. Risks already taken into account in estimating future cash flowsdo not affect the discount rate. Increases in provisions due to accretionofinterest are recognised as interest expenses through profit or loss.The pension provision recognised for defined benefit plans corresponds tothe net present value of the defined benefit obligations (DBOs) as at thebalance sheet date less the fair value of the plan assets. If the value ofthe plan assets exceeds the value of the DBO, the exceeding amount is shownwithin other assets. Measurement of such an asset is limited to the netpresent value of the value in use in the form of reimbursements from theplan or reductions in future contribution payments. The DBOs are calculatedannually by independent actuaries using the projected unit credit method.The net present value of the DBOs is calculated by discounting the expectedfuture outflows of cash at a rate based on the interest rate of top-ratedcorporate bonds.Past service cost is immediately recognised through profit or loss.Remeasurements (in particular actuarial gains and losses) arising from theregular adjustment of actuarial parameters are eliminated against equityoutside profit and loss in full when they occur.For defined contribution plans, the Group pays contributions to public orprivate pension insurance plans on the basis of a statutory or contractualobligation or on a voluntary basis. The Group does not have any furtherpayment obligations on top of the payment of the contributions. Thecontributions are recognised under staff costs when they fall due.LiabilitiesLiabilities are always recognised at the date on which they arise at fairvalue less borrowing and transaction costs. Over the course of time,liabilities are measured at amortised cost based on application of theeffective interest method.As a matter of principle, the foreign exchange differences resulting fromthe translation of trade accounts payable are reported as a correction ofthe cost of sales. Foreign exchange differences from the translation ofliabilities not resulting from normal operating processes are reportedunderother income / other expenses, financial expenses / income oradministrativeexpenses, depending on the nature of the underlying liability.Deferred taxesIn accordance with IAS 12, deferred taxes are determined using the balancesheet liability method. Accordingly, probable future tax assets andliabilities are recognised for all temporary differences between thecarrying amounts of assets and liabilities for financial reporting purposesand the amounts used for taxation purposes.Expected tax savings from the use of losses carried forward assessed asrecoverable in the future are recognised as deferred tax assets. Regardlessof the unlimited ability to carry German losses forward which continues toexist, the annual utilisation is limited by the minimum taxation. Foreignlosses carried forward frequently have to be used within a givencountry-specific time limit and are subject to restrictions concerning theuse of these losses carried forward for profits on ordinary activities,which are taken into account accordingly in the measurement.Income tax is directly charged or credited to equity if the tax relates toitems directly credited or charged to equity in the same period or someother period.Deferred tax assets are recognised to the extent that it is probable thatfuture taxable profits will be available against which the temporarydifference or an unused tax loss can be utilised.Deferred taxes are measured at the tax rates and tax provisions applicableat the balance sheet date or adopted by law and expected to be applicableatthe date of recognition of the deferred tax asset or the payment of thedeferred tax liability.Current income taxesThe German companies of the TUI Group have to pay trade income tax of 15.7%(previous year 15.2 %). As in the prior year, the corporation tax rate is15.0 %, plus a 5.5 % solidarity surcharge on corporation tax.The calculation of foreign income taxes is based on the laws and provisionsapplicable in the individual countries. The income tax rates applied toforeign companies vary from 0.0 % to 40.0 %.Deferred and current income tax liabilities are offset against thecorresponding tax assets if they exist in the same fiscal territory andhavethe same nature and maturity.Share-based paymentsAll share-based payment schemes in the Group are payment schemes paid incash or via equity instruments.For transactions with cash compensation, the resulting liability for theGroup is charged to expenses at its fair value as at the date of theperformance of the service by the beneficiary. Until payment of theliability, the fair value of the liability is remeasured at every closingdate and all changes in the fair value are recognised through profit andloss.For equity settled transactions the fair value of the awards granted isrecognised under staff costs with a corresponding direct increase inequity.The fair value is determined at the point when the awards are granted andspread over the vesting period during which the employees become entitledtothe awards.The fair value of the awards granted is measured using option valuationmodels, taking into account the terms and conditions upon which the awardswere granted. The amount to be included under staff costs is adjusted toreflect the actual number of share options that vest except whereforfeitureis due only to market-based performance conditions not meeting thethresholds for vesting.Summary of selected accounting and measurement methodsThe table below lists the key accounting and measurement methods used bytheTUI Group. Summary of selected measurement bases Item in the statement Measurement base of financial position Assets Goodwill At cost (subsequent measurement: impairment test) Other intangible assets At cost (subsequent measurement: impairment with indefinite useful test) lives Other intangible assets At amortised cost with definite useful lives Property, plant & At amortised cost equipment Equity accounted At cost as adjusted for post-acquisition investments changes in the Group's share of the investment's net assets Financial assets Loans and receivables At amortised cost Held to maturity Not applicable Held for trading / At fair value Derivatives Available for sale Fair value (with gains or losses recognised within other comprehensive income) or at cost Inventory Lower of cost and net realisable value Trade and other At amortised cost receivables Cash and cash At cost equivalents Assets held for sale Lower of cost and fair value less cost of disposal Liabilities and Provisions Loans and borrowings At amortised cost Provision for pensions Projected unit credit method Other provisions Present value of the settlement amount Financial liabilities Non-derivative At amortised cost financial liabilities Derivative financial At fair value liabilities Payables, trade and At amortised cost other liabilities Key estimates and judgementsThe presentation of the assets, liabilities, provisions and contingentliabilities shown in the consolidated financial statements is based onestimates and judgements. Any uncertainties are appropriately taken intoaccount in determining the values.All estimates and judgements are based on the conditions and assessments asat the balance sheet date. In evaluating the future development ofbusiness,reasonable assumptions were made regarding the expected future economicenvironment in the business areas and regions in which the Group operates.Estimates and judgements that may have a material impact on the amountsreported for assets and liabilities in the TUI Group are mainly related tothe following balance sheet-related facts and circumstances: * Establishment of assumptions for impairment tests, in particular for goodwill, * Determination of the fair values for acquisitions of companies and determination of the useful lives of acquired intangible assets, * Determination of useful lives and residual carrying amounts ofproperty, plant and equipment, * Determination of actuarial assumptions to measure pension obligations, * Recognition and measurement of other provisions, * Recoverability of future tax savings from tax losses carried forwardand tax-deductible temporary differences * Measurement of tax risks * Recoverable amounts of touristic prepayments. Other estimates and judgements relate to the determination of therecoverable amount in relation to impairment tests for equity accountedinvestments and the determination of the fair value of financialinstruments.Despite careful preparation of the estimates, actual results may differfromthe estimate. In such cases, the assumptions and the carrying amounts oftheassets and liabilities concerned, if necessary, are adjusted accordingly.Asa matter of principle, changes in estimates are taken into account in thefinancial year in which the changes have occurred and in future periods.GoodwillThe goodwill reported as at 30 September 2016 has a carrying amount of EUR2,853.5 m (previous year EUR 3,220.4 m). The determination of therecoverable amount of a CGU for the annual impairment test requiresestimates and judgement with regard to the methodology used and theassumptions, which may have a considerable effect on the recoverable amountand the level of a potential impairment. They relate, in particular, to theweighted average cost of capital (WACC) after income taxes, used as thediscounting basis, the growth rate in perpetuity and the forecasts forfuture cash flows including the underlying budget assumptions based oncorporate planning. Changes in these assumptions may have a substantialimpact on the recoverable amount and the level of a potential impairment.Acquisition of companies and intangible assetsIn accounting for business combinations, the identifiable assets,liabilities and contingent liabilities acquired have to be measured attheirfair values. In this context, cash flow-based methods are regularly used.Depending on the assumptions underlying such methods, different results maybe produced. In particular, some judgement is required in estimating theeconomic useful lives of intangible assets and determining the fair valuesof contingent liabilities.Detailed information on acquisitions of companies or useful lives ofintangible assets is provided in the section 'Acquisitions - divestments -discontinued operation' in the chapter on 'Principles and methods ofconsolidation' and in the section on 'Goodwill and other intangible assets'of the chapter 'Accounting and measurement methods'.Property, plant and equipmentThe measurement of wear-and-tear to property, plant and equipment itemsentails estimates. The carrying amount of property, plant and equipment asat 30 September 2016 totals EUR 3,714.5 m (previous year EUR 3,636.8 m). Inorder to review the amounts carried, an evaluation is carried out on anannual basis to assess whether there are any indications of a potentialimpairment. These indications relate to a number of areas and factors, e.g.the market-related or technical environment but also physical condition. Ifany such indication exists, management must estimate the recoverable amounton the basis of expected cashflows and appropriate interest rates.Moreover,essential estimates and judgements relate to the definition of economicuseful lives as well as the residual amounts of items of property, plantandequipment which may be recovered.More detailed information on the useful lives and residual values ofproperty, plant and equipment items is provided in the section 'Property,plant and equipment' in the chapter 'Accounting and measurement methods'.Pension provisionsAs at 30 September 2016, the carrying amount of provisions for pensions andsimilar obligations totals EUR 1,450.9 m (previous year EUR 1,146.9 m). Forthose pension plans where the plan assets exceed the obligation, otherassets amounting to EUR 36.2 m are shown as at 30 September 2016 (prioryearEUR 15.2 m).In order to determine the obligations under defined benefit pensionschemes,actuarial calculations are used which rely on underlying assumptionsconcerning life expectancy and the discount rate. In respect of theestimation of the discount rate used for the UK pensions plans, there hasbeen a change as at 30 September 2016 in regard to the determination thatisexplained in the section 'Changes in estimates'.At the balance sheet date, the fair value of the plan assets totals EUR2,676.0 m (previous year EUR 2,302.1 m). As assets classified as planassetsare never available for short-term sale, the fair values of these planassets may change significantly up to the realisation date. The interestrate used to discount the liability is also used to determine the expectedreturn on plan assets.Detailed information on actuarial assumptions is provided in Note 31.Other provisionsAs at 30 September 2016, other provisions of EUR 1,177.8 m (previous yearEUR 1,209.7 m) are reported. When recognising and measuring provisions,assumptions are required about probability of occurrence, maturity andlevelof risk. Provisions are recognised if a past event has resulted in acurrentlegal or constructive obligation, if an outflow of assets is probable inorder to meet that obligation, and if a reliable estimate can be made oftheamount of the liability.Determining whether a current obligation exists is usually based on reviewby internal or external experts. The amount of provision is based onexpected expenses, and is either calculated by assessing the specific casein the light of empirical values, outcomes from comparable circumstances,orelse estimated by experts. Due to the uncertainties associated withassessment, actual expenses may deviate from estimates so that unexpectedcharges may result.More detailed information on other provisions is offered in the Notes tothestatement of financial position in Note 32.Deferred tax assetsAs at 30 September 2016, deferred tax assets totalling EUR 344.7 m(previousyear EUR 330.7 m restated) were recognised. Prior to offsetting againstdeferred tax liabilities, deferred tax assets total EUR 727.5 m, includedanamount of EUR 211.5 m (previous year EUR 239.4 m) for recognised lossescarried forward. The assessment of the recoverability of deferred taxassetsis based on the ability of the respective Group company to generatesufficient taxable income. TUI therefore assesses at every balance sheetdate whether the recoverability of expected future tax savings issufficiently probable in order to recognise deferred tax assets. Theassessment is based on various factors including internal forecastsregarding the future tax asset situation of the Group company. If theassessment of the recoverability of future deferred tax assets changes,impairments may be recognised, if necessary, on the deferred tax assets.More detailed information on deferred tax assets is available in the Notesto the statement of financial position in Note 21.Income taxesThe Group is liable to pay income taxes in various countries. Key estimatesare required when determining income tax liabilities, including theprobability, the timing and the size of any amounts that may becomepayable.For certain transactions and calculations the final tax charge cannot bedetermined during the ordinary course of business. After taking appropriateexternal advice, the Group makes provisions or discloses contingencies foruncertain tax positions based on the probable or possible level ofadditional taxes that might be incurred. The level of obligations forexpected tax audits is based on an estimation of whether and to what extentadditional income taxes will be due. Judgements are corrected, ifnecessary,in the period in which the final tax charge is determined.Detailed information on the German trade tax liability is available in theNotes to contingent liabilities in Note 39.Recoverable Amounts of touristic prepaymentsAt 30 September 2016, trade receivables and other assets include touristicprepayments of EUR 724.2 m (previous year EUR 966.6 m). The assessment ofthe recoverable amounts of touristic prepayments made to hoteliers requiresjudgement about the volume of future trading with hoteliers and the creditworthiness of those hoteliers. To assess the recoverablity of touristicprepayments, TUI considers the financial strength of those hoteliers, thequality of the hotels as well as the demand for each hotel and the relevantdestination during the past and in coming seasons.Changes in estimatesIn financial year 2015 / 16, the basis for the determination of thediscountrate for pension plans in the UK has changed. The discount rate used forpension provisions is based on an index of first-class corporate bonds.Previously, the yield structure resulting from that index has beenextrapolated on the basis of the yield curves for various almost risk-freebonds, taking account of an appropriate risk mark-up reflecting the term ofthe obligation. The bonds to be used have to reflect the maturity of theobligation. Due to the small size of the market for long-term bonds, thecalculation has exclusively been based on market data for medium-term bondsto date. In order to enhance the presentation of the maturities profile ofUK pension plans, the determination of the yield structure now alsoincludesbonds with longer maturities. This change causes an increase in the scopeofmarket data included in the determination.The change in this estimate causes an increase in the discount rate of 15basis points. As a result, provisions for pensions and similar obligationsdeclined by EUR 111.5 m, while deferred tax assets decreased by EUR 22.3 mand equity rose by EUR 89.2 m without impact on profit and loss.Due to the higher discount rate, the net interest on the defined benefitpension plans will also increase in the next financial year. Applying thesame estimates as in the past, the net interest for the pension plansconcerned would be EUR 64.3 m for financial year 2016 / 17. Using thechanged estimates, the expected net interest for these plans now totals EUR68.7 m for the next financial year.Segment reportingNotes on the segmentsThe identification of operating segments is based on the internalorganisational and reporting structure primarily built around the differentproducts and services as well as a geographical structure within the TUIGroup. Allocation of individual organisational entities to operatingsegments is exclusively based on economic criteria, irrespective of theparticipation structure under company law. The segments are independentlymanaged by those in charge, who regularly receive separate financialinformation for each segment. They regularly report to the Group ExecutiveCommittee, which consists of five Executive Board members and six otherexecutives. The legally binding decision regarding the use of resources istaken by the Executive Board. The TUI Group Executive Board has thereforebeen identified as the Chief Operating Decision Maker (CODM) in accordancewith IFRS 8.The Northern Region segment comprises the tour operators and airlines aswell as the cruise business in the UK, Ireland and the Nordic countries.This segment also comprises the strategic Canadian venture Sunwing and thejoint venture TUI Russia. Since Q3 2015 / 16, this segment has alsoincludedthe tour operators Crystal Ski and Thomson Lakes & Mountains, previouslycarried in the Specialist Group segment, which provide winter seasonbusiness for the UK airline. The prior year's numbers have been restated toreflect the changes in the segments.The Central Region segment comprises the tour operators and airlines inGermany and tour operators in Austria, Poland and Switzerland.The Western Region segment comprises the tour operators and airlines inBelgium and the Netherlands and the tour operator in France.The Hotels & Resorts segment comprises all Group-owned hotels and hotelshareholdings of the TUI Group. The hotel activities of the former TravelSector have also been allocated to the Hotels & Resorts segment.The Cruises segment consists of Hapag-Lloyd Cruises and the joint ventureTUI Cruises.The Other Tourism segment comprises the French schedules airline Corsairandcentral tourism functions such as the flight control and informationtechnology. In addition, the incoming agencies previously carried in theHotelbeds Group segment have been integrated into the Tourism business andare therefore also shown in the Other Tourism segment. The prior year'snumbers have been restated to reflect the changes in the segments.In addition to the above segments forming the Tourism business, 'All othersegments' is recognised. It comprises all business operations not relatedtothe Tourism business, and includes the central corporate functions andinterim holdings of TUI Group and the Group's real estate companies.Due to the planned sale of Specialist Group in financial year 2016 / 17,this segment is carried as a discontinued operation at the balance sheetdate. The prior year's numbers are restated accordingly. Specialist Groupcomprises the specialist tour operators, offering expedition travel, luxurytours, sports event packages, student travel and sailing holidays.HotelbedsGroup, classified as a discontinued operation in Q2 2015 / 16, whichcomprises B2B hotel portals and incoming agencies, was sold on 12 September2016. The turnover and profit until the divestment date are also shown inthe line 'Discontinued operations'. The prior year's segment reporting wasadjusted accordingly. Discontinued operations also include LateRooms Groupuntil it was sold on 6 October 2015. For more detailed explanations ofdiscontinued operations, refer to the section Discontinued operations inthesection on Acquisitions - Divestments - Discontinued Operations.Notes to the segment dataThe selection of segment data presented is based on the regular internalreporting of segmented financial indicators to the Executive Board. Segmentreporting discloses in particular the performance indicators EBITA andunderlying EBITA, since these indicators are used for value-orientedcorporate management and thus represent the consolidated performanceindicator within the meaning of IFRS 8.The TUI Group defines EBITA as earnings before interest, income taxes andgoodwill impairments. EBITA includes amortisation of other intangibleassets. EBITA does not include measurement effects from interest hedges andthe proportionate result and measurement effects from container shipping,asthe stake in Hapag-Lloyd AG is a financial investment rather than anoperative stake from TUI AG's perspective.In contrast to EBITA, the underlying EBITA has been adjusted for gains ondisposal of financial investments, expenses in connection withrestructuringmeasures according to IAS 37, all effects of purchase price allocations,ancillary acquisition cost and conditional purchase price payments andotherexpenses for and income from one-off items. The one-off items carried asadjustments are income and expense items impacting or distorting theassessment of the operating profitability of the segments and the Group dueto their levels and frequency. These one-off items include majorrestructuring and integration expenses not meeting the criteria of IAS 37,major expenses for litigation, profit and loss from the sale of aircraftandother material business transactions of a one-off nature.Alongside this indicator, segment reporting is extended to include EBITDAand EBITDAR. In the TUI Group EBITDA is defined as earnings beforeinterest,income taxes, goodwill impairments and amortisation and write-ups of otherintangible assets, depreciation and write-ups of property, plant andequipment and investments. The amounts of amortisation and depreciationrepresent the net balance including write-backs. For the reconciliationfromEBITDA to the indicator EBITDAR, long-term leasing and rental expenses areeliminated.Internal and external turnover, depreciation and amortisation, impairmentson other intangible assets (excluding goodwill), property, plant andequipment and investments as well as the share of result of joint venturesand associates are likewise shown for each segment, as these amounts areincluded when measuring EBITA. As a rule, inter-segment businesstransactions are based on the arm's length principle, as applied intransactions with third parties. No single external customer accounts for10% or more of turnover.Assets and liabilities per segment are not included in the reporting to theExecutive Board and are therefore not shown in segment reporting. The onlyasset-related segmental indicator reported to the Executive Board iscapitalexpenditure, which therefore is also disclosed in the segment reporting.Theamounts shown represent cash capital expenditure on intangible assets andproperty, plant and equipment in line with the indicator reportedinternally. Related financing loans and finance lease agreements are notincluded in this indicator. Therefore the amount of the capital expendituredoes not coincide with the additions to intangible assets and property,plant and equipment in the fixed assets and intangible assets movements. Areconciliation of the investments is presented in a separate table.Depreciation, amortisation and write-backs relate to non-current assetsthatare split geographically and do not include goodwill impairments.The non-current assets, which are split geographically, contain otherintangible assets, investment property, property, plant and equipment andother non-current assets that do not meet the definition of financialinstruments.Segment indicators Turnover by segment 2015 / 2014 / 16 15 EUR External Group Total External Group Total million restated restated Northern 7,001.5 50.9 7,052.4 7,348.4 71.4 7,419.8 Region Central 5,566.6 54.8 5,621.4 5,600.9 57.9 5,658.8 Region Western 2,869.9 18.9 2,888.8 2,847.0 9.6 2,856.6 Region Hotels & 618.6 659.8 1,278.4 574.8 677.4 1,252.2 Resorts Cruises 296.7 - 296.7 273.3 - 273.3 Other 665.5 258.0 923.5 704.8 160.2 865.0 Tourism Consolida- - - - 972.7 - - 885.4 - 885.4 tion 972.7 Tourism 17,018.8 69.7 17,088.5 17,349.2 91.1 17,440.3 All other 165.8 44.1 209.9 166.3 40.6 206.9 segments Consolida- - - - 113.8 - - 131.7 - 131.7 tion 113.8 Conti- 17,184.6 - 17,184.6 17,515.5 - 17,515.5 nuing operati- ons Disconti- 2,321.6 108.9 2,430.5 2,565.8 64.8 2,630.6 nued operati- ons Total 19,506.2 108.9 19,615.1 20,081.3 64.8 20,146.1 EBITA and underlying EBITA by segment EBITA Underlying EBITA EUR million 2015 / 2014 / 2015 / 16 2014 / 16 15 15 Northern Region 440.4 513.4 460.9 538.4 Central Region 67.3 72.9 88.5 103.5 Western Region 72.1 57.7 86.1 68.7 Hotels & Resorts 285.1 195.7 287.3 234.6 Cruises 129.6 80.5 129.6 80.5 Other Tourism - 6.2 - 4.1 4.6 8.4 Tourism 988.3 916.1 1,057.0 1,034.1 All other segments - 90.2 - 121.5 - 56.5 - 80.9 Continuing operations 898.1 794.6 1,000.5 953.3 Discontinued operations 14.7 2.6 92.9 107.3 Total 912.8 797.2 1,093.4 1,060.5 In order to enhance comparability, EBITA from the discontinued operationsdoes not include the gain from the sale of Hotelbeds Group. Reconciliation to earnings before income taxes of the continuing operations of the TUI Group EUR million 2015 / 2014 / 15 16 restated Underlying EBITA of continuing operations 1,000.5 953.3 Result on disposal* - 0.8 3.3 Restructuring expense* - 12.0 - 59.4 Expense from purchase price allocation* - 41.9 - 42.1 Expense from other one-off items* - 47.7 - 60.5 EBITA of continuing operations 898.1 794.6 Profit on Container Shipping measured at - 0.9 equity Loss on measurement of financial investment in - 100.3 - 147.1 Container Shipping Net interest expense and expense from - 179.5 - 182.6 measurement of interest hedges Earnings before income taxes of continuing 618.3 465.8 operations * For a description of the adjustments please refer to the managementreport. EBITDA and EBITDAR by segment EBITDA Long-term EBITDAR leasing and rental expenses EUR million 2015 / 2014 / 2015 / 16 2014 2015 / 2014 / 16 15 / 15 16 15 Northern 534.6 619.3 372.8 374.9 907.4 994.2 Region Central Region 90.0 101.1 148.8 206.1 238.8 307.2 Western Region 97.9 78.0 153.5 144.2 251.4 222.2 Hotels & 380.1 308.7 110.1 116.8 490.2 425.5 Resorts Cruises 148.9 97.6 5.3 10.7 154.2 108.3 Other Tourism 54.5 60.6 39.3 36.1 93.8 96.7 Consolidation - - - 7.5 - 5.6 - 7.5 - 5.6 Tourism 1,306.0 1,265.3 822.3 883.2 2,128.3 2,148.5 All other - 0.9 - 50.6 376.8 373.8 375.9 323.2 segments Consolidation - - - 454.7 - - 454.7 - 451.9 451.9 Continuing 1,305.1 1,214.7 744.4 805.1 2,049.5 2,019.8 operations Discontinued 85.6 135.2 65.1 64.1 150.7 199.3 operations Total 1,390.7 1,349.9 809.5 869.2 2,200.2 2,219.1 Othe- r seg- men- tal in- for- mati- on Amortisation- Thereof Share Capi- (+) / impair- of tal write-backs ments re- expen- (-) of (+) / sult di- intangible write-- of ture assets and backs joint depreciation- (-) ventu- (+) / res write-backs and (-) of asso- property, cia- plant and tes equipment and investments EUR 2015 / 16 2014 2015 / 2014 2015 2014 2015 2014 mil- / 15 16 / 15 / 16 / 15 / 16 / 15 lion re- state- d Nor- 94.2 105.9 1.3 4.9 22.4 23.7 86.4 69.9 ther- n Regi- on Cen- 22.7 28.2 0.1 4.4 3.1 3.1 20.6 23.6 tral Regi- on Wes- 25.8 20.3 6.6 0.4 0.6 - 21.6 23.5 tern Regi- on Ho- 95.0 113.0 2.5 26.0 57.7 44.0 262.3 173.3 tels & Re- sort- s Crui- 19.3 17.1 - - 100.1 68.1 10.7 88.5 ses Othe- 60.7 64.7 7.8 23.2 3.3 4.1 101.0 102.2 r Tou- rism Tou- 317.7 349.2 18.3 58.9 187.2 143.0 502.6 481.0 rism All 89.3 71.0 0.9 0.6 - - 20.8 45.7 othe- r seg- ment- s Con- 407.0 420.2 19.2 59.5 187.2 143.0 523.4 526.7 ti- nuin- g ope- rati- ons Dis- 70.9 132.5 16.9 50.1 0.3 0.6 82.2 75.3 con- ti- nued ope- rati- ons To- 477.9 552.7 36.1 109.6 187.5 143.6 605.6 602.0 tal Reconciliation of capital expenditure EUR million 2015 2014 / 15 / 16 restated Capital expenditure 605.6 602.0 Debt financed investments - 211.0 Finance leases 315.5 477.4 Advance payments 91.8 224.4 Additions to the group of consolidated 2.7 8.6 companies Additions to discontinued operations - - 20.6 Additions to other intangible assets and 995.0 1,523.4 property, plant and equipment Key figu- res by region Exter- Thereof Non-cur- The- nal exter- rent reo- turno- nal assets f ver turno- non- by ver -cu- custo- from rre- mer discon- nt tinued as- operati- set- ons s fro- m dis- con- ti- nue- d ope- ra- ti- ons EUR 2015 2014 / 2015 / 2014 / 2015 / 2014 / 201- 2014 milli- / 16 15 16 15 16 15 5 / /15 on 16 Germa- 5,125- 5,033.0 87.2 131.9 615.2 581.3 0.3 - ny .4 Great 6,356- 6,824.3 641.8 785.1 2,000.3 2,054.7 178- 11.4 Bri- .6 .0 tain Spain 232.3 483.4 112.6 369.1 470.0 604.4 - - Other 6,276- 6,148.4 342.8 287.9 456.3 499.3 55.- - Europe .1 7 North 1,038- 972.8 835.8 716.0 401.5 533.8 71.- - and .6 5 South Ameri- ca Rest 477.2 619.4 301.4 275.8 488.3 462.9 48.- - of the 2 world Total 19,50- 20,081.- 2,321.6 2,565.8 4,431.6 4,736.4 353- 11.4 6.2 3 .7 Notes to the consolidated income statementThe Group's earnings position showed strong growth in financial year 2015 /16. Operating growth was primarily driven by the continued strong businessperformance of Northern Region, Hotels & Resorts and Cruises. Additionally,the improvement of the Group profit was driven by the profit on the sale ofthe Hotelbeds Group.(1) TurnoverGroup turnover is mainly generated from tourism services. A breakdown ofturnover by segments is shown under segment reporting.(2) Cost of sales and administrative expensesCost of sales relates to the expenses incurred in the provision of tourismservices. In addition to expenses for personnel, depreciation,amortisation,rental and leasing, it includes all costs incurred by the Group inconnection with the provision and delivery of airline services, hotelaccommodation, cruises and distribution costs.Administrative expenses comprise all expenses incurred in connection withactivities by the administrative functions and break down as follows: Administrative expenses EUR million 2015 / 16 2014 / 15 restated Staff cost 697.6 737.3 Lease, rental and leasing expenses 60.5 60.2 Depreciation, amortisation and impairments 64.3 79.9 Others 394.5 475.2 Total 1,216.9 1,352.6 In the prior year, administrative expenses were impacted by impairment ofVAT claims in an Italian subsidiary and a provision for litigation inconnection with the acquisition of a Turkish hotel. In financial year 2015/16, similar expenses did not recur so that administrative expenses declinedyear-on-year. Moreover, the prior year reference period included higherexpenses for reorganisation and restructuring measures, in particular therationalisation of the corporate head office, changes in source marketorganisation and the aggregation of the airlines. In addition, the mergerbetween TUI AG and TUI Travel PLC created synergies in the period underreview, which caused a decline in administrative expenses. Administrativeexpenses also declined due to the development of exchange rates.The cost of sales and administrative expenses include the followingexpensesfor rent and leasing, personnel and depreciation / amortisation: Lease, rental and leasing expenses EUR million 2015 / 16 2014 / 15 restated Lease, rental and leasing expenses 817.0 854.2 thereof cost of sales 756.5 794.0 thereof administrative expenses 60.5 60.2 Where rental and lease expenses for operating leases are directly relatedtothe turnover generating activities, these expenses are shown under the costof sales. However, where rental and lease expenses are incurred in respectof administrative buildings, they are shown under administrative expenses.The year-on-year decline in lease, rental and leasing expenses is mainlydriven by exchange rate movements and primarily relates to leasing expensesfor aircraft. Moreover, lease payments for cruise ships declinedyear-on-year due to the acquisition of Europa 2, which had still beenleasedin the first quarter of the previous year. Staff costs EUR million 2015 / 2014 / 15 16 restated Wages and salaries 1,846.7 1,869.7 thereof cost of sales 1,268.8 1,265.9 thereof administrative expenses 577.9 603.8 Social security contributions, pension 425.3 435.7 costs and benefits thereof cost of sales 305.6 302.2 thereof administrative expenses 119.7 133.5 Total 2,272.0 2,305.4 Pension costs include service cost for defined benefit obligations. The netinterest expense from the defined benefit obligations is included underfinancial expenses due to its financing nature. A detailed presentation ofpension obligations is provided in Note 31.The year-on-year decline in staff costs in financial year 2015 / 16 mainlyresults from foreign exchange effects and higher expenses posted in theprior year in connection with restructuring measures. Moreover, expensesforshare-based payments, carried under administrative expenses, declinedyear-on-year due to changes in the structure of the remuneration models andthe development of the share price. On the other hand, some staff costsroseyear-on-year in operating areas, in particular in airlines and hotels,causing a slight overall increase in the cost of sales.The average annual headcount (excluding apprentices) developed as follows: Average annual headcount in the financial year (excl. apprentices) 2015 / 2014 / 15 16 restated Average annual - Continuing operations 57,331 57,486 Average annual - Discontinued operations 11,887 13,856 Total 69,218 71,342 Depreciation/amortisation/impairment EUR million 2015 2014 / 15 / 16 restated Depreciation and amortisation 390.7 360.6 thereof cost of sales 327.5 282.4 thereof administrative expenses 63.2 78.2 Impairment of other intangible assets and 17.3 58.3 property, plant and equipment thereof cost of sales 16.2 56.6 thereof administrative expenses 1.1 1.7 Total 408.0 418.9 Depreciation and amortisation include the amortisation of other intangibleassets, depreciation of property, plant and equipment as well aswrite-downsof investment property. The uniform Group-wide useful lives underlyingdepreciation and amortisation and the principles for impairment areoutlinedunder Accounting and measurement in the Notes.The addition of property, plant and equipment in the prior year, inparticular seven aircraft and the cruise ship Europa 2, caused an increasein depreciation and amortisation, carried under cost of sales. This trendwas further reinforced by further additions in the financial year underreview, including an aircraft and the cruise ship TUI Discovery.Depreciation and amortisation also rose due to investments in hotels andsoftware.Impairments of property, plant and equipment mainly relate to impairmentsoftrademarks of EUR 6.1 m and impairments of software of EUR 7.8 m.In the prior year, impairments mainly comprised impairments of EUR 26.4 monproperty, plant and equipment in Tenuta di Castelfalfi S.p.A. and animpairment charge of EUR 24.9 m for software.(3) Other income / other expenses Other income/other expenses EUR million 2015 / 16 2014 / 15 restated Other income 36.3 42.9 Other expenses 7.4 5.7 Total 28.9 37.2 In financial year 2015 / 16, other income mainly results from the sale of aRiu Group hotel, from the sale of a joint venture and from the sale of thecruise ship Island Escape. Income was also generated from the sale ofcommercial real estate owned by Preussag Immobilien GmbH, Salzgitter, andthe sale of vehicles owned by incoming agencies.Other income recognised in the prior year mainly related to gains from thesale of a Riu Group hotel and from the sale of two Greek hotel companies aswell as to the sale of companies in the PEAK Adventure Travel Group and thesale of two Specialist Group hotels. Income was also generated from therecycling of cumulative foreign exchange gains previously carried in equityoutside profit and loss resulting from a capital reduction in a subsidiary.Other expenses recognised in financial year 2015 / 16 mainly relates todisposals of aircraft spare parts and the recycling of foreign exchangelosses in connection with capital restructuring.Other expenses recognised in the prior year mainly resulted from foreignexchange losses in connection with capital reductions and liquidations ofsubsidiaries and from book losses on the sale of aircraft assets.(4) Goodwill impairmentIn financial year 2015 / 16, as in the prior year, the impairment testsconducted in accordance with IAS 36 did not result in any goodwillimpairments for TUI Group's cash generating units.(5) Financial income Financial income EUR million 2015 2014 / 15 / 16 restated Income from non-consolidated Group companies 1.4 1.6 including income from profit transfer agreements Income from other investments 1.0 1.5 Income from investments 2.4 3.1 Other interest and similar income 19.5 18.6 Income from the measurement of hedges 1.0 1.0 Interest income 20.5 19.6 Income from the measurement of other financial 4.1 3.9 instruments Foreign exchange gains on financial items 31.5 9.2 Total 58.5 35.8 (6) Financial expenses Financial expenses EUR million 2015 2014 / 15 / 16 restated Net interest expenses from defined benefit 27.6 34.4 pension plans Other interest and similar expenses 159.9 150.6 Expenses relating to the measurement of hedges 12.5 17.2 Interest expenses 200.0 202.2 Expenses relating to the measurement of the 100.3 147.1 investment in Hapag-Lloyd AG Expenses relating to the measurement of other 4.0 6.2 financial instruments Foreign exchange losses on financial items 41.6 9.0 Total 345.9 364.5 The year-on-year increase in other interest and similar expenses isattributable to changes in the structure of financial liabilities. Afterthebalance sheet date, TUI AG's bond with a nominal value of EUR 300.0 m wasredeemed ahead of its due date at a redemption price of 102.25 %. Interestexpenses therefore rose in the financial year under review. They alsoincreased due to the rise in liabilities from finance leases. An oppositetrend was driven by the conversion of all convertible bonds in financialyear 2014 / 15.The other financial expenses primarily comprise the measurement of thestakein Hapag-Lloyd AG, shown in a separate line. The measurement of the stakeeffected in the course of the year at the closing rate of the Hapag-Lloydshare as at 31 March 2016 in the principal market Xetra at EUR 16.10 pershare with a fair value of EUR 234.0 m resulted in an impairment of EUR100.3 m, carried in financial expenses (Level 1 measurement). Thesubsequentincrease in the value driven by the rise in Hapag-Lloyd's share price toEUR18.29 as at 30 September 2016 and the resulting increase in fair value toEUR 265.8 m was carried in equity outside profit and loss, in line with IAS39. As a result, the impairment charge carried in financial expensesremainsat EUR 100.3 m. For more detailed information, we refer to Note 18.In the prior year, expenses for the measurement of other financialinstruments also resulted from the measurement of the stake in Hapag-LloydAG at fair value (previous year Level 3 measurement).(7) Share of results of joint ventures and associates Share of result of joint ventures and associates EUR million 2015 / 2014 / 15 16 restated Income from associated companies measured 25.3 35.3 at equity Expenses for associated companies measured 0.1 7.0 at equity Share of result of associates 25.2 28.3 Income from joint ventures measured at 163.0 124.1 equity Expenses for joint ventures measured at 1.0 8.5 equity Share of result of joint ventures 162.0 115.6 Total 187.2 143.9 The share of result of joint ventures and associates comprises the netprofit for the year attributable to the associated companies and jointventures.The year-on-year decline in income from associated companies measured atequity is attributable to the Canadian tour operator Sunwing. Due to thefall of the Canadian dollar versus the US dollar, Sunwing recorded anincrease in direct costs and a resulting decline in its results versus theprior year. Offsetting this, a Caribbean hotel company which had stillposted a negative profit contribution in the prior year reported a positivecontribution in the period under review.The increase in income from joint ventures mainly results from theimprovement in the operating performance of Riu Hotels as well as the soundperformance of TUI Cruises and the first-time full-year operation of MeinSchiff 4 and the launch of Mein Schiff 5 in July 2016.Expenses for joint ventures declined year-on-year as the negative profitcontributions of two Greek hotel companies did not reoccur since thesecompanies were sold in Q3 2014 / 15.In the financial year under review, the share of results of joint venturesand associates did not include any impairments, consistent with the prioryear.(8) Income taxes Breakdown of income taxes EUR million 2015 / 16 2014 / 15 restated Current tax expense in Germany 39.5 16.2 abroad 125.1 140.3 Deferred tax income - 11.2 - 98.3 Total 153.4 58.2 The increase in current income tax expenses in Germany is attributable tothe reassessment of the trade tax risk in hotel purchasing, which resultedin tax expenses of EUR 35.1 m related to prior periods in the financialyearunder review. In terms of income taxes in the rest of the world, countriesoutside Germany posted tax income related to prior periods, unlike in 2014/15. Overall, current tax expenses related to prior periods amount to EUR9.9m (previous year EUR 14.8.) in financial year 2014 / 15.Deferred tax assets mainly arose abroad, outside of Germany. In the prioryear, deferred tax assets for losses carried forward were re-measuredfollowing the merger between TUI AG and TUI Travel PLC, resulting in taxassets of EUR 114.2 in the prior year reference period.In financial year 2015 / 16, total income taxes of EUR 153.4 m (previousyear EUR 58.2 m) were derived from an 'expected' income tax expense thatwould have arisen if the statutory income tax rate of TUI AG as the parentcompany (aggregate income tax rate) had been applied to earnings before taxas follows: Reconciliation of expected to actual income taxes EUR million 2015 / 2014 / 15 16 restated Earnings before income taxes 618.3 465.8 Expected income tax (current year 31.5 %, 194.8 144.4 previous year 31.0 %) Variation from the difference between actual - 27.0 - 34.9 and expected tax rates Changes in tax rates and tax law - 26.1 - 3.3 Income not taxable - - 125.3 114.6 Expenses not deductible 101.8 157.6 Effects from loss carryforwards 31.3 - 113.4 Temporary differences for which no deferred - 1.0 6.8 taxes were recognised Deferred and current tax relating to other - 11.1 25.3 periods (net) Other differences 5.3 1.0 Income taxes 153.4 58.2 In the prior year, the effects from losses carried forward included therevaluation of German losses carried forward from the enlargement of thefiscal unity in Germany. An offsetting effect arose from impairments ofdeferred tax assets on losses carried forward in the UK.(9) Result from discontinued operationThe result from discontinued operations includes the after-tax results ofSpecialist Group, Hotelbeds Group and LateRooms Group, classified asdiscontinued operations. For further information, please refer to thesection 'Discontinued operations' within 'Acquisitions - Divestments -Discontinued operations'.(10) Group profit for the year attributable to shareholders of TUI AGThe share of Group profit attributable to the TUI AG shareholders improvedfrom EUR 340.4 m in the prior year to EUR 1,037.4 m in financial year 2015/16. Apart from the general improvement in the Group's performance, theincrease is attributable to the disposal of Hotelbeds Group (for moredetails, please refer to the section on Discontinued operations). Theyear-on-year increase in the share in Group profit attributable to TUI AGshareholders is also driven by the fact that non-controlling interests inTUI Travel PLC were only held until the merger between TUI AG and TUITravelPLC in December 2014.(11) Group profit for the year attributable to non-controlling interest Group profit for the year attributable to non-controlling interest EUR million 2015 / 2014 / 16 15 Central Region 0.3 2.3 Hotels & Resorts 111.2 88.8 Other Tourism 0.2 0.1 Tourism 111.7 91.2 Specialist Group - 0.1 - 3.1 Hotelbeds Group 3.4 2.0 All other segments - 0.2 - 0.3 Formerly Travel (TUI Travel PLC - Group) - - 50.6 Total 114.8 39.2 In Hotels & Resorts, Group profit for the year attributable tonon-controlling interests primarily relates to RIUSA II Group. In the prioryear, the segment structure was slightly changed. The non-controllinginterests carried in the line 'Formerly Travel' in the prior year comprisethe prorated losses of the former TUI Travel PLC sub-group until theacquisition of the shares in TUI Travel PLC held by non-controllinginterests by TUI AG in December 2014. Since the merger between TUI AG andTUI Travel PLC in December 2014, there have no longer been anynon-controlling interests in the former TUI Travel PLC sub-group.(12) Earnings per shareIn accordance with IAS 33, basic earnings per share are calculated bydividing the Group profit for the year attributable to TUI AG shareholdersby the weighted average number of registered shares outstanding during thefinancial year under review. The average number of shares is derived fromthe total number of shares at the beginning of the financial year(586,603,217 shares) and the employee shares issued on a pro rata temporisbasis (179,486 new shares). The prorated effect of the own shares held byanemployee benefit trust of 2,664,194 shares was deducted.In the prior year, the dividend on the hybrid capital was deducted fromGroup profit for the year attributable to shareholders of TUI AG until thecall date on 24 March 2015 since the hybrid capital represented equityuntilthe call date but did not constitute Group profit attributable to TUI AGshareholders. Earnings per share 2015 / 16 2014 / 15 restated Group profit for the year attributable to 1,037.4 340.4 shareholders of TUI AGEUR million Dividend effect on hybrid capitalEUR - - 10.9 million = Adjusted Group profit for the year 1,037.4 329.5 attributable to shareholders of TUI AGEUR million Weighted average number of shares 584,118,509 513,114,716 Basic earnings per shareEUR 1.78 0.64 - Basic earnings per share from 0.61 0.66 continuing operationsEUR - Basic earnings per share from 1.17 - 0.02 discontinued operationsEUR Diluted Earnings per share 2015 / 16 2014 / 15 restated Adjusted Group profit for the year 1,037.4 329.5 attributable to shareholders of TUI AGEUR million Weighted average number of shares 584,118,509 513,114,716 Diluting effect from assumed exercise of 1,522,934 6,384,006 share awards Weighted average number of shares 585,641,443 519,498,722 (diluted) Diluted earnings per shareEUR 1.77 0.63 - Diluted earnings per share from 0.60 0.65 continuing operationsEUR - Diluted earnings per share from 1.17 - 0.02 discontinued operationsEUR As a rule, a dilution of earnings per share occurs when the average numberof shares increases due to the issue of shares from conversion of shareoptions. In the financial year under review, these effects resulted fromshare-based remuneration plans. The conversion rights existing in prioryears fully expired in financial year 2014 / 15.(13) Taxes attributable to other results Tax effects relating to other comprehensive income 2015 2014 / 16 / 15 EUR million Gross Tax Net Gross Tax Net ef- ef- fect fect Foreign exchange differences 52.4 - 52.4 - - - 221.7 221.7 Available for sale financial 31.8 - 31.8 - - - instruments Cash flow hedges 546.1 - 465.2 - 27.1 - 80.9 221.0 193.9 Remeasurements of pension - 157.9 - 82.2 - 58.0 provisions and related fund 593.3 435.4 24.2 assets Changes in the measurement of - - - 22.1 - 22.1 companies measured at equity 32.0 32.0 outside profit or loss Other comprehensive income 5.0 77.0 82.0 - 2.9 - 338.4 335.5 In addition, income taxes worth EUR - 0.9 m (previous year EUR 17.7 m)carried outside profit and loss were generated in the period under reviewand recognised directly in equity.Notes on the consolidated statement of financial position(14) Goodwill Goodwill EUR million 2015 / 16 2014 / 15 Historical cost Balance as at 1 Oct 3,678.8 3,590.6 Exchange differences - 234.3 95.6 Additions 9.2 1.6 Disposals* - - Reclassification as assets held for sale - 167.0 - 9.0 Balance as at 30 Sep 3,286.7 3,678.8 Impairment Balance as at 1 Oct 458.4 454.4 Exchange differences - 25.0 3.9 Disposals* - - Reclassification as assets held for sale - 0.2 0.1 Balance as at 30 Sep 433.2 458.4 Carrying amounts as at 30 Sep 2,853.5 3,220.4 * Of which no disposals from changes in the group of consolidated companiesThe decrease in the carrying amount is mainly attributable to thetranslation of goodwill not carried in the TUI Group's functional currencyinto euros and recognition of the Hotelbeds Group and Specialist Groupsegments as discontinued operations. In Q1 2015 / 16, incoming agencies(Destination Services) were carved out from the Hotelbeds Group segment andtransferred to Other Tourism. They are carried as a separatecash-generatingunit.In accordance with the rules of IAS 21, goodwill allocated to theindividualsegments and sectors was recognised in the functional currency of thesubsidiaries and subsequently translated when preparing the consolidatedfinancial statements. As with the treatment of other differences from thetranslation of annual financial statements of foreign subsidiaries,differences due to exchange rate movements between the exchange rate at thedate of acquisition of the subsidiary and the exchange rate at the balancesheet date are taken directly to equity outside profit and loss and aredisclosed as a separate item. In financial year 2015 / 16, a decrease inthecarrying amount of goodwill of EUR 209.3 m (previous year increase of EUR91.7 m) resulted from foreign exchange differences.The following table provides a breakdown of the carrying amounts ofgoodwillby cash generating unit (CGU): Goodwill per cash generating unit EUR million 30 Sep 2016 30 Sep 2015 Northern Region 1,545.1 1,736.1 Central Region 507.7 505.7 Western Region 338.8 338.4 Specialist Group - 70.5 Hotelbeds Group - 202.1 Destination Services 94.3 - Riu 351.7 351.7 Robinson 9.7 9.7 TUI Blue 6.2 6.2 Total 2,853.5 3,220.4 Impairment charges are recognised if the carrying amount of the tested unitplus the allocated goodwill exceeds the recoverable amount. In thefinancialyear under review, goodwill was tested for impairment at the level of cashgenerating units (CGUs) as at 30 June 2016.For all cash generating units, the recoverable amount was determined on thebasis of fair value less costs of disposal. The fair value was determinedbydiscounting expected future cash inflows. This was based on the budget forQ4 of the financial year under review, the medium-term plan for the entityunder review, prepared as at 30 September 2016, after deduction of incometax payments. Budgeted turnover and EBITA margins are based on observedvalues from prior financial years and expectations with regard to thefuturedevelopment of the market. The cash inflows after the planning period areextrapolated on the basis of individual growth rates based on long-termbusiness expectations.The discount rates are calculated as the weighted average cost of capital,taking account of the risks associated with the cash generating unit on thebasis of external capital market information. The cost of equity includedinthe calculation reflects the return expected by investors. The cost ofborrowing is derived from the long-term financing terms of comparablecompanies in the peer group.The table below provides an overview of the assumptions used fordeterminingthe fair values per CGU. It shows the timeframe for the cash flow forecast,the growth rates used to extrapolate the cash flow forecast, and therelevant valuation hierarchy according to IFRS 13. The table lists the maincash generating units to which goodwill has been allocated. Assumptions for calculation of fair value in financial year 2015/16 Planning Growth EBITA- Growth rate WACC L- period rate -Mar- after in % e- in years revenues gin planning v- in % in % period in % e- l Northern Region 3.25 8.3 7.2 0.5 6.75 3 Central Region 3.25 7.1 2.3 0.5 6.75 3 Western Region 3.25 7.8 3.4 0.5 6.75 3 Destination Services 3.25 8.2 7.3 0.5 6.75 3 Riu 3.25 3.7 31.2 0.5 5.75 3 Robinson 3.25 17.2 14.9 0.5 5.75 3 TUI Blue 3.25 93.1 12.8 0.5 5.75 3 Assumptions for calculation of fair value in financial year 2014/15 Planning Growth EBITA- Growth rate WACC L- period rate -Mar- after in % e- in years revenues gin planning v- in % in % period in % e- l Northern Region 3.25 4.3 6.8 0.5 7.25 3 Central Region 3.25 8.2 2.8 0.5 7.25 3 Western Region 3.25 9.3 3.1 0.5 7.25 3 Riu 3.25 2.4 24.1 0.5 6.75 3 Robinson 3.25 17.9 17.3 0.5 6.75 3 Iberotel 3.25 5.9 18.4 0.5 6.75 3 Specialist Group 3.25 2.3 2.8 0.5 7.25 3 Hotelbeds Group 3.25 11.3 6.0 0.5 7.25 3 Goodwill was tested for impairment as at 30 June 2016. The test did notresult in a requirement to recognise an impairment. Neither an increase inWACC of 50 basis points nor a reduction in the growth rate in perpetuity of50 basis points would have led to an impairment of goodwill. The sameapplies to a decrease of revenue growth rates and EBITA-margin inperpetuityby 10 % each.(15) Other intangible assets Other intangible assets EUR million Concessions, Selfge- Trans- Custo- Pay- Total industrial nera- port and mer ments property ted leasing base on rights and softwa- con- ac- similar re tracts count rights and values Historical cost Balance as at 1 1,276.0 142.1 107.1 252.5 0.4 1,778.1 Oct 2014 Exchange 48.8 4.8 6.4 6.4 - 66.4 differences Additions due 0.8 - - 0.2 - 1.0 1 to changes in the group of consolidated companies Additions 165.7 23.9 - 1.6 0.3 191.5 Disposals 35.4 17.0 - 2.2 - 54.6 2 Reclassificati- - 73.1 - 44.7 - - 3.6 - - 121.4 on as assets held for sale Reclassificati- - 111.9 114.4 - 3.0 0.7 - 0.2 - ons Balance as at 1,270.9 223.5 110.5 255.6 0.5 1,861.0 30 Sep 2015 Exchange - 90.6 - 20.0 - 10.4 - 6.5 - - 127.5 differences Additions due 0.7 - - 0.4 - 1.1 to changes in the group of consolidated companies Additions 146.7 6.1 - 0.3 2.5 155.6 Disposals 104.5 4.6 - 1.6 - 110.7 Reclassificati- - 408.5 - 33.6 - 7.1 - - - 648.2 on as assets 199.0 held for sale Reclassificati- - 128.3 128.8 - - - 0.5 - ons Balance as at 686.4 300.2 93.0 49.2 2.5 1,131.3 30 Sep 2016 Amortisation Balance as at 1 626.6 57.4 37.7 122.9 - 844.6 October 2014 Exchange 20.4 1.9 2.1 3.5 - 27.9 differences Amortisation 96.5 27.9 0.5 18.2 - 143.1 for the current year Impairments for 7.2 29.2 - - - 36.4 the current year Disposals 29.0 17.0 - 2.2 - 48.2 Reclassificati- - 27.5 - 25.0 - - 1.8 - - 54.3 on as assets held for sale Reclassificati- - 35.8 31.6 4.2 - - - ons Balance as at 658.4 106.0 44.5 140.6 - 949.5 30 Sep 2015 Exchange - 43.6 - 6.6 - 5.4 - 4.0 - - 59.6 differences Amortisation 74.1 31.4 4.7 11.1 - 121.3 for the current year Impairments for 22.9 8.0 - - - 30.9 the current year Disposals 100.0 4.3 - 1.6 - 105.9 Reclassificati- - 210.1 - 19.5 - 5.2 - - - 350.7 on as assets 115.9 held for sale Reclassificati- - 11.0 6.3 4.7 - - - ons Balance as at 390.7 121.3 43.3 30.2 - 585.5 30 Sep 2016 Carrying 612.5 117.5 66.0 115.0 0.5 911.5 amounts as at 30 Sep 2015 Carrying 295.7 178.9 49.7 19.0 2.5 545.8 amounts as at 30 Sep 2016 1 Of which additions due to first-time consolidation of non-consolidatedcompanies EUR 0.2 m2 Of which disposals due to changes in the group of consolidated companiesof EUR 1.5 m (historical costs) and EUR 0.8 m (amortisation)Other intangible assets, consisting in particular of trademarks andcustomerrelationships, are amortised over their useful lives.Self-generated software consists of computer programs for tourismapplications exclusively used internally by the Group.The decrease in the carrying amount of the intangible assets compared totheprior year is mainly attributable to the reclassification of the segmentsHotelbeds Group and Specialist Group to assets held for sale.The increase in disposals is driven by the implementation of new softwareinthe Northern Region segment. The software previously used and fullyamortised was therefore derecognised.Impairments include an amount of EUR 9.7 m in respect of the SpecialistGroup brands, required due to the sale of businesses in the course of theyear. In addition, brands in the Western Region segment worth EUR 6.1 mwereimpaired as they are no longer in use due to the adoption of the Group'snewbrand strategy. Impairments also included software worth EUR 6.3 m inSpecialist Group and a module of an Internet platform worth EUR 7.8 m inOther Tourism, as they are no longer used.The prior year's impairments of EUR 21.8 m relate to various modules of anInternet platform for joint use in Northern, Western and Central Regions.At the balance sheet date, the carrying amount of intangible assets subjectto restraints on ownership or pledged as security amounts to EURnil(previous year EUR 109.1 m).(16) Property, plant and equipment Pro- per- ty, plan- t and equi- pmen- t EUR Real Other A- Ships, Machi- Oth- As- Pay- Total mil- estate real i- yachts nery er sets ments lion with estate- r- and and pla- under on hotels , land c- boats fixtu- nt- con- ac- rights r- res s, struc- count and a- ope- tion buil- f- ra- dings t tin- incl. g buil- and dings of- on fi- third-- ce party equ- proper- ip- ties men- t re- vi- sed His- tori- cal cost Bala- 1,333.1 255.4 1- 788.4 254.9 985- 65.2 221.7 5,064.8 nce ,- .8 as 1- at 1 6- Oct 0- 2014 .- 3 Ex- - 11.7 - 1.5 7- 29.3 - 1.1 1.0 1.1 16.5 110.6 chan- 7- ge .- dif- 0 fe- renc- es Addi- 6.5 - - - - 1.1 - - 7.61 ti- ons due to chan- ges in the grou- p of con- soli- da- ted com- pa- nies Addi- 41.9 42.0 5- 314.9 23.7 83.- 59.7 232.2 1,323.3 ti- 2- 0 ons 5- .- 9 Dis- 1.5 8.9 4- 24.6 4.7 65.- 4.0 236.4 388.1 2 po- 2- 8 sals .- 2 Re- 6.9 - 0.7 - - - - - 6.5 - 7.6 -67.4 clas- 4- 14.- sifi- 5- 5 cati- .- on 0 as as- sets held for sale Re- 26.3 - 4.8 5- 2.1 4.2 16.- - - -8.7 clas- 8- 2 60.5 50.6 sifi- .- cati- 4 ons Bala- 1,401.5 281.5 1- 1,110.1 277.0 1,0- 55.0 175.8 6,042.1 nce ,- 06.- as 7- 8 at 3- 30 4- Sep .- 2015 4 Ex- - 32.5 - 17.6 - - 61.5 - 1.9 - - 2.8 - 9.2 -177.0 chan- 2- 27.- ge 4- 4 dif- .- fe- 1 renc- es Addi- - - - - - 1.6 - - 1.6 ti- ons due to chan- ges in the grou- p of con- soli- da- ted com- pa- nies Addi- 48.1 55.8 1- 228.0 26.6 77.- 157.7 98.1 836.7 ti- 4- 0 ons 5- .- 4 Dis- 5.6 25.7 4- 156.2 6.2 107- 1.7 43.1 389.0 po- 3- .1 sals .- 4 Re- - - 67.3 - - 246.0 - - - 2.0 - -411.8 clas- 5- 90.- sifi- .- 8 cati- 7 on as as- sets held for sale Re- 25.4 4.7 2- 20.1 9.1 - - - 2.3 clas- 8- 25.- 48.1 11.5 sifi- .- 9 cati- 5 ons Bala- 1,436.9 231.4 1- 894.5 304.6 834- 158.1 210.1 5,904.9 nce ,- .2 as 8- at 3- 30 5- Sep .- 2016 1 De- pre- cia- tion Bala- 383.4 95.3 5- 355.6 180.8 681- - - 2,221.1 nce 2- .4 as 4- at 1 .- Oct 6 2014 Ex- - 3.6 3.7 1- 13.7 - 0.6 1.0 - - 28.0 chan- 3- ge .- dif- 8 fe- renc- es De- 38.8 6.6 1- 52.8 15.1 85.- - - 300.1 pre- 0- 8 cia- 1- tion .- for 0 the cur- rent year Im- 0.2 19.8 0- 2.9 4.8 0.4 2.2 - 30.9 pair- .- ment- 6 s for the cur- rent year Dis- 1.1 6.4 3- 19.2 4.4 56.- 1.7 - 125.3 po- 5- 9 sals .- 6 Re- 1.4 - 0.1 - - - - - 0.5 - -45.7 clas- 3- 10.- sifi- 6- 5 cati- .- on 0 as as- sets held for sale Re- 11.2 - 7.6 - - 2.4 - 1.5 - - - -3.8 clas- 3.5 sifi- cati- ons Bala- 430.3 111.3 5- 403.4 194.2 697- 0.0 - 2,405.3 nce 6- .7 as 8- at .- 30 4 Sep 2015 Ex- - 10.4 0.9 - - 14.1 - 1.1 - - - -64.4 chan- 2- 18.- ge 1- 7 dif- .- fe- 0 renc- es De- 37.7 5.7 1- 58.7 19.3 78.- - - 323.6 pre- 2- 8 cia- 3- tion .- for 4 the cur- rent year Im- - 1.3 - - 0.7 0.7 - - 2.7 pair- ment- s for the cur- rent year Dis- 4.4 17.4 3- 144.8 6.1 101- - - 311.5 po- 7- .1 sals .- 7 Re- - - 28.4 - - 82.7 - - - - -167.7 clas- 0- 56.- sifi- .- 0 cati- 6 on as as- sets held for sale Re- 4.8 2.6 0- - 0.3 13.1 - - 0.2 - 2.4 clas- .- 18.- sifi- 6 2 cati- ons Bala- 458.0 76.0 6- 220.2 220.1 583- - 0.2 - 2,190.4 nce 3- .2 as 3- at .- 30 1 Sep 2016 Car- 971.2 170.2 1- 706.7 82.8 309- 55.0 175.8 3,636.8 ry- ,- .1 ing 1- amou- 6- nts 6- as .- at 0 30 Sep 2015 Car- 978.9 155.4 1- 674.3 84.5 251- 158.3 210.1 3,714.5 ry- ,- .0 ing 2- amou- 0- nts 2- as .- at 0 30 Sep 2016 1 Of which additions due to first-time consolidation of non-consolidatedcompanies of EUR 0.2 m2 Of which disposals due to changes in the group of consolidated companiesof EUR 0.8 m (historical cost) and EUR 0.7 m (depreciation), respectivelyThe decrease in the carrying amount of property, plant and equipmentcompared to the prior year is mainly attributable to the reclassificationofthe segments Hotelbeds Group and Specialist Group to assets held for sale.In the reporting period, additions included the cruise ship TUI Discoverywith a carrying amount of EUR 182.9 m held as a finance lease. The ship isoperated in the Northern Region segment. In the prior year, additions ofships included Europa 2 in the Cruise segment worth EUR 278.2 m.Moreover, one aircraft, operated under a finance lease, was capitalised inthe amount of EUR 120.2 m in the period under review. In addition, advancepayments for aircraft ordered amounting to EUR 91.8 m were capitalised.Additions to assets under construction included investments in hotelfacilities in Hotels & Resorts worth EUR 100.9 m.In the prior year, impairment charges mainly related to buildings andtechnical systems at Tenuta di Castelfalfi S.p.A. in Hotels & Resorts.All investment property was sold in the course of the financial year. Formateriality reasons, the development of these assets is therefore shownunder Other real estate, land rights and buildings incl. buildings onthird-party properties. In the prior year, these assets had a carryingamount of EUR 7.2 m and a fair value of EUR 10.1 m.As at the balance sheet date, the carrying amount of tangible assetssubjectto ownership restrictions or pledged as security totals EUR 613.1 m(previous year EUR 700.4 m).Property, plant and equipment also comprise leased assets in which Groupsubsidiaries have assumed substantially all the risks and rewards ofownership of the assets. Composition of finance leased assets Net carrying amounts EUR million 30 Sep 30 Sep 2016 2015 Other real estate, land rights and buildings 14.8 24.2 incl. buildings on third-party properties Aircraft 955.0 871.0 Ships, yachts and boats 232.5 96.3 Machinery and fixtures - 0.1 Other plant, operating and office equipment 27.7 18.4 Total 1,230.0 1,010.0 The payment obligations resulting from future lease payments are carried asliabilities, with future interest expenses not reflected in the carryingamount of the financial liabilities. Total payments due under financeleasesamount to EUR 1,450.1 m (previous year EUR 1,216.6 m). Group companies havenot accepted any guarantees for the residual values of the leased assets,asin the prior year. Reconci- liation of future lease payments to liabili- ties from finance leases 30 30 Sep Sep 2016 2015 Remai- Remai- ning ning term term EUR up to 1- 5 more Total up to 1- 5 more Total million 1 years than 1 years than year 5 year 5 years years Total 125.7 462.4 862.0 1,450.1 103.3 396.4 716.9 1,216.6 future lease payments Interest 33.5 113.4 71.5 218.4 34.4 115.8 84.4 234.6 portion Liabili- 92.2 349.0 790.5 1,231.7 68.9 280.6 632.5 982.0 ties from finance leases (17) Investments in joint ventures and associatesThe table below presents the TUI Group's significant joint arrangements andassociates. All joint arrangements and associates are shown in the list ofTUI Group Shareholdings in Note 55. All joint arrangements are jointventures. There are no joint operations within the definition of IFRS 12. Significant associates and joint ventures Capital Voting share in rights % share in % Name and headquarter of Nature 30 Sep 30 30 Sep 30 company of 2016 Sep 2016 Sep business 2015 2015 Associates Sunwing Travel Group Inc., Tour 49.0 49.0 25.0 25.0 Toronto, Canada operator Blue Diamond Hotels and Hotel -* 49.0 -* 49.0 Resorts Inc., St. Michael, operator Barbados Joint ventures Riu Hotels S. A., Palma de Hotel 49.0 49.0 49.0 49.0 Mallorca, Spain operator TUI Cruises GmbH, Hamburg, Cruise 50.0 50.0 50.0 50.0 Germany ship operator Togebi Holdings Limited, Tour 25.0 49.0 25.0 49.0 Nicosia, Cyprus operator * Since 30 Sep 2016 shares are held by Sunwing Travel Group Inc., Toronto,Canada.All companies shown in the table are accounted for using the equity method.The financial years of Sunwing Travel Group Inc. and Blue Diamond HotelsandResorts Inc. correspond to the TUI Group's financial year. The financialyears of the other associates and joint ventures end on 31 December of eachyear. In order to update at equity measurement as at the TUI Group'sbalancesheet date, interim financial statements for the period ending 30 Septemberare prepared for these companies.Significant associatesIn 2009, the Sunwing Travel Group entered into a partnership with TUIGroup.Sunwing Travel Group Inc. is a vertically integrated travel company thatencompasses tour operators, an airline and retail travel agencies. Thecompany has different classes of shares. TUI Group holds 25 % of the votingshares.Blue Diamond Hotels & Resorts Inc., a hotel operation and developmentcompany operating a chain of luxury beach holiday resorts and hotels in theCaribbean and Mexico, was carried as an associate and measured at equity inthe prior year. In September 2016, the company was transferred to SunwingTravel Group and therefore no longer constituted a direct associate as atthe balance sheet date.Significant joint venturesRiu Hotels S. A. is a hotel company established in 1976, which owns andoperates 4- to 5-star hotels, mainly located in Spain and Central America.TUI Cruises was established in 2008, and is a joint venture with the USshipping line Royal Caribbean Cruises Ltd. The Hamburg-based company offersGerman-speaking cruises for the premium market. Since the commissioning ofMein Schiff 5 in July 2016, TUI Cruises has operated five cruise ships.Togebi Holdings Limited (TUI Russia) is a joint venture with OscriviaLimited, a subsidiary of the Russian ZAO Sever Group (ZSG). ZSG is owned bya large shareholder and member of the supervisory board of TUI AG. Thebusiness purpose of this joint venture, established in 2009, is to developthe tour operation business, in particular in Russia and Ukraine. Thecompany owns tour operator subsidiaries and retail chains in thesecountries.Changes in the Group's interest in significant joint venturesIn the prior year, the TUI Group held a stake of 49.0 % in TUI Russia. InOctober 2015, contractual agreements on the reorganisation of the equity ofTUI Russia were concluded with Oscrivia Limited. The parties agreed acapital increase in which TUI Group participated by paying a net amount of$3 m, while Oscrivia Limited paid a net amount of $ 17 m. TUI Group's sharein TUI Russia declined from 49 % to 25 % and Oscrivia Limited increased itsshare to 75 %. Existing loans and guarantees of the shareholders wereadjusted to reflect the new stakes. Furthermore, the joint ventureagreementwas amended to reflect the new voting rights proportions. The relevantactivities of TUI Russia continue to be jointly determined by TUI Group andOscrivia Limited, so that TUI Russia remains classified as a joint venture.Financial information on associates and joint venturesThe following tables provide summarised financial information for thesignificant associates and joint ventures of the TUI Group. The informationdisclosed reflects the full amounts presented in the consolidated financialstatements of the relevant associates and joint ventures (100 per cent) andnot TUI Group's share of those amounts. Combined financial information of material associates Sunwing Travel Blue Diamond Hotels Group Inc., and Resorts Inc., Toronto, St. Michael, Canada3 Barbados2 EUR million 30 Sep 2016 / 30 Sep 30 Sep 2016 / 2015 30 Sep 2015 / 16 2015 / / 16 2015 / 2014 / 2014 / 15 15 Non-current 736.5 163.1 - 314.7 assets Current assets 491.5 368.9 - 84.1 Non-current 386.3 44.9 - 114.9 provisions and liabilities Current 421.9 285.7 - 170.8 provisions and liabilities Revenues 1,432.6 1,557.3 264.8 201.9 Profit / loss 1 11.6 45.2 48.3 17.5 Other 4.5 - - - 1.6 comprehensive income Total 16.1 45.2 48.3 15.9 comprehensive income 1 Solely from continuing operations2 Since 30 Sep 2016 shares are held by Sunwing Travel Group Inc., Toronto,Canada3 The balance sheet at 30 Sep 2016 also contains the balances of the BlueDiamonds Hotels and Resorts Inc., St. Michael, Barbados, as well as otherentities, which were transferred to the Sunwing Travel Group at the balancesheet date. Combined financial information of material joint ventures Riu Hotels TUI Togebi S. A., Cruises Holdings Palma de GmbH, Limited, Mallorca, Hamburg, Nicosia, Spain Germany Cypres EUR million 30 Sep 30 30 Sep 30 Sep 30 Sep 30 2016 / Sep 2016 / 2015 / 2016 / Sep 2015 / 16 2015 2015 / 2014 / 2015 / 16 2015 / 16 15 / 2014 2014 / 15 / 15 Non-current 739.8 829.7 2,049.0 1,569.4 3.9 5.2 assets Current assets 79.5 72.1 379.5 195.7 27.1 19.0 thereof cash 26.8 27.4 105.5 109.0 3.4 3.4 and cash equivalents Non-current 13.3 101.7 1,234.8 860.4 117.3 157.0 provisions and liabilities thereof 9.0 73.2 1,234.8 860.4 114.6 146.1 financial liabilities Current 148.3 160.6 614.1 367.9 27.2 35.5 provisions and liabilities thereof 82.2 104.6 - - 18.6 27.3 financial liabilities Turnover 305.7 276.9 807.3 614.1 129.5 200.9 Depreciation 21.1 24.9 58.1 42.0 1.3 4.7 of intangible assets and property, plant and equipment Interest 0.2 0.1 - 5.8 - - income Interest 1.7 2.6 16.2 11.4 4.7 5.0 expenses Income taxes 36.7 26.1 0.3 - 0.1 - Profit / loss 92.5 70.9 200.2 136.2 9.2 - * 44.1 Other - 36.4 69.1 - 37.8 - 22.6 - - comprehensive income Total 56.1 140.0 162.4 113.6 9.2 - comprehensive 44.1 income * Solely from continuing operationsIn financial year 2015 / 16, TUI Group received dividends of EUR 60.0 mfromTUI Cruises and EUR 12.2 m from Riu Hotels. In total, dividends of EUR 79.4m were paid by all joint ventures to TUI Group (previous year EUR 76.4 m,including EUR 34.3 m from Riu Hotels and EUR 35.0 m from TUI Cruises). Infinancial year 2015 / 16 as well as in the prior year, TUI Group did notreceive any dividends from its major associates; in total, TUI Groupreceived dividends of EUR 1.1 m from its associates (previous year EUR 2.6m).In addition to the material associates and joint ventures, TUI Group hasinterests in a number of equity accounted associates and joint venturesthatare individually not considered significant. The tables below provideinformation on TUI Group's share of the profit / loss, other income andother comprehensive income of the material associates and joint ventures aswell as the aggregated amount of the share of these earnings figures fortheimmaterial associates and joint ventures. Share of financial information of material and other associates Sunwing Blue Othe- Asso- Travel Diamond r cia- Group Hotels and asso- tes Inc., Resorts cia- To- Toronto, Inc., St. tes tal Canada Michael, Barbados EUR million 2015 / 16 2014 2015 / 16 2014 2015 2014 2015 2014 / 15 / 15 / 16 / 15 / 16 /15 re- re- stat- stat- ed ed TUI's share of Profit / 5.7 22.1 23.7 8.6 - - 25.2 28.3 loss 4.2 2.4 Other 4.5 - - - - 0.7 4.5 - comprehensi- 0.8 0.1 ve income / loss Total 10.2 22.1 23.7 7.8 - - 29.7 28.2 comprehensi- 4.2 1.7 ve income / loss SHARE OF FINAN- CIAL INFOR- MATIO- N OF MATER- IAL AND OTHER VENTU- RES Riu TUI Toge- Othe- Joint Ho- Cru- bi r ventu- tels ise- Hol- join- res S. s dings t Total A., Gm- Limi- ven- Palma bH, ted, tu- de Ham- Nico- res Mal- bur- sia, lor- g, Cy- ca, Ger- pres Spain ma- ny EUR 2015 2014 201- 2014 2015 2014 2015 2014 2015 2014 milli- / 16 / 15 5 / / 15 / 16 / 15 / 16 / 15 / 16 / 15 on 16 TUI's share of Pro- 45.3 34.7 100- 68.1 - - 16.6 12.8 162.0 115.6 fit / .1 loss Other - 33.6 - - - - - - - 21.5 com- 18.1 18.- 11.3 0.8 36.8 pre- 7 hensi- ve inco- me / loss Total 27.2 68.3 81.- 56.8 - - 16.6 12.0 125.2 137.1 com- 4 pre- hensi- ve inco- me / loss Net assets of the material associates EUR million Sunwing Travel Blue Diamond Hotels and Group Inc., Resorts Inc., St. Michael, Toronto, Canada2 Barbados1 Net assets as at 170.4 87.0 1 Oct 2014 Profit / loss 45.2 17.5 Other - - 1.6 comprehensive income Dividends - - Capital increase - - Foreign exchange - 14.2 10.2 effects Net assets as at 201.4 113.1 30 Sep 2015 Net assets as at 201.4 113.1 1 Oct 2015 Profit / loss 11.6 48.3 Other 9.2 - comprehensive income Dividends - - payable Capital increase - 60.4 Foreign exchange 0.9 - effects Consolidation 196.7 - 221.8 effects Net assets as at 419.8 - 30 Sep 2016 1 Since 30 Sep 2016 shares are held by Sunwing Travel Group Inc., Toronto,Canada.2 The net assets at 30 Sep 2016 also contain the balances of the BlueDiamonds Hotels and Resorts Inc., St. Michael, Barbados, which wastransferred to the Sunwing Travel Group at the balance sheet date, as wellas other transferred entities. Reconciliation to the carrying amount of the associates in the Group balance sheet EUR million Sunwing Blue Diamond Othe- Associa- Travel Group Hotels and r tes Inc., Resorts Inc., St. asso- total Toronto, Michael, cia- re- Canada2 Barbados1 tes stated Share of TUI in % as at 49.0 49.0 - - 30 Sep 2015 TUI's share of the net 98.7 55.4 25.5 179.6 assets as at 30 Sep 2015 Goodwill as at 30 Sep 50.1 - 4.0 54.1 2015 Carrying value as at 30 148.8 55.4 29.5 233.7 Sep 2015 Share of TUI in % as at 49.0 - - - 30 Sep 2016 TUI's share of the net 205.7 - 50.9 256.6 assets as at 30 Sep 2016 Goodwill as at 30 Sep 51.3 - 4.0 55.3 2016 Carrying value as at 30 257.0 - 54.9 311.9 Sep 2016 1 Since 30 Sep 2016 shares are held by Sunwing Travel Group Inc., Toronto,Canada.2 The balance sheet at 30 Sep 2016 also contains the balances of the BlueDiamonds Hotels and Resorts Inc., St. Michael, Barbados, which wastransferred to the Sunwing Travel Group at the balance sheet date. Net assets of the material joint ventures EUR million Riu Hotels S. A., TUI Cruises Togebi Holdings Palma de Mallorca, GmbH, Hamburg, Limited, Nicosia, Spain Germany Cyprus Net assets as at 564.5 493.2 - 107.7 1 Oct 2014 Profit / loss 70.9 136.2 - 44.1 Other 69.1 - 22.6 - comprehensive income Dividends - 70.0 - 70.0 - Capital increase - - - Foreign exchange 3.2 - - 16.7 effects Net assets as at 637.7 536.8 - 168.5 30 Sep 2015 Net assets as at 637.7 536.8 - 168.5 1 Oct 2015 Profit / loss 92.5 200.2 9.2 Other - 36.4 - 37.8 - 0.2 comprehensive income Dividends payable - 25.0 - 120.0 - Capital increase - - 48.3 Foreign exchange - 12.5 - - 2.3 effects Net assets as at 656.3 579.2 - 113.5 30 Sep 2016 Reconciliation to the carrying amount of the joint ventures in the Group balance sheet EUR million Riu Hotels TUI Togebi Other Joint S. A., Cruises Holdings joint ventu- Palma de GmbH, Limited, ventu- res Mallorca, Hamburg, Nicosia, res total Spain Germany Cyprus Share of TUI in % as 49.0 50.0 49.0 - - at 30 Sep 2015 TUI's share of the net 312.7 268.4 - 82.6 228.1 726.6 assets as at 30 Sep 2015 unrecognised share of - - 39.9 - 39.9 losses Goodwill as at 30 Sep 1.7 - 42.7 33.2 77.6 2015 Carrying value as at 314.4 268.4 - 261.3 844.1 30 Sep 2015 Share of TUI in % as 49.0 50.0 25.0 - - at 30 Sep 2016 TUI's share of the net 321.6 289.6 - 28.4 228.4 811.2 assets as at 30 Sep 2016 unrecognised share of - - 6.5 - 6.5 losses Goodwill as at 30 Sep 1.7 - 21.9 27.6 51.2 2016 Carrying value as at 323.3 289.6 - 256.0 868.9 30 Sep 2016 Unrecognised losses by joint venturesUnrecognised accumulated losses of EUR 6.5 m (previous year EUR 39.9 m)relate to the joint venture TUI Russia, operating in the source markets ofRussia and Ukraine. Due to the recognition of the share of losses in theprevious years the carrying amount of the joint venture was already fullywritten off in financial year 2013 / 14. Further losses of EUR 39.9 m havenot been recognised in the previous years as the TUI Group has noobligationto cover the losses. Recognition of these losses would have reduced thecarrying amount of the joint venture to below zero. The decline of theunrecognised proportional losses of EUR 33.4 m in the reporting period aremainly due to the reduction of the interest and the capital increase in TUIRussia.Risks associated with the stakes in associates and joint venturesNo contingent liabilities existed in respect of associates as at 30September 2016 and 30 September 2015.Contingent liabilities of EUR 106.2 m (previous year EUR 125.4 m) exist inrespect of joint ventures. In addition, financial liabilities frominvestments of EUR 613.2 m (previous year EUR 877.2 m) and from lease,charter and rental agreements worth EUR 8.4 m (previous year EUR 9.3 m) arein place in respect of joint ventures.(18) Financial assets available for saleFinancial assets available for sale consist of stakes in non-consolidatedGroup companies, interests and other securities. Financial assets available for sale 30 Sep 2016 30 Sep 2015 EUR million Remaining term Total Remaining term Total more than 1 year more than 1 year Shares in 2.1 2.1 5.9 5.9 non-consolidated Group companies Investments 36.3 302.1 38.5 373.4 Other securities 12.0 12.0 11.8 11.8 Total 50.4 316.2 56.2 391.1 Investments comprise the remaining interests in Hapag-Lloyd AG totallingEUR265.8 m. An IPO of Hapag-Lloyd AG took place on 6 November 2015. TUI'sinterest in Hapag-Lloyd AG declined from 13.9 % to 12.3 % due tonon-participation in the associated cash capital increase and the sale of27,079 Hapag-Lloyd AG shares as part of the IPO.The shares in Hapag-Lloyd AG are traded in the Regulated Market (PrimeStandard) of the Frankfurt Stock Exchange. The investment is measured attheclosing rate of the Hapag-Lloyd share in the principal market Xetra at therespective balance sheet date (Level 1 measurement). The measurement of thestake effected in the course of the year at the closing rate of theHapag-Lloyd share as at 31 March 2016 in the principal market Xetra at EUR16.10 per share with a fair value of EUR 234.0 m resulted in an impairmentof EUR 100.3 m, carried in financial expenses. Since then, Hapag-Lloyd'sshare price has risen to EUR 18.29 as at 30 September 2016 so that the fairvalue has again risen to EUR 265.8 m. This increase of EUR 31.8 m in thevalue was carried in equity outside profit and loss, in line with IAS 39.Asa result, the impairment charge carried in financial expenses remains atEUR100.3 m.On 30 September 2016, TUI AG entered into an agreement to close the gapbetween the obligations and the fund assets of defined benefit pensionplansin the UK in the long run. All shares in Hapag-Lloyd AG were assigned ascollateral at the balance sheet date. In October 2016, a securities accounthas been opened and the number of shares assigned as collateral hasdeclined. In future, every quarter end it will be determined as a quotientof £ 126 m to the share price translated into pounds sterling and reducedbya safety margin of 10 %. The agreement does not prevent TUI from sellingtheshares.The impairment of financial assets held for sale, carried in theconsolidated income statement for the period under review, totalled EUR101.0 m (previous year EUR 155.6 m).Where a listed market price in an active market is not available and othermethods to determine an objective market value do not produce any reliableresults, the shares are measured at cost.(19) Trade receivables and other assets Trade receivables and other assets 30 Sep 2016 30 Sep 2015 EUR million Remaining term Total Remaining term Total more than 1 year more than 1 year Trade receivables - 429.5 - 740.1 Advances and 220.5 831.9 243.2 1,086.5 loans Other receivables 94.8 374.0 89.3 454.6 and assets Total 315.3 1,635.4 332.5 2,281.2 The decrease in trade receivables and other assets results primarily fromthe sale of Hotelbeds Group. Ageing structure of the financial instruments included in trade receivables and other assets of which not impaired and overdue in the following periods EUR million Carrying of less than 30 bet- bet- more amount which days ween ween than of not 30 91 180 financi- impai- and and days al red but 90 180 instru- overdue days days ments Balance as at 30 Sep 2016 Trade receivables 429.5 176.0 119.3 24.3 15.7 16.7 Advances and loans 75.5 18.5 17.4 0.1 - 1.0 Other receivables 184.7 21.2 11.4 2.7 1.1 6.0 and assets Total 689.7 215.7 148.1 27.1 16.8 23.7 Balance as at 30 Sep 2015 Trade receivables 740.1 190.0 94.1 66.0 15.1 14.8 Advances and loans 118.5 17.7 - 0.7 0.3 16.7 Other receivables 206.1 18.2 12.2 3.9 0.4 1.7 and assets Total 1,064.7 225.9 106.3 70.6 15.8 33.2 For financial assets which are neither overdue nor impaired, the TUI Groupassumes that the borrower concerned has a good credit standing.As at 30 September 2016, trade receivables and other assets worth EUR 62.7m(previous year EUR 99.7 m) were impaired. The table below provides amaturity analysis of the impairments. Ageing structure of impairment of financial instruments included in trade receivables and other assets 30 30 Sep Sep 2015 2016 EUR million Gross Im- Net Gross Im- Net value pair- value value pair- value ment ment Trade receivables and other assets Not overdue 478.8 4.8 474.0 859.7 20.9 838.8 Overdue up to 30 days 149.9 1.8 148.1 107.1 0.8 106.3 Overdue 30 - 90 days 30.1 3.0 27.1 75.9 5.3 70.6 Overdue 91 - 180 days 18.8 2.0 16.8 22.3 6.5 15.8 Overdue more than 180 days 74.8 51.1 23.7 99.4 66.2 33.2 Total 752.4 62.7 689.7 1,164.4 99.7 1,064.7 Impairments of trade receivables and other assets developed as follows: Impairment on assets of the trade receivables and other assets category according to IFRS 7 EUR million 2015 2014 / 16 / 15 Balance at the beginning of period 99.7 100.3 Additions 10.5 16.1 Disposals 23.1 5.9 Other changes - - 24.4 10.8 Balance at the end of period 62.7 99.7 In financial year 2015 / 16 as well as in the prior year no cash inflow wasrecorded from impaired interest-bearing trade receivables and other assets.Trade receivables, advances and loans as well as other receivables andassets comprise the following items: Trade receivables EUR million 30 Sep 2016 30 Sep 2015 From third parties 415.4 712.4 From non-consolidated Group companies 1.7 1.5 From affiliates 12.4 26.2 Total 429.5 740.1 Advances and loans 30 Sep 2016 30 Sep 2015 EUR million Remaining term Total Remaining term Total more than 1 year more than 1 year Advances to 0.4 17.8 0.4 17.4 non-consolidated Group companies Advances to 6.2 6.4 0.1 0.9 affiliates Loans to 9.6 9.6 39.6 40.7 affiliates Advances to third 11.0 35.9 1.4 24.5 parties Loans to third 34.6 38.1 34.9 36.4 parties Payments on 5.4 10.9 3.0 11.7 account to affiliates Payments on 153.3 713.2 163.8 954.9 account to third parties Total 220.5 831.9 243.2 1,086.5 Payments on account mainly relate to advance payments for future tourismservices, in particular future hotel services payable by tour operators,which is customary in the industry. Other receivables and assets 30 Sep 2016 30 Sep 2015 EUR million Remaining term Total Remaining term Total more than 1 year more than 1 year Other receivables from 1.5 1.6 1.5 1.7 non-consolidated Group companies Other receivables from - 6.6 6.2 18.0 affiliates Interest deferral - 1.2 - 1.9 Other tax refund 15.4 81.6 9.9 90.4 claims Defined benefit asset 36.2 36.2 15.2 15.2 Other assets 41.7 246.8 56.5 327.4 Total 94.8 374.0 89.3 454.6 (20) Derivative financial instruments Derivative financial instruments 30 Sep 2016 30 Sep 2015 EUR million Remaining term Total Remaining term Total more than 1 more than 1 year year Third party receivables 126.8 671.4 48.1 329.1 from derivative financial instruments Derivative financial instruments are included at their fair value (marketvalue). They are mainly used to hedge our future operating business andtheir nature is detailed in the explanatory information on financialinstruments.(21) Deferred and income tax assetsThe measurement of deferred and income taxes is detailed in the section'Accounting and measurement methods'. Income tax assets EUR million 30 Sep 2016 30 Sep 2015 Deferred tax assets 344.7 330.7 Income tax assets 87.7 58.5 Total 432.4 389.2 Deferred income tax assets include EUR 328.7 m (previous year EUR 287.6 m)that is expected to be realised after more than twelve months. Individual items of deferred tax assets and liabilities recognised in the financial position 30 30 Sep Sep 2016 2015 EUR million Asset Liabi- Asset Liabi- lity lity Finance lease transactions 2.2 - - 2.2 Recognition and measurement differences for 67.6 231.9 110.7 317.7 property, plant and equipment and other non-current assets Recognition differences for receivables and 23.1 62.4 4.4 40.0 other assets Measurement of financial instruments 21.4 64.5 53.5 22.1 Measurement of pension provisions 253.5 0.1 143.2 0.8 Recognition and measurement differences for 63.1 32.0 67.4 14.1 other provisions Other transactions 85.1 54.8 64.1 80.8 Capitalised tax savings from recoverable 211.5 - 239.4 - losses carried forward Netting of deferred tax assets and - - - - liabilities 382.8 382.8 352.0 352.0 Balance sheet amount 344.7 62.9 330.7 125.7 No deferred tax assets are recognised for deductible temporary differencesof EUR 157.3 m (previous year EUR 128.2 m).No deferred tax liabilities are recognised for temporary differences of EUR58.6 m (previous year EUR 49.5 m) between the net assets and the respectivetaxable carrying amounts of subsidiaries since these temporary differencesare not expected to be reversed in the near future. Recognised losses carried forward and time limits for non-recognised losses carried forward EUR million 30 Sep 30 Sep 2016 2015 Recognised losses carried forward 1,041.0 1,184.4 Non-recognised losses carried forward 4,654.5 4,449.8 of which losses carried forward forfeitable 4.4 2.7 within one year of which losses carried forward forfeitable 83.0 62.3 within 2 to 5 years of which losses carried forward forfeitable 1.8 6.0 within more than 5 years (excluding non-forfeitable loss carryforwards) Non-forfeitable losses carried forward 4,565.3 4,378.8 Total unused losses carried forward 5,695.5 5,634.2 Losses carried forward for German companies comprise the cumulative amountof trade tax and corporation tax as well as interest carried forward inrelation to the German interest barrier. Potential tax savings totallingEUR981.7 m (previous year EUR 907.2 m) were not capitalised since the use ofthe underlying losses carried forward is unlikely to be utilised within theplanning period.In the financial year 2015 / 16, the use of losses carried forwardpreviously assessed as non-recoverable and for which no deferred tax assethad been recognised as at 30 September 2015 led to tax reductions of EUR10.7 m (previous year EUR 24.0 m). As in the prior year, no tax reductionswere realised by means of losses carried back. Development of deferred tax assets from losses carried forward EUR million 2015 / 2014 / 16 15 Capitalised tax savings at the beginning of the 239.4 135.0 year Use of losses carried forward - 15.3 - 14.4 Capitalisation of tax savings from tax losses 6.7 150.1 carried forward Write-down of capitalised tax savings from tax - 13.7 - 36.1 losses carried forward Reclassification to discontinued operation - 4.8 - 0.3 Exchange adjustments and other items - 0.8 5.1 Capitalised tax savings at financial year-end 211.5 239.4 Capitalised deferred tax assets from temporary differences and lossescarried forward that are assessed as recoverable of EUR 4.9 m (previousyearEUR 203.3 m) are covered by expected future taxable income even forcompanies that generated losses in the period under review or the prioryear.(22) Inventories Inventories EUR million 30 Sep 2016 30 Sep 2015 Marine inventory - 33.2 Airline spares and operating equipment 24.9 28.6 Real estate for sale 39.0 32.8 Other inventories 41.3 39.9 Total 105.2 134.5 Other inventories included an amount of EUR 16.1 m for consumables used inhotels (previous year EUR 16.6 m).No major reversals of inventory provisions were recognised in the financialyear 2015 / 16, nor in the prior year.The decline in the amount of inventories is mainly driven by thereclassification of the inventories related to Specialist Group to Assetsheld for sale.(23) Cash and cash equivalents Cash and cash equivalents EUR million 30 Sep 2016 30 Sep 2015 Bank deposits 2,037.6 1,641.8 Cash in hand and cheques 35.3 30.9 Total 2,072.9 1,672.7 At 30 September 2016, cash and cash equivalents of EUR 128.6 m (previousyear EUR 198.5 m) was subject to restriction on disposal. This included anamount of EUR 116.4 m for cash collateral received, which was deposited inaBelgian subsidiary by the Belgian tax authorities in the financial year2012/ 13 relating to long-standing litigation over VAT refunds for the years2001 to 2011. Without prejudice to the outcome, the purpose was to suspendthe accrual of interest for both parties. In order to collateralise apotential repayment, the Belgian government was granted a bank guarantee.Due to the bank guarantee, TUI Group's ability to dispose of the cash andcash equivalents has been restricted.(24) Assets held for sale Assets held for sale EUR million 30 Sep 2016 30 Sep 2015 Discontinued Operation Specialist Group 928.9 - Discontinued Operation LateRooms Group - 38.8 Property and hotel facilities - 0.4 Other assets 0.9 3.0 Total 929.8 42.2 In the reporting period, the Specialist Group segment was reclassified toAssets held for sale as a discontinued operation. Assets worth EUR 928.9 mexist in connection with this discontinued operation as at 30 September2016. The LateRooms Group was sold at the beginning of the financial year.For further information, refer to the section on Discontinued operations.The Hotelbeds Group segment was classified to Assets held for sale duringthe reporting period and sold on 12 September 2016.(25) Subscribed capitalThe subscribed capital of TUI AG consists of no-par value shares, eachrepresenting an identical share in the capital stock. The proportionateshare in the capital stock per no-par value share is around EUR 2.56. SinceJuly 2005, the shares have been registered shares, whose owners have beenlisted by name in the share register.The subscribed capital of TUI AG has been registered in the commercialregisters of the district courts of Berlin-Charlottenburg and Hanover. Inthe financial year under review, it rose due to the issue of 434,970 sharesresulting from the issue of employee shares. Subscribed capital thusconsisted of 587,038,187 shares at the end of the financial year. Itincreased by EUR 1.1 m to EUR 1,500.7 m. The increase recorded in the prioryear was driven by a capital increase against non-cash contribution inconnection with the merger between TUI AG and TUI Travel PLCand theconversion of bonds of TUI AG and TUI Travel PLC.As at 30 September 2016, 2,664,194 shares in TUI AG were held by anemployeebenefit trust of TUI Travel Limited.The Annual General Meeting on 9 February 2016 authorised the ExecutiveBoardof TUI AG to acquire own shares of up to 5 % of the capital stock. Theauthorisation will expire on 8 August 2017. The authorisation to acquireownshares has not been used to date.Conditional capitalThe Annual General Meeting of 9 February 2016 created conditional capitalfor the issue of bonds of EUR 150.0 m. The authorisation to issue bondswithconversion options and warrants as well as profit-sharing rights and incomebonds (with and without fixed terms) has been limited to a total nominalamount of EUR 2.0 bn and will expire on 8 February 2021.Overall, TUI AG had total conditional capital of around EUR 150.0 m(previous year EUR 120.0 m) as at 30 September 2016.Authorised capitalThe Annual General Meeting of 13 February 2013 resolved new authorisedcapital for the issue of employee shares worth EUR 10.0 m. The ExecutiveBoard of TUI AG has been authorised to use this capital in one or severaltransactions to issue employee shares against cash contribution by 12February 2018. 434,970 new employee shares were issued in the completedfinancial year so that authorised capital totals around EUR 8.3 m at thebalance sheet date.The General Meeting of 28 October 2014 resolved to create authorisedcapitalto issue new shares against non-cash contribution of EUR 18.0 m in order tobe able to service TUI Travel share awards granted by TUI Travel to itsemployees with new shares in TUI AG. The authorisation for this capitalwillexpire on 27 October 2019.The Annual General Meeting on 9 February 2016 resolved to create anauthorisation for the issue of new registered shares against cashcontribution of up to a maximum of EUR 150.0 m. The authorisation willexpire on 8 February 2021.The Annual General Meeting on 9 February 2016 also created authorisedcapital for the issue of new shares against cash or non-cash contributionofEUR 570.0 m. The issue of new shares against non-cash contribution has beenlimited to EUR 300.0 m. The authorisation for this approved capital willexpire on 8 February 2021.Unused authorised capital thus totals EUR 746.3 m at 30 September 2016(previous year EUR 337.9 m).(26) Capital reservesThe capital reserves comprise transfers of premiums. They also containamounts entitling the holders to acquire shares in TUI AG in respect ofbonds issued for conversion options and warrants. Premiums from the issueofshares due to the exercise of conversion options and warrants were alsotransferred to the capital reserves.In the period under review, capital reserves rose by EUR 4.5 m (previousyear EUR 1.2 m) due to the issue of employee shares. In the previous year,TUI AG's capital reserves rose by EUR 453.4 m due to the conversion ofconvertible bonds and by EUR 2,676.8 m due to the capital increase againstnon-cash contribution in connection with the merger between TUI AG and TUITravel PLC.(27) Revenue reservesIn the completed financial year, TUI AG paid a dividend of EUR 0.56 perno-par value share to its shareholders; the total amount paid was EUR 327.0m (previous year EUR 94.5 m). In financial year 2015 / 16, non-controllinginterest declined by EUR 13.6 m due to the payment of dividends. Theyear-on-year change is mainly driven by the payment of dividends tonon-Group shareholders in TUI Travel PLC of EUR 183.0 m made before themerger between TUI AG and TUI Travel PLC. Moreover, the interest paid onthehybrid bond issued by TUI AG had to be carried as a dividend in accordancewith IFRS rules until it was called on 24 March 2015.Existing equity-settled share-based payment transactions resulted in anincrease in equity of EUR 4.3 m. Disclosures on these long-term incentiveprogrammes are outlined in Note 42 in the section on 'Share-based payments'in accordance with IFRS 2.Moreover, an employee share trust of TUI Travel Ltd acquired shares in TUIAG in financial year 2015 / 16 in order to use them for stock option plans.The amounts used for this purpose were offset against revenue reserves asanacquisition of non-controlling interest. Equity therefore declined by EUR56.3 m. Due to the issue of shares through the stock option plans, ownshares remained largely unchanged overall. The employee benefit trust nowholds 2,664,194 shares in TUI AG.Deconsolidation effects mainly resulted from the sale of Hotelbeds Group infinancial year 2015 / 16. For more detailed information, refer to thesection 'Discontinued operations'.In financial year 2015 / 16, non-controlling interest were acquired for aconsideration of EUR 6.5 m. The carrying amount of these interest was EUR0.4 m. Acquisitions of non-controlling interest primarily includednon-controlling interest in Atraveo GmbH, Düsseldorf.In the prior year, the effects of the acquisition of non-controllinginterest primarily reflected the merger between TUI AG and TUI Travel PLC.The consideration including ancillary acquisition costs for the purchase ofthe non-controlling interest totalled EUR 3,359.7 m, while the carryingamount of the acquired interest accounted for EUR- 606.2 m. Peak AdventureTravel Group Ltd, Australia, which was split up in the prior year, waspartly carried as an acquisition of non-controlling interest. Theconsideration paid for the acquisition totalled EUR 23.4 m, while thenon-controlling interest acquired totalled EUR 42.0 m.Foreign exchange differences comprise differences from the translation ofthe financial statements of foreign subsidiaries as well as differencesfromthe translation of goodwill denominated in foreign currencies.Changes in financial instruments available for sale of EUR 31.8 m reflectthe value increase from the rise in Hapag-Lloyd share prices in financialyear 2015 / 16. More detailed information on the increase in fair values isprovided in the section 'Financial assets available for sale' in Note 18.The proportion of gains and losses from hedges used as effective hedges offuture cash flows is carried in equity in other comprehensive incomeoutsideprofit and loss in an amount of EUR 546.1 m (before tax). A reversal ofthisprovision through profit and loss takes place in the same period in whichthe hedged item has an effect on profit and loss or is no longer assessedasprobable. The considerable increase recorded in financial year 2015 / 16 ismainly driven by changes in exchange rates and in fuel prices.The re-measurement of pension obligations (in particular from actuarialgains and losses) is also included in other income in equity outside profitand loss.The revaluation reserve formed in accordance with IAS 27 (old version) inthe framework of step acquisitions of companies is retained until the dateof deconsolidation of the company concerned.(28) Use of Group profit available for distributionIn accordance with the German Stock Corporation Act, the Annual GeneralMeeting decides on the distribution of the profit reported in TUI AG'sannual financial statements. TUI AG's net profit for the year totals EUR139.9 m, which combined with retained profits brought forward of EUR 682.4m, gives profit available for distribution of EUR 822.3 m. A proposal willbe submitted to the Annual General Meeting to use the profit available fordistribution for the financial year to pay a dividend of EUR 0.63 perno-parvalue share, estimated to be worth EUR 369.8 m, and carry the amount of EUR452.5 m remaining after deduction of the dividend forward on new account.The final dividend total will depend on the number of dividend-bearingno-par value shares in issue at the date on which the resolution is adoptedby the Annual General Meeting.(29) Hybrid capitalThe subordinated hybrid capital issued by TUI AG in December 2005 with anominal value of EUR 300.0 m was redeemed in the prior year. The borrowingcosts incurred for the issue of the hybrid capital were offset againstrevenue reserves upon redemption.(30) Non-controlling interestNon-controlling interest mainly relate to RIUSA II S. A. based in Palma deMallorca, Spain. TUI's share in this hotel company remains at 50.0 %, as inthe prior year.The financial year of RIUSA II S. A. ends on 31 December and thus differsfrom TUI Group's financial year. This reporting date was determined at thecreation of the company. For the preparation of the consolidated financialstatements of TUI Group as at 30 September, consolidated financialstatements of RIUSA II Group are prepared as at TUI Group's balance sheetdate, 30 September.RIUSA II Group, recognised within the Hotels & Resorts segment, operatesowned and leased hotels and hotels operated under management contracts intourism destinations of TUI Group. Due to the contractual agreementsbetweenthe shareholders and the framework agreements with TUI Group and theimportance of TUI tour operation to the economic success of RIUSA II Group,TUI Group is able to direct decisions on the most relevant activities.RIUSAII Group is therefore fully consolidated although TUI Group only holds a 50% equity stake.The table below provides summarised financial information for RIUSA II S.A., Palma de Mallorca, Spain, the subsidiary with material non-controllinginterest. The information disclosed reflects the amounts presented in theconsolidated financial statements of the sub-group. Summarised financial information on RIUSA II S. A., Palma de Mallorca, Spain* EUR million 30 Sep 2016 30 Sep 2015 / 2015 / 16 / 2014 / 15 Current assets 336.3 294.5 Non-current assets 1,296.5 1,242.1 Current liabilities 113.9 110.3 Non-current liabilities 22.1 86.4 Revenues 796.1 715.9 Profit / loss 221.4 177.2 Other comprehensive income - 42.4 - 8.4 Cash inflow / outflow from operating 292.4 232.6 activities Cash inflow / outflow from investing - 166.8 - 99.0 activities Cash inflow / outflow from financing - 85.6 - 64.9 activities Accumulated non-controlling interest 572.6 494.1 Profit / loss attributable to 110.7 88.6 non-controlling interest Dividends attributable to 11.0 10.0 non-controlling interest * Consolidated sub-group(31) Pension provisions and similar obligationsA number of defined contribution plans and defined benefit pension plansareoperated for Group employees. Pension obligations vary, reflecting thedifferent legal, fiscal and economic conditions in each country ofoperation, and usually depend on employees' length of service and paylevels.All defined contribution plans are funded by the payment of contributionstoexternal insurance companies or funds. German employees enjoy benefits froma statutory defined contribution plan paying pensions as a function ofemployees' income and the contributions paid in. Several additionalindustrypension organisations exist for companies of the TUI Group. Once thecontributions to the state-run pension plans and private pension insuranceorganisations have been paid, the Company has no further paymentobligations. One major private pension fund is Aegon Levensverzekering N.V.operating the defined contribution pension plans for the main Dutchsubsidiaries of the TUI Group. Contributions paid are expensed for therespective period. In the period under review, the expenses for all definedcontribution plans totalled EUR 81.9 m (previous year EUR 85.8 m).Apart from these defined contribution pension plans, the TUI Group operatesdefined benefit plans, which usually entail the formation of provisionswithin the Company or investments in funds outside the Company.Within this group, MER-Pensionskasse VVaG, a private pension fund in whichGerman companies of the tourism industry are organised, represents amulti-employer plan classified as a defined benefit plan. In accordancewiththe statues of the plan, the plan participants and the employers paysalary-based contributions into the plan. There are no further obligationspursuant to the statutes of the plan; an additional funding obligation ofthe participating companies is explicitly excluded. The paid-incontributions are invested in accordance with the policies of the pensionplan unless they are used in the short term to deliver benefits. As theinvestments are pooled and are not kept separately for each participatingemployer, an allocation of plan assets to individual participatingemployersis not possible. The investment risk and the mortality risk are jointlyshared by all plan participants. Moreover, the pension fund does notprovideany information to participating companies that would allow the allocationof any over- or underfunding or TUI's participation in the plan. For thisreason, accounting for the plan in accordance with the requirements of IAS19 is not possible, and the plan is therefore classed as a definedcontribution plan. In the period under review, contributions toMER-Pensionskasse WAG totalled EUR 5.9 m (previous year EUR 5.5 m). For thenext financial year, contributions are expected to remain at that level.TUI Group's major pension plans recognised as defined benefit plans existinGermany and the UK. By far the largest pension plans are operated by theGroup's tour operators in the UK. They accounted for 74.6 % (previous year75.3 %) of TUI Group's total obligations at the balance sheet date. Germanplans account for a further 21.3 % (previous year 20.2 %).In the UK, the following major pension plans linking pension payments tofinal salary and length of service are operated. The final remuneration tobe taken into account is capped. Material defined benefit plans in Great Britain Scheme name Status BAL Scheme closed TUI UK Scheme closed TAPS Scheme closed Almost all defined benefit plans in the UK are funded externally. Under UKlaw, the employer is obliged to ensure sufficient funding so that planassets cover the pension payments to be made and the administrative costsofthe funds. The pension funds are managed by independent trustees. Thetrustees comprise independent members but also beneficiaries of the planandemployer representatives. The trustees are responsible for the investmentoffund assets, taking account of the interests of plan members, but they alsonegotiate the level of the contributions to the fund to be paid by theemployers, which constitute minimum contributions to the funds. To thatend,actuarial valuations are made every three years by actuaries commissionedbythe trustees. The annual contributions to be paid to the funds in order tocover any shortfalls were last defined in September 2016. On top of a fixedannual contribution, a certain percentage of the pensionable remunerationofplan members has to be paid into the plan. In order to account for theincrease in underfunding, in particular driven by the drop in interestrates, one-off payments linked to the occurrence of certain events wereagreed. As a result, an additional £ 150 m (previous year EUR 174.2 m) werepayable to the funds upon the sale of Hotelbeds Group in the period underreview.By contrast, defined benefit plans in Germany are unfunded. The companyassumes the obligation for payments of company pensions when thebeneficiaries reach the legal retirement age. The amount of the pensionpaidusually depends on the remuneration received by the staff members at theretirement date. Pension obligations usually include surviving dependants'benefits and invalidity benefits. Material defined benefit plans in Germany Scheme name Status Versorgungsordnung TUI AG closed Versorgungsordnung Hapag-Lloyd Fluggesellschaft GmbH open Versorgungsordnung TUI Deutschland GmbH closed Versorgungsordnung TUI Beteiligungs GmbH closed Versorgungsordnung Preussag Immobilien GmbH closed In the period under review, defined benefit pension obligations createdtotal expenses of EUR 83.0 m. Overall, expenses declined by EUR 7.9 myear-on-year largely due to lower net interest expenses. Pension costs for defined benefit obligations EUR million 2015 / 2014 / 16 15 Current service cost for employee service in the 57.1 59.1 period Curtailment gains - 1.7 Net interest on the net defined benefit 27.6 34.4 liability Past service cost - 1.7 - 0.9 Total 83.0 90.9 Provisions for pension obligations are established for benefits payable inthe form of retirement, invalidity and surviving dependants' benefits.Provisions are exclusively formed for defined benefit schemes under whichthe Company guarantees employees a specific pension level, includingarrangements for early retirement and temporary assistance benefits. Defined benefit obligation recognised on the balance sheet EUR million 30 Sep 2016 30 Sep 2015 Total Total Present value of funded obligations 3,185.9 2,711.0 Fair value of external plan assets 2,676.0 2,302.1 Deficit of funded plans 509.9 408.9 Present value of unfunded pension 904.8 722.8 obligations Defined benefit obligation recognised on 1,414.7 1,131.7 the balance sheet of which Overfunded plans in other assets 36.2 15.2 Provisions for pensions and similar 1,450.9 1,146.9 obligations of which current 40.6 32.4 of which non-current 1,410.3 1,114.5 Re-measurements (in particular actuarial gains and losses) are immediatelyoffset against equity in the year in which they arise. TUI Group's totalpension obligations are therefore fully recognised in the statement offinancial position net of fund assets.Where the defined benefit pension obligations are not unfunded, they arefunded externally. This type of funding of pension obligations is common inthe UK. For funded pension plans, the provision carried only covers theshortfall in coverage between plan assets and the present value of benefitobligations.Where plan assets exceed funded pension obligations, taking account of adifference due to past service cost, and where at the same time there is anentitlement to reimbursement or reduction of future contributions to thefund, the excess is recognised in conformity with the cap defined by IAS19.At 30 September 2016, defined benefit assets of EUR 36.2 m (previous yearEUR 15.2 m) were shown in other assets. Development of defined benefit obligations EUR million Present value Fair value of Total of obligation plan assets Balance as at 1 Oct 2015 3,433.8 - 2,302.1 1,131.7 Current service cost 57.1 - 57.1 Past service cost - 1.7 - - 1.7 Curtailments and settlements - - - Interest expense (+) / interest 108.2 - 80.6 27.6 income (-) Pensions paid - 160.5 125.2 - 35.3 Contributions paid by employer - - 300.2 - 300.2 Contributions paid by employees 1.5 - 1.5 - Remeasurements 1,076.7 - 483.4 593.3 due to changes in financial 1,083.3 - 1,083.3 assumptions due to changes in demographic - 1.1 - - 1.1 assumptions due to experience adjustments - 5.5 - - 5.5 due to return on plan assets not - - 483.4 - 483.4 included in group profit for the year Exchange differences - 420.8 363.8 - 57.0 Other changes - 3.6 2.8 - 0.8 Balance as at 30 Sep 2016 4,090.7 - 2,676.0 1,414.7 Development of defined benefit obligations EUR million Present value Fair value of Total of obligation plan assets Balance as at 1 Oct 2014 3,254.5 - 1,980.0 1,274.5 Current service cost 59.1 - 59.1 Past service cost - 0.9 - - 0.9 Curtailments and settlements - 2.1 0.4 - 1.7 Interest expense (+) / interest 114.4 - 80.0 34.4 income (-) Pensions paid - 132.7 99.6 - 33.1 Contributions paid by employer - - 149.8 - 149.8 Contributions paid by employees 1.2 - 1.2 - Remeasurements - 6.6 - 75.6 - 82.2 due to changes in financial 20.5 - 20.5 assumptions due to changes in demographic - 30.2 - - 30.2 assumptions due to experience adjustments 3.1 - 3.1 due to return on plan assets not - - 75.6 - 75.6 included in group profit for the year Exchange differences 146.9 - 115.5 31.4 Other changes - - - Balance as at 30 Sep 2015 3,433.8 - 2,302.1 1,131.7 In the period under review, the present value of the pension obligationroseby EUR 656.9 m to EUR 4,090.7 m, primarily due to the significant fall ininterest rates in the Eurozone and the UK.TUI Group's fund assets rose significantly by EUR 373.9 m in the periodunder review. Apart from contributions made by UK subsidiaries in order toreduce the existing funding gap, the increase was driven by higher assetprices, in particular, of fixed-interest bonds linked to the lower interestrate. Composition of pension assets at the balance sheet date 30 Sep 2016 30 Sep 2015 Quoted market Quoted market price in an price in an active market active market EUR million yes no yes no Fair value of fund 1,633.9 1,042.1 1,560.2 741.9 assets at end of period of which equities 727.5 - 692.0 - of which 104.9 - 292.0 - government bonds of which corporate 301.8 - 274.8 - bonds of which liability 489.2 - 250.0 - driven investments of which property - 108.2 - 138.0 of which growth - 83.3 - 89.3 funds of which insurance - 73.2 - 63.7 policies of which - 65.6 - 63.0 catastrophe bonds of which cash - 585.2 - 246.4 of which other 10.5 126.6 51.4 141.5 At the balance sheet date, as in the prior year, fund assets did notcomprise any direct investments in financial instruments issued by TUI AGorits consolidated subsidiaries or any property owned by the Group. Forfundedplans, investment in passive index tracker funds may entail a proportionateinvestment in Group-owned financial instruments.Pension obligations are measured on the basis of actuarial calculationsbased on country-specific parameters and assumptions. The obligations underdefined benefit plans are calculated on the basis of the internationallyaccepted projected unit credit method, taking account of expected futureincreases in salaries and pensions. Actuarial assumptions 30 Sep 2016 Percentage p. a. Germany Great Other Britain countries Discount rate 1.0 2.3 1.4 Projected future salary 2.5 2.7 1.4 increases Projected future pension 1.8 3.6 1.3 increases 30 Sep 2015 Percentage p. a. Germany Great Other Britain countries Discount rate 2.25 3.8 1.9 Projected future salary 2.5 2.7 1.9 increases Projected future pension 1.75 3.6 1.4 increases The interest rate applicable in discounting the provision for pensions isbased on an index for corporate bonds adjusted for securities alreadydowngraded and under observation by rating agencies as well as subordinatebonds in order to meet the criterion for high quality bonds (ratedAA orhigher) required under IAS 19. In order to cover a correspondingly broadmarket, an index partly based on shorter-term bonds is used (e. g. iBoxxEURCorporates AA 7-10 for the Eurozone). The resulting yield structure isextrapolated on the basis of the yield curves for almost risk-free bonds,taking account of an appropriate risk mark-up reflecting the term of theobligation.Apart from the parameters described above, a further key assumption relatesto life expectancy. In Germany, the Heubeck reference tables 2005 G areusedto determine life expectancy, as in the prior year. In the UK, the S1NxAbase tables are used, adjusted to future expected increases on the basis ofthe Continuous Mortality Investigation (CMI) 2015. The pension in paymentescalation formulae depend primarily on the pension plan concerned. Apartfrom fixed rates of increase, there are also a number of inflation-linkedpension adjustment mechanisms in different countries.Changes in the key actuarial assumptions mentioned above would lead to thechanges in defined benefit obligations presented below. The methodologyusedto determine sensitivity corresponds to the method used to calculate thedefined benefit obligation. The assumptions were amended in isolation eachtime; actual interdependencies between the assumptions were not taken intoaccount. The effect of the increase in life expectancy by one year iscalculated by means of a reduction in mortality due to the use of theHeubeck tables 2005 G for pension plans in Germany. In the UK, an extrayearis added to the life expectancy determined on the basis of the mortalitytables. Sensitivity of the defined benefit obligation due to changed actuarial assumptions 30 Sep 30 Sep 2016 2015 EUR million + 50 - 50 + 50 - 50 Basis Basis Basis Basis points points points points Discount rate - 415.5 + 484.7 - 292.5 + 330.5 Salary increase + 32.2 - 30.7 + 23.8 - 23.0 Pension increase + 144.8 - 137.3 + 110.3 - 103.5 + 1 + 1 year year Life expectancy + 172.9 - + 114.6 - The weighted average duration of the defined benefit obligations totalled21.7 years (previous year 18.5 years) for the overall Group. In the UK, theweighted duration was 23.5 years (previous year 19.7 years), while it stoodat 16.6 years (previous year 15.1 years) in Germany.Fund assets are determined on the basis of the fair values of the fundsinvested as at 30 September 2016. The interest rate used to determine theinterest income from the assets of external funds is identical with thediscount rate used for the defined benefit obligation.For the forthcoming financial year, the companies of TUI Group are expectedto contribute around EUR 109.6 m (previous year EUR 128.5 m) to pensionfunds and pay pensions worth EUR 40.6 m (previous year EUR 32.4 m) forunfunded plans. For funded plans, payments to the recipients are fully madefrom fund assets so that TUI Group does not record a cash outflow as aresult.TUI Group's defined benefit plans entail various risks, some of which mayhave a substantial effect on the Company.Investment riskThe investment risk plays a major role, in particular for the large fundedplans in the UK. Although shares usually outperform bonds in terms ofproducing higher returns, they also entail stronger volatility of balancesheet items and the risk of short-term shortfalls in coverage. In order tolimit this risk, the trustees have built a balanced investment portfolio tolimit the concentration of risks.Interest rate riskThe interest rate influences in particular unfunded schemes in Germany as adecline in interest rates leads to an increase in the defined benefitobligations. Accordingly, an increase in the interest rate leads to areduction in the defined benefit obligations. Funded plans are lessstronglyaffected by this development as the performance of the interest-bearingassets included in plan assets regularly dampens the effects.Inflation riskAn increase in the inflation rate normally increases the obligation inpension schemes linked to the final salary of beneficiaries as inflationcauses an increase in the projected salary increases. At the same time,inflation-based pension increases included in the plan also rise. Theinflation risk is reduced through the use of caps and collars. Moreover,thelarge pension funds in the UK hold inflation-linked assets, which alsopartly reduce the risk from a significant rise in inflation.Longevity riskAn increasing life expectancy increases the expected benefit duration ofthepension obligation. This risk is countered by using regularly updatedmortality data in calculating the present values of the obligation.Currency riskFor the TUI Group, the pension schemes entail a currency risk as mostpension schemes are operated in the UK and therefore denominated insterling. The risk is limited as the currency effects on the obligation andthe assets partly offset each other. The currency risk only relates to theexcess of pension obligations over scheme assets.(32) Other provisions Development of provisions in the financial year 2015/16 EUR million Balance Changes with Usage Re- Addi- Balance as at 30 no effect on ver- tions as at 30 Sep 2015 profit and sal Sep 2016 loss* Maintenance 563.7 - 50.0 91.9 21.2 213.0 613.6 provisions Risks from 48.1 - 5.0 12.8 5.2 5.9 31.0 onerous contracts Restructuring 41.9 - 3.7 17.4 1.7 4.9 24.0 provisions Provisions for 38.1 0.3 9.9 3.3 10.4 35.6 other personnel costs Provisions for 27.4 5.1 1.8 4.2 6.0 32.5 other taxes Provisions for 40.5 - 3.0 1.1 5.3 41.7 environmental protection Provisions for 109.1 - 18.3 13.6 12.9 15.0 79.3 Litigation Miscellaneous 340.9 - 40.4 62.4 32.4 114.4 320.1 provisions Other 1,209.7 - 112.0 212.8 82.0 374.9 1,177.8 provisions * Reclassifications, transfers, exchange differences and changes in thegroup of consolidated companies.Provisions for external maintenance primarily relate to contractualmaintenance, overhaul and repair requirements for aircraft, engines andother specific components arising from aircraft operating lease contracts.Measurement of these provisions is based on the expected cost of the nextmaintenance event, estimated on the basis of current prices, expected priceincreases and manufacturers' data sheets. In line with the arrangements ofthe individual contracts and the aircraft model concerned, additions arerecognised on a prorated basis in relation to flight hours, the number offlights or the length of the complete maintenance cycle.Provisions for onerous contracts principally relate to unfavourable leasecontracts. The decrease in the financial year under review is mainly drivenby the utilisation of these provisions.Restructuring provisions primarily relate to restructuring projects inGermany and the UK, for which detailed, formal restructuring plans havebeendrawn up and communicated to the parties concerned. The restructuringprovisions included at the balance sheet date of EUR 24.0 m (previous yearEUR 41.9 m) largely relate to benefits for employees in connection with thetermination of employment contracts.Provisions for personnel costs comprise provisions for jubilee benefits andprovisions for share-based payment schemes with cash compensation inaccordance with IFRS 2. Information on these long-term incentive programmesis presented in Note 42 in the section on Share-based payments inaccordancewith IFRS 2.Provisions for environmental protection measures primarily relate tostatutory obligations to remediate sites contaminated with legacy wastefromformer mining and metallurgical activities. Estimating the future cost ofremediating contaminated sites entails many uncertainties, which may alsoimpact the value of provisions. The measurement is based on assumptionsabout future costs derived from empirical values, conclusions fromenvironmental expert reports and the legal assessment of the Group as wellas the expected duration of the remediation measures. Unwinding theseobligations under environmental law takes a long time and constitutes atechnically complex process. Accordingly, there are considerableuncertainties about the actual timeframe and the specific amount ofexpensesrequired, so that actual costs may exceed the provisions carried.Provisions for litigation are established in relation to existing lawsuits.Most provisions relate to demands for compensation from the containerterminal at Zeebrugge and various other individual lawsuits. Takenindividually, none of the lawsuits has a significant influence onTUIGroup'seconomic position.Changes in other provisions outside profit and loss primarily relate tochanges in the group of consolidated companies, foreign exchangedifferencesand reclassifications within other provisions.Where the difference between the present value and the settlement value ofaprovision is material for the measurement of a non-current provision as atthe balance sheet date, the provision is recognised at its present value inaccordance with IAS 37. The discount rate to be applied should take accountof the specific risks of the provision and of future price increases. Thiscriterion applies to some items contained in TUI Group's other provisions.Additions to other provisions comprise an interest portion of EUR 6.7 m(previous year EUR 4.6 m), recognised as an interest expense. Terms to maturity of other provisions 30 Sep 2016 30 Sep 2015 EUR million Remaining term Total Remaining term Total more than 1 year more than 1 year Maintenance 534.8 613.6 455.8 563.7 provisions Risks from 18.2 31.0 23.3 48.1 onerous contracts Restructuring - 24.0 0.2 41.9 provisions Provisions for 24.3 35.6 23.6 38.1 other personnel costs Provisions for 24.3 32.5 22.3 27.4 other taxes Provisions for 37.6 41.7 38.4 40.5 environmental protection Provisions for 51.1 79.3 50.5 109.1 litigation Miscellaneous 112.7 320.1 132.2 340.9 provisions Other provisions 803.0 1,177.8 746.3 1,209.7 (33) Financial liabilities Financi- al liabili- ties 30 30 Sep Sep 2016 2015 Remai- Remai- ning ning term term EUR up to 1- 5 more Total up to 1- 5 more Total million 1 years than 5 1 years than 5 year years year years Bonds 306.5 - - 306.5 - 293.7 - 293.7 Liabili- 47.0 169.4 194.4 410.8 61.0 207.3 225.8 494.1 ties to banks Liabili- 92.2 349.0 790.5 1,231.7 68.9 280.6 632.5 982.0 ties from finance leases Financi- 6.6 - - 6.6 5.2 - - 5.2 al liabili- ties due to non-con- solida- ted Group compa- nies Financi- 8.0 - - 8.0 8.0 - - 8.0 al liabili- ties due to affilia- tes Other 77.4 0.1 - 77.5 90.0 13.4 - 103.4 financi- al liabili- ties Total 537.7 518.5 984.9 2,041.1 233.1 795.0 858.3 1,886.4 Non-current financial liabilities decreased year-on-year by EUR 149.9 m toEUR 1,503.4 m as at the balance sheet date. The reduction resulted from theexpected refinancing of bonds issued in September 2014. The carrying amountof the bond of EUR 306.5 m was therefore reclassified to current financialliabilities. In addition the liabilities to banks reduced by EUR 69.3 m.Thedecline is partly offset by an increase in liabilities from finance leasesof EUR 226.4 m. The increase is mainly driven by the finance lease forcruise ship Discovery and an aircraft in Q3 2015 / 16.Current liabilities rose by EUR 304.6 m to EUR 537.7 m year-on-year as at30September 2016. Fair values and carrying amounts of the bonds issued at 30 Sep 2016 30 30 Sep Sep 2016 2015 EUR million Issu- Nomi- Nomi- Inte- Stock Carry- Stock Carry- er nal nal rest mar- ing mar- ing value value rate ket amoun- ket amoun- initi- out- % p. value t value t al stan- a. ding 2014 / 19 TUI 300.0 300.0 4.500 308.3 306.5 314.4 293.7 bond AG Total 308.3 306.5 314.4 293.7 On 26 September 2014, TUI AG issued a fixed-interest bond with a coupon of4.5 % p.a. with a nominal value of EUR 300.0 m. The bond was originally tomature on 1 October 2019. It can be redeemed ahead of maturity date from 1October 2016. At the balance sheet date, it was expected that TUI was goingto use its redemption right and redeem the bond at short notice at aredemption price of 102.25 % per bond as part of a refinancing scheme.(34) Trade accounts payable Trade payables EUR million 30 Sep 2016 30 Sep 2015 To third parties 2,450.6 3,181.2 To non-consolidated Group companies 1.0 5.8 To affiliates 25.3 37.2 Total 2,476.9 3,224.2 The decrease in trade payables results primarily from the sale of HotelbedsGroup.(35) Derivative financial instruments Derivative financial instruments 30 30 Sep Sep 2016 2015 Remai- Remai- ning ning term term EUR million up to 1- 5 more Total up to 1- 5 more Total 1 year- than 5 1 year- than 5 year s years year s years Liabilities 249.6 27.5 - 277.1 388.2 78.5 - 466.7 from derivative financial instruments to third parties Derivative financial instruments are included at their fair values (marketvalues). They mainly serve to hedge future business operations and aredetailed in the explanatory information on financial instruments.(36) Deferred and current tax liabilities Deferred and current tax liablities EUR million 30 Sep 2016 30 Sep 2015 Deferred tax liabilities 62.9 125.7 Current tax liabilities 218.2 194.6 Total 281.1 320.3 Deferred tax liabilities include an amount of EUR 49.2 m (previous year EUR105.5 m) to be realised after more than twelve months.(37) Other liabilities Other liabilities 30 Sep 30 Sep 2016 2015 Remai- Remai- ning ning term term EUR million up to 1 1- 5 Total up to 1 1- 5 Total year years year years Other liabilities due 7.5 - 7.5 3.6 - 3.6 to non-consolidated Group companies Other liabilities due 13.3 5.8 19.1 29.1 8.0 37.1 to affiliates Other liabilities 27.8 - 27.8 41.9 - 41.9 relating to other taxes Other liabilities 45.7 - 45.7 47.2 - 47.2 relating to social security Other liabilities 237.8 17.1 254.9 273.4 13.8 287.2 relating to employees Other liabilities 8.5 - 8.5 4.2 - 4.2 relating to members of the Boards Advance payments 2,301.3 - 2,301.3 2,568.3 13.5 2,581.8 received Other miscellaneous 192.4 64.1 256.5 205.0 25.7 230.7 liabilities Other liabilities 2,834.3 87.0 2,921.3 3,172.7 61.0 3,233.7 Deferred income 38.1 73.1 111.2 74.6 75.2 149.8 Total 2,872.4 160.1 3,032.5 3,247.3 136.2 3,383.5 The decrease in other liabilities results primarily from the sale ofHotelbeds Group and the classification of Specialist Group as discontinuedoperation.(38) Liabilities related to assets held for sale Liabilities related to assets held for sale EUR million 30 Sep 30 Sep 2016 2015 Discontinued Operation Specialist Group 472.3 - Discontinued Operation LateRooms Group - 31.5 Total 472.3 31.5 For more detailed information, reference is made to the section on'Discontinued operations'.(39) Contingent liabilitiesAs at 30 September 2016, contingent liabilities amount to EUR 326.1 m(previous year EUR 364.4 m). Contingent liabilities are reported at anamount representing the best estimate of the potential expenditure thatwould be required to meet the potential obligation as at the balance sheetdate. Contingent liabilities as at 30 September 2016 are principallyattributable to the granting of guarantees for the benefit of Hapag-LloydAGand TUI Cruises GmbH for collateralised ship financing schemes. Theyear-on-year decline versus 30 September 2015 mainly results from thereturnof guarantees and from redemption payments, which more than offset theincrease resulting from contingent liabilities newly entered into.During financial year 2011 / 12, the German tax administration issued adecree on the interpretation of the trade tax act, amended with effect fromfinancial year 2008. This decree, only binding for the tax administration,is interpreted by the German tax administration as indicating that expensesof German tour operators for the purchase of hotel beds are not fullydeductible in determining the basis for the assessment of trade tax. TUIdoes not share that view, in particular as hotel purchasing contracts aremixed contracts also covering catering, cleaning, entertaining guests andother services characterising the purchase service.On 4 February 2016 the Münster fiscal court agreed with the interpretationof the German tax administration in the case of a third party touroperator.To recognise the increased risk compared to 30 September 2015 income taxliabilities amounting to EUR 44.4 m were recognised at 30 September 2016.(40) LitigationNeither TUI AG nor any of its subsidiaries are involved in pending orforeseeable court or arbitration proceedings which might have a significantimpact on their economic position as at 30 September 2016 or futureperiods.This also applies to actions claiming warranty, repayment or any othercompensation in connection with the divestment of subsidiaries and businessunits over the past few years. As in previous years, the respective Groupcompanies recognised adequate provisions, partly covered by expectedinsurance benefits, to cover all potential financial charges from court orarbitration proceedings.In 1999, the operator of the container terminal in Zeebrugge Belgium filedan action for damages against CP Ships Ltd., part of TUI Group, and some ofits subsidiaries for an alleged breach of contract in connection withswitching the Belgian port of call from Zeebrugge to Antwerp. Followingfirst oral proceedings in September 2013, the court ruled against twosubsidiaries of CP Ships Ltd. in October 2013 and dismissed the actionagainst all other defendants (including CP Ships Ltd.). Both parties haveappealed so that the action is now only pending against the twosubsidiariesof CP Ships Ltd. and CP Ships Ltd. itself. Moreover, the CP Ships companieswould have rights of recourse against solvent third parties in the event ofan adverse final judgment.(41) Other financial commitments Nomi- nal and fair va- lues of other finan- cial com- mit- ments 30 30 Sep Sep 2016 2015 Remai- Remai- ning ning term term EUR up to 1- 5 more Total up to 1- more Total milli- 1 years than 5 1 5 than 5 on year years year ye- years ar- s Order 657.1 2,929.7 1,199.9 4,786.7 275.1 1,- 1,682.8 3,927.7 com- 96- mit- 9.- ments 8 in re- spect of capi- tal expen- di- ture Other 68.1 45.9 - 114.0 39.2 75- - 114.4 finan- .2 cial com- mit- ments Total 725.2 2,975.6 1,199.9 4,900.7 314.3 2,- 1,682.8 4,042.1 04- 5.- 0 Fair 718.0 2,888.1 1,105.1 4,711.2 307.5 1,- 1,399.5 3,619.9 value 91- 2.- 9 The fair value of other financial commitments was determined by means ofdiscounting future expenses using a customary market interest rate of 1.00%p. a. (previous year 2.25 % p. a.). If the previous year's interest rate of2.25 % had been applied, the fair value would have been EUR 220.3 m lower.Order commitments in respect of capital expenditure relate almostexclusively to Tourism and increased by EUR 859.0 m year-on-year as at 30September 2016. This was primarily due to new order commitments foraircrafts and aircraft equipment. Other significant increases include neworders for cruise ships and higher levels of hotel construction projects.The increase was partly offset by foreign exchange effects for liabilitiesdenominated in non-functional currencies. F- i- n- a- n- c- i- a- l c- o- m- m- i- t- m- e- n- t- s f- r- o- m o- p- e- r- a- t- i- n- g l- e- a- s- e- , r- e- n- t- a- l a- n- d c- h- a- r- t- e- r c- o- n- t- r- a- c- t- s 30 30 Sep Sep 2016 2015 Remai- Remai- ning ning term term E- up to 1- 5 5- 10 more Total up to 1- 5 5- 10 more T- U- 1 years years than 1 years years than o- R year 10 year 10 t- m- years years a- i- l l- l- i- o- n A- 391.7 1,125- 368.9 - 1,886.3 401.4 1,219- 508.6 15.2 2- i- .7 .5 ,- r- 1- c- 4- r- 4- a- .- f- 7 t H- 242.3 411.9 67.7 10.0 731.9 231.9 462.4 90.9 8.4 7- o- 9- t- 3- e- .- l 6 c- o- m- p- l- e- x- e- s T- 67.9 124.8 30.4 6.0 229.1 74.1 143.1 38.7 7.8 2- r- 6- a- 3- v- .- e- 7 l a- g- e- n- c- i- e- s A- 43.4 108.7 64.7 54.4 271.2 54.6 129.7 76.1 67.1 3- d- 2- m- 7- i- .- n- 5 i- s- t- r- a- t- i- v- e b- u- i- l- d- i- n- g- s S- 99.6 104.7 0.3 - 204.6 96.9 97.6 0.5 - 1- h- 9- i- 5- p- .- s- 0 , y- a- c- h- t- s a- n- d m- o- t- o- r b- o- a- t- s O- 22.5 26.1 8.9 56.8 114.3 26.8 26.9 8.8 56.3 1- t- 1- h- 8- e- .- r 8 T- 867.4 1,901- 540.9 127.2 3,437.4 885.7 2,079- 723.6 154.8 3- o- .9 .2 ,- t- 8- a- 4- l 3- .- 3 F- 858.7 1,846- 499.6 115.2 3,319.6 866.1 1,944- 605.7 123.9 3- a- .1 .9 ,- i- 5- r 4- v- 0- a- .- l- 6 u- e The fair value of financial commitments from lease, rental and charteragreements was determined by means of discounting future expenses using astandard market interest rate of 1.00 % p. a. (previous year 2.25 % p. a.).If the previous year's interest rate of 2.25 % p. a. had been applied, thefair value would have been EUR 137.6 m lower.The commitments from lease, rental and charter agreements exclusivelyrelateto leases that do not transfer all the risks and rewards of ownership oftheassets to the companies of the TUI Group in accordance with IFRS rules(operating leases).Operating leases for aircraft generally do not include a purchase option.Current lease payments usually do not include any maintenance costs. Thebasic lease term is usually around 8 years on average.The decrease in commitments compared to 30 September 2015 can largely beexplained by a reduction of lease obligations for aircraft. Increasesresulting from the commission of several aircraft were off-setsignificantlyby decreases caused by low levels of lease extensions. Commitments forhotelleases reduced as several contracts were re-negotiated during the year andobligations for administrative buildings decreased as commitments for theprior year included amounts from Hotelbeds Group, which are no longerincluded in the current year. A further decline was caused by foreignexchange effects for liabilities denominated in non-functional currencies.(42) Share-based payments in accordance with IFRS 2Multi-Annual bonus paymentThe long-term incentive programme for Board members is based on phantomshares. In each financial year, a new period of performance measurementscommences, spanning the current plus the following three financial years.Asa result, each performance measurement period has a general term of fouryears. All Board members have their individual target amount defined intheir service contract. This is translated at the beginning of eachperformance measurement period into phantom shares based on the averageprice of TUI AG shares ('preliminary number of phantom shares'). Theaverageshare price is calculated based on the share prices during the 20 dayspriorto the beginning of any financial year. The entitlement under the long-termincentive programme arises upon completion of the four-year performanceperiod.Upon the completion of the four-year performance period, the preliminarynumber of phantom shares is multiplied by the degree of target achievement.This degree is determined by the rank achieved by TUI AG when comparing thetotal shareholder return (TSR) of companies listed in the 'Dow Jones Stoxx600 Travel & Leisure' index. The rank is subsequently translated into apercentage, which is the degree of target achievement. If the degree oftarget achievement is less than 25 %, no preliminary phantom shares areremunerated. If the degree of target achievement exceeds 25 %, it ismultiplied by the number of preliminary phantom shares granted, subject toacap of 175 %. At the end of the four-year performance period, the number ofphantom shares determined in this way is multiplied by the average price(20trading days) of TUI AG shares, and the resulting amount is automaticallypaid out in cash. The maximum amount payable under the long-term incentiveprogramme has been capped for each individual.If the condition mentioned above is met, upon expiry of the performanceperiod, the awards are automatically exercised. If the conditions are notmet, the awards are forfeited. The service period will be restricted to theend of the employment period if plan participants leave the Company, aslongas employment is not terminated due to a significant reason within thesphere of responsibility of the participant or by the participant withoutcause.Stock option planThe stock option plan was closed during financial year 2015 / 16. The lasttranche was granted in February 2016. Stock options already granted underthe plan are exercisable in accordance with the plan rules described below.Bonuses were granted to Group executives entitled to receive a bonus; thebonuses were translated into phantom shares in TUI AG on the basis of anaverage share price. The phantom shares were calculated on the basis ofGroup earnings before interest, taxes and amortisation of goodwill (EBITA).The translation into phantom shares was based on the average share price ofthe TUI share on the 20 trading days following the Supervisory Boardmeetingat which the annual financial statements were approved. The number ofphantom shares granted in a financial year was therefore only determined inthe subsequent year. Following a lock-up period of two years, theindividualbeneficiaries are free to exercise their right to cash payment from thisbonus within three years. Following significant corporate news, theentitlements have to be exercised within defined timeframes. The lock-upperiod is not applicable if a beneficiary leaves the Company; in that case,the entitlements have to be exercised in the next time window. The level ofthe cash payment depends on the average share price of the TUI share over aperiod of 20 trading days after the exercise date. There are no absolute orrelative return or share price targets. A cap has been agreed forexceptional, unforeseen developments. Since the strike price is EUR 0.00andthe incentive programme does not entail a vesting period, the fair valuecorresponds to the intrinsic value and hence the market price at thebalancesheet date. Accordingly, the fair value of the obligation is determined bymultiplying the number of phantom shares with the share price at therespective reporting date.Performance Share Plan (PSP)After the termination of the Stock option plan, a new scheme was introducedfor applicable Group executives. The scheme conditions are harmonised withthe multi-annual bonus plan of the Board Members with the notable exceptionof a three year performance period instead of four years.The multi-annual bonus, stock option plan and PSP schemes are recognised aspayments with cash compensation and are granted with an exercise price ofEUR 0.00. The personnel expense is recognized upon actual delivery ofservice according to IFRS 2 and is therefore split over a period of time.According to IFRS 2, all contractually granted entitlements from the PSPhave to be accounted for, irrespective of whether and when they areactuallyawarded. The phantom shares granted during financial year 2015 / 16 areawarded pro rata upon actual delivery of service. Phantom shares developedas follows for the above remuneration schemes. Development of phantom shares Number of Present value EUR shares million Balance as at 30 Sep 2014 1,181,042 14.0 Phantom shares granted 779,616 9.7 Phantom shares exercised 497,970 8.3 Phantom shares forfeited 69,116 0.8 Measurement results - 8.2 Balance as at 30 Sep 2015 1,393,572 22.8 Phantom shares granted 4,301,851 59.1 Phantom shares exercised 451,455 5.9 Phantom shares forfeited - - Measurement results - - 9.4 Balance as at 30 Sep 2016 5,243,968 66.6 From all granted phantom shares, during financial year 2015 / 16 394,363phantom shares have been awarded.In financial year 2015 / 16, personnel expenses due to share-based paymentschemes with cash compensation of EUR 4.5 m (2014 / 15: EUR 8.0 m) wererecognised through profit and loss.As at 30 September 2016 provisions relating to entitlements under theselong-term incentive programmes totaled EUR 13.4 m and further EUR 1.9 mwereincluded as liabilities (previous year provisions of EUR 15.2 m and EUR 1.5m liabilities). Within the stock option plan 216,698 phantom shares (valueequivalent to EUR 2.8 m) vested as at 30 September 2016.The fair value of services received in return for phantom shares grantedwasmeasured by reference to the fair value of the underlying equityinstruments. The fair value at the date the share awards were granted isusually estimated using a binominal methodology, except where there is amarket-based performance condition attached to vesting. In that case aMonteCarlo simulation is used for the estimate. Information relating to fair values of phantom shares granted 2015 / 16 Fair values at measurement date (scaled to EUR 0.75 to 1.73 1)EUR Share priceEUR 12.69 Expected volatility% 31.11 46.40 to Award lifeyears 1 to 16.75 Risk free interest rate% - 0.72 - to 0.69 Employee sharesTUI AG offers shares at preferential conditions for purchase by eligibleemployees in Germany and some European countries. The purchase entails alock-up period of two years. In financial year 2015 / 16, a total of181,280employee shares that employees had subscribed to in the prior year wereissued. The subscription period for employee shares in financial year 2015/16 expired on 30 June 2016. Employees subscribed to 253,690 employee shareswhich were issued in September 2016. Personnel costs recognised throughprofit and loss, i.e. the difference between the current share price as atthe balance sheet date and the reduced purchase price, amount to EUR 0.8 m.Share-based payment schemes in TUI AG subsidiariesThe three principal schemes below are all closed to new participants.Eligible participants are now included in the TUI AG phantom schemes,details of which are provided above.Certain beneficiaries (except for the Executive Board members) wereeligibleto receive awards under the three remuneration schemes described below.Prior to the merger between TUI Travel PLC and TUI AG, the schemes operatedby TUI Travel PLC businesses were equity-settled and all outstanding awardsremain equity-settled. All awards granted under the schemes after themergerwill be settled in cash.The three principal share-based payment schemes linked executiveremuneration to the future performance of the company are: a PerformanceShare Plan (PSP), a Deferred Annual Bonus Scheme (DABS) and a DeferredAnnual Bonus Long-Term Incentive Scheme (DABLIS). These incentive schemeswere offered to participants free of charge and entail both lock-up periodsand performance conditions.The share awards of all remuneration schemes will only vest if the averageannual return on invested capital (ROIC) is at least equal to the averageweighted average cost of capital (WACC) over a period of three years. Ifthis condition is fulfilled, the number of vesting awards are determined asa function of the fulfilment of the following performance conditions.Performance share plan (PSP)Up to 50 % of these awards granted will vest based on growth in the Group'sreported earnings per share (EPS) in excess of growth in the UK RetailPriceIndex. Up to 25 % of the awards will vest based on the Group's totalshareholder return (TSR) performance relative to an average of the TSRperformance of an index of other capital market-orientated travel andtourism companies. Likewise, up to 25 % of the awards vest if the Group'saverage return on invested capital (ROIC) meets predefined targets.Deferred annual bonus scheme (DABS)The awards granted under this scheme vest upon completion of a three-yearperiod at the earliest.Up to 50 % of the granted awards will vest based on growth in earnings pershare (EPS) relative to the UK Retail Price Index (RPI). 25 % of the awardswill vest based on total shareholder return (TSR) performance relative tothe TSR performance of other capital market-oriented travel and tourismcompanies. Likewise, up to 25 % of the awards will vest if the averagereturn on invested capital (ROIC) meets certain targets.Deferred annual bonus long-term incentive scheme (DABLIS)The Deferred Annual Bonus Long-Term Incentive Scheme (DABLIS), forexecutivestaff (except for the Executive Board) required a 25 % conversion of anyannual variable compensation into shares. Some eligible staff have beenawarded further (matching) share awards as additional bonuses. Matchingshares are limited to four times the converted amount. The earliest pointfor the shares to be eligible for release is similarly at the end of athree-year period.Up to 50 % of the awards will vest based on achievement of certain EBITAtargets. Up to 25 % of awards will vest based on the earnings per share(EPS) performance relative to the UK Retail Price Index and up to 25 %basedon the total shareholder return (TSR) performance in relation to the TSRperformance of other capital market-oriented travel and tourism companies.The following schedules relate to the outstanding awards under the TUITravel equity-settled schemes and show the number of TUI Travel Limitedshares which remain outstanding following conversion into TUI AG shares atthe conversion rate of 0.399 new TUI AG shares for each TUI Travel share asagreed in the merger documentation.The vesting schedule for the awards was as follows as at 30 September 2016: Share award schemes and ordinary shares outstanding 30 Sep 2016 30 Sep 2015 Date due to Number of Number of vest / date shares shares vested Performance Share Plan - 732,594 6 December (PSP) 2015 227,129 486,203 12 December 2016 - - Deferred Annual Bonus - 1,393,129 6 December Scheme (DABS) 2015 343,215 925,025 12 December 2016 - - Deferred Annual Bonus - 808,039 6 December Long-Term Incentive Scheme 2015 (DABLIS) 570,732 681,508 12 December 2016 Total 1,141,076 5,026,498 The development of awards already granted is as follows: Development of the number of share options Number Outstanding at 1 Oct 2015 5,026,498 Forfeited during the year - 677,243 Exercised during the financial year - 3,208,179 Granted during the financial year - Balance as at 30 Sep 2016 1,141,076 The weighted average TUI AG share price was EUR 14.76 at exercise date(previous year EUR 14.56). The weighted average remaining contractual lifeof options not exercised is 0.19 years at 30 September 2016 (previous year0.61 years).In addition to the above shares, the deferral of variable compensation intoshare awards means that 75,462 shares (previous year 558,154 shares) arestill outstanding under DABS and 306,396 (previous year 799,354) underDABLIS. The awards will vest on 12 December 2016.Participants are not entitled to dividends prior to vesting. Expectedvolatility is based on historic volatility adjusted for changes to futurevolatility indicated by publicly available information.In financial year 2015 / 16, personnel costs of EUR 6.2 m (previous yearEUR20.1 m) relating to share-based payment schemes involving compensation byequity instruments were carried through profit and loss.After the merger, eligible beneficiaries were included in a cash-settled(Phantom) scheme. Calculation of the cash settlement is based on the samecriteria as those used for settlement by equity instruments. In thefinancial year 2015 / 16, this gave rise to staff costs of EUR 9.6 m(previous year EUR 10.9 m). As at 30 September 2016 provisions relating toentitlements under these long-term incentive programmes totalled EUR 12.5 m(previous year EUR 11.2 m) and were classified as accruals.The schedule below shows the development of outstanding cash-settledphantomshares as at 30 September 2016: Development of phantom shares granted at sub-group level Number of Present value shares EUR million Balance as at 30 Sep 2015 1,604,386 26.7 Phantom shares granted 829,786 13.5 Phantom shares exercised - 402,039 - 6.5 Phantom shares forfeited - 292,200 - 4.8 Measurement results - - 6.7 Balance as at 30 Sep 2016 1,739,933 22.2 (43) Financial instrumentsRisks and risk managementRisk management principlesDue to the nature of its business operations, the TUI Group is exposed tovarious financial risks, including market risks (consisting of currencyrisks, interest rate risks and market price risks), credit risks andliquidity risks.In accordance with the Group's financial goals, financial risks have to bemitigated. In order to achieve this, policies and procedures have beendeveloped to manage risk associated with financial transactions undertaken.The rules, responsibilities and processes as well as limits fortransactionsand risk positions have been defined in policies. The trading, processingand control have been segregated in functional and organisational terms.Compliance with the policies and limits is continually monitored. Allhedgesby the TUI Group are consistently based on recognised or forecastedunderlying transactions. Standard software is used for assessing,monitoring, reporting, documenting and reviewing the effectiveness of thehedging relationships for the hedges entered into. In this context, thefairvalues of all derivative financial instruments determined on the basis ofthe Group's own systems are regularly compared with the fair valueconfirmations from the external counterparties. The processes, the methodsapplied and the organisation of risk management are reviewed for compliancewith the relevant regulations on at least an annual basis by the internalaudit department and external auditors.Within the TUI Group, financial risks primarily arise from cash flows inforeign currencies, fuel requirements (jet fuel and bunker oil) andfinancing via the money and capital markets. In order to limit the risksfrom changes in exchange rates, market prices and interest rates forunderlying transactions, the TUI Group uses over-the-counter derivativefinancial instruments. These are primarily fixed-price transactions. Inaddition, the TUI Group also uses options and structured products. Use ofderivative financial instruments is confined to internally fixed limits andother policies. The transactions are concluded on an arm's length basiswithcounterparties operating in the financial sector, whose counterparty riskisregularly monitored. Foreign exchange translation risks from theconsolidation of Group companies not preparing their accounts in euros arenot hedged.Accounting and measurement of financial instruments is in line with IAS 39.Market riskMarket risks result in fluctuations in earnings, equity and cash flows. Inorder to limit or eliminate these risks, the TUI Group has developedvarioushedging strategies, including the use of derivative financial instruments.IFRS 7 requires the presentation of a sensitivity analysis showing theeffects of hypothetical changes in relevant market risk variables on profitor loss and equity. The effects for the period are determined by relatingthe hypothetical changes in risk variables to the portfolio of primary andderivative financial instruments as at the balance sheet date. It isensuredthat the portfolio of financial instruments as at the balance sheet date isrepresentative for the entire financial year.The analyses of the TUI Group's risk reduction activities outlined belowandthe amounts determined using sensitivity analyses represent hypotheticalandthus uncertain risks. Due to unforeseeable developments in the globalfinancial markets, actual results may deviate substantially from thedisclosures provided. The risk analysis methods used must not be considereda projection of future events or losses, since the TUI Group is alsoexposedto risks of a non-financial or non-quantifiable nature. These risksprimarily include sovereign, business and legal risks not covered by thefollowing presentation of risks.Currency riskThe business operations of the TUI Group's companies generate payments orreceipts denominated in foreign currencies, which are not always matched bypayments or receipts with equivalent terms in the same currency. Usingpotential netting effects (netting of payments made and received in thesamecurrency with identical or similar terms), the TUI Group enters intoappropriate hedges with external counterparties in order to protect itsprofit margin from exchange rate-related fluctuations.Within the TUI Group, risks from exchange rate fluctuations are hedged,withthe largest hedging volumes relating to US dollars, euros and poundsterling. The Eurozone limits the currency risk from transactions in thekeytourist destinations to Group companies whose functional currency is nottheeuro. The tourism business operations are mainly affected by changes in thevalue of the US dollar and the euro, the latter predominantly affecting theTUI tour operators in the UK and the Nordic countries. In tourismoperations, payments in US dollars primarily relate to the procurement ofservices in non-European destinations, purchases of jet and ship fuel andaircraft and cruise ship purchases or charter.The tourism companies use financial derivatives to hedge their plannedforeign exchange requirements. They aim to cover 80 % to 100 % of theplanned currency requirements at the beginning of the tourism season. Inthis regard, account is taken of the different risk profiles of the TUIGroup companies. The hedged currency volumes are adjusted in line withchanges in planned requirements based on reporting by business units.Currency risks within the meaning of IFRS 7 arise from primary andderivative monetary financial instruments issued in a currency other thanthe functional currency of a company. Exchange rate-related differencesfromthe translation of financial statements into the Group's presentationcurrency are not taken into account. Taking account of the differentfunctional currencies within the TUI Group, the sensitivity analyses of thecurrencies identified as relevant risk variables are presented below. A 10%strengthening or weakening of the respective functional currencies,primarily euro and pound sterling, against the other currencies would causethe following effects on the revaluation reserve and earnings after tax: Sensitivity analysis - currency risk EUR million 30 Sep 30 Sep 2016 2015 Variable: Foreign exchange rate + 10 % - 10 % + 10 % - 10 % Exchange rates of key currencies EUR / US dollar Revaluation reserve - 123.4 + - 102.3 + 124.0 102.4 Earnings after income taxes - 6.5 + 6.7 - 8.0 + 9.8 EUR / Pound sterling Revaluation reserve - 176.0 + - 203.8 + 176.0 203.8 Earnings after income taxes + 17.3 - 22.2 - 150.5 + 152.4 Pound sterling / US dollar Revaluation reserve - 114.3 + - 97.9 + 97.9 114.3 Earnings after income taxes + 10.0 - 10.0 - 13.5 + 13.5 EUR / Swedish krona Revaluation reserve - 0.7 + 0.7 + 21.0 - 21.0 Earnings after income taxes - - - - Interest rate riskThe TUI Group is exposed to interest rate risks from floating-rate primaryand derivative financial instruments. Where interest-driven cash flows offloating-rate primary financial instruments are converted into fixed cashflows using derivative hedges, they are not exposed to an interest raterisk. No interest rate risk exists for fixed-interest financial instrumentscarried at amortised cost.Changes in market interest rates mainly impact floating-rate primaryfinancial instruments and derivative financial instruments entered into inorder to reduce interest-induced cashflow fluctuations.The table below presents the equity and earnings effects of an assumedincrease or decrease in the market interest rate of 50 base points as atthebalance sheet date. Sensitivity analysis - interest rate risk EUR million 30 Sep 30 Sep 2016 2015 Variable: Interest rate level + 50 - 50 + 50 - 50 for floating interest-bearing basis basis basis basis debt points points points points Revaluation reserve - - - - Earnings after income taxes + 2.6 - 2.6 + 0.3 - Fuel price riskDue to the nature of its business operations, the TUI Group is exposed tomarket price risks from the purchase of fuel, both for the aircraft fleetand the cruise ships.The tourism companies use financial derivatives to hedge their exposure tomarket price risks for the planned consumption of fuel. At the beginning ofthe touristic season the target hedging ratio is at least 80 %. Thedifferent risk profiles of the Group companies operating in differentsourcemarkets are taken into account, including the possibility of levying fuelsurcharges. The hedging volumes are adjusted for changes in plannedconsumption as identified by the Group companies.If the commodity prices, which underlie the fuel price hedges, increase ordecrease by 10 % on the balance sheet date, the impact on equity and onearnings after income taxes would be as shown in the table below. Sensitivity analysis - fuel price risk EUR million 30 Sep 30 Sep 2016 2015 Variable: Fuel prices for aircraft + 10 % - 10 + 10 % - 10 and ships % % Revaluation reserve + 81.2 - + 62.4 - 80.8 61.6 Earnings after income taxes - 0.3 - - 0.1 - 0.3 Other price risksApart from the financial risks that may result from changes in exchangerates, commodity prices and interest rates, the TUI Group is not exposed tosignificant price risks at the balance sheet date, except for the shareprice risk related to Hapag-Lloyd AG.A hypothetical change of + 10 % / - 10 % in the Hapag-Lloyd AG share pricewould result in a EUR 26.6 m increase or -EUR 26.6 m decrease in the fairvalue of the shares held by the Group and would be recognised in othercomprehensive income. In the prior year the sensitivity analysis relatingtothe stake in Hapag-Lloyd was based on the effect of changes tonon-observable input factors on the fair value (level 3 measurement). Anassumed increase or decrease in the non-observable input factors of 0.25 %would have resulted in the following favourable or unfavourable impacts onprofit or loss: (Forecasted) EBITA-margin EUR 71.5 m / EUR - 71.4 m, WACCEUR - 43.0 m / EUR 47.2 m, terminal growth rate EUR 40.4 m / EUR - 36.8 m.Credit riskThe credit risk in non-derivative financial instruments results from therisk of counterparties defaulting on their contractual payment obligations.Maximum credit risk exposure corresponds to the total of the recognisedcarrying amounts of the financial assets (including derivative financialinstruments with positive market values). It also relates to the grantingoffinancial guarantees for the discharge of liabilities. Details concerningthe guarantees at the balance sheet date are presented in Note 39. Wherelegally enforceable, financial assets and liabilities are netted. Creditrisks are reviewed closely on conclusion of the contract and continuallymonitored thereafter in order to swiftly respond to potential impairmentsina counterparty's solvency. Responsibility for handling the credit risk isheld by the Group company holding the receivable.Since the TUI Group operates in many different business areas and regions,significant credit risk concentrations of receivables from and loans tospecific debtors or groups of debtors are not to be expected. A significantconcentration of credit risks related to specific countries is not to beexpected either. As of the balance sheet date, there is no collateral held,or other credit enhancements that reduce the maximum credit risk (previousyear EUR 1.1 m). Collateral held in the prior period relates exclusively tofinancial assets of the category 'Trade receivable and other assets'. Thecollateral mainly comprises collateral for financial receivables grantedandmaturing in more than one year and / or with a volume of more than EUR 1 m.Rights in rem, directly enforceable guarantees, bank guarantees and comfortletters are used as collateral.Identifiable credit risks of individual receivables are subject toprovisions for bad debts. In addition, portfolios are impaired based onobserved values. An analysis of the aging structure of the category Tradereceivables and other assets is presented in Note 19.At the balance sheet date, there were no financial assets that would beoverdue or impaired unless the terms and conditions of the contract hadbeenrenegotiated, neither in financial year 2015 / 16 nor in 2014 / 15.Credit management also covers the TUI Group's derivative financialinstruments. The maximum credit risk for derivative financial instrumentsentered into is limited to the total of all positive market values of theseinstruments since in the event of counterparty default asset losses wouldonly be incurred up to that amount. Since derivative financial instrumentsare concluded with different debtors, credit risk exposure is reduced. Thespecific credit risks of individual counterparties are taken into accountindetermining the fair values of derivative financial instruments. Inaddition, the counterparty risk is continually monitored and controlledusing internal bank limits.Liquidity riskThe liquidity risks arises from the TUI Group being unable to meet itsshortterm financial obligations and the resulting increases in funding costs.Forthis reason, the key objectives of TUI's internal liquidity managementsystem are to secure the TUI Group's liquidity at all times andconsistentlycomply with contractual payment obligations. Assets of EUR 0.5 m (previousyear EUR 0.3 m) were deposited as collateral for liabilities. Theparticipating Group companies are also jointly and severally liable forfinancial liabilities from cash pooling agreements.The tables provided below list the contractually agreed (undiscounted) cashflows of all primary financial liabilities and derivative financialinstruments as at the balance sheet date. Planned payments for future newliabilities were not taken into account. Where financial liabilities have afloating interest rate, the forward interest rates fixed at the balancesheet date were used to determine future interest payments. Financialliabilities cancellable at any time are allocated to the earliest maturityband. Cash flow of financial instruments - financial liabilities (30 Sep 2016) Cash outflow until 30 Sep up to 1 1 - 2 - 5 more year 2 years than year- 5 s years EUR million repay- inte- re- inte- repay- inte- repay- inte- ment rest pay- rest ment rest ment rest ment Financial liabilities Bonds* - - - - - - - - 13.5 13.5 300.0 20.3 Liabilities - 47.0 - - - - - - - to banks 12.0 47.6 12.4 121.8 32.2 194.4 31.6 Liabilities - 92.2 - - - - - - - from finance 33.5 91.2 31.6 257.8 81.8 790.5 71.5 leases Financial - 6.6 - - - - - - - liabilities due to non-consolida- ted Group companies Financial - 8.0 - - - - - - - liabilities 0.1 due to affiliates Other - 77.4 - - - - - - - financial 0.1 liabilities Trade - - - - - - - - payables 2,476.9 Other - 175.7 - - - - - - - liabilities 19.8 8.4 * The bond was early redeemed in November 2016. For further details pleaserefer to the section 49 'Significant transactions after the balance sheetdate'. Cash flow of financial instruments - financial liabilities (30 Sep 2015) Cash outflow until 30 Sep up to 1 1 - 2 - 5 more year 2 years than year- 5 s years EUR million repay- inte- re- inte- repay- inte- repay- inte- ment rest pay- rest ment rest ment rest ment Financial liabilities Bonds - - - - - - - - 13.5 13.5 300.0 33.8 Liabilities - 61.0 - - - - - - - to banks 4.3 55.6 3.5 151.7 8.6 225.8 7.3 Liabilities - 68.8 - - - - - - - from finance 34.4 68.2 32.2 212.5 83.6 632.5 84.4 leases Financial - 5.2 - - - - - - - liabilities due to non-consolida- ted Group companies Financial - 8.0 - - - - - - - liabilities due to affiliates Other - 90.0 - - - - - - - financial 13.4 liabilities Trade - - - - - - - - payables 3,224.2 Other - 66.2 - - - - 2.7 - - - liabilities 12.2 7.5 Cash flow of derivative financial instruments (30 Sep 2016) Cash in/ outflow until 30 Sep EUR million up to 1 year 1 - 2 2 - 5 more years years than 5 years Derivative financial instruments Hedging transactions - + 7,362.3 + + - inflows 1,587.1 345.3 Hedging transactions - - 7,062.0 - - - outflows 1,531.3 316.0 Other derivative financial + 1,688.0 + 44.4 + 0.7 - instruments - inflows Other derivative financial - 1,714.5 - 43.0 - 0.8 - instruments - outflows Cash flow of derivative financial instruments (30 Sep 2015) Cash in/ outflow until 30 Sep EUR million up to 1 year 1 - 2 2 - 5 more years years than 5 years Derivative financial instruments Hedging transactions - + 6,865.3 + + + 0.7 inflows 1,620.3 412.1 Hedging transactions - - 7,016.7 - - - 0.7 outflows 1,660.1 423.0 Other derivative financial + 4,090.9 + 153.1 + - instruments - inflows 23.2 Other derivative financial - 3,576.0 - 150.1 - - instruments - outflows 22.4 Derivative financial instruments and hedgesStrategy and goalsIn accordance with the TUI Group's policy, derivatives are allowed to beused if they are based on underlying recognised assets or liabilities, firmcommitments or forecasted transactions. Hedge accounting based on the rulesof IAS 39 is applied to forecasted transactions. In the financial yearunderreview, hedges primarily consisted of cash flow hedges.Derivative financial instruments in the form of fixed-price transactionsandoptions as well as structured products are used to limit currency, interestrate and fuel risks.Cash Flow HedgesAs at 30 September 2016, hedges existed to manage cash flows in foreigncurrencies with maturities of up to five years (2015: up to six years). Thefuel price hedges had terms of up to four years (2015: up to four years).There were no longer any hedges of TUI AG's floating-rate interest paymentobligations.In accounting for cash flow hedges, the effective portion of the cumulativechange in market value is carried in the revaluation reserve outside profitand loss until the hedged item occurs. It is carried in the incomestatementthrough profit and loss when the hedged item is executed. In the financialyear under review, income of EUR 40.4 m (previous year expenses of EUR580.8m) for currency hedges and derivative financial instruments used as pricehedges were carried in the cost of sales. There was no result from interesthedges (previous year expenses of EUR 0.3 m). Income of EUR 1.6 m (previousyear income of EUR 0.7 m) was carried for the ineffective portion of thecash flow hedges. Nominal amounts of derivative financial instruments used 30 Sep 30 Sep 2016 2015 Remai- Remai- ning ning term term EUR million up to 1 more Total up to 1 more Total year than 1 year than 1 year year Interest rate hedges Caps - 150.0 150.0 67.7 160.4 228.1 Swaps - 25.2 25.2 - 25.2 25.2 Currency hedges Forwards 8,924.1 2,006.3 10,930.4 10,261.1 2,109.5 12,370.6 Options - - - 2.1 - 2.1 Structured 63.0 10.9 73.9 114.5 113.6 228.1 instruments Commodity hedges Swaps 779.9 476.6 1,256.5 977.2 313.5 1,290.7 Options 20.7 - 20.7 37.4 - 37.4 The nominal amounts correspond to the total of all purchase or sale amountsor the contract values of the transactions.Fair values of derivative financial instrumentsThe fair values of derivative financial instruments correspond to themarketvalues. The market price determined for all derivative financialinstrumentsis the price that would be received to sell an asset or paid to transfer aliability in an orderly transaction between market participants at themeasurement date. A description of the determination of the fair values ofderivative financial instruments is provided with the classification offinancial instruments measured at fair value. Positive and negative fair values of derivative financial instruments shown as receivables or liabilities 30 30 Sep Sep 2016 2015 EUR million Recei- Liabi- Recei- Liabi- va- li- va- li- bles ties bles ties Cash flow hedges for currency risks 480.7 104.0 257.5 96.7 other market price risks 59.0 115.0 4.9 347.1 interest rate risks - - - - Fair value hedges for currency risks - - - - Hedging 539.7 219.0 262.4 443.8 Other derivative financial instruments 131.7 58.1 66.7 22.9 Total 671.4 277.1 329.1 466.7 Financial instruments which are entered into in order to hedge a riskposition according to operational criteria but do not meet the strictcriteria of IAS 39 to qualify for hedge accounting are shown as otherderivative financial instruments. They include foreign currencytransactionsentered into in order to hedge against foreign exchange-exposure to changesin the value of balance sheet items and foreign exchange fluctuations fromfuture expenses in Tourism.Financial instruments - Additional disclosuresCarrying amounts and fair valuesWhere financial instruments are listed in an active market, e. g. sharesheld and bonds issued, the fair value or market value is the respectivequotation in this market at the balance sheet date. For over-the-counterbonds, liabilities to banks, promissory notes and other non-currentfinancial liabilities, the fair value is determined as the present value offuture cash flows, taking account of yield curves and the respective creditspread, which depends on the credit rating.Due to the short remaining terms of cash and cash equivalents, currenttradereceivables and other assets, current trade payables and other payables,thecarrying amounts are taken as realistic estimates of the fair value.The fair values of non-current trade receivables and other assetscorrespondto the present values of the cash flows associated with the assets, takingaccount of current interest parameters which reflect market- andcounterparty-related changes in terms and expectations. There are nofinancial investments held to maturity. Car- ry- ing amou- nts and fair va- lues ac- cor- ding to clas- ses and mea- sure- ment cate- go- ries as at 30 Sep 2016 Catego- ry under IAS 39 EUR Carry- At At Fair Fair Values Carry- Fair mil- ing amorti- cost value value accor- ing value lion amount sed with no throu- ding amount of cost effect gh to IAS of financi- on pro- 17 financi- al profit fit (lease- al instru- and and s) instru- ments loss loss ments As- sets Avai- 316.2 - 44.4 271.8 - - 316.2 316.2 la- ble for sale fi- nan- cial as- sets Tra- 1,635.4 689.7 - - - - 689.7 689.7 de re- cei- va- bles and othe- r as- sets Deri- vati- ve fi- nan- cial in- stru- ment- s Hed- 539.7 - - 539.7 - - 539.7 539.7 ging Othe- 131.7 - - - 131.7 - 131.7 131.7 r deri- vati- ve fi- nan- cial in- stru- ment- s Cash 2,072.9 2,072.9 - - - - 2,072.9 2,072.9 and cash equi- val- ents Lia- bili- ties Fi- 2,041.1 809.4 - - - 1,231.- 809.4 818.0 nan- 8 cial lia- bili- ties Tra- 2,476.9 2,476.4 - - - - 2,476.4 2,476.4 de paya- bles Deri- vati- ve fi- nan- cial in- stru- ment- s Hed- 219.0 - - 219.0 - - 219.0 219.0 ging Othe- 58.1 - - - 58.1 - 58.1 58.1 r deri- vati- ve fi- nan- cial in- stru- ment- s Othe- 3,032.5 134.2 - - - - 134.2 134.2 r lia- bili- ties Car- ry- ing amou- nts and fair va- lues ac- cor- ding to clas- ses and mea- sure- ment cate- go- ries as at 30 Sep 2015 Catego- ry under IAS 39 EUR Carry- At At Fair Fair Values Carry- Fair mil- ing amorti- cost value value accor- ing value lion amount sed with no throu- ding amount of cost effect gh to IAS of financi- on pro- 17 financi- al profit fit (lease- al instru- and and s) instru- ments loss loss ments As- sets Avai- 391.1 - 50.4 340.7 - - 391.1 391.1 la- ble for sale fi- nan- cial as- sets Tra- 2,281.2 1,064.7 - - - - 1,064.7 1,064.7 de re- cei- va- bles and othe- r as- sets Deri- vati- ve fi- nan- cial in- stru- ment- s Hed- 262.4 - - 262.4 - - 262.4 262.4 ging Othe- 66.7 - - - 66.7 - 66.7 66.7 r deri- vati- ve fi- nan- cial in- stru- ment- s Cash 1,672.7 1,672.7 - - - - 1,672.7 1,672.7 and cash equi- val- ents Lia- bili- ties Fi- 1,886.4 904.5 - - - 982.0 904.5 925.1 nan- cial lia- bili- ties Tra- 3,224.2 3,224.0 - - - - 3,224.0 3,224.0 de paya- bles Deri- vati- ve fi- nan- cial in- stru- ment- s Hed- 443.8 - - 443.8 - - 443.8 443.8 ging Othe- 22.9 - - - 22.9 - 22.9 22.9 r deri- vati- ve fi- nan- cial in- stru- ment- s Othe- 3,383.5 152.9 - - - - 152.9 152.9 r lia- bili- ties The financial investments classified as financial assets available for saleinclude an amount of EUR 44.4 m (previous year EUR 50.4 m) for stakes inpartnerships and corporations for which an active market does not exist.Thefair value of these non-listed stakes is not determined using a measurementmodel since the future cash flows cannot be reliably determined. The stakesare carried at acquisition cost. In the period under review and in theprevious year, there were no major disposals of stakes in partnerships andcorporations measured at acquisition cost. The TUIGroup does not intend tosell or derecognise the stakes in these partnerships and corporations inthenear future. Aggregation according to measurement categories under IAS 39 as at 30 Sep 2016 Fair value EUR million At At with no through Carry- Fair amorti- cost effect on profit ing value sed profit and and amount cost loss loss Total Loans and 2,762.6 - - - 2,762.6 2,762.6 receivables Financial assets available for - 44.4 271.8 - 316.2 316.2 sale held for trading - - - 131.7 131.7 131.7 Financial liabilities at amortised 3,420.0 - - - 3 420.0 3,428.6 cost held for trading - - - 58.1 58.1 58.1 Aggregation according to measurement categories under IAS 39 as at 30 Sep 2015 Fair value EUR million At At with no through Carry- Fair amorti- cost effect on profit ing value sed profit and and amount cost loss loss Total Loans and 2,737.4 - - - 2,737.4 2,737.4 receivables Financial assets available for - 50.4 340.7 - 391.1 391.1 sale held for trading - - - 66.7 66.7 66.7 Financial liabilities at amortised 4,281.4 - - - 4,281.4 4,302.0 cost held for trading - - - 22.9 22.9 22.9 Fair value measurementThe table below presents the fair values of recurring, non-recurring andother financial instruments measured at fair value in line with theunderlying measurement level. The individual measurement levels have beendefined as follows in line with the inputs: * Level 1: (unadjusted) quoted prices in active markets for identical assets or liabilities. * Level 2: inputs for the measurement other than quoted market prices included within Level 1 that are observable in the market for the asset or liability, either directly (as quoted prices) or indirectly (derivable from quoted prices). * Level 3: inputs for the measurement of the asset or liability not based on observable market data. Classification of fair value measurement of financial instruments as of 30 September 2016 Fair value hierarchy EUR million Total Level 1 Level Le- 2 vel 3 Assets Available for sale financial assets 271.8 265.8 - 6.0 Derivative financial instruments Hedging transactions 539.7 - 539.7 - Other derivative financial instruments 131.7 - 131.7 - Liabilities Derivative financial instruments Hedging transactions 219.0 - 219.0 - Other derivative financial instruments 58.1 - 58.1 - At amortised cost Financial liabilities 818.0 308.3 509.7 - Classification of fair value measurement of financial instruments as of 30 September 2015 Fair value hierarchy EUR million Total Level 1 Level Level 2 3 Assets Available for sale financial assets 340.7 - - 340.7 Derivative financial instruments Hedging transactions 262.4 - 262.4 - Other derivative financial instruments 66.7 - 66.7 - Liabilities Derivative financial instruments Hedging transactions 443.8 - 443.8 - Other derivative financial instruments 22.9 - 22.9 - At amortised cost Financial liabilities 925.1 314.4 610.7 - At the end of every reporting period, TUI Group checks whether there areanyreasons for reclassification to or from one of the measurement levels.Financial assets and financial liabilities are generally transferred out ofLevel 1 into Level 2 if the liquidity and trading activity no longerindicate an active market. The opposite situation applies to potentialtransfers out of Level 2 into Level 1. In the period under review, therewere no transfers between Level 1 and Level 2.Reclassifications from Level 3 to Level 2 or Level 1 are effected ifobservable market price quotations become available for the asset orliability concerned. TUI Group records transfers to and out of Level 3 asatthe date of the obligating event or occasion triggering the transfer. Thereview as at 31 December 2015 due to the initial public offering ofHapag-Lloyd AG resulted in the transfer of the valuation of the stake inHapag-Lloyd AG from Level 3 into Level 1. Other than that, there were notransfers into or out of Level 3.Level 1 Financial instruments:The fair value of financial instruments for which an active market existsisbased on quoted prices at the reporting date. An active market exists ifquoted prices are readily and regularly available from an exchange, dealer,broker, pricing service or regulatory agency and these prices representactual and regularly occurring market transactions on an arm's lengthbasis.These financial instruments are classified as Level 1. The fair valuescorrespond to the nominal amounts multiplied by the quoted prices at thereporting date. Level 1 financial instruments primarily comprise shares inlisted companies classified as available for sale and bonds issuedclassified as financial liabilities at amortised cost.Level 2 Financial instruments:The fair values of financial instruments not traded in an active market, e.g. over-the-counter (OTC) derivatives, are determined by means of valuationtechniques. These valuation techniques make maximum use of observablemarketdata and minimise the use of Group-specific assumptions. If all essentialinputs for the determination of the fair value of an instrument areobservable, the instrument is classified as Level 2.If one or several key inputs are not based on observable market data, theinstrument is classified as Level 3.The following specific valuation techniques are used to measure financialinstruments: * For over-the-counter bonds, liabilities to banks, promissory notes and other non-current financial liabilities, the fair value is determinedas the present value of future cash flows, taking account of yield curves and the respective credit spread, which depends on the credit rating. * The fair value of over-the-counter derivatives is determined by meansof appropriate calculation methods, e. g. by discounting the expected future cash flows. The forward prices of forward transactions are based on the spot or cash prices, taking account of forward premiums and discounts. The calculation of the fair values of options concluded for currency options is based on the Black & Scholes model and the Turnbull & Wakeman model for optional fuel hedges. The fair values determined on the basis of the Group's own systems are periodically compared withfair value confirmations of the external counterparties. * Other valuation techniques, e. g. discounting future cash flows, are used to determine the fair values of other financial instruments. Level 3 Financial instruments:The table below presents the fair values of the financial instrumentsmeasured at fair value on a recurring basis, classified as Level 3: Financial assets measured at fair value in level 3 EUR million Available for sale financial assets Balance as at 1 October 2014 5.5 Additions (incl. Transfers) 481.9 Total gains or losses for the period - 146.7 recognised throug profit or loss - 147.1 recognised in other comprehensive income 0.4 Balance as at 30 September 2015 340.7 Change in unrealised gains or losses for the - 147.1 period for financial assets held at the balance sheet date Balance as at 1 October 2015 340.7 Additions (incl. Transfers) - Disposals - repayment / sale - conversion / rebooking 334.9 Total gains or losses for the period 0.2 recognised throug profit or loss 0.2 recognised in other comprehensive income - Balance as at 30 September 2016 6.0 Change in unrealised gains or losses for the - period for financial assets held at the balance sheet date The disposals caused by reclassification into Level 1 of the measurementhierarchy relate to the investment in Hapag-Lloyd AG, for which observableinput parameters have existed since the IPO on 6 November 2015. Detailedinformation is provided in Note 18 'Financial assets available for sale'.Effects on resultsThe effects of the measurement of financial assets available for saleoutside profit and loss and the effective portions of changes in fairvaluesof derivatives designated as cash flow hedges are listed in the statementofchanges in equity.The net results of the financial instruments by measurement categoryaccording to IAS 39 are as follows: Net results of financial instruments 2015 / 2014 / 16 15 EUR million from other net from other net inte- net re- inte- net re- rest results sult rest results sult Loans and receivables - 6.4 263.1 256.7 - 13.0 80.1 67.1 Available for sale - - 99.2 - - - 141.3 - financial assets 99.2 141.3 Financial assets and - 0.6 - 9.2 - 9.8 - 98.6 - liabilities held for 142.0 43.4 trading Financial liabilities - 44.2 - 25.5 - - 49.5 - 82.6 - at amortised cost 69.7 132.1 Total - 51.2 129.2 78.0 - - 45.2 - 204.5 249.7 Other net result of available for sale financial assets comprises theimpairment of the stake in Hapag-Lloyd AG of EUR 100.3 m.In addition, it includes results from participations, gains and losses ondisposal, effects of fair value measurements and impairments as well asinterest income and interest expenses.Financial instruments measured at fair value outside profit and loss didnotgive rise to any commission expenses in financial year 2015 / 16, just asinthe previous year.NettingThe following financial assets and liabilities are subject to contractualnetting arrangements: Offset- ting - financi- al assets Related amounts not set off in the balance sheet EUR Gross Gross amounts Net Financial Cash Net million Amounts of recognised amounts liabilities Colla- Amount of financial of teral financi- liabilities financial recei- al set off assets ved assets presented in the balance sheet Financi- al assets as at 30 Sep 16 Deriva- 671.4 - 671.4 277.1 - 394.3 tive financi- al assets Cash 4,917.8 2,844.9 2,072.9 - - 2,072.9 and cash equival- ents Financi- al assets as at 30 Sep 15 Deriva- 329.1 - 329.1 56.5 - 272.6 tive financi- al assets Cash 5,556.3 3,883.6 1,672.7 - - 1,672.7 and cash equival- ents Offset- ting - financi- al liabili- ties Related amounts not set off in the balance sheet EUR Gross Gross Net Financial Cash Net million Amounts amounts of amounts of assets Colla- Amount of recognised financial teral financi- financial liabili- gran- al assets set ties ted liabili- off presented ties in the balance sheet Financi- al liabili- ties as at 30 Sep 16 Derivati- 277.1 - 277.1 277.1 - - ve financi- al liabili- ties Financi- 4 886.0 2,844.9 2,041.1 - - 2,041.1 al liabili- ties Financi- al liabili- ties as at 30 Sep 15 Derivati- 466.7 - 466.7 56.5 - 410.2 ve financi- al liabili- ties Financi- 5,770.0 3,883.6 1,886.4 - - 1,886.4 al liabili- ties Financial assets and financial liabilities are only netted in the balancesheet if a legally enforceable right to netting exists and the companyintends to settle on a net basis.The contracts for financial instruments are based on standardised masteragreements for financial derivatives (including ISDA Master Agreement,German master agreement for financial derivatives), creating a conditionalright to netting contingent on defined future events. Under the contractualagreements all derivatives contracted with the corresponding counterpartywith positive or negative fair values are netted in that case, resulting ina net receivable or payable in the amount of the balance. As thisconditional right to netting is not enforceable in the course of ordinarybusiness transactions, the derivative financial assets and liabilities arecarried at their gross amounts in the balance sheet date at the reportingdate.Financial assets and liabilities in the framework of the cash poolingschemeare shown on a net basis if there is a right to netting in ordinarybusinesstransactions and the Group intends to settle on a net basis.(44) Capital risk managementOne of the key performance indicators in the framework of capital riskmanagement is the IFRS-based gearing, i. e. the relationship between theGroup's net debt and Group equity. From a risk perspective, a balancedrelation between net debt and equity is sought. TUI Group therefore strivesfor an appropriate ratio between net debt and equity.In order to exert active control over the capital structure, the TUIGroup'smanagement may change dividend payments to the shareholders, repay capitalto the shareholders, issue new shares or issue hybrid capital. Themanagement may also sell assets in order to reduce Group debt. Gearing calculation EUR million 2015 / 16 2014 / 15 Average financial debt 2,396.3 2,308.5 Average cash and cash equivalent 1,425.8 1,346.7 Average Group net debt 970.5 961.8 Average Group equity 2,314.8 1,976.0 Gearing% 41.9 48.7 Notes on the cash flow statementThe cash flow statement shows the flow of cash and cash equivalentsseparately for cash inflows and outflows from operating, investing andfinancing activities. The effects of changes in the group of consolidatedcompanies are eliminated. The cash flows are shown for the continuingoperations and the discontinued operation.In the reporting period, cash and cash equivalents rose by EUR 721.4 m toEUR 2,403.6 m, including an amount of EUR 330.7 m carried as assets heldforsale.(45) Cash inflow / outflow from operating activitiesBased on the Group result after tax, the cash flow from operatingactivitiesis derived using the indirect method. In the financial year under review,the cash inflow from operating activities amounted to EUR 1,034.7 m(previous year EUR 790.5 m).In the period under review, the cash inflow included interest of EUR 21.1 mand dividends of EUR 84.7 m. Income tax payments resulted in a cash outflowof EUR 186.4 m. In contrast, tax payments of EUR 94.9 relating to the saleof Hotelbeds Group, were carried under cash outflows from investingactivities.(46) Cash inflow / outflow from investing activitiesIn financial year 2015 / 16, the cash inflow from investing activitiestotalled EUR 239.0 m (previous year outflow of EUR 216.8 m).The cash flow from investing activities includes a cash outflow for capitalexpenditure related to property, plant and equipment and intangible assetsof EUR 605.6 m, including EUR 243.1 m for tour operators and airlines andEUR 262.3 m for Hotels & Resorts. The Group also recorded a cash inflow ofEUR 72.2 m from the sale of property, plant and equipment, primarily aBritish cruise ship, a hotel in Majorca, several properties in Germany andaFrench tour operator brand. The cash outflow for investments in property,plant and equipment and intangible assets and the cash inflow fromcorresponding divestments do not match the additions and disposals shown inthe development of fixed assets, which also include non-cash investmentsanddisposals.In the financial year under review, the sale of Hotelbeds Group generated acash inflow of EUR 867.9 m after deduction of income tax and consultancycosts and cash and cash equivalents of the consolidated companies sold (EUR254.1 m).A further EUR 19.3 m for consultancy services were only payable after thebalance sheet date and will therefore be shown in the cash outflow frominvesting activities for the next financial year.A net cash inflow of EUR 20.3 m after deducting cash and cash equivalentsofthe sold companies of EUR 0.8 m resulted from the sale of othersubsidiariesand joint ventures. In the prior year, the sale of shares in the moneymarket fund had caused an inflow of EUR 300.0 m.In financial year 2015 / 16, a cash outflow of EUR 8.2 m resulted fromacquisitions of consolidated companies. This amount includes payments ofEUR4.0 for acquisitions made in prior years. Cash and cash equivalentsacquiredthrough the acquisitions total EUR 1.2 m so that the total cash outflowamounted to EUR 7.0 m.The cash outflow for other assets includes an amount of EUR 56.2 m forcapital increases in joint ventures.(47) Cash inflow / outflow from financing activitiesThe cash outflow from financing activities totals EUR 662.1 m (previousyearEUR 1,116.7 m).The segment Hotels & Resorts has taken out financial liabilities worth EUR47.8 m, while other tourism companies have taken out EUR 11.0 m. A furtherEUR 43.7 m have been taken out to refinance an aircraft. The Group repaidfinance lease liabilities worth EUR 78.1 m and other financial liabilitiesworth EUR 197.3 m. Interest payments were a cash outflow of EUR 92.3 m.Further outflows relate to the dividends for TUI AG shareholders (EUR 327.0m) and minority shareholders (EUR 14.1 m). The employee benefit trust ofTUITravel Ltd. has purchased shares in TUI AGworth EUR 56.3 m in order to usethem for stock option plans. A cash outflow of EUR 8.0 m resulted from theincrease in stakes in consolidated companies.The amounts drawn from the external revolving credit facility to manage theseasonality of the Group's cash flows and liquidity in the financial yearunder review have meanwhile been fully repaid. The significantly highercashoutflow shown for the previous year primarily resulted from the redemptionof TUI AG's perpetual subordinated bond of EUR 300.0 m and the repayment ofa bank liability of EUR 195.3 m in connection with the merger between TUIAGand TUI Travel PLC.(48) Development of cash and cash equivalentsCash and cash equivalents comprise all liquid funds, i.e. cash in hand,bankbalances and cheques.The change in cash and cash equivalents driven by changes in the group ofconsolidated companies shows the increase in the Group's cash and cashequivalents caused by the merger of a previously non-consolidated companywith a consolidated company.At 30 September 2016, cash and cash equivalents of EUR 128.6 m were subjectto restrictions. They included an amount of EUR 116.3 m for cash collateralreceived, which was deposited in a Belgian subsidiary by Belgian taxauthorities in financial year 2012 / 13 in the framework of long-standinglitigation over VAT refunds for the years 2001 to 2011 without admission ofguilt, the purpose being to suspend the accrual of interest for bothparties. In order to collateralise a potential repayment, the Belgiangovernment was granted a bank guarantee. Due to the bank guarantee, TUI'sability to dispose of the cash and cash equivalents has been restricted.Theremaining restrictions relate to cash and cash equivalents deposited tomeetlegal or regulatory requirements.Other notes(49) Significant transactions after the balance sheet dateOn 26 October 2016, TUI AG issued a fixed-interest bond with a coupon of2.125 % p.a. and a nominal volume of EUR 300.0 m. The bond was issued at aprice of 99.415 % in denominations with nominal values of EUR 100,000. Itwill mature on 26 October 2021.On 18 November 2016, TUI AG redeemed the fixed-interest bond with a nominalvolume of EUR 300.0 m issued on 26 September 2014, originally maturing on 1October 2019, ahead of maturity. The bond was redeemed at a price of 102.25% plus accrued interest. The cash inflow of EUR 298.2 m received by TUI AGfrom issuing the bond on 26 October 2016 was used to redeem the bond.On 21 June 2016, TUI had concluded an agreement with Transat A. T. Inc. toacquire the tour operator Transat France S. A., France, and itssubsidiariesfor a purchase price of EUR 64.9 m. Following regulatory approvals, theacquisition was completed on 31 October 2016. For further details on theacquisition, please refer to the section 'Acquisitions - Divestments -Discontinued Operations'.On 23 November 2016, the supervisory board of TUI AG approved the agreementof a term sheet with Etihad Aviation Group. This agreement is the basis forthe acquisition of a minority share in a company through the contributionofthe shares in TUIfly GmbH. The Etihad Aviation Group will also invest inthis company. It is assumed that the minority share will be accounted foratequity. It is expected that the contractual negotiations will be finalisedwithin the next few weeks. The transaction is subject to approval by therelevant aviation and competition authorities.(50) Services of the auditors of the consolidated financial statementsTUI AG's consolidated financial statements are audited byPricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft.Since 30 September 2013 they have been signed by Thomas Stieve, the auditorin charge. Total expenses for the services provided by the auditors of theconsolidated financial statements in financial year 2015 / 16 break down asfollows: Services of the auditors of the consolidated financial statements EUR million 2015 / 2014 / 16 15 Audit fees for TUI AG and subsidiaries in Germany 3.0 2.9 Audit fees 3.0 2.9 Review of interim financial statements 1.1 1.0 Other audit related services 0.1 0.3 Other certification and measurement services 1.2 1.3 Consulting fees 0.7 2.3 Tax advisor services 0.2 0.1 Other services 0.9 2.4 Total 5.1 6.6 (51) Remuneration of Executive and Supervisory Board membersIn the financial year under review, the remuneration paid to ExecutiveBoardmembers totalled EUR 4,720.6 thousand (previous year EUR 2,829.0 thousand).Remuneration for former Executive Board members or their survivingdependants totalled EUR 4,933.2 thousand (previous year EUR 4,891.1thousand) in the financial year under review. Pension obligations forformerExecutive Board members and their surviving dependants amounted to EUR84,294.2 thousand (previous year EUR 79,754.3 thousand) at the balancesheetdate.Disclosures of the relevant amounts for individual Board members andfurtherdetails on the remuneration system are provided in the Remuneration Reportincluded in the Management Report.(52) Exemption from disclosure and preparation of a management report inaccordancewith section 264 (3) of the German Commercial Code (HGB)The following German subsidiaries fully included in consolidation have metthe condition required under section 264 (3) of the German Commercial Codeand were therefore exempted from the requirement to disclose their annualfinancial statements and prepare a management report: * Atraveo GmbH, Düsseldorf * Berge & Meer Touristik GmbH, Rengsdorf * DEFAG Beteiligungsverwaltungs GmbH I, Hanover * DEFAG Beteiligungsverwaltungs GmbH III, Hanover * FOX-TOURS Reisen GmbH, Rengsdorf * Hapag-Lloyd Executive GmbH, Langenhagen * Hapag-Lloyd Cruises GmbH, Hamburg * Last-Minute-Restplatzreisen GmbH, Baden-Baden * Leibniz Service GmbH, Hanover * L'tur tourismus Aktiengesellschaft, Baden-Baden * Master-Yachting GmbH, Eibelstadt * MEDICO Flugreisen GmbH, Baden-Baden * MSN 1359 GmbH, Hanover * Preussag Beteiligungsverwaltungs GmbH IX, Hanover * Preussag Immobilien GmbH, Salzgitter * ProTel Gesellschaft für Kommunikation mbH, Rengsdorf * Robinson Club GmbH, Hanover * TCV Touristik-Computerverwaltungs GmbH, Baden-Baden * TICS GmbH Touristische Internet und Call Center Services, Baden-Baden * TUI 4 U GmbH, Bremen * TUI aqtiv GmbH, Hanover * TUI Aviation GmbH, Hanover * TUI Beteiligungs GmbH, Hanover * TUI Business Services GmbH, Hanover * TUI Connect GmbH, Hanover * TUI Customer Operations GmbH, Hanover * TUI Group Services GmbH, Hanover * TUI-Hapag Beteiligungs GmbH, Hanover * TUI Hotel Betriebsgesellschaft mbH, Hanover * TUI InfoTec GmbH, Hanover * TUI Leisure Travel Service GmbH, Neuss * TUI Magic Life GmbH, Hanover * TUIfly Vermarktungs GmbH, Hanover * Wolters Reisen GmbH, Stuhr (53) Related partiesApart from the subsidiaries included in the consolidated financialstatements, TUI AG, in carrying out its ordinary business activities,maintains indirect or direct relationships with related parties. Relatedparties controlled by the TUI Group or over which the TUI Group is able toexercise a significant influence are listed in the list of shareholdingspublished in the electronic Federal Gazette (www.ebanz.de). Apart from pureequity investments, related parties also include companies that supplygoodsor provide services for TUI Group companies.Financial obligations from order commitments vis-à-vis related partiesprimarily relate to the purchasing of hotel services. TUI Group also hasobligations of EUR 613.2 m (previous year EUR 877.2 m) from ordercommitments vis-à-vis the related company TUI Cruises, resulting fromfinance leases for cruise ships.In addition, there are obligations of EUR 8.4 m (previous year EUR 15.1 m)from rental and lease agreements. Transactions with related parties EUR million 2015 / 2014 / 15 16 restated Services provided by the Group Management and consultancy services 93.2 84.6 Sales of tourism services 62.2 92.7 Other services 1.3 0.6 Total 156.7 177.9 Services received by the Group In the framework of lease, rental and 33.2 31.6 leasing agreements Purchase of hotel services 224.8 254.0 Distribution services 8.8 8.7 Other services 9.0 20.8 Total 275.8 315.1 Transactions with related parties EUR million 2015 / 16 2014 / 15 restated Services provided by the Group to non-consolidated Group companies 0.5 1.5 joint ventures 72.9 96.9 associates 29.7 34.6 other related parties 53.6 44.9 Total 156.7 177.9 Services received by the Group from non-consolidated Group companies 6.1 7.0 joint ventures 224.1 249.9 associates 34.3 46.4 other related parties 11.3 11.8 Total 275.8 315.1 Transactions with joint ventures and associates are recognised in thetourism business. They relate mainly to the tourism services of the hotelcompanies used by the Group's tour operators.All transactions with related parties are executed on an arm's lengthbasis,based on international comparable uncontrolled price methods in accordancewith IAS 24. Receivables against related parties EUR million 30 Sep 2016 30 Sep 2015 Trade receivables from non-consolidated Group companies 1.7 1.5 joint ventures 10.4 20.6 associates 3.9 4.7 other related parties 0.5 0.9 Total 16.5 27.7 Advances and loans to non-consolidated Group companies 17.8 17.4 joint ventures 3.2 34.0 associates 5.6 7.6 Total 26.6 59.0 Payments on account to joint ventures 0.4 11.7 Total 0.4 11.7 Other receivables from non-consolidated Group companies 1.6 1.7 joint ventures 3.3 10.7 associates 2.9 7.3 Total 7.8 19.7 Payables due to related parties EUR million 30 Sep 2016 30 Sep 2015 Trade payables due to non-consolidated Group companies 1.0 5.8 joint ventures 23.0 32.3 associates 2.5 4.9 other related parties 0.1 - Total 26.6 43.0 Financial liabilities due to non-consolidated Group companies 6.6 5.2 joint ventures 192.1 8.0 Total 198.7 13.2 Other liabilities due to non-consolidated Group companies 7.5 3.6 joint ventures 13.5 28.8 associates 5.6 8.3 other related parties 8.5 4.2 Total 35.1 44.9 Liabilities to related parties included liabilities from finance leases ofEUR 184.1 m (previous year none).The share of result of associates and joint ventures is shown separately bysegment in segment reporting.The Russian entrepreneur Alexey Mordashov, chief operating officer of ZAOSever Group, member of the supervisory board of TUI AG since February 2016,holds 19.3 % of the shares in TUI AG at the balance sheet date.For details on the change of TUI's interest in TUI Russia please refer toNote 17.The joint venture Riu Hotels S. A. holds 3.4 % of the shares in TUI AG atthe balance sheet date. Luis Riu Güell and Carmen Riu Güell (member of theSupervisory Board of TUI AG) hold a stake of 51 % in Riu Hotels S. A.A family member of a member of the supervisory board is employed by TUI.Theremuneration corresponds to the remuneration of other employees in asimilarposition and is based on the internal remuneration guidelines of the TUIGroup.In accordance with IAS 24, key management functions within the Group, theExecutive Board and the Supervisory Board are related parties whoseremuneration has to be listed separately. Remuneration of Executive and Supervisory Board EUR million 2015 / 2014 / 16 15 Short-term benefits 14.4 13.8 Post-employment benefits 3.0 3.9 Other long-term benefits (share-based 7.9 8.3 payments) Termination benefits 6.6 2.3 Total 31.9 28.3 Post-employment benefits are transfers to or reversals of pensionprovisionsfor Executive Board members active in the period under review. The expensesmentioned do not meet the definition of remuneration for Executive andSupervisory Board members under German accounting rules.Pension provisions for active Executive Board members total EUR 13.7 m(previous year EUR 10.7 m) as at the balance sheet date.In addition, accruals and liabilities of EUR 8.6 m (previous year EUR 6.9m)are recognised relating to the long-term incentive programme.(54) International Financial Reporting Standards (IFRS) not yet applied New stan- dards endor- sed by the EU, but appli- cable after 30 Sep 2016 Stan- App- Expected amendments Expected dard lica- impact on ble financial from statements IFRS 1 The amendments specify how to account for Not material 11 Jan the acquisition of an interest in a Joint Accoun- 2016 Operation that constitutes a 'business' ting (as defined in IFRS 3). Accordingly, the for acquirer has to measure identifiable Acqui- assets and liabilities at fair value, siti- recognise acquisition-related costs as ons of expenses, recognise deferred tax assets Inte- and liabilities and capitalise any rests residual amounts as goodwill. Furthermore, in the disclosure requirements of IFRS 3 Joint apply. The amendments are to be applied Opera- prospectively. tions IAS 16 1 The amendment clarifies when a method of None & IAS Jan depreciation or amortisation based on 38 2016 revenue may be appropriate. According to Clari- it, depreciation of an item of property, ficati- plant and equipment based on revenue on of generated by using the asset is not Accep- appropriate, amortisation based on revenue table for intangible assets only in exceptional Method- cases. The amendments are to be applied s of prospectively. Depre- ciati- on and Amorti- sation IAS 16 1 Bearer plants that bear biological assets None & IAS Jan for more than one period without being an 41 2016 agricultural product themselves, such as Agri- grape vines or olive trees, have this far cultu- been measured at fair value. In future, re: bearer plants will be treated as property, Bearer plant and equipment in scope of IAS 16 and Plants are to be measured at amortised cost. By contrast, the produce growing on bearer plants will continue to be measured at fair value in accordance with IAS 41. IAS 27 1 Application of the equity method in Not relevant Equity Jan separate financial statements to account to TUI AG as Method 2016 for investments in subsidiaries, joint no separate in ventures and associates is permitted IFRSfinancial separa- again. The option to account for such statementsare te interests in accordance with IAS 39 or at prepared. Finan- cost remains intact. cial State- ments Va- 1 The amendments from the Annual Not material rious Jan Improvements Project comprise changes to Impro- 2016 four standards: IAS 19, IAS 34, IFRS 5 and ve- IFRS 7. The amendments introduce minor ments changes to the content as well as to clarifications regarding recognition, IFRS presentation and measurement. (2012 - 2014) IAS 1 1 The amendments address the application of Not material Disclo- Jan materiality when presenting the components sure 2016 of financial statements. The standard no Initia- longer prescribes a particular order of tive the notes so that the order of the notes may reflect the individual relevance for the company. The amendments clarify that immaterial disclosures are not required. This also applies if disclosure is required by another standard. Furthermore, the presentation of an entity's share of other comprehensive income of equity-accounted associates and joint ventures in the statement of comprehensive income is clarified. IAS 1 The amendments clarify which subsidiaries Not relevant 28, Jan of investment entities have to be IFRS 2016 consolidated and which subsidiaries are to 10 be carried at fair value. The amendments &IFRS are to be applied prospectively. 12 Invest- ment enti- ties: Apply- ing the Conso- lidati- on Excep- tion IFRS 1 IFRS 15 combines and supersedes the TUI has not 15 Jan guidance on revenue recognition comprised yet completed Reve- 2018 in various standards and interpretations the analysis nue so far. It establishes a single, and from comprehensive framework for revenue implementation Con- recognition, to be applied across of IFRS 15. tracts industries and for all categories of IFRS 15can with revenue transactions, specifying which have a Custo- amount of revenue and at which point in material mers time or over which time period revenue is effect on the to be recognised. IFRS 15 replaces, Group's amongst others, IAS 18 Revenue and IAS 11 financial Construction Contracts. statements. The possible effects are explained below. IFRS 9 1 The new standard replaces current the IAS TUI is Finan- Jan 39 guidance on classification and currently cial 2018 measurement of financial assets and assessing the Instru- introduces new rules for hedge accounting. effects onthe ments The existing impairment rules are being Group's superseded by a new model based on financial expected credit losses. statements. The likely effects are explained below. Management is currently assessing the effects of IFRS 15 Revenue fromContracts with Customers in a Group-wide project to implement the newrequirements. The areas likely to be principally affected by the new rulesare: * Multiple element arrangements: Depending on whether various performance obligations towards a customer represent distinct separate performance obligations or a single performance obligation in the context of the contract, there is the possibility that the revenue recognition pattern for some business models in the tour operating business (package holiday, modular travel offerings, dynamic packaging) may be requiredto change. Currently a sizeable part of revenues in the tour operating business is being recognised at tour start date. For some business models the new requirements may lead to revenues being recognised at different points in time or for different amounts. * Travel agency commissions: The point at which travel agencies in the tour operator business are to recognise the agency commissionreceivable from the arrangement of touristic service contracts is to be re-evaluated. * Principal versus agent: In the evaluation whether TUI renders some services acting as a principal (gross revenue) or as an agent (net revenue), there is the possibility that more business models in thetour operating business will result in a net revenue presentation in the future. * Disclosures: The new requirements demand a significant extension of qualitative and quantitative information to be disclosed in the notes. At this stage, a reliable estimate of the effects of the new rules is notyet possible. TUI intends to make a more detailed assessment of the effectsover the next 12 months. The Group will not adopt the new standard before 1October 2018. New stan- dards not yet endor- sed by the EU and appli- cable after 30 Sep 2016 Stan- App- Expected amendments Expected dard lica- impacton ble financial from statements Amend- 1 The amendments will enable users of financial TUI ments Jan statements to better evaluate changes in expects to 2017 liabilities arising from financing activities. the IAS 7 An entity is required to disclose additional amendments Discl- information about cash flows and non-cash toresult osure changes in liabilities, for which cashflows are in Ini- classified as financing activities in the additional tiati- statement of cashflows. disclos- ve ures. Amend- 1 The amendments address the recognition of Not ments Jan deferred tax assets for unrealised losses on material to 2017 available for sale financial instruments. The IAS amendments clarify that an entity recognises 12Re- deferred tax assets for deductible temporary cogni- differences resulting from unrealised losses on tion debt instruments measured at fair value if it of has the ability and the intent to hold these Defer- instruments to maturity. Furthermore, it is red clarified, that when assessing the Tax recoverability of deferred tax assets, the tax As- deduction from the reversal of those deferred sets tax assets is excluded from estimated future for taxable profit used in that evaluation, unless Unrea- there are sufficient adequate deferred tax lised liabilities available. Los- ses Amend- 1 The amendments clarify that the measurement of Not ments Jan cash-settled, share-based payments which include material to 2018 vesting and non-vesting conditions should follow IFRS an approach consistent with that used for the 2Clas- measurement for equity-settled share-based sifi- payments. In addition, they set out guidance how cati- to account for modifications that change the on transaction from a cash-settled to an and equity-settled share-based payment. The Measu- amendments also introduce an exception to the re- principles in IFRS 2 that will require an award ment to be treated as if it was wholly of equity-settled, where a company is obliged to Sha- withhold an amount for the employee's tax re-Ba- obligation associated with a share-based payment sed and pay that amount to the tax authority. Pay- ments Clari- 1 The amendments comprise clarifications of the IFRS 15 fica- Jan guidance on identifying performance obligations, and the tions 2018 the principal versus agent assessment (i.e., clarifica- to gross vs. net revenue presentation) as well as tions to IFRS the accounting for revenue from licences at a IFRS 15 15 'point in time' or 'over time'. In addition, it may Reve- introduces practical expedients to simplify signifi- nue first-time adoption. cantly from affectthe Con- Group's tract- financial s statement- with s. The Custo- possible mers effects are explained above. IFRS 1 The amendments to IFRS 4 affect the first time The 4 Jan adoption of IFRS 9 for insurance companies. amendments Apply- 2019 are not ing relevant IFRS for TUI. 9 joint- ly with IFRS 4 IFRS 1 IFRS 16 replaces the current IAS 17 and its The new 16 Jan interpretations. For lessees, there is no longer standard Lea- 2019 the requirement to classify into finance and willhave ses operating leases. Instead all leases are signifi- accounted for according to the so-called 'Rights cant of Use' approach. In the statement of financial effectson position a lessee is to recognise an asset for the the right to use the leased item and a liability Group's for the future lease payments. There is a financial optional exemption for short-term leases (< 12 statement- months) and small-ticket leases. For lessors, s. The the accounting stays largely unchanged. Lessors likely will continue to classify leases in accordance effects with the criteria transfered from IAS 17. Early are application is permitted, but only in explained conjunction with IFRS 15. below. TUI is currently assessing the effects of applying IFRS 9 FinancialInstruments on the Group's financial statements. In principle, TUI expectsthe following effects: * There will be no significant impact resulting from the reclassification of financial assets based on the business model for managing those financial assets and the related contractual cash flows. The financial assets currently carried at amortised cost satisfy the conditions for classification at amortised cost under IFRS 9. For the instruments currently classified as available for sale an election to classify asat fair value through other comprehensive income (FVOCI) is available. * The transition of impairments from the Incurred-loss model to the new Expected-loss model is expected to result in an impact of first-time application. For the majority of financial assets TUI will be able to make use of a simplification offered by the standard, the so-called Full-Lifetime-Expected-Loss Model, in which all expected impairment losses are considered at first recognition. For touristic loans the Expected-Loss model will be applicable. * There will be no impact on the accounting of financial liabilities. The new requirements only affect the accounting for such financial liabilities which were designated at fair value through profit or loss. The Group does not currently make use of this so-called fair value option. * The new hedge accounting requirements will give TUI the opportunity to align the accounting for hedge relationships more closely with the Group's economic risk management. While the Group is yet to undertake a detailed evaluation of the hedge relationships, it appears as if the current hedge relationship would qualify as continuing hedge relationships upon the first-time application of IFRS 9. Therefore, TUI does not currently expect an impact on the accounting for its hedge relationships. A reliable estimate of the quantitative impact is not yet possible at thisstage. TUI intends to complete the detailed evaluation of the effects overthe next twelve months. The Group does not expect to adopt IFRS 9 early atthis point in time.IFRS 16 Leases will have a significant impact on the Group's financialstatement as well as the presentation of the net assets, financial positionand earnings of the Group: * Statement of financial position: Obligations from operating leases currently require disclosure in the notes to the financial statements. In future the rights and obligations will be recognised as right-of-use assets and lease liabilities in the statement of financial position. In view of the existing obligations from operating leases shown in section 41 TUI expects a significant increase in lease liabilities and in items of property, plant and equipment when it adopts the new standard. Dueto this increase in total assets the equity ratio will decline. Due to the increase in lease liabilities the net financial liabilities will increase correspondingly. * Income statement: For operating leases a lessee will recognise depreciation or amortisation and interest expenses instead of lease rental expenses in the future. This change will result in a significant improvement of the key financial measures EBITDA and EBITA as well asan improvement of the key financial measure EBIT. * Statement of cash flows: The change in presentation of the lease expenses from operating leases will result in an improvement of thecash flows from operating activities and a decrease of the cash flows from financing activities. TUI has set up a Group-wide project to evaluate the impact of applying thenew requirements. Before completion of this project a reliable estimate ofthe quantitative effects is not possible. TUI does not intend to apply thenew standard before 1 October 2019.(55) TUI Group ShareholdingsDisclosure of the TUI Group's shareholdings ist required under section 313of the German Commercial Trading Act. Comparative information for theprior-year reference period is therefore not provided. Company Country Capital Share in % Consolidated companies Tourism 'MAGIC LIFE' Assets AG, Vienna Austria 100 Abbey International Insurance PCC Malta 100 Limited, Qormi Absolut Holding Limited, Luqa Malta 99.9 Adehy Limited, Dublin Ireland 100 Aeolos Malta Ltd., Pieta Malta 100 Aeolos Travel LLP, Nicosia Cyprus 100 AMP Management Ltd., Crawley United 100 Kingdom Anse Marcel Riusa II SNC, Paris France 100 Apart Hotel Zarevo EOOD, Varna Bulgaria 100 aQi Hotel Schladming GmbH, Bad Erlach Austria 100 Arccac Eurl, Bourg St. Maurice France 100 atraveo GmbH, Düsseldorf Germany 100 Berge & Meer Touristik GmbH, Rengsdorf Germany 100 Boomerang-Reisen GmbH, Trier Germany 100 Boomerang-Reisen Vermögensverwaltungs Germany 75 GmbH, Trier Brunalp SARL, Venosc France 100 BU RIUSA II EOOD, Sofia Bulgaria 100 Cabotel-Hoteleria e Turismo Lda., Cape Verde 100 Santiago Callers-Pegasus Pension Trustee Ltd., United 100 Crawley Kingdom Club Hôtel Management Tunisia SARL, Tunisia 100 Djerba Corsair S. A., Rungis France 100 Crystal Holidays Ltd., Crawley United 100 Kingdom Crystal Holidays, Inc, Wilmington United States 100 (Delaware) of America Crystal International Travel Group United 100 Ltd., Crawley Kingdom Daidalos Hotelund Touristikunternehmen Greece 89.8 A.E., Athens Dominicanotel S. A., Puerto Plata Dominican 100 Republic Egyptian Germany Co. for Hotels Egypt 66.6 (L.T.D), Cairo Elena SL, Palma de Mallorca Spain 100 Entreprises Hotelières et Touristiques Greece 100 PALADIEN Lena Mary S. A., Argolis Europa 2 Ltd, Valletta Malta 100 Explorers Travel Club Limited, Crawley United 100 Kingdom Falcon Leisure Group (Overseas) United 100 Limited, Crawley Kingdom First Choice (Turkey) Limited, Crawley United 100 Kingdom First Choice Airways Limited, Crawley United 100 Kingdom First Choice Holiday Hypermarkets United 100 Limited, Crawley Kingdom First Choice Holidays & Flights United 100 Limited, Crawley Kingdom First Choice Land (Ireland) Limited, Ireland 100 Dublin First Choice Travel Shops (SW) United 100 Limited, Crawley Kingdom First Choice Travel Shops Limited, United 100 Crawley Kingdom Follow Coordinate Hotels Portugal Portugal 100 Unipessoal Lda, Albufeira Freguesia FOX-TOURS Reisen GmbH, Rengsdorf Germany 100 Fritidsresor AB, Stockholm Sweden 100 Fritidsresor Tours & Travels India Pvt India 100 Ltd, Bardez, Goa GEAFOND Número Dos Fuerteventura S. Spain 100 A., Las Palmas, Gran Canaria GEAFOND Número Uno Lanzarote S. A., Spain 100 Las Palmas, Gran Canaria Groupement Touristique International France 100 S. A. S., Lille Hannibal Tour SA, Tunis Tunisia 100 Hapag-Lloyd (Bahamas) Ltd., Nassau Bahamas 100 Hapag-Lloyd Cruises GmbH, Hamburg Germany 100 Hellenic EFS Hotel Management E.P.E., Greece 100 Athens Holiday Center S. A., Cala Serena / Spain 100 Cala d'Or Holidays Services S. A., Agadir Morocco 100 Horizon Holidays Ltd., Crawley United 100 Kingdom Horizon Midlands (Properties) Ltd., United 100 Crawley Kingdom Iberotel International A. S., Antalya Turkey 100 Iberotel Otelcilik A. S., Istanbul Turkey 100 Imperial Cruising Company SARL, Egypt 90 Heliopolis-Cairo Inter Hotel SARL, Tunis Tunisia 100 Itaria Limited, Nicosia Cyprus 100 Jandia Playa S. A. U., Morro Jable / Spain 100 Fuerteventura Jetair Real Estate N. V., Brussels Belgium 100 Jetair Travel Distribution N. V., Belgium 100 Oostende Jetaircenter N. V., Mechelen Belgium 100 JNB (Bristol) Limited, Crawley United 100 Kingdom Kras B.V., Ammerzoden Netherlands 100 Label Tour EURL, Montreuil France 100 Lapter Eurl, Macot La Plagne France 100 Last-Minute-Restplatzreisen GmbH, Germany 100 Baden-Baden Lodges & Mountain Hotels SARL, Notre France 100 Dame de Bellecombe, Savoie L'TUR Suisse AG, Dübendorf / ZH Switzerland 99.5 l'tur tourismus Aktiengesellschaft, Germany 80 Baden-Baden Lunn Poly (Jersey) Ltd., St. Helier Jersey 100 Lunn Poly Ltd., Crawley United 100 Kingdom Magic Hotels SA, Tunis Tunisia 100 Magic Life Egypt for Hotels LLC, Sharm Egypt 100 el Sheikh Magic Life GmbH & Co KG, Vienna Austria 100 Magic Life Greece S. A., Athens Greece 100 Magic Tourism International S. A., Tunisia 100 Tunis Mainstream DS Dominicana S. A. S., Dominican 100 Higuey Republic Medico Flugreisen GmbH, Baden-Baden Germany 100 Morvik EURL, Bourg Saint Maurice France 100 MX RIUSA II S. A. de C. V., Cabo San Mexico 100 Lucas Nazar Nordic AB, Malmö Sweden 100 Nordotel S. A. U., San Bartolomé de Spain 100 Tirajana Nouvelles Frontières Senegal S.R.L., Senegal 100 Dakar Ocean College LLC, Sharm el Sheikh Egypt 100 Ocean Ventures for Hotels and Tourism Egypt 98 Services SAE, Sharm el Sheikh Orion Airways Ltd., Crawley United 100 Kingdom Oy Finnmatkat AB, Helsinki Finland 100 PATS N. V., Oostende Belgium 100 Petit Palais Srl, Valtournenche Italy 100 Preussag Beteiligungsverwaltungs GmbH Germany 100 IX, Hanover Professor Kohts Vei 108 AS, Stabekk Norway 100 Promociones y Edificaciones Chiclana Spain 100 S. A., Palma de Mallorca ProTel Gesellschaft für Kommunikation Germany 100 mbH, Rengsdorf Puerto Plata Caribe Beach S. A., Dominican 100 Puerto Plata Republic RC Clubhotel Cyprus Limited, Limassol Cyprus 100 RCHM S. A. S., Agadir Morocco 100 Rideway Investment Ltd., London United 100 Kingdom Riu Jamaicotel Ltd., Negril Jamaica 100 Riu Le Morne Ltd, Port Louis Mauritius 100 RIUSA II S. A., Palma de Mallorca Spain 50* * Controlling influence RIUSA NED B. V., Amsterdam Netherlands 100 ROBINSON AUSTRIA Clubhotel GmbH, Austria 100 Villach-Landskron Robinson Club GmbH, Hanover Germany 100 Robinson Club Italia S.p.A., Marina di Italy 100 Ugento Robinson Club Maldives Private Maldives 100 Limited, Malé Robinson Clubhotel Turizm Ltd. Sti., Turkey 100 Istanbul Robinson Hoteles España S. A., Cala Spain 100 d'Or Robinson Hotels Portugal S. A., Vila Portugal 67 Nova de Cacela Robinson Otelcilik A. S., Istanbul Turkey 100 Saint Martin RIUSA II SAS, Basse Terre France 100 SERAC Travel GmbH, Zermatt Switzerland 100 Simply Travel Holdings Ltd., Crawley United 100 Kingdom Skymead Leasing Ltd., Crawley United 100 Kingdom Société d'Exploitation du Paladien Morocco 100 Marrakech SA, Marrakech Société d'Investissement Aérien S. A., Morocco 100 Casablanca Société d'Investissement et France 100 d'Exploration du Paladien de Calcatoggio (SIEPAC), Montreuil Société d'investissement hotelier Morocco 100 Almoravides S. A., Marrakech Société Marocaine pour le Morocco 100 Developpement des Transports Touristiques S. A., Agadir Sons of South Sinai for Tourism Egypt 84.1 Services and Supplies SAE, Sharm el Sheikh Specialist Holidays Group Ltd., United 100 Crawley Kingdom Specialist Holidays, Inc., Canada 100 Mississauga, Ontario Star Tour A/S, Copenhagen Denmark 100 Star Tour Holding A/S, Copenhagen Denmark 100 Startour-Stjernereiser AS, Stabekk Norway 100 STIVA RII Ltd., Dublin Ireland 100 Sunshine Cruises Limited, Crawley United 100 Kingdom Tantur Turizm Seyahat A. S., Istanbul Turkey 100 TCV Touristik-Computerverwaltungs Germany 100 GmbH, Baden-Baden TdC Agricoltura Società agricola a Italy 100 r.l., Florence TdC Amministrazione S.r.l., Florence Italy 100 Tec4Jets B.V., Rijswijk ZH Netherlands 100 Tec4Jets NV, Oostende Belgium 100 Tenuta di Castelfalfi S.p.A., Florence Italy 100 Thomson Airways Limited, Crawley United 100 Kingdom Thomson Reisen GmbH, St. Johann Austria 100 Thomson Services Ltd., St. Peter Port Guernsey 100 Thomson Travel Group (Holdings) Ltd., United 100 Crawley Kingdom TICS GmbH Touristische Internet und Germany 100 Call Center Services, Baden-Baden Tigdiv Eurl, Tignes France 100 TLT Reisebüro GmbH, Hanover Germany 100 Transfar - Agencia de Viagens e Portugal 100 Turismo Lda., Faro Travel Choice Limited, Crawley United 100 Kingdom travel-Ba.Sys GmbH & Co KG, Mülheim an Germany 83.5 der Ruhr Tropical Places Ltd., Crawley United 100 Kingdom TT Hotels Italia S.R.L., Rome Italy 100 TT Hotels Turkey Otel Hizmetleri Turkey 100 Turizm ve ticaret AS, Antalya TUI (Cyprus) Limited, Nicosia Cyprus 100 TUI (Suisse) AG, Zurich Switzerland 100 TUI (Suisse) Holding AG, Zurich Switzerland 100 TUI 4 U GmbH, Bremen Germany 100 TUI Airlines Belgium N. V., Oostende Belgium 100 TUI Airlines Nederland B. V., Rijswijk Netherlands 100 TUI aqtiv GmbH, Hanover Germany 100 TUI Austria Holding GmbH, Vienna Austria 100 TUI Belgium NV, Oostende Belgium 100 TUI Bulgaria EOOD, Varna Bulgaria 100 TUI Curaçao N. V., Curaçao Country 100 Curacao TUI Customer Operations GmbH, Hanover Germany 100 TUI Denmark Holding A/S, Copenhagen Denmark 100 TUI Deutschland GmbH, Hanover Germany 100 TUI DS USA, Inc, Wilmington (Delaware) United States 100 of America TUI España Turismo S. A., Barcelona Spain 100 TUI France SAS, Nanterre France 100 TUI Hellas Travel Tourism and Airline Greece 100 SA, Athens TUI Holding Spain S.L., Barcelona Spain 100 TUI Hotel Betriebsgesellschaft mbH, Germany 100 Hanover TUI InfoTec GmbH, Hanover Germany 100 TUI Leisure Travel Special Tours GmbH, Germany 100 Hanover TUI Magic Life GmbH, Hanover Germany 100 TUI Mexicana SA de CV, Mexico Mexico 100 TUI Nederland Holding N. V., Rijswijk Netherlands 100 TUI Nederland N. V., Rijswijk Netherlands 100 TUI Nordic Holding AB, Stockholm Sweden 100 TUI Northern Europe Ltd., Crawley United 100 Kingdom TUI Norway Holding AS, Stabekk Norway 100 TUI Österreich GmbH, Vienna Austria 100 TUI Pension Scheme (UK) Ltd., Crawley United 100 Kingdom TUI Poland Dystrybucja Sp. z o.o., Poland 100 Warsaw TUI Poland Sp. z o.o., Warsaw Poland 100 TUI PORTUGAL - Agencia de Viagens e Portugal 100 Turismo S. A., Faro TUI Reisecenter Austria Business Austria 74.9 Travel GmbH, Vienna TUI Service AG, Altendorf Switzerland 100 TUI Suisse Retail AG, Zurich Switzerland 100 TUI Travel (Ireland) Limited, Dublin Ireland 100 TUI Travel Group Solutions Limited, United 100 Crawley Kingdom TUI Travel Holdings Sweden AB, Sweden 100 Stockholm TUI UK Italia S.r.L., Turin Italy 100 TUI UK Ltd., Crawley United 100 Kingdom TUI UK Retail Limited, Crawley United 100 Kingdom TUI UK Transport Ltd., Crawley United 100 Kingdom TUIfly GmbH, Langenhagen Germany 100 TUIfly Nordic AB, Stockholm Sweden 100 TUIfly Vermarktungs GmbH, Hanover Germany 100 Tunisie Investment Services Holding S. Tunisia 100 A., Tunis Tunisie Voyages S. A., Tunis Tunisia 100 Tunisotel S. A. R. L., Tunis Tunisia 100 Turcotel Turizm A. S., Istanbul Turkey 100 Turkuaz Insaat Turizm A. S., Ankara Turkey 100 Ultramar Express Transport S. A., Spain 100 Palma de Mallorca Voukouvalides Tours Tourism S. A., Kos Greece 100 Wolters Reisen GmbH, Stuhr Germany 100 WonderCruises AB, Stockholm Sweden 100 WonderHolding AB, Stockholm Sweden 100 Xidias Coaches Limited, Larnaca Cyprus 51 Specialist Travel Adventure Transport Limited, Crawley United 100 Kingdom Adventure Travels USA, Inc., United States 100 Wilmington (Delaware) of America Alcor Yachting SA, Geneva Switzerland 100 Alkor Yat Turizm Isletmacileri A. S., Turkey 100 Izmir American Adventures Travel, Inc, United States 100 Wilmington (Delaware) of America Antigua Charter Services, St. John's Antigua and 100 Barbuda Brightspark Travel Inc, State of United States 100 Delaware of America CBQ No. 2 (UK) Limited, Crawley United 100 Kingdom CBQ No. 2 (US) Limited, State of United States 100 Delaware of America CBQ No. 2 International Projects United 100 Limited, Crawley Kingdom CBQ No. 2 (Australia) Pty Ltd, Sydney Australia 100 CHS Tour Services Ltd, Crawley United 100 Kingdom Connoisseur Belgium BVBA, Nieuwpoort Belgium 100 Crown Blue Line France SA, France 100 Castelnaudary Crown Blue Line GmbH, Kleinzerlang Germany 100 Crown Blue Line Limited, Crawley United 100 Kingdom Crown Holidays Limited, Crawley United 100 Kingdom Crown Travel Limited, Crawley United 100 Kingdom Educatours Limited, Mississauga, Canada 100 Ontario EEFC, Inc., State of Delaware United States 100 of America Emerald Star Limited, Dublin Ireland 100 Events International (Sports Travel) United 100 Limited, Crawley Kingdom Events International Limited, Crawley United 100 Kingdom Exodus Travels Australia Pty Ltd, Australia 100 Melbourne Exodus Travels Canada Inc, Toronto Canada 100 Exodus Travels Limited, Crawley United 100 Kingdom Exodus Travels USA, Inc., Emeryville, United States 100 CA of America Fanatics Sports & Party Tours UK United 100 Limited, Crawley Kingdom Fanatics Sports and Party Tours PTY Australia 100 Limited, Banksia FanFirm Pty Ltd, Banksia Australia 100 Fantravel.com, Inc., Wilmington United States 100 (Delaware) of America FCM (BVI) Ltd, British Virgin Islands British 100 Virgin Islands First Choice Expeditions, Inc., State United States 100 of Delaware of America First Choice Marine (Malaysia) Snd Malaysia 100 Bhd, Malaysia First Choice Marine Limited, Crawley United 100 Kingdom First Choice Sailing, Inc. (USA) (also United States 100 known as Sunsail, Inc.), State of of America Delaware Francotel Limited, Crawley United 100 Kingdom GEI-Moorings, LLC, State of Delaware United States 100 of America Gullivers Group Limited, Crawley United 100 Kingdom Gullivers Sports Travel Limited, United 100 Crawley Kingdom Hayes & Jarvis (Travel) Limited, United 100 Crawley Kingdom Headwater Holidays Limited, Crawley United 100 Kingdom Hellenic Sailing Holidays SA, Athens Greece 100 Hellenic Sailing SA, Athens Greece 100 International Expeditions, Inc., State United States 100 of Delaware of America Intrav, Inc., State of Delaware United States 100 of America Le Boat Netherlands B.V., Rotterdam Netherlands 100 Le Piolet SCI, St Martin de France 100 Belleville, Savoie Les Tours Jumpstreet Tours, Inc., Canada 100 Montreal Mariner International Asia Limited, Hong Kong 100 Hongkong Mariner International Travel (UK) United 100 Limited, Crawley Kingdom Mariner International Travel, Inc., United States 100 State of Delaware of America Mariner Operations USA Inc, State of United States 100 Delaware of America Mariner Travel GmbH, Bad Vilbel Germany 100 Mariner Travel SARL, Paris France 100 Mariner Yacht Services SA, Le Marin France 100 (Martinique) Mariner Yachts (Proprietary) Limited, South Africa 100 Illovo Master-Yachting GmbH, Eibelstadt Germany 100 Maxi Yen SL, Palma de Mallorca Spain 100 Molay Travel SARL, Molay-Littry, France 100 Calvados Molay Travel SCI, Molay-Littry, France 100 Calvados Mont Charvin Ski SARL, Paris France 100 Moorings Grenadines Ltd., St. Vincent St. Vincent 100 and Grenadines and the Grenadines Moorings Yachting SAS, Paris France 100 Moorings Yat Isletmecilgi Turizm Ve Turkey 100 Tic Ltd, Mugla MyPlanet Holding A/S, Holstebro Denmark 100 MyPlanet International A/S, Aarhus Denmark 100 MyPlanet Sweden AB, Göteborg Sweden 100 Platinum Event Travel Limited, Crawley United 100 Kingdom Porter and Haylett Limited, Crawley United 100 Kingdom Premier Holidays Afloat Limited, Ireland 100 Dublin Premiere International Corp, Gardena United States 100 of America Prestige Boating Holidays Limited, Ireland 100 Dublin Quark Expeditions, Inc., State of United States 100 Delaware of America Real Travel Ltd, Crawley United 100 Kingdom Sawadee Amsterdam BV, Amsterdam Netherlands 100 Ski Bound Limited, Crawley United 100 Kingdom Skibound France SARL, Notre Dame de France 100 Bellecombe Specialist Holiday Group Ireland Ltd., Ireland 100 Dublin Specialist Holidays (Travel) Limited, United 100 Crawley Kingdom Specialist Holidays Contracting Ltd., United 100 Crawley Kingdom Specialist Holidays Ltd., Crawley United 100 Kingdom Sports Executive Travel Limited, United 100 Crawley Kingdom Sportsworld (Beijing) Sports China 100 Management Consulting Limited Company, Peking Sportsworld Eventos Ltda, São Paulo Brazil 100 Sportsworld Group Limited, Crawley United 100 Kingdom Sportsworld Holdings Limited, Crawley United 100 Kingdom Student City S.a.r.l., Paris France 100 Student City Travel Limited, Crawley United 100 Kingdom Student Skiing Limited, Crawley United 100 Kingdom Studentcity.com, Inc., State of United States 100 Delaware of America Sunsail (Antigua) Limited, Antigua Antigua and 100 Barbuda Sunsail (Australia) Pty Ltd, Hamilton Australia 100 Island, Queensland Sunsail (Seychelles) Limited, Mahé Seychelles 100 Sunsail (Thailand) Company Ltd, Phuket Thailand 30* * Controlling influence Sunsail Adriatic d.o.o., Split Croatia 100 Sunsail Hellas MEPE, Athens Greece 100 Sunsail International B.V., Rotterdam Netherlands 100 Sunsail SAS, Castelnaudary France 100 Sunsail Worldwide Sailing Limited, United 100 Crawley Kingdom Sunsail Worldwide Sailing St. Vincent St. Vincent 100 Limited, St. Vincent and Grenadines and the Grenadines TCS & Starquest Expeditions, Inc., United States 100 Seattle of America TCS Expeditions, Inc., State of United States 100 Delaware of America Teamlink Travel Limited, Crawley United 100 Kingdom The Moorings (Bahamas) Ltd, Nassau Bahamas 100 The Moorings (Seychelles) Limited, Seychelles 100 Mahé The Moorings (St. Lucia) LTD, St. Saint Lucia 100 Lucia The Moorings Belize Limited, Belize Belize 100 City The Moorings d.o.o., Split Croatia 100 The Moorings Limited, British Virgin British 100 Islands Virgin Islands The Moorings Sailing Holidays Limited, United 100 Crawley Kingdom The Moorings SARL, Utoroa, Raiatea French 100 Polynesia Thomson Sport (UK) Limited, Crawley United 100 Kingdom TRAVCOA Corporation, State of Delaware United States 100 of America Travel Class Limited, Crawley United 100 Kingdom Travel Services Europe Spain SL, Spain 100 Barcelona Travel Turf, Inc., Allentown United States 100 of America Travelbound European Tours Limited, United 100 Crawley Kingdom Travelmood Limited, Crawley United 100 Kingdom Travelopia Contract Services Limited, United 100 Crawley Kingdom Travelopia Holdings Limited, Crawley United 100 Kingdom Travelopia USA, Inc., State of United States 100 Delaware of America Trek America Travel Limited, Crawley United 100 Kingdom Trek Investco Limited, Crawley United 100 Kingdom TTSS Limited, Crawley United 100 Kingdom TTSS Transportation Limited, Crawley United 100 Kingdom TUI Holdings (Australia) PTY Limited, Australia 100 Queensland TUI Marine Grenada Limited, St. Grenada 100 George's TUI Travel SAS Adventure Limited, United 100 Crawley Kingdom Versun Yachts NSA, Athens Greece 100 We Love Rugby Pty Ltd, Banksia Australia 100 Williment Travel Group Limited, New Zealand 100 Wellington World Challenge Expeditions Limited, United 100 Crawley Kingdom World Challenge Expeditions Pty Ltd, Australia 100 Victoria World Challenge Expeditions, Inc., United States 100 Cambridge, MA of America World Challenge NZ Limited, Wellington New Zealand 100 Yachts International Limited, British British 100 Virgin Islands Virgin Islands YIL, LLC, State of Delaware United States 100 of America Your Man Tours, Inc., El Segundo, CA United States 100 of America Zegrahm Expeditions, Inc., Seattle United States 100 of America All other segments Absolut Insurance Limited, St. Peter Guernsey 100 Port Amber Nominee GP Limited, Crawley United 100 Kingdom Asiarooms Pte Ltd, Singapur Singapur 100 B.D.S Destination Services Tours, Egypt 100 Cairo Canada Maritime Services Limited, United 100 Crawley Kingdom Canadian Pacific (UK) Limited, Crawley United 100 Kingdom Cast Agencies Europe Limited, Crawley United 100 Kingdom Cast Group Services Limited, United 100 Southamton Kingdom Cheqqer B.V., Rijswijk Netherlands 100 Contship Holdings Limited, Southampton United 100 Kingdom CP Ships (Bermuda) Ltd., Hamilton Bermuda 100 CP Ships (UK) Limited, Crawley United 100 Kingdom CP Ships Ltd., Saint John Canada 100 CPS Holdings (No. 2) Limited, United 100 Southampton Kingdom CPS Number 4 Limited, Southampton United 100 Kingdom DEFAG Beteiligungsverwaltungs GmbH I, Germany 100 Hanover DEFAG Beteiligungsverwaltungs GmbH Germany 100 III, Hanover First Choice Holidays Finance Limited, United 100 Crawley Kingdom First Choice Holidays Limited, Crawley United 100 Kingdom First Choice Leisure Limited, Crawley United 100 Kingdom First Choice Olympic Limited, Crawley United 100 Kingdom First Choice Overseas Holdings United 100 Limited, Crawley Kingdom First Choice USA Limited, Crawley United 100 Kingdom Hapag-Lloyd Executive GmbH, Germany 100 Langenhagen I Viaggi del Turchese S.r.l., Fidenza Italy 100 Jetset Group Holding (Brazil) Limited, United 100 Crawley Kingdom Jetset Group Holding (UK) Limited, United 100 Crawley Kingdom Jetset Group Holding Limited, Crawley United 100 Kingdom Leibniz-Service GmbH, Hanover Germany 100 Mala Pronta Viagens e Turismo Ltda., Brazil 100 Curitiba Manufacturer's Serialnumber 852 Ireland 100 Limited, Dublin MSN 1359 GmbH, Hanover Germany 100 Paradise Hotels Management Company Egypt 100 LLC, Cairo PM Peiner Maschinen GmbH, Hanover Germany 100 Preussag Immobilien GmbH, Salzgitter Germany 100 Preussag UK Ltd., Crawley United 100 Kingdom Sovereign Tour Operations Limited, United 100 Crawley Kingdom Thomson Airways Trustee Limited, United 100 Crawley Kingdom TTG (Jersey) Limited, Jersey Jersey 100 TUI Ambassador Tours Unipessoal Lda, Portugal 100 Lissabon TUI Aviation GmbH, Hanover Germany 100 TUI Beteiligungs GmbH, Hanover Germany 100 TUI Brasil Operadora e Agencia de Brazil 100 Viagens LTDA, Curitiba TUI Business Services GmbH, Hanover Germany 100 TUI Canada Holdings, Inc, Toronto Canada 100 TUI Chile Operador y Agencia de Viajes Chile 100 SpA, Santiago TUI China Travel CO. Ltd., Peking China 75 TUI Colombia Operadora y Agencia de Colombia 100 Viajes SAS, Bogota TUI Connect GmbH, Hanover Germany 100 TUI Group Services GmbH, Hanover Germany 100 TUI Group UK Trustee Limited, Crawley United 100 Kingdom TUI India Private Limited, New Delhi India 100 TUI Leisure Travel Service GmbH, Neuss Germany 100 TUI LTE Viajes S.A de C.V, Mexico City Mexico 100 TUI Spain, SLU, Madrid Spain 100 TUI Travel Amber E&W LLP, Crawley United 100 Kingdom TUI Travel Amber Limited, Edinburgh United 100 Kingdom TUI Travel Amber Scot LP, Edinburgh United 100 Kingdom TUI Travel Aviation Finance Limited, United 100 Crawley Kingdom TUI Travel Common Investment Fund United 100 Trustee Limited, Crawley Kingdom TUI Travel Group Management Services United 100 Limited, Crawley Kingdom TUI Travel Healthcare Limited, Crawley United 100 Kingdom TUI Travel Holdings Limited, Crawley United 100 Kingdom TUI Travel Limited, Crawley United 100 Kingdom TUI Travel Nominee Limited, Crawley United 100 Kingdom TUI Travel Overseas Holdings Limited, United 100 Crawley Kingdom TUI-Hapag Beteiligungs GmbH, Hanover Germany 100 Joint Ventures and associated companies Tourism .BOSYS SOFTWARE GMBH, Hamburg Germany 25.2 Ahungalla Resorts Limited, Colombo Sri Lanka 40 Aitken Spence Travels Ltd, Colombo Sri Lanka 50 alps & cities 4ever GmbH, Vienna Austria 50 Atlantica Hellas S. A., Rhodos Greece 50 Atlantica Hotels and Resorts Limited, Cyprus 49.9 Lemesos Bartu Turizm Yatirimlari Anonim Turkey 50 Sirketi, Istanbul Bonitos GmbH & Co KG, Frankfurt am Germany 50 Main Daktari Travel & Tours Ltd., Limassol Cyprus 33.3 DER Reisecenter TUI GmbH, Berlin Germany 50 ENC for touristic Projects Company S. Egypt 50 A. E., Sharm el Sheikh Etapex, S. A., Agadir Morocco 35 Fanara Residence for Hotels S. A. E., Egypt 50 Sharm el Sheikh GBH Turizm Sanayi Isletmecilik ve Turkey 50 Ticaret A. S., Istanbul Gebeco Gesellschaft für internationale Germany 50.1 Begegnung und Cooperation mbH & Co. KG, Kiel GRUPOTEL DOS S. A., Can Picafort Spain 50 Holiday Travel (Israel) Limited, Israel 50 Airport City Hydrant Refuelling System NV, Brussels Belgium 25 InteRes Gesellschaft für Germany 25.2 Informationstechnologie mbH, Darmstadt Interyachting Limited, Limassol Cyprus 45 Jaz Hotels & Resorts S. A. E., Cairo Egypt 51 Kamarayat Nabq Company for Hotels S. Egypt 50 A. E., Sharm el Sheikh Karisma Hotels Adriatic d.o.o., Zagreb Croatia 33.3 Karisma Hotels Caribbean S. A., Panama Panama 50 Nakheel Riu Deira Islands Hotel FZ CO, United Arab 40 Dubai Emirates Raiffeisen-Tours RT-Reisen GmbH, Germany 25.1 Burghausen Riu Hotels S. A., Palma de Mallorca Spain 49 Sharm El Maya Touristic Hotels Co. S. Egypt 50 A. E., Cairo Sun Oasis for Hotels Company S. A. E., Egypt 50 Hurghada Sunwing Travel Group, Inc, Toronto Canada 49 Teckcenter Reisebüro GmbH, Kirchheim Germany 50 unter Teck Tikida Bay S. A., Agadir Morocco 34 TIKIDA DUNES S. A., Agadir Morocco 30 Tikida Palmeraie S. A., Marrakech Morocco 33.3 Togebi Holdings Limited, Nicosia Cyprus 25 Travco Group Holding S. A. E., Cairo Egypt 50 TRAVELStar GmbH, Hanover Germany 50 TUI Cruises GmbH, Hamburg Germany 50 UK Hotel Holdings FZC L. L. C., United Arab 50 Fujairah Emirates All other segments ACCON-RVS Accounting & Consulting Germany 50 GmbH, Berlin Responsibility statementby managementTo the best of our knowledge, and in accordance with the applicablereporting principles, the consolidated financial statements give a true andfair view of the net assets, financial position and results of operationsofthe Group, and the Group Management Report includes a fair review of thedevelopment and performance of the business and the position of the Group,together with a description of the principal opportunities and risksassociated with the expected development of the Group.Hanover, 6 December 2016The Executive Board Friedrich Joussen Horst Baier David Burling Sebastian Ebel Dr Elke Eller IndependentAuditor's ReportTo TUI AG, Berlin and HanoverReport on the Audit of the Consolidated Financial StatementsAudit Opinion on the Consolidated Financial StatementsWe have audited the consolidated financial statements of TUI AG, Berlin andHanover, and its subsidiaries (the Group), which comprise the consolidatedstatement of financial position as at September 30, 2016, and theconsolidated income statement, the consolidated statement of comprehensiveincome, consolidated statement of changes in equity and consolidatedstatement of cash flows for the financial year from October 1, 2015, toSeptember 30, 2016, and notes to the consolidated financial statements,including a summary of significant accounting policies.According to § (Article) 322 Abs. (paragraph) 3 Satz (sentence) 1 zweiterHalbsatz (second half sentence) HGB ('Handelsgesetzbuch': German CommercialCode), we state that, in our opinion, based on the findings of our audit,the accompanying consolidated financial statements comply, in all materialrespects, with IFRS, as adopted by the EU, and the additional German legalrequirements applicable under § 315a Abs. 1 HGB and give a true and fairview of the net assets and financial position of the Group as at September30, 2016, as well as the results of operations for the financial year fromOctober 1, 2015, to September 30, 2016, in accordance with theserequirements.According to § 322 Abs. 3 Satz 1 erster Halbsatz (first half sentence) HGB,we state that our audit has not lead to any reservations with respect tothepropriety of the consolidated financial statements.Basis for Audit Opinion on the Consolidated Financial StatementsWe conducted our audit in accordance with § 317 HGB and German generallyaccepted standards for the audit of financial statements promulgated by theInstitut der Wirtschaftsprüfer (Institute of Public Auditors in Germany;IDW), and additionally considered of the International Standards onAuditing(ISA). Our responsibilities under those provisions and standards, as wellassupplementary standards, are further described in the 'Auditor'sResponsibilities for the Audit of the Consolidated Financial Statements'section of our report. We are independent of the Group in accordance withthe provisions under German commercial law and professional standards, andwe have fulfilled our other German ethical responsibilities in accordancewith these requirements. We believe that the audit evidence we haveobtainedis sufficient and appropriate to provide a basis for our audit opinion.Key Audit MattersKey audit matters are those matters that, in our professional judgment,wereof most significance in our audit of the consolidated financial statementsfor the financial year from October 1, 2015, to September 30, 2016. Thesematters were addressed in the context of our audit of the consolidatedfinancial statements as a whole, and in forming our audit opinion thereon;we do not provide a separate audit opinion on these matters.In our view, the key audit matters were as follows:Recoverability of goodwillDisposal of shares in Hotelbeds Group companies and planned sale of sharesin Specialist Group companiesProvisions and other areas requiring judgmentDeferred taxes on loss carryforwards and trade tax risksEBITA adjustmentsOur presentation of these key audit matters has been structured as follows:Matter and issueAudit approach and findingsReference to further informationRecoverability of goodwillGoodwill amounting to EUR 2,854 million in total has been reported underthegoodwill line item in the statement of financial position in theconsolidated financial statements of TUI AG. Goodwill is tested by theCompany for impairment as of June 30 in the financial year (impairmenttest). It is measured using a discounted cash flow valuation technique. Theresult of this measurement depends to a large extent on Management'sassessment of future cash inflows and the discount rate used, and istherefore subject to considerable uncertainty, particularly as a result ofthe United Kingdom's announcement to leave the European Union (so-called'Brexit') and the assumptions on the development of tourism in Turkey whichare relevant to the determination of cash inflows. Against this backgroundthis matter was in our view of particular importance during our audit,With respect to the appropriateness of the future cash inflows used in thecalculation we satisfied ourselves, amongst other procedures, by agreeingthis information with the current budgets in the three-year plan adopted byManagement and approved by the supervisory board, as well as by comparisonwith general and sector-specific market expectations. With the knowledgethat even relatively small changes in the discount rate applied can havematerial effects on the value of goodwill calculated in this way, we alsofocused our testing on the parameters used to determine the discount rateapplied, including the weighted average cost of capital, and reperformedthecalculations. Due to the materiality of goodwill (representingapproximately20 % of consolidated total assets) and the fact that its measurement alsodepends on economic conditions which are outside of the company's sphere ofinfluence, we also assessed the sensitivity analyses prepared by theCompanyfor cash-generating units with little headroom (Net book value compared topresent value) and found that the respective goodwill was sufficientlycovered by discounted future cash surpluses. Overall we considered, themeasurement inputs and assumptions used by Management to be in line withourexpectations.The Company's goodwill disclosures are contained in section 14 of the notesto the consolidated financial statements.Disposal of shares in Hotelbeds Group companies and planned sale of sharesinSpecialist Group companiesDuring the financial year shares in the companies belonging to theHotelbedsGroup were sold as part of the focusing on the core tourism business. Forthis reason, the Hotelbeds Group was designated as a disposal group (IFRS5)as of March 31, 2016, and classified as a discontinued operation. EffectiveSeptember 12, 2016 the Hotelbeds Group was sold and deconsolidated.Overall,the gain on disposal at group level was EUR 681 million. Furthermore, theTUI Group is planning to sell its shares in the Specialist Group. In thiscontext the Specialist Group segment was designated as a disposal group(IFRS 5) as of September 30, 2016, and classified as a discontinuedoperation. From our point of view, these matters were of particularimportance due to the complexity of the underlying contractual agreementsand the materialeffects on the Group.To test whether the accounting treatment of the disposal of the shares inthe companies belonging to the Hotelbeds Group was appropriate we examined,inter alia, as part of our audit, the company law principles as well as theterms of the underlying sale agreement. In this regard, we examined whetherthe conditions for the designation during the financial year as a disposalgroup (IFRS 5) had been met; we examined the resulting effects on themeasurement of assets and liabilities and the conditions for theclassification as a discontinued operation, as well as the deconsolidationof the Hotelbeds Group (IFRS 10). Regarding the designation as adiscontinued operation of the Specialist Group, we also examined whethertheconditions for a disposal group (IFRS 5) had been met; we examined theresulting effects on the measurement of assets and liabilities and theconditions for the classification as a discontinued operation. We were ableto satisfy ourselves that the accounting for the sale of the shares in thecompanies belonging to the Hotelbeds Group and the associated measurementwere suitable and that the total gain on disposal recognized had beendetermined appropriately. There are no reservations concerning thedesignation of the Specialist Group as a disposal group or theclassification and measurement as a discontinued operation.The Company's disclosures on the disposal of the shares in the HotelbedsGroup and the planned disposal of the Specialist Group are contained insection 'discontinued operations' of the notes to the consolidatedfinancialstatements.Provisions and other areas of judgmentIn TUI AG's consolidated financial statements, tourism prepayments in theamount of EUR 724 million have been reported under the balance sheet item'Trade receivables and other assets'; provisions for aircraft maintenanceinthe amount of EUR 614 million and provisions for risks from executorycontracts in the amount of EUR 31 million have been reported under thebalance sheet line item 'Other provisions' . In addition, provisions forpensions and similar obligations of EUR 1,451 million have been reported.From our point of view, this matter was of particular importance, asrecognition and measurement of these material items are based onManagement's estimates and assumptions.With the knowledge that estimated values result in an increased risk ofmaterial misstatements within the consolidated financial statements andthatManagement's measurement decisions have a direct and significant effect onconsolidated profit, we assessed the appropriateness of the carryingamountsinter alia by comparing these amounts with historical data and by referringto the underlying contracts provided to us. Amongst other tests, we * assessed the recoverability of tourism prepayments in the hotel industry, particularly against the background of current political developments in Turkey, based on the repayment plans agreed with the respective hoteliers, the possibilities for offset payments with future overnight accommodation services and the framework agreements entered into with them; * evaluated the measurement of the provision for onerous contracts from hotel leases, particularly for hotels in Turkey, based on the leases entered into and the Company's earnings projections for the individual hotels; * reperformed the calculation of the costs expected for maintenance expenses for aircraft maintenance based on group-wide maintenance agreements, the price increases expected based on external market forecasts and the discount rates applied and * assessed the appropriateness of the inputs used to calculate pension provisions by involving the expertise of our internal pension valuation specialists. In doing so, we were able to satisfy ourselves that the estimates appliedand the assumptions made by Management were sufficiently documented andsupported to justify the recognition and measurement of the materialprovisions and other areas where judgment was involved.The Company's disclosures about trade receivables and other assets as wellas provisions are contained in sections 19 as well as 31 and 32 of thenotesto the consolidated financial statements.Deferred taxes on loss carryforwards and German trade tax risksDeferred tax assets of EUR 345 million (of which EUR 212 million for losscarryforwards) have been reported in the consolidated statement offinancialposition in the consolidated financial statements of TUI AG. Therecoverability of capitalized deferred tax assets on loss carryforwards ismeasured using future earnings position forecasts. Furthermore, there aretax risks, as any possibly estimated proportion of rentals from hotelexpenses is not fully deductible when determining the tax base for Germantrade tax. In the financial year, the finance court issued a judgment(whichis not yet final) on a similar case involving another tour operator thataddbacks must be applied for certain structures. Against the background ofthisfinance court judgment, the Company changed its estimate of the probabilityof this risk to over 50 % and set up a provision for trade tax risksincluding interest in the total amount of EUR 44 million. From our point ofview, these matters were of particular importance as they depend to a largeextent on estimates and assumptions made by Management and are subject touncertainties.Within our audit of these tax matters, we included internal tax accountingspecialists in our audit team. With their support, we assessed the internalprocesses and controls implemented for the recording of tax matters. Weassessed the recoverability of deferred tax assets relating to losscarryforwards and deductible temporary differences based on the Company'sinternal forecasts for the future taxable income position of TUI AG and itsmaterial controlled entities for income tax purposes using Management'splanning, and evaluated the appropriateness of the basis used for theplanning. Working together with our internal tax accounting specialists, weevaluated Management's assessment and gained an understanding about takingthe tax risks from the German trade tax add-backs of certain hotel expensesinto account, and evaluated the appropriateness of the recognition in theaccounting. We were able to retrace the assumptions made by Managementconcerning the recognition and measurement of deferred taxes and the tradetax risks, and agree with the assessments taken by Management.The Company's disclosures about deferred taxes are contained in the notestothe consolidated financial statements in the section 'Accounting policies'as well as in sections 8, 21 and 36 and, for tax disputes, in section 39.EBITA adjustmentsFor the TUI Group's management and analysis purposes, operating profit(earnings before interest, taxes and amortization - EBITA) is used andadjusted for extraordinary effects and non-operating effects on profit.Adjustments to EBITA in the amount of EUR 181 million have been reported inthe consolidated financial statements of TUI AG. Underlying EBITA is usedfor capital market communication as a core financial performance indicator.The adjustments to EBITA were of particular importance during our audit,because the applied adjustments are based on TUI AG's applicable internalaccounting provisions and there is a risk of bias in Management's judgment.We reperformed the calculation of underlying EBITA and assessed theidentification of one off effects on profit and non-operating effects onprofit. Based on the knowledge obtained during the audit and theinformationprovided to us by Management, we examined whether the adjustments made arein accordance with the definition and the procedural method stated in thesegment reporting disclosures. We were able to satisfy ourselves that theadjustments applied to EBITA by Management were consistent with the segmentreporting disclosures and had been applied consistently.The Company's disclosures about the adjustments to EBITA as well as theirdetermination are presented under 'Segment data disclosures' in the segmentreporting of the notes to the consolidated financial statements.Other InformationManagement is responsible for the other information. The other informationcomprises * the Corporate Governance Report under no. 3.10 of the German Corporate Governance Code, * the Corporate Governance Statement pursuant to § 289a HGB, * the report concerning the UK Corporate Governance Code according to no. 9.8.6 R (5) of the listing rules in the United Kingdom and * the report to the shareholders according to no. 9.8.8 R of the listing rules in the United Kingdom, as well as * other parts of the annual report of TUI AG, Berlin and Hanover, for the financial year ended on September 30, 2016, which did not require to be audited. Our audit opinion on the consolidated financial statements does not coverthe other information and we do not express any form of assuranceconclusionthereon.In connection with our audit of the consolidated financial statements, ourresponsibility is to read the other information, and, in doing so, considerwhether the other information is materially inconsistent with theconsolidated financial statements or our knowledge obtained in the audit orotherwise appears to be materially misstated. If, based on the work we haveperformed, we conclude that there is a material misstatement of this otherinformation, we are required to report that fact. We have nothing to reportin this regard.Responsibilities of Management and Those Charged with Governance for theConsolidated Financial StatementsManagement is responsible for the preparation of the consolidated financialstatements, which comply with IFRS, as adopted by the EU, and theadditionalGerman legal requirements applicable under § 315a Abs. 1 HGB, and give atrue and fair view of the net assets, financial position and results ofoperations of the Group in accordance with these requirements. Furthermore,Management is responsible for such internal control as Managementdeterminesis necessary to enable the preparation of consolidated financial statementsthat are free from material misstatement, whether due to fraud or error.In preparing the consolidated financial statements, Management isresponsible for assessing the Group's ability to continue as a goingconcern, disclosing, as applicable, matters related to going concern andusing the going concern basis of accounting unless Management eitherintendsto liquidate the Group or to cease operations, or has no realisticalternative but to do so.The Supervisory Board is responsible for overseeing the Group's financialreporting process for the preparation of the consolidated financialstatements.Auditor's Responsibilities for the Audit of the Consolidated FinancialStatementsOur objective is to obtain reasonable assurance about whether theconsolidated financial statements as a whole are free from materialmisstatement, whether due to fraud or error, and to issue an auditor'sreport that includes our audit opinion on the consolidated financialstatements. Reasonable assurance is a high level of assurance, but is not aguarantee that an audit conducted in accordance with § 317 HGB and Germangenerally accepted standards for the audit of financial statementspromulgated by the Institut der Wirtschaftsprüfer (Institute of PublicAuditors in Germany; IDW), with additional consideration of the ISAs, willalways detect a material misstatement. Misstatements can arise from fraudorerror and are considered material if, individually or in the aggregate,theycould reasonably be expected to influence economic decisions of users takenon the basis of these consolidated financial statements.As part of an audit in accordance with § 317 HGB and German generallyaccepted standards for the audit of financial statements promulgated by theInstitut der Wirtschaftsprüfer (Institute of Public Auditors in Germany;IDW), with additional consideration of the ISA, we exercise professionaljudgment and maintain professional skepticism throughout the audit. Wealso: * Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error,design and perform audit procedures responsive to those risks, and obtainaudit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. * Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by Management. * Conclude on the appropriateness of Management's use of the goingconcern basis of accounting and, based on the audit evidence obtained, whethera material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or the Group management report or, if such disclosures are inadequate, to modify our audit opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going concern. * Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that the consolidated financial statements give a true and fair view of the net assets and financial position as well as the results of operations of the Group inaccordance with IFRS, as adopted by the EU, and the additional German legal requirements applicable under § 315a Abs. 1 HGB. * Obtain sufficient and appropriate audit evidence regarding thefinancial information of the entities or business activities within the Group to express an audit opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance, among other matters, theplanned scope and timing of the audit and significant audit findings,including any significant deficiencies in internal control that we identifyduring our audit.We also provide those charged with governance with a statement that we havecomplied with relevant ethical requirements regarding independence, and tocommunicate with them all relationships and other matters that mayreasonably be thought to bear on our independence, and related safeguards.From the matters communicated with those charged with governance, wedetermine those matters that were of most significance in the audit of theconsolidated financial statements of the current period and are thereforethe key audit matters. We describe these matters in our report on the auditof the consolidated financial statements unless law or regulation precludespublic disclosure about the matter.Other legal and regulatory RequirementsReport on the Audit of the Group Management ReportAudit Opinion on the Group Management ReportWe have audited the group management report of TUI AG, Berlin and Hanover,which is combined with the Company's management report, for the financialyear from October 1, 2015, to September 30, 2016.In our opinion, based on the findings of our audit, the accompanying groupmanagement report as a whole provides a suitable view of the Group'sposition. In all material respects, the group management report isconsistent with the consolidated financial statements and suitably presentsthe opportunities and risks of future development.Our audit has not led to any reservations with respect to the propriety ofthe group management report.Basis for Audit Opinion on the Group Management ReportWe conducted our audit of the group management report in accordance with §317 Abs. 2 HGB and German generally accepted standards for the audit ofmanagement reports promulgated by the Institut der Wirtschaftsprüfer(Institute of Public Auditors in Germany; IDW). We believe that the auditevidence we have obtained is sufficient and appropriate to provide a basisfor our audit opinion.Responsibilities of Management and Those Charged with Governance for theGroup Management ReportManagement is responsible for the preparation of the group managementreport, which as a whole provides a suitable view of the Group's position,is consistent with the consolidated financial statements and suitablypresents the opportunities and risks of future development. Furthermore,Management is responsible for such arrangements and measures (systems) asManagement determines as necessary to enable the preparation of a groupmanagement report in accordance with the German legal requirementsapplicable under § 315 Abs. 1 HGB and to provide sufficient and appropriateevidence for the assertions in the group management report.The Supervisory Board is responsible for overseeing the Group's financialreporting process for the preparation of the group management report.Auditor's Responsibilities for the Audit of the Group Management ReportOur objective is to obtain reasonable assurance about whether the groupmanagement report as a whole provides a suitable view of the Group'sposition as well as, in all material respects, is consistent with theconsolidated financial statements, and suitably presents the opportunitiesand risks of future development, and to issue an auditor's report thatincludes our audit opinion on the group management report.As part of an audit, we examine the group management report in accordancewith § 317 Abs. 2 HGB and German generally accepted standards for the auditof management reports promulgated by the IDW. In this connection, we drawattention to the following: * The audit of the group management report is integrated into the auditof the consolidated financial statements. * We obtain an understanding of the arrangements and measures (systems) relevant to the audit of the group management report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an audit opinion on the effectiveness ofthese arrangements and measures (systems). * We perform audit procedures on the prospective information presented by Management in the group management report. Based on appropriate and sufficient audit evidence, we hereby, in particular, retrace the material assumptions used by Management as a basis for the prospective information and assess the reasonableness of these assumptions as well as the appropriate derivation of the prospective information from these assumptions. We are not issuing a separate audit opinion on the prospective information or the underlying assumptions. There is a significant, unavoidable risk that future events will deviate significantly from the prospective information. * We are also not issuing a separate audit opinion on individual disclosures in the group management report; our audit opinion coversthe group management report as a whole. Review of Management's Statement regarding the UK Corporate Governance CodeUnder no. 9.8.10 R (2) of the Listing Rules in the United Kingdom, we arerequired to review Management's statement pursuant to 9.8.6 R (6) of theListing Rules in the United Kingdom contained in the report on the UKCorporate Governance Code, on compliance with the provisions in C.1.1,C.2.1and C.2.3 as well as C.3.1 to C.3.8 of the UK Corporate Governance Code inthe financial year or respectively Company's explanation in case ofdiscrepancies. We have nothing to report having performed our review.Engagement PartnerThe engagement partner on the audit resulting in this independent auditor'sreport is Thomas Stieve.Hanover, 6 December 2016PricewaterhouseCoopersAktiengesellschaftWirtschaftsprüfungsgesellschaft sgd. Thomas Stieve sgd. Prof. Dr Mathias Schellhorn Wirtschaftsprüfer Wirtschaftsprüfer (German Public Auditor) (German Public Auditor) Forward-looking StatementsThe annual report, in particular the report on expected developmentsincluded in the management report, includes various forecasts andexpectations as well as statements relating to the future development oftheTUI Group and TUI AG. These statements are based on assumptions andestimates and may entail known and unknown risks and uncertainties. Actualdevelopment and results as well as the financial and asset situation maytherefore differ substantially from the expectations and assumptions made.This may be due to market fluctuations, the development of world marketprices for commodities, of financial markets and exchange rates, amendmentsto national and international legislation and provision or fundamentalchanges in the economic and political environment. TUI does not intend toand does not undertake an obligation to update or revise anyforward-lookingstatements to adapt them to events or developments after the publication ofthis annual report.Financial calender8 December 2016Annual Report 2015 / 1614 February 2017Annual General Meeting 201714 February 2017Q1 2016 / 1729 March 2017Pre-Close Trading UpdateMay 2017H1 2016 / 17August 20179M 2016 / 17December 2017Annual Report 2016 / 17 Contact:ANALYST & INVESTOR ENQUIRIES Andy Long, Director of Investor Relations, Tel: +44 (0)1293 645 831 Contacts for Analysts and Investors in UK, Ireland and Americas Sarah Coomes, Head of Investor Relations, Tel: +44 (0)1293 645 827 Hazel Newell, Investor Relations Manager, Tel: +44 (0)1293 645 823 Jacqui Smith, PA to Andy Long, Tel: +44 (0)1293 645 831 Contacts for Analysts and Investors in Continental Europe, Middle East andAsia Nicola Gehrt, Head of Investor Relations, Tel: +49 (0)511 566 1435 Ina Klose, Investor Relations Manager, Tel: +49 (0)511 566 1318 Jessica Blinne, Team Assistant, Tel: +49 (0)511 566 1425 --------------------------------------------------------------------------- The EQS Distribution Services include Regulatory Announcements,Financial/Corporate News and Press Releases.Archive at www.dgap.de/ukreg --------------------------------------------------------------------------- Language: English Company: TUI AG Karl-Wiechert-Allee 4 30625 Hannover Germany Phone: +49 (0)511 566-00 Fax: +49 (0)511 566-1901 E-mail: Investor.Relations@tui.com Internet: www.tuigroup.com ISIN: DE000TUAG000, DE000TUAG273, DE000TUAG281 WKN: TUAG00 , TUA G27, TUA G28 Listed: Regulated Market in Hanover; Regulated Unofficial Market in Berlin, Dusseldorf, Hamburg, Munich, Stuttgart, Tradegate Exchange; Open Market in Frankfurt ; London Category Code: ACS TIDM: TUI Sequence Number: 3663 Time of Receipt: 08-Dec-2016 / 07:25 CET/CEST End of Announcement EQS News Service --------------------------------------------------------------------------- 527897 08-Dec-2016UK-Regulatory-announcement transmitted by DGAP - a service of EQS Group AG.The issuer is solely responsible for the content of this announcement.