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EX-31 - EXHIBIT 31 - Belmond Ltd.bel-ex31_20141231x10xka.htm
EX-23.2 - EXHIBIT 23.2 - Belmond Ltd.bel-ex232_20141231x10xka.htm
EX-32 - EXHIBIT 32 - Belmond Ltd.bel-ex32_20141231x10xka.htm


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 
 
 
 
 

 FORM 10-K/A
Amendment No. 1

(Mark One)
 
 
 
 

x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2014

OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                to
 Commission File Number 001-16017

 
 
 
 
 
BELMOND LTD.
(Exact name of registrant as specified in its charter)

Bermuda
 
98-0223493
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)

22 Victoria Street,
Hamilton HM 12, Bermuda
(Address of principal executive offices)
Registrant’s telephone number, including area code:  (441) 295-2244

 
 
 
 
 
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

Title of each class
 
Name of each exchange on which registered
Class A Common Shares, $0.01 par value each
 
New York Stock Exchange
Preferred Share Purchase Rights
 
New York Stock Exchange
 SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None.

 
 
 
 
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes x  No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes o  No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x  No o




 Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x  No o

 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (Not applicable. See third paragraph under Item 1—Business.)
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Act. (Check one):

Large Accelerated Filer x
 
Accelerated Filer o
Non-Accelerated Filer o
 
Smaller reporting company o
(Do not check if a smaller reporting company)
 
 

 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o  No x
 The aggregate market value of the class A common shares held by non-affiliates of the registrant computed by reference to the closing price on June 27, 2014 (the last business day of the registrant’s second fiscal quarter in 2014) was approximately $1,206,000,000.
 As of June 22, 2015, 103,227,492 class A common shares and 18,044,478 class B common shares of the registrant were outstanding.  All of the class B shares are owned by a subsidiary of the registrant (see Note 17(c) to the Financial Statements (Item 8) in Form 10-K filed February 27, 2015).
 
 
 
 
 
DOCUMENTS INCORPORATED BY REFERENCE: None

 






EXPLANATORY NOTE

Belmond Ltd. (the “registrant”) is filing this Amendment No. 1 (the “Amendment”) to its Annual Report on Form 10-K for the fiscal year ended December 31, 2014, filed with the U.S. Securities and Exchange Commission (“SEC”) on February 27, 2015 (the “Original Filing”).

This Amendment is being filed because, pursuant to Rule 3-09 of SEC Regulation S-X, the registrant is required to file audited financial statements of Perurail S.A., a 50% owned unconsolidated company. The financial statements of this unconsolidated company are filed in this Amendment under Item 15 - Exhibits and Financial Statement Schedules.

Except as described above and to update the description and cross-reference to Exhibits 4.1 and 4.2 in the Exhibit Index, no other changes have been made to the Original Filing, and this Form 10-K/A does not amend, update or change any other items or disclosures in the Original Filing.  This Form 10-K/A does not reflect events occurring after the Original Filing and, other than providing the financial statements of the unconsolidated company named above under Item 15, does not modify or update the disclosures in the Original Filing in any way.








PART IV



ITEM 15. Exhibits and Financial Statement Schedules



1. Financial Statements

(a) Perurail S.A.
 
Page Number
 
 
2
Financial statements - years ended December 31, 2014, 2013 and 2012:
 
Balance sheets (December 31, 2014 and 2013)
3
Statements of operations
4
Statements of shareholders’ equity
5
Statements of cash flows
6
Notes to financial statements
7

2. Financial Statement Schedule

Incorporated by reference to the financial statement schedule filed with the Original Filing.  No additional financial statement schedule is filed with this report on Form 10-K/A.

3. Exhibits

The index to exhibits appears on the pages immediately following the signature page to this report.


1



Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders
Perurail S.A.
Lima, Peru

We have audited the accompanying balance sheets of Perurail S.A. as of December 31, 2014 and 2013, and the related statements of operations, cash flows and shareholders’ equity for each of the three years in the period ended December 31, 2014. These financial statements are the responsibility of the Company´s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Perurail S.A. at December 31, 2014 and 2013, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2014, in conformity with accounting principles generally accepted in the United States of America.


Pazos, López de Romaña, Rodriguez S. Civil de R.L.
 
Lima, Peru
 
June 23, 2015
 
 
 
Countersigned by:
 
 
 
 
 
/s/ Liliana Córdova Mejía
 
Liliana Córdova Mejía
 
Certified Chartered Public Accountant
 
Register No. 01-17661
 



2



Perurail S.A.
Balance Sheets
 
 
2014
 
2013
December 31,
 
$’000
 
$’000
 
 
 
 
 
Assets
 
 
 
 
Cash
 
5,195

 
3,748

Accounts receivable, net of allowances of $Nil and $Nil
 
3,462

 
3,906

Due from related parties
 
18,829

 
15,954

Prepaid expenses
 
2,835

 
2,274

Inventories
 
9,294

 
7,711

 
 
 
 
 
Total current assets
 
39,615

 
33,593

 
 
 
 
 
Property, plant and equipment, net of accumulated depreciation of $30,013 and $22,488
 
54,759

 
41,384

Intangible assets, net of accumulated amortization of $390 and $356
 
316

 
300

Other assets
 
100

 
100

 
 
 
 
 
Total non-current assets
 
55,175

 
41,784

 
 
 
 
 
Total assets
 
94,790

 
75,377

 
 
 
 
 
Liabilities and Shareholders’ Equity
 
 
 
 
Working capital facilities
 
4,766

 
7,148

Accounts payable
 
5,365

 
3,620

Accrued liabilities
 
8,440

 
8,743

Due to related parties
 
3,964

 
4,123

Current portion of long-term debt
 
21,250

 
2,488

 
 
 
 
 
Total current liabilities
 
43,785

 
26,122

 
 
 
 
 
Long-term debt
 
1,840

 
2,088

Deferred income tax liability, net
 
6,110

 
7,717

 
 
 
 
 
Total long-term liabilities
 
7,950

 
9,805

 
 
 
 
 
Total liabilities
 
51,735

 
35,927

 
 
 
 
 
Commitments and contingencies
 
 
 
 
 
 
 
 
 
Shareholders’ equity:
 
 
 
 
Common shares S/1.00 par value (50,000,000 shares authorized) Issued - 50,000,000 (2013 - 20,000,000)
 
16,934

 
6,684

Legal reserve
 
1,448

 
1,448

Retained earnings
 
24,673

 
31,318

 
 
 
 
 
Total shareholders’ equity
 
43,055

 
39,450

 
 
 
 
 
Total liabilities and shareholders’ equity
 
94,790

 
75,377

 The accompanying notes are an integral part of these financial statements.



3



Perurail S.A.
Statements of Operations
 
 
2014
 
2013
 
2012
Year ended December 31,
 
$’000
 
$’000
 
$’000
 
 
 
 
 
 
 
Revenue, net of discounts
 
96,448

 
92,784

 
84,585

 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
Cost of services
 
(47,455
)
 
(48,056
)
 
(47,265
)
Depreciation and amortization
 
(7,559
)
 
(6,102
)
 
(4,398
)
Selling, general and administrative
 
(25,430
)
 
(19,828
)
 
(17,222
)
Impairment of property, plant and equipment and other assets
 

 

 
(894
)
 
 
 
 
 
 
 
Total operating costs and expenses
 
(80,444
)
 
(73,986
)
 
(69,779
)
 
 
 
 
 
 
 
Gain on insurance settlement
 

 

 
90

Gain on disposal of fixed assets
 

 

 
757

 
 
 
 
 
 
 
 
 

 

 
847

 
 
 
 
 
 
 
Earnings from operations
 
16,004

 
18,798

 
15,653

 
 
 
 
 
 
 
Interest expense, net
 
(848
)
 
(900
)
 
(740
)
Foreign currency, net
 
(792
)
 
(440
)
 
233

 
 
 
 
 
 
 
Net finance costs
 
(1,640
)
 
(1,340
)
 
(507
)
 
 
 
 
 
 
 
Earnings before income tax
 
14,364

 
17,458

 
15,146

 
 
 
 
 
 
 
Income taxes
 
(4,279
)
 
(4,665
)
 
(8,009
)
 
 
 
 
 
 
 
Net earnings
 
10,085

 
12,793

 
7,137


No statement of comprehensive income is presented because Perurail S.A. has no items of other comprehensive income in any period presented.

The accompanying notes are an integral part of these financial statements.



4



Perurail S.A.
Statements of Shareholders’ Equity
 
 
Common shares
at par value
 
Legal reserve
 
Retained
earnings
 
 
$’000
 
$’000
 
$’000
 
 
 
 
 
 
 
Balance, January 1, 2012
 
6,684

 
821

 
24,531

 
 
 
 
 
 
 
Dividends
 

 

 
(5,308
)
Legal reserve
 

 
627

 
(627
)
Net earnings
 

 

 
7,137

 
 
 
 
 
 
 
Balance, December 31, 2012
 
6,684

 
1,448

 
25,733

 
 
 
 
 
 
 
Dividends
 

 

 
(7,208
)
Net earnings
 

 

 
12,793

 
 
 
 
 
 
 
Balance, December 31, 2013
 
6,684

 
1,448

 
31,318

 
 
 
 
 
 
 
Dividends
 

 

 
(6,480
)
Stock split
 
10,250

 

 
(10,250
)
Net earnings
 

 

 
10,085

 
 
 
 
 
 
 
Balance, December 31, 2014
 
16,934

 
1,448

 
24,673


The accompanying notes are an integral part of these financial statements.



5



Perurail S.A.
Statements of Cash Flows
 
 
2014
 
2013
 
2012
Year ended December 31,
 
$’000
 
$’000
 
$’000
 
 
 
 
 
 
 
Cash flows from operating activities:
 
 
 
 
 
 
Net earnings
 
10,085

 
12,793

 
7,137

Adjustment to reconcile net earnings to net cash provided by operating activities:
 
 
 
 
 
 
Depreciation
 
7,525

 
6,068

 
4,338

Amortization
 
34

 
34

 
60

Amortization of finance costs
 
5

 

 
38

Gain on disposal of fixed assets
 

 

 
(757
)
Impairment of property, plant and equipment and other assets
 

 

 
893

Change in deferred tax
 
(1,607
)
 
(1,070
)
 
2,931

 
 
 
 
 
 
 
Change in assets and liabilities:
 
 
 
 
 
 
Decrease/(increase) in accounts receivable
 
444

 
915

 
1,325

Decrease/(increase) in inventories
 
(1,583
)
 
623

 
(1,393
)
(Decrease)/increase in due to related parties
 
(159
)
 
(5,711
)
 
238

Decrease/(increase) in prepaid expenses
 
(566
)
 
1,466

 
(2,508
)
(Decrease)/increase in accounts payable
 
1,745

 
(117
)
 
(470
)
(Decrease)/increase in accrued liabilities
 
(303
)
 
(154
)
 
1,999

 
 
 
 
 
 
 
Total adjustments
 
5,535

 
2,054

 
6,694

 
 
 
 
 
 
 
Net cash provided by operating activities
 
15,620

 
14,847

 
13,831

 
 
 
 
 
 
 
Cash flows from investing activities:
 
 
 
 
 
 
Proceeds from disposal of fixed assets
 

 

 
757

(Increase)/decrease in due from related parties
 
(2,875
)
 

 

Capital expenditures
 
(20,949
)
 
(7,625
)
 
(6,488
)
 
 
 
 
 
 
 
Net cash used in investing activities
 
(23,824
)
 
(7,625
)
 
(5,731
)
 
 
 
 
 
 
 
Cash flows from financing activities:
 
 
 
 
 
 
Payment of dividends
 
(6,480
)
 
(7,208
)
 
(5,308
)
Payments on working capital facilities
 
(8,760
)
 
(8,691
)
 
(7,076
)
Proceeds from working capital facilities
 
6,377

 
11,655

 
8,234

Principal payments under long-term debt
 
(2,315
)
 
(1,262
)
 
(3,012
)
Principal payments under capital lease
 
(1,321
)
 
(1,961
)
 
(1,255
)
Proceeds from long-term debt
 
22,000

 

 

Proceeds from capital lease
 
150

 

 

 
 
 
 
 
 
 
Net cash provided by financing activities
 
9,651

 
(7,467
)
 
(8,417
)
 
 
 
 
 
 
 
Net (decrease) /increase in cash
 
1,447

 
(245
)
 
(317
)
 
 
 
 
 
 
 
Cash at beginning of year
 
3,748

 
3,993

 
4,310

 
 
 
 
 
 
 
Cash at end of year
 
5,195

 
3,748

 
3,993


The accompanying notes are an integral part of these financial statements.



6



Perurail S.A.
Notes to Financial Statements

1.                                  Summary of significant accounting policies and basis of presentation

(a)                          Business

Perurail S.A. (hereinafter the “Company”) was incorporated in the city of Lima, Peru in 1999.

The Company is 50% owned by Belmond Ltd. incorporated in Bermuda, and 50% owned by Peruvian Trains & Railways S.A. incorporated in Peru.

Its headquarters and registered address are located at Av. Alcanfores # 775, District of Miraflores, Department of Lima.

The purpose of the Company is the operation of passenger and freight transport by rail, as well as ground cargo transport services for the Cerro Verde mine.

In order to perform its corporate purpose, in August 2000 the Company entered a lease with Ferrocarril Transandino S.A. by which the Company was granted access to and use of the tracks, locomotives, coaches, wagons, machine shops and parts of the train stations of the South and South-East Railways operated by Ferrocarril Transandino S.A. Under this contract, various rates are established and payable for the use of locomotives, coaches and wagons based on traveled kilometers, which are settled on a monthly basis.

(b)                           Basis for the presentation

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and reflect the results of operations, financial position and cash flows of the Company.  The financial statements have been prepared using the historical cost basis in the assets and liabilities and the historical results of operations directly attributable to the Company in the normal course of business.

“FASB” means Financial Accounting Standards Board. “ASC” means the Accounting Standards Codification of the FASB and “ASU” means an Accounting Standards Update of the FASB.

(c)                            Estimates

The Company bases its estimates on historical experience and also on assumptions the Company believes are reasonable based on the relevant facts and circumstances of the estimate. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Estimates include, among others, the allowance for doubtful accounts, allowance on devaluation of inventories, long-lived asset impairment, depreciation and amortization, taxes and contingencies.  Actual results could differ from those estimates.

(d)                           Foreign currency

The functional currency of the Company is the U.S. Dollar which is also the reporting currency of the Company. The local currency is the Nuevo Sol.

Foreign currency transaction gains and losses are recognized in earnings as they occur. Transactions in currencies other than the Company’s functional currency (“foreign currencies”) are recorded at the exchange rates prevailing on the dates of the transactions. All monetary assets and liabilities denominated in foreign currencies are translated at the exchange rate prevailing at the reporting date. Non-monetary items carried at historical cost are translated at the exchange rate prevailing on the date of transaction. Exchange differences arising from changes in exchange rates are recognized in earnings as they occur.




7



(e)                            Cash

Cash includes all cash balances. The Company keeps its bank accounts in functional currency and local currency. Cash balances are freely disposable and accrue no interest.

(f)                              Accounts receivable and allowance for doubtful accounts

The Company states its accounts receivable at their estimated net realizable value. The Company maintains an allowance for doubtful accounts for specifically identified estimated losses resulting from the inability of its customers to make required payments.

(g)                          Inventories

Inventories include supplies for minor maintenance of fixed assets.  Inventories are valued at the lower of cost or market value under the weighted average method.

(h)                           Income taxes

Current portion of income tax

The amount of income taxes paid or payable is determined by applying the provisions of the enacted tax law to the taxable income or excess deductions over revenues for the year. The rates used and regulations applied to compute the amount are those enacted as of the balance sheet date.

Deferred portion of income tax

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of transactions and events that have been recognized in the financial statements but have not yet been reflected in the Company’s income tax returns, or vice versa.

Deferred income taxes result from temporary differences between the carrying value of assets and liabilities recognized for financial reporting purposes and their respective tax bases.  Deferred taxes are measured at enacted statutory rates and are adjusted as enacted rates change. Classification of deferred tax assets and liabilities corresponds with the classification of the underlying assets and liabilities giving rise to the temporary differences or the period of expected reversal, as applicable.  A valuation allowance is established, when necessary, to reduce deferred tax assets to the amount that is more likely than not to be realized based on available evidence.

In evaluating the Company’s ability to recover deferred tax assets, management considers all available evidence, both positive and negative, which includes reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations. Management reassesses the need for valuation allowances at each reporting date. Any increase or decrease in a valuation allowance will increase or reduce respectively the income tax expense in the period in which there has been a change in judgment.

Income tax positions must meet a more-likely-than-not threshold to be recognized in the financial statements. Management recognizes tax liabilities in accordance with ASC 740 guidance applicable to uncertain tax positions, and adjusts these liabilities when judgment changes as a result of the evaluation of new information not previously available. Due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the Company’s current estimate of the tax liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which the actual tax liabilities are determined or the statute of limitations has expired.  The Company recognizes interest and penalties related to unrecognized tax benefits within the income tax expense line in the statements of operations. Liabilities for uncertain tax benefits are included in the balance sheets and classified as current or non-current liabilities depending on the expected timing of payment. At December 31, 2014 and 2013 the Company did not record any liabilities for uncertain tax positions.

(i)                              Property, plant and equipment

Property, plant and equipment is stated at cost less accumulated depreciation.  The cost of significant renewals and betterments is capitalized and depreciated, while expenditures for normal maintenance and repairs are expensed as incurred.

8




Depreciation expense is computed using the straight-line method over the following estimated useful lives:
Description
 
Useful lives
 
 
 
Installations
 
33 years
Machinery and equipment
 
10 years
Transport units
 
5 years
Improvements to locomotive and rolling stock assets under lease
 
5 years
Owned locomotives and rolling stock
 
5 years
Furniture and fixtures
 
10 years
Computer equipment
 
4 years

(j)                              Intangible assets

Software costs are recorded under assets and classified as intangibles if such costs are not part of the related hardware. Software is amortized using the straight-line method.

Amortization expense is computed using the straight-line method over the following estimated useful lives:
Description
 
Useful lives
 
 
 
Logo and trademarks
 
30 years
Software and licenses
 
4 years

(k)                            Impairment of long-lived assets

The Company’s management evaluates the carrying value of long-lived assets for impairment by comparing the expected undiscounted future cash flows of the assets to the net book value of the assets if certain trigger events occur. If the expected undiscounted future cash flows are less than the net book value of the assets, the excess of the net book value over the estimated fair value is charged to current earnings. Fair value is based upon discounted cash flows of the assets at a rate deemed reasonable for the type of asset and prevailing market conditions, sales of similar assets, appraisals and, if appropriate, current estimated net sales proceeds from pending offers. The Company evaluates the carrying value of its long-lived assets based on its plans, at the time, for such assets and such qualitative factors as future development in the surrounding area, status of expected local competition and projected incremental income from renovations. Changes to the Company's plans, including a decision to dispose of or change the intended use of an asset, can have a material impact on the carrying value of the asset.

(l)                              Capital leasing

For capital leasing transactions, the method used consists of showing the total cost of the contract under fixed assets and its corresponding liability. Financial expenses are charged to operations in the period in which they become due, and depreciation of assets is charged to operations based on their useful life.

(m)                         Employees’ length of service compensation

The provision for employees’ length of service compensation included under taxes and other accounts payable is charged to operations as the compensation becomes due.

(n)                           Revenue recognition

Passenger transport revenue includes ticket revenue that is recognized when the related services are provided.  Rail freight and cargo revenues are recognized when the freight and cargo reaches their destination. Ground cargo transport services revenues are recognized on a fixed fee basis per month, plus variable fees per ton transported when the services are provided.  Revenues are presented net of taxes collected from customers and remitted to governmental authorities.

Revenues in providing these services are recognized, as appropriate, when:


9



1.    The amount of revenues can be reliably quantified;

2.    The transaction-related economic benefits are likely to flow to the Company;

3.    The degree of completion of the transaction, on the date of the balance, can be reliably quantified; and

4.
The costs incurred in providing the services, as well as those still to be incurred until completed, can be reliably quantified.

Deferred revenue includes all ticket revenue where tickets have been sold, but the related services have not yet been provided.

(o)                           Deferred financing costs

Debt issuance costs incurred in connection with the placement of long-term debt are capitalized and amortized to interest expense over the term of the related debt.

(p)                           Risks and uncertainties

The Company’s activities expose it to a variety of financial risks: market risks (including interest rate risk and exchange risk), credit risk, and liquidity risk. The Company’s risk management program tries to minimize the potential adverse effects on its financial performance. Management is aware of the market conditions and, based on its knowledge and experience, controls the exchange, interest rate, credit and liquidity risks, following the policies approved by the Board of Directors. The most important aspects of these risks are:

Liquidity risk

Liquidity risk is the risk that cash may not be available to pay obligations at their maturity at a fair value. The Company controls the required liquidity through a proper management of asset and liability maturity dates, so that the flow of cash matches future payments.

Credit risk

The Company’s financial assets that are potentially exposed to concentration of credit risk are mainly trade accounts receivable, accounts receivable from related parties and from shareholders, and various accounts receivable.

Interest rate risk

The Company´s exposure to this risk arises from changes in the interest rates in its financial assets and liabilities. The Company keeps mainly long-term debt subject to a floating interest rate.  Management does not expect to incur significant losses due to interest rate risk.

Exchange risk

The Company carries out its transactions mostly in foreign currency, but management estimates that due to the short-term nature, any fluctuation will not adversely affect the results of the Company’s operations.

(q)                           Employee profit sharing

In accordance with Peruvian law, employee profit sharing is limited to 18 times an employee’s monthly average salary. The excess of calculated statutory employee profit sharing is paid to the Peruvian government and is treated as an additional tax. The Company’s practice is to recognize the employee profit sharing as part of operating cost and any excess profit sharing is recognized as part of current income tax. The Company has a 5% rate for calculating employee profit sharing.  To date, no excess profit sharing has been recognized.


10



(r)                           Recently issued and adopted accounting guidance

Accounting pronouncements adopted during the year

In July 2013, the FASB issued guidance on financial statement presentation of an uncertain tax benefit (“UTB”) when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The FASB’s objective in issuing this guidance is to eliminate diversity in practice resulting from a lack of guidance on this topic in current U.S. GAAP.  Under the ASU, an entity must present a UTB, or a portion of a UTB, in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. The ASU’s amendments are effective for public entities for fiscal years beginning after December 15, 2013, and interim periods within those years. The amendments should be applied to all UTBs that exist as of the effective date. Entities may choose to apply the amendments retrospectively to each prior reporting period presented. The adoption of this guidance did not have a material effect on the Company's financial position, results of operations and cash flows.
 
In March 2013, the FASB issued guidance which indicates that the entire amount of a cumulative translation adjustment (“CTA”) related to an entity’s investment in a foreign entity should be released when there has been any of the following:
 
•      Sale of a subsidiary or group of net assets within a foreign entity and the sale represents the substantially complete liquidation of the investment in the foreign entity.
•      Loss of a controlling financial interest in an investment in a foreign entity (i.e., the foreign entity is deconsolidated).
•      Step acquisition for a foreign entity (i.e., when an entity has changed from applying the equity method for an investment in a foreign entity to consolidating the foreign entity).
 
The ASU does not change the requirement to release a pro rata portion of the CTA of the foreign entity into earnings for a partial sale of an equity method investment in a foreign entity. This guidance is effective for fiscal years (and interim periods within those fiscal years) beginning on or after December 15, 2013. The guidance should be applied prospectively from the beginning of the fiscal year of adoption. The adoption of this guidance did not have a material effect on the Company's financial position, results of operations and cash flows.
 
In February 2013, the FASB issued guidance which requires entities to measure obligations resulting from joint-and-several liability arrangements for which the total amount of the obligation within the scope of this guidance is fixed at the reporting date, as the sum of (a) the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors, and (b) any additional amount the reporting entity expects to pay on behalf of its co-obligors. Required disclosures include a description of the joint-and-several arrangement and the total outstanding amount of the obligation for all joint parties. The guidance permits entities to aggregate disclosures (as opposed to providing separate disclosures for each joint-and-several obligation). These disclosure requirements are incremental to the existing related party disclosure requirements. The guidance is effective for all prior periods in fiscal years beginning on or after December 15, 2013 (and interim reporting periods within those years). The guidance should be applied retrospectively to obligations with joint-and-several liability existing at the beginning of an entity’s fiscal year of adoption. Entities that elect to use hindsight in measuring their obligations during the comparative periods must disclose that fact. The adoption of this guidance did not have a material effect on the Company's financial position, results of operations and cash flows.

Accounting pronouncements to be adopted

In April 2014, the FASB issued guidance that amends the definition of a discontinued operation and requires entities to provide additional disclosures about disposal transactions. The revised guidance will change how entities identify and disclose information about disposal transactions. The guidance is effective prospectively for all disposals (except disposals classified as held for sale before the adoption date) or components initially classified as held for sale in periods beginning on or after December 15, 2014, with early adoption permitted. The Company does not expect the adoption of this guidance to have a material impact on its financial statements.
 
In May 2014, the FASB issued new guidance which is intended to improve the comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets. The guidance supersedes existing revenue recognition guidance and requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance is effective for the fiscal year beginning January 1, 2017. The Company is currently evaluating the impact of the adoption of this guidance on its consolidated financial statements.



11



In August 2014, the FASB issued new guidance on determining when and how reporting entities must disclose going-concern uncertainties in their financial statements. The new standard requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date of issuance of the entity’s financial statements. Further, an entity must provide certain disclosures if there is “substantial doubt about the entity’s ability to continue as a going concern”. The guidance is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. The Company is assessing what impact, if any, the adoption of this guidance will have on its disclosures.

In February 2015, the FASB issued new guidance which amends consolidation requirements and changes the analysis required in relation to variable interest entities and whether or not these entities should be consolidated. The guidance is effective for annual and interim periods beginning after December 15, 2015, with early adoption permitted. The Company does not expect the adoption of this guidance to have a material impact on its financial statements.
 
In April 2015, the FASB issued new guidance which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying value of the associated debt liability, consistent with the presentation of a debt discount. The standard does not affect the recognition and measurement of debt issuance costs, which would continue to be calculated using the interest method and be reported as interest expense. Additionally, the other areas of U.S. GAAP that prescribe the accounting treatment for third-party debt issuance costs will not be affected. The guidance is effective for annual and interim periods beginning after December 15, 2015, with early adoption permitted for financial statements that have not been previously issued. The new guidance will be applied on a retrospective basis when applicable. Debt issuance costs were $Nil at December 31, 2014 (2013 - $5,000).

2.                          Property, plant and equipment

The major classes of property, plant and equipment are as follows:
 
 
2014
 
2013
December 31,
 
$’000
 
$’000
 
 
 
 
 
Land
 
861

 
861

Installations
 
1,909

 
1,806

Machinery and equipment
 
1,464

 
1,447

Transport units
 
5,219

 
5,219

Improvements to locomotive and rolling stock assets under lease
 
45,681

 
39,091

Owned locomotives and rolling stock
 
5,215

 
3,873

Furniture and fixtures
 
3,889

 
4,379

Works in progress
 
20,534

 
7,196

Less: accumulated depreciation
 
(30,013
)
 
(22,488
)
 
 
 
 
 
 
 
54,759

 
41,384


The major classes of assets under capital leases included above are as follows:
 
 
2014
 
2013
December 31,
 
$’000
 
$’000
 
 
 
 
 
Transport units
 
2,484

 
2,334

Locomotives and rolling stock
 
3,572

 
3,572

Less: accumulated depreciation
 
(690
)
 
(456
)
 
 
 
 
 
 
 
5,366

 
5,450


The depreciation charge on property, plant and equipment for the year ended December 31, 2014 was $7,525,000 (2013 - $6,068,000; 2012 - $4,338,000).

No property, plant and equipment impairments were recorded in the years ended December 31, 2014 and 2013. In the year ended December 31, 2012, the Company identified a non-cash property, plant and equipment charge of $701,000 relating to the value of engines refurbished during the year.

12




3.                            Intangible assets

Intangible assets consist of the following as of December 31, 2014 and 2013:
 
 
Logo and
trademarks
 
Software
and licenses
 
Total
 
 
$’000
 
$’000
 
$’000
 
 
 
 
 
 
 
Carrying amount:
 
 
 
 
 
 
Balance at January 1, 2013
 
122

 
373

 
495

Additions
 

 
161

 

Transfers
 

 

 

 
 
 
 
 
 
 
Balance at December 31, 2013
 
122

 
534

 
656

 
 
 
 
 
 
 
Additions
 

 
50

 
50

Transfers
 

 

 

 
 
 
 
 
 
 
Balance at December 31, 2014
 
122

 
584

 
706

 
 
 
 
 
 
 
Accumulated amortization:
 
 
 
 
 
 
Balance at January 1, 2013
 
50

 
272

 
322

Charge for the period
 
4

 
30

 
34

 
 
 
 
 
 
 
Balance at December 31, 2013
 
54

 
302

 
356

 
 
 
 
 
 
 
Charge for the period
 
4

 
30

 
34

 
 
 
 
 
 
 
Balance as at December 31, 2014
 
58

 
332

 
390

 
 
 
 
 
 
 
Net book value:
 
 
 
 
 
 
December 31, 2012
 
72

 
101

 
173

 
 
 
 
 
 
 
December 31, 2013
 
68

 
232

 
300

 
 
 
 
 
 
 
December 31, 2014
 
64

 
252

 
316


Amortization expense for the year ended December 31, 2014 was $34,000 (2013 - $34,000; 2012 - $60,000).

Estimated amortization expense for each of the years ended 2015 to 2019 is $34,000.

4.                       Working capital facilities

Working capital facilities are composed of the following, all repayable within one year:
 
 
2014
 
2013
December 31,
 
$’000
 
$’000
 
 
 
 
 
Working capital facilities
 
4,766

 
7,148


Bank loans accrue an annual average interest rate of 5.58% (2013 - 4.62%).

The Company had approximately $15,220,000 of working capital and overdraft lines of credit at December 31, 2014 (2013 - $9,150,000) issued by various financial institutions and having various expiration dates, of which $10,454,000 was undrawn (2013 - $2,002,000).


13



5.                            Accrued liabilities

A breakdown of accrued liabilities and deferred revenue is as follows:
 
 
2014
 
2013
December 31,
 
$’000
 
$’000
 
 
 
 
 
Current tax payable
 
191

 
1,187

Other taxes
 
188

 
247

Employees’ length of service compensation
 
102

 
87

Vacation payable
 
440

 
657

Remuneration and profit sharing payable
 
2,034

 
1,963

Advance payments received from passengers
 
927

 
860

Deferred revenue
 
3,202

 
2,965

Provision for purchases and services
 
1,297

 
482

Other accounts payable
 
59

 
295

 
 
 
 
 
 
 
8,440

 
8,743


6.                                Long-term debt, obligations under capital lease and fair value disclosures

(a)                       Long-term debt

Long-term debt consists of the following:
 
 
2014
 
2013
December 31,
 
$’000
 
$’000
 
 
 
 
 
Loans from banks collateralized by property, plant and equipment payable over a period of one year (2013 - one to two years), with a weighted average interest rate of 2.29% (2014 - 3.47%)
 
20,000

 
315

Obligations under capital lease (see Note 6(b))
 
3,090

 
4,261

 
 
23,090

 
4,576

Less: current portion
 
21,250

 
2,488

 
 
 
 
 
 
 
1,840

 
2,088


The Company is in compliance with all financial covenants in its long-term debt obligations at December 31, 2014 and 2013.

The Company's loan facilities are secured by a mortgage on the owned locomotives and transport units of the business.

During 2014 the Company drew two bridge loans totaling $20,000,000 and maturing in 2015. The first loan of $15,000,000 bears interest at a rate of 1.30% per annum, and the second loan of $5,000,000 bears interest at a rate of 5.25% per annum. In 2015, the loans will be refinanced with long-term facilities.

Deferred financing costs related to the above outstanding long-term debt of the Company were $Nil at December 31, 2014 (2013 - $5,000) and are amortized to interest expense over the term of the corresponding long-term debt.

The Company has guaranteed $11,279,000 of the long-term debt of Ferrocarril Transandino S.A. as at December 31, 2014 (2013 - $17,301,000). The guarantee exists as long as the debt of Ferrocarril Transandino S.A. remains outstanding, and can be called in the event of non-payment on due dates of an amount equal to or greater than $1,000,000. See Notes 1(a) and 13.

The following is a summary of the aggregate maturities of long-term debt of the Company excluding obligations under capital leases at December 31, 2014:

14



Year ending December 31,
 
$’000
 
 
 
2015
 
20,000

 
 
 
 
 
20,000


(b)                  Obligations under capital leases

The following is a summary of future minimum lease payments under capital leases together with the present value of the minimum lease payments at December 31, 2014:
Year ending December 31,
 
$’000
 
 
 
2015
 
1,453

2016
 
1,387

2017
 
452

2018
 
36

2019
 

 
 
 
Minimum lease payments
 
3,328

Less: amount of interest contained in above payments
 
(238
)
 
 
 
Present value of minimum lease payments
 
3,090

Less: current portion
 
(1,250
)
 
 
 
 
 
1,840


The amount of interest deducted from minimum lease payments to arrive at the present value is the interest contained in each of the leases.

(c)                        Fair value of financial instruments

Certain methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate fair value. The carrying amount of cash and cash equivalents, accounts receivable, working capital facilities, accounts payable, and accrued liabilities approximates fair value because of the short maturity of those instruments. The fair value of debt is calculated by discounting back future interest and principal payments using a discount factor which reflects the Company’s current credit metrics. This factor is derived from credit analysis using inputs such as profit, cash generation, and level of debt.

The estimated fair values of the Company’s debt as of December 31, 2014 and 2013 are as follows:
 
 
December 31, 2014
 
December 31, 2013
 
 
Carrying
amount
 
Fair
value
 
Carrying
amount
 
Fair
value
 
 
$’000
 
$’000
 
$’000
 
$’000
 
 
 
 
 
 
 
 
 
Long-term debt, including current portion, excluding obligations under capital leases
 
20,000

 
20,000

 
315

 
318


(d)     Non-financial assets measured at fair value on a non-recurring basis

There were no non-financial assets measured at fair value on a non-recurring basis for the years ended December 31, 2014 and 2013.

The estimated fair value of the Company’s non-financial assets measured on a non-recurring basis at December 31, 2012 was as follows:

15



 
 
 
 
Fair value measurements using
 
 
 
 
Fair value at December 31, 2012
$’000
 
Quoted prices in active markets for identical assets
(Level 1)
$’000
 
Significant other observable inputs
(Level 2)
$’000
 
Significant unobservable inputs
(Level 3)
$’000
 
Total losses in the year ended December 31, 2012
$’000
 
 
 
 
 
 
 
 
 
 
 
Property, plant and equipment
 

 

 

 

 
(701
)
 
 
 
 
 
 
 
 
 
 
 
Other assets
 

 

 

 

 
(193
)

For the year ended December 31, 2012, the Company purchased new train engines and, as a consequence, property, plant and equipment with a carrying value of $701,000 for train engines replaced was written down to a fair value of $Nil, resulting in a non-cash impairment charge of $701,000. This impairment is included in earnings from continuing operations in the period incurred. See Note 2.

For the year ended December 31, 2012, deferred costs associated with a project no longer anticipated to be completed with a carrying value of $193,000 were written down to a fair value of $Nil, resulting in a non-cash impairment charge of $193,000. This impairment is included in earnings from continuing operations in the period incurred.

7.                            Income taxes

The provision for income taxes consists of the following:
 
 
2014
 
2013
 
2012
Year ended December 31,
 
$’000
 
$’000
 
$’000
 
 
 
 
 
 
 
Earnings before income tax
 
14,364

 
17,458

 
15,146

 
 
 
 
 
 
 
Current income tax charge
 
(5,577
)
 
(5,735
)
 
(5,078
)
 
 
 
 
 
 
 
Deferred income tax credit/(charge)
 
1,298

 
1,070

 
(2,931
)
 
 
 
 
 
 
 
Total
 
(4,279
)
 
(4,665
)
 
(8,009
)

The reconciliations of the Peru income tax rate to the Company’s effective income tax rate for the three years ended December 31, 2014. 2013 and 2012 are as follows:
 
 
2014
 
2013
 
2012
Year ended December 31,
 
%
 
%
 
%
 
 
 
 
 
 
 
Peru income tax rate
 
30

 
30

 
30

Prior year adjustments
 

 
                 —

 
17

Permanent differences
 
11

 
2

 
5

Other
 
(11
)
 
(5
)
 
1

 
 
 
 
 
 
 
Effective tax rate
 
30

 
27

 
53


Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The following represents the Company’s net deferred tax liabilities:


16



 
 
2014
 
2013
December 31,
 
$’000
 
$’000
 
 
 
 
 
Provisions included in books
 
1,070

 
1,668

Other deferred income tax assets
 
34

 
11

 
 
 
 
 
Deferred income tax assets
 
1,104

 
1,679

 
 
 
 
 
Fixed assets and intangibles
 
(6,903
)
 
(7,555
)
Exchange rate related to fixed assets
 
(286
)
 
(1,328
)
Other deferred tax liabilities
 
(25
)
 
(513
)
 
 
 
 
 
Deferred income tax liabilities
 
(7,214
)
 
(9,396
)
 
 
 
 
 
Net deferred income tax liabilities
 
(6,110
)
 
(7,717
)

Net deferred tax liabilities are presented on the face of the balance sheet. The Company required no provision in respect of uncertain tax positions and believes that it is reasonably possible that within the next 12 months this provision will not change.

8.                                Shareholders’ equity

(a)                    Share capital and additional-paid in capital

In November 2014 the Company implemented a split of its common stock. Shareholders received 1.5 additional shares for every one share held. This increased the Company’s share capital to 50,000,000 fully subscribed and paid shares (2013 - 20,000,000) with a par value of S/1.00 each, all carrying the same rights.

The shareholders of the Company are as follows:
 
 
Number of
  shares
 
Percentage
  ownership
 
 
 
 
 
Belmond Ltd.
 
25,000,000

 
50.00

Peruvian Trains & Railways S.A.
 
25,000,000

 
50.00

 
 
 
 
 
 
 
50,000,000

 
100.00


(b)                      Legal reserve

In accordance with Peruvian law, a minimum 10% of the annual profits that can be distributed have to be transferred to a legal reserve until it equals 20% of the paid-in capital. The legal reserve can be used only to offset losses, but must be replenished and cannot be distributed as dividends, except in case of liquidation. The Company may capitalize the legal reserve but must replenish it in the year immediately after profits are obtained.

For the year ended December 31, 2012, the Company increased its legal reserve by the amount of $627,000, which was set aside from earnings corresponding to the 2012 period. Calculations of the legal reserve are based on locally prepared financial statements in accordance with “Ley General de Sociedades” in Peru.

(c)                      Retained earnings

Retained earnings may be capitalized or distributed as dividends, by resolution of the shareholders. The Company´s distributable profits are limited to the amount of retained earnings available under local statutory provisions. As from 2003, dividends and any other form of distributed profit are subject to a withholding tax at a 4.1% rate on the distributed amount to be borne by the shareholders who are individuals, whether or not domiciled in Peru, or who are juridical persons not domiciled in Peru. Any dividends distribution must be proportionate to the shareholders’ contribution.


17



 9.                                Employees’ profit sharing

According to Peruvian law, employees have a share of 5% of the Company profits before income tax. Employees’ profit sharing is computed on the taxable net income balance of the year subject to tax, as assessed for local purposes.

10.                         Information by segments

Accounting standards require that the Company present financial information by segments. Segments are determined by the form in which the management organizes the Company to make decisions and assess the business performance. In this regard, management considers that the Company operates one single reportable segment, all within the country of Peru.

Financial information regarding the breakdown of revenues by type of product is as follows:
 
 
2014
 
2013
 
2012
Year ended December 31,
 
$’000
 
$’000
 
$’000
 
 
 
 
 
 
 
Passenger transport
 
75,676

 
69,292

 
59,951

Freight and cargo transport
 
17,222

 
20,050

 
21,059

Other
 
3,550

 
3,442

 
3,575

 
 
 
 
 
 
 
Revenue
 
96,448

 
92,784

 
84,585


Sociedad Minera Cerro Verde is a major customer to the Company, and in the year ended December 31, 2014 represented 10% (2013 - 13%; 2012 - 15%) of total revenue included within freight and cargo transport.

11.                      Commitments and contingencies

Outstanding contracts to purchase property, plant and equipment were approximately $5,896,000 at December 31, 2014 (2013 - $Nil).

Rental expense for the year ended December 31, 2014 amounted to $538,000 (2013 - $565,000; 2012 - $468,000).

12.                         Supplemental cash flow information
 
 
2014
 
2013
 
2012
Year ended December 31,
 
$’000
 
$’000
 
$’000
 
 
 
 
 
 
 
Cash paid for:
 
 
 
 
 
 
Interest
 
149

 
215

 
378

 
 
 
 
 
 
 
Income taxes
 
6,809

 
4,781

 
4,654


The Company did not enter into any capital leases during the years ended December 31, 2014 and 2013. During the year ended December 31, 2012, the Company entered into capital lease obligations totaling $5,875,000, which is considered a non-cash investing and financing activity.

13.                         Related party transactions

Accounts receivable include non-interest bearing loans extended to the Company’s shareholders. The amount due from shareholders to the Company at December 31, 2014 was $77,000 (2013 - $66,000).

Accounts receivable from Ferrocarril Transandino S.A. for working capital requirements at December 31, 2014 were $18,829,000 (2013 - $15,173,000). These receivables fluctuate as the Company utilizes the railway, locomotives and rolling stock, and stations and yards of Ferrocarril Transandino S.A.

Accounts receivable from Rail Asset S.A.C. for loans and working capital requirements at December 31, 2014 were $23,000 (2013 - $23,000).


18



The amount due to Ferrocarril Transandino S.A. at December 31, 2014 was $221,000 (2013 - $280,000) and relates to the invoicing for the access and use of the railway, locomotives and rolling stock, stations and yards, and loans. These accounts accrue no interest. In 2014, the Company received services from Ferrocarril Transandino S.A. in the amount of $19,248,000 (2013 - $19,152,000; 2012 - $19,481,000), including the value added tax of 18% (2013 and 2012 - 18%).

The Company has guaranteed $11,279,000 of the long-term debt of Ferrocarril Transandino S.A. as at December 31, 2014 (2013 - $17,301,000). The guarantee exists as long as the debt of Ferrocarril Transandino S.A. remains outstanding, and can be called in the event of non-payment on due dates of an amount equal or greater than $1,000,000. See Notes 1(a) and 6.

The amount due to Belmond Peru S.A. at December 31, 2014 was $60,000 (2013 - $55,000) relating to expense reimbursements.

The amount due to Belmond Peru Management S.A. at December 31, 2014 was $3,302,000 (2013 - $2,419,000) relating to the invoicing of management fees and expense reimbursements established in the current management agreement.

The amount due to Belmond Hotel Holdings (UK) Ltd at December 31, 2014 was $42,000 (2013 - $40,000) relating to the invoicing of licence fees and marketing expenses.

The amount due to Peru Belmond Experiences S.A. at December 31, 2014 was $3,000 (2013 - $700,000) relating to the invoicing of working capital facilities.

The amount due to Peru Belmond Hotels S.A. at December 31, 2014 was $421,000 relating to on-board catering services (2013 - $533,000), which accrues no interest.

14.    Subsequent events

On June 7, 2015, the Company entered into a certain transportation services agreement (the “Transportation Agreement”) with Minera Las Bambas S.A., a company controlled by MMG Limited, a Hong Kong company listed on the Stock Exchange of Hong Kong Stock Limited and majority owned by China Minmetal Corporation, a Chinese State-owned enterprise (“MLB”). The Transportation Agreement provides for the copper concentrate to be produced by MLB at its Las Bambas mine to be transferred by the Company approximately 300 kilometers from a transfer station approximately 430 kilometers from the mine to the Port of Matarani on the Pacific coast of Peru. The Transportation Agreement has an initial term of fifteen (15) years that is expected to commence on January 1, 2016, subject to earlier termination by MLB after ten (10) years, with MLB having options to extend the Transportation Agreement for additional fifteen year terms. The Transportation Agreement contains customary terms for events of default, indemnities and related provisions.

MLB shall pay a fee under the Transportation Agreement consisting of a fixed component that reflects the Company’s fixed costs in delivering the transportation services and a variable component that is measured on the basis of price per ton of copper concentrate actually transported and unloaded. MLB is obligated to pay the fixed component at all times during the term of the Transportation Agreement, subject to a specified subset of force majeure and “Act of God” events when MLB would only pay, based on a formula, between 64% to 81% of the fixed component.

To ensure that the equipment was available in time for the commencement of production from the mine, MLB has entered into purchase contracts with independent third party manufacturers for the equipment necessary for the rail transportation, including locomotives, rail wagons, containers and turning equipment. The total cost for all such equipment is approximately $76 million. The Company will acquire all such equipment from MLB at its cost upon the closing of project financing secured solely by such equipment and related infrastructure used only for the services under the Transportation Agreement, but not any other assets of the Company. The Company will make this acquisition with 100% debt financing. If required by the project lenders, MLB will provide a bank letter of guarantee for an amount of $106.5 million for the benefit of the project. If the Company has not been able to obtain project financing by November 1, 2015, the Company will be deemed to have borrowed the amount of debt necessary to acquire the equipment from MLB, subject to a reduction in the monthly fee otherwise payable by MLB to the extent of deemed financing costs that shall be equal to what the Company’s actual financing costs would have been for the period from November 1, 2015 until the Company’s closing on project financing. Upon the closing on project financing, the Company will take title to all of the equipment previously acquired by MLB.

The Company will acquire assets of approximately $107 million, and these will be 100% financed by non-recourse debt, secured only by the assets and a guarantee from MMG Limited. This contract is expected to contribute a net loss to the Company of approximately $1.6 million in 2015 and net income of approximately $0.9 million in 2016 and $1.3 million in 2017.


19




SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated:  June 25, 2015


 
BELMOND LTD.
 
 
 
 
 
By:
/s/ Martin O'Grady
 
 
Martin O’Grady
 
 
Executive Vice President, Chief Financial Officer




20



EXHIBIT INDEX


Exhibit No.
 
Incorporated by Reference to
 
Description
 
 
 
 
 
3.1
 
Exhibit 3.2 to June 15, 2011 Form 8-K/A Current Report (File No. 001-16017)
 
Memorandum of Association and Certificate of Incorporation of Belmond Ltd.
3.2
 
Exhibit 3.2 to June 15, 2007 Form 8-K Current Report (File No. 001-16017)
 
Bye-Laws of Belmond Ltd.
3.3
 
Exhibit 1 to April 23, 2007 Amendment No. 1 to Form 8-A Registration Statement
(File No. 001-16017)
 
Rights Agreement dated June 1, 2000, and amended and restated April 12, 2007, between Orient-Express Hotels Ltd. and Computershare Trust Company N.A., as Rights Agent
3.4
 
Exhibit 4.2 to December 10, 2007 Form 8-K Current Report (File No. 001-16017)
 
Amendment No. 1 dated December 10, 2007 to Amended and Restated Rights Agreement (Exhibit 3.3)
3.5
 
Exhibit 4.3 to May 27, 2010 Form 8-K Current Report (File 001-16017)
 
Amendment No. 2 dated May 27, 2010 to Amended and Restated Rights Agreement (Exhibit 3.3)
4.1
 
Exhibit 10.1 to March 27, 2014 Form 8-K Current Report (File No. 001-16017)
 
Credit Agreement dated March 21, 2014 among Orient-Express Hotels Ltd., Belmond Interfin Ltd., Barclays Bank PLC, JPMorgan Chase Bank, N.A., and Credit Agricole Corporate and Investment Bank
4.2
 
Exhibit 10.1 to June 8, 2015 Form 8-K Current Report (File No. 001-16017)
 
First Amendment to Credit Agreement dated June 2, 2015 among Belmond Ltd., Belmond Interfin Ltd., Barclays Bank PLC, JPMorgan Chase Bank, N.A., and Credit Agricole Corporate and Investment Bank

Belmond has no instrument with respect to long-term debt not listed above under which the total amount of securities authorized exceeds 10% of the total assets of Belmond on a consolidated basis.  The Company agrees to furnish to the Securities and Exchange Commission upon request a copy of each instrument with respect to long-term debt that is not required to be filed as an exhibit to this report.

21




10.1
 
Exhibit 10.1 to 2012 Form 10-K Annual Report (File No. 001-16017)
 
Orient-Express Hotels Ltd. 2000 Stock Option Plan, as amended

10.2
 
Exhibit 10.2 to 2012 Form 10-K Annual Report (File No. 001-16017)
 
Orient-Express Hotels Ltd. 2004 Stock Option Plan, as amended
10.3
 
Exhibit 10.3 to 2008 Form 10-K Annual Report (File No. 001-16017)
 
Orient-Express Hotels Ltd. 2007 Performance Share Plan, as amended
10.4
 
Exhibit 10.4 to 2009 Form 10-K Annual Report (File 001-16017)
 
Orient-Express Hotels Ltd. 2007 Stock Appreciation Rights Plan, as amended
10.5
 
Exhibit 10.5 to 2012 Form 10-K Annual Report (File No. 001-16017)
 
Orient-Express Hotels Ltd. 2009 Share Award and Incentive Plan, as amended
10.6
 
Exhibit 10.3 to 2004 Form 10-K Annual Report (File No. 001-16017)
 
Amended and Restated Agreement Regarding Hotel Cipriani Interests dated February 8, 2005 between James B. Sherwood, Hotel Cipriani S.r.l. and Orient-Express Hotels Ltd.
10.7
 
Exhibit 10.4 to 2004 Form 10-K Annual Report (File No. 001-16017)
 
Amended and Restated Right of First Refusal and Option Agreement Regarding Indirectly Held Hotel Cipriani Interests dated February 8, 2005 between James B. Sherwood and Orient-Express Hotels Ltd.
10.8
 
Exhibit 10.8 to 2012 Form 10-K Annual Report (File No. 001-16017)
 
Service Agreement between Orient-Express Services Ltd. and
John M. Scott III dated November 8, 2012
10.9
 
Exhibit 10.9 to 2012 Form 10-K Annual Report (File No. 001-16017)
 
Severance Agreement between Orient-Express Hotels Ltd. and
John M. Scott III dated November 8, 2012
10.10
 
Exhibit 10.10 to 2012 Form 10-K Annual Report (File No. 001-16017)
 
Indemnification Agreement between Orient-Express Hotels Ltd. and John M. Scott III dated November 8, 2012
10.11
 
Exhibit 10.11 to 2012 Form 10-K Annual Report (File No. 001-16017)
 
Form of Severance Agreement between Orient-Express Hotels Ltd. and certain of its officers, as amended
10.12
 
Exhibit 10.12 to 2012 Form 10-K Annual Report (File No. 001-16017)
 
Form of Indemnification Agreement between Orient-Express Hotels Ltd. and its non-executive directors and certain of its officers
10.13
 
Exhibit 10 to June 30, 2013 Form 10-Q Quarterly Report (File No. 001-16017)
 
Services Agreement between Orient-Express Hotels Ltd. and J. Robert Lovejoy dated June 18, 2013
12
 
 
 
Statement of computation of ratios*
14
 
Exhibit 14 to April 30, 2013 Form 8-K Current Report (File No. 001-16017)
 
Code of Conduct as adopted April 30, 2013
            

* Previously Filed
Exhibit No.
 
Incorporated by Reference to
 
Description
 
 
 
 
 
21
 
 
 
Subsidiaries of Belmond Ltd.*
23.1
 
 
 
Consent of Deloitte LLP relating to Form S-3 Registration Statement No. 333-188355 and Form S-8 Registration Statements No. 333-58298, No. 333-129152, No. 333-147448, No. 333-161459, No. 333-168588 and No. 333-183142*
23.2
 
 
 
Consent of Pazos, López de Romaña, Rodriguez S.C. relating to Form S-3 Registration Statement No. 333-188355 and Form S-8 Registration Statements No. 333-58298, No. 333-129152, No. 333-147448, No. 333-161459, No. 333-168588 and No. 333-183142
31
 
 
 
Rule 13a-14(a)/15d-14(a) Certifications
32
 
 
 
Section 1350 Certification
99.1
 
Exhibit 99.1 to June 1, 2010 Form 8-K Current Report (File No. 001-16017)
 
Judgment of Bermuda Supreme Court dated June 1, 2010 in D.E. Shaw Oculus Portfolios LLC et al. vs. Orient-Express Hotels Ltd. et al.
101
 
 
 
Interactive data file*
            

* Previously Filed



22