UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549











FORM 10-K/A


Amendment No. 1





(Mark One)





xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the fiscal year ended December 31, 2016





ORoTRANSITION 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)





Bermuda98-0223493(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 className of each exchange on which registeredClass A Common Shares, $0.01 par value eachNew York Stock ExchangePreferred Share Purchase RightsNew 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







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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, a smaller reporting company, or an emerging growth company.  See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Act. (Check one):





Large Accelerated FilerxAccelerated FileroNon-Accelerated FileroSmaller reporting companyoEmerging growth companyo(Do not check if a smaller reporting company)





If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.


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 30, 2016 (the last business day of the registrant’s second fiscal quarter in 2016 ) was approximately $992,000,000 .


As of June 19, 2017 , 102,239,682 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 28, 2017 ).





DOCUMENTS INCORPORATED BY REFERENCE: None



















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EXPLANATORY NOTE





Belmond Ltd. (the “Registrant” or “Belmond”) is filing this Amendment No. 1 (the “Amendment”) to its Annual Report on Form 10-K for the fiscal year ended December 31, 2016, filed with the U.S. Securities and Exchange Commission (“SEC”) on February 28, 2017 (the “Original 2016 Form 10-K”).





This Amendment is being filed because, pursuant to Rule 3-09 of SEC Regulation S-X (“Rule 3-09”), the Registrant is required to file the financial statements of Perurail S.A. (“Perurail”), a 50% Belmond-owned unconsolidated company. The fiscal financial statements for Perurail for 2016, 2015 and 2014 were prepared by that company’s management in accordance with United States Generally Accepted Accounting Principles (“U.S. GAAP”), and have been audited by BDO - Pazos, Lopez de Romana, Rodriguez S. Civil de R.L. pursuant to applicable standards of the United States Public Company Accounting Oversight Board (“PCAOB”).





The above-described financial statements of Perurail are filed herewith pursuant to this Amendment under Item 15 of Form 10-K - Exhibits and Financial Statement Schedules.





Except as described above, no other changes have been made to the Original 2016 Form 10-K Filing, and this Form 10-K/A does not amend, update or change any other items or disclosures in the Original 2016 Form 10-K Filing. This Form 10-K/A does not reflect events occurring after the date of the Original 2016 Form 10-K 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 2016 Form 10-K Filing in any way.






















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PART IV











ITEM 15.  Exhibits and Financial Statement Schedules








1. Financial Statements





(a) Perurail S.A.


Page NumberReport of independent registered public accounting firm2Financial statements – years ended December 31, 2016, 2015 and 2014:Balance sheets (December 31, 2016 and 2015)3Statements of operations4Statements of shareholders’ equity5Statements of cash flows6Notes to financial statements7





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.











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PERURAIL S.A.








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, 2016 and 2015 , and the related statements of operations, cash flows and shareholders’ equity for each of the three years in the period ended December 31, 2016 . 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, 2016 and 2015 , and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2016 , in conformity with accounting principles generally accepted in the United States of America.








/s/ Pazos, López de Romaña, Rodriguez S. Civil de R.L.Lima, PeruJune 21, 2017Countersigned by:/s/ Liliana Córdova MejíaLiliana Córdova MejíaCertified Chartered Public AccountantRegister No. 01-17661











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Perurail S.A.


Balance Sheets


20162015December 31,$’000$’000AssetsCash43,69314,600Accounts receivable, net of allowances of $1,787 in 2016 (2015-$Nil)14,2758,658Due from related parties21,70820,934Prepaid expenses1,543999Inventories7,0097,340Total current assets88,22852,531Property, plant and equipment, net of accumulated depreciation of $41,300 and $30,921154,26068,877Intangible assets, net of accumulated amortization of $612 and $447450422Other assetsTotal non-current assets154,71069,299Total assets242,938121,830Liabilities and Shareholders’ EquityWorking capital facilities2,02910,320Accounts payable5,5927,317Accrued liabilities11,7828,618Due to related parties5,6957,268Current portion of long-term debt and obligations under capital lease18,6173,646Total current liabilities43,71537,169Long-term debt and obligations under capital lease138,74931,374Deferred income tax liability, net4,5714,984Total long-term liabilities143,32036,358Total liabilities187,03573,527Commitments and contingencies (Note 11)Shareholders’ equity:Common shares S/1.00 par value (50,000,000 shares authorized):Issued - 50,000,000 (2015 - 50,000,000)16,93416,934Legal reserve3,2522,336Retained earnings35,71729,033Total shareholders’ equity55,90348,303Total liabilities and shareholders’ equity242,938121,830


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











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Perurail S.A.


Statements of Operations


201620152014Year ended December 31,$’000$’000$’000Revenue, net of discounts146,571104,58296,448Expenses:Cost of services(64,008)(49,371)(47,455)Selling, general and administrative(27,438)(27,314)(25,430)Depreciation and amortization(20,280)(8,998)(7,559)Total operating costs and expenses(111,726)(85,683)(80,444)Gain on insurance settlement277945—Loss on disposal of property, plant and equipment(1,191)(284)—Earnings from operations33,93119,56016,004Interest expense, net(9,565)(1,466)(848)Foreign currency, net(273)(844)(792)Earnings before income tax24,09317,25014,364Provision for income taxes(8,845)(4,922)(4,279)Net earnings15,24812,32810,085





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.














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Perurail S.A.


Statements of Shareholders’ Equity


Common shares at par valueLegal reserveRetained  earningsTotal shareholders' equity$’000$’000$’000$’000Balance at January 1, 20146,6841,44831,31839,450Dividends——(6,480)(6,480)Net earnings——10,08510,085Stock split10,250—(10,250)—Balance at December 31, 201416,9341,44824,67343,055Dividends——(7,080)(7,080)Net earnings——12,32812,328Legal reserve—888(888)—Balance at December 31, 201516,9342,33629,03348,303Dividends——(7,648)(7,648)Net earnings——15,24815,248Legal reserve—916(916)—Balance at December 31, 201616,9343,25235,71755,903





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











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Perurail S.A.


Statements of Cash Flows


201620152014Year ended December 31,$’000$’000$’000Cash flows from operating activities:Net earnings15,24812,32810,085Adjustment to reconcile net earnings to net cash provided by operating activities:Depreciation20,1158,9417,525Amortization1655734Amortization of finance costs——5Loss on disposal of property, plant and equipment1,191284—Change in deferred tax(413)(1,126)(1,607)Change in assets and liabilities:Decrease/(increase) in accounts receivable(5,617)(5,196)444Decrease/(increase) in prepaid expenses(544)1,836(566)Decrease/(increase) in inventories3311,954(1,583)(Decrease)/increase in due to related parties(1,573)3,304(159)(Decrease)/increase in accounts payable(1,725)1,9521,745(Decrease)/increase in accrued liabilities3,164178(303)Total adjustments15,09412,1845,535Net cash provided by operating activities30,34224,51215,620Cash flows from investing activities:Capital expenditures(106,882)(23,406)(20,949)Net cash used in investing activities(106,882)(23,406)(20,949)Cash flows from financing activities:Payment of dividends(7,648)(7,080)(6,480)Payments on working capital facilities(9,726)(7,635)(8,760)Proceeds from working capital facilities1,43613,1896,377(Increase)/decrease in due from related parties(774)(2,105)(2,875)Principal payments under long-term debt(41,614)(21,323)(2,315)Principal payments under capital lease(873)(1,747)(1,321)Proceeds from long-term debt158,03435,00022,000Proceeds from capital lease6,798—150Net cash provided by financing activities105,6338,2996,776Net (decrease) /increase in cash29,0939,4051,447Cash at beginning of year14,6005,1953,748Cash at end of year43,69314,6005,195





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











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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. Armendariz 480 office 501, 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.





In order to perform its corporate purpose, in August 2000 the Company entered into a lease with Ferrocarril Transandino S.A., an affiliate, under 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 of 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 Peruvian 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.











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(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 taxes





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. Prior to 2015, classification of deferred tax assets and liabilities corresponded with the classification of the underlying assets and liabilities giving rise to the temporary differences or the period of expected reversal, as applicable. In 2015 the Company adopted new guidance whereby all deferred tax assets and liabilities are classified as non-current. 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, 2016 and 2015 the Company did not record any liabilities for uncertain tax positions.








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(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.





Depreciation expense is computed using the straight-line method over the following estimated useful lives:


DescriptionUseful livesInstallations33 yearsMachinery and equipment10 yearsTransport units5 yearsImprovements to locomotive and rolling stock assets under lease5 yearsOwned locomotives and rolling stock10 yearsFurniture and fixtures10 yearsComputer equipment4 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:





DescriptionUseful livesLogo and trademarks30 yearsSoftware and licenses4 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.








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(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 reach 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:





1.    The amount of revenues can be reliably quantified;





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





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





(o)  Debt issuance costs





Debt issuance costs incurred in connection with the placement of long-term debt are capitalized and presented as a direct deduction from the associated debt liability 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 rate risk), credit risk, and liquidity risk. The Company’s risk management program tries to minimize the potential adverse effects on its financial performance. Management, based on its knowledge and experience, seeks to mitigate the exchange rate, interest rate, credit and liquidity risks by 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 mitigates this risk through its procedures to monitor and manage asset and liability maturity dates, so that the Company can be best prepared for the flow of cash to match 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 majority of the Company's long-term debt is subject to a fixed interest rate.





Exchange rate risk





The Company carries out its transactions mainly in foreign currency, but management estimates that due to the short-term nature, any fluctuation will not materially 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.








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(r)  Recently issued and adopted accounting guidance





Accounting pronouncements adopted during the year.





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 adoption of this guidance did not have a material effect on the Company’s consolidated financial statements.





(s)  Accounting pronouncements to be adopted





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. Entities will have the option of using either a full retrospective approach or a modified approach to adopt the new guidance. The guidance was originally effective for annual and interim periods beginning after December 15, 2016, however in July 2015 the FASB confirmed that the effective date would be deferred by one year, to apply to annual and interim periods beginning after December 15, 2017. Early adoption is permitted for annual reporting periods beginning after December 15, 2016. The Company is currently evaluating the impact of the adoption of this guidance on its financial statements.





In February 2016, the FASB issued its new standard on accounting for leases, which introduces a lessee model that brings most leases on the balance sheet. A distinction between finance leases and operating leases is retained, with the result that the effect of leases in the statement of comprehensive income and the statement of cash flows is largely unchanged from previous lease guidance.  The guidance is effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The Company is currently evaluating the impact of the adoption of this guidance on its financial statements.





In August 2016, the FASB issued new guidance which clarifies the classification of certain cash receipts and payments in the statement of cash flows. The guidance is effective for annual and interim periods beginning after December 15, 2017, with early adoption permitted. The new guidance will be applied on a retrospective basis where applicable. The Company is currently evaluating the impact of the adoption of this guidance on its financial statements.





In October 2016, the FASB issued new guidance which is intended to simplify the tax consequences of certain types of intra-entity asset transfers. The guidance is effective for annual periods ending after December 15, 2017, and interim periods thereafter, with early adoption permitted. The new guidance will be applied on a modified retrospective basis. The Company is currently evaluating the impact of the adoption of this guidance on its financial statements.











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2.    Property, plant and equipment





The major classes of property, plant and equipment are as follows:


20162015December 31,$’000$’000Land1,353861Installations22,14416,778Machinery and equipment29,91614,637Transport units18,6707,007Improvements to locomotive and rolling stock assets under lease36,03542,035Owned locomotives and rolling stock63,3096,926Furniture and fixtures2941,837Works in progress23,8399,717195,56099,798Less: Accumulated depreciation(41,300)(30,921)Total property, plant and equipment, net of accumulated depreciation154,26068,877





The major classes of assets under capital leases included above are as follows:





20162015December 31,$’000$’000Locomotives and rolling stock10,3012,174Less: Accumulated depreciation(1,473)(1,534)Total property, plant and equipment under capital leases, net of accumulated depreciation8,828640





The depreciation charge on property, plant and equipment for the year ended December 31, 2016 was $20,115,000 ( 2015 - $8,941,000 ; 2014 - $7,525,000 ).





In 2016, the Company has acquired assets for $73,593,000 and has works in progress for $ 11,319,000 in relation to a new contract with Minera Las Bambas S.A. consisting primarily of locomotives, freight cars and containers to move copper concentrate from the Las Bambas mine to the port.





No property, plant and equipment impairments were recorded in the years ended December 31, 2016 , 2015 and 2014 .








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3.    Intangible assets





Intangible assets consist of the following as of December 31, 2016 and 2015 :


Logo and trademarksSoftware and licensesTotal$’000$’000$’000Carrying amount:Balance at January 1, 2015122584706Additions—163163Balance at December 31, 2015122747869Additions—193193Balance at December 31, 20161229401,062Accumulated amortization:Balance at January 1, 201558332390Charge for the period94857Balance at December 31, 201567380447Charge for the period55110165Balance at December 31, 2016122490612Net book value:December 31, 201464252316December 31, 201555367422December 31, 2016—450450





Amortization expense for the year ended December 31, 2016 was $165,000 ( 2015 - $57,000 ; 2014 - $34,000 ).





Estimated amortization expense for each of the years ended December 31, 2017 to 2021 is $90,000.








4.  Working capital facilities





Working capital facilities are composed of the following, all repayable within one year:


20162015December 31,$’000$’000Working capital facilities2,02910,320





Working capital facilities accrue interest at a weighted average rate of 3.73% ( 2015 - 5.74%) and include a short term facility to finance insurance policies. As of December 31, 2015, the working capital facilities included $8,063,000 relating to a loan received in November 2015 from Minera Las Bambas S.A. This loan was repaid in February 2016.





The Company had approximately $15,918,000 of working capital and overdraft lines of credit at December 31, 2016 ( 2015 - $16,650,000) issued by various financial institutions and having various expiration dates, of which $11,250,000 was undrawn ( 2015 - $13,988,000).





The Company has issued a $15,000,000 bond letter in favor of the lenders of Las Bambas Project, with an annual fee payment of 2%, to guarantee the registration of the surface rights over the land on which infrastructure for the Las Bambas project is being built. The bond will lapse upon formalizing the surface rights over the land.





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5.  Accrued liabilities





A breakdown of accrued liabilities and deferred revenue is as follows:





20162015December 31,$’000$’000Remuneration and profit sharing payable3,4342,249Deferred revenue3,1633,578Current tax payable1,60684Provision for purchases and services9821,314Advance payments received from passengers756351Vacation payable739515Employees’ length of service compensation150112Other tax payable131105Other accounts payable82131011,7828,618











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





(a)  Long-term debt





Long-term debt consists of the following:


20162015December 31,$’000$’000Loans from banks collateralized by property, plant and equipment payable over a period of 6 to 10 years (2015 - ten years), with a weighted average interest rate of 5.1% (2015 - 6.23%)153,21734,567Obligations under capital lease (see Note 6(b))7,1701,246Total long-term debt and obligations under capital lease160,38735,813Less: Current portion18,6173,646Less: Debt issuance costs3,021793Non-current portion of long-term debt and obligations under capital lease138,74931,374





The Company is in compliance with all financial covenants in its long-term debt obligations at December 31, 2016 and 2015 .





The bank loans are associated with the transportation of copper concentrate for two mining projects. Debt service is taken from the revenue generated by the transportation of the concentrate and the Lenders have security over the revenue streams and the specific assets (locomotives, wagons, containers and other infrastructure) used in those contracts. The estimated annual revenue streams amount to $51,000,000 (excluding VAT), and the carrying value of the assets as of December 31, 2016 , is $81,230,838.  The Lenders have no recourse to any other assets of Perurail.





As of December 31, 2016 , the long term debt included loans amounting to $153,217,000 to finance infrastructure and equipment for cargo projects.








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During the course of 2016 the Company contracted two loans. The first one was for a total $126,956,000 with drawdowns between February and May 2016 in three tranches; each tranche was subject to different annual effective interest rates (5.2%, 5.85% and 3.1%). This loan is paid in quarterly installments with a maturity date on February 2026. The second loan was for $34,100,000 and was fully drawn down on June 2016 at an annual effective interest rate of 6.23 %. This second loan is paid in monthly installments with a maturity date on September 2023.





The balance of debt issuance costs related to the above outstanding long-term debt of the Company were $3,021,000 at December 31, 2016 ( 2015 - $793,000 ) and are amortized to interest expense over the term of the corresponding long-term debt.





Perurail guarantees the long-term debt obligations of Ferrocarril Transandino S.A. for the period of its lease with the Company as described in Note 1(a). The guarantee applies to payment defaults of amounts equal to or greater than $1,000,000. Ferrocarril Transandino S.A. had no long-term debt outstanding as of December 31, 2016 (2015 - $2,927,000). See Note 13.





The following is a summary of the aggregate maturities of long-term debt of the Company excluding obligations under capital lease at December 31, 2016 :





Year ending December 31,$’000201718,458201819,267201914,750202013,6642021 and thereafter87,078Total long-term debt excluding obligations under capital leases153,217





(b)  Obligations under capital lease





The Company entered into two capital leases during the year ended December 31, 2016 . The amounts of the obligations under capital leases are $4,078,800 and $2,719,200 at December 31, 2016 .





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, 2016 :





Year ending December 31,$’00020171,12120181,58620191,55020201,5502021 and thereafter2,3268,133Minimum lease paymentsLess: amount of interest contained in above payments963Present value of minimum lease payments7,170Less: current portion6986,472





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








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(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, 2016 and 2015 are as follows:


December 31, 2016December 31, 2015Carrying amountFair valueCarrying amountFair value$’000$’000$’000$’000Long-term debt, including current portion, before deduction of debt issuance costs, excluding obligations under capital leases153,217154,20734,56735,907





(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, 2016 , 2015 and 2014 .








7.  Income taxes





The provision for income taxes consists of the following:


201620152014Year ended December 31,$’000$’000$’000Earnings before income tax24,09317,25014,364Current income tax charge(9,257)(6,048)(5,886)Deferred income tax credit/(charge)4121,1261,607Total(8,845)(4,922)(4,279)





The reconciliations of the Peruvian income tax rate to the Company’s effective income tax rate for the three years ended December 31, 2016 , 2015 and 2014 are as follows:


201620152014Year ended December 31,%%%Peruvian income tax rate282830Permanent differences9711Change of rate2——Other(2)(6)(11)Effective tax rate372930





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:








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20162015December 31,$’000$’000Provisions included in books228369Other deferred income tax assets779128Deferred income tax assets1,007497Fixed assets and intangibles(7,129)(7,413)Exchange rate related to fixed assets1,7312,041Other deferred tax liabilities(180)(109)Deferred income tax liabilities(5,578)(5,481)Net deferred income tax liabilities(4,571)(4,984)





By means of Legislative Decree No. 1261, enacted on December 10, 2016, the Peruvian income tax law was amended to be effective as of fiscal 2017. This amendment sets forth a corporate income tax rate of 29.5%. It also sets forth an income tax rate on dividends of 5% applicable to non-domiciled legal entities and individuals effective as of fiscal 2017. Profits accumulated up to December 31, 2016 will continue to be taxed at 6.8% income tax rate regardless of whether the distribution is agreed or occurs in subsequent periods





The Company early-adopted ASU 2015-17 effective December 31, 2015 on a prospective basis. Adoption of this ASU resulted in a reclassification of the net current deferred tax liability to the net non-current deferred tax liability in the balance sheet as of December 31, 2015. No prior periods were retrospectively adjusted. Net non-current deferred tax liabilities are presented on the balance sheet. The Company required no provision in respect of uncertain tax positions.











8.  Shareholders’ equity





(a)  Share capital and additional-paid in capital





The shareholders of the Company are as follows:


Number ofsharesPercentageownershipBelmond Ltd.25,000,00050Peruvian Trains & Railways S.A.25,000,0005050,000,000100





(b)  Legal reserve





In accordance with Peruvian law, a minimum 10% of the annual profits that can be distributed are required 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, 2016 , the Company increased its legal reserve by the amount of $916,000 , which was set aside from earnings corresponding to the 2016 period. Calculations of the legal reserve are based on locally prepared financial statements in accordance with “Ley General de Sociedades” in Peru.








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(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. Dividends to be distributed to shareholders other than legally resident entities are subject to a 4.1% rate (based on 2014’s profits), 6.8% (based on 2015’s and 2016’s profits) and 5.00% (on profits for 2017 and thereafter) of income tax payable by these shareholders; this tax rate is required to be withheld and settled by the Company.








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. See Note 1(q).








10.  Information by segments





Accounting standards require that the Company present financial information by segments. Segments are determined by the form in which 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:


201620152014Year ended December 31,$’000$’000$’000Passenger transport86,00484,22375,676Freight and cargo transport57,10817,07817,222Other3,4593,2813,550Revenue146,571104,58296,448





Las Bambas is a major customer to the Company, and in the year ended December 31, 2016 represented 20% (2015 - Nil%; 2014 - Nil%) of total revenue included within freight and cargo transport. The Company’s second largest customer is Sociedad Minera Cerro Verde, and in the year ended December 31, 2016 represented 15% (2015 - 11%; 2014 - 10%) of total revenue included within freight and cargo transport.











11.  Commitments and contingencies





Outstanding contracts to purchase property, plant and equipment were approximately $6,798,000 at December 31, 2016 , relating to locomotives ( 2015 - $126,956,000 relating to the Las Bambas project).





Rental expense for the year ended December 31, 2016 amounted to $502,000 ( 2015 - $641,000; 2014 - $538,000).








12.  Supplemental cash flow information


201620152014Year ended December 31,$’000$’000$’000Cash paid during the period for:Interest6,116459149Income taxes5,5225,2306,809





The Company entered into capital leases during the year ended December 31, 2016 .  See Note 6(b).








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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, 2016 was $Nil  (2015 - $95,000; 2014 - $77,000).





Accounts receivable from Ferrocarril Transandino S.A., an affiliate, for working capital requirements at December 31, 2016 were $21,708,000 (2015 - $20,934,000; 2014 - 18,829,000). 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 Peru Belmond Hotel SA at December 31, 2016 was $6,000 (2015 -$Nil)





The accounts receivable from Rail Asset S.A.C. for loans and working capital requirements were fully paid as of December 31, 2016 (2015 - $23,000; 2014 - $23,000).





The amount due to Ferrocarril Transandino S.A. at December 31, 2016 was $295,000 (2015 - $218,000; 2014 - $221,000) 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 2016, the Company received services from Ferrocarril Transandino S.A. in the amount of $26,181,000 (2015 - $20,276,000; 2014 - $19,248,000), including the value added tax of 18% (2015 and 2014 - 18%).





Perurail guarantees the long-term debt obligations of Ferrocarril Transandino S.A. for the period of its lease with the Company as described in Note 1(a). The guarantee applies to payment defaults of amounts equal to or greater than $1,000,000. Ferrocarril Transandino S.A. had no long-term debt outstanding as of December 31, 2016 (2015 - $2,927,000). See Notes 1(a) and 6.





The amount due to Belmond Peru S.A. was fully paid as of December 31, 2016 (2015 - $1,000; 2014 - $60,000) relating to expense reimbursements.





The amount due to Belmond Peru Management S.A. at December 31, 2016 was $5,122,000 (2015 - $4,071,000; 2014 - $3,302,000) relating to the invoicing of management fees and expense reimbursements established in the current management agreement.





The amount due to Belmond Ltd. at December 31, 2016 was $41,000 (2015 - $98,000; 2014 - $42,000) relating to the invoicing of licence fees and marketing expenses.





The amount due to Peru Belmond Experiences S.A. was fully paid as of December 31, 2016 (2015 - $Nil; 2014 - $3,000) relating to the invoicing of working capital facilities.





The amount due to Peru Belmond Hotels S.A. at December 31, 2016 was $190,000 relating to the invoice of on-board catering services (2015 -$2,860,000 relating to a loan received of $2,439,000 and on-board catering services amounting to $421,000), which accrues no interest.





On April 19, 2016, Perurail SA completed the purchase of the carriages to be used as the Belmond Andean Explorer service from Belmond Ltd., which were formerly operated as the Great South Pacific Express in Queensland, Australia. The amount paid for this equipment was $2,362,000.











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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 22, 2017








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














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EXHIBIT INDEX


Exhibit No.Incorporated by Reference toDescription3.1Exhibit 3.2 to the Current Report on Form 8-K dated July 2, 2014Memorandum of Association and Certificate of Incorporation of Belmond Ltd.3.2Exhibit 3.2 to the Current Report on Form 8-K dated June 15, 2007Bye-Laws of Belmond Ltd.3.3Exhibit 1 to Amendment No. 1 to the Registration Statement on Form 8-A dated April 23, 2007Rights 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 Agent3.4Exhibit 4.2 to the Current Report on Form 8-K dated December 10, 2007Amendment No. 1 dated December 10, 2007 to Amended and Restated Rights Agreement3.5Exhibit 4.3 to the Current Report on Form 8-K dated May 27, 2010Amendment No. 2 dated May 27, 2010 to Amended and Restated Rights Agreement4.1Exhibit 10.1 to the Current Report on Form 8-K dated March 27, 2014Credit 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 Bank4.2Exhibit 10.1 to the Current Report on Form 8-K dated June 8, 2015First 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 Bank10.1Exhibit 10.2 to the 2012 Form 10-KOrient-Express Hotels Ltd. 2004 Stock Option Plan, as amended10.2Exhibit 10.3 to the Annual Report on Form 10-K for the year ended December 31, 2008Orient-Express Hotels Ltd. 2007 Performance Share Plan, as amended10.3Exhibit 10.4 to the Annual Report on Form 10-K for the year ended December 31, 2009Orient-Express Hotels Ltd. 2007 Stock Appreciation Rights Plan, as amended10.4Exhibit 10.5 to the 2012 Form 10-KOrient-Express Hotels Ltd. 2009 Share Award and Incentive Plan, as amended10.5Exhibit 10.3 to the Annual Report on Form 10-K for the year ended December 31, 2004 (the "2004 Form 10-K")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.10.6Exhibit 10.4 to the 2004 Form 10-KAmended 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.10.7Exhibit 10.2 to the Quarterly Report on Form 10-Q for the quarter ended September 30, 2015 (the "September 30, 2015 Form 10-Q)Employment Agreement between Belmond (UK) Limited and H. Roeland Vos dated September 20, 201510.8Exhibit 10.3 to the September 30, 2015 Form 10-QLetter Agreement between Belmond (UK) Ltd and H. Roeland Vos dated September 20, 201510.9Exhibit 10.11 to the 2012 Form 10-KForm of Severance Agreement between Belmond Ltd. and certain of its officers, as amended10.10Exhibit 10.12 to the 2012 Form 10-KForm of Indemnification Agreement between Belmond Ltd. and its non-executive directors and certain of its officers12Statement of computation of ratios *21Subsidiaries of Belmond Ltd. *23Consent of Deloitte LLP *23.1Consent of Pazos, López de Romaña, Rodriguez S.C.31Rule 13a-14(a)/15d-14(a) Certifications





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Exhibit No.Incorporated by Reference toDescription32Section 1350 Certification99.1Exhibit 99.1 to the Current Report on Form 8-K dated June 1, 2010Judgment of Bermuda Supreme Court dated June 1, 2010 in D.E. Shaw Oculus Portfolios LLC et al. vs. Orient-Express Hotels Ltd. et al.101Interactive data file *





* Previously filed as exhibits to the Annual Report on Form 10-K for the year ended December 31, 2016 .





The Company hereby agrees to furnish to the Securities and Exchange Commission at its request copies of long-term debt instruments defining the rights of holders of outstanding long-term debt that are not required to be filed herewith.








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