BEL Belmond Ltd. Class A

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

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

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PART IV

ITEM 15. Exhibits and Financial Statement Schedules

1. Financial Statements

(a) Perurail S.A.

	Page Number
Reports  of independent registered public accounting firm s	2
Financial statements – years ended December 31, 2018, 2017 and 2016:
Balance sheets (December 31, 2018 and 2017)	4
Statements of operations and comprehensive income	5
Statements of shareholders’ equity	6
Statements of cash flows	7
Notes to financial statements	8

(b) Ferrocarril Transandino S.A.

	Page Number
Report  of independent registered public accounting firm	23
Financial statements – years ended December 31, 2018 and 2017:
Balance sheets (December 31, 2018 and 2017)	24
Statements of operations and comprehensive income/(loss)	25
Statements of shareholders’ equity	26
Statements of cash flows	27
Notes to financial statements	28

Also presented are the unaudited statements of operations and comprehensive (loss)/income, cash flows and shareholders' equity for the year ended December 31, 2016 .

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

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PERURAIL S.A.

Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders

Perurail S.A.

Lima, Peru

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Perurail S.A. as of December 31, 2018 and 2017, and the related statements of operations and comprehensive income, of changes in shareholders’ equity and of cash flows for each of the two years in the period ended December 31, 2018, including the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of Perurail S.A. as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the U.S. Securities and Exchange Commission and the PCAOB.

We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Gaveglio, Aparicio y Asociados S. Civil de R. L.
Lima, Peru
April 24, 2019
Countersigned by:
/s/ Francisco Patiño
Francisco Patiño
Peruvian Certified Public Accountant
Register No. 01-25611

We have served as the Company’s auditor since 2017

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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 balance sheets of Perurail S.A. as of December 31, 2016 and the related accompanying statements of operations, cash flows and shareholders’ equity for the year 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 the results of its operations and its cash flows for the year ended December 31, 2016, in conformity with accounting principles generally accepted in the United States of America.

/s/ Pierrend, Gómez & Asociados S. Civil de R.L.
Lima, Perú
June 21, 2017, except for the statement of cash flows and notes 1(s) and 13 which are as of April 24, 2019, and notes 2 and 7 which are as of June 26, 2018.
Countersigned by:
/s/ Liliana Córdova Mejía
Liliana Córdova Mejía
Certified Chartered Public Accountant
Register No. 01-17661

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Perurail S.A.

Balance Sheets

		2018			2017
December 31,		$’000			$’000
Assets
Cash		21,371			25,551
Restricted cash		13,763			16,475
Accounts receivable, net of allowances of $1,767 and $1,791		8,631			10,947
Due from related parties		16,805			18,359
Prepaid expenses		2,806			644
Inventories		6,960			6,329
Total current assets		70,336			78,305
Property, plant and equipment, net of accumulated depreciation of $52,645 and $46,099		158,032			171,249
Intangible assets, net of accumulated amortization of $134 and $644		3,970			2,314
Total non-current assets		162,002			173,563
Total assets		232,338			251,868
Liabilities and Shareholders’ Equity
Accounts payable		3,744			11,045
Accrued liabilities		18,846			17,586
Due to related parties		2,146			4,098
Current portion of long-term debt and obligations under capital lease		18,692			23,618
Total current liabilities		43,428			56,347
Long-term debt and obligations under capital lease		118,064			129,785
Deferred income tax liability, net		2,323			3,302
Total long-term liabilities		120,387			133,087
Total liabilities		163,815			189,434
Commitments and contingencies (Note 11)
Shareholders’ equity:
Common shares S/1.00 par value (50,000,000 shares authorized):
Issued - 50,000,000 (2017 - 50,000,000)		16,934			16,934
Legal reserve		3,252			3,252
Retained earnings		48,337			42,248
Total shareholders’ equity		68,523			62,434
Total liabilities and shareholders’ equity		232,338			251,868

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Perurail S.A.

Statements of Operations and Comprehensive Income

		2018			2017			2016
Year ended December 31,		$’000			$’000			$’000
Revenue, net of discounts		163,911			157,080			146,571
Expenses:
Cost of services		(81,263	)		(75,331	)		(64,008	)
Selling, general and administrative		(31,929	)		(32,702	)		(27,438	)
Depreciation and amortization		(20,612	)		(21,721	)		(20,280	)
Total operating costs and expenses		(133,804	)		(129,754	)		(111,726	)
(Loss)/gain on insurance settlement		—			(217	)		277
Gain/(loss) on disposal of property, plant and equipment		106			174			(1,191	)
Earnings from operations		30,213			27,283			33,931
Interest expense, net		(8,881	)		(9,364	)		(9,565	)
Foreign currency, net		(69	)		(449	)		(273	)
Earnings before income tax		21,263			17,470			24,093
Provision for income taxes		(6,594	)		(5,372	)		(8,845	)
Net earnings and comprehensive income		14,669			12,098			15,248

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Perurail S.A.

Statements of Shareholders’ Equity

		Common shares at par value			Legal reserve			Retained earnings			Total shareholders' equity
		$’000			$’000			$’000			$’000
Balance at January 1, 2016		16,934			2,336			32,346			51,616
Dividends		—			—			(7,648	)		(7,648	)
Net earnings		—			—			15,248			15,248
Legal reserve		—			916			(916	)		—
Balance at December 31, 2016		16,934			3,252			39,030			59,216
Dividends		—			—			(8,880	)		(8,880	)
Net earnings		—			—			12,098			12,098
Balance at December 31, 2017		16,934			3,252			42,248			62,434
Dividends		—			—			(8,580	)		(8,580	)
Net earnings		—			—			14,669			14,669
Balance at December 31, 2018		16,934			3,252			48,337			68,523

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Perurail S.A.

Statements of Cash Flows

		2018			2017			2016
Year ended December 31,		$’000			$’000			$’000
Cash flows from operating activities:
Net earnings		14,669			12,098			15,248
Adjustment to reconcile net earnings to net cash provided by operating activities:
Depreciation		20,488			21,689			20,115
Amortization		124			32			165
Gain/(loss) on disposal of property, plant and equipment		(106	)		(174	)		1,191
Change in deferred tax		(979	)		(2,656	)		(413	)
Change in assets and liabilities:
Decrease/(increase) in accounts receivable		2,316			3,328			(5,617	)
(Increase)/decrease in prepaid expenses		(2,162	)		899			(544	)
(Increase)/decrease in inventories		(631	)		680			331
Decrease in due to related parties		(1,952	)		(1,597	)		(1,573	)
(Decrease)/increase in accounts payable		(6,730	)		647			(1,725	)
Increase in accrued liabilities		1,260			2,499			3,164
Total adjustments		11,628			25,347			15,094
Net cash provided by operating activities		26,297			37,445			30,342
Cash flows from investing activities:
Decrease/(increase) in due from related parties		1,554			3,349			(774	)
Proceeds from sale of property, plant and equipment		633			—			—
Capital expenditures		(5,014	)		(26,525	)		(106,882	)
Net cash used in investing activities		(2,827	)		(23,176	)		(107,656	)
Cash flows from financing activities:
Payment of dividends		(8,580	)		(8,880	)		(7,648	)
Payments on working capital facilities		—			(2,029	)		(9,726	)
Proceeds from working capital facilities		—			10,998			1,436
Principal payments under long-term debt		(21,154	)		(18,458	)		(41,614	)
Principal payments under capital lease		(3,741	)		(999	)		(873	)
Proceeds from long-term debt		3,113			3,432			158,034
Proceeds from capital lease		—			—			6,798
Net cash (used in)/provided by financing activities		(30,362	)		(15,936	)		106,407
Net (decrease) /increase in cash		(6,892	)		(1,667	)		29,093
Cash and restricted cash at beginning of year		42,026			43,693			14,600
Cash and restricted cash at end of year		35,134			42,026			43,693

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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., which is incorporated in Bermuda, and 50% owned by Peruvian Trains & Railways S.A., which is incorporated in Peru.

Its headquarters and registered address are located at Av. Armendariz 480 office 402, 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 contract with Ferrocarril Transandino S.A. ("Ferrocarril Transandino") 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. 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)      Restricted cash

Restricted cash is the carrying amount of cash and cash equivalents which are restricted under contract or otherwise as to withdrawal or usage. These include deposits held as compensating balances against borrowing arrangements or under agreements entered into with others, but exclude compensating balance arrangements that do not legally restrict the use of cash amounts shown on the balance sheet.

(g)      Accounts receivable and allowance for doubtful accounts

The Company states its accounts receivable at their outstanding fair value adjusted for any write off and allowance for doubtful accounts. The Company maintains an allowance for doubtful accounts for specifically identified estimated losses resulting from the inability of its customers to make required payments.

(h)      Inventories

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

(i)      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. 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 a 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, 2018 and 2017 the Company did not record any liabilities for uncertain tax positions.

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(j)      Property, plant and equipment

Property, plant and equipment is stated at cost less accumulated depreciation. The cost of significant renewals and improvements 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:

Description		Useful lives
Installations		Up to 32 years
Machinery and equipment		Up to 22 years
Transport units		Up to 15 years
Improvements to locomotive and rolling stock assets under lease		Up to 30 years
Owned locomotives and rolling stock		Up to 30 years
Furniture and fixtures		Up to 10 years

(k)      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
Copyrights and trademarks		30 years
Software and licenses		4 years

(l)      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.

There were no impairments of long-lived assets in the years ended December 31, 2018, 2017 and 2016.

(m)      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.

(n)      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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(o)      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; and

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.

(p)      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.

(q)      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.

Credit risk with respect to trade accounts receivables is limited due to the number of companies comprising the Company’s customer base. Although the Company is directly affected by the financial condition of its customers, management does not believe significant credit risks exist at December 31, 2018. Minera Las Bambas S.A. is a major customer to the Company, and in the year ended December 31, 2018 represented 24% (2017 - 25%; 2016 - 20%) of total revenue. The Company’s second largest customer is Sociedad Minera Cerro Verde, and in the year ended December 31, 2018 represented 13% (2017 - 14%; 2016 - 15%) of total revenue.

See Note 10.

Interest rate risk

The Company´s exposure to this risk arises from changes in the interest rates in its financial assets and liabilities. All of the Company's long-term debt is subject to a fixed interest rate with a weighted average interest rate of 5.42% in 2018 (2017 - 5.4%; 2016 - 5.1%).

Exchange rate risk

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

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(r)      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.

(s)    Accounting pronouncements adopted during the year

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 Company adopted ASU 2016-18 on a modified retrospective basis as of January 1, 2018. The adoption of this standard did not have an impact on the current period or prior period financial statements.

In November 2016, FASB issued ASU No. 2016-18 (“ASU 2016-18”), “Statement of Cash Flows (Topic 230): Restricted Cash.” ASU 2016-18 requires entities to present the aggregate changes in cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. In addition, when cash, cash equivalents, restricted cash and restricted cash equivalents are presented in more than one line item on the balance sheet, ASU 2016-18 requires a reconciliation of the totals in the statement of cash flows to the related captions on the balance sheet. The Company adopted ASU 2016-18 retrospectively as of January 1, 2018. The adoption of this standard did not have a material impact on the current period or prior period financial statements.

(t)    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. In March 2016, the FASB issued additional guidance which amends the principal-versus-agent implementation guidance and illustrations in the original accounting pronouncement. In May 2016, the FASB issued an update that clarified guidance in certain narrow aspects of the topic. 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 annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2017. Early adoption was permitted as of the original effective date in ASU 2014-09 (i.e., annual reporting periods beginning after December 15, 2016, including interim reporting periods within the annual periods). In July 2017, the SEC announced that certain public business entities, for which PeruRail meets the definition, were able to defer the adoption of the new standard for one year. The Company intends to adopt the standard in the annual period beginning January 1, 2019 under the modified retrospective approach with a cumulative effect recognized in equity and no prior period restatement.

The analysis of the standard for the Company resulted that adopting this standard will not have a material impact to our financial statements and related disclosures. Under ASU 2014-09, a performance obligation is satisfied, and the related revenue recognized when control of the underlying goods or services related to the performance obligation is transferred to the customer. The Company's performance obligations associated with (i) the operation of passenger transport by rail, and (ii) freight transport by rail are satisfied over time. This is because each rail-user simultaneously receives and consumes the benefits provided by the Company as the transportation services are performed and therefore the Company recognizes revenue over time. Since there would not be a net income impact upon adoption of the new guidance, a cumulative effect adjustment to opening retained earnings would not be necessary.

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. Under the new standard, a lessee will recognize on its balance sheet a right-of-use asset and lease liability for most leases, including operating leases. The new standard will also distinguish leases as either finance leases or operating leases.

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In January 2018, the FASB issued an update that clarified the application of the new leases standard to land easements. Additionally, in July 2018, the FASB issued two updates to make targeted improvements to the new lease standard. The first update makes 16 separate narrow-scope amendments to the new leasing standard. The second update provides entities with relief from the costs of implementing certain aspects of the new leasing standard and with an additional (and optional) transition method on adoption. It also allows lessors to not separate non-lease components from the associated lease component if certain conditions are met. An entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. In December 2018, the FASB issued an update which clarified the accounting by lessors when applying the new leases standard. The update addressed the following issues lessors encounter: 1) sales taxes and other similar taxes collected from lessees 2) certain lessor costs paid directly by lessees, and 3) recognition of variable payments for contracts with lease and non lease components. In July 2017, the SEC announced that certain public business entities, for which PeruRail meets the definition, were able to defer the adoption of the new standard for one year. The Company intends to adopt the standard in the annual period beginning January 1, 2020, as permitted by the SEC, using the transition method that permits the recognition of a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company is currently evaluating the impact of the adoption of this guidance in its financial statements.

In June 2016, the FASB issued ASU No. 2016-13 (“ASU 2016-13”), “Financial Instruments - Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments”. ASU 2016-13 revises the measurement of credit losses for financial assets measured at amortized cost from an incurred loss methodology to an expected loss methodology. ASU 2016-13 affects trade receivables, debt securities, net investment in leases, and most other financial assets that represent a right to receive cash. Additional disclosures about significant estimates and credit quality are also required. In November 2018, the FASB issued ASU No. 2018-19, “Codification Improvements to Topic 326, Financial Instruments - Credit Losses”. This ASU clarifies that receivables from operating leases are accounted for using the lease guidance and not as financial instruments. The effective date of ASU No. 2016-13 is the first quarter of fiscal year 2021, with early adoption permitted beginning in fiscal year 2020. The Company is evaluating the potential effects on the financial statements.  

In February 2017, the FASB issued new guidance to clarify the scope of the FASB's guidance on nonfinancial asset derecognition (ASU 610-20), as well as the accounting for partial sales of nonfinancial assets. The guidance is effective on the same date the new revenue guidance is adopted, with early adoption permitted. The Company intends to adopt the standard in the annual period beginning January 1, 2019 and does not expect the adoption of this guidance to have a material effect on its financial statements.

In July 2018, the FASB issued amendments to a variety of topics to clarify, correct errors in, or make minor improvements to the Accounting Standards Codification. Some of the amendments were effective upon issuance and others have transition guidance with effective dates for annual periods beginning after December 15, 2018. The Company is currently evaluating the potential impact of those amendments that are not yet effective but it does not expect they will have a material impact on its financial statements.  

In August 2018, the FASB issued two new standards to improve the effectiveness of disclosures in notes to the financial statements. The first standard removes, modifies and adds certain disclosure requirements related to fair value measurements in ASC 820 and is effective for fiscal years beginning after December 15, 2019, including interim periods therein, with early adoption permitted. The Company intends to adopt the standard in the annual period beginning January 1, 2020. The second standard modifies ASC 715-20 to improve disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans and is effective for fiscal years beginning after December 15, 2020, including interim periods therein, with early adoption permitted. The Company intends to adopt the standard in the annual period beginning January 1, 2021. The Company is currently assessing what impact the adoption of this guidance will have on its financial statements.

13

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2.    Property, plant and equipment

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

		2018			2017
December 31,		$’000			$’000
Land		1,353			1,353
Installations		41,403			38,761
Machinery and equipment		35,310			30,961
Transport units		5,257			18,670
Improvements to locomotive and rolling stock assets under lease		47,787			44,457
Owned locomotives and rolling stock		78,305			66,000
Furniture and fixtures		437			295
Works in progress		825			16,851
		210,677			217,348
Less: Accumulated depreciation		(52,645	)		(46,099	)
Total property, plant and equipment, net of accumulated depreciation		158,032			171,249

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

		2018			2017
December 31,		$’000			$’000
Locomotives and rolling stock		32,604			26,689
Less: Accumulated depreciation		(5,524	)		(5,944	)
Total property, plant and equipment under capital leases, net of accumulated depreciation		27,080			20,745

The depreciation charge on property, plant and equipment for the year ended December 31, 2018 was $20,488,000 ( 2017 - $21,689,000 ; 2016 - $20,115,000 ).

In 2018, the Company acquired assets in the amount of $8,363,000 (2017 - $16,362,000; 2016 - $73,593,000) to provide transportation services to Minera Las Bambas S.A., which include transporting copper concentrate from the Company's transfer station to the delivery port under a contract between the parties signed in June 2015. The assets acquired during 2018 related to railway sidings built at the Islay transfer station, while in 2017 the assets acquired were related to a new transfer station which was built to facilitate the transfer of loaded containers from trucks to the trains.

No property, plant and equipment impairments were recorded in the years ended December 31, 2018 , 2017 and 2016 .

14

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3.    Intangible assets

Intangible assets consist of the following as of December 31, 2018 and 2017 :

		Logo and trademarks			Software and licenses			Total
		$’000			$’000			$’000
Carrying amount:
Balance at January 1, 2017		122			940			1,062
Additions		—			1,896			1,896
Balance at December 31, 2017		122			2,836			2,958
Additions		—			1,469			1,469
Disposals		(122	)		(523	)		(645	)
Transfers		—			322			322
Balance at December 31, 2018		—			4,104			4,104
Accumulated amortization:
Balance at January 1, 2017		122			490			612
Charge for the period		—			32			32
Balance at December 31, 2017		122			522			644
Charge for the period		—			124			124
Disposals		(122	)		(512	)		(634	)
Balance at December 31, 2018		—			134			134
Net book value:
December 31, 2016		—			450			450
December 31, 2017		—			2,314			2,314
December 31, 2018		—			3,970			3,970

Amortization expense for the year ended December 31, 2018 was $124,000 ( 2017 - $32,000 ; 2016 - $165,000 ).

Estimated amortization expense for each of the years ended December 31, 2019 to 2023 is $351,000. The estimated amount includes the amortization of a passenger sales and reservation system that is in the development phase (Accumulated cost of $3,595,000 at December 2018) and it is expected to be completed in 2020.

4.      Working capital facilities

In 2017, the working capital facilities were paid in full.

At December 31, 2018, the Company had approved lines of credit of approximately $20,000,000 ( 2017 - $19,550,000), which can be used as working capital. This includes guarantee letters issued by various financial institutions with various expiration dates, of which $18,190,000 was undrawn as at December 31, 2018 (2017 - $ 17,790,000). The remaining amount of $1,810,000 as at December 31, 2018 (2017 - $1,760,000) relates to non-executed guarantee letters issued to cover operational needs.

15

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5.      Accrued liabilities

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

		2018			2017
December 31,		$’000			$’000
Deferred revenue		7,905			7,841
Remuneration and profit sharing payable		4,826			3,998
Provision for purchases and services		1,477			1,921
Advance payments received from passengers		1,734			1,204
Vacation payable		735			748
Employees’ length of service compensation		205			175
Other tax payable		285			284
Other accounts payable		1,679			1,415
		18,846			17,586

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

(a)      Long-term debt

Long-term debt consists of the following:

		2018			2017
December 31,		$’000			$’000
Loans from banks collateralized by property, plant and equipment payable over a period of 6 to 10 years (2017 - 6 to 10 years), with a weighted average interest rate of 5.56% (2017 - 5.4%)		117,525			135,589
Obligations under capital leases (see Note 6(b))		21,677			20,620
Total long-term debt and obligations under capital leases		139,202			156,209
Less: Current portion		18,692			23,618
Less: Debt issuance costs		2,446			2,806
Non-current portion of long-term debt and obligations under capital leases		118,064			129,785

The Company is in compliance with all financial covenants in its long-term debt obligations at December 31, 2018 and 2017 .

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 $57,000,000 (excluding VAT), and the carrying value of the assets as of December 31, 2018 , is $69,667,000. The Lenders have no recourse to any other assets of Perurail.

During 2016, the Company entered into a non-recourse loan agreement with Banco de Crédito del Perú S.A., Scotiabank del Perú S.A.A., Banco Internacional del Perú S.A.A. and Banco Sabadell for a total of $126,956,000. This loan was obtained to fund the freight services the Company provides to the Las Bambas mining project. The loan has three tranches, and the drawdowns occurred between February and May 2016. The loan is payable in quarterly installments with a maturity date in February 2026 and each tranche bears interest at annual effective interest rates of 3.10%, 5.20% and 5.85%.

16

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During 2016, the Company entered into a second non-recourse loan agreement with Banco de Crédito del Perú S.A. and Scotiabank del Perú S.A.A. for a total of $ 34,100,466. This loan was obtained to fund the freight services the Company provides to the Cerro Verde mining project. The loan was fully drawdown in June 2016. The loan is payable in monthly installments with a maturity date in September 2023 and bears interest at an annual effective interest rate of 6.23% per annum. 

The balance of debt issuance costs related to the above outstanding long-term debt of the Company was $2,446,000 at December 31, 2018 ( 2017 - $2,806,000 ) and is amortized to interest expense over the term of the corresponding long-term debt.

Perurail guarantees the long-term debt obligations of Ferrocarril Transandino 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 the $1,000,000. Ferrocarril Transandino had no long-term debt outstanding as of December 31, 2018 and 2017. See Note 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, 2018 :

Year ending December 31,		$’000
2019		14,041
2020		14,038
2021		14,845
2022		15,690
2023 and thereafter		58,911
Total long-term debt excluding obligations under capital leases		117,525

(b)      Obligations under capital leases

At December 31, 2018, the Company had five leasing contracts. The amounts of the obligations under capital leases are $3,311,000, $3,669,000, $3,318,000, $6,810,000 and $4,569,000, with two capital leases (amounting to $7,887,000 at December 31, 2017) entered into during 2018. With this addition during the year, the total amount of the obligations under capital leases as at December 31, 2018 is $21,677,000.

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, 2018 :

Year ending December 31,		$’000
2019		5,718
2020		5,869
2021		6,030
2022		4,833
2023 and thereafter		—
		22,450
Minimum lease payments
Less: amount of interest contained in above payments		(773	)
Present value of minimum lease payments		21,677
Less: current portion		(5,320	)
		16,357

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

17

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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 a 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, 2018 and 2017 are as follows:

December 31, 2018

December 31, 2017

Carrying amount

Fair value

Carrying amount

Fair value

$’000

$’000

$’000

$’000

Long-term debt, including current portion, before deduction of debt issuance costs, excluding obligations under capital leases

117,525

115,799

135,589

134,059

(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, 2018 , 2017 and 2016 .

7.      Income taxes

The provision for income taxes consists of the following:

		2018			2017			2016
Year ended December 31,		$’000			$’000			$’000
Earnings before income tax		21,263			17,470			24,093
Current income tax charge		(7,573	)		(8,028	)		(9,257	)
Deferred income tax credit		979			2,656			412
Total		(6,594	)		(5,372	)		(8,845	)

The reconciliations of the Peruvian income tax rate to the Company’s effective income tax rate for the three years ended December 31, 2018 , 2017 and 2016 are as follows:

		2018			2017			2016
Year ended December 31,		%			%			%
Peruvian income tax rate		29.5			29.5			28
Permanent differences		1.4			4.0			9
Change of rate		—			—			2
Other		0.1			(2.8	)		(2	)
Effective tax rate		31			30.7			37

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:

18

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		2018			2017			2016
December 31,		$’000			$’000			$’000
Provisions included in books		158			133			228
Other deferred income tax assets		467			1,326			779
Deferred income tax assets		625			1,459			1,007
Fixed assets and intangibles		(2,788	)		(3,879	)		(8,516	)
Exchange rate related to fixed assets		(282	)		(61	)		1,731
Other deferred tax liabilities		122			(821	)		(180	)
Deferred income tax liabilities		(2,948	)		(4,761	)		(6,965	)
Net deferred income tax liabilities		(2,323	)		(3,302	)		(5,958	)

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, 2017 continued to be taxed at 6.8% income tax rate regardless of whether the distribution was agreed or occurs in subsequent periods.

8.      Shareholders’ equity

(a)      Share capital and additional-paid in capital

The shareholders of the Company are as follows:

		Number of    shares			Percentage    ownership
Belmond Ltd.		25,000,000			50
Peruvian Trains & Railways S.A.		25,000,000			50
		50,000,000			100

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		2018			2017			2016
Year ended December 31,		$’000			$’000			$’000
Passenger transport		95,538			87,648			86,004
Freight and cargo transport		65,818			66,787			57,108
Other		2,555			2,645			3,459
Revenue		163,911			157,080			146,571

Year ending December 31,		$’000
2019		2,092
2020		2,172
2021		2,198
2022		2,235
2023		2,270
		10,967

		2018			2017			2016
Year ended December 31,		$’000			$’000			$’000
Cash paid during the period for:
Interest		7,116			6,026			6,116
Income taxes		8,599			9,721			5,522

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		2018			2017			2016
December 31,		$’000			$’000			$’000
Cash		21,371			25,551			30,918
Trust for freight mining projects		13,763			16,475			12,775
Total cash and restricted cash		35,134			42,026			43,693

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Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders

Ferrocarril Transandino S.A.

Lima, Peru

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Ferrocarril Transandino S.A. as of December 31, 2018 and 2017, and the related statements of operations and comprehensive income/(loss), of changes in shareholders’ equity and of cash flows for each of the two years in the period ended December 31, 2018, including the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of Ferrocarril Transandino S.A. as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.

The accompanying statements of operations and comprehensive income/(loss), of changes in shareholders’ equity and cash flows of Ferrocarril Transandino S.A. for the year ended December 31, 2016 are presented for purposes of complying with Rule 3-09 of SEC Regulation S-X; however, Rule 3-09 does not require the 2016 financial statements to be audited and they are therefore not covered by this report.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the U.S. Securities and Exchange Commission and the PCAOB.

We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Gaveglio, Aparicio y Asociados S. Civil de R. L.
Lima, Peru
April 24, 2019
Countersigned by:
/s/ Francisco Patiño
Francisco Patiño
Peruvian Certified Public Accountant
Register No. 01-25611

We have served as the Company’s auditor since 2017

23

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Ferrocarril Transandino S.A.

Balance Sheets

		2018			2017
December 31,		$’000			$’000
Assets
Cash		821			997
Restricted cash		11,629			9,921
Accounts receivable, net of allowances of $Nil and $Nil		841			772
Due from related parties		407			279
Inventories		5,953			4,474
Prepaid expenses and other		159			2,706
Total current assets		19,810			19,149
Property, plant and equipment, net of accumulated depreciation of $360 and $1,224		857			443
Deferred costs, net of accumulated amortization of $21,974 and $27,134 and impairment loss of $58,331		32,586			27,604
Intangible assets, net of accumulated amortization of $422 and $835		4			92
Deferred income tax asset, net		2,756			4,354
Total non-current assets		36,203			32,493
Total assets		56,013			51,642
Liabilities and Shareholders’ Equity
Accounts payable		1,106			1,658
Accrued liabilities		19,528			20,025
Due to related parties		16,855			18,444
Total current liabilities		37,489			40,127
Deferred revenue		7,101			7,544
Total long-term liabilities		7,101			7,544
Total liabilities		44,590			47,671
Commitments and contingencies (Note 10)
Shareholders’ equity:
Common shares S/1.00 par value (25,000,000 shares authorized):
Issued - 25,000,000 (2017 - 25,000,000)		7,857			7,857
Legal reserve		546			546
Retained earnings/(deficit)		3,020			(4,432	)
Total shareholders’ equity		11,423			3,971
Total liabilities and shareholders’ equity		56,013			51,642

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Ferrocarril Transandino S.A.

Statements of Operations and Comprehensive Income/(Loss)

		2018			2017			2016
Year ended December 31,		$’000			$’000			$’000
								(unaudited)
Revenue, net of discounts		34,513			31,064			26,125
Expenses:
Cost of services		(16,290	)		(13,174	)		(11,271	)
Selling, general and administrative		(4,588	)		(6,281	)		(4,010	)
Depreciation and amortization		(2,233	)		(3,738	)		(4,798	)
Impairment of assets		—			(58,531	)		—
Total operating costs and expenses		(23,111	)		(81,724	)		(20,079	)
Earnings/(losses) from operations		11,402			(50,660	)		6,046
Interest expense, net		(310	)		(204	)		(361	)
Foreign currency, net		117			(100	)		(78	)
Earnings/(losses) before income tax		11,209			(50,964	)		5,607
(Provision for)/benefit from income taxes		(3,757	)		13,437			(1,014	)
Net earnings/(losses) and comprehensive income/(losses)		7,452			(37,527	)		4,593

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Ferrocarril Transandino S.A.

Statements of Shareholders’ Equity

		Common shares at par value			Legal reserve			Retained earnings/(deficit)			Total shareholders' equity
		$’000			$’000			$’000			$’000
Balance at January 1, 2016 (unaudited)		7,857			546			28,502			36,905
Net earnings (unaudited)		—			—			4,593			4,593
Balance at December 31, 2016 (unaudited)		7,857			546			33,095			41,498
Net losses		—			—			(37,527	)		(37,527	)
Balance at December 31, 2017		7,857			546			(4,432	)		3,971
Net earnings		—			—			7,452			7,452
Balance at December 31, 2018		7,857			546			3,020			11,423

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Ferrocarril Transandino S.A.

Statements of Cash Flows

		2018			2017			2016
Year ended December 31,		$’000			$’000			$’000
								(unaudited)
Cash flows from operating activities:
Net earnings/(losses)		7,452			(37,527	)		4,593
Adjustment to reconcile net earnings/(losses) to net cash provided by operating activities:
Depreciation		115			34			23
Amortization		2,118			3,704			4,775
Impairment of assets		—			58,531			—
Change in deferred tax		1,598			(16,835	)		(1,474	)
Change in assets and liabilities:
(Increase)/decrease in accounts receivable		(69	)		562			(1,104	)
Decrease in prepaid expenses and other		2,547			926			2,039
(Increase)/decrease in inventories		(1,479	)		(664	)		49
(Decrease)/increase in accounts payable		(552	)		403			(1,927	)
(Decrease)/increase in due from related parties		(128	)		17			(78	)
(Decrease)/increase in accrued liabilities		(496	)		6,481			8,237
Decrease in deferred revenue		(443	)		(442	)		(2,248	)
Total adjustments		3,211			52,717			8,292
Net cash provided by operating activities		10,663			15,190			12,885
Cash flows from investing activities:
Capital expenditures		(7,542	)		(6,984	)		(6,603	)
Net cash used in investing activities		(7,542	)		(6,984	)		(6,603	)
Cash flows from financing activities:
Payments on working capital facilities		—			(2,125	)		(6,496	)
(Decrease)/increase in due from related parties		(1,589	)		(3,361	)		747
Net cash used in financing activities		(1,589	)		(5,486	)		(5,749	)
Net increase in cash and restricted cash		1,532			2,720			533
Cash and restricted cash at beginning of year		10,918			8,198			7,665
Cash and restricted cash at end of year		12,450			10,918			8,198

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Description		Useful lives
Installations		10 to 35 years
Machinery and equipment		Up to 10 years
Transport units		Up to 10 years
Owned locomotives and rolling stock		Up to 10 years
Furniture and fixtures and computer equipment		Up to 5 years

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-	Main consideration, which is to be paid annually, amounting to 37.25% of gross revenues (as defined in the Concession Contract), excluding any revenues from the lease of locomotives and rolling stock.

-	Special consideration, which is to be paid monthly, amounting to 50% of the revenues obtained from the lease of locomotives and rolling stock.

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		2018			2017
December 31,		$’000			$’000
Installations		275			—
Machinery and equipment		939			879
Transport units		—			717
Furniture and fixtures		3			71
		1,217			1,667
Less: Accumulated depreciation		(360	)		(1,224	)
Total property, plant and equipment, net of accumulated depreciation		857			443

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	Carrying amount			Accumulated amortization			Net book value
	$’000			$’000			$’000
Balance at January 1, 2017 (unaudited)	106,011			(23,447	)		82,564
Additions	7,258			(3,687	)		3,571
Impairment	(58,531	)		—			(58,531	)
Balance at December 31, 2017	54,738			(27,134	)		27,604
Additions	6,876			(2,111	)		4,765
Disposals	(7,579	)		7,579			—
Reclassifications	525			(308	)		217
Balance at December 31, 2018	54,560			(21,974	)		32,586

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		Concessions			Software and licenses			Total
		$’000			$’000			$’000
Carrying amount:
Balance at January 1, 2017 (unaudited)		228			699			927
Additions		—			—			—
Balance at December 31, 2017		228			699			927
Disposals		—			(289	)		(289	)
Reclassifications		(228	)		16			(212	)
Balance at December 31, 2018		—			426			426
Accumulated amortization:
Balance at January 1, 2017 (unaudited)		131			687			818
Charge for the period		8			9			17
Balance at December 31, 2017		139			696			835
Charge for the period		—			7			7
Disposals		—			(289	)		(289	)
Reclassifications		(139	)		8			(131	)
Balance at December 31, 2018		—			422			422
Net book value:
December 31, 2017		89			3			92
December 31, 2018		—			4			4

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		2018			2017
December 31,		$’000			$’000
Concession fee to the State (see Note 1(p))		9,983			9,018
Accrual for tax contingencies		3,845			3,497
Current tax payable		2,842			1,968
Remuneration and profit sharing payable		700			732
Other tax payable		606			101
Provision for purchases and services		517			731
Deferred revenue		443			2,955
Vacation payable		96			110
Employees’ length of service compensation		28			24
Other accounts payable		468			889
		19,528			20,025

		2018			2017			2016
Year ended December 31,		$’000			$’000			$’000
								(unaudited)
(Losses)/earnings before income tax		11,209			(50,964	)		5,607
Current income tax charge		(2,159	)		(3,398	)		(2,488	)
Deferred income tax credit/(charge)		(1,598	)		16,835			1,474
Total		(3,757	)		13,437			(1,014	)

		2018			2017			2016
Year ended December 31,		%			%			%
								(unaudited)
Peruvian income tax rate		29.5			29.5			28
Permanent differences		1.1			—			6
Change of rate		—			—			(2	)
Other		2.9			(3.5	)		(14	)
Effective tax rate		33.5			26.0			18

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		2018			2017			2016
Year ended December 31,		$’000			$’000			$’000
								(unaudited)
Provisions included in books		(130	)		106			36
Other deferred income tax assets		(97	)		—			858
Deferred income tax assets		(227	)		106			894
Fixed assets and intangibles		(3,183	)		(4,538	)		11,524
Other deferred tax liabilities		654			78			63
Deferred income tax liabilities		(2,529	)		(4,460	)		11,587
Net deferred income tax (assets)/liabilities		(2,756	)		(4,354	)		12,481

		Number of    shares			Percentage    ownership
Belmond Ltd.		12,500,000			50
Peruval Corp S.A.		12,500,000			50
		25,000,000			100

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		2018			2017			2016
Year ended December 31,		$’000			$’000			$’000
								(unaudited)
Cash paid during the period for:
Interest		—			—			192
Income taxes		1,156			140			165

		2018			2017
December 31,		$’000			$’000
Cash		821			997
Guarantee for concession fees		11,629			9,921
Total cash and restricted cash		12,450			10,918

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EXHIBIT INDEX

Exhibit No.		Incorporated by Reference to		Description
2.1		Exhibit 2.1 to the Current Report on Form 8-K filed December 14, 2018		Agreement and Plan of Merger dated December 13, 2018 among Belmond Ltd., LVMH Moët Hennessy-Louis Vuitton SE, Palladio Overseas Holding Limited and Fenice Ltd.
3.1		Exhibit 3.1 to the Current Report on Form 8-K filed July 2, 2014		Memorandum of Association and Certificate of Incorporation of Belmond Ltd.
3.2		Exhibit 3.2 to the Current Report on Form 8-K filed June 21, 2007		Bye-Laws of Belmond Ltd.
3.3		Exhibit 1 to Amendment No. 1 to the Registration Statement on Form 8-A filed April 23, 2007		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 the Current Report on Form 8-K filed December 10, 2007		Amendment No. 1 dated December 10, 2007 to Amended and Restated Rights Agreement
3.5		Exhibit 4.3 to the Current Report on Form 8-K filed May 27, 2010		Amendment No. 2 dated May 27, 2010 to Amended and Restated Rights Agreement
3.6		Exhibit 4.1 to the Current Report on Form 8-K filed December 14, 2018		Amendment No. 3 dated December 13, 2018 to Amended and Restated Rights Agreement
4.1		Exhibit 10.1 to the Current Report on Form 8-K filed March 27, 2014		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 the Current Report on Form 8-K filed June 8, 2015		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
4.3		Exhibit 10.1 to the Current Report on Form 8-K dated July 6, 2017		Amended and Restated Credit Agreement dated July 3, 2017, among Belmond Ltd., Belmond Interfin Ltd., Barclays Bank PLC, Credit Agricole Corporate and Investment Bank, HSBC Bank USA, National Association, Fifth Third Bank and JP Morgan Chase Bank, N.A.
10.1		Exhibit 10.2 to the Annual Report on Form 10-K for the year ended December 31, 2012 (the "2012 Form 10-K")		Orient-Express Hotels Ltd. 2004 Stock Option Plan, as amended
10.2		Exhibit 10.3 to the Annual Report on Form 10-K for the year ended December 31, 2008		Orient-Express Hotels Ltd. 2007 Performance Share Plan, as amended
10.3		Exhibit 10.4 to the Annual Report on Form 10-K for the year ended December 31, 2009		Orient-Express Hotels Ltd. 2007 Stock Appreciation Rights Plan, as amended
10.4		Exhibit 10.5 to the 2012 Form 10-K		Orient-Express Hotels Ltd. 2009 Share Award and Incentive Plan, as amended
10.5		Exhibit 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.
10.6		Exhibit 10.4 to the 2004 Form 10-K		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.
10.7		Exhibit 10.1 to the Current Report on Form 8-K filed July 10, 2018		Transaction Agreement dated July 6, 2018 between Belmond Ltd. and James B. Sherwood
10.8		Exhibit 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, 2015
10.9		Exhibit 10.3 to the September 30, 2015 Form 10-Q		Letter Agreement between Belmond (UK) Ltd and H. Roeland Vos dated September 20, 2015
10.10				Restated and Amended Employment Agreement between Belmond (UK) Limited and H. Roeland Vos dated October 11, 2018  *
10.11		Exhibit 10.11 to the 2012 Form 10-K		Form of Severance Agreement between Belmond Ltd. and certain of its officers, as amended

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Exhibit No.		Incorporated by Reference to		Description
10.12				Amendment to Severance Agreement between Belmond Ltd. and H. Roeland Vos dated October 11, 2018  *
10.13				Form of Amended Severance Agreement between Belmond Ltd. and certain of its officers, as amended October 2018  *
10.14		Exhibit 10.12 to the 2012 Form 10-K		Form of Indemnification Agreement between Belmond Ltd. and its non-executive directors and certain of its officers
10.15		Exhibit 10.1 to the Current Report on Form 8-K filed December 14, 2018		Support Agreement dated December 13, 2018 between LVMH Moët Hennessy - Louis Vuitton SE and Belmond Holdings 1 Ltd.
21				Subsidiaries of Belmond Ltd.  *
23				Consent of Deloitte LLP  *
23.1				Consent of Pierrend, Gómez & Asociados S. Civil de R.L.
23.2				Consent of Gaveglio, Aparicio y Asociados S. Civil de R. L.
23.3				Consent of Gaveglio, Aparicio y Asociados S. Civil de R. L.
31				Rule 13a-14(a)/15d-14(a) Certifications
32				Section 1350 Certification
99.1		Exhibit 99.1 to the Current Report on Form 8-K dated June 1, 2010		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 as exhibits to the Annual Report on Form 10-K for the year ended December 31, 2018 .

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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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:   April 24, 2019

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

43