Pensions

From January 1, 2003, a number of non-U.S. OEH employees participated in a funded defined benefit pension plan in the United Kingdom called Orient-Express Services 2003 Pension Scheme. On May 31, 2006, the plan was closed for future benefit accruals.

The significant weighted-average assumptions used to determine net periodic costs of the plan during the year were as follows:



	2012		2011		2010
Year ended December 31,	%		%		%
Discount rate	4.70	%	5.40	%	5.80	%
Expected long-term rate of return on plan assets	5.30	%	6.40	%	6.60	%

The significant weighted-average assumptions used to determine benefit obligations of the plan at year end were as follows:

The discount rate effectively represents the average rate of return on high quality corporate bonds at the end of the year in the country in which the assets are held.

The expected rate of return on the pension fund assets, net of expenses has been determined by considering the actual asset classes held by the plan at December 31, 2012 and the yields available on U.K. government bonds at that date.

For equities and corporate bonds, management has assumed that long-term returns will exceed those expected on U.K. government bonds by a risk premium. This is based on historical equity and bond returns over the long term. As these returns are long-term expected returns, the total returns on equities and corporate bonds only vary in line with the U.K. government bond yields and are not further adjusted for current market trends.

The expected returns on annuities are set equal to the end of year discount rate as the value of annuities is tied to that rate. The fair value of OEH’s pension plan assets at December 31, 2012 and 2011 by asset category is as follows:



	Total	Quoted prices in active markets for identical assets (Level 1)	Significant observable inputs (Level 2)	Significant unobservable inputs (Level 3)
December 31, 2012	$’000	$’000	$’000	$’000

Cash	87	87	—	—
Equity securities:
U.K. managed funds	5,232	5,232	—	—
Overseas managed funds	4,869	4,869	—	—
Fixed income securities:
U.K. government bonds	1,651	1,651	—	—
Corporate bonds	4,233	4,233	—	—
Other types of investments:
Hedge funds	1,534	—	1,534	—
Annuities	2,046	—	—	2,046

	19,652	16,072	1,534	2,046



	Total	Quoted prices in active markets for identical assets (Level 1)	Significant observable inputs (Level 2)	Significant unobservable inputs (Level 3)
December 31, 2011	$’000	$’000	$’000	$’000

Cash	90	90	—	—
Equity securities:
U.K. managed funds	4,324	4,324	—	—
Overseas managed funds	4,072	4,072	—	—
Fixed income securities:
U.K. government bonds	1,618	1,618	—	—
Corporate bonds	2,144	2,144	—	—
Other types of investments:
Hedge funds	1,428	—	1,428	—
Annuities	1,871	—	—	1,871

	15,547	12,248	1,428	1,871

Fair value measurements using significant unobservable inputs (Level 3) at December 31, 2012 and 2011 are as follows:



	Annuities		Total
December 31, 2012	$’000		$’000

Beginning balance at January 1, 2012	1,871		1,871
Actual return on assets:
Assets still held at the reporting date	158		158
Purchases, sales and settlements	(75	)	(75	)
Gain/ (loss) recorded in earnings	—		—
Gain/ (loss) recorded in other comprehensive income	—		—
Foreign exchange	92		92

Ending balance at December 31, 2012	2,046		2,046



	Annuities		Total
December 31, 2011	$’000		$’000

Beginning balance at January 1, 2011	1,669		1,669
Actual return on assets:
Assets still held at the reporting date	286		286
Purchases, sales and settlements	(67	)	(67	)
Gain/ (loss) recorded in earnings	—		—
Gain/ (loss) recorded in other comprehensive income	—		—
Foreign exchange	(17	)	(17	)

Ending balance at December 31, 2011	1,871		1,871

The allocation of the assets was in compliance with the target allocation set out in the plan investment policy, the principal objectives of which are to deliver returns above those of government and corporate bonds and to minimize the cost of providing pension benefits. OEH is currently purchasing annuities to match the benefits of pensioners. OEH is allocating a majority of the plan’s assets to equities as they have historically outperformed bonds over the long term. OEH will allocate plan assets to bonds and cash to help reduce the volatility of the portfolio and reflect the age profile of the membership.

The changes in the benefit obligation, the plan assets and the funded status for the plan were as follows:



	2012		2011		2010
Year ended December 31,	$’000		$’000		$’000

Change in benefit obligation:
Benefit obligation at beginning of year	24,189		20,074		19,235
Service cost	—		—		—
Interest cost	1,154		1,062		1,067
Plan participants’ contributions	—		—		—
Net transfer in	—		—		—
Actuarial loss	1,869		4,259		471
Benefits paid	(560	)	(839	)	(246	)
Curtailment gain	—		—		—
Settlement	—		—		—
Foreign currency translation	1,275		(367	)	(453	)

Benefit obligation at end of year	27,927		24,189		20,074

Change in plan assets:
Fair value of plan assets at beginning of year	15,547		14,457		11,833
Actual return on plan assets	1,958		347		1,538
Employer contributions	1,854		1,770		1,571
Plan participants’ contributions	—		—		—
Net transfer in	—		—		—
Benefits paid	(560	)	(839	)	(246	)
Settlement	—		—		—
Foreign currency translation	853		(188	)	(239	)

Fair value of plan assets at end of year	19,652		15,547		14,457

Funded status at end of year	(8,275	)	(8,642	)	(5,617	)

Net actuarial loss/(gain) recognized in other comprehensive loss	(141	)	4,310		(879	)

Amounts recognized in the consolidated balance sheets consist of the following:



	2012	2011
December 31,	$’000	$’000

Non-current assets	—	—

Current liabilities	—	—

Non-current liabilities	8,275	8,642

Amounts recognized in accumulated other comprehensive income/(loss) consist of the following:



	2012		2011
December 31,	$’000		$’000

Net loss	(13,975	)	(14,116	)
Prior service cost	—		—
Net transitional obligation	—		—

Total amount recognized in other comprehensive loss	(13,975	)	(14,116	)

The following table details certain information with respect to OEH’s U.K. defined benefit pension plan:



	2012	2011
Year ended December 31,	$’000	$’000

Projected benefit obligation	27,927	24,189

Accumulated benefit obligation	27,927	24,189

Fair value of plan assets	19,652	15,547

Components of net periodic pension benefit cost are as follows:



	2012		2011		2010
Year ended December 31,	$’000		$’000		$’000

Service cost	—		—		—
Interest cost on projected benefit obligation	1,154		1,062		1,088
Expected return on assets	(846	)	(1,006	)	(805	)
Net amortization and deferrals	899		608		678

Net periodic benefit cost	1,207		664		961

OEH expects to contribute $2,618,000 to the U.K. defined benefit pension plan in 2013. The following benefit payments, which reflect assumed future service, are expected to be paid:



Year ended December 31,		$’000

2013		460
2014		517
2015		548
2016		577
2017		628
Next five years		3,643

The estimated net loss amortized from accumulated other comprehensive income/(loss) into net periodic pension cost in the next fiscal year is $968,000.

OEH has certain other post-retirement benefit obligations, of which the most significant relates to Mount Nelson Hotel in South Africa.

OEH has a defined benefit pension plan in South Africa for certain employees of the Mount Nelson Hotel. The total number of active members is one, and the remaining members are retired pensioners. The latest actuarial valuation performed as at December 31, 2011 and updated for foreign exchange rates at December 31, 2012 showed a net pension plan deficit of approximately $77,000 (2011 - surplus of $15,000) based on fair value of plan assets of $700,000 (2011 - $971,000) and projected benefit obligation of $777,000 (2011 - $956,000).

Certain employees of OEH were members of defined contribution pension plans. Total contributions to the plans were as follows:



	2012	2011	2010
Year ended December 31,	$’000	$’000	$’000

Employers’ contributions	2,719	3,023	2,552

December 31,

Discount rate