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:



	2013	2012	2011
Year ended December 31,	%	%	%

Discount rate	4.50	4.70	5.40
Expected long-term rate of return on plan assets	4.70	5.30	6.40

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



	2013	2012
December 31,	%	%

Discount rate	4.50	4.50

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 benefit obligations arise.

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, 2013 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, 2013 and 2012 by asset category is as follows:



	Total	Level 1	Level 2	Level 3
December 31, 2013	$’000	$’000	$’000	$’000

Cash	1,583	1,583	—	—
Equity securities:
U.K. managed funds	6,459	6,459	—	—
Overseas managed funds	5,402	5,402	—	—
Fixed income securities:
U.K. government bonds	1,549	1,549	—	—
Corporate bonds	6,124	6,124	—	—
Other types of investments:
Annuities	2,045	—	—	2,045

	23,162	21,117	—	2,045



	Total	Level 1	Level 2	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

Reconciliations of fair value measurements using significant unobservable inputs (Level 3) at December 31, 2013 and 2012 are as follows:



	Annuities		Total
Year ended December 31, 2013	$’000		$’000

Beginning balance at January 1, 2013	2,046		2,046
Foreign exchange	37		37
Actual return on plan assets:
Assets still held at the reporting date	42		42
Purchases, sales and settlements, net	(80	)	(80	)
Transfers into or out of Level 3	—		—

Ending balance at December 31, 2013	2,045		2,045



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

Beginning balance at January 1, 2012	1,871		1,871
Foreign exchange	92		92
Actual return on plan assets:
Assets still held at the reporting date	158		158
Purchases, sales and settlements, net	(75	)	(75	)
Transfers into or out of Level 3	—		—

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

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. The scheme trustees are currently purchasing annuities to match the benefits of pensioners and allocating a majority of the plan’s assets to equities as they have historically outperformed bonds over the long term. The scheme trustees 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:



	2013		2012		2011
Year ended December 31,	$’000		$’000		$’000

Change in benefit obligation:
Benefit obligation at beginning of year	27,927		24,189		20,074
Service cost	—		—		—
Interest cost	1,200		1,154		1,062
Plan participants’ contributions	—		—		—
Net transfer in	—		—		—
Actuarial (gain)/loss	(4,093	)	1,869		4,259
Benefits paid	(573	)	(560	)	(839	)
Curtailment gain	—		—		—
Settlement	—		—		—
Foreign currency translation	307		1,275		(367	)

Benefit obligation at end of year	24,768		27,927		24,189

Change in plan assets:
Fair value of plan assets at beginning of year	19,652		15,547		14,457
Actual return on plan assets	1,665		1,958		347
Employer contributions	1,880		1,854		1,770
Plan participants’ contributions	—		—		—
Net transfer in	—		—		—
Benefits paid	(573	)	(560	)	(839	)
Settlement	—		—		—
Foreign currency translation	538		853		(188	)

Fair value of plan assets at end of year	23,162		19,652		15,547

Funded status at end of year	(1,606	)	(8,275	)	(8,642	)

Net actuarial (gain)/loss recognized in other comprehensive loss	(5,763	)	(141	)	4,310

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



	2013	2012
December 31,	$’000	$’000

Non-current assets	—	—

Current liabilities	—	—

Non-current liabilities	1,606	8,275

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



	2013		2012
December 31,	$’000		$’000

Net loss	(8,212	)	(13,975	)
Prior service cost	—		—
Net transitional obligation	—		—

Total amount recognized in other comprehensive loss	(8,212	)	(13,975	)

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



	2013	2012
Year ended December 31,	$’000	$’000

Projected benefit obligation	24,768	27,927

Accumulated benefit obligation	24,768	27,927

Fair value of plan assets	23,162	19,652

Components of net periodic benefit cost are as follows:



	2013		2012		2011
Year ended December 31,	$’000		$’000		$’000

Service cost	—		—		—
Interest cost on projected benefit obligation	1,200		1,154		1,062
Expected return on assets	(926	)	(846	)	(1,006	)
Net amortization and deferrals	930		899		608

Net periodic benefit cost	1,204		1,207		664

OEH expects to contribute $2,327,000 to the U.K. defined benefit pension plan in 2014. The following benefit payments, which reflect assumed future service, are expected to be paid:



Year ended December 31,		$’000

2014		632
2015		463
2016		549
2017		657
2018		533
Next five years		3,929

The estimated net loss amortized from accumulated other comprehensive income/(loss) into net periodic pension cost in the next fiscal year is $554,000.

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



	2013	2012	2011
Year ended December 31,	$’000	$’000	$’000

Employers’ contributions	2,542	2,719	3,023