Variable interest entities

(a) VIEs of which Belmond is the primary beneficiary

Belmond holds a 19.9% equity investment in Charleston Center LLC, owner of Belmond Charleston Place, Charleston, South Carolina. Belmond has also made a number of loans to the hotel. Belmond concluded that Charleston Center LLC is a VIE because the total equity at risk is insufficient for the entity to fund its operations without additional subordinated financial support, the majority of which has been provided by Belmond. Belmond is the primary beneficiary of this VIE because it is expected to absorb a majority of the VIE’s expected losses and residual gains through the subordinated financial support it has provided, and has the power to direct the activities that impact the VIE’s performance, based on the current organizational structure.

Assets of Charleston Center LLC that can only be used to settle obligations of the consolidated VIEs and liabilities of Charleston Center LLC whose creditors have no recourse to Belmond Ltd are presented as a footnote to the consolidated balance sheets. The third-party debt of Charleston Center LLC is secured by its net assets and is non-recourse to its members, including Belmond. The hotel's separate assets are not available to pay the debts of Belmond and the hotel's separate liabilities do not constitute obligations of Belmond. The assets of Charleston Center LLC that can only be used to settle obligations of Charleston Center LLC totaled $206,267,000 at December 31, 2017 (December 31, 2016 - $210,276,000) and exclude goodwill of $40,395,000 (December 31, 2016 - $40,395,000). The liabilities of Charleston Center LLC for which creditors do not have recourse to the general credit of Belmond totaled $122,968,000 (December 31, 2016 - $121,621,000).

All deferred taxes attributable to Belmond’s investment in the LLC arise at the investor level and are therefore not included in the footnote to the consolidated balance sheets.

(b) VIEs of which Belmond is not the primary beneficiary

Belmond holds a 25% equity investment in Eastern and Oriental Express Ltd., which operates the Eastern & Oriental Express luxury tourist train in Southeast Asia. Belmond concluded that the Eastern & Oriental Express joint venture is a variable interest entity because the total equity at risk is insufficient for it to fund its operations without additional subordinated financial support. The joint venture does not have a primary beneficiary because no one party has the power to direct the activities that most significantly impact the economic performance of the entity. The joint venture is accounted for under the equity method of accounting and included in earnings/(losses) before income taxes and earnings from unconsolidated companies in the statements of consolidated operations.

The carrying amounts and maximum exposure to loss as a result of Belmond's involvement with its Eastern & Oriental Express joint venture are as follows:



	Carrying amounts		Maximum exposure
	2017	2016	2017	2016
December 31,	$’000	$’000	$’000	$’000

Investment	2,642	2,818	2,642	2,818
Due from unconsolidated company	6,302	4,771	6,302	4,771
Guarantees	—	—	—	—
Contingent guarantees	—	—	—	—

Total	8,944	7,589	8,944	7,589

Belmond holds a 50% equity investment in its rail joint venture in Peru, FTSA, part of its Peru Rail business that has a concession from the Government of Peru to operate the track network in southern and southeastern Peru. Belmond previously concluded that the FTSA joint venture was a variable interest entity because the total equity at risk was insufficient for it to fund its operations without additional subordinated financial support. The joint venture is under joint control as all significant budgetary and capital decisions require a majority of approval of the joint venture's board of directors, on which board Belmond holds two of four seats with the other two seats representing unaffiliated local Peruvian investors.

Previously, Belmond had guaranteed certain debt obligations of the joint venture. The guaranteed debt was repaid with non-guaranteed debt in the year ended December 31, 2015. Belmond concluded that this constituted a change in the design of the entity and reconsidered its initial determination of the entity’s VIE status. Following this, Belmond concluded that the joint venture qualified for the scope exceptions contained within U.S. GAAP to be excluded from consideration under the VIE guidance.

The joint venture is accounted for under the equity method of accounting and included in earnings/(losses) before income taxes and earnings from unconsolidated companies in the statements of consolidated operations.