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Orient-Express H

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nnual Report 2004

HOTEL CIPRIANI

Venice, ItalyPALAZZO VENDRAMIN

Venice, ItalyHOTEL SPLENDIDO

Portofino, Italy

HOTEL SPLENDIDO MARE

Portofino, ItalyVILLA SAN MICHELE

Florence, Italy CAPANNELLE

Tuscany, ItalyHOTEL CARUSO

Ravello, Italy HOTEL RITZ

Madrid, SpainLA RESIDENCIA

Deià, Mallorca, Spain

LAPA PALACE

Lisbon, PortugalREID'S PALACE HOTEL

Madeira, PortugalHÔTEL DE LA CITÉ

Carcassonne, FranceGRAND HOTEL EUROPE

St Petersburg, RussiaHARRY’S BAR

London, EnglandLE MANOIRAUX QUAT’SAISONS

Chef-Proprietor Raymond BlancOxfordshire, England

‘21’ CLUB

New York, New YorkINN AT PERRY CABIN

St Michaels, MarylandKESWICK HALL

Charlottesville,VirginiaWINDSOR COURT HOTEL

New Orleans, LouisianaCHARLESTON PLACE

Charleston, South CarolinaEL ENCANTO

Santa Barbara, California

MAROMA RESORT AND SPA

Riviera Maya, MexicoLA SAMANNA

St Martin, French West IndiesMOUNT NELSON HOTEL

Cape Town, South AfricaTHE WESTCLIFF

Johannesburg, South AfricaORIENT-EXPRESS SAFARIS

Eagle Island Camp, BotswanaORIENT-EXPRESS SAFARIS

Khwai River LodgeBotswana

ORIENT-EXPRESS SAFARIS

Savute Elephant CampBotswana

THE OBSERVATORY HOTEL

Sydney, AustraliaLILIANFELS BLUE MOUNTAINS

Katoomba, New South Wales,Australia

COPACABANA PALACE

Rio de Janeiro, BrazilLA CABAÑA

Buenos Aires, Argentina

MIRAFLORES PARK HOTEL

Lima, PeruHOTEL MONASTERIO

Cuzco, PeruMACHU PICCHU

SANCTUARY LODGE

Machu Picchu, Peru

BORA BORA LAGOON

RESORT & SPA

Bora Bora, French Polynesia

PERURAIL

Peru VENICE SIMPLON-ORIENT-EXPRESS

London, Paris,Venice

BRITISH PULLMAN

South of EnglandNORTHERN BELLE

North of EnglandTHE ROYAL SCOTSMAN

ScotlandEASTERN & ORIENTAL EXPRESS

Southeast AsiaROAD TO MANDALAY

Irrawaddy River, Burma(Myanmar)

AFLOAT IN FRANCE

France

Orient-Express Hotels Ltd.

www.orient-express.com

PANSEA HOTELS & RESORTSSiem Reap, Bali, Koh Samui,

Luang Prabang,Yangon,Southeast Asia

Orient-Express Hotels Ltd. 2004 ANNUAL REPORT

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Afloat in FranceBurgundy and Languedoc, FranceU.K. telephone: +44 20 7960 0500Fax: +44 20 7805 5908U.S. telephone: +1 401 351 7518Fax: +1 401 351 7220

Bora Bora Lagoon Resort & SpaTahiti, French PolynesiaTelephone: +689 60 40 00 Fax: +689 60 40 03

British PullmanSouth of EnglandU.K. telephone: +44 20 7960 0500Fax: +44 20 7805 5908U.S. telephone: +1 401 351 7518 Fax: +1 401 351 7220

Charleston PlaceCharleston, South CarolinaTelephone: +1 843 722 4900 Fax: +1 843 722 0728

Copacabana PalaceRio de Janeiro, BrazilTelephone: +55 21 2548 7070 Fax: +55 21 2235 7330

Eastern & Oriental ExpressSoutheast AsiaU.K. telephone: +44 20 7960 0500Fax: +44 20 7805 5908U.S. telephone: +1 401 351 7518 Fax: +1 401 351 7220

El Encanto Hotel & Garden VillasSanta Barbara, California Currently under development.

Grand Hotel EuropeSt Petersburg, RussiaTelephone: +7 812 329 6000 Fax: +7 812 329 6001

Harry’s BarLondon, England (A private club)

Hotel CarusoRavello, ItalyTelephone: +39 0185 267898 Fax: +39 0185 267899

Hotel Cipriani and Palazzo VendraminVenice, ItalyTelephone: +39 0 41 520 7744 Fax: +39 0 41 520 3930

Hôtel de la CitéCarcassonne, FranceTelephone: +33 468 71 98 71 Fax: +33 468 71 50 15

Hotel MonasterioCuzco, PeruTelephone: +51 84 24 1777 Fax: +51 84 24 6983

Hotel RitzMadrid, SpainTelephone: +34 91 701 67 67 Fax: +34 91 701 67 76

Hotel Splendido andSplendido MarePortofino, ItalyTelephone: +39 0185 267 800 Fax: +39 0185 267 804

Jimbaran Puri BaliBali, IndonesiaTelephone: +62 361 701 605 Fax: +62 361 701 320

Keswick HallCharlottesville,VirginiaTelephone: +1 434 979 3440 Fax: +1 434 977 4171

La CabañaBuenos Aires,ArgentinaTelephone and fax: +54 11 4814 0001

Lapa PalaceLisbon, PortugalTelephone: +351 21 394 9494 Fax: +351 21 395 0665

La Résidence d’AngkorSiem Reap, Cambodia Telephone: +855 63 963 390 Fax: +855 63 963 391

La Résidence Phou VaoLuang Prabang, LaosTelephone: +856 71 21 2194Fax: +856 71 21 2534

La ResidenciaDeià, Mallorca, SpainTelephone: +34 971 63 90 11 Fax: +34 971 63 93 70

La SamannaSt Martin, French West IndiesTelephone: +590 590 87 6400 Fax: +590 590 87 8786

Le Manoir aux Quat’SaisonsOxfordshire, EnglandTelephone: +44 1844 278881 Fax: +44 1844 278847

Lilianfels Blue MountainsKatoomba,Australia Telephone: +61 2 4780 1200 Fax: +61 2 4780 1300

Machu Picchu Sanctuary LodgeMachu Picchu, PeruTelephone: +51 84 21 1038 Fax: +51 84 21 1053

Maroma Resort and SpaRiviera Maya, MexicoTelephone: +52 998 872 8200 Fax: +52 998 872 8220

Miraflores Park HotelLima, PeruTelephone: +51 1 242 3000 Fax: +51 1 242 3393

Mount Nelson HotelCape Town, South Africa Telephone: +27 21 483 1000 Fax: +27 21 483 1782

NapasaiKoh Samui,ThailandTelephone: +66 77 42 92 00Fax: +66 77 42 92 01

Northern BelleU.K.U.K. telephone: +44 20 7690 0500Fax: +44 20 7805 5908U.S. telephone: +1 401 351 7518 Fax: +1 401 351 7220

Orient-Express SafarisEagle Island Camp, Khwai River Lodge,Savute Elephant Camp Botswana, Southern AfricaTelephone: +27 11 274 1800 Fax: +27 11 481 6065

PeruRailHiram Bingham train, Cuzco-Machu PicchuTelephone: +51 84 238 722 Fax: +51 84 221 114

Reid’s PalaceFunchal, Madeira, PortugalTelephone: +351 291 71 7171 Fax: +351 291 71 7177

Road To MandalayMandalay, MyanmarU.K. telephone: +44 20 7960 0500Fax: +44 20 7805 5908U.S. telephone: +1 401 351 7518 Fax: +1 401 351 7220

The Governor’s ResidenceYangon, Myanmar Telephone: +951 229 860Fax: +95 1 228 260

The Inn at Perry CabinSt Michaels, Maryland Telephone: +1 410 745 2200 Fax: +1 410 745 3348

The Observatory HotelSydney,Australia Telephone: +61 2 9256 2222 Fax: +61 2 9256 2233

The Orient-Express Gift CollectionLondon, EnglandTelephone: +44 20 7805 5019 Fax: +44 20 7805 5909

The Royal ScotsmanEdinburgh, ScotlandU.K. telephone: +44 131 555 1344Fax: +44 131 555 1345U.S. telephone: +1 800 922 8625

The WestcliffJohannesburg, South Africa Telephone: +27 11 646 2400 Fax: +27 11 646 3500

‘21’ ClubNew York, New YorkTelephone: +1 212 582 7200 Fax: +1 212 581 7138

Ubud Hanging GardensBali, IndonesiaTelephone: +62 361 701 605Fax: +62 361 701 320

Venice Simplon-Orient-ExpressLondon-Paris-VeniceU.K. telephone: +44 20 7960 0500Fax: +44 20 7805 5908U.S. telephone: +1 401 351 7518 Fax: +1 401 351 7220

Villa San MicheleFlorence, Italy Telephone: +39 0 55 567 8200 Fax: +39 0 55 567 8250

Windsor Court HotelNew Orleans, Louisiana Telephone: +1 504 523 6000 Fax: +1 504 596 4513

Reservation information

Contents

3 Company profile

3 Financial highlights

4 Directors and management team

6 Chairman’s message

8 President’s overview of performance

16 Chief Financial Officer’s report

18 Awards received in 2004

19 Financial review

44 Shareholder and investor information

45 Reservation information

Above: Afloat in France operates five péniche-hôtels – luxuriously-converted canal boats – whichtravel through exceptional landscapes in Languedoc,Burgundy and Provence. Arguably the most relaxedand sybaritic way of experiencing the Frenchcountryside, these lavishly equipped craft link greatcities with remote villages, traveling past forests,fields and world-renowned vineyards. Guests enjoythe services of a full crew on board, who serveexceptional regional cuisine and arrange visits tolocal sights.

45ORIENT-EXPRESS HOTELS LTD.www.orient-express.com

COVERS.rev 21/4/05 3:35 pm Page 2

3ORIENT-EXPRESS HOTELS LTD.


Orient-Express Hotels owns or part-owns,and mostly manages, 49 leisure properties in25 countries.Thirty-eight are hotels rangingacross five continents, from the HotelCipriani in Venice to the Mount Nelson inCape Town, the Copacabana Palace in Rio deJaneiro, the Observatory in Sydney, andCharleston Place in Charleston, S.C.

Restaurants include ‘21’ Club in New York,Le Manoir aux Quat’Saisons in Oxfordshire,England, La Cabaña in Buenos Aires andHarry’s Bar (a private club) in London. Sixtourist trains include the legendary VeniceSimplon-Orient-Express in Europe and theEastern & Oriental Express in Asia.Thecompany also part-owns and manages PeruRailin Peru, which operates the Cuzco-MachuPicchu train service used by nearly every touristto Peru (there are no roads to the famousInca ruins and otherwise it is a four-day hike).The m.v. Road To Mandalay provides luxurycruises on the Irrawaddy River in Myanmar.

The company started in 1976 as the leisuredivision of Sea Containers Ltd. and was laterincorporated as Orient-Express Hotels Ltd.,a Bermuda company. Orient-Express Hotels

was floated on the New York StockExchange in August, 2000. Sea Containerspresently owns 25% of the company and plansto sell its remaining shares in due course.

Orient-Express Hotels seeks out uniqueproperties which have expansion potential.It owns or part-owns its properties becauseit believes that equity returns are greaterthan simply management fee income.Increases in property values allow thecompany to increase funding against thoseassets and thus fuel expansion.The uniquenature of the assets insulates againstcompetition and therefore allows greaterpricing flexibility.

The company avoids the use of a chainbrand.Thus, none of its properties arebranded “Orient-Express” (except the trainand safari camps). Management believes thatdiscriminating travelers will choose anindividual property of fame in priority to achain brand. In the few locations where thecompany competes with de luxe brandchains (Venice, Lisbon and Rio de Janeiro are examples) it achieves up to 40% higheraverage rates than the chain brand hotels.

2004 2003 Change %$000 $000

Revenue 357,284 315,863 13

EBITDA(1) (2)

79,016 69,130 14

Net earnings (2)

28,222 23,609 20

Earnings per common share

(2)$0.82 $0.76 8

Number of shares (million) 34.30 31.14 10

(1) See page 42.(2) Includes in 2003 a gain on sale of hotel asset of $4,250,000.

Financial highlights

Front cover: Orient-Express Hotels recentlywelcomed the Grand Hotel Europe,St Petersburg, to its ever-expanding portfolio.This 130-year-old property is ideally placed forthe city’s top cultural attractions. A glamorous,belle-époque building decorated with animpressive collection of more than 200 worksof art, it boasts 301 guest rooms and sixrestaurants serving cuisine ranging from classicEuropean dishes to local specialties at itsrenowned Caviar Bar.

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Directors

From left to rightDaniel J. O’SullivanSenior Vice President – Finance andChief Financial Officer (retired) of Sea Containers Ltd.

John D. Campbell * Senior Counsel (retired) of ApplebySpurling Hunter (attorneys).Mr Campbell was a member of the firm until 1999, and is also aDirector of Sea Containers Ltd.

James B. SherwoodChairman of the company.Mr Sherwood is also a Director andPresident of Sea Containers Ltd.

Simon M.C. SherwoodPresident of the company.Previously Senior Vice President –Leisure of Sea Containers Ltd.(1997-2000) and was originallyappointed Vice President in 1991,prior to which he was Manager,Strategic Consulting of BostonConsulting Group (1986-1990).

Georg R. RafaelManaging Director of Rafael Group S.A.M.Previously Vice Chairman – ExecutiveCommittee of Mandarin OrientalHotels (2000-2002). ManagingDirector and founder of RafaelHotels (1986-2000) and JointManaging Director of RegentInternational Hotels (1972-1986).

J. Robert Lovejoy *Senior Managing Director ofRipplewood Holdings LLC (a privateequity investment firm).Prior to joining Ripplewood, MrLovejoy was Managing Director ofLazard Frères & Co. LLC and aGeneral Partner of the predecessorpartnership for over 15 years.

James B. Hurlock * Partner (retired) of White & Case LLP(attorneys).Mr Hurlock was Chairman of theManagement Committee of White &Case LLP (1980-2000), overseeing thefirm’s worldwide operations.

*Member of the Audit Committee

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Management team

Back row from left to rightPaul White Vice President – Hotels, Africa,Australia and South America. Previously a managerof the company working on hotel financial andoperational matters, having joined from ForteHotels in 1991.

James G. Struthers Vice President – Finance andChief Financial Officer. Joined the company in2000. Previously Finance Director of Eurostar UKLtd. (1997-1999).Worked with Sea ContainersLtd. as Controller (1991-1996), having qualifiedas a chartered accountant with KPMG in 1986.

David C.Williams Vice President – Sales &Marketing. Joined the company in 1981 andserved as Commercial Director responsible forstrategic marketing developments and businessinitiatives in the Americas, Europe and Asia-Pacific. Previously with Carlson MarketingGroup.

Dean P. Andrews Vice President – Hotels,North America. Joined the company in 1997,having been previously with Omni Hotels

(1981-1997) working in new hotel developmentand financial and asset management.

Nicholas R.Varian Vice President – Trains andCruises. Joined Orient-Express Hotels in 1985from P&O Steam Navigation Company andbecame Vice President responsible for train and cruise activities in 1989.

Roger V. Collins Vice President – TechnicalServices. An engineer his entire career, he hasworked in the hotel industry since 1979 withGrand Metropolitan Hotels, Courage Inns andTaverns, and Trusthouse Forte Hotels, joiningOrient-Express Hotels in 1991.

Edwin S. Hetherington Secretary. Also VicePresident, General Counsel and Secretary of Sea Containers Ltd., having joined Orient-Express Hotels in 1980.

Front row seatedAdrian D. Constant Vice President – Hotels,Europe. Joined the company from Le MeridienHotels in 2001, where he had responsibility for

the development of its hotels in South America.He has also managed hotels in the Algarve,Malta, London and Madrid.

Pippa Isbell Vice President – Public Relations.Joined the company in 1998 after selling thepublic relations consultancy she founded in 1987, which had clients such as Inter-ContinentalHotels, Forte, Hilton International, Jarvis Hotels,and Millennium and Copthorne.

Natale Rusconi Vice President.Appointed ManagingDirector of Hotel Cipriani,Venice, in 1977 andresponsible for makingHotel Cipriani one of theworld’s top luxury hotels.Previously at the SavoyHotel and with CIGAHotels.

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Chairman’s message

April 1, 2005

Dear Shareholder

2004 was a year of excellent earnings growthfor your company. Excluding the gain on saleof a hotel in 2003, net earnings in 2004 were46% higher than in 2003, reaching $28.2million ($0.82 per common share) on revenueof $357.3 million. Revenue was up 13% fromthe prior year. This having been said, our netearnings still did not surpass the $40 millionof 2000, nor do they take into account thecapital investment made since 2000, so thereis considerable upside to come. As revenuerises through increased occupancy and higherrates, a greater proportion will fall to thebottom line. This is one of the reasons why a13% revenue gain translated into a 46% netearnings increase in 2004.

Our key financial indicators for 2004 were:a RevPAR of $213 vs. $184 in 2003, an increaseof 16%; EBITDA was $79 million vs. $65 million(excluding gain on sale of a hotel); long-termdebt (excluding the current portion) to equityratio was 1:1 with current assets equallingcurrent liabilities; year-end cash and undrawncredit facilities were $98 million comparedwith $149 million at the end of 2003.

The company made a number of newinvestments in 2004 plus the majorinvestment in the Grand Hotel Europe in St Petersburg, Russia in February, 2005. Inaddition, it invested $65 million in existingproperties. Because of the cash expended in

connection with these transactions, it wasdeemed prudent to enlarge the capital basein March, 2005 by selling 5.05 million class Acommon shares at $25.54 per share. Thisshould give the company the freedom tomake further attractive acquisitions and capitalimprovements in coming years, whilemaintaining balance in the company’s keyfinancial ratios.

In addition to the Grand Hotel Europeinvestment in early 2005, the company in2004 committed $8 million through aconvertible loan to the Pansea group inSoutheast Asia (EBITDA of Pansea doubled in 2004 over 2003 to $2.4 million), weacquired El Encanto in Santa Barbara,California in November, 2004 for $26 millionand we bought a 50% interest in Afloat inFrance in May, 2004 for $3 million (with anoption to acquire the other 50%). All theseacquisitions fit the company’s strategy of only investing in unique properties. The list of investments in existing properties is too long to recite here, but needless to say,we believe it will convert quickly intoincreased profitability.

Our diversity of investment by region andproduct (hotels, restaurants and tourist trains)has served us well. While European hotelearnings in 2004 were flat due to the strengthof the euro and British pound, earnings fromtourist trains soared and made Europe as awhole significantly more profitable in 2004than in 2003. All other regions outperformed2003 in 2004 but in making this comparison

Above:The Casanova Spa at Hotel Cipriani overlooksbeautiful gardens where vines named after thelegendary seducer are planted. Managed by Babor,the spa is an elegant retreat enhanced by locallymade features such as Murano glass chandeliers.

2003 2004

EBITDA Total $ millions

Owned hotels – Europe 29.9 32.8 (8.8)

North America 15.0 11.1 34.7

Rest of the World 18.1 11.1 63.0

Total owned hotels 63.0 55.0 14.4

Management and part-ownership interests 14.9 13.5 10.4

Restaurants 3.9 2.6 49.5

Total hotels and restaurants 81.8 71.1 14.9

Trains and cruises 13.0 6.0 118.2

Central overheads (15.8) (12.2) (29.2)

Gain on sale of Quinta do Lago – 4.3

Total EBITDA 79.0 69.1* 14.3

79.0

69.1

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we need to take into account the SARSepidemic and the Iraq war in 2003 whichboth affected travel.

We are particularly pleased with ourinvestments in Latin America. Travel to Peru,Brazil, Argentina and Mexico where we haveproperties, has increased not only from theUS but from Europe and by nationals living inLatin America. We are currently looking atthree hotel acquisitions in Latin America but itis too early to say whether any will come tofruition. Our luxury tourist train, the HiramBingham, introduced in 2004 on the Cuzco-Machu Picchu route in Peru, has proven verypopular. Our plan to convert the LakeTiticaca steamer ss. Ollanta into an overnightcruise ship has been abandoned as the cost of conversion proved to be too high, so thevessel will be retained in its present state forday excursions. We own a property in theColca Canyon in Peru which is earmarked for development into a hotel when access

2004 2003 Change %

EBITDA ($ millions)

* Figures in 2003 include $4.25 million from gain on sale of the Hotel Quinta do Lago in November 2003.

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Above: Planet at the Mount Nelson Hotel is Cape Town’s most elegant new bar. Guests sipchampagne at an onyx, underlit bar and relax on leather banquettes beneath a fiber optic MilkyWay and a mobile of the solar system.

problems can be resolved. This spectacularvalley is the home of the condor, the largestbird in the world.

In North America, the focus of ourattention is our residential village developmentat La Samanna in St Martin, addition of roomsat Maroma Resort and Spa on the RivieraMaya in Mexico, construction of an annex forconferences and banqueting at the WindsorCourt in New Orleans and renovation of El Encanto in Santa Barbara, California.

In Europe, the restoration of the HotelCaruso in Ravello, Italy is well advanced andthe hotel will reopen this summer. The GrandHotel Europe in St Petersburg is in excellentphysical condition but we will want toredecorate the property.

No significant investment is required in2005 in our South Pacific hotels followingcompletion of improvements to Bora BoraLagoon Resort & Spa and Lilianfels. In Asia,Pansea will be opening the Ubud HangingGardens Hotel in Bali in July and is currentlycompleting a renovation of its Jimbaran Puribeach hotel also in Bali.

We are acquiring a 50% interest in theRoyal Scotsman tourist train in April, 2005 for $2.7 million and have an option to acquirethe other 50%.

We continue to follow two policies thatdifferentiate us from many of ourcompetitors. We do not manage propertiesunless we hold an equity interest, usually 50%or more, in them. We do this for tworeasons. First, we want to realize the benefitof increasing property values and secondly wewant to decide on physical improvements.When management and ownership aredivorced the two interests are not always inalignment. Second, we do not brand ourproperties “Orient-Express” but insteadpromote them under their individual nameswhich we believe adds value throughexclusiveness and rate setting. We do,however, centrally market the propertiesthrough the Orient-Express Hotels,Trains &Cruises trade name.

Our largest shareholder, Sea ContainersLtd., has recently sold down part of its holdingin conjunction with our primary share issue,and now owns 25% of Orient-Express Hotels.Sea Containers has indicated that its intention is to exit entirely its investment inOrient-Express Hotels in due course.

Our results for 2004 were achievedthrough the hard work of our 5,500 staff in25 countries. In recognition of his formativerole in the company, Dr Natale Rusconi,

General Manager of the Hotel Cipriani inVenice (our first hotel) and the person whointroduced me to the hotel business, wasmade a Vice President in 2004. David CWilliams was promoted to Vice President –Sales and Marketing during the year.

Barring unforeseen events, 2005 and 2006appear to be very promising for your company.

Sincerely,

James B. SherwoodChairman & Founder

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President’s overview of performance

Hotels: EuropeSame store RevPAR in local currency was up2% allowing us no more than to hold groundagainst inflation. As a result EBITDA on asame store basis was flat at about $30 million(the 2003 results include over $3 million ofEBITDA from the Hotel Quinta do Lagogenerated during the year prior to its sale).Given the difficult trading conditions at manyof our hotels we are quite pleased with thisperformance. The strength of the euro, upanother 11% over the year, continues to be achallenge and has reduced the percentage ofU.S. guests to about 25%, well down fromhistoric levels. Our U.S. bookings showedsome growth in 2004 but there is unlikely tobe a major recovery with the dollar so weak.

Our most exciting development is that in February 2005 we acquired the majorityinterest in the Grand Hotel Europe, StPetersburg (301 keys) – the residual 6%continues to be owned by the City of St Petersburg. This is Russia’s most famoushotel and recently celebrated its 130thbirthday. It is located in the heart of the cityon Nevsky Prospekt attracting both touristsand business travelers. In 2004 it generatedEBITDA of about $17 million and ourinvestment was made at an EBITDA multipleof about six, so this investment willimmediately add to the company’s earnings.In addition it should help us build Russianoutbound business for our other properties.

ItalyWork is well advanced at the Hotel Carusoin Ravello and the property should open in a few months’ time for the high season. Thehotel really will be stunning with magnificentviews out over the Amalfi coast and aspectacular pool set in historic gardens. Thedesign includes a large number of suites, asthese are so popular (and profitable) at ourother Italian hotels. This project has takenmany years to complete due to the strictdevelopment regulations in the area. Theselimitations make it difficult for anybody to addnew hotels so over the next few years we areconfident our investment in the Caruso willgenerate very attractive returns.

At the Hotel Cipriani and PalazzoVendramin (104 keys) EBITDA increased

another $0.5 million in spite of the strongeuro acting as a deterrent to U.S. guests. Wecontinue to invest in improvements at thehotel. The new spa has been well receivedand this last winter we have enhanced manyrooms by adding balconies and we havecreated the Dogaressa suite with views overSt Mark’s Square.

The Hotel Splendido and Splendido Mare(81 keys) fully justified our investments of lastwinter with RevPAR up 15% in euros (26% indollars) and EBITDA growing by $1 million.

The Villa San Michele (45 keys) had atougher year and we had to show moreflexibility with rates than in the past but EBITDAheld at $2.9 million similar to the result in2003. With so much going on at the Carusoand Cipriani we are not planning any majorchanges this year at our other Italian hotels.

SpainThe Hotel Ritz (167 keys) showed goodprogress, increasing its market penetration andrevenue share in Madrid. However this wasmore than offset by a generally weak marketthat also suffered in the aftermath of theterrorist bomb attacks in the city. We havelifted service standards at the hotel and are

now starting to make physical improvements.The lobby and reception area have beenrefurbished and major works should start onthe rooms this summer.

Our new suites at La Residencia (59keys) in Mallorca have been a great successwith the hotel’s average room rate going up11% in euros (22% in dollars). This underlinesthe value of our permits to add up to 20additional suites. This winter we worked onthe central guest areas making improvementsto the lounges and adding a new elevator toimprove access to the main pool.

PortugalPortugal had another difficult year withoccupancy and EBITDA down at both our

Above: The newly designed Medieval Room atHôtel de la Cité embodies all the history andmagic of the ancient citadel of Carcassonne.With its rich wood paneling, hand-carved canopybed and crackling log fire, it takes visitors back tothe days when knights in armour rode through the fortress town. This spectacular guest room is just one of the hotel’s many memorableaccommodations, which include suites with privateterraces overlooking the French countryside.

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Reid’s Palace Hotel

Lapa Palace Hotel

La Residencia

Hôtel de la Cité

Hotel Splendido and Hotel Splendido Mare

Hotel Caruso

Villa San Michele

Hotel Cipriani andPalazzo Vendramin

Harry’s BarLe Manoir aux Quat’Saisons

Hotel Ritz

hotels. International demand has beenaffected by the strong euro and domesticdemand is lackluster due to a local recession.We hope that we are seeing the bottom ofthe cycle and are beginning to see bookingspick up.

Madeira has suffered as a destination andwe saw a decline in demand at Reid’s Palace(164 keys) particularly from U.K. touroperators. Even in these hard times the hotelcontinues to generate 8% EBITDA return oninvestment with, of course, a much higherreturn on our equity. To compete better as adestination Madeira needs improved accessand we are doing what we can to encouragethe authorities to attract one of the low-costEuropean airlines to provide a service fromthe U.K.

The Lapa Palace (109 keys) in Lisbon also had a challenging 2004 but demand isstarting to pick up and we recently receivedconfirmation that two low-cost airlines willoffer a U.K.-Lisbon service from July 2005.Our hotel stands head and shoulders abovethe competition and should do very wellonce general demand for Lisbon recovers.

Other European hotelsAt Le Manoir aux Quat’Saisons (32 keys) ,the famed chef Raymond Blanc has greatplans for 2005 as it is the 21st birthday of thehotel. He is creating a new Asian garden toprovide fresh ingredients for his menu. Heand his team’s energy and creativity should

continue to stimulate new demand and theireffort was rewarded in 2004 with a numberof major honors including Best British Hotel(Condé Nast Traveler, U.S.). The restaurant hasreceived a two-star Michelin rating every yearfor the last 20 years.

Hôtel de la Cité (61 keys) showed amodest improvement in profitability over2003 helped by a lift in occupancy. During2004 we refurbished one of the suites in the oldest part of the building to reflect itsmedieval heritage.We also added terraces to three other suites.

Owned Hotels: Europe

2004 2003

* RevPAR = Revenue per available room (the roomsdepartment revenue divided by the number of lettable hotelrooms for each night of operation). ** Comparison of the sameunits’ operations, e.g. excluding the effect of any acquisitions.

EBITDA ($ millions) 29.9 32.8

Overall – Average daily rate ($) 626 493

Rooms sold (‘000) 108 139

RevPAR ($)* 342 280

Same store** RevPAR ($) 346 307

RevPAR change (in U.S.$) +13%

RevPAR change (in local currency) +2%

Below: Portofino’s best address is the recently restored Presidential Suite at Hotel Splendido, with threegenerous terraces overlooking lush gardens and the picturesque harbor beyond. The spacious interior is afeast for the eyes, decorated in delicate pastel colors that complement the dramatic Mediterranean setting.

Grand Hotel Europe

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Hotels: North America(including the Caribbean andMexico)

The recovery continued in 2004 for NorthAmerica with same store RevPAR up 8% and EBITDA up 35%. Demand steadilystrengthened through the year and in thefourth quarter same store RevPAR was up 18% with demand (and bookings) strongfor 2005.

U.S.A.In November 2004, we broadened ourpresence in the U.S. with the acquisition of El Encanto Hotel (88 keys) in Santa Barbarafor $26 million. This charming hotel is setabove the Mission with views over the coast.The purchase price is less than $300,000 perkey and includes rights to add another ninekeys and to expand the central public areas.We will close the hotel during the low seasonto start this work. This is our first property inthe area and it should help increaseawareness of Orient-Express Hotels in theimportant west coast markets.

EBITDA at the Windsor Court Hotel(324 keys) grew 9% on the back of improvedRevPAR and a very effective cost-containmentprogram. The third quarter was affected byHurricane Ivan, which led to some last minutegroup cancelations, but the end of the yearwas particularly strong and this has continuedthrough the early months of 2005. Withdemand recovering we are pushing aheadwith the addition of more meeting space.We also plan to create some club floors andadd a spa.

Bookings at Charleston Place (442 keys)look strong for 2005, another sign of demandrecovery in the U.S. EBITDA was slightly upfor 2004 and we expect further improvementin 2005. Our central reservations inCharleston, which handles all our NorthAmerican properties and supports ourinternational ones, has developed well withtotal call volume up 29% for 2004 andconversion at 27% versus an industry average of 22%.

The new capacity at The Inn at PerryCabin (81 keys) is starting to generate areturn and EBITDA in 2004 was almost 30% up on the prior year. We are adding a

dedicated spa facility as the finishing touch tothis property. Keswick Hall (48 keys) alsoshowed good progress with hotel EBITDA up 100% over the prior year (albeit off a lowbase) and strong interest in golf clubmemberships and the surrounding real estatelots. The new restaurant “Fossett’s” opened inMay 2004 and has been a great success withrestaurant revenue for July to December2004 up 67% over 2003. This new restaurantis also allowing us to take larger groupbookings as it has freed up the old restaurantarea for banqueting and meetings.

MexicoMaroma Resort and Spa (64 keys) goes fromstrength to strength. 2004 RevPAR increased30% over 2003 and EBITDA grew over 70%up to $3.6 million. Margins also improvedsubstantially. The expanded restaurantopened mid-2004 and the magnificent newspa “Kinan” opened towards the end of theyear. The Riviera Maya is becoming ever morepopular as flights come in from all over theU.S., especially Miami and New York. There ishuge demand for our best suites so we planto add eight super-luxury beachfront ones thisyear and are also working on plans to developsome villas for private ownership.

Property developmentLa Samanna (81 keys) on the island of StMartin in the French West Indies had anexcellent 2004 with RevPAR, EBITDA andmargins all improving in spite of the weakdollar which increased the hotel’s coststructure (the hotel is in French territory so costs are in euros).

Most importantly we attained all of thenecessary permits for our first major propertydevelopment project and broke ground a fewmonths ago. We will develop our land on theDutch side of the island in two phases withthe first, “Cupecoy Village” consisting of 169condominiums, 60,000sq ft of mixed-use retail

Windsor Court

Maroma Resort and Spa

Charleston Place

‘21’ Club

The Inn at Perry Cabin

Keswick Hall

La Samanna

Owned Hotels: North America

2004 2003



Rooms sold (’000) 142 131

RevPAR ($) 217 200

Same store RevPAR ($) 216 200



El Encanto

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Above: Positioned on the Californian coast at Santa Barbara, El Encanto Hotel & Garden Villashas long been an exclusive retreat for Hollywoodcelebrities and other guests in search of peace and serenity. This elegant property comprisesclusters of cottages set in gardens planted withrare trees. Orient-Express Hotels is working withthe National Trust for Historic Preservation torestore the hotel, and to add five more cottages,a spa and a fitness center.

and a marina with seven mega-yacht berths.This development will be spread over severalyears and could generate about $50 millioncumulatively in profit on sale of condominiumsas well as an ongoing earning stream of about$5 million per annum. It will use just over twothirds of our land parcel on the Dutch side.

On the French side we have also brokenground and are building 10 luxury cliff-frontvillas. This project should be complete in thenext two years and generate profit on sale of over $10 million. It uses only a small part of our French-side land and we are alreadyworking on designs for a further 20 villas on other parcels. In addition to the profit

on sale, there will be ongoing earnings frommaintenance/service charges and revenuefrom renting out the villas when not used bythe owners.

We look on property development as agrowing business for us as it fits well with ourcompany’s image and can make good use ofthe land bank we have built up over the years.In addition to our projects at La Samanna andKeswick we are working to roll out ourdevelopment arm at Maroma,The Inn at PerryCabin and Bora Bora Lagoon Resort & Spa.

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2004 was a much better year as all theproperties bounced back from a tough 2003that was affected by both the Iraq War andSARS. Same store RevPAR increased 18% in local currency (29% in dollars) and thistranslated into much improved EBITDA (up63%) and stronger margins. At the time ofwriting, forward bookings are 17% ahead so2005 should be another strong year.

South AmericaEBITDA at the Copacabana Palace (222 keys)increased to $9.1 million from $6.6 million in2003 mostly due to improved occupancy dueto growing demand from Europe (particularlythe U.K. and Germany). The start of 2005 has

also been very strong and bookings are wellahead for the rest of the year.

We have seen a similar pattern in Peru.The Hotel Monasterio (126 keys) and Machu

Picchu Sanctuary Lodge (31 keys) combinedto generate EBITDA of $6.2 million for ourjoint venture, up 63% over 2003. TheMiraflores Park Hotel (82 keys) in Lima alsoperformed well with RevPAR up 30% overprior year but EBITDA did not greatly increaseas we closed the hotel for refurbishment inthe fourth quarter. This is now complete andthe hotel boasts refurbished rooms, additionalelevators, a larger pool and improved restaurantand meeting facilities. As demand to Peru isgrowing so quickly, it was clearly a good decisionto push ahead with these works last year.

Southern AfricaIn South Africa our cost structure has beenaffected by the strength of the rand versusthe dollar. In spite of this all of our businessesin the region have done well. Both the MountNelson Hotel (226 keys) in Cape Town andThe Westcliff (119 keys) in Johannesburgshowed marked improvement in profitabilityin 2004. Among other improvements, we planto add a spa to each. Orient-Express Safaris

MirafloresPark Hotel

HotelMonasterioMachu PicchuSanctuary Lodge

La Cabaña

CopacabanaPalace

Mount Nelson HotelThe Westcliff

Orient-Express Safaris

The Observatory Hotel

Lilianfels Blue Mountains

Bora Bora Lagoon Resort & SpaUbud Hanging Gardens

Jimbaran Puri Bali

Napasai

The Governor’s Residence

La Résidence d’ Angkor

La Résidence Phou Vao

Hotels: Rest of the World

Left: Opening in mid-2005, Ubud HangingGardens nestles on a dramatic hillside in the heart of Bali close by the artists’ colony of Ubud.A private funicular will take guests to its 38individual villas, built in traditional local style,each with its own plunge pool.

Owned Hotels: Rest of the World

2004 2003



Rooms sold (’000) 183 160

RevPAR ($) 136 107




12

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RestaurantsOur largest investment in stand-alone restaurantsis at ‘21’ Club in New York. 2004 was a muchstronger year with revenue up 14% and EBITDA$1.2 million ahead of the prior year. Thebusiness climate seems more positive as weenter 2005 and we are getting more demandfrom the investment banking sector that hasalways been a mainstay for the restaurant.

Our other restaurant investments aremuch smaller. At La Cabaña in Buenos Aires2004 was the first full year of operations andthe restaurant made a small loss but demand is steadily growing month on month so 2005should show improvement. Harry’s Bar ourjoint venture private dining club in Londoncontinues to do well.

Above: The new infinity swimming pool at BoraBora Lagoon Resort & Spa is the largest in thelagoon, and enjoys spectacular views of MotuToopua, a fragment of an ancient volcano. Alsonew for guests is the opportunity to combine a stay with a six-night cruise aboard a 30-berthyacht, visiting nearby islands.

(39 keys) generated EBITDA of $0.2 million in2004 after suffering a $0.5 million loss in2003. Bookings are well ahead (again) andwe are now offering an air service to thecamps from Johannesburg which should makeaccess much easier for our guests.

AustralasiaAll of our properties in Australasia showedmarked improvement as they recovered in2004 from the downturn in 2003 (primarilydue to SARS). At The Observatory Hotel(96 keys) occupancy recovered to 69% from56% in 2003 and EBITDA increased byalmost 70%.

At Lilianfels (85 keys) in the BlueMountains we finished our refurbishment,adding an outdoor pool and a spa. In thesecond half of the year the hotel returnedimmediately to pre-2000 operating levels and bookings are well ahead for 2005.

Bora Bora Lagoon Resort & Spa

(79 keys) was a major problem in 2003generating $1.2 million loss at the EBITDAlevel. The results have turned around in 2004with RevPAR up over 50% generatingEBITDA of $0.5 million for the year. 2005looks like another year of improvement butlonger term we still face challenges as severalnew hotels are under construction in the area.

AsiaOur Asian hotel collection is the Pansea groupof six properties and our investment duringFebruary 2004 looks to have been very welltimed as demand has picked up reflecting therecovery of tourism to Southeast Asia.

At Jimbaran Puri (41 keys) in Bali,occupancy grew back to 71% in 2004 versusonly 47% in 2003. As a result, revenue andEBITDA both increased to more than 2.5times the prior year level. In Bali we have underconstruction Ubud Hanging Gardens (38 keys)that will open mid-2005.This beautiful propertyis located in the mountains and each roomhas a private pool. Ubud has always been apopular destination and should be the perfectcomplement to our existing beachfront hotel.

The Napasai (55 keys) on Koh Samui,Thailand opened during 2004 so it is early daysto judge performance. Fortunately Koh Samuiisland is on the east side of Thailand so it was

unaffected by the tsunami or its aftermath.La Résidence d’Angkor (55 keys) in

Siem Reap, La Résidence Phou Vao (34 keys)in Luang Prabang, and The Governor’sResidence (49 keys) in Yangon have all seensubstantial gains and Pansea’s total EBITDAhas more than doubled over 2003. Ouragreement with Pansea includes a convertibleloan and the right to buy the company at afuture date so we are very encouraged to seethe business grow so well.

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14

PeruRail

Eastern & Oriental Express

Road to Mandalay

Afloat in France

Royal Scotsman

Northern Belle

British Pullman

Venice Simplon-Orient-Express

Trains and Cruises

Our trains and cruises recovered the groundlost in 2003 (due to the Iraq war and SARS)and much more. All of the European trainshad an outstanding year and bookings areencouraging for 2005.

EBITDA for our flagship train, the VeniceSimplon-Orient-Express, was $4.3 million,more than $2 million ahead of 2003. Most ofthe demand growth came from the U.K., Franceand Germany. The U.S. and Japan are stillbelow historic levels so there is clear potentialfor us to generate more business from thesemarkets. The new Budapest route introducedin 2004 was particularly well received.

Our Pullman train offers day trips outfrom London. Bookings poured in andEBITDA increased to $2.2 million versus lessthan $1 million in the prior year. Even morepleasing was our more recently launchedNorthern Belle train that primarily serves the northern U.K. markets. EBITDA was

$1.8 million ($0.3 million in 2003) so we are generating an excellent return on our $9 million total investment.

The Road To Mandalay river cruiser andthe Eastern & Oriental Express also bouncedback albeit less strongly. 2005 bookings looksolid although we did suffer some cancelationsfollowing the tsunami last December as someguests combine these trips with holidays atbeach resorts that were affected.

Our earnings from PeruRail increaseddramatically (up almost $3 million) helped by

Below: The Hiram Bingham luxury rail service,operated by PeruRail between Cuzco and MachuPicchu, has proved so popular that it has increasedits service to run six times a week. The train, whichhas two dining cars and an open-air observationcar, departs from and returns to Cuzco later in theday than other services, allowing guests to explorethe sanctuary as the sun goes down.

Trains and Cruises EBITDA ($ millions)

2004 2003

Owned European train operations 8.3 3.5

PeruRail 6.4 3.5

Road To Mandalay 0 0.4

Central costs and other (1.7) (1.4)

Total 13.0 6.0

the success of our new luxury Hiram Binghamrail service that operates between Cuzco andMachu Picchu. Peru is becoming a verypopular destination and we have had to investin additional rolling stock and an extralocomotive to cope with demand.

Based on the strength of these businesseswe have invested in two other cruise and trainoperations during 2004. The first is Afloat inFrance, which has five luxury canal boats thatoperate in Burgundy and Provence. Eachboat takes between six and 12 guests andseveral have their own pools. There is anexcellent fit with our customer profile andplenty of scope for expansion. We acquired50% of the business for $3 million and willbuy the remaining 50% at a price equivalentto seven times EBITDA in a few years time.

We also agreed to acquire The RoyalScotsman luxury train which runs five to 10day itineraries around Scotland and the northof England. The deal was structured in asimilar way to acquire 50% of the businessupfront and then the residual at a multiple (in this case about six times) a few yearslater. This is attractive to us as it allows us to build the business and helps assure thatwe have not overpaid.

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I look back with some satisfaction at theOutlook section of last year’s annual report.It was clear at that time we were likely to seea recovery with much stronger demand “fromthe second quarter onwards”. As weexpected, results have picked up particularlytowards the end of the year and 2004 fourthquarter RevPAR was up 12% in local currency(18% in dollars).

What we could not foresee was thesuccess we would have in finding exciting newacquisitions to add to our portfolio. TheGrand Hotel Europe is a very positive

The magic of the Scottish Highlands surroundsguests aboard The Royal Scotsman, as it travelsthrough wild countryside and along virgin stretchesof coast.The train stops at castles, whiskeydistilleries and other places of interest along theway, where guests enjoy special tours in thecompany of local experts – or even the laird of a private estate.

addition as it is a large investment at six timesEBITDA so it instantly adds to the bottomline. Our ability to locate and complete thissort of deal is a major strength of thecompany.

Another real positive is the speed withwhich we have attained the required permitsfor our first major property development,the villas and condominiums at La Samanna.I expect property developments around theworld to become a major generator of profitfor the company in the years to come.

We look forward to 2005 with high

expectations. At the time of writing business isgoing well, bookings are 7% ahead of last yearand we have the added upside from theforthcoming opening of the Caruso hotel inItaly and profits from our recent acquisitionselsewhere.

Simon M. C. Sherwood President

Outlook for 2005

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Chief Financial Officer’s report

EBITDA in 2004 was up 22% to $79 millionfrom $64.9 million (excluding the gain on sale of a hotel in 2003). Depreciationincreased by $3.1 million primarily due toacquisitions, capital expenditure and partly the weaker dollar.

We continue to enjoy the benefit of a low effective tax rate (16% in 2004) due inlarge part to the company being incorporated in Bermuda so the flow-through from EBITDA to bottom line earnings is particularlyefficient. Net earnings for the year increasedby 46% from $19.4 million in 2003 (excludingthe gain on sale of a hotel) to $28.2 million.Cash flow from operations improved 60%from $33 million to $53 million.

Above: Keswick Hall at Charlottesville,Virginia,has opened “Fossett’s”, a new 70-seat restaurantnamed for Thomas Jefferson’s cook at his nearbyhome of Monticello.This is a dining room with a view: floor-to-ceiling windows provide aspectacular panorama of the recently upgradedArnold Palmer championship golf course and the countryside beyond.

16

All owned hotels

2004 2003


Rooms sold (’000) 433 430

RevPAR ($) 214 184


RevPAR change (in U.S.$) 16%

RevPAR change (in local currency) 8%

During the year, the company invested$35 million in acquisitions, which included the purchase of El Encanto in Santa Barbara($26 million) and an investment in Afloat inFrance ($3 million). A further $65 million wasspent on capital expenditure to existingproperties (including approximately $15million of maintenance capital expenditure).The major works during the year were thecontinued renovation of the Hotel Caruso,the addition of rooms and new facilities atMaroma Resort and Spa, a new spa at theCipriani, completion of the refurbishment of Bora Bora Lagoon Resort & Spa and the addition of new rooms and improvedfacilities at La Residencia.

To fund this program, the company drewdown debt of $110 million versus principalrepayments of $55 million. After payingdividends of $3 million, net cash flow for the year was a surplus of $5 million, resultingin a cash balance of $86 million at 31December, 2004.

Total debt at year end was $584 millionof which $303 million was in euros, $218million in U.S. dollars and the balance in othercurrencies. All the debt is senior securedmortgage finance. We find that the uniqueproperties we have in our portfolio areattractive security to the banks allowing them

Left: Maroma Resort and Spa on the MexicanRiviera has recently added a new, dedicated spa“Kinan” that offers a number of specializedMexican treatments.

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have obtained attractive finance. The terms ofthis financing is such that the company willprovide its equity participation by way of theland and not cash. The loan will be repaid asstage payments are received from thepurchasers of condominiums and villas with aproportion of these proceeds going to thebank and the balance to the company. Thisshould further enhance the cash flow returnof the project.

With all of this activity in the last 12months (particularly the Grand Hotel Europe)and other acquisitions and investments thatwe have under consideration, we decided toraise additional funds through the sale ofequity. In March 2005 the company sold

5.05 million shares at $25.54 per share.Sea Containers (our largest shareholder) alsotook the opportunity to sell 4.5 million sharesreducing its shareholding from 42% down to25%. This has helped alleviate any perceivedoverhang related to its position and has alsogreatly increased the company’s free float(excluding Sea Containers’ shareholding) from20 million shares to 30 million shares.

James G. StruthersVice President – Finance and Chief FinancialOfficer

to offer us very competitive rates and terms.Our average cost of debt was 4.1% atDecember 31, 2004.

The company has been very active so farin 2005. On February 8 we added the Grand Hotel Europe in St Petersburg to ourcollection of hotels. This will result in a totalinvestment of around $125 million once ourprogram of refurbishment and investment iscomplete. $65 million of finance has beenprovided by a syndicate of banks led by theInternational Finance Corporation, a subsidiaryof the World Bank, which has extensivelending experience in Russia.

We have also made much progress withour property development on St Martin and

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18

A selection of awards received in 2004

Hotel Cipriani• Gold List Condé Nast Traveler (U.S.)• 6th Best City Hotel in Europe

Departures magazine (U.S.)• Best Hotel in Venice

Andrew Harper’s Hideaway Report (U.S.)• 5th Best European Hotel Condé Nast Traveller (U.K.)

Villa San Michele• Gold List Condé Nast Traveler (U.S.)• 11th Best International Resort Hideaway


Hotel Splendido • Gold List Condé Nast Traveler (U.S.)• 6th Best International Resort Hotel


Hôtel de la Cité • 500 Ultimate Guide – The Greatest Hotels in

The World Travel & Leisure (U.S.)• Gold List Condé Nast Traveler (U.S.)• Retained one Michelin Star for the third

consecutive year Michelin Guide

Lapa Palace• Top Restaurant in Lisbon – Ristorante Hotel

Cipriani Zagat Guide (U.S.)• Gold List Condé Nast Traveler (U.S.)• Top Hotel in Lisbon


Reid’s Palace• Gold List Condé Nast Traveler (U.S.)

Hotel Ritz, Madrid• Gold List Condé Nast Traveler (U.S.)• 16th Best City Hotel in Europe

Departures magazine (U.S.)• Best Hotel in Madrid Global Finance (U.S.)• Top Hotel in Madrid

Andrew Harper’s Hideaway Report (U.S.)• Spain’s Leading Hotel World Travel Awards

La Residencia• 11th Best Beach Hotel in Europe

Departures magazine (U.S.)

Windsor Court Hotel• 17th Best City Hotel in the U.S.A. & Canada

Departures magazine (U.S.)• 8th Best Hotel in the U.S.A. and Canada

Travel and Leisure (U.S.)• Top Hotel in New Orleans

Andrew Harper’s Hideaway Report (U.S.)

Miraflores Park Hotel• One of the World’s Best Business Hotels

Travel & Leisure (U.S.)• 6th Best South American Hotel

Condé Nast Traveller (U.K.)

Bora Bora Lagoon Resort & Spa• Gold List (scored 100% for location)

Condé Nast Traveler Gold (U.S.)• 9th Best Spa in Australia and the South Pacific –

Maru Spa Condé Nast Traveller (U.K.)• 9th Best Hotel in Australia, New Zealand & South

Pacific Departures magazine (U.S.)• 6th Best Australasia and South Pacific Leisure

Hotel Condé Nast Traveller (U.K.)• Maru Spa named as the “New Spa to Watch”

Travel & Leisure (U.S.)

Mount Nelson Hotel• Included in the 500 Ultimate Guide of the

Greatest Hotels in The World Travel & Leisure (U.S.)• Gold List Condé Nast Traveler (U.S.)• 12th Best Overseas Leisure Hotel in Africa,

Indian Ocean and Maldives Condé Nast Traveller (U.K.)

• Africa’s Leading Hotel World Travel Awards

The Westcliff• Gold List Condé Nast Traveler (U.S.)

Above: The Maru Spa at Bora Bora Lagoon Resortoffers guests a unique experience – traditionalPolynesian treatments high above the ground in thebranches of a massive banyan tree. This loftytreehouse spa is complemented by other treatmentrooms on the beachfront and beside the lagoon –all encircled by lush tropical gardens.

The Inn at Perry Cabin• Included in the 500 Ultimate Guide – The

Greatest Hotels in The World Travel & Leisure (U.S.)• Gold List Condé Nast Traveler (U.S.)• 18th Best U.S. Resort Hideaway

Andrew Harper’s Hideaway Report (U.S.)

Keswick Hall• Gold List Condé Nast Traveler (U.S.)• 23rd Best Boutique Hotel in U.S.A. & Canada


Charleston Place • Gold List Condé Nast Traveler (U.S.)• 4th Top U.S. and Canada Destination

Travel and Leisure (U.S.)• Gold Key Award 2004 for Excellence in

Hospitality Design (U.S.)• Top City Hotel Spa in the U.S.A. and Canada –

The Spa at Charleston Place Travel & Leisure (U.S.)• One of the top 100 travel experiences in the

world – highest score ever in the 17-year history of the award Condé Nast Traveler (U.S.)

• Preferred Hotel PartnerDiners Club Magazine (Germany)

Maroma Resort and Spa• Gold List Condé Nast Traveler (U.S.)• Mexico’s Leading Spa Resort

World Travel Awards • 3rd Best Central American Hotel

Condé Nast Traveler (U.S.)

La Samanna• Included in the 500 Ultimate Guide to the

Greatest Hotels in The World Travel & Leisure (U.S.)• Top Hotel in the Atlantic & Caribbean


Copacabana Palace• Gold List Condé Nast Traveler (U.S.)• 4th Best Hotel in Mexico, Central and South

America Departures magazine (U.S.)• South America’s Leading hotel

World Travel Awards • 18th Best Overseas Leisure Hotel – Americas

and Caribbean Condé Nast Traveler (U.S.)• 7th Best South American Hotel

Condé Nast Traveller (U.K.)

Hotel Monasterio• Gold List Condé Nast Traveler (U.S.)• 82nd Best Hotel in the World

Condé Nast Traveller (U.K.)• 4th Best Hotel in South America

Condé Nast Traveller (U.K.)• Peru’s Leading Hotel World Travel Awards

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Khwai River Lodge• Gold List Condé Nast Traveler (U.S.)• 12th best safari camp Condé Nast Traveller (U.K.)

Savute Elephant Camp• 2nd Best Safari Camp in Botswana

Travel & Leisure (U.S.)

Le Manoir aux Quat’Saisons• Best British Hotel Condé Nast Traveler (U.S.)• Gold List Condé Nast Traveler (U.S.)• 2nd Best Country Hotel in Europe

Departures magazine (U.S.)• Gold Ribbon RAC (U.S.) • 3rd Best U.K. Leisure Hotel Condé Nast

Traveller (U.K.)• Retained two Michelin Stars for the 20th

consecutive year Michelin Guide

The Observatory Hotel• Gold List Condé Nast Traveler (U.S.)• Best Five Star Accommodation Hotel &

Accommodation Management magazine (Australia)• Best Overall Accommodation Property in Australia

Hotel & Accommodation Management magazine (Australia)

• Deluxe Hotel of the Year Australian Hotel Awards • 20th Best Australasia and South Pacific Overseas

Leisure Hotel Condé Nast Traveller (U.K.)• 11th Best Pacific Rim Hotel Condé Nast

Traveler (U.S.)• Australasia’s Leading Hotel World Travel Awards

Lilianfels Blue Mountains Resort & Spa• Best Boutique Hotel Hotel & Accommodation

Management magazine (Australia)• Best Regional Property Hotel & Accommodation

Management magazine (Australia)• Best Restaurant – Darley’s Australian Hotel Awards• 14th Best Overseas Leisure Hotel Australasia and

South Pacific Condé Nast Traveller (U.K.)• 14th Best Hotel in the Pacific Rim

Condé Nast Traveler (U.S.)

Corporate• Gold E Award of Excellence – James B.

Sherwood Entrée (U.S.) • Best Travel & Leisure Title – Orient-Express

Magazine APA Media Awards (U.K.)• James B. Sherwood awarded Hotel Design Award

(U.K.)• National Order of the Southern Cross –

James B. Sherwood Government of Brazil

Financial review

Contents

Report of independent registered public accounting firm 21

Consolidated balance sheets 22

Statements of consolidated operations 23

Statements of consolidated cash flows 24

Statements of consolidated shareholders’ equity 25

Notes to consolidated financial statements 26

Summary of quarterly earnings 40

Five-year performance 41

Price range of common shares 41

Summary of earnings by operating unit and region 42

Summary of operating information for owned hotels 43

Corporate governance 43

Shareholder and investor information 44

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20

This report contains, in addition to historical information, forward-looking statements that involve risks and uncertainties. These includestatements regarding earnings growth, investment plans and similarmatters that are not historical facts. These statements are based onmanagement’s current expectations and are subject to a number ofuncertainties and risks that could cause actual results to differmaterially from those described in the forward-looking statements.Factors that may cause a difference include, but are not limited to,those mentioned in the report, unknown effects on the travel andleisure markets of terrorist activity and any police or militaryresponse, varying customer demand and competitive considerations,realization of bookings and reservations as actual revenue, inability tosustain price increases or to reduce costs, fluctuations in interestrates and currency values, uncertainty of negotiating and completingproposed capital expenditures and acquisitions, adequate sources ofcapital and acceptability of finance terms, possible loss or amendmentof planning permits and delays in construction schedules forexpansion projects, shifting patterns of tourism and business traveland seasonality of demand, adverse local weather conditions,changing global and regional economic conditions, and legislative,regulatory and political developments. Further information regardingthese and other factors is included in the filings by the company andSea Containers Ltd. with the U.S. Securities and Exchange Commission.

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Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders March 3, 2005Orient-Express Hotels Ltd.Hamilton, Bermuda

We have audited the accompanying consolidated balance sheets ofOrient-Express Hotels Ltd. and subsidiaries (the “Company”) as ofDecember 31, 2004 and 2003, and the related consolidated statementsof operations, shareholders’ equity, and cash flows for each of the threeyears in the period ended December 31, 2004. The consolidatedfinancial statements are the responsibility of the Company’smanagement. Our responsibility is to express an opinion on theseconsolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of thePublic Company Accounting Oversight Board (United States). Thosestandards require that we plan and perform the audit to obtainreasonable assurance about whether the consolidated financialstatements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts anddisclosures in the consolidated financial statements. An audit alsoincludes assessing the accounting principles used and significantestimates made by management, as well as evaluating the overallfinancial statement presentation. We believe that our audits provide areasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, inall material respects, the financial position of Orient-Express Hotels Ltd.

and subsidiaries as of December 31, 2004 and 2003, and the results oftheir operations and their cash flows for each of the three years in the period ended December 31, 2004, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of thePublic Company Accounting Oversight Board (United States), theeffectiveness of the Company’s internal control over financial reportingas of December 31, 2004, based on the criteria established in InternalControl – Integrated Framework issued by the Committee ofSponsoring Organizations of the Treadway Commission and our report(not presented herein) dated March 3, 2005 expressed an unqualifiedopinion on management’s assessment of the effectiveness of theCompany’s internal control over financial reporting and an unqualifiedopinion on the effectiveness of the Company’s internal control overfinancial reporting.

Deloitte & Touche LLPNew York, New York

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22

December 31,

AssetsCash and cash equivalentsAccounts receivable, net of allowances of $1,027 and $976Due from related partiesPrepaid expenses and otherInventoriesTotal current assets

Property, plant and equipment, net of accumulated depreciation of $155,582 and $127,772 InvestmentsGoodwillOther assets

Liabilities and Shareholders’ EquityWorking capital facilitiesAccounts payableDue to related parties Accrued liabilities Deferred revenueCurrent portion of long-term debt and capital leases Total current liabilities

Long-term debt and obligations under capital leasesDeferred income taxes

Minority interest

Shareholders’ equity:Preferred shares $0.01 par value (30,000,000 shares authorized, issued nil)class A common shares $0.01 par value (120,000,000 shares authorized):

Issued – 31,790,601class B common shares $0.01 par value (120,000,000 shares authorized):

Issued – 20,503,877Additional paid-in capitalRetained earningsAccumulated other comprehensive lossLess: reduction due to class B common shares owned by a subsidiary – 18,044,478Total shareholders’ equityCommitments and contingencies

See notes to consolidated financial statements.

2004$000

85,61034,98414,71811,91428,965

176,191

916,811123,59929,52919,461

1,265,591

42,92023,8395,453

37,28820,49346,245

176,238

537,4612,710

716, 4094,192

–

318

205280,212277,281(12,845)

(181)544,990

–1,265,591

2003$000

81,34728,06010,73711,71726,115

157,976

822,257146,49529,52912,969

1,169,226

19,16518,8304,924

40,40912,61751,271

147,216

502,9172,846

652,9793,803

–

318

205278,821252,484(19,203)

(181) 512,444

–1,169,226

Consolidated Balance Sheets

48818_OEX_FINANCIALS_p20.qxd 14/4/05 2:04 pm Page 22


Year ended December 31,

Revenue

Expenses:Depreciation and amortizationOperatingSelling, general and administrative

Total expenses

Gain on sale of hotel asset

Earnings from operations before net finance costs

Interest expense, netInterest and related incomeNet finance costs

Earnings before income taxes

Provision for income taxes

Earnings before earnings from unconsolidated companies

Earnings from unconsolidated companies net of tax

Net earnings on class A and B common shares

Earnings per class A and B common share:Basic and diluted

Dividends per class A and class B common shareSee notes to consolidated financial statements.

2003$000

315,863

25,265158,577101,761285,603

4,250

34,510

(19,892)2,673

(17,219)

17,291

1,002

16,289

7,320

23,609$

0.76

–

2004$000

357,284

28,349175,547114,474318,370

–

38,914

(19,948)2,723

(17,225)

21,689

2,551

19,138

9,084

28,222$

0.82

0.10

2002$000

279,268

19,546136,19886,063

241,807

–

37,461

(19,771)1,420

(18,351)

19,110

2,287

16,823

8,471

25,294$

0.82

–

Statements of Consolidated Operations

48818_p20_44.qxd.rev2 20/4/05 10:23 am Page 23

24


Cash flows from operating activities:Net earnings

Adjustment to reconcile net earnings to net cash provided by operating activities:

Depreciation and amortizationUndistributed earnings of affiliatesOther non cash itemsGain from sale of hotel assetChange in assets and liabilities, net of effects

from acquisition of subsidiaries:(Increase)/decrease in accounts receivable, prepaid expenses and other Increase in inventories Increase/(decrease) in accounts payable, accrued liabilities, deferred

revenue and other liabilitiesTotal adjustments

Net cash provided by operating activities

Cash flows from investing activities:Capital expendituresAcquisitions and investments, net of cash acquiredProceeds from sale of fixed assets and otherProceeds from sale of hotel asset

Net cash used in investing activities

Cash flows from financing activities:Net proceeds from/(repayments of) working capital

facilities and redrawable loansIssuance of common shares (net)Proceeds from long-term debtPrincipal payments under long-term debtPayment of common share dividends

Net cash provided by financing activities

Effect of exchange rate changes on cashNet increase/(decrease) in cash and cash equivalentsCash and cash equivalents at beginning of yearCash and cash equivalents at end of yearSee notes to consolidated financial statements.

2003$000

$ 23,609

25,265(2,275)

(234)(4,250)

1,445 (1,172)

(9,144)9,635

33,244

(54,450)(27,225)

1,50439,604

(40,567)

(7,715)51,89368,236

(64,080)–

48,334

2,47643,48737,86081,347

2004$000

28,222

28,349(3,588)(1,054)

–

(9,220)(1,208)

11,06424,34352,565

(65,104)(38,479)

3,003–

(100,580)

21,336–

88,226(55,053)(3,425)51,084

1,1944,263

81,34785,610

2002$000

25,294

19,546(2,142)2,919

–

320(2,699)

(7,919) 10,02535,319

(56,857)(62,094)

––

(118,951)

15,036–

84,134(35,879)

–63,291

338(20,003)57,86337,860

Statements of Consolidated Cash Flows



Balance, January 1, 2002

Comprehensive income:Net earnings on common shares

for the yearOther comprehensive income

Balance, December 31, 2002

Issuance of class A common shares in public offering, net of issuance costs

Comprehensive income:Net earnings on common shares

for the yearOther comprehensive income

Balance, December 31, 2003

Stock based compensationDividends on common sharesComprehensive income:

Net earnings on common shares for the year

Other comprehensive income

Balance, December 31, 2004See notes to consolidated financial statements.

Total

Comprehensive

Income

$000

25,294 8,601

33,895

23,60910,46034,069

28,222 6,358

34,580

Common

Shares

Held By A

Subsidiary

$000

(181)

(181)

(181)

(181)

Accumulated

Other

Comprehensive

Loss

$000

(38,264)

8,601

(29,663)

10,460

(19,203)

6,358

(12,845)

Retained

Earnings

$000

203,581

25,294

228,875

23,609

252,484

(3,425)

28,222

277,281

Additional

Paid-in

Capital

$000

226,963

226,963

51,858

278,821

1,391

280,212

class B

Common

Shares

At Par

Value

$000

205

205

205

205

class A

Common

Shares

At Par

Value

$000

283

283

35

318

318

Statements of Consolidated Shareholders’ Equity

Preferred

Shares

At Par

Value

$000

–

–

–

–

48818_p20_44.qxd.rev2 20/4/05 10:23 am Page 25

26

Notes to Consolidated Financial Statements

1. Summary of significant accounting policies and basis of presentation

(a) BusinessIn this report Orient-Express Hotels Ltd. is referred to as the“Company”, and the Company and its subsidiaries are referred tocollectively as “OEH”. At December 31, 2004, Sea Containers Ltd., aBermuda company (“SCL”), owned 42% of the equity shares in theCompany.

At December 31, 2004, OEH owned or invested in 37 de luxe hotelsand resorts located in the United States, Caribbean, Europe, southernAfrica, South America, Southeast Asia, Australia and South Pacific, threerestaurants in London, New York and Buenos Aires, six tourist trains inEurope, Southeast Asia and Peru, and a river cruiseship in Burma andfive canal boats in France. See Note 17 regarding the purchase of anadditional hotel in February 2005.(b) Basis of presentationThe accompanying consolidated financial statements reflect the resultsof operations, financial position and cash flows of the Company and allits majority-owned subsidiaries. The consolidated financial statementshave been prepared using the historical basis in the assets and liabilitiesand the historical results of operations directly attributable to OEH,and all intercompany accounts and transactions between the Companyand its subsidiaries have been eliminated. Unconsolidated companiesthat are 20% to 50% owned are accounted for on an equity basis.

Cash and cash equivalents include all cash balances and highly-liquidinvestments having original maturities of three months or less.

The consolidated financial statements include an allocation of certaingeneral corporate administrative expenses from SCL which are providedunder a shared services agreement with SCL. In the opinion ofmanagement, general corporate administrative expenses have beenallocated to OEH on a reasonable and consistent basis usingmanagement's estimate of services provided by SCL. However, suchallocations are not necessarily indicative of the level of expenses whichmight have been incurred had OEH not been operating under a sharedservices agreement during the periods presented. Therefore, the financialinformation included herein may not necessarily reflect the consolidatedresults of operations, financial position and cash flows of OEH hadOEH been a separate stand alone entity for the years presented.

Certain items in 2003 and 2002 have been reclassified to conform tothe current year's presentation.

“FASB” means Financial Accounting Standards Board and “APB”means Accounting Principles Board, the FASB’s predecessor. “SFAS”means Statement of Financial Accounting Standards of the FASB, and“FIN” means an accounting interpretation of the FASB.(c) Foreign currency translationThe functional currency for each of the Company’s foreign subsidiariesis the applicable local currency. Foreign subsidiary income andexpenses are translated into U.S. dollars, the reporting currency of theCompany, at the average rates of exchange prevailing during the year.The assets and liabilities are translated into U.S. dollars at the rates ofexchange on the balance sheet date and the related translationadjustments are included in accumulated other comprehensiveincome/(loss). No income taxes are provided on the translation

adjustments as management does not expect that such gains or losseswill be realized. Foreign currency transaction gains and losses arerecognized in operations as they occur.(d) EstimatesThe preparation of financial statements in conformity with accountingprinciples generally accepted in the United States of America requiresmanagement to make estimates and assumptions that affect thereported amounts of assets and liabilities and the disclosure ofcontingent assets and liabilities at the date of the financial statementsand the reported amounts of revenues and expenses during thereporting period. Estimates include, among others, the allowance fordoubtful accounts, depreciation and amortization, carrying value ofassets including intangible assets, employee benefits, taxes andcontingencies. Actual results may differ from those estimates.(e) Stock-based compensationSFAS No. 123, “Accounting for Stock Based Compensation”, asamended by SFAS No. 148, “Accounting for Stock-BasedCompensation – Transition and Disclosure – An Amendment of FASBStatement No. 123”, encourages but does not require companies torecord compensation cost for stock based employee compensationplans at fair value. The Company has chosen to account for stockbased compensation using the intrinsic value method prescribed in APBOpinion No. 25, “Accounting for Stock Issued to Employees”, asamended, and related interpretations.(f) Revenue recognitionHotel and restaurant revenues are recognized when the rooms areoccupied and the services are performed. Tourist train and cruiserevenues are recognized upon commencement of the journey.Deferred revenue consisting of deposits paid in advance is recognizedas revenue when the services are performed for hotels and restaurantsand upon commencement of tourist train and cruise journeys.Revenues under management contracts are recognized based upon theattainment of certain financial results, primarily revenue and operatingearnings, in each contract as defined.(g) Earnings from unconsolidated companiesEarnings from unconsolidated companies include OEH’s share of thenet earnings of its equity investments as well as interest income relatedto loans and advances to the equity investees amounting to $8,165,000in 2004 (2003 – $7,080,000, 2002 – $7,892,000).(h) Marketing costsMarketing costs are expensed as incurred and are reported in selling,general and administrative expenses. Marketing costs include costs ofadvertising and other marketing activities. These costs were$26,780,000 in 2004 (2003 – $24,783,000, 2002 – $20,091,000).(i) Interest expense, netOEH capitalizes interest during the construction of assets. Interestexpense, net excludes interest which has been capitalized in theamount of $1,708,000 in 2004 (2003 – $1,795,000, 2002 –$1,271,000).(j) Interest and related incomeInterest and related income consists entirely of foreign currencyexchange transaction gains of $2,723,000 in 2004 (2003 – $2,673,000,2002 – $1,420,000).(k) Income taxesDeferred income taxes result from temporary differences between thefinancial reporting and tax bases of assets and liabilities. Deferred taxesare recorded at enacted statutory rates and are adjusted as enacted

48818_p20_44.qxd.rev2 19/4/05 3:03 pm Page 26


rates change. Classification of deferred tax assets and liabilitiescorresponds with the classification of the underlying assets and liabilitiesgiving rise to the temporary differences or the period of expectedreversal, as applicable. A valuation allowance is established, whennecessary, to reduce deferred tax assets to the amount that is morelikely than not to be realized based on available evidence.(l) Earnings per shareBasic earnings per share exclude dilution and are computed by dividingnet earnings available to common shareholders by the weightedaverage number of class A and B common shares outstanding for theperiod. The number of shares used in computing basic earnings pershare was 34,250,000 for the year ended December 31, 2004 (2003 –31,139,000, 2002 – 30,800,000). The number of shares used incomputing diluted earnings per share was 34,367,000 for the yearended December 31, 2004 (2003 – 31,152,000, 2002 – 30,858,000).

The following table is a reconciliation of the net earnings and pershare amounts used in the calculation of basic earnings per share anddiluted earnings per share:

(m) InventoriesInventories include food, beverages, certain operating stocks and retailgoods. Inventories are valued at the lower of cost or market valueunder the first-in, first-out method.(n) Property, plant and equipment, netProperty, plant and equipment, net are stated at cost less accumulateddepreciation. The cost of significant renewals and betterments iscapitalized and depreciated, while expenditures for normal maintenanceand repairs are expensed as incurred.Depreciation expense is computed using the straight-line method overthe following estimated useful lives:

Description Useful livesBuildings Up to 60 years and 10% residual valueTourist trains Up to 50 yearsFurniture, fixtures and equipment 5-25 yearsRiver cruiseship and canal boats 25 yearsEquipment under capital lease and

leasehold improvements Lesser of initial lease term or economic life

(o) Impairment of long-lived assetsIn accordance with SFAS No. 144, “Accounting for the Impairment orDisposal of Long-Lived Assets”, OEH management reviews long-livedassets whenever events or changes in circumstances indicate that thecarrying amount of the assets may not be recoverable. In the eventthat an impairment occurs, OEH records a charge to income calculatedas the excess of the asset's carrying value over the estimated fair value.(p) InvestmentsInvestments include equity interests in and advances to unconsolidatedcompanies.(q) GoodwillIn accordance with SFAS No. 142, “Goodwill and Other IntangibleAssets”, goodwill must be evaluated annually to determine impairment.Goodwill is not amortized.

The goodwill impairment testing under SFAS No. 142 is performed intwo steps, first, the determination of impairment based upon the fairvalue of a reporting unit as compared with its carrying value and,second, if there is an impairment, the measurement of the amount ofimpairment loss by comparing the implied fair value of goodwill withthe carrying amount of that goodwill. Impairment testing is performedannually at year end. At December 31, 2004, there was no impairment.(r) Concentration of credit riskDue to the nature of the leisure industry, concentration of credit riskwith respect to trade receivables is limited. OEH’s customer base iscomprised of numerous customers across different geographic areas.(s) Derivative financial instrumentsIf the derivative is designated as a fair value hedge, the changes in thefair value of the derivative and of the hedged item attributable to thehedged risk are recognized in earnings. If the derivative is designated asa cash flow hedge, the effective portions of changes in the fair value ofthe derivative are recorded as a component of accumulated othercomprehensive income/(loss) in shareholders’ equity and arerecognized in the statement of consolidated operations when thehedged item affects earnings. The ineffective portion of a hedgingderivative’s change in the fair value will be immediately recognized inearnings. If the derivative is not designated as a hedge for accountingpurposes, the change in its fair value is recorded in earnings.

OEH management formally documents all relationships betweenhedging instruments and hedged items, as well as its risk managementobjectives and strategies for undertaking various hedge transactions.OEH links all hedges that are designated as fair value hedges to specificassets or liabilities on the balance sheet or to specific firmcommitments. OEH links all hedges that are designated as cash flowhedges to forecasted transactions or to floating rate liabilities on thebalance sheet. OEH management also assesses, both at the inceptionof the hedge and on an ongoing basis, whether the derivatives that areused in hedging transactions are highly effective in offsetting changes infair values or cash flows of hedged items. Should it be determined thata derivative is not highly effective as a hedge, OEH will discontinuehedge accounting prospectively.

OEH is exposed to interest rate risk on its floating rate debt andmanagement tries to manage the impact of interest rate changes onearnings and cash flows. OEH’s policy is to enter into interest rateswap and interest rate cap agreements from time to time to hedge thevariability in interest rate cash flows due to interest rate risk on floatingrate debt. These swaps convert the floating rate interest payments ona portion of the outstanding debt into fixed payments.

Year ended December 31, 2004:Basic earnings per shareEffect of dilutive stock optionsDiluted earnings per share



Per ShareAmount

$

0.82–

0.82

0.76–

0.76

0.82–

0.82

Numberof Shares

” ’000

34,250117

34,367

31,13913

31,152

30,80058

30,858

Net Earnings

$000

28,222–

28,222

23,609–

23,609

25,294–

25,294

48818_p20_44.qxd.rev2 20/4/05 10:24 am Page 27

28

(t) Recent accounting pronouncementsIn December 2004, the FASB issued SFAS No 123R, “Share-BasedPayment”, requiring employee stock options and rights to purchaseshares under stock participation plans to be accounted for under the fair value method, and eliminates the ability to account for theseinstruments under the intrinsic value method prescribed by APBOpinion No. 25 and allowed under the original provisions of SFAS No. 123. SFAS No. 123R requires the use of an option pricing modelfor estimating fair value, which is amortized to expense over theservice periods. The requirements of SFAS No. 123R are effective forfiscal periods beginning after June 15, 2005. SFAS No. 123R allows foreither prospective recognition of compensation expense orretrospective recognition, which may be back to the original issuance of SFAS No. 123 or only to interim periods in the year of adoption.The Company is currently evaluating these transition methods and the impact of its adoption.

2. Significant acquisitions and investments

(a) Acquisitions2004 Acquisitions:Effective November 1, 2004, OEH acquired El Encanto Hotel andGarden Villas in Santa Barbara, California for $26,000,000 paid in cash.Part of the purchase price was financed with a bank loan. The entirepurchase price was allocated to tangible fixed assets, primarily land,based on their fair value.

Also in November 2004, OEH entered into an agreement to acquireThe Royal Scotsman luxury tourist train. OEH expects to purchase50% ownership of The Royal Scotsman in April 2005 and the balancewill be acquired on an earn-out basis at a multiple of 5.5 times EBITDA(as defined in the purchase agreement) in three years. The initial 50%is being acquired for approximately $2,700,000 (including assumptionof 50% of debt) and the balance will depend on earnings.

On May 25, 2004, OEH acquired a 50% interest in a luxury Frenchcanal and river cruise business called Afloat in France. Also as part ofthis transaction OEH acquired the five canal boats operated in thebusiness. The total investment was $3,000,000 paid in cash.

On February 2, 2004, OEH entered into an agreement with thePansea Hotel group, the owner of six de luxe hotels in Southeast Asia.Under this agreement, OEH is to provide a maximum of $8,000,000 in loans to the hotel holding company which are convertible after three years into approximately 25% of the holding company’s shares.As of December 31, 2004, OEH had provided $4,625,000 in loans toPansea which are recorded in other assets. The conversion price of the loans is determined at a multiple of EBITDA less existing debt on the exercise date (as defined in the investment agreement).OEH is not managing the hotels but is marketing them along with its other properties.2003 Acquisitions:In April 2003, OEH acquired a 50% interest in the Hotel Ritz in Madrid,Spain, through a 50%/50% joint venture with a Spanish real estateinvestment company. The purchase price of the hotel was$135,000,000, and each joint venture partner contributed $22,000,000with the balance financed by bank loans. In addition to its interest inthe hotel, OEH acquired the exclusive long-term management contractof the hotel. This investment is accounted for under the equity methodof accounting.2002 Acquisitions:In February 2002, OEH acquired the hotel La Residencia in Mallorca,Spain and the hotel Le Manoir aux Quat’Saisons in Oxfordshire,England for approximately $40,000,000 in total. The price was paidlargely with bank mortgage finance.

In March 2002, OEH acquired for approximately $7,500,000 a 75%share interest in Maroma Resort and Spa near Cancún, Mexico. Thepurchase price was paid in cash, with $1,000,000 paid in March 2003.(b) DispositionsIn November 2003, but effective at the beginning of the fourth quarter,OEH sold the Hotel Quinta do Lago in the Algarve region of Portugalat a price of $40,000,000 received in cash, which resulted in a gain ofapproximately $4,250,000 (or $0.14 per share).(c) InvestmentsInvestments represent equity interests of 50% or less and in whichOEH exerts significant influence. OEH does not have effective controlof these unconsolidated companies and, therefore, accounts for these

48818_p20_44.qxd.rev2 19/4/05 3:04 pm Page 28


investments using the equity method.OEH’s investments in and loans and advances to unconsolidated

companies amounted to $123,599,000 at December 31, 2004 (2003 – $146,495,000, 2002 – $85,159,000). OEH’s earnings from unconsolidated companies were $9,084,000 in 2004 (2003 –

Included in unconsolidated companies is the Charleston Place Hotel to which OEH has made loans in addition to its equity investment. One ofthese loans has a conversion feature exercisable by OEH no sooner than 2020 and in limited circumstances before then, under which OEH mayconvert its loans into additional capital, thereby giving OEH a majority equity interest in the hotel.

Also included in unconsolidated companies are the Peru hotel and PeruRail joint ventures, under which OEH and the other 50% participant mustcontribute equally additional equity capital needed for the businesses. If the other participant does not meet this obligation, OEH has the right todilute the other participant and obtain a majority equity interest in the affected joint venture company. OEH also has rights to purchase the otherparticipant's interests, exercisable in limited circumstances such as its bankruptcy.

$7,320,000, 2002 – $8,471,000), and OEH received no dividends in2004, 2003 or 2002 from these investments. See Note 16.

Summarized financial data for unconsolidated companies are asfollows:

December 31,

Current assetsProperty, plant and equipment, netOther assetsTotal assets

Current liabilitiesLong-term debtOther liabilitiesTotal shareholders' equityTotal liabilities and shareholders' equity


RevenueEarnings from operations before net finance costs Net loss

2003$000

42,172279,298

4,472325,942

43,538144,25171,35166,802

325,942

2003$000

110,95213,953(1,282)

2004$000

39,993357,949

5,469403,411

41,290216,25179,40366,467

403,411

2004$000

135,250 16,467 (4,767)

2002$000

91,82310,837 (3,002)

3. Property, plant and equipment, net

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

December 31,

Land and buildings Machinery and equipmentFixtures, fittings and office equipment River cruiseship and canal boats

Less: accumulated depreciation

2003$000

678,683 135,584119,19116,571

950,029(127,772)822,257

2004$000

769,951149,191134,93518,316

1,072,393(155,582)916,811

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

December 31,

Freehold and leased land and buildings Machinery and equipmentFixtures, fittings and office equipment

Less: accumulated depreciation

2003$000

14,080 1,9644,229

20,273(1,626)18,647

2004$000

14,6122,4104,886

21,908(2,591)19,317

48818_p20_44.qxd.rev2 20/4/05 10:25 am Page 29

30

December 31,

Unsecured working capital facilities, with a weighted average interest rate of 4.59% and 7.43%, respectively

2003$000

19,165

2004$000

42,920

6. Long-term debt and obligations under capital leases

(a) Long-term debtLong-term debt consists of the following:

The interest rates on substantially all of OEH's long-term debt areadjusted regularly to reflect current market rates. Accordingly, thecarrying amounts of OEH’s long-term debt also approximate fair value.

OEH has guaranteed, through 2011, $12,184,000 of the debt obligationsof the PeruRail operations, an unconsolidated joint venture in whichOEH has a 50% investment and, through 2005, $4,413,000 of PeruRail

contingent obligations relating to the performance of its governmentalrail concessions. OEH has guaranteed, through 2005, $3,000,000 ofthe debt obligations of Charleston Center LLC, owner of the CharlestonPlace Hotel in which OEH has a 19.9% equity investment. OEH hasguaranteed, through 2005, a $3,000,000 bank loan to Eastern andOriental Express Ltd. in which OEH has a 25% equity investment. Allof these guarantees were in place before December 31, 2002.(b) Obligations under capital leasesThe following is a summary of future minimum lease payments undercapital leases together with the present value of the minimum leasepayments at December 31, 2004 :

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

4. Goodwill

As of December 31, 2004 and 2003, OEH determined the carryingvalues of all its reporting units were less than their estimated fairvalues, indicating that there was no impairment of the recordedgoodwill.

The Company’s goodwill consists of $700,000 related to the trainsand cruises business segment and $28,829,000 related to the hotelsand restaurants business segment. There was no change in the carryingamount of goodwill for the year ended December 31, 2004.

December 31,

Loans from banks collateralized by property, plant and equipment payableover periods of 1 to 11 years, with a weighted average interest rate of 4.18% and 3.74%, respectively, primarily based on LIBOR

Loan secured by river cruiseship payable over 4 years, with a weighted interest rate of 2.78% based on LIBOR

Obligations under capital lease (see Note 6(b))

Less: current portion

2003$000

530,003

3,00021,185

554,18851,271

502,917

2004$000

567,012

–16,694

583,70646,245

537,461

Certain credit agreements of OEH have restrictive covenants,including a minimum consolidated net worth test and a minimumconsolidated interest coverage test as defined under a bank-syndicated $179,000,000 loan facility borrowed during 2004 andsecured by three of OEH’s Italian hotels. At December 31, 2004,OEH was in compliance with all of its restrictive covenants. OEHdoes not currently have any covenants in any of its loan agreementswhich limit the payment of dividends.

The following is a summary of the aggregate maturities ofconsolidated long-term debt excluding obligations under capital leasesat December 31, 2004:

$00043,329

134,446103,303208,88744,50332,544

567,012

Year ending December 31,2005 2006 2007 2008 2010 2010 and thereafter

$0003,6922,6202,3762,3082,1296,993

20,1183,424

16,6942,916

13,778

Year ending December 31,2005200620072008 2009 2010 and thereafter Minimum lease payments Less: amount of interest contained in above payments Present value of minimum lease payments Less: current portion

5.Working capital facilities

Working capital facilities are comprised of the following, all repayablewithin one year :

OEH had approximately $55,000,000 of working capital lines of creditat December 31, 2004 (2003 – $55,000,000) issued by various financialinstitutions and having various expiration dates, of which $12,000,000was undrawn (2003 – $35,835,000).



7. Pension plan

Through December 31, 2002, a number of non-U.S. OEH employees participated in a defined benefit pension plan of a subsidiary of SCL. As ofJanuary 1, 2003, an OEH subsidiary established a new defined benefit plan and the OEH employees formerly included in the SCL plan transferredto the new plan.

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

Year ended December 31,Discount rateAssumed rates of compensation increasesExpected long-term rate of return on plan assets

20035.4%3.0%7.0%

20045.4%3.0%7.0%

20025.6%2.6%6.5%

Year ended December 31,Discount rateAssumed rate of compensation increases

20045.60%3.00%

20045.30%3.25%

The significant weighted-average assumptions used to determine benefit obligations at year end are as follows:

The discount rate essentially represents the rate of return on high-quality corporate bonds at the end of the year in the country in which theassets are held.

In determining the expected long-term rate of return on assets, management has evaluated information from OEH’s actuaries and financialadvisors, including their review of anticipated future long-term performance of individual asset classes and the asset allocation strategy given theanticipated requirements of the plan to determine the average rate of earnings expected on the funds invested. The returns projected are basedon broad equity and bond indices, including fixed interest rate U.K. gilts of long-term duration. OEH’s expected long-term rate of return is basedon an asset allocation of 61.2% in equity investments and 38.8% in fixed income investments.

The weighted-average asset allocations of OEH’s pension plan as of December 31, 2004 and 2003 by asset category as a percentage of planassets are as follows:

Year ended December 31,Equity securitiesFixed income investmentsTotal

200360.4%39.6%

100.0%

200461.2%38.8%

100.0%

48818_p20_44.qxd.rev2 20/4/05 10:25 am Page 31

32


Change in benefit obligation:Benefit obligation at beginning of yearService costInterest cost Plan participants’ contributionsActuarial loss/(gain)Benefits paidForeign currency translationBenefit obligation at end of year

Change in plan assets:Fair value of plan assets at beginning of yearActual return on plan assetsEmployer contributionsPlan participants' contributionsTransferred-in assetsBenefits paidForeign currency translationFair value of plan assets at end of year

Funded statusUnrecognized net actuarial lossNet amount recognized

2003$000

5,15852035322838–

6806,977

3,613579848228

––

5555,823

(1,154)3,3602,206

2004$000

6,977780448280

4,986(329)811

13,953

5,823463772280

–(329)531

7,540

(6,413)6,697

284

7. Pension plan (continued)The changes in the benefit obligation, the plan assets and the funded status for the plan were as follows:


Prepaid benefit cost Accrued benefit cost Accumulated other comprehensive lossNet amount recognized

2003$000362

(460)2,3042,206

2004$000284

––

284

Included in actuarial loss/(gain) are amounts attributable to OEH employees as a result of individual OEH employee benefit obligationstransferred from the SCL defined benefit pension plan referred to above.

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

At December 31, 2003, the accumulated benefit obligation was in excess of plan assets under the SCL defined benefit pension plan referred toabove. The following table details certain information with respect to OEH’s pension plan as follows:


Project benefit obligationAccumulated benefit obligationFair value of plan assets

2003$0006,0575,2184,758

2004$000

13,9537,3597,540




Service costInterest cost on projected benefit obligationExpected return on assetsNet amortization and deferralsNet periodic benefit cost

2003$000520353

(274)92

691

2004$000780448

(362)5

871

2002$000425 270

(264)95

526

Additional information about OEH’s pension plan is as follows:

The components of net periodic benefit cost for the OEH employees covered under the plan consisted of the following:


Decrease/(increase) in minimum pension liability (net of tax) in othercomprehensive income

2003$000

(159)

2004$000

1,613

OEH expects to contribute $833,000 to its pension plan in 2005. At December 31, 2004, there were no members receiving benefits from theplan. The following benefit payments, which reflect assumed future service, are expected to be paid:

$000–3

4444 52

784927

Year ending December 31,200520062007200820092010-2014

8. Income taxes

The provision for income taxes consists of the following:

United StatesOther

Total $0001,981

3062,287

Deferred $0001,204

(1,927)(723)

Current$000777

2,2333,010

Total $000(440)

1,4421,002

Deferred $000(146)

(2,003)(2,149)

Current $000(294)

3,4453,151

Total $000848

1,7032,551

Deferred $000538

(2,575)(2,037)

Current $000310

4,2784,588

Year ended December 31, 2004 Year ended December 31, 2003 Year ended December 31, 2002

The Company is incorporated in Bermuda, which does not impose an income tax. OEH’s effective tax rate is entirely due to income taxesimposed by jurisdictions in which OEH conducts business other than Bermuda.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financialreporting purposes and the amounts used for income tax purposes. The following represents OEH’s net deferred tax liabilities:

December 31,

Gross deferred tax assets (operating loss carryforwards)Less: valuation allowanceNet deferred tax assetsDeferred tax liabilitiesNet deferred tax liabilities

2004$000

64,493 (31,996)32,497

(35,207)(2,710)

2003$000

71,467 (39,886)31,581

(34,427)(2,846)

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34

10. Shareholders’ equity

(a) Public offeringIn November and December 2003, the Company completed aregistered public offering in the United States through underwriters of3,450,000 newly-issued class A common shares. Net proceedsamounted to $51,893,000.(b) Dual common share capitalizationThe Company has been capitalized with class A common shares, ofwhich there are 120,000,000 authorized, and class B common shares, ofwhich there are 120,000,000 authorized, each convertible at any timeinto one class A common share. In general, holders of class A and classB common shares vote together as a single class, with holders of class Bshares having one vote per share and holders of class A shares havingone-tenth of one vote per share. In all other substantial respects, theclass A and class B common shares are the same.(c) Shareholder rights agreementThe Company has in place a shareholder rights agreement which willbe implemented not earlier than the tenth day following the first to

occur of (i) the public announcement of the acquisition by a person(other than a subsidiary of the Company, SCL or a subsidiary of SCL)of shares carrying 20% or more of the total voting rights which may be cast at any general meeting of the Company and (ii) thecommencement or announcement of a tender offer or exchange offerby a person for shares carrying 30% or more of the total voting rightsthat may be cast at any general meeting of the Company. At that time,the rights will detach from the class A and class B common shares, andthe holders of the rights will be entitled to purchase, for each rightheld, one one-hundredth of a series A junior participating preferredshare of the Company at an exercise price of $142 (the “PurchasePrice”) for each one one-hundredth of such junior preferred share,subject to adjustment in certain events. From and after the date onwhich any person acquires beneficial ownership of shares carrying 20%or more of the total voting rights which may be cast at any generalmeeting of the Company, each holder of a right (other than the

8. Income taxes (continued)The deferred tax assets consist primarily of tax loss carryforwards. The gross amount of tax loss carryforwards is $196,299,000. Of this amount,$59,168,000 will expire in the five years ending December 31, 2009, and a further $9,574,000 will expire in the five years ending December 31,2014. The remaining losses of $127,557,000 will expire after December 31, 2014 or have no expiry date.

A valuation allowance has been provided against gross deferred tax assets where it is thought more likely than not that the benefits associatedwith these assets will not be realized. The decrease in the valuation allowance from December 31, 2003 to December 31, 2004 of $7,890,000reflects, among other things, the fact that management now believes that certain deferred tax assets in respect of the U.S. and Italian operationsare more likely than not to be realized.

The deferred tax liabilities consist primarily of differences between the tax basis of depreciable assets and the adjusted basis as reflected in thefinancial statements.

OEH has prepared these financial statements pursuant to a tax sharing agreement with SCL and its subsidiaries. In accordance with thatagreement, prior to August 10, 2000, the date of the Company’s initial public offering, OEH utilized/relinquished losses with certain SCLsubsidiaries. After that date, OEH may no longer utilize/relinquish losses with SCL and its subsidiaries. The following represents the net liability thatexists from OEH to SCL and its subsidiaries:

9. Supplemental cash flow information


Tax sharing agreement

2003$000

(1,973)

2002$000

(1,973)

2004$000

(92)


Cash paid for :InterestIncome taxes

2003$000

19,7143,411

2002$000

19,920 5,097

2004$000

21,4364,071

Non-cash investing and financing activities:In conjunction with certain acquisitions in 2004, 2003 and 2002 (see Note 2(a)), liabilities were assumed as follows:


Fair value of assets acquired Cash paidLiabilities assumed

2003$000

50,611(22,000)28,611

2002$000

73,166 (47,500)25,666

2004$000

30,146(29,670)

476



acquiring person) will be entitled upon exercise to receive, at the thencurrent Purchase Price and in lieu of the junior preferred shares, thatnumber of class A or class B common shares (depending on whetherthe right was previously attached to a class A or B share) having amarket value of twice the Purchase Price. If the Company is acquiredor 50% or more of its consolidated assets or earning power is sold,each holder of a right will be entitled to receive, upon exercise at thethen current Purchase Price, that amount of common equity of theacquiring company which at the time of such transaction would have amarket value of two times the Purchase Price. Also, the Company’sboard of directors may exchange all or some of the rights for class Aand class B common shares (depending on whether the right waspreviously attached to a class A or B share) if any person acquires 20% beneficial ownership as described above, but less than 50%beneficial ownership. The rights will expire on June 1, 2010 but may beredeemed at a price of $0.05 per right at any time prior to the tenthday following the date on which a person acquires beneficial ownershipof shares carrying 20% or more of the total voting rights which may becast at any general meeting of the Company.

(d) Acquired sharesIncluded in shareholders’ equity is a reduction for 18,044,478 class Bcommon shares of the Company that a subsidiary of the Companyacquired from SCL in July 2002 under an agreement with SCL datingfrom July 2000. Consistent with the overall presentation of the capitalstructure in the financial statements, the Company has given effect tothe terms and conditions of that agreement as if the agreement hadbeen consummated from the beginning of the earliest year presented.As a result, a total of 18,044,478 class B common shares are deemedto be owned by the Company subsidiary at December 31, 2004 and2003. Under applicable Bermuda law, these shares are outstanding andmay be voted although in computing earnings per share these sharesare treated as a reduction to outstanding shares.(e) Preferred sharesThe Company has 30,000,000 authorized preferred shares, par value$0.01 each, 500,000 of which have been reserved for issuance as seriesA junior participating preferred shares upon exercise of preferredshare purchase rights held by class A and B common shareholders inconnection with the shareholder rights agreement. See Note 10(c).

11. Employee stock option plans

Under the Company’s 2000 and 2004 stock option plans, options to purchase up to 750,000 and 500,000, respectively, class A and B common shares maybe awarded to employees of OEH at fair market value at the date of grant. Options are exercisable three years after award and must be exercised tenyears from the date of grant. At December 31, 2004, 737,000 class A common shares were reserved under the 2000 plan for issuance pursuant to optionsawarded to 47 persons, and 87,000 class A common shares were reserved under the 2004 plan for issuance pursuant to options awarded to 34 persons.

Transactions under the plans have been as follows:

Outstanding at beginning of periodGrantedTerminatedExercisedOutstanding at end of periodExercisable at end of period

Option price$13.00-$19.00

$14.70$13.40

$13.00-$19.00

Shares676,000150,000

(2,000)–

824,000271,500

Option price$19.00

$13.00-$13.06$19.00

$13.00-$19.00

Shares546,500301,500

(275,000)–

573,000–

Option price$13.00-$19.00$13.40-$17.09

$13.00-$19.00$19.00

Shares573,000103,000

––

676,000260,000

Year ended December 31, 2004 Year ended December 31, 2003 Year ended December 31, 2002

The options outstanding at December 31, 2004, were as follows:

Range of Exercise Prices

$13.00$13.06$13.40$14.70$17.09$19.00$19.00

Outstanding at 12/31/2004

30,000271,50098,000

150,0003,000

11,500260,000 824,000

Exercisable at 12/31/2004

–––––

11,500260,000271,500

Remaining Contractual Lives

7.87.88.49.6 8.86.25.6

Exercise Prices for Outstanding Options

$13.00$13.06$13.40$14.70$17.09$19.00$19.00

Exercise Prices for Exercisable Options

–––––

$19.00$19.00

Weighted Average ofNumber of Shares

48818_p20_44.qxd.rev2 20/4/05 10:26 am Page 35

36

11. Employee stock option plans (continued)As discussed in Note 1(e), OEH accounts for its stock-based compensation plans under APB Opinion No. 25. Had compensation cost for theCompany's stock option plans been determined based on fair values as of the dates of grant, OEH’s net earnings and earnings per share wouldhave been reported as follows:


Net earnings:As reported on common sharesAdd: Stock-based compensation expense included

in reported net income, net of related tax effectsDeduct:Total stock-based employee compensation expense

determined under fair value based method, net of related taxPro forma

Basic and diluted earnings per share:As reportedPro forma

2003$000

23,609

–

(1,040)22,569

$0.760.72

2002$000

25,294

–

(382)24,912

$0.820.81

2004$000

28,222

1,514

(897)28,839

$0.820.80

12. Commitments and contingencies

Outstanding contracts to purchase fixed assets were approximately $27,200,000 at December 31, 2004 (2003 – $11,200,000).Future rental payments under operating leases in respect of equipment rentals and leased premises are payable as follows:

Year ending December 31,200520062007200820092010 and thereafter

$000922 507257194159155

2,194

Rental expense for the year ended December 31, 2004 amounted to $1,716,000 (2003 – $1,366,000, 2002 – $1,108,000).Under the agreement to acquire The Royal Scotsman (see Note 2(a)), OEH has an option exercisable in April 2005 to purchase 50% of the

outstanding shares of the train-owning company at a multiple of EBITDA less existing debt (as defined in the agreement). OEH also has an optionexercisable in December 2007 to acquire the remaining 50% of the outstanding shares at a multiple of EBITDA less existing debt (as defined in theagreement). In the event that OEH does not exercise these options, the existing shareholders have the option to sell the related shares to OEHfor £1,400,000 ($2,700,000) and £2,100,000 ($4,000,000), respectively. At December 31, 2004, the fair value of this contract was approximately zero.

Pursuant to the terms of its investment in the Afloat in France business (see Note 2(a)), OEH purchased an option to acquire the remainingshares in the business, which is exercisable effective in May 9, 2009. Prior to that date, the other shareholders have the right to sell their shares inthe business to OEH. Both options have the same exercise prices, which are determined at a multiple of EBITDA less existing debt (as defined inthe agreement) during the exercise periods. The exercise price of each option approximates the fair value of the shares at December 31, 2004.

Pursuant to the terms of its investment in the Pansea Hotel group (see Note 2(a)), OEH paid $1,400,000, which is recorded in other assets, foroptions exercisable after three to five years to acquire all of the holding company’s shares. The existing shareholders also have the right to selltheir shares to OEH after five years. These options have the same exercise prices, which are determined at a multiple of EBITDA less existing debt(as defined in the agreement) during the exercise periods. The exercise price of the options approximates the fair value of the shares atDecember 31, 2004.

The pro forma figures in the preceding table may not be representative of amounts in future years.

Estimates of fair values of stock options on the grant dates using the Black Scholes option pricing model are based on the following assumptions:

As of and for year ended December 31,Expected share price volatilityRisk free interest rateExpected annual dividends per shareExpected life of stock optionsWeighted average fair value

200446.33%4.01%$0.10

5 years$6.70

200351.68%2.25%None

5 years$6.27

200240.34%2.78%None

5 years$5.64

48818_p20_44.qxd.rev2 19/4/05 3:05 pm Page 36


13. Derivative financial instruments

OEH is exposed to interest rate risk on its floating rate debt and has entered into interest rate cap agreements that limit such exposure to acertain level. These agreements have been designated and have qualified as cash flow hedges of the benchmark interest rate risk related to thefloating rate debt. Considering that the cap agreements have the same profile as the respective hedged debt instruments, they are expected to beand have been highly effective and, therefore, no ineffectiveness has been recognized in earnings and no component of the derivative instrumentswas excluded from the assessment of hedge effectiveness.

At December 31, 2004 and 2003, the fair values of the outstanding interest rate caps were accounted for as other assets at $124,000 and$524,000, respectively.

The amounts in accumulated other comprehensive income, a $209,000 loss at December 31, 2004, will be recognized in earnings in the periodsduring which the hedged forecasted transactions affect earnings (i.e., when the hedged interest expense on the debt is recorded). Of the existinglosses at December 31, 2004, approximately $210,000 will be reclassified into earnings during the next 12 months, assuming no further changes infair value of the contracts. No hedges were discontinued during 2004 and OEH does not hold derivatives other than for hedging purposes.

In December 2003, OEH entered into an interest rate swap to hedge its exposure to interest rate movements in a loan for a notional amount ofa9,466,700 ($12,900,000). The fair value of the swap was $630,000 negative and $142,800 negative at December 31, 2004 and 2003, respectively,and recorded in accrued liabilities. Changes in the fair value of this swap are recorded to interest expense as OEH elected not to apply hedgeaccounting for this transaction.

14. Other comprehensive income/(loss)

The accumulated balances for each component of other comprehensive loss are as follows:


Foreign currency translation adjustmentsDerivative financial instrumentsMinimum pension liability, net of tax

2003$000

(17,682) 92

(1,613)(19,203)

2004$000

(12,636)(209)

–(12,845)


Net earnings on common sharesForeign currency translation adjustmentsChange in fair value of derivativesReclassification adjustment for losses included in net earningsAdditional minimum pension liability, net of taxComprehensive income

2003$000

23,60910,465

102–

(107)34,069

2002$000

25,2948,361

(10)1,756

(1,506)33,895

2004$000

28,2225,046(301)

–1,613

34,580

The components of other comprehensive income/(loss) are as follows:

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38

15. Information concerning financial reporting for segments and operations in different geographical areas

OEH’s segment information has been prepared in accordance with SFAS No. 131, “Disclosures about Segments of an Enterprise and RelatedInformation”. OEH’s operations are organized along service lines as two segments, (i) hotels and restaurants and (ii) tourist trains and cruises, andare grouped into various geographical regions. Hotels at December 31, 2004 are located in the United States, Caribbean, Mexico, Europe,Southern Africa, South America, Southeast Asia, Australia and South Pacific, restaurants are located in London, New York and Buenos Aires, touristtrains operate in Europe, Southeast Asia and Peru, and a river cruiseship operates in Burma and five canal boats in France. Segment performanceis evaluated based upon segment net earnings before interest, tax (including tax on earnings from unconsolidated companies), depreciation,amortization and gain on hotel asset sale (“segment EBITDA”). Segment information is presented in accordance with the accounting policiesdescribed in Note 1.

Financial information regarding these business segments is as follows:


Revenue:Hotels and restaurants

Owned hotels – Europe– North America– Rest of World

Hotel management/part ownership interestsRestaurants

Tourist trains and cruises

Depreciation and amortization:Hotels and restaurants


Restaurants


Segment EBITDA:Owned hotels – Europe

– North America– Rest of World

Hotel management/part ownership interestsRestaurantsTourist trains and cruisesCentral overheads

Segment EBITDA/net earnings reconciliation:Segment EBITDAAdd:

Gain on sale of hotel assetLess

Depreciation and amortizationNet finance costsProvision for income taxesShare of provision for income taxes of unconsolidated companies

Net earnings

2003$000

115,884 66,56462,9896,495

17,510269,44246,421

315,863

8,4206,2496,888

59522,152 3,113

25,265

32,78911,09711,07713,4742,6165,984

(12,157) 64,880

64,880

4,250

25,26517,2191,0022,035

23,609

2004$000

116,07475,37679,5767,344

20,339298,70958,575

357,284

9,9546,5367,755

75725,0023,347

28,349

29,86814,95118,05114,8853,911

13,057(15,707)79,016

79,016

–

28,34917,2252,5512,669

28,222

2002$000

99,939 58,80154,7255,104

18,240236,80942,459

279,268

6,5434,4335,481

51216,9692,577

19,546

29,17011,14912,69612,4083,7798,348

(10,509)67,041

67,041

–

19,54618,3512,2871,563

25,294


39


Earnings from unconsolidated companies:Hotels and restaurants

Hotel management/part ownership interests Restaurants


Capital expenditure:Hotels and restaurants


Restaurants


Identifiable assets:Hotels and restaurants


Hotel management/part ownership interestsRestaurants


2004$000

6,437223

6,6602,4249,084

32,64314,17715,214

69462,7282,376

65,104

415,791296,704307,155103,18443,024

1,165,85899,733

1,265,591

2002$000

7,310(125)

7,1851,2868,471

16,71223,60112,3502,313

54,9761,881

56,857

2003$000

6,97985

7,064256

7,320

16,827 19,92813,213

80150,7693,681

54,450

411,818230,956316,53281,15937,543

1,078,00891,218

1,169,226

Financial information regarding geographic areas based on the location of properties is as follows:


Revenue:EuropeNorth America Rest of World

Long-lived assets at book value:EuropeNorth AmericaRest of World

Property, plant and equipmentInvestmentsGoodwill

2003$000

157,63287,34170,890

315,863

412,246276,070309,965998,281

2003$000

822,257146,49529,529

998,281

2004$000

169,78898,24489,252

357,284

431,663331,544306,732

1,069,939

2004$000

916,811123,59929,529

1,069,939

2002$000

137,17980,87361,216

279,268

Long-lived assets at book value constitute the following:

ORIENT-EXPRESS HOTELS LTD.

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40

16. Related party transactions

For the year ended December 31, 2004, OEH paid subsidiaries of SCL$5,330,000 (2003 – $4,631,000, 2002 – $5,899,000) for the provisionof various services provided under a shared services agreementbetween OEH and SCL. These amounts have been settled inaccordance with the shared services agreement and are included inselling, general and administrative expenses.

OEH manages under a long-term contract the Charleston PlaceHotel (accounted for under the equity method) and has made loans tothe hotel-owning company. For the year ended December 31, 2004,OEH earned $3,943,000 (2003 – $3,917,000, 2002 – $4,087,000) inmanagement fees which are recorded in revenue, and $8,165,000(2003 – $7,080,000, 2002 – $7,892,000) in interest income onpartnership and other loans, which is recorded in earnings fromunconsolidated companies. These loans have an indefinite maturityperiod and bear interest at a spread over LIBOR.

OEH manages under long-term contracts the Hotel Monasterio andthe Machu Picchu Sanctuary Lodge owned by its 50%/50% joint venturewith local Peruvian interests, as well as the 50%-owned PeruRailoperation, and provides loans, guarantees and other credit accommodationto these joint ventures. In the year ended December 31, 2004, OEHearned management and guarantee fees of $4,337,000 (2003 –$1,940,000, 2002 – $1,167,000), and loan interest of $104,000 (2003 –$297,000, 2002 – $330,000) which is recorded in earnings formunconsolidated companies. At December 31, 2004, loans to the hotelsaggregated $2,000,000, bear interest at a spread over LIBOR and comedue in 2005. At the same date, OEH had a $750,000 subordinated loanto the PeruRail operation with an indefinite maturity date and interestalso at a spread over LIBOR. All of the guarantees relating to theCompany’s investments in Peru were in place prior to December 31, 2002.

OEH manages under a long-term contract the Hotel Ritz in Madrid,

Spain, in which OEH acquired a 50% interest in April 2003 (see Note2) and is accounted for under the equity method. For the year endedDecember 31, 2004, OEH earned $969,000 (2003 – $1,069,000) inmanagement fees, which are included in revenue.

OEH has granted to James Sherwood, Chairman and a director ofthe Company, a right of first refusal to purchase the Hotel Cipriani inVenice, Italy in the event OEH proposes to sell it. The purchase pricewould be the offered sale price in the case of a cash sale or the fairmarket value of the hotel, as determined by an independent valuer, inthe case of a non-cash sale. Mr. Sherwood has also been granted anoption to purchase the hotel at fair market value if a change in controlof the Company occurs.

17. Subsequent events (unaudited)

On February 10, 2005, OEH announced that it had acquired a 93.5%interest in, and full management and operational control of, the 301-room Grand Hotel Europe in St Petersburg, Russia. The totalinvestment in this property over three years is expected toapproximate $125,000,0000, including the total purchase price andsubsequent refurbishment. Financing for the investment, in the amountof $65,000,000, was provided by the International Finance Corporationand a syndicate of banks.

On February 25, 2005, the Company filed a registration statementwith the SEC for the public offering in the United States throughunderwriters of 4,000,000 newly-issued class A common shares of theCompany. Net proceeds from the offering are estimated at$94,800,000 which OEH intends to use primarily for its generalcorporate purposes which may include funding capital expenditure atexisting OEH properties, or purchase of additional properties, fundingOEH’s working capital needs, or reducing OEH debt.

Summary of quarterly earnings (unaudited)

2004RevenueEarnings/(losses) before net finance costsNet finance costsEarnings/(losses) before income taxesProvision for/(benefit from) income taxesEarnings from unconsolidated companies net of taxNet earnings/(losses) on class A and B common shares

Net earnings/(losses) per class A and B common share: basic and dilutedDividends per class A and B common share

September 30$000

100,02515,807(4,751)11,0562,5042,943

11,495

$ 0.34

0.025

December 31$000

92,8899,511

(2,618)6,893

(1,316)213

8,422

$ 0.25

0.025

March 31$000

63,834(2,933)(4,980)(7,913)(1,012)2,295

(4,606)

$ (0.13)0.025

June 30$000

100,53616,529(4,876)11,6532,3753,633

12,911

$ 0.38

0.025

Quarter ended



Five-year performanceYear ended December 31,

Revenue

Gain on sale of hotel asset

Earnings from unconsolidated companies – net of tax

Net earnings on class A and class B common shares

Net earnings per class A and class B common shareBasic and diluted

Total assets

Long-term obligations

Shareholders’ equity

Dividends per class A and class B common share

2002$000

279,268

–

8,471

25,294$

0.82$000

998,532

459,016

426,482$ –

2003$000

315,863

4,250*

7,320

23,609$

0.76$000

1,169,226

554,188

512,444$–

2004$000

357,284

–

9,084

28,222$

0.82$000

1,265,591

583,706

544,990$

0.10

2000$000

267,459

–

8,536

39,965$

1.43$000

725,876

276,773

378,717$ –

2001$000

252,236

–

7,415

29,850$

0.97$000

836,251

362,871

392,587$ –

*The gain in 2003 related to the sale of the Hotel Quinta do Lago in Portugal.

Price range of common shares and dividends (unaudited)

The class A common shares of the Company are traded on the New York Stock Exchange under the symbol OEH.The class B common shares ofthe Company are closely held and not listed. The following table presents the quarterly high and low sales prices of class A common shares in2004 and 2003 as reported for New York Stock Exchange composite transactions:

First quarterSecond quarterThird quarterFourth quarter

High$

19.7918.2317.0423.05

Low$

16.3514.5014.5015.71

High$

13.5014.8117.2017.70

Low$

8.509.35

13.8915.55

2004 2003

The Company paid no cash dividends on its class A and B common shares in 2003, and paid quarterly cash dividends at the rate of $0.025 perclass A and B common share in 2004.

Summary of quarterly earnings (unaudited) continued

2003RevenueGain on sale of hotel assetEarnings before net finance costsNet finance costsEarnings/(losses) before income taxesProvision for/(benefit from) income taxesEarnings from unconsolidated companies net of taxNet earnings/(losses) on class A and B common shares

Net earnings/(losses) per class A and B common share: basic and diluted

September 30$000

88,492–

11,697(4,600)7,0971,3082,3918,180

$ 0.27

December 31$000

77,7084,250 8,818

(2,919)5,899

(1,530)1,1898,618

$ 0.27

March 31$000

60,409–

721(4,971)(4,250)

(600)1,042

(2,608)

$ (0.08)

June 30$000

89,254–

13,274(4,729)8,5451,8242,6989,419

$ 0.31

Quarter ended

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42


Revenue and earnings from unconsolidated companies:

Owned hotels – Europe– North America– Rest of the World

Hotel management interests RestaurantsTourist trains and cruisesGain on sale of Quinta do LagoTotal

Segment EBITDA:Owned hotels – Europe

– North America– Rest of the world

Hotel management interestsRestaurantsTourist trains and cruisesCentral overheadsTotal segment EBITDA

2003$m

115.966.663.013.517.648.74.2

329.5

32.811.111.113.52.66.0

(12.2)64.9

2004$m

116.175.479.614.920.562.5

–369.0

29.915.018.014.93.9

13.0 (15.7)79.0

2002$m

99.958.854.812.418.145.3

–289.3

29.211.1 12.712.43.8 8.3

(10.5)67.0

Summary of earnings by operating unit and region (unaudited)

The foregoing segment EBITDA reconciles to net earnings as follows:


Segment net earnings Add:Depreciation and amortizationNet finance costs Provision for income taxesShare of provision for income taxes of unconsolidated companiesLess:Gain on sale of hotelSegment EBITDA

2003$m

23.7

25.317.21.02.0

(4.3)64.9

2004$m

28.2

28.4 17.22.62.6

–79.0

2002$m

25.2

19.518.42.31.6

–67.0

The revenue and segment net earnings before interest, tax (including tax on earnings from unconsolidated companies), depreciation, amortizationand gain on hotel asset sale (“segment EBITDA”) for the years ended 2004, 2003 and 2002 are analyzed as follows:

Management evaluates the operating performance of the Company’s segments on the basis of segment EBITDA and believes that segmentEBITDA is a useful measure of operating performance because segment EBITDA is not affected by non-operating factors such as leverage and thehistoric cost of assets. EBITDA is a financial measure commonly used in the Company's industry. Our segment EBITDA, however, may not becomparable in all instances to EBITDA as disclosed by other companies.

Segment EBITDA should not be considered as an alternative to earnings from operations or net earnings (as determined in accordance with U.S. generally accepted accounting principles) as a measure of the Company’s operating performance, or as an alternative to net cash provided byoperating, investing and financing activities (as determined in accordance with U.S. generally accepted accounting principles) as a measure of ourability to meet cash needs.



Summary of operating information for owned hotels (unaudited)Average Daily Rate ($) Year ended December 31,

Europe North America Rest of World

Worldwide

Rooms Sold (’000) Year ended December 31,Europe

North America Rest of World

Worldwide

RevPAR ($) Year ended December 31,Europe


Worldwide

Comparable/Same Store RevPAR ($) Year ended December 31,Europe


Worldwide

2004626322247366

2004108142183433

2004342217136214

2004346216137213

2003493314228340

2003139131160430

2003280200107184

2003307200106184

$138

2916

Local Currency

28

188

Change %

Corporate governance

The Board of Directors of the Company has established corporate governance measures substantially in compliance with requirements of theNew York Stock Exchange (“NYSE”). These include a set of Corporate Governance Guidelines, Charters for each of the Audit Committee,Compensation Committee, and Nominating and Governance Committee of the full Board, and a Code of Business Conduct for Directors, Officersand Employees. The Board of Directors has also adopted a Code of Business Practices for the Company's Principal Executive, Financial andAccounting Officers. These documents are published on the Company’s website (www.orient-express.com) or may be obtained by writing to theCompany’s Secretary at its registered office address (Orient-Express Hotels Ltd., 22 Victoria Street, P.O. Box HM 1179, Hamilton HM EX, Bermuda).

Because the Company is a foreign private issuer as defined in rules of the U.S. Securities and Exchange Commission, it is not required to complywith all NYSE corporate governance requirements as they apply to U.S. domestic companies listed on the NYSE. The Company’s corporategovernance measures differ in two significant ways. First, the Charter of the Company’s Nominating and Governance Committee generallymandates the same responsibilities as NYSE rules require but authorizes the Committee to act only upon the Board’s request and in an advisorycapacity. Second, the Charter of the Company’s Compensation Committee authorizes the Committee to recommend to the Board thecompensation of the Company's chief executive officers but does not empower the Committee itself to determine, approve or modify thatcompensation.

48818_p20_44.qxd.rev2 20/4/05 10:33 am Page 43

44

Shareholder and investor information

Registered office Orient-Express Hotels Ltd.22 Victoria StreetP.O. Box HM 1179Hamilton HM EXBermudaTel: +1 (441) 295-2244Fax: +1 (441) 292-8666

CorrespondenceOrient-Express Services Ltd.20 Upper GroundLondon SE1 9PFEnglandTel: +44 (0)20 7805 5060Fax: +44 (0)20 7805 5908(delete first 0 if dialling from outside the U.K.)

Websitehttp://www.orient-express.com

Stock exchange listingOrient-Express Hotels Ltd. class A common shares are listed on the New York Stock Exchange under the trading symbol OEH.

Share transfer agent and registrarEquiServe Trust Company N.AP.O. Box 43010 Providence, Rhode Island 02940-3010Tel: +1 (781) 575-3170Website: http://www.equiserve.com

Shareholders are encouraged to contact the Transfer Agent directly regarding any change in certificate registration,change of mailing address, lost or stolen certificates, consolidation of multiple accounts, elimination of duplicate mailings and related shareholder service matters. Shareholders may also access their accounts and other information directly through EquiServe’s website.

Co-registrar of shares The Bank of Bermuda6 Front Street Hamilton HM 11Bermuda

Independent registered public accounting firmDeloitte & Touche LLPTwo World Financial Center New York, New York 10281

Annual general meetingThe annual general meeting of shareholders will be held at theregistered office of the company at 22 Victoria Street, Hamilton,Bermuda, on June 6, 2005, at 2:00pm.

Shareholder informationCopies of SEC Form 10-K annual reports, SEC Form 10-Q quarterlyreports and other published financial information are available on thecompany’s website or may be obtained upon request to:Orient-Express Hotels Inc.1114 Avenue of the Americas New York, New York 10036 Tel: +1 (212) 302-5055Fax: +1 (212) 302-5073

Investor relationsShareholders, securities analysts, portfolio managers and representativesof financial institutions seeking financial information may contact:

James StruthersChief Financial Officer Orient-Express Hotels Ltd.c/o Orient-Express Services Ltd.20 Upper GroundLondon SE1 9PFTel: +44 (0)20 7805 5223Fax: +44 (0)20 7805 5010Email: [email protected](delete first 0 if dialling from outside the U.K.)

William W. Galvin III The Galvin Partnership 136 Maple AvenueP.O. Box 1248Greenwich, Connecticut 06830 Tel: +1 (203) 618-9800Fax: +1 (203) 618-1010Email: [email protected]

Media seeking information should contact:Pippa IsbellVice President – Public Relations Orient-Express Hotels Ltd.c/o Orient-Express Services Ltd.20 Upper GroundLondon SE1 9PFTel: +44 (0)20 7805 5065Fax: +44 (0)20 7805 5938Email: [email protected](delete first 0 if dialling from outside the U.K.)

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48818_p20_44.qxd.rev2 19/4/05 3:06 pm Page 44

2

Afloat in FranceBurgundy and Languedoc, FranceU.K. telephone: +44 20 7960 0500Fax: +44 20 7805 5908U.S. telephone: +1 401 351 7518Fax: +1 401 351 7220

Bora Bora Lagoon Resort & SpaTahiti, French PolynesiaTelephone: +689 60 40 00 Fax: +689 60 40 03

British PullmanSouth of EnglandU.K. telephone: +44 20 7960 0500Fax: +44 20 7805 5908U.S. telephone: +1 401 351 7518 Fax: +1 401 351 7220

Charleston PlaceCharleston, South CarolinaTelephone: +1 843 722 4900 Fax: +1 843 722 0728

Copacabana PalaceRio de Janeiro, BrazilTelephone: +55 21 2548 7070 Fax: +55 21 2235 7330

Eastern & Oriental ExpressSoutheast AsiaU.K. telephone: +44 20 7960 0500Fax: +44 20 7805 5908U.S. telephone: +1 401 351 7518 Fax: +1 401 351 7220

El Encanto Hotel & Garden VillasSanta Barbara, California Currently under development.

Grand Hotel EuropeSt Petersburg, RussiaTelephone: +7 812 329 6000 Fax: +7 812 329 6001

Harry’s BarLondon, England (A private club)

Hotel CarusoRavello, ItalyTelephone: +39 0185 267898 Fax: +39 0185 267899

Hotel Cipriani and Palazzo VendraminVenice, ItalyTelephone: +39 0 41 520 7744 Fax: +39 0 41 520 3930

Hôtel de la CitéCarcassonne, FranceTelephone: +33 468 71 98 71 Fax: +33 468 71 50 15

Hotel MonasterioCuzco, PeruTelephone: +51 84 24 1777 Fax: +51 84 24 6983

Hotel RitzMadrid, SpainTelephone: +34 91 701 67 67 Fax: +34 91 701 67 76

Hotel Splendido andSplendido MarePortofino, ItalyTelephone: +39 0185 267 800 Fax: +39 0185 267 804

Jimbaran Puri BaliBali, IndonesiaTelephone: +62 361 701 605 Fax: +62 361 701 320

Keswick HallCharlottesville,VirginiaTelephone: +1 434 979 3440 Fax: +1 434 977 4171

La CabañaBuenos Aires,ArgentinaTelephone and fax: +54 11 4814 0001

Lapa PalaceLisbon, PortugalTelephone: +351 21 394 9494 Fax: +351 21 395 0665

La Résidence d’AngkorSiem Reap, Cambodia Telephone: +855 63 963 390 Fax: +855 63 963 391

La Résidence Phou VaoLuang Prabang, LaosTelephone: +856 71 21 2194Fax: +856 71 21 2534

La ResidenciaDeià, Mallorca, SpainTelephone: +34 971 63 90 11 Fax: +34 971 63 93 70

La SamannaSt Martin, French West IndiesTelephone: +590 590 87 6400 Fax: +590 590 87 8786

Le Manoir aux Quat’SaisonsOxfordshire, EnglandTelephone: +44 1844 278881 Fax: +44 1844 278847

Lilianfels Blue MountainsKatoomba,Australia Telephone: +61 2 4780 1200 Fax: +61 2 4780 1300

Machu Picchu Sanctuary LodgeMachu Picchu, PeruTelephone: +51 84 21 1038 Fax: +51 84 21 1053

Maroma Resort and SpaRiviera Maya, MexicoTelephone: +52 998 872 8200 Fax: +52 998 872 8220

Miraflores Park HotelLima, PeruTelephone: +51 1 242 3000 Fax: +51 1 242 3393

Mount Nelson HotelCape Town, South Africa Telephone: +27 21 483 1000 Fax: +27 21 483 1782

NapasaiKoh Samui,ThailandTelephone: +66 77 42 92 00Fax: +66 77 42 92 01

Northern BelleU.K.U.K. telephone: +44 20 7690 0500Fax: +44 20 7805 5908U.S. telephone: +1 401 351 7518 Fax: +1 401 351 7220

Orient-Express SafarisEagle Island Camp, Khwai River Lodge,Savute Elephant Camp Botswana, Southern AfricaTelephone: +27 11 274 1800 Fax: +27 11 481 6065

PeruRailHiram Bingham train, Cuzco-Machu PicchuTelephone: +51 84 238 722 Fax: +51 84 221 114

Reid’s PalaceFunchal, Madeira, PortugalTelephone: +351 291 71 7171 Fax: +351 291 71 7177

Road To MandalayMandalay, MyanmarU.K. telephone: +44 20 7960 0500Fax: +44 20 7805 5908U.S. telephone: +1 401 351 7518 Fax: +1 401 351 7220

The Governor’s ResidenceYangon, Myanmar Telephone: +951 229 860Fax: +95 1 228 260

The Inn at Perry CabinSt Michaels, Maryland Telephone: +1 410 745 2200 Fax: +1 410 745 3348

The Observatory HotelSydney,Australia Telephone: +61 2 9256 2222 Fax: +61 2 9256 2233

The Orient-Express Gift CollectionLondon, EnglandTelephone: +44 20 7805 5019 Fax: +44 20 7805 5909

The Royal ScotsmanEdinburgh, ScotlandU.K. telephone: +44 131 555 1344Fax: +44 131 555 1345U.S. telephone: +1 800 922 8625

The WestcliffJohannesburg, South Africa Telephone: +27 11 646 2400 Fax: +27 11 646 3500

‘21’ ClubNew York, New YorkTelephone: +1 212 582 7200 Fax: +1 212 581 7138

Ubud Hanging GardensBali, IndonesiaTelephone: +62 361 701 605Fax: +62 361 701 320

Venice Simplon-Orient-ExpressLondon-Paris-VeniceU.K. telephone: +44 20 7960 0500Fax: +44 20 7805 5908U.S. telephone: +1 401 351 7518 Fax: +1 401 351 7220

Villa San MicheleFlorence, Italy Telephone: +39 0 55 567 8200 Fax: +39 0 55 567 8250

Windsor Court HotelNew Orleans, Louisiana Telephone: +1 504 523 6000 Fax: +1 504 596 4513

Reservation information

Contents

3 Company profile

3 Financial highlights

4 Directors and management team

6 Chairman’s message

8 President’s overview of performance

16 Chief Financial Officer’s report

18 Awards received in 2004

19 Financial review

44 Shareholder and investor information

45 Reservation information

Above: Afloat in France operates five péniche-hôtels – luxuriously-converted canal boats – whichtravel through exceptional landscapes in Languedoc,Burgundy and Provence. Arguably the most relaxedand sybaritic way of experiencing the Frenchcountryside, these lavishly equipped craft link greatcities with remote villages, traveling past forests,fields and world-renowned vineyards. Guests enjoythe services of a full crew on board, who serveexceptional regional cuisine and arrange visits tolocal sights.

45ORIENT-EXPRESS HOTELS LTD.www.orient-express.com

COVERS.rev 21/4/05 3:35 pm Page 2

3470-AR

-04

Orient-Express H

otels Ltd.A

nnual Report 2004

HOTEL CIPRIANI

Venice, ItalyPALAZZO VENDRAMIN

Venice, ItalyHOTEL SPLENDIDO

Portofino, Italy

HOTEL SPLENDIDO MARE

Portofino, ItalyVILLA SAN MICHELE

Florence, Italy CAPANNELLE

Tuscany, ItalyHOTEL CARUSO

Ravello, Italy HOTEL RITZ

Madrid, SpainLA RESIDENCIA

Deià, Mallorca, Spain

LAPA PALACE

Lisbon, PortugalREID'S PALACE HOTEL

Madeira, PortugalHÔTEL DE LA CITÉ

Carcassonne, FranceGRAND HOTEL EUROPE

St Petersburg, RussiaHARRY’S BAR

London, EnglandLE MANOIRAUX QUAT’SAISONS

Chef-Proprietor Raymond BlancOxfordshire, England

‘21’ CLUB

New York, New YorkINN AT PERRY CABIN

St Michaels, MarylandKESWICK HALL

Charlottesville,VirginiaWINDSOR COURT HOTEL

New Orleans, LouisianaCHARLESTON PLACE

Charleston, South CarolinaEL ENCANTO

Santa Barbara, California

MAROMA RESORT AND SPA

Riviera Maya, MexicoLA SAMANNA

St Martin, French West IndiesMOUNT NELSON HOTEL

Cape Town, South AfricaTHE WESTCLIFF

Johannesburg, South AfricaORIENT-EXPRESS SAFARIS

Eagle Island Camp, BotswanaORIENT-EXPRESS SAFARIS

Khwai River LodgeBotswana

ORIENT-EXPRESS SAFARIS

Savute Elephant CampBotswana

THE OBSERVATORY HOTEL

Sydney, AustraliaLILIANFELS BLUE MOUNTAINS

Katoomba, New South Wales,Australia

COPACABANA PALACE

Rio de Janeiro, BrazilLA CABAÑA

Buenos Aires, Argentina

MIRAFLORES PARK HOTEL

Lima, PeruHOTEL MONASTERIO

Cuzco, PeruMACHU PICCHU

SANCTUARY LODGE

Machu Picchu, Peru

BORA BORA LAGOON

RESORT & SPA

Bora Bora, French Polynesia

PERURAIL

Peru VENICE SIMPLON-ORIENT-EXPRESS

London, Paris,Venice

BRITISH PULLMAN

South of EnglandNORTHERN BELLE

North of EnglandTHE ROYAL SCOTSMAN

ScotlandEASTERN & ORIENTAL EXPRESS

Southeast AsiaROAD TO MANDALAY

Irrawaddy River, Burma(Myanmar)

AFLOAT IN FRANCE

France


www.orient-express.com

PANSEA HOTELS & RESORTSSiem Reap, Bali, Koh Samui,

Luang Prabang,Yangon,Southeast Asia

Orient-Express Hotels Ltd. 2004 ANNUAL REPORT

48818_COVERS.rev 20/4/05 4:56 pm Page 1

Documents

Orient-Express Hotels Ltd. - · PDF filecountryside,these lavishly equipped craft link great ... Orient-Express Hotels Ltd. Orient-Express Hotels owns or part-owns, and mostly manages,49