UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-K

|(Mark One)                                  |                                                                                         
|------------------------------------------- | ----------------------------------------------------------------------------------------
|ý                                           | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
|For the fiscal year ended December 31, 2003
|or                                         
|o                                           | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|For the transition period from
 to         

Commission File Number 1-16017

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ORIENT-EXPRESS HOTELS LTD.(Exact name of registrant as specified in its charter)

|Bermuda(State or other jurisdiction of
incorporation or organization)                                |  | 98-0223493(I.R.S. Employer
Identification No.)
|---------------------------------------------------------------------------------------------------- |  | ----------------------------------------------
|22 Victoria Street, P.O. Box HM 1179
Hamilton HM EX, Bermuda(Address of principal executive offices)
|Registrant's telephone number, including area code:(441) 295-2244                                   

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SECURITIES
REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

|Title of each class                         |  | Name of each exchange
on which registered
|------------------------------------------- |  | -----------------------------------------
|Class A Common Shares, $0.01 par value each |  | New York Stock Exchange                  
|Preferred Share Purchase Rights             |  | New York Stock Exchange                  

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:None.

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Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ý No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment
to this Form 10-K.(Not applicable. See third paragraph under Item 1Business on page 4.)

Indicate
by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes ý No
o

The aggregate market value of the Class A common shares held by non-affiliates of the registrant computed according to the closing price on
June 30, 2003 (the last business day of the registrant's second fiscal quarter in 2003) was approximately $287,000,000.

As
of March 8, 2004, 31,790,601 Class A common shares and 20,503,877 Class B common shares of the registrant were outstanding (including 18,044,478 Class B
shares owned by a subsidiary of the registrant (see Note 10(d) to the Financial Statements (Item 8)) and 11,943,901 Class A shares and 2,459,399 Class B shares owned by Sea
Containers Ltd.).

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DOCUMENTS
INCORPORATED BY REFERENCE:None.



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Peliminary Note:Forward-looking statements concerning the operations, performance, financial
condition, plans and prospects
of Orient-Express Hotels Ltd. and its subsidiaries are based on management's current expectations and are subject to various risks and uncertainties. Actual results could differ materially from
those anticipated in the statements due to a number of factors, including those described in Item 1Business, Item 7Management's Discussion and Analysis, Item
7AQuantitative and Qualitative Disclosures about Market Risk, and Item 12Security Ownership of Certain Beneficial Owners and Management below. Orient-Express
Hotels Ltd. undertakes no obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events or otherwise.

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MAP

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PART I

ITEM 1. Business

Orient-Express Hotels Ltd. (the "Company" and, together with its subsidiaries, "OEH") is incorporated in the Islands of Bermuda and is a "foreign private
issuer" as defined in Rule 3b-4 under the Securities Exchange Act of 1934 (the "1934 Act") and in Rule 405 under the Securities Act of 1933. As a result, it is eligible to
file this annual report pursuant to Section 13 of the 1934 Act on Form 20-F (in lieu of Form 10-K) and to file its interim reports on
Form 6-K (in lieu of Forms 10-Q and 8-K). However, the Company elects to file its annual and interim reports on Forms 10-K, 10-Q and
8-K, and does so as those forms apply to foreign private issuers.

These
reports and amendments to them are available free of charge on the internet website of the Company as soon as reasonably practicable after they are filed electronically with the
U.S. Securities and Exchange Commission ("SEC"). The internet website address is http://www.orient-express.com.

Pursuant
to Rule 3a12-3 under the 1934 Act regarding foreign private issuers, the proxy solicitations of the Company are not subject to the disclosure and procedural
requirements of Regulation 14A under the 1934 Act, and transactions in its equity securities by its officers, directors and significant shareholders are exempt from Section 16 of the
1934 Act.

Introduction

OEH is a hotel and leisure group focused on the luxury end of the leisure market. It currently owns and/or part owns and manages 39 properties consisting of 30
highly individual deluxe hotels worldwide,
three restaurants, five tourist trains and a river cruiseship. OEH acquires or manages only very distinctive properties in areas of outstanding cultural, historic or recreational interest in order to
provide luxury lifestyle experiences for the elite traveler.

The
locations of OEH's various properties are shown in the map above, where they number 35 because the Hotel Cipriani and Palazzo Vendramin are both in Venice, the Hotel Splendido and
Splendido Mare are both in Portofino, and three separate safari lodges operate as a unit in Botswana. These seven properties bring the total to 39.

Hotels
and restaurants represent the largest segment of OEH's business, contributing 85% of revenue in 2003. Tourist trains and cruises accounted for the remaining 15%. OEH's worldwide
portfolio of hotels currently consists of 2,965 individual guest rooms and multiple-room suites, each known as a "key". Those owned in 2003 achieved an average daily room rate ("ADR") of
$340 and a revenue per available room ("RevPAR") of $184. Approximately two-thirds of OEH's customers are leisure travelers, with approximately 51% of guests in 2003 originating from the
United States, 34% from Europe and the remaining 15% from elsewhere in the world.

Revenue,
operating earnings and identifiable assets of OEH in 2001, 2002 and 2003 for its business segments and geographic areas are presented in Note 15 to the Financial
Statements (Item 8 below).

At
the present time, Sea Containers Ltd. owns a 42% equity interest in OEH. See "OEH's Relationship with Sea Containers Ltd." below.

Owned HotelsEurope



TheHotel CiprianiandPalazzo Vendramin103
keysin Venice were built for the most part in the 1950s and are located on three acres on Giudecca Island opposite the Piazza San Marco. Most of the rooms have views over the Venetian
lagoon. Features include fine cuisine in three indoor and outdoor restaurants, gardens and terraces encompassing an Olympic-sized swimming pool, a tennis

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court
and a private boat service to the Piazza San Marco. OEH acquired in 2000 an historic warehouse building adjacent to the hotel where, after light refurbishment, banquets and meetings can be held,
thereby freeing up space in the main hotel. Accordingly a large deluxe suite was added in 2002 and six more new keys are planned. In 2004, a spa will be built.

The Hotel SplendidoandSplendido Mare82 keysoverlook
picturesque Portofino harbor on the Italian Riviera. Set on four acres, the main hotel was built in 1901 and is surrounded by gardens and terraces which include a swimming pool and tennis court. There
are two open-air and enclosed restaurants as well as banquet/meeting rooms, and a shuttle bus linking the two parts of the resort. OEH acquired the Splendido Mare during 2001, having
previously operated it under a long-term lease. Several of the guest rooms in the main hotel will be refurbished and enlarged in 2004.

TheVilla San Michele45 keysis located in Fiesole, a short distance from Florence. Originally built as a
monastery in the 15th century with a façade attributed to Michelangelo, it has stunning views over historic Florence and the Arno River Valley. OEH has remodelled and expanded the guest
accommodation to luxury standards, including the addition of a swimming pool. A shuttle bus service is provided into Florence. The property occupies ten acres. OEH has planning permission to add a
further two keys and a spa.

These
Italian properties are seasonal and are closed for varying periods during the winter.

OEH
is rebuilding with up to 60 keys theHotel Carusoin Ravello on three hill-top acres overlooking the Amalfi coast near
Naples. Parts of the property date back to the 11th century. OEH has received grants from the European Union to help finance this redevelopment. Because of delays in obtaining local government
planning permits, management does not expect to re-open the hotel until 2005.



Reid's Palace164 keysis the most famous hotel on the island of Madeira, situated on ten
acres of semitropical gardens on a cliff top above the sea and the bay of Funchal, the main port city. Opened in 1891, the hotel has four restaurants and meeting facilities. Leisure and sports
amenities include two fresh water swimming pools, a third tide-filled pool, tennis courts, ocean water sports and access to two championship golf courses. It is particularly favored in the
British and German leisure markets and has year round appeal, serving both winter escapes to the sun and regular summer holidays. In 2004, a new spa and restaurant will be built and the meeting
facilities will be reorganized as a conference center.

TheLapa Palace109 keysis in the embassy district of Lisbon, near the city center and overlooking the Tagus
River. The historic part of the hotel was originally built in the 1870s as the palace of a Portuguese noble family. It opened as a luxury hotel in 1992 after extensive conversion and expansion,
including the addition of conference facilities and underground car parking. The hotel is set amid gardens with ornamental fountains and both indoor and outdoor swimming pools, occupying a total of
three acres. During 2003, all of the guest rooms in the hotel's historic part were refurbished. OEH owns an adjoining parcel of land suitable for development and has applied for planning permission to
add up to 46 more keys.

OEH
owned for many years the Hotel Quinta do Lago with 141 keys near Faro in the Algarve region, a popular golf destination, until November 2003 when the property was sold. See
Note 2(b) to the Financial Statements.



Hôtel de la Cité61 keysis located in the central square of
the beautiful walled medieval town of Carcassonne, France near Toulouse. Opened in 1909, the hotel incorporates one of the 50 watch towers in Carcassonne's ancient fortifications and features two
restaurants, gardens, a swimming pool

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and
a nearby conference center, altogether occupying two acres. One of the restaurants has been awarded one star for fine dining by the influential Michelin Guide. The hotel also owns and operates a
canal barge on the Canal du Midi providing day excursions for guests.

In
February 2002, OEH acquiredLa Residencia62 keyslocated in the charming village of Deià
on the rugged northwest coast of the island of Mallorca, Spain in the Mediterranean. Mallorca is a popular European tourist destination throughout the year. The core of La Residencia was created from
two adjoining 16th and 17th century country houses set on a hillside site of 30 acres. The hotel features three restaurants including the gourmet El Olivio, one of the foremost on the island, as well
as two large outdoor swimming pools, tennis courts and a spa with an indoor pool. OEH is currently refurbishing the guest rooms and added three large suites in 2003. In 2004, the front entrance, one
of the restaurants and the spa will be renewed.

Also
in February 2002, OEH acquiredLe Manoir aux Quat' Saisons32 keysin Oxfordshire, England about an
hour's drive west of London. The main part of the hotel is a 16th century manor house set in 27 acres of gardens. The property was developed by Raymond Blanc, one of Britain's most famous chefs, and
the hotel's restaurant has two stars in the Michelin Guide, placing it among the best in the British Isles. Mr. Blanc has given a long-term commitment to remain the chef at the
hotel.

Owned HotelsNorth America



TheWindsor Court324 keysopened in 1984 and is located in the central business district
of New Orleans near the French Quarter and the Mississippi riverfront. Harrah's operates the only land-based casino in Louisiana across the street from the hotel. Each room has panoramic
views over the river or the city. Facilities include three restaurants and lounges, a roof-top ballroom, several other banquet and meeting rooms, an outdoor swimming pool and a health
club. The hotel's interior décor features a collection of historic European art and antique furniture. In 2004, the hotel plans to begin building a conference center on a nearby owned
lot, for which it has planning permission, catering to small and medium sized business meetings.

Keswick Hall48 keysis located in the rolling countryside of central Virginia, near Charlottesville. Originally a
private home dating from 1912, it is popular for weekend breaks and business meetings because of the natural beauty of the area and the adjacent Keswick Club which features tennis courts, swimming
pool, and an Arnold Palmer-designed golf course. The total site occupies 600 acres including vacant land around the golf course being sold in parcels for residential development. In 2004, management
plans to add a restaurant, reconfigure its meeting space and build nine new keys in cottages near the hotel.

TheInn at Perry Cabin81 keyswas built in 1812 as a country inn and is located in St. Michaels, Maryland on the
eastern shore of Chesapeake Bay. Set on 25 shoreside acres that include a health club, indoor and outdoor swimming pools, and boating and fishing on the Bay, it is an attractive conference and
vacation destination, particularly for the Washington, D.C. market. A major renovation of the hotel took place in 2002 and 2003 with the addition of 40 keys and a new conference facility. In 2004, a
spa will be built.



La Samanna81 keysis located on the island of St. Martin in the French West Indies. Built
in 1973, the hotel has two restaurants and comprises several buildings on ten acres of land along a 4,000-foot beach. Amenities include a freshwater swimming pool, a spa, tennis courts,
fitness and conference centers, boating and ocean water sports. The hotel owns an adjacent 45 acres of land available for future development, and plans to begin developing in 2004 up to 150 vacation
apartments

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with
shops, a restaurant and a marina on part of this land which OEH would sell and retain management. The hotel is open most of the year, seasonally closing during the autumn months. The hotel has
also been closed for short periods in the past due to hurricane damage and is insured for this risk.



In March 2002, OEH acquired a 75% interest inMaroma Resort and Spa58 keyson
Mexico's Caribbean coast 25 miles south of Cancun's international airport. OEH manages the hotel with continuing support from the previous owner, who retains a 25% interest over which OEH has a right
of first refusal to acquire in certain circumstances. The resort opened in 1995 and has 25 acres of land, including some for future expansion, along a 750-foot beach with the Cozumel
barrier reef offshore where guests may fish, snorkel and scuba-dive. Important Mayan archaeological sites are also nearby. Rooms are arranged in low-rise villas and there are
extensive spa facilities. OEH plans the addition of up to eight new keys in 2004.

Owned HotelsRest of the World



Built in the 1920s on a three-acre site facing Copacabana Beach near the central business district of Rio de Janeiro, Brazil, the Copacabana
Palace225 keysis one of the most famous in South America and features two gourmet restaurants, a
500-seat theater, several spacious function and meeting rooms, a large swimming pool and health club, and a roof-top tennis court and pool. Future expansion is planned subject
to obtaining government planning permission.

TheMiraflores Park Hotel81 keysis located in an exclusive residential district of Lima, Peru surrounded by
parkland and looking out at the Pacific Ocean, yet near the commercial and cultural center of the city. Opened in 1997, the hotel has a large ballroom, outdoor pool, health and beauty facilities and a
business center for guests, and occupies about one acre of land. OEH has planning permission to expand.



TheMount Nelson Hotel226 keysin Cape Town, South Africa is an historic property opened
in 1899 with beautiful gardens and pools and has long enjoyed a reputation as one of the foremost hotels on the African continent. It stands just below Table Mountain and is within walking distance of
the main business, civic and cultural center of the city. The hotel has a ballroom, two swimming pools, tennis courts and a fitness center, all situated on ten acres of grounds and gardens. Expansion
is planned through incorporation into the hotel of owned adjoining residential properties starting with a spa in 2004.

The Westcliff Hotel119 keysis the only garden hotel in Johannesburg, South Africa, situated on six hillside
acres with views over the city's zoo and park. Its resort amenities include two swimming pools, a tennis court and health club, and the hotel attracts business guests because of its proximity to the
city center. It opened in 1998, and during 2003, OEH added a banquet and conference center on adjacent expansion land.

Orient-Express Safaris39 keys totalconsist of three separate game-viewing lodges in Botswana called Khwai River Lodge, Eagle Island CampandSavute Elephant Camp. Established in 1971, OEH leases the lodge
sites in the Okavango River delta and nearby game reserves, where some of the best wildlife in Africa can be observed from open safari vehicles or boats. Each camp has 12 or 15 twin-bedded
deluxe tents, and guests travel between the camps by light aircraft. Boating, fishing, hiking and swimming are offered at the various sites.

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TheObservatory Hotel96 keysis in Sydney within walking distance of the central business
district of the city. This hotel opened in 1993 and has two restaurant and lounge areas, extensive meeting and banquet rooms, a health club with indoor swimming pool, a tennis court and a large
parking garage on a site of about one acre. OEH has planning permission to add keys in a new top floor to the hotel.

TheLilianfels Hotel85 keysis in the Blue Mountains National Park west of Sydney. It is named after the original
estate house, dating from 1890, where the hotel's gourmet restaurant is located. The main hotel, built in 1992, has a second restaurant and conference facilities. The resort's four acres of grounds
encompass an indoor swimming pool, health club and spa, tennis court and extensive gardens with views over the Blue Mountains. The hotel was completely refurbished in 2003, and there is expansion land
to add keys in the future.



TheBora Bora Lagoon Resort80 keysopened in 1993 and has bungalows situated over the
lagoon water plus additional beach and garden bungalows, all built in traditional Tahitian style on a 12-acre site. Guests dine in two restaurants and enjoy extensive water sports and
tennis. A major renovation program at this property was recently completed, involving a new swimming pool, spa and conference facility.

Hotel Management Interests

In April 2003, through a 50%/50% joint venture company with a Spanish investment company, OEH acquired the famousHotel
Ritz167 keysin central Madrid near the financial district, Madrid Stock Exchange, Spanish Parliament and many of the city's well known tourist
attractions like the Prado Museum, Royal Palace and Retiro Park. See Note 2(a) to the Financial Statements. Opened in 1910, the hotel has four spacious conference and banqueting suites, an
indoor restaurant and the famous Ritz Terrace restaurant outdoors in the gardens. OEH manages the hotel under an exclusive long-term contract and plans extensive capital improvements with
its 50% partner.

TheCharleston Place442 keysis located in the heart of historic Charleston, South Carolina, a popular
destination for tourists, groups and business meetings. Opened in 1986, the hotel has two restaurants, extensive banqueting and conference space including a grand ballroom, a health club with spa and
swimming pool and roof-top tennis court, and a shopping arcade of 25 retail outlets leased to third parties. The hotel also owns the adjacent historic Riviera Theater remodelled as an
additional conference facility and three retail shops. Development of more meeting space is planned by enclosing one of the hotel's courtyards. OEH has a 19.9% ownership interest in the hotel, manages
the property under an exclusive long-term contract, and receives interest on partnership loans which it assumed at the time of its original investment and other loans made since then.

OEH
has a 50%/50% joint venture with local investors in Peru which, under exclusive management of OEH, operates the following two hotels under 20-year renewable leases which
commenced in 1995.

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TheHotel Monasterio124 keysis located in the ancient Inca capital of Cusco, the most important tourist
destination in Peru. OEH is upgrading and expanding the property which includes a long-term lease on the adjoining Nazarenas convent for future development, a total site of about three
acres. The hotel was originally built as a Spanish monastery in the 16th century and was converted to hotel use in 1995. The deluxe guest rooms and suites and two restaurants are arranged around
open-air cloisters. Because of Cusco's high altitude, specially oxygenated ventilation has been added to some of the refurbished rooms.

TheMachu Picchu Sanctuary Lodge31 keysis the only hotel in the vicinity of the famous mountaintop Inca ruins.
All of the rooms have been refurbished to a high standard. The joint venture also has a lease on seven acres at the foot of the ruins, close to the town where tourists arrive by train and where a
larger hotel could be built, but it is unlikely that this project would be started for several years given the time required for permits, design and construction.

Restaurants

OEH owns'21' Club, the famous landmark restaurant in mid-town New York City. Originally a speakeasy
during Prohibition in the 1920s, this restaurant is open to the public, occupies three brownstone buildings in midtown Manhattan and features gourmet American cuisine. It serves à la
carte meals in the original bar restaurant and a separate dining room refurbished in 2002, and also has a number of banqueting rooms used for functions, including the famous secret wine cellar.

OEH
has a 49% interest inHarry's Bar, a private dining club in the Mayfair area of London. The majority partner manages the restaurant
with assistance from OEH's Italian hotels. Its menu features gourmet Italian cuisine. OEH has a right of first refusal to acquire the remaining interest in this property under certain conditions.

OEH
has re-established the famousLa Cabañasteak house in Buenos Aires dating from the 1920s. OEH bought the
contents and name of the restaurant some years ago and, after relocating to the La Recoleta area of the city, reopened in September 2003. The main dining room features a traditional open fire
where steaks are seared, and three private dining rooms have regional Argentine themes.

The
purchase of two hotels in Spain and England in February 2002, as noted under "Owned HotelsEurope" above, included a 50% interest in a group of four restaurants
called Le Petit Blanc in England. OEH disposed of its interest in 2003.

Tourist Trains and Cruises

OEH's principal European tourist trains, called theVenice Simplon-Orient-Express, operate in two parts in a
regularly scheduled overnight service between London and Venice and on short excursions in southern England. OEH owns 30 railway cars originally used on the historic "Orient-Express" and other famous
European trains. All have been refurbished in original 1920s/1930s décor and meet modern safety standards. The services offered are a continuation of, and are marketed as, the Orient-
Express trains of pre-World War II years. One train is based in Great Britain composed entirely of Pullman cars with a capacity for up to 250 passengers. The other on the Continent is made
up of Compagnie Internationale des Wagons-Lits et du Tourisme sleeping cars and day coaches with capacity for up to 180 passengers. They operate once or twice weekly principally between
London and Venice from March to November each year via Paris, Zurich and Innsbruck on a scenic route through the Alps. Passengers travel under the English Channel by bus on the Eurotunnel shuttle
train. Occasional trips are also made from time to time to Rome, Prague and Istanbul and other European destinations.

The British Pullmancars of Venice Simplon-Orient-Express operate all year, originating out of London on short excursions to places of
historic or scenic interest in southern England, including some

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overnight
trips when passengers stay at local hotels. Both the British and Continental trains are available for private charter.

TheNorthern Belletourist train offers day trips and charter service principally in the north of Britain. It builds on the success of
OEH's British Pullman business, which focuses on the south of England around London. This train consists of six dining cars elegantly decorated to be reminiscent of old British "Belle" trains of the
1930s, plus related service cars, and can carry up to 250 passengers. Full course gourmet meals are served on board and passengers stay in local hotels on overnight itineraries.

PeruRailis a 50%/50% joint venture between OEH and Peruvian partners formed to operate part of the state-owned railways in Peru under a
30-year franchise acquired in 1999 with possible extension for a further 30 years. The joint venture pays the government a fee related to traffic levels which can be offset until
2009 against investment in track improvements. The 70-mile Cusco-Machu Picchu line carries mainly tourists visiting the famous Inca ruins, the principal means of access because there is no
convenient road. A second rail line runs from Cusco to Matarani on the Pacific Ocean via Puno on Lake Titicaca and Arequipa and principally serves
freight traffic at present. The Cusco-Machu Picchu line connects two of OEH's Peruvian hotels allowing creation of inclusive packages. OEH operates a deluxe daytime tourist train service on the
Cusco-Puno route through the High Andes mountains using refurbished PeruRail passenger cars, and a 1920s steamer included in the franchise on day excursions for tourists on Lake Titicaca.
In 2003, OEH began a deluxe tourist train service on the Cusco-Machu Picchu route using carriages acquired in Singapore.

The Eastern & Oriental Expressin Southeast Asia makes up to one round trip each week between Singapore, Kuala Lumpur and
Bangkok.
The journey lasts about 48 hours each way and includes two nights on board and side trips to Penang in Malaysia and the River Kwai in Thailand. Some overnight trips are also made from Bangkok
to Chiang Mai and elsewhere in Thailand. Originally built in 1970, the 24 cars were substantially rebuilt to an elegant oriental style of décor and fitted with modern facilities such as
air-conditioning and private bathrooms. The train is made up of sleeping cars with three types of berths, three restaurant cars, a bar car and an open air observation car and can carry 125
passengers. The Eastern & Oriental Express is available for charter by private groups. OEH manages the train exclusively and has a 25% shareholding in the owning company.

OEH
owns and operates a deluxe river cruiseship on the Irrawaddy River in central Burma, or Myanmar, called theRoad to Mandalay. The ship
was a Rhine River cruiser built in 1964 which OEH bought and refurbished. It has 66 air-conditioned cabins with private bathrooms, spacious restaurant and lounge areas and a canopied sun
deck with swimming pool. The ship travels between Mandalay and Pagan up to eight times each month and carries 126 passengers who enjoy sightseeing along the river and guided shore excursions to places
of historic interest. Five to eight night itineraries are offered including airfare to and from the ship and hotel accommodation in Rangoon. OEH also operates occasional cruises to different
destinations, such as to Bhamo in the north of the country close to the China border. The ship does not operate in the hot summer season and occasionally when the water level of the Irrawaddy River
falls below normal levels due to lack of rainfall.

OEH
managed for Queensland Rail the Great South Pacific Express deluxe tourist train in Australia until June 2003 when the state railway suspended service because of the decline
in long-haul tourist numbers to Australia from abroad in 2002 and 2003. Comprised of 21 day and sleeping carriages, the train was based in Brisbane and traveled along the east coast
on overnight itineraries south to Sydney and north to Cairns stopping at tourist destinations along the route. OEH has retained a right of first refusal to acquire the Great South Pacific Express
carriages if Queensland Rail decides to sell them during 2004.

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Pansea Hotels

On February 2, 2004, OEH announced it was making an $8,000,000 investment in the Pansea group of five deluxe hotels in Southeast Asia. The properties are
located in Luang Prabang, Laos; Koh Samui, Thailand; Rangoon, Burma; Siem Reap, Cambodia; and Bali, Indonesia. They total 234 keys at present but all are capable of expansion. A second hotel in Bali
is under development. These hotels are not included in the discussion above because OEH will not manage them but will market them along with its other properties, in particular the Eastern &
Oriental Express tourist train and the Road to Mandalay cruiseship.

The
investment has been structured as an $8,000,000 loan at 5% annual interest to the Pansea Asia holding company, convertible after three years into about 25% of the company's shares.
At that time OEH has an option to acquire all of the shares. OEH has a further option to acquire all of the shares after five years, at which time the existing shareholders have the right to sell
their shares to OEH at the same price. OEH paid $1,400,000 for its option rights. The loan conversion price and option exercise prices are based on multiples of the holding company's net book value or
its earnings before interest, tax, depreciation and amortization, less the holding company's debt. The loan proceeds are to be used primarily to expand the existing Pansea properties and to fund new
properties in the region.

Management Strategies

As the foregoing indicates, OEH has a mix of hotel and other deluxe travel products that are geographically diverse and appeal to the high-end leisure
market, reflecting an important management strategy. As a result, about two-thirds of annual revenue derives from leisure customers while corporate/ business travel accounts for the rest.

OEH
benefits from trends and developments favorably impacting the world hotel, travel and leisure markets, including strong demand growth trends in the luxury hotel market in many parts
of the world, increased travel and leisure spending by consumers, favorable demographic trends in relevant age and income brackets of U.S. and European populations, and increased online travel
bookings. These trends suffered a setback since 2001 due to slowing national economies, the shock of terrorist attacks, the build-up and aftermath of the wars in Afghanistan and Iraq and
the SARS epidemic. Management believes that the public's confidence in world travel is returning and demand for luxury hotel and tourist products will resume.

For
the future, OEH plans to grow its business by increasing RevPAR and earnings at its established properties and newer acquisitions, by expanding existing hotel and restaurant
properties where land or space is already available, by increasing the utilization of its tourist trains and cruiseship to add trips, and by acquiring additional distinctive luxury properties
throughout the world. Factors in OEH's evaluation of a potential acquisition include the uniqueness of the property, attractions for guests in the
vicinity, acceptability of initial investment returns, visible upside potential such as by pricing, expansion or improved marketing, limitations on nearby competition, and convenient access.

OEH
management plans to continue owning or part owning and managing most OEH properties. Ownership encourages OEH to develop the distinctive character of its properties and allows it to
benefit from all of the current cash flow and future capital gains should it sell a property. Self-management has enabled OEH to capture the economic benefits otherwise shared with a
third-party manager, to control the operations, quality and expansion of the hotels, and to use its experience with price changes, expansions and renovations to improve cash flow and enhance asset
values.

Many
of OEH's individual properties, such as the Hotel Cipriani and '21' Club, have distinctive local brand identities. OEH links these together under its umbrella "Orient-Express
Hotels" name

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which
originated with the legendary luxury European train in the late 19th and early 20th centuries and which is recognizable worldwide and synonymous with sophisticated travel and refined elegance.

Marketing, Sales and Public Relations

OEH's sales and marketing function is based upon direct sales, cross-selling to existing customers and public relations. OEH has a global sales force of over 220
persons in 40 locations. Hotel marketing is coordinated through OEH's regional sales offices mainly in New York, Paris, Frankfurt and London while the tourist trains and cruiseship are marketed
through sales and reservations offices in Providence (Rhode Island), London, Paris, Cologne, Tokyo, Singapore and Cusco. OEH also has local sales representatives at many of the hotels. The
responsibilities of OEH's sales staff include promoting special events, working with group and corporate account representatives and planning direct mail efforts. OEH belongs to a number of
international organizations, such as "The Leading Hotels of the World" and "Preferred Hotels and Resorts Worldwide", to promote its properties in conjunction with other non-branded, luxury
operators.

Internet
usage is an important direct sales tool. Through OEH's website (www.orient-express.com), with its prize-winning design, OEH offers direct reservations services to customers.
On-line sales have lower transaction costs by saving travel agent commissions and tour operator discounts. The internet also enhances marketing exposure and increases distribution.

Because
repeat customers appreciate the consistent quality of OEH's hotels, trains and restaurants, an important aspect of its strategy is to promote other OEH properties through various
cross-selling
efforts. These include direct mail to existing customers, in-house brochures and promotions, discounted special offers, and OEH's "Orient-Express Travel Club" website and
in-house "Orient-Express Magazine". OEH also sells luxury souvenir goods branded with the names of its travel products.

OEH's
marketing strategy also focuses on public relations, which it believes is a highly cost-effective marketing tool for luxury properties. Because of the unique nature of
the OEH properties, guests are more likely to hear about OEH's hotels and tours through word-of-mouth or magazine or newspaper articles rather than through direct advertising.
OEH has two in-house public relations offices in London and New York and representatives in 13 countries worldwide, including contracts with third-party public relations firms, to promote
its properties through travel magazines, newspapers and other media. During 2003, OEH hosted over 1,700 journalists at its various properties. As a result, about 6,000 articles and stories were
published or broadcast about OEH's properties, many in publications with large local, regional or international circulations.

Industry Awards

OEH has gained a worldwide reputation for quality and service in the luxury segment of the leisure and business travel market. Over the years, OEH's properties
have won numerous national and international awards given by trade or consumer publications such as Conde Nast Traveller, Gourmet, Travel & Leisure and Tatler and private subscription
newsletters such as Andrew Harper's Hideaway Report, or industry bodies such as the American Automobile Association. The awards are based on opinion polls of their readers or the professional opinion
of journalists or panels of experts. The awards are believed to influence consumer choice and are therefore highly prized.

Competition

OEH competes for hotel and restaurant acquisition opportunities with others who may have substantially greater financial resources. This competition may have the
effect of increasing OEH's acquisition costs, reducing the number of suitable investment opportunities offered to OEH and increasing the bargaining power of property owners seeking to sell or to enter
into management agreements.

12

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Competition
for guests in the hospitality industry is based generally on the convenience of location, the quality of the property, pricing, range and quality of food services and
amenities offered, types of cuisine, and name recognition. Demographic, geographic or other changes in one or more of OEH's markets could impact the convenience or desirability of the sites of OEH's
hotels and restaurants, and so could adversely affect their profitability. Also, new or existing competitors could significantly lower prices or offer greater conveniences, services or amenities or
significantly expand, improve or introduce new facilities in markets in which OEH's hotels and restaurants compete.

OEH's
strategy is to acquire only hotels which have special locations and distinctive character. Many are in areas with unique local history or high entry barriers because of zoning
restrictions. OEH builds its competitive advantage further by offering high quality service and cuisine, often with a local flavor. Typically, therefore, OEH competes by providing a special
combination of location, character, cuisine and service rather than relying on price competition.

OEH's
luxury trains have no direct competitors. Other trains exist on similar routes, but management believes OEH's trains and onboard service are so unique that guests consider an OEH
train more as a luxury experience and an end in itself rather than as a means of transport.

Employees

OEH currently employs about 5,300 persons, about 2,200 of whom are represented by labor unions. Approximately 4,600 persons are employed in the hotels and
restaurants, 640 are employed in the trains and cruises business, and the balance are engaged in central administration and sales.

Management
believes that OEH's ongoing labor relations are satisfactory but these could deteriorate at any time due to disputes over wage or benefit levels, working conditions or OEH's
response to changes in government regulation of workers and the workplace. OEH's operations rely heavily on employees providing high-quality personal service, and any labor shortage or
stoppage caused by poor relations with employees could adversely affect OEH's ability to provide those services.

Government Regulation

OEH and its properties are subject to numerous laws and government regulations such as those relating to food and beverage preparation and sale, liquor service,
health and safety of premises, employee relations, the environment and handling of hazardous substances. Management believes that OEH is in compliance in all material respects with relevant laws and
regulations with respect to its business. Changes in these and in government tax rates or regimes, however, may adversely affect the results of OEH's various properties.

The
expansion of existing properties may be dependent upon obtaining necessary planning/building permits or zoning variances from local authorities. The failure or delay to obtain these
could adversely affect OEH's strategy of increasing revenues and net income through expansion of existing properties.

Certain Trading Factors

OEH's business prospects, financial condition, results of operations or cash flow could be adversely affected by the following trading factors as well as others
described in this report.

OEH's
operations are subject to factors generally encountered in the hospitality industry, such as



13

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The
effect of these factors varies among the hotels and other properties because of their geographic diversity. The recent SARS epidemic is Asia, for example, caused a reduction in
passenger bookings on OEH's tourist train operating between Bangkok and Singapore and had a negative impact on travel to Australia and Tahiti. Although the SARS outbreak has been contained, it is
possible that the disease could re-emerge. The occurrence of this or a similar event may have a negative impact on OEH's operations.

In
particular, international, regional and even domestic travel has been disrupted as a result of terrorist attacks in the U.S. on September 11, 2001, the continuing threat of
terrorism and the wars in Afghanistan and Iraq. Demand for most of OEH's properties declined since the September 11 attacks, and the effects of the disruption are continuing to be felt. For
example, American leisure travellers seem more reluctant to go abroad, and booking lead-times by guests, travel agents and tour operators have shortened.

OEH's
hotels and restaurants are subject to risk generally incident to the ownership of commercial real estate and often beyond its control. These include



Local
weather conditions such as storms and hurricanes, destructive forces like fire or flooding and, in the case of OEH's tourist trains, disruption of the railway networks on which
they operate may adversely affect operations and revenue at individual OEH properties. OEH carries property and loss of earnings insurance in amounts management deems adequate, but damages may exceed
the insurance limits or be outside the scope of coverage.

14

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Management intends to increase revenues and net income through acquisitions of new properties and expansion of existing ones. Pursuit of these opportunities depends on OEH's ability to
identify suitable properties, to negotiate purchases or construction on satisfactory terms, to obtain the necessary financing and governmental permits, to build on schedule and with minimum disruption
to guests, and to integrate new properties into OEH's operations. Also, the acquisition of properties in new geographic locations may present operating and marketing challenges that are different from
those currently encountered in existing locations. OEH may develop new properties in the future which are subject to such adverse factors as market or site deterioration after acquisition, inclement
weather, construction delays, labor or materials shortages, work stoppages and the unavailability of construction and permanent financing.

The
acquisition and expansion of leisure properties, as well as the ongoing renovations, refurbishments and improvements required to maintain or upgrade existing properties, are capital
intensive. Current expansion plans call for the expenditure of up to an aggregate of $90,000,000 over the next few years to add new rooms or facilities at existing properties, and current acquisition
plans contemplate expenditure of about $50,000,000 per year for new properties which would be financed mainly by a suitable level of mortgage debt. The availability of future borrowings and access to
the capital markets for equity financing to fund these acquisitions and expansions depend on prevailing market conditions and the acceptability of financing terms offered to OEH. There can be no
assurance that future borrowings or equity financing will be available to OEH, or available on acceptable terms, in an amount sufficient to fund OEH's needs. Future equity financings may be dilutive
to existing holders of OEH shares, and future debt financings may involve restrictive covenants limiting OEH's flexibility to operate its business.

Currency
fluctuations may materially affect OEH's financial statements and operating margins because of the geographic diversity of its operations linked to foreign currencies. OEH
financial statements are presented in U.S. dollars and can be impacted by foreign exchange fluctuations through both (i) translation risk, which is the risk that the financial statements for a
particular period or as of a certain date depend on the prevailing exchange rates of the various currencies against the U.S. dollar, and (ii) transaction risk, which is the risk that the
currency of OEH's costs and liabilities fluctuates in relation to the currency of its revenue and assets, which fluctuation may adversely affect operating margins. With respect to translation risk,
even though the fluctuations of currencies against the U.S. dollar can be substantial and therefore significantly impact comparisons with prior periods, the translation impact is a reporting
consideration and does not affect the underlying results of operations, as transaction risk does. OEH tries to match foreign currency revenues and costs and assets and liabilities to provide a natural
hedge against translation risks although this is not a perfect hedge. With respect to transaction risk, OEH may try to mitigate its exposure by entering into forward foreign exchange contracts from
time to time. See Item 7AQuantitative and Qualitative Disclosures about Market Risk below.

OEH
may incur a significant amount of debt from time to time which could require OEH to dedicate much of its cash flow from operations to payments on indebtedness, thus



Also,
since most of OEH's long-term debt accrues interest at rates that fluctuate with prevailing interest rates, any increases in prevailing interest rates may increase
interest payment obligations. From

15

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time
to time OEH enters into hedging transactions in order to manage its floating interest rate exposure. See Item 7AQuantitative and Qualitative Disclosures about Market Risk below.

OEH's Relationship with Sea Containers Ltd.

Sea Containers Ltd. ("SCL"), a Bermuda company with shares listed on the New York Stock Exchange, currently owns about 42% of the Company's
Class A and B common shares (excluding the Class B shares owned by a Company subsidiary) having about 15% of the combined voting power of all outstanding Class A and B common
shares of the Company. See Item 12Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters below. SCL engages in four main businesses, namely
(i) ferry transport operations primarily in and around Britain and Scandinavia, (ii) high speed passenger rail servies in Britain, (iii) worldwide marine cargo
container leasing primarily through its GE SeaCo joint venture with General Electric Capital Corporation and (iv) hotel and leisure operations through OEH. Until the initial public offering of
the Company's Class A shares in August 2000, OEH was a wholly-owned subsidiary of SCL.

At
the time of the initial public offering, the Company and certain of its subsidiaries and SCL entered into agreements providing for the separation of their business operations and
various ongoing relationships between the companies such as shared services and offices, tax matters and noncompetition, and relating to the shares of the Company and SCL owned by their respective
subsidiaries. See Item 13Certain Relationships and Related Transactions below.

As
a result of sales by the Company and SCL of the Company's common shares since the initial public offering, SCL currently owns less than a majority of the equity shares in the Company
(disregarding the Company shares owned by its subsidiary) and holds less than majority voting power for most matters submitted to a vote of Company shareholders. Accordingly, SCL no longer has power
to elect the Company's Board of Directors or otherwise to control OEH's business direction and policies. Of the seven directors on the Company's Board, only three are also directors or officers of
SCL. OEH has ceased to be a consolidated subsidiary of SCL and is accounted for in SCL's financial statements using the equity method of accounting. The Company has filed a registration
statement with the SEC, which was declared effective on February 19, 2003, for sales by SCL from time to time, in one or more transactions, of any or all of its remaining common shares in the
Company.

OEH
has guaranteed no debt of SCL. All former guarantees by SCL of OEH debt dating from before the Company's initial public offering have been or are being terminated. See Note 17
to the Financial Statements below.

ITEM 2. Properties

OEH owns 26 hotels, three European tourist trains, a cruiseship and two restaurants, and owns interests of 50% or less in four hotels, its Southeast Asian tourist
train and PeruRail, and a third restaurant, all as described in Item 1Business above. The small regional sales, marketing and operating offices of the hotels, tourist trains and
cruiseship are occupied under lease.

ITEM 3. Legal Proceedings

There are no material legal proceedings, other than ordinary routine litigation incidental to OEH's business, to which the Company or any of its subsidiaries is a
party or to which any of their property is subject.

ITEM 4. Submission of Matters to a Vote of Security Holders

The Company submitted no matter to a vote of its security holders during the fourth quarter of 2003.

16

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PART II

ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters

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 of the Company
are closely held and not listed. The following table presents the quarterly high and low sales prices of a Class A common share in 2002 and 2003 as reported for New York Stock Exchange
composite transactions:

|               |  | 2002 |       | 2003
|-------------- |  | ---- | ----- | ----
|
|First quarter  |  | $    | 20.90 |     
|Second quarter |  |      | 20.80 |     
|Third quarter  |  |      | 17.71 |     
|Fourth quarter |  |      | 14.50 |     

The
Company paid no cash dividends on its Class A and B common shares in 2002 and 2003. The Company paid its first quarterly cash dividend since its initial public offering in
2000 on January 20, 2004 at the rate of $0.025 per share.

The
Islands of Bermuda where the Company is incorporated have no applicable governmental laws, decrees or regulations which restrict the export or import of capital or affect the payment
of dividends or other distributions to nonresident holders of the Class A and B common shares of the Company or which subject United States holders to taxes.

At
March 8, 2004, the number of record holders of the Class A common shares of the Company was approximately 20.

17

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ITEM 6.    Selected Financial Data

Orient-Express Hotels Ltd. and Subsidiaries

|                                                   |                   | Year ended December 31, |          
|-------------------------------------------------- | ----------------- | ----------------------- | ---------
|
|
|Revenue and earnings from unconsolidated companies |                   | $                       | 325,218  
|                                                   |                   |                         |          
|Gain on sale of assets and other                   |                   | $                       | 4,250    
|                                                   |                   |                         |          
|Net earnings on class A and class B common shares  |                   | $                       | 23,609   
|                                                   |                   |                         |          
|Net earnings per class A and class B common share  |                   |                         |          
|                                                   | Basic and diluted |                         | $        
|                                                   |                   |                         |          
|Total assets                                       |                   | $                       | 1,173,652
|                                                   |                   |                         |          
|Long-term obligations                              |                   | $                       | 554,188  
|                                                   |                   |                         |          
|Shareholders' equity                               |                   | $                       | 512,444  
|                                                   |                   |                         |          

---

See
notes to consolidated financial statements (Item 8).

18

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ITEM 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations

Overview

OEH has two business segments: (1) hotels and restaurants and (2) tourist trains and cruises. Hotels currently consist of 30 deluxe hotels,
including La Residencia, Le Manoir aux Quat' Saisons and Maroma Resort and Spa, all acquired in early 2002, and a 50% interest in the Hotel Ritz Madrid acquired in 2003 (see Note 2 to the
Financial Statements (Item 8 below)). Twenty-six of these hotels are wholly or majority owned, and are referred to in this discussion as "owned hotels". The other four hotels, in which OEH
has an equity interest and operates under management contracts, are referred to in this discussion as "hotel management interests". Total revenue and other income referred to in this discussion
consists of revenues from owned hotels, restaurants, tourist trains and cruises, earnings from unconsolidated companies and gains on sale of assets. In 2003, revenue from hotel management interests,
including earnings from unconsolidated companies, was $13.5 million, or 4% of total revenue and other income, which consisted of $8.3 million from investments accounted for using the
equity method and $5.2 million from management fees. Of the owned hotels, 11 are located in Europe, five in North America and ten in the rest of the world. One of the hotels in Europe, the
Hotel Caruso in Ravello, Italy, is not currently operational as it is undergoing restoration and refurbishment.

Also,
OEH currently owns and operates the restaurant '21' Club in New York, has a 49% interest in Harry's Bar in London and owns and operates La Cabaña restaurant in
Buenos Aires which opened in September 2003 (the "restaurants").

OEH's
tourist trains and cruises segment operates five tourist trainsthree of which are owned and operated and two in which OEH has an equity interest and exclusive
management contractsand a river cruiseship.

Revenue
per available room, or RevPAR, is a key performance indicator used widely within the hotel industry as it is a function of the average daily room rate, or ADR, achieved for the
rooms sold and average occupancy, being the rooms sold as a proportion of the rooms available to be sold. ADR on its own gives no indication of the relative occupancy of the hotel and could be shown
as increasing while the number of rooms sold had fallen resulting in a reduction in rooms revenue over a prior period.

Following
the terrorist attacks in the United States on September 11, 2001, as well as weakening regional economies in 2001, OEH experienced a significant adverse impact on its
business in common with other companies in the travel and hospitality sector. During 2002, the business showed some improving trends quarter on quarter. In the first half of 2003, however, with the
prospect and then commencement of the Iraq War and the outbreak of the SARS epidemic, travel was further reduced with a consequential reduction in occupancy and OEH's profitability. In the second half
of the year, business was generally better than in the first half, but RevPAR remained below pre-September 11 levels, primarily due to 15%-20% lower occupancy at the
hotels compared to 2000 and 2001 occupancy (on a comparable or same store basissee below). The improvement in business in the second half was not sufficient to reverse the impact of the
Iraq War and SARS on the results of the first half, leading to earnings for 2003 at $23.6 million (including the $4.25 million gain on sale of the Hotel Quinta do Lago) being down from
$25.3 million in 2002. Currently, while bookings are still relatively short-term, they are ahead of the same time last year and, assuming no recurrence of the types of adverse
events of 2003, earnings of OEH for 2004 are expected to be better than 2003 if actual occupancy improves.

In
April 2003, OEH acquired the Hotel Ritz in Madrid, Spain with a joint venture partner, each taking a 50% interest, and OEH retaining a long-term agreement to manage
the hotel (see Note 2).

19

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OEH
has a strategy to grow its business through:



On
February 2, 2004, OEH announced it was making an $8 million investment in the Pansea group of five deluxe hotels in Southeast Asia (see Note 17).

In
November 2003, OEH sold the Hotel Quinta do Lago in the Algarve, Portugal, for $40 million cash, equivalent to a multiple of 16 times historic EBITDA. The hotel was not
considered a long-term fit with OEH's portfolio and strategy so OEH took the opportunity to sell the property at an attractive price. Also, in November and December 2003, the
Company issued and sold through underwriters 3,450,000 newly- issued class A common shares at $16 each, raising $51.9 million net of underwriters' fees and expenses. The proceeds from
the sales of the hotel and new shares will be used to invest in other hotels and related assets and to fund expansion of some existing hotels as part of OEH's growth strategy outlined above.

In
2003, 82% of OEH's revenue and other income were derived from the hotels and restaurants segment and the remainder from the tourist trains and cruises segment. In the hotels and
restaurants segment, 87% of revenue and other income were from owned hotels, 6% was from restaurants, 5% was from hotel management interests and 1% was from the gain on sale of the Hotel Quinta do
Lago.

OEH
derives revenue from owned hotel operations primarily from the sale of rooms and the provision of food and beverages. The main factors for analyzing rooms revenue are the number of
room nights sold and the ADR, and RevPAR referred to above which is a measure of both these factors.

Revenue
from restaurants is derived from food and beverages sold to customers. Revenue from hotel management interests includes fees received under management contracts, which are based
upon a combination of a percentage of the revenue from operations and operating earnings calculated before specified fixed charges. Other income includes OEH's share of the earnings of unconsolidated
companies, interest income on loans made to unconsolidated companies, and the gain on sale of a hotel asset.

The
revenue from the tourist trains and cruises segment primarily comprises tickets sold for travel and food and beverage sales.

Operating
costs include labor, repairs and maintenance, energy and the costs of food and beverages sold to customers in respect of owned hotel operations, restaurants, tourist trains and
cruises.

Selling,
general and administrative expenses include travel agents' commissions, the salaries and related costs of the sales teams, advertising and public relations costs, and the
salaries and related costs of management. Some of the central general and administrative expenses are provided under agreement with SCL. See Note 16.

Depreciation
and amortization includes depreciation of owned hotels, restaurants, tourist trains and the cruiseship.

20

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When
OEH discusses results for a period on a "comparable" or "same store" basis, OEH is considering only the results of hotels owned and operating throughout the period mentioned and
excluding the effect of any acquisitions or dispositions.

Results of Operations

OEH's operating results for years 2003, 2002, and 2001, expressed as a percentage of total revenue and other income, are as follows:

|                                                               |                                        | Year ended December 31, |   
|-------------------------------------------------------------- | -------------------------------------- | ----------------------- | --
|
|Revenue and other income:                                      |                                        |                         |   
|                                                               | Hotels and restaurants                 |                         | 82
|                                                               | Tourist trains and cruises             |                         | 14
|                                                               | Earnings from unconsolidated companies |                         | 3 
|                                                               | Gain on sale of hotel asset            |                         | 1 
|                                                               |                                        |                         |   
|                                                               |                                        | 100                     |   
|Expenses:                                                      |                                        |                         |   
|                                                               | Depreciation and amortization          |                         | 8 
|                                                               | Operating                              |                         | 48
|                                                               | Selling, general and administrative    |                         | 31
|Net finance costs                                              |                                        | 5                       |   
|                                                               |                                        |                         |   
|Earnings before income taxes                                   |                                        | 8                       |   
|Provision of income taxes                                      |                                        | 1                       |   
|                                                               |                                        |                         |   
|Net earnings as a percentage of total revenue and other income |                                        | 7                       | % 
|                                                               |                                        |                         |   

21

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The
revenue and other income and the earnings before interest, tax, depreciation and amortization (EBITDA) of OEH's operations for the years 2003, 2002, and 2001 are analyzed as follows
(dollars in millions):

|                          |                             | Year ended December 31, |  
|------------------------- | --------------------------- | ----------------------- | -
|
|Revenue and other income: |                             |                         |  
|                          | Owned Hotels:               |                         |  
|                          |                             | Europe                  |  
|                          |                             | North America           |  
|                          |                             | Rest of the world       |  
|                          | Hotel management interests  |                         |  
|                          | Restaurants                 |                         |  
|                          | Tourist trains and cruises  |                         |  
|                          | Gain on sale of hotel asset |                         |  
|                          |                             |                         |  
|                          | Total                       |                         | $
|                          |                             |                         |  
|EBITDA:                   |                             |                         |  
|                          | Owned Hotels:               |                         |  
|                          |                             | Europe                  |  
|                          |                             | North America           |  
|                          |                             | Rest of the world       |  
|                          | Hotel management interests  |                         |  
|                          | Restaurants                 |                         |  
|                          | Tourist trains and cruises  |                         |  
|                          | Central overheads           |                         |  
|                          | Gain on sale of hotel asset |                         |  
|                          |                             |                         |  
|                          | Total EBITDA                |                         | $
|                          |                             |                         |  

Management
believes that EBITDA is a useful measure of operating performance, to help determine the ability to incur capital expenditure or service indebtedness, because it is not
affected by non-operating factors such as leverage and the historic cost of assets. EBITDA is also a financial measure commonly used in the hotel and leisure industry. However, EBITDA does
not represent cash flow from operations as defined by U.S. generally accepted accounting principles, is not necessarily indicative of cash available to fund all cash flow needs and should not be
considered as an alternative to earnings from operations before net finance costs under U.S. generally accepted accounting principles for purposes of evaluating results of operations.

The
following table reconciles EBITDA as defined with OEH's earnings from operations before net finance costs and with net earnings, as derived from the audited financial information for
the years ended December 31, 2003, 2002 and 2001 (dollars in millions):

|                                                  |  | Year ended December 31,
|------------------------------------------------- |  | -----------------------
|
|EBITDA                                            |  | $                      
|Depreciation and amortization                     |  |                        
|                                                  |  |                        
|Earnings from operations before net finance costs |  |                        
|Net finance costs                                 |  |                        
|Provision for income taxes                        |  |                        
|                                                  |  |                        
|Net earnings                                      |  | $                      
|                                                  |  |                        

22

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Operating
information for OEH's owned hotels for the years ended December 31, 2003 and 2002 is as follows:

|                                |               | Year ended
December 31, |     |  |     | 
|------------------------------- | ------------- | ----------------------- | --- |  | --- | 
|
|Average Daily Rate (in dollars) |               |                         |     |  |     | 
|                                | Europe        |                         | 493 |  | 376 | 
|                                | North America |                         | 314 |  | 314 | 
|                                | Rest of World |                         | 228 |  | 186 | 
|                                | Worldwide     |                         | 340 |  | 286 | 
|Rooms Sold (in thousands)       |               |                         |     |  |     | 
|                                | Europe        |                         | 139 |  | 157 | 
|                                | North America |                         | 131 |  | 118 | 
|                                | Rest of World |                         | 160 |  | 176 | 
|                                |               |                         |     |  |     | 
|                                | Worldwide     |                         | 430 |  | 451 | 
|RevPAR (in dollars)             |               |                         |     |  |     | 
|                                | Europe        |                         | 280 |  | 242 | 
|                                | North America |                         | 200 |  | 206 | 
|                                | Rest of World |                         | 107 |  | 96  | 
|                                | Worldwide     |                         | 184 |  | 168 | 

|                                          |               |  |     |  |     | Change % |   
|----------------------------------------- | ------------- |  | --- |  | --- | -------- | --
|
|Comparable/Same Store RevPAR (in dollars) |               |  |     |  |     |          |   
|                                          | Europe        |  | 284 |  | 247 |          | 15
|                                          | North America |  | 203 |  | 206 |          | -2
|                                          | Rest of World |  | 107 |  | 96  |          | 12
|                                          | Worldwide     |  | 183 |  | 168 |          | 9 

Year Ended December 31, 2003 compared to Year Ended December 31, 2002

Revenue and Other Income

Total revenue and other income increased by $40.2 million, or 14%, from $289.3 million in 2002 to $329.5 million in 2003. Hotels and
restaurants revenue (including earnings from unconsolidated companies) increased by $32.6 million, or 13%, from $244.0 million in 2002 to $276.6 million in 2003, and the revenue
from tourist trains and cruises (including earnings from unconsolidated companies) increased by $3.4 million, or 8%, from $45.3 million in 2002 to $48.7 million in 2003. A gain on
the sale of the Hotel Quinta do Lago of $4.25 million was recorded in 2003 and included in revenue (2002$nil).

The
increase in hotels and restaurants revenue (including earnings from unconsolidated companies) consisted of the following:



23

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The increase in owned hotels revenue of $32.0 million is analyzed by region as follows:

Europe.Revenue increased by $16.0 million, or 16%, from $99.9 million in 2002 to $115.9 million in
2003. The Hotel Quinta do Lago was sold in November 2003 with effect from the beginning of the fourth quarter. The revenue derived from this hotel in the fourth quarter of 2002 was
$1.9 million. Excluding the effect of this, revenue increased by $17.9 million, or 18%, from $98.0 million in 2002 to $115.9 million in 2003. This was mainly due to the
translation effect of the euro being stronger against the dollar in 2003 on average compared to 2002.

On
a same store basis in euros, RevPAR declined by 4% in 2003 over 2002 but when translated to U.S. dollars increased by 15%. The decline in RevPAR in local currency was mainly caused by
the adverse effect upon travel prior to and during the war in Iraq.

North America.Revenue increased by $7.8 million, or 13%, from $58.8 million in 2002 to $66.6 million in
2003. Excluding the effect of the acquisition of Maroma Resort and Spa in March 2002, revenue increased by $4.1 million. This was mainly due to the re-opening of the Inn at
Perry Cabin in 2003 following an expansion of the hotel from 41 rooms to 81 rooms which resulted in increased revenue in 2003 of $2.9 million.

On
a same store basis RevPAR actually declined by 2% over 2002.

Rest of the World.Revenue increased by $8.2 million, or 15%, from $54.8 million in 2002 to
$63.0 million in 2003. This increase was mainly caused by the relative weakness of the dollar in 2003 against the currencies earned in the hotels located in the rest of the world, especially
the South African rand, and the resulting impact upon the translation of the revenues and the costs of the operations into U.S. dollars.

RevPAR
declined by 5% in local currencies but increased by 12% in U.S. dollars. The decline in RevPAR in local currency was mainly driven by the adverse effect upon travel prior to and
during the war in Iraq and the outbreak of the SARS epidemic, especially in OEH's Australasian operations.

Depreciation and Amortization

Depreciation and amortization increased by $5.8 million, or 29%, from $19.5 million in 2002 to $25.3 million in 2003 primarily due to the
effect of the relative weakness of the dollar in 2003 which led to the translation of depreciation on assets denominated in other currencies into higher dollar amounts and capital expenditure.

Operating Expenses

Operating expenses increased by $22.4 million, or 16%, from $136.2 million in 2002 to $158.6 million in 2003. This was primarily due to the
translation of operating costs incurred in hotel currencies which were stronger against the U.S. dollar in 2003 compared to 2002.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased by $15.7 million, or 18%, from $86.1 million in 2002 to $101.8 million in 2003. The
primary reason for this, as with operating expenses, was the translation of selling, general and administrative costs incurred in local currencies.

Earnings from Operations before Net Finance Costs

Earnings from operations decreased by $3.6 million, or 8%, from $47.5 million in 2002 to $43.9 million in 2003. The earnings from operations
in 2003 include a gain of $4.25 million on the sale of the Hotel Quinta do Lago during the year. Excluding the gain, earnings from operations decreased

24

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by
$7.9 million, or 17%, from $47.5 million in 2002 to $39.6 million in 2003. Earnings from operations represent total revenue less depreciation and amortization, operating
expenses and selling, general and administrative expenses.

Net Finance Costs

Net finance costs decreased by $1.2 million, or 6%, from $18.4 million in 2002 to $17.2 million in 2003. This was mainly due to foreign
exchange gains on euro cash balances held by OEH.

Taxes on Income

The provision for income taxes decreased by $0.8 million, or 21%, from $3.8 million in 2002 to $3.0 million in 2003. The Company is
incorporated in Bermuda, which does not impose an income tax. Accordingly, the entire income tax provision was attributable to income tax charges incurred by subsidiaries operating in jurisdictions
that impose an income tax. The decrease of $0.8 million was due to reduced profitability of these subsidiaries.

Net Earnings

In 2003, OEH's net earnings decreased by $1.7 million, or 7%, from $25.3 million in 2002 to $23.6 million in 2003 including a gain on the
sale of the Hotel Quinta do Lago of $4.25 million. Net earnings represent earnings from operations less net finance costs and provision for income taxes. The year 2003 was adversely affected by
the various factors discussed above including the build-up and actual war in Iraq during OEH's prime booking period early in the year as well as the SARS epidemic that impacted both OEH's
Australasian properties and outbound travel in general from that region.

Year Ended December 31, 2002 compared to Year Ended December 31, 2001

Revenue and Other Income

Total revenue and other income increased by $28.0 million, or 11%, from $261.3 million in 2001 to $289.3 million in 2002 (on a same store
basis, excluding acquisitions in 2001 and 2002, revenue decreased by $2.2 million). Hotels and restaurants revenue and other income increased by $23.6 million, or 11%, from
$220.4 million in 2001 to $244.0 million in 2002 (on a same store basis, excluding
acquisitions in 2001 and 2002, revenue and other income decreased by $6.6 million), and the revenue and other income from tourist trains and cruises increased by $4.4 million, from
$40.9 million in 2001 to $45.3 million in 2002.

The
increase in hotels and restaurants revenue and other income consisted of the following:



25

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The
increase in owned hotels revenue of $21.8 million (including acquisitions of $30.0 million) is analyzed by region as follows:

Europe.On a same store basis, revenue decreased by $0.5 million, or 1%, from $79.8 million in 2001 to
$79.3 million in 2002. The acquisitions of La Residencia in Mallorca, Spain and Le Manoir aux Quat' Saisons in Oxfordshire, England during the first quarter of 2002 accounted for an additional
$20.6 million of revenue.

RevPAR
on a same store basis decreased by 1% in U.S. dollars in 2002 over 2001 and 6% in local currency. The Hotel Cipriani suffered from a decline of U.S. visitors and the Lapa Palace
Hotel in Lisbon had fewer business travelers than normal.

North America.On a same store basis, revenue decreased by $3.8 million, or 6%, from $59.2 million in 2001 to
$55.4 million in 2002. The acquisition of Maroma Resort and Spa in the second quarter of 2002 accounted for $3.4 million of revenue. The Inn at Perry Cabin was closed for a large part of
the year while major works were carried out, and New Orleans had a soft market for conventions and other major events which impacted results at the Windsor Court Hotel.

On
a same store basis RevPAR declined by 5% in 2002 compared to 2001.

Rest of the World.On a same store basis, revenue decreased by $3.9 million, or 8%, from $46.6 million in 2001
to $42.7 million in 2002. The acquisition of the Miraflores Park Hotel accounted for $4.0 million of revenue. The Mount Nelson Hotel in Cape Town and the Westcliff in Johannesburg showed
marked improvement while Orient-Express Safaris in Botswana were down due to fewer arrivals from the U.S. A large part of the room stock at the Copacabana Palace Hotel was off-line for
refurbishment and the Brazilian elections depressed business travel. Forest fires in Sydney and major refurbishment at Lilianfels in the Blue Mountains, west of Sydney, caused a decline in results in
the Australian owned hotels.

The
revenue decline of $3.9 million was primarily driven through a decline in same store RevPAR of 3% in U.S. dollars.

Depreciation and Amortization

Depreciation and amortization increased by $3.1 million, or 19%, from $16.4 million in 2001 to $19.5 million in 2002 primarily due to the
effect of acquisitions.

Operating Expenses

Operating expenses increased by $16.2 million, or 14%, from $120.0 million in 2001 to $136.2 million in 2002. Excluding the effect of
acquisitions, operating expenses increased by $2.4 million.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased by $13.8 million, or 19%, from $72.2 million in 2001 to $86.1 million in 2002.
Excluding the effect of acquisitions, selling, general and administrative expenses increased by $3.8 million. Rising insurance costs were an important component of this increase.

26

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Earnings from Operations before Net Finance Costs

Earnings from operations decreased by $5.2 million, or 10%, from $52.7 million in 2001 to $47.5 million in 2002. Earnings from operations
represent total revenue less depreciation and amortization, operating expenses and selling, general and administrative expenses.

Net Finance Costs

Net finance costs decreased by $0.3 million, or 2%, from $18.7 million in 2001 to $18.4 million in 2002. OEH has benefited from the effect of
lower interest rates, which has been offset by the increases in debt relating to capital expenditure and acquisitions financed in 2001 and 2002.

Taxes on Income

The provision for income taxes decreased by $0.4 million, or 9%, from $4.2 million in 2001 to $3.8 million in 2002. The Company is
incorporated in Bermuda, which does not impose an income tax. Accordingly, the entire income tax provision was attributable to income tax charges incurred by subsidiaries operating in jurisdictions
that impose an income tax. The decrease of $0.4 million was due to reduced profitability of these subsidiaries.

Net Earnings

In 2002, OEH's net earnings decreased by $4.6 million, or 15%, from $29.9 million in 2001 to $25.3 million in 2002. Net earnings represent
earnings from operations less net finance costs and provision for income taxes.

Liquidity and Capital Resources

Working Capital

OEH had cash and cash equivalents of $81.3 million at December 31, 2003, $43.4 million more than the $37.9 million at
December 31, 2002. At December 31, 2003, there were undrawn amounts available to OEH under a secured revolving credit facility of $32.0 million and committed
short-term lines of credit of $35.8 million ($22.8 million at December 31, 2002), bringing total cash availability at December 31, 2003 to
$149.1 million.

Current
assets less current liabilities, including the current portion of long-term debt, resulted in a working capital surplus of $10.8 million at December 31,
2003, a working capital increase of $38.0 million from a deficit of $27.2 million at December 31, 2002. The overall increase in working capital was comprised of the following:



OEH's
business does not require the maintenance of significant inventories or receivables and, therefore, management believes working capital is not the most appropriate measure of
liquidity.

27

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Cash Flow

Operating Activities.Net cash provided by operating activities decreased by $2.1 million to $33.2 million for
the year ended December 31, 2003, from cash provided by operating activities of $35.3 million for the year ended December 31, 2002. The decrease was primarily attributable to a
decrease in net earnings of $1.7 million after adjustment for certain non-cash items, including depreciation and amortization.

Investing Activities.Cash used in investing activities was $40.6 million for the year ended December 31, 2003,
compared to $119.0 million for the year ended December 31, 2002, a decrease of $78.4 million of which $39.6 million was due to proceeds from asset sales and
$34.9 million was due to reduced expenditure on acquisitions and investments.

Financing Activities.Cash provided from financing activities for the year ended December 31, 2003 was
$48.3 million as compared to cash provided from financing activities of $63.3 million for the year ended December 31, 2002, a decrease of $15.0 million. This increase was
mainly due to the proceeds from the issuance of common shares of $51.9 million and decreased proceeds from the long-term debt, partly offset by reduced proceeds from working capital
facilities of $22.8 million and increased principal payments under long-term debt of $28.2 million.

Capital Commitments

There were $11.0 million of capital commitments outstanding as of December 31, 2003 mainly on investments in owned hotels.

Indebtedness

At December 31, 2003, OEH had $554.2 million of consolidated long-term debt, including the current portion, secured by OEH assets with a
number of commercial bank lenders which is payable over periods of one to 12 years with a weighted average interest rate of 3.83%. These financing agreements contain covenants that include
limits on the ability to raise additional debt secured by these properties, limits on liens on the properties and limits on mergers and asset sales and, in some cases, financial covenants on the
relevant properties such as a minimum interest coverage ratio and debt service coverage ratio. Some of the Company guarantees of these facilities contain financial covenants on OEH covering a minimum
consolidated tangible net worth and a minimum consolidated interest coverage ratio. OEH is in full compliance with these covenants, and management believes they will not substantially limit OEH's
ability to finance future acquisitions or capital expenditure plans. See Note 6 regarding the maturity of long-term debt.

Approximately
50% of the outstanding principal was drawn in euros at December 31, 2003, and the balance primarily drawn in U.S. dollars. At December 31, 2003, 97% of
borrowings of OEH were in floating interest rates.

At
December 31, 2003, $19.1 million of OEH's consolidated long-term debt was guaranteed by SCL (2002$110.8 million) and contained
cross-default clauses to SCL borrowing agreements (2002$35.1 million). This indebtedness predated the Company's initial public offering in August 2000. In March 2004, the
loan agreement evidencing this debt was being amended to substitute the Company for SCL on the guarantee and cross-default clauses so that SCL will no longer be involved in any OEH
long-term indebtedness.

Liquidity

Management plans to invest over the next few years in the expansion of existing hotel properties consistent with its growth strategy, subject to market
conditions. In addition, OEH aims to acquire more properties which it expects to finance with an appropriate level of debt secured on the properties,

28

---

and
the balance through available cash resources. At December 31, 2003, OEH had capital commitments of $11.0 million overall.

Management
expects to have available cash from operations and appropriate debt finance sufficient to fund its working capital requirements, capital expenditures, acquisitions and debt
service for 2004 and later years.

Contractual Obligations Summary

The following table summarizes OEH's material known contractual obligations, excluding accounts payable and accrued liabilities, in 2004 and later years as of
December 31, 2003. The data are derived from Notes 5 (Working capital facilities), 6 (Long-term debt and obligations under capital leases), and 12 (Commitments and contingencies) to
the Financial Statements below (dollars in thousands):

|                           |  | Year ended December 31,
|-------------------------- |  | -----------------------
|
|Working capital facilities |  | $                      
|Debt                       |  |                        
|Capital leases             |  |                        
|Operating leases           |  |                        
|Capital commitments        |  |                        
|                           |  |                        
|                           |  | $                      
|                           |  |                        

Off-Balance Sheet Arrangements

OEH had no material off-balance sheet arrangements at December 31, 2003 other than those involving its equity investees reported in Notes 2(c), 6(a)
and 16, and commitments and contingencies and derivative financial instruments reported in Notes 12 and 13.

Critical Accounting Policies and Estimates

The preceding discussion and analysis of OEH's financial condition and results of operations is based on its consolidated financial statements, which have been
prepared in accordance with accounting
principles generally accepted in the United States. The preparation of these financial statements requires OEH management to make estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses. On an ongoing basis, OEH management evaluates these estimates, including those related to the recoverability of long-lived assets including intangible
assets, purchase price allocations and tax valuation allowances. Management bases its estimates on historical experience and on various other assumptions that it believes are reasonable under the
circumstances, the result of which form the basis for judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.

Critical
accounting policies are those that reflect significant judgments or uncertainties, and potentially result in materially different results under different assumptions and
conditions. OEH management believes the following are OEH's most critical accounting policies and estimates.

Revenue and other income recognition

OEH's revenue and other income are primarily derived from the following sources: (1) hotel and restaurant revenues at OEH's owned and unconsolidated joint
venture properties; (2) tourist train and cruise revenues at OEH's owned and unconsolidated joint venture operations; (3) management fees and loan interest; and (4) other revenues
which are ancillary to OEH's operations. Generally, revenues

29

---

are
recognized when the services have been rendered. The following is a description of the composition of revenues for OEH:



Carrying values of long-lived assets and goodwill

OEH management periodically evaluates the recoverability of long-lived assets whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable. These evaluations include analyses based on the cash flows generated by the underlying assets, profitability information including estimated future operating results,
trends or other determinants of fair value. If the value of the asset determined by these evaluations is less than its carrying amount, a loss is recognized for the difference between the fair value
and the carrying value of the asset. Future adverse changes in market conditions or poor operating results of the related business may indicate an inability to recover the carrying value of the asset,
thereby possibly requiring an impairment charge in the future.

In
accordance with Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets", goodwill must be evaluated annually for impairment. The
impairment testing under SFAS No. 142 is performed in two steps, first, the determination of impairment based upon the fair value of a reporting unit as compared with its carrying value and,
second, if there is an impairment, the measurement of the amount of impairment loss by comparing the implied fair value of goodwill with the carrying amount of that goodwill. As of December 31,
2003 and 2002, OEH determined the carrying value of all its operating segments was less than their respective derived fair values, indicating that there was no impairment of the recorded goodwill. To
determine fair value, OEH relied on valuation models utilizing discounted cash flows.

Depreciation

Real estate and other fixed assets are recorded at cost and are depreciated over their estimated useful lives by the straight-line method. The
depreciation rates on freehold buildings range from 20 to 60 years with a 10% residual value, and on machinery and other remaining assets from 5 to 25 years. Leasehold improvements are
depreciated over the shorter of the estimated useful life or the respective lease terms.

Pensions

OEH's primary pension plan is accounted for using actuarial valuations required by SFAS No. 87, "Employers' Accounting for Pensions", and SFAS
No. 106, "Employers' Accounting for Post-Retirement Benefits other than Pensions". OEH's minimum pension liability was approximately

30

---

$2,304,000
as of December 31, 2003. Management considers accounting for pensions critical to all of OEH's operating segments because management is required to make significant subjective
judgments about a number of actuarial assumptions, which include discount rates, health care cost trends and rates, salary growth, long-term return on plan assets and mortality rates.

Management
believes that a 7% long-term return on plan assets in 2003 is reasonable despite the recent market volatility in which OEH's plan assets had gains of approximately
15% for the year ended December 31, 2003 and losses of approximately 25% for the year ended December 31, 2002. In determining the expected long-term rate of return on assets,
management has evaluated input from OEH's actuaries and financial advisors, including their review of anticipated future long-term performance of individual asset classes and the
consideration of the appropriate asset allocation strategy given the anticipated requirements of the plan to determine the average rate of earnings expected on the funds invested. The projected
returns are based on broad equity and bond indices, including fixed interest rate gilts of long-term duration since the plan is in the U.K. OEH's expected long-term rate of
return is based on a planned asset allocation of 60% in equity investments, with an expected long-term rate of return of 7%, and 40% in fixed income investments, with an expected
long-term rate of return of 7%. OEH's actual asset allocation as of December 31, 2003 was in line with planned allocations.

Management
regularly reviews OEH's actual asset allocation and periodically rebalances investments to targeted allocations when considered appropriate. While the analysis considers
recent fund performance and historical returns, the assumption is primarily a long-term, prospective rate. Management will continue to evaluate the expected rate of return at least
annually, and will adjust as necessary.

Depending
on the assumptions and estimates used, pension expense could vary within a range of outcomes and have a material effect on OEH's consolidated financial statements. Lowering the
expected long-term rate of return on OEH's pension plan by 0.5% (from 7% to 6.5%) would have increased pension expense for fiscal 2003 by approximately $21,000. Management is currently
monitoring and evaluating the level of pension contributions based on various factors that include investment performance, actuarial valuation and tax deductibility. Management will evaluate the need
for additional contributions in 2004 based on these factors. Management believes that the cash flows from OEH's operations will be sufficient to fund additional contributions, if any, to the plan. See
Note 7 regarding pensions.

Tax assets

OEH maintains a valuation allowance to reduce its gross deferred tax assets to reflect the amount, based upon OEH's estimates of income that would likely be
realized. If OEH's future operations differed from those in the estimates, OEH may need to increase or decrease the valuation allowance, which could affect its reported operations.

See
Note 1 to the Financial Statements for a discussion of accounting policies with respect to these and other items.

Recent Accounting Pronouncements

For a discussion of OEH's adoption of recent accounting pronouncements, see Note 1(t) to the Financial Statements.

31

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ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk

OEH is exposed to market risk from changes in interest rates and foreign currency exchange rates. These exposures are monitored and managed as part of its overall
risk management program, which recognizes the unpredictability of financial markets and seeks to mitigate material adverse effects on consolidated earnings and cash flow. OEH does not hold market rate
sensitive financial instruments for trading purposes.

The
market risk relating to interest rates arises mainly from the financing activities of OEH. Earnings are affected by changes in interest rates on floating rate borrowings, principally
based on U.S. dollar LIBOR and EURIBOR, and on short-term cash investments. OEH management assesses market risk based on changes in interest rates using a sensitivity analysis. If interest
rates increased by 10% with all other variables held constant, annual net finance costs of OEH would have
increased by approximately $2,100,000 based on borrowings outstanding at December 31, 2003. The interest rates on substantially all of OEH's long-term debt are adjusted regularly to
reflect current market rates. Accordingly, the carrying amounts approximate fair value.

The
market risk relating to foreign currencies arises from buying, selling and financing in currencies other than the U.S. dollar, principally the European euro, South African rand,
Brazilian real and Australian dollar. Some non-U.S. subsidiaries of the Company borrow in local currencies, and OEH may in the future enter into forward exchange contracts relating to
purchases denominated in foreign currencies. There are no foreign currency derivative financial instruments currently in effect relating to OEH.

Ten
of OEH's owned hotels in 2003 operated in currencies linked to the euro, two operated in South African rand, two in Australian dollars, one in British pounds sterling, one in Mexican
pesos, one in Botswanan pula, one in Brazilian reais and one in Peruvian nuevo soles. The Venice Simplon-Orient-Express, British Pullman and Northern Belle tourist trains operate primarily in British
pounds sterling and currencies linked to the euro. OEH faces exposure arising from the impact of translating its global foreign currency earnings into U.S. dollars, and anticipates this foreign
exchange rate risk will remain a market exposure for the foreseeable future.

OEH
management uses a sensitivity analysis to assess the changes in the values of the U.S. dollar on foreign currency denominated monetary assets and liabilities. The primary assumption
used in this model is a hypothetical 10% weakening or strengthening of the U.S. dollar against OEH's currency exposure. At December 31, 2003, as a result of this analysis, OEH management
determined that the impact of a 10% change in foreign currency exchange rates in relation to the U.S. dollar would not be material to OEH's net earnings.

As
far as it can, OEH matches foreign currency earnings and costs and so provides a natural hedge against currency movements. In addition, a significant proportion of the guests at OEH
hotels located outside of the United States originate from the United States. When a foreign currency in which OEH operates devalues against the U.S. dollar, OEH has considerable flexibility to
increase prices in local currency, or vice versa. Management believes that when these factors are combined, OEH does not face a material exposure to its net earnings from currency movements, although
the reporting of OEH's revenues and costs translated into U.S. dollars can, from period to period, be materially affected. The gains or losses OEH has incurred from transactions denominated in foreign
currencies have not been material.

32

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ITEM 8. Financial Statements and Supplementary Data

INDEPENDENT AUDITORS' REPORT

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

We
have audited the accompanying consolidated balance sheets of Orient-Express Hotels Ltd. and subsidiaries (the "Company") as of December 31, 2003 and 2002, and the
related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2003. Our audits also included the financial
statement schedule listed in Item 15. The financial statement schedule and the consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and the financial statement schedule based on our audits.

We
conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In
our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Orient-Express Hotels Ltd. and subsidiaries as of
December 31, 2003 and 2002, and the results of their operations and their cash flows for each of the three years in the period ended
December 31, 2003 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

As
disclosed in Note 1 to the consolidated financial statements, effective January 1, 2002, the Company adopted the provisions of Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets".

/s/
Deloitte & Touche LLP

New
York, New York
March 12, 2004

33

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ORIENT-EXPRESS HOTELS LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

|                                                                                        |                                                                             | December 31,                         |          
|--------------------------------------------------------------------------------------- | --------------------------------------------------------------------------- | ------------------------------------ | ---------
|
|
|Assets                                                                                  |                                                                             |                                      |          
|Cash and cash equivalents                                                               |                                                                             | $                                    | 81,347   
|Accounts receivable, net of allowances of $976 and $592                                 |                                                                             |                                      | 43,223   
|Prepaid expenses and other                                                              |                                                                             |                                      | 11,717   
|Inventories                                                                             |                                                                             |                                      | 26,115   
|                                                                                        |                                                                             |                                      |          
|Total current assets                                                                    |                                                                             |                                      | 162,402  
|Property, plant and equipment, net of accumulated depreciation of $127,772 and $101,238 |                                                                             |                                      | 822,257  
|Investments                                                                             |                                                                             |                                      | 146,495  
|Goodwill                                                                                |                                                                             |                                      | 29,529   
|Other assets                                                                            |                                                                             |                                      | 12,969   
|                                                                                        |                                                                             |                                      |          
|                                                                                        |                                                                             | $                                    | 1,173,652
|                                                                                        |                                                                             |                                      |          
|Liabilities and Shareholders' Equity                                                    |                                                                             |                                      |          
|Working capital facilities                                                              |                                                                             | $                                    | 19,165   
|Accounts payable                                                                        |                                                                             |                                      | 23,754   
|Accrued liabilities                                                                     |                                                                             |                                      | 44,835   
|Deferred revenue                                                                        |                                                                             |                                      | 12,617   
|Current portion of long-term debt and capital leases                                    |                                                                             |                                      | 51,271   
|                                                                                        |                                                                             |                                      |          
|Total current liabilities                                                               |                                                                             |                                      | 151,642  
|Long-term debt and obligations under capital leases                                     |                                                                             |                                      | 502,917  
|Deferred income taxes                                                                   |                                                                             |                                      | 2,846    
|                                                                                        |                                                                             |                                      |          
|                                                                                        |                                                                             |                                      | 657,405  
|                                                                                        |                                                                             |                                      |          
|Minority interest                                                                       |                                                                             |                                      | 3,803    
|                                                                                        |                                                                             |                                      |          
|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31,790,601 (2002: 28,340,601) |          
|                                                                                        | Class B common shares $0.01 par value (120,000,000 shares authorized):      |                                      |          
|                                                                                        |                                                                             | Issued20,503,877 (2002: 20,503,877) |          
|Additional paid-in capital                                                              |                                                                             |                                      | 278,821  
|Retained earnings                                                                       |                                                                             |                                      | 252,484  
|Accumulated other comprehensive loss net of income taxes                                |                                                                             |                                      | (19,203  
|Less: reduction due to class B common shares owned by a subsidiary18,044,478           |                                                                             |                                      | (181     
|                                                                                        |                                                                             |                                      |          
|Total shareholders' equity                                                              |                                                                             |                                      | 512,444  
|                                                                                        |                                                                             |                                      |          
|Commitments and contingencies                                                           |                                                                             |                                      |          
|                                                                                        |                                                                             |                                      |          
|                                                                                        |                                                                             | $                                    | 1,173,652
|                                                                                        |                                                                             |                                      |          

See
notes to consolidated financial statements.

34

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ORIENT-EXPRESS HOTELS LTD. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED OPERATIONS

|                                                  |                                        | Year ended December 31, |        
|------------------------------------------------- | -------------------------------------- | ----------------------- | -------
|
|
|Revenue                                           |                                        | $                       | 315,863
|Other income:                                     |                                        |                         |        
|                                                  | Earnings from unconsolidated companies |                         |        
|                                                  | Gain on sale of hotel asset            |                         |        
|                                                  |                                        |                         |        
|                                                  |                                        |                         | 329,468
|                                                  |                                        |                         |        
|Expenses:                                         |                                        |                         |        
|                                                  | Depreciation and amortization          |                         |        
|                                                  | Operating                              |                         |        
|                                                  | Selling, general and administrative    |                         |        
|                                                  |                                        |                         |        
|Total expenses                                    |                                        |                         | 285,603
|                                                  |                                        |                         |        
|Earnings from operations before net finance costs |                                        |                         | 43,865 
|                                                  |                                        |                         |        
|Interest expense, net                             |                                        |                         | (19,892
|Interest and related income                       |                                        |                         | 2,673  
|                                                  |                                        |                         |        
|Net finance costs                                 |                                        |                         | (17,219
|                                                  |                                        |                         |        
|Earnings before income taxes                      |                                        |                         | 26,646 
|Provision for income taxes                        |                                        |                         | 3,037  
|                                                  |                                        |                         |        
|Net earnings                                      |                                        | $                       | 23,609 
|                                                  |                                        |                         |        
|Earnings per class A and B common share:          |                                        |                         |        
|                                                  | Basic and diluted                      |                         | $      
|                                                  |                                        |                         |        

See
notes to consolidated financial statements.

35

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ORIENT-EXPRESS HOTELS LTD. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS

|                                                     |                                                                                    | Year Ended December 31,                                                            |                                                                                                     
|---------------------------------------------------- | ---------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------
|
|
|Cash flows from operating activities:                |                                                                                    |                                                                                    |                                                                                                     
|                                                     | Net earnings                                                                       |                                                                                    | $                                                                                                   
|                                                     |                                                                                    |                                                                                    |                                                                                                     
|                                                     | Adjustment to reconcile net earnings to net cash provided by operating activities: |                                                                                    |                                                                                                     
|                                                     |                                                                                    | Depreciation and amortization                                                      |                                                                                                     
|                                                     |                                                                                    | Undistributed earnings of affiliates                                               |                                                                                                     
|                                                     |                                                                                    | Other non-cash items                                                               |                                                                                                     
|                                                     |                                                                                    | Gain from sale of hotel asset                                                      |                                                                                                     
|                                                     |                                                                                    | Change in assets and liabilities, net of effects from acquisition of subsidiaries: |                                                                                                     
|                                                     |                                                                                    |                                                                                    | Decrease/(increase) in accounts receivable, prepaid expenses and other                              
|                                                     |                                                                                    |                                                                                    | Increase in inventories                                                                             
|                                                     |                                                                                    |                                                                                    | (Decrease)/increase in accounts payable, accrued liabilities, deferred revenue and other liabilities
|                                                     |                                                                                    |                                                                                    |                                                                                                     
|                                                     |                                                                                    | Total adjustments                                                                  |                                                                                                     
|                                                     |                                                                                    |                                                                                    |                                                                                                     
|Net cash provided by operating activities            |                                                                                    |                                                                                    | 33,244                                                                                              
|                                                     |                                                                                    |                                                                                    |                                                                                                     
|Cash flows from investing activities:                |                                                                                    |                                                                                    |                                                                                                     
|                                                     | Capital expenditures                                                               |                                                                                    |                                                                                                     
|                                                     | Acquisitions and investments, net of cash acquired                                 |                                                                                    |                                                                                                     
|                                                     | Proceeds from sale of fixed assets and other                                       |                                                                                    |                                                                                                     
|                                                     | Proceeds from sale of hotel asset                                                  |                                                                                    |                                                                                                     
|                                                     |                                                                                    |                                                                                    |                                                                                                     
|Net cash used in investing activities                |                                                                                    |                                                                                    | (40,567                                                                                             
|                                                     |                                                                                    |                                                                                    |                                                                                                     
|Cash flows from financing activities:                |                                                                                    |                                                                                    |                                                                                                     
|                                                     | Net proceeds from working capital facilities and redrawable loans                  |                                                                                    |                                                                                                     
|                                                     | Issuance of common shares (net)                                                    |                                                                                    |                                                                                                     
|                                                     | Proceeds from long-term debt                                                       |                                                                                    |                                                                                                     
|                                                     | Principal payments under long-term debt                                            |                                                                                    |                                                                                                     
|                                                     | Purchase and cancellation of common shares                                         |                                                                                    |                                                                                                     
|                                                     |                                                                                    |                                                                                    |                                                                                                     
|Net cash provided by financing activities            |                                                                                    |                                                                                    | 48,334                                                                                              
|                                                     |                                                                                    |                                                                                    |                                                                                                     
|Effect of exchange rate changes on cash              |                                                                                    |                                                                                    | 2,476                                                                                               
|                                                     |                                                                                    |                                                                                    |                                                                                                     
|Net increase/(decrease) in cash and cash equivalents |                                                                                    |                                                                                    | 43,487                                                                                              
|Cash and cash equivalents at beginning of year       |                                                                                    |                                                                                    | 37,860                                                                                              
|                                                     |                                                                                    |                                                                                    |                                                                                                     
|Cash and cash equivalents at end of year             |                                                                                    | $                                                                                  | 81,347                                                                                              
|                                                     |                                                                                    |                                                                                    |                                                                                                     

See
notes to consolidated financial statements.

36

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ORIENT-EXPRESS HOTELS LTD. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY

|                                                                            |                                                     | Preferred
Shares
At Par
Value |   | Class A
Common
Shares
At Par
Value |   | Class B
Common
Shares
At Par
Value |   | Additional
Paid-In
Capital |     | Retained
Earnings |   | Accumulated
Other
Comprehensive
Loss |   | Common
Shares
Held By A
Subsidiary |         | Total
Comprehensive
Income |  
|--------------------------------------------------------------------------- | --------------------------------------------------- | ----------------------------- | - | ---------------------------------- | - | ---------------------------------- | - | -------------------------- | --- | ----------------- | - | ------------------------------------ | - | ---------------------------------- | ------- | -------------------------- | -
|
|Balance, January 1, 2001                                                    |                                                     | $                             |  |                                    | $ | 284                                |   | $                          | 205 |                   | $ | 228,862                              |   | $                                  | 173,399 |                            | $
|Purchase and cancellation of class A common shares                          |                                                     |                               |   |                                    |   | (1                                 | ) |                            |     |                   |   | (1,899                               | ) |                                    | 332     |                            |  
|Comprehensive income:                                                       |                                                     |                               |   |                                    |   |                                    |   |                            |     |                   |   |                                      |   |                                    |         |                            |  
|                                                                            | Net earnings on common shares for the year          |                               |   |                                    |   |                                    |   |                            |     |                   |   |                                      |   |                                    |         | 29,850                     |  
|                                                                            | Other comprehensive loss                            |                               |   |                                    |   |                                    |   |                            |     |                   |   |                                      |   |                                    |         |                            |  
|                                                                            | Cumulative effect of change in accounting principle |                               |   |                                    |   |                                    |   |                            |     |                   |   |                                      |   |                                    |         |                            |  
|                                                                            |                                                     |                               |   |                                    |   |                                    |   |                            |     |                   |   |                                      |   |                                    |         |                            |  
|                                                                            |                                                     |                               |   |                                    |   |                                    |   |                            |     |                   |   |                                      |   |                                    |         |                            |  
|                                                                            |                                                     |                               |   |                                    |   |                                    |   |                            |     |                   |   |                                      |   |                                    |         |                            |  
|Balance, December 31, 2001                                                  |                                                     |                               |  |                                    |   | 283                                |   |                            | 205 |                   |   | 226,963                              |   |                                    | 203,581 |                            |  
|Comprehensive income:                                                       |                                                     |                               |   |                                    |   |                                    |   |                            |     |                   |   |                                      |   |                                    |         |                            |  
|                                                                            | Net earnings on common shares for the year          |                               |   |                                    |   |                                    |   |                            |     |                   |   |                                      |   |                                    |         | 25,294                     |  
|                                                                            | Other comprehensive income                          |                               |   |                                    |   |                                    |   |                            |     |                   |   |                                      |   |                                    |         |                            |  
|                                                                            |                                                     |                               |   |                                    |   |                                    |   |                            |     |                   |   |                                      |   |                                    |         |                            |  
|                                                                            |                                                     |                               |   |                                    |   |                                    |   |                            |     |                   |   |                                      |   |                                    |         |                            |  
|                                                                            |                                                     |                               |   |                                    |   |                                    |   |                            |     |                   |   |                                      |   |                                    |         |                            |  
|Balance, December 31, 2002                                                  |                                                     |                               |  |                                    |   | 283                                |   |                            | 205 |                   |   | 226,963                              |   |                                    | 228,875 |                            |  
|Issuance of class A common shares in public offering, net of issuance costs |                                                     |                               |   |                                    |   | 35                                 |   |                            |     |                   |   | 51,858                               |   |                                    |         |                            |  
|Comprehensive income:                                                       |                                                     |                               |   |                                    |   |                                    |   |                            |     |                   |   |                                      |   |                                    |         |                            |  
|                                                                            | Net earnings on common shares for the year          |                               |   |                                    |   |                                    |   |                            |     |                   |   |                                      |   |                                    |         | 23,609                     |  
|                                                                            | Other comprehensive income                          |                               |   |                                    |   |                                    |   |                            |     |                   |   |                                      |   |                                    |         |                            |  
|                                                                            |                                                     |                               |   |                                    |   |                                    |   |                            |     |                   |   |                                      |   |                                    |         |                            |  
|                                                                            |                                                     |                               |   |                                    |   |                                    |   |                            |     |                   |   |                                      |   |                                    |         |                            |  
|                                                                            |                                                     |                               |   |                                    |   |                                    |   |                            |     |                   |   |                                      |   |                                    |         |                            |  
|Balance, December 31, 2003                                                  |                                                     | $                             |  |                                    | $ | 318                                |   | $                          | 205 |                   | $ | 278,821                              |   | $                                  | 252,484 |                            | $
|                                                                            |                                                     |                               |   |                                    |   |                                    |   |                            |     |                   |   |                                      |   |                                    |         |                            |  

See notes to consolidated financial statements.

37

---

ORIENT-EXPRESS HOTELS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.     Summary of significant accounting policies and basis of presentation

(a)    Business

In this report Orient-Express Hotels Ltd. is referred to as the "Company", and the Company and its subsidiaries are referred to collectively as "OEH". At
December 31, 2003, Sea Containers Ltd., a Bermuda company ("SCL"), owned 42% of the equity shares in the Company.

At
December 31, 2003, OEH owned or partially owned and managed 30 deluxe hotels and resorts located in the United States, Caribbean, Europe, southern Africa, South America,
Australia and South Pacific, three restaurants in London, New York and Buenos Aires, five tourist trains in Europe, Southeast Asia and Peru, and a river cruiseship in Burma.

(b)    Basis of presentation

The accompanying consolidated financial statements reflect the results of operations, financial position and cash flows of the Company and all its majority-owned
subsidiaries. The consolidated financial statements have been prepared using the historical basis in the assets and liabilities and the historical results of operations directly attributable to OEH,
and all intercompany accounts and transactions
between the Company and its subsidiaries have been eliminated. Unconsolidated companies that are 20% to 50% owned are accounted for on an equity basis.

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

The
consolidated financial statements include an allocation of certain general corporate administrative expenses from SCL and its subsidiaries which are provided under a shared services
agreement with SCL. In the opinion of management, general corporate administrative expenses have been allocated to OEH on a reasonable and consistent basis using management's estimate of services
provided by SCL and its subsidiaries. However, such allocations are not necessarily indicative of the level of expenses which might have been incurred had OEH been operating as a separate, stand-alone
entity during the periods presented. Therefore, the financial information included herein may not necessarily reflect the consolidated results of operations, financial position and cash flows of OEH
had OEH been a separate stand-alone entity for the years presented.

Certain
items in 2002 and 2001 have been reclassified to conform to the 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 translation

The functional currency for each of the Company's foreign subsidiaries is the applicable local currency. Foreign subsidiary income and expenses are translated
into U.S. dollars, the reporting currency of the Company, at the average rates of exchange prevailing during the year. The assets and liabilities are translated into U.S. dollars at the rates of
exchange on the balance sheet date and the related translation adjustments are included in accumulated other comprehensive income/(loss). No income taxes are provided on the translation adjustments as
management does not expect that such gains or losses will be realized. Foreign currency transaction gains and losses are recognized in operations as they occur.

38

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(d)    Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Estimates include, among others, the allowance for doubtful accounts, inventories, depreciation and amortization, carrying value of assets including
intangible assets, employee benefits, taxes and contingencies. Actual results may differ from those estimates.

(e)    Stock-based compensation

SFAS No. 123, "Accounting for Stock-Based Compensation", as amended by SFAS No. 148, "Accounting for Stock-Based CompensationTransition
and DisclosureAn Amendment of FASB Statement No. 123", encourages but does not require companies to record compensation cost for stock-based employee compensation plans at fair
value. The Company has chosen to account for stock-based compensation using the intrinsic value method prescribed in APB Opinion No. 25, "Accounting for Stock Issued to Employees", as amended,
and related interpretations. Accordingly, compensation cost for share options is measured as the excess, if any, of the quoted market price of the Company's shares at the date of the grant over the
amount an employee must pay to acquire the shares. The amount of compensation cost, if any, is charged to income over the vesting period.

Had
compensation cost for the Company's stock option plan been determined based on fair values as of the dates of grant, OEH's net earnings and earnings per share would have been
reported as follows (dollars in thousands, except per share amounts):

|                                      |                                                                                                                      | Year ended December 31, |  
|------------------------------------- | -------------------------------------------------------------------------------------------------------------------- | ----------------------- | -
|
|Net earnings:                         |                                                                                                                      |                         |  
|                                      | As reported                                                                                                          |                         | $
|                                      | Deduct: Total stock-based employee compensation expense determined under fair value based method, net of related tax |                         |  
|                                      |                                                                                                                      |                         |  
|                                      | Pro forma                                                                                                            |                         | $
|                                      |                                                                                                                      |                         |  
|Basic and diluted earnings per share: |                                                                                                                      |                         |  
|                                      | As reported                                                                                                          |                         | $
|                                      |                                                                                                                      |                         |  
|                                      | Pro forma                                                                                                            |                         | $
|                                      |                                                                                                                      |                         |  

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

(f)    Revenue recognition

Hotel and restaurant revenues are recognized when the rooms are occupied and the services are performed. Tourist train and cruise revenues are recognized upon
commencement of the journey. Deferred revenue consisting of deposits paid in advance is recognized as revenue when the services are performed for hotels and restaurants and upon commencement of
tourist train and cruise journeys. Revenues under management contracts are recognized based upon the attainment of certain financial results, primarily revenue and operating earnings, in each contract
as defined.

39

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(g)    Earnings from unconsolidated companies

Earnings from unconsolidated companies include OEH's share of the net earnings of its equity investments as well as interest income related to loans and advances
to the equity investees amounting to $7,080,000 in 2003 (2002$7,892,000, 2001$6,702,000).

(h)    Marketing costs

Marketing costs, including website research and planning costs, are expensed as incurred and are reported in selling, general and administrative expenses.
Marketing costs include costs of advertising and other marketing activities. These costs were $24,783,000 in 2003 (2002$20,091,000, 2001$18,300,000).

(i)    Interest expense, net

OEH capitalizes interest during the construction of assets. Interest expense, net excludes interest which has been capitalized in the amount of $1,795,000 in 2003
(2002$1,271,000, 2001$882,000).

(j)    Interest and related income

Interest and related income consists entirely of foreign exchange gains of $2,673,000 in 2003 (2002$1,420,000, 2001$367,000).

(k)    Income taxes

Deferred income taxes result from temporary differences between the financial reporting and tax bases of assets and liabilities. Deferred taxes are recorded at
enacted statutory rates and are adjusted as enacted rates change. Classification of deferred tax assets and liabilities corresponds with the classification of the underlying assets and liabilities
giving rise to the temporary differences or the period of expected reversal, as applicable. A valuation allowance is established, when necessary, to reduce deferred tax assets to the amount that is
more likely than not to be realized based on available evidence.

(l)    Earnings per share

Basic earnings per share exclude dilution and are computed by dividing net earnings available to common shareholders by the weighted average number of
class A and B common shares outstanding for the period. The number of shares used in computing basic earnings per share was 31,139,000 for the year ended December 31, 2003
(200230,800,000, 200130,874,000). The number of shares used in computing diluted earnings per share was 31,152,000 for the year ended December 31, 2003
(200230,858,000, 200130,874,000). There was no material dilutive effect in each of the three years ended December 31, 2003.

(m)    Inventories

Inventories include food, beverages, certain retail goods and train-related items. Inventories are valued at the lower of cost or market value under the
first-in, first-out method.

(n)    Property, plant and equipment, net

Property, plant and equipment, net are stated at cost less accumulated depreciation. The cost of significant renewals and betterments is capitalized and
depreciated, while expenditures for normal maintenance and repairs are expensed as incurred.

40

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Depreciation
expense is computed using the straight-line method over the following estimated useful lives:

|Description                                              |  | Useful lives                         
|-------------------------------------------------------- |  | -------------------------------------
|Buildings                                                |  | Up to 60 years and 10% residual value
|Tourist trains                                           |  | Up to 50 years                       
|Furniture, fixtures and equipment                        |  | 5-25 years                           
|River cruiseship                                         |  | 25 years                             
|Equipment under capital lease and leasehold improvements |  | Lesser of lease term or economic life

(o)    Impairment of long-lived assets

In accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", OEH management reviews
long-lived assets whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. In the event that an impairment occurs, the fair value
of the related asset is estimated, and OEH records a charge to income calculated as the excess of the asset's carrying value over the estimated fair value.

(p)    Investments

Investments include equity interests in and advances to unconsolidated companies.

(q)    Goodwill

In accordance with the adoption of SFAS No. 142, "Goodwill and Other Intangible Assets", as of January 1, 2002, goodwill must be evaluated annually
to determine impairment. Goodwill is no longer amortized. For the year ended December 31, 2001, goodwill was amortized using the straight-line method over its estimated useful life.
See Note 4.

(r)    Concentration of credit risk

Due to the nature of the leisure industry, concentration of credit risk with respect to trade receivables is limited. OEH's customer base is comprised of numerous
customers across different geographic areas.

(s)    Derivative financial instruments

Effective January 1, 2001, OEH adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", as amended by SFAS
No. 137, No. 138 and No. 149. SFAS No. 133 requires OEH to record all derivatives on the balance sheet at fair value. If the derivative is designated as a fair value hedge,
the changes in the fair value of the derivative and of the hedged item attributable to the hedged risk are recognized in earnings. If the derivative is designated as a cash flow hedge, the effective
portions of changes in the fair value of the derivative are recorded as a component of accumulated other comprehensive income/(loss) in shareholders' equity and are recognized in the statement of
consolidated operations when the hedged item affects earnings. The ineffective portion of a hedging derivative's change in the fair value will be immediately recognized in earnings. If the derivative
is not designated as a hedge for accounting purposes, the change in its fair value is recorded in earnings.

OEH
management formally documents all relationships between hedging instruments and hedged items, as well as its risk management objectives and strategies for undertaking various hedge
transactions. OEH links all hedges that are designated as fair value hedges to specific assets or liabilities on the balance sheet or to specific firm commitments. OEH links all hedges that are

41

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designated
as cash flow hedges to forecasted transactions or to floating rate liabilities on the balance sheet. OEH management also assesses, both at the inception of the hedge and on an ongoing
basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items. Should it be determined that a derivative
is not highly effective as a hedge, OEH will discontinue hedge accounting prospectively.

The
initial adoption of SFAS No. 133 resulted in an unrealized loss of $1,333,000 in accumulated other comprehensive income/(loss) as of January 1, 2001.

(t)    Recent accounting pronouncements

In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement No. 133 on Derivative Instruments and Hedging Activities", which amends
and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS No. 133. OEH adopted SFAS
No. 149 on July 1, 2003, and adoption had no effect on OEH's financial statements.

In
May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity", which establishes standards
for how an issuer classifies and measures financial instruments with characteristics of both liabilities and equity. With the exception of certain financial measurement criteria deferred indefinitely
by the FASB, SFAS No. 150 was adopted in fiscal 2003. The implementation of SFAS No. 150 had no effect on OEH's financial condition or results of operations.

In
December 2003, the FASB issued a revised SFAS No. 132, "Employers' Disclosures about Pensions and Other Post-Retirement Benefits", which requires companies
to provide additional information about plan assets, benefit obligations, cash flows, benefit costs and other relevant data. Revised SFAS No. 132 is effective for fiscal years beginning after
June 15, 2004, with earlier adoption encouraged. OEH adopted revised SFAS No. 132 on December 31, 2003 and, accordingly, the additional information is included in the notes to the
financial statements.

In
November 2002, the FASB issued FIN No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others",
which clarifies and elaborates on the requirement for entities to recognize a liability and provide disclosures relating to the fair value of the obligation undertaken in a guarantee. Under FIN
No. 45, OEH will record a liability at the inception of a transaction representing the fair value of the guarantee and maintain the liability until it is relieved of the contingent obligation.
FIN No. 45 requires the fair value of the guarantee to be recorded for all guarantees issued or modified after December 31, 2002. The recognition of this liability results in delayed
recognition of revenue until the guarantee has been settled or expired. FIN No. 45 also provides for disclosure regarding existing guarantees. The adoption of FIN No. 45 did not have a
material effect on OEH's financial position or results of operations. The disclosures required have been provided in the notes to the financial statements.

In
December 2003, the FASB issued revised FIN No. 46, "Consolidation of Variable Interest Entities", that addresses the consolidation of certain types of entities including
special purpose entities. Revised FIN No. 46 requires a variable interest entity to be consolidated if OEH's investment in the entity (regardless of the date it was created) will absorb a
majority of the entity's expected losses and/or residual returns if they occur, and must be applied by March 31, 2004. OEH is evaluating the effect that adoption of revised FIN No. 46
will have on its financial position or results of operations and currently does not believe it will have to consolidate or disclose information about a variable interest entity.

42

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2.     Significant acquisitions, dispositions and investments

(a)    Acquisitions

2003 Acquisitions:

On April 25, 2003, OEH acquired a 50% interest in the Hotel Ritz in Madrid, Spain, through a 50%/50% joint venture with a Spanish real estate investment
company. The purchase price was $135,000,000, and each joint venture partner contributed $22,000,000 with the balance financed by bank loans. Subsidiaries of the Company are obligated on $27,000,000
of these loans until the completion of various legal procedures in Spain when the debt would be entirely non-recourse to OEH. In addition, OEH became the exclusive long-term
manager of the hotel. This investment is accounted for under the equity method of accounting. A portion of the purchase price was allocated to a trademark not subject to amortization. No goodwill was
recognized in this transaction.

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 paid largely with bank mortgage finance.

In
March 2002, OEH acquired for approximately $7,500,000 a 75% share interest in Maroma Resort and Spa near Cancun, Mexico. The purchase price was paid in cash, with $1,000,000
paid in March 2003.

2001 Acquisitions

On April 27, 2001, OEH acquired the Bora Bora Lagoon Resort in French Polynesia, a hotel previously managed by OEH, for a cash price of approximately
$19,600,000. OEH funded most of the purchase price with bank mortgage finance.

On
January 17, 2001, OEH acquired the Miraflores Park Hotel in Lima, Peru. Because OEH's 50%/50% hotel joint venture in Peru had an option to purchase the hotel at cost which, if
exercised, would have resulted in OEH becoming the exclusive long-term manager of the hotel, it was accounted for in 2001 as an equity investment by OEH. Because the option lapsed, the
hotel has been accounted for as an acquisition with effect from December 31, 2001. The purchase price of approximately $17,000,000 was paid largely by the assumption of existing debt, with the
balance paid in cash and the issuance of notes to the seller.

The
purchase prices paid for these acquisitions in 2002 and 2001 approximated the fair value of the net tangible and identifiable intangible assets acquired, and any resulting goodwill
was not material. They have been accounted for as purchases and, accordingly, the assets and liabilities of the acquired companies have been recorded at their fair value at the dates of acquisition.
The operating results of the acquired companies have been included in OEH's consolidated statements of operations from the effective dates of acquisition. Pro forma data have not been presented as the
revenues and net earnings resulting from these acquisitions would not have had a material impact in the year of acquisition.

(b)    Dispositions

On November 6, 2003, OEH sold the Hotel Quinta do Lago in the Algarve region of Portugal at a price of $40,000,000 paid in cash, which resulted in a gain
of approximately $4,250,000 (or $0.14 per share). The operations of this hotel were not material to OEH's consolidated financial statements and, accordingly, pro forma data have not been presented.

43

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(c)    Investments

Investments represent equity interests of 50% or less and in which OEH exerts significant influence. OEH does not have effective control of these unconsolidated
companies and, therefore, accounts for these investments using the equity method.

OEH's
investments in and loans and advances to unconsolidated companies amounted to $146,495,000 at December 31, 2003 (2002$85,159,000). OEH's earnings from
unconsolidated companies were $9,355,000 in 2003 (2002$10,034,000, 2001$9,112,000) and it received no dividends in 2003, 2002 or 2001. See Note 16.

Summarized
financial data for unconsolidated companies are as follows (dollars in thousands):

|                                           |  | December 31,
|------------------------------------------ |  | ------------
|
|Current assets                             |  | $           
|Property, plant and equipment, net         |  |             
|Other assets                               |  |             
|                                           |  |             
|Total assets                               |  | $           
|                                           |  |             
|Current liabilities                        |  | $           
|Long-term debt                             |  |             
|Other liabilities                          |  |             
|Total shareholders' equity                 |  |             
|                                           |  |             
|Total liabilities and shareholders' equity |  | $           
|                                           |  |             

|                                                  |  | Year ended December 31, |        
|------------------------------------------------- |  | ----------------------- | -------
|
|Revenue                                           |  | $                       | 110,952
|                                                  |  |                         |        
|Earnings from operations before net finance costs |  | $                       | 13,953 
|                                                  |  |                         |        
|Net loss                                          |  | $                       | (1,282 
|                                                  |  |                         |        

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

44

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

3.     Property, plant and equipment, net

The major classes of property, plant and equipment are as follows (dollars in thousands):

|                                        |  | December 31, |         
|--------------------------------------- |  | ------------ | --------
|
|Freehold and leased land and buildings  |  | $            | 678,683 
|Machinery and equipment                 |  |              | 135,584 
|Fixtures, fittings and office equipment |  |              | 119,191 
|River cruiseship                        |  |              | 16,571  
|                                        |  |              |         
|                                        |  |              | 950,029 
|Less: accumulated depreciation          |  |              | (127,772
|                                        |  |              |         
|                                        |  | $            | 822,257 
|                                        |  |              |         

The
major classes of assets under capital leases are as follows (dollars in thousands):

|                                        |  | December 31, |       
|--------------------------------------- |  | ------------ | ------
|
|Freehold and leased land and buildings  |  | $            | 14,080
|Machinery and equipment                 |  |              | 1,964 
|Fixtures, fittings and office equipment |  |              | 4,229 
|                                        |  |              |       
|                                        |  |              | 20,273
|Less: accumulated depreciation          |  |              | (1,626
|                                        |  |              |       
|                                        |  | $            | 18,647
|                                        |  |              |       

4.     Goodwill

Effective January 1, 2002, OEH adopted the provisions of SFAS No. 141, "Business Combinations", and SFAS No. 142. These statements
established financial accounting and reporting standards for acquired goodwill and other intangible assets. Specifically, the standards address how acquired intangible assets should be accounted for
both at the time of acquisition and after they have been recognized in the
financial statements. In accordance with SFAS No. 142, goodwill must be evaluated annually for impairment.

The
goodwill impairment testing under SFAS No. 142 is performed in two steps, first, the determination of impairment based upon the fair value of a reporting unit as compared with
its carrying value and, second, if there is an impairment, the measurement of the amount of impairment loss by comparing the implied fair value of goodwill with the carrying amount of that goodwill.
As of December 31, 2003 and 2002, OEH determined the carrying value of all its operating segments was less than their respective derived fair values, indicating that there was no impairment of
the recorded goodwill and indefinite-lived intangible assets. To determine fair value, OEH relied on valuation models utilizing discounted cash flows.

45

---

The
Company's goodwill consists of $700,000 related to the trains and cruises business segment and $28,829,000 related to the hotels and restaurants business segment. There was no change
in the carrying amount of goodwill for the year ended December 31, 2003. During 2003 and 2002, there was no amortization expense due to the adoption of SFAS No. 142. If SFAS
No. 142 had been applied to goodwill in 2001, full year net earnings would have increased by $894,000 ($0.03 per share).

5.     Working capital facilities

Working capital facilities are comprised of the following, all repayable within one year (dollars in thousands):

|                                                                                                              |  | December 31,
|------------------------------------------------------------------------------------------------------------- |  | ------------
|
|Unsecured working capital facilities, with a weighted average interest rate of 7.43% and 5.81%, respectively. |  | $           
|                                                                                                              |  |             

OEH
had approximately $55,000,000 of working capital lines of credit at December 31, 2003 (2002$46,600,000) issued by various financial institutions and having
various expiration dates, of which $35,800,000 was undrawn (2002$22,800,000).

6.     Long-term debt and obligations under capital leases

(a)    Long-term debt

Long-term debt consists of the following (dollars in thousands):

|                                                                                                                                                                                                  |  | December 31,
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------
|
|Loans from banks secured by property, plant and equipment payable over periods of 1 to 11 years, with a weighted average interest rate of 3.74% and 4.30%, respectively, primarily based on LIBOR |  | $           
|Loan secured by river cruiseship payable over 4 years, with a weighted average interest rate of 2.78% and 3.47%, based on LIBOR                                                                   |  |             
|Obligations under capital lease (see Note 6(b))                                                                                                                                                   |  |             
|                                                                                                                                                                                                  |  |             
|                                                                                                                                                                                                  |  |             
|Less: current portion                                                                                                                                                                             |  |             
|                                                                                                                                                                                                  |  |             
|                                                                                                                                                                                                  |  | $           
|                                                                                                                                                                                                  |  |             

Certain
credit agreements of OEH have restrictive covenants, including a minimum consolidated net worth test and a minimum consolidated interest coverage test as defined under a
bank-syndicated $154,000,000 loan facility borrowed during 2003 and secured by three of OEH's Italian hotels. At December 31, 2003, OEH was in compliance with all of its restrictive
covenants. OEH does not currently have any covenants in any of its loan agreements which limit the payment of dividends.

At
December 31, 2003, $19,088,000 of OEH's consolidated long-term debt under one loan agreement dating from before the Company's initial public offering in
August 2000 was guaranteed by SCL (2002$110,854,000) and contained cross-default clauses to SCL debt. The agreement is being amended in March 2004 to remove the SCL
guarantee and cross-default clauses. See Note 17.

46

---

The following is a summary of the aggregate maturities of consolidated long-term debt excluding obligations under capital leases at December 31, 2003 (dollars in
thousands):

|Year ending December 31, |  |  
|------------------------ |  | -
|2004                     |  | $
|2005                     |  |  
|2006                     |  |  
|2007                     |  |  
|2008                     |  |  
|2009 and thereafter      |  |  
|                         |  |  
|                         |  | $
|                         |  |  

The
interest rates on substantially all of OEH's long-term debt are adjusted regularly to reflect current market rates. Accordingly, the carrying amounts of OEH's
long-term debt also approximate fair value.

Also,
OEH has guaranteed, through 2011, $14,532,000 of the debt obligations of the PeruRail operations, an unconsolidated joint venture in which OEH has a 50% investment, and, through
2004, $4,417,000 of PeruRail contingent obligations relating to the performance of its governmental rail concessions. OEH has guaranteed, through 2014, $10,000,000 of the debt obligations of Peru OEH
S.A., the unconsolidated owning company of two hotels in Peru in which OEH has a 50% investment.
OEH has guaranteed, through 2005, $3,000,000 of the debt obligations of Charleston Center LLC, owner of the Charleston Place Hotel in which OEH has a 19.9% equity investment. All of these guarantees
were in place before December 31, 2002.

(b)    Obligations under capital leases

The following is a summary of future minimum lease payments under capital leases together with the present value of the minimum lease payments at
December 31, 2003 (dollars in thousands):

|Year ending December 31,                             |  |  
|---------------------------------------------------- |  | -
|2004                                                 |  | $
|2005                                                 |  |  
|2006                                                 |  |  
|2007                                                 |  |  
|2008                                                 |  |  
|2009 and thereafter                                  |  |  
|                                                     |  |  
|Minimum lease payments                               |  |  
|Less: amount of interest contained in above payments |  |  
|                                                     |  |  
|Present value of minimum lease payments              |  |  
|Less: current portion                                |  |  
|                                                     |  |  
|                                                     |  | $
|                                                     |  |  

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

7.     Pension plans

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 of
January 1, 2003, an OEH subsidiary established a new defined benefit plan and the OEH employees formerly included in the SCL plan transferred to the

47

---

new
plan. Assets and liabilities in respect of services accrued prior to January 1, 2003 for these employees have been transferred during 2004 to the new plan based on actuarial valuations.
Benefits are based primarily on years of service and employee compensation near retirement. Plan assets consist primarily of common stocks, mutual funds, government securities and corporate debt
securities held through separate trustee-administered funds.

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

|                                                 |  | Year ended December 31, |  
|------------------------------------------------ |  | ----------------------- | -
|
|Discount rate                                    |  | 5.4                     | %
|Assumed rates of compensation increases          |  | 3.0                     | %
|Expected long-term rate of return on plan assets |  | 7.0                     | %

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

|                                      |  | December 31, |  
|------------------------------------- |  | ------------ | -
|
|                                      |  |              |  
|Discount rate                         |  | 5.6          | %
|Assumed rate of compensation increase |  | 3.0          | %

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 the assets are held.

In
determining the expected long-term rate of return on assets, management has evaluated information from OEH's actuaries and financial advisors, including their review of
anticipated future long-term performance of individual asset classes and the asset allocation strategy given the anticipated requirements of the plan to determine the average rate of
earnings expected on the funds invested. The returns projected are based on 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 based on an asset allocation of 60% in equity investments, with an expected long-term rate of return of 7%, and 40% in fixed income investments,
with an expected long-term rate of return of 7%.

The
weighted-average asset allocations of OEH's pension plan as of December 31, 2003 and 2002 by asset category as a percentage of plan assets are as follows:

|                         |  | Year ended
December 31, |  
|------------------------ |  | ----------------------- | -
|
|
|Equity securities        |  | 61.2                    | %
|Fixed income investments |  | 38.8                    | %
|                         |  |                         |  
|Total                    |  | 100.0                   | %
|                         |  |                         |  

48

---

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

|                                         |                                                | Year ended
December 31, |       
|---------------------------------------- | ---------------------------------------------- | ----------------------- | ------
|
|Change in benefit obligation:            |                                                |                         |       
|                                         | Benefit obligation at beginning of year        |                         | $     
|                                         | Service cost                                   |                         |       
|                                         | Interest cost                                  |                         |       
|                                         | Plan participants' contributions               |                         |       
|                                         | Actuarial loss/(gain)                          |                         |       
|                                         | Benefits paid                                  |                         |       
|                                         | Foreign currency translation                   |                         |       
|                                         |                                                |                         |       
|Benefit obligation at end of year        |                                                |                         | 6,977 
|                                         |                                                |                         |       
|Change in plan assets:                   |                                                |                         |       
|                                         | Fair value of plan assets at beginning of year |                         |       
|                                         | Actual return on plan assets                   |                         |       
|                                         | Employer contributions                         |                         |       
|                                         | Plan participants' contributions               |                         |       
|                                         | Benefits paid                                  |                         |       
|                                         | Foreign currency translation                   |                         |       
|                                         |                                                |                         |       
|Fair value of plan assets at end of year |                                                |                         | 5,823 
|                                         |                                                |                         |       
|Funded status                            |                                                |                         | (1,154
|Unrecognized net actuarial loss          |                                                |                         | 3,360 
|Unrecognized prior service cost          |                                                |                         |      
|                                         |                                                |                         |       
|Net amount recognized                    |                                                | $                       | 2,206 
|                                         |                                                |                         |       

Amounts
recognized in the consolidated balance sheets consist of the following (dollars in thousands):

|                                     |  | Year ended
December 31, |      
|------------------------------------ |  | ----------------------- | -----
|
|Prepaid benefit cost                 |  |                         | 362  
|Accrued benefit cost                 |  |                         | (460 
|Intangible assets                    |  |                         |     
|Accumulated other comprehensive loss |  |                         | 2,304
|                                     |  |                         |      
|Net amount recognized                |  | $                       | 2,206
|                                     |  |                         |      

The
accumulated benefit obligation for all pension plans was approximately $5,809,000 as of December 31, 2003 (2002$4,550,000). The portion of the assets and
liabilities in respect of services of OEH employees accrued prior to January 1, 2003 under the SCL defined benefit pension plan has an

49

---

accumulated
benefit obligation which is in excess of plan assets. The following table details certain information with respect to this plan as follows (dollars in thousands):

|                               |  | Year ended
December 31,
|------------------------------ |  | -----------------------
|
|Project benefit obligation     |  | $                      
|                               |  |                        
|Accumulated benefit obligation |  | $                      
|                               |  |                        
|Fair value of plan assets      |  | $                      
|                               |  |                        

The
components of net periodic benefit cost for the OEH employees covered under the plan consisted of the following (dollars in thousands):

|                                              |  | Year ended December 31, |     
|--------------------------------------------- |  | ----------------------- | ----
|
|Service cost                                  |  | $                       | 520 
|Interest cost on projected benefit obligation |  |                         | 353 
|Expected return on assets                     |  |                         | (274
|Net amortization and deferrals                |  |                         | 92  
|                                              |  |                         |     
|Net periodic benefit cost                     |  | $                       | 691 
|                                              |  |                         |     

Additional
information about OEH's pension plan is as follows (dollars in thousands):

|                                                                    |  | Year ended December 31,
|------------------------------------------------------------------- |  | -----------------------
|
|Increase in minimum pension liability in other comprehensive income |  | $                      
|                                                                    |  |                        

OEH
expects to contribute $954,000 to its pension plan in 2004. At December 31, 2003, there were no members receiving benefits from the plan. The following benefit payments, which
reflect assumed future service, are expected to be paid (dollars in thousands):

|Year ending December 31, |  |  
|------------------------ |  | -
|2004                     |  | $
|2005                     |  |  
|2006                     |  |  
|2007                     |  |  
|2008                     |  |  
|20092013                |  |  
|                         |  |  
|                         |  | $
|                         |  |  

50

---

8.     Income taxes

The provision for income taxes consists of the following (dollars in thousands):

|              |  | Year ended December 31, 2003 |      
|------------- |  | ---------------------------- | -----
|
|United States |  | $                            | (294 
|Other         |  |                              | 3,831
|              |  |                              |      
|              |  | $                            | 3,537
|              |  |                              |      

|              |  | Year ended December 31, 2002
|------------- |  | ----------------------------
|
|United States |  | $                           
|Other         |  |                             
|              |  |                             
|              |  | $                           
|              |  |                             

|              |  | Year ended December 31, 2001
|------------- |  | ----------------------------
|
|United States |  | $                           
|Other         |  |                             
|              |  |                             
|              |  | $                           
|              |  |                             

The
Company is incorporated in Bermuda, which does not impose an income tax. OEH's effective tax rate is entirely due to income taxes imposed 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 financial reporting purposes and the amounts used for
income tax purposes. The following represents OEH's net deferred tax liabilities (dollars in thousands):

|                                                         |  | December 31, |        
|-------------------------------------------------------- |  | ------------ | -------
|
|Gross deferred tax assets (operating loss carryforwards) |  | $            | 71,467 
|Less: valuation allowance                                |  |              | (39,886
|                                                         |  |              |        
|Net deferred tax assets                                  |  |              | 31,581 
|Deferred tax liabilities                                 |  |              | (34,427
|                                                         |  |              |        
|Net deferred tax liabilities                             |  | $            | (2,846 
|                                                         |  |              |        

The
deferred tax assets consist primarily of tax loss carryforwards. In addition, during 2003 OEH recognized a deferred tax asset of $691,000 (2002$645,000). This amount
represents the future tax benefits of accrued pension costs recognized in other comprehensive income pursuant to SFAS No. 87, "Employers' Accounting for Pensions". The deferred tax liabilities
consist primarily of differences between the tax basis of depreciable assets and the adjusted basis as reflected in the financial statements.

OEH
has prepared these financial statements pursuant to a tax sharing agreement with SCL and its subsidiaries. In accordance with that agreement, prior to August 10, 2000, the
date of the Company's initial public offering, OEH utilized/relinquished losses with certain SCL subsidiaries. After that date,

51

---

OEH
may no longer utilize/relinquish losses with SCL and its subsidiaries. The following represents the net liability that exists from OEH to SCL and its subsidiaries (dollars in thousands):

|                      |  | Year ended December 31, |       
|--------------------- |  | ----------------------- | ------
|
|Tax sharing agreement |  | $                       | (1,973
|                      |  |                         |       

9.     Supplemental cash flow information

|               |              | Year ended December 31,
|-------------- | ------------ | -----------------------
|
|
|Cash paid for: |              |                        
|               | Interest     |                        
|               |              |                        
|               | Income taxes |                        
|               |              |                        

Non-cash
investing and financing activities:

In
conjunction with the acquisitions in 2003, 2002 and 2001 (see Note 2(a)), liabilities were assumed as follows (dollars in thousands):

|                              |  | Year ended December 31, |        
|----------------------------- |  | ----------------------- | -------
|
|Fair value of assets acquired |  | $                       | 50,611 
|Cash paid for acquisitions    |  |                         | (22,000
|                              |  |                         |        
|Liabilities assumed           |  | $                       | 28,611 
|                              |  |                         |        

10.   Shareholders' equity

(a)    Public offering

In November and December 2003, the Company completed a registered public offering in the United States through underwriters of 3,450,000 newly-issued
class A common shares. Net proceeds amounted to $51,893,000.

(b)    Dual common share capitalization

The Company has been capitalized with class A common shares, of which there are 120,000,000 authorized, and class B common shares, of which there
are 120,000,000 authorized, each convertible at any time into one class A common share. In general, holders of class A and class B common shares vote together as a single class,
with holders of class B shares having one vote per share and holders of class A shares having one-tenth of one vote per share. In all other substantial respects, the
class A and class B common shares are the same.

(c)    Shareholder rights agreement

The Company has in place a shareholder rights agreement which will be 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

52

---

(ii) the
commencement or announcement of a tender offer or exchange offer by a person for shares carrying 30% or more of the total voting rights that 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, and the holders of the rights will be entitled to purchase, for each right held, one
one-hundredth of a series A junior participating preferred share of the Company at an exercise price of $142 (the "Purchase Price") for each one one-hundredth of such
junior preferred share, subject to adjustment in certain events. From and after the date on which any person acquires beneficial ownership of shares carrying 20% or more of the total voting rights
which may be cast at any general meeting of the Company, each holder of a right (other than the acquiring person) will be entitled upon exercise to receive, at the then current Purchase Price and in
lieu of the junior preferred shares, that number of class A or class B common shares (depending on whether the right was previously attached to a class A or B share) having a
market value of twice the Purchase Price. If the Company is acquired or 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 the then current Purchase Price, that amount of common equity of the acquiring company which at the time of such transaction would have a market value of two times the Purchase Price.
Also, the Company's board of directors may exchange all or some of the rights for class A and class B common shares (depending on whether the right was previously 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 be redeemed
at a price of $0.05 per right at any time prior to the tenth day following the date on which a person acquires beneficial ownership of shares carrying 20% or more of the total voting rights which may
be cast at any general meeting of the Company.

(d)    Acquired shares

Included in shareholders' equity is a reduction for 18,044,478 class B common shares of the Company that a subsidiary of the Company acquired on
July 22, 2002 for $180,445 from SCL under an Amended and Restated Share Owning Subsidiaries Restructuring Agreement originally dated July 21, 2000. Consistent with the overall
presentation of the capital structure in the financial statements, the Company has given effect to the terms and conditions of that agreement as if the agreement had been consummated from the
beginning of the earliest year presented. As a result, a total of 18,044,478 class B common shares are deemed to be owned by the Company subsidiary at December 31, 2003 and 2002. Under
applicable Bermuda law, these shares are outstanding and may be voted although in computing earnings per share these shares are treated as a reduction to outstanding shares.

(e)    Preferred shares

The Company has 30,000,000 authorized preferred shares, par value $0.01 each, 500,000 of which have been reserved for issuance as series A junior
participating preferred shares upon exercise of preferred share purchase rights held by class A and B common shareholders in connection with the shareholder rights agreement. See
Note 10(c).

11.   Employee stock option plan

Under the Company's 2000 stock option plan, options to purchase up to 750,000 class A and B common shares may be 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 ten years from the date of grant. At December 31, 2003, 676,000 class A common shares
were reserved for issuance pursuant to options awarded to 48 persons.

No
charges or credits are made to income with respect to options awarded or exercised under the plan since all options to employees are awarded at market value at date of grant.

53

---

Transactions under the plan have been as follows:

|                                   |  | Year ended
December 31, 2003
|---------------------------------- |  | ----------------------------
|
|Outstanding at beginning of period |  | 573,000                     
|Granted                            |  | 103,000                     
|Terminated                         |  |                            
|Exercised                          |  |                            
|                                   |  |                             
|Outstanding at end of period       |  | 676,000                     
|                                   |  |                             
|Exercisable at end of period       |  | 260,000                     
|                                   |  |                             

|                                   |  | Year ended
December 31, 2002
|---------------------------------- |  | ----------------------------
|
|Outstanding at beginning of period |  | 546,500                     
|Granted                            |  | 301,500                     
|Terminated                         |  | (275,000                    
|Exercised                          |  |                            
|                                   |  |                             
|Outstanding at end of period       |  | 573,000                     
|                                   |  |                             
|Exercisable at end of period       |  |                            
|                                   |  |                             

|                                   |  | Year ended
December 31, 2001
|---------------------------------- |  | ----------------------------
|
|Outstanding at beginning of period |  | 547,000                     
|Granted                            |  | 23,000                      
|Terminated                         |  | (23,500                     
|Exercised                          |  |                            
|                                   |  |                             
|Outstanding at end of period       |  | 546,500                     
|                                   |  |                             
|Exercisable at end of period       |  |                            
|                                   |  |                             

The
options outstanding at December 31, 2003, were as follows:

|       |  | Number of Shares |  | Weighted Average of
|------ |  | ---------------- |  | -------------------
|
|$13.00 |  | 30,000           |  |                   
|$13.06 |  | 271,500          |  |                   
|$13.40 |  | 100,000          |  |                   
|$17.09 |  | 3,000            |  |                   
|$19.00 |  | 11,500           |  |                   
|$19.00 |  | 260,000          |  | 260,000            
|       |  |                  |  |                    
|       |  | 676,000          |  | 260,000            
|       |  |                  |  |                    

As
discussed in Note 1(e), OEH accounts for its stock-based compensation plan under APB Opinion No. 25. Accordingly, no compensation cost has been recognized for the stock
options with

54

---

exercise
prices equal to the market price of the stock on the date of grant. Estimates of fair values of stock options on the grant dates in the Black-Scholes option pricing model are based on the
following assumptions:

|                                |  | As of and for year ended December 31, |        
|------------------------------- |  | ------------------------------------- | -------
|
|Expected price volatility range |  |                                       | 51.68  
|Risk-free interest rate range   |  |                                       | 2.25   
|Expected dividends              |  |                                       | None   
|Expected life of stock options  |  |                                       | 5 years
|Weighted average fair value     |  | $                                     | 6.27   

12.   Commitments and contingencies

Outstanding contracts to purchase fixed assets were approximately $11,200,000 at December 31, 2003 (2002$10,100,000).

Future
rental payments under operating leases in respect of equipment rentals and leased premises are payable as follows (dollars in thousands):

|     |  | Year ended
December 31,
|---- |  | -----------------------
|2004 |  | $                      
|2005 |  |                        
|2006 |  |                        
|2007 |  |                        
|2008 |  |                        
|     |  |                        
|     |  | $                      
|     |  |                        

Rental
expense for the year ended December 31, 2003 amounted to $1,366,000 (2002$1,108,000, 2001$1,208,000).

13.   Derivative financial instruments

(a)    Interest rate risk management

OEH is exposed to interest rate risk on its floating rate debt and management tries to manage the impact of interest rate changes on earnings and cash flows.
OEH's policy is to enter into interest rate swap and interest rate cap agreements from time to time to hedge the variability in interest rate cash flows due to interest rate risk on floating rate
debt. These swaps convert the floating rate interest payments on a portion of the outstanding debt into fixed payments. OEH had four interest rate cap agreements outstanding at December 31,
2003 (2002six) and the fair value of these derivatives at that date was $521,000 (2002$290,000). OEH had one interest rate swap agreement outstanding at December 31,
2001 for the equivalent of €117,000,000 ($103,660,000) which expired in September 2002. At December 31, 2001, the fair value of the derivative was $1,756,000. This swap
had been designated as a cash flow hedge for accounting purposes. As of December 31, 2003, OEH had no interest rate swap agreements.

During
the year ended December 31, 2003, OEH recognized a credit of $102,000 (2002a charge of $10,000, 2001a charge of $1,756,000) in other comprehensive
income/(loss) representing the

55

---

effective
portion of the hedges, and no ineffectiveness was recognized during 2003, 2002 and 2001. OEH reclassified $10,000 out of other comprehensive income/(loss) and into earnings in 2003
(2002$1,756,000). Amounts accumulated in other comprehensive income/(loss) will be reclassified into earnings as the hedged interest cash flows are accrued.

(b)    Foreign exchange risk management

From time to time, OEH utilizes foreign currency forward contracts to reduce exposure to exchange rate risks primarily associated with OEH's international
transactions. These contracts establish the exchange rates at which OEH will purchase or sell at a future date the contracted amount of currencies for specified foreign currencies. OEH utilizes
forward contracts which are short-term in nature and receives or pays the difference between the contracted forward rate and the exchange rate at the settlement date. No contracts were
outstanding at December 31, 2003 and 2002.

14.   Other comprehensive income/(loss)

The accumulated balances for each component of other comprehensive loss are as follows (dollars in thousands):

|                                         |  | Year ended
December 31, |        
|---------------------------------------- |  | ----------------------- | -------
|
|Foreign currency translation adjustments |  | $                       | (17,682
|Derivative financial instruments         |  |                         | 92     
|Minimum pension liability, net of tax    |  |                         | (1,613 
|                                         |  |                         |        
|                                         |  | $                       | (19,203
|                                         |  |                         |        

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

|                                                                |  | Year ended December 31 |       
|--------------------------------------------------------------- |  | ---------------------- | ------
|
|Net earnings on common shares                                   |  | $                      | 23,609
|Foreign currency translation adjustments                        |  |                        | 10,465
|Cumulative effect of change in accounting principles (SFAS 133) |  |                        |      
|Change in fair value of derivatives                             |  |                        | 102   
|Reclassification adjustment for losses included in net earnings |  |                        |      
|Additional minimum pension liability, net of tax                |  |                        | (107  
|                                                                |  |                        |       
|Comprehensive income                                            |  | $                      | 34,069
|                                                                |  |                        |       

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 Related Information". OEH's
operations are organized along service lines as two segments, (i) hotels and restaurants and (ii) tourist trains and cruises, and are grouped into various geographical segments. Hotels
at December 31, 2003 are located in the United States, Caribbean, Mexico, Europe, southern Africa, South America, Australia and South Pacific, restaurants are located in London, New York and
Buenos Aires, tourist trains operate in Europe, Southeast Asia and Peru, and a river cruiseship operates in Burma. Segment performance is evaluated based upon net earnings from operations before net
finance costs, taxes and depreciation and amortization excluding the effects of changes in accounting principles and gains on sale of assets. Segment information is presented in accordance with the
accounting policies described in Note 1.

Financial
information regarding these business segments is as follows, with net finance costs being net of capitalized interest and interest and related income (dollars in thousands):

56

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|                                                    |                                           | Year ended December 31, |        
|--------------------------------------------------- | ----------------------------------------- | ----------------------- | -------
|
|Revenue and Earnings from unconsolidated companies: |                                           |                         |        
|Hotels and restaurants                              |                                           |                         |        
|                                                    | Owned hotelsEurope                       |                         | $      
|                                                    | North America                            |                         |        
|                                                    | Rest of World                            |                         |        
|                                                    | Hotel management/part ownership interests |                         |        
|                                                    | Restaurants                               |                         |        
|                                                    |                                           |                         |        
|                                                    |                                           |                         | 276,506
|Tourist trains and cruises                          |                                           |                         | 48,712 
|                                                    |                                           |                         |        
|                                                    |                                           | $                       | 325,218
|                                                    |                                           |                         |        
|Earnings from unconsolidated companies:             |                                           |                         |        
|Hotels and restaurants                              |                                           |                         |        
|                                                    | Hotel management/part ownership interests |                         | $      
|                                                    | Restaurants                               |                         |        
|                                                    |                                           |                         |        
|                                                    |                                           |                         | 7,064  
|Tourist trains and cruises                          |                                           |                         | 2,291  
|                                                    |                                           |                         |        
|                                                    |                                           | $                       | 9,355  
|                                                    |                                           |                         |        
|Depreciation and amortization:                      |                                           |                         |        
|Hotels and restaurants                              |                                           |                         |        
|                                                    | Owned hotelsEurope                       |                         | $      
|                                                    | North America                            |                         |        
|                                                    | Rest of World                            |                         |        
|                                                    | Restaurants                               |                         |        
|                                                    |                                           |                         |        
|                                                    |                                           |                         | 22,152 
|                                                    |                                           |                         |        
|Tourist trains and cruises                          |                                           |                         | 3,113  
|                                                    |                                           |                         |        
|                                                    |                                           | $                       | 25,265 
|                                                    |                                           |                         |        
|Earnings from operations before net finance costs:  |                                           |                         |        
|Hotels and restaurants                              |                                           |                         |        
|                                                    | Owned hotelsEurope                       |                         | $      
|                                                    | North America                            |                         |        
|                                                    | Rest of World                            |                         |        
|                                                    | Hotel management/part ownership interests |                         |        
|                                                    | Restaurants                               |                         |        
|                                                    |                                           |                         |        
|                                                    |                                           |                         | 48,901 
|Tourist trains and cruises                          |                                           |                         | 2,871  
|Gain on sale of hotel asset                         |                                           |                         | 4,250  
|                                                    |                                           |                         |        
|                                                    |                                           |                         | 56,022 
|Central selling, general and administrative costs   |                                           |                         | (12,157
|                                                    |                                           |                         |        
|                                                    |                                           |                         | 43,865 
|Net finance costs                                   |                                           |                         | (17,219
|                                                    |                                           |                         |        
|Earnings before income taxes                        |                                           |                         | 26,646 
|Provision for income taxes                          |                                           |                         | 3,037  
|                                                    |                                           |                         |        
|Net earnings                                        |                                           | $                       | 23,609 
|                                                    |                                           |                         |        
|                                                    |                                           |                         |        

57

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|Capital expenditure:       |                     |   |        |        |   |        |        |   |        |       
|-------------------------- | ------------------- | - | ------ | ------ | - | ------ | ------ | - | ------ | ------
|Hotels and restaurants     |                     |   |        |        |   |        |        |   |        |       
|                           | Owned hotelsEurope |   | $      | 16,827 |   | $      | 16,712 |   | $      | 19,846
|                           | North America      |   |        | 19,928 |   |        | 23,601 |   |        | 6,923 
|                           | Rest of World      |   |        | 13,213 |   |        | 12,350 |   |        | 7,392 
|                           | Restaurants         |   |        | 801    |   |        | 2,313  |   |        | 1,173 
|                           |                     |   |        |        |   |        |       
|                           |                     |   | 50,769 |        |   | 54,976 |        |   | 35,334 |       
|Tourist trains and cruises |                     |   | 3,681  |        |   | 1,881  |        |   | 2,296  |       
|                           |                     |   |        |        |   |        |       
|                           |                     | $ | 54,450 |        | $ | 56,857 |        | $ | 37,630 |       
|                           |                     |   |        |        |   |        |       

|                           |                                           | December 31,
|-------------------------- | ----------------------------------------- | ------------
|
|Identifiable assets:       |                                           |             
|Hotels and restaurants     |                                           |             
|                           | Owned hotelsEurope                       |             
|                           | North America                            |             
|                           | Rest of World                            |             
|                           | Hotel management/part ownership interests |             
|                           | Restaurants                               |             
|                           |                                           |             
|                           |                                           |             
|Tourist trains and cruises |                                           |             
|                           |                                           |             
|                           |                                           | $           
|                           |                                           |             

Financial
information regarding geographic areas based on the location of properties is as follows (dollars in thousands):

|         |               | Year ended December 31,
|-------- | ------------- | -----------------------
|
|Revenue: |               |                        
|         | Europe        |                        
|         | North America |                        
|         | Rest of World |                        
|         |               |                        
|         |               | $                      
|         |               |                        

|                                 |               | December 31,
|-------------------------------- | ------------- | ------------
|
|Long-lived assets at book value: |               |             
|                                 | Europe        |             
|                                 | North America |             
|                                 | Rest of World |             
|                                 |               |             
|                                 |               | $           
|                                 |               |             

58

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16.   Related party transactions

For the year ended December 31, 2003, OEH incurred net amounts of $4,631,000 (2002$5,899,000 2001$5,508,000) to SCL and its
subsidiaries for the provision of various services, including financial, legal, accounting, corporate executive, public company, human resources administration, insurance, pension benefits, office
facilities, and system and computer services. SCL owned a 42% equity interest in the Company at December 31, 2003. These were provided under a shared services agreement between OEH and SCL on
the basis of a fee plus reimbursements equivalent to the direct and indirect costs of providing the services. The agreement had an initial term of one year and is automatically renewed annually unless
terminated by SCL or OEH. These amounts have been included in selling, general and administrative expenses, and the unpaid net amount of $4,924,000 at December 31, 2003
(2002$4,082,000) is included in accounts payable.

SCL
guaranteed a bank loan to OEH in an outstanding principal amount of $19,088,000 at December 31, 2003 (2002$112,854,000). This guarantee predated the Company's
initial public offering in August 2000 and is being cancelled in March 2004 (see Note 17).

OEH
manages under a long-term contract the Charleston Place Hotel and has made loans to the hotel-owning company. For the year ended December 31, 2003, OEH earned
$3,917,000 (2002$4,087,000, 2001$3,876,000) in management fees and $7,080,000 (2002$7,892,000, 2001$6,702,000) in interest income on partnership and
other loans. OEH owns a 19.9% equity interest in this hotel. At December 31, 2003, the loans aggregated $59,344,000 (2002$57,808,000) with an indefinite maturity date and interest
at either a fixed rate of 12% p.a. or a spread over LIBOR.

For
the year ended December 31, 2003, OEH charged $90,000 (2002$160,000) for services provided to the group of four restaurants in England in which it had a 50%
interest before disposing of that interest in 2003.

OEH
manages under long-term contracts the Hotel Monasterio and the Machu Picchu Sanctuary Lodge owned by its 50%/50% joint venture with local Peruvian interests, as well as
the 50%-owned PeruRail operation, and provides loans to these joint ventures. In 2003, OEH earned management fees of $1,940,000 (2002$1,167,000, 2001$1,097,000) and loan
interest of $297,000 (2002$330,000, 2001$516,000) from the joint ventures. At December 31, 2003, loans to the hotels aggregated $2,000,000, bear interest at a spread
over LIBOR and come due in 2005. At the same date, OEH had a $750,000 subordinated loan to the PeruRail operation with an indefinite maturity date and interest also at a spread over LIBOR.

OEH
manages under a long-term contract the Hotel Ritz in Madrid, Spain, in which OEH acquired a 50% interest in April 2003 (see Note 2). In 2003, OEH earned
$1,069,000 in management fees.

OEH
has granted since 1989 to James Sherwood, Chairman and a director of the Company, a right of first refusal to purchase the Hotel Cipriani in Venice, Italy in the event OEH proposes
to sell it. The purchase price would be the offered sale price in the case of a cash sale or the fair market value of the hotel, as determined by an independent valuer, in the case of a
non-cash sale.

17.   Subsequent events

On January 20, 2004, the Company paid its first quarterly cash dividend at the rate of $0.025 per class A and class B common share.

On
February 2, 2004, OEH announced it was making an $8,000,000 investment in the Pansea group of five deluxe hotels in Southeast Asia. The transaction has been structured as a
loan to the group holding company, convertible after three years into about 25% of the company's shares. OEH also paid $1,400,000 for options exercisable after three or five years to acquire all of
the holding company's shares, and the existing shareholders have the right to sell their shares to OEH after five years. OEH will not manage the hotels but will market them along with its other
properties.

Prior
to the Company's initial public offering when it was a wholly-owned subsidiary of SCL, SCL guaranteed a bank loan to two Company subsidiaries. The loan agreement contained
cross-default provisions such that a default by SCL in certain circumstances would trigger a default of the loan. At December 31, 2003, $19,088,000 was outstanding under this loan. In March
2004, the Company, the lending bank and SCL were entering into an amendment of the loan agreement substituting the Company as the guarantor instead of SCL and making the cross-default provisions apply
to the Company instead of SCL.

59

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Summary of Quarterly Earnings (unaudited)

|                                                      |                   | Quarter ended |       
|----------------------------------------------------- | ----------------- | ------------- | ------
|
|
|2003                                                  |                   |               |       
|Revenue                                               |                   | $             | 77,708
|Earnings from unconsolidated companies                |                   |               | 2,901 
|Gain on sale of hotel asset                           |                   |               | 4,250 
|                                                      |                   |               |       
|                                                      |                   | $             | 84,859
|                                                      |                   |               |       
|Earnings before net finance costs                     |                   | $             | 11,719
|Net finance costs                                     |                   |               | (2,919
|                                                      |                   |               |       
|Earnings/(losses) before income taxes                 |                   |               | 8,800 
|Provision for/(benefit from) income taxes             |                   |               | 182   
|                                                      |                   |               |       
|Net earnings/(losses) on class A and B common shares  |                   | $             | 8,618 
|                                                      |                   |               |       
|Net earnings/(losses) per class A and B common share: |                   |               |       
|                                                      | Basic and diluted |               | $     
|                                                      |                   |               |       
|2002                                                  |                   |               |       
|Revenue                                               |                   | $             | 70,252
|Earnings from unconsolidated companies                |                   |               | 3,198 
|                                                      |                   |               |       
|                                                      |                   | $             | 73,450
|                                                      |                   |               |       
|Earnings before net finance costs                     |                   | $             | 8,468 
|Net finance costs                                     |                   |               | (3,669
|                                                      |                   |               |       
|Earnings before income taxes                          |                   |               | 4,799 
|Provision for income taxes                            |                   |               | 622   
|                                                      |                   |               |       
|Net earnings on class A and B common shares           |                   | $             | 4,177 
|                                                      |                   |               |       
|Net earnings per class A and B common share:          |                   |               |       
|                                                      | Basic and diluted |               | $     
|                                                      |                   |               |       

60

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ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

ITEM 9A. Controls and Procedures

The Company's chief executive and financial officers have evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in SEC
Rule 13a-15(e)) as of December 31, 2003 and found no material deficiencies or weaknesses. There have been no changes in the Company's internal control over financial reporting (as
defined in SEC Rule 13a-15(f)) during the fourth quarter of 2003 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial
reporting.

It
should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met. In
addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there
can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

61

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PART III

ITEM 10. Directors and Executive Officers of the Registrant

Directors

The directors of the Company are as follows:

|Name, Age                |  | Principal Occupation and Other Major Affiliations                                              |  | Year
First Became
Director
|------------------------ |  | ---------------------------------------------------------------------------------------------- |  | --------------------------
|John D. Campbell, 61     |  | Senior Counsel (retired) of Appleby Spurling & Kempe (attorneys)                               |  | 1994                      
|James B. Hurlock, 70     |  | Interim CEO of Stolt-Nielsen Transportation Group Ltd. (a chemical transport services company) |  | 2000                      
|J. Robert Lovejoy, 59    |  | Senior Managing Director of Ripplewood Holdings LLC (a private equity investment firm)         |  | 2000                      
|Daniel J. O'Sullivan, 65 |  | Senior Vice PresidentFinance and Chief Financial Officer of SCL                               |  | 1997                      
|Georg R. Rafael, 66      |  | Managing Director of Rafael Group S.A.M. (hoteliers)                                           |  | 2002                      
|James B. Sherwood, 70    |  | Chairman of the Company                                                                        |  | 1994                      
|Simon M.C. Sherwood, 43  |  | President of the Company                                                                       |  | 1994                      

The
principal occupation of each director during the last five years is that shown in the table supplemented by the following information.

Mr. Campbell
was a member of Appleby Spurling & Kempe until March 1999 and retired as Senior Counsel in July 2003. Mr. Campbell is a non-executive
director and Chairman of the Risk and Audit Committee of The Bank of Bermuda Ltd., a subsidiary of HSBC Holdings plc, and a non-executive director and Chairman of the Nominations and
Governance Committee of Argus Insurance Company Ltd., a public company listed on the Bermuda Stock Exchange.

Mr. Hurlock
is also an attorney and was a member of White & Case LLP acting as Chairman of the firm's Management Committee overseeing worldwide operations from 1980 until
his retirement in 2000. He was appointed to his current position at Stolt-Nielsen in July 2003.

Mr. Lovejoy,
prior to joining Ripplewood in 2000, was a Managing Director of Lazard Freres & Co. LLC and a General Partner of Lazard's predecessor partnership for over
15 years.

Mr. Rafael
was until early 2002 the Vice ChairmanExecutive Committee of Mandarin Oriental Hotels, having sold to them in 2000 Rafael Hotels Ltd., a deluxe
hotel owning and operating company that Mr. Rafael established in 1986. Before Rafael Hotels, he was joint Managing Director of Regent International Hotels, a hotel group Mr. Rafael
helped start in 1972.

Mr. James
Sherwood has also been a director and the President of SCL since 1974.

Mr. Simon
Sherwood was Senior Vice PresidentLeisure of SCL (1997-2000) and was originally appointed Vice President of SCL in 1991, prior to which he was
Manager, Strategic Consulting of Boston Consulting Group (1986-1990). He is the stepson of Mr. James Sherwood.

The
Board of Directors has established a standing Audit Committee for the purpose of overseeing the accounting and financial reporting processes of OEH and the audits of its financial
statements. Messrs. Campbell, Hurlock and Lovejoy are the committee members. The Board has determined that the committee members meet the audit committee independence rules of the SEC and the
New York Stock Exchange when they become applicable to the Company in July 2005. The Board has designated Mr. Lovejoy as the audit committee financial expert, as defined under SEC rules.

62

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Executive Officers

The executive officers of the Company are as follows:

|Name, Age                 |  | Position                                                             
|------------------------- |  | ---------------------------------------------------------------------
|James B. Sherwood, 70     |  | Chairman since 1994                                                  
|Simon M.C. Sherwood, 43   |  | President since 1994                                                 
|Dean P. Andrews, 51       |  | Vice PresidentHotels, North America since 1997                      
|Roger V. Collins, 57      |  | Vice PresidentTechnical Services since 2001                         
|Adrian D. Constant, 43    |  | Vice PresidentHotels, Europe and Asia since 2001                    
|Pippa Isbell, 50          |  | Vice PresidentPublic Relations since 2000                           
|James G. Struthers, 40    |  | Vice PresidentFinance and Chief Financial Officer since 2000        
|Nicholas R. Varian, 49    |  | Vice PresidentTourist Trains and Cruises since 1994                 
|Paul White, 39            |  | Vice PresidentHotels, Africa, Australia and South America since 2000
|Edwin S. Hetherington, 54 |  | Secretary since 1994                                                 

The
principal occupation of each person during the last five years is shown in the table supplemented by the following information.

The
previous experience of Messrs. James Sherwood and Simon Sherwood is reported under the heading "Directors" above.

Mr. Andrews
was with Omni Hotels (1981-1997) working in new hotel development and financial and asset management.

Mr. Collins,
an engineer, has worked in the hotel industry since 1979 with Grand Metropolitan Hotels, Courage Inns and Taverns, and Trusthouse Forte Hotels, joining the Company's
predecessor, Orient-Express Hotels Inc., in 1991.

Mr. Constant
began his career in the hotel industry in 1983, including positions at Intercontinental and Forte Hotels, and worked for Le Meridien Hotels (1993-2001)
ending as Regional Manager for Brazil.

Ms. Isbell
was appointed a Manager of the Company in 1998 after selling the public relations consultancy she founded in 1987. Her work in the hospitality industry included
Intercontinental Hotels, Forte, Hilton International, Jarvis Hotels, and Millennium and Copthorne.

Mr. Struthers
is also Vice PresidentController of SCL having joined originally in 1991 as Group Financial Controller and worked briefly (1997-1999) as
Finance Director of Eurostar (UK) Ltd., the operator of high speed passenger train services between Britain and Continental Europe.

Mr. Varian
joined Orient-Express Hotels Inc. in 1985 from P&O Steam Navigation Company and has worked extensively on various cruise and tourist train projects, becoming a
Vice President in 1989.

Mr. White
was previously a Manager of the Company working on hotel financial and operational matters, having joined from Forte Hotels in 1991.

Mr. Hetherington
is also Vice President, General Counsel and Secretary of SCL having joined Orient-Express Hotels Inc. in 1980.

The
Board of Directors has adopted a code of business practices for the Company's principal executive, financial and accounting officers, which is filed as an exhibit to this report.

63

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ITEM 11. Executive Compensation

Because the Company is a foreign private issuer, it is replying to this Item 11 pursuant to Item 402(a)(l)(ii) of SEC Regulation S-K.

The
following table shows the salary and bonus of Mr. Simon Sherwood paid in cash during 2003, and of all executive officers as a group, for services to OEH in all capacities:

|Name of Individual or Group                    |  | Principal
Capacities in
Which Served |  | Cash
Compensation
|---------------------------------------------- |  | ------------------------------------ |  | -----------------
|Simon M.C. Sherwood                            |  | President and Director               |  | $                
|All executive officers as a group (10 persons) |  |                                      |  | $                

The
group data in the table include the salary and bonus of Mr. James Sherwood paid by OEH ($371,400). Under the shared services agreement between OEH and SCL described under Item
13Certain Relationships and Related Transactions below, part of the salary and bonus of Mr. Hetherington is included in the corporate and administrative charges of SCL to OEH and
is excluded from the table. See also Note 16 to the Financial Statements (Item 8 above).

Each
of Messrs. Campbell, Hurlock, Lovejoy and Rafael receives a fee of $2,750 for each meeting of the Board of Directors or a committee thereof which he attends, and is paid a
director retainer fee at the annual rate of $17,500. Aggregate attendance and retainer fees amounted to $131,000 in 2003. They are also entitled to 50% discounts off the usual room rates and food and
beverage prices for personal visits at OEH's properties.

Pensions

Executive officers who are United Kingdom citizens participate in a contributory defined benefit pension plan established by OEH in 2003 for British employees.
The amount of contribution to the plan in respect of a specific person cannot readily be separated or individually calculated. Participants in the plan are eligible to receive at their normal
retirement date an annual pension based on the number of years of permanent employment and their final pensionable compensation, up to a maximum pension of two-thirds of the final
pensionable compensation for service of up to 20 years, reduced by pension benefits paid by the British government. A participant's pensionable compensation upon which benefits are based is the
greater of (i) the average of the participant's highest three consecutive pensionable salaries during the ten years preceding retirement or (ii) the participant's pensionable salary for
the year immediately preceding retirement. In 2002 and prior years, most British executive officers participated in an SCL pension plan at SCL's cost charged to OEH under the shared
services agreement referred to above. Based on actuarial advice, plan assets were divided when the OEH plan was established as of January 1, 2003.

Under
this U.K. defined benefit plan, currently estimated accrued annual benefits payable to participating executive officers of the Company amounted to approximately $257,400 in the
aggregate at December 31, 2003. See Note 7 to the Financial Statements regarding the U.K. plan. Messrs. James Sherwood, Andrews and Hetherington who are U.S. citizens participate
in no OEH pension pan.

2000 Stock Option Plan

Options to purchase Class A common shares of the Company have been granted to directors, executive officers and selected employees under the Company's 2000
Stock Option Plan, which is administered by the Board of Directors. The plan provides for the award of options to purchase up to 750,000 Class A and B common shares at market value at the time
of the award. In general, options become exercisable three years after the date of grant and expire ten years from date of grant. In certain circumstances constituting a change in control of the
Company, outstanding options become

64

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immediately
exercisable, and optionees may thereafter surrender their options instead of exercising them and receive directly from the Company in cash the difference between the option exercise price
and the value of the underlying shares determined according to the plan.

During
2003, options to purchase an aggregate of 65,000 Class A shares were granted to directors and executive officers of the Company at a price of $13.40 per share, including
options on 5,000 shares to each of the directors. No options were exercised by directors or officers during 2003. At December 31, 2003, options to purchase an aggregate of 490,000
Class A shares (of which 197,500 were exercisable) were held by directors and executive officers at per share exercise prices ranging from $13.00 to $19.00 and expiring between 2010 and 2013.
See Note 11 to the Financial Statements.

ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Five Percent Shareholders

The following table contains information concerning the beneficial ownership of the Company's Class A common shares and Class B common shares by the
only persons known to OEH to own beneficially more than 5% of the outstanding shares of either class.

Orient-Express
Holdings 1 Ltd. ("Holdings") listed in the table below is a subsidiary of the Company which owns only Class B shares. Under Bermuda law, the shares owned by
Holdings are outstanding
and may be voted. Each Class B share is convertible at any time into one Class A share and, therefore, the shares listed as owned by Holdings represent Class B shares and the
Class A shares into which those shares are convertible.

Voting
and dispositive power with respect to the Class B shares owned by Holdings is exercised by its Board of Directors, who are Messrs. James Sherwood, O'Sullivan,
Campbell and three other persons who are not directors or officers of the Company. Each of these persons may be deemed to share beneficial ownership of the Class B shares owned by Holdings for
which he serves as a director, as well

65

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as
the Class A shares into which those Class B shares are convertible, but is not shown in the table below.

|Name and Address                                                                               |  | No. of
Class A
and Class B
Shares |     | Percent
of
Class A
Shares(1) |   | Percent
of
Class B
Shares |  
|---------------------------------------------------------------------------------------------- |  | --------------------------------- | --- | ---------------------------- | - | ------------------------- | -
|Orient-Express Holdings 1 Ltd
22 Victoria Street
Hamilton HM 12
Bermuda                        |  | 18,044,478                        |     | 36.2                         | % | 88.0                      | %
|Citibank International plc et al.(2)
Citicorp Centre
Canada Square
Canary Wharf
London E14 5LB |  | 14,406,500                        |     | 42.1                         | % | 12.0                      | %
|Sea Containers Ltd.(3)
22 Victoria Street
Hamilton HM 12
Bermuda                               |  | 14,403,300                        |     | 42.1                         | % | 12.0                      | %
|Capital Research and Management Co.(4)
333 South Hope Street
Los Angeles, California 90071     |  | 1,795,000                         | (6) | 5.6                          | % |                          |  
|Westport Asset Management Inc.(5)
253 Riverside Avenue
Westport, Connecticut 06880             |  | 1,737,900                         | (6) | 5.5                          | % |                          |  

---

66

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Directors and Executive Officers

The following table contains information concerning the beneficial ownership of Class A common shares of the Company by each director and executive officer
of the Company and by all directors and executive officers of the Company as a group. Each person has sole voting and dispositive power with respect to his or her shares, except Mr. James
Sherwood who shares voting and dispositive power with respect to 10,300 Class A shares. Each individual's holding is less than 1% of the Class A shares outstanding, other than
Mr. James Sherwood with 1.2%. The group total includes 197,500 Class A shares covered by exercisable stock options held by directors and executive officers under the Company's 2000 Stock
Option Plan which, together with the other shares beneficially owned by directors and executive officers, represents 1.9% of Class A shares outstanding.

|Name                                                                                                   |  | No. of Class A
Shares
|------------------------------------------------------------------------------------------------------ |  | ---------------------
|D.P. Andrews                                                                                           |  | 1,000                
|J.D. Campbell                                                                                          |  | 1,000                
|R.V. Collins                                                                                           |  |                     
|A.D. Constant                                                                                          |  |                     
|E.S. Hetherington                                                                                      |  | 1,000                
|J.B. Hurlock                                                                                           |  | 1,000                
|P. Isbell                                                                                              |  | 650                  
|J.R. Lovejoy                                                                                           |  | 5,000                
|D.J. O'Sullivan                                                                                        |  |                     
|G.R. Rafael                                                                                            |  |                     
|J.B. Sherwood                                                                                          |  | 378,600              
|S.M.C. Sherwood                                                                                        |  | 14,400               
|J.G. Struthers                                                                                         |  | 300                  
|N.R. Varian                                                                                            |  | 600                  
|P. White                                                                                               |  | 1,000                
|All directors and executive officers as a group (15 persons) including exercisable stock option shares |  | 602,050              

Voting Control of the Company

The following table lists the voting power held by the known beneficial owners of more than 5% of the outstanding Class A or Class B common shares
of the Company and all directors and executive officers as a group. Those directors and executive officers of the Company who are deemed to be

67

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beneficial
owners solely because they are directors of Holdings are not listed individually but are included in the group.

|Name                                                                                                   |  | No. of
Class A
Shares |  | No. of
Class B
Shares |  | Combined
Voting Power |  
|------------------------------------------------------------------------------------------------------ |  | --------------------- |  | --------------------- |  | --------------------- | -
|Holdings                                                                                               |  |                      |  | 18,044,478            |  | 76.2                  | %
|Citibank                                                                                               |  | 11,947,101            |  | 2,459,399             |  | 15.4                  | %
|SCL                                                                                                    |  | 11,943,901            |  | 2,459,399             |  | 15.4                  | %
|Capital                                                                                                |  | 1,795,000             |  |                      |  |                      |  
|Westport                                                                                               |  | 1,448,700             |  |                      |  | (1                    | )
|All directors and executive officers as a group (15 persons) including exercisable stock option shares |  | 602,050               |  | 18,044,478            |  | 76.4                  | %

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In
general the holders of Class A and B common shares of the Company vote together as a single class on most matters submitted to general meetings of shareholders, with holders of
Class B shares having one vote per share and holders of Class A shares having one-tenth of a vote per share. Each Class B share is convertible at any time into one
Class A share. In all other material respects, the Class A and B shares are identical and are treated as a single class of common shares.

Holdings
and the Company's directors and executive officers hold in total approximately 36% in number of the outstanding Class A and Class B shares having approximately 76%
of the combined voting power of the outstanding common shares of the Company for most matters submitted to a vote of the Company's shareholders. Other shareholders, accordingly, hold approximately 64%
in number of the common shares having about 24% of combined voting power in the Company.

Under
Bermuda law, the Class B shares owned by Holdings (representing approximately 76% of the combined voting power) are outstanding and may be voted by that subsidiary. The
investment by Holdings in Class B shares and the manner in which Holdings votes those shares are determined by the Board of Directors of Holdings (three of whom are also directors or officers
of the Company) consistently with the exercise by those directors of their fiduciary duties to the subsidiary. Holdings,
therefore, has the ability to elect at least a majority of the members of the Board of Directors of the Company and to control the outcome of most matters submitted to a vote of the Company's
shareholders.

With
respect to a number of matters which would tend to change control of the Company, its memorandum of association and bye-laws contain provisions that could make it harder
for a third party to acquire OEH without the consent of the Company's board of directors. These provisions include supermajority shareholder voting provisions for the removal of directors and for
"business combination" transactions with beneficial owners of shares carrying 15% or more of the votes which may be cast at any general meeting of shareholders, and limitations on the voting rights of
such 15% beneficial owners. Also, the Company's Board of Directors has the right under Bermuda law to issue preferred shares without shareholder approval, which could be done to dilute the share
ownership of a potential hostile acquirer. Also, the rights to purchase series A junior preferred shares, one of which is attached to each Class A and Class B common share of the
Company, may have antitakeover effects. See Note 10(c) to the Financial Statements. Although OEH management believes these provisions provide for an opportunity to receive a higher bid by
requiring potential acquirers to negotiate with the Company's Board of Directors, these provisions apply even if the offer may be considered beneficial by many shareholders.

Information
under Item 201(d) of SEC Regulation S-K is omitted because the Company is a foreign private issuer.

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ITEM 13. Certain Relationships and Related Transactions

Mr. James Sherwood owns a private residential apartment in the Hotel Cipriani in Venice, Italy, a hotel owned by a subsidiary of the Company. OEH has
granted Mr. Sherwood a right of first refusal to purchase the hotel in the event OEH proposes to sell it. The purchase price would be the offered sale price in the case of a cash sale or the
fair market value of the hotel, as determined by an independent valuer, in the case of a non-cash sale. Similarly, if Mr. Sherwood proposes to sell his apartment, he has granted OEH
a right of first refusal to purchase it at fair market value or, at Mr. Sherwood's option in the case of a proposed cash sale, the offered sale price. In addition, SCL has granted an option to
Mr. Sherwood to purchase the hotel at fair market value if a change in control of SCL occurs. SCL and the Company will amend this option to apply to a change in control of the Company.

Mr. James
Sherwood and the subsidiary of the Company which owns the Hotel Cipriani have entered into an agreement under which he may rent his apartment to the hotel in return for
50% of the
amounts paid by hotel guests for use of the apartment. In 2001, the hotel paid Mr. Sherwood $104,100 for the use of his apartment. Also, in any calendar year when the apartment is made
available to the hotel for 90 days or more when the hotel is open to guests, the hotel is obligated to clean, repair and insure the apartment at its expense and provide Mr. Sherwood and
his guests with all hotel services other than food and drink free of charge, including electricity, air conditioning, telephone rental, water and room services for the apartment. To the extent that
the apartment is made available to the hotel for less than 90 days per year, Mr. Sherwood must pay a proportionate share of those expenses.

Mr. James
Sherwood and his two stepsons including Mr. Simon Sherwood own Capannelle S.r.l., a vineyard in the Chianti region of Italy that produces wine, olive oil and
other products principally for sale to third parties. In 2003, the vineyard sold $77,100 of products to OEH hotels at prices the same as its third party prices.

Capannelle
and the Company's subsidiary that owns the Villa San Michele near Florence, Italy have entered into an agreement effective in 2003 under which Capannelle makes the main house
and other parts of the vineyard available to short-stay guests provided by the hotel. The incremental costs of Capannelle and Villa San Michele in servicing the guests each year are netted
against the amounts charged by the hotel for guest accommodation, food, beverage and other hotel services, and the net amount is shared equally between Capannelle and Villa San Michele. In 2003,
Capannelle earned $7,900 from this arrangement which continues on a year-to-year basis unless terminated by either party.

See
also Note 16 to the Financial Statements (Item 8 above) regarding related party transactions.

Agreements with Sea Containers Ltd.

In connection with the initial public offering of the Company's Class A common shares in August 2000 and in anticipation of the separation of the
two companies, OEH and SCL entered into the following agreements:



SCL and OEH entered into a shared services agreement covering the provision to OEH of various services, including financial, legal, accounting, corporate
executive, public company, human resources administration, insurance, pension benefits and information technology. OEH also occupies space in offices leased by various SCL subsidiaries in London and
overseas. For these services, OEH pays a fee plus reimbursements approximating the costs of SCL in providing the services. OEH may terminate these arrangements on one year's notice.

69

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OEH entered into a tax sharing agreement with SCL that allocates responsibilities for tax matters between the two companies for periods prior to the separation of
OEH and SCL. In general, OEH will continue to be responsible for taxes of itself and its subsidiaries after the separation from SCL, and SCL has agreed to indemnify OEH for all taxes attributable to
the separation itself.



SCL and OEH entered into an amended and restated share owning subsidiaries restructuring agreement pursuant to which Orient-Express Holdings 1 Ltd., a
subsidiary of the Company, exercised an option to acquire on July 22, 2002 from SCL 18,044,478 Class B common shares of the Company owned by SCL at an aggregate price of $180,445,
thereby providing the Company with a share owning subsidiary ownership structure very similar to that of SCL. See Item 12Security Ownership of Certain Beneficial Owners and Management
above. In a takeover of OEH, this structure may assist in maximizing the value shareholders of the Company receive in the takeover transaction. Also under this agreement on July 22, 2002, a
subsidiary of SCL exercised an option to acquire from four OEH subsidiaries including Orient-Express Holdings 1 Ltd. an aggregate of 12,900,000 Class B common shares of SCL at an
aggregate price of $129,000.



SCL has undertaken to OEH not to own an interest in or manage any luxury hotel or luxury restaurant, other than any luxury hotel or luxury restaurant operated in
conjunction with SCL's passenger ferry and rail services, until August 2005.

ITEM 14. Principal Accountant Fees and Services

The following table presents the fees of Deloitte & Touche LLP, OEH's independent auditor, for audit and permitted non-audit services in 2003
and 2002:

|                   |  | 2003 |           | 2002
|------------------ |  | ---- | --------- | ----
|Audit fees         |  | $    | 1,202,000 |     
|Audit-related fees |  |      | 104,000   |     
|Tax fees           |  |      | 419,000   |     
|All other fees     |  |      |          |     
|                   |  |      |           |     
|Total              |  | $    | 1,725,000 |     
|                   |  |      |           |     

Audit
services consist of work performed in the preparation of audited financial statements for each fiscal year and in the review of financial statements included in quarterly reports
during the year, as well as work normally done by the independent auditor in connection with statutory and regulatory filings, such as statutory audits of non-U.S. subsidiaries, consents
and comfort letters for SEC registration statements, accounting research and assistance, and implementation of new accounting standards.

Audit-related
services consist of assurance and related services that are normally performed by the independent auditor and that are reasonably related to the audit or review of
financial statements but are not reported under audit services, including due diligence reviews in potential transactions and audits of benefit plans.

Tax
services consist of all services performed by the independent auditor's tax personnel, except those services specifically related to the audit or review of financial statements, and
include fees in the areas of tax return preparation and compliance and tax planning and advice.

70

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Other
services consist of those services permitted to be provided by the independent auditor but not included in the other three categories.

During
2003, the Audit Committee of the Board of Directors of the Company established a policy to pre-approve all audit and permitted non-audit services provided
by the independent auditor. Prior to engagement of the auditor for the next year's audit, management and the auditor submit to the Committee a description of the audit and permitted
non-audit services expected to be provided during that year for each of four categories of services described above, together with a fee proposal for those services. Prior to the
engagement of the independent auditor, the Audit Committee considers with management and the auditor and approves (or revises) both the description of audit and permitted non-audit
services proposed and the budget for those services. If circumstances arise during the year when it becomes necessary to engage the independent auditor for additional services not contemplated in the
original pre-approval, the Audit Committee at its regularly scheduled meetings requires separate pre-approval before engaging the independent auditor. To ensure prompt handling
of unexpected matters, the Committee may delegate pre-approval authority to one or more of its members who report any pre-approval decisions to the Committee at its next
scheduled meeting. For 2003, when this policy was adopted, all of the audit and permitted non-audit services described above were pre-approved under the policy.

71

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PART IV

ITEM 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

|   |  |                                                                                                                       |  | Page Number
|-- |  | --------------------------------------------------------------------------------------------------------------------- |  | -----------
|1. |  | Financial Statements                                                                                                  |  |            
|   |  | Independent auditors' report                                                                                          |  | 33         
|   |  | Consolidated financial statementsyears ended December 31, 2003, 2002 and 2001:                                       |  |            
|   |  | Balance sheets (December 31, 2003 and 2002)                                                                           |  | 34         
|   |  | Operations                                                                                                            |  | 35         
|   |  | Cash flows                                                                                                            |  | 36         
|   |  | Shareholders' equity                                                                                                  |  | 37         
|   |  | Notes                                                                                                                 |  | 38         
|2. |  | Financial Statement Schedules                                                                                         |  |            
|   |  | Schedule IIValuation and qualifying accounts (years ended December 31, 2003, 2002 and 2001)                          |  | 73         
|3. |  | Exhibits. The index to exhibits appears below, on the pages immediately following the signature pages to this report. |  |            

|Date of Report    |  | Item No. |  | Description                                             
|----------------- |  | -------- |  | --------------------------------------------------------
|November 11, 2003 |  | 7 and 12 |  | Third quarter 2003 earnings news release of the Company.

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ORIENT-EXPRESS HOTELS LTD. AND SUBSIDIARIES        Schedule IIValuation and Qualifying Accounts

|Column A                        |  | Column B |         | Column C |   | Column D |  | Column E
|------------------------------- |  | -------- | ------- | -------- | - | -------- |  | --------
|
|
|Year ended December 31, 2003:   |  |          |         |          |   |          |  |         
|Allowance for doubtful accounts |  | $        | 592,000 |          | $ | 282,000  |  | $       
|                                |  |          |         |          |   |          |  |         
|                                |  |          |         |          |   |          |  | $       
|Year ended December 31, 2002:   |  |          |         |          |   |          |  |         
|Allowance for doubtful accounts |  | $        | 514,000 |          | $ | 146,000  |  | $       
|                                |  |          |         |          |   |          |  |         
|                                |  |          |         |          |   |          |  | $       
|Year ended December 31, 2001:   |  |          |         |          |   |          |  |         
|Allowance for doubtful accounts |  | $        | 422,000 |          | $ | 81,000   |  | $       
|                                |  |          |         |          |   |          |  |         
|                                |  |          |         |          |   |          |  | $       

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

|Dated: March 15, 2004 |  | ORIENT-EXPRESS HOTELS LTD.
|--------------------- |  | --------------------------
|                      |  | By:                       

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on
the date indicated.

Dated:
March 15, 2004

|Name                                        |  | Title                                                                            
|------------------------------------------- |  | ---------------------------------------------------------------------------------
|                                            |  |                                                                                  
|/s/JOHN D. CAMPBELLJohn D. Campbell         |  | Director                                                                         
|/s/JAMES B. HURLOCKJames B. Hurlock         |  | Director                                                                         
|/s/J. ROBERT LOVEJOYJ. Robert Lovejoy       |  | Director                                                                         
|/s/DANIEL J. O'SULLIVANDaniel J. O'Sullivan |  | Director                                                                         
|/s/GEORG R. RAFAELGeorg R. Rafael           |  | Director                                                                         
|/s/JAMES B. SHERWOODJames B. Sherwood       |  | Chairman and Director (Co-Principal Executive Officer)                           
|/s/SIMON M.C. SHERWOODSimon M.C. Sherwood   |  | President and Director (Co-Principal Executive Officer)                          
|/s/JAMES G. STRUTHERSJames G. Struthers     |  | Vice President-Finance and Chief Financial Officer (Principal Accounting Officer)

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EXHIBIT INDEX

|Exhibit
No. |  | Incorporated by Reference to                                               |  | Description                                                                                                                               
|----------- |  | -------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------
|3.1         |  | Exhibit 3.1 to Form S-1 Registration Statement No. 333-12030.              |  | Memorandum of Association and Certificate of Incorporation of Orient-Express Hotels Ltd.                                                  
|3.2         |  | Exhibit 3.2 to Form S-1 Registration Statement No. 333-12030.              |  | Bye-Laws of Orient-Express Hotels Ltd.                                                                                                    
|4.1         |  | Exhibit 4.2 to Form S-1 Registration Statement No. 333-12030.              |  | Rights Agreement between Orient-Express Hotels Ltd. and Fleet National Bank, as Rights Agent, dated June 1, 2000.                         
|4.2         |  | Exhibit 10 to June 30, 2003 Form 10-Q Quarterly Report (File No. 1-16017). |  | Agreement for €135 Million Term and Multi-Currency Revolving Credit Facility dated July 1, 2003 between the Company and Barclays Bank PLC.

OEH
has no instrument with respect to long-term debt under which the total amount of securities authorized exceeds 10% of the total assets of OEH on a consolidated basis. The Company
agrees to furnish to the SEC upon request a copy of each instrument with respect to long-term debt not filed as an exhibit to this report.

|10.1 |  | Exhibit 10.1 to Form S-1 Registration Statement No. 333-12030.                                              |  | Orient-Express Hotels Ltd. 2000 Stock Option Plan.                                                                                                                                                                                                                                                   
|---- |  | ----------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.2 |  | Exhibit 28(b) to February 10, 1989 Form 8-K Current Report of Orient-Express Hotels Inc. (File No. 1-6066). |  | Agreement Regarding Hotel Cipriani Interests dated January 27, 1989 among James B. Sherwood, Orient- Express Hotels Inc. and Hotel Cipriani S.p.A.                                                                                                                                                   
|10.3 |  | Exhibit 10(e) to 1989 Form 10-K Annual Report of Sea Containers Ltd. (File No. 1-7560).                     |  | Right of First Refusal and Option Agreement Regarding Indirectly Held Hotel Cipriani Interests dated August 22, 1989 among James B. Sherwood, Orient-Express Hotels Inc. and Sea Containers America Inc.                                                                                             
|10.4 |  | Exhibit 10.4 to Form S-1 Registration Statement No. 333-12030.                                              |  | Agreement dated February 18, 1982 between James B. Sherwood and Hotel Cipriani S.p.A.                                                                                                                                                                                                                
|10.5 |  | Exhibit 2.1 to Form S-1 Registration Statement No. 333-12030.                                               |  | Services Agreement dated August 1, 2000 among Sea Containers Ltd., Sea Containers Services Ltd. and Orient-Express Hotels Ltd.                                                                                                                                                                       
|10.6 |  | Exhibit 10.6 to 2001 Form 10-K Annual Report (File No. 1-16017).                                            |  | Amendment to Services Agreement dated January 1, 2001 (Exhibit 10.5 above).                                                                                                                                                                                                                          
|10.7 |  | Exhibit 2.1 to June 30, 2001 Form 10-Q Quarterly Report (File No. 1-16017).                                 |  | Amended and Restated Share Owning Subsidiaries Restructuring Agreement dated June 6, 2001 among Sea Containers Ltd., Orient-Express Hotels Ltd., Orient-Express Holdings 1 Ltd., Orient-Express Holdings 2 Ltd., Orient-
Express Holdings 3 Ltd., Orient-Express Holdings 4 Ltd. and Contender 2 Ltd.
|10.8 |  | Exhibit 2.3 to Form S-1 Registration Statement No. 333-12030.                                               |  | Tax Sharing Agreement dated August 1, 2000 between Sea Containers Ltd. and Orient-Express Hotels Ltd.                                                                                                                                                                                                
|     |  |                                                                                                             |  |                                                                                                                                                                                                                                                                                                      

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|10.9  |  | Exhibit 2.5 to Form S-1 Registration Statement No. 333-12030. |  | Noncompete Agreement dated August 1, 2000 between Sea Containers Ltd. and Orient-Express Hotels Ltd.                                           
|----- |  | ------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------
|10.10 |  | Page 77.                                                      |  | Contract of Special Partnership or Joint Venture dated August 1, 2002 between Alberghiera Fiesolana S.p.A. and Capanelle S.r.l.                
|11    |  | Page 79.                                                      |  | Statement of computation of per share earnings.                                                                                                
|12    |  | Page 80.                                                      |  | Statement of computation of ratios.                                                                                                            
|14    |  | Page 81.                                                      |  | Code of Business Practices for Principal Executive, Financial and Accounting Officers.                                                         
|21    |  | Page 83.                                                      |  | Subsidiaries of Orient- Express Hotels Ltd.                                                                                                    
|23    |  | Page 85.                                                      |  | Consents of Deloitte & Touche LLP relating to Form S-8 Registration Statement No. 333-58298 and Form S-3 Registration Statement No. 333-102576.
|31    |  | Page 86.                                                      |  | Rule 13a-14(a)/15d-14(a) Certifications.                                                                                                       
|32    |  | Page 89.                                                      |  | Section 1350 Certification.                                                                                                                    

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