Sea Containers Ltd. Annual Report 2002 Ltd.

Contents Sea Containers Ltd. is a Bermuda company with operating subsidiaries in London, Genoa, New York, Rio de Janeiro and Sydney. It is owned primarily by Company description 2 U.S. shareholders and its common shares are listed on the New York Stock Exchange under the trading symbols SCRA and SCRB. Financial highlights 3

Directors and officers 4 The company is engaged in two main activities: passenger and freight transport and marine container leasing. Within each segment are a number of operating President’s letterto shareholders 7 units. Passenger transport consists of fast ferry services in the English Channel Discussion by division: under the name Hoverspeed Ltd.; both fast and conventional ferry services in the Irish Sea under the name Isle of Man Steam Packet Company; fast ferry Passenger and Freight Transport 15 services in New York under the name SeaStreak; fast and conventional ferry services in the Baltic under the name ; and in the Adriatic under the Containers 21 name SNAV-Hoverspeed (50% owned). Rail operations in the U.K. are Property, Publishing and Plantations 24 conducted under the name Great North Eastern Railway (GNER). Ship management and naval architects subsidiaries support the passenger and Finance 26 freight transport division and have outside clients as well.

Financial review 29 Marine container leasing is conducted primarily through GE SeaCo SRL, a Shareholder and investor information 56 Barbados company owned 50% by Sea Containers and 50% by General Electric Capital Corporation. GE SeaCo operates one of the largest marine container fleets in the world, nearly one million units. Sea Containers also owns or partly owns five container service depots, four container manufacturing facilities and a refrigerated container service business. In addition, it owns one container ship, which is currently on charter.

The company also owns 47% of the equity of Orient-Express Hotels Ltd. Orient-Express Hotels’ common shares are listed on the New York Stock Exchange under OEH. This company has 40 de luxe leisure properties in 17 Front cover: The cruise ship m.v. Silja Opera at the Swedish countries. Most of the properties are owned but some are partly owned. One resort of Visby. The 1,398-berth vessel was returned from charter in early 2002 and commenced a new cruise program joint venture is PeruRail, the railways of Peru, which operates tourist trains on from , to Visby and the Latvian capital Riga in the Cuzco/Machu Picchu route and from Cuzco and Arequipa to Lake Titicaca. the summer. St Petersburg has been added to the program for PeruRail has extensive freight train operations to and from the port of Matarani 2003. On-board attractions include an outdoor pool deck as well. The hotels, restaurants, river cruise ship and tourist trains compete in the with a retractable glass roof. top end of the market.

Other Sea Containers’ activities include port interests in the U.K. and Greece, property development, publishing, fruit farming in the Ivory Coast and Brazil, and a U.K.-based travel agency.

2 SEA CONTAINERS LTD. Financial highlights (See note 20 to the Financial Statements on page 50)

2002 2001 Change $000 $000 %

Revenue 1,637,225 1,269,813 28.9

Earnings before net finance costs: Passenger and freight transport operations 120,316 68,058 76.8 Container operations 23,499 30,568 (23.1 ) Leisure operations 41,275 52,738 (21.7 ) Plantation, property, publishing and other operations 4,452 681 553.7 189,542 152,045 24.7

Corporate costs (15,038 ) (13,508 ) 11.3

174, 504 138,537 26.0

Add depreciation and amortization 113, 710 109,742

EBITDA* 288,214 248,279 Pro forma adjustment to exclude OEH EBITDA (55,630 ) (69,094 )

EBITDA as adjusted to exclude OEH 232,584 179,185 28.9

Net earnings on common shares 41,928 4,546 822.3

Total assets at book value 2,796,834 2,652,446 5.4

Long-term obligations 1,784,274 1,673,803 6.6

$ $% Net earnings per class A and class B common share: - basic 2.08 0.24 766.7 - diluted 2.07 0.24 762.5 Cash dividends per class A common share 0.225 0.30 (25.0 ) Cash dividends per class B common share 0.204 0.272 (25.0 )

* EBITDA means Earnings Before Interest, Tax, Depreciation and Amortization. EBITDA is a common financial measure that management uses to judge operating performance and the ability to service or incur indebtedness on a consistent basis without regard to depreciation and amortization which can vary depending on accounting methods or non-operating factors, such as historic cost.

3 Below: The Lapa Palace new bridge, which allows Directors and officers Hotel in Lisbon, an Orient- direct access to the hotel’s Express Hotels property, ornamental gardens from opened its new Villa Lapa most guest rooms. garden wing in 2002, bringing the total number of keys at the hotel to 109. The development includes this

From left to right: James B. Sherwood President of the company Charles N.C. Sherwood Partner of Permira Advisors Ltd. Philip J.R. Schlee Chairman of Robert Anderson & Co. Ltd. (a private equity investment firm) (a private investment firm) Michael J.L. Stracey* Executive Vice President and Chief Financial W. Murray Grindrod* Chairman of Grindrod Ltd. Officer (retired) and Consultant to the company (a shipping, transport and financial services company) Robert M. Riggs* Partner of Carter Ledyard & Milburn LLP Ian Hilton Member of Appleby Spurling & Kempe (attorneys) (attorneys) (retired) John D. Campbell Bermuda Vice President of the company. Senior Counsel of Appleby Spurling & Kempe (attorneys) * member of the Audit Committee

4 SEA CONTAINERS LTD. Officers other than the President

Back row, left to right: David G. Benson Senior Vice President, Passenger and Freight Transport Edwin S. Hetherington Vice President, General Counsel and Secretary Guy N. Sanders Vice President, Funding James A. Beveridge Vice President, Administration and Property, Front row, left to right: Plantations and Publishing Angus R. Frew Vice President, Containers James G. Struthers Vice President, Controller Daniel J. O’Sullivan Senior Vice President, Finance and Christopher W.M. Garnett Vice President, Rail Chief Financial Officer

Regional Managers

Franco delle Piane Chresten A. Bjerrum Robert Alagna Robin Lynch Luis Freitas Regional Manager, Regional Manager, Regional Manager, Regional Manager, Regional Manager, Mediterranean Asia Australasia North America South America

5 6 SEA CONTAINERS LTD. President’s letter to shareholders

May 1, 2003 $160 million of cash net of underlying debt and to use these funds to retire a portion of the 2003 and Dear Shareholder 2004 maturing public debt. We have also initiated exchange offers for this debt as an alternative to Your company returned to solid profitability in redemption in cash. We have arranged a 2002 after a poor 2001. Net earnings in 2002 $158 million standby credit with a bank syndicate were $41.9 million ($2.08 per common share), to be used if required to pay off the 2003 compared with net earnings of $4.5 million ($0.24 maturing debt. The assets being sold are The Isle per common share) in 2001. Profits in 2001 were of Man Steam Packet Company, our remaining largely achieved through gains on asset sales, port interests in the U.K. and our Charleston, SC while in 2002 such gains were minimal. Revenue container manufacturing facility. Funds not needed increased in 2002 to $1.64 billion from for debt repayment or investment may be used to James B. Sherwood $1.27 billion in 2001. EBITDA, excluding retire some of the company’s longer-dated public President and Founder Orient-Express Hotels, in 2002 was $232 million debt. This debt can currently be purchased at a compared with $179 million in 2001. large discount to par. It is not expected that the Despite our improved results, our share price sale of assets and retirement of debt will be is currently around $9, having been as high as $25 significantly dilutive of earnings. in the first quarter of 2001. This is clearly We currently own about 47% of the equity of unacceptable, but it partially reflects the persistent Orient-Express Hotels and believe its share price weakness in the U.S. stock market since the high is seriously undervalued by the market, so we point of the 2001-2002 period. It also reflects the intend to hold on to our shares until the market decision not to spin off shares in Orient-Express price recovers to prior levels. Hotels Ltd. to Sea Containers shareholders as Left: The volume of cars parked previously planned. Nonetheless, the current Marine Container Leasing at SeaStreak’s Highlands, New market price at 3.4x 2002 net earnings seems After a long period of stagnant demand for leased Jersey terminal reflects the exceptionally low and your management will be containers the market improved markedly from company’s growing success in making a major effort in the months ahead to April, 2002, and continues strong. In 2002, the New York-New Jersey commuter market. Passenger stimulate investor interest in the company’s shares. GE SeaCo, the company’s 50/50 joint venture with carryings from Highlands were At the time of writing this letter I can advise General Electric Capital Corporation, purchased 410,200 in 2002, while total we are closer to satisfactory resolution of our $160 million of new containers, all of which were SeaStreak carryings in the year claims against Network Rail, having won the placed on long lease at attractive rates. GE SeaCo’s reached 786,500, a 44% appeal in a crucial arbitration decision. owned container fleet with a book value of increase over 2001. Two new craft are due for delivery by the The company has about $260 million of public $494 million at end 2002, currently enjoys a 97% end of 2003. This will bring to debt falling due between mid-2003 and end 2004. utilization. Sea Containers also purchased four the number of new, larger We would have replaced the debt with new such $15 million of new containers in 2002 for leases craft brought into service by debt but, because of the poor 2001 results which and deferred payment sales outside the scope of SeaStreak during Sea resulted in a down-rating of our securities, the the GE SeaCo joint venture. A similar level of Containers’ ownership, each with a capacity of more than public debt markets are not open to us at purchasing by both companies is expected in 2003. 400 passengers. SeaStreak also acceptable interest rates. We have decided, GE SeaCo operates the container fleets of both employs three smaller vessels in therefore, to sell assets to generate about companies which pre-date the joint venture, its services.

7 Above: Vehicles disembarking i.e. which were purchased prior to 1998, in a Russia, Brazil and China and to reduce its costs of from SuperSeaCat One at “pool” arrangement. Both utilization and lease positioning, storage and repairs. Dieppe, France on arrival from rates of the pool containers rose from April 2002, Newhaven, England. This route has enjoyed success since it was although considerable expense was incurred in Ferry and Freight Transportation launched by Hoverspeed in positioning and repairing for lease, which The most important development in 2002 was the 1999, restoring a historic sea dampened profitability. GE SeaCo had net acquisition of 100% of Silja Ltd., the leading Baltic link between the two ports. earnings of $30 million in 2002 compared with passenger and freight ferry operator. Silja’s EBIT Revenue improved by 11% in $22 million in 2001. Sea Containers also owns in 2002 was $45 million compared with 2002 over 2001. In 2003, the service will consist of two return four container factories, which were profitable in $27.4 million in 2001 when we owned only 50% sailings a day throughout the 2002, as well as investments in five container of the company. Our investment in Silja at end season, with an additional depots, two refrigerated container service 2002 was $237 million. crossing on peak days. facilities, and a spare parts business which were A number of initiatives were taken in 2002 to also profitable. The unprofitable Houston depot improve Silja’s earnings, including the launch of a was closed in 2002 and will be sold in due course. pure cruise ship operation with the m.v. Silja One of the company’s two containerships was Opera (pictured on the cover); the introduction of sold in 2002 and the other is currently on charter. a larger freight ship, m.v. Sky Wind, on the The company’s strategy for the container - route; commencement of a leasing business is to continue to have GE SeaCo primarily freight service on the Helsinki- invest in new equipment, to increase both route with m.v. Star Wind; and the development utilization and lease rates for “pool” containers, to of a winter-only cruise ferry service using m.v. expand significantly GE SeaCo’s specialized Europa on the Turku-Kapellskär route. These new container fleet of tanks, swap bodies, refrigerated operations are being tuned to achieve optimum and proprietary “SeaCell” containers, to build its profitability and we expect considerable profit domestic leasing programs in countries like improvement from them in 2003 and later years.

8 SEA CONTAINERS LTD. The company will double its fast ferry service on Belfast-Troon we suffered from discount airline the Helsinki-Tallinn route in 2003 and include St competition. The airlines gave free flights between Petersburg in its cruising program. Belfast and Glasgow and Edinburgh. The air Our English Channel fast ferry operations carriers have now merged, fares have been set at were not profitable in 2002 due to losses on the sensible levels and traffic volumes on our ferry Dover-Ostend route, which has now been closed. have increased. We will not operate the Heysham H.M. Customs & Excise, under the pretext of route in 2003. reducing smuggling, deliberately tried to Our joint venture Ancona, Italy-Split, Croatia discourage passengers from travelling on our service operated profitably with a larger ship in 2002 English Channel ships. We sued them over their and the outlook in 2003 is for an improved result. illegal practices and won both in the lower court Our SeaStreak fast ferry services in New York Above: A specialized nuclear and upon appeal. Customs have now radically harbor benefited from the two large new ferries waste container, designed and built by Yorkshire Marine altered their practices and traffic volumes are introduced in 2001 and 2002. A new service from Containers Ltd., for use in the expected to rise. We have been given leave by the Wall Street to South Amboy, New Jersey was power generation industry. The court to collect damages from Customs. Our claim successfully introduced in 2002. Two additional company offers research and will be substantial. new large fast ferries are currently under design services to meet specific Our Isle of Man and Liverpool-Dublin services construction for the SeaStreak operation. The first customer needs. Recent orders include containers to transport conducted by the Isle of Man Steam Packet will be introduced in September, 2003, and the compacted garbage; and a Company were solidly profitable in 2002, however, second at the end of the year. contract to supply 600 side as noted above, we are selling this business. Our door containers to the U.K. Belfast-Heysham and Belfast-Troon services Rail Services armed forces for storage of were unprofitable in 2002, in the case of Heysham The Great North Eastern Railway (GNER) had a equipment and ammunition. due to a fire on the vessel (there were no injuries better year in 2002, earning $68.9 million at the to passengers or crew) and in the case of EBIT level on revenue of $696 million; however,

9 Below: One of nine new junior traffic volumes were still depressed by the currently refurbishing most of its train sets and is suites recently added at the consequences of the Hatfield rail disaster in late lengthening its nine diesel locomotive-hauled sets Villa San Michele, Florence, a 2000. The infrastructure provider, Railtrack, was by one car. New train sets have very long delivery 15th-century former monastery owned by Orient-Express Hotels. put into Britain’s form of Chapter XI bankruptcy lead times and GNER believes they will be needed All suites have been sensitively (Administration) and has now emerged as Network to accommodate future travel demand, however, landscaped within the hotel’s Rail. The Strategic Rail Authority, the U.K. they cannot be ordered until a new franchise is classic gardens, in keeping with government’s administrator of the railways, was granted. Station improvements will also be needed the historic atmosphere. completely reorganized as well. These and the longer the franchise the easier it will be to reorganizations will hopefully lead to a more amortize such investment. stable rail industry. It has so far proven GNER will be seeking not only a franchise impossible for GNER to settle its claims against renewal but expansion of its rail business. A joint Network Rail, although GNER has withheld the bid to acquire another train operating company in amounts from its track access charges. GNER has the U.K. failed in 2002, but other opportunities obtained arbitration decisions in its favor and has are expected to arise. also won on appeal, so it is hoped that settlement will be shortly achieved. Property, Plantations and Publishing GNER’s current franchise expires in April Although these businesses are small in comparison 2005, and it will seek a new franchise for as long with container leasing, ferries and rail, they make a period as the Strategic Rail Authority will as a group an excellent return on investment. Most allow—expected to be seven years. GNER is of our port interests in the U.K. are in the process of being sold, which will leave us with the Corinth Canal in Greece, which was not only profitable in 2002 but which also has considerable property development potential. Our table-grape plantation in Brazil yielded an encouraging first profit on our investment in 2002, while our banana plantation in the Ivory Coast only achieved breakeven. The Brazilian plantation’s output of seedless grapes is rapidly expanding and it is in high demand at premium prices. Civil strife in the Ivory Coast caused some loss of crops in 2002. Our publishing business provides print, library, video, conference and some public relations services to us and our Orient-Express Hotels affiliate as well as to numerous outside clients. Major cost reductions were achieved in 2002, which reduced our group overhead expense. The company’s business travel subsidiary, Fairways & Swinford, had a profitable year in a difficult market.

10 SEA CONTAINERS LTD. Orient-Express Hotels Ltd. Sea Containers’ banking agreements. Above: A view of the Inn at During 2002, this company, previously a subsidiary, Sea Containers now owns 14.4 million Class A Perry Cabin on the Miles River, in Maryland, owned by Orient- became independent of Sea Containers when heavy and B shares in Orient-Express Hotels and intends Express Hotels. The hotel has vote Class B shares held by Sea Containers were to exit this investment when market prices completed a $17 million transferred to a subsidiary of Orient-Express Hotels improve. Orient-Express Hotels is a sound program of improvements, in accordance with a contract entered into at the company with excellent earnings growth potential. including the addition of a time of Orient-Express Hotels’ initial public All hospitality stocks have taken a beating because conference center, a horizon- edge swimming pool and offering in August, 2000. Sea Containers also sold of September 11th, Iraq, SARS and reduced 40 new guest rooms and suites, 4.9 million Class A shares of Orient-Express Hotels business travel, but we believe these events are as well as a new gourmet into the market at an average price of $14 per share transitory and investors will move share prices restaurant. The new structures during 2002, thus reducing its shareholding up before long. were carefully designed to harmonize with the original to 47% of the equity. This permitted the In 2002, Orient-Express Hotels had net 1816 building. deconsolidation of Orient-Express Hotels from earnings of $25.3 million ($0.82 per common Sea Containers, improving covenant tests in share) compared with net earnings of $29.9 million

11 Below: Automotive assembled into C- class SeaCell attractive to the components being unloaded Mercedes cars for right-hand automotive industry. Others from SeaCells at Daimler- drive markets. The 40ft who have requested their Chrysler’s factory in East SeaCells pictured can carry logistics providers to use London, South Africa. The car 60 standard euro pallets SeaCells include General manufacturer uses SeaCells compared with 50 in a Motors, Toyota and Ford. to transport parts from standard container. This Europe, which are then capacity advantage makes

12 SEA CONTAINERS LTD. ($0.97 per common share) in 2001. It made three excellent acquisitions in 2002 and has agreed together with a Spanish investor to acquire the famous Ritz Hotel in Madrid, a transaction that should be completed by the time you receive this report. Orient-Express Hotels has not yet given Above: A finished Mercedes car “earnings guidance” for 2003, but the travel being loaded into a SeaCell at East London. The return leg of Outlook market is expected to bounce back after the Iraqi the journey takes vehicles back Assuming the asset sales described above war is over and the SARS epidemic has passed. to Daimler-Chrysler in the U.K. (excluding further sales of Orient-Express Hotels for final inspection and common shares) are concluded as planned, Sea Management and Staff distribution. More than 1,800 Containers should have a very profitable 2003. Sea Containers had a dedicated staff of 9,700 at SeaCells are currently leased on Daimler-Chrysler’s behalf by Asset sale prices should greatly exceed book the end of 2002, all of whom contributed in their ocean carriers. values. Of course, earnings from these assets will own way to the improved profits. Recognition be lost for the second half of the year, but since should also be given to the additional staff of net sales proceeds will be applied to debt 5,300 in GE SeaCo and Orient-Express Hotels. reduction, the interest savings should largely In the senior management, Robert S. Ward offset those lost profits. retired at the end of 2002 as Senior Vice Profits from container leasing should be higher President, Container Leasing, after 34 years quarter by quarter in 2003. New containers service and his responsibilities were assumed delivered throughout 2002 will generate earnings by Angus R. Frew, 44, a chartered accountant for the entire year 2003, utilization and rates of who came to us from the Seagrams Wine and “pool” containers should rise, and storage and Spirits Group. repair costs should decline. There has been a great deal of press Although Silja will report a poor first quarter speculation about my continued role as President due to consolidation of 100% of winter losses and Chief Executive when I turn 70 later this year. compared with 50% in 2002, plus exceptionally My and the board’s wish is to divide the roles of high fuel costs prior to the Iraq war, it should Chairman and Chief Executive, with my assuming perform well for the year as a whole. Fast ferry the Chairmanship on or before the 2004 annual operations in Northern Ireland and the English meeting of shareholders. Daniel J. O’Sullivan, the Channel should show improved results since two Chief Financial Officer, has agreed to defer his loss-making routes in 2002 have been eliminated. retirement so the appointment of the new Chief Adriatic and New York City ferry services should Executive and new Chief Financial Officer can go show improved results over 2002. hand in hand. Rail operations are expected to be satisfactory in 2003, helped by significant staff cost reductions Sincerely, early in 2003 and hopefully improved performance by the infrastructure provider, Network Rail. Property, plantations and publishing, excluding port assets to be sold, are expected to generate James B. Sherwood increased profits over 2002. Founder, President and Chief Executive Officer

13 14 SEA CONTAINERS LTD. Analysis of division: Passenger and Freight Transport

Ferry Services – British Isles $8.6 million (2001 – $9 million). Cross Channel operations under our Hoverspeed Routes to and from the Isle of Man showed brand carried 1.83 million passengers in 2002 strong growth, with 634,000 passengers and (2001 – 2.25 million) and 467,000 vehicles (2001 173,000 cars, coaches and motorbikes being – 545,000). Smaller, less costly, SeaCats operated carried in 2002 (2001 – 556,000 passengers, our Dover/Calais services in 2002, whereas in 134,000 cars, coaches and motorbikes). Freight 2001 SuperSeaCats were employed. meterage increased once again from 420,000 in Service to Ostend ceased in September 2002. On 2001 to 458,000 in 2002. In 2001, carryings to Dover/Calais, average yields for foot passengers and from the Isle of Man were adversely affected were 33% higher than 2001 and for vehicles 8%. by the cancellation of many events, including the On Newhaven/Dieppe, yields for vehicles increased TT motorbike races, due to the outbreak of foot- by 4%. Total revenue from Hoverspeed was and-mouth disease in England and Scotland. Total David G. Benson $104.8 million (2001 – $97.4 million.) revenue on the Isle of Man routes was $64.8 Senior Vice President, Passenger and Freight The Dover/Calais service will be operated once million (2001 – $55.3 million). Transport again in 2003 by two 74-meter SeaCats, Hoverspeed Great Britain, SeaCat Danmark, Ferry Services – USA Great North Eastern Railway and the 81-meter SeaCat Diamant. These craft Traffic growth continued at the SeaStreak commuter Silja Line will offer hourly departures in peak periods. ferry services between Monmouth and Middlesex The Isle of Man Steam Packet Company SuperSeaCat One will once again perform the Counties, New Jersey and Manhattan. 782,000 Hoverspeed Newhaven/Dieppe service. passengers were carried (2001 – 545,000). SeaStreak On the Irish Sea, 414,000 passengers and Revenue totalled $10.8 million (2001 – $8.9 Hart, Fenton & Co 99,000 vehicles were carried (2001 – 484,000 million). Two further high-speed passenger carrying passengers and 107,000 vehicles) between Belfast craft will be employed in the fleet in late 2003. and Troon, and Belfast and Heysham. Services to Left: Shoppers at the Hoverstore Heysham were affected by serious technical Silja Line in Calais, France. Since the problems with SeaCat Rapide and ceased in mid- The total market for passenger ferry services abolition of duty-free sales August. The routes also faced intense competition between Finland and , and Finland and within the EU, Hoverspeed has from two cheap airlines on the Northern Ireland to amounted to 16.3 million passengers refocused its retail strategy towards France, where excise Scotland routes, which has now lessened following (2001 – 16.1 million), an increase of 1%. tax rates are lower than in the their merger. Revenue from these routes, including U.K. The company won a retail sales, totalled $28.8 million (2001 – $21.2 Divisional revenue Divisional operating income historic court victory against HM million). $ millions $ millions Customs & Excise in 2002, scrapping artificial Customs The 81-meter SeaCat Rapide will operate the 1271.6 120.3 limits on the amount of alcohol Belfast/Troon service this year. The Belfast to and cigarettes that passengers Heysham route has been discontinued. 881.6 861.1 can bring into the U.K. from SuperSeaCat Three operated the seasonal 68.1 abroad for personal service between Liverpool, England, and Dublin, consumption. The Calais store 43.2 had sales in excess of $22.2 Ireland, and carried 156,000 passengers and million in 2002, while on-board 36,000 cars (2001 – 162,000 passengers and sales on the Dover-Calais route 35,000 vehicles). Revenue from this route totalled 2000 2001 2002 2000 2001 2002 topped $17.6 million.

15 Above: A Eurostar train in Silja Line operates the routes Helsinki- Line carried a total of 111,309 units (2001 – GNER colors at Leeds station, Stockholm and Turku-Stockholm/Kapellskär via 108,262 million). The company had a 37% market England. This is one of three sets Åland, and Helsinki-Tallinn and, in summer, share (2001 – 38%) in the cargo service between leased by GNER in 2002 to increase frequency on the Helsinki-Rostock via Tallinn. Silja Opera makes Finland and Sweden, and an 11% share (2001 – London to Leeds line. cruises on the , the main destinations 10%) between Finland and Estonia. Of Silja Line’s Improvements are underway to being Visby, Riga and Tallinn. total cargo volume, some 50% was carried on the GNER’s electric fleet. More than Silja Line carried a total of 5 million car decks of the passenger ferries. SeaWind Line, 300 coaches are having their passengers (2001 – 4.8 million) during the year. employing three combined car/train ferries, interiors redesigned and rebuilt as part of an overall $160 The increase is mainly attributable to the carried the remainder. The Turku–Stockholm line million investment by the rolling- introduction of Silja Opera, which started her was served all year by the Sea Wind and until stock owners. service in June. Silja Line had a total market share October by the Star Wind, which was then of 31% (2001 – 30%). replaced by the Sky Wind when the Star Wind The market for freight vehicles between was transferred to a new service on the Finland and Sweden grew by 2%, whereas the Helsinki–Tallinn route. market between Finland and Tallinn grew by 10%. At year-end 2002, the group had a total of 11 The quantities carried by Silja Line, including ships. Silja Line had five passenger-car ferries, its SeaWind Line subsidiary, remained at the 2001 Silja Serenade, Silja Symphony, Silja Europa, level on the routes between Finland and Sweden, Silja Festival and Finnjet. SeaWind Line but increased by 27% on the Tallinn route. Silja operated three roro ships with railway capacity:

16 SEA CONTAINERS LTD. Below: Croazia Jet in Ancona, Great North Eastern Railway Italy, awaiting departure for Split, the largest city on Croatia’s For GNER, 2002 was a year of consolidation Dalmatian coast. This larger following the problems of the Hatfield derailment vessel was introduced on the and the resulting speed restrictions on the railway. joint-venture route in 2002 to However, the overall reliability of our route cope with increased traffic between London and Edinburgh took longer to generated by Croatia’s recovering tourist industry. The recover than we had expected. In May 2002, as seasonal service (June- part of the extended franchise arrangements, September) carried nearly GNER leased an extra train set and started 59,000 passengers and 13,250 operating 124 services a day (one less than pre- vehicles in the year, an increase of 52% over 2001. Hatfield). This increase in service enabled a near half-hourly operation to be introduced between London and Leeds, which is GNER’s most important single revenue flow. GNER carried 14.6 million passengers in the year and passenger revenues were $543 million, both of which were the highest since the start of

Sea Wind, Star Wind and Sky Wind. In addition to these, SuperSeaCat Four was employed in Silja Line’s service and SuperSeaCat Three will join her on the Helsinki/Tallinn route in spring 2003. It is anticipated the day-trip market on this route will grow when Estonia joins the EU in April 2004. SuperStar Taurus (ex Leeward) was returned from charter in January 2002. The vessel was refurbished for Silja Line’s traffic and she is now employed in cruise service in the Baltic under the name Silja Opera. At the turn of the year, the group also owned one cruise ship, the Walrus, which is chartered out until December 2004 for cruises in Hong Kong waters. Six ships fly the Swedish flag and three the Finnish flag. SuperSeaCats Three and Four fly the Italian flag. The chartered-out cruise ship, Walrus, is registered in Panama.

17 Right: A train boarding Sky Wind in Turku, Finland. Carrying freight and passengers, SeaWind Line offers more than 1.1 lane kilometers of rail wagon capacity on Sky Wind and her sister ship Sea Wind. Rail freight is favored in Scandinavia for environmental reasons.

Opposite page: Silja Europa the franchise. However, overall passenger volumes which, although only a third complete, has seen an at Kapellskär, Sweden. This are not growing within the U.K. because of the improvement of 35% in unplanned shutdowns. vessel operates between Turku- consequences of the Hatfield accident, which GNER has the best figures for reliability of its Stockholm during the summer means that punctuality continues to be poor. rolling stock for U.K. long-distance operators. months and Turku-Kapellskär during the winter. The switch GNER’s financial performance has been as good During the year, GNER continued to work to saves fuel costs, while offering a as any of the long-distance operators in spite of improve its customer service and to train its staff. more convenient winter cruise being most affected by competition from low-cost It became the first train operator in the U.K. to timetable for passengers. Silja airlines, particularly out of Edinburgh. receive the Investors in People Award as well as Europa is the largest ship in the Following the award of the franchise extension establishing partnership agreements with trade fleet with 1,152 cabins and 3,123 cabin berths, as well as until April 2005, design work has been taking unions, again a first, along with receiving the significant car and freight place for the rebuilding of the cars of the electric highest rating of safety awareness of any train capacity. All departures call at trains and for investment in station improvements. company in Britain. the Åland Islands, enabling the At the same time, a number of car parks are being sale of duty-free goods. enlarged. GNER’s locomotive performance improved considerably during the year, with the average distance run by our electric locomotives between unplanned shutdowns improving by 60% as their rebuild program comes to a close. The program to rebuild GNER’s diesel fleet started, David G. Benson Senior Vice President

18 SEA CONTAINERS LTD. 19 Below: A GE SeaCo tank of specialized tank containers, container being loaded with offering more than 200 vodka at a distillery in the models, with many specifically Baltic states. The tank is one of designed for food-grade several leased to a local cargoes, and others that can shipping line for transportation be insulated depending on to bottling plants. GE SeaCo the temperature requirements is a leading global supplier of the cargo.

20 SEA CONTAINERS LTD. Analysis of division: Containers

Container Leasing have allowed us to increase per diem rates The start of the year saw the end of one of the being charged for containers going out on hire. deepest down-cycles experienced. The container With new container prices again on the industry was faced with huge stocks of dry increase in 2003 owing to rising steel prices, freight containers lying idle in depots around and demand once again very strong after the world, tumbling lease rates, and the Chinese New Year, we are optimistic that we will container factories in China at a standstill. see further increases in both per diem rates and Confidence in the U.S.A. having been dented utilization of our fleet. in the aftermath of September 11th, retailers Our refrigerated container business remained ran their inventories down to very low levels. very healthy in 2002, and the outlook seems However, with American consumer spending encouraging for 2003, with industry analysts quickly recovering through the fall of 2001, predicting a 6% growth in refrigerated cargoes. Angus R. Frew retailers started placing orders in the spring of We were honored to receive from Carrier Vice President, Containers and President, GE SeaCo SRL 2002 to replenish and increase inventory levels, Corporation, our sole supplier of refrigeration while looking ahead to potential supply chain units, a special centennial refrigeration unit to GE SeaCo disruption resulting from the anticipated West mark the 100th anniversary of Walter Carrier’s Container manufacturing Coast longshoremen’s strike in June. invention of modern refrigeration and air- Container depots As a result, the end of Chinese New Year conditioning technology. This was presented to Container ships 2002 heralded strong demand for dry freight Sea Containers and GE SeaCo in recognition of containers in China and the Far East. Shipping our being their longest-standing customer of lines and leasing companies alike were taken by container refrigeration equipment. surprise at the speed of recovery, and were left A targeted marketing campaign for our Divisional revenue scrambling for shipping slots to move idle patented SeaCell container—a type that is used $ millions containers to the Far East, and competing for as a conventional dry cargo container but with 155. 7 depot repair time to prepare containers for use. increased cubic and pallet capacity—has been 133.7 123.0 From March 2002 onwards, we have successful in driving further penetration into consistently seen lease-outs of containers many niche trade routes. We continue to exceed returns, with utilization of the GE SeaCo negotiate with a number of the largest global operating fleet of dry freight containers carriers who are considering introducing climbing in excess of 10 percentage points over SeaCells in their major trade lanes, representing 2000 2001 2002 the last year. Although for the year 2002 orders of many thousands of units. operating income was down, this conceals GE SeaCo invested a record $160 million in Divisional operating income strong quarter by quarter improvements in the new equipment in 2002. With strong demand second half of the year. for all equipment continuing, we expect $ millions Prices of new containers from the Chinese purchases in 2003 to be at a similar level. To factories rose 12% at the end of the first quarter help fund this expansion, we successfully 48.1 of 2002, from their all-time low, and these concluded a $300 million securitization of 30.6 prices have subsequently remained steady over existing GE SeaCo equipment in November 2002. 23.5 the last year. Higher container prices, allied GE SeaCo significantly increased its 2000 2001 2002 with strong demand from the shipping lines, program for sale of older containers in surplus

21 Below: Staff at GE SeaCo’s centers, in Singapore, Miami company’s new global Operations Center in and Antwerp, have approach to customer Singapore. This is one of streamlined GE SeaCo’s relationship management. three global hubs set up to customer service and provide a one-stop shop for administration activities, container service enquiries, saving costs and improving previously handled through response times for customers. local offices and agents. The This is in line with the

congratulated for having greatly improved results in 2002, but also for having put the processes and procedures in place to ensure continued improvements in quality and productivity in the future. Charleston Marine manufactures a range of containers and accessories for military and peace- keeping uses and has a number of large and profitable ongoing contracts with the U.S. armed forces. The factory is also receiving many quick- response orders from the military, driven by the massive deployment of U.S. ground forces in the Middle East. Yorkshire Marine Containers Ltd is the Sea Containers manufacturing facility in the U.K. Production was streamlined in 2001 from three sites to two, and the redundant site was sold. The factory was very busy throughout 2002 producing swapbodies for GE SeaCo and specialized waste containers for other customers. Earnings in 2002 were substantially ahead of 2001. Yorkshire Marine’s outlook for 2003 is very encouraging as it already has a substantial order book requiring the investment in a fifth production line. These orders include swapbodies and other specialized containers for GE SeaCo, design and development of waste containers for third parties, and an order for containers for the British Army related to the build up of forces in the Middle East. Paulista Containers Maritimos Ltda., our container depot and manufacturing operation in locations, with 73,000 leaving the fleet in 2002, Santos, Brazil, commissioned a new tank-cleaning and over 40,000 expected to be sold in 2003. facility in spring 2002, which is operating very well and is already profitable. It started Factories and Depot Operations manufacturing specialized containers again in the Charleston Marine Containers Inc. is the Sea third quarter of 2002, with orders for GE SeaCo Containers factory located in the old U.S. Navy and also for the offshore oil exploration and Yard in Charleston, South Carolina. The new telecoms industries. Paulista Containers is the only management team put in place in 2001 is to be marine container manufacturer in South America,

22 SEA CONTAINERS LTD. and with export demand being driven by the Outlook for 2003 Above: Quadcon containers depreciation of the Brazilian real and the With world container trade forecast to grow by made to order for the U.S. military by Charleston Marine Argentine peso, we are receiving enquiries for over 8% in 2003, and container ships continuing Containers Inc. Charleston production of standard marine containers. to sail full out of the Far East, the outlook for the Marine builds a wide range of Our depot operations in Santos, Brazil, container leasing industry in 2003 seems highly specialized units Charleston, U.S.A. and Singapore all continued to promising. designed to provide flexible perform well in 2002 but can expect reduced We expect continued high utilization of our mobile storage solutions for the Army and Marine Corps, profits in 2003 as a result of lower storage and existing container fleet, strong demand for new holding everything from small repair revenues owing to the higher utilization of equipment, and improving per diem rates for ammunition to motor parts. The the global container fleet. Our unprofitable equipment going out on hire. Higher revenues company has delivered more Houston depot was closed in 2002 and is being from our container fleet, allied with good profits than 20,000 Quadcons and Tricons, many of which are offered for sale. from our manufacturing operations, are expected deployed to the Persian Gulf to deliver increased year-on-year divisional in support of U.S. forces Other Activities revenue and operating income for the first time fighting in Iraq. During the year, the container ship Boxer since 1998. Captain Cook was sold and the last remaining container ship, the Puerto Cortes, is currently on charter. Angus R. Frew Vice President

23 Analysis of division: Property, Publishing and Plantations

This wide-ranging division comprises property freight, although our principal long-term intention investment, development and management, U.K. is to develop the land area available for housing ports, the Corinth Canal, publishing, investor and and leisure activities. In the U.S.A., we continue corporate public relations, and a corporate travel the sale of our surplus land at Houston, Texas, agency, as well as providing a corporate human where we now have 46 acres available for sale, all resources service to the group as a whole. The with appropriate infrastructure installed. division also manages our banana plantation in the Work continues on our development site on Ivory Coast and our grape plantation in Brazil. the Isle of Man, where we have planning consent 2002 was a watershed year for U.K. for 190,000sq. ft. net of offices. We are looking to commercial and residential property. An secure a significant pre-let before commencing appreciable slowdown followed the atrocities of construction. As with all property markets in James A. Beveridge September 11th, but then a gradual bounce back Europe, the Isle of Man is currently experiencing a Vice President, Administration occurred. However, by mid-2002 the property slowdown of office space absorption. and Property, Publishing and market could not withstand the twin pressures of The management of Sea Containers House in Plantations slower world economic growth and significantly London continues on behalf of the owners and Plantations declining worldwide stock markets. Commercial the management contract extends until 2011. Property development rents have declined by up to 15% in certain major Sea Containers subsidiaries occupy approximately Publishing business centers, while more expensive housing 20% of the building. Corporate relations has come under severe pressure, especially in The Corinth Canal in Greece is producing Fairways & Swinford Travel London. These recent difficulties would, however, satisfactory returns to the group. The number of Below: The Illustrated London have been significantly worse if interest rates were transits has increased over 2001 and reflects the News Group publishes a portfolio of high-quality not at their historic lows. active management and marketing of the canal’s magazines for Sea Containers Our Tortington Manor development, near facilities. The canal now operates 24 hours a day subsidiaries and third party clients, Arundel in West Sussex, has been affected by these and hence attracts a larger customer base. We are ranging from property developers pressures, and sales were slower than forecast with planning to develop the associated land for leisure to Chelsea Football Club. In 10 units remaining. However, all of the lower- activities and are working with the relevant 2003, the Group is due to launch a new business travel magazine priced houses built at Newhaven were sold before authorities to get the land rezoned in order for us for the British Tourist Authority. The completion of building and all contracts were to proceed. As we await these zoning changes, we Group also operates a full service completed during 2002. We are currently looking are developing an appropriate masterplan with design, marketing and new at developing up to a further 100 housing units architectural features. We have recently acquired a media agency under the name around our marina at Newhaven. wooden schooner boat for the canal, which we i-Communications. Our remaining interests in the port of intend to use for tourist transits starting this Newhaven are now limited to a 300- Easter. The canal is of significant historical berth marina, small amounts of land interest and this is highlighted in our plans. with housing potential and a mixed 2002 was a difficult year for our 750-acre industrial/warehousing zone of banana plantation in the Ivory Coast. The banana approximately 35 acres. A solid income market was weak for large parts of the year and is received from our remaining we struggled to break even. Overall sentiment in investments. Our port at Folkestone the Ivory Coast is negative due to unrest following continues to handle small amounts of an attempted coup in September. There was

24 SEA CONTAINERS LTD. significant fighting between government troops and rebels in the northern part of the country, but so far the effects have not been too adverse on the banana-growing area in the southern part of the country, and the fruit-exporting port of Abidjan. We had a good year on our table grape plantation in north-east Brazil. The volume of seedless grape output is increasing with each harvest, and there is a receptive market in the U.K. The seedless grape variety is Princess, which is well suited to the climate of the area and readily accepted by U.K. supermarkets. We continue to sell our seeded grapes in continental Europe. We have just acquired an additional 350 acres of land which abuts the grape plantation. We will prepare the land and plant an additional 200 acres of Princess seedless. It takes approximately three years from planting for the vines to reach fruition. Our publishing unit, The Illustrated London savings in outcosts and an enhanced online Above: An aerial view of the News Group, publishes 18 magazines and presence. Braziluvas grape plantation in north-eastern Brazil. In late produces a variety of marketing material for Sea Fairways & Swinford, our Corporate travel 2002, the plantation yielded its Containers, Orient-Express Hotels and external management company, increased both sales and first major crop of seedless clients. The company’s performance was relatively profit levels during the year. This result was a grapes, producing more than robust in 2002, especially given that the particularly good performance, bearing in mind 170 tons for the European advertising market has gone through one of the downward trends in business travel, following market. Braziluvas grows Princess grapes, which yield two worst downturns for decades. Where some September 11th and concerns over the Iraq war. crops a year. The plantation subsidiaries of Sea Containers have reduced their Fairways & Swinford also went online in 2002, also produces in excess of publishing activity, this has been replaced with allowing clients to make airline, hotel and car hire 1,500 tons of seeded grapes new business from third parties, with clients such bookings via the internet. annually for the continental European markets. as the British Tourist Authority, Eversheds (the European law firm) and Hebridean Cruises. Other projects in 2002 included a commemorative book on the Queen Mother, published in the U.K., U.S.A. and Canada with Pan Macmillan, drawing on our James A. Beveridge Vice President rich picture archive. In 2002, we established an in-house New Media Team to develop Sea Containers’ online communication and service the web-related needs of the group and external clients. This team created 16 brand-new web sites and relaunched eight, bringing considerable

25 Analysis of division: Finance

The 2002 results showed a significant improvement ($1 million and OEH $57.9 million). In addition to over 2001 and EBITDA of $288.2 million for 2002 the cash on the balance sheet at December 31, compared with $248.3 million for 2001 an 2002 of $218 million there were undrawn bank improvement of $39.9 million. Excluding OEH the facilities of $39.2 million, giving cash availability EBITDA was $232.6 million which was $53.4 of $257.2 million. million above the 2001 figure of $179.2 million, The company acquired the 50% of Silja it did not which included a gain on the sale of two ports of own during the year at a cost of $74 million, of which $20 million. $38 million was paid in the company’s Class A Orient-Express Hotels Ltd (OEH) was shares based on a share price of $15.34 per share. consolidated for first nine months of 2002 as the The company has $159 million of senior public company only reduced its ownership below 50% in notes coming due on July 1, 2003 and has decided Daniel J. O’Sullivan the fourth quarter and it owned 47% at December to sell assets which are expected to generate Senior Vice President, Finance 31, 2002. Therefore, the OEH results for the nine approximately $160 million of cash after repaying and Chief Financial Officer months are included in both our statement of existing debt on the assets. Subordinated public

Corporate finance consolidated operations and our statement of debt in the sum of $99 million also comes due on Information services consolidated cash flows for the year 2002. Our December 1, 2004, and an exchange offer has Insurance 2002 cash flow statement shows the cash generated been filed to allow holders of these debentures to Pensions by OEH for the nine months to September 30 as an convert into senior debt at the same coupon outflow of cash in the financing activities section of maturing in December 2009. Additionally, an the report, which amounts to $56.4 million. Sea exchange offer for the 2003 notes has also been filed Containers’ cash flow from operations amounted to to convert them into 13% debt maturing in July $162.2 million ($193.7 million less OEH $31.5 2006. We are also working on a $158 million standby million), which, together with the proceeds from facility led by Citigroup to be used to pay the 2003 the sale of assets of $77.5 million (including notes if the asset sales are delayed. These measures, proceeds from the sale of OEH shares of $68.7 together with existing cash availability, are expected million) and funds from the issuance of long-term to enable the 2003 and 2004 notes to be repaid. debt of $116 million ($202.2 million less OEH Our 50%-owned container company GESeaCo $86.2 million), gave total cash flow of $355.7 purchased $160 million of new containers in 2002 million; $102.5 million ($209.2 million less OEH and raised $350 million of new container finance, $106.7 million) was invested in capital additions, including a $300 million 10-year securitized $138.7 million ($163.3 million less OEH $24.6 facility through Wachovia Corporation, of which million) was repaid on long-term debt, $53.2 $167 million was used to repay an existing bank million ($41.8 million and OEH $11.4 million) was facility. GESeaCo has containers with a book value repaid on working capital facilities and redrawable of $494 million at December 31, 2002 and debt of loans, $5.4 million paid in dividends on common $368 million which is not guaranteed by the and preferred shares and $9.7 million paid to parent companies. retire public debt, leaving a surplus after Under the terms of the company’s loan adjustment for foreign exchange and other items facilities, the most restrictive covenants are the (surplus of $12.7 million ($13.4 million less OEH leverage and interest coverage tests. At December $0.7 million)) for the year of $58.9 million 31, 2002, we had the ability to borrow under these

26 SEA CONTAINERS LTD. Left: A view of Sea Containers House and the South Bank of the Thames, looking towards the London Eye. This area of London has been transformed by the addition of the Eye and the Tate Modern gallery and is now one of the city’s most sought-after locations. Sea Containers Services Ltd. retains the management of the building (floor area 417,000sq. ft. approx.) until 2011and receives substantial fee income from the owners.

covenants a further $500 million. It is anticipated mainly taxable in the U.K. and Finland—both that planned capital expenditure of about $40 high-tax jurisdictions. Available tax shelter, which million in 2003 will be covered by a combination has kept taxes to a minimum, is diminishing so that of bank debt, cash flow and existing liquidity. the tax charge is likely to increase in future years. At December 31, 2002 the company had total Our Information Services department is debt of almost $1.8 billion (cash availability was currently upgrading our container computer $257 million) of which $521 million relates to systems to keep them at the forefront of the public debt, leaving nearly $1.3 billion of bank container leasing industry. debt of which $650 million is in euros with the Our UK pension plans are in deficit for the balance primarily in dollars. first time due to the downturn in equity markets The company was in compliance with the worldwide and an amount of $34.7 million, covenants in its major bank agreements and bond calculated under SFAS87, has been charged to indentures at December 31, 2002, and believes it other comprehensive income at December 31, 2002. will continue to be in 2003. The company’s tax charge in 2002, excluding OEH, was $2.7 million and largely relates to our passenger transport division profits, which are Daniel J. O’Sullivan Senior Vice President

27 This report contains, in addition to historical information, forward-looking statements that involve risks and uncertainties. These include statements regarding earnings growth, investment plans and similar matters that are not historical facts. These statements are based on management’s current expectations and are subject to a number of uncertainties and risks that could cause actual results to differ materially from those described in the forward- looking statements. Factors that may cause a difference include, but are not limited to, those mentioned in the report, unknown effects of the Iraqi war or terrorist activity and any military or police response on the transport, leasing and leisure markets in which the company operates, varying customer demand and competitive considerations, inability to sustain price increases or to reduce costs, fluctuations in interest rates, currency values and public securities prices, variable fuel prices, variable container prices and lease and utilization rates, potentially unstable relations with labor unions, uncertainty of negotiating and completing proposed purchase, sale or capital expenditure transactions, inadequate sources of capital and unacceptability of finance terms, uncertainty of acceptance of proposed public debt exchange offers, global, regional and industry economic conditions, shifting patterns and levels of world trade and tourism, realization of bookings and reservations as actual revenue, seasonality and adverse weather conditions, changes in ferry service and ship deployment plans, inability of Network Rail to restore, improve and maintain the U.K. rail infrastructure and uncertainty of claims against Network Rail and insurers, and legislative, regulatory and political developments including the uncertainty of extending the GNER rail franchise beyond 2005. Further information regarding these and other factors is included in the filings by the company and Orient-Express Hotels Ltd. with the U.S. Securities and Exchange Commission.

28 SEA CONTAINERS LTD. Financial Review

Contents

Report of independent auditors 30 Consolidated balance sheets 31 Statements of consolidated operations 32 Statements of consolidated cash flows 33 Statements of consolidated shareholders’ equity 34 Notes to consolidated financial statements 35 Five year performance (unaudited) 53 Price range of common shares and dividends (unaudited) 53 Summary of quarterly earnings (unaudited) 54 Shareholder and investor information 56

29 Report of Independent Auditors In our opinion, such consolidated financial statements present fairly, in March 6, 2003 all material respects, the financial position of Sea Containers Ltd. and subsidiaries as of December 31, 2002 and 2001, and the results of Board of Directors and Shareholders their operations and their cash flows for each of the three years in the Sea Containers Ltd. period ended December 31, 2002 in conformity with accounting Hamilton, Bermuda principles generally accepted in the United States of America.

We have audited the accompanying consolidated balance sheets of As disclosed in Note 1 to the consolidated financial statements, Sea Containers Ltd. and subsidiaries (the “Company”) as of effective January 1, 2002, the Company adopted the provisions of December 31, 2002 and 2001, and the related consolidated Statement of Financial Accounting Standards (“SFAS”) No. 142, statements of operations, shareholders’ equity, and cash flows for “Goodwill and Other Intangible Assets”, and SFAS No. 145, each of the three years in the period ended December 31, 2002. “Rescission of FASB Statements No. 4, 44 and 64, Amendment of These consolidated financial statements are the responsibility of the FASB Statement No. 13, and Technical Corrections”, and effective Company’s management. Our responsibility is to express an opinion January 1, 2001, the Company adopted SFAS No. 133, “Accounting on these consolidated financial statements based on our audits. for Derivative Instruments and Hedging Activities”, as amended by SFAS No. 137 and No. 138. 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 Deloitte & Touche LLP consolidated financial statements. An audit also includes assessing Two World Financial Center the accounting principles used and significant estimates made by New York, New York 10281-1414 management, as well as evaluating the overall financial statement Tel: (212) 436-2000 presentation. We believe that our audits provide a reasonable basis Fax: (212) 436-5000 for our opinion. www.deloitte.com

30 SEA CONTAINERS LTD. & SUBSIDIARIES Consolidated Balance Sheets

December 31, 2002 2001 $000 $000 Assets Cash and cash equivalents 218,022 216,936 Accounts receivable, net of allowances of $9,365 and $8,037 187,896 206,019 Asset sale receivables 35,844 27,455 Advances on asset purchase contracts 5,242 9,453 Containers at cost, less accumulated depreciation of $512,724 and $523,120 551,712 599,639 Ships at cost, less accumulated depreciation of $140,897 and $137,108 1,105,143 351,015 Assets under capital leases, less accumulated depreciation of $14,748 and $11,245 15, 574 25,078 Real estate and other fixed assets at cost, less accumulated depreciation of $92,619 and $174,892 179,377 743,689 Inventories 46,061 54,277 Investments 288,570 273,681 Goodwill 31,867 33,679 Other intangible assets 90,591 95,242 Other assets 40,935 16,283 2,796,834 2,652,446 Liabilities and Shareholders’ Equity Working capital facilities 1,651 26,119 Accounts payable 143,454 81,387 Accrued liabilities 268,063 196,891 Manufacturer accounts payable, notes payable, bank loans and other purchase obligations in respect of containers 407,358 463,797 Mortgage loans in respect of ships 579,849 207,743 Obligations under capital leases 11, 76 3 26,685 Bank loans in respect of real estate and other fixed assets 264,036 433,575 Senior notes 422,783 423,294 Senior subordinated debentures 98,485 118,709 Deferred revenue and taxes 11,025 27,570 2,208,467 2,005,770 Minority interest 1, 535 153,771

Redeemable preferred shares: Preferred shares $.01 par value (15,000,000 shares authorized): Issued and outstanding: 150,000 $7.25 convertible cumulative preferred shares (liquidation value of $100 per share) 15,000 15,000 Shareholders’ equity: Class A common shares $.01 par value (60,000,000 shares authorized): Issued – 19,500,115 shares (2001 - 16,936,879) 195 169 Class B common shares $.01 par value (60,000,000 shares authorized): Issued – 14,419,614 shares (2001 - 14,496,514) 144 145 Paid-in capital 389,693 351,637 Retained earnings 761,364 723,762 Accumulated other comprehensive loss (188,303) (206,547) Less: reduction due to class B common shares acquired with voting rights by a subsidiary - 12,900,000 shares at cost (391,261 ) (391,261 ) Total shareholders’ equity 571,832 477,905 Commitments and contingencies - - 2,796,834 2,652,446 See notes to consolidated financial statements.

31 Statements of Consolidated Operations

Year ended December 31, 2002 2001 2000 $000 $000 $000

Revenue 1,614,860 1,215,75 1,297,103 Other 22,365 54,054 63,634 1,637,225 1,269,813 1,360,737

Expenses: Depreciation and amortization 113 , 710 109,742 111,510 Operating 1,118,005 847,984 901,198 Selling, general and administrative 231,006 173,550 167,829 Total expenses 1,462, 721 1,131,276 1,180,537

Earnings from operations before net finance costs 174, 504 138,537 180,200

Interest expense, net (124,993) (123,814 ) (136,984) Interest and related income 10,323 7,933 15,930 Net finance costs (114,670) (115,881 ) (121,054)

Earnings before minority interest and income taxes 59,834 22,656 59,146

Minority interest (10,958) (11,052 ) (6,185)

Earnings before income taxes 48,876 11, 604 52,961

Provision for income taxes 5,860 5,970 7,000

Net earnings 43,016 5,634 45,961

Preferred share dividends 1,088 1,088 1,088

Net earnings on class A and class B common shares 41,928 4,546 44,873 $ $ $ Earnings per class A and class B common share: Basic 2.08 0.24 2.42

Diluted 2.07 0.24 2.42

Dividends per class A common share 0.225 0.30 0.975

Dividends per class B common share 0.204 0.272 0.878 See notes to consolidated financial statements.

32 SEA CONTAINERS LTD. & SUBSIDIARIES Statements of Consolidated Cash Flows

Year ended December 31, 2002 2001 2000 $000 $000 $000

Cash flows from operating activities: Net earnings on class A and class B common shares 41,928 4,546 44,873 Adjustment to reconcile net earnings to net cash provided by operating activities: Preferred share dividends 1,088 1,088 1,088 Depreciation and amortization 113 , 710 109,742 111,510 Undistributed (earnings)/losses of affiliates and other non-cash items (7,550) (27,409 ) (22,539) Losses/(gains) from sale of assets 139 (23,146 ) (38,991) Change in assets and liabilities net of effects from acquisition of subsidiaries: Decrease/(increase) in receivables 36,878 12,677 (7,122) Decrease/(increase) in inventories 487 (380 ) (5,558) Increase in accounts payable, accrued liabilities and other liabilities 7,052 28,182 5,701 Total adjustments 151,804 100,754 44,089

Net cash provided by operating activities 193, 732 105,300 88,962

Cash flows from investing activities: Capital expenditures (123,718) (90,612 ) (161,662 ) Acquisitions and investments, net of cash acquired (85,503) (40,799 ) (56,580) Proceeds from sale of fixed assets and other 8,834 76,249 27,574

Net cash used in investing activities (200,387) (55,162 ) (190,668)

Cash flows from financing activities: Issuance of common shares 127 47 4,534 Issuance of long-term debt 202,201 162,916 236,095 Issuance of OEH shares by OEH - - 85,527 Sale of OEH shares by SCL 68,650 1,518 112,986 Cash reduction from deconsolidation of OEH (56,355) - - Principal payments under long-term debt (163,345) (139,893 ) (147,726) Purchase and retirement of notes and debentures (9,700) (9,059 ) (159 ) Payment of preferred share dividends (1,088) (1,088 ) (1,088) Payment of common share dividends (4,326) (5,504 ) (17,874 ) Purchase and retirement of OEH shares - (1,407 ) - Working capital facilities and redrawable loans (repaid)/drawn (41,824) 34,092 (142,179 )

Net cash (used in)/provided by financing activities (5,660) 41,622 130,116

Effect of exchange rate changes on cash and cash equivalents 13,401 (2,657 ) (4,340)

Net increase in cash and cash equivalents 1,086 89,103 24,070

Cash and cash equivalents at beginning of year 216,936 127,833 103,763

Cash and cash equivalents at end of year 218,022 216,936 127,833

33 Statements of Consolidated Shareholders’ Equity

Class A Class B Accumulated Common Total Common Common Other Shares Held Comprehensive Shares at Shares at Paid-in Reatained Comprehensive by a Income ParValue ParValue Capital Earnings Loss Subsidiary (Loss)

$000 $000 $000 $000 $000 $000 $000 Balance, January 1, 2000 166 147 319,816 697,721 (156,108) (391,261 ) Issuance of class A common shares under dividend reinvestment plan – – 198 – – – Issuance of common shares under employee stock option plan – – 423 – – – Issuance of class A common shares in public offering, net of issuance costs 1 – 3,912 – – – Conversion of class B common shares 1 (1 ) – – – – Dividends on common shares – – – (17,874 ) – – Comprehensive income: Net earnings on common shares for the year – – – 44,873 – – 44,873 Other comprehensive income/(loss) for the year – – – – (19,698) – (19,698) 25,175 Gain on sale of OEH class A common shares by OEH, net of costs – – 27,241 – – –

Balance, December 31, 2000 168 146 351,590 724,720 (175,806) (391,261 ) Issuance of class A common shares under dividend reinvestment plan – – 47 – – – Conversion of class B common shares 1 (1 ) – – – – Dividends on common shares – – – (5,504) – – Comprehensive income: Net earnings on common shares for the year – – – 4,546 – – 4,546 Other comprehensive income/(loss) for the year – – – – (23,215) – (23,215) Cumulative effect of change in accounting principle – – – – (7,526) – (7,526) (26,195)

Balance, December 31, 2001 169 145 351,637 723,762 (206,547) (391,261 ) Issuance of class A common shares under dividend reinvestment plan – – 79 – – – Issuance of common shares under employee stock option plan – – 48 – – – Issuance of class A common shares to acquire a subsidiary 25 – 37,929 – – – Conversion of class B common shares 1 (1 ) – – – – Dividends on common shares – – – (4,326) – – Comprehensive income: 41,928 Net earnings on common shares for the year – – – 41,928 – – 18,244 Other comprehensive income/(loss) for the year – – – – 18,244 – 60,172

Balance, December 31, 2002 195 144 389,693 761,364 (188,303) (391,261 ) See notes to consolidated financial statements.

34 SEA CONTAINERS LTD. & SUBSIDIARIES Notes to Consolidated Financial Statements currency, at the average rates of exchange prevailing during the year. The assets and liabilities are translated into U.S. dollars at the 1. Summary of significant accounting policies rates of exchange on the balance sheet date and the related translation adjustments are included in accumulated other (a) Principles of consolidation comprehensive income/(loss). No income taxes are provided on the The consolidated financial statements include the accounts of Sea translation adjustments as management does not expect that such Containers Ltd. and all majority-owned subsidiaries. All significant gains or losses will be realized. Foreign currency transaction gains intercompany balances and transactions have been eliminated. and losses are recognized in operations as they occur. Unconsolidated companies that are 20% to 50% owned are accounted for on an equity basis. (e) Intangible assets For purposes of these Notes, the “Company” refers to In accordance with the adoption SFAS No. 142, “Goodwill and Other Sea Containers Ltd., and “SCL” refers to Sea Containers Ltd. and its Intangible Assets”, as of January 1, 2002, goodwill and indefinite subsidiaries. “OEH” refers to Orient-Express Hotels Ltd., an equity lived assets must be evaluated annually to determine impairment. investment of the Company engaged in the hotel and leisure business Those intangible assets that will continue to be classified as goodwill (see Notes 2 and 3). “GE SeaCo” refers to GE SeaCo SRL, a and other intangibles with indefinite lives are no longer amortized. container leasing joint venture company between the Company and Intangible assets with finite lives will continue to be amortized using General Electric Capital Corporation accounted for under the equity the straight-line method over their estimated useful lives. For the years method (see Note 3(b)). “GNER” refers to Great North Eastern ended December 31, 2001 and 2000, intangible assets were amortized Railway Ltd., a wholly-owned subsidiary of the Company and using the straight-line method over the estimated useful lives of the operator of SCL’s passenger rail franchise in Great Britain. “Silja” related intangible assets, ranging from 40 years for trademarks and refers to Silja Oyj Abp, a wholly-owned subsidiary of the Company licenses and primarily 40 years for goodwill. See Note 7. based in Finland engaged in ferry operations in the northern Baltic Sea (see Note 3(a)). (f) Revenue recognition Certain items in 2001 and 2000 have been reclassified to conform Container assets are revenue-earning under operating leases and, with the current year’s presentation. accordingly, the financial statements reflect such operating lease “FASB” means Financial Accounting Standards Board and “APB” rentals as revenue. With respect to sales-type leases, a gain or loss means Accounting Principles Board, the FASB’s predecessor. “SFAS” is calculated in accordance with SFAS No. 13, “Accounting for Leases” means Statement of Financial Accounting Standard of the FASB. and is included in revenue. Passenger transport revenues are “FIN” means an accounting interpretation of the FASB. recognized upon completion of the train or ferry journey. Hotel revenue is recognized when a service is performed. Deferred revenue (b) Cash and cash equivalents consisting of deposits paid in advance are recognized as revenue Cash and cash equivalents include all cash balances and highly-liquid when the services are performed and upon completion of the train or investments having original maturities of three months or less. ferry journeys. Deferred revenue amounted to $11,025,000 and $22,938,000 at December 31, 2002 and 2001, respectively. (c) Containers, ships, real estate and other fixed assets Revenues under management contracts are recognized based upon Containers and ships are recorded at cost and, after allowance for the attainment of certain financial results, primarily revenue and salvage value, are depreciated over their estimated useful lives by the operating earnings, in each contract as defined. straight-line method. The estimated useful life and salvage value for containers are generally 20 years and 20%, respectively, and for (g) Other ships generally 30 to 35 years and 15% to 5%, respectively. In Other in the statements of consolidated operations comprises 2002, the estimated useful lives of certain vessels for depreciation gains/(losses) on asset sales and earnings from unconsolidated purposes were extended from 20 to 30 years. The impact of this affiliates. change in estimate resulted in an increase in net earnings of Gains/(losses) on asset sales were ($1,530,000) in 2002 (2001 - $5,800,000 for the year ended December 31, 2002. $20,787,000, 2000 – $35,040,000). During 2002, gains of Real estate, tourist train and other fixed assets are recorded at cost $2,883,000 related to the sale by the Company of OEH shares and and are depreciated over their estimated useful lives by the straight- losses of $4,434,000 related to container disposals. During 2001, line method. The depreciation rates on freehold buildings and tourist $20,200,000 of the gains related to the sale of the port of Heysham train assets range from 25 to 50 years and on machinery and other and part of the port of Newhaven and $551,000 (2000 - remaining assets from 5 to 25 years. Leasehold improvements are $36,000,000) to the sale of OEH shares (see Note 2). depreciated over the shorter of the estimated useful life or the Earnings from unconsolidated companies include SCL's share of the respective lease term. net earnings of its equity investments as well as interest income related to loans and advances to the equity investees. See Note 3(b). (d) Foreign currency translation The functional currency for each of the Company’s foreign (h) Government subsidy subsidiaries is the applicable local currency. Foreign subsidiary In 2001, operating expenses included $7,000,000 (2000 - income and expenses are translated into U.S. dollars, SCL’s reporting $14,000,000) which was received from the British government in

35 Notes to Consolidated Financial Statements (continued} interest and related income in 2002 included a gain of $1,000,000 on redemption of Silja convertible bonds, in 2001 a gain of respect of an expense subsidy for GNER. Under the GNER franchise $2,141,000 on retirement of senior notes and subordinated agreement, 2001 was the last year any expense subsidy was due debentures, and in 2000 a gain of $13,000,000 relating to the sale and, accordingly, no amount has been included in 2002. of a foreign currency swap. Also included is interest on receivables related to sales-type leases. (i) Inventories Inventories include train, vessel and container related items, food and (n) Estimates beverages, and certain retail goods. Inventories are valued at the The preparation of financial statements in conformity with accounting lower of cost or market value under the first-in, first-out method. principles generally accepted in the United States requires management to make estimates and assumptions that affect the (j) Earnings per share reported amounts of assets and liabilities and the disclosure of Basic earnings per class A and class B common share for each year contingent assets and liabilities at the date of the financial statements are computed by dividing net earnings on class A and class B and the reported amounts of revenues and expenses during the common shares by the weighted average number of common shares reporting period. Estimates include, among others, the allowance for outstanding (excluding voting shares owned by a subsidiary). doubtful accounts, inventories, depreciation and amortization, Diluted earnings per class A and class B common share for each carrying value of ship assets and container assets, carrying value of year are computed by dividing net earnings by the sum of the intangible assets, employee benefits, taxes and contingencies. Actual weighted average number of common shares outstanding (excluding results may differ from those estimates. voting shares owned by a subsidiary), the weighted average number of shares reserved for conversion of outstanding convertible (o) Income taxes preferred shares (if dilutive) and the dilutive effect of stock options. Deferred income taxes result from temporary differences between the Common shares to be issued, assuming conversion of convertible financial reporting and tax bases of assets and liabilities. Deferred preferred shares, were not included in the 2002, 2001 and 2000 taxes are recorded at enacted statutory rates and are adjusted as computations of diluted earnings per class A and class B common enacted rates change. Classification of deferred tax assets and share because to do so would have been anti-dilutive. The number liabilities corresponds with the classification of the underlying assets of common shares excluded from the calculation was 478,622 in each and liabilities giving rise to the temporary differences or the period of of the three years ended December 31, 2002. Diluted earnings per expected reversal, as applicable. A valuation allowance is established, class A and class B common share were the same as basic for 2001 when necessary, to reduce deferred tax assets to the amount that is and 2000 as the conversion of stock options did not affect the more likely than not to be realized based on available evidence. computation. (p) Concentration of credit risk The number of shares used in computing basic and diluted earnings Concentration of credit risk with respect to trade receivables is limited per share at year end was as follows: because of the large number of customers comprising SCL’s customer base and their dispersion across different businesses and geographic December 31, 2002 2001 2000 areas. Also, management routinely assesses the financial strength of 000 000 000 SCL’s customers. Basic 20,199 18,530 18,507 Diluted 20,222 18,557 18,517 (q) Stock-based compensation SFAS No. 123, “Accounting for Stock-Based Compensation”, as amended, encourages, but does not require, companies to record (k) Interest expense, net compensation cost for stock-based employee compensation plans at SCL capitalizes interest during the construction of assets. Interest fair value. The Company has chosen to continue to account for stock- expense is net of capitalized interest of $1,168,000 in 2002 (2001 - based compensation using the intrinsic value method prescribed in $1,815,000, 2000 - $1,365,000). APB Opinion No. 25, “Accounting for Stock Issued to Employees”, as amended, and related interpretations. Accordingly, compensation (l) Marketing costs cost for share options is measured as the excess, if any, of the quoted Marketing costs, including website research and planning costs, are market price of the Company’s shares at the date of the grant over expensed as incurred and are reported in selling, general and the amount an employee must pay to acquire the shares. administrative expenses. Marketing costs include costs of advertising Compensation expense for stock appreciation rights is recorded and other marketing activities. These costs were $56,906,000 in annually based on the quoted market price of the Company’s shares 2002 (2001 - $46,796,000, 2000 - $45,129,000). at the end of the period. If compensation cost for the Company’s stock option plans had been (m) Interest and related income determined based on fair values as of the date of grant, SCL’s net Interest and related income in 2002 includes foreign exchange gains earnings and earnings per share would have been reported as of $7,236,000 (2001 - $3,454,000, 2000 - $536,000). In addition, follows:

36 SEA CONTAINERS LTD. & SUBSIDIARIES Year ended December 31, 2002 2001 2000 $000 $000 $000

Net earnings on common shares: As reported 41,928 4,546 44,873 Deduct: Total stock-based employee compensation expense determined under fair value based method, net of related tax (56) (555 ) (606) Pro forma 41,872 3,991 44,267

$ $ $ Basic and diluted earnings per share: As reported: 2.08 0.24 2.42 Basic 2.07 0.24 2.42 Diluted Pro forma: 2.07 0.22 2.39 Basic 2.07 0.22 2.39 Diluted

The pro forma figures in the preceding table may not be management objectives and strategies for undertaking various hedge representative of pro forma amounts in future years. transactions. SCL links all hedges that are designated as fair value hedges to specific assets or liabilities on the balance sheet or to (r) Impairment of long-lived assets specific firm commitments. SCL links all hedges that are designated as In accordance with SFAS No. 144, “Accounting for the Impairment or cash flow hedges to forecasted transactions or to floating-rate Disposal of Long-Lived Assets”, the Company reviews its long-lived liabilities on the balance sheet. Management also assesses, both at assets whenever events or changes in circumstances indicate that the the inception of the hedge and on an ongoing basis, whether the carrying amount of the assets may not be recoverable. An derivatives that are used in hedging transactions are highly effective impairment would be recognized when expected future undiscounted in offsetting changes in fair values or cash flows of hedged items. operating cash flows are lower than the carrying value. In the event Should it be determined that a derivative is not highly effective as a that an impairment occurs, the fair value of the related asset is hedge, SCL will discontinue hedge accounting prospectively. estimated, and SCL records a charge to earnings calculated as the The initial adoption of SFAS No. 133 resulted in an unrealized loss excess of the asset's carrying value over the estimated fair value. of $7,526,000 in accumulated other comprehensive income/(loss) as of January 1, 2001. For the year ended December 31, 2002, the (s) Derivative financial instruments change in the fair market value of derivative instruments resulted in a Effective January 1, 2001, the Company adopted SFAS No. 133, credit to other comprehensive loss of $6,843,000 (2001 - a charge “Accounting for Derivative Instruments and Hedging Activities”, as of $341,000). See Note 19. amended by SFAS No. 137 and 138. SFAS No. 133 requires SCL to record all derivatives on the balance sheet at fair value. If the (t) Recent accounting pronouncements derivative is designated as a fair value hedge, the changes in the fair Effective January 1, 2002, the Company adopted SFAS No. 141, value of the derivative and of the hedged item attributable to the “Business Combinations”, and SFAS No. 142. See Notes 1(e) and 7. hedged risk are recognized in operating expense in the consolidated The Company adopted SFAS No. 144 as of January 1, 2002. SFAS statement of operations. If the derivative is designated as a cash No. 144 defines an impairment as the condition that exists when the flow hedge, the effective portions of changes in the fair value of the carrying amount of a long-lived asset is not recoverable and exceeds derivative are recorded as a component of accumulated other its fair value. The statement also identifies the circumstances that comprehensive loss in shareholders’ equity and are recognized in apply when testing for recoverability, as well as other potential interest expense in the statement of consolidated operations when adjustments or revisions relating to recoverability. Specific guidance is the hedged item affects earnings. The ineffective portion of a provided for recognition and measurement, as well as reporting and hedging derivative’s change in the fair value will be immediately disclosure, for long-lived assets held and used and those disposed of. recognized in either operating or interest expense as appropriate in The adoption of this statement did not have an effect on SCL’s the consolidated statement of operations. If the derivative is not consolidated results of operations, financial position or cash flows. designated as a hedge for accounting purposes, the change in its fair In April 2002, the FASB issued SFAS No. 145, “Rescission of FASB value is recorded in either operating or interest expense as Statements No. 4, 44, and 64, Amendment of FASB Statement No. appropriate in the consolidated statement of operations. 13, and Technical Corrections”. This statement eliminates the SCL management formally documents all relationships between classification of gain or loss on extinguishment of debt as an hedging instruments and hedged items, as well as its risk extraordinary item of income and requires that such gain or loss be

37 Notes to Consolidated Financial Statements (continued} 2. Sales of OEH shares and deconsolidation In the initial public offering of OEH in August 2000, OEH sold evaluated for extraordinary classification under the criteria of APB 5,000,000 of its newly issued class A common shares and the Opinion No. 30, “Reporting Results of Operations”. SFAS No. 145 also Company concurrently sold an additional 6,500,000 existing class A requires sale-leaseback accounting for certain lease modifications that common shares of OEH, all at a price of $19.00 per share. OEH have economic effects that are similar to sale-leaseback transactions, received proceeds net of related costs of $85,527,000 from its and makes various other technical corrections to existing primary offering, and SCL received proceeds net of related costs of pronouncements. The Company adopted SFAS No. 145 as of January $112,986,000 from its secondary sale. As a result, SCL recognized in 1, 2002 and has reclassified a $2,141,000 gain from extraordinary 2000 a gain of $36,000,000 relating to its sale of existing OEH item to operating income in the 2001 statement of operations. shares and a further gain of $27,241,000 which was recorded directly In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs to shareholders’ equity in respect of the primary offering of shares by Associated with Exit or Disposal Activities”, which requires that costs OEH in accordance with the provisions of SEC Staff Accounting associated with an exit or disposal plan be recognized when incurred Bulletin No. 51. rather than at the date of a commitment to a plan. SFAS No. 146 is During 2001, the Company sold an additional 75,200 existing OEH to be applied prospectively to exit or disposal activities initiated after class A shares at an average price of $20.27 per share, and OEH December 31, 2002. purchased 100,000 of its outstanding class A shares at an average In December 2002, the FASB issued SFAS No. 148, “Accounting for price of $13.99 per share which were cancelled. As a result, SCL Stock-Based Compensation - Transition and Disclosure - An recognized in 2001 a gain of $551,000 relating to its sale of OEH Amendment of FASB Statement No. 123”, which is effective for shares. financial statements for fiscal years ending after December 15, 2003, During 2002, the Company sold an additional 4,921,500 existing with early adoption permitted. SFAS No. 148 will enable companies OEH class A common shares at an average price of $13.96 per that choose to adopt the fair value based method to report the full share, culminating in a 3,100,000 share sale on November 14, 2002. effect of employee stock options in their financial statements SCL recognized in 2002 a gain of $2,883,000 relating to its sale of immediately upon adoption, and to make available to investors OEH shares. Effective November 14, 2002, because the Company’s disclosure about the cost of employee stock options. The Company economic interest in OEH dropped below 50% to approximately will continue to apply the disclosure-only provisions of both SFAS No. 47% and the Company does not otherwise have control over OEH, 123 and SFAS No. 148. See Note 1(q). the Company began to account for its investment in OEH under the In November 2002, the FASB issued FIN No. 45, “Guarantor’s equity method of accounting. Accounting and Disclosure Requirements for Guarantees, Including The following unaudited pro forma financial information presents Indirect Guarantees of Indebtedness of Others”, which clarifies and the consolidated results of operations for SCL as if the 2002 sales of elaborates on the requirement for entities to recognize a liability and OEH shares had occurred on January 1, 2002, after giving effect to provide disclosures relating to the fair value of the obligation certain adjustments, including the reduction of interest expense as a undertaken in a guarantee. Under FIN No. 45, SCL will record a result of the utilization of the net proceeds of the sales to reduce liability at the inception of a transaction representing the fair value of SCL’s long-term debt. The unaudited pro forma information is the guarantee and maintain such liability until it is relieved of the presented for informational purposes only and does not purport to contingent obligation. FIN No. 45 requires the fair value of the be indicative of the results of operation of SCL had these transactions guarantee to be recorded for all guarantees issued or modified after been made on January 1, 2002: December 31, 2002. The recognition of this liability results in delayed recognition of revenue until the guarantee has been settled or expired. The adoption of FIN No. 45 is not expected to have a Year ended December 31, 2002 material effect on SCL’s financial position or results of operations. FIN $000 No. 45 also contains disclosure provisions surrounding existing guarantees, which are effective for financial statements of interim or Total revenue 1,430,952 annual periods ending after December 15, 2002. See Note 18. Total expenses 1,285,896 In January 2003, the FASB issued FIN 46 “Consolidation of Variable Net earnings 42,395 Interest Entities”, which addresses the consolidation issues relating to Net earnings on class A and class B certain types of entities, including special purpose entities. FIN No. 46 common shares 41,307 requires a variable interest entity to be consolidated if a company’s $ variable interest (i.e., investment in the entity) will absorb a majority Basic earnings per class A and of the entity’s expected losses and/or residual returns if they occur. class B common share 2.05 FIN No. 46 is applicable immediately to any variable interest entity Diluted earnings per class A and formed after January 31, 2003 and must be applied in the third class B common share 2.04 quarter of 2003 to any such entity created before February 1, 2003. The Company is reviewing the provisions of FIN No. 46 and does not expect its implementation to have a material effect on the Company’s financial position or results of operations.

38 SEA CONTAINERS LTD. & SUBSIDIARIES 3. Significant acquisitions and investments results of operations have been included in the consolidated financial results of SCL. The pro forma impact on results, had this (a) Acquisitions acquisition occurred on January 1, 2002, is not material.

Silja Oyj Abp: OEH acquisitions in 2002: During the second quarter of 1999, SCL purchased a 50% interest in In February 2002, OEH acquired the hotel La Residencia in Silja which was listed on the Helsinki Exchanges. The cash purchase Mallorca, Spain and the hotel Le Manoir aux Quat’ Saisons in price was $102,800,000 funded initially by a bank loan to SCL, Oxfordshire, England and a 50% interest in a group of four which was refinanced by the issuance of the 10 3/4% senior notes due restaurants called Le Petit Blanc in England, all for approximately 2006 (see Note 10(c)). The shareholders from whom SCL acquired $40,000,000. The price was paid largely with bank mortgage this investment had a right to sell the balance of their shares in Silja finance. to SCL in April 2002, representing up to an additional 25% of shares In March 2002, OEH acquired for approximately $7,500,000 a outstanding, at a total price of approximately $35,000,000. This 75% share interest in Maroma Resort and Spa near Cancún, amount was payable at SCL’s option in cash or class A common Mexico. The purchase price was paid in cash, with $1,000,000 shares of the Company. payable in March 2003. These options were exercised in April 2002 and SCL purchased the No goodwill was recognized on these transactions. These shares at a total price of euro 40,299,000 ($37,954,000) paid in acquisitions have been accounted for as purchases in accordance newly-issued class A common shares of the Company. On June 25, with SFAS No. 141. The results of these operations have been 2002, SCL launched a redemption offer for the remaining shares in included in the consolidated financial results of OEH from the dates Silja and for Silja's outstanding convertible subordinated bonds of acquisition and the assets and liabilities of the acquired which had an aggregate par value of euro 55,368,000. The offer companies have been recorded at their fair value at the date of was euro 2.25 for each common share and 92.4% of the par value acquisition. The pro forma impact on results, had these acquisitions of the bonds. The offer expired on August 26, 2002 and SCL occurred on January 1, 2002, is not material. acquired additional Silja shares, bringing its total shareholding to 97.2%, and euro 13,222,900 of the Silja bonds for an aggregate OEH acquisitions in 2001 and 2000: price of euro 43,398,000 ($42,654,000) paid in cash which was On April 27, 2001, OEH acquired the Bora Bora Lagoon Resort in largely funded by bank loans. Any shares not tendered have been French Polynesia, a hotel previously managed by OEH, for a cash compulsorily acquired as permitted by Finnish law. During the third price of approximately $19,600,000. OEH funded most of the quarter, SCL recognized a gain on the redemption of Silja bonds of purchase price with bank mortgage finance. approximately $1,000,000 which is included in net finance costs. See On January 17, 2001, OEH acquired the Miraflores Park Plaza in Note 1(m). Lima, Peru. Because OEH’s 50/50 hotel joint venture in Peru had an The acquisition was accounted for using the purchase method of option to purchase the hotel at cost which, if exercised, would have accounting in accordance with SFAS No. 141. The purchase price has resulted in OEH becoming the exclusive long-term manager of the been allocated to the assets and liabilities acquired using estimated hotel, it was accounted for in 2001 as an equity investment by fair values at the date of acquisition and resulted in assigning value OEH. Because the option lapsed, the hotel has been accounted for to Silja trademarks of $24,918,000. The trademarks are considered as an acquisition with effect from December 31, 2001. The purchase to have indefinite useful lives and will not be amortized, in price of approximately $17,000,000 was paid largely by the accordance with SFAS No. 142. The following table shows the assumption of existing debt, with the balance paid in cash and the allocation of the purchase price: issuance of notes to the seller. On March 24, 2000, OEH acquired the Observatory and December 31, 2002 Lilianfels Hotels in Australia for an aggregate purchase price of $000 approximately $40,000,000. The purchase has been substantially financed by a bank loan. Cash 14,216 The purchase prices paid for these acquisitions approximated the Other current assets 43,965 fair value of the net tangible and intangible assets acquired, and Property, plant and equipment 503,452 any resulting goodwill was not material. Trademarks 24,918 The above acquisitions have been accounted for as purchases Inventories 6,332 and, accordingly, the assets and liabilities of the acquired 592,883 companies have been recorded at their fair value at the date of Purchase price, including SCL class A common acquisition. The operating results of the acquired companies have shares issued, cash and the carrying value been included in OEH’s consolidated statements of operations from of the existing investment in Silja 211,141 the effective dates of acquisition. Pro forma data have not been Liabilities assumed 381,742 presented as the revenues and net earnings resulting from these acquisitions would not have had a material impact in the year of Prior to May 2002, SCL had accounted for its initial investment in acquisition. Silja under the equity method. Since the dates of acquisition, the

39 Notes to Consolidated Financial Statements (continued} Orient-Express Hotels Ltd. OEH and its subsidiaries are engaged in the hotel and leisure (b) Investments business. Effective November 14, 2002, because the Company’s Investments represent equity interests of 20% to 50% in any economic interest in OEH dropped below 50% and the Company unconsolidated companies. SCL does not have effective control of does not otherwise have control over OEH, the Company began to these unconsolidated companies and, therefore, accounts for these account for its investment in OEH under the equity method of accounting investments using the equity method. SCL’s principal equity investees (see Note 2). As of December 31, 2002, SCL had a 47% interest in are as follows: OEH. See Note 21 regarding transactions between SCL and OEH. SCL’s interest income related to loans and advances to its equity GE SeaCo SRL investees amounted to $5,197,000 in 2002 (2001 - $6,702,000, GE SeaCo and its subsidiaries are engaged in the container leasing 2000 - $5,941,000). See Note 1(g). business. The Company and General Electric Capital Corporation Summarized financial data for SCL’s unconsolidated companies for each have a 50% interest in GE SeaCo. See Note 21 regarding the periods during which the investments were held by SCL are as transactions between SCL and GE SeaCo. follows:

December 31, 2002 2001 $000 $000

Current assets 186,804 190,319 Property, plant and equipment, net 1,281,101 1,003,384 Other assets 172,171 28,292

Total assets 1,640,076 1,221,995

Current liabilities 206,558 176,786 Long term debt 827,123 665,239 Other liabilities 32,390 93,454 Total shareholders’ equity 574,005 286,516

Total liabilities and shareholders’ equity 1,640,076 1,221,995

Year ended December 31, 2002 2001 2000 $000 $000 $000

Revenue 336,929 599,804 616,273 Earnings from operations before net finance costs 60,994 86,527 63,103 Net earnings 30,879 30,716 15,129

4. Real estate and other fixed assets The major classes of real estate and other fixed assets are as follows at year end:

December 31, 2002 2001 $000 $000

Freehold and leased land and buildings 161,110 644,937 Machinery and equipment 60,448 170,843 Fixtures, fittings and office equipment 50,438 102,801 271,996 918,581 Less: accumulated depreciation 92,619 174,892 179,377 743,689

40 SEA CONTAINERS LTD. & SUBSIDIARIES 5. Asset sale receivables The components of asset sale receivables are as follows at year end:

December 31, 2002 2001 $000 $000

Gross asset sale receivable 38,786 31,892 Unearned income 2,942 4,437

Asset sale receivables 35,844 27,455

Contractual maturities of SCL’s gross asset sale receivables subsequent to December 31, 2002 are as follows:

Year ending December 31, $000

2003 19,919 2004 9, 762 2005 5,036 2006 3,009 2007 1,022 2008 and thereafter 38 38,786

6. Assets under capital lease The following is an analysis of assets leased under capital leases by major classes at year end:

December 31, 2002 2001 $000 $000

Machinery and equipment 8,857 8,262 Real estate and other fixed assets 21,465 28,061 30,322 36,323 Less: accumulated depreciation 14, 748 11,245 15, 574 25,078

The following is a schedule of future minimum lease payments under capital leases together with the present value of the minimum lease payments at December 31, 2002:

Year ending December 31, $000

2003 5,396 2004 4,445 2005 2,378 2006 761 2007 592 2008 and thereafter 44 Minimum lease payments 13,616 Less: amount of interest contained in above payments 1,853 Present value of minimum lease payments 11, 76 3

The amount of interest deducted from minimum lease payments to arrive at the present value is the interest contained in each of the leases. In the normal course of business, the Company has an option to purchase certain leases at a bargain purchase option. In other cases, the leases will be renewed or replaced upon expiration.

41 Notes to Consolidated Financial Statements (continued} purposes of SFAS No. 131, the Company has determined that its operating segments are as set forth in Note 20. SFAS No. 142 requires goodwill and 7. Intangible assets intangible assets be assigned to reporting units and the useful lives of Effective January 1, 2002, the Company adopted the provisions of SFAS intangible assets acquired on or before June 30, 2001 be reassessed No. 141, “Business Combinations”, and SFAS No. 142, “Goodwill and Other and the remaining amortization periods adjusted accordingly. Intangible Assets”. These statements establish financial accounting and In accordance with SFAS No. 142, the Company completed transitional reporting standards for acquired goodwill and other intangible assets. impairment testing of intangible assets during the three months ended Specifically they address how acquired intangible assets should be March 31, 2002. Preliminary assessments of identifiable intangible assets accounted for both at the time of acquisition and after they have indicated financial statement adjustments would not be required upon been recognized in the financial statements. adoption of this pronouncement. The impairment testing was performed in SFAS No. 141 changes the accounting for business combinations, two steps, first by a determination of impairment based upon the fair value requiring that all business combinations be accounted for using the of a reporting unit as compared to its carrying value and then, if there was purchase method and that intangible assets be recognized as assets apart an impairment, by the measurement of the amount of impairment loss by from goodwill if they arise from contractual or other legal rights, or if they comparing the implied fair value of goodwill with the carrying amount of are separable or capable of being separated from the acquired entity and that goodwill. Subsequent to March 31, 2002, with the assistance of a sold, transferred, licensed, rented or exchanged. SFAS No. 142 specifies third-party valuation firm, the Company finalized the testing of goodwill. the financial accounting and reporting for acquired goodwill and other Using assumptions to model reporting units, the Company determined the intangible assets. In accordance with SFAS No. 142, intangible assets, carrying values of all its operating segments were less than their respective including purchased goodwill, must be evaluated annually for impairment. derived fair values, indicating that there was no impairment of the recorded Those intangible assets that will continue to be classified as goodwill or as goodwill and indefinite lived intangible assets. To determine fair value, the other intangibles with indefinite lives are no longer amortized. Intangible Company relied on valuation models utilizing discounted cash flows. For assets with finite lives will continue to be amortized using the straight- goodwill valuation purposes only, the revised fair value of each reporting line method over their estimated useful lives. unit was allocated to the assets and liabilities of the respective units to To facilitate the implementation of SFAS No. 142, the Company was arrive at an implied fair value of goodwill, based upon known facts required to aggregate financial information into operating segments and and circumstances, as if the acquisition occurred currently. Intangible reporting units as defined in SFAS No. 131, “Disclosures about Segments assets consist of the following: of an Enterprise and Related Information”, and SFAS No. 142. For

December 31, 2002 2001 $000 $000

Intangible assets not subject to amortization: Goodwill 31,867 33,679 Trademarks 24,918 27,385 Other intangible assets at cost 37,091 35,846 93,876 96,910 Intangible assets subject to amortization: Other intangibles at cost 51,450 51,450 Less: accumulated amortization (22,868) (19,439) 28,582 32,011 Total 122,458 128,921

The majority of the goodwill and intangible assets recognized prior to January 1, 2002 will no longer be amortized. During 2002, amortization expense of $3,429,000 was approximately $3,700,000 and $3,600,000 lower than 2001 and 2000, respectively, due to the adoption of SFAS No. 142. Amortization for the succeeding five years is expected to be approximately $3,400,000 annually.

The changes in the carrying amount of goodwill for the year ended December 31, 2002 are as follows:

Passenger Transport Container Leisure Other Segment Segment Segment Segment Total $000 $000 $000 $000 $000

Balance as of January 1, 2002 22,091 5,665 2,144 3,779 33,679 Deconsolidation of OEH – – (2,144) – (2,144) Foreign currency translation – – – 332 332 Balance as of December 31, 2002 22,091 5,665 – 4,111 31,867

42 SEA CONTAINERS LTD. & SUBSIDIARIES The following pro forma information reconciles the net earnings and earnings per share reported for the year ended December 31, 2001 and 2000 to adjusted net earnings and earnings per share which reflect the adoption of SFAS No. 142 :

Year ended December 31, 2001 2000 $000 $000

Reported earnings on common shares 4,546 44,873 Add: Amortization of goodwill and other intangible assets, net of tax 3,704 3,562 Adjusted earnings on common shares 8,250 48,435 $ $ Reported earnings per common share 0.24 2.42 Add: Amortization of goodwill and other intangible assets, net of tax, per share (basic) 0.20 0.19 Adjusted earnings per share (basic) 0.44 2.61

Reported earnings per common share 0.24 2.42 Add: Amortization of goodwill and other intangible assets, net of tax, per share (diluted) 0.19 0.19 Adjusted earnings per share (diluted) 0.43 2.61

8. Working capital facilities Working capital facilities at year end are comprised of the following, all repayable within one year:

December 31, 2002 2001 $000 $000

Working capital facility secured by certain assets, with an interest rate of 7.00% – 8,344 Unsecured working capital facilities, with a weighted average interest rate of 4.57% and 5.94%, respectively 1,651 17,775 1,651 26,119

There are additional working capital lines of credit in place but not drawn amounting to $39,200,000 (2001 - $75,000,000), of which $10,700,000 (2001 - $10,000,000) is undrawn under secured revolving credit facilities (see Note 9). The working capital facilities are issued by various financial institutions and have various expiration dates.

9. Long-term debt (other than senior notes and subordinated debentures) Long-term debt at year end consists of the following:

December 31, 2002 2001 $000 $000

Container manufacturer accounts payable, notes payable and bank loans payable over periods of 2 to 8 years, with a weighted average interest rate of 3.86% and 3.34%, respectively 407,358 463,797 Ship mortgage loans payable over periods of 1 to 13 years, with a weighted average interest rate of 4.72% and 4.16% respectively 579,849 207,743 Loans from banks secured by real estate and other fixed assets payable over periods of 1 to 9 years, with a weighted average interest rate of 6.62% and 4.85% respectively 264,036 433,575 1,251,243 1,105,115

Containers are secured to financial institutions as collateral for debt container equipment. SCL may borrow on a revolving basis until obligations. The ship loans are secured by first or second mortgages October 25, 2004 and must repay the balance outstanding at that on the vessels and are shown net of cash totalling $6,656,000 (2001 date. Interest on the facility ranges from 1.25% to 1.70% over - $1,122,500) which is held as security for, or otherwise allocated to, LIBOR. At December 31, 2002, $128,000,000 (2001 - repayment of obligations in respect of certain ships. $129,000,000) was outstanding under this facility. Included in container long-term debt is a revolving credit facility Also included in long-term debt is a $283,115,000 securitization with a group of banks amounting to $209,100,000 secured by facility secured by container equipment. A bankruptcy-remote

43 Notes to Consolidated Financial Statements (continued} 10. Senior notes and subordinated debentures The Company purchased during 2002, $21,119,000 principal amount subsidiary of the Company formed to facilitate asset securitization (2001 - $11,200,000) of its publicly traded senior notes and senior issued a senior note in the principal amount of $242,115,000 which is subordinated debentures for approximately $21,105,000 (2001 - non-recourse to the Company and its other subsidiaries. The senior $8,920,000), realizing a gain of $14,000 which is included in interest note began its nine-year amortization period in October 2002. The and related income (2001 - $2,141,000). Interest accruing to the date Company issued an effectively subordinated $41,000,000 note for of purchase and retirement was also paid and is included in interest the balance of the facility. The subordinated note began its five-year expense. At December 31, 2002, SCL was in compliance with all the amortization period in October 2001. The overall interest rate is covenants in its senior notes and senior subordinated debentures. approximately 1.10% to 1.31% over LIBOR. At December 31, 2002, $279,615,000 (2001 - $335,388,000) was outstanding under this facility. (a) 91/2% senior notes due 2003 Under a syndicated loan facility with a group of banks, Silja had The aggregate principal amount of these notes is $95,223,000 and borrowed at December 31, 2002 a $154,058,000 term loan and an they bear interest at 91/2% per annum, payable semi-annually. They are additional $94,693,000 revolving credit loan. The undrawn amount redeemable, in whole or in part, at the option of the Company at a of the revolving credit portion of the facility was $25,107,000 at price of 100% of the principal amount. The notes may also be redeemed December 31, 2002. Loans bear interest at 1.25% over LIBOR and by the Company in the event of certain tax law changes. The notes are secured by most of Silja’s ship assets. The term loan matures in have no sinking fund requirement and come due on July 1, 2003. In installments ending in 2008 when any outstanding revolving credit the event a change in control of the Company occurs, it is obligated loan must also be repaid. to make an offer to purchase the notes at a price of 101% of the principal At December 31, 2002, SCL was in full compliance with all the amount. The fair value of these notes as of December 31, 2002 was requirements of the credit and financing agreements evidencing its approximately $93,000,000 based upon available market quotes. long-term debt. These requirements included financial covenants to maintain specified minimum debt service coverage and minimum (b) 101/2% senior notes due 2003 interest coverage and not to exceed specified leverage. The carrying The aggregate principal amount of these notes is $63,575,000 and they value of the long-term debt approximated its fair value due to the bear interest at 101/2% per annum, payable semi-annually. They are variable-rate nature of the respective borrowings. redeemable, in whole or in part, at the option of the Company at a The following is a summary of the aggregate maturities of long-term price of 100% of the principal amount. The notes may also be redeemed debt at December 31, 2002. The 2004 amount includes $142,243,000 by the Company in the event of certain tax law changes. The notes due under bank-syndicated loan facilities that SCL expects to refinance: have no sinking fund requirement and come due on July 1, 2003. In the event a change in control of the Company occurs, it is obligated Year ending December 31, $000 to make an offer to purchase the notes at a price of 101% of the principal amount. The fair value of these notes as of December 31, 2002 was 2003 154,416 approximately $63,000,000 based upon available market quotes. 2004 342,027 2005 140,513 (c) 10 3/4% senior notes due 2006 2006 131,363 The aggregate principal amount of these notes is $115,000,000 and 2007 146,853 they bear interest at 10 3/4% per annum, payable semi-annually, and 2008 and thereafter 336,071 were originally issued at a discount to yield 11% per annum. They 1,251,243 are redeemable, in whole or in part, at the option of the Company, at an initial price of 105.375% of the principal amount at October In addition, syndicates of banks have provided GE SeaCo with 15, 2003, declining to 100% of the principal amount on and after $122,500,000 of credit facilities to fund new container purchases. Also, October 15, 2005. The notes may also be redeemed by the Company a bankruptcy-remote subsidiary of GE SeaCo formed to facilitate asset in the event of certain tax law changes. The notes have no sinking securitization has a $400,000,000 container securitization facility fund requirement and come due on October 15, 2006. In the event consisting of $300,000,000 of term notes issued in November 2002 which a change in control of the Company occurs, it is obligated to make amortize over ten years and a $100,000,000 revolving note which, if not an offer to purchase the notes at a price of 101% of the principal extended, converts to a ten-year term note in November 2003. At amount. The fair value of these notes as of December 31, 2002 was December 31, 2002, GE SeaCo had borrowed $368,100,000 (2001 - approximately $92,000,000 based upon available market quotes. $279,000,000) under these facilities, none of which is guaranteed by the Company or General Electric Capital Corporation. (d) 7 7/8% senior notes due 2008 Also the Company has guaranteed through 2005 bank loans of The aggregate principal amount of these notes is $149,750,000 and OEH in an aggregate amount of $112,854,000, including a they bear interest at 77/8% per annum, payable semi-annually. They $2,000,000 bank loan to Eastern & Oriental Express Ltd. in which are redeemable, in whole or in part, at the option of the Company at OEH owns a 25% interest, and has guaranteed through 2010 one an initial price of 103.938% of the principal amount commencing on half of a $8,879,000 bank loan of Speedinvest Ltd., owner of the February 15, 2003, and thereafter declining to 100% of the principal Adriatic fast ferry in which SCL has a 50% interest. amount on and after February 15, 2005. The notes may also be

44 SEA CONTAINERS LTD. & SUBSIDIARIES redeemed by the Company in the event of certain tax law changes. The are being amortized over the life of the debentures. The effective notes have no sinking fund requirement and come due on February 15, 2008. annual interest rate on the total principal amount is 12.75%. The In the event a change in control of the Company occurs, it is obligated debentures are subordinated to all existing and future superior to make an offer to purchase the notes at a price of 101% of the indebtedness, but rank senior to certain subordinated indebtedness, principal amount. The fair value of these notes as of December 31, 2002 and are redeemable, in whole or in part, at the option of the was approximately $97,000,000 based upon available market quotes. Company at a price of 100% of the principal amount. The debentures may also be redeemed by the Company in the event of (e) 121/2% senior subordinated debentures due 2004 certain tax law changes. The debentures have no sinking fund The aggregate principal amount of these debentures is $98,883,000 requirement and come due on December 1, 2004. In the event a and they bear interest at 121/2% per annum, payable semi-annually. change in control of the Company occurs, it is obligated to make an The Company issued these debentures in two tranches. The first offer to purchase the debentures at a price of 101% of the principal tranche, designated series A, was sold at a discount while the second amount. The fair value of these debentures as of December 31, 2002 tranche, designated series B, was sold at a premium, both of which was approximately $92,000,000 based upon available market quotes.

11. Pension plans SCL has pension plans covering substantially all of its employees. The significant plans are four defined benefit plans in which the benefits are based primarily on years of service and employee compensation near retirement. It is SCL’s policy to fund its plans in accordance with applicable laws and income tax regulations. 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 for these plans consisted of the following:

Year ended December 31, 2002 2001 2000 Discount rate 5.6% 6.0% 6.0% Assumed rates of compensation increases 2.7% 3.5% 3.5% Expected long-term rate of return on plan assets 6.4% 6.5% 6.5%

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

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

Year ended December 31, 2002 2001 $000 $000 Change in benefit obligation: Benefit obligation at beginning of year 153,230 152,381 Benefit obligations transferred in 11, 322 – Service cost 4,507 4,264 Interest cost on projected benefit obligation 9,642 8,723 Plan participants’ contributions 1,439 1,754 Actuarial loss (110 ) (3,642) Benefits paid (6,094) (6,790) Foreign currency translation 18,072 (3,460) Benefit obligation at end of year 192,008 153,230

Change in plan assets: Fair value of plan assets at beginning of year 132,394 151,754 Plan assets transferred in 15,429 – Actual return on plan assets (25,389) (16,884) Employer contributions 6,280 6,739 Plan participants’ contributions 1,439 1,754 Benefits paid (6,094) (6,790) Foreign currency translation 14,351 (4,179) Fair value of plan assets at end of year 138,410 132,394

Funded status (53,598) (20,836)

Unrecognized net actuarial loss 69,136 31,198 Unrecognized prior service cost 663 944 Unrecognized transition amount 396 400 Prepaid benefit cost 16, 597 11,706

45 Notes to Consolidated Financial Statements (continued}

The components of net periodic benefit cost consisted of the following: Year ended December 31, 2002 2001 2000 $000 $000 $000

Service cost 4,507 4,264 4,418 Interest cost on projected benefit obligation 9,642 8,723 8,471 Expected return on assets (9,386) (9,673 ) (10,495) Net amortization and deferrals 1,473 505 178 Net periodic benefit cost 6,236 3,819 2,572

Three pension plans included in 2002 above and one pension plan included in 2001 above had accumulated benefit obligations in excess of plan assets at December 31, 2002 and 2001, respectively. The projected benefit obligation, accumulated benefit obligation and fair value of plan assets of these plans were, in aggregate, $181,262,000 (2001 - $27,309,000), $163,030,000 (2001 - $26,581,000), and $126,196,000 (2001 - $19,169,000), respectively. While SCL operates GNER, it is responsible for providing pension benefits for the relevant employees who participate in a multiple-employer plan covering many British rail franchises. SCL’s net periodic benefit cost under this pension plan for 2002 was $2,088,000 (2001 - $6,188,000, 2000 - $6,692,000). These amounts are excluded from the amounts disclosed above relating to the three significant defined benefit plans.

12. Income taxes The provision for income taxes consisted of the following: Year ended December 31, 2002 Year ended December 31, 2001 Year ended December 31, 2000 Current Deferred Total Current Deferred Total Current Deferred Total $000 $000 $000 $000 $000 $000 $000 $000 $000

United States 1,006 (1,648) (642) 1,722 1,450 3,172 2,762 (18) 2,744 Other foreign 7,054 (552) 6,502 4,242 (1,444) 2,798 4,533 (277) 4,256 8,060 (2,200) 5,860 5,964 6 5,970 7,295 (295) 7,000

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

The net deferred tax assets/liabilities recognized in the consolidated balance sheets at year end are comprised of the following:

December 31, 2002 2001 $000 $000

Gross deferred tax assets (operating loss carry forwards) 46,145 77,509 Less: Valuation allowance (17,407 ) (54,719) Net deferred tax assets 28,738 22,790 Deferred tax liabilities (7,206) (27,423) Net deferred tax assets /(liabilities) 21, 532 (4,633)

The gross deferred tax assets relate primarily to tax loss carryforwards. In addition, during 2002, SCL recognized a deferred tax asset of $14,684,000, representing 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 asset is included in other assets. The deferred tax liabilities are temporary differences substantially caused by tax depreciation in excess of book depreciation.

13. Supplemental cash flow information

Year ended December 31, 2002 2001 2000 $000 $000 $000 Cash paid for: Interest 117,692 129,829 136,901 Income taxes 5,534 6,399 5,346

46 SEA CONTAINERS LTD. & SUBSIDIARIES Non-cash investing and financing activities: In conjunction with acquisitions (see Note 3(a)), liabilities were assumed as follows:

Year ended December 31, 2002 2001 2000 $000 $000 $000

Fair value of assets acquired 814,814 51,769 47,636 Class A common shares issued and cash paid (129,775) (36,600 ) (42,934) Carrying value of existing investment (137,061) – – Liabilities assumed 547,978 15,169 4,702

14. Redeemable preferred shares Out of authorized preferred shares, 300,000 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 (see Note 16(b)). The $7.25 convertible cumulative preferred shares are convertible at the option of the holder at any time, unless previously redeemed, into class B common shares of the Company at a conversion price of $31.34 per share (equivalent to a conversion rate of approximately 3.19 class B common shares for each preferred share), subject to adjustment under certain conditions. They provide for cumulative dividends at the annual rate of $7.25 per share payable quarterly and are redeemable at the option of the Company, in whole or in part, at any time at a per share redemption price of $101.45 during the 12 months beginning May 6, 2002, and thereafter at $100.00 per share. Any preferred shares outstanding on May 6, 2005 must be redeemed at $100.00 per share plus any accrued and unpaid dividends.

15. Employee stock option and stock appreciation rights plans (a) Stock option plans Under the Company’s 1997 stock option plan, options to purchase up to 500,000 class A or B common shares of the Company may be awarded to employees of SCL 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, 2002, 240,300 class A common shares were reserved for issuance pursuant to options awarded to 76 persons. The 1986 stock option plan of the Company terminated in 1996. At December 31, 2002, 12,000 class A common shares of the Company were reserved for issuance pursuant to options awarded to 4 persons. No charges or credits are made to income with respect to options awarded or exercised under the plans since all options to employees are awarded at market value at date of grant. Transactions under the Company’s plans have been as follows:

Year ended December 31, 2002 Shares Option Price Outstanding at beginning of period 218,900 $8.55-$30.00 Granted 49,000 $9.00 - $16.20 Terminated (10,000) $21. 75 - $30.00 Exercised (5,600) $8.55 Outstanding at end of period 252,300 $8.55-$30.00 Exercisable at end of period 96,000 $16.00 - $30.00

Year ended December 31, 2001 Shares Option Price Outstanding at beginning of period 162,500 $16.00 - $30.00 Granted 58,400 $8.55 Terminated (2,000) $30.00 Exercised – Outstanding at end of period 218,900 $8.55-$30.00 Exercisable at end of period 54,000 $16.00 - $25.125

Year ended December 31, 2000 Shares Option Price Outstanding at beginning of period 144,000 $16.00 - $30.00 Granted 57,500 $21.75 Terminated (19,000) $25.125 - $30.00 Exercised (20,000) $20.625 - $21.75 Outstanding at end of period 162,500 $16.00 - $30.00 Exercisable at end of period 12,000 $16.00

47 Notes to Consolidated Financial Statements (continued}

The options outstanding under the Company’s plans at December 31, 2002 were as follows: Number of Shares Weighted Average of

Range of Exercise Outstanding at Exercisable at Remaining Exercise Prices for Exercise Prices for Prices 12/31/2002 12/31/2002 Contractual Lives Outstanding Options Exercisable Options $ 8.55 52,800 – 8.8 $ 8.55 – $ 9.00 10,000 – 8.7 $ 9.00 – $11.00 20,000 – 9.8 $11.00 – $16.00 12,000 12,000 1.8 $16.00 $16.00 $16.20 19,000 – 9.3 $16.20 – $21.75 to $30.00 138,500 84,000 6.6 $25.275 $27.56 252,300 96,000

As discussed in Note 1(q), these plans are accounted for under APB Opinion No. 25. Accordingly, no compensation cost has been recognized for the stock options with exercise prices equal to the market price of the shares on the date of grant. Estimates of fair values of stock options on the grant dates in the Black-Scholes option-pricing model were based on the following assumptions:

Year ended December 31, 2002 2001 2000

Expected price volatility range 39.69% 52.60% 19.50% Risk-free interest rate range 2.78% 4.62% 6.50% Expected dividends 1. 76% 1.89% 1.50% Expected life of stock options 5years 5 years 5 years Weighted average fair value $3.92 $3.74 $5.41

(b) Stock appreciation rights plan The 1991 stock appreciation rights plan of the Company terminated in 2001 and provided that the Company could grant to SCL employees stock appreciation rights (“SARs”) with respect to class A common shares of the Company. SARs entitle the holder to a cash amount equal in value to the excess of the fair market value of the common shares at the time of exercise of the SARs over the fair market value of the common shares at the time the SARs were granted. All outstanding SARs are currently exercisable and must be exercised ten years from the date of grant. At December 31, 2002, 46,000 SARs (2001 – 61,000, 2000 - 113,600) were outstanding. In 2002, a net charge to earnings arising from SARs amounted to $nil (2001 - $nil, 2000 - $447,000).

16. Shareholders’ equity Company and (ii) the commencement or announcement of a tender (a) Dual common share capitalization offer or exchange offer by a person for shares carrying 30% or more Effective June 23, 1992, following shareholder approval, the existing of the total voting rights which may be cast at any general meeting of common shares of the Company were classified as class B common the Company. At that time, the rights will detach from the class A and shares, each of which is convertible at any time into one class A class B common shares, and the holders of the rights will be entitled to common share of the Company. Cash dividends on the class A purchase, for each right held, one two-hundredth of a series A junior common shares, if any, must be at least 10% higher than any cash participating preferred share of the Company at an exercise price of dividends on the class B common shares. In general, holders of class $180 (the “Purchase Price”) for each one two-hundredth of such junior A and class B common shares vote together as a single class, with preferred share, subject to adjustment in certain events. From and holders of class B shares having one vote per share and holders of after the date on which any person acquires beneficial ownership of class A shares having one-tenth of one vote per share. In all other shares carrying 20% or more of the total voting rights which may be substantial respects, the class A and B shares are the same. cast at any general meeting of the Company, each holder of a right (other than the acquiring person) will be entitled upon exercise to (b) Shareholder rights agreement receive, at the then current Purchase Price and in lieu of the junior The Company has in place a shareholder rights agreement, as preferred shares, that number of class A or class B common shares amended and restated as of June 1, 1998, which will be implemented (depending on whether the right was previously attached to a class A not earlier than the tenth day following the first to occur of (i) the or B share) having a market value of twice the Purchase Price. If the public announcement of the acquisition by a person (other than a Company is acquired or 50% or more of its consolidated assets or subsidiary of the Company) of shares carrying 20% or more of the earning power is sold, each holder of a right will be entitled to receive, total voting rights which may be cast at any general meeting of the upon exercise at the then current Purchase Price, that amount of

48 SEA CONTAINERS LTD. & SUBSIDIARIES common equity of the acquiring company which at the time of such 18. Commitments and contingencies transaction would have a market value of two times the Purchase (a) Commitments Price. The rights will expire on June 19, 2008 but may be redeemed Outstanding contracts to purchase fixed assets were approximately at a price of $0.025 per right at any time prior to the tenth day $14,000,000 at December 31, 2002 (2001 - $35,000,000). following the date on which a person acquires beneficial ownership of shares carrying 20% or more of the total voting rights which may be Future rental payments under operating leases in respect of equipment cast at any general meeting of the Company. rentals and leased premises are payable by SCL as follows : 2002 (c) Reserved shares Year ending December 31, $000 At December 31, 2002, in addition to the 512,000 common shares reserved for options granted or available under the 1986 and 1997 2003 230,880 stock option plans of the Company (see Note 15), a further 478,622 2004 266,257 class B common shares were reserved for issuance upon conversion 2005 79,152 of the $7.25 convertible cumulative preferred shares. 2006 6,000 2007 6,044 (d) Acquired shares 2008 and thereafter 57,428 A total of 12,900,000 class B common shares were owned by a 645,761 subsidiary of the Company at December 31, 2002. Under applicable law, these shares are outstanding and may be voted by the Of the total above, $554,020,000 relates to rental payments by GNER subsidiary, although in computing earnings per share these shares are in respect of leases of rolling stock and access charges for railway treated as a reduction to outstanding shares. infrastructure. These commitments are payable only while GNER holds the passenger rail franchise which is currently scheduled to expire in 2005. (e) Certain restrictions on payment of dividends SCL is party to certain credit agreements which restrict the payment Rental expense for the year ended December 31, 2002 amounted to of dividends and the purchase of common shares. Under these $169,706,000 (2001 - $249,184,000, 2000 - $263,798,000). agreements, approximately $122,000,000 was available at December 31, 2002 (2001 - $75,000,000) for the payment of cash (b) Contingencies dividends and the purchase of shares. GNER track access agreement GNER experienced severe disruption of its services following an 17. Rental income under operating leases and charters accident in October 2000, for which Network Rail as successor to The following are the minimum future rentals at December 31, 2002 Railtrack is required to pay compensation under the track access due SCL under operating leases of containers and leases of property agreement. Network Rail owns and maintains substantially all of the and other fixed assets: railway infrastructure in Britain. GNER has contracted with Network Rail for track access based on the level of service GNER provides. Year ending December 31, Because of disputes, both GNER and Network Rail withheld $000 contractual payments due during 2001 and arbitration proceedings were commenced to determine liability and the amounts due. Payments 2003 53,661 have resumed since March 2002. Pursuant to separate arbitration 2004 45,757 awards under different parts of the track access agreement, Network 2005 31, 565 Rail’s liability to compensate GNER was confirmed and proceedings 2006 23,304 are continuing on the amounts due. To date, GNER has been 2007 14,248 awarded substantial partial compensation which GNER has received 2008 and thereafter 25,019 or previously withheld from Network Rail. Network Rail has appealed 193, 554 to the U.K. Rail Regulator one of the awards confirming its liability, and the parties are awaiting that decision. Also, the U.K. Strategic Of the total above, related party rental payments due from Rail Authority, the franchisor under GNER's passenger rail franchise GE SeaCo amounted to $125,564,000 (2001 - $232,933,000). agreement, has claimed a financial interest in part of any compensation payable by Network Rail, but GNER has been advised by its legal counsel that it has no obligation to the Authority under that agreement.

GNER performance bond GNER has undertaken to reimburse the British government its costs in the event GNER breaches its franchise agreement to the extent that the government must award the franchise to another operator. This undertaking is secured by a surety bond issued by a bank in the amount of $25,738,000 which the Company has guaranteed.

49 Notes to Consolidated Financial Statements (continued} (d) Foreign exchange risk management From time to time, SCL utilizes foreign currency forward contracts to 19. Derivative financial instruments reduce exposure to exchange rate risks primarily associated with SCL’s (a) Interest rate swap agreements international transactions. These contracts establish the exchange rates SCL is exposed to interest rate risk on its floating rate debt (both U.S. dollar at which SCL will purchase or sell at a future date the contracted and euro) and tries to manage the impact of interest rate changes on amount of currencies for specified foreign currencies. SCL utilizes earnings and cash flows. The Company’s policy is to enter into interest rate forward contracts which are short-term in nature and receives or pays swap agreements from time to time to hedge the variability in interest rate the difference between the contracted forward rate and the exchange cash flows due to interest rate risk on floating rate debt. These swaps rate at the settlement date. No contracts were outstanding at convert the floating rate interest payments on a portion of the outstanding December 31, 2002. debt into fixed payments. The swap agreements expire over a period of one to seven years. At December 31, 2002, the sum of the fair values of the 20. Information concerning financial reporting for segments derivatives was a $10,956,000 liability (2001 - $7,336,000 liability). These and operations in different geographical areas swaps have been designated as cash flow hedges for accounting purposes. SCL’s business activities are grouped into three main reporting At December 31, 2002, the $10,956,000 liability was accumulated in other segments. The first segment is the operation of passenger and vehicle comprehensive income/(loss) representing the effective portion of these transport services using ferries and trains and the services which hedges. No ineffectiveness was recognized during the year ended support these transport activities. Ferries operate between Great December 31, 2002. Amounts accumulated in other comprehensive Britain and France, Ireland and the Isle of Man and in the Baltic Sea income/(loss) will be reclassified into earnings as the hedged interest cash and New York harbor, and GNER trains operate in Britain. This business flows are accrued. None of these hedges was discontinued during is referred to as “Passenger transport operations”. The second segment the year ended December 31, 2002. is leasing of cargo containers (principally through the GE SeaCo joint SCL entered into a swap contract on July 20, 2001 in connection with its venture) to liner ship operators, road and rail operators, forwarders securitized container debt facility. SCL simultaneously entered into a second and exporters located throughout the world and the services which swap contract that mirrored the terms of the first one. As such, these support these activities, including the manufacture and repair of contracts had equal and opposite fair values. On December 20, 2002, SCL container equipment. This business is referred to as “Container sold the second swap contract which had a fair value of $9,100,000. This operations”. The third segment historically has been the ownership transaction did not impact the operations statement as the contract was and/or management of hotels, restaurants, tourist trains and a river already marked to market through earnings. The remaining swap contract cruiseship located worldwide through OEH. This business is referred to has been redesignated as a cash flow hedge. as “Leisure operations”. During 2002, SCL’s economic interest in OEH dropped below 50% and the Company began to account for its (b) Fuel swap agreements investment in OEH under the equity method of accounting (see Note SCL uses commodity futures contracts to procure a large portion of its fuel 2). This change is reflected in the 2002 segment information from the requirements and to hedge its exposure to volatility in fuel market prices. date OEH was deconsolidated (November 14, 2002). “Other SCL has entered into swap agreements to fix the price of fuel. These swaps operations” include the Corinth Canal, real estate development, have been designated as cash flow hedges for accounting purposes as of perishable commodity production and trading, and publishing activities. December 31, 2002 and mature over the next 12 months. No Transactions between reportable segments are not material. ineffectiveness was recognized during the year ended December 31, 2002. SCL’s segment information has been prepared in accordance with At December 31, 2002, a $932,000 receivable (2001 - $531,000 liability) SFAS No. 131, “Disclosures about Segments of an Enterprise and was accumulated in other comprehensive income/(loss) representing the Related Information”. The main factor SCL uses to identify its three main effective portion of these hedges. SCL expects to reclassify all of this amount segments is the similarity of the products and services provided. out of other comprehensive income/(loss) and into earnings over the next 12 Segment performance is evaluated based upon net earnings from months. Amounts accumulated in other comprehensive income/(loss) will be operations before net finance costs, taxes and depreciation and reclassified as SCL recognizes in earnings the purchases of fuel. None of amortization. Segment information is presented in accordance with these hedges was discontinued during the year ended December 31, 2002. the accounting policies described in Note 1.

(c) Components of other comprehensive income/(loss) The components of other comprehensive income/(loss) are as follows: Year ended December 31, 2002 2001 2000 $000 $000 $000

Net earnings on common shares 41,928 4,546 44,873 Foreign currency translation adjustments 46,082 (22,874) (19,698) Cumulative effect of change in accounting principles (SFAS 133) – (7,526 ) – Change in fair value of derivatives 6,843 (341) – Additional minimum pension liability, net of tax (34,681) – – Comprehensive income/(loss) 60,172 (26,195 ) 25,175

50 SEA CONTAINERS LTD. & SUBSIDIARIES Financial information regarding these business segments is as follows, with net finance costs being net of capitalized interest and interest and related income:

Year ended December 31, 2002 2001 2000 $000 $000 $000

Revenue: Passenger transport operations 1,272,360 828,097 869,427 Container operations 111, 8 61 122,322 149,236 Leisure operations 209,016 252,236 267,459 Other operations 21,623 13,104 10,981 1,614,860 1,215,759 1,297,103 Other: Passenger transport operations (718) 32,998 12,191 Container operations 11,116 11, 393 6,507 Leisure operations 9,084 9,112 8,936 Other operations 2,883 551 36,000 22,365 54,054 63,634 Depreciation and amortization: Passenger transport operations 44,580 32,769 32,351 Container operations 53,561 59,688 61,839 Leisure operations 14,355 16,356 15,132 Other operations 1,214 929 2,188 113 , 710 109,742 111,510 Earnings from operations before net finance costs: Passenger transport operations 120,316 68,058 43,194 Container operations 23,499 30,568 48,115 Leisure operations 41,275 52,738 68,970 Other operations 4,452 681 34,735 189, 542 152,045 195,014 Corporate costs (15,038) (13,508 ) (14,814 ) 174, 504 138,537 180,200

Net finance costs (114,670) (115,881 ) (121,054)

Earnings before minority interest and income taxes 59,834 22,656 59,146 Minority interest (10,958) (11,052 ) (6,185) 48,876 11, 604 52,961 Provision for income taxes 5,860 5,970 7,000

Net earnings 43,016 5,634 45,961

Preferred share dividends 1,088 1,088 1,088

Net earnings on class A and class B common shares 41,928 4,546 44,873

Capital expenditure: Passenger transport operations 59,644 19,411 84,121 Container operations 18, 540 26,305 34,606 Leisure operations 45,008 37,630 35,771 Other operations 526 7, 26 6 7,16 4 123, 718 90,612 161,662 Identifiable assets: Passenger transport operations 1,651,967 853,008 Container operations 887,720 912,377 Leisure operations 212, 704 836,251 Other operations 44,443 50,810 2,796,834 2,652,446

51 Notes to Consolidated Financial Statements (continued} 2002 (2001 - $1,200,000, 2000 - $1,185,000). These services were provided on the basis of reimbursement of SCL’s costs as approved Non-U.S. domestic operations accounted for more than 96% of by the board of directors of Silja. Included in the 2001 fee amount revenue and 94% of earnings before net finance costs in 2002 (2001 was interest charged on a two-month borrowing in the amount of – 92% and 90%, 2000 – 92% and 90%). Containers are regularly $2,302,000 by Silja under a maximum $16,500,000 seasonal line of moving between countries in international commerce over hundreds credit provided by SCL during the year. SCL also charters a of trade routes. SCL has no knowledge of, or control over, the SuperSeaCat to Silja to operate on the Helsinki-Tallin route for which movement of containers under lease or the location of leased $1,260,000 was paid to SCL in 2002 (2001 - $3,832,000, 2000 – containers at any moment in time. Based on container leases in force $3,843,000), and SCL charters from Silja a floating passenger at December 31, 2002, containers may touch ports in more than 100 terminal located at Liverpool for which $56,000 was paid to Silja in different countries worldwide. It is therefore impossible to assign 2002 (2001 - $144,000, 2000 – $44,000). The amounts paid in revenues or assets of container operations by geographical areas. 2002 relate to the period prior to acquisition. Passenger transport operations and identifiable assets are mainly carried on and held in Europe, principally in and around Great Britain. Leisure operations are spread throughout the world with no one country representing more than 10% of the revenue or identifiable assets.

21. Related party transactions For the year ended December 31, 2002, SCL earned revenue in connection with the lease and management agreements relating to SCL-owned containers provided to the GE SeaCo joint venture of $33,101,000 (2001 - $47,447,000, 2000 - $68,210,000). Also in 2002, SCL incurred expenses under the services agreement with GE SeaCo by which SCL provides management and administration services to the joint venture and for which GE SeaCo recognized and paid to SCL net amounts of $30,690,000 (2001 - $29,157,000, 2000 - $31,627,000). For the year ended December 31, 2002, SCL sold containers from its factories and provided use of SC’s depots for container repair and storage services, for which GE SeaCo paid $23,713,000 (2001 - $13,694,000, 2000 - $17,304,000). In addition, in 2002, GE SeaCo paid interest of $50,000 on loans from SCL (2001 - $401,000, 2000 - $934,000) and at year end, SCL had a loan balance of $6,000,000 due from GE SeaCo (2001 - $3,100,000). At December 31, 2002, a receivable of $8,662,000 (2001 – a payable of $5,615,000) remains outstanding for GE SeaCo in respect of all the above, which is included in accounts receivable (or accounts payable) on SCL’s consolidated balance sheet. For the year ended December 31, 2002, subsidiaries of the Company received from OEH $5,899,000 (2001 - $5,508,000, 2000 - $5,419,000) 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. These were provided under a shared services agreement between SCL and OEH on the basis of a fee plus reimbursements equivalent to the direct and indirect costs of providing the services. The agreement has an initial term of one year and is automatically renewed annually unless it is terminated by SCL or OEH. SCL has guaranteed an aggregate principal amount of $112,854,000 of bank loans to OEH outstanding at December 31, 2002 (2001 - $171,401,000) including a $2,000,000 bank loan to Eastern & Oriental Express Ltd. in which OEH owns a 25% shareholder interest. SCL received from Silja, prior to its acquisition in May 2002, fees for the provision of various services which amounted to $400,000 in

52 SEA CONTAINERS LTD. & SUBSIDIARIES Five-year performance (unaudited)

Year ended December 31, 2002 2001 2000 1999 1998 $000 $000 $000 $000 $000

Revenue 1,614,860 1,215,759 1,297,103 1,306,742 1,259,598

Net earnings on class A and class B common shares 41,928 4,546 44,873 60,564* 54,265 $ $ $ $ $ Net earnings per class A and class B common share:

Basic 2.08 0.24 2.42 3.30* 3.34

Diluted 2.07 0.24 2.42 3.27* 3.11

Cash dividends per class A common share 0.225 0.30 0.975 1.10 0.885

Cash dividends per class B common share 0.204 0.272 0.878 0.9945 0.8045

$000 $000 $000 $000 $000 Total assets 2,796,834 2,652,446 2,608,990 2,515,417 2,314,455

Long-term obligations 1, 784,274 1,673,803 1,628,104 1,700,285 1,510,278

Redeemable preferred shares 15,000 15,000 15,000 15,000 15,000

Shareholders’ equity 571,832 477,905 509,557 470,481 459,555

* Year ended December 31, 1999 excludes the cumulative effect of change in accounting principle of $12,306,000. Including the effect of change in accounting principle, net earnings on class A and class B common shares would be $48,258,000 and net earnings per class A and class B common share would be $2.63 basic and $2.62 diluted.

Price range of common shares and dividends (unaudited) The principal market on which the Class A and B common shares of the Company are traded is the New York Stock Exchange. Their trading symbols are SCRA and SCRB, respectively. Both classes are also listed on the Pacific Exchange and the London Stock Exchange. The following table presents the quarterly high and low sales prices of the common shares in 2001 and 2002 as reported for New York Stock Exchange composite transactions: 2002 2001 High Low High Low Class A Common Shares $ $ $ $ First quarter 17.90 12.15 25.15 18.15 Second quarter 18.62 14.20 19.00 13.70 Third quarter 14. 70 9.90 19.30 7. 51 Fourth quarter 11.05 8.19 13.99 8.20

Class B Common Shares First quarter 17.60 12.20 25.00 18.30 Second quarter 18.20 14.20 18.80 14.00 Third quarter 14.50 10.09 19.00 8.25 Fourth quarter 10.90 8.40 13.55 8.55

The Company paid cash dividends on its Class A and B common shares during 2001 and the first three quarters of 2002 at the quarterlyrates of $0.075 per Class A share and $0.068 per Class B share. The Company suspended payment of quarterly cash dividends in the fourth quarter of 2002 for the foreseeable future.

53 Summary of quarterly earnings (unaudited) Quarter ended

December 31 September 30 June 30 March 31 2002 $000 $000 $000 $000 Revenue: Passenger transport operations 369,564 429,865 296,091 176,122 Container operations 32,721 29,421 27,512 33,323 Leisure operations 2,248 83,088 79,094 53,670 Other operations 3,396 4,892 7, 504 8,562 407,929 547,266 410,201 271,677 Earnings/(losses) before net finance costs: Passenger transport operations 36,988 45,175 34,311 3,842 Container operations 8,303 5,416 2,642 7,13 8 Leisure operations 2,248 15, 791 17,901 5,335 Other operations (2,616) 238 2,608 4,222 44,923 66,620 57,462 20,537 Corporate costs (3,883) (3,907) (3,743) (3,505) Net finance costs (26,459) (31,867) (29,001) (27,343)

Earnings/(losses) before minority interest and income taxes 14, 581 30,846 24,718 (10,311) Minority interest – (3,827) (6,959) (172)

Earnings/(losses) before income taxes 14, 581 27,019 17, 759 (10,483) Provision for/(benefit from) income taxes 280 8,863 1,490 (4,773)

Net earnings/(losses) 14,301 18,156 16,269 (5,710)

Preferred share dividends (272) (272) (272) (272)

Net earnings/(losses) on class A and class B common shares 14,029 17,884 15,997 (5,982)

$ $ $ $ Earnings/(losses) per class A and class B common share: Basic and diluted 0.67 0.85 0.79 (0.32)

Dividends per class A common share – 0.075 0.075 0.075

Dividends per class B common share – 0.068 0.068 0.068

54 SEA CONTAINERS LTD. & SUBSIDIARIES Summary of quarterly earnings (unaudited) Quarter ended

December 31 September 30 June 30 March 31 2001 $000 $000 $000 $000 Revenue: Passenger transport operations 198,900 253,478 212,559 196,158 Container operations 33,047 32,101 33,622 34,945 Leisure operations 58,787 67,953 76,697 57,911 Other operations 5,095 2,802 3,564 2,194 295,829 356,334 326,442 291,208 Earnings/(losses) before net finance costs: Passenger transport operations 6,632 28,941 19,360 13,125 Container operations 8,956 5,866 6,869 8,877 Leisure operations 7, 78 3 13,525 20,753 10,677 Other operations 708 99 515 (641) 24,079 48,431 47,497 32,038 Corporate costs (3,758) (3,145) (3,234) (3,371) Net finance costs (26,977) (27,584) (31,081) (30,239)

Earnings/(losses) before minority interest and income taxes (6,656) 17,702 13,182 (1,572) Minority interest (1,133) (2,775) (5,334) (1,810 )

Earnings/(losses) before income taxes (7,789) 14,927 7, 848 (3,382) Provision for/(benefit from) income taxes 1,005 8,100 1,425 (4,560)

Net earnings/(losses) (8,794) 6,827 6,423 1,178

Preferred share dividends (272) (272) (272) (272)

Net earnings/(losses) on class A and class B common shares (9,066) 6,555 6,151 906

$ $ $ $ Earnings/(losses) per class A and class B common share: Basic and diluted (0.49) 0.35 0.33 0.05

Dividends per class A common share 0.075 0.075 0.075 0.075

Dividends per class B common share 0.068 0.068 0.068 0.068

55 Shareholder and investor information

Registered office Auditors Sea Containers Ltd. Deloitte & Touche LLP 41 Cedar Avenue Two World Financial Center P.O. Box HM 1179 New York, New York 10281 Hamilton HM EX Bermuda Annual general meeting Tel: +1 (441) 295 2244 The annual general meeting of shareholders will be held at the Fax: +1 (441) 292 8666 registered office of the company at 41 Cedar Avenue, Hamilton, Bermuda on Monday, June 2, 2003 at 10.00a.m. Correspondence Sea Containers Services Ltd. Shareholder information Sea Containers House Copies of SEC Form 10-K annual reports, SEC Form 10-Q quarterly 20 Upper Ground reports and other published financial information are available on the London SE1 9PF Sea Containers website, or may be obtained upon request to: England Sea Containers America Inc. Tel: +44 (0) 20 7805 5000 1155 Avenue of the Americas Fax: +44 (0) 20 7805 5900 New York, New York 10036 (delete first 0 if dialling from outside the U.K.) Tel: +1 (212) 302-5066 Fax: +1 (212) 302-5073 Internet address http://www.seacontainers.com Investor relations Shareholders, securities analysts, portfolio managers and Stock exchange listings representatives of financial institutions seeking financial information Sea Containers Ltd. Class A and Class B common shares are listed on may contact: the New York, Pacific and London Stock Exchanges. William W. Galvin III On the U.S. exchanges the trading symbols are SCRA and SCRB. The Galvin Partnership 76 Valley Road Share transfer agent and registrar Greenwich, Connecticut 06807 EquiServe Trust Company N.A. Tel: +1 (203) 618-9800 P.O. Box 43010 Fax: +1 (203) 618-1010 Providence, Rhode Island 02940-3010 Email: [email protected] Tel: +1 (781) 575-3170 Internet: http://www.equiserve.com Share purchase plan Sea Containers Ltd. offers this plan to owners of its common shares Shareholders are encouraged to contact the Transfer Agent directly as a convenient and economical method of making optional cash regarding any change in certificate registration, change of mailing deposits to purchase Class A common shares at market price without address, lost or stolen certificates, replacement of dividend checks, payment of commissions or other charges. For further information consolidation of multiple accounts, elimination of duplicate mailings, about the plan, please contact the share transfer agent and registrar, replacement of Form 1099-DIV and related shareholder service EquiServe, at the address left. matters. Shareholders may also access their accounts and other information directly through EquiServe’s website.

Co-registrar of shares The Bank of Bermuda 6 Front Street Hamilton HM 11

Bermuda byProduced Printed in the United Kingdom by News Group. London The Illustrated Ltd. Group GreenShires

56 SEA CONTAINERS LTD. & SUBSIDIARIES

Sea Containers Ltd. 41 Cedar Avenue P.O. Box HM 1179 Hamilton HM EX Bermuda

Tel: +1 (441) 295 2244 Fax: +1 (441) 292 8666

Correspondence: Sea Containers Services Ltd. Sea Containers House 20 Upper Ground London SE1 9PF England

Tel: +44 (0)20 7805 5000 Fax: +44 (0)20 7805 5900 www.seacontainers.com 2860-AR-02