Sea ContainersSea Ltd. ReportAnnual 2000

Sea Containers Ltd. Annual Report 2000

2860-AR-00 Tel: +44 (0) 20 7805Tel: 5000 +44 (0) 20 7805Fax: 5900 www.seacontainers.com Correspondence: Services Ltd. Sea Containers Sea Containers House 20 Upper Ground SE1London 9PF Tel: +1 (441) 295 2244 +1 Tel: (441) +1Fax: 292 (441) 8666 Sea Containers Ltd. Sea Containers 41Cedar Avenue 1179 HM P.O.Box EX Hamilton HM Bermuda Sea Containers Ltd.

Front cover: The company participated in a public tender to Sea Containers Ltd. is a Bermuda company with operating subsidiaries in privatize the Corinth Canal, which divides mainland Greece London, Genoa, New York, Rio de Janeiro and Sydney. It is owned primarily from the Peloponnisos, about 30 nautical miles west of Piraeus, Greece’s principal port. It recently won the tender by U.S. shareholders and its common shares are listed on the New York Stock and expects to take over the 40-year concession from mid- Exchange under the trading symbols SCRA and SCRB. 2001. The canal has about 12,000 ship transits a year and The company is engaged in three main activities: passenger transport, marine is a major tourist attraction. It first opened in 602 B.C. when ships were porteraged along a limestone block road which container leasing and leisure-based operations. Within each segment is a still exists. The water canal was completed only in the 19th number of operating units. Passenger transport consists of fast ferry operations century. The company intends to develop both the marine in the English Channel under the name Hoverspeed Ltd., both fast and and tourist potential of the canal. conventional ferry services in the Irish Sea under the name Isle of Man Steam Packet Company, fast ferry operations in New York under the name SeaStreak, fast and conventional ferry services in the Baltic under the name Silja Line (50% owned) and in the Adriatic under the name SNAV-SeaCat (50% owned). Rail operations in the U.K. are conducted under the name Great North Eastern Contents Railway (GNER), and the company has port interests in the U.K. and Greece. Company description 2 Ship management and naval architects subsidiaries support the passenger transport division and have outside clients as well. Financial highlights 3 Marine container leasing is conducted primarily through GE SeaCo SRL, a Directors and officers 4 Barbados company owned 50% by Sea Containers and 50% by General

President’s letter to shareholders 7 Electric Capital Corporation. GE SeaCo operates one of the largest marine container fleets in the world, over one million units. Sea Containers also owns Discussion by division: or partly owns six container service depots, five container manufacturing PassengerTransport 14 facilities and a refrigerated container service business. It owns two container ships which are chartered out in Asia and the Middle East. Leisure 20 The company’s leisure business is conducted through Orient-Express Hotels Ltd., a Containers 23 63% owned subsidiary. Orient-Express Hotels’ common shares are listed on the New York Stock Exchange under OEH. This company has 37 de luxe leisure Property, Publishing and Plantations 26 properties in 15 countries. Most of the properties are owned but some are Finance 28 partly owned, and one tourist train is only managed. One joint venture is

Financial review 31 PeruRail, the railways of Peru, which operates tourist trains on the Cuzco/Machu Picchu route and from Cuzco and Arequipa to Lake Titicaca. PeruRail has extensive Shareholder and investor information 58 freight train operations as well. The hotels, restaurants, river cruise ship and tourist trains compete in the top end of the market. Other activities of Sea Containers include property development, publishing, fruit farming in the Ivory Coast and Brazil and a U.K.-based travel agency.

2 SEA CONTAINERS LTD. Financial highlights

2000 1999 Change $000 $000 %

Revenue 1,360,737 1,339,069 1.6

Earnings before corporate and finance costs:

Passenger transport operations 40,892 69,486 (41.1 )

Leisure operations 68,970 62,187 10.9

Container operations 50,417 61,639 (18.2 )

Other 34,735 206 16,761.7

Total 195,014 193,518 0.8

Net earnings 45,961 49,346 (6.9 )

Total assets at book value 2,608,990 2,515,417 3.7

Long-term obligations 1,628,104 1,700,285 (4.2 )

$ $%

Net earnings per class A and class B common share:

- basic 2.42 2.63 (8.0)

- diluted 2.42 2.62 (7.6)

Cash dividends per class A common share 0.975 1.10 (11.3 )

Cash dividends per class B common share 0.878 0.9945 (11.7 )

3 Directors and officers

Back row, left to right: Robert M. Riggs* W. Murray Grindrod* Philip J.R. Schlee John D. Campbell Ian Hilton Member of Carter, Chairman of Grindrod Chairman of Robert Senior Counsel of Private investor Ledyard & Milburn Unicorn Group Ltd. Anderson & Co. Ltd. Appleby Spurling & (attorneys) (a shipping and (a private investment firm) Kempe (attorneys) transportation company)

Front row, left to right: Michael J.L. Stracey* James B. Sherwood Charles N.C. Sherwood Executive Vice President President of the Partner of Schroder (retired) and Consultant company Ventures (a private to the company equity investment firm) * 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 Transport James G. Struthers Vice President, Controller Christopher W.M. Garnett Vice President, Rail Edwin S. Hetherington Vice President, General Counsel and Secretary Daniel J. O’Sullivan Senior Vice President, Finance and Front row, left to right: Chief Financial Officer Stephen O. Whittam Vice President, Management Information Systems Simon M.C. Sherwood President, Orient-Express Hotels Ltd. Michael V. Scawn Vice President, Funding James A. Beveridge Vice President, Administration and Property Robert S. Ward Senior Vice President, Containers

Regional Managers

Franco Chresten A. Ian Routledge Robin Lynch Toby G. Grey delle Piane Bjerrum Regional Regional Regional Regional Regional Manager, Manager, Manager, Manager, Manager, Australasia North America South America Mediterranean Asia

5 As a short-term solution to 20-year franchise. Problems of has decided to place responsibility capacity shortage, GNER has the track and signal provider, for rail upgrade in the hands of been able to lease several idle Railtrack, have caused a delay a public-private partnership in Eurostar train sets until its own in the franchise award because which Sea Containers has new trains are delivered. The new the franchise plan depends on offered to participate. Award trains cannot be ordered until major improvements to the rail of the new franchise to GNER is GNER has been awarded a new infrastructure. The U.K. government expected soon.

6 SEA CONTAINERS LTD. President’s letter to shareholders

May 1, 2001 Wasa-Umea of Silja Line, Gothenburg-Frederikshavn and Folkestone-Boulogne, suffered losses and had Dear Shareholder, to be stopped. Both we and Silja incurred significant 2000 was a year of mixed results for your company. wind-up expense in the process. We also took the Leisure, rail and the Isle of Man Steam Packet decision to replace our fuel thirsty, low capacity and Company had excellent earnings, while fast ferries, expensive-to-maintain hovercraft on Dover-Calais Silja and marine container leasing were disappointing. with less costly and higher capacity SuperSeaCats James B. Sherwood The year closed with net income of $46.0 million and this created additional wind-up costs. President and Founder on revenue of $1.4 billion compared with net income in 1999 of $49.3 million on revenue of Silja is 50% owned by Sea Containers, and 2000 was $1.3 billion. Diluted earnings per common share our first full year of involvement. Silja’s earnings were $2.42 compared with $2.62 in 1999. A major were adversely impacted by fuel costs, losses on contributor to 2000 earnings was a gain of $36 the Wasa-Umea former duty free sales route and million on the sale of Orient-Express Hotels Ltd. start-up costs of a new fast ferry service on the common shares. Helsinki-Tallinn route. The start-up costs related to the unwillingness of Finnish trade unions to allow Passenger Transport Operations Silja to man the fast ferry on a basis competitive Earnings from these activities collapsed from with other operators. A compromise was finally $69.5 million in 1999 to $40.9 million despite the reached, so operations in 2001 should be less costly. good performance from rail and the Isle of Man Silja has purchased much of its fuel requirements Steam Packet Company. At the risk of over- for 2001 at much lower prices and has stopped the simplification, our fuel bill was $20 million higher Wasa-Umea service and sold the related assets. in 2000 compared with 1999 and we were unable Silja and its main competitor decided to move to recover this from our customers. In April, 2000 their ships from the Finnish flag to another regional fuel prices were coming down, and we expected flag unless Finland adopted 'net wages' agreements them to be little higher for the year than in 1999. comparable to those of other Nordic countries. Then they shot through the roof, and we could Finland has indicated it will adopt such agreements not adjust our fares in time to recover from our shortly and the Finnish trade unions have further customers. For 2001, we purchased forward nearly said they will cooperate to improve productivity. all our fuel at much lower prices, and we have 'Net wages' means that employees receive wages been able to increase fares for 2001 on many routes. net of tax which is retained by the employer. 1999 benefited from six months of duty free Silja also needs to reduce its overhead costs. sales, but we underestimated the impact of losing Under the direction of the new Chief Executive, such sales in 2000. Three former duty free routes, Nils-Gustav Palmgren, we feel the company is

7 Silja Line’s floating terminal, now moving in the right direction, and we are emerged after the Hatfield accident that Railtrack Pontus, has been brought to targeting a return on our investment of more than had let the network deteriorate to an unacceptable Liverpool to serve the Isle of Man Steam Packet Company, 20% per annum from 2002. In 2002 the main level, and it has taken the entire past winter to remedy whose ship and terminal Finnish shareholders have an option to 'put' their the problem. Pre-Hatfield track speeds may not be facilities there are inadequate. 26% shareholding in Silja to us at a fixed price in achieved until Autumn 2001. The Selby accident A new vehicle marshalling area will be built in the winter of return for Sea Containers Class A common shares. was quickly cleared up, and the track reopened two 2001/2002. Shown here is If this option is exercised, Sea Containers would weeks later. SeaCat Rapide, which operates likely make an offer for the balance of the shares In my opinion, the first accident would never have a daily service between Liverpool and Dublin, Ireland, on the same basis. It is at Sea Containers’ option happened if the track and signalling had been under and between Liverpool and to pay cash in lieu of common shares. the control of the main operator, GNER, and we Douglas, Isle of Man. This ship In summary, the cost of fuel, losses on former duty intend to renew our request to the government to was purchased in early 2000. free sales routes, wind-up costs and a reduced be allowed to take over responsibility for the East contribution from Silja ($12.6 million vs. $19.5 Coast Main Line. The Hatfield accident delayed million in 1999) accounted for the $29 million the government’s decision on GNER’s new 20-year reduction in operating profits from this division. franchise, but we are hopeful that by the time you Turning this observation around, however, would receive this report a decision in our favor will have imply that we should recover these reductions in been taken. 2001 and future years, based on lower fuel prices, We were insured for the consequences of both elimination of losses from the three terminated these accidents and have been credited with $4 routes, avoidance of further wind-up costs and million per week of track access charges by Railtrack better results from Silja. since October 17, 2000. We do not expect to incur Our highly successful GNER rail subsidiary was any loss in connection with these accidents. the innocent victim of two rail crashes, one at Passenger numbers are returning to normal. Britain’s Hatfield on October 17, 2000, and the other at roads and airports are as overcrowded as ever. Selby on February 28, 2001. The first was due to a In our port activities we successfully sold the broken rail, the responsibility of Railtrack, the major part of the port of Newhaven to French track provider, and the other was due to a vehicle government interests last month for $22 million. which plunged off an embankment and landed on We will retain some profitable parts of the harbor. the rail line minutes before a GNER high speed We have also signed an agreement to sell the port train collided with it. These two accidents sadly of Heysham and have received approval from the resulted in 14 deaths and a number of injured. It competition authorities. The profits from these

8 SEA CONTAINERS LTD. sales will be taken in 2001. We have recently been awarded a 40-year concession on the Corinth Canal in Greece, which will become a mixed port and leisure-based facility. Our present plan is to close the port of Folkestone and sell or redevelop it. In 2000 we sold Bathside Bay near Harwich, England, at a small profit. Upon completion of all these sales and additions we will have placed our ports portfolio on a much improved profit footing. Our Passenger Transport Division also supervises our naval architects firm, Hart Fenton & Co, and balance sheet, but merely its share of the net On October 17, 2000, a rail shattered at Hatfield, north of our ship management company, Pacifica, both of earnings on the income statement. GE SeaCo has London, derailing a GNER train which had satisfactory years. an operating lease arrangement with both travelling at 115mph. Sea Containers and GE Capital whereby it Tragically, there were four fatalities. Subsequent Marine Container Operations effectively manages the fleets of these parties investigation revealed that the We thought we were seeing a significant owned prior to May 1, 1998. Net revenue from entire British rail network had improvement in marine container leasing in the these containers is split 30% to Sea Containers and been allowed to deteriorate by the track and signalling early part of 2000, and I felt we would be able to 70% to GE Capital to reflect respective fleet sizes provider, Railtrack. Railtrack report quarter by quarter increases in operating and earning capacity. felt it necessary to impose income. Unfortunately, world trade in Both GE Capital and Sea Containers have speed restrictions, which massively disrupted operations. containerized goods started to decline in mid-year accelerated the sale of older units, largely through GNER has held Railtrack and container demand softened in the vital Asian conversion of on-lease containers to finance leases, responsible for its loss of market. So, instead of the expected stabilization and sale of idle units in U.S. depots to avoid revenue and will also obtain insurance recoveries. The of operating profits, we saw a decline from $61.6 repositioning costs. This policy will continue in 2001. aftermath of this accident million in 1999 to $50.4 million in 2000. The marine container leasing business is delayed the award of a new Sea Containers invested $30 million in new undergoing substantial change. The imbalance of 20-year franchise to GNER because the U.K. government containers in 2000 and GE SeaCo SRL, our 50/50 trade between Asia and the U.S. in particular has had to reconsider the role of joint venture with General Electric Capital made it impossible for container lessors to allow Railtrack in the upgrade of the Corporation, bought another $105 million. At containers to be returned in traditional U.S. import East Coast Main Line, upon which the franchise application December 31, 2000, GE SeaCo owned $276 locations of low lease demand, such as New York is based. million of container assets, which were 96% on and Chicago, which in turn has lessened the lease and had operating profits of $23.3 million for attraction of high service “master agreement” the year. Sea Containers does not include the leases to ocean carriers. In addition, the major ship revenue, assets or liabilities of GE SeaCo on its operators have achieved enormous economies of

9 scale, forcing smaller operators to sell out or demand to accommodate additional cargo flows Above: In a joint venture between Hoverspeed Ltd. and withdraw completely. South America today has in normal years and replacement of life expired a subsidiary of Mediterranean only one surviving major operator, while 10 years units. In 2000, approximately 800,000 new Shipping Company called SNAV-SeaCat, a fast ferry ago there were a dozen. No major operator containers (20ft equivalent units) entered service. service between Ancona, Italy, and Split, Croatia was remains in Africa or Australasia. The world container fleet at the end of 2000 was launched in 2000 using a These forces have required the container lessors about 14.4 million units. The combined fleet of Sea Containers first-generation SeaCat. Tourism to Croatia is to reduce master agreement leasing of standard Sea Containers and GE SeaCo is approximately rapidly recovering now that tensions in the Balkans have dry cargo containers and increase long-term leases. 1.1 million units. lessened. The service is Lease periods for new units have been extended As of the date of this letter it would appear that expected to make an operating profit in 2001. from a typical three years to a typical five to eight 2001 will be a “flat” year for marine container years. Leases for new refrigerated containers have leasing compared with 2000. Lower interest rates followed the same pattern, while leases for older will reduce the cost of related debt. We are trying such units have become seasonal to match to manage the adjustment of the business to be northern hemisphere winter cargo flows. Demand in a position to improve profits as soon as the U.S. for specialized container types such as tanks, swap- economy recovers. GE SeaCo is in the midst of a bodies, open tops and flat racks is growing, but program to reduce costs significantly through office numbers are not large by comparison with standard closures, movement of back office operations dry cargo and refrigerated units. GE SeaCo to lower cost locations and 'slimming down' continues to be able to lease increasing numbers of wherever possible. its “palletwide” SeaCell types, with one of the largest containership operators having taken Leisure Operations significant numbers in 2000. Your company’s leisure investments are contained Sea Containers is also active in the manufacture entirely in our subsidiary, Orient-Express Hotels Ltd., of specialized containers and the operation of which had operating profits in 2000 of $69 million container depots and service facilities. Its Santos, compared with $62.2 million in 1999. This made it

Brazil factory is manufacturing mobile phone the most profitable segment of the company for Facing page: Assembly line for stations, while its Charleston, South Carolina the first time. The business is composed of 27 flatracks at Charleston Marine Containers Inc. in Charleston, factory assembles containers for the U.S. military. hotels, three restaurants, five tourist trains, one South Carolina. This manufacturing unit has large Its factories in the U.K. build tanks, swapbodies river cruise ship and PeruRail, located in 15 countries. contracts for the supply of and flatracks. Chinese manufacturers now build all In 2000 it acquired the Observatory Hotel in specialized containers to the U.S. military and also builds the standard dry cargo and refrigerated containers Sydney, Australia, and Lilianfels in Katoomba, chassis for sale and lease primarily to ocean carriers. in the world at prices which cannot be matched Australia, and early in 2001 it acquired the The factory incurred start-up elsewhere. Miraflores Park Plaza in Lima, Peru, and the Bora losses in 1999, extending into 2000, but is now operating Underpinning the market is a large annual Bora Lagoon Resort in French Polynesia. In satisfactorily.

11 Bora Bora Lagoon Resort, PeruRail two luxury tourist trains have been built acquired early in 2001 but managed by Orient-Express for the Cuzco-Lake Titicaca route at the Hotels for several years. Bora company’s workshops in Arequipa, and a further Bora, near Tahiti in French Polynesia, is particularly tourist train is being purchased from Malaysian popular with residents of the interests for an Arequipa-Lake Titicaca service. western U.S. and Japan who seek guaranteed tropical Orient-Express Hotels also expects to acquire in weather, white sand beaches and a romantic setting. A 2001 the Parador de Colca in the Colca Canyon of program of upgrade and Peru, which will be enlarged. The company has expansion is now starting. The hotel has the most spacious made offers on two hotel properties in South East “over-the-water” bungalows in Asia and has bought a building in Buenos Aires, Bora Bora. These private units, from which guests can swim in Argentina, where it plans to recreate Argentina’s the midst of multi-colored fish along the reef, are extremely most famous steak house, La Cabaña. All the popular and command artefacts of the old La Cabaña were purchased premium rates. several years ago from the liquidator. Orient-Express Hotels seeks unique properties and prefers ownership in whole or part to mere management. It acquires properties which have company must be in compliance with its bond expansion potential, as the incremental costs of indentures and have the consent of its principal expansion tend to be very low in comparison with lenders. The company also needs to ensure that the incremental profits. Orient-Express Hotels its bond rating is maintained at a satisfactory promotes its brand on a low-key basis and stresses level following the distribution. Despite the the individuality of its business units. This distribution being in compliance with its bond strategy allows it to have average achieved room indentures, the company expects some rates in the case of hotels some 30% to 40% higher bondholders to object, in which case a court than branded chains such as Four Seasons, Ritz would need to rule on the matter. It is believed Carlton and Sheraton in the same markets. such a ruling could be obtained within a few In August, 2000, Sea Containers sold 37% of months. Orient-Express Hotels in an initial public offering Sea Containers shareholders will be sent copies which was well received. It intends to sell another of the 2000 Orient-Express Hotels Ltd. annual five million shares and distribute subsequently report. 14.4 million shares to Sea Containers public shareholders (about 0.75 Orient-Express Hotels Property, Publishing and Plantation Operations common share for each Sea Containers Ltd. The company’s Property Division has been active common share). To make the distribution, the in the sale and development of ports and is currently

12 SEA CONTAINERS LTD. constructing residential housing in Newhaven and so we must demonstrate better results which will Arundel, England. We are planning to construct a be recognized by investors. new office building in Douglas, Isle of Man, three Our 14,000 employees have had to deal in 2000 parkway stations for GNER once the new franchise with a changing marketplace, changing cost is awarded, and to develop land at the Corinth structures and the unexpected. Special Canal in Greece. This division also supervises the recognition goes to Christopher Garnett, Chief company’s fruit farming interests in the Ivory Coast Executive of GNER, and his team for their and Brazil, as well as our Illustrated London News sensitivity and professionalism in dealing with the publishing unit and Fairways & Swinford travel Hatfield and Selby rail accidents. agency in London. Results from these activities were mixed in 2000 but the outlook for 2001 is Sincerely, promising. Seldom can I remember a more turbulent year. Fortunately, we have a rich diversity of interests which allows us to compensate for problems as James B. Sherwood President they arise. We have done that, and I expect 2001 to be a satisfactory year. Our share price is, in my opinion, not reflective of the company’s true value

13 Analysis of division: Passenger Transport

Ferry Operations Cross English Channel operations under our Hoverspeed brand carried 2.67 million passengers in 2000 (1999 3.5 million) and 615,000 vehicles (1999 722,000) as the total market contracted following the withdrawal of duty-free sales in mid- 1999. Hoverspeed continued to raise average David G. Benson Senior Vice President, rates to compensate for lost duty-free income, and Passenger Transport average vehicle yields were 25% higher than in 1999 with passenger yields 47% higher. Total Great North Eastern Railway revenue from Hoverspeed, including retail sales, Silja Line was $124 million (1999 $158 million). The Isle of Man Steam Packet Company The hovercraft were withdrawn from service on Hoverspeed the Dover-Calais route on October 1, 2000, SeaStreak pending sale or redeployment. SuperSeaCats One, Ports of Heysham, Newhaven Tw o and Three will be operating the Dover-Calais and Folkestone Cargo ships and Dover-Ostende routes in Summer 2001, Hart, Fenton & Co. supported by SeaCat Danmark. The seasonal Newhaven-Dieppe route will be operated by the 81-meter SeaCat Diamant. On the Irish Sea, our route between Belfast, Northern Ireland, and Troon, Scotland, operated by SeaCat Scotland, proved popular in its first full year of operation.

Divisional revenue Divisional operating income The seasonal service $ millions $ millions between Belfast and were carried (1999 486,000 passengers and Heysham will be 137,000 vehicles). Revenue from these routes, 918.6 operated by the including retail sales, totalled $24.9 million (1999 885.5 837.3 69.5 SeaCat Hoverspeed $23.5 million). 61.9 Great Britain in 2001. SuperSeaCat Three continued in service between

40.9 On these two Irish Liverpool, England, and Dublin, Ireland, on a Sea routes 609,000 reduced frequency with one round trip per day, passengers and better matching capacity with demand. 167,000 1998 1999 2000 1998 1999 2000 124,000 vehicles passengers and 36,000 vehicles were carried (1999

14 SEA CONTAINERS LTD. The 32-year-old hovercraft The SuperSeaCat has three ferry operator on the Dover- which operated between Dover times the capacity of a Calais and Dover-Ostend and Calais were retired in hovercraft at lower operating routes. The Belgian route is 2000 and replaced by costs, and crossing time will only especially valuable because of SuperSeaCats, one of which is be about 10 minutes longer frequent strikes in France, which shown here in Dover under the (40 minutes instead of 30). close its ferry ports. historic castle. Hoverspeed is the only fast

264,000 passengers and 49,000 vehicles), and million from $53.3 million, with passenger revenue totalled $9.8 million including retail sales carryings of 601,000, up from 557,000 in 1999. (1999 $17.3 million based on two round trips daily Cars, coaches and motorcycles increased to on Liverpool-Dublin). Additionally, this ship made 159,000 from 148,000 in 1999. Freight meterage a daily round trip between Liverpool and the Isle was 393,000 (1999 355,000), reflecting continuing of Man. 50% of its costs and the revenue are included strengthening of the economy of the Isle of Man. within the Isle of Man Steam Packet Company. SeaStreak commuter services between New Strong growth was once again exhibited by the Jersey, Brooklyn and Manhattan carried 430,000 Steam Packet. Total revenue increased to $57.2 passengers (1999 374,000 in 11 months under our

15 The year 2000 will not go down in history as one of the most successful, but it was eventful, and thus significant, in many ways. As with all other ferry operators, Silja Line was hit by the high oil price, and bunker costs were $17.5 million higher than in 1999. Only a small part could be recovered through fuel surcharges but Silja Line succeeded in raising the price level on all routes, except for the Gulf of Bothnia service, both for tickets and on-board sales, an important achievement with respect to the future profitability. The Gulf of Bothnia service was strongly hit by the abolition of duty-free sales and, after having been heavily loss-making, it was closed down on December 31, 2000. Sea Containers’ fast monohull ferry SuperSeaCat Four entered Silja Line’s service between Helsinki The SeaCat service between control) with revenue totalling $6 million (1999 and Tallinn from the middle of April 2000. The Belfast and Troon in Scotland $5.1 million). A new craft, SeaStreak New York, vessel achieved the position of market leader has grown in popularity. It saves 50 miles of winding two- which can carry 400 passengers at 38 knots will among the fast ferries. The profitability was, lane driving on a road join the fleet in May, 2001. however, hit by higher than expected start-up congested with heavy, slow SNAV-SeaCat, employing one of the company’s costs. After labor action by the Finnish Seamen’s trucks. Shown here is SeaCat Scotland loading in Troon. The SeaCats, commenced service on the Ancona, Italy Union, an agreement was reached permitting four-lane Scottish motorway to Split, Croatia route in 2000. In its first season employment of Estonian cabin crew at system links into Troon. In 2000, the service carried 33,000 passengers and 8,000 international wage rates on this ship. This 376,000 passengers and 83,000 vehicles were carried vehicles and generated $1.8 million in revenue, achievement paved the way for an agreement on this route. including retail sales. SNAV-SeaCat is a joint signed with the union in November to produce venture between Hoverspeed Ltd. and savings in the labor costs of Finnish passenger Mediterranean Shipping Company. ships of about 8% - 12%. The agreement comes Silja Line provides the market in the northern into effect gradually from March, 2001. Baltic Sea with high-class passenger and cargo The total market for passenger ferry services transport and attractive cruises for the leisure between Finland and Sweden and between Finland and conference markets. and Estonia decreased by 3%. In 2000 Silja Line

16 SEA CONTAINERS LTD. carried a total of 5.2 million passengers, a 5% decrease from 1999. The decrease is mainly attributable to the drop of passenger volume by 44% in the Gulf of Bothnia service following the abolition of duty- free sales on July 1, 1999. Duty- free sales continue on all Silja Line’s other routes. Of Silja’s three cruise ships, the Walrus and the Superstar Taurus are on bareboat charter in the Far East until late 2002. The third, Crown Dynasty, was sold to Commodore Holdings Ltd. in January, 2000, for $86 million, of which $24 million was in the form of a seller’s credit. Commodore ran into liquidity problems and filed for Chapter 11 in December, 2000. Silja has made a provision for a loss of $13.8 million. The trend of revenues on Silja Line’s main routes was satisfactory, and its gross revenues amounted to $466.2 million (1999 $474.5 million) and from other operations, mainly the cruise ships, $18.4 million (1999 $23 million). At the end of 2000, Silja’s interest bearing liabilities amounted to $386.9 million (1999 $453.3 million), of which $50.7 million (1999 $50.7 million) constituted a convertible subordinated bond loan. In addition to this, Silja has a capital loan of $7.4 million (1999 $7.4 million) entered as equity. Of its liabilities, the amount of $340.9 requires that, by decision of the respective One of SeaStreak’s New Jersey million was renegotiated with a syndicate of banks. governments, the cost level on Swedish and termini is at Highlands, where the company owns a large car Repayment will take place over eight years. Finnish passenger ships be placed on a par with park. SeaStreak’s service has As most of the reasons for the sharp deterioration the level of the other Nordic countries. A decision been operating to capacity, so of Silja Line’s result have been addressed, the on this question is expected shortly. Failing this, it has been necessary to add 400 extra parking spaces in basis for an improvement of the result from Silja will be forced to reflag its vessels to another 2000 in preparation for the operations has been created. EU country. arrival of the next generation Longer term, improvement in Silja’s performance of vessels in 2001.

17 Cargo Ships Ports Our two remaining containerships, the Puerto Revenue at Heysham was $13.5 million (1999 Cortes and the Boxer Captain Cook are on charter $13.5 million) and regulatory approval for its sale trading in the Arabian Gulf and Far East, has now been received so that disposal of this port respectively. One small ro-ro vessel was sold can be completed shortly. At Newhaven, revenue during the year, and two others remain laid-up totalled $3.6 million (1999 $4.3 million). At pending disposal or long-term charter work. Folkestone, revenue totalled $2.3 million (1999

18 SEA CONTAINERS LTD. Total revenue was 3.6% up on 1999. Shown here is Silja Line’s Prior to the Hatfield derailment, GNER was SuperSeaCat Four leaving Helsinki harbor for Tallinn, operating 125 departures per day. This was an Estonia, with the m.v. Silja increase of 13 over 1999 following the approval and Symphony behind. The Silja introduction in May, 2000 of two new Class 373/2 Symphony operates together with the Silja Serenade on the trainsets leased from Eurostar (UK) Ltd. These popular Helsinki to Stockholm new services, marketed as ‘White Rose’, run route, providing an overnight between King’s Cross and York and have been well service in each direction. The SuperSeaCat makes up to four received, especially by leisure passengers, with round trips daily in peak season initial volumes exceeding expectations. on the 42 nautical mile Helsinki 2000 saw continued product improvements with to Tallinn route. the launch of an improved on-board service for business passengers between Newcastle and London marketed as ‘Standard Plus’. This follows from a lengthy trial on Leeds-London, which saw an encouraging growth in revenue. New car parks opened at Wakefield and Peterborough have also proved popular with business passengers. GNER continued its success in improving the reliability of its fleet of electric locomotives with the signing of an important repair contract to complete a major overhaul and refurbishment of all 31 units. The first locomotive was completed by the end of 2000, and three are now in service. During 2000 GNER once again received recognition for the high quality of its customer service, winning a number of national rail awards including $2.3 million). A large part of Newhaven port was Best Train Operator, Best Station (Doncaster), recently sold to French interests for $22 million. Best Customer Experience and the U.K. Rail Industry Innovation Award for Customer Service. Rail During 2000, GNER carried 14.3 million passengers and had total revenue of $581 million, of which $495 million was passenger revenue. David G. Benson Senior Vice President

19 Analysis of division: Leisure

It has been an exciting year for our leisure success of the last few years. There has been investments under Orient-Express Hotels. The much press coverage of a possible recession and businesses have performed well, generating we are keeping a close eye on booking patterns. operating profits of $69 million, up from $62.2 We are not complacent but do take some comfort million in 1999 (which included $3.8 million from three characteristics of our business which one-time gains). Several acquisitions made a we believe will help buffer us should a recession significant contribution to our earnings, most occur. Orient-Express Hotels operates at the Simon M.C. Sherwood President, notably the two Australian hotels that we “super-luxury” end of the market, which has Orient-Express Hotels Ltd. purchased early in 2000 and the full year impact of proved very resilient in the past. We rely heavily our highly profitable Peruvian joint ventures. on leisure travelers (approximately 65% of our Hotels Alongside these new investments, our core guests) whereas most other companies in our Restaurants businesses progressed well and Orient-Express industry cater predominantly for business travelers Tourist trains River cruising Hotels showed a same store* operating profit who are much more price sensitive in difficult improvement of 9%, driven largely by 5% same times. Finally, our wide geographical mix of both store revpar growth. customers and operations means that we are not As a result of our growth and steadily improving overly reliant on any individual market. financial performance, Sea Containers was able to More detailed information on the performance of float Orient-Express Hotels on the New York the business is available in the 2000 annual report Stock Exchange on August 10, 2000. The initial of Orient-Express Hotels Ltd. public offering price of $19 equates to a market capitalization of about $600 million for the division. Our challenge in 2001 is to build upon the Simon M.C. Sherwood President, Orient-Express Hotels

Operating income Same store Same store figures exclude any $ millions $ millions properties not owned or managed by the company for all of 1999 and 2000.

Hotel Statistics Hotels represent over 85% of total leisure assets 69.0 Total Same store 62.2+ 55.7 2000 1999 2000 1999 51.2 Occupancy 68% 64% 68% 64% ADR** 271 289 271 273

REVPAR++ 185 186 184 175

**ADR = Average Daily Rate (for accommodation only) ++ REVPAR = Revenue Per Available Room (the rooms department revenue 1999 2000 1999 2000 divided by the number of lettable hotel rooms for each night of operation) + Includes $3.8 million one-time gains

*Same store = comparison of the same units operations, e.g. excluding the effect of any acquisitions

20 SEA CONTAINERS LTD. Below: Orient-Express Hotels district and overlooks the beach. acquired Lima, Peru's premier hotel, It complements the company's the Miraflores Park Plaza, early in other two Peruvian hotels, Hotel 2001. This stylish 81 room property Manasterio in Cuzco and the is located in Lima's most fashionable Machu Picchu Sanctuary Lodge.

21 The Paulista Containers cargo containers. Nearly all large container repair, Maritimos factory in Santos, non-specialized marine maintenance and storage Brazil, now builds mobile containers are now built in facility adjacent to the factory. telephone stations for the China, where prices are the Both the factory and depot burgeoning Brazilian telecoms lowest in the world. Paulista were profitable in 2000. industry, instead of marine Containers also maintains a

22 SEA CONTAINERS LTD. Analysis of division: Containers

2000 was a disappointing year. Although we containers which would, in due course, be achieved an excess of lease-outs over returns returned to surplus locations, to sales to existing through July, from August onwards we experienced lessees. So far approximately 55,000 of such a slowdown of demand in the Far East, particularly containers have been disposed of in this way, in Taiwan and Hong Kong, and this persisted removing the risk of return and the costs through February 2001. consequent upon return. This program will In March and April 2001 we have seen a better continue throughout 2001. Robert S.Ward balance restored and, although economic slow- Our European swapbody business has shown Senior Vice President, down in both the USA and Europe is predicted, great strength in 2000 and the first months of Containers our customers are expecting better demand in the 2001. The use of swapbodies, which replace road GE SeaCo Far East later in the year. We are well positioned trailers, is a major factor in the intra-European Container manufacturing to meet any demand, with stocks strategically cargo business. In particular we have captured Container depots placed throughout traditional Far East demand from our competitors the entire business of the areas. German Post Office – a vast European-wide Europe has shown a markedly better balance forwarding operation involved in far more than throughout 2000, particularly in Germany and just the carrying of mail. This contract, involving Benelux, the two main export areas of Northern new containers from our factories in the U.K., also Europe, and in Italy. The USA still has an excess involves profitable management of the servicing of import containerized cargo over export cargo and repair operations for the entire G.P.O. fleet, but we have been able to reduce lease-returns both owned and leased. there over the year. We have now built or have on order about 25,000 Prices of new containers have stabilized at about of our patented SeaCell units – a container that 14% above the low prices of 1999. The main does the job of a standard dry cargo container but, Chinese manufacturers once again shut down because of its their factories for six weeks over the winter innovative design, Divisional revenue Divisional operating income $ millions $ millions holidays period, and speculative buying by our has much more competitors is considerably down compared capacity to carry to last year. Reduced supply in the Far East standard pallets than 185.5 75.4 should improve our lease-out performance in the conventional designs. 154.9 151.9 61.6 future. Up until the 50.4 GE SeaCo with its partners are, as I reported last middle of last year, year, engaged in a substantial program of disposal market penetration of older idle units in surplus locations. This has of this type was been extended to the conversion of older on-lease mainly in smaller 1998 1999 2000 1998 1999 2000

23 Charleston Marine Containers closed-circuit markets in short-sea trades, and in 2000 than in previous years. Overcapacity led to has a long-term contract with the 2000 we made our first breakthrough into the lower prices and rates for standard tanks, and we U.S. Army to manufacture 35,000 containers, for pre-positioned large Japan/China trade. concentrated our investment on higher value supplies, called “Quadcons”, four However, we are now seeing signs that this type specialized types. Nevertheless, our tank business of which nest together in a 20ft of container will have a considerable future in the remains very profitable, with high utilization and standard container module. It also builds similar containers called major deep-sea trades. low operating costs. “Tricons” for the U.S. Marine Corps, Factory prices of SeaCells are still above those We are the largest lessor of refrigerated where three units nest into a 20ft for standard types, but as production runs grow so containers, a market which is growing rapidly as module. Other specialized types are manufactured for all the the gap is shrinking, and any minor difference in the container shipping lines compete head-to-head branches of the U.S. military. In price is well compensated by the additional cargo with conventional break-bulk operators to capture addition, the company assembles revenue earning capacity. their traditional traffic. over-the-road chassis for sale and lease. Our tank container business grew more slowly in The market is becoming largely one for 40ft high

24 SEA CONTAINERS LTD. The SeaDeck is a patented market. Yorkshire Marine also flatrack manufactured by Yorkshire manufactures significant quantities Marine Containers, the U.K. of intermodal road-to-rail manufacturing arm of the containers called “swapbodies”. company which only makes Shown here is a 40ft SeaDeck specialized container types, loaded with heavy metal coils primarily for the European in Buenos Aires, Argentina. cube units, which now comprise well over half our fleet. Utilization of this type is steady at over 90%, and leasing rates and prices are stable. For our older fleet of standard 20ft and 40ft refrigerated units we continue to develop domestic businesses in less-developed countries, mainly for use as cold stores. At the time of writing, the outbreak of foot and mouth disease in Europe, particularly in the U.K., is starting to produce refrigerated container shortages as Asia stops importing European meat and moves to other sources. Yorkshire Marine Containers, our three factories in the U.K., had another busy and profitable year. A large proportion of their output is now European swapbodies for GE SeaCo and for a variety of third-party customers. We have a number of mobile phones. Paulista established itself early as GE SeaCo is the largest lessor important patents on certain vital parts of the prime producer of these units and is expecting of refrigerated containers with 98,000 TEUs. Shown here is a swapbodies, particularly the 13.6 meter-long types substantial profitable orders over the coming years. Mediterranean Shipping – the maximum permitted length in Europe. Our other depot operations in the U.S., Singapore Company container ship with Demand from the U.S. military for Quadcon and Australasia had a satisfactory year. many of these units at the stern. Refrigerated containers containers built at our Charleston factory is very Our cost-cutting exercise is now well underway often vent cargo gasses which strong, and the entire factory is currently devoted with a view to taking many millions of dollars of build up during transit, so on- to this type. We have appointed a new overhead out of our business. We are, of course, deck storage is preferable to under-deck closed storage. management team which has transformed results, being careful not to compromise service and are and we are currently bidding for two more very increasingly moving to the internet for routine large contracts. matters. Paulista Containers Maritimos, our container depot and manufacturing operation in Santos, Brazil, had another active year. Deregulation of the telephone system, particularly in Brazil but Robert S. Ward Senior Vice President also in other South American countries, has produced a huge demand for relay stations for

25 Analysis of division: Property, Publishing and Plantations

The division includes tropical fruit farming, completed the sale of commercial land we owned property investment and development, adjacent to the port of Harwich in eastern England publishing, investor and corporate public relations, at a small surplus over book value. and a travel agency. The division also provides a We have now received planning permission for corporate personnel service. our intended 190,000 sq ft office building on the The housing market throughout the United Isle of Man. It will be the biggest commercial Kingdom fundamentally remained strong throughout development on the island and will be partly James A. Beveridge Vice President, Administration 2000. Interest-rate reductions have helped. occupied by the Isle of Man Steam Packet and Property The last 12 months have been the wettest in the Company. United Kingdom since records began. This has In Houston, Texas, we continue to sell plots of Plantations inevitably had an impact on the building industry, commercial land, and we now have 54 acres Property development with time lost to the bad weather. However, our available for sale. The land plots have been Publishing Corporate relations development of 55 residential units at Tortington provided with appropriate infrastructure. Fairways & Swinford travel Manor, near Arundel, Sussex, is progressing well, We manage Sea Containers House in London on and 13 have now been sold. We are very behalf of its owners until 2011. Our subsidiaries The Illustrated London News Group publishes 17 leisure and optimistic about the sales prospects for the occupy approximately 20% of the office space. “lifestyle” magazines, many for remaining units. We have recently commenced Our table grape farm in north eastern Brazil is subsidaries of Sea Containers, our development of 64 residential units on the performing according to plan. Two crops a year and it also maintains a photo llibrary and produces annual West Quay at the port of Newhaven and, despite are produced for the European markets. Currently, reports and sales aids. Not only the bad weather, site works are progressing well. 160 acres are producing seeded Italia grapes. 110 does this permit substantial During the year we acres of land has been planted with white seedless savings in print and design costs, The Illustrated London grapes, which should be harvested in commercial News also publishes magazines quantities for the first time in 2001. for outside interests at a profit. We have chosen a variety of seedless grapes suited to the harsh climatic conditions found at approximately 10˚ south of the equator. The new packing house and cold stores are functioning well, and more than 2,000 tons of fruit will be produced this year. 2000 was a difficult year for banana production in the Ivory Coast. Our 750-acre plantation just broke even. Political upheaval,

26 SEA CONTAINERS LTD. plantation just broke even. Political upheaval, was introduced. This unit principally services the Sea Containers Property Division is currently constructing with two coups, a world glut of bananas and severe publishing requirements of the group, but it also 19 town houses, six cottages weather conditions, all contributed to the poor publishes under contract to third parties. This and 30 apartments near result. There was also flagrant abuse of the annual report and other group publications are Arundel Castle in Sussex, England. The division also European Union banana import rules. These rules produced significantly more cheaply than they manages Sea Containers are in the process of being changed, and new rules would be if produced by third parties. House in London, the company’s are currently to be introduced in July. They should At Fairways & Swinford, our corporate travel port property interests, and controls design and construction help to stabilize the market. Banana prices in the business, we managed to maintain profit levels of buildings for the company’s world market have recently been strong due to a similar to 1999, which is a satisfactory subsidiaries. It sold Bathside decline in Central American production. achievement in a highly competitive market. Bay, a commercial property near Harwich, England, in 2000 Our publishing business, The Illustrated London at a premium over book value. News Group, now has 17 titles. During 2000, two titles were discontinued and advertising revenue was below budget. However, the business came under new management in November, a new contract was won and a program to reduce costs James A. Beveridge Vice President and increase advertising and contract fee revenue

27 Analysis of division: Finance

Cash flow from operations in 2000 was $89 million, acquisitions, and $33 million to finance container plus funds from the issuance of long-term debt of division and other assets. The above figures $236.1 million (including $89 million from include the refinancing of existing hotel assets refinancing existing assets) and the issuance of of $42 million and passenger transport assets of Sea Containers Ltd. common shares of $4.5 million, $47 million. a total $329.6 million. Of this amount, $190.7 Silja completed the bank refinancing of its fleet million was invested in capital additions (net of during 2000 for $350 million which has the effect Daniel J O’Sullivan Senior Vice President, proceeds from the sale of fixed assets of $27.6 of reducing loan repayments over the next three Finance and Chief Financial million), $62.7 million was repaid on long-term years by approximately $150 million. Officer debt (excluding $85 million prepaid on hotels out Under the terms of the company’s loan of the proceeds of the issue of Orient-Express agreements, the most restrictive covenants are Corporate finance Hotels Ltd. shares) and $18.9 million was paid in the leverage and interest coverage tests. At Information systems Insurance dividends on common and preferred shares, December 31, 2000, we had the ability to borrow leaving a surplus of $57.3 million. This surplus under the covenants a further $425 million. Bank was increased by net proceeds from the sale of finance has been arranged for the purchase of the Orient-Express Hotels shares of $198.5 million, two hotels so far committed to in 2001 for $37 out of which $142.2 million was used to repay million, and further planned capital expenditure working capital facilities and redrawable loans, and in 2001 will be covered by a combination of bank $85 million to prepay hotel debt, leaving, after debt, cash flow and existing liquidity. adjustments for foreign exchange and “other”, an Currently, the company has floating rate debt increase in cash for the year of $24.1 million. In of approximately $1 billion, of which $320 million addition to the cash on the balance sheet at is in Euros and the balance primarily in U.S. December 31, 2000 of $127.8 million, there were dollars. The company’s interest rate averaged 8% undrawn bank and other facilities of $172 million. in 2000 on total debt outstanding during the year. There were also a number of Orient-Express U.S. dollar interest rates have reduced by 2% per Hotels’ properties unfinanced at that date, as the annum since the beginning of 2001, which will debt on them had been prepaid and these reduce the cost of our floating rate debt in the properties were refinanced early in 2001 to the current year. sum of $90 million. Depending on market conditions, the company New long-term bank debt of $235 million was plans to sell a further 5,000,000 of its shares in borrowed in 2000, of which $118 million was Orient-Express Hotels Ltd., which would reduce used to finance passenger transport division its equity holding from 63% to 47%. We intend to assets including two 81-meter SeaCats, $85 spin off the balance of our shareholding in Orient- million to finance leisure division assets and Express Hotels to the company’s shareholders if

28 SEA CONTAINERS LTD. various conditions are met, such as approval by the profits are mainly taxable in the U.K., a high tax The company sold a major part company’s shareholders and compliance with its jurisdiction, but where we still have available tax of the port of Newhaven to French interests in early 2001 debt instruments. shelter, which has kept taxes to a minimum. but retained the Newhaven The company is currently in compliance with the Our management information systems yacht marina, which is being covenants in its major bank agreements and bond department devoted significant effort to the progressively upgraded. There is a shortage of marina indentures, and believes it will continue to be so development of web-based systems and dockage in the south of at the date of spin off. If the spin off had taken applications during 2000. In particular, tickets for England, and Newhaven is place at December 31, 2000, our debt would all the company’s ferry routes can be booked via conveniently located for the wealthy residential communities have reduced to $1.35 billion and net equity to the internet, and further options are being added south of London. $292 million. The company’s cash and available to the container business websites to assist bank and other loan facilities, excluding customers and suppliers. Container movements Orient-Express Hotels, amounted to $270 million processed by our computers in 2000 were 580,000 at December 31, 2000, and a substantial part of (558,000 in 1999) and ferry bookings were the cash could have been used to reduce debt. A 1,000,000 (1,200,000 in 1999). further sale of Orient-Express Hotels shares would We are carrying an insurance receivable of increase equity and the proceeds could be used to $22 million with respect to the Hatfield rail repay debt. accident, at December 31, 2000. The company’s tax charge in 2000 of $7 million includes $6 million on its Orient-Express Hotels subsidiary since most of the hotels operate in high tax jurisdictions. Our passenger transport division Daniel J O’Sullivan Senior Vice President

29 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, customer demand and competitive considerations, inability to increase prices or reduce costs, seasonality and adverse weather conditions, uncertainty of achieving a GNER franchise replacement and acceptability of proposed terms, satisfaction of necessary conditions for a spinoff of Orient-Express Hotels shares (including sale of additional shares, debt compliance, shareholder and Board approval, and receipt of an appropriate U.S. tax opinion) and delay or abandonment of that transaction, interest rate and currency value fluctuations, variable fuel prices, variable container prices and market acceptance of new container types, potentially unstable relations with labor unions, uncertainty of negotiating and completing proposed purchase, sale or capital expenditure transactions, adequate sources of capital and acceptability of finance terms, global, regional and industry economic conditions, shifting patterns of world trade and tourism, realization of bookings and reservations as revenue, changes in ferry service and ship deployment plans, inability of Railtrack to restore the U.K. rail infrastructure promptly and uncertainty of claims against Railtrack and insurers, recovery of the U.K. passenger rail market following the Hatfield derailment, and legislative, regulatory and political developments. 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.

30 SEA CONTAINERS LTD. Financial Review

Contents Report of independent auditors 32 Consolidated balance sheets 33 Statements of consolidated operations 34 Statements of consolidated cash flows 35 Statements of consolidated shareholders’ equity 36 Notes to consolidated financial statements 37 Five-year performance (unaudited) 54 Summary of quarterly earnings (unaudited) 55 Price range of common shares and dividends (unaudited) 57 Shareholder and investor information 58

31 Report of Independent Auditors

March 9, 2001 In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Sea Containers Board of Directors and Shareholders Ltd. and subsidiaries as of December 31, 2000 and 1999, and the Sea Containers Ltd. results of their operations and their cash flows for each of the Hamilton, Bermuda three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States We have audited the accompanying consolidated balance sheets of America. of Sea Containers Ltd. and subsidiaries as of December 31, 2000 and 1999, and the related consolidated statements of operations, As disclosed in Note 1 to the consolidated financial statements, shareholders' equity and cash flows for each of the three years in effective January 1, 1999, the company adopted Statement of the period ended December 31, 2000. These consolidated financial Position No. 98-5, Reporting on the Costs of Start-Up Activities. statements are the responsibility of the company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a Deloitte & Touche LLP test basis, evidence supporting the amounts and disclosures in the Two World Financial Center consolidated financial statements. An audit also includes assessing New York, New York 10281-1414 the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement Tel: (212) 436-2000 presentation. We believe that our audits provide a reasonable Fax: (212) 436-5000 basis for our opinion. www.us.deloitte.com

32 SEA CONTAINERS LTD. & SUBSIDIARIES Consolidated Balance Sheets

Year ended December 31, 2000 1999 $000 $000 Assets Cash 127,833 103,763 Accounts receivable,net of allowances of $8,263 and $22,114 214,284 220,764 Asset sale receivables 31,929 29,952 Advances on asset purchase contracts 12,630 11,755 Containers at cost,less accumulated depreciation of $504,996 and $462,390 651,061 673,517 Ships at cost,less accumulated depreciation of $122,614 and $103,032 370,619 327,036 Assets under capital leases 17,806 15,458 Real estate and other fixed assets at cost,less accumulated depreciation of $172,641 and $155,950 752,690 729,369 Inventories 55,221 53,249 Investments 244,392 213,641 Other assets 130,525 136,913 2,608,990 2,515,417 Liabilities and Shareholders’ Equity Working capital facilities 35,004 43,755 Accounts payable and accrued liabilities 244,192 245,809 Manufacturer accounts payable,notes payable,bank loans and other purchase obligations in respect of containers 402,472 509,703 Mortgage loans in respect of ships 233,271 214,553 Obligations under capital leases 14,540 10,828 Bank loans in respect of real estate and other fixed assets 425,009 412,545 Senior notes 428,603 428,662 Senior subordinated debentures 124,209 123,994 Deferred revenue and taxes 29,179 33,652 Minority interest 147,954 6,435 2,084,433 2,029,936 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 - 16,843,752 shares (1999 - 16,556,733) 168 166 Class B common shares $.01 par value (60,000,000 shares authorized): Issued - 14,584,925 shares (1999 - 14,706,225) 146 147 Paid-in capital 351,590 319,816 Retained earnings 724,720 697,721 Translation adjustment (175,806) (156,108) Less:reduction due to class B common shares acquired with voting rights by subsidiaries - 12,900,500 shares at cost (391,261) (391,261) Total shareholders’ equity 509,557 470,481 Commitments and contingency - - 2,608,990 2,515,417 See notes to consolidated financial statements.

33 Statements of Consolidated Operations

Year ended December 31, 2000 1999 1998 (except per share amounts) $000 $000 $000 Revenue 1,297,103 1,306,742 1,259,598 Other revenue 63,634 32,327 6,935 Total revenue 1,360,737 1,339,069 1,266,533 Expenses: Depreciation and amortization 111, 510 104,706 106,203 Operating 901,939 897,171 817,391 Selling, general and administrative 167,088 156,277 171,084 Total expenses 1,180,537 1,158,154 1,094,678 Earnings from operations before net finance costs 180,200 180,915 171,855 Interest expense (net of capitalized interest) (136,984) (118,958) (115,013) Interest and related income 15,930 4,697 6,792 Net finance costs (121,054) (114,261) (108,221) Earnings before minority interest, income taxes and cumulative effect of change in accounting principle 59,146 66,654 63,634 Minority interest (6,185) - - Provision for income taxes 7,000 5,002 4,950 Earnings before cumulative effect of change in accounting principle 45,961 61,652 58,684 Cumulative effect of change in accounting principle - (12,306) - Net earnings 45,961 49,346 58,684 Preferred share dividends 1,088 1,088 4,419 Net earnings on class A and class B common shares 44,873 48,258 54,265 $ $$ Earnings per class A and class B common share: Basic: Earnings before cumulative effect of change in accounting principle 2.42 3.30 3.34 Cumulative effect of change in accounting principle - (0.67) - Net earnings 2.42 2.63 3.34 Diluted: Earnings before cumulative effect of change in accounting principle 2.42 3.27 3.11 Cumulative effect of change in accounting principle - (0.65) - Net earnings 2.42 2.62 3.11 Dividends per class A common share 0.975 1.10 0.885 Dividends per class B common share 0.878 0.9945 0.8045

See notes to consolidated financial statements.

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

Year ended December 31, 2000 1999 1998 $000 $000 $000 Cash flows from operating activities: Net earnings on class A and class B common shares 44,873 48,258 54,265 Add non-cash effect of change in accounting principle - 12,306 - 44,873 60,564 54,265 Adjustments to reconcile net earnings to net cash provided by operating activities: Preferred share dividends 1,088 1,088 4,419 Depreciation and amortization 111, 510 104,706 106,203 Undistributed (earnings)/losses of affiliates and other non-cash items (22,539) (23,375) 323 (Gains)/losses from sale of assets (38,991) 1,443 4,059 Change in assets and liabilities net of effects from acquisition of subsidiaries: Increase in accounts receivable (7,122) (10,535) (12,044) Increase in inventories (5,558) (8,327) (3,994) Increase/(decrease) in accounts payable 5,701 (14,958) 1,136 Total adjustments 44,089 50,042 100,102 Net cash provided by operating activities 88,962 110,606 154,367 Cash flows from investing activities: Capital expenditures (161,662) (158,423) (153,666) Acquisitions and investments, net of cash acquired (56,580) (159,206) (83,888) Proceeds from sale of fixed assets and other 27,574 21,113 6,868 Net cash used in investing activities (190,668) (296,516) (230,686) Cash flows from financing activities: Issuance of common shares 4,534 1,706 33,049 Issuance of preferred shares - - 15,000 Issuance of long-term debt 236,095 143,717 157,009 Issuance of senior notes - 110,611 146,762 Issuance of OEH shares by OEH 85,527 -- Sale of OEH shares by SCL 112,986 -- Principal payments under long-term debt (147,726) (53,913) (53,234) Payment of preferred share dividends (1,088) (1,088) (4,419) Payment of common share dividends (17,874) (19,966) (14,296) Redemption of preferred shares - - (36,497) Redemption of debentures - - (10,000) Other (159) -- 272,295 181,067 233,374 Working capital facilities and redrawable loans (repaid)/drawn (142,179) 7,860 (142,880) Net cash provided by financing activities 130,116 188,927 90,494 Total cash flows 28,410 3,017 14,175 Effect of exchange rate changes on cash (4,340) (3,982) (88) Net increase/(decrease) in cash 24,070 (965) 14,087 Cash at beginning of year 103,763 104,728 90,641 Cash at end of year 127,833 103,763 104,728 See notes to consolidated financial statements.

35 Statements of Consolidated Shareholders’ Equity

$4.00 Class A Class B Convertible Common Common Accumulated Common Cumulative Shares Shares Other Shares Total Preferred at Par at Par Paid-in Retained Comprehensive Held by Comprehensive Shares Value Value Capital Earnings Income (Loss) Subsidiaries Income $000 $000 $000 $000 $000 $000 $000 $000 Balance, January 1, 1998 109,650 113 150 176,258 629,460 (136,792 ) (391,261) Issuance of class A common shares under dividend reinvestment plan - - - 274 - - - Issuance of common shares under employee stock option plan - - - 221 - - - Issuance of class A common shares in public offering and private placement, net of issuance costs - 11 - 32,543 - - - Redemption of convertible preferred shares (797) ------Conversion of convertible preferred shares to common shares (108,853) 28 10 108,815 - - - Conversion of class A and B common shares - 7 (7 ) - - - - Dividends on common shares - - - - (14,296 ) - - Comprehensive income: Net earnings on common shares for the year - - - - 54,265 - - 54,265 Other comprehensive income - translation adjustment for the year - - - - - (244 ) - (244) 54,021 Balance, December 31, 1998 - 159 153 318,111 669,429 (137,036) (391,261) Issuance of class A common shares under dividend reinvestment plan - - - 314 - - - Issuance of common shares under employee stock option plan - - - 89 - - - Issuance of class A common shares in public offering, net of issuance costs - 1 - 1,302 - - - Conversion of class A and B common shares - 6 (6 ) - - - - Dividends on common shares - - - - (19,966 ) - - Comprehensive income: Net earnings on common shares for the year - - - - 48,258 - - 48,258 Other comprehensive income - translation adjustment for the year - - - - - (19,072 ) - (19,072) 29,186 Balance, December 31, 1999 - 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 A and 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 Translation adjustment 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) See notes to consolidated financial statements.

36 SEA CONTAINERS LTD. & SUBSIDIARIES Notes to Consolidated Financial Statements (d) Other assets Other assets include goodwill of $33,924,000 (1999-$35,590,000) 1. Summary of significant accounting policies arising upon the purchase of subsidiaries which is written off over periods up to 40 years by the straight-line method. (a) Principles of consolidation (e) Revenue recognition The consolidated financial statements include the accounts of Revenues are recognized when a service is performed or a Sea Containers Ltd. and all majority-owned subsidiaries. All product is shipped. With respect to sales-type leases, a gain or loss significant intercompany balances and transactions have been is calculated in accordance with Statement of Financial Accounting eliminated. Unconsolidated companies that are 20 to 50% owned Standards ("SFAS") No. 13 of the Financial Accounting Standards are accounted for on an equity basis. Board and included in revenue. For purposes of these Notes, the 'company' refers to In 2000, $21,600,000 has been recorded in revenue relating Sea Containers Ltd. and 'SCL' refers to Sea Containers Ltd. and its to insurance claims by GNER, mainly in respect of the disruption subsidiaries. 'OEH' refers to Orient-Express Hotels Ltd., a majority- to GNER's services following a derailment of a GNER train on owned subsidiary of the company, 'GE SeaCo' refers to GE SeaCo October 17, 2000, due to broken track and the consequent SRL, a container leasing joint venture company between the imposition of speed restrictions on much of the rail system in Britain company and General Electric Capital Corporation, and 'GNER' for several months. The amount is included in accounts receivable refers to Great North Eastern Railway Ltd., a wholly-owned at December 31, 2000. subsidiary of the company and operator of SCL's passenger rail (f) Other revenue franchise in Great Britain. 'Silja' refers to Silja Oyi Abp, a 50% Other revenue comprises gains/(losses) on asset sales of owned affiliate based in Finland. $35,040,000 in 2000 (1999 - $2,733,000, 1998 - $1,881,000), Certain items in 1999 and 1998 have been reclassified to conform mainly a gain on the sale of OEH shares of $36,000,000 (see Note with the current year's presentation. The reclassifications have no 1(o)), and earnings from unconsolidated companies (see Note 2(b)). effect on net earnings as previously reported. (g) Government subsidy (b) Containers, ships, real estate and other fixed assets Included in operating expenses is an amount received from the Containers and ships are recorded at cost and, after allowance for British government in respect of GNER. In 2000 this amounted to salvage value, are depreciated over their estimated useful lives by the $14,000,000 (1999 - $36,000,000, 1998 - $69,000,000). straight-line method. The estimated useful life and salvage value for (h) Inventories containers are generally 20 years and 20%, respectively, and for Inventories are valued at the lower of cost or market value under the ships generally 20 to 25 years and 15 to 5%, respectively. first-in, first-out method. Container assets are revenue-earning under operating leases. (i) Earnings per share The financial statements reflect rentals as revenue. Basic earnings per class A and class B common share for each When a gain on the sale of container or ship assets is recognized year are computed by dividing net earnings on class A and class B and payment is deferred, such gain is recorded after applying the common shares by the weighted average number of common shares present value to any receivables beyond one year's maturity. outstanding (excluding voting shares owned by subsidiaries). Real estate, tourist train and other fixed assets are recorded at Diluted earnings per class A and class B common share for each cost and are depreciated over their estimated useful lives by the year are computed by dividing net earnings reduced for the straight-line method. The depreciation rates on freehold buildings non-convertible preferred share dividend requirements by the sum and tourist train assets range from 35 to 60 years and on of the weighted average number of common shares outstanding machinery and other remaining assets from 5 to 25 years. (excluding voting shares owned by subsidiaries), the weighted Leasehold improvements are depreciated over the shorter of average number of shares reserved for conversion of outstanding the estimated useful life or the respective lease term. convertible preferred shares (if dilutive) and the dilutive effect of (c) Foreign currency translation stock options. Diluted earnings per class A and class B common Foreign subsidiary income and expenses are translated into U.S. share were the same as basic for 2000 as the conversion of dollars, SCL's reporting currency, at the average rates of exchange convertible securities and stock options did not affect the prevailing during the year. The assets and liabilities are translated computation. into U.S. dollars at the rates of exchange on the balance sheet The number of shares used in computing basic and diluted date and the related translation adjustments are included in earnings per share at year end was as follows (in thousands): accumulated other comprehensive income (loss). No income taxes are provided on the translation adjustments as management does not expect that such gains or losses will be realized. Foreign December 31, 2000 1999 1998 currency transaction gains and losses are recognized in operations Basic 18,507 18,334 16,244 as they occur. Diluted 18,995 18,832 18,384

37 Notes to Consolidated Financial Statements continued the provisions of SEC Staff Accounting Bulletin No. 51. (p) Recent accounting pronouncements (j) Capitalized interest In 1999, SCL adopted Statement of Position No. 98-5, "Reporting on SCL capitalizes interest during the construction of assets. Interest the Costs of Start-Up Activities", of the American Institute of Certified has been capitalized in the amount of $1,365,000 in 2000 Public Accountants. This required SCL to write-off $12,306,000 in the (1999 - $1,928,000, 1998 - $1,392,000). first quarter of 1999 representing mainly deferred start-up costs of (k) Interest and related income container manufacturing facilities and cruise operations which may Interest and related income in 2000 includes a gain of $13,000,000 no longer be carried forward under this Statement. relating to the sale of a foreign currency swap, and foreign exchange In June 1998, the Financial Accounting Standards Board issued gains in 2000 of $536,000 (1999 - $2,959,000, 1998 - $4,079,000). SFAS No. 133, "Accounting for Derivative Instruments and Hedging Also included is interest on receivables related to sales-type leases. Activities", as amended by SFAS No. 137 and 138. SFAS No. 133 (l) Estimates requires SCL to record all derivatives on the balance sheet at fair The preparation of financial statements in conformity with generally value. Changes in derivative fair values will either be recognized in accepted accounting principles requires management to make earnings as offsets to the changes in fair value of related hedged estimates and assumptions that affect the reported amounts of assets assets, liabilities and firm commitments or, for forecasted transactions, and liabilities and the disclosure of contingent assets and liabilities at deferred and recorded as a component of shareholders' equity until the date of the financial statements and the reported amounts of the hedged transactions occur and are recognized in earnings. The revenues and expenses during the reporting period. Actual results ineffective portion of a hedging derivative's change in fair value will could differ from those estimates. be immediately recognized in earnings. For the impact of the initial (m) Stock-based compensation adoption of SFAS No. 133, see Note 17(a). SFAS No. 123, 'Accounting for Stock-Based Compensation', of the Financial Accounting Standards Board encourages, but does 2. Acquisitions and investments not require, companies to record compensation cost for stock-based employee compensation plans at fair value. SCL has chosen to (a) Acquisitions continue to account for stock-based compensation using the intrinsic On March 24, 2000, OEH acquired the Observatory and Lilianfels value method prescribed in Opinion No. 25, 'Accounting for Stock Hotels in Australia for an aggregate purchase price of approximately Issued to Employees', as amended, of the Accounting Principles $40,000,000. The purchase has been substantially financed by a Board and related interpretations. Accordingly, compensation cost bank loan. for share options is measured as the excess, if any, of the quoted Effective July 1, 1999, SCL acquired the 50% interest in the joint market price of the company's shares at the date of the grant over venture company which it did not already own that operated the the amount an employee must pay to acquire the shares. Dover-Ostend ferry service using two SeaCats on charter from Compensation expense for stock appreciation rights is recorded Holyman Ltd. The purchase price was nominal, but the purchase annually based on the quoted market price of the company's agreement obligated SCL to acquire the two SeaCats at a cost of shares at the end of the period. See Note 13. $25,800,000 each, which was completed on March 30, 2000, (n) Impairment of long-lived assets and funded by ship mortgage loans. Long-lived assets and certain identifiable intangible assets are reviewed On May 6, 1999, OEH acquired Ashley House Inc., owner of by SCL whenever events or changes in circumstances indicate that the Keswick Hall near Charlottesville, Virginia, and Inn at Perry Cabin in carrying amount of the assets may not be recoverable. In the event that St. Michaels, Maryland. The $25,500,000 purchase price was paid an impairment occurs, the fair value of the related asset is estimated, and in cash and funded in part by a bank loan. SCL records a charge to income calculated by comparing the asset's On July 29, 1998, OEH acquired the Lapa Palace Hotel in Lisbon, carrying value to the estimated fair value. Portugal, at a purchase price of $25,000,000 paid in cash and notes (o) Initial public offering of OEH shares payable to the seller. On June 23, 1998, OEH acquired the Hotel In the initial public offering of OEH in August 2000, OEH sold Quinta do Lago near Faro, Portugal, at a purchase price of 5,000,000 of its newly issued class A common shares and the company $27,000,000 paid in cash and notes payable to the seller. The cash concurrently sold an additional 6,500,000 existing class A common elements of these purchases were funded by bank loans. shares of OEH, all at a price of $19.00 per share. OEH received The purchase prices paid for these acquisitions approximated the proceeds net of related costs of $85,527,000 from its primary offering fair value of the net tangible and intangible assets acquired, and any and SCL received proceeds net of related costs of $112,986,000 from its resulting goodwill was not material. secondary sale. As a result, SCL recognized in revenue in 2000 a gain All of the above acquisitions have been accounted for as purchases of $36,000,000 relating to its sale of existing OEH shares and a further and, accordingly, the assets and liabilities of the acquired companies gain of $27,241,000 which was recorded directly to shareholders’ equity have been recorded at their fair value at the date of acquisition. The in respect of the primary offering of shares by OEH in accordance with operating results of the acquired companies have been included in

38 SEA CONTAINERS LTD. & SUBSIDIARIES SCL's consolidated statements of operations from the effective dates shareholders from whom SCL acquired this investment have of acquisition. Pro forma data have not been presented as the a contractual right to sell the balance of their shares in Silja to revenues and net income resulting from these acquisitions would SCL in April 2002, representing up to an additional 26% of not have had a material impact in the year of acquisition. shares outstanding, at a total price of approximately $40,000,000. (b) Investments This amount is payable at SCL's option in cash or class A common SCL does not have effective control of these unconsolidated shares of the company. companies and, therefore, accounts for these investments using the On March 31, 1999, OEH acquired for $10,000,000 a 50% equity method. Investments represent equity interests of 20 to 50% interest in a joint venture company that bought two hotels in Peru, in any unconsolidated companies. the Hotel Monasterio del Cusco and the Machu Picchu Sanctuary On September 21, 1999, OEH acquired a 50% interest in a Lodge. OEH is managing these properties. joint venture company to which the Peruvian government awarded The 50% owned GE SeaCo joint venture began operations long-term concessions to operate the Southern and Machu Picchu with effect from May 1, 1998. SCL contributed approximately lines of the state-owned railway system in Peru. OEH has been $12,300,000 of GE SeaCo's initial equity capital of approximately appointed manager of the concessions and rail services which $27,500,000, and provided 30% of the initial $35,000,000 operate under the name PeruRail. No payment was required to principal amount of loans to GE SeaCo from the joint venture partners. acquire the concessions other than the purchase of spare parts and SCL's share of the net earnings of its equity investments as well office equipment of which OEH's share amounted to $1,750,000. as interest income related to loans and advances to the equity During the second quarter of 1999, SCL purchased a 50% interest investees amounted to $5,941,000 in 2000 (1999 - $5,790,000, in Silja, a ferry company based in Finland and listed on 1998 - $5,086,000). the Helsinki Exchanges. The cash purchase price was $102,800,000 Summarized financial data for SCL's unconsolidated companies funded initially by a bank loan to SCL, which was refinanced by for the periods during which the investments were held by SCL are the issue of 103/4% senior notes due 2006 (see Note 8). The as follows:

Year ended December 31, 2000 1999 $000 $000 Current assets 233,752 205,495 Property, plant and equipment 998,246 1,027,452 Other assets 31,163 30,906 Total assets 1,263,161 1,263,853 Current liabilities 275,543 373,016 Long-term debt 655,168 608,382 Other liabilities 57,265 51,899 Total shareholders’ equity 275,185 230,556 Total liabilities and shareholders’ equity 1,263,161 1,263,853

Year ended December 31, 2000 1999 Revenue 947,106 854,106 Earnings from operations before net finance costs 59,278 88,006 Net income 7,120 37,757

39 Notes to Consolidated Financial Statements continued

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

Year ended December 31, 2000 1999 $000 $000

Freehold and leased land and buildings 658,214 626,938 Machinery and equipment 166,966 161,861 Fixtures, fittings and office equipment 100,151 96,520 925,331 885,319 Less: accumulated depreciation 172,641 155,950 752,690 729,369

4. Asset sale receivables Asset sale receivables of $31,929,000 at December 31, 2000, at present value discounted at an average rate of 8.28% per annum, are collectible as follows:

Year ended December 31, $000

2001 14,427 2002 5,977 2003 3,633 2004 4,109 2005 2,972 2006 and thereafter 811 31,929

5. Capital leases The following is an analysis of assets leased under capital leases by major classes at year end:

Year ended December 31, 2000 1999 $000 $000

Containers - 8,819 Machinery and equipment 9,767 10,594 Real estate and other fixed assets 18,286 16,895 28,053 36,308 Less: accumulated depreciation 10,247 20,850 17,806 15,458

40 SEA CONTAINERS LTD. & SUBSIDIARIES 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, 2000:

Year ended December 31, $000

2001 4,781 2002 4,517 2003 3,797 2004 2,693 2005 977 2006 and thereafter 98 Minimum lease payments 16,863 Less: amount of interest contained in above payments (1) 2,323 Present value of minimum lease payments 14,540

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

6. Working capital facilities Working capital facilities at December 31are comprised of the following, all repayable within one year: Year ended December 31, 2000 1999 $000 $000 Working capital facility secured by certain assets, with an interest rate of 7.00 and 6.50%, respectively 5,571 362 Unsecured working capital facilities, with a weighted average interest rate of 7.29and 7.40%, respectively 29,433 43,393 35,004 43,755

There are additional working capital lines of credit, currently in place but not drawn, amounting to $172,000,000 (1999 - $72,000,000), of which $120,000,000 (1999 - $34,000,000) is undrawn under secured revolving credit facilities (see Note 7). The working capital facilities are issued by various financial institutions and have various expiration dates.

41 Notes to Consolidated Financial Statements continued

7. Long-term debt Long-term debt at year end consists of the following: Year ended December 31, 2000 1999 $000 $000 Container manufacturer accounts payable, notes payable and bank loans payable over periods of 4 to 9years, with a weighted average interest rate of 7.87 and 7.24%, respectively 402,472 509,703 Ship mortgage loans payable over periods of 4 to 10 years, with a weighted average interest rate of 6.73 and 6.04%, respectively 233,271 214,553 Loans from banks secured by real estate and other fixed assets payable over periods of1 to 12years, with a weighted average interest rate of 7.05and 6.46%, respectively 425,009 412,545 1,060,752 1,136,801

Most containers are secured to financial institutions as collateral for debt obligations. The ship mortgage loans are secured by first or second mortgages on the vessels and are shown net of cash totalling $1,122,500 (1999 - $1,122,500) which is held as security for, or otherwise allocated to, repayment of obligations in respect of certain cargo ships. Included in container long-term debt is a revolving credit facility with a group of banks amounting to $220,000,000 secured by container equipment. SCL may borrow on a revolving basis until October 25, 2004, and must repay the balance outstanding at that date. Interest on the facility ranges from 1.25 to 1.70% over LIBOR. At December 31, 2000, $170,000,000 was available under this facility of which $50,045,000 (1999 - $193,546,000) was outstanding. Also included in long-term debt is a $350,000,000 securitization facility with a nine-year term secured by container equipment. An SCL subsidiary issued a senior note in the principal amount of $291,700,000 which is non-recourse to the company and its other subsidiaries, bears interest only until October 20, 2001, and thereafter amortizes over eight years. The company has issued an effectively subordinated $58,300,000 revolving credit note for the balance of the facility. The overall interest rate is approximately 1.10 to 1.32% over LIBOR. At December 31, 2000, $350,000,000 (1999 - $350,000,000) was outstanding under this facility. At December 31, 2000, SCL was in full compliance with all the requirements of the credit and financing agreements evidencing its long-term debt. These requirements included financial covenants to maintain specified minimum debt service coverage and minimum interest coverage and not to exceed specified leverage. The carrying value of the long-term debt approximated its fair value due to the variable-rate nature of the respective borrowings. The following is a summary of the aggregate maturities of long-term debt at December 31, 2000:

Year ended December 31, $000 2001 116,527 2002 143,498 2003 101,718 2004 183,858 2005 94,568 2006 and thereafter 420,583 1,060,752

In addition, syndicates of banks have provided GE SeaCo with $272,500,000 credit facilities to fund new container purchases, of which $100,000,000 each is guaranteed by the company and General Electric Capital Corporation. At December 31, 2000, GE SeaCo had borrowed $225,000,000 (1999 - $128,800,000) under these facilities. Also SCL has guaranteed a $7,500,000 bank loan to Charleston Center LLC, owner of Charleston Place Hotel, and a $2,000,000 bank loan to Eastern & Oriental Express Ltd., in each of which SCL owns a minority shareholder interest.

42 SEA CONTAINERS LTD. & SUBSIDIARIES 8. Senior notes and subordinated debentures interest at 7 7/8% per annum, payable semi-annually. They are redeemable, in whole or in part, at the option of the company At December 31, 2000, SCL was in compliance with all the covenants at an initial price of 103.938% of the principal amount commencing in its senior notes and subordinated debentures. on February 15, 2003, and thereafter declining to 100% of the principal amount on and after February 15, 2005. The notes may (a) 91/2% senior notes due 2003 also be redeemed by the company in the event of certain tax law The aggregate principal amount of these notes is $100,000,000 changes. The notes have no sinking fund requirement and come due and they bear interest at 91/2% per annum, payable semi-annually. on February 15, 2008. In the event a change in control of the They are redeemable, in whole or in part, at the option of the company occurs, it is obligated to make an offer to purchase the company at a price of 100% of the principal amount. The notes may notes at a price of 101% of the principal amount. The fair value of also be redeemed by the company in the event of certain tax law these notes at December 31, 2000, was approximately $99,000,000 changes. The notes have no sinking fund requirement and come due (1999 - $131,000,000) based upon available market quotes. on July 1, 2003. In the event a change in control of the company (e) 121/2% senior subordinated debentures due 2004 occurs, it is obligated to make an offer to purchase the notes at a The aggregate principal amount of these debentures is $125,000,000 price of 101% of the principal amount. The fair value of these notes and they bear interest at 121/2% per annum, payable semi-annually. as of December 31, 2000, was approximately $80,000,000 The company issued these debentures in two tranches. The first (1999 - $95,000,000) based upon available market quotes. tranche ($100,000,000 principal amount designated series A) (b) 101/2% senior notes due 2003 was sold at a discount while the second ($25,000,000 principal The aggregate principal amount of these notes is $65,000,000 amount designated series B) was sold at a premium, both of which and they bear interest at 101/2% per annum, payable semi-annually. are being amortized over the life of the debentures. The effective They are redeemable, in whole or in part, at the option of the annual interest rate on the total principal amount is 12.75%. The company at an initial price of 105.25% of the principal amount debentures are subordinated to all existing and future superior commencing on July 1, 2000, and thereafter declining to 100% of the indebtedness, but rank senior to certain subordinated indebtedness, principal amount on and after July 1, 2002. The notes may also be and are redeemable, in whole or in part, at the option of the redeemed by the company in the event of certain tax law changes. company at a price of 106.25% of the principal amount, declining The notes have no sinking fund requirement and come due on July 1, to 100% of the principal amount on and after December 1, 2001. 2003. In the event a change in control of the company occurs, it is The debentures may also be redeemed by the company in the obligated to make an offer to purchase the notes at a price of 101% event of certain tax law changes. The debentures have no sinking of the principal amount. The fair value of these notes as of December fund requirement and come due on December 1, 2004. In the event 31, 2000, was approximately $53,000,000 (1999 - $62,000,000) a change in control of the company occurs, it is obligated to make based upon available market quotes. an offer to purchase the debentures at a price of 101% of the (c) 103/4% senior notes due 2006 principal amount. The fair value of these debentures as of December On October 18, 1999, the company issued and sold an 31, 2000, was approximately $101,000,000 (1999 - $128,000,000) aggregate principal amount of $115,000,000 of these notes based upon available market quotes. at a discount to yield 11% per annum. They bear interest (accruing from the date of issue) at 103/4% per annum, payable semi-annually. They 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 15, 2003, declining to 100% of the principal amount on and after October 15, 2005. The notes may also be redeemed by the company in the event of certain tax law changes. The notes have no sinking fund requirement and come due on October 15, 2006. In the event a change in control of the company occurs, it is obligated to make an offer to purchase the notes at a price of 101% of the principal amount. These notes were not actively traded on or about December 31, 2000, and accordingly no third party quotes were available. The fair value of these notes as of December 31, 1999, was estimated to be approximately $114,000,000. (d) 77/8% senior notes due 2008 On February 19, 1998, the company issued and sold an aggregate principal amount of $150,000,000 of these notes at par. They bear

43 Notes to Consolidated Financial Statements continued

9. Pension plans SCL has pension plans covering substantially all of its employees. The significant plans are three 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, common trust 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, 2000 1999 1998 % % % Discount rate* 6.0 6.0 5.5 Assumed rates of compensation increases 3.5 3.5 3.5 Expected long-term rate of return on plan assets 6.5 6.5 6.5

* 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 three plans were as follows:

Year ended December 31, 2000 1999 $000 $000 Change in benefit obligation: Benefit obligation at beginning of year 150,352 134,835 Service cost 4,418 3,757 Interest cost 8,471 7,13 8 Plan participants’ contributions 1,563 1,620 Actuarial gain 3,497 12,568 Benefits paid (4,536) (5,383) Foreign currency translation (11,384) (4,183) Benefit obligation at end of year 152,381 150,352 Change in plan assets: Fairvalue of plan assets at beginning of year 171,906 139,320 Actual return on plan assets (9,700) 36,737 Employer contributions 5,135 4,037 Plan participants’ contributions 1,563 1,620 Benefits paid (4,536) (5,383) Foreign currency translation (12,713) (4,425) Fairvalue of plan assets at end of year 151,655 171,906 Funded status (726) 21,554

Unrecognized net actuarial loss/(gain) 8,478 (16,335) Unrecognized prior service cost 1,317 1, 799 Unrecognized transition amount 457 541 Prepaid benefit cost 9,526 7, 559

44 SEA CONTAINERS LTD. & SUBSIDIARIES The components of net periodic benefit cost consisted of the following:

Year ended December 31, 2000 1999 1998 $000 $000 $000 Service cost 4,418 3,757 3,531 Interest cost on projected benefit obligation 8,471 7,138 8,023 Expected return on assets (10,495) (8,879) (9,879) Net amortization and deferrals 178 543 418 Net periodic benefit cost 2,572 2,559 2,093

The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for another pension plan with accumulated benefit obligations in excess of plan assets at December 31, 2000, were $26,431,000, $25,728,000 and $24,484,000, 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 2000 was $6,692,000 (1999 - $4,265,000). These amounts are excluded from the amounts disclosed above relating to the three significant defined benefit plans.

10. Income taxes Income taxes provided by SCL relate principally to its foreign subsidiaries as pre-tax income is primarily foreign. The provision for income taxes consisted of the following:

Year ended December 31, 2000 Year ended December 31, 1999 Year ended December 31, 1998 Current Deferred Total Current Deferred Total Current Deferred Total $000 $000 $000 $000 $000 $000 $000 $000 $000 United States 2,762 (18) 2,744 2,472 500 2,972 1,068 - 1,068 Other foreign 4,533 (277) 4,256 2,877 (847) 2,030 2,816 1,066 3,882 7,295 (295) 7,000 5,349 (347) 5,002 3,884 1,066 4,950

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 liabilities recognized in the consolidated balance sheets at year end are comprised of the following:

Year ended December 31, 2000 1999 $000 $000 Gross deferred tax assets (operating loss carry forwards) 58,215 68,225 Less: valuation allowance (40,168) (46,444) Net deferred tax assets 18,047 21,781 Deferred tax liabilities (24,405) (28,636) Net deferred tax liabilities (6,358) (6,855)

The gross deferred tax assets relate primarily to tax loss carryforwards. The deferred tax liabilities are temporary differences substantially caused by tax depreciation in excess of book depreciation.

45 Notes to Consolidated Financial Statements continued

11. Supplemental cash flow information

Year ended December 31, 2000 1999 1998 $000 $000 $000 Cash paid for: Interest 136,901 116,336 110,307 Income taxes 5,346 2,620 3,498

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

Year ended December 31, 2000 1999 1998 $000 $000 $000 Fairvalue of assets acquired 47,636 27,319 57,936 Cash paid (42,934) (25,036) (49,016) Liabilities assumed 4,702 2,283 8,920

12. 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 14(c)). The $7.25 convertible cumulative preferred shares were issued on May 6, 1998. They 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 $102.90 during the 12 months beginning May 6, 2001, $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.

46 SEA CONTAINERS LTD. & SUBSIDIARIES 13. 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, 2000, 150,500 class A common shares were reserved for issuance pursuant to options awarded to 57 persons. The 1986 stock option plan of the company terminated in 1996. At December 31, 2000, 12,000 class A common shares of the company were reserved for issuance pursuant to options awarded to 4 persons. Under OEH's separate 2000 stock option plan, established in connection with its initial public offering in August 2000, options to purchase up to 750,000 class A and B common shares of OEH may be awarded to employees of OEH at fair market value at the date of grant. In general, options are exercisable three years after award and must be exercised ten years from the date of grant. At December 31, 2000, 547,000 class A common shares of OEH were reserved for issuance pursuant to options awarded to 37 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, 2000 Shares Option Price Outstanding at beginning of period 144,000 $16.001 - $30.00 Granted 57,500 $21.751 Terminated (19,000) $25.125 - $30.00 Exercised (20,000) $20.625 - $21.75 Outstanding at end of period 162,500 $16.001 - $30.00 Exercisable at end of period 12,000 $16.001

Year ended December 31, 1999 Shares Option Price Outstanding at beginning of period 89,834 $4.50 1 - $28.00 Granted 62,000 $30.00 1 Terminated - Exercised (7,834) $4.50 1 -$17.50 Outstanding at end of period 144,000 $16.00 1 - $30.00 Exercisable at end of period 32,000 $16.00 1 - $21.75

Year ended December 31, 1998 Shares Option Price Outstanding at beginning of period 59,724 $4.50 1 -$21.75 Granted 50,000 $25.1251 - $28.00 Terminated - Exercised (19,890) $4.50 1 -$17.50 Outstanding at end of period 89,834 $4.50 1 - $28.00 Exercisable at end of period 39,834 $4.50 1 -$21.75

The options outstanding under the company’s plans at December 31, 2000, were as follows: Dates of Number of Average Option Dates of Grant Expiration Shares Price October 3, 1994, October 2, 2004, to June 5, 2000 to June 4, 2010 162,500 $24.79

47 Notes to Consolidated Financial Statements continued

Transactions under OEH’s plan have been as follows:

Year ended December 31, 2000 Shares Option Price Outstanding at beginning of period - Granted 547,000 $19.00 Terminated - Exercised - Outstanding at end of period 547,000 $19.00 Exercisable at end of period -

The options outstanding under OEH’s plan at December 31, 2000, none of which were exercisable, were as follows: Date of Number of Average Option Date of Grant Expiration Shares Price August 10, 2000 August 9, 2010 547,000 $19.00

As discussed in Note 1(m), these plans are accounted for under APB Option 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: SCL Stock OEH Stock Option Plans Option Plan Expected price volatility range 19.5% 36.9% Risk-free interest rate range 6.5% 6.5% Expected dividends 1.5% none Expected life of stock options 5 years 5 years

Had compensation cost for SCL's plans been determined based on fair values as of the date of grant, SCL's net income and earnings per share would have been reported as follows (dollars in thousands, except in share amounts):

Year ended December 31, 2000 Net income: $000 As reported 44,873 Pro forma 43,267 Basic and undiluted earnings per share: $ As reported 2.42 Pro forma 2.39

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

48 SEA CONTAINERS LTD. & SUBSIDIARIES (b) Stock appreciation rights plan If the company is acquired or 50% or more of its consolidated The 1991 stock appreciation rights plan of the company, as assets or earning power is sold, each holder of a right will be amended, provides that SCL may grant to its employees stock entitled to receive, upon exercise at the then current Purchase Price, appreciation rights ("SARs") with respect to up to an aggregate of that amount of common equity of the acquiring company which at 600,000 class A common shares of the company. SARs entitle the the time of such transaction would have a market value of two times holder to a cash amount equal in value to the excess of the fair the Purchase Price. The rights will expire on June 19, 2008, but may market value of the common shares at the time of exercise of the be redeemed at a price of $0.025 per right at any time prior to the SARs over the fair market value of the common shares at the time tenth day following the date on which a person acquires beneficial the SARs were granted. SARs become exercisable three years after ownership of shares carrying 20% or more of the total voting rights grant and must be exercised ten years from the date of grant. At which may be cast at any general meeting of the company. December 31, 2000, 113,600 SARs (1999 - 153,100, 1998 - 156,100) (c) Reserved shares were outstanding. In 2000, a net charge to income arising from SARs At December 31, 2000, in addition to the 512,000 common shares amounted to $447,000 (1999 - $44,000, 1998 - $2,572,000). reserved for options granted or available under the 1986 and 1997 stock option plans (see Note 13), a further 478,622 class B common 14. Shareholders’ equity shares were reserved for issuance upon conversion of the $7.25 convertible cumulative preferred shares. (a) Dual common share capitalization (d) Acquired shares Effective June 23, 1992, following shareholder approval, the existing A total of 12,900,500 class B common shares were owned by common shares of the company were classified as class B common certain SCL subsidiaries at December 31, 2000. Under applicable shares, each of which is convertible at any time into one class A law, these shares are outstanding and may be voted by the common share of the company. Cash dividends on the class A subsidiaries, although in computing earnings per share these common shares must be at least 10% higher than any cash dividends shares are treated as a reduction to outstanding shares. on the class B common shares. In general, holders of class A and (e) Certain restrictions on payment of dividends class B common shares vote together as a single class, with holders SCL is party to certain credit agreements which restrict the of class B shares having one vote per share and holders of class A payment of dividends and the purchase of common shares. shares having one-tenth of one vote per share. In all other substantial Under these agreements, approximately $71,000,000 was available respects, the class A and B shares are the same. at December 31, 2000 (1999 - $65,000,000) for the payment of (b) Shareholder rights agreement cash dividends and the purchase of shares. The company has in place a shareholder rights agreement, as amended and restated as of June 1, 1998, which will be implemented not earlier than the tenth day following the first to occur of (i) the public announcement of the acquisition by a person (other than a subsidiary of the company) of shares carrying 20% or more of the total voting rights which may be cast at any general meeting of the company and (ii) the commencement or announcement of a tender offer or exchange offer by a person for shares carrying 30% or more of the total voting rights which may be cast at any general meeting of the company. At that time, the rights will detach from the class A and class B common shares, and the holders of the rights will be entitled to purchase, for each right held, one two-hundredth of a series A junior participating preferred share of the company at an exercise price of $180 (the "Purchase Price") for each one two-hundredth of such junior preferred share, subject to adjustment in certain events. From and after the date on which any person acquires beneficial ownership of shares carrying 20% or more of the total voting rights which may be cast at any general meeting of the company, each holder of a right (other than the acquiring person) will be entitled upon exercise to receive, at the then current Purchase Price and in lieu of the junior preferred shares, that number of class A or class B common shares (depending on whether the right was previously attached to a class A or B share) having a market value of twice the Purchase Price.

49 Notes to Consolidated Financial Statements continued

15. Rental income under operating leases and charters The following are the minimum future rentals at December 31, 2000, under operating leases of containers and leases of property and other fixed assets:

Year ended December 31, $000

2001 81, 718 2002 73,211 2003 62,743 2004 54,250 2005 39,520 2006 and thereafter 79,723 391,165

Of the total above, related party rental payments due from GE SeaCo amounted to $310,824,000 (1999 - $378,684,000).

16. Commitments and contingency

(a) Commitments Outstanding contracts to purchase fixed assets were approximately $51,000,000 at December 31, 2000 (1999 - $116,000,000). Future rental payments under operating leases in respect of equipment rentals and leased premises are payable as follows:

Year ended December 31, $000

2001 319,604 2002 319,365 2003 79,822 2004 2,888 2005 2,309 2006 and thereafter 14,270 738,258

Of the total above, $695,000,000 relates to rental payments by GNER in respect of leases of rolling stock and access charges for railway infrastructure. These commitments are payable only while the franchise continues. Where the agreements provide for rental payments calculated on a factor varying with interest rates, the factors applicable to the interest rates ruling at December 31, 2000, have been used. Rental expense for the year ended December 31, 2000, amounted to $263,798,000 (1999 - $316,046,000, 1998 - $262,504,000).

50 SEA CONTAINERS LTD. & SUBSIDIARIES (b) Contingency at December 31, 2000, would not have been material. In August 2000, a group of institutional investors alleging to The above agreements are not held for trading purposes and SCL own approximately $158,000,000 (out of an aggregate of has no current intention to terminate the agreements. At December $430,000,000) of the company's four series of publicly held 31, 2000, SCL believes that there was no significant credit risk of senior notes commenced a lawsuit in the Supreme Court of non-performance by counterparties. New York, County of New York. The defendants are the (b) Off-balance sheet risk company, OEH and James B. Sherwood, President of the company From time to time, SCL utilizes foreign currency forward contracts and Chairman of OEH. The plaintiffs allege, among other things, that to reduce exposure to exchange rate risks primarily associated the proposed spinoff distribution of OEH shares owned by SCL will with SCL's international transactions. These contracts establish the violate various covenants in the senior note indentures and will also exchange rates at which SCL will purchase or sell at a future date the constitute a fraudulent conveyance. The plaintiffs are seeking, among contracted amount of currencies for specified foreign currencies. SCL other things, a declaratory judgment that they have the right to utilizes forward contracts which are short-term in nature and receives declare a default under the indentures, an injunction preventing or pays the difference between the contracted forward rate and the the proposed spinoff distribution and any fraudulent conveyance exchange rate at the settlement date. No contracts were outstanding of SCL assets, and unspecified money damages for breach of the at December 31, 2000. note indentures. (c) Concentration of credit risk The company intends to effect the spinoff distribution in a manner Concentration of credit risk with respect to trade receivables is limited which will not result in any violation of the indenture covenants or in because of the large number of customers comprising SCL's customer a fraudulent conveyance. Accordingly, management has concluded base and their dispersion across different businesses and geographic that the allegations of the senior noteholders are without merit. In areas. Also, SCL routinely assesses the financial strength of its October 2000, the company filed a motion to dismiss the plaintiffs' customers. claims and will continue to oppose this lawsuit vigorously. While the company believes an adverse outcome is remote, in the unlikely 18. Information concerning financial reporting event the plaintiffs prevail, the consequence of that outcome could for segments and operations in different cause an acceleration of long-term debt of SCL including certain geographical areas long-term debt of OEH guaranteed by the company or containing cross-default provisions to SCL debt. In order to protect OEH, the SCL's business activities are grouped into three main reporting company has agreed to indemnify OEH with respect to possible segments. The first is the operation of passenger and vehicle losses arising from this lawsuit. transport services using ferries and trains and the services which support these transport activities. Ferries operate between 17. Financial instruments with off-balance sheet risk Great Britain and France, Belgium, Ireland and the Isle of Man, and concentrations of credit risk and in Scandinavia and New York harbor, and GNER trains operate in Britain. Ports located in Britain are included in this segment. This (a) Interest rate swap agreements business is referred to as 'Passenger transport operations'. The In May 2000, SCL entered into interest rate swap agreements second is the ownership and/or management of hotels and other relating to an aggregate of $200,000,000 fixed rate for leisure activities through OEH. Hotels are located in the United floating U.S. dollar rate debt, maturing in May 2002, and in States, the Caribbean, Europe, southern Africa, South America, September 2000, SCL entered into interest rate swap agreements Australia and the South Pacific, tourist trains operate in Europe, relating to an aggregate of euro 293,000,000 (equivalent to Southeast Asia, Australia and Peru, restaurants are located in $275,000,000 at December 31, 2000) fixed rate for floating rate London, New York and Buenos Aires, and a cruiseship operates euro-denominated debt, maturing in September 2002. The cost to in Burma. This business is referred to as 'Leisure operations'. SCL to terminate these agreements at December 31, 2000 would The third is leasing of cargo containers (principally through the have been approximately $7,500,000. For the initial adoption of GE SeaCo joint venture) to liner ship operators, road and rail SFAS No. 133, this amount represents the unrealized loss which operators, forwarders and exporters located throughout the will be recorded in accumulated other comprehensive income (loss) world and the services which support these activities, including as of January 1, 2001. the manufacture and repair of container equipment. This business is SCL has outstanding two other interest rate swap agreements referred to as 'Container operations'. 'Other operations' includes under which U.S. dollar fixed rate debt has been effectively SCL's real estate development, perishable commodity production and converted to floating U.S. dollar rate debt. At December 31, 2000, trading, and publishing activities. Transactions between reportable the aggregate notional amount of these two swap agreements was segments are not material. approximately $20,400,000, both maturing in the first quarter of SCL's segment information has been prepared in accordance with 2002. The approximate cost to SCL to terminate these agreements SFAS No. 131, "Disclosures about Segments of an Enterprise and

51 Notes to Consolidated Financial Statements continued

Related Information". The main factor SCL uses to identify its three amortization, excluding the effect of changes in accounting principle main segments is the similarity of the products and services provided. and gains on sale of assets. Segment information is presented in Segment performance is evaluated based upon net earnings from accordance with the accounting policies described in Note 1. operations before net finance costs, taxes and depreciation and

Financial information regarding these business segments is as follows:

Year ended December 31, 2000 1999 1998 $000 $000 $000 Revenue: Passenger transport operations 885,507 918,636 837,324 Leisure operations 276,395 252,882 230,883 Container operations 151,854 154,853 185,533 Other operations 46,981 12,698 12,793 1,360,737 1,339,069 1,266,533 Depreciation and amortization: Passenger transport operations 34,966 28,774 27,252 Leisure operations 15,132 13,149 14,233 Container operations 59,224 61,265 63,312 Other operations 2,188 1,518 1,406 111, 510 104,706 106,203 Earnings from operations before net finance costs: Passenger transport operations 40,892 69,486 61,919 Leisure operations 68,970 62,187 46,857 Container operations 50,417 61,639 75,386 Other operations 34,735 206 132 195,014 193,518 184,294 Corporate costs (14,814) (12,603) (12,439) 180,200 180,915 171,855 Net finance costs (1) (121,054) (114,261) (108,221) Earnings before minority interest, income taxes and cumulative effect of change in accounting principle 59,146 66,654 63,634 Minority interest (6,185) - - 52,961 66,654 63,634 Provision for income taxes 7,000 5,002 4,950 Net earnings before cumulative effect of change in accounting principle 45,961 61,652 58,684 Preferred share dividends 1,088 1,088 4,419 Net earnings on class A and class B common shares before cumulative effect of change in accounting principle 44,873 60,564 54,265 Capital expenditure: Passenger transport operations 84,121 106,434 66,884 Leisure operations 35,771 46,749 47,056 Container operations 34,606 3,333 31,325 Other operations 7,164 1,907 8,401 161,662 158,423 153,666

(1) Net of capitalized interest and interest and related income.

52 SEA CONTAINERS LTD. & SUBSIDIARIES Year ended December 31, 2000 1999 $000 $000 Identifiable assets: Passenger transport operations 901,603 836,432 Leisure operations 725,876 661,865 Container operations 934,225 958,892 Other operations 47,286 58,228 2,608,990 2,515,417

Non-U.S. domestic operations accounted for more than 92% of SCL has guaranteed an aggregate principal amount of revenue and 90% of earnings before net finance costs in $236,812,000 of bank loans to OEH outstanding at December 31, 2000 (1999 - 93% and 89%, 1998 - 95% and 91%). Containers 2000 (1999 - $260,000,000) including a $7,500,000 bank loan to are regularly moving between countries in international commerce Charleston Center LLC, owner of Charleston Place Hotel, and a over hundreds of trade routes. SCL has no knowledge of, or control $2,000,000 loan to Eastern & Oriental Express Ltd., in each of which over, the movement of containers under lease or the location of OEH owns a minority shareholder interest. leased containers at any moment in time. Based on container leases SCL receives from Silja Oyj for the provision of various services in force at December 31, 2000, containers may touch ports in more which amounted to $733,000 in 2000 (1999 - $2,000,000). These than 100 different countries worldwide. It is therefore impossible services were provided on the basis of reimbursement of SCL’s costs to assign revenues or earnings of container operations by as approved by the board of directors of Silja. geographical areas. Passenger transport operations and identifiable assets are mainly 20. Subsequent events (unaudited) carried on and held in Europe, principally in and around the United Kingdom. Leisure operations are spread throughout the world with no On January 17, 2001, OEH acquired the Miraflores Park Plaza one country representing more than 10% of the revenue or in Lima, Peru, for approximately $17,000,000. The price was paid identifiable assets. largely by the assumption of existing debt, with the balance in cash and the issue of notes to the seller. OEH's 50/50 hotel joint venture 19. Related party transactions in Peru has an option to purchase the hotel at cost which, if exercised, will result in OEH becoming the exclusive long-term manager of For the year ended December 31, 2000, GE SeaCo paid SCL net the hotel. amounts of $68,210,000 (1999 - $69,906,000) under the lease In a separate transaction also in January, OEH contracted to and management agreements relating to SCL-owned containers acquire in April 2001 the Bora Bora Lagoon Resort in French provided to the joint venture, $31,627,000 (1999 - $32,278,000) Polynesia, a hotel managed by OEH, for a cash price of under the services agreement with GE SeaCo by which SCL approximately $19,600,000. OEH plans to fund most of the provides management and administration services to the joint purchase price with bank mortgage finance. venture, $17,304,000 (1999 - $17,600,000) in connection with In separate transactions in February and March 2001, SCL purchases of containers from SCL's factories, use of SCL's depots contracted to sell the port of Heysham and most of the port of for container repair and storage services, and employment of an Newhaven for an aggregate price of approximately $60,000,000. SCL containership to reposition containers, and $934,000 Both sales are expected to be completed later in 2001, and any (1999 - $584,000) of interest on loans from SCL. gains on these transactions have not yet been finalized. For the year ended December 31, 2000, subsidiaries of SCL received from OEH $5,419,000 (1999 - $5,573,000, 1998 - $5,107,000) 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.

53 Five-year performance (unaudited)

Sea Containers Ltd. and Subsidiaries

Year ended December 31, 2000 1999 1998 1997 1996 $000 $000 $000 $000 $000 Revenue 1,360,737 1,339,069 1,266,533 1,157,461 868,726 Net earnings on class A and class B common shares before cumulative effect of change in accounting principle 44,873 60,564 54,265 27,773 15,032 $ $$$$ Net earnings per class A and class B common share before cumulative effect of change in accounting principle: Basic 2.42 3.30 3.34 2.07 1.20 Diluted 2.42 3.27 3.11 2.07 1.20 Cash dividends per class A common share 0.975 1.10 0.885 0.77 0.77 Cash dividends per class B common share 0.878 0.9945 0.8045 0.70 0.70 $000 $000 $000 $000 $000 Total assets 2,608,990 2,515,417 2,314,455 2,126,100 2,026,220 Long-term obligations 1,628,104 1,700,285 1,510,278 1,365,565 1,270,288 Redeemable preferred shares 15,000 15,000 15,000 35,700 44,100 Shareholders’ equity 509,557 470,481 459,555 387,578 386,626

See notes to consolidated financial statements.

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

Quarter ended December September June March Total 31 30 30 31 $000 $000 $000 $000 $000 2000 Revenue: Passenger transport operations 885,507 208,660 279,474 223,366 174,007 Leisure operations 276,395 70,218 73,330 78,804 54,043 Container operations 151,854 36,149 38,322 40,709 36,674 Other operations 46,981 3,830 36,842 3,470 2,839 1,360,737 318,857 427,968 346,349 267,563 Earnings/(losses) before net finance costs: Passenger transport operations 40,892 (1,467) 24,929 17,733 (303) Leisure operations 68,970 18,713 18,750 21,851 9,656 Container operations 50,417 10,987 13,045 13,630 12,755 Other operations 34,735 856 34,252 153 (526) 195,014 29,089 90,976 53,367 21,582 Corporate costs (14,814) (3,939) (3,700) (3,699) (3,476) Net finance costs (121,054) (34,308) (21,377) (34,405) (30,964) Earnings/(losses) before minority interest and tax 59,146 (9,158) 65,899 15,263 (12,858) Minority interest (6,185) (4,385) (1,800) - - Earnings/(losses) before tax 52,961 (13,543) 64,099 15,263 (12,858) Provision for/ (benefit from ) income taxes 7,000 2,000 9,102 1,094 (5,196) Net earnings/(losses) 45,961 (15,543) 54,997 14,169 (7,662) Preferred share dividends 1,088 272 272 272 272 Net earnings/(losses) on class A and class B common shares 44,873 (15,815) 54,725 13,897 (7,934) $ $ $ $ $ Net earnings/(losses) per class A and class B common share: Basic 2.42 (0.85) 2.96 0.75 (0.43) Diluted 2.42 (0.85) 2.89 0.75 (0.43)

55 Summary of quarterly earnings (unaudited)

Quarter ended December September June March Total 31 30 30 31 $000 $000 $000 $000 $000 1999 Revenue: Passenger transport operations 918,636 222,305 292,844 223,233 180,254 Leisure operations 252,882 66,927 65,349 70,380 50,226 Container operations 154,853 36,888 35,566 40,015 42,384 Other operations 12,698 4,268 2,010 3,352 3,068 1,339,069 330,388 395,769 336,980 275,932 Earnings/(losses) before net finance costs: Passenger transport operations 69,486 4,198 37,169 23,263 4,856 Leisure operations 62,187 18,533 16,199 18,240 9,215 Container operations 61,639 14,810 13,838 15,497 17,494 Other operations 206 722 (589) 384 (311) 193,518 38,263 66,617 57,384 31,254 Corporate costs (12,603) (2,440) (2,738) (3,687) (3,738) Net finance costs (114,261) (27,435) (29,463) (29,499) (27,864) Earnings/(losses) before tax and cumulative effect of change in accounting principle 66,654 8,388 34,416 24,198 (348) Provision for/(benefit from ) income taxes 5,002 152 8,297 753 (4,200) Net earnings before cumulative effect of change in accounting principle 61,652 8,236 26,119 23,445 3,852 Preferred share dividends 1,088 272 272 272 272 Net earnings on class A and class B common shares before cumulative effect of change in accounting principle 60,564 7,964 25,847 23,173 3,580 Cumulative effect of change in accounting principle (12,306) - - - (12,306) Net earnings/(losses) on class A and class B common shares 48,258 7,964 25,847 23,173 (8,726) $ $ $ $ $ Net earnings/(losses) per class A and class B common share: Basic: Net earnings before cumulative effect of change in accounting principle 3.30 0.43 1.41 1.27 0.20 Cumulative effect of change in accounting principle (0.67) - - - (0.68) Net earnings/(losses) 2.63 0.43 1.41 1.27 (0.48) Diluted: Net earnings before cumulative effect of change in accounting principle 3.27 0.43 1.39 1.25 0.20 Cumulative effect of change in accounting principle (0.65) - - - (0.68) Net earnings/(losses) 2.62 0.44 1.39 1.25 (0.48)

56 SEA CONTAINERS LTD. & SUBSIDIARIES 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 and London Stock Exchanges. The following table presents the quarterly high and low sales prices of the common shares in 2000 and 1999 as reported for New York Stock Exchange composite transactions:

2000 1999 High Low High Low Class A Common Shares $$ $$ First quarter 29.56 20.50 30.00 20.75 Second quarter 25.13 20.88 39.00 25.56 Third quarter 29.69 21.00 34.00 27.63 Fourth quarter 24.69 18.50 32.19 23.75

Class B Common Shares $$ $$ First quarter 29.38 20.50 29.88 22.25 Second quarter 25.00 21.56 38.75 26.00 Third quarter 29.63 22.94 34.00 28.44 Fourth quarter 24.44 18.56 32.00 24.25

The company paid cash dividends on its class A and B common shares during the first and second quarters of1999 at the quarterly rates of $0.25 per class A share and $0.22725 per class B share, during the third and fourth quarters of1999 and the first, second and third quarters of 2000 at the quarterly rates of $0.30 per class A share and $0.27 per class B share, and during the fourth quarter of 2000 at the quarterly rates of $0.075 per class A share and $0.68 per class B share.

57 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 Elbow Beach Hotel, 60 South Shore Road, Paget PG 04, Bermuda on June 6, 2001, at 9.00 a.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: (212) 302-5066 Fax: (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 67 Mason Street Share transfer agent and registrar Greenwich, Connecticut 06830 Fleet National Bank Tel: (203) 618-9800 c/o EquiServe Fax: (203) 618-1010 P.O. Box 43010 Email: [email protected] Providence, Rhode Island 02940-3010 Tel: (781) 575-3170 Dividend reinvestment and share purchase plan Internet: http://www.equiserve.com Sea Containers Ltd. offers this plan to owners of its common shares as a convenient and economical method of investing their cash Shareholders are encouraged to contact the Transfer Agent directly dividends in Class A common shares at a discount from the market regarding any change in certificate registration, change of mailing address, price and without payment of any brokerage commission or service lost or stolen certificates, replacement of dividend checks, consolidation charge. A common shareholder under the plan may also make of multiple accounts, elimination of duplicate mailings, replacement optional cash deposits to purchase Class A common shares at market of Form 1099-DIV and related shareholder service matters. price without payment of commissions or other charges. For further Shareholders may also access their accounts and other information information about the plan, please contact the share transfer agent directly through EquiServe’s website. and registrar, EquiServe, at the address left.

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

58 SEA CONTAINERS LTD. & SUBSIDIARIES Sea Containers Ltd.

Front cover: The company participated in a public tender to Sea Containers Ltd. is a Bermuda company with operating subsidiaries in privatize the Corinth Canal, which divides mainland Greece London, Genoa, New York, Rio de Janeiro and Sydney. It is owned primarily from the Peloponnisos, about 30 nautical miles west of Piraeus, Greece’s principal port. It recently won the tender by U.S. shareholders and its common shares are listed on the New York Stock and expects to take over the 40-year concession from mid- Exchange under the trading symbols SCRA and SCRB. 2001. The canal has about 12,000 ship transits a year and The company is engaged in three main activities: passenger transport, marine is a major tourist attraction. It first opened in 602 B.C. when ships were porteraged along a limestone block road which container leasing and leisure-based operations. Within each segment is a still exists. The water canal was completed only in the 19th number of operating units. Passenger transport consists of fast ferry operations century. The company intends to develop both the marine in the English Channel under the name Hoverspeed Ltd., both fast and and tourist potential of the canal. conventional ferry services in the Irish Sea under the name Isle of Man Steam Packet Company, fast ferry operations in New York under the name SeaStreak, fast and conventional ferry services in the Baltic under the name Silja Line (50% owned) and in the Adriatic under the name SNAV-SeaCat (50% owned). Rail operations in the U.K. are conducted under the name Great North Eastern Contents Railway (GNER), and the company has port interests in the U.K. and Greece. Company description 2 Ship management and naval architects subsidiaries support the passenger transport division and have outside clients as well. Financial highlights 3 Marine container leasing is conducted primarily through GE SeaCo SRL, a Directors and officers 4 Barbados company owned 50% by Sea Containers and 50% by General

President’s letter to shareholders 7 Electric Capital Corporation. GE SeaCo operates one of the largest marine container fleets in the world, over one million units. Sea Containers also owns Discussion by division: or partly owns six container service depots, five container manufacturing PassengerTransport 14 facilities and a refrigerated container service business. It owns two container ships which are chartered out in Asia and the Middle East. Leisure 20 The company’s leisure business is conducted through Orient-Express Hotels Ltd., a Containers 23 63% owned subsidiary. Orient-Express Hotels’ common shares are listed on the New York Stock Exchange under OEH. This company has 37 de luxe leisure Property, Publishing and Plantations 26 properties in 15 countries. Most of the properties are owned but some are Finance 28 partly owned, and one tourist train is only managed. One joint venture is

Financial review 31 PeruRail, the railways of Peru, which operates tourist trains on the Cuzco/Machu Picchu route and from Cuzco and Arequipa to Lake Titicaca. PeruRail has extensive Shareholder and investor information 58 freight train operations as well. The hotels, restaurants, river cruise ship and tourist trains compete in the top end of the market. Other activities of Sea Containers include property development, publishing, fruit farming in the Ivory Coast and Brazil and a U.K.-based travel agency.

2 SEA CONTAINERS LTD. Sea ContainersSea Ltd. ReportAnnual 2000

Sea Containers Ltd. Annual Report 2000

2860-AR-00 Tel: +44 (0) 20 7805Tel: 5000 +44 (0) 20 7805Fax: 5900 www.seacontainers.com Correspondence: Services Ltd. Sea Containers Sea Containers House 20 Upper Ground SE1London 9PF Tel: +1 (441) 295 2244 +1 Tel: (441) +1Fax: 292 (441) 8666 Sea Containers Ltd. Sea Containers 41Cedar Avenue 1179 HM P.O.Box EX Hamilton HM Bermuda