UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

Amendment No. 1

(Mark One)

For the fiscal year ended December 31, 2010

OR

For the transition period from            to            

Commission File Number 1-16017

ORIENT-EXPRESS HOTELS LTD.

(Exact name of registrant as specified in its charter)

22 Victoria Street,

Hamilton HM 12, Bermuda

(Address of principal executive offices)

Registrant’s telephone number, including area code: (441) 295-2244

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

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes x  No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes o  No x

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x  No o

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes o  No x

The aggregate market value of the Class A common shares held by non-affiliates of the registrant computed by reference to the closing price on June 30, 2010 (the last business day of the registrant’s second fiscal quarter in 2010) was approximately $757,000,000.

As of June 6, 2011, 102,469,000 Class A common shares and 18,044,478 Class B common shares of the registrant were outstanding.  All of the Class B shares are owned by a subsidiary of the registrant (see Note 15(d) to the Financial Statements (Item 8) in Form 10-K).

DOCUMENTS INCORPORATED BY REFERENCE:  None

EXPLANATORY NOTE

Orient-Express Hotels Ltd. (the “registrant”) is filing this Amendment No. 1 (the “Amendment”) to its Annual Report on Form 10-K for the fiscal year ended December 31, 2010, filed with the U.S. Securities and Exchange Commission (“SEC”) on February 25, 2011 (The “Original Filing”).

This Amendment is being filed because, pursuant to Rule 3-09 of SEC Regulation S-X, the registrant is required to file audited and unaudited financial statements of Hotel Ritz Madrid S.A. and Perurail S.A., each a 50% owned unconsolidated company.  The financial statements of these two unconsolidated companies are filed in this Amendment under Item 15 - Exhibits and Financial Statement Schedules.

Except as described above, no other changes have been made to the Original Filing, and this Form 10-K/A does not amend, update or change any other items or disclosures in the Original Filing.  This Form 10-K/A does not reflect events occurring after the Original Filing and, other than providing the financial statements of the two unconsolidated companies named above under Item 15, does not modify or update the disclosures in the Original Filing in any way.

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PART IV

ITEM 15.               Exhibits and Financial Statement Schedules

1. Financial Statements

(a) Hotel Ritz Madrid S.A.

Also presented are the unaudited balance sheet as at December 31, 2010 and unaudited statements of operations, cash flows and shareholders’ equity for the year ended December 31, 2010.

(b) Perurail S.A.

Also presented are the unaudited statements of operations, cash flows and shareholders’ equity for the year ended December 31, 2008.

2. Financial Statement Schedule

Incorporated by reference to the financial statement schedule filed with the Original Filing.  No additional financial statement schedule is filed with this report on Form 10-K/A.

3. Exhibits

The index to exhibits appears below, on the pages immediately following the signature page to this report.

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Hotel Ritz Madrid S.A.:

We have audited the accompanying balance sheet of Hotel Ritz Madrid S.A. as of December 31, 2009, and the related statements of operations, shareholders’ equity and cash flows for the years ended December 31, 2009 and 2008. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Hotel Ritz Madrid S.A. at December 31, 2009, and the results of its operations and its cash flows for the years ended December 31, 2009 and 2008 in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1(b) to the financial statements, the Company has suffered recurring losses from operations and is out of compliance with its mortgage loan facility covenants that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1(b). The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

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Hotel Ritz Madrid S.A.

Balance Sheets

The accompanying notes are an integral part of these financial statements.

5

Hotel Ritz Madrid S.A.

Statements of Operations

The accompanying notes are an integral part of these financial statements.

6

Hotel Ritz Madrid S.A.

Statements of Cash Flows

The accompanying notes are an integral part of these financial statements.

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Hotel Ritz Madrid S.A.

Statements of Shareholders’ Equity

The accompanying notes are an integral part of these financial statements.

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Hotel Ritz Madrid S.A.

Notes to Financial Statements

1.          Summary of significant accounting policies and basis of presentation

(a)          Business

In this report Hotel Ritz Madrid SA is referred to as the “Company”. The Company owns and operates The Hotel Ritz in Madrid, Spain.

The Company is 50% owned indirectly by Orient-Express Hotels Ltd. (“OEH”) and 50% owned indirectly by Omega Capital S.L. (“Omega”).

(b)          Basis of presentation and liquidity

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and reflect the results of operations, financial position and cash flows of the Company.  The financial statements have been prepared using the historical cost basis in the assets and liabilities and the historical results of operations directly attributable to the Company in the normal course of business.

As noted in Note 6, at December 31, 2010 and 2009, the Company was out of compliance with a loan to value ratio and debt service coverage ratio in its first mortgage loan facility. A total of €72,200,000 (unaudited) had been borrowed under this loan facility at December 31, 2010. The Company continues to service fully the interest and principal repayments as these fall due, including a principal repayment of €3,700,000 (unaudited) in April 2011 and is continuing to negotiate with the lender to determine how to bring the Company back into compliance. Although the loan is otherwise non-recourse to and not credit-supported by OEH and Omega, they have provided separate partial guarantees of €7,500,000 each based on respective ownership percentages as of December 31, 2010 to obtain a covenant waiver from the lender.

The risk that the Company may not successfully complete this renegotiation with the lender and obtain the related amendment of certain financial covenants included in the loan facility, and/or the risk that the Company may not have adequate liquidity to fund its operations as a result of not meeting its projected financial results, even if the renegotiation is completed, raise substantial doubt about the Company’s ability to continue as a going concern.

During 2009, 2010 and 2011, the Company has taken steps to reduce its operating and selling, general and administrative expenses. In addition, the Company is developing renovation plans that should enhance future revenue growth.  Management believes these actions will enable the Company to improve its future profitability. While these activities are on-going, shareholders continue to provide participative loan financing as necessary to support the operations of the Company.  As a result, the financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of the Company’s ability to continue as a going concern.

“FASB” means Financial Accounting Standards Board. “ASC” means the Accounting Standards Codification of the FASB and “ASU” means an Accounting Standards Update of the FASB.

(c)           Cash and cash equivalents

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

(d)          Foreign currency

The functional currency of the Company is Euros which is also the local currency and reporting currency of the Company. Foreign currency transaction gains and losses are recognized in earnings as they occur.

(e)           Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Significant estimates include, but are not limited to, the allowance for doubtful accounts, valuation of intangible assets and goodwill, depreciation and amortization, taxes and contingencies.  Actual results could differ materially from management’s estimates.

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(f)            Accounts receivable

The Company states its accounts receivable at their estimated net realizable value. The Company maintains allowance for doubtful accounts for specifically identified estimated losses resulting from the inability of its customers to make required payments.

(g)          Deferred financing costs

Debt issuance costs incurred in connection with the placement of long-term debt are capitalized and amortized to interest expense over the lives of the related debt.

(h)          Revenue recognition

Hotel and restaurant revenue is recognized when the rooms are occupied and the services are performed.  Deferred revenue consisting of deposits paid in advance is recognized as revenue when the services are performed.

(i)           Marketing costs

Marketing costs are expensed as incurred and are reported in selling, general and administrative expenses.  Marketing costs include costs of advertising and other marketing activities.  These costs were €1,003,500 (unaudited) in 2010 (2009-€836,500; 2008-€1,164,000).

(j)            Interest expense, net

The Company capitalizes interest during the construction of assets. Interest expense, net excludes interest which has been capitalized in the amount of €136,000 (unaudited) in 2010 (2009-€136,000; 2008-€119,000).

(k)          Income taxes

The Company accounts for income taxes in accordance with ASC 740 “Income Taxes”.  The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year and to recognize deferred tax liabilities and assets for the future tax consequences of events that have been recognized in the Company’s financial statements or tax returns.

Current and deferred tax assets and liabilities are recognized for estimated taxes payable or refundable due to temporary differences and carryforwards. All available evidence, both positive and negative, is considered to determine whether, based on the weight of that evidence, a valuation allowance is needed for some portion or all of a deferred tax asset. Judgment is used in considering the relative impact of negative and positive evidence.

ASC 740-20 requires that any liability created for unrecognized tax benefits is disclosed. The application of ASC 740-20 may also affect the tax bases of assets and liabilities and therefore may change or create deferred tax liabilities or assets. The Company would recognize interest and penalties related to unrecognized tax benefits in provision for income taxes. At December 31, 2010 (unaudited) and 2009, respectively, the Company did not record any liabilities for uncertain tax positions.

(l)           Inventories

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

(m)          Property, plant and equipment, net

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

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

Art and certain antiques are not depreciated.

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(n)          Impairment of long-lived assets

In accordance with ASC 360-10-35 “Impairment or Disposal of Long-Lived Assets-Subsequent Measurement”, the Company’s management reviews long-lived assets whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.  In the event that an impairment occurs, the Company records a charge to income calculated as the excess of the asset’s carrying value over the estimated fair value.

(o)          Goodwill

In accordance with ASC 350 “Intangibles-Goodwill and Other”, goodwill must be evaluated at least annually to determine impairment.  Goodwill is not amortized.  The goodwill impairment testing under ASC 350 is performed in two steps, first, the determination of impairment based upon the fair value of a reporting unit as compared with its carrying value and, second, if there is an implied impairment, the measurement of the amount of impairment loss is determined by comparing the implied fair value of goodwill with the carrying amount of that goodwill.  Impairment testing is performed annually at year end.  Other intangible assets with indefinite useful lives are also reviewed for impairment in accordance with ASC 350. During 2010, no impairment losses (unaudited) relating to goodwill have been identified or recorded (2009-€nil; 2008-€7,105,000) (see Note 3).

(p)          Trademark

Trademark has indefinite useful life and is reviewed annually for impairment in accordance with ASC 350 “Intangibles-Goodwill and Other”.  During 2010, no impairment losses (unaudited) relating to the trademark have been identified or recorded (2009-€nil; 2008-€2,000,000) (see Note 4).

(q)          Concentration of credit risk

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

(r)           Other liabilities

Other liabilities consist of provision for severance payments that are due to be paid to certain employees on their retirement according to local legislation. Employees who are at least 50 years old and worked for the Company for at least 10 years are entitled to receive a lump-sum payment when they leave employment with the Company. The provision is recorded based on the information about staff ages, years of service and history of staff turnover in the Company.

(s)           Risks and uncertainties

The Company’s future operating results are subject to a number of risks, including, but not limited to, competition, competitive pricing pressures, economic slowdowns, the Company’s ability to sustain and manage growth and the Company’s ability to attract and retain key personnel.

The Company’s primary financial market exposure related to changes in interest rates.

(t)           Subsequent events

For the year ended December 31, 2010, the Company has evaluated subsequent events for potential recognition and disclosure through June 7, 2011, the date of financial statement issuance.

(u)          Recent accounting pronouncements

In January 2010, the FASB issued an amendment to the accounting for fair value measurements and disclosures requiring a gross presentation of changes within Level 3 valuations period to period as a rollforward, and adding a new requirement to disclose transfers in and out of Level 1 and Level 2 measurements. The new disclosures apply to all entities that report recurring and nonrecurring fair value measurements. This amendment is effective in the first interim reporting period beginning after December 15, 2009, with an exception for the gross presentation of Level 3 rollforward information, which is required for annual reporting periods beginning after December 15, 2010, and for interim reporting periods within those years. The Company’s adoption of the provisions of this amendment during 2010 did not have a material impact on the Company’s financial statement disclosures.

The Company is considering the guidance issued by the FASB in October 2009 that amends the accounting for revenue recognition on multiple-deliverable revenue arrangements. Specifically, the guidance addresses the unit of accounting for arrangements involving multiple deliverables. It also addresses how arrangement consideration should be allocated to the separate units of accounting, when applicable. The adoption of the provisions of this amendment is required for fiscal years beginning on or after June 15, 2010, and is not expected to have a material impact on the Company’s financial statements.

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In December 2010, the FASB issued guidance concerning the performance of the second step of goodwill impairment testing, namely measurement of the amount of an impairment loss. The ASU amends the criteria for performing the second step for reporting units with zero or negative carrying amounts and requires performing the second step if qualitative factors indicate that it is more likely than not that a goodwill impairment exists. The Company will adopt ASU 2010-28 for impairment tests performed in periods beginning after December 15, 2010, and is currently evaluating the impact of this adoption of the ASU on its financial statements.

2.             Property, plant and equipment, net

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

In July 2010, a fire at Hotel Ritz Madrid caused damage to the kitchen and bedrooms, resulting in the closure of the hotel for four days.  Initial insurance proceeds associated with business interruption of €297,000 (unaudited) were received in December 2010 and were recorded within revenue.  Additional proceeds of €310,000 (unaudited) were received in May 2011.

3.           Goodwill

During 2010 (unaudited) and 2009, the Company did not have any goodwill impairment charges as part of its annual impairment testing as of December 31, 2010 and December 31, 2009, respectively.  Under the first step of the 2010 and 2009 testing, the fair value of the reporting unit was approximately 5% in excess of its carrying value. There is no guarantee that the Company´s business will achieve the forecasted results which have been included in its impairment analysis due to the impact of the economic downturn in the Spanish market. If the Company is unable to meet these forecasted results in future reporting periods, the Company may be required to record a charge in a future statement of operations for goodwill impairment charges.

The gross goodwill amount at January 1, 2010 was €4,200,000 (unaudited) (January 1, 2009-€4,200,000) and the accumulated impairment at that date was €7,105,000 (unaudited) (2009-€7,105,000).

The Company’s goodwill impairment testing is performed in two steps: first, the determination of impairment based upon the fair value of the reporting unit as compared with its carrying value and, second, if there is an implied impairment, the measurement of the amount of the impairment loss is determined by comparing the implied fair value of goodwill with the carrying value of the goodwill. If the carrying value of the reporting unit’s goodwill exceeds its implied fair value, the goodwill is deemed to be impaired and is written down to the extent of the difference.

The determination of the impairment incorporates various assumptions and uncertainties that the Company believes are reasonable and supportable considering all available evidence, such as the future cash flows of the business, future growth rates and the related discount rate. However, these assumptions and uncertainties are, by their very nature, highly judgmental.

During 2008, due to the downturn in the economy the Company identified and recorded goodwill impairment loss in the amount of €7,105,000.

4.             Trademark

There were no changes in the carrying amount of the trademark (an unamortized intangible asset) of €22,000,000 for the years ended December 31, 2010 (unaudited) and 2009.

The Company’s trademark asset was reviewed for impairment by comparing its carrying value with the fair value. An impairment loss of €2,000,000 was identified and recorded as at December 31, 2008. The fair value was estimated based on expected future cash flows, growth rates and discount rates which were lower than in previous years due to the downturn in the market that occurred over the last few months of 2008.

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5.             Working capital facilities

Working capital facilities are composed of the following, all repayable within one year:

The Company had a €2,000,000 (unaudited) working capital line of credit at December 31, 2010 (2009-€3,000,000) issued by one financial institution and having an expiration date of April 9, 2011, of which €10,000 (unaudited) was undrawn (2009-€809,000).  The working capital line has been renewed until April 2012 under the same terms and conditions.  OEH and Omega each guaranteed, until April 2010, €1,500,000 and, as from May 2010 until April 2011, €1,000,000 (unaudited) of this working capital facility of the Company.  These guarantees were also renewed until April 2012 under the same terms and conditions.

6.             Long-term debt

Long-term debt consists of the following:

In July 2009, the Company borrowed €1,000,000 from a governmental financial institution (Instituto de Crédito Oficial) at a fixed rate of 1.5% and with semi-annual installments and a final payment in July 2014.

At December 31, 2010 and 2009, the Company was out of compliance with a loan to value ratio and a debt service coverage ratio in its first mortgage loan facility. A total of €72,200,000 (unaudited) had been borrowed under this loan facility at December 31, 2010. The Company continues to service fully the interest and principal repayments as these fall due, including a principal repayment of €3,700,000 (unaudited) in April 2011, and is continuing to negotiate with the lender to determine how to bring the Company back into compliance.  No assurances can be given that the Company will be successful in completing these negotiations and therefore the €72,200,000 (unaudited) borrowings have been shown in the current portion of long-term debt. Although the loan is otherwise non-recourse to and not credit-supported by OEH and Omega, they have provided separate guarantees of €7,500,000 each of principal repayments and payment of interest as of December 31, 2010 to obtain a covenant waiver from the lender.

The following is a summary of the aggregate maturities of long-term debt at December 31, 2010:

7.             Other liabilities

Other liabilities at December 31, 2010 amount to €1,480,000 (unaudited) (2009-€1,532,000) relating to deferred retirement benefit obligations of the Company. There are no assets to be disclosed.

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8.             Income taxes

The provision for income taxes consists of the following:

No income taxes were paid during 2010, 2009 and 2008.

The reconciliations of the Spanish income tax rate to the Company’s effective tax rate for the three years ended December 31, 2010 are as follows:

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

The deferred tax assets consist primarily of tax loss carryforwards. The gross amount of tax loss carryforwards is €22,582,000. Of this amount, €nil will expire in the five years ending December 31, 2015, €6,777,000 will expire in the five years ending December 31, 2020, and €15,805,000 will expire in the five years ended December 31, 2025.  No valuation allowance has been provided against gross deferred tax assets as we expect to recover the full value of our tax assets.

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

9.             Supplemental cash flow information

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10.          Shareholders’ equity

(a)          Share capital and additional-paid in capital

At December 31, 2010, the Company’s share capital consisted of 20,000 fully subscribed and paid shares with a par value of three euros each, all carrying the same rights. The additional paid-in capital amounts to €37,235,000 (unaudited) and is a distributable reserve, except an amount of €3,000,000 at December 31, 2010 (unaudited) (2009-€1,500,000) which is non-distributable under Spanish Law.

The shareholders of the Company are as follows:

Landis Inversiones S.L. is a wholly-owned subsidiary of Omega Capital S.L.

(b)      Retained earnings

Within retained earnings there is an amount of €3,202,000 at December 31, 2010 (unaudited) (2009-€3,202,000) which is non-distributable under Spanish Law.

11.          Commitments and contingencies

Outstanding contracts to purchase fixed assets were approximately €nil at December 31, 2010 (unaudited) (2009-€nil). There are no operating leases.

12.          Other comprehensive (loss)/income

The components of comprehensive loss are as follows:

13.          Fair value

Certain methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate fair value. The carrying amount of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities and working capital facilities approximates fair value because of the short maturity of those instruments. The fair value of debt is calculated by discounting back future interest and principal payments using a discount factor which reflects the Company’s current credit metrics. This factor is derived from credit analysis using inputs such as profit, cash generation, and level of debt.

The estimated fair values of the Company’s financial instruments as of December 31, 2010 and 2009 are as follows:

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The carrying values of non-financial assets that are measured on a non-recurring basis approximate their fair values.

14.          Related party transactions

OEH holds an indirect 50% interest in the Company accounted for under the equity method.  For the year ended December 31, 2010, OEH earned €719,000 (unaudited) (2009-€694,000; 2008-€883,000) in management fees, which are included in the Company’s selling, general and administrative expenses.  The amount due to OEH from the Company at December 31, 2010 was €11,630,000 (unaudited) (2009-€7,380,000), with the increase primarily due to OEH providing participative loans to the Company in 2010 of €3,821,000 (unaudited) (2009-€6,100,000) to fund operations in 2010, at an interest rate of 3.05% with an original maturity in April 2010 and subject to automatic renewal for additional periods as necessary.

The amount due to Omega from the Company at December 31, 2010 was €11,510,000 (unaudited) (2009-€7,926,000), with the increase due to Omega providing participative loans to the Company in 2010 of €3,300,000 (unaudited) (2009-€6,621,000) to fund operations in 2010, at an interest rate of 3.05% with an original maturity in April 2010 and subject to automatic renewal for additional periods as necessary.

OEH and Omega have provided separate partial guarantees of €7,500,000 each as of December 31, 2010 to obtain a covenant waiver from a third party lender which provides an otherwise non-recourse first mortgage loan facility to the Company.

In July 2009, the Company entered into a restructuring plan involving certain employees. All the employees took their cases to court.  As of December 31, 2009, several of the cases had been resolved and the remaining ones were scheduled for a hearing in February 2010.  In February 2010, the Company settled with the Union (cancelling all court hearings) and agreed the employment status of several of the employees and signed voluntary agreements with the remaining employees to leave employment with the Company.

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BDO — Pazos, López de Romaña, Rodriguez S.C.

Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders

Perurail S.A.

We have audited the accompanying balance sheets of Perurail S.A. as of December 31, 2010 and 2009, and the related statements of operations, cash flows and shareholders’ equity for the years then ended. These financial statements are the responsibility of the Company´s management. Our responsability is to express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Perurail S.A. at December 31, 2010 and 2009, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

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Perurail S.A.

Balance Sheets