STAR CRUISES LIMITEDSuite 1501, Ocean Centre, 5 Canton Road, Tsimshatsui, Kowloon, Hong Kong SAR

2004 AN

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2004 ANNUAL REPORT

Beijing

Shanghai

GuangzhouNew Delhi

Ahmedabad

Mumbai

Dubai

Bangkok

Port Klang

(Kuala Lumpur)Singapore

Jakarta

Hong Kong

Taipei

Manila

Sydney Auckland

SeoulTokyo

London

Star Cruises Corporate HeadquartersWorldwide Offices

ALASKA Anchorage (Seward), Anchorage (Whittier), Juneau, Ketchikan, Sitka,Skagway, Wrangell ANTARCTICA Cape Lookout (Elephant Island), Elsehul (SouthGeorgia), Gold Harbour (South Georgia), Grytviken (South Georgia), Half MoonIsland, Hope Bay, Lemaire Channel/Port Lockroy (Jougla Point), Paradise Harbour,Shingle Cove (Coronation Island), West Point (Falkland Islands) ASIA-PACIFICIshigaki (Yaeyama Islands) Japan, Hong Kong, Keelung (Taipei) Taiwan R.O.C., KoSamui (Thailand), Laem Chabang (Thailand), Langkawi (Malaysia), Malacca(Malaysia), Miyako (Japan), Naha (Okinawa Islands) Japan, Penang (Malaysia), Phuket(Thailand), Port Klang (Kuala Lumpur) Malaysia, Singapore (Singapore) NORTHAMERICA Astoria (Oregon), Bar Harbor (Maine), Boston (Massachusetts), CatalinaIsland (California), Charleston (South Carolina), Halifax (Nova Scotia), Houston(Texas), Key West (Florida), Los Angeles (California), Martha’s Vineyard(Massachusetts), Miami (Florida), Mobile (Alabama), Monterey (California), Nanaimo(British Columbia), New Orleans (Louisiana), New York (New York), Newport (RhodeIsland), Orlando (Port Canaveral) Florida, Philadelphia (Pennsylvania), Prince Rupert(British Columbia), Quebec City (Quebec), Saint John (New Brunswick), San Diego(California), San Francisco (California), Seattle (Washington), St. John’s(Newfoundland), Sydney (Nova Scotia), Vancouver (British Columbia), Victoria(British Columbia) SOUTH AMERICA Arica (Chile), Boca Da Valeria (Brazil),Buenos Aires (Argentina), Callao (Peru) Lima, Cartagena (Colombia), Coquimbo

(Chile), Ile Royal (French Guiana), Iquique (Chile), Lima (Callao) Peru, Manaus(Brazil), Manta (Ecuador), Montevideo (Uruguay), Puerto Chacabuco (Chile), PuertoMadryn (Argentina), Puerto Montt (Chile), Punta Arenas (Chile), Recife (Brazil),Rio De Janeiro (Brazil), Salaverry (Peru) Trujillo, Santarem (Brazil), Santiago(Valparaiso) Chile, Scarborough (Tobago), Stanley (Falkland Islands), Ushuaia(Argentina) EUROPE Almeria (Spain), Amsterdam (Netherlands), Athens (Piraeus)Greece, Barcelona (Spain), Berlin (Warnemunde) Germany, Bremerhaven (Germany),Brest (France), Brussels/Brugge (Zeebrugge) Belgium, Cadiz (Spain), Cannes (France),Cobh (Ireland), Corfu (Greece), Edinburgh (Leith) Scotland, Eemshaven (Holland),Florence/Pisa (Livorno) Italy, Funchal (Madeira) Portugal, Genoa (Italy), Gibraltar(United Kingdom), Istanbul (Turkey), Izmir (Turkey), Korcula (Croatia), Kusadasi(Turkey), La Rochelle (France), Lisbon (Portugal), Livorno (Italy) Florence & Pisa,London (Dover) England, Malaga (Spain), Monte Carlo (Monaco), Mykonos (Greece),Oporto (Leixoes) Portugal, Palma De Mallorca (Spain), Paris (Le Havre) France,Portofino (Italy), Reykjavik (Iceland), Rome (Civitavecchia) Italy, Santa Cruz DeTenerife (Spain), Santorini (Greece), Sorrento (Italy) Capri & Pompeii, Split (Croatia),Taormina (Naxos) Sicily, Valletta (Malta), Venice (Italy) SCANDINAVIA & RUSSIAArhus (Denmark), Bergen (Norway), Copenhagen (Denmark), Flam (Norway),Gdansk (Poland), Geiranger (Fjord), Gudvangen (Norway), Hellsylt (Norway),Helsinki (Finland), Honningsvag (Norway), Oslo (Norway), Riga (Latvia), St.

Petersburg (Russia), Stockholm (Sweden), Tallinn (Estonia), Tromso (Norway),Trondheim (Norway), Turku (Finland), Visby (Sweden) HAWAI’I Fanning Island(Republic of Kiribati), Hilo (Hawai’i), Honolulu (Oahu), Kahului (Maui), Kona(Hawai’i), Lahaina (Maui), Nawiliwili (Kauai) AFRICA Alexandria (Egypt), Casablanca(Morocco), Sao Vicente, Cape Verde (Porto Grande), Tripoli (Libya) CARIBBEAN& BERMUDA Basseterre (St. Kitts), Belize City (Belize), Bridgetown (Barbados),Castries (St. Lucia), Fort-de-France (Martinique), Freeport (Bahamas), George Town(Grand Cayman), Great Stirrup Cay (Bahamas), Hamilton (Bermuda), King’s Wharf

(Bermuda), Montego Bay (Jamaica), Nassau (Bahamas), Ocho Rios (Jamaica),Oranjestad (Aruba), Philipsburg (St. Maarten), Puerto Limon (Costa Rica), Puntarenas(Costa Rica), Roatan (Bay Islands) Honduras, Roseau (Dominica), San Juan (PuertoRico), St. John’s (Antigua), St. George’s (Grenada), St. Thomas (US Virgin Islands),Tortola (British Virgin Islands), Willemstad (Curacao) PANAMA CANAL &MEXICO Acapulco (Mexico), Cabo San Lucas (Mexico), Cancun (Mexico), Colon(Panama), Cozumel (Mexico), Huatulco (Mexico), Playa Del Carmen (Mexico), PuertoVallarta (Mexico), Zihuatanejo (Ixtapa) Mexico

The Star Cruises Group

*Ports of call are subject to change.

SCHEDULED INTERNATIONAL PORTS OF CALL BY REGION 2005

Honolulu

Oslo

Wiesbaden

Miami

CONTENTS

Corporate Information 3

Chairman’s Statement 4

Fleet Profile 8

Global Highlights 12

Management’s Discussion and Analysis of 16Financial Condition and Results of Operations

Directors and Senior Management Profiles 21

Report of the Directors 26

Consolidated Profit and Loss Account 39

Balance Sheets 40

Consolidated Cash Flow Statement 41

Statements of Changes in Equity 44

Notes to the Accounts 46

Auditors’ Report 85

Audited Five Years Financial Summary 86

Property Summary 87

Star Cruises Worldwide 88

This Annual Report contains forward-looking statements that involve risksand uncertainties. The forward-looking statements are not historical facts,but rather are based on the current beliefs, assumptions, expectations,estimates and projections of the directors and management of Star CruisesLimited (the “Company”) about the industry and markets in which theCompany and its subsidiaries (the “Group”) operate. These statements arenot guarantees of future performance and are subject to risks, uncertaintiesand other factors, some of which are beyond the control of the Group, aredifficult to predict and could cause actual result to differ materially fromthose expressed or forecast in the forward-looking statements. Factors thatcould cause actual results to differ materially from those reflected in theforward-looking statements include general economics and businessconditions, changes in cruise industry competition, weather and other factors.Reliance should not be placed on these forward-looking statements, whichreflect the view of the Company’s directors and management as of the date ofthis report only. The Company undertakes no obligation to publicly revisethese forward-looking statements to reflect events or circumstances that ariseafter publication.

Cover: NCL America’s Pride of Aloha in Hawai’i

CORPORATE INFORMATION

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BOARD OF DIRECTORS

Tan Sri Lim Kok ThayChairman, President and Chief Executive Officer

Mr. Alan Howard Smith, J.P.Deputy Chairman and Independent Non-executive Director

Mr. Chong Chee TutExecutive Director and Chief Operating Officer

Mr. William Ng Ko SengExecutive Director and Executive Vice President

Mr. David Colin Sinclair VeitchExecutive Director of the Company, Deputy Chairman, President

and Chief Executive Officer of NCL Corporation Ltd.

Mr. Tan Boon Seng

Independent Non-executive Director

Mr. Lim Lay Leng

Independent Non-executive Director

SecretaryMs. Louisa Tam Suet Lin

Assistant SecretaryMr. Tan Wooi MengAppleby Corporate Services (Bermuda) Ltd.

Registered OfficeCanon’s Court, 22 Victoria Street, Hamilton HM 12, Bermuda

Corporate HeadquartersSuite 1501, Ocean Centre, 5 Canton Road, Tsimshatsui,Kowloon, Hong Kong SARTel: (852) 23782000 Fax: (852) 23143809

Bermuda Principal RegistrarButterfield Fund Services (Bermuda) LimitedRosebank Centre, 11 Bermudiana Road, Pembroke, BermudaTel: (441) 2951111 Fax: (441) 2956759

Hong Kong Branch RegistrarComputershare Hong Kong Investor Services Limited46th Floor, Hopewell Centre, 183 Queen’s Road East,Hong Kong SARTel: (852) 28628628 Fax: (852) 28650990/25296087

Transfer AgentM & C Services Private Limited138 Robinson Road #17-00, The Corporate Office,Singapore 068906Tel: (65) 62280507 Fax: (65) 62251452

AuditorsPricewaterhouseCoopers, Certified Public Accountants22nd Floor, Prince’s Building, Central, Hong Kong SAR

Internet Homepagewww.starcruises.com

Investor RelationsEnquiries may be directed to:

Ms. Louisa Tam Suet LinCompany SecretaryHong Kong SARTel: (852) 23782000 Fax: (852) 23143809E-mail : louisatam@starcruises.com.hk

Mr. Gerard Lim Ewe KengChief Financial OfficerPort Klang, MalaysiaTel: (603) 31092600 Fax: (603) 38840213E-mail: gerard@starcruises.com.my

CHAIRMAN’S STATEMENT

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Dear Valued Shareholders,

On behalf of the Board of Directors, I would like to present theAnnual Report for the Star Cruises Group of companies (“theGroup”) for the year ended 31 December 2004.

REVIEW OF FINANCIAL RESULTS

For the year ended 31 December 2004, the Group recorded anet profit (before impairment loss, non-recurring expenses, non-cash foreign currency debts translation and forward contractslosses) of US$31.4 million as compared with a net loss (beforeimpairment loss, non-recurring expenses and forward contractsgain) of US$12.3 million for the year 2003.

In 2004, the Group recorded an impairment loss of US$14.5million on s/s Norway and US$5.1 million of non-recurringexpenses, which were mainly for custom fines on m.v. NorwegianStar resulting from necessary alterations to the ship’s Hawai’i/Fanning Island itinerary in response to a problem with the Azipodpropulsion system. In addition, the Group recorded a non-cashEuro denominated debt translation loss of US$9.5 million andforward contracts loss of US$11.3 million as a result of theweakening US dollar.

In 2003, the Group had US$5.3 million net proceeds from theloss-of-hire coverage arising from the s/s Norway boiler accidentwhich partially offset a legal settlement provision of US$18.5million and US$99.5 million of the ships and tradenamesimpairment losses. The forward contracts gain was US$0.5million.

As a result of these aforementioned factors, the Group recordeda net loss of US$9.0 million for the year ended 31 December2004 as compared to a net loss of US$124.5 million for the year2003.

During the year, the Group rationalised the bankingarrangements between Star Cruises Limited (“the Company”)and its subsidiary NCL Corporation Ltd. (“NCLC”). Prior tothe rationalisation, the Company guaranteed all the borrowingsof the new ships acquired after the purchase of NCL. In addition,there were upstream guarantees from the subsidiaries of NCLCfor the corporate borrowings of the Company. After therationalisation, all the borrowings of subsidiaries of NCLC thatwere previously guaranteed by the Company were replaced by aguarantee from NCLC. Likewise, all the upstream guaranteesfrom the subsidiaries of NCLC were removed. I am glad to reportthat the rationalisation is now completed.

As part of the rationalisation, we also planned to move the mid-sized ships from NCL over to the Asia-Pacific operations and Iam pleased to say that the first ship, the Norwegian Sea, will bemoved over to Asia in September 2005. In addition, we alsoraised a US$250 million 10-year Senior Notes, and US$800million term loan and revolving credit for NCLC. The facilitiesraised will give NCLC enough equity money to finance two morenewbuildings and liquidity for their operations.Tan Sri Lim Kok Thay

Chairman, President andChief Executive Officer

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Towards the end of 2004, the Group made an investment in alow cost value airline – Valuair which operates out of Singapore.Unlike other no-frills airlines, Valuair offers limited facilities onboard such as food, a longer seat pitch and assigned seating toname a few. Valuair’s flight range will extend up to 6 hours whichwill help bring passengers from the Asia-Pacific region toSingapore at a lower price thereby complementing our cruisepackages out of Singapore.

A BRIEF REVIEW

Asian Operations

2004 saw the continued recovery of the Asia-Pacific region fromthe effects of Severe Acute Respiratory Syndrome which affectedthe operations in 2003. The passenger numbers are returningand in some markets, the number of passengers has exceededthat of 2002. This is very encouraging and it has proven onceagain that the cruise industry is a resilient industry.

The number of capacity days in the Asia-Pacific decreased from2.5 million to 1.8 million as a result of the sale of the SuperStarAries and SuperStar Capricorn and the transfer of the SuperStarLeo to NCL. The decision to transfer the SuperStar Leo to theNCL brand had to be taken to fill the gap that was left becauseof the delay in the delivery of the Pride of America. The deliveryof the Pride of America was delayed because it took in waterafter a storm at Lloyd Werft in Bremerhaven where the ship wasin its final stages of completion. We immediately made plans tomove the Pride of Aloha (previously the Norwegian Sky) toHawai’i in July 2004 earlier than its scheduled date to Hawai’i.This meant that the Norwegian Sky had to give up its verylucrative summer itinerary in Alaska and a decision was made tomove the SuperStar Leo to fill the gap in the Alaska. TheSuperStar Leo is now renamed Norwegian Spirit.

The Indian market continues to be a good market for Asia-Pacificwith ongoing efforts in promoting our cruises in the region beingintensified in key market segments. We expanded our scope ofsales and marketing activities in India with the opening of thethird sales office in Ahmedabad, in the eastern part of the countryin just over five years. In addition, Star Cruises embarked on amajor road show covering the four key cities of Mumbai,Ahmedabad, New Delhi and Chennai. These efforts underlineour commitment in further developing the cruise potential inline with the growing presence of the Star Cruises brand in India.

In North Asia, Star Cruises was proud to be part of a specialjoint project involving the cities of Fukuoka, Busan and Shanghai.A special six-night cruise charter by the Japan Tourism Board onSuperStar Gemini saw more than 1,000 guests embark anddisembark from the three cities participating in an exchange ofviews on cultural, economic, educational and tourism issues.

SuperStar Gemini departed Taiwan for Port Klang, Malaysia inOctober where she will be based till March 2005. Two successfulspecial public ship showcases were held in conjunction with herdeployment in Port Klang to coincide with the year-end schooland festive holidays.

Norwegian Spirit (previously sailed as SuperStar Leo) makes her way along the waters of Alaska.

Press Conference held in conjunction of the formation of a strategicalliance between Star Cruises and Singapore's first low cost carrier,Valuair on 20 December 2004.

China which continues to be one of the key areas of our businessfocus saw Star Cruises become the first company to receive alicence to operate a 100% owned international travel agencyin Shanghai. This was indeed a significant highlight whichsupports our efforts to develop a rapidly growing tourismmarket. It is also an extension of our overall business activitieson the Chinese mainland in actively promoting cruises in theAsia-Pacific region.

Star Cruises signed a Memorandum of Understanding withthe Nanhu Vocational School in Shanghai to jointly introduceand organise the Genting – Star International CruiseManagement Programme for youth. The programme aims toprovide students with a level of vocational education andtraining of international standard in building a talented poolof dedicated professionals to support the cruise and hospitalityeconomy in China.

These initiatives complement the ongoing upgrading andimprovement of our infrastructure and facilities in our cruisehubs such as the opening of a new reservations office in HongKong in providing our guests with the convenience and ease tocruise on our ships.

In eleven years of operations, StarCruises has always endeavouredto provide vacationers with thebest possible and memorablecruise experiences aboard its fleetof ships with levels of serviceexcellence, high safety standardsand a range of world classentertainment, dining andrecreation options. A glowingtestimony to this would be thewinning of the “Best CruiseOperator in Asia-Pacific 2004”award for the seventh time. It isalso a reflection of the dedicationand commitment displayed bythe staff and crew in striving toprovide the very best at all times.

For the Asian Operations, the year ended on a sombre note whenthe devastating Asian Tsunami hit parts of South Asia on 26December 2004. Star Cruises reacted to temporarily replace thePhuket calls by SuperStar Virgo and SuperStar Gemini with callsto Langkawi and Penang in Malaysia.

NORWEGIAN CRUISE LINE (NCL)

NCL Operations

The Group’s US operations continue to figure prominently underthe NCL, NCL America and Orient Lines brands. With a fleetof 15 ships in operation and under construction, NCL madeUS maritime history in July 2004 when it introduced thereflagged Pride of Aloha under the NCL America brand on itsHawaiian itineraries. The Pride of Aloha is the first US-flaggedship in almost half a century with a fully US-based crew. Changesin fleet wide global operations have also seen the introduction ofSuperStar Leo, now known as Norwegian Spirit into the NCLfleet in May with cruise itineraries to Alaska. She currently offersseven-day cruises calling at Barbados, Grenada, St. Lucia, Antiguaand Tortola as well as a five-day cruises from Miami calling atGrand Cayman and Roatan, Bay Islands and Honduras.

In line with the growth strategy of the NCL America brand cruiseproduct in Hawai’i, NCLC acquired Polynesian Adventure Tours,one of two major tour bus companies in Hawai’i at a purchaseprice of approximately US$5 million in November 2004. Withover 100 motor coaches and buses, a statewide presence andreputation for exceptional customer service coupled with a loyalclientele, the acquisition will position NCL to develop the groundoperations necessary to serve the core of its tour and transferrequirements.

SAFETY & SECURITY

Star Cruises always places high priority on safety and securityand we are pleased to note that Star Cruises ships and ports arenow compliant with the International Ship and Port FacilitiesCode which came into mandatory effect in July 2004.

FLEET RATIONALISATION

Fleet rationalisation plans continue with the plannedredeployment of medium capacity vessels like the NorwegianSea from the NCL fleet to the Asia-Pacific. This is in line withStar Cruises’ aim to modify its fleet profile in Asia in order tohave a greater number of relatively modern vessels of mediumcapacity instead of mega ships. This would allow for greaterdeployment flexibility and diversification in a developing marketwhere demand patterns have yet to be established.

NEWBUILDS

The Star Cruises Group has set up a corporate newbuilding officein London to oversee its newbuild projects which will see thecompletion of two vessels in 2005.

Public queue up for ship tour of SuperStar Gemini during her showcases inPort Klang in Malaysia in November and December 2004.

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The Pride of America and the Norwegian Jewel are scheduledfor delivery in June and August 2005 respectively, whilst NCL isexpected to take delivery of the third newbuild, the Pride ofHawai’i in April 2006.

In line with renewing the NCL fleet, NCL had on 24 December2004 entered into a contract for the building of a new 2,400-berth ship. The ship will be built at Meyer Werft in Papenburg,Germany and will be delivered in February 2007.

The new ship will be the eighth new ship introduced to theNCL fleet since Star Cruises took control of NCL in early 2000.

ACKNOWLEDGEMENT

On behalf of the Board of Directors, I would like to express myheartfelt appreciation to the management, staff and crew for theirdedication and commitment that have contributed to the Group’sperformance in 2004.

I wish to also express Star Cruises’ sorrow and offer ourcondolences to the victims of the Asian Tsunami that hit parts ofAsia on 26 December 2004 and look forward to the speedyrecovery of the affected areas and the return to normalcy.

My sincere thanks to the various local authorities, businesspartners, consultants, travel partners, customers and loyalshareholders for their support and cooperation throughout theyear. I am also grateful for the tremendous support from thecentral and local governments in the jurisdictions where weoperate.

Tan Sri Lim Kok ThayChairman, President andChief Executive Officer

22 February 2005

Pride of Aloha on her way toHawaii from San Francisco.

The first of 67 keel blocks that will complete the hull of NCL America’sPride of Hawai’i. In the background is NCL Corporation’s Norwegian Jewel,scheduled for delivery in August 2005.

Artist’s Impression ofNorwegian Jewel’s Atrium Lobby

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FLEET PROFILE

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Mariners Buffet, SuperStar Gemini

SuperStar Virgo sailing towards Singapore

The Group’s vessels operating under the brand names Star

Cruises, Norwegian Cruise Line, NCL America, Orient Lines

and Cruise Ferries call at about 200 destinations and islands in

Asia -Pacific, Caribbean, Alaska, Bermuda, Antarctica, Hawai’i,

North and South America, Europe and the Mediterranean.

Grand Piazza, SuperStar Virgo

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Palazzo, SuperStar Virgo

Star Pisces

MegaStar Aries

SuperStar Virgo

SuperStar Gemini

MegaStar Taurus

Wasa Queen

Star CruisesStar Cruises currently operates five ships in Asia-Pacific namelySuperStar Virgo, SuperStar Gemini, Star Pisces, MegaStarAries and MegaStar Taurus.

Cruise FerriesThe Cruise Ferries brand was introduced in 2001 and currentlycomprises the Wasa Queen which sails from Hong Kong. Thebrand is designed to provide an entry-point experience for first-time cruisers.

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Norwegian Cruise LineShips currently in operation include Norwegian Dawn,Norwegian Star, Norwegian Sun, Norwegian Wind, NorwegianDream, Norwegian Sea, Norwegian Majesty, Norwegian Crownand the Norwegian Spirit (formerly SuperStar Leo).

* The Norwegian Jewel is scheduled for delivery in August 2005.

Norwegian Sun

Norwegian Spirit

Norwegian Star

Norwegian Dawn

* Norwegian Jewel

Norwegian Crown

Norwegian Majesty

Norwegian Sea

Norwegian Dream

Norwegian Wind

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NCL AmericaNCL America currently operates Pride of Aloha, which will bejoined by the Pride of America in June 2005, followed by thePride of Hawai’i in April 2006.

Pride of Aloha

Pride of America

Marco Polo

Hukilau Cafe, Pride of Aloha

Venetian, Norwegian Dawn

Tivoli Pool, Norwegian Spirit

Orient LinesFounded in 1992, the award winning cruise line operates a singlecruise ship, the Marco Polo specialising in destination-orientedcruises worldwide.

Shanghai, 1 May 2004 –Tan Sri KT Lim (sixth from theleft) with a group of invitedguests at the first launch of aseries of international cruises onSuperStar Gemini fromShanghai to Hong Kong.

GLOBAL HIGHLIGHTS

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Reunion of Two Sisters – SuperStar Virgo andSuperStar Leo berthed side by side at the HarbourFront Centre, Singapore and the welcomingceremony on 7 January 2004.

Memorandum Of Understanding (MOU) SigningCeremony of “Genting-Star International CruiseManagement Programme” for youth in Shanghai,China.

Mr. William Ng, Executive Director and Executive Vice President forCorporate Affairs with Mr Richard Loh, Director of Sales andMarketing - Central China during the opening ceremony of StarCruises Travel Agency (Shanghai) Company Limited, the first whollyforeign owned travel agency in Shanghai, China in November 2004.

Sorpresa! A new million dollarproduction show by Star Cruiseslaunched onboard SuperStar Virgo.

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New reservations office at the Tsimshatsui Star Ferry Pier,Hong Kong.

Star Cruises’ booth at the National Association ofTravel Agents Singapore (“Natas”) Travel Fair heldat Suntec City Convention Hall, Singapore from 19to 21 March 2004.

Mr. Vijay Puthran receiving the “Most Unique Product Award” atIndia International Travel Mart (IITM) from Mr. Anurag Gupta,Director of IITM (left). On the right, Mr. Surendra Hakku, Directorof Marketing IITM.

The Star Cruises galley team won a total of 7 medals at the 14thFood Hotel Asia ("FHA") 2004 Culinary Challenge Competitionheld in Singapore in April 2004.

Star Cruises’ booth at the Malaysian Association of Tours & TravelAgents (“MATTA”) Fair held at the Putra World Trade Centre inKuala Lumpur on 12-14 March 2004.

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SuperStar Leo now known as Norwegian Spiritsailing in the colours of Norwegian Cruise Lineafter joining the fleet in May 2004.

NCL’s first US-flagged vessel, Pride of Aloha commenced cruises in Hawai’i, July 2004.

Mrs. Daniel K. Inouye, Godmother of Pride of Aloha andMr. Colin Veitch, NCL’s President and CEO.

Tan Sri KT Lim (second from the right) together with the NCLAmerica and Hawaiian dignitaries celebrate the christening of Prideof Aloha in Hawai’i, 4 July 2004.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

The following discussion is based on, and should be read in conjunction with, the financial statements and the notes theretoincluded elsewhere in the annual report.

GeneralThe Group is the third largest cruise line in the world by lower berths, with a combined fleet of 21 ships in service and underconstruction with over 31,000 lower berths under four mainstream brand names, Star Cruises, Norwegian Cruise Line, OrientLines and NCL America. Star Cruises and Cruise Ferries operate six ships offering various cruise itineraries and calls destinationsprimarily in the Asia Pacific region. Norwegian Cruise Line and Orient Lines operate ten cruise ships offering a wide variety ofitineraries in North America (including Alaska and Hawaii), Central and South America, Antarctica, Bermuda, the Caribbean,Europe and the Mediterranean. In July 2004, the Group introduced the reflagged Pride of Aloha under the NCL America brand onits Hawaii itineraries.

Revenues from Cruise and Cruise-Related ActivitiesRevenues from cruise and cruise-related activities can be further categorised as “cruise revenues’’ and “on-board revenues”. Cruiserevenues are derived from the sale of passenger tickets. Passenger ticket sales comprise a one-off up-front payment collected frompassengers for accommodation, meals in certain restaurants on the ship, certain on-board entertainment and, where relevant, airand land transportation to and from the ship. Revenues from passenger ticket sales are collected from passengers prior to theirdeparture on the cruise, usually at the time of booking the cruise.

On-board revenues consist of revenues from gaming, beverage sales, shore excursions, spa services, internet cafés, art auctions, pre-cruise and post cruise packages, a la carte dining outlets and revenues from on-board retail sales. On-board revenues vary accordingto the size of the ships in operation, the length of cruises operated, and the markets in which the ships operate. The Group recordsonboard revenues from onboard activities the Group performs directly or that are performed by independent concessionaires, fromwhich the Group receives a percentage of their revenues.

Other RevenuesOther revenues comprise the revenues from the bareboat charter-hire of a catamaran to a third party customer and provision oftransportation and tour services. Charter-hire revenue generally vary according to the number of ships it has on charter-hire duringa given period.

Operating ExpensesOperating expenses are made up of air and land transportation expenses, overnight shoreside hotel expenses, passenger transfercosts, travel agent commission and all shipboard operating expenses including crew wages and benefits, port charges, fuel, food, shiprepairs and maintenance and entertainment expenses, cabin consumables and ship insurance. Most of the operating expenses aregenerally fixed per cruise, although passenger food expenses and the cost of other consumables typically vary according to thenumber of passengers on board a particular cruise ship.

Selling, General and Administrative ExpensesSelling expenses consist of the expenses of the Group’s marketing activities. These marketing activities include advertising andpromotional activities, and other passenger related services, such as the Group’s loyalty programmes.

General and administrative expenses consist of shoreside personnel wages and benefits, and expenses relating to the Group’s world-wide offices, information technology support, crew training and support (including the operation of the Star Cruises ShipSimulator Centre), operation of the Group reservation call centres and support functions, accounting, purchasing operations, shipadministration and other ship-related support activities.

Depreciation and AmortisationDepreciation and amortisation expenses consist primarily of depreciation of ships and shoreside assets as well as amortisation ofgoodwill and trade names. Costs associated with drydocking a ship are deferred and included in the cost of the ships and amortisedover the period to that ship’s next scheduled drydocking which is generally once every two to three years.

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Foreign Exchange and Interest Rate SwapsThe functional currency of the Group is the U.S. dollar as a substantial portion of the Group’s transactions are realised or settled inU.S. dollars. Transactions in currencies other than U.S. dollars (“foreign currencies”) are translated into U.S. dollars at exchangerates in effect at the transaction dates. Monetary assets and liabilities expressed in foreign currencies are translated at exchange ratesat the balance sheet date. All such exchange differences are reflected in the consolidated profit and loss account.

The Group does not undertake extensive hedging of its foreign currency cashflows as the Directors believe that the main foreigncurrencies in which the Group derives its revenues, the Singapore dollar and the Hong Kong dollar, are generally stable. The Groupdoes from time to time enter into hedging arrangements in connection with anticipated foreign currency fluctuations against theU.S. dollar. As at 31 December 2004, the Group was a party to certain forward contracts with a total notional amount of US$206.7million in respect of the Singapore dollars and US$60.7 million in respect of the Hong Kong dollars. These forward contracts haveremaining life ranging from 1 to 7 years.

Substantially, all of the Group’s indebtedness and its related interest expenses are denominated in U.S. dollars and are based uponfloating rates of interest. In order to limit its exposure to interest rate fluctuation, variable to fixed interest rate swaps have beenutilised from time to time, to fix a portion of interest costs over a period of time. The Group continuously evaluates its debtportfolio, including interest rate swaps to achieve a desired proportion of variable and fixed debt based on its view of interest ratemovement. As at 31 December 2004, the Group had interest rate swaps on debts with a notional amount of US$430.4 million withremaining lives ranging from 3 to 7 years. In addition, the Group has a series of 5.5% capped USD LIBOR-in-arrears interest rateswaps with a notional amount of approximately US$140.8 million to limit its exposure to fluctuations in interest rate movementsif the LIBOR rate moves beyond the cap level of 5.5% with the remaining lives of 4 years.

TaxationBermuda, the jurisdiction of continuation for Star Cruises Limited (“the Company”) and the jurisdiction of incorporation forcertain of its operating subsidiaries, and the Isle of Man, the jurisdiction of incorporation for most of the Company’s operatingsubsidiaries, impose no tax on income derived outside of those respective jurisdictions. The Company’s operating subsidiaries do,however, file relevant returns in the tax regimes of the relevant jurisdictions in which they operate, and pay taxes as required by thoseregimes. Income tax expense includes current tax and the deferred tax charges.

SeasonalityThe cruise industry in Asia Pacific is less seasonal than the North American cruise market. This lower degree of seasonality isprimarily attributable to the lower degree of seasonal climate variation in certain parts of Asia Pacific, particularly South East Asia.However, the Group has generally experienced a decrease in demand in December and January in the Hong Kong marketattributable to unfavourable weather patterns during that time of year. This seasonal decrease in demand is generally offset byincreased demand in other markets, such as Singapore, Thailand, and Malaysia, as a result of public holidays in December andJanuary.

The cruise industry in North America is, however, moderately seasonal with greater demand generally occurring during the monthsof June to August.

Demand, however, also varies by ship and itinerary.

Human ResourcesAs at 31 December 2004, the Group had approximately 14,900 full time employees, of which approximately 12,600 were shipofficers, crew and staff on ships. The remaining was employed in shoreside operations world-wide. The Group provides employeebenefits including provident fund scheme and medical insurance schemes for its staff.

The Group has a Post-listing Employees’ Share Option Scheme, under which options may be granted to employees of the Groupentitling them to subscribe for shares of the issued and paid up share capital of the Company from time to time.

There is no significant change in the remuneration policies, bonus and share options schemes and training schemes for the Groupduring the year ended 31 December 2004.

18

Corporate ReorganisationStarting in late 2003, the Group undertook a reorganisation of the Norwegian Cruise Line and Orient Lines businesses within theGroup. The reorganisation, which closed on 23 April 2004, was intended to increase the financial self-sufficiency of NCLCorporation Ltd. (“NCLC”)’s business, allowing NCLC to raise general and ship-specific financing without guarantees or otherfinancial assistance from the Company and to facilitate the renewal of NCLC’s fleet as newly-built ships are placed into service. Inaddition, NCLC transferred six of its ships to the Company’s subsidiaries at their net book values along with US$403.2 million ofsecured indebtedness associated with these ships. After the transfer, NCLC entered into arrangements with the Company’ssubsidiaries to charter these six ships for periods ranging from one to six years to continue operating them under Norwegian CruiseLine and Orient Lines brands.

Results for the year ended 31 December 2004 (“Year 2004”) as compared with the year ended 31 December 2003 (“Year 2003”)

TurnoverThe Group’s revenue for the Year 2004 was US$1,636.4 million, up 1.1% from US$1,618.2 million for the Year 2003 despite areduction in capacity of 7.2%. Total capacity days for Year 2004 was 8,163,437 as compared to 8,796,135 for Year 2003. Netrevenue increased by 4.3%. Net revenue represents revenue less air ticket costs, travel agent commissions and other direct costs (allof which are included in operating expenses). Net revenue yield for the Year 2004 increased by 12.4% as compared with the Year2003. Net revenue yield is defined as net revenue per capacity day. Occupancy for the Year 2004 was 103.8%, up from 96.1% forthe Year 2003. The Group’s performance for the Year 2003 was severely affected by the impact from the Iraq conflict and theoutbreak of Severe Acute Respiratory Syndrome.

Star Cruises Asia Pacific operated with 28.8% lower capacity days in the Year 2004 as compared to the Year 2003. Net revenue yieldwas 34.7% higher as compared with the Year 2003 and 18.3% higher as compared with the same period in 2002. Occupancy for theYear 2004 was 96.5%, up from 75.7% for Year 2003 and 84.7% for the same period in 2002 respectively.

For the Year 2004, NCLC Group offered 1.5% more capacity days (6.4 million) split as to 93.7% International Fleet and 6.3% USflag fleet. Occupancy was up from 104.2% to 105.9% overall and from 104.2% to 106.2% in the International Fleet. Occupancyon the US flag fleet (one ship) was 100.7%. Net revenue yield was up 6.9% versus Year 2003 or by 6.7% excluding the impact ofrevenues from the Hawaii tour operation.

Costs and expensesTotal costs and expenses before interest and non-operating items for the Year 2004 amounted to US$1,515.9 million as comparedwith US$1,638.7 million for the Year 2003. In the Year 2004, the Group recorded an impairment loss of US$14.5 million relatingto the write down of the book value of s/s Norway and US$4.3 million custom fines on Norwegian Star resulting from necessaryalteration to the ship’s Hawaii/Fanning Island itinerary in response to a problem with the ship’s Azipod propulsion system. Inaddition, the Group incurred US$0.8 million legal settlement costs in Year 2004. In the Year 2003, the Group had US$99.5 millionof impairment losses from the disposals of m.v. SuperStar Capricorn and m.v. SuperStar Aries and the write down of the book valuesof m.v. SuperStar Express (a catamaran) and s/s Norway as well as the trade names. The Group also made provision of US$15million in respect of legal settlement expenses and related costs, which was partially offset by US$5.3 million net proceeds from theloss-of-hire coverage arising from the s/s Norway boiler accident.

Excluding these items, total costs and expenses before interest and non-operating items was US$1,496.3 million for Year 2004 ascompared with US$1,529.4 million for Year 2003, a decrease of US$33.1 million.

Operating expenses before non-recurring expenses decreased by US$29.2 million to US$1,059.5 million for Year 2004 fromUS$1,088.7 million in Year 2003. Ship operating expenses (excluding costs such as travel agent commissions, air tickets and otherdirect costs as they are already included in the net revenue calculation) was however 0.6% higher as compared with the Year 2003.The Group’s ship operating expenses per capacity day were 8.4% higher as compared with the Year 2003, in part due to risingpayroll and other costs, and in part due to the heightened cost levels of the US flag operation. In Asia Pacific, ship operatingexpenses per capacity day for Star Cruises registered an increase of 5.3%. Ship operating expenses per capacity day for NCLC Grouprose by 9.4%. Fuel cost per capacity day for 2004 was marginally down on Year 2003.

Selling, general and administrative (SG&A) expenses increased by US$11.6 million to US$255.0 million for Year 2004 fromUS$243.4 million for Year 2003. On a per capacity day basis, the Group’s SG&A expenses increased by 12.9% as compared withthe Year 2003. The increase has been driven in part by the shoreside costs of the new Honolulu operation and, during the early partof the year, by TV advertising campaigns in California and New York to support the new Hawaii operation and the year-round NewYork operation. Both of these markets are targeted for considerable growth in NCLC future deployment and the decision was takento commence the investment in consumer marketing this year in advance of the build-up. In addition, the reduction in capacity alsopushed the SG&A costs per capacity day up.

19

Costs and expenses (continued)Depreciation and amortisation expenses decreased by US$15.4 million to US$181.9 million for the Year 2004 as compared withUS$197.3 million for the Year 2003 as a result of the disposal of the two ships mentioned above and reduced depreciation for s/s Norway.

Operating profit/(loss)The Group recorded an operating profit of US$120.5 million for the Year 2004 as compared with an operating loss of US$20.5million in 2003. Excluding impairment losses and non-recurring expenses, the Group would have achieved an operating profit ofUS$140.1 million for the Year 2004 as compared with an operating profit of US$88.8 million for the Year 2003.

Non-operating income/(expense)Non-operating expenses increased by 25.6% to US$128.5 million for the Year 2004 as compared with US$102.3 million for theYear 2003. During the Year 2004, the Group had forward contract losses amounting to US$11.3 million as compared to a gain ofUS$0.5 million in 2003. The loss resulted primarily from the strengthening of the Singapore dollar and Euro against the US dollarduring the year. The Group recorded a non-cash Euro denominated debt translation loss of US$9.5 million for the Year 2004. TheGroup did not have any Euro denominated debt in 2003. In addition, the Group incurred US$3.5 million of legal expenses in Year2003.

Interest expense, net of interest income and capitalised interest increased to US$104.6 million for the Year 2004 from US$91.2million in Year 2003. Interest expenses were higher primarily due to higher average outstanding debts and higher interest rates.Capitalised interest for the Year 2004 was US$10.2 million as compared with US$2.2 million for the Year 2003.

Loss before taxationLoss before taxation for the Year 2004 was US$8.0 million as compared to a loss before taxation of US$122.8 million for the Year2003. Excluding the impairment losses, non-recurring expenses, non-cash Euro denominated debt translation and forwardcontracts losses mentioned above, the profit before taxation for the Year 2004 would be US$32.4 million as compared with lossbefore taxation of US$10.6 million for the Year 2003.

TaxationThe Group incurred taxation expenses of US$1.0 million for the Year 2004 as compared to US$1.7 million for the Year 2003. Thelower taxation expenses in the Year 2004 were mainly a result of overprovision of shipping income of prior years.

Net loss attributable to shareholdersAs a result of the changes in revenues and expenses, the Group recorded a net loss attributable to shareholders of US$9.0 million forthe Year 2004. Excluding the abovementioned impairment losses, non-recurring expenses, non-cash Euro denominated debttranslation and forward contracts losses, the Group would have recorded a net profit of US$31.4 million for the Year 2004.

Liquidity and capital resources

Sources and uses of fundsThe majority of the cash and cash equivalents are held in U.S. dollars. For the Year 2004, cash and cash equivalents decreased toUS$341.0 million from US$377.0 million as at 31 December 2003. The Group’s business provided US$283.0 million of net cashfrom operations for the Year 2004 as compared to US$178.7 million for the Year 2003. The increase in net cash generated fromoperations was primarily due to an increase in advance ticket sales.

During the Year 2004, the Group’s capital expenditure was approximately US$468.3 million. Approximately US$387.4 million ofthe capital expenditure was related to the construction of new ships. The remaining of the expenditure was for vessel refurbishmentsand onboard assets. During the Year 2004, the Group received net proceeds of approximately US$82.2 million from the disposal ofships and insurance proceeds related to the s/s Norway boiler accident. The Group used approximately US$15.1 million to acquirean equity interest in Valuair Limited. In addition, US$4.6 million net of cash and cash equivalents acquired, was used to acquire asubsidiary, Polynesian Adventure Tours, Inc.

In April 2004, the Group refinanced the outstanding balance of US$403.2 million of the US$623 million Fleet Loan through adrawndown of US$400 million Reducing Revolving Credit Facility. In July 2004, the Group drewdown US$480 million under theUS$800 million Loan Facility and together with US$250 million from the Senior Notes issue, repaid the outstanding amount ofthe Pride of Aloha Loan and loans related to Norwegian Spirit and Norwegian Star as well as partially repaid the US$450 millionterm loan.

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Liquidity and capital resources (continued)

Sources and uses of funds (continued)Principal long term debts repayments of US$229.7 million was made in the Year 2004. In the Year 2004, the Group drewdown atotal of US$369.7 million under the existing long term debts for the construction of the ships and working capital purposes.

Restricted cash decreased approximately US$2.2 million during the Year 2004 and was at approximately US$28.5 million as at 31December 2004.

As at 31 December 2004, the Group had approximately US$2.2 billion of bank borrowings, US$180 million of convertible bondsand US$250 million unsecured senior notes. The outstanding bank borrowings are secured by legal charges over vessels includingfixed and floating charges over assets of the Group of US$3.7 billion.

Gearing ratioThe gearing ratio as at 31 December 2004 was 0.52 times, increased slightly, as compared with 31 December 2003. The calculationof gearing ratio is based on total outstanding borrowings (including convertible bonds) of the Group of approximately US$2.60billion (2003: US$2.45 billion) divided by the total assets at the end of the year of approximately US$4.99 billion (2003: US$4.80billion).

Contingent liabilityDetails of the contingent liabilities of the Group as at 31 December 2004 are disclosed in note 29 to the accounts.

ProspectsIn Asia Pacific, the recent tsunami in the Indian Ocean which devastated tourist spots in South and Southeast Asia has caused aslight disruption in the travel industry in the region. Barring further severe aftermath, the financial impact on the Group is expectedto be modest with the two affected ships, m.v. SuperStar Virgo and m.v. SuperStar Gemini resuming its regular calls into Phuketonce a week from early March 2005.

NCLC Group has firmly ordered one more ship and entered into a letter of intent to order another. The first is with Meyer Werftand is an exact repeat of the m.v. Norwegian Jewel. It will be delivered in February 2007. Committed financing, at attractive rates,has been secured on this ship. The second ship is a new design at a new yard. The Finnish yard, Aker Finnyards, will build a 2,400passenger ship for delivery at the end of June 2007. Work continues on the detail of the specification and the financing package.

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DIRECTORS AND SENIOR MANAGEMENT PROFILES

Directors

Tan Sri Lim Kok ThayChairman, President and Chief Executive OfficerTan Sri Lim Kok Thay, aged 53, was appointed an Executive Director in September 1994. He is the Chairman, President and ChiefExecutive Officer of the Group and a director of a number of subsidiaries of the Group. He focuses on long term policies and newshipbuildings. Tan Sri Lim has been with the Group since the formation of the Company in 1993. He is the Chairman of GentingInternational PLC, a public company listed on the Luxembourg Stock Exchange and a subsidiary of Genting Berhad; Chairman,President and Chief Executive of Genting Berhad, a company listed on Bursa Malaysia Securities Berhad; Chairman, President andChief Executive of Resorts World Bhd and Joint Chief Executive of Asiatic Development Berhad, both of which are public listedcompanies in Malaysia and subsidiaries of Genting Berhad; and a director of Resorts World Limited, Golden Hope Limited,Joondalup Limited and Cove Investments Limited. Resorts World Limited, Golden Hope Limited acting as trustee of the GoldenHope Unit Trust, Joondalup Limited and Cove Investments Limited are substantial shareholders of the Company. Genting Berhadis an investment holding company and is principally involved, through its subsidiaries and associated companies, in leisure andhospitality, gaming and entertainment businesses, plantations, property development and management, tours and travel relatedservices, investments, manufacturing and trading in paper and paper related products, generation and supply of electric power andoil and gas exploration activities. Tan Sri Lim was also involved in the development of the Genting Highlands Resort in Malaysiaand the overall concept and development of the Burswood Resort in Perth, Australia and the Adelaide casino in South Australia. TanSri Lim graduated with a Bachelor of Science (Civil Engineering) degree from the University of London in 1975 and attended theProgram for Management Development at the Harvard Graduate School of Business in 1979.

Mr. Alan Howard Smith, J.P.Deputy Chairman and Independent Non-executive DirectorMr. Alan Howard Smith, J.P., aged 61, has been an Independent Non executive Director of the Company since August 2000. Mr.Smith was the Vice Chairman, Pacific Region, of Credit Suisse First Boston (“CSFB”), a leading global investment bank from 1997until he retired in December 2001. Prior to joining CSFB, he was Chief Executive of the Jardine Fleming Group from 1983 to 1994and was Chairman of the Jardine Fleming Group from 1994 to 1996. Mr. Smith has over 27 years of investment banking experiencein Asia. He was elected a council member of The Stock Exchange of Hong Kong Limited on two occasions. He was a member of theHong Kong Special Administrative Region Government’s Economic Advisory Committee, and was for 10 years a member of theHong Kong Government’s Standing Committee on Company Law Reform. He graduated with an LL.B. (Honours) degree fromBristol University, England in 1964, and was admitted as a solicitor in England in 1967 and in Hong Kong in 1970.

Mr. Chong Chee TutExecutive Director and Chief Operating OfficerMr. Chong Chee Tut, aged 55, was appointed an Executive Director in August 2000. Mr. Chong is the Chief Operating Officer ofthe Company and a director of a number of subsidiaries of the Group. Mr. Chong worked for 18 years for Exxon Corporation inAustralia, Malaysia and Thailand in various senior management positions. Prior to joining the Company in 1995, Mr. Chong wasemployed by Genting Australia Pty Ltd., an affiliate of the Company and was involved in property development and managementin Sydney. Mr. Chong has a Bachelor of Mechanical Engineering (Honours) degree from the University of Canterbury, NewZealand.

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Directors (continued)

Mr. William Ng Ko SengExecutive Director and Executive Vice President for Corporate AffairsMr. William Ng Ko Seng, aged 50, was appointed an Executive Director in August 1998. Mr. Ng is the Executive Vice President forCorporate Affairs and a director of a number of subsidiaries of the Group. He joined the Group at its inception in 1994 and hasbeen responsible in various senior executive positions in finance, administration, operations, sales and marketing at group andregional levels. Prior to joining the Group, he had been with the Genting International Group since 1987. Mr. Ng had also been inpublic practice with international accounting firms in the United Kingdom and Malaysia for 12 years. He is a Fellow of the Instituteof Chartered Accountants in England and Wales, Fellow of the Hong Kong Institute of Certified Public Accountants and Associateof the Institute of Chartered Accountants in Australia and Malaysian Institute of Accountants. Mr. Ng also holds a Master of Artdegree in Information Technology from Macquarie University in Sydney, Australia.

Mr. David Colin Sinclair VeitchExecutive Director of the Company and Deputy Chairman, President and Chief Executive Officer of NCL Corporation Ltd.Mr. David Colin Sinclair Veitch, aged 48, has been an Executive Director of the Company since August 2000. He is also the DeputyChairman, President and Chief Executive Officer of NCL Corporation Ltd. (“NCLC”) and a director of a number of subsidiariesof NCLC. Before he joined the NCLC Group in January 2000, Mr. Veitch was the Chief Financial Officer and the Senior VicePresident of Marketing and Corporate Development of Princess Cruises for approximately eight years, with responsibilities atvarying times for finance, marketing, international sales, strategic planning and corporate development. In addition, beginning inmid 1998, he was also the executive in charge of Princess Cruises’ sister company, P&O Cruises (Australia). Mr. Veitch graduatedwith a Master in Business Administration degree from the Harvard Graduate School of Business in 1984 and also holds a Bachelorof Science degree with First Class Honours from the University of London.

Mr. Tan Boon SengIndependent Non-executive DirectorMr. Tan Boon Seng, aged 49, has been an Independent Non executive Director of the Company since August 2000. Mr. Tan is alsothe Chairman and Managing Director of Lee Hing Development Limited and a Director of Wo Kee Hong (Holdings) Limited,both of which are companies listed on The Stock Exchange of Hong Kong Limited. Mr. Tan is the Executive Director of IGBCorporation Berhad, a company listed on Bursa Malaysia Securities Berhad, and also holds directorships in a number of othercompanies. He has extensive experience in property development and investment, corporate finance and trading businesses. Mr.Tan received his degree from Cambridge University, where he graduated in 1977.

Mr. Lim Lay LengIndependent Non-executive DirectorMr. Lim Lay Leng, aged 54, has been an Independent Non executive Director of the Company since October 2000. Mr. Lim is aDirector of several property and investment holding companies in Hong Kong, China and Malaysia and has extensive experience inproperty development and investment. Mr. Lim holds a Bachelor of Civil Engineering (Honours) degree from Queen Mary Collegeat the University of London.

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Senior Management of the Company

Mr. Gerard Lim Ewe KengChief Financial OfficerMr. Gerard Lim Ewe Keng, aged 45, was appointed Chief Financial Officer in March 2004. Mr. Lim was the Senior Vice President– Chief Executive Office since December 2000. He has held the position of Vice President - Corporate Planning since 1997. Priorto that, he was Vice President - Corporate Affairs at Genting International PLC from 1992 to 1997 and Corporate PlanningExecutive at Genting Berhad from 1984 to 1992. Mr. Lim is responsible for the corporate, legal, finance and treasury and taxplanning of various businesses of the Star Cruises Group. He graduated with a Bachelor of Science (Chemical Engineering) degreefrom the University of Birmingham and has a Master of Business Administration degree from University of Aston, UK.

Mr. Lee Swee HingExecutive Vice President of VIP Services and Club OperationsMr. Lee Swee Hing, aged 45, assumed the position of Executive Vice President - VIP Services and Sales and Marketing (from April2000), with responsibility over VIP Services and Sales and Marketing functions (until early December 2000). Since December2000, Mr. Lee has resumed responsibility for Club Operations and VIP Services. He joined the Company in October 1993 asDirector - VIP Services and was promoted to Senior Vice President - VIP Services in May 1994 and then to Executive Vice President- VIP Services in January 1997. Mr. Lee worked with Genting Berhad from September 1984 to December 1985 and joinedBurswood Resort Casino, Western Australia as Director responsible for international marketing from 1985 to September 1993. Mr.Lee graduated with a Bachelor of Science degree in Computer Science from the University Sains Malaysia, Penang, Malaysia.

Mr. Nils NordhExecutive Vice President of Marine Operations and Corporate NewbuildingsMr. Nils Nordh, aged 60, joined the Company as Senior Vice President - Marine Operations in 1997 and has been the ExecutiveVice President - Marine Operations and Corporate Newbuildings since January 1999. His responsibilities include technicaloperations, nautical operations, quality assurance, port operations and newbuilding. Mr. Nordh actively participates in industryassociations, including the Malaysian Swedish Business Association. He frequently speaks at maritime conferences. Mr. Nordh wasa Senior Vice President of Marine Operations of Royal Caribbean Cruises, President of Transatlantic Ship Management AB, andChairman of Nordia Shipping AB in Stockholm. Mr. Nordh graduated as an Officer at the Royal Swedish Naval Academy inStockholm and is a Captain in the Royal Swedish Navy Reserve. Mr. Nordh is currently the Chairman of Dynamar BV, a leadingcompany in transport and shipping information.

Mr. Graham CadmanSenior Vice President of Hotel OperationsMr. Graham Cadman, aged 54, has been Senior Vice President - Hotel Operations of the Company since April 1999. Mr. Cadmanjoined the Company in June 1994 as Hotel Manager. From July 1995 to June 1996, he was Vice President - Hotel Operations, andfrom July 1996 to April 1999, he was Vice President - Hotel Newbuilding. Mr. Cadman has over 30 years of experience in thehospitality industry, of which 18 were with Hilton International. Prior to joining the Company, Mr. Cadman was Director of Food& Beverage at Dynasty Singapore from October 1991 to June 1994.

Ms. Jean TeoSenior Vice President of Sales and Marketing (Asia Pacific)Ms. Jean Teo, aged 43, assumed the position of Senior Vice President - Sales and Marketing (Asia Pacific) in February 2000. She hasprimary responsibilities in Sales and Marketing including advertising, promotions and public relations for the Star Cruises fleet inthe Asia Pacific region. She joined the Company in February 1995 as Director of Sales and progressed to Vice President in October1997. Prior to joining the Company, she has 14 years of working experience in leading hotels in Singapore, holding senior positionsas Director of Sales and Regional Director of Sales. Ms. Teo has a Diploma in Hotel Management.

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Senior Management of the Company (continued)

Mr. Teoh Boon KeongVice President of Internal AuditMr. Teoh Boon Keong, aged 39, has been the Head of Internal Audit since May 1999. He was redesignated to Vice President -Internal Audit in March 2002 to commensurate with his responsibilities. He is responsible for the entire audit process of theCompany. He was transferred to the Company from Genting Berhad which he joined in November 1991 as Audit Executive andthe last position held in April 1999 was Audit Manager. Prior to Genting Berhad, he worked with Kassim Chan & Co., KualaLumpur, a member firm of Deloitte Touche Tohmatsu International. Mr. Teoh is a member of the Malaysian Institute of CertifiedPublic Accountants and a Chartered Accountant of the Malaysian Institute of Accountants.

Mr. Stephen ReillyVice President of Corporate Surveillance and SecurityMr. Stephen Reilly, aged 38, is presently the Vice President of Corporate Surveillance and Security. He has 14 years of relevantsurveillance and security experience of which eight years were with the Star Cruises organization. He is responsible for the co-ordination of hotel and casino surveillance and security for all of Star Cruises’ vessels and land-based operations. He joined theCompany in April 1997 as Director of Surveillance. Prior to that, he worked on Star Cruises’ ships for over two years (January 1995to April 1997), progressing from Surveillance Operator to Surveillance Manager in July 1996. Before his ship assignments, he hassix years of experience in overseeing the surveillance and security of the gaming operations in Regency and Barracuda Casinos,London. He started as a Chief Security Officer in Regency with responsibility for gaming operations security, and later progressedto Surveillance Officer in Barracuda, responsible for the surveillance and security of gaming operations.

Mr. Steven BlackVice President of Passenger ServicesMr. Steven Black, aged 49, has been the Vice President of Passenger Services since May 2000. He is responsible for the company-wide yield management, inventory control, passenger services and call centre operations in Port Klang, as well as all reservation-related functions in all offices. His responsibilities also include formulating strategies and plans for improving market penetrationand revenue yields. Mr. Black was the Group Director of Reservation and Yield Management, CDL Hotels International,Singapore, prior to joining Star Cruises in 2000.

Mr. Choo Seng NamVice President of Group Accounting and TreasuryMr. Choo Seng Nam, aged 38, joined the Company as an Accountant in October 1995 and was holding the position of Controller,Group Accounts from July 1999 to December 2003. He subsequently progressed to the position of Vice President – GroupAccounting and Treasury on 1 January 2004. Mr. Choo is responsible for Treasury, Corporate Finance and ManagementAccounting functions of the Star Cruises Group. He is a fellow member of both the Association of Certified Chartered Accountantsand Hong Kong Institute of Certified Public Accountants. He is also a Chartered Accountant of the Malaysian Institute ofAccountants. Prior to joining the Company in 1995, he worked with Kassim Chan & Co., Kuala Lumpur, a member firm ofDeloitte Touche Tohmatsu International.

Senior Management of NCL Corporation Ltd. (“NCLC”), a major subsidiary of the Company

Mr. Lamarr B. CoolerExecutive Vice President and Chief Financial OfficerMr. Lamarr B. Cooler, aged 56, was appointed Executive Vice President and Chief Financial Officer of the NCLC Group in January1997. Beginning in March 1987, Mr. Cooler served as Vice President and Corporate Controller. Since 1975, he was the Director ofAccounting and served in various other capacities. Mr. Cooler graduated from the Georgia Institute of Technology in 1970 with aBachelor of Science degree in Industrial Management. In 1979, Mr. Cooler graduated from Florida International University with aMaster of Science degree in Accounting. From 1982 to 2001, he was a Certified Public Accountant in the State of Florida. Mr.Cooler was appointed to the Board of Directors for West of England Shipowners Insurance Limited in 2003. He also serves on theBoard of Directors of the United States Coast Guard Foundation and the Board of Directors for the PGA Ford Championship atDoral.

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Senior Management of NCL Corporation Ltd. (“NCLC”), a major subsidiary of the Company (continued)

Mr. William HamlinExecutive Vice President of Fleet OperationsMr. William Hamlin, aged 52, joined the NCLC Group on 1 June 2004 as Executive Vice President, Fleet Operations. In thiscapacity he is responsible for all marine and hotel operations for all three NCLC brands. Immediately prior to joining the NCLCGroup, Mr. Hamlin was President of the America Region for APL Limited based in Oakland, California. He had previously heldpositions as Vice President, Operations for the America Region and President North America. Prior to joining APL, Mr. Hamlinheld positions with Sea-Land, United States Line and other maritime organizations. Mr. Hamlin has over twenty-five years ofmaritime and logistics experience. He attended the University of Maine in Orono.

Mr. Robert M. KritzmanExecutive Vice President of NCL America, Inc.Mr. Robert M. Kritzman, aged 44, was appointed as Executive Vice President of NCL America, Inc. in August 2003. Mr. Kritzmanpreviously was Senior Vice President and General Counsel of the NCLC Group. Prior to joining the NCLC Group in June 1990,Mr. Kritzman was an attorney with the law firm of McDermott, Will & Emery. He obtained a Bachelor of Science degree inEconomics and a Juris Doctorate degree from the University of Florida. He is a member of the Florida Bar Association and theAmerican Bar Association and serves on the Florida Bar Committee on Corporate Banking and Business Law. He also serves on theboards of the International Council of Cruise Lines and the North West Cruiseship Association. Mr. Kritzman is based in NCLAmerica, Inc.’s offices in Honolulu, Hawai’i.

Mr. Andrew StuartExecutive Vice President of Sales, Marketing and Passenger ServicesMr. Andrew Stuart, aged 41, was appointed as Executive Vice President of Sales, Marketing and Passenger Services of the NCLCGroup in September 2003. He previously held the position of Senior Vice President of Marketing and Sales since August 1998 and,prior to that, he was Senior Vice President of Passenger Services. He joined the NCLC Group in August 1988 in its London officeholding various Sales and Marketing positions before relocating to the NCLC Group’s headquarters in Miami. Mr. Stuart earned aBachelor of Science degree in Catering Administration from Bournemouth University, UK.

Mr. Mark E. WarrenSenior Vice President, General Counsel and SecretaryMr. Mark E. Warren, aged 53, was appointed Senior Vice President, General Counsel and Secretary of the NCLC Group in August2003. Mr. Warren was formerly a partner in the Los Angeles, California and Washington, D.C. offices of the international law firmof Gibson, Dunn & Crutcher. Mr. Warren previously served as Senior Vice President and General Counsel of Princess Cruises. Healso worked in the federal government, previously served on both the United States Senate and the White House staff of Walter F.Mondale. Mr. Warren graduated with a Bachelor of Arts degree with high honors in Political Science and International Studies fromGustavus Adolphus College and a Juris Doctorate degree with honors from the University of Minnesota School of Law.

Mr. Dana Leon LeibovitzSenior Vice President of Casino Operations and MarketingMr. Dana Leon Leibovitz, aged 36, was transferred to the NCLC Group from Star Cruises as Senior Vice President of CasinoOperations and Marketing in January 2003. In this capacity, he is responsible for the overall casino operation including cage,surveillance and marketing. Prior to this appointment, he was Vice President – Corporate Surveillance and Security of Star Cruisesduring the years 1996 to 2002 and was responsible for the co-ordination of hotel and casino surveillance and security for all StarCruises vessels and land-based operations. He joined the Company in December 1994 as Director of Surveillance and Security.Prior to joining the Company, he had worked in Par-A-Dice Casino, Illinois (as Surveillance Operator), the Hollywood Casino,Illinois (as Surveillance Shift Supervisor). Mr. Leibovitz has a Bachelor of Arts degree in Criminal Justice from Eastern IllinoisUniversity.

26

REPORT OF THE DIRECTORS

The Directors submit their report together with the audited accounts for the year ended 31 December 2004.

Principal Activities and Geographical Analysis of OperationsThe principal activity of the Company is investment holding. The Company’s subsidiaries are principally engaged in the business ofcruise and cruise related operations. Details of the Company’s principal subsidiary companies are set out in note 32 to the accounts.

An analysis of the Group’s performance for the year by business and geographical segments is set out in note 2 to the accounts.

ResultsThe results of the Company and its subsidiaries for the year ended 31 December 2004 are set out in the consolidated profit and lossaccount on page 39.

DividendsThe Directors do not recommend the declaration of any dividend in respect of the year ended 31 December 2004.

ReservesMovements in the reserves of the Company and the Group during the year are set out in pages 44 and 45. The distributable reservesof the Company amounted to US$274.2 million as at 31 December 2004.

Five Years Financial SummaryA summary of the results and of the assets and liabilities of the Group for the last five years is set out on page 86.

Purchase, Sale or Redemption of SharesNeither the Company nor any of its subsidiaries has purchased, redeemed or sold any of the Company’s shares during the year ended31 December 2004, save for the issuance of 66,480 new ordinary shares of US$0.10 each at an aggregate price of US$17,857pursuant to the exercise of options granted under The Star Cruises Employees Share Option Scheme adopted by the Company on16 April 1997 prior to the listing of its ordinary shares on The Stock Exchange of Hong Kong Limited (the “Pre-listing EmployeeShare Option Scheme”) .

DonationsCharitable and other donations made by the Group during the year amounted to US$0.4 million.

Fixed AssetsA brief description of the properties owned by the Group is set out on page 87.

Details of the movements in fixed assets during the year are set out in note 12 to the accounts.

Share Capital and Convertible BondsDetails of the movements in share capital and convertible bonds of the Company are set out in notes 23 and 24 to the accounts.

IndebtednessDetails of long-term financing facilities of the Company and its subsidiary companies at 31 December 2004 are set out in note 22to the accounts.

27

DirectorsThe Directors during the year and up to the date of this report are:

Tan Sri Lim Kok ThayMr. Alan Howard Smith, J.P.Mr. Chong Chee TutMr. William Ng Ko SengMr. David Colin Sinclair VeitchMr. Tan Boon SengMr. Lim Lay Leng

In accordance with Bye-law 99 of the Company’s Bye-laws, Mr. David Colin Sinclair Veitch and Mr. Alan Howard Smith, J.P. willretire by rotation at the forthcoming Annual General Meeting and, being eligible, offer themselves for re-election.

Biographical details of the Directors and senior management are set out on pages 21 to 25.

Directors’ Service ContractsMr. David Colin Sinclair Veitch has a three year “evergreen” service contract with the Group which commenced from 24 January2000, to be perpetually renewed until terminated by either party in accordance with terms thereof.

Save for Mr. Veitch, none of the Directors proposed for re-election at the forthcoming annual general meeting has a service contractwith the Group which is not determinable by the Group within one year without payment of compensation, other than statutorycompensation.

Interests of Directors and Controlling Shareholders in Contracts of SignificanceSave as disclosed in the section headed “Connected transactions” below and in the section headed “Related party transactions andbalances” in note 19 to the accounts, no contracts of significance to which the Company or any of its subsidiaries was a party andin which any of the Company’s Director or controlling shareholder or its subsidiaries had a material interest, whether directly orindirectly, subsisted at the end of the year or at any time during the year.

Connected Transactions(a) Significant related party transactions entered into by the Group during the year ended 31 December 2004 are disclosed in note

19 (a) to (d) and (f ) to the accounts.

(b) Items (a) to (d) of these related party transactions, which constitute connected transactions (the “Continuing ConnectedTransactions”) under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (“ListingRules”), are as follows:

(1) Kien Huat Development Sdn Bhd (“KHD”), a company in which a brother of Tan Sri Lim Kok Thay has a substantialinterest, together with its related companies, have since 1997 been engaged by certain companies in the Group toconstruct terminal buildings and a number of jetties which serve as the administrative and technical support offices andberthing facilities for the Group’s vessels. KHD also involved in carrying out improvements to the Group’s berthingfacilities and other infrastructure facilities (“KHD Transactions”). Amounts charged to the Group for the KHDTransactions were approximately US$12,000 for the year ended 31 December 2004.

(2) Genting Berhad (“GB”), a company in which Tan Sri Lim Kok Thay has a deemed interest and is also the Chairman,President and Chief Executive and shareholder, entered into a services agreement with the Company on 14 January 2003in relation to the provision of treasury management services, secretarial services, share registration services, informationtechnology support services, finance and administrative services, travel services, air ticket purchasing services, otherpurchasing services, central reservation services, leasing of office space and risk management services by GB and its relatedcompanies (“GB Group”) to the Group as and when required by the Group from time to time (“GB Transactions”).Amounts charged to the Group in respect of the GB Transactions were approximately US$711,000 for the year ended31 December 2004.

28

Connected Transactions (continued)(3) The Company entered into a services agreement with GB on 14 January 2003 in relation to the provision of office space,

administrative and information technology services and other services (such as travel services and secretarial services) bythe Group to the GB Group as and when required by the GB Group from time to time (“SC Transactions”). Amountscharged to the GB Group in respect of the SC Transactions were approximately US$66,000 for the year ended 31December 2004.

(4) On 19 January 2004, the following agreements were entered into by the Group:

(i) the Shareholders’ Agreement, the WorldCard Merchant Agreement and two addenda among certain wholly-ownedsubsidiaries of the Company and of Genting International PLC (“GIPLC”) whereby the Group subscribed for 50%of the enlarged issued capital of WorldCard International Limited (“WCIL”) for a total subscription price ofUS$500,000 and participated as a merchant in the customer loyalty programme known as “WorldCard”. WCILtogether with its related companies operates and administers the WorldCard Programme on an international basis(save as Malaysia).

(ii) the Joint Promotion and Marketing Agreement and an addendum among certain wholly-owned subsidiaries of theGroup, Resorts World Bhd (“RWB”) and a wholly-owned subsidiary of GB in relation to the implementation ofjoint promotion and marketing programmes for the purpose of promoting the respective businesses of the Groupand the RWB Group.

GIPLC and RWB are companies listed on the Luxembourg Stock Exchange and Bursa Malaysia Securities Berhadrespectively and are both subsidiaries of GB. Tan Sri Lim Kok Thay is also the Chairman of GIPLC and the Chairman,President and Chief Executive of RWB.

In October 2004, the Group entered into a supplemental agreement with a related company of WCIL whereby theGroup was allowed to participate in the WorldCard programme in Malaysia.

For the year ended 31 December 2004, amounts charged to/(from) the GB Group in respect of the abovementioned cardservices as well as joint promotion and marketing programmes were approximately US$571,000 and US$387,000respectively.

Subject to certain conditions, The Stock Exchange of Hong Kong Limited granted waivers (the “Waivers”) for an indefiniteperiod to the Company from strict compliance with the connected transactions requirements of the Listing Rules in force priorto 31 March 2004 in respect of the Continuing Connected Transactions.

Upon the commencement of certain new Listing Rules effective 31 March 2004, the Waivers lapsed automatically andcompliance with the new Listing Rules is required. For the year ended 31 December 2004, the aggregate annual considerationunder each category of the Continuing Connected Transactions is less than 0.1% of the applicable percentage ratios (as definedin the new Listing Rules). Accordingly, the Continuing Connected Transactions are exempt from reporting, announcementand independent shareholders’ approval requirements under Rule 14A.33 of the new Listing Rules.

Directors’ Interests in Competing BusinessTan Sri Lim Kok Thay, the Chairman, President and Chief Executive Officer of the Company, is the Chairman, President and ChiefExecutive of Genting Berhad and Resorts World Bhd, which are both substantial shareholders of the Company and companieslisted on Bursa Malaysia Securities Berhad. He is also the Chairman of Genting International PLC, a company listed on theLuxembourg Stock Exchange. Resorts World Bhd’s principal activities include the operation of a tourist resort in Malaysia known asGenting Highlands Resort, along with other land-based Malaysian resorts, through its subsidiaries. Other activities of ResortsWorld Bhd cover leisure and hospitality services which comprise amusement, gaming, hotel and entertainment. GentingInternational PLC ‘s principal activities include the provision of sales and marketing services to resort related businesses. ResortsWorld Bhd and Genting International PLC are subsidiaries of Genting Berhad.

The Group engages in cruise and cruise-related businesses. Resorts World Bhd, Genting International PLC and Genting Berhad, asset out above, are not engaged in cruise or cruise-related businesses. However, as the cruise industry forms a segment of the leisureindustry, there may be indirect competition between the Group, Resorts World Bhd and Genting International PLC.

29

Directors’ Interests in Competing Business (continued)Tan Sri Lim Kok Thay is therefore considered as having interests in business (the “Deemed Competing Business”) apart from theGroup’s business, which may compete indirectly with the Group’s business under paragraph 8.10 of the Listing Rules. TheCompany’s management team is separate and independent from Resorts World Bhd, Genting International PLC and GentingBerhad. Coupled with the appointment of three Independent Non-executive Directors to the Board of Directors of the Company,the Group is capable of carrying on its business independent of and at arm’s length from the Deemed Competing Business.

Interests of DirectorsAs at 31 December 2004, the interests and short positions of the Directors and the Chief Executive of the Company in the shares,underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of theSecurities and Futures Ordinance, Hong Kong (the “SFO”)) as recorded in the register required to be kept under section 352 of theSFO or as otherwise notified to the Company and The Stock Exchange of the Hong Kong Limited (the “Stock Exchange”) pursuantto the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”) and in accordance withinformation received by the Company were as follows:

(A) Interests in the shares of the Company

Number of ordinary shares (Notes)Percentage of

Personal Family Corporate Other issuedinterests interests interests interests Total ordinary shares

Tan Sri Lim Kok Thay 8,068,977 4,599,245,708 1,952,619,759 4,570,887,811 4,607,314,685 87.042(1) (2) (3 and 4) (5)

Mr. Chong Chee Tut 456,205 — — — 456,205 0.009Mr. William Ng Ko Seng 228,229 — — — 228,229 0.004Mr. David Colin Sinclair Veitch 335,445 — — — 335,445 0.006

Notes:

1. Tan Sri Lim Kok Thay (“Tan Sri KT Lim”) has a family interest in 4,599,245,708 ordinary shares (comprising (i) the same block of1,908,561,862 ordinary shares directly held by Resorts World Limited (“RWL”), the same block of 15,700,000 ordinary sharesdirectly held by Genting Overseas Holdings Limited (“GOHL”) and the same block of 2,646,625,949 ordinary shares directly orindirectly held by Golden Hope Limited (“Golden Hope”) as trustee of Golden Hope Unit Trust (“GHUT”) in which his child hasdeemed interests and (ii) the same block of 28,357,897 ordinary shares directly held by Goldsfine Investments Ltd. (“Goldsfine”) inwhich his wife, Puan Sri Wong Hon Yee (“Puan Sri Wong”) has a corporate interest).

2. Tan Sri KT Lim is also deemed to have a corporate interest in 1,952,619,759 ordinary shares (comprising (i) the same block of1,908,561,862 ordinary shares directly held by RWL and the same block of 15,700,000 ordinary shares directly held by GOHL byvirtue of his interests in a chain of corporations holding RWL and GOHL (details of the percentage interests in such corporations areset out in the section headed “Interests of Substantial Shareholders”) and (ii) the same block of 28,357,897 ordinary shares directlyheld by Goldsfine in which each of Tan Sri KT Lim and Puan Sri Wong holds 50% of its issued share capital).

3. Tan Sri KT Lim as founder and a beneficiary of two discretionary trusts, has a deemed interest in 4,570,887,811 ordinary shares(comprising the same block of 1,908,561,862 ordinary shares directly held by RWL, the same block of 15,700,000 ordinary sharesdirectly held by GOHL and the same block of 2,646,625,949 ordinary shares directly or indirectly held by Golden Hope as trustee ofGHUT).

4. Out of the same block of 2,646,625,949 ordinary shares directly or indirectly held by Golden Hope as trustee of GHUT, 299,600,000ordinary shares are pledged shares.

5. There is no duplication in arriving at the total interest.

6. All the above interests represent long positions in the shares of the Company and exclude those in the underlying shares through shareoptions or equity derivatives. Interests of the respective Directors set out in this subsection (A) need to be aggregated with theirinterests in the underlying shares through share options or equity derivatives of the Company set out in subsection (B) below in orderto give the total interests of the respective Directors in the Company pursuant to the SFO or as otherwise notified to the Company andthe Stock Exchange pursuant to the Model Code.

30

Interests of Directors (continued)(B) Interests in the underlying shares of the Company through share options or equity derivatives

Share options are granted to the Directors under The Star Cruises Employees Share Option Scheme adopted by the Companyon 16 April 1997 prior to the listing of its ordinary shares on the Stock Exchange (the “Pre-listing Employee Share OptionScheme”) and the share option scheme adopted by the Company on 23 August 2000 (as effected on 30 November 2000 andamended on 22 May 2002) (the “Post-listing Employee Share Option Scheme”).

As at 31 December 2004, the Directors had personal interests in the following underlying shares of the Company held throughshare options granted under the Pre-listing Employee Share Option Scheme and the Post-listing Employee Share OptionScheme:

Number of underlying Percentage of issuedordinary shares ordinary shares

Tan Sri Lim Kok Thay 16,467,300 0.311Mr. Chong Chee Tut 1,858,975 0.035Mr. William Ng Ko Seng 1,433,265 0.027Mr. David Colin Sinclair Veitch 3,659,400 0.069

Further details of share options granted to the Directors under the Pre-listing Employee Share Option Scheme and the Post-listing Employee Share Option Scheme are set out in the section headed “Share Options” below and note 30 to the accounts.

These interests in share options represent long positions in the underlying shares in respect of physically settled derivatives ofthe Company. Interests of the respective Directors set out in this subsection (B) need to be aggregated with their interests in theshares of the Company set out in subsection (A) above in order to give the total interests of the respective Directors in theCompany pursuant to the SFO or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code.

(C) Interests in the shares of WorldCard International Limited, an associated corporation of the Company

Number of ordinary shares (Notes)Percentage of

Personal Family Corporate Other issuedinterests interests interests interests Total ordinary shares

Tan Sri Lim Kok Thay — 1,000,000 1,000,000 1,000,000 1,000,000 100(1) (2) (3) (4)

Notes:

1. Tan Sri KT Lim has a family interest in 1,000,000 ordinary shares (comprising (i) the same block of 500,000 ordinary shares directlyheld by Star Cruise (C) Limited (“SCC”) and (ii) the same block of 500,000 ordinary shares directly held by Calidone Limited(“Calidone”), in both of which his child has deemed interests). As at 31 December 2004, SCC was a wholly-owned subsidiary of theCompany which in turn was directly held by RWL as to 36.06% while Calidone was a wholly-owned subsidiary of GentingInternational PLC (a company listed on the Luxembourg Stock Exchange) which in turn was a 64.3% owned subsidiary of GentingBerhad through its wholly-owned subsidiary, namely GOHL.

2. Tan Sri KT Lim is also deemed to have a corporate interest in 1,000,000 ordinary shares (comprising (i) the same block of 500,000ordinary shares directly held by SCC by virtue of his interest in a chain of corporations holding SCC (details of the percentage interestsin such corporations are set out in Note (1) above and the section headed “Interests of Substantial Shareholders”) and (ii) the sameblock of 500,000 ordinary shares directly held by Calidone by virtue of his interest in a chain of corporations holding Calidone (detailsof the percentage interests in such corporations are set out in Note (1) above and the section headed “Interests of SubstantialShareholders”)).

3. Tan Sri KT Lim as founder and a beneficiary of two discretionary trusts, has a deemed interest in 1,000,000 ordinary shares(comprising the same block of 500,000 ordinary shares directly held by SCC and the same block of 500,000 ordinary shares directlyheld by Calidone).

4. There is no duplication in arriving at the total interest.

5. All the above interests represent long positions in the shares of WorldCard International Limited.

31

Interests of Directors (continued)(D) Interests in subsidiaries of the Company

Certain Directors held qualifying shares in certain subsidiaries of the Company on trust for other subsidiaries.

Save as disclosed above and in the sections headed “Share Options” and “Interests of Substantial Shareholders” below:

(a) as at 31 December 2004, none of the Directors or the Chief Executive of the Company had any interests or short positions inany shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of PartXV of the SFO) as recorded in the register required to be kept under section 352 of the SFO or as otherwise notified to theCompany and the Stock Exchange pursuant to the Model Code; and

(b) at no time during the year was the Company, its subsidiaries or its associated companies a party to any arrangement to enablethe Directors of the Company to acquire benefits by means of the acquisition of shares, underlying shares or debentures in theCompany or any other body corporate.

Share OptionsDetails of the Company’s Pre-listing Employee Share Option Scheme and Post-listing Employee Share Option Scheme are set outin note 30 to the accounts. Share Options are granted to certain Directors of the Company and employees of the Group under thesaid schemes. Details of the movement in the share options granted under the Pre-listing Employee Share Option Scheme and thePost-listing Employee Share Option Scheme during the year and outstanding as at 31 December 2004 are as follows:

(A) Pre-listing Employee Share Option Scheme

Number ofshares

Number of acquired upon Number of Number of Number ofoptions exercise of options options options Exercise

outstanding options during lapsed during cancelled during outstanding priceat 1/1/2004 the year the year the year at 31/12/2004 Date granted per share Exercisable Period

Tan Sri Lim Kok Thay 1,829,700 — (609,900) — 1,219,800 25/5/1998 US$0.2686 21/8/1999 - 20/8/2005(Director) 4,421,775 — (884,355) — 3,537,420 24/3/1999 US$0.2686 24/3/2002 - 23/3/2009

1,677,225 — (335,445) — 1,341,780 24/3/1999 US$0.4206 24/3/2002 - 23/3/20091,219,800 — — — 1,219,800 23/10/2000 US$0.2686 23/10/2003 - 22/8/20104,421,775 — (884,355) — 3,537,420 16/11/2000 US$0.2686 24/3/2002 - 23/3/20091,677,225 — (335,445) — 1,341,780 16/11/2000 US$0.4206 24/3/2002 - 23/3/2009

304,950 — — — 304,950 16/11/2000 US$0.2686 23/10/2003 - 22/8/2010

15,552,450 — (3,049,500) — 12,502,950

Mr. Chong Chee Tut 135,398 — (45,133) — 90,265 25/5/1998 US$0.2686 20/12/2000 - 19/12/2005(Director) 76,238 — (15,248) — 60,990 25/5/1998 US$0.4206 23/6/2000 - 22/6/2007

414,732 — — — 414,732 24/3/1999 US$0.2686 24/3/2002 - 23/3/200991,485 — (18,297) — 73,188 24/3/1999 US$0.4206 24/3/2002 - 23/3/2009

585,504 — — — 585,504 23/10/2000 US$0.2686 23/10/2003 - 22/8/201024,396 — — — 24,396 23/10/2000 US$0.4206 23/10/2003 - 22/8/2010

1,327,753 — (78,678) — 1,249,075

Mr. William Ng Ko Seng 137,228 — (45,743) — 91,485 25/5/1998 US$0.2686 21/8/2000 - 20/8/2005(Director) 30,495 (6,099)1 — — 24,396 24/3/1999 US$0.2686 24/3/2002 - 23/3/2009

121,980 — (24,396) — 97,584 24/3/1999 US$0.4206 24/3/2002 - 23/3/2009463,524 — — — 463,524 23/10/2000 US$0.2686 23/10/2003 - 22/8/2010

24,396 — — — 24,396 23/10/2000 US$0.4206 23/10/2003 - 22/8/2010

777,623 (6,099) (70,139) — 701,385

Mr. David Colin 1,219,800 — — — 1,219,800 7/1/2000 US$0.4206 7/1/2003 - 6/1/2010Sinclair Veitch(Director)

32

Share Options (continued)(A) Pre-listing Employee Share Option Scheme (continued)

Number ofshares

Number of acquired upon Number of Number of Number ofoptions exercise of options options options Exercise

outstanding options during lapsed during cancelled during outstanding priceat 1/1/2004 the year the year the year at 31/12/2004 Date granted per share Exercisable Period

All other employees 4,263,204 — (988,041) (18,297) 3,256,866 25/5/1998 US$0.2686 21/8/1999 - 20/8/200562,210 — (20,737) — 41,473 25/5/1998 US$0.2686 20/12/2000 - 19/12/2005

152,475 (30,495)2 — — 121,980 25/5/1998 US$0.2686 11/3/2000 - 10/3/2007640,395 — (128,079) — 512,316 25/5/1998 US$0.4206 23/6/2000 - 22/6/2007

3,482,554 — (719,707) (295,802) 2,467,045 25/5/1998 US$0.4206 6/1/2000 - 5/1/200717,923,870 (29,886)3 (3,194,498) (1,621,060) 13,078,426 24/3/1999 US$0.2686 24/3/2002 - 23/3/200910,271,378 — (2,017,852) (922,538) 7,330,988 24/3/1999 US$0.4206 24/3/2002 - 23/3/2009

9,149 — — — 9,149 24/3/1999 US$0.4206 24/3/2003 - 23/3/2005238,473 — (238,473) — — 24/3/1999 US$0.4206 24/3/2003 - 23/3/2004

1,366,444 — (256,794) (215,418) 894,232 30/6/1999 US$0.2686 30/6/2002 - 29/6/20092,878,199 — (551,977) (547,570) 1,778,652 30/6/1999 US$0.4206 30/6/2002 - 29/6/2009

18,297 — (18,297) — — 30/6/1999 US$0.4206 30/6/2003 - 29/6/20042,623,668 — — (311,049) 2,312,619 23/10/2000 US$0.2686 23/10/2003 - 22/8/20103,443,342 — — (368,382) 3,074,960 23/10/2000 US$0.4206 23/10/2003 - 22/8/2010

47,373,658 (60,381) (8,134,455) (4,300,116) 34,878,706

Grand Total 66,251,284 (66,480) (11,332,772) (4,300,116) 50,551,916

Notes:

1. Exercise date was 13 March 2004. At the date before the options were exercised, the market closing value per share quoted on The StockExchange of Hong Kong Limited (the “Stock Exchange”) was HK$2.250.

2. Exercise date was 5 March 2004. At the date before the options were exercised, the market closing value per share quoted on the StockExchange was HK$2.300.

3. At the dates before the options were exercised, the weighted average market closing value per share quoted on the Stock Exchange wasHK$2.282.

HK$: Hong Kong dollars, the lawful currency of Hong Kong.

The outstanding share options under the Pre-listing Employee Share Option Scheme vest over a period of 10 years following theirrespective original dates of grant and generally become exercisable as to 20% and 30% of the amount granted 3 years and 4 yearsafter the grant date, with the remaining options exercisable annually in equal tranches of 10% over the remaining option period,subject to further terms and conditions set out in the relevant offer letters and provisions of the Pre-listing Employee Share optionScheme.

33

Share Options (continued)(B) Post-listing Employee Share Option Scheme

Number ofshares Number of

Number of acquired upon Number of options Number ofoptions Number of exercise of options cancelled options Exercise

outstanding options granted options during lapsed during during outstanding priceat 1/1/2004 on 23/8/2004 1 the year the year the year at 31/12/2004 Date granted per share Exercisable Period

Tan Sri Lim Kok Thay 3,964,350 — — (594,653 ) — 3,369,697 19/8/2002 HK$2.9944 20/8/2004 - 19/8/2012(Director) — 594,653 — — — 594,653 23/8/2004 HK$1.7240 2 24/8/2006 - 23/8/2014

3,964,350 594,653 — (594,653 ) — 3,964,350

Mr. Chong Chee Tut 609,900 — — (91,485 ) — 518,415 19/8/2002 HK$2.9944 20/8/2004 - 19/8/2012(Director) — 91,485 — — — 91,485 23/8/2004 HK$1.7240 2 24/8/2006 - 23/8/2014

609,900 91,485 — (91,485 ) — 609,900

Mr. William Ng Ko Seng 731,880 — — (109,782 ) — 622,098 19/8/2002 HK$2.9944 20/8/2004 - 19/8/2012(Director) — 109,782 — — — 109,782 23/8/2004 HK$1.7240 2 24/8/2006 - 23/8/2014

731,880 109,782 — (109,782 ) — 731,880

Mr. David Colin 2,439,600 — — (365,940 ) — 2,073,660 19/8/2002 HK$2.9944 20/8/2004 - 19/8/2012Sinclair Veitch — 365,940 — — — 365,940 23/8/2004 HK$1.7240 2 24/8/2006 - 23/8/2014(Director)

2,439,600 365,940 — (365,940 ) — 2,439,600

All other employees 91,110,115 — — (22,472,337 ) (163,453 ) 68,474,325 19/8/2002 HK$2.9944 20/8/2004 - 19/8/2012792,870 — — — — 792,870 8/9/2003 HK$2.9944 9/9/2005 - 8/9/2013

— 12,516,065 — — — 12,516,065 23/8/2004 HK$1.7240 2 24/8/2006 - 23/8/2014

91,902,985 12,516,065 — (22,472,337 ) (163,453 ) 81,783,260

Grand Total 99,648,715 13,677,925 — (23,634,197 ) (163,453 ) 89,528,990

Notes:

1. The offer of share options made on 23 August 2004 is valid for acceptance during the period from 23 August 2004 to 31 March 2005 (asextended).

2. The closing price per share quoted on the Stock Exchange on 20 August 2004, the trading day immediately before the date on which theoptions were granted was HK$1.71.

The Group accounts for non-cash compensation expense in respect of share options issued to directors and employees based on theexcess, if any, of the quoted market price of the share at the date of grant over the exercise price of the option. The excess, if any, istreated as additional paid-in-capital and is recognised as an expense over the option periods. The Group recorded non-cashcompensation expense of approximately US$57,000 for the options granted and accepted in 2004. The remaining US$364,000 ofunearned compensation expense as at 31 December 2004 related to the options granted and accepted in 2004 will be amortised overthe option period.

34

Share Options (continued)(B) Post-listing Employee Share Option Scheme (continued)

The Group used the extended binomial option pricing model to estimate the fair value of these options. The binomial pricingmodel, which is one of the commonly used models in estimating fair value of an option, requires input that are highly subjectiveassumptions. Such subjective assumptions include the volatility of the share price, expected dividend per share, risk-free interest rateand expected option life and accordingly, any change in the variables so adopted may materially affect the estimation of the fairvalue of an option. The extended binomial options pricing model, therefore, does not necessarily provide a reliable measure of thefair value of the share options.

Using the extended binomial option pricing model with the following assumptions, the estimated fair value of the options grantedon 23 August 2004 was US$0.16 per share:

Risk-free interest rate 3.44%Expected option life (in years) 10Expected volatility 40.17%Expected dividend per share —

Other than the share options granted on 23 August 2004 under the Post-listing Employee Share Option Scheme which, upon validacceptance, become exercisable in part or in full for a period of eight years commencing from two years after the date of offer, theoutstanding share options under the Post-listing Employee Share Option Scheme vest in seven tranches over a period of ten yearsfrom their respective dates of offer and become exercisable as to 30% and 20% of the amount granted commencing from two yearsand three years respectively after the dates of offer, with the remaining options exercisable annually in equal tranches of 10%commencing in each of the following years. All the outstanding share options under the Post-listing Employee Share OptionScheme are subject to further terms and conditions set out in the relevant offer letters and provisions of the Post-listing EmployeeShare Option Scheme.

35

Interests of Substantial ShareholdersAs at 31 December 2004, the following persons (other than the Directors or the Chief Executive of the Company) had interests orshort positions in the shares and underlying shares of the Company, being 5% or more of the Company’s issued share capital, asrecorded in the register required to be kept under section 336 of the SFO and in accordance with information received by theCompany:

(A) Interests in the shares of the Company

Number of ordinary shares (Notes)Percentage of

Direct/Personal Family Corporate Other issuedName of shareholder (Notes) interests interests interests interests Total ordinary shares

Parkview Management Sdn Bhd — — 1,924,261,862 1,924,261,862 1,924,261,862 36.35(as trustee of a discretionary trust) (1) (10) (12) (21)

Kien Huat Realty Sdn Bhd (2) — — 1,924,261,862 — 1,924,261,862 36.35(10)

Genting Berhad (3) — — 1,924,261,862 — 1,924,261,862 36.35(10)

Resorts World Bhd (4) — — 1,908,561,862 — 1,908,561,862 36.06(11)

Sierra Springs Sdn Bhd (5) — — 1,908,561,862 — 1,908,561,862 36.06(11)

Resorts World Limited (5) 1,908,561,862 — — — 1,908,561,862 36.06

GZ Trust Corporation — — 2,646,625,949 2,646,625,949 2,646,625,949 50.00(as trustee of a discretionary trust) (6) (13) (15,17 and 20) (21)

Cove Investments Limited (7) — — — 2,646,625,949 2,646,625,949 50.00(18 and 20) (21)

Golden Hope Limited — — 414,260,835 2,646,625,949 2,646,625,949 50.00(as trustee of (14) (16 and 20) (21)Golden Hope Unit Trust) (8)

Joondalup Limited (9) 414,260,835 — — — 414,260,835 7.83

Puan Sri Wong Hon Yee — 4,607,314,685 28,357,897 299,600,000 4,607,314,685 87.04(19(a)) (19(b)) (20) (21)

Notes:

1. Parkview Management Sdn Bhd (“Parkview”) is a trustee of a discretionary trust (the “Discretionary Trust 1”), the beneficiaries ofwhich include certain members of Tan Sri Lim Goh Tong’s family (the “Lim Family”). As at 31 December 2004, Tan Sri Lim Kok Thay(“Tan Sri KT Lim”) controlled 33.33% of the equity interest in Parkview.

2. Kien Huat Realty Sdn Bhd (“KHR”) is a private company of which the Discretionary Trust 1, through Aranda Tin Mines Sdn Bhd,Infomark (Malaysia) Sdn Bhd, Inforex Sdn Bhd, Dataline Sdn Bhd and Info-Text Sdn Bhd (all of which were 100% held by Parkviewas trustee of the Discretionary Trust 1) controlled an aggregate of 100% of its equity interest as at 31 December 2004.

3. Genting Berhad (“GB”), a company listed on Bursa Malaysia Securities Berhad (“Bursa Malaysia”) of which KHR controlled 41.56%of its equity interest as at 31 December 2004.

4. Resorts World Bhd (“RWB”), a company listed on Bursa Malaysia of which GB controlled 56.79% of its equity interest as at 31December 2004.

5. Resorts World Limited (“RWL”) is a wholly-owned subsidiary of Sierra Springs Sdn Bhd (“Sierra Springs”) which is in turn a wholly-owned subsidiary of RWB.

36

Interests of Substantial Shareholders (continued)(A) Interests in the shares of the Company (continued)

6. GZ Trust Corporation (“GZ”) is the trustee of a discretionary trust (the “Discretionary Trust 2”) established for the benefit of certainmembers of the Lim Family. GZ as trustee of the Discretionary Trust 2 holds 99.99% of the units in Golden Hope Unit Trust(“GHUT”), a private unit trust directly and 0.01% of the units in GHUT indirectly through Cove (as defined below).

7. Cove Investments Limited (“Cove”) is wholly-owned by GZ as trustee of the Discretionary Trust 2.

8. Golden Hope Limited (“Golden Hope”) is the trustee of GHUT.

9. Joondalup Limited (“Joondalup”) is wholly-owned by Golden Hope as trustee of GHUT.

10. Each of Parkview as trustee of the Discretionary Trust 1, KHR and GB has a corporate interest in 1,924,261,862 ordinary shares(comprising the same block of 1,908,561,862 ordinary shares held directly by RWL and the same block of 15,700,000 ordinary sharesheld directly by Genting Overseas Holdings Limited (“GOHL”), a wholly-owned subsidiary of GB).

11. Each of RWB and Sierra Springs has a corporate interest in the same block of 1,908,561,862 ordinary shares held directly by RWL.

12. The interest in 1,924,261,862 ordinary shares is held by Parkview in its capacity as trustee of the Discretionary Trust 1 and it comprisesthe same block of 1,908,561,862 ordinary shares held directly by RWL and the same block of 15,700,000 ordinary shares held directlyby GOHL.

13. GZ as trustee of the Discretionary Trust 2 has a corporate interest in the same block of 2,646,625,949 ordinary shares held by GoldenHope as trustee of GHUT (out of which 2,232,365,114 ordinary shares are directly held by Golden Hope as trustee of GHUT and414,260,835 ordinary shares are held indirectly through Joondalup).

14. Golden Hope as trustee of GHUT has a corporate interest in the same block of 414,260,835 ordinary shares held directly byJoondalup.

15. GZ in its capacity as trustee of the Discretionary Trust 2 has a deemed interest in the same block of 2,646,625,949 ordinary shares heldby Golden Hope as trustee of GHUT (out of which 2,232,365,114 ordinary shares are directly held by Golden Hope as trustee ofGHUT and 414,260,835 ordinary shares are held indirectly through Joondalup).

16. The interest in 2,646,625,949 ordinary shares is held by Golden Hope in its capacity as trustee of GHUT (out of which2,232,365,114 ordinary shares are directly held by Golden Hope as trustee of GHUT and 414,260,835 ordinary shares are heldindirectly through Joondalup).

17. GZ as trustee of the Discretionary Trust 2 is deemed to have interest in the same block of 2,646,625,949 ordinary shares held directlyor indirectly by Golden Hope as trustee of GHUT in its capacity as beneficiary of GHUT.

18. Cove which holds 0.01% of the units in GHUT is deemed to have interest in the same block of 2,646,625,949 ordinary shares helddirectly or indirectly by Golden Hope as trustee of GHUT in its capacity as beneficiary of GHUT.

19. (a) Puan Sri Wong Hon Yee (“Puan Sri Wong”) as the spouse of Tan Sri KT Lim, has a family interest in the same block of4,607,314,685 ordinary shares in which Tan Sri KT Lim has a deemed interest. These interests do not include the deemedinterests of Puan Sri Wong in the underlying shares of the Company through share options held personally by Tan Sri KT Limand need to be aggregated with such interests set out in subsection (B) below to give the total interests of Puan Sri Wong pursuantto the SFO.

(b) Puan Sri Wong also has a corporate interest in 28,357,897 ordinary shares held directly by Goldsfine by holding 50% of its equityinterest as at 31 December 2004.

20. Out of the same block of 2,646,625,949 ordinary shares held directly or indirectly by Golden Hope as trustee of GHUT, 299,600,000ordinary shares are pledged shares.

21. There is no duplication in arriving at the total interest.

22. All these interests represent long positions in the shares of the Company and exclude those in the underlying shares through shareoptions or equity derivatives.

37

Interests of Substantial Shareholders (continued)(B) Interests in the underlying shares of the Company through share options or equity derivatives

Number of underlying Percentage of issuedName of shareholder ordinary shares ordinary shares

Puan Sri Wong Hon Yee 16,467,300 (Note) 0.311

Note:

Puan Sri Wong Hon Yee as the spouse of Tan Sri KT Lim, is deemed to have a family interest in 16,467,300 underlying ordinary shares of theCompany by virtue of the share options granted to Tan Sri KT Lim under the Pre-listing Employee Share Option Scheme and the Post-listing Employee Share Option Scheme. These interests represent long positions in the underlying shares in respect of physically settledderivatives of the Company and need to be aggregated with her interests set out in subsection (A) above to give her total interests pursuantto the SFO.

Save as disclosed above and in the sections headed “Interests of Directors” and “Share Options” above, as at 31 December 2004,there were no other persons who had interests or short positions in the shares or underlying shares of the Company as recorded inthe register required to be kept under section 336 of the SFO.

Pre-Emptive RightsThere are no provisions for pre-emptive rights under the Company’s Bye-laws and there are no restrictions against such rights underthe laws in Bermuda.

Retirement Benefit SchemesInformation on the Group’s retirement benefit schemes is set out in note 31 to the accounts.

Management ContractsSave for the arrangements relating to the provision of services by Genting Berhad and its related companies to the Group as set outin the section headed “Connected Transactions” above and in the section headed “Related Party Transactions and Balances” in note19 to the accounts, no contracts concerning the management and administration of the whole or any substantial part of the businessof the Group were entered into or existed during the year.

Major Customers and SuppliersDuring the year, the Group purchased less than 30% of its goods and services from its five largest suppliers and the aggregateamount of turnover attributable to the Group’s five largest customers was less than 30% of the Group’s turnover.

Corporate GovernanceIn compliance with the Code of Best Practice stipulated in Appendix 14 of the Listing Rules (the “Code of Best Practice”) in forceprior to 1 January 2005 which remains applicable to this annual report, the Company has established an Audit Committee withwritten terms of reference with reference to “A Guide for Effective Audit Committees” published by the Hong Kong Institute ofCertified Public Accountants.

The Audit Committee provides an important link between the Board and the Company’s auditors in matters coming within thescope of the Group audit. It also reviews the effectiveness of the external and internal audit and of internal controls and riskevaluation. The Audit Committee comprises the three Independent Non-executive Directors of the Company, namely, Mr. AlanHoward Smith, J.P., Mr. Tan Boon Seng and Mr. Lim Lay Leng. This annual report has been reviewed by the Audit Committee.

In the opinion of the Directors, the Company has complied with the Code of Best Practice throughout the year, except that theIndependent Non-executive Directors were not appointed for a specific term but are subject to retirement by rotation and re-election at the annual general meeting of the Company in accordance with the provisions of the Bye-laws of the Company.

38

General Disclosure Pursuant to the Listing RulesPursuant to Rules 13.18 and 13.21 of the Listing Rules, the Company discloses the following information.

(i) Loan Agreements of the Group

The Group is a party to twelve loan agreements for an aggregate principal amount of approximately US$4.25 billion, of whichUS$3.18 billion has been drawndown, with terms ranging from six to sixteen years from the dates of these agreements. As at31 December 2004, the outstanding loan balances was approximately US$2.17 billion. Five of these agreements require theLim Family (or the Lim Family and/or the Lim Family through its indirect shareholding in Resorts World Bhd) to control(directly or indirectly) together or individually, the Company and beneficially own (directly or indirectly) at least 51% of theissued share capital of, and equity interest in the Company during the terms of these loans. The other seven agreements requirethe Lim Family to control (directly or indirectly) together or individually, NCL Corporation Ltd. (“NCLC”), a direct wholly-owned subsidiary of the Company, and beneficially own (directly or indirectly) at least 51% of the issued share capital of, andequity interest in NCLC during the terms of these loans. In the event that the shares of NCLC are listed on an approved stockexchange, if: (i) a third party owns or gains control of more than 33% of the voting stock of NCLC and the Lim Family ceasestogether or individually, to control (directly or indirectly) NCLC and beneficially own (directly or indirectly) at least 51% ofthe issued share capital of, and equity interest in NCLC; or (ii) without the prior written consent of the agent, NCLC ceasesto be listed on an approved stock exchange (in the case the US$800 million loan facility, in the event that the shares of NCLCare listed on an approved stock exchange, if: (i) two or more persons acting in concert or any individual person acquires (a)legally and/or beneficially and either directly or indirectly at least 33% of the issued share capital of NCLC or (b) the right orability to control, either directly or indirectly, the affairs or composition of the majority of the board of directors (or itsequivalent) of NCLC; and the Lim Family ceases to own (legally and/or beneficially and either directly or indirectly) at least51% of the issued share capital of NCLC; or (ii) NCLC ceases to be listed on an approved stock exchange), this will constitutean event of default under the relevant loan agreements.

(ii) Convertible Bonds of the Company

Pursuant to the Trust Deed dated 20 October 2003 constituting the US$180 million 2% Convertible Bonds of the Company,the Convertible Bonds may be redeemed at the option of the Bondholders prior to their maturity on 20 October 2008 whenany person or persons, other than Genting Berhad, Golden Hope Limited, Resorts World Bhd or any of their affiliates,acquires control of more than 50% of the voting rights of the issued share capital of the Company.

(iii) Senior Notes of NCL Corporation Ltd.

Pursuant to the Indenture dated 15 July 2004 constituting the US$250 million 10.625% Senior Notes of NCLC, holders ofthe Senior Notes have the right to require NCLC to repurchase all or a portion of the Senior Notes prior to their maturity on15 July 2014 when any person or group of related persons, other than Tan Sri Lim Goh Tong, Golden Hope Limited as trusteeof the Golden Hope Unit Trust or Genting Berhad and any affiliate or related person thereof (together the “PermittedHolders”), beneficially owns or controls more than 40% of the voting stock of NCLC if at such time the Permitted Holdersbeneficially own or control less of the voting stock of NCLC than such person.

AuditorsThe accounts have been audited by PricewaterhouseCoopers who will retire at the forthcoming Annual General Meeting and, beingeligible, offer themselves for re-appointment.

On behalf of the Board

Tan Sri Lim Kok ThayChairman, President and Chief Executive Officer

Hong Kong, 22 February 2005

39

CONSOLIDATED PROFIT AND LOSS ACCOUNTFOR THE YEAR ENDED 31 DECEMBER 2004

Note GROUP

2004 2003US$’000 US$’000

Turnover 2 1,636,405 1,618,208

Operating expenses (excluding depreciation,amortisation and impairment loss) (1,064,574) (1,098,431)

Selling, general and administrative expenses(excluding depreciation) (254,956) (243,379)

Depreciation and amortisation (181,909) (197,349)Impairment loss 3 (14,500) (99,545)

(1,515,939) (1,638,704)

Operating profit/(loss) 2, 4 120,466 (20,496)

Interest income 2,985 2,613Financial costs 5 (107,566) (93,804)Other non-operating expenses, net 6 (23,920) (11,123)

(128,501) (102,314)

Loss before taxation (8,035) (122,810)

Taxation 7 (971) (1,663)

Net loss for the year (9,006) (124,473)

Basic loss per share (US cents) 8 (0.17) (2.51)

Fully diluted earnings per share (US cents) 8 N/A N/A

40

BALANCE SHEETSAS AT 31 DECEMBER 2004

Note GROUP COMPANY

2004 2003 2004 2003US$’000 US$’000 US$’000 US$’000

NON-CURRENT ASSETSIntangible assets 11 605,286 621,750 — —Deferred tax asset 26 387 23 — —Fixed assets 12 3,823,302 3,626,873 — —Investments in subsidiaries 13 — — 2,788,948 2,694,517Investment in an associated company 14 15,148 — — —Restricted cash 150 150 — —Other assets 15 85,095 39,666 8,839 7,196

4,529,368 4,288,462 2,797,787 2,701,713

CURRENT ASSETSConsumable inventories 16 42,059 38,075 — —Trade receivables 17 12,089 17,423 — —Prepaid expenses and others 31,925 44,274 5,160 10,782Amounts due from related companies 19 125 — — —Restricted cash 28,520 30,724 — —Cash and cash equivalents 18 341,027 377,033 117,446 115,401

455,745 507,529 122,606 126,183

CURRENT LIABILITIESTrade creditors 20 83,481 98,950 — —Provisions, accruals and other liabilities 21 242,611 229,824 44,565 50,829Current portion of long-term borrowings 22 179,159 1,074,226 75,788 412,500Amounts due to related companies 19 — 109 — —Advance ticket sales 240,713 196,605 — —

745,964 1,599,714 120,353 463,329

Net current assets/(liabilities) (290,219) (1,092,185) 2,253 (337,146)

Total assets less current liabilities 4,239,149 3,196,277 2,800,040 2,364,567

Financed by:Share capital 24 529,320 529,314 529,320 529,314Reserves 1,284,652 1,279,202 1,610,708 1,654,659

Shareholders’ funds 1,813,972 1,808,516 2,140,028 2,183,973

NON-CURRENT LIABILITIESLong-term borrowings 22 2,238,904 1,199,567 480,012 —Convertible bonds 23 180,000 180,000 180,000 180,000Other long-term liabilities 25 5,734 7,992 — 594Deferred tax liabilities 26 539 202 — —

4,239,149 3,196,277 2,800,040 2,364,567

The Board of Directors approved the Balance Sheets as at 31 December 2004 on 22 February 2005.

Tan Sri Lim Kok Thay Mr. Chong Chee TutChairman, President and Chief Executive Officer Chief Operating Officer

41

CONSOLIDATED CASH FLOW STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2004

Note GROUP

2004 2003US$’000 US$’000

OPERATING ACTIVITIESCash generated from operations (a) 356,184 266,867Interest paid (74,483) (89,266)Interest received 2,948 2,608Income tax paid (1,698) (1,527)

Net cash inflow from operating activities 282,951 178,682

INVESTING ACTIVITIESPurchase of fixed assets (468,270) (327,673)Proceeds from sale of fixed assets 82,171 250Acquisition of a subsidiary, net of cash acquired (b) (4,647) —Acquisition of an equity investment in Valuair Limited (15,148) —Purchase of other assets (4,695) (9,686)

Net cash outflow from investing activities (410,589) (337,109)

FINANCING ACTIVITIES (c)Proceeds from long-term borrowings 1,499,697 374,957Principal repayments of long-term borrowings (1,358,100) (535,189)Proceeds from rights issue, net of issuance cost

of approximately US$1.3 million — 99,004Proceeds from issuance of ordinary shares pursuant

to the Pre-listing Employee Share Option Scheme 18 193Proceeds from issuance of convertible bonds — 180,000Expenses in connection with the issue of convertible bonds — (3,723)Payment of loan arrangement fees (53,375) (17,703)Restricted cash, net 2,204 20,038Others, net (504) (594)

Net cash inflow from financing activities 89,940 116,983

Effect of exchange rate changes on cash and cash equivalents 1,692 1,519

Net decrease in cash and cash equivalents (36,006) (39,925)Cash and cash equivalents at beginning of year 377,033 416,958

Cash and cash equivalents at end of year 341,027 377,033

42

Notes to Consolidated Cash Flow Statement(a) Cash generated from operations

GROUP

2004 2003US$’000 US$’000

OPERATING ACTIVITIESLoss before taxation (8,035) (122,810)Depreciation and amortisation

- relating to operating function 172,299 186,689- relating to selling, general and administrative function 9,610 10,660

181,909 197,349

Interest expense, net of capitalised interest 107,566 93,804Interest income (2,985) (2,613)Impairment loss 14,500 99,545Others 9,807 2,485

302,762 267,760Decrease/(increase) in:

Trade receivables 7,768 (2,362)Consumable inventories (3,635) 336Prepaid expenses and others 24,966 4,651Other assets (1,617) (347)

Increase/(decrease) in:Trade creditors (14,019) (7,712)Provisions, accruals and other liabilities (3,915) 4,179Amounts due to related companies (234) (24)Advance ticket sales 44,108 386

Cash generated from operations 356,184 266,867

43

Notes to Consolidated Cash Flow Statement (continued)(b) Acquisition of a subsidiary, net of cash acquired

In November 2004, the Group acquired all of the outstanding shares of Polynesian Adventure Tours, Inc. (“Polynesian”), atour bus operator in Hawaii that had previously provided the Group with shore excursions. The purchase price wasapproximately US$4.6 million, net of cash acquired. The acquisition of the tour bus company did not have a material impacton the Group’s consolidated profit and loss for the year ended 31 December 2004. The details of the net assets acquired andcash flow arising from the acquisition of Polynesian are shown below. The Group has commissioned a valuation of the assetsand liabilities of Polynesian which is currently in progress, to assess the fair values of these assets and liabilities, includingintangibles, if any, at the date of acquisition.

GROUP

At date ofacquisition

US$’000Net assets acquired:Fixed assets 2,288Other assets 4,347Consumable inventories 349Trade and other receivables 1,653Cash and bank balances 638Trade and other payables (1,112)Long-term borrowings (including current portion) (2,673)Other long-term liabilities (205)

Purchase consideration 5,285Cash and bank balances of a subsidiary acquired (638)

Satisfied by cash 4,647

(c) Analysis of changes in financing

GROUP

Long-termborrowings

Share capital (includingincluding current Convertiblepremium portion) bonds

US$’000 US$’000 US$’000

At 1 January 2003 1,698,018 2,434,025 —Shares issued for cash consideration 99,197 — —Proceeds from long-term borrowings — 374,957 —Repayment of long-term borrowings — (535,189) —Proceeds from issuance of convertible bonds — — 180,000

At 31 December 2003 1,797,215 2,273,793 180,000Shares issued for cash consideration 18 — —Proceeds from long-term borrowings — 1,499,697 —Repayment of long-term borrowings — (1,358,100) —Loans assumed arising on acquisition

of a subsidiary — 2,673 —

At 31 December 2004 1,797,233 2,418,063 180,000

44

STATEMENTS OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2004

Foreign RetainedAdditional currency Unamortised Cash flow earnings/

Share Share paid-in translation share option hedge (Accumulatedcapital premium capital adjustments expense reserve losses) Total

GROUP US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

At 1 January 2003 494,614 1,203,404 93,436 (25,842) (3,912) (44,570) 102,400 1,819,530Exchange translation differences — — — 2,829 — — — 2,829Cash flow hedge:

- Loss on financial instruments — — — — — (5,750) — (5,750)

- Transferred to profit and loss account — — — — — 15,954 — 15,954Net amounts not recognised

in the profit andloss account — — — 2,829 — 10,204 — 13,033

Net loss for the year — — — — — — (124,473) (124,473)Issue of ordinary shares

pursuant to thePre-listing EmployeeShare Option Scheme 72 121 — — — — — 193

Issue of 7 rights sharesfor every 100 existingshares, net of issuancecost of approximatelyUS$1.3 million 34,628 64,376 — — — — — 99,004

Amortisation ofshare option expense — — — — 1,229 — — 1,229

Forfeiture of share option — — (618) — 618 — — —

At 31 December 2003 529,314 1,267,901 92,818 (23,013) (2,065) (34,366) (22,073) 1,808,516

At 1 January 2004 529,314 1,267,901 92,818 (23,013) (2,065) (34,366) (22,073) 1,808,516Exchange translation differences — — — (184) — — — (184)Cash flow hedge:

- Loss on financial instruments — — — — — (2,667) — (2,667)

- Transferred to profit and loss account — — — — — 16,469 — 16,469Net amounts not

recognised in theprofit and loss account — — — (184) 13,802 — 13,618

Net loss for the year — — — — — — (9,006) (9,006)Issue of ordinary shares

pursuant to thePre-listing EmployeeShare Option Scheme 6 12 — — — — — 18

Amortisation ofshare option expense — — — — 826 — — 826

Issuance of share option — — 421 — (421) — — —Forfeiture of share option — — (550) — 550 — — —

At 31 December 2004 529,320 1,267,913 92,689 (23,197) (1,110) (20,564) (31,079) 1,813,972

45

Additional Unamortised Cash flowShare Share paid-in share option hedge Retained

capital premium capital expense reserve earnings Total

COMPANY US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

At 1 January 2003 494,614 1,203,404 91,670 (3,028) (44,570) 367,887 2,109,977

Cash flow hedge:- Loss on financial instruments — — — — (5,750) — (5,750)- Transferred to profit and loss

account — — — — 15,954 — 15,954Net amounts not recognised in the

profit and loss account — — — — 10,204 — 10,204Net loss for the year — — — — — (36,518) (36,518)Issue of ordinary shares

pursuant to thePre-listing EmployeeShare Option Scheme 72 121 — — — — 193

Issue of 7 rights sharesfor every 100 existingshares, net of issuancecost of approximatelyUS$1.3 million 34,628 64,376 — — — — 99,004

Amortisation ofshare option expense — — — 1,113 — — 1,113

Forfeiture of share option — — (618) 618 — — —

At 31 December 2003 529,314 1,267,901 91,052 (1,297) (34,366) 331,369 2,183,973

At 1 January 2004 529,314 1,267,901 91,052 (1,297) (34,366) 331,369 2,183,973Cash flow hedge:

- Loss on financial instruments — — — — (3,880) — (3,880)- Transferred to profit and loss

account — — — — 16,469 — 16,469Net amounts not recognised

in the profit and loss account — — — — 12,589 — 12,589Net loss for the year — — — — — (57,210) (57,210)Issue of ordinary shares

pursuant to the Pre-listingEmployee Share Option Scheme 6 12 — — — — 18

Amortisation ofshare option expense — — — 658 — — 658

Issuance of share option — — 243 (243) — — —Forfeiture of share option — — (550) 550 — — —

At 31 December 2004 529,320 1,267,913 90,745 (332) (21,777) 274,159 2,140,028

46

NOTES TO THE ACCOUNTS

1. Principal Accounting Policies

(a) Basis of preparationThe accounts have been prepared in accordance with accounting principles generally accepted in Hong Kong and complywith accounting standards issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”). Thepreparation of accounts in conformity with generally accepted accounting principles requires management to makeestimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets andliabilities at the date of the accounts and the reported amounts of revenues and expenses during the reporting period.Actual results could differ from those estimates. The accounts are prepared under the historical cost convention asmodified by the revaluation of certain fixed assets.

The HKICPA has issued a number of new and revised Hong Kong Financial Reporting Standards and Hong KongAccounting Standards (“new HKFRSs”) which are effective for accounting periods beginning on or after 1 January 2005.The Group has not early adopted these new HKFRSs in the financial statement for the year ended 31 December 2004.The Group has already commenced an assessment of the impact of these new HKFRSs but is not yet in a position to statewhether these new HKFRSs would have a significant impact on its results of operations and financial position.

Where necessary, comparative figures have been reclassified to conform to the current year’s presentation.

(b) Group accounting

(i) ConsolidationSubsidiaries are those entities in which the Group, directly or indirectly, controls more than one half of the votingpower; has the power to govern the financial and operating policies; to appoint or remove the majority of themembers of the board of directors; or to cast majority of votes at the meetings of the board of directors.

The consolidated accounts include the accounts of the Company and its subsidiaries made up to the end of the year.The results of subsidiaries acquired or disposed of during the year are included in the consolidated profit and lossaccount from the effective date of acquisition or up to the effective date of disposal, as appropriate.

All significant intercompany transactions and balances within the Group are eliminated on consolidation.

The gain or loss on the disposal of a subsidiary represents the difference between the proceeds of the sale and theGroup’s share of its net assets together with any goodwill or negative goodwill which was not previously charged orrecognised in the consolidated profit and loss account.

In the Company’s balance sheet, investments in subsidiaries are stated at cost less any impairment loss, if any. Theresults of subsidiaries are accounted for by the Company on the basis of dividends received and receivable.

(ii) Associated companyAn associated company is a company, not being a subsidiary or a joint venture, in which an equity interest is held forthe long-term and significant influence is exercised in its management.

The consolidated profit and loss account includes the Group’s share of the results of associated company for the year,and the consolidated balance sheet includes the Group’s share of the net assets of the associated company andgoodwill/negative goodwill (net of accumulated amortisation) on acquisition.

Equity accounting is discontinued when the carrying amount of the investment in an associated company reacheszero, unless the Group has incurred obligations or guaranteed obligations in respect of the associated company.

Unrealised gains on transactions between the Group and its associate are eliminated to the extent of the Group’sinterest in the associate; unrealised losses are eliminated unless the transaction provides evidence of an impairmentof the asset transferred.

47

1. Principal Accounting Policies (continued)

(c) Intangible assetsIntangible assets consist of goodwill and trade names.

Goodwill, which represents the excess of purchase consideration over the fair values ascribed to the separable assets andliabilities of the acquired subsidiaries and associated company at the date of acquisition, is recognised as an asset andamortised by equal annual instalments over its estimated useful economic lives of 40 years. Negative goodwill whichrepresents the excess, as at the date of acquisition, of the Group’s interests in the fair values of the identifiable assets andliabilities acquired over the cost of the acquisition is included in the balance sheet under “intangible assets” and isrecognised in the profit and loss account over 26 years, the remaining weighted average useful life of the non-monetaryassets acquired.

Trade names of Norwegian Cruise Line and Orient Lines recorded on acquisition of NCL Holding ASA (“NCL”) arebeing amortised on a straight-line basis over their estimated useful economic lives of 40 years.

The Group is currently amortising goodwill and trade names over useful lives of 40 years which is in excess of therebuttable presumption in Statement of Standard Accounting Practice (“SSAP”) 29 “Intangible Assets” and SSAP 30“Business Combinations” that the useful lives of such assets should not exceed 20 years, due to the following:

(i) The Group believes that 40 years is a reasonable estimate of the useful lives of this goodwill as NCL business hasbeen in operation since the 1960s and operates in a market that is expected to grow and in which there are barriersto entry given the major capital investment required.

(ii) The Group considers that 40 years is a reasonable estimate of the useful live of these assets as the trade names havealready been in existence for many years (since 1960s). In addition, the Group incurs and intends to continuouslyincur significant advertising expenditure which supports the selection of a long useful life for these assets.

As the Group amortises goodwill and trade names over a period exceeding twenty years, the recoverable amounts ofgoodwill and trade names are assessed annually (see note 1(y)).

(d) Translation of foreign currenciesTransactions in currencies other than US dollars (“foreign currencies”) are translated into US dollars at exchange rates ineffect at the transaction dates. Monetary assets and liabilities expressed in foreign currencies are translated at exchangerates at the balance sheet date. All such exchange differences are reflected in the consolidated profit and loss account.

For those subsidiaries and associated company which do not have the US dollar as their reporting currency, translation oftheir foreign currency accounts is dealt with as follows:

(i) assets and liabilities are translated at exchange rates at the balance sheet date; and

(ii) income and expense items are translated at average exchange rates prevailing during the year.

The resulting translation gains and losses arising from remeasurement are included as a separate component of reserve“Foreign currency translation adjustments”.

(e) Revenue and expense recognitionRevenues are recognised when the relevant services have been rendered. Cruise revenue, and all associated direct costs ofa voyage, are generally recognised on a pro rata basis over the period. Future travel vouchers issued to guests are recordedas a reduction of revenues when such vouchers are utilised. Where services are provided on credit, ongoing creditevaluations are performed and potential credit losses are expensed at the time accounts receivable are estimated to beuncollectible.

Income from charter-hire is recognised evenly over the period of the charter-hire.

Deposits received from customers for future voyages are recorded as advance ticket sales until such passenger revenue isearned.

Interest income and expense is recognised on a time proportion basis, taking into account the principal amountoutstanding and the interest rates applicable.

48

1. Principal Accounting Policies (continued)

(f ) Drydocking expensesDrydocking costs represent major inspection and overhaul costs and are depreciated to reflect the consumption ofbenefits, which are to be replaced or restored by the subsequent drydocking generally every two to three years. The Grouphas included these drydocking costs as a separate component of the ship costs in accordance with revised SSAP 17“Property, Plant and Equipment”.

(g) Advertising costsThe Group’s advertising costs are generally expensed as incurred. Costs incurred that result in tangible assets, includingbrochures are treated as prepaid supplies and expensed as consumed.

(h) Start up expensesStart up expenses, which primarily comprise expenses of deploying a ship from the dockyard to its port of operations andrepositioning a ship to develop a new market, including crew payroll and ship expenses, are expensed as incurred andincluded in operating expenses. Marketing expenses incurred during this period are included in selling, general andadministrative expenses.

(i) Deferred taxationDeferred taxation is provided in full, using the liability method, on temporary differences arising between the tax bases ofassets and liabilities and their carrying amounts in the accounts. Taxation rates enacted or substantially enacted by thebalance sheet date are used to determine deferred taxation.

Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against whichthe temporary differences can be utilised.

Deferred taxation is provided on temporary differences arising on investments in subsidiaries and associates, except wherethe timing of the reversal of the temporary difference can be controlled and it is probable that the temporary differencewill not reverse in the foreseeable future.

(j) Cash and cash equivalentsCash and cash equivalents include investments with original maturities of three months or less that are readily convertibleto known amounts of cash with no significant risk of changes in value and are stated at cost which approximates marketvalue.

(k) Restricted cashRestricted cash consists of cash collateral in respect of certain loan agreements, letters of credit and other obligationsincluding requirements imposed by the Group’s bank card processor.

(l) Loan arrangement feesCosts incurred in connection with the arranging of loan financing have been deferred and amortised over the lives of theloan agreement. The unamortised amount, which is to be amortised within one year is included in prepaid expenses andothers. The remaining amount is included in other assets.

(m) Convertible bondsConvertible bonds are regarded as liabilities unless conversion actually occurs. The finance cost recognised in the profitand loss account in respect of convertible bonds is calculated so as to produce a constant periodic rate of charge on theremaining balances of the convertible bonds for each accounting period.

The costs incurred in connection with the issue of convertible bonds are deferred and amortised over the lives of theconvertible bonds from the date of issue of the bonds to their final redemption date. The unamortised amount, which isto be amortised within one year is included in prepaid expenses and others. The remaining amount is included in otherassets. If any of the bonds are redeemed or converted prior to the final redemption date, an appropriate portion of anyremaining unamortised costs will be charged immediately to consolidated profit and loss account.

49

1. Principal Accounting Policies (continued)

(n) Consumable inventoriesConsumable inventories mainly consist of provisions, supplies and engine and ship spare parts and are carried at the lowerof cost, determined on a weighted average basis, and net realisable value. Net realisable value is determined on the basis ofanticipated sales proceeds less estimated selling expenses.

(o) Software development costsDeferred software development costs consist principally of salaries and fringe benefits of certain programmers and systemanalysts and outside consultant fees incurred in connection with the enhancement of significant internal data processingsystems. These costs are recognised as an asset and amortised when the software is available for use using the straight-linemethod over their estimated useful lives, not exceeding ten years. The unamortised amount is included in other assets.

(p) Provisions, contingent liabilities and contingent assetsProvisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it isprobable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can bemade.

A contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed bythe occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group. Itcan also be a present obligation arising from past events that is not recognised because it is not probable that outflow ofeconomic resources will be required or the amount of obligation cannot be measured reliably.

A contingent liability is not recognised but is disclosed in the notes to the accounts. When a change in the probability ofan outflow occurs so that outflow is probable, it will then be recognised as a provision.

A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by theoccurrence or non-occurrence of one or more uncertain events not wholly within the control of the Group.

Contingent assets are not recognised but are disclosed in the notes to the accounts when an inflow of economic benefitsis probable. When inflow is virtually certain, the asset is recognised.

(q) Assets under leases

(i) Finance leasesLeases that substantially transfer to the Group all the risks and rewards of ownership of assets are accounted for asfinance leases. Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leasedassets or the present value of the minimum lease payments. Each lease payment is allocated between the capital andfinance charges so as to achieve a constant rate on the capital balances outstanding. The corresponding rentalobligations, net of finance charges, are included in long-term liabilities. The finance charges are charged to the profitand loss account over the lease periods.

Assets held under finance leases are depreciated over the shorter of their estimated useful lives or the lease periods.

(ii) Operating leasesLeases where substantially all the rewards and risks of ownership of assets remain with the leasing company areaccounted for as operating leases. Rental payments applicable to such operating leases are charged to the profit andloss account on a straight-line basis over the lease term.

50

1. Principal Accounting Policies (continued)

(r) Fixed assetsFixed assets are stated at cost less accumulated depreciation except for land, leasehold land, jetties, terminal buildings andimprovements which are stated at valuation less accumulated depreciation. Significant cruise ship refurbishing costs arecapitalised as additions to the cruise ship while costs of repairs and maintenance are expensed as incurred.

Cruise ships, catamaran and passenger ferry are depreciated to their estimated residual values on a straight-line basis overperiods ranging from 13 to 30 years. Other assets are depreciated on a straight-line basis over their estimated useful livesas follows:

Leasehold land 30 - 99 yearsJetties and terminal buildings 28 - 99 yearsEquipment and motor vehicles 3 - 20 years

The useful lives of fixed assets are reviewed on a regular basis. On 1 January 2004, the Group revised the estimated usefullives of the catamaran from 30 years to 20 years to more realistically reflect its remaining estimated useful lives. Thechange in the useful lives of the catamaran did not have any material effect on the results and financial position of theGroup for the year ended 31 December 2004.

No depreciation is provided on fixed assets which are under construction. The Group capitalises interest based on theweighted average cost of borrowings on cruise ships, catamaran and other capital projects during the period required toget such assets ready for their intended use. Interest capitalisation ceases when the asset is substantially complete.

The gain or loss on disposal of a fixed asset is the difference between the net sales proceeds and the carrying amount of therelevant asset, and is recognised in the consolidated profit and loss account. Any revaluation reserve balance attributableto the relevant asset is transferred to retained earnings and is shown as a movement in reserves.

(s) Financial instrumentsThe Group enters into derivative instruments, primarily forward contracts and interest rate swaps to limit its exposures tofluctuations in foreign currency exchange rates, and to modify its exposure to interest rate movements and to manage itsinterest costs.

The Group uses forward contracts to manage foreign currency exchange rate risk related to certain projected cash flowsand foreign currency firm commitments. These instruments are carried at fair value on the balance sheet. Changes in thefair value of forward contracts are recognised in the consolidated profit and loss account. Changes in the market value offorward contracts that hedge foreign currency commitments to complete the construction of a cruise ship are deferredand included in the cost of the ship when the commitment is paid.

Interest rate swaps allow the Group to convert long-term borrowings from floating rates and swap them into fixed rates.Under the interest rate swaps, the Group agrees with other parties to exchange, at specified intervals, the differencebetween fixed contract rates and floating rate interest amounts calculated by reference to the agreed notional principalamount. The differential in interest rates to be paid or received under interest rate swaps is recognised during the financialyear in the consolidated profit and loss account as part of interest expense. These instruments are carried at fair value onthe balance sheet. Changes in the fair value of the interest rate swaps are deferred, included as a separate component ofreserves, and recognised in the consolidated profit and loss account as the underlying hedged items are recognised.

(t) Share option expenseThe Group accounts for compensation expense in respect of the award of share options to employees based on the excess,if any, of the quoted market price of the share at the date of the grant over the exercise price of the option. The excess hasbeen treated as additional paid in capital and is recognised as an expense over the option periods. The unamortisedamount is included as a separate component of reserves.

(u) Earnings per shareBasic earnings per share is computed by dividing net profit by the weighted average number of ordinary sharesoutstanding during each year. Fully diluted earnings per share is computed by dividing net profit by the weighted averagenumber of ordinary shares, potential ordinary shares and other potentially dilutive securities outstanding during eachperiod.

51

1. Principal Accounting Policies (continued)

(v) Retirement benefit costsContributions to the defined contribution retirement schemes are expensed as incurred and are reduced by contributionsforfeited by those employees who leave employment before being fully vested.

Expenses in respect of a retirement scheme providing benefits based on final pay are charged to the consolidated profitand loss account in the period to which they relate. The pension obligations, which are wholly unfunded, are determinedbased on the estimates of the effects of future events on the actuarially determined net present value of accrued pensionobligations and are determined by a qualified actuary on a regular basis. Actuarial gains and losses are recognised as anexpense over the average remaining service lives of employees.

(w) Employee leave entitlementsEmployee entitlements to annual leave are recognised when they accrue to employee. A provision is made for theestimated liability for annual leave as a result of services rendered by employees up to the balance sheet date.

Employee entitlements to sick leave and maternity or paternity leave are not recognised until the time of leave.

(x) Borrowing costsBorrowing costs that are directly attributable to the acquisition, construction or production of an asset that necessarilytakes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of that asset. Allother borrowing costs are charged to the consolidated profit and loss account in the year in which they are incurred.

(y) Recoverability of assetsAt each balance sheet date, both internal and external sources of information are considered to assess whether there is anyindication that fixed assets, goodwill and trade names are impaired. If any indication of impairment of an asset exists, andannually for goodwill and trade names (as such assets are being amortised over 40 years (see note 1 (c)), the recoverableamount of the asset is estimated and where relevant, an impairment loss is recognised to reduce the asset to recoverableamount. Such impairment losses are recognised in the consolidated profit and loss account except where the asset iscarried at valuation and the impairment loss does not exceed the revaluation surplus for the same asset, in which case it istreated as a revaluation decrease. Assets are grouped and evaluated at the lowest level for which there are identifiable cashflows that are largely independent of the cash flows of other groups of assets.

The Group measures the amount of the impairment by comparing the carrying amount of an asset to its recoverableamount which is the higher of an asset’s net selling price or its value in use. The Group estimates recoverable amountbased on the best information available making whatever estimates, judgements and projections considered necessary.Net selling price is the amount obtainable from the sale of an asset in an arm’s length transaction between knowledgeablewilling parties less costs of disposal. The estimation of value in use is measured using various financial modelingtechniques such as discounting future cash flows expected to arise from the continuing use of an asset and from itsdisposal at the end of its useful lives at discount rates which commensurate with the risk involved.

(z) Segment reportingThe Group has determined that business segments be presented as the primary reporting format and geographical as thesecondary reporting format.

Unallocated costs represent corporate expenses. Segment assets consist primarily of fixed assets, trade names, inventories,receivables and cash and cash equivalents. Segment liabilities comprise operating liabilities and exclude items such astaxation and certain corporate borrowings. Capital expenditure comprises additions to fixed assets and intangible assetsother than goodwill, including additions resulting from acquisitions through purchases of subsidiaries.

In respect of geographical segment reporting, turnover is based on the country in which the customer is located.

52

2. Turnover, Operating Profit/(Loss) and Segment InformationThe turnover consists of revenues earned from cruise and cruise related activities and other activities.

The Group is principally engaged in the operation of passenger cruise ships. Cruise and cruise related revenues comprise salesof passenger tickets, including, in some cases, air transportation to and from the cruise ship, and revenues from onboardservices and other related services, including gaming, food and beverage. Other operations of the Group comprise charter hireand provision of transportation and tour services, none of which are of a sufficient size to be reported separately.

The amounts of each significant category of revenue recognised by the Group were as follows:

Cruise and cruise2004 related activities Others Total

US$’000 US$’000 US$’000

Turnover 1,631,439 4,966 1,636,405

Operating profit/(loss) before impairment loss 135,465 (499) 134,966Impairment loss (14,500) — (14,500)

120,965 (499) 120,466

Interest income 2,985Financial costs (107,566)Other non-operating expenses, net (23,920)

Loss before taxation (8,035)Taxation (971)

Net loss for the year (9,006)

Segment assets 4,478,088 22,319 4,500,407

Goodwill 367,396 367,396

Other unallocated assets 117,310

Total assets 4,985,113

Segment liabilities 569,208 2,104 571,312Long-term borrowings (including current portion) 2,415,855 2,208 2,418,063

2,985,063 4,312 2,989,375

Tax liabilities 1,766Convertible bonds 180,000

Total liabilities 3,171,141

Capital expenditure 453,128 3,320 456,448

Depreciation and amortisation 179,236 2,673 181,909

53

2. Turnover, Operating Profit/(Loss) and Segment Information (continued)

Cruise and cruise2003 related activities Others Total

US$’000 US$’000 US$’000

Turnover 1,615,724 2,484 1,618,208

Operating profit/(loss) before impairment loss 79,222 (173) 79,049Impairment loss (81,852) (17,693) (99,545)

Operating loss after impairment loss (2,630) (17,866) (20,496)

Interest income 2,613Financial costs (93,804)Other non-operating expenses, net (11,123)

Loss before taxation (122,810)Taxation (1,663)

Net loss for the year (124,473)

Segment assets 4,288,630 15,066 4,303,696

Goodwill 377,095 377,095

Other unallocated assets 115,200

Total assets 4,795,991

Segment liabilities 531,456 605 532,061Long-term borrowings (including current portion) 2,273,793 — 2,273,793

2,805,249 605 2,805,854

Tax liabilities 1,621Convertible bonds 180,000

Total liabilities 2,987,475

Capital expenditure 325,469 92 325,561

Depreciation and amortisation 195,164 2,185 197,349

54

2. Turnover, Operating Profit/(Loss) and Segment Information (continued)The Group’s turnover, operating profit/(loss) and assets in its principal markets of Asia Pacific and North America are analysedas follows:

Operating Capital2004 Turnover profit Total assets expenditure

US$’000 US$’000 US$’000 US$’000

Asia Pacific 383,393 94,523 681,725 8,665North America (note) 1,138,668 30,444* 3,818,682 447,783Others 114,344 5,198 — —

1,636,405 130,165 4,500,407 456,448

Goodwill (9,699) 367,396Other unallocated assets — 117,310

120,466 4,985,113

* Included in the 2004’s operating profit of North America segment was an impairment loss of US$14.5 million.

Operating Capital2003 Turnover profit/(loss) Total assets expenditure

US$’000 US$’000 US$’000 US$’000

Asia Pacific 409,963 (44,882)* 1,081,389 36,120North America (note) 1,099,686 26,109* 3,222,307 289,441Others 108,559 6,685 — —

1,618,208 (12,088) 4,303,696 325,561

Goodwill (8,408) 377,095Other unallocated assets — 115,200

(20,496) 4,795,991

* Included in the 2003’s operating profit/(loss) of Asia Pacific and North America segments were impairment losses of US$77.3 millionand US$22.2 million respectively.

Note: Substantially, all the turnover and operating profit/(loss) arises in the United States of America.

55

3. Impairment Loss

GROUP

2004 2003US$’000 US$’000

Impairment loss:Ships and onboard equipment 14,500 76,758Spare parts and other assets — 3,787Trade names — 19,000

14,500 99,545

During the year ended 31 December 2004, the Group reviewed the trade names and certain ships for which there wereindications of possible impairment or as required annually (see note 1(y)). As a result of the review, the Group reduced thecarrying value of one of the ships by recording an impairment charge of US$14.5 million.

At 31 December 2003, an impairment loss of US$59.7 million was recognised in respect of the ships and onboard equipmentand other assets related to m.v. SuperStar Capricorn and m.v. SuperStar Aries, which were disposed of in February 2004 andApril 2004 respectively. In addition, the Group also reviewed its trade names and various ships for impairment purposes inDecember 2003 and determined that Orient Lines trade names and certain of its cruise ships were impaired. As a result of thisreview, the Group wrote down the carrying value of certain ships and their related assets in the amount of US$20.8 million andthe carrying value of Orient Lines’ trade names in the amount of US$19 million. The recoverable amount of these assets wasdetermined by reference to the estimated value in use.

The above impairment losses represented the amount by which the carrying amount of assets exceeded their fair values.

56

4. Operating Profit/(Loss)Operating profit/(loss) is stated after charging/(crediting) the following:

GROUP

2004 2003US$’000 US$’000

Charging:

Amortisation of goodwill 9,699 8,408Depreciation of fixed assets 163,400 180,970Amortisation of software development costs 2,045 681Amortisation of trade names 6,765 7,290Total depreciation and amortisation analysed into: 181,909 197,349

- relating to operating function 172,299 186,689- relating to selling, general and administrative function 9,610 10,660

Staff costs (see note 9) 356,104 321,017Operating leases - land and buildings 8,306 7,637Auditors’ remuneration 995 856Advertising expenses 83,834 84,158Impairment loss (see note 3) 14,500 99,545Proceeds from the loss-of-hire insurance coverage, net of expenses — (5,254)Provision for legal and settlement expenses 790 15,000Custom fines on itinerary modifications resulting from the Azipod problem on a ship 4,333 —Total (see note below) 5,123 9,746

Note:

The Group recorded other expenses of approximately US$5.1 million for the year ended 31 December 2004, being legal settlement andrelated expenses in the amount of US$0.8 million and custom fines on m.v. Norwegian Star resulting from necessary alternations to theship’s Hawaii/Fanning Island itinerary in response to a problem with the ship’s Azipod propulsion system of US$4.3 million.

The Group recorded other expenses of approximately US$9.7 million for the year ended 31 December 2003, being legal settlement andrelated expenses in the amount of US$15 million, offset by the proceeds of US$5.3 million from the loss-of-hire coverage net of relatedexpenses arising from s/s Norway boiler accident.

The above expenses are included within operating expenses in the consolidated profit and loss accounts.

57

5. Financial Costs

GROUP

2004 2003US$’000 US$’000

Amortisation of:- bank loans arrangement fees 8,227 4,100- issue costs of convertible bonds and US$250 million Senior Notes 1,058 149

Interests on:- bank loans 82,306 88,421- convertible bonds and US$250 million Senior Notes 22,117 2,008

Loans arrangement fees written off 4,086 1,359

Total borrowing costs incurred 117,794 96,037Less: interest capitalised in fixed assets (10,228) (2,233)

Total financial costs 107,566 93,804

The capitalisation rate applied to funds borrowed and used for the construction of the cruise ships in 2004 was between 1.9%and 3.8% per annum (2003: 1.9% to 3.0% per annum).

6. Other Non-Operating Expenses, Net

GROUP

2004 2003US$’000 US$’000

(Gain)/Loss on disposal of fixed assets 147 (3)(Gain)/Loss on financial instruments 11,334 (577)Litigation and related costs — 3,484Loss on foreign exchange 1,778 1,319Loss on translation of debts 9,545 —Other non-operating expenses, net 1,116 6,900

23,920 11,123

58

7. Taxation

GROUP

2004 2003US$’000 US$’000

Overseas taxation- Current taxation 1,561 1,645- Deferred taxation (166) 18

1,395 1,663

(Over)/Under provision in respect of prior years- Current taxation (555) —- Deferred taxation 131 —

971 1,663

Deferred taxation charged/(credited) in respect of temporary differences (35) 18

The Company, which is domiciled in Bermuda, and the majority of its subsidiaries, are not subject to income tax as theirincome is mainly derived in international waters or outside taxing jurisdictions. However, the Group has incurred a tax charge,as illustrated in the table above, based on the income which is subject to local tax in certain of the jurisdictions where itoperates. The appropriate local tax rate has been applied, in such circumstances, to determine the applicable tax charge.

NCL Corporation Ltd. (“NCLC”), incorporated in Bermuda and operating in the United States, is not subject to UnitedStates federal income taxes due to the provisions of Section 883 of the Internal Revenue Code of 1986 (the “Code”), whichprovides NCLC with an exemption from income taxation by the United States with respect to its United States source incomederived from the international operation of the ships (“Shipping Income”). Section 883 provides that a foreign corporationwill qualify for the exemption if (i) the foreign country in which the foreign corporation is organised grants an equivalentexemption for Shipping Income of sufficiently broad scope to a United States corporation (“Equivalent Exemption”) and (ii)more than 50% in value of its shares is directly or indirectly owned by individuals who are resident of one or more foreigncountries which grant an Equivalent Exemption (“Look-Through Test”).

Management believes that NCLC’s Shipping Income, which is substantially all of the NCLC’s income, is exempt from theUnited States federal income taxes because (i) NCLC’s country of origination, Bermuda, grants an Equivalent Exemption and(ii) NCLC meets the Look-Through Test because more than 50% in value of NCLC’s stock is directly or indirectly owned byindividuals residing in Equivalent Exemption jurisdictions. If NCLC was found not to be exempt from United States federalincome taxes, as described above, then NCLC’s Shipping Income, to the extent derived from U.S. sources, could be taxed ona net basis at graduated U.S. federal corporate income tax rates (currently, a maximum of 35%). NCLC would also be subjectto a 30% federal branch profits tax under Section 884 of the Code, generally on the portion of such income that was derivedfrom U.S. sources each year to the extent such income was not properly viewed as reinvested and maintained in the U.S.business. Interest paid or accrued by NCLC could also be subject to branch interest taxes under Section 884 of the Code andcould be treated as U.S. source interest.

On 26 August 2003, the U.S. Internal Revenue Service issued final regulations interpreting Section 883 of the Code. Thesefinal regulations list several items of income which are not considered to be incidental to the international operation of shipsand, to the extent derived from U.S. sources, are subject to U.S. federal income taxes. Income items considered non-incidentalto the international operation of ships include income from the sale of single-day shore excursions, air and othertransportation, and pre- and post-cruise land packages. The final regulations will apply to NCLC’s 2005 taxable year.

Arrasas Limited and certain other subsidiaries of NCLC which are incorporated in the Isle of Man, are not subject to incometax in the Isle of Man in respect of activities undertaken outside the Isle of Man. These companies are not subject to UnitedStates federal income taxes due to the provisions of Section 883 of the Code which provide an exception from income taxationby their United States source income derived from Shipping Income.

Income derived from the operation of NCLC’s U.S.-flagged operations is subject to tax on a net basis at the graduated U.S.federal corporate income tax rates generally applicable to corporations organized in the United States. U.S. source dividendspaid by this subsidiary generally would be subject to a 30% withholding tax.

59

8. Earnings/(Loss) Per ShareEarnings/(Loss) per share has been calculated as follows:

GROUP

2004 2003US$’000 US$’000

BASIC

Net loss (9,006) (124,473)

Weighted average outstanding ordinary shares in thousands 5,293,187 4,967,186

Basic loss per share in US cents (0.17) (2.51)

FULLY DILUTED

Net loss (9,006) (124,473)

Weighted average outstanding ordinary shares in thousands 5,293,187 4,967,186

Effect of dilutive ordinary shares in thousands 524 88,539

Weighted average outstanding ordinary shares after assuming dilution in thousands 5,293,711 5,055,725

Fully diluted earnings per share in US cents N/A* N/A*

* Diluted loss per share for the years ended 31 December 2004 and 2003 are not shown, as the diluted loss per share is less than the basicloss per share.

9. Staff CostsStaff costs include employee salaries and other employee related benefits but excluding directors’ remuneration.

GROUP

2004 2003US$’000 US$’000

Wages and salaries 338,159 306,769Unutilised annual leave 628 207Termination benefits 860 1,852Social security costs 8,462 5,724Non-cash share option expenses 333 575Pension costs - defined contribution plans (Note 31(a)) 7,662 5,890

356,104 321,017

60

10. Emoluments of Directors and Senior ManagementThe aggregate amounts of emoluments of the Directors of the Company during the year are as follows:

GROUP

2004 2003US$’000 US$’000

Fees, of which US$144,000 (2003:US$144,000) were toindependent non-executive directors 192 192

Basic salaries, discretionary bonuses, housing allowances,other allowances and benefits in kind 3,974 4,041

Contribution to provident fund 20 20Accrued unfunded pension liability 2,192 2,179Non-cash share option expenses 493 654

6,871 7,086

The emoluments of the Directors of the Company fall within the following bands:Number of Directors

2004 2003

HK$nil - HK$500,000 3 3HK$3,000,001 - HK$3,500,000 — 1HK$3,500,001 - HK$4,000,000 1 —HK$4,500,001 - HK$5,000,000 — 1HK$5,500,001 - HK$6,000,000 1 —HK$12,000,001 - HK$12,500,000 1 —HK$13,000,001 - HK$13,500,000 — 1HK$30,500,001 - HK$31,000,000 1 —HK$32,500,001 - HK$33,000,000 — 1

Details of the emoluments of the five highest paid individuals in the Group are as follows:GROUP

2004 2003US$’000 US$’000

Fees 36 36Basic salaries, discretionary bonuses, housing allowances,

other allowances and benefits in kind 4,602 4,851Contributions to provident fund 18 18Accrued unfunded pension liability 2,291 2,289Non-cash share option expenses 468 615

7,415 7,809

Number of Directors included in the five highest paid individual 3 3

The emoluments of the 5 individuals fall within the following bands:Number of individuals

2004 2003

HK$4,000,001 - HK$4,500,000 1 1HK$4,500,001 - HK$5,000,000 1 1HK$5,500,001 - HK$6,000,000 1 1HK$12,000,001 - HK$12,500,000 1 —HK$13,000,001 - HK$13,500,000 — 1HK$30,500,001 - HK$31,000,000 1 —HK$32,500,001 - HK$33,000,000 — 1

61

11. Intangible AssetsIntangible assets consist of the following items arising from the acquisition of NCL Holding ASA (“NCL”):

GROUP

2004 2003US$’000 US$’000

Trade names 237,890 244,655

Goodwill on consolidation 407,165 418,743Negative goodwill (39,769) (41,648)

Net goodwill 367,396 377,095

605,286 621,750

Trade names

GROUP

2004 2003US$’000 US$’000

CostAt 1 January and year end 291,600 291,600

Accumulated amortisation and impairmentAt 1 January (46,945) (20,655)Amortisation (6,765) (7,290)Impairment loss — (19,000)

At year end (53,710) (46,945)

Net book value at year end 237,890 244,655

Goodwill arising on acquisition of 84.5% of NCL

GROUP

2004 2003US$’000 US$’000

CostAt 1 January 456,624 409,909Additions (see below) — 46,715

At year end 456,624 456,624

Accumulated amortisationAt 1 January (37,881) (27,595)Amortisation (11,578) (10,286)

At year end (49,459) (37,881)

Net book value at year end 407,165 418,743

62

11. Intangible Assets (continued)Negative goodwill arising on acquisition of remaining 15.5% of NCL

GROUP

2004 2003US$’000 US$’000

CostAt 1 January and year end (45,868) (45,868)

Accumulated amortisationAt 1 January 4,220 2,342Amortisation 1,879 1,878

At year end 6,099 4,220

Net book value at year end (39,769) (41,648)

In December 1999, the Group through a subsidiary, Arrasas Limited (“Arrasas”), acquired an interest of approximately 38.6%of the then outstanding shares of NCL as at 31 December 1999, a company incorporated under the laws of the Kingdom ofNorway.

In February 2000, subsequent to mandatory offers made by Arrasas, the Group had acquired an aggregate interest of about84.5% of the outstanding shares in NCL. Following the purchase by Arrasas of an additional 10.9% of the shares of NCL fromrelated companies (at Norwegian Kroner (“NOK”) 15 per share) on 29 November 2000, Arrasas owned 95.4% of the sharesin NCL.

In accordance with Norwegian law, Arrasas on 30 November 2000 compulsorily acquired the remaining shares in NCL heldby the minority shareholders, at an offer price of NOK 13 per share. As a result of this acquisition, Arrasas became the soleowner of all outstanding shares of NCL. Persons formerly holding in aggregate 1,831,848 shares rejected the offer price(“minority shareholders”). As such, pursuant to applicable Norwegian law, Arrasas submitted a valuation petition on 26October 2001 to the Oslo City Court to request the valuation court to determine the fair value of the shares held by theminority shareholders.

The valuation proceedings were heard in September 2003, and on 5 December 2003, the Oslo City Court fixed theredemption price for the minority shareholders at NOK 25 per share. Pursuant to this decision, Arrasas is required to pay theminority shareholders NOK 25 per share. Pursuant to the terms of the respective stock purchase agreements with the relatedcompanies, Arrasas is required to pay the related companies an additional NOK 10 per share (representing the amount inexcess of NOK 15 per share).

In accordance with SSAP 28, as at 31 December 2003, the Group provided an aggregate amount of approximately US$46.7million, representing the aggregate amount of the additional NOK 10 per share to related companies and the amount in excessof the offer price of NOK 13 per share to the minority shareholders in the compulsory acquisition in November 2000. Theseadjustments to the purchase consideration result in a revision to goodwill previously recognised in the amount of US$46.7million (see Note 21).

On 8 January 2004, Arrasas filed an appeal against the decision granted on 5 December 2003. The appeal has been fixed forhearing sometime in April 2005. The Appeal Court has to conduct, inter alia, full new valuation proceedings to reassess theredemption price for the 1,831,848 shares. It is likely that the outcome of the said appeal will be known sometime towards theend of the first half of 2005.

In addition, the Group is also involved in other legal actions in connection with the acquisition of NCL. However, decisionsof the said actions have been granted in favour of the Group which are currently pending appeal by the plaintiffs in therespective actions.

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12. Fixed AssetsFixed assets consist of the following:

GROUP

Land,leasehold land, Equipment

Cruise ships, jetties, terminal Equipment Cruise ships and otherYear ended catamaran and buildings and and motor under construction31 December 2004 passenger ferry improvements vehicles construction in progress Total

US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

Cost and valuationAt 1 January 2004 3,797,948 86,004 247,242 253,424 23,372 4,407,990Exchange differences — 337 206 — — 543Acquisition of

a subsidiary — — 2,288 — — 2,288Reclassification of

fixed assets — 558 2,373 — (2,931) —Additions 80,049 407 4,811 368,032 861 454,160Assets written off (230) (16) (2,631) — — (2,877)Disposals (139,956) — (18,582) — — (158,538)

At 31 December 2004 3,737,811 87,290 235,707 621,456 21,302 4,703,566

Accumulateddepreciation andimpairment

At 1 January 2004 (677,332) (16,018) (87,767) — — (781,117)Exchange differences — (121) (205) — — (326)Charge for the year (141,844) (3,393) (18,163) — — (163,400)Impairment loss (14,500) — — — — (14,500)Assets written off 230 — 2,629 — — 2,859Disposals 66,310 — 9,910 — — 76,220

At 31 December 2004 (767,136) (19,532) (93,596) — — (880,264)

Net book valueAt 31 December 2004 2,970,675 67,758 142,111 621,456 21,302 3,823,302

At 31 December 2003 3,120,616 69,986 159,475 253,424 23,372 3,626,873

Cost/valuationAt 31 December 2004At cost 3,737,811 33,929 235,707 621,456 21,302 4,650,205At 2000 valuation — 53,361 — — — 53,361

3,737,811 87,290 235,707 621,456 21,302 4,703,566

At 31 December 2003At cost 3,797,948 32,643 247,242 253,424 23,372 4,354,629At 2000 valuation — 53,361 — — — 53,361

3,797,948 86,004 247,242 253,424 23,372 4,407,990

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12. Fixed Assets (continued)Included within fixed assets are assets in the charter hire segment as follows:

Land,leasehold land, Equipment

jetties, terminal Equipment Cruise ships and otherbuildings and and motor under construction

Catamaran improvements vehicles construction in progress Total

US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

Cost 37,524 — 454 — — 37,978Less: accumulated

depreciationand impairment (24,819) — (266) — — (25,085)

Net book valueat 31 December 2004 12,705 — 188 — — 12,893

Net book valueat 31 December 2003 13,357 — 233 — — 13,590

In conjunction with the listing of the Company’s entire share capital on the Stock Exchange, certain of the Group’s propertieswere revalued at 30 September 2000 by the Directors on the basis of an open market valuation by Jones Lang LaSalle Limited,an independent property valuer. As at 31 December 2004 and 2003, the carrying amount of these properties would have beenUS$60.6 million and US$61.6 million respectively had they been stated at cost less accumulated depreciation.

At 31 December 2004 and 2003, the net book value of fixed assets pledged as security for the Group’s long-term bank loansamounted to US$3.7 billion and US$3.4 billion respectively.

Net book value of land, leasehold land, jetties, terminal buildings and improvements comprises:

GROUP

2004 2003US$’000 US$’000

Hong Kong: — —

Outside Hong Kong:

Freehold 6,508 6,508Long leasehold (not less than 50 years) 45,087 47,150Medium leasehold (less than 50 years but not less than 10 years) 16,163 16,328

67,758 69,986

13. Investments in SubsidiariesCOMPANY

2004 2003US$’000 US$’000

Investments at cost:Unlisted shares 1,647,700 1,283,673Amounts due from subsidiaries 1,171,450 1,412,771Amounts due to subsidiaries (30,202) (1,927)

2,788,948 2,694,517

Amounts due from/(to) subsidiaries are unsecured, interest free and have no fixed repayment terms.

A list of principal subsidiaries is included in note 32 to the accounts.

65

14. Investment in an Associated Company

GROUP

2004 2003US$’000 US$’000

Investment at cost:Unlisted shares 15,148 —

In December 2004, the Group through a wholly-owned subsidiary, Star Cruises Singapore Investment Holding Pte. Ltd.,acquired an associated company, the details of which are as follows:

Country of Interest heldincorporation Particulars of indirectly in Principal

Name and operation issued shares held percentage activities

Valuair Limited Singapore Ordinary shares of S$1.00 26% Provision of airlineeach transportation and air

chartering services

S$: Singapore Dollar

Valuair Limited (“Valuair”) has financial year end of 31 March which is not coterminous with the Group. As the acquisition ofValuair was completed close to the balance sheet date, the Group has not included the results of Valuair in the consolidatedprofit and loss account for the year ended 31 December 2004 on the basis that the effect of accounting for its share of suchresults would not be material. The Group is in the process of commissioning a valuation of the assets and liabilities of Valuairto assess the fair values of these assets and liabilities, including intangibles, if any, at the date of acquisition.

15. Other Assets

GROUP COMPANY

2004 2003 2004 2003US$’000 US$’000 US$’000 US$’000

Loan arrangement fees 53,535 22,877 6,758 4,369Convertible bonds and senior

notes issuance costs 10,606 2,827 2,081 2,827Software development costs, net 15,314 13,164 — —Others 5,640 798 — —

85,095 39,666 8,839 7,196

16. Consumable Inventories

GROUP

2004 2003US$’000 US$’000

Food and beverages 8,648 9,962Supplies, spares and consumables 33,411 28,113

42,059 38,075

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17. Trade ReceivablesGROUP

2004 2003US$’000 US$’000

Trade receivables 15,906 22,501Less: Provisions (3,817) (5,078)

12,089 17,423

Credit terms generally range from payment in advance to 45 days credit terms.

At 31 December 2004 and 2003, the ageing analysis of the trade receivables were as follows:

GROUP

2004 2003US$’000 US$’000

Current to 30 days 4,983 11,23131 days to 60 days 2,557 4,42061 days to 120 days 2,897 2,413121 days to 180 days 2,345 1,434181 days to 360 days 2,473 1,820Over 360 days 651 1,183

15,906 22,501

18. Cash and Cash EquivalentsCash and cash equivalents consist of the following:

GROUP COMPANY

2004 2003 2004 2003US$’000 US$’000 US$’000 US$’000

Deposits with banks - maturing within 3 months 127,992 124,455 117,310 115,200Cash and bank balances 213,035 252,578 136 201

341,027 377,033 117,446 115,401

19. Related Party Transactions and BalancesGolden Hope Limited, a company incorporated in the Isle of Man acting as trustee of the Golden Hope Unit Trust, a privateunit trust which is held directly and indirectly by GZ Trust Corporation as trustee of a discretionary trust established for thebenefit of certain members of Tan Sri Lim Goh Tong’s family, is a substantial shareholder of the Company.

Tan Sri Lim Kok Thay, the Chairman, President and Chief Executive Officer of the Group, is a son of Tan Sri Lim Goh Tong.

Kien Huat Development Sdn Bhd (“KHD”) is a company in which a brother of Tan Sri Lim Kok Thay has a substantialinterest.

Genting Berhad (“GB”), a company in which Tan Sri Lim Kok Thay has a deemed interest and which is listed on the BursaMalaysia Securities Berhad (“Bursa Malaysia”), controls Resorts World Bhd (“RWB”), a company also listed on Bursa Malaysiawhich in turn indirectly controls Resorts World Limited (“RWL”) which is a substantial shareholder of the Company. GBindirectly controls Genting International PLC (“GIPLC”), a company listed on the Luxembourg Stock Exchange.

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19. Related Party Transactions and Balances (continued)WorldCard International Limited (“WCIL”) is a company in which a subsidiary of each of the Group and GIPLC has a 50%interest. As at 31 December 2004, the carrying amount of this investment in WCIL amounted to US$254,000 is includedwithin other assets. The Group’s share of losses from WCIL amounted to US$246,000 for the financial year ended 31December 2004.

Significant related party transactions entered into or subsisting between the Group and these companies during the year ended31 December 2004 are set out below:

(a) KHD, together with its related companies, was involved in carrying out improvements to the Group’s berthing facilitiesand other infrastructure facilities. Amounts charged to the Group in respect of these services were approximatelyUS$12,000 and US$41,000 in the years ended 31 December 2004 and 2003 respectively.

(b) GB and its related companies provide certain services to the Group, including treasury services, secretarial services,certain information technology support services and other support services. The Group also purchases air tickets from asubsidiary of RWB. Amounts charged to the Group in respect of these services were approximately US$711,000 andUS$919,000 in the years ended 31 December 2004 and 2003 respectively.

(c) The Group provides certain administrative support services to GIPLC internationally and the amounts charged toGIPLC were approximately US$66,000 and US$95,000 for the years ended 31 December 2004 and 2003 respectively.

(d) On 19 January 2004, the Group subscribed for 500,000 shares of US$1 each at par in WCIL and participated as amerchant in the customer loyalty programme known as “WorldCard”. WCIL together with its related companiesoperates and administers the WorldCard programme on an international basis (save as Malaysia). In October 2004, theGroup entered into a supplementary agreement whereby the Group was allowed to participate in the WorldCardprogramme in Malaysia.

In addition, certain agreements were entered into among certain subsidiaries of the Group and RWB and a subsidiary ofthe GB Group in relation to the implementation of joint promotion and marketing programmes for the purpose ofpromoting the respective businesses of the Group and the RWB Group.

Amounts charged to/(from) the GB Group were approximately US$571,000 and US$387,000 respectively in the yearended 31 December 2004.

Amounts outstanding at the end of each fiscal year in respect of the above transactions were included in the balance sheetswithin amounts due from/(to) related companies. The related party transactions described above were carried out on terms,conditions and prices obtainable in transactions with unrelated parties.

(e) On 24 November 2000, Arrasas Limited entered into separate Stock Purchase Agreements with RWL, Genting OverseasHoldings Limited (a wholly owned subsidiary of GB) and Palomino Limited (an indirect subsidiary of GB) to acquire anaggregate of 29,110,200 ordinary shares representing approximately 10.9% of the issued share capital of NCL for a totalcash consideration of approximately NOK436.7 million (US$45.7 million) or NOK15 (US$1.572) per share. Thetransaction was completed on 29 November 2000. The agreements require that in the event Arrasas Limited pays morethan NOK15 (US$1.572) per share in any subsequent transaction, Arrasas Limited will be required to pay to theserelated companies the difference between such higher price per share and NOK15 per share (US$1.572) (see note 11).

Transactions with Directors(f ) Certain Directors of the Company and the Group were granted share options entitling them to subscribe for ordinary

shares in the share capital of the Company under both the Pre-listing Employee Share Option Scheme and Post-listingEmployee Share Option Scheme. Share options granted are exercisable at the price of US$0.2686 and US$0.4206 pershare under the Pre-listing Employee Share Option Scheme and HK$2.9944 (US$0.38) and HK$1.7240 (US$0.22) pershare under the Post-listing Employee Share Option Scheme. Details of the movement of the share options during theyear ended 31 December 2004 and the outstanding share options as at 31 December 2004 are set out in the sectionheaded “Share Options” in the Report of the Directors.

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20. Trade CreditorsThe ageing of trade creditors as at 31 December 2004 and 2003 is as follows:

GROUP

2004 2003US$’000 US$’000

Current to 60 days 76,311 91,08561 days to 120 days 5,887 7,289121 days to 180 days 813 155Over 180 days 470 421

83,481 98,950

Credit terms granted to the Group generally vary from no credit to 45 days credit.

21. Provisions, Accruals and Other LiabilitiesProvisions, accruals and other liabilities consists of the following:

GROUP COMPANY

2004 2003 2004 2003US$’000 US$’000 US$’000 US$’000

Payroll, taxes and related benefits 25,902 20,676 — —Interest 46,840 20,694 18,824 11,616Forward currency contracts and

interest rate swaps 23,753 35,396 23,753 35,396Provisions (see below) 58,275 61,715 — —Others 87,841 91,343 1,988 3,817

242,611 229,824 44,565 50,829

The movements of the provisions are as follows:

GROUP

Provision foradditional

purchase Provision forconsideration legal and

for NCL settlementacquisition costs Total

US$’000 US$’000 US$’000

As at 1 January 2004 46,715 15,000 61,715Add: additional provision — 790 790Less: amounts paid — (4,230) (4,230)

As at 31 December 2004 46,715 11,560 58,275

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22. Long-Term BorrowingsLong-term borrowings consist of the following:

GROUP COMPANY

2004 2003 2004 2003US$’000 US$’000 US$’000 US$’000

SECURED:US$521.6 million syndicated

term loan (i) 171,734 364,906 — —US$450 million term loan (ii) 182,300 412,500 182,300 412,500US$623 million fleet loan (iii) — 403,200 — —US$400 million Reducing

Revolving Credit Facility (iii) 373,500 — 373,500 —US$626.9 million syndicated term loan (v) 271,666 564,230 —US$210 million Pride of Aloha loan (vi) — 154,000 — —US$225 million term loan (vii) 207,000 225,000 — —€298 million secured term loan (viii) 259,066 149,957 — —US$334.1 million Norwegian Jewel loan (ix) 113,377 — — —€308.1 million Pride of Hawaii loan (x) 47,212 — — —US$800 million loan facility (xi) 540,000 — — —

UNSECURED:US$250 million Senior Notes (xii) 250,000 — — —

Others 2,208 — — —

Total liabilities 2,418,063 2,273,793 555,800 412,500Less: Current portion (179,159) (1,074,226) (75,788) (412,500)

Long-term portion 2,238,904 1,199,567 480,012 —

All the outstanding balance of the long-term borrowings are denominated in U.S. dollars except for an amount of €43 million(2003: nil) of the €298 million secured term loan and the outstanding balance of €34.9 million (2003: nil) of the €308.1million Pride of Hawaii loan which are denominated in Euro.

The following is a schedule of principal repayments of the long-term borrowings in respect of the outstanding borrowings as at31 December 2004 and 2003.

GROUP COMPANY

2004 2003 2004 2003US$’000 US$’000 US$’000 US$’000

Within one year 179,159 1,074,226 75,788 412,500In the second year 223,070 108,567 98,575 —In the third to fifth years 651,336 325,701 272,937 —After the fifth year 1,364,498 765,299 108,500 —

2,418,063 2,273,793 555,800 412,500

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22. Long-Term Borrowings (continued)(i) US$521.6 million syndicated term loan

On 22 January 1998, a syndicated term loan for an amount up to US$521.6 million was obtained by two subsidiaries,Superstar Leo Limited and Superstar Virgo Limited, as joint and several borrowers to part finance the construction ofm.v. SuperStar Leo (renamed m.v. Norwegian Spirit) and m.v. SuperStar Virgo. This syndicated term loan was fullydrawndown in September 1999.

In July 2004, the Group repaid the loan related to m.v. Norwegian Spirit (see Note 22(xi)). On 30 December 2004, asupplemental agreement was entered into with a syndicate of banks whereby Superstar Leo Limited was released anddischarged from its obligations as a joint and several borrower.

The loan related to m.v. SuperStar Virgo bears interest at rates which vary according to the London Interbank Offer Rate(“LIBOR”) and is repayable in 24 equal half yearly installments commencing 6 months from the ship delivery date, witha maturity date payment to be paid on the maturity date. This facility is secured by ship mortgage over m.v. SuperStarVirgo and guarantees from the Company, and a subsidiary, Star Cruise Services Limited. In addition, the earnings andinsurances are assigned to lenders as security. The shares of the borrower are also pledged as collateral. The loan containsrestrictive covenants which require compliance with certain financial ratios.

(ii) US$450 million term loanOn 20 February 2002, the Company signed an agreement with a syndicate of banks to provide up to US$450 million inloans (“US$450 million term loan”) to refinance the outstanding balance of an existing term loan. The US$450 millionterm loan bears interest at rates, which vary according to LIBOR, is repayable in 12 equal installments payable at six-monthly intervals commencing 18 months from the facility agreement date.

The US$450 million term loan is secured by first and second priority mortgages over certain ships of the Group,guarantees from certain subsidiaries, assignment of earnings and assignment of insurances granted by the subsidiariesowning the ships relating to the first and second priority mortgages. The shares of these subsidiaries owning the shipsrelating to the first priority mortgage are also pledged as collateral. The loan contains restrictive covenants which requirecompliance with certain financial ratios.

(iii) US$400 million Reducing Revolving Credit Facility and US$623 million fleet loanOn 20 April 2004, the Company as borrower signed an agreement for a Reducing Revolving Credit Facility with asyndicate of banks to provide up to US$400 million (“US$400 million facility”) to refinance the outstanding balance ofthe US$623 million fleet loan (“fleet loan”). On 23 April 2004, the Group drewdown US$400 million under the US$400million facility and together with US$3.2 million of internally generated funds, repaid the outstanding amount of thefleet loan. The US$400 million facility bears interest at a rate which varies according to LIBOR, and is repayable in 14equal half yearly installments with a balloon payment due in April 2011.

The US$400 million facility is secured primarily by a first priority mortgage over and other security relating to certain ofthe Group’s ships and a guarantee given by various wholly-owned subsidiaries of the Company. The guarantee containsundertakings requiring compliance with certain financial ratios.

(iv) On 25 September 2003, the Company entered into two letters of credit facilities in an aggregate amount not exceedingUS$100 million (the “L/C Facilities”) to secure the risk in processing NCL Group credit card sales transactions. Theletters of credit pursuant to the L/C Facilities were issued on 26 September 2003. There was no outstanding amount inrespect of these L/C Facilities as at 31 December 2004.

The L/C Facilities contain provisions that affect the liquidity and capital resources of the Company including compliancewith financial covenants.

71

22. Long-Term Borrowings (continued)(v) US$626.9 million syndicated term loan

On 26 June 1999, a syndicated term loan for an amount up to US$604.8 million was obtained by two subsidiaries,Norwegian Star Limited and Norwegian Dawn Limited, to part finance the construction of m.v. Norwegian Star andm.v. Norwegian Dawn, respectively. In October 2001, this syndicated term loan agreement was amended to provide forborrowings of up to US$626.9 million. This syndicated term loan was fully drawndown in December 2002.

In July 2004, the Group repaid the loan related to m.v. Norwegian Star (see Note 22(xi)).

The US$626.9 million syndicated term loan bears interest at rates which vary according to LIBOR and is repayable in 24equal half yearly installments commencing 6 months from the ship delivery date, with a maturity date payment to be paidon the maturity date.

(vi) US$210 million Pride of Aloha loanNorwegian Cruise Line Limited (“NCLL”) entered into a non-cancelable loan agreement with a syndicate of banks(“Loan Agreement”) to finance repayment of an existing loan and payments in connection with the construction of M/SNorwegian Sky (renamed m.v. Pride of Aloha). In July 1999, NCLL borrowed US$210 million under this LoanAgreement. This term loan which bears interest at a rate which varies according to LIBOR and is repayable in 20 equalhalf-yearly instalments with a balloon payment due in July 2009. In July 2004, this loan was repaid with the proceeds ofthe US$800 million loan facility (see Note 22(xi)).

(vii) US$225 million term loanOn 9 July 2003, Norwegian Sun Limited (“NSL”), an indirect wholly-owned subsidiary of the Company, as borrowersigned an agreement with a syndicate of banks to provide up to US$225 million (“US$225 million term loan”) torefinance the outstanding balance of US$225 million M/S Norwegian Sun Post-delivery Loan. On 16 July 2003, theGroup drewdown US$225 million and fully repaid the outstanding balance of US$225 million M/S Norwegian SunPost-delivery Loan and the balance of US$9.4 million was paid to the Group. The US$225 million term loan bearsinterest at rate which varies according to LIBOR, and is repayable in 16 equal half yearly installments with a balloonpayment due in July 2011.

(viii)€298 million secured term loanOn 4 April 2003, Ship Holding LLC, an indirect wholly-owned subsidiary of the Company, as borrower entered intoagreements with a syndicate of banks to provide secured term loans of the equivalent amount in United States Dollars ofup to €298 million (equivalent to approximately US$375.9 million based on the exchange rate of US$1.3626 to €1 as at31 December 2004 on the undrawn amount) to part finance the construction of the Pride of America vessel (the“Vessel”). As at 31 December 2004, the Group drewdown €212.3 million (equivalent to approximately US$259.1million) to pay installments to the shipyard under the construction contract.

The €298 million secured term loan bears interest at a rate which varies according to LIBOR or European InterbankOffer Rate “EURIBOR”, depending on the denomination of the underlying draws, is repayable in 24 equal half yearlyinstallments commencing 6 months from the earlier of the delivery date or 29 October 2004.

The facility is secured by a guarantee given by the Federal Republic of Germany acting through HermesKreditversicherungs-AG for up to €245 million and interest thereunder.

(ix) US$334.1 million Norwegian Jewel loanOn 20 April 2004, Hull 667 Limited (renamed as Norwegian Jewel Limited), an indirect wholly-owned subsidiary of theCompany, as borrower, secured a term loan of up to US$334.1 million (the “US$334.1 million Norwegian Jewel loan”)from a syndicate of banks to part finance the construction of Norwegian Jewel.

During the year ended 31 December 2004, the Group drewdown US$113.4 million of the US$334.1 million NorwegianJewel loan to pay the shipyard.

The facility bears interest at a rate, which varies according to LIBOR, is repayable in 24 equal half yearly installmentscommencing 6 months from the earlier of the delivery date of the Norwegian Jewel or 31 January 2006.

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22. Long-Term Borrowings (continued)(x) €308.1 million Pride of Hawaii loan

On 20 April 2004, Ship Ventures Inc. (renamed as Pride of Hawaii, Inc.), an indirect wholly-owned subsidiary of theCompany, as borrower, secured a term loan of up to €308.1 million (equivalent to approximately US$419.5 millionbased on the exchange rate of US$1.3626 to €1 as at 31 December 2004 on the undrawn amount) from a syndicate ofbanks to part finance the construction of Pride of Hawaii.

During the year ended 31 December 2004, the Group drewdown €34.9 million (equivalent to approximately US$47.2million) of the €308.1 million Pride of Hawaii loan to pay the shipyard.

The facility bears interest at a rate, which varies according to EURIBOR or LIBOR depending on whether amountsunder the facility are drawndown in Euro or US dollars. This facility is repayable in 24 equal half yearly installmentscommencing 6 months from the earlier of the delivery date of the Pride of Hawaii or 10 October 2006.

(xi) US$800 million loan facilityOn 7 July 2004, NCLC as borrower signed an agreement for a Secured Credit Facility with a syndicate of banks toprovide up to US$800 million, comprising a term loan facility of US$300 million and a revolving credit facility ofUS$500 million (the “US$800 million loan facility”). The US$800 million loan facility bears interest at rates whichvaries according to LIBOR plus a margin between 1.5% - 1.7% and matures on the sixth anniversary of the signing of theloan documentation. The term loan requires semi-annual principal reductions totaling US$17.5 million, with theremaining unpaid principal balance due at maturity. The revolving credit facility allows NCLC to borrow on a revolvingbasis at any time prior to maturity, with all outstanding amounts then due. In regards to the revolving credit facility,NCLC is required to pay quarterly a commitment fee equal to approximately 0.4% of the unutilised commitment.

The US$500 million Revolving Credit Facility entered into on 23 April 2004 intended for the re-financing of NorwegianStar, part acquisition of Norwegian Spirit and for general corporate purposes has not been drawn down and has beencancelled in conjunction with the creation of the US$800 million loan facility.

In July 2004, the Group drewdown US$480 million under the US$800 million loan facility and together with the netproceeds from the Senior Notes issue (see note 22 (xii)), repaid the outstanding amount of the Pride of Aloha loan andloans related to Norwegian Spirit and Norwegian Star as well as partially repaid the US$450 million term loan. Inaddition, the Group drewdown US$100 million and repaid US$40 million of the US$800 million loan facility duringthe year ended 31 December 2004.

NCLC’s bank borrowings (v) to (xi) aboveNCLC’s long-term loan agreements contain various restrictive covenants that limits NCLC incurrence of debt, the creation ofencumbrances and assets sales, the payment of dividends and capital expenditures, and requires NCLC to maintain aminimum cash balance of US$50 million. In addition, these agreements specify that the earnings and insurance policiesrelated to certain of NCLC’s ships, the shares of the individual shares of NCLC’s subsidiaries and NCLC’s ships and its otherproperty are pledged to the lenders as collateral.

(xii) US$250 million Senior NotesIn July 2004, NCLC completed the issue of US$250 million Senior Notes due 2014 (the “Senior Notes”). The SeniorNotes bears interest at 10 5/8% payable semi-annually. The Senior Notes are unsecured senior obligations of NCLC andwill rank equally with all of NCLC’s existing and future senior unsecured debt. NCLC may redeem all or a portion of theSenior Notes at any time after 15 July 2009. In addition, NCLC may redeem a portion of the Senior Notes using the cashproceeds of certain equity offerings completed before 15 July 2007. NCLC is also required to repurchase the Senior Notesif NCLC sells substantially all of its assets or experiences a change in control, as defined.

73

23. Convertible BondsIn October 2003, the Company issued US$180 million 2% Convertible Bonds (the “Bonds”) due in 2008. The Bonds arelisted on the Luxembourg Stock Exchange. The issue price of the Bonds was 100% of their principal amount and the Bondscarried interest at the rate of 2% per annum payable semi-annually in arrears. Subject to certain conditions, the Bonds carrieda right of conversion into fully-paid ordinary shares of the Company at an initial conversion price of HK$3.180 (rounded tothree decimal places) (US$0.41 based on a fixed rate of exchange applicable on conversion of the Bonds of HK$7.743 =US$1.00) per share, subject to reset and adjustments.

On or at any time after 20 October 2005, the Company may, subject to satisfaction of certain conditions, redeem all or aportion of the Bonds at their Early Redemption Amount (as defined in the Terms and Conditions of the Bonds) whichrepresents a gross yield of 5.55% on a semi-annual basis for the Bondholder plus any accrued interest provided that the closingprice of the Company’s ordinary shares for a defined duration of time is at least 125% of the conversion price in effect on therelevant trading day. In addition, if at any time the aggregate principal amount of the Bonds outstanding is less than 10% ofUS$180 million, the Company shall have the option to redeem such outstanding Bonds in whole but not in part at the EarlyRedemption Amount plus any accrued interest.

Upon exercise of the right of conversion of the Bonds by the bondholders at anytime on or after 19 November 2003 and up to19 September 2008, the Company may choose to deliver ordinary shares, cash or a combination of cash and ordinary shareswith a total value equal to the value of the ordinary shares otherwise deliverable.

The Bonds may be redeemed, at the option of the bondholders, in the event of a Change in Control or Delisting (as such termsare defined in the Terms and Conditions of the Bonds), at the Early Redemption Amount together with any accrued butunpaid interest.

Unless previously converted, redeemed or purchased and cancelled as set out in the Terms and Conditions of the Bonds, theBonds will be redeemed on 20 October 2008 at 120.136% of the outstanding principal amount thereof, plus any accrued butunpaid interest.

Detailed terms and conditions of the Bonds are constituted by the trust deed dated 20 October 2003 entered into between theCompany and the trustee.

As at 31 December 2004, none of the Bonds were redeemed or purchased by the Company or converted into ordinary sharesof the Company.

The net proceeds of approximately US$176.3 million from the issuance of the Bonds is being used for the acquisition orconstruction of vessels in line with the Group’s strategy to upgrade its fleet, as general working capital and/or for the reductionof outstanding liabilities under certain bank loans of the Group. During the year ended 31 December 2004, the Group usedapproximately US$109.0 million of the net proceeds to fund the newbuilding programme and for general working capitalpurposes. As at 31 December 2004, the balance of unapplied proceeds of approximately US$67.3 million was on deposit withbanks.

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24. Share CapitalGROUP/COMPANY

Authorised share capital

Preference shares of Ordinary shares ofUS$0.10 each US$0.10 each

No of shares US$’000 No of shares US$’000

At 31 December 2003 and 2004 10,000 1 9,999,990,000 999,999

GROUP/COMPANY

Issued and fully paidOrdinary shares of

US$0.10 each

No of Shares US$’000

At 1 January 2003 4,946,137,992 494,614Issuance of shares pursuant to the Pre-listing Employee Share Option Scheme 717,510 72Issuance of 7 ordinary shares for every 100 existing shares

pursuant to a rights issue, net of issuance costs ofapproximately US$1.3 million (see note below) 346,279,885 34,628

At 31 December 2003 5,293,135,387 529,314

At 1 January 2004 5,293,135,387 529,314Issuance of shares pursuant to the Pre-listing Employee Share Option Scheme 66,480 6

At 31 December 2004 5,293,201,867 529,320

Note:

In December 2003, the Company issued 346,279,885 ordinary shares of US$0.10 each in the proportion of 7 new ordinary shares for every100 existing shares held pursuant to a rights issue at the subscription price of HK$2.25 (US$0.29), with an aggregate price, net of issuancecosts, of approximately US$99.0 million. The closing price per share on 15 October 2003, the trading date immediate before theUnderwriting Agreement was entered into, was HK$2.50 (US$0.32) on the Stock Exchange.

The remaining net proceeds from the rights issue in 2002 and the net proceeds from the rights issues in 2003 have beenapplied during the years ended 31 December 2004 and 31 December 2003 as follows:

2004 2003US$’000 US$’000

Funding of newbuilding programme 105,470 106,974Used as general working capital — 68,560

105,470 175,534

As at 31 December 2004, there were no unapplied proceeds from these rights issues.

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25. Other Long-Term Liabilities

GROUP COMPANY

2004 2003 2004 2003US$’000 US$’000 US$’000 US$’000

Deferred gains on derivative instruments — 1,959 — 594Deferred lease liability 894 1,181 — —Pension plan 1,092 1,254 — —Others 3,748 3,598 — —

5,734 7,992 — 594

26. Deferred Tax

GROUP

Excess of capital allowancesover depreciation

2004 2003US$’000 US$’000

Deferred tax liabilities

The movement on the deferred tax liabilities account is as follows:

At 1 January 202 178Exchange difference 8 6Deferred taxation charged to profit and loss account 329 18

At 31 December 539 202

The amount shown in the balance sheet includes the following:

Deferred tax liabilities to be settled after more than 12 months 539 202

GROUP

Tax losses2004 2003

US$’000 US$’000

Deferred tax asset

The movement on the deferred tax asset account is as follows:

At 1 January 23 23Deferred taxation credited to profit and loss account 364 —

At 31 December 387 23

The amount shown in the balance sheet includes the following:

Deferred tax assets to be recovered after more than 12 months 387 23

As at 31 December 2004, the amount of unused tax losses for U.S. tax purposes, which will expire at various timescommencing in 2024 and for which no deferred tax asset was recognised in the consolidated balance sheet was approximatelyUS$59.7 million.

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27. Financial InstrumentsThe fair values of financial instruments including derivatives are determined based on a variety of factors and assumptions.Accordingly, the fair values may not represent actual values of the financial instruments that could have been realised as at the balancesheet date or that will be realised in the future and do not include expenses that could be incurred in an actual sale or settlement. Thefollowing are the estimated fair values of the Group’s financial instruments and the methods used to estimate such fair values:

(a) Certain short-term financial instrumentsThe carrying amounts of cash, cash equivalents, trade receivables, trade creditors and accrued liabilities approximate theirfair values due to the short-term maturities of these instruments.

(b) Long-term borrowingsAs at 31 December 2004, the fair value of the long-term borrowings, including the current portion, was approximatelyUS$2,435.5 million, which was approximately US$17.4 million more than the carrying values. The difference betweenthe fair value and carrying value of the long-term borrowings is due to variable rate debt obligations carrying interest ratesthat are above or below market rates at the measurement dates. The fair value of long-term borrowings is estimated basedon rates currently available for the same or similar terms and remaining maturities.

(c) Interest rate swaps and foreign exchange forward contracts(i) The Group has several interest rate swaps with an aggregate amount of US$430.4 million to convert certain long-

term borrowings from a floating rate obligation to a fixed rate obligation. The notional amount will be reduced six-monthly in varying amounts over periods ranging from 6 to 10 years from the dates of the interest rate swapagreements. As at 31 December 2004, the estimated fair market value of the interest rate swaps was approximatelyUS$21.8 million, which was unfavourable to the Group.

The Group has a series of 5.5% capped USD LIBOR-in-arrears interest rate swaps with a notional amount ofapproximately US$140.8 million to limit its exposure to fluctuations in interest rate movements if rate movesbeyond the cap level of 5.5%. The notional amount for each interest period will be reduced six-monthly in varyingamounts over 5 years from August 2003. As at 31 December 2004, the estimated fair market value of these interestrate swaps was approximately US$0.6 million, which was unfavourable to the Group.

The changes in the fair value of these interest rate swaps are included as a separate component of reserves and arerecognised in the consolidated profit and loss account as the underlying hedged items are recognised.

(ii) The Group entered into various Singapore dollars forward contracts and the notional amount of these contracts wasapproximately US$206.7 million. The notional amount will be reduced six-monthly in varying amounts overperiods ranging from 5 to 11 years from the dates of the contracts. As at 31 December 2004, the estimated fairmarket value of these forward contracts was approximately US$1.2 million, which was favourable to the Group. Thechanges in the fair value of these forward contracts were recognised as other income in the consolidated profit andloss account.

(iii) The Group entered into a series of monthly forward contracts to buy US dollars against Hong Kong dollars. Thenotional amount of these forward contracts was approximately US$60.7 million and will be reduced monthly infixed amounts maturing within 3 years from December 2002. As at 31 December 2004, the estimated fair marketvalue of these contracts was approximately US$0.4 million, which was unfavourable to the Group. The changes inthe fair value of these forward contracts were recognised as other expense in the consolidated profit and loss account.

(iv) The Group had forward contracts maturing every two months up to April 2004 with a total notional amount of US$160.7million which were originally designated as a hedge against the Euro denominated currency shipbuilding commitments onthe construction of the Pride of America vessel. As a result of the Pride of America incident, where the vessel took on excessiveamounts of water and partially sank during a severe storm while under construction at the Lloyd Werft Bremerhaven shipyardin Germany causing a delay in the completion of the ship, the hedge became ineffective as at 14 January 2004. These forwardcontracts matured in April 2004 and the Group recognised a loss of US$1.5 million in the year ended 31 December 2004.

The Group then entered into two forward contracts maturing in July 2004 for total notional amounts of US$92.1million and €78.2 million. These forward contracts matured in July 2004 and the Group recognised a loss ofUS$2.1 million in the year ended 31 December 2004.

The fair values of these instruments have been estimated using public market prices or quotes from reputable financialinstitutions. The Group had no significant concentrations of credit risk as at 31 December 2004 other than deposits ofcash with reputable financial institutions.

77

28. Commitments

(i) Capital expenditureThe Group had the following commitments as at 31 December 2004 and 2003:

GROUP

2004 2003US$’000 US$’000

Contracted but not provided for- Cruise ships and other related costs 673,286 995,955

In addition to the above commitments, in December 2004, the Group entered into an additional shipbuilding contractwith Meyer Werft Shipyard to construct another new ship, Hull No. S.669. The contract price of the ship is €389 million(approximately US$530.1 million based on the 31 December 2004 exchange rate). The ship is scheduled to be deliveredin the first quarter of 2007. The Group intends to finance required payments during construction through its revolvingline of credit and has signed a commitment letter, subject to certain requirements, to borrow €311.2 million for the finalcontract payment required upon delivery. No amounts were paid under this contract as at 31 December 2004.

(ii) Operating leasesRent expense under non-cancellable operating lease commitments were US$7.6 million and US$7.2 million for the yearsended 31 December 2004 and 2003 respectively.

At 31 December 2004 and 2003, future minimum lease payments payable under non-cancellable operating leases were asfollows:

GROUP

2004 2003US$’000 US$’000

Within one year 6,301 5,437In the second to fifth year inclusive 16,244 15,767After the fifth year 14,951 15,181

37,496 36,385

The rent expense under non-cancellable operating lease commitments mainly relates to rental of offices occupied by theGroup and of leasehold land in Thailand.

(iii) Other commitmentsIn June 2004, NCLC entered into a Usage Agreement with the New York City Economic Development Corporation thatwill allow NCLC to use cruise ship terminals in the New York area through 2017.

As at 31 December 2004, the Group has future commitments to pay for usage of certain port facilities, including thecommitment described above as follows:

GROUP

2004US$’000

Within one year 13,617In the second and fifth year inclusive 44,908After the fifth year 68,977

127,502

78

28. Commitments (continued)

(iv) Charter hire revenueCharter hire revenue receivable under non-cancellable operating lease commitments in respect of catamaran and onboardequipment was US$2.6 million and US$2.5 million in the years ended 31 December 2004 and 2003 respectively.

At 31 December 2004, there were no minimum annual rentals receivable for leases with initial or remaining terms inexcess of one year for the year ending 31 December 2005. As at 31 December 2003, the minimum annual rentalsreceivable for leases with initial or remaining terms in excess of one year was US$ 2.5 million for the year ended 31December 2004.

The details of assets in the charter hire segment are set out in note 12 to the accounts.

29. Contingent Liabilities

(i) ContingenciesAs required by the United States Federal Maritime Commission (“FMC”), NCLC maintains a US$15 millionperformance guarantee with respect to liabilities for non-performance of transportation and other obligations topassengers. The FMC has proposed rules which, if adopted, would eliminate the US$15 million ceiling on theperformance guarantee requirements and replace it with a sliding scale. If the proposed rules were to be implemented,NCLC’s performance guarantee would increase to approximately US$100 million. The Group cannot predict if or whensuch rules might be adopted or the final form of any such rules.

(ii) Material litigation(1) In April 1996, a proposed class action was brought in Florida against NCLL alleging violation of Florida’s Unfair

and Deceptive Trade Practices Act and fraudulent practice by including an element of profit in port charges collectedfrom passengers. The trial court denied plaintiffs motion for class certification. Subsequently, the Third DistrictCourt of Appeal reversed the Court’s denial of class certification and remanded the case to the trial court withinstructions to certify the class. On 8 March 2004, the parties reached a tentative settlement which was preliminarilyapproved by the Court on 12 August 2004. A group of objectors has filed an appeal.

(2) In March 2001, NCLL was served with a class action complaint in the United States District Court, SouthernDistrict of New York. The complaint alleged that during the period 1 January 1998 through the present, NCLLfailed to pay plaintiffs overtime wages in accordance with their contracts of employment. The proposed class consistsof all unlicensed seafarers who worked on NCLL vessels during that period of time and seeks recovery of overtimewages plus statutory penalty wages. The Court entered an order certifying the class as a class action. The SecondCircuit Court has denied NCLL’s request for leave to file an appeal of the District Court judge’s order certifying theclass. Discovery has been completed. The case has been set for trial in May 2005.

(3) In May 2003, the s/s Norway experienced a severe accident, which resulted in crew casualties and physical propertydamage to the vessel. Management is of the opinion that the repairs relating to the physical property damage will becovered by the vessel’s hull and machinery insurance policy. Numerous personal injury claims have been filed againstNCLL seeking compensatory and punitive damages. NCLL has been defending these claims in coordination withits indemnity and insurance arrangements. Many claims have been settled. NCLL has successfully invoked thearbitration provision of the Philippines Overseas Employment Agreement in the District Court, and has initiatedarbitration in the Philippines for those cases involving Filipino crewmen, which is the subject of an appeal currentlypending in the U.S. Eleventh Circuit Court of Appeals.

(4) On 2 August 2004, NCLC was served with a complaint in the U.S. District Court for the Southern District ofFlorida which alleged breach of contract and unjust enrichment stemming from the cancellation of a group salesagreement. Discovery has commenced.

In addition, the Group is routinely involved in personal injury and personal property damage claims typical of the cruiseship business. After application of deductibles, these claims are covered by insurance and other indemnity arrangements.In the opinion of management, such claims, if decided adversely, individually or in the aggregate, would not have amaterial adverse effect on the results of operation, cash flows, and financial position of the Group.

79

30. Share Option Schemes

(i) Pre-listing Employee Share Option SchemePrior to the de-merger from GIPLC in December 1997 the employees of the Group were offered share options in GIPLCunder the “Genting International Employees’ Share Option Scheme for Executives”. Subsequently, a share option schemeknown as “The Star Cruises Employees’ Share Option Scheme for Executives” (“the Pre-listing Employee Share OptionScheme”) was implemented for the benefit of the employees of the Group. The employees of the Group were offeredoptions under the Pre-listing Employee Share Option Scheme in exchange for the unexpired share options previouslygranted by GIPLC.

On 23 August 2000, the share option agreement was modified to reflect a four for one share bonus and to accelerate theoriginal vesting period to comply with the requirements of The Stock Exchange of Hong Kong Limited (the “StockExchange”). With effect from 30 November 2000, the date of listing of the Company’s shares on the Stock Exchange (the“Listing”), no further options can be granted under the Pre-listing Employee Share Option Scheme.

A summary of the Pre-listing Employee Share Option Scheme is given below:

PurposeTo grant options to selected employees of the Group and Star Cruises Investments Limited, acting as a trustee companyfor the employees under the said scheme.

ParticipantsEmployees of the Group who are executives of any company comprised in the Group.

Total number of shares available for issuePrior to the Listing, the allocation of the total amount of options under the Pre-listing Employee Share Option Schemecould not exceed 5% of the issued ordinary shares of the Company at any time during the existence of the Pre-listingEmployee Share Option Scheme. No further options can be granted under the Pre-listing Employee Share OptionScheme following the Listing.

Maximum entitlement of each employeePrior to the Listing, the Board of Directors might in its absolute discretion at any time and from time to time as it deemedfit make an offer to any employee whom the Board of Directors might in its absolute discretion select to subscribe forordinary shares of the Company in accordance with the terms of the Pre-listing Employee Share Option Scheme providedalways that any such offer by the Board in the case of any one employee should not exceed three million shares of theCompany or zero point two per centum (0.2%) of the issued ordinary shares of the Company per offer, whichever was thehigher amount.

Period within which the shares must be taken up under an optionPrior to the Listing, options would expire at the retirement age of the employees, which is 55 years old, and if theretirement period was less than 10 years from the date of an offer, the option period for the remaining tranches wouldexpire on the tenth year from the grant date or at any age to be determined by the Board. Following the Listing, theoptions will expire in the tenth year from their original grant date.

Minimum period for which an option must be held before it can be exercisedUnder the Pre-listing Employee Share Option Scheme, the Board of Directors of the Company may determine at itsabsolute discretion the minimum period, if any, for which an option must be held before it can be exercised. Prior to theListing, the options generally became exercisable as to 50% of the amount granted 4 years after the grant date and theremaining can be exercised annually in tranches subject to a minimum amount per tranche per year at various dates in thefuture until the retirement age of the employees.

Following the Listing, options vest over a period of 10 years from their respective original dates of grant and generallybecame exercisable as to 20% and 30% of the amount granted 3 years and 4 years after the grant date, with the remainingoptions exercisable annually in equal tranches of 10% over the remaining option period.

80

30. Share Option Schemes (continued)

(i) Pre-listing Employee Share Option Scheme (continued)

Amount payable on acceptance of the option and period within which payments must be madePrior to the Listing, an offer of options under the Pre-listing Employee Share Option Scheme should be open foracceptance within three months from the date of such offer or such period as the Board of Directors may at its solediscretion determine. An option price of US$1 was payable by the employee concerned on acceptance of the option.

Basis of determining the exercise price of the sharesPrior to the Listing, options were generally granted at an exercise price per share equal to the average of the middle marketquotation of the share as quoted and shown in the daily official list issued by the Luxembourg Stock Exchange or anyapproved stock exchange as the Directors deemed relevant for the five market days preceding the date of the offer inwriting to the employee.

Remaining life of the Pre-listing Employee Share Option SchemeNo further options may be granted under the Pre-listing Employee Share Option Scheme following the Listing. Theoptions remaining outstanding thereunder (as modified) remain exercisable under the Pre-listing Employee Share OptionScheme on the terms and conditions subject to the respective grants.

Details of the movement during the year for options outstanding are set out in section headed “Share Options” in theReport of the Directors.

A summary of the share options outstanding as at 31 December 2004 is as follows:

OptionsOptions outstanding exercisable

Number Weighted averageoutstanding remaining life Number

Exercise price (in thousands) (years) (in thousands)

US$0.2686 31,195 1.9 18,125US$0.4206 19,357 2.1 9,825

50,552 2.0 27,950

(ii) Post-listing Employee Share Option SchemeThe Company adopted a share option scheme on 23 August 2000 which was effected on 30 November 2000 upon listingof the Company’s shares on the Stock Exchange and amended on 22 May 2002 (the “Post-listing Employee Share OptionScheme”) to comply with the new requirements set out in Chapter 17 of the Rules Governing the Listing of Securities onthe Stock Exchange effective 1 September 2001. A summary of the Post-listing Employee Share Option Scheme is givenbelow:

PurposeThe main purpose of the Post-listing Employee Share Option Scheme is to motivate the employees of the Groupincluding any executive directors of any company in the Group.

ParticipantsThe participants are the employees of the Group including any executive director of any company in the Group.

81

30. Share Option Schemes (continued)

(ii) Post-listing Employee Share Option Scheme (continued)

Total number of shares available for issueThe maximum number of shares available for issue under the Post-listing Employee Share Option Scheme and options tobe granted under any other schemes of the Company is 132,733,953, representing approximately 3.2% of the issuedshare capital of the Company as of 22 May 2002 (the date of adoption of the Post-listing Employee Share Option Scheme(as amended)) and approximately 2.5% of the issued share capital as at the date of this Report.

Maximum entitlement of each employeeThe total number of shares issued and to be issued upon exercise of the options granted to any one employee (includingthe exercised, cancelled and outstanding options) in any 12-month period up to and including the proposed date of thelatest grant shall not exceed 1 per cent. of shares in issue, provided that the Company may grant further options in excessof this 1 per cent. limit subject to the issue of a circular by the Company and the approval of the shareholders in generalmeeting with such employee and his associates (as defined in the Listing Rules) abstaining from voting.

Granting options to Directors, Chief Executive or Substantial ShareholdersAny grant of options to a Director, the Chief Executive or a Substantial Shareholder of the Company or any of theirrespective associates (as defined in the Listing Rules) is required to be approved by the Independent Non-executiveDirectors of the Company (excluding any Independent Non-executive Director who is a grantee of the options).

If the Company proposes to grant options to a Substantial Shareholder (as defined in the Listing Rules) or anyIndependent Non-executive Director of the Company or their respective associates (as defined in the Listing Rules)which will result in the number of shares issued and to be issued upon exercise of options granted and to be granted(including options exercised, cancelled and outstanding) to such person in the 12-month period up to and including thedate of such grant:

(a) representing in aggregate over 0.1% of the shares in issue; and

(b) having an aggregate value in excess of HK$5 million, based on the closing price of the shares as quoted in the StockExchange’s daily quotation sheet at the offer date of such option,

such further grant of options will be subject to the issue of a circular by the Company and the approval of the shareholdersin general meeting on a poll at which the connected persons (as defined in the Listing Rules) of the Company shallabstain from voting except that any connected person may vote against the relevant resolution at the general meetingprovided that his intention to do so has been stated in the circular.

Period within which the shares must be taken up under an optionThe period during which the options may be exercised will be determined by the Board of Directors of the Company atits absolute discretion, save that no option can be exercised more than 10 years after it has been granted.

Minimum period for which an option must be held before it can be exercisedThe Board of Directors of the Company may determine at its absolute discretion the minimum period, if any, for whichan option must be held before it can be exercised.

Amount payable on acceptance of the option and period within which payments must be madeAn offer of options shall be open for acceptance for a period of ninety days after the date of offer or such period as theBoard of Directors may at its sole discretion determine. An option price of US$1 shall be payable by the employeeconcerned on acceptance of the option.

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30. Share Option Schemes (continued)

(ii) Post-listing Employee Share Option Scheme (continued)

Basis of determining the exercise price of the sharesThe exercise price shall be determined by the Board of Directors of the Company, save that such price will not be less thanthe highest of (a) the closing price of the shares as stated on the daily quotations sheet of the Stock Exchange on the dateof grant, which must be a business day; (b) the average of the closing prices of the shares as stated in the daily quotationssheets of the Stock Exchange for the five business days immediately preceding the date of grant; and (c) the nominal valueof a share of the Company.

Remaining life of the Post-listing Employee Share Option SchemeThe Post-listing Employee Share Option Scheme will remain in force until 29 November 2010.

On 23 August 2004, the Share Option Committee of the Board of Directors approved an offer of options to the Directorsand employees of the Group entitling them to subscribe for an aggregate of 13,677,925 shares under the Post-listingEmployee Share Option Scheme. The offer is valid for acceptance from 23 August 2004 to 31 March 2005 (as extended).Further details of the offer and movement during the year are stated in the section headed “Share Options” in the Reportof Directors.

Other than the share options granted on 23 August 2004 which, upon valid acceptance, become exercisable in part or infull for a period of eight years commencing from two years after the date of offer, the options vest in seven tranches overa period of ten years from their respective dates of offer and become exercisable as to 30% and 20% of the amount grantedcommencing from two years and three years respectively after the dates of offer, with the remaining options exercisableannually in equal tranches of 10% commencing in each of the following years. All outstanding share options are subjectto further terms and conditions set out in the relevant offer letters and provisions of the Post-listing Employee ShareOption Scheme.

Details of the movement during the year for options outstanding are set out in the section headed “Share Options” in theReport of Directors.

A summary of the share options outstanding as at 31 December 2004 is as follows:

OptionsOptions outstanding exercisable

Number Weighted averageoutstanding remaining life Number

Exercise price (in thousands) (years) (in thousands)

HK$2.9944 75,851 7.6 14,883HK$1.7240 13,678 9.6 Nil

89,529 8.0 14,883

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31. Pensions and Other Post Retirement Obligations

(a) Defined Contribution PlansNCLC has a defined contribution plan (the “Plan”) for its shoreside employees. Effective 1 January 2002, NCLCamended the Plan to cease employer contributions. The Plan is subject to the provisions of the U.S. EmploymentRetirement Income Security Act of 1974.

In addition, NCLC maintains a 401(k) Plan (the “401(k) Plan”). The 401(k) Plan covers substantially all its shoresideemployees. Participants may contribute up to 100% of eligible compensation each pay period, subject to certainlimitation. NCLC makes matching contributions equal to 100% of the first 3% and 50% of the next 7% of theparticipant’s contribution and shall not exceed 6.5% of each participant’s compensation. NCLC’s matchingcontributions are vested according to a five-year schedule.

NCLC maintains a Supplemental Executive Retirement Plan (“SERP Plan”), a defined contribution plan, for certain ofits key employees whose benefits are limited under the Plan and the 401(k) Plan. NCLC records an expense for amountsdue to the SERP Plan on behalf of each participant that would have been contributed without regard to any limitationsimposed by the U.S. Internal Revenue Code. No amounts are required to be or were contributed under the SERP Plan byNCLC as at 31 December 2004 and 2003 as the SERP Plan is unfunded.

NCLC recorded expenses related to the above described defined contribution plans of approximately US$4.5 million andUS$2.4 million for the years ended 31 December 2004 and 2003, respectively.

NCLC’s contributions are reduced by contributions forfeited by those employees who leave the schemes prior to vestingfully in the contributions. Approximately US$0.01 million of the forfeited contribution was utilised in each of the yearsended 31 December 2004 and 2003, respectively. As at 31 December 2004 and 2003, approximately US$0.08 millionand US$0.01 million respectively were available to reduce future contributions.

In addition to the above plans, the Group also contributes to other statutory defined contribution plans, includingprovident fund scheme of various countries in which it operates.

(b) Defined Benefit PlanThe Group maintains a Supplemental Senior Executive Retirement Plan (“SSERP Plan”), a defined benefit plan, forselected senior executives. The Group has recorded within payroll, taxes and related benefits accrual at 31 December2004 and 2003 of approximately US$8.9 million and US$7.0 million respectively with respect to the SSERP Plan in theaccompanying balance sheet. The Group records an expense related to the SSERP Plan for such amounts based on thefollowing actuarial assumptions: 5% discount rate and 5% annual increase in compensation.

No amounts are required to be or were contributed under the SSERP Plan by the Group as at 31 December 2004 and2003 as the SSERP Plan is unfunded. The Group recorded expenses related to the above described defined benefit plan ofapproximately US$1.9 million and US$2.0 million within selling, general and administrative expenses for the yearsended 31 December 2004 and 2003, respectively.

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32. Principal SubsidiariesThe following is a list of principal subsidiary companies as at 31 December 2004:

EffectivePrincipal Issued and equity

Name of country of Country of fully paid up interest in PrincipalCompany operation incorporation share capital percentage activities

(in thousands)

Subsidiaries held directly:

NCL Corporation Ltd. Bermuda Bermuda US$12 100.00 Holding company

Star Cruises Asia Bermuda Bermuda US$12 100.00 Investment holdingHolding Ltd. Note (3)

Star Cruise Note (1) & Isle of Man US$2,000 100.00 Investment holding, shipManagement Limited Note (3) management and

marketing services

Cruise Properties Limited Note (3) Isle of Man RM197,600 100.00 Investment holding

Inter-Ocean Limited Note (3) Isle of Man US$52,000 100.00 Investment holding

Star Cruise Services Limited Note (3) Isle of Man US$52,000 100.00 Investment holdingand cruise services

Cruise Ferries Holding Note (3) Bermuda US$12 100.00 Investment holding andLimited cruise ferry services

Subsidiaries held indirectly:

NCL International, Ltd. Bermuda Bermuda US$12 100.00 Holding company

NCL America Holdings, Inc. USA Delaware, USA US$0.01 100.00 Holding company

Superstar Virgo Limited Note (2) Isle of Man US$25,000 100.00 Bareboat chartering

Norwegian Star Limited Note (2) Isle of Man US$0.002 100.00 Cruise services

Norwegian Dawn Limited Note (2) Isle of Man US$0.002 100.00 Cruise services

Norwegian Sun Limited Note (2) Bermuda US$12 100.00 Cruise services

Norwegian Spirit, Ltd. Note (2) Bermuda US$12 100.00 Cruise services

Pride of Aloha, Inc. USA Delaware, USA US$0.01 100.00 Cruise services

Norwegian Jewel Limited Note (2) Isle of Man US$0.002 100.00 Cruise services

Ship Ventures Inc. USA Delaware, USA US$0.003 100.00 Cruise services(now known as Prideof Hawaii, Inc.)

Hull 669 Limited Note (2) Bermuda US$12 100.00 Cruise services

Star Cruises Ship Malaysia Malaysia RM150 100.00 Operator of shipManagement Sdn. Bhd. simulator for training

purposes and marineand technicaladministrative services

RM: Malaysian Ringgit

(1) This company provides ship management and marketing services to cruise ships operating substantially in international waters.

(2) These companies provide cruise services substantially in international waters.

(3) In January 2005, Star Cruises Limited transferred its shares in Star Cruise Management Limited, Cruise Properties Limited, Inter-Ocean Limited, Star Cruise Services Limited and Cruise Ferries Holding Limited to Star Cruises Asia Holding Ltd.

85

AUDITORS’ REPORT

AUDITORS’ REPORT TO THE SHAREHOLDERS OF STAR CRUISES LIMITED(Continued into Bermuda with limited liability)

We have audited the accounts on pages 39 to 84 which have been prepared in accordance with accounting principles generallyaccepted in Hong Kong.

Respective Responsibilities of Directors and AuditorsThe Company’s Directors are responsible for preparing accounts which give a true and fair view. In preparing accounts which givea true and fair view it is fundamental that appropriate accounting policies are selected and applied consistently.

It is our responsibility to form an independent opinion, based on our audit, on those accounts and to report our opinion solely toyou, as a body, in accordance with Section 90 of the Companies Act 1981 of Bermuda, and for no other purpose. We do not assumeresponsibility towards or accept liability to any other person for the contents of this report.

Basis of OpinionWe conducted our audit in accordance with Statements of Auditing Standards issued by the Hong Kong Institute of CertifiedPublic Accountants. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in theaccounts. It also includes an assessment of the significant estimates and judgements made by the Directors in the preparation of theaccounts, and whether the accounting policies are appropriate to the circumstances of the Company and the Group, consistentlyapplied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in orderto provide us with sufficient evidence to give reasonable assurance as to whether the accounts are free from material misstatement.In forming our opinion we also evaluated the overall adequacy of the presentation of information in the accounts. We believe thatour audit provides a reasonable basis for our opinion.

OpinionIn our opinion, the accounts give a true and fair view of the state of affairs of the Company and the Group as at 31 December 2004and of the loss and cash flows of the Group for the year then ended and have been properly prepared in accordance with thedisclosure requirements of the Hong Kong Companies Ordinance.

PricewaterhouseCoopersCertified Public Accountants

Hong Kong, 22 February 2005

86

AUDITED FIVE YEARS FINANCIAL SUMMARY

2004 2003 2002 2001 2000US$’000 US$’000 US$’000 US$’000 US$’000

Results

Turnover 1,636,405 1,618,208 1,573,588 1,381,566 1,326,743

Operating profit beforeimpairment loss 134,966 79,049 160,842 92,971 198,462

Impairment loss (14,500) (99,545) — (8,430) (38,663)

Operating profit/(loss) 120,466 (20,496) 160,842 84,541 159,799Interest income 2,985 2,613 3,325 6,821 7,488Financial costs (107,566) (93,804) (99,326) (118,492) (185,512)Other non-operating

income/(expenses), net (23,920) (11,123) (12,435) 12,846 (1,345)Share of losses of

associated company, net — — — — (748)

Profit/(Loss) beforetaxation (8,035) (122,810) 52,406 (14,284) (20,318)

Taxation (971) (1,663) (1,475) (1,759) (18,032)

Profit/(Loss) aftertaxation (9,006) (124,473) 50,931 (16,043) (38,350)

Minority interests — — — — (5,650)

Net profit/(loss)attributable toshareholders (9,006) (124,473) 50,931 (16,043) (44,000)

Basic earnings/(loss) pershare (US cents) (0.17) (2.51) 1.15 (0.37) (1.32)

Fully diluted earningsper share (US cents) N/A* N/A* 1.15 N/A* N/A*

Assets and Liabilities

Total assets 4,985,113 4,795,991 4,758,697 4,218,986 3,929,257Total liabilities (3,171,141) (2,987,475) (2,939,167) (2,644,745) (2,334,320)

Shareholders’ funds 1,813,972 1,808,516 1,819,530 1,574,241 1,594,937

* Diluted loss per share for the years ended 31 December 2004, 2003, 2001 and 2000 are not shown, as the diluted loss per share is less thanthe basic loss per share.

87

PROPERTY SUMMARY

Approximate Approximate gross Lease termLocation Lot No. land area built-up area (years) Usage

1. Star Cruises Jetty, Porto Malai, Lot 2930 137,962ft2 96,123ft2 90 JLangkawi, Kedah Darul Aman, (previously (12,817m2) (8,930m2)Malaysia Lot PT 740)

2. An adjoining site to the Lot 2931 40,462ft2 — 90 JStar Cruises Jetty (previously Lot (3,759m2)(presently still PT 741)submerged under water),Porto Malai, Langkawi,Kedah Darul Aman, Malaysia

3. Star Cruises Terminal Lot PT 64547 252,728ft2 292,888ft2 99 T(Building), Pulau Indah, (23,479m2) (27,210m2)Pelabuhan Kelang(Port Klang),Selangor Darul Ehsan,Malaysia

4. Star Cruises Terminal Lot PT 64548 270,489ft2 — 99 T(Car Park), Pulau Indah (25,129m2)Pelabuhan Kelang(Port Klang),Selangor Darul Ehsan,Malaysia

5. Star Cruises Terminal Lot PT 63807 262,103ft2 104,050ft2 99 J(Jetty), Pulau Indah, (24,350m2) (9,666.5m2)Pelabuhan Kelang(Port Klang),Selangor Darul Ehsan,Malaysia

6. Star Cruises Jetty, Lot PT 4580 65,122ft2 8,124ft2 30 JKijal, Kemaman, (6,050m2) (754.75m2)Terengganu Darul Iman,Malaysia

7. Passenger Port A1 of — 404,673ft2 269,638ft2 30 T, JLaem Chabang Port, (37,595m2) (25,050m2)Toong Sukhla Sub-district,Sriracha District,Chon Buri Province20230 Thailand

8. Great Stirrup Cay, — 91.32 hectares — — IBerry Islands, (225.72 acres)Bahamas

Notes:

i. The Group owns 100% of each of the above properties.

ii. Usage:

J – JettyT – Passenger TerminalI – Island, an island owned by the Group and used for cruise destination

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STAR CRUISES WORLDWIDE

Corporate HeadquartersHong Kong1501 Ocean Centre5 Canton RoadTsimshatsuiHong Kong S.A.R.Tel: (852) 2378 2000Fax: (852) 2314 3809

MalaysiaStar Cruises TerminalPulau IndahPelabuhan Barat42009 Pelabuhan KlangSelangor Darul EhsanMalaysiaTel: (60) 3 3101 1313Fax: (60) 3 3101 1406

AustraliaLevel 8, 401 Sussex StreetSydney, 2000 NSW, AustraliaTel: (61) 2 9212 6288Fax: (61) 2 9212 6188

ChinaBeijing (Representative Office)Unit 2507-08, Level 25China World Tower 1No.1 Jian Guo Men Wai AvenueBeijing 100004 P.R.C.Tel: (86) 10 6505 6223Fax: (86) 10 6505 6221

Guangzhou (Representative Office)Unit 927, The Garden Tower368 Huanshi Dong LuGuangzhou 510064 P.R.C.Tel: (86) 20 8387 9047Fax: (86) 20 8387 9048

Shanghai (Travel Agency)Room 2610, 26FCitic Square1168 Nanjing Road WShanghai 200041 P.R.C.Tel: (86) 21 5292 5608Fax: (86) 21 3218 1998

IndiaMumbai1118 Maker Chamber - VNariman PointMumbai - 400021IndiaTel: (91) 22 2281 5591/5592

(91) 22 2282 6503Fax: (91) 22 2287 1948

(91) 22 2281 8369

New Delhi610-611A International Trade TowerNehru Place, New Delhi 110019IndiaTel: (91) 11 5160 8401/02/03Fax: (91) 11 5160 8404

Ahmedabad307, Setu ComplexNr. Ship Cross RoadOff C.G. RoadAhmedabad 380009IndiaTel: (91) 79 2640 0239Fax: (91) 79 2640 0238

IndonesiaJalan IR.H. Juanda III29B Jakarta Pusat 10120IndonesiaTel: (62) 21 385 9729Fax: (62) 21 350 4518

Japan8/F Palazzo Siena2-4-6 Higashi Shinbashi Minato-KuTokyo 105-0021JapanTel: (81) 3 6403 5188Fax: (81) 3 6403 5189

Korea4th Floor, Hanmi Building1 Kongpyong Dong, Chongro GuSeoul, KoreaTel: (82) 2 752 8998Fax: (82) 2 754 8998

New Zealand (Correspondence Address)P.O. Box 28478Remuera, AucklandNew ZealandTel: (64) 9 633 0026Fax: (64) 9 633 0026

PhilippinesUnit 3B, Pacific Place Building539 Arquiza St., ErmitaManila, PhilippinesTel: (63) 2 521 5660/526 8401Fax: (63) 2 521 5637

Singapore9 Penang Road#11-08 Park MallSingapore 238459Tel: (65) 6226 1168Fax: (65) 6220 6993

Taiwan6F, No. 180, Section 4Chung Hsiao East Road, TaipeiTaiwan R.O.C.Tel: (886) 2 2731 0808Fax: (886) 2 2773 8877

Thailand177/1, 11th Floor, Unit 1Bangkok Union Insurance BuildingSoi Anumarnrachathon 1Surawongse Road, Bangrak DistrictBangkok 10500, ThailandTel: (66) 2 634 8255Fax: (66) 2 634 7218

United Arab EmiratesP.O. Box 26527203 Qassim Sultan BuildingAirport Road, DeiraDubai, United Arab EmiratesTel: (971) 4 295 6651Mobile: (971) 50 456 9153Fax: (971) 4 294 5855

United Kingdom1 Derry StreetKensingtonLondon, W8 5NNUnited KingdomTel: (44) 207 591 8225Fax: (44) 207 591 8065

NCL HeadquartersUSANorwegian Cruise Line7665 Corporate Center Drive, MiamiFlorida 33126, United States of AmericaToll Free: 1-800-327-9020 (ext. 7210/4475)Tel: (1) 305 436 4000 (ext. 7210/4475)Fax: (1) 305 436 4126

89

SCHEDULED PORTS OF CALL BY CRUISE LINE 2005

ISHIGAKI, JAPANKEELUNG, TAIWANKO SAMUI, THAILANDLAEM CHABANG, THAILANDLANGKAWI, MALAYSIAMALACCA, MALAYSIAMIYAKO, JAPANNAHA, JAPANPENANG, MALAYSIAPHUKET, THAILANDPORT KLANG (KUALA LUMPUR), MALAYSIASINGAPORE, SINGAPOREHONG KONG, HONG KONG

ACAPULCO, MEXICOALMERIA, SPAINANCHORAGE (SEWARD), ALASKAANCHORAGE (WHITTIER), ALASKAARICA, CHILEASTORIA, OREGONBAR HARBOR, MAINEBARCELONA, SPAINBELIZE CITY, BELIZEBERLIN (WARNEMUNDE), GERMANYBOSTON, MASSACHUSETTSBRIDGETOWN, BARBADOSBUENOS AIRES, ARGENTINACABO SAN LUCAS, MEXICOCANCUN, MEXICOCANNES, FRANCECARTAGENA, COLOMBIACASTRIES, ST. LUCIACATALINA ISLAND, CALIFORNIACHARLESTON, SOUTH CAROLINACOBH, IRELANDCOLON, PANAMACOPENHAGEN, DENMARKCOQUIMBO, CHILECOZUMEL, MEXICOEEMSHAVEN, HOLLANDFANNING ISLAND, REPUBLIC OF KIRIBATIFLORENCE/PISA (LIVORNO), ITALYFREEPORT, BAHAMASGEORGE TOWN, GRAND CAYMANGIBRALTAR, UNITED KINGDOMGREAT STIRRUP CAY, BAHAMASHALIFAX, NOVA SCOTIAHAMILTON, BERMUDAHELSINKI, FINLANDHILO, HAWAI’IHONOLULU, OAHU, HAWAI’IHOUSTON, TEXASHUATULCO, MEXICOIQUIQUE, CHILEJUNEAU, ALASKAKAHULUI, MAUI, HAWAI’IKETCHIKAN, ALASKAKEY WEST, FLORIDAKING'S WHARF, BERMUDAKONA, HAWAI’ILAHAINA, MAUILIMA (CALLAO), PERULISBON, PORTUGALLONDON (DOVER), ENGLANDLOS ANGELES, CALIFORNIAMIAMI, FLORIDAMOBILE, ALABAMAMONTEGO BAY, JAMAICAMONTEREY, CALIFORNIAMONTEVIDEO, URUGUAYNANAIMO, BRITISH COLUMBIANASSAU, BAHAMASNAWILIWILI, KAUAI, HAWAI’INEW ORLEANS, LOUISIANANEW YORK, NEW YORKNEWPORT, RHODE ISLAND * Ports of call are correct at time of print and are subject to change.

OCHO RIOS, JAMAICAORANJESTAD, ARUBAORLANDO (PORT CANAVERAL), FLORIDAOSLO, NORWAYPHILADELPHIA, PENNSYLVANIAPHILIPSBURG, ST. MAARTENPLAYA DEL CARMEN, MEXICOPRINCE RUPERT, BRITISH COLUMBIAPUERTO CHACABUCO, CHILEPUERTO LIMON, COSTA RICAPUERTO MADRYN, ARGENTINAPUERTO MONTT, CHILEPUERTO VALLARTA, MEXICOPUNTA ARENAS, CHILEPUNTARENAS, COSTA RICAQUEBEC CITY, QUEBECREYKJAVIK, ICELANDROATAN, BAY ISLANDS, HONDURASROME (CIVITAVECCHIA), ITALYROSEAU, DOMINICASAINT JOHN, NEW BRUNSWICKSALAVERRY (TRUJILLO), PERUSAN DIEGO, CALIFORNIASAN FRANCISCO, CALIFORNIASAN JUAN, PUERTO RICOSANTIAGO (VALPARAISO), CHILESEATTLE, WASHINGTONSITKA, ALASKASKAGWAY, ALASKAST JOHN'S, ANTIGUAST. GEORGE'S, BERMUDAST. JOHN'S, NEWFOUNDLANDST. PETERSBURG, RUSSIAST. THOMAS, US VIRGIN ISLANDSSTANLEY, FALKLAND ISLANDSSTOCKHOLM, SWEDENSYDNEY, NOVA SCOTIATALLINN, ESTONIATORTOLA, BRITISH VIRGIN ISLANDSUSHUAIA, ARGENTINAVANCOUVER, BRITISH COLUMBIAVICTORIA, BRITISH COLUMBIAWILLEMSTAD, CURACAOWRANGELL, ALASKAZIHUATANEJO (IXTAPA), MEXICO

BREMERHAVEN, GERMANYCABO SAN LUCAS, MEXICOCHARLESTON, SOUTH CAROLINAHILO, HAWAI’IHONOLULU, OAHUKAHULUI, MAUIKONA, HAWAI’ILAHAINA, MAUILONDON (DOVER), ENGLANDLOS ANGELES, CALIFORNIAMARTHA'S VINEYARD, MASSACHUSETTSMIAMI, FLORIDANAWILIWILI, KAUAINEW YORK, NEW YORKORLANDO (PORT CANAVERAL), FLORIDAPUERTO LIMON, COSTA RICAPUNTARENAS, COSTA RICAROATAN, BAY ISLANDS, HONDURASSAN DIEGO, CALIFORNIASAN FRANCISCO, CALIFORNIA

ALEXANDRIA, EGYPTAMSTERDAM, NETHERLANDSARHUS, DENMARKARICA, CHILEATHENS (PIRAEUS), GREECEBARCELONA, SPAINBASSETERRE, ST. KITTSBERGEN, NORWAY

BERLIN (WARNEMUNDE), GERMANYBOCA DA VALERIA, BRAZILBREST, FRANCEBRIDGETOWN, BARBADOSBRUSSELS/BRUGGE (ZEEBRUGGE), BELGIUMBUENOS AIRES, ARGENTINACADIZ, SPAINCALLAO, PERU (LIMA)CANNES, FRANCECAPE LOOKOUT, ELEPHANT ISLANDCASABLANCA, MOROCCOCASTRIES, ST. LUCIACOPENHAGEN, DENMARKCOQUIMBO, CHILECORFU, GREECEEDINBURGH (LEITH), SCOTLANDELSEHUL, SOUTH GEORGIAFLAM, NORWAYFORT-DE-FRANCE, MARTINIQUEFUNCHAL, MADEIRA, PORTUGALGDANSK, POLANDGEIRANGER FJORDGENOA, ITALYGOLD HARBOR, SOUTH GEORGIAGRYTVIKEN, SOUTH GEORGIAGUDVANGEN, NORWAYHALF MOON ISLANDHELLSYLT, NORWAYHELSINKI, FINLANDHONNINGSVAG, NORWAYHOPE BAYILE ROYAL, FRENCH GUIANAIQUIQUE, CHILEISTANBUL, TURKEYIZMIR, TURKEYKORCULA, CROATIAKUSADASI, TURKEYLA ROCHELLE, FRANCELEMAIRE CHANNEL/PORT LOCKROY (JOUGLA POINT)LISBON, PORTUGALLIVORNO, ITALY (FLORENCE & PISA)LONDON (DOVER), ENGLANDMALAGA, SPAINMANAUS, BRAZILMANTA, ECUADORMONTE CARLO, MONACOMONTEVIDEO, URUGUAYMYKONOS, GREECEOPORTO (LEIXOES), PORTUGALORANJESTAD, ARUBAOSLO, NORWAYPALMA DE MALLORCA, SPAINPARADISE HARBORPARIS (LE HAVRE), FRANCEPORTOFINO, ITALYPUERTO LIMON, COSTA RICAPUERTO MONTT, CHILEPUNTA ARENAS, CHILERECIFE, BRAZILRIGA, LATVIARIO DE JANEIRO, BRAZILROME (CIVITAVECCHIA), ITALYSALAVERRY, PERU (TRUJILLO)SANTA CRUZ DE TENERIFE, SPAINSANTAREM, BRAZILSANTIAGO (VALPARAISO), CHILESANTORINI, GREECESAO VICENTE, CAPE VERDE (PORTO GRANDE)SCARBOROUGH, TOBAGOSHINGLE COVE, CORONATION ISLANDSORRENTO, ITALY (CAPRI & POMPEII)SPLIT, CROATIAST. GEORGE'S, GRENADAST. JOHN'S, ANTIGUAST. PETERSBURG, RUSSIASTANLEY, FALKLAND ISLANDSSTOCKHOLM, SWEDENTALLINN, ESTONIATAORMINA (NAXOS), SICILYTRIPOLI, LIBYATROMSO, NORWAYTRONDHEIM, NORWAYTURKU, FINLANDUSHUAIA, ARGENTINAVALLETTA, MALTAVENICE, ITALYVISBY, SWEDENWEST POINT, FALKLAND ISLANDSWILLEMSTAD, CURACAO