##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 20-F
 ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2007
 Commission file number 333-128780
 NCL Corporation Ltd.
 (Exact name of registrant as specified in its charter)
 Bermuda
 (Jurisdiction of incorporation or organization)
 
 7665 Corporate Center Drive
Miami, Florida 33126
 (305) 436-4000
 (Address of principal executive offices)
 
 Securities registered or to be registered pursuant to Section 12(b) of the Act.
  Securities registered or to be registered pursuant to Section 12(g) of the Act.
  Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
 Title of Class
  Indicate the number of outstanding shares of each of the issuers classes of capital or common
stock as of the close of the period covered by the annual report:
 Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act.
 o þ
 If this report is an annual or transition report, indicate by check mark if the registrant is not
required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
 þ o
 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports) and (2) has been subject
to such filing requirements for the past 90 days.
 o þ
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in
Rule 12b-2 of the Exchange Act. (Check one):
 o o þ
 Indicate by check mark which financial statement item the registrant has elected to follow:
 o þ
 If this is an annual report, indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act):
 o þ




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##### 



Table of Contents
  
 PageItem 1.
    
    Identity of Directors, Senior Management and Advisers
    
    
    3Item 2.
    
    Offer Statistics and Expected Timetable
    
    
    3Item 3.
    
    Key Information
    
    
    3Item 4.
    
    Information on the Company
    
    
    13Item 4A.
    
    Unresolved Staff Comments
    
    
    31Item 5.
    
    Operating and Financial Review and Prospects
    
    
    32Item 6.
    
    Directors, Senior Management and Employees
    
    
    46Item 7.
    
    Major Shareholders and Related Party Transactions
    
    
    51Item 8.
    
    Financial Information
    
    
    56Item 9.
    
    Offer and Listing Details
    
    
    58Item 10.
    
    Additional Information
    
    
    58Item 11.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    63Item 12.
    
    Description of Securities Other than Equity Securities
    
    
    63Item 13.
    
    Defaults, Dividend Arrearages and Delinquencies
    
    
    64Item 14.
    
    Material Modifications to the Rights of Security Holders and Use of Proceeds
    
    
    64Item 15.
    
    Controls and Procedures
    
    
    64Item 16.
    
    Reserved
    
    
    64Item 16A.
    
    Audit Committee Financial Expert
    
    
    65Item 16B.
    
    Code of Ethics
    
    
    65Item 16C.
    
    Principal Accountant Fees and Services
    
    
    65Item 16D.
    
    Exemptions from Listing Standards for Audit Committees
    
    
    66Item 16E.
    
    Purchases of Equity Securities by the Issuer and Affiliated Purchasers
    
    
    66Item 17.
    
    Financial Statements
    
    
    67Item 18.
    
    Financial Statements
    
    
    67Item 19.
    
    Exhibits
    
    
    67Glossary
    
    
    
    
    68EX-4.47 Amended and Restated Bye-Laws of NCL Corporation Ltd.EX-4.48 Shareholders' AgreementEX-4.49 Reimbursement and Distribution AgreementEX-4.50 Subscription AgreementEX-4.51 Joinder to Shareholders' AgreementEX-4.52 Joinder to Shareholders' AgreementEX-4.53 Joinder to Shareholders' AgreementEX-4.54 Third Supplemental DeedEX-4.55 Second Supplemental DeedEX-4.56 First Supplemental DeedEX-4.57 Fourth Supplemental DeedEX-4.58 Eighth Supplemental DeedEX-4.59 Fourth Supplemental DeedEX-4.60 Fifth Supplemental DeedEX-4.61 Third Supplemental DeedEX-4.62 First Supplemental DeedEX-4.63 First Supplemental DeedEX-4.64 Amendment Nos.1 thru 4 to Office Lease AgreementEX-4.65  Amendment No.1 Shipbuilding ContractEX-4.66  Amendment No.1 Shipbuilding ContractEX-4.67 Agreement on a ModificationEX-4.68 AOM No. 5EX-12.1 Certification under Section 302EX-12.2 Certification under Section 302EX-13.1 Certification under Section 906




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Forward Looking Statements
  
    
    changes in cruise capacity, as well as capacity changes in the overall vacation
industry;
    
    introduction of competing itineraries and other products by other companies;
    
    changes in general economic, business and geo-political conditions;
    
    reduced consumer demand for cruises as a result of any number of reasons, including
armed conflict, terrorist attacks, geo-political and economic uncertainties or the
unavailability of air service, and the resulting concerns over the safety and security
aspects of traveling;
    
    lack of acceptance of new itineraries, products or services by our targeted customers;
    
    our ability to implement brand strategies and our shipbuilding programs, and to
continue to expand our business worldwide;
    
    costs of new initiatives, including those involving our inter-island Hawaii cruise
operations;
    
    changes in interest rates, fuel costs, or foreign currency rates;
    
    delivery schedules of new ships;
    
    risks associated with operating internationally;
    
    impact of the spread of contagious diseases;
    
    accidents and other incidents affecting the health, safety, security and vacation
satisfaction of passengers and causing damage to ships, which could cause the modification
of itineraries or cancellation of a cruise or series of cruises;
    
    our ability to attract and retain qualified shipboard crew and maintain good relations
with employee unions;
 1




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
    
    changes in other operating costs such as crew, insurance and security costs;
    
    continued availability of attractive port destinations;
    
    the impact of pending or threatened litigation;
    
    the ability to obtain financing on terms that are favorable or consistent with our
expectations;
    
    changes involving the tax, environmental, health, safety, security and other regulatory
regimes in which we operate;
    
    emergency ship repairs;
    
    disruptions to our software and other information technology systems;
    
    the implementation of regulations in the U.S. requiring U.S. citizens to obtain
passports for travel to additional foreign destinations; and
    
    weather and natural disasters.
  Industry and market data
  2




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##### Table of Contents



PART I
 
 Item 1. Identity of Directors, Senior Management and Advisers
  
 Item 2. Offer Statistics and Expected Timetable
  
 Item 3. Key Information
 Selected Financial Data
  Years ended December 31,(Dollars
in thousands)
    
    2003
    
    
    2004
    
    
    2005

    
    
    2006
    
    

    2007Statement of Operations dataRevenues:Passenger ticket revenues
    
    $
    976,124
    
    
    $
    990,758
    
    
    $
    1,194,461
    
    
    $
    1,438,996
    
    
    $
    1,571,772Onboard and other revenues
    
    
    321,909
    
    
    
    353,238
    
    
    
    435,262
    
    
    
    537,313
    
    
    
    601,043Total revenues
    
    
    1,298,033
    
    
    
    1,343,996
    
    
    
    1,629,723
    
    
    
    1,976,309
    
    
    
    2,172,815Cruise operating expenses:Commissions, transportation and
other
    
    
    292,453
    
    
    
    257,947
    
    
    
    328,899
    
    
    
    425,648
    
    
    
    430,670Onboard and other
    
    
    112,942
    
    
    
    120,250
    
    
    
    141,957
    
    
    
    186,240
    
    
    
    204,768Payroll and related
    
    
    204,365
    
    
    
    243,355
    
    
    
    323,621
    
    
    
    412,943
    
    
    
    436,843Fuel
    
    
    77,088
    
    
    
    78,013
    
    
    
    119,412
    
    
    
    164,530
    
    
    
    193,173Food
    
    
    79,154
    
    
    
    81,448
    
    
    
    94,105
    
    
    
    102,324
    
    
    
    120,633Ship charter costs
    
    
    
    
    
    
    22,046
    
    
    
    28,603
    
    
    
    26,226
    
    
    
    20,384Other operating
    
    
    191,384
    
    
    
    204,030
    
    
    
    211,929
    
    
    
    249,471
    
    
    
    286,469Total cruise operating expenses
    
    
    957,386
    
    
    
    1,007,089
    
    
    
    1,248,526
    
    
    
    1,567,382
    
    
    
    1,692,940Marketing, general and
administrative expenses
    
    
    186,923
    
    
    
    204,560
    
    
    
    225,240
    
    
    
    249,250
    
    
    
    287,093Depreciation and
amortization expenses
    
    
    95,765
    
    
    
    76,937
    
    
    
    85,615
    
    
    
    119,097
    
    
    
    148,003Impairment loss (1)
    
    
    18,155
    
    
    
    14,500
    
    
    
    
    
    
    
    8,000
    
    
    
    2,565Total operating expenses
    
    
    1,258,229
    
    
    
    1,303,086
    
    
    
    1,559,381
    
    
    
    1,943,729
    
    
    
    2,130,601Operating income
    
    
    39,804
    
    
    
    40,910
    
    
    
    70,342
    
    
    
    32,580
    
    
    
    42,214Non-operating (income) expenses:Interest income
    
    
    (802
    )
    
    
    (1,434
    )
    
    
    (4,803
    )
    
    
    (3,392
    )
    
    
    (1,384
    )Interest expense, net of
capitalized interest
    
    
    50,849
    
    
    
    48,886
    
    
    
    87,006
    
    
    
    136,478
    
    
    
    175,409Other expenses (income), net (2)
    
    
    2,165
    
    
    
    11,548
    
    
    
    (28,096
    )
    
    
    30,393
    
    
    
    95,151Total non-operating expenses
    
    
    52,212
    
    
    
    59,000
    
    
    
    54,107
    
    
    
    163,479
    
    
    
    269,176Net (loss) income
    
    $
    (12,408
    )
    
    $
    (18,090
    )
    
    $
    16,235
    
    
    $
    (130,899
    )
    
    $
    (226,962
    )
 3




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(Dollars in thousands, except
    
       As of or for the years ended December 31,operating data and ratios)
    
    2003
    
    2004
    
    2005
    
    2006
    
    2007Balance sheet data
Assets:Cash and cash equivalents
    
    $
    199,141
    
    
    $
    172,424
    
    
    $
    60,416
    
    
    $
    63,530
    
    
    $
    40,291Property and equipment, net
    
    
    2,660,991
    
    
    
    2,529,739
    
    
    
    3,113,229
    
    
    
    3,816,292
    
    
    
    4,243,872Total assets
    
    
    3,593,676
    
    
    
    3,464,546
    
    
    
    3,984,227
    
    
    
    4,629,624
    
    
    
    5,033,698Liabilities and shareholders
equity:Advance ticket sales
    
    
    188,364
    
    
    
    226,081
    
    
    
    276,644
    
    
    
    314,050
    
    
    
    332,802Other current liabilities (3)
    
    
    529,758
    
    
    
    191,225
    
    
    
    220,571
    
    
    
    298,768
    
    
    
    291,509Current portion of long-term
debt
    
    
    476,995
    
    
    
    86,198
    
    
    
    140,694
    
    
    
    154,638
    
    
    
    191,172Long-term debt
    
    
    1,019,392
    
    
    
    1,604,331
    
    
    
    1,965,983
    
    
    
    2,405,357
    
    
    
    2,977,888Other long-term liabilities (3)
    
    
    372,589
    
    
    
    5,734
    
    
    
    2,631
    
    
    
    1,744
    
    
    
    4,801Ordinary
shares (4)
    
    
    12
    
    
    
    12
    
    
    
    12
    
    
    
    12
    
    
    
    12Total shareholders equity
    
    
    1,006,578
    
    
    
    1,350,977
    
    
    
    1,377,704
    
    
    
    1,455,067
    
    
    
    1,235,526Operating dataPassengers carried
    
    
    878,067
    
    
    
    874,926
    
    
    
    981,665
    
    
    
    1,153,844
    
    
    
    1,304,385Passenger cruise days (5)
    
    
    6,543,896
    
    
    
    6,744,609
    
    
    
    7,613,100
    
    
    
    8,807,632
    
    
    
    9,857,946Capacity days (6)
    
    
    6,277,888
    
    
    
    6,370,096
    
    
    
    7,172,040
    
    
    
    8,381,445
    
    
    
    9,246,715Occupancy percentage (7)
    
    
    104.2
    %
    
    
    105.9
    %
    
    
    106.1
    %
    
    
    105.1
    %
    
    
    106.6
    %Total number of cruise ships
    
    
    10
    
    
    
    11
    
    
    
    12
    
    
    
    14
    
    
    
    13Other financial dataNet cash provided by operating
activities
    
    
    86,310
    
    
    
    153,758
    
    
    
    136,828
    
    
    
    147,504
    
    
    
    36,331Net cash used in investing
activities
    
    
    (275,588
    )
    
    
    (750,710
    )
    
    
    (678,309
    )
    
    
    (756,245
    )
    
    
    (581,578
    )Net cash provided by financing
activities
    
    
    271,815
    
    
    
    570,235
    
    
    
    429,473
    
    
    
    611,855
    
    
    
    522,008Capital expenditures
    
    
    295,626
    
    
    
    748,267
    
    
    
    658,795
    
    
    
    809,403
    
    
    
    582,837
 
 (1)
    
    In 2003, the impairment loss was recorded as a result of a write-down of $15.0 million
relating to the Orient Lines tradename and a write-down of $3.2 million to the carrying value of
one of our cruise ships; in 2004, the impairment loss was recorded as a result of a write-down of
$14.5 million relating to the carrying value of one of our cruise ships; in 2006, the impairment
loss was recorded as a result of a write-down of $8.0 million relating to the Orient Lines
tradename; and in 2007, the impairment loss was recorded as a result of a write-down of $2.6
million relating to the sale of Oceanic, formerly known as Independence.(2)
    
    For the years ended December 31, 2003, 2004, 2005, 2006 and 2007 such amount includes foreign
currency translation losses of $2.2 million, $11.5 million, gains of $28.7 million, losses of $38.9
million and $94.5 million, respectively, primarily due to fluctuations in the Euro/U.S. dollar
exchange rate.(3)
    
    At December 31, 2003, 2004 and 2005 we had amounts due to Star Cruises Limited of $0.7 billion,
$1.3 million and $3.1 million, respectively. The amounts due to Star Cruises Limited at December
31, 2004 and 2005 were classified as other current liabilities because such amounts were due on
demand. At December 31, 2003, $366.6 million was classified as a long-term liability because such
amount was satisfied through reclassification to equity in the Reorganization and the remaining
$374.8 million was classified as a current liability because such amount was repaid in the
Reorganization.(4)
    
    On November 12, 2007, Star Cruises Limited and our board
approved a share split. At December
31, 2007 we had 25,000,000 authorized and 10,000,000 ordinary shares with par value $.0012
per share issued and outstanding, retrospectively restated. 4




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(5)
    
    Represents the number of passengers carried for the period multiplied by the number of days in
their respective cruises.(6)
    
    Represents double occupancy per cabin multiplied by the number of cruise days for the period.(7)
    
    Represents the ratio of Passenger Cruise Days to Capacity Days. A percentage in excess of 100%
indicates that three or more passengers occupied some cabins. Risk factors
  Risks relating to our business
 An increase in the supply of cruise ships without a corresponding increase in passenger demand
could materially and adversely affect our financial condition and results of operations.
  We face intense competition.
   5




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Adverse economic conditions in the North American region or other factors that depress the level of
disposable income of consumers or consumer confidence could adversely affect our financial
condition and results of operations.
  We rely on external distribution channels for passenger bookings; major changes in the availability
of external distribution channels could undermine our customer base.
  We rely on scheduled commercial airline services for passenger connections; increases in the price
of or major changes or reduction in commercial airline services could undermine our customer base.
  Increases in fuel prices or other cruise operating costs would have an adverse impact on our
financial condition and results of operations.
  6




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Our revenues are seasonal owing to variations in passenger fare rates and occupancy levels at
different times of the year; we may not be able to generate revenues that are sufficient to cover
our expenses during certain periods of the year.
  Any delays in the delivery of new cruise ships or any mechanical failures on or of our cruise ships
may have a material adverse effect on our business, financial condition and results of operations.
  We are dependent upon the services of key management personnel.
  Conducting business internationally and development of information technology areas may result in
increased costs and risks.
  7




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Future epidemics and viral outbreaks may have an adverse effect on our financial condition and
results of operations.
  The political environment in certain countries where we operate is uncertain and our ability to
operate our business as we have in the past may be restricted.
  Adverse incidents involving cruise ships may have an adverse impact on our financial condition and
results of operations.
  Amendments to the collective bargaining agreements for crew members of our fleet have had and could
have an adverse impact on our financial condition and results of operations.
  8




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Pride of America Pride of Aloha Pride of America Pride of Hawaii Pride of Hawaii Norwegian Jade Pride of Aloha
 Unavailability of ports of call may adversely affect our financial condition and results of
operations.
  We may suffer an uninsured loss, as we are not protected against all risks or lawsuits that we may
face.
    9




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Our future operating cash flow may not be sufficient to fund future obligations, and we may not be
able to obtain additional financing, if necessary, at a cost that is favorable or that meets our
expectations.
  We are highly leveraged with a high level of floating rate debt, and our level of indebtedness
could limit cash flow available for our operations and could adversely affect our financial
condition, operations, prospects and flexibility.
  
    
    a substantial portion of our cash flow from operations will be required to service
debt, thereby reducing the funds available to us for other purposes;
    
    our ability to obtain additional financing for working capital, capital expenditures
and general corporate purposes, including upgrades of our current ships or the construction
of new ships, may be limited; and
    
    our high level of leverage may hinder our ability to withstand competitive pressures or
adjust rapidly to changing market conditions.
   10




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Risks relating to the regulatory environment in which we operate
 Future changes in applicable tax laws, or our inability to take advantage of favorable tax regimes,
may have an adverse impact on our financial condition and results of operations.
    11




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Certain State, Local and Non-U.S. Tax Matters
  We are subject to complex laws and regulations, including environmental laws and regulations, which
could adversely affect our operations; any changes in the current laws and regulations could lead
to increased costs or decreased revenues and adversely affect our business prospects, financial
condition and results of operations.
    12




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New health, safety, security and other regulatory issues could adversely affect our business
prospects, financial condition and results of operations.
   
 Item 4. Information on the Company
 History and development of the Company
    13




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Business overview
 Marco Polo Pride of America
 Segment Reporting
   14




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Our business strategies
  Freestyle Cruising
 
    
    flexible dining policy in our dining rooms; no fixed dining times or pre-assigned
seating;
    
    up to 11 dining locations ranging from casual fast-food outlets to à la carte gourmet
and specialty ethnic restaurants;
    
    resort-casual dress code acceptable throughout the ship, at all times;
    
    increased service staff for a more personalized vacation experience;
    
    replacement of cash tipping with an automated service charge system;
    
    diverse lifestyle activities, including cultural and educational onboard programs
along with an increased adventure emphasis for shore excursions; and
    
    passenger-friendly disembarkation policies.
   Hawaii
 15




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Pride of Hawaii Norwegian Jade Pride of Aloha Pride of America
 Fleet renewal
 
    
    new ships are more attractive to passengers;
    
    new ships are larger and have a more profitable mix of cabins, including a higher
percentage of cabins with private balconies for which passengers are willing to pay a
premium;
    
    our new ships are faster than many of our competitors ships, giving us more flexibility
in designing new and attractive itineraries;
    
    new ships tend to provide greater operating economies of scale; and
    
    our new ships have been designed and built to deliver Freestyle Cruising.
  Homeland Cruising
 16




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The fleet
  Norwegian Jade Norwegian Gem Norwegian Pearl Norwegian Jewel Norwegian Star Norwegian Dawn Norwegian Jade Norwegian Gem Norwegian Pearl Norwegian Jewel
 Norwegian Cruise Lines ships
  Year Built/
    
    
    
    
    
    
    Crew
    
    
    Gross
    
    
    Primary Areas ofShip
    
    Rebuilt
    
    
    Berths
    
    
    Capacity
    
    
    Tons
    
    
    OperationNorwegian Gem
    
    
    2007
    
    
    
    2,400
    
    
    
    1,200
    
    
    
    93,500
    
    
    Europe, BahamasNorwegian Pearl
    
    
    2006
    
    
    
    2,400
    
    
    
    1,200
    
    
    
    93,500
    
    
    Alaska, Caribbean, PacificCoastal and Panama CanalNorwegian Jewel
    
    
    2005
    
    
    
    2,380
    
    
    
    1,100
    
    
    
    93,500
    
    
    Caribbean and EuropeNorwegian Dawn
    
    
    2002
    
    
    
    2,220
    
    
    
    1,100
    
    
    
    92,300
    
    
    Bahamas, Bermuda,Caribbean, Canada and NewEnglandNorwegian Star
    
    
    2001
    
    
    
    2,240
    
    
    
    1,100
    
    
    
    91,700
    
    
    Alaska, Mexico and PacificCoastalNorwegian Sun
    
    
    2001
    
    
    
    1,940
    
    
    
    900
    
    
    
    78,300
    
    
    Alaska, Caribbean, PacificCoastal and Panama CanalNorwegian Majesty
    
    
    1992/1999
    
    
    
    1,460
    
    
    
    700
    
    
    
    40,900
    
    
    Bahamas, Bermuda andCaribbeanNorwegian Wind(1)
    
    
    1993/1998
    
    
    
    1,740
    
    
    
    700
    
    
    
    50,800
    
    
    Alaska and HawaiiNorwegian Dream(1)
    
    
    1992/1998
    
    
    
    1,740
    
    
    
    700
    
    
    
    50,800
    
    
    Caribbean, Europe, PanamaCanal and South AmericaNorwegian Spirit
    
    
    1998
    
    
    
    1,980
    
    
    
    1,000
    
    
    
    75,300
    
    
    Caribbean, Bahamas, Canadaand New EnglandNorwegian Crown(1)
    
    
    1988
    
    
    
    1,080
    
    
    
    550
    
    
    
    34,200
    
    
    Panama Canal, SouthAmerica and Bermuda
 
 (1)
    
    Norwegian Windand Norwegian Crownleft the fleet in April 2007 and November 2007,
respectively. Norwegian Dreamis scheduled to leave the fleet in 2008. 17




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NCL Americas ships
  PrimaryCrew
    
    
    Gross
    
    
    Areas ofShip
    
    Year Built
    
    
    Berths
    
    
    Capacity
    
    
    Tons
    
    
    OperationPride of Hawaii
    
    
    2006
    
    
    
    2,460
    
    
    
    950
    
    
    
    93,600
    
    
    HawaiiPride of America
    
    
    2005
    
    
    
    2,140
    
    
    
    950
    
    
    
    80,400
    
    
    HawaiiPride of Aloha
    
    
    1999
    
    
    
    2,000
    
    
    
    900
    
    
    
    77,100
    
    
    Hawaii
 Pride of Hawaii, Norwegian Jade Pride of Aloha Pride of America
 Orient Lines ship
 Marco Polo
 Current new ships on order
  Expected Delivery
    
    
    
    
    
    GrossShip
    
    Date
    
    Berths
    
    
    TonsF3 One
    
    First Quarter 2010
    
    
    4,200
    
    
    
    150,000F3 Two
    
    Third Quarter 2010
    
    
    4,200
    
    
    
    150,000
 United States
 United States
 Ship deployment
  18




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##### Table of Contents



Ports and facilities
 Norwegian Majesty, Norwegian Spirit, Norwegian Dawn, Norwegian Dream,
     Company revenue management
 Cruise pricing and revenue management
   19




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##### Table of Contents



Onboard and other revenues
  Seasonality
  Sales and marketing
 Travel agent relationships
    20




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##### Table of Contents



Marketing, brand communications and advertising
    www.ncl.com
 Company operations and cruise infrastructure
 Ship maintenance
  21




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##### Table of Contents



Information technology
     Suppliers
  Crew and passenger safety
   22




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##### Table of Contents




    
    strict alcohol and drug policy, including frequent random tests and a zero tolerance
policy for alcohol use by senior officers and watch keepers at all times;
    
    a policy of requiring the presence of at least two officers in the navigation center of
every cruise ship while at sea (except under certain low-risk situations);
    
    a comprehensive fleet safety program with four traveling safety officers;
    
    Navigation Conditions system involving the presence of additional officers on the
bridge when a cruise ship is operating in identified yellow zones or red zones"specific
locations and situations identified as being potentially hazardous or deviating from the
normal course of the cruise ship;
    
    procedure checklists;
    
    performance of an internal and external audit at least annually to ensure safety
implementation, corrective action following incidents and continuous regular improvements;
    
    standardization and upgrade of equipment on our ships;
    
    installation of automatic identification system, or AIS, in the navigation centers of
all of our ships;
    
    psychological profiling of officers;
    
    bridge and crew resource management courses for all bridge officers;
    
    centralized and automated engine control (except on Marco Polo);
    
    additional onboard training in the use of the navigation and safety equipment; and
    
    stringent implementation of additional controls and procedures, which have been
published as safety recommendations, following investigation analyses of incidents or
accidents in other parts of the cruise industry.
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##### Table of Contents



Insurance
   
    
    protection and indemnity insurance (that is, coverage for third party liabilities) on
each ship;
    
    war risk insurance, including terrorist risk insurance, on each ship in an amount equal
to the total insured hull value, subject to certain coverage limits, deductibles and
exclusions. The terms of our marine war risk policies include provisions where
underwriters can give seven days notice to the insured that the policies will be cancelled,
which is typical for policies in the marine industry;
    
    insurance for cash onboard; and
    
    insurance for our shoreside property and general liability risks.
   Trademarks
  24




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##### Table of Contents



Regulatory issues
 Registration of our ships
 Pride of Aloha Pride of America
  Pride of America Pride of Hawaii Norwegian Jade Pride of Aloha Pride of Aloha
 Non-Resident Alien Crew (NRAC)
  25




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##### Table of Contents



Health and environment
     
    
    deployment of environmental officers and environmental engineers on all ships;
    
    a dedicated, full time environmental staff at shoreside;
    
    a comprehensive environmental training and awareness program;
    
    an environmental hotline;
    
    advanced wastewater treatment systems installed on 100% of the fleet;
    
    our own patent-pending ballast water management system to prevent discharge of damaging
non-indigenous marine species in ballast water;
    
    advanced treatment systems for oily bilge water installed on all ships; and
    
    an innovative bio-sludge disposal and used lube recycling programs.
 Permits for Glacier Bay Alaska
  26




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##### Table of Contents



Security and safety
       27




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##### Table of Contents



Financial requirements
   Taxation
 U.S. federal income taxation  foreign-flagged operations
    28




---



##### Table of Contents



Certain State, Local and Non-U.S. Tax Matters.
 29




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##### Table of Contents



U.S. federal income taxation  U.S.-flagged operations
  Organizational structure
 1
 
 
 1
    
    All subsidiaries are 100% owned by their immediate parent companies.2
    
    NCL Corporation Ltd. is owned 50% by Star Cruises Limited, 37.5% by Apollo and 12.5% by TPG.3
    
    Ship-holding companies for Bahamas flagged-ships.4
    
    Operates Bahamas flag fleet, including ships under charter agreements with Star
Cruises Limited, and performs under contract with NCL America Inc. certain marketing, ticket
issuance and other services.5
    
    Ship-holding companies for U.S.-flagged ships.6
    
    Operates U.S.-flagged fleet. Property, plant and equipment
   30




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##### Table of Contents



Industry
 Industry background
   Cruise PassengersSourced inCalendar Year
    
    North America (1)
    
    Berths (2)2003
    
    8,195,000
    
    215,3972004
    
    9,107,000
    
    220,1872005
    
    9,670,000
    
    227,7172006
    
    10,180,000
    
    246,7592007
    
    10,330,000
    
    262,690
 
 (1)
    
    Based on passengers carried for at least two consecutive nights for the calendar year.(2)
    
    As of the end of the calendar year. These figures include ships that are marketed in North
America and elsewhere.
   
 Item 4A. Unresolved Staff Comments
  31




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##### Table of Contents



Item 5. Operating and Financial Review and Prospects
 Managements Discussion and Analysis of Financial Condition and Results of Operations
  
    
    changes in cruise capacity, as well as capacity changes in the overall vacation industry;
    
    introduction of competing itineraries and other products by other companies;
    
    changes in general economic, business, and geo-political conditions;
    
    reduced consumer demand for cruises as a result of any number of reasons, including
armed conflict, terrorists attacks, geo-political and economic uncertainties or the
unavailability of air service, and the resulting concerns over the safety and security
aspects of traveling;
    
    lack of acceptance of new itineraries, products or services by our targeted
customers;
    
    our ability to implement brand strategies and our shipbuilding programs, and to
continue to expand our business worldwide;
    
    costs of new initiatives, including those involving our inter-island Hawaii cruise operations;
    
    changes in interest rates, fuel costs or foreign currency rates;
    
    delivery schedules of new ships;
    
    risks associated with operating internationally;
    
    impact of the spread of contagious diseases;
    
    accidents and other incidents affecting the health, safety, security and vacation
satisfaction of passengers and causing damage to ships, which could cause the modification
of itineraries or cancellation of a cruise or series of cruises;
    
    our ability to attract and retain qualified shipboard crew and maintain good
relations with employee unions;
    
    changes in other operating costs, such as crew, insurance and security costs;
    
    continued availability of attractive port destinations;
 32




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##### Table of Contents




    
    the impact of pending or threatened litigation;
    
    the ability to obtain financing on terms that are favorable or consistent with our expectations;
    
    changes involving the tax, environmental, health, safety, security and other
regulatory regimes in which we operate;
    
    emergency ship repairs;
    
    disruptions to our software and other information technology systems;
    
    the implementation of regulations in the U.S. requiring U.S. citizens to obtain
passports for travel to additional foreign destinations; and
    
    weather and natural disasters.
   Terminology and Non-GAAP Financial Measures
      33




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##### Table of Contents



Overview
     
    
    Commissions, transportation and other expenses consist of those amounts directly
associated with passenger ticket revenues. These amounts include travel agent
commissions, air and other transportation expenses, credit card fees, and certain port
expenses.
    
    Onboard and other expenses consist of direct costs that are incurred primarily in
connection with onboard and other revenues. These costs are incurred in connection with
shore excursions, beverage sales, land packages, and sales of travel protection for
vacation packages.
    
    Payroll and related expenses represent the cost of wages and benefits for shipboard
employees.
    
    Fuel expenses include fuel costs, the impact of fuel hedges and delivery costs.
    
    Food expenses consist of food costs for passengers and crew, which typically vary
according to the number of passengers onboard a particular cruise ship.
    
    Ship charter costs consist of amounts paid for chartering ships.
    
    Other operating expenses consist of costs such as repairs and maintenance (including
dry-docking costs), ship insurance and other ship expenses.
 34




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Critical accounting policies
  Ship accounting
    Asset impairment
  35




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##### Table of Contents



Contingencies
  Recent accounting pronouncements
   36




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37




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Results of operations
  Years Ended December 31,2005
    
    
    2006
    
    
    2007Total revenues
    
    $
    1,629,723
    
    
    $
    1,976,309
    
    
    $
    2,172,815Total cruise operating expenses
    
    $
    1,248,526
    
    
    $
    1,567,382
    
    
    $
    1,692,940Operating income
    
    $
    70,342
    
    
    $
    32,580
    
    
    $
    42,214Net income (loss)
    
    $
    16,235
    
    
    $
    (130,899
    )
    
    $
    (226,962
    )
  Years Ended December 31,2005
    
    2006
    
    2007RevenuesPassenger ticket revenues
    
    
    73.3
    %
    
    
    72.8
    %
    
    
    72.3
    %Onboard and other revenues
    
    
    26.7
    %
    
    
    27.2
    %
    
    
    27.7
    %Total revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cruise operating expensesCommissions, transportation and other
    
    
    20.2
    %
    
    
    21.5
    %
    
    
    19.8
    %Onboard and other
    
    
    8.7
    %
    
    
    9.4
    %
    
    
    9.4
    %Payroll and related
    
    
    19.9
    %
    
    
    20.9
    %
    
    
    20.1
    %Fuel
    
    
    7.3
    %
    
    
    8.3
    %
    
    
    8.9
    %Food
    
    
    5.8
    %
    
    
    5.2
    %
    
    
    5.6
    %Ship charter costs
    
    
    1.7
    %
    
    
    1.3
    %
    
    
    0.9
    %Other operating
    
    
    13.0
    %
    
    
    12.7
    %
    
    
    13.2
    %Total cruise operating expenses
    
    
    76.6
    %
    
    
    79.3
    %
    
    
    77.9
    %Marketing, general and administrative expenses
    
    
    13.8
    %
    
    
    12.6
    %
    
    
    13.2
    %Depreciation and amortization expenses
    
    
    5.3
    %
    
    
    6.0
    %
    
    
    6.8
    %Impairment loss
    
    
    
    %
    
    
    0.4
    %
    
    
    0.1
    %Total operating expenses
    
    
    95.7
    %
    
    
    98.3
    %
    
    
    98.0
    %Operating income
    
    
    4.3
    %
    
    
    1.7
    %
    
    
    2.0
    %Non-operating (income) expensesInterest income
    
    
    (0.3
    )%
    
    
    (0.1
    )%
    
    
    (0.1
    )%Interest expense, net of capitalized interest
    
    
    5.3
    %
    
    
    6.9
    %
    
    
    8.1
    %Other (income) expenses, net
    
    
    (1.7
    )%
    
    
    1.5
    %
    
    
    4.4
    %Total non-operating expenses
    
    
    3.3
    %
    
    
    8.3
    %
    
    
    12.4
    %Net income (loss)
    
    
    1.0
    %
    
    
    (6.6
    )%
    
    
    (10.4
    )%
  Years Ended December 31,2005
    
    2006
    
    2007Passengers Carried
    
    
    981,665
    
    
    
    1,153,844
    
    
    
    1,304,385Passenger Cruise Days
    
    
    7,613,100
    
    
    
    8,807,632
    
    
    
    9,857,946Capacity Days
    
    
    7,172,040
    
    
    
    8,381,445
    
    
    
    9,246,715Occupancy Percentage
    
    
    106.1
    %
    
    
    105.1
    %
    
    
    106.6
    %
 38




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##### Table of Contents



Years Ended December 31,2005
    
    
    2006
    
    
    2007Passenger ticket revenues
    
    $
    1,194,461
    
    
    $
    1,438,996
    
    
    $
    1,571,772Onboard and other revenues
    
    
    435,262
    
    
    
    537,313
    
    
    
    601,043Total revenues
    
    
    1,629,723
    
    
    
    1,976,309
    
    
    
    2,172,815Less:Commissions, transportation and other
    
    
    328,899
    
    
    
    425,648
    
    
    
    430,670Onboard and other
    
    
    141,957
    
    
    
    186,240
    
    
    
    204,768Net revenues
    
    $
    1,158,867
    
    
    $
    1,364,421
    
    
    $
    1,537,377Capacity Days
    
    
    7,172,040
    
    
    
    8,381,445
    
    
    
    9,246,715Gross Yields
    
    $
    227.23
    
    
    $
    235.80
    
    
    $
    234.98Net Yields
    
    $
    161.58
    
    
    $
    162.79
    
    
    $
    166.26
  Years Ended December 31,2005
    
    
    2006
    
    
    2007Total cruise operating expenses
    
    $
    1,248,526
    
    
    $
    1,567,382
    
    
    $
    1,692,940Marketing, general and administrative expenses
    
    
    225,240
    
    
    
    249,250
    
    
    
    287,093Gross Cruise Costs
    
    
    1,473,766
    
    
    
    1,816,632
    
    
    
    1,980,033Less:Commissions, transportation and other
    
    
    328,899
    
    
    
    425,648
    
    
    
    430,670Onboard and other
    
    
    141,957
    
    
    
    186,240
    
    
    
    204,768Net Cruise Costs
    
    $
    1,002,910
    
    
    $
    1,204,744
    
    
    $
    1,344,595Capacity Days
    
    
    7,172,040
    
    
    
    8,381,445
    
    
    
    9,246,715Gross Cruise Costs per Capacity Day
    
    $
    205.49
    
    
    $
    216.74
    
    
    $
    214.13Net Cruise Costs per Capacity Day
    
    $
    139.84
    
    
    $
    143.74
    
    
    $
    145.41
 Year ended December 31, 2006 compared to year ended December 31, 2007
 Revenues
 Pride of Hawaii, Norwegian Pearl Norwegian Gem Norwegian Wind Norwegian
Crown
 39




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##### Table of Contents



Expenses
 Pride of Hawaii
 Pride of Hawaii, Norwegian Pearl Norwegian Gem
 Oceanic Independence
 Other (Income) Expense
 Pride of America
 Year ended December 31, 2005 compared to year ended December 31, 2006
 Revenues
 Pride of America Norwegian Jewel Pride of Hawaii Norwegian Pearl Norwegian Sea
 40




---



##### Table of Contents



Expenses
  Pride of America Norwegian Jewel Pride of Hawaii Norwegian
Pearl
 Other (Income) Expense
 Pride of America
 Liquidity and capital resources
  Pride of
America Norwegian Jewel Pride of Hawaii Norwegian Pearl Norwegian Gem
  41




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##### Table of Contents



Pride of America Norwegian Jewel Pride of Hawaii Norwegian Pearl Norwegian Dawn Norwegian Sun Norwegian Gem
  Future capital commitments
  Expected Delivery
    
    
    
    
    
    GrossShip
    
    Date
    
    Berths
    
    TonsF3 One
    
    First Quarter 2010
    
    
    4,200
    
    
    
    150,000F3 Two
    
    Third Quarter 2010
    
    
    4,200
    
    
    
    150,000
   42




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##### Table of Contents



Contractual Obligations:
  Less than 1
    
    
    1-3
    
    
    3-5
    
    
    More than 5Total
    
    
    year
    
    
    years
    
    
    years
    
    
    yearsLong-term debt obligations(1)
    
    $
    4,292,370
    
    
    $
    395,793
    
    
    $
    1,300,307
    
    
    $
    697,126
    
    
    $
    1,899,144Operating lease obligations(2)
    
    
    48,820
    
    
    
    6,651
    
    
    
    11,016
    
    
    
    7,810
    
    
    
    23,343Ship charter obligations(3)
    
    
    17,170
    
    
    
    12,407
    
    
    
    4,763
    
    
    
    
    
    
    
    Ship purchase
obligations(4)
    
    
    2,239,609
    
    
    
    135,089
    
    
    
    2,104,520
    
    
    
    
    
    
    
    Port facilities(5)
    
    
    144,876
    
    
    
    7,815
    
    
    
    28,254
    
    
    
    28,474
    
    
    
    80,333Capital lease obligations(6)
    
    
    15,537
    
    
    
    3,410
    
    
    
    7,230
    
    
    
    4,897
    
    
    
    Other(7)
    
    
    24,803
    
    
    
    11,556
    
    
    
    13,247
    
    
    
    
    
    
    
    Total
    
    $
    6,783,185
    
    
    $
    572,721
    
    
    $
    3,469,337
    
    
    $
    738,307
    
    
    $
    2,002,820
 
 (1)
    
    Assumes LIBOR rate of 4.6% and EURIBOR of 4.7% for all periods and EURO/USD exchange
rate of 1.4590.(2)
    
    We are obligated under noncancellable operating leases primarily for offices and motor
vehicles.(3)
    
    Ship charter costs are for ships chartered from Star Cruises Limited.(4)
    
    Amounts represent contractual obligations with initial terms in excess of one year,
assumes EURO/USD of 1.4590.(5)
    
    Amounts represent future commitments with remaining terms in excess of one year to pay
for our usage of a New York City terminal, Fanning Island and Bermuda port facilities.(6)
    
    Capital leases are primarily for buses for Hawaii operations.(7)
    
    Amounts represent future commitments with remaining terms in excess of one year to pay
for primarily service and maintenance contracts.   Funding sources
   43




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##### Table of Contents



Pride of Aloha Pride of Aloha
      Financial instruments and other
 General
  Interest rate risk
  44




---



##### Table of Contents



Foreign currency exchange rate risk
   Fuel price risk
  Related party transactions
  45




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##### Table of Contents



Item 6. Directors, Senior Management and Employees
 Directors and senior management
  Name
    
    Age
    
    Position with NCLTan Sri Lim Kok Thay
    
    
    56
    
    
    Chairman of the Board of DirectorsDavid Colin Sinclair Veitch
    
    
    52
    
    
    President and Chief Executive OfficerMarc J. Rowan
    
    
    45
    
    
    DirectorSteve Martinez
    
    
    39
    
    
    DirectorAdam M. Aron
    
    
    53
    
    
    DirectorWalter L. Revell
    
    
    73
    
    
    Director, Chairman of the Audit CommitteeKevin M. Sheehan
    
    
    54
    
    
    Executive Vice President and Chief Financial OfficerGregory W. Hunt
    
    
    51
    
    
    Executive Vice President Strategic and Commercial DevelopmentWilliam A. Hamlin
    
    
    55
    
    
    Executive Vice President of Newbuilding and Global Strategic SourcingAndrew Stuart
    
    
    44
    
    
    Executive Vice President of Sales, Marketing and Passenger ServicesDaniel S. Farkas
    
    
    39
    
    
    Senior Vice President and General Counsel
 Tan Sri Lim Kok Thay
 David Colin Sinclair Veitch
 46




---



##### Table of Contents



Marc J. Rowan Summa Cum Laude
 Steve Martinez Magna Cum Laude
 Adam M. Aron Cum Laude
 47




---



##### Table of Contents



Walter L. Revell
 Kevin M. Sheehan
 Gregory W. Hunt .
 William A. Hamlin
 Andrew Stuart
 Daniel S. Farkas
 48




---



##### Table of Contents



Cum Laude
  Compensation of directors and executive officers
  Share option scheme for shares of Star Cruises Limited
     49




---



##### Table of Contents



Incentive Bonus Plans, qualified and non-qualified benefit plans
 Incentive Bonus Plans
 Defined Contribution Plan.
 4 01(k) Plan.
 Supplemental Executive Retirement Plan.
 Supplemental Senior Executive Retirement Plan.
  Board practices
 Terms of directors and executive officers
   50




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##### Table of Contents



Employees
  December 31,2005
    
    2006
    
    2007Shipboard (1)
    
    
    10,088
    
    
    
    12,145
    
    
    
    12,115Shoreside
    
    
    1,860
    
    
    
    2,052
    
    
    
    2,175Total
    
    
    11,948
    
    
    
    14,197
    
    
    
    14,290
 
 (1)
    
    Does not include crew members that were on leave as of the respective dates.  Share Ownership
 
 Item 7. Major Shareholders and Related Party Transactions
 Major shareholders
  51




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##### Table of Contents



Shareholder
    
    Number of Shares(4)
    
    Percentage OwnershipStar Cruises Limited(1)
    
    
    10,000,000
    
    
    
    50.0
    %Apollo (2)
    
    
    7,500,000
    
    
    
    37.5
    %TPG (3)
    
    
    2,500,000
    
    
    
    12.5
    %
 
 (1)
    
    Star Cruises Limited owns our ordinary shares indirectly through Star NCLC Holdings Ltd, a
wholly-owned subsidiary.(2)
    
    Apollo affiliates, NCL Investment Ltd. and NCL Investment II Ltd. own 2,645,036 ordinary shares and 4,854,964 ordinary shares, respectively.(3)
    
    TPG Viking I, L.P., TPG Viking II, L.P. and TPG Viking AIV III, L.P., own 1,864,309 ordinary shares, 548,684 ordinary shares and 87,007 ordinary shares, respectively.(4)
    
    On November 12, 2007, Star Cruises Limited and our board
approved a share split. At
December 31, 2007 we had 25,000,000 authorized and 10,000,000
ordinary shares with
par value $.0012 per share issued and outstanding, retrospectively restated.   Percentage Ownership in StarShareholder
    
    Cruises LimitedGHL (1)
    
    
    33.82
    %RWB (2)
    
    
    19.30
    %
 
 (1)
    
    GHL is a company incorporated in the Isle of Man acting as trustee of the
Golden Hope Unit Trust, a private unit trust which is held directly and indirectly by
GZ Trust Corporation as trustee of a discretionary trust established for the benefit of
certain members of the Lim Family.(2)
    
    RWB is a Malaysian company listed on Bursa Malaysia Securities Berhad in which
the Lim Family has a substantial indirect beneficial interest.  Related party transactions
 Transactions in connection with the Reorganization
   52




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##### Table of Contents



Norwegian Crown Norwegian Dream Norwegian Majesty Norwegian Sea Marco Polo Norwegian Wind Norwegian Majesty, Norwegian Dream Marco Polo Marco Polo Norwegian Dream
  Transactions with Star Cruises Limited, Apollo and TPG
      The Reimbursement and Distribution Agreement
  53




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##### Table of Contents



Pride of Aloha Pride of America
 Pride of Aloha Pride of
Aloha Pride of Aloha Pride of America
  The Shareholders Agreement
     
    
    any acquisitions or divestitures with the aggregate consideration paid or received
exceeding $200 million;
    
    the primary issuance by us of equity securities in a public offering (other than in the
case of the initial public offering of primary ordinary shares, if the number of ordinary shares proposed to be
 54




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##### Table of Contents



issued in the initial public offering does not exceed 20% of the ordinary shares that would
be outstanding after giving effect to the initial public offering);
    
    subject to limited exceptions, the issuance by us of equity securities in a private
offering to third parties;
    
    any capital expenditures with the aggregate amount exceeding $20 million;
    
    declaring or paying any non-pro rata dividends or distributions;
    
    any changes to our memorandum of association or bye-laws.
     The Subscription Agreement
   55




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##### Table of Contents



Item 8. Financial Information
  Legal proceedings
  (i)
    
    A proposed class action suit was filed on August 1, 2000 in the
U.S. District Court for the Southern District of Texas against us, alleging that
we violated the Americans with Disabilities Act of 1990 (ADA) in our treatment
of physically impaired passengers. The same plaintiffs also filed on the same
date a proposed class action suit in a Texas state court alleging that we and a
third party violated Texas Deceptive Trade Practices and Consumer Protection
Act. The state courts grant of our motion for summary judgment was reversed in
part on appeal and remanded for trial. On June 6, 2005, the U.S. Supreme Court
ruled in the Federal matter that the ADA is applicable to foreign-flagged cruise
ships that operate in U.S. waters to the same extent that it applies to
U.S.-flagged ships. The U.S. Supreme Court remanded the case to the Fifth
Circuit Court of Appeals to determine which claims in the lawsuit remain and the
Fifth Circuit remanded the case to the trial court. We believe that we have
meritorious defenses to these claims and, accordingly, are defending vigorously
this action.(ii)
    
    A proposed class action suit was filed on May 17, 2001 in the
U.S. District Court for the Southern District of New York alleging that during
the period from January 1998 through March 2005, we failed to pay unlicensed
seafarers overtime wages in accordance with their contracts of employment. The
court entered an order certifying the case as a class action. In March 2005,
the parties reached a settlement which was subsequently approved by the court.
We have fulfilled our obligations under the settlement agreement. The
satisfaction of the settlement did not have a material impact on our financial
position, results of operations or cash flows.(iii)
    
    In May 2003, an explosion in the boiler room onboard Norway
resulted in the death of eight crew members and the injury of approximately 20
other crew members. All
 56




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##### Table of Contents



personal injury claims stemming from this incident have been resolved. The
National Transportation Safety Board has concluded its investigation and issued
its final report and the incident remains under criminal investigation by the
United States Attorneys Office for the Southern District of Florida through an
impaneled grand jury proceeding. We are cooperating with this investigation.(iv)
    
    On June 16, 2006, a complaint was filed against us in the Circuit
Court of Miami-Dade County, Florida, alleging breach of contract and fraudulent
misrepresentation stemming from two 2004 charter sailings of Pride of Aloha. We
believe that we have meritorious defenses to these claims and, accordingly, are
defending vigorously this action.(v)
    
    On August 24, 2006, we were served with a complaint by the U.S.
Equal Employment Opportunity Commission to correct alleged unlawful employment
practices on the basis of national origin and religion and to provide relief to
seven former employees who were allegedly terminated as a result of same. The
seven former employees joined the action as Plaintiff-Intervenors. The case has
been set for trial in the United States District Court for the District of Hawaii
on May 6, 2008. We believe that we have meritorious defenses to these claims
and, accordingly, are defending vigorously this action.(vii)
    
    In 2008, several proposed class action suits were filed in the
U.S. District Court for the Southern District of Florida alleging violations of
the Sherman Antitrust Act and the Florida Deceptive and Unfair Trade Practices
Act stemming from the Companys implementation of a passenger fuel supplement.
We believe that we have meritorious defenses to these claims and accordingly, are
defending vigorously this action.In the normal course of our business, various other claims
and lawsuits have been filed or are pending against us. Most of these
claims and lawsuits are covered by insurance and, accordingly, the maximum
amount of our liability is typically limited to our deductible amount.
Nonetheless, the ultimate outcome of these claims and lawsuits that are not
covered by insurance cannot be determined at this time. We have evaluated
our overall exposure with respect to all of our threatened and pending
litigation. To the extent required, we have accrued amounts for all
estimable probable losses associated with our deemed exposure. We are
currently unable to estimate any other potential contingent losses beyond
those accrued, as discovery is not complete nor is adequate information
available to estimate such range of loss or potential recovery. As
discussed above, we intend to vigorously defend our legal position on all
claims and, to the extent necessary, seek recovery. At December 31, 2007,
we had accrued amounts of approximately $6.6 million for the above pending
legal matters.
 57




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##### Table of Contents



Certain contracts we enter into include indemnification provisions that obligate us to
make payments to the counterparty if certain events occur. The indemnification clauses
are often standard contractual terms that are entered into in the normal course of
business. There are no stated or notional amounts included in the indemnification
clauses and we are not able to estimate the maximum potential amount of future
payments, if any, under these indemnification clauses. We have not been required to
make any payments under such clauses in the past, and do not believe that, under
current circumstances, a request for indemnification is probable.
 Dividends
  Significant changes
  
 Item 9. Offer and Listing Details
  
 Item 10. Additional Information
 General
  Share capital
  58




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##### Table of Contents



Dividend rights
  Variation of shareholder rights
  Transfer of shares
 
 59




---



##### Table of Contents



Meetings of shareholders
  Access to books and records and public dissemination of information
  Election and removal of directors
   60




---



##### Table of Contents



Proceedings of the Board of Directors
   Indemnification of directors and officers
  Amendment of memorandum of association and bye-laws
   Appraisal rights and shareholder suits
  61




---



##### Table of Contents



Capitalization of profits and reserves
  Material contracts
      62




---



##### Table of Contents



Norwegian Dawn Norwegian Sun
 Exchange controls
  Documents on display
 http://www.sec.gov
 
 Item 11. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 12. Description of Securities Other than Equity Securities
  63




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##### Table of Contents



PART II
 
 Item 13. Defaults, Dividend Arrearages and Delinquencies
  
 Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
  
 Item 15. Controls and Procedures
  Internal Control-Integrated Framework Internal Control-Integrated Framework
    
 Item 16. Reserved
 64




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##### Table of Contents



Item 16A. Audit Committee Financial Expert
  
 Item 16B. Code of Ethics
  
 Item 16C. Principal Accountant Fees and Services
  Total FeesFor the years ended December 31,2006
    
    
    2007(in thousands of dollars)FeesAudit fees
    
    $
    1,025
    
    
    $
    973Audit related fees
    
    
    37
    
    
    
    37Tax fees
    
    
    145
    
    
    
    73All other fees
    
    
    2
    
    
    
    2Total
    
    $
    1,209
    
    
    $
    1,085
     Audit Committee pre-approval policies and procedures
  65




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##### Table of Contents



Item 16D. Exemptions from Listing Standards for Audit Committees
  
 Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
  66




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##### Table of Contents



PART III
 
 Item 17. Financial Statements
  
 Item 18. Financial Statements
  
 Item 19. Exhibits
  67




---



##### Table of Contents



Glossary
 Berths.
 Charter.
 CLIA.
 Single-day cruises
 Dry-dock.
 Gross Tons.
 IMO.
 Jones Act.
 MARPOL.
 SOLAS
 Terminal.
 68




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##### Table of Contents



SIGNATURE
  NCL Corporation Ltd.By:

/s/ Kevin M. SheehanName:
    Kevin M. SheehanTitle:
    Executive Vice President and Chief Financial
Officer  69




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##### Table of Contents



Exhibitnumber
    
    Description of exhibit
 1.1
    
    Memorandum of Association of NCL Corporation Ltd.*1.2
    
    Bye-Laws of NCL Corporation Ltd.*2.1
    
    Indenture, dated July 15, 2004, between NCL Corporation Ltd. and JPMorgan Chase Bank, N.A.,
as Indenture Trustee with respect to $250 million 10 5/8% Senior Notes due 2014.*4.1
    
    $626.9 million Syndicated Term Loan, dated as of June 26, 1999, as amended by four
supplemental agreements, among Norwegian Star Limited, Norwegian Dawn Limited and a syndicate
of international banks and related Guarantee by NCL Corporation Ltd.*+4.2
    
    Fifth Supplemental Deed, dated as of 30 September 2005, to $626.9 million Syndicated Term
Loan, among Norwegian Dawn Limited, NCL Corporation Ltd. and a syndicate of international
banks.**4.3
    
    $225.0 million Norwegian Sun Loan, dated as of July 9, 2003, as amended, among Norwegian Sun
Limited and a syndicate of international banks and related Guarantee by NCL Corporation Ltd.*+4.4
    
    Second Supplemental Deed, dated as of 30 September 2005, to $225.0 million Norwegian Sun
Loan, among Norwegian Sun Limited, NCL Corporation Ltd. and a syndicate of international
banks.**4.5
    
    Euro 298.0 million Pride of America Loans, dated as of April 4, 2003, among Ship Holding LLC
and a syndicate of international banks and related Guarantee by NCL Corporation Ltd.*+4.6
    
    Supplemental Amendments, to Euro 298.0 million Pride of America Loans, among Pride of America
Ship Holding, Inc., NCL Corporation Ltd. and a syndicate of international banks.**4.7
    
    $800.0 million Senior Secured Credit Facility, dated as of July 7, 2004, among NCL
Corporation Ltd. and a syndicate of international banks.*4.8
    
    Supplemental Deed, dated as of 30 September 2005, to $800.0 million Senior Secured Credit
Facility, among Norwegian Star Limited, Norwegian Spirit Ltd., Pride of Aloha, Inc., NCL
Corporation Ltd. and a syndicate of international banks.**4.9
    
    Facility Agreement, dated as of 23 September 2005, in connection with Letters of Credit
required by the Merchant Services Bankcard Agreement, by and among NCL Corporation Ltd. and a
syndicate of international banks.**4.10
    
    Euro 334.1 million Norwegian Jewel Loan, dated as of April 20, 2004, among Norwegian Jewel
Limited and a syndicate of international banks and related Guarantee by NCL Corporation Ltd.*+4.11
    
    Supplemental Deed, dated as of 30 September 2005, to Euro 334.1 million Norwegian Jewel Loan,
among Norwegian Jewel Limited, NCL Corporation Ltd. and a syndicate of international banks.**4.12
    
    Euro 308.1 million Pride of Hawaii Loan, dated as of April 20, 2004, as amended, among Pride
of Hawaii, Inc. and a syndicate of international banks and related Guarantee by NCL
Corporation Ltd.*+4.13
    
    Second Supplemental Deed, dated as of 30 September 2005, to Euro 308.1 million Pride of
Hawaii Loan, among Pride of Hawaii, Inc., NCL Corporation Ltd. and a syndicate of
international banks.**4.14
    
    Merchant Services Bankcard Agreement, dated as of March 26, 2004, among NCL Corporation Ltd.,
Chase Merchant Services, LLC and JPMorgan Chase Bank.*
 70




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##### Table of Contents



Exhibitnumber
    
    Description of exhibit
 4.15
    
    Bareboat Charter Agreement, dated April 20, 2004, between Crown Odyssey Limited and NCL
(Bahamas) Ltd.*+4.16
    
    Bareboat Charter Agreement, dated April 20, 2004, between Crown Wind Limited and NCL
(Bahamas) Ltd.*+4.17
    
    Bareboat Charter Agreement, dated April 20, 2004, between Ocean Dream Limited and NCL
(Bahamas) Ltd.*+4.18
    
    Bareboat Charter Agreement, dated April 20, 2004, between Ocean Voyager Limited and NCL
(Bahamas) Ltd.*+4.19
    
    Amended and Restated Shipbuilding Contract for Pride of America, dated February 5, 2003,
between Ship Holding LLC and Lloyd Werft Bremerhaven GmbH, as amended by addendum No. 1 dated
March 7, 2003, addendum No. 2 dated March 14, 2003 and addendum No. 3 dated July 1, 2004.*+4.20
    
    Shipbuilding Contract for Hull No. 667, dated September 15, 2003, between Arrasas Limited and
Jos. L. Meyer GmbH, as amended by addendum No. 1 dated March 25, 2004.*+4.21
    
    Shipbuilding Contract for Hull No. 668, dated September 15, 2003, between Arrasas Limited,
Pride of Hawaii, Inc. and Jos. L. Meyer GmbH, as amended by addendum No. 1 dated April 13,
2004.*+4.22
    
    Shipbuilding Contract for Hull No. S669, dated December 24, 2004, between Hull 669 Ltd., NCL
Corporation Ltd. and Jos. L. Meyer GmbH.*+4.23
    
    Shipbuilding Contract for Hull No. S670, dated May 3, 2005, between Newbuild Holding, Ltd.,
NCL Corporation Ltd. and Jos. L. Meyer GmbH.*+4.24
    
    Up to Euro 624.0 million Revolving Loan Facility Agreement, dated October 7, 2005, among NCL
Corporation Ltd., and a syndicate of international banks.**4.25
    
    Sixth Supplemental Deed, dated November 13, 2006, to $626.9 million Syndicated Term Loan,
dated as of June 26, 1999, as amended, by and among Norwegian Star Limited, Norwegian Dawn
Limited and a syndicate of international banks and a related Guarantee by NCL Corporation Ltd.
***+4.26
    
    Third Supplemental Deed, dated November 13, 2006, to $225.0 million Norwegian Sun Loan, dated
as of July 9, 2003, as amended, by and among Norwegian Sun Limited and a syndicate of
international banks and a related Guarantee by NCL Corporation Ltd.***+4.27
    
    Seventh Supplemental Deed to Euro 258.0 million Pride of America Loans and Sixth Supplemental
Deed to Euro 40.0 million Pride of America Loans, both dated November 13, 2006, to Euro 298.0
million Pride of America Loans, dated as of April 4, 2003, and amended and restated by an
agreement dated April 20, 2004, by and among Pride of America Ship Holding, Inc. and a
syndicate of international banks and a related Guarantee by NCL Corporation Ltd. ***+4.28
    
    Second Supplemental Deed, dated November 13, 2006, to $800.0 million Senior Secured Credit
Facility, dated as of July 7, 2004, as amended, by and among NCL Corporation Ltd., Norwegian
Star Limited, Norwegian Spirit, Ltd., Pride of Aloha, Inc., and a syndicate of international
banks. ***+4.29
    
    First Supplemental Deed, dated November 13, 2006, to Facility Agreement, dated September 23,
2005, in connection with Letters of Credit required by the Merchant Services Bankcard
Agreement, by and among NCL Corporation Ltd. and a syndicate of international banks. ***+4.30
    
    Second Supplemental Deed, dated April 4, 2006, and Third Supplemental Deed, dated November
13, 2006, to $334.1 million Norwegian Jewel Loan, dated as of April 20, 2004, as amended, by
and among
 71




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##### Table of Contents



Exhibitnumber
    
    Description of exhibit
 Norwegian Jewel Limited and a syndicate of international banks and a related Guarantee by
NCL Corporation Ltd. ***+4.31
    
    Third Supplemental Deed, dated November 13, 2006, to Euro 308.1 million Pride of Hawaii
Loan, dated as of April 20, 2004, as amended, by and among Pride of Hawaii, Inc. and a
syndicate of international banks and a related Guarantee by NCL Corporation Ltd. ***+4.32
    
    First Supplemental Deed, dated November 13, 2006, to up to Euro 624.0 million Revolving Loan
Facility Gem/Pearl Agreement, dated October 7, 2005, as amended, by and among NCL Corporation
Ltd. and a syndicate of international banks. ***+4.33
    
    Euro 662.9 million Syndicated Loan Facility, dated September 22, 2006, by and among F3 One,
Ltd. and a syndicate of international banks and a related Guarantee by NCL Corporation Ltd.,
for the construction of Hull C33 at Aker Yards S.A. ***+4.34
    
    Euro 662.9 million Syndicated Loan Facility, dated September 22, 2006, by and among F3 Two,
Ltd. and a syndicate of international banks and a related Guarantee by NCL Corporation Ltd.,
for the construction of Hull D33 at Aker Yards S.A. ***+4.35
    
    $610.0 million Revolving Credit Facility, dated December 22, 2006, by and between NCL
Corporation Ltd. and a syndicate of international banks for the refinancing of m.v. Norwegian
Sun and m.v. Norwegian Dawn vessels (amongst other matters). ***+4.36
    
    Amendment Agreement, dated September 1, 2006, to Bareboat Charter Agreement, dated April 20,
2004, by and between Crown Odyssey Limited and NCL (Bahamas) Ltd. ***+4.37
    
    Addendum No. 1, dated November 28, 2006, to Bareboat Charter Agreement, dated April 20, 2004,
by and between Crown Wind Limited and NCL (Bahamas) Ltd. ***+4.38
    
    Addendum No. 1, dated November 28, 2006, to Bareboat Charter Agreement, dated April 20, 2004,
by and between Ocean Dream Limited and NCL (Bahamas) Ltd. ***+4.39
    
    Addendum No. 1, dated November 28, 2006, to Bareboat Charter Agreement, dated April 20, 2004,
by and between Ocean Voyager Limited and NCL (Bahamas) Ltd. ***+4.40
    
    Addendum No. 4, dated April 28, 2005, Addendum No. 5, dated June 7, 2005, and Addendum No. 6,
dated June 25, 2005, to Amended and Restated Shipbuilding Contract for Pride of America, dated
February 5, 2003, by and between Pride of America Ship Holding, Inc. and Lloyd Werft
Bremerhaven GmbH. ***+4.41
    
    Addendum, dated February 14, 2006, and Addendum No. 3, dated April 19, 2006, to Shipbuilding
Contract for Hull No. 668, dated September 15, 2003, by and among, Arrasas Limited, Pride of
Hawaii, Inc. and Jos. L. Meyer GmbH. ***+4.42
    
    Addendum No. 1, dated February 14, 2006, to Shipbuilding Contract for Hull No. S669, dated
December 24, 2004, by and among Norwegian Pearl, Ltd., NCL Corporation Ltd. and Jos. L. Meyer
GmbH.***4.43
    
    Shipbuilding Contract for Hull No. C33, dated September 7, 2006, by and between F3 One, Ltd.
and Aker Yards S.A., and Agreement on a Modification (AOM) No. 1, dated September 7, 2006,
AOM No. 2, dated September 7, 2006, AOM No. 3, dated September 7, 2006, and AOM No. 4, dated
September 7, 2006. ***+4.44
    
    Shipbuilding Contract for Hull No. D33, dated September 7, 2006, by and between F3 Two, Ltd.
and Aker Yards S.A., and AOM No. 1, dated September 7, 2006, AOM No. 2, dated September 7,
2006, AOM No. 3, dated September 7, 2006, and AOM No. 4, dated September 7, 2006. ***+
 72




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Exhibitnumber
    
    Description of exhibit
 4.45
    
    Side Letter Agreement, dated as of September 7, 2006, by and between, F3 One, Ltd., F3 Two,
Ltd. and Aker Yards S.A.***+4.46
    
    Office Lease Agreement, dated November 27, 2006, by and between NCL (Bahamas) Ltd. and Hines
Reit Airport Corporate Center LLC and a related Guarantee by NCL Corporation Ltd., and First
Amendment, dated November 27, 2006.***+4.47
    
    Amended and Restated Bye-Laws of NCL Corporation Ltd. dated January 7, 2008.4.48
    
    Shareholders Agreement, dated August 17, 2007, by and among NCL Investment Ltd., Star
Cruises Limited and NCL Corporation Ltd.4.49
    
    Reimbursement and Distribution Agreement, dated August 17, 2007, by and among NCL Investment
Ltd., Star Cruises Limited and NCL Corporation Ltd.4.50
    
    Subscription Agreement, dated August 17, 2007, by and among NCL Investment Ltd., Star Cruises
Limited and NCL Corporation Ltd.4.51
    
    Joinder, dated January 8, 2008, to the Shareholders Agreement, dated August 17, 2007, by and
among the Company and TPG Viking I, L.P., TPG Viking II, L.P. and TPG Viking AIV III, L.P.4.52
    
    Joinder, dated January 7, 2008, to the Shareholders Agreement, dated August 17, 2007, by and
among the Company and Star NCLC Holdings Ltd.4.53
    
    Joinder, dated January 7, 2008, to the Shareholders Agreement, dated August 17, 2007, by and
among the Company and NCL Investment II Ltd.4.54
    
    Third Supplemental Deed, dated December 21, 2007, to $800.0 million Secured Loan Facility
Agreement, dated as of July 7, 2004, as amended, by and among NCL Corporation Ltd., Norwegian
Spirit, Ltd., Norwegian Star Limited, Pride of Aloha, Inc. and a syndicate of international
banks and related amended and restated Guarantees by Norwegian Spirit, Ltd., Norwegian Star
Limited and Pride of Aloha, Inc. ++4.55
    
    Second Supplemental Deed, dated December 21, 2007, to Euro 624.0 million Revolving Loan
Facility Gem/Pearl Agreement, dated as of October 7, 2005, as amended, by and among NCL
Corporation Ltd., Norwegian Pearl, Ltd., Norwegian Gem, Ltd. and a syndicate of international
banks and related amended and restated Guarantees by Norwegian Pearl, Ltd. and Norwegian Gem,
Ltd. ++4.56
    
    First Supplemental Deed, dated December 21, 2007, to $610.0 million Revolving Loan Facility
Agreement, dated as of December 22, 2006, as amended, by and among, NCL Corporation Ltd.,
Norwegian Sun Limited, Norwegian Dawn Limited and a syndicate of international banks and
related amended and restated Guarantees by Norwegian Sun Limited and Norwegian Dawn Limited.
++4.57
    
    Fourth Supplemental Deed, dated December 21, 2007, to $334.1 million Norwegian Jewel Loan,
dated as of April 20, 2004, as amended, by and among Norwegian Jewel Limited, NCL Corporation
Ltd. and a syndicate of international banks and related amended and restated Guarantee by NCL
Corporation Ltd. ++4.58
    
    Eighth Supplemental Deed to Euro 258.0 million Pride of America Loan and Seventh Supplemental
Deed to Euro 40.0 million Pride of America Loan, each dated as of April 4, 2003, each as
amended, dated December 21, 2007, by and among Pride of America Ship Holding, Inc., NCL
Corporation Ltd. and a syndicate of international banks and related amended and restated
Guarantees by NCL Corporation Ltd. ++4.59
    
    Fourth Supplemental Deed, dated December 21, 2007, to Euro 308.1 million Pride of Hawaii
Loan, dated as of April 20, 2004, as amended, by and among Pride
of Hawaii, Inc., NCL
Corporation Ltd. and a syndicate of international banks and a related amended and restated
Guarantee by NCL Corporation Ltd. ++
 73




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Exhibitnumber
    
    Description of exhibit
 4.60
    
    Fifth Supplemental Deed, dated February 10, 2008, to Euro 308.1 million Pride of Hawaii
Loan, dated as of April 20, 2004, as amended, by and among Pride
of Hawaii, Inc., NCL
Corporation Ltd. and a syndicate of international banks. ++4.61
    
    Third Supplemental Deed, dated December 21, 2007, to Facility Agreement, dated as of
September 23, 2005, as amended, in connection with Letters of Credit required by the Merchant
Services Bankcard Agreement, by and among NCL Corporation Ltd., Norwegian Sun Limited,
Norwegian Dawn Limited and a syndicate of international banks. ++4.62
    
    First Supplemental Deed, dated December 21, 2007, to Euro 662.9 million F3 One Loan, dated as
of September 22, 2006, as amended, by and among F3 One, Ltd., NCL Corporation Ltd. and a
syndicate of international banks and a related amended and restated Guarantee by NCL
Corporation Ltd. ++4.63
    
    First Supplemental Deed, dated December 21, 2007, to Euro 662.9 million F3 Two Loan, dated as of September 22, 2006, as amended, by and among F3 Two, Ltd., NCL
Corporation Ltd. and a syndicate of international banks and a related amended and restated
Guarantee by NCL Corporation Ltd. ++4.64
    
    Amendment No. 1, dated December 1, 2006, Amendment No. 2, dated March 20, 2007, Amendment No.
3, dated July 31, 2007, and Amendment No. 4, dated December 10, 2007, to Office Lease
Agreement, dated December 1, 2006, by and between Hines Reit Airport Corporate Center LLC and
NCL (Bahamas) Ltd. +4.65
    
    Amendment No. 1, dated May 22, 2007, to Shipbuilding Contract for Hull No. C33, dated
September 7, 2006, by and between F3 One, Ltd. and Aker Yards S.A. ++4.66
    
    Amendment No. 1, dated May 22, 2007, to Shipbuilding Contract for Hull No. D33, dated
September 7, 2006, by and between F3 Two, Ltd. and Aker Yards S.A. ++4.67
    
    Agreement on a Modification (AOM) No. 5, dated November 6, 2007, AOM No. 11, dated November
6, 2007, AOM No. 12, dated November 6, 2007, AOM No. 13, Revision C, dated November 6, 2007,
AOM No. 13, Revision D, dated December 15, 2007, AOM No. 14, dated November 6, 2007, AOM No.
16, dated November 6, 2007, AOM No. 18, dated November 6, 2007, AOM No. 18 A, dated December
15, 2007, AOM No. 19, dated November 6, 2007, AOM No. 22, dated November 6, 2007, AOM No. 25,
dated November 6, 2007, AOM No. 28 A, dated December 15, 2007, to Shipbuilding Contract for
Hull No. C33, dated September 7, 2006, by and between F3 One, Ltd. and Aker Yards S.A. ++4.68
    
    AOM No. 5, dated November 11, 2007, AOM No. 11, dated November 6, 2007, AOM No. 12, dated
November 6, 2007, AOM No. 13, Revision C, dated November 6, 2007, AOM No. 13, Revision D,
dated December 15, 2007, AOM No. 14, dated November 6, 2007, AOM No. 16, dated November 6,
2007, AOM No. 18, dated November 6, 2007, AOM No. 18 A, dated December 15, 2007, AOM No. 19,
dated November 6, 2007, AOM No. 22, dated November 6, 2007, AOM No. 25, dated November 6,
2007, AOM No. 28 A, dated December 15, 2007, to Shipbuilding Contract for Hull No. D33, dated
September 7, 2006, by and between F3 Two, Ltd. and Aker Yards S.A. ++8.1
    
    List of subsidiaries of NCL Corporation Ltd.*12.1
    
    Certification under Section 302 of the Sarbanes-Oxley Act of 2002.12.2
    
    Certification under Section 302 of the Sarbanes-Oxley Act of 2002.13.1
    
    Certification under Section 906 of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Incorporated herein by reference to our registration statement on Form F-4 (File No. 333-128780).**
    
    Incorporated herein by reference to our annual report on Form 20-F filed on March 29, 2006 (File
No. 333-128780). 74




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##### Table of Contents



***
    
    Incorporated herein by reference to our annual report on Form 20-F filed on March 6, 2007 (File
No. 333-128780).+
    
    Confidential treatment has been granted with respect to certain portions of this exhibit. Omitted
portions have been filed separately with the SEC.++
    
    Confidential treatment has been requested with respect to certain portions of this exhibit.
Omitted portions have been filed separately with the SEC. 75




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NCL Corporation Ltd.
Index to Consolidated Financial Statements
 Page(s)Report of Independent Registered Certified Public Accounting Firm
    
    
    F-1Consolidated Financial StatementsConsolidated Statements of Operations
for the years ended December 31, 2005, 2006 and 2007
    
    
    F-2Consolidated Balance Sheets as of December 31, 2006 and 2007
    
    
    F-3Consolidated Statements of Cash Flows
for the years ended December 31, 2005, 2006 and 2007
    
    
    F-4Consolidated Statements of Changes in Shareholders Equity
for the years ended December 31, 2005, 2006 and 2007
    
    
    F-5Notes to the Consolidated Financial Statements
    
    F-7 to F-29




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##### Table of Contents



Report of Independent Registered Certified Public Accounting Firm
    
 F-1




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##### Table of Contents



NCL Corporation Ltd.
Consolidated Statements of Operations
(in thousands of dollars)
 Years Ended December 31,2005
    
    
    2006
    
    
    2007RevenuesPassenger ticket revenues
    
    $
    1,194,461
    
    
    $
    1,438,996
    
    
    $
    1,571,772Onboard and other revenues
    
    
    435,262
    
    
    
    537,313
    
    
    
    601,043Total revenues
    
    
    1,629,723
    
    
    
    1,976,309
    
    
    
    2,172,815Cruise operating expensesCommissions, transportation and other
    
    
    328,899
    
    
    
    425,648
    
    
    
    430,670Onboard and other
    
    
    141,957
    
    
    
    186,240
    
    
    
    204,768Payroll and related
    
    
    323,621
    
    
    
    412,943
    
    
    
    436,843Fuel
    
    
    119,412
    
    
    
    164,530
    
    
    
    193,173Food
    
    
    94,105
    
    
    
    102,324
    
    
    
    120,633Ship charter costs
    
    
    28,603
    
    
    
    26,226
    
    
    
    20,384Other operating
    
    
    211,929
    
    
    
    249,471
    
    
    
    286,469Total cruise operating expenses
    
    
    1,248,526
    
    
    
    1,567,382
    
    
    
    1,692,940Marketing, general and administrative expenses
    
    
    225,240
    
    
    
    249,250
    
    
    
    287,093Depreciation and amortization expenses
    
    
    85,615
    
    
    
    119,097
    
    
    
    148,003Impairment loss
    
    
    
    
    
    
    8,000
    
    
    
    2,565Total operating expenses
    
    
    1,559,381
    
    
    
    1,943,729
    
    
    
    2,130,601Operating income
    
    
    70,342
    
    
    
    32,580
    
    
    
    42,214Non-operating (income) expensesInterest income
    
    
    (4,803
    )
    
    
    (3,392
    )
    
    
    (1,384
    )Interest expense, net of capitalized interest
    
    
    87,006
    
    
    
    136,478
    
    
    
    175,409Other (income) expenses, net
    
    
    (28,096
    )
    
    
    30,393
    
    
    
    95,151Total non-operating expenses
    
    
    54,107
    
    
    
    163,479
    
    
    
    269,176Net income (loss)
    
    $
    16,235
    
    
    $
    (130,899
    )
    
    $
    (226,962
    )
  F-2




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NCL Corporation Ltd.
Consolidated Balance Sheets
(in thousands of dollars, except share data)
 December 31,2006
    
    
    2007AssetsCurrent assets:Cash and cash equivalents
    
    $
    63,530
    
    
    $
    40,291Restricted cash
    
    
    1,226
    
    
    
    1,375Accounts receivable, net
    
    
    10,244
    
    
    
    8,173Amount due from Star Cruises Limited
    
    
    5,033
    
    
    
    235Consumable inventories
    
    
    33,392
    
    
    
    41,997Prepaid expenses and other
    
    
    24,211
    
    
    
    27,353Total current assets
    
    
    137,636
    
    
    
    119,424Property and equipment, net
    
    
    3,816,292
    
    
    
    4,243,872Restricted cash
    
    
    1,650
    
    
    
    1,682Goodwill
    
    
    400,254
    
    
    
    400,254Tradenames
    
    
    202,538
    
    
    
    202,538Other assets
    
    
    71,254
    
    
    
    65,928Total assets
    
    $
    4,629,624
    
    
    $
    5,033,698Liabilities and Shareholders EquityCurrent liabilities:Current portion of long-term debt
    
    $
    154,638
    
    
    $
    191,172Accounts payable
    
    
    116,947
    
    
    
    88,715Accrued expenses and other liabilities
    
    
    181,821
    
    
    
    202,794Advance ticket sales
    
    
    314,050
    
    
    
    332,802Total current liabilities
    
    
    767,456
    
    
    
    815,483Long-term debt
    
    
    2,405,357
    
    
    
    2,977,888Other long-term liabilities
    
    
    1,744
    
    
    
    4,801Total liabilities
    
    
    3,174,557
    
    
    
    3,798,172Commitments and contingencies (Note 9)Shareholders
equityOrdinary shares, $.0012 par value; 25,000,000 shares authorized;
10,000,000 shares issued and outstanding (Note 2)
    
    
    12
    
    
    
    12Additional paid-in capital
    
    
    1,711,114
    
    
    
    1,715,718Accumulated other comprehensive (loss) income
    
    
    (1,516
    )
    
    
    1,301Accumulated deficit
    
    
    (254,543
    )
    
    
    (481,505
    )Total shareholders equity
    
    
    1,455,067
    
    
    
    1,235,526Total liabilities and shareholders equity
    
    $
    4,629,624
    
    
    $
    5,033,698
  F-3




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##### Table of Contents



NCL Corporation Ltd.
Consolidated Statements of Cash Flows
(in thousands of dollars)
 Years Ended December 31,2005
    
    
    2006
    
    
    2007Cash flows from operating activitiesNet income (loss)
    
    $
    16,235
    
    
    $
    (130,899
    )
    
    $
    (226,962
    )Adjustments to reconcile net income (loss) to
net cash provided by operating activities:Depreciation and amortization expenses
    
    
    85,615
    
    
    
    119,097
    
    
    
    148,003Impairment loss
    
    
    
    
    
    
    8,000
    
    
    
    2,565(Gain) loss on translation of debt
    
    
    (29,418
    )
    
    
    35,122
    
    
    
    92,024Other
    
    
    3,359
    
    
    
    1,347
    
    
    
    843Changes in operating assets and liabilities:(Increase) decrease in accounts receivable
    
    
    (885
    )
    
    
    1,447
    
    
    
    2,071Increase in consumable inventories
    
    
    (10,732
    )
    
    
    (3,932
    )
    
    
    (8,605
    )(Increase) decrease in prepaid expenses and other assets
    
    
    (1,300
    )
    
    
    (535
    )
    
    
    8,013Increase (decrease) in accounts payable
    
    
    3,128
    
    
    
    43,944
    
    
    
    (28,232
    )Increase in accrued expenses and other liabilities
    
    
    20,263
    
    
    
    36,507
    
    
    
    27,859Increase in advance ticket sales
    
    
    50,563
    
    
    
    37,406
    
    
    
    18,752Net cash provided by operating activities
    
    
    136,828
    
    
    
    147,504
    
    
    
    36,331Cash flows from investing activitiesCapital expenditures
    
    
    (658,795
    )
    
    
    (809,403
    )
    
    
    (582,837
    )(Increase) decrease in restricted cash
    
    
    (19,514
    )
    
    
    45,158
    
    
    
    (181
    )Proceeds received for transfer of tradename to Star Cruises Limited
    
    
    
    
    
    
    8,000
    
    
    
    Proceeds from sale of asset
    
    
    
    
    
    
    
    
    
    
    1,440Net cash used in investing activities
    
    
    (678,309
    )
    
    
    (756,245
    )
    
    
    (581,578
    )Cash flows from financing activitiesPrincipal repayments on long-term debt
    
    
    (280,440
    )
    
    
    (809,740
    )
    
    
    (323,464
    )Proceeds from debt
    
    
    715,696
    
    
    
    1,219,557
    
    
    
    839,925Proceeds from Star Cruises Limited
    
    
    1,868
    
    
    
    4,151
    
    
    
    8,454Contribution from Star Cruises Limited
    
    
    461
    
    
    
    208,000
    
    
    
    Payment of loan arrangement fees
    
    
    (8,112
    )
    
    
    (10,113
    )
    
    
    (2,907
    )Net cash provided by financing activities
    
    
    429,473
    
    
    
    611,855
    
    
    
    522,008Net (decrease) increase in cash and cash equivalents
    
    
    (112,008
    )
    
    
    3,114
    
    
    
    (23,239
    )Cash and cash equivalents at beginning of period
    
    
    172,424
    
    
    
    60,416
    
    
    
    63,530Cash and cash equivalents at end of period
    
    $
    60,416
    
    
    $
    63,530
    
    
    $
    40,291
 Supplemental disclosures (Note 11)
  F-4




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##### Table of Contents



NCL Corporation Ltd.
Consolidated Statements of Changes in Shareholders Equity
For the Years Ended December 31, 2005, 2006 and 2007
(in thousands of dollars)
 AccumulatedAdditional
    
    
    Unamortized
    
    
    otherOrdinary
    
    
    paid-in
    
    
    share option
    
    
    comprehensive
    
    
    Accumulatedshares
    
    
    capital
    
    
    expense
    
    
    (loss) income
    
    
    deficit
    
    
    TotalBalance, December 31, 2004
    
    $
    12
    
    
    $
    1,491,623
    
    
    $
    (779
    )
    
    $
    
    
    
    $
    (139,879
    )
    
    $
    1,350,977Issuance of
share options
    
    
    
    
    
    
    94
    
    
    
    (38
    )
    
    
    
    
    
    
    
    
    
    
    56Accretion of
share option expense
    
    
    
    
    
    
    
    
    
    
    224
    
    
    
    
    
    
    
    
    
    
    
    224Adjustments
to variable share options
    
    
    
    
    
    
    64
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    64Contribution from Star Cruises Limited
(Note 5)
    
    
    
    
    
    
    10,148
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,148Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,235
    
    
    
    16,235Balance, December 31, 2005
    
    
    12
    
    
    
    1,501,929
    
    
    
    (593
    )
    
    
    
    
    
    
    (123,644
    )
    
    
    1,377,704Non-cash
share-based compensation
    
    
    
    
    
    
    1,559
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,559Reclassification
of unamortized share option expense
    
    
    
    
    
    
    (593
    )
    
    
    593
    
    
    
    
    
    
    
    
    
    
    
    Contribution from Star Cruises Limited
(Note 5)
    
    
    
    
    
    
    208,219
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    208,219Changes
related to cash flow derivative hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,516
    )
    
    
    
    
    
    
    (1,516
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (130,899
    )
    
    
    (130,899
    )Balance, December 31, 2006
    
    
    12
    
    
    
    1,711,114
    
    
    
    
    
    
    
    (1,516
    )
    
    
    (254,543
    )
    
    
    1,455,067Non-cash
share-based compensation
    
    
    
    
    
    
    948
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    948Contribution from Star Cruises Limited
(Note 5)
    
    
    
    
    
    
    3,656
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,656Changes related to cash flow derivative hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,817
    
    
    
    
    
    
    
    2,817Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (226,962
    )
    
    
    (226,962
    )Balance, December 31, 2007
    
    $
    12
    
    
    $
    1,715,718
    
    
    $
    
    
    
    $
    1,301
    
    
    $
    (481,505
    )
    
    $
    1,235,526
  F-5




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##### Table of Contents



NCL Corporation Ltd.
Consolidated Statements of Changes in Shareholders Equity
For the Years Ended December 31, 2005, 2006 and 2007
(in thousands of dollars) (continued)
  Years Ended December 31,2005
    
    
    2006
    
    
    2007Net income (loss)
    
    $
    16,235
    
    
    $
    (130,899
    )
    
    $
    (226,962
    )Changes related to cash flow derivative hedges
    
    
    
    
    
    
    (1,516
    )
    
    
    2,817Total comprehensive income (loss)
    
    $
    16,235
    
    
    $
    (132,415
    )
    
    $
    (224,145
    )Changes related to cash flow derivative hedgesAccumulated other comprehensive (loss) at beginning of year
    
    $
    
    
    
    $
    
    
    
    $
    (1,516
    )Current-period change
    
    
    
    
    
    
    (1,516
    )
    
    
    2,817Accumulated other comprehensive (loss) income at end of year
    
    $
    
    
    
    $
    (1,516
    )
    
    $
    1,301
  F-6




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##### Table of Contents



NCL Corporation Ltd.
Notes to the Consolidated Financial Statements
 1.
    
    Description of Business and OrganizationOn December 15, 2003, we were incorporated in Bermuda as a wholly-owned subsidiary of Star
Cruises Limited. In connection with our formation, Star Cruises Limited transferred the stock
it held in Arrasas Limited (Arrasas) to us. This transaction has been accounted for at
historical cost since we and Arrasas were under the common control of Star Cruises Limited.
The accompanying consolidated financial statements have been prepared as if we were in
existence on January 1, 2003. Accordingly, the consolidated statements of changes in
shareholders equity has been adjusted to reflect this capital structure for all periods
presented.During 2007, we operated three cruise brands, Norwegian Cruise Line, NCL America and Orient
Lines. As of December 31, 2007, we operated 13 ships offering cruises in Alaska, Antarctica,
the Bahamas, Bermuda, the Caribbean, Europe, Hawaii, Mexico, New England, North Africa and
Central and South America and Scandinavia. In March 2008, the charter agreement for Marco
Polowill expire and we will no longer operate under the Orient Lines brand name.On January 7, 2008, Apollo became the owners of 50% of our outstanding ordinary share capital
through an equity investment of $1.0 billion made pursuant to a subscription agreement dated
August 17, 2007 among us, Star Cruises Limited and NCL Investment Ltd. (the Subscription
Agreement) and an assignment agreement dated January 7, 2008 by and among us, Apollo and Star
Cruises Limited. The net proceeds of the equity investment was
approximately $948 million. On
January 8, 2008, TPG acquired, in the aggregate, 12.5% of our outstanding ordinary share
capital from Apollo (the TPG Investment) pursuant to a Master Agreement (we refer you to
Note 12 Subsequent Events).2.
    
    Summary of Significant Accounting PoliciesThe following accounting policies have been used consistently in the preparation of the
consolidated financial statements:Basis of PresentationThe consolidated financial statements have been prepared in accordance with generally accepted
accounting principles in the United States of America. Estimates are required for the
preparation of consolidated financial statements in accordance with generally accepted
accounting principles. Actual results could differ from those estimates. All significant
intercompany accounts and transactions are eliminated in consolidation.Revenue and Expense RecognitionDeposits received from customers for future voyages are recorded as advance ticket sales until
such passenger revenue is earned. Revenues are recognized when the relevant services have
been rendered. Passenger ticket revenues and all associated direct costs of a voyage are
recognized on a pro rata basis over the period of the voyage.Revenue and expenses include taxes assessed by a governmental authority that are directly
imposed on a revenue-producing transaction between a seller and a customer. The amounts
included on a gross basis are $68.3 million, $83.3 million and $90.6 million for the years
ended December 31, 2005, 2006 and 2007, respectively.
 F-7




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NCL Corporation Ltd.
Notes to the Consolidated Financial Statements
 Cash and Cash Equivalents
  Restricted Cash
  Accounts Receivable
  Foreign Currency
  Property and Equipment
   Useful LifeCruise ships
    
    30 yearsOther property and equipment
    
    3-20 years
   F-8




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##### Table of Contents



NCL Corporation Ltd.
Notes to the Consolidated Financial Statements
 Goodwill and Tradenames
     Consumable Inventories
  Advertising Costs
  Insurance
  F-9




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##### Table of Contents



NCL Corporation Ltd.
Notes to the Consolidated Financial Statements
 Income TaxesDeferred tax assets and liabilities are calculated in accordance with the liability method.
Deferred taxes are recorded using the currently enacted tax rates that apply in the periods
differences are expected to reverse. Deferred taxes are not discounted. In conjunction with
business acquisitions, we record acquired deferred tax assets and liabilities.We provide a valuation allowance on deferred tax assets when it is more likely than not that
such assets will not be realized. With respect to acquired deferred tax assets, future
reversals of the valuation allowance will first be applied against goodwill and other
intangibles before recognition of a benefit in the consolidated statements of operations.In June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation
No. 48, Accounting for Uncertainty in Income Taxes  an interpretation of FASB Statement
109 (FIN 48). FIN 48 prescribes a comprehensive model for recognizing, measuring,
presenting and disclosing in the financial statements tax positions taken or expected to be
taken on a tax return. The provisions of FIN 48 were effective beginning January 1, 2007
with the cumulative effect of the change in accounting principle recorded as an adjustment to
the opening balance of accumulated deficit. The adoption of FIN 48 did not have a material
impact on our consolidated financial position and results of operations.Share-Based CompensationEffective January 1, 2006, we adopted the provisions of Statement of Financial Accounting
Standards (SFAS) No. 123 (revised 2004), Share-Based Payment (SFAS 123R). SFAS 123R
requires the measurement and recognition of compensation expense at fair value for all
share-based awards over their vesting period. Prior to January 1, 2006, we accounted for
share-based compensation plans in accordance with the provisions of APB Opinion No. 25,
Accounting for Stock Issued to Employees (APB 25), and disclosed pro forma information as
if we had applied the fair value recognition provisions of SFAS No. 123, Accounting for
Stock-Based Compensation (SFAS 123).We have adopted SFAS 123R under the modified prospective application transition method.
Under this method, the share-based compensation expense recognized beginning January 1, 2006
includes compensation cost for all employee share-based awards granted prior to, but not
vested as of December 31, 2005, based on the grant date fair value originally estimated in
accordance with the provisions of SFAS 123 over their remaining vesting period. Compensation
expense associated with awards granted subsequent to January 1, 2006 will be based on the
grant date fair value estimated in accordance with the provisions of SFAS 123R. In addition,
SFAS 123R requires us to estimate the amount of expected forfeitures when calculating the
compensation expense, instead of accounting for forfeitures as they occurred, which was our
previous method. Prior period results are not restated under the modified prospective
application method. As of January 1, 2006, the cumulative effect of adopting the expected
forfeiture method was not significant.The following table illustrates the effect on net income for the year ended December 31, 2005
if we had applied the fair value recognition provisions of SFAS 123 to share-based employee
compensation (in thousands of dollars):
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NCL Corporation Ltd.
Notes to the Consolidated Financial Statements
 2005Net income
    
    $
    16,235Add:Total share-based employee compensation expense included in
net income
    
    
    343Deduct:Total share-based employee compensation expense determined
under fair value method for all awards
    
    
    (3,524
    )Pro forma net income
    
    $
    13,054
 Share Option Plans
     F-11




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##### Table of Contents



NCL Corporation Ltd.
Notes to the Consolidated Financial Statements
    Years Ended December 31,2005
    
    
    2006Dividend yield
    
    
    
    
    
    
    Expected
share price volatility
    
    
    40.2
    %
    
    
    49.9
    %Risk-free interest rate
    
    
    3.4
    %
    
    
    3.7
    %Expected option life
    
    10 years
    
    
    10 years
   Segment Reporting
 Marco Polo
  F-12




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##### Table of Contents



NCL Corporation Ltd.
Notes to the Consolidated Financial Statements
 Financial Instruments
  Recent Accounting Pronouncements
   Share Split
  F-13




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##### Table of Contents



NCL Corporation Ltd.
Notes to the Consolidated Financial Statements
 3.
    
    Property and EquipmentProperty and equipment at December 31, 2006 and 2007 consists of the following (in thousands
of dollars):
 2006
    
    
    2007Cruise ships
    
    $
    3,876,857
    
    
    $
    4,469,520Cruise ships under construction
    
    
    223,945
    
    
    
    178,445Other property and equipment
    
    
    115,813
    
    
    
    136,0244,216,615
    
    
    
    4,783,989Less: accumulated depreciation
    
    
    (400,323
    )
    
    
    (540,117
    )Total
    
    $
    3,816,292
    
    
    $
    4,243,872
    Pride of America
 F-14




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##### Table of Contents



NCL Corporation Ltd.
Notes to the Consolidated Financial Statements
 4.
    
    Long-Term DebtLong-term debt as of December 31, 2006 and 2007 consists of the following (in thousands of
dollars):
 2006
    
    
    2007$300.0 million Senior Secured Term Loan, LIBOR + applicable margin (1.50% and 1.70% at December 31, 2006 and 2007, respectively ), due through 2010
    
    $
    230,000
    
    
    $
    195,000$500.0 million Senior Secured Revolving Credit Facility, LIBOR + applicable margin (1.50% and 1.70% at December 31, 2006 and 2007, respectively), due 2010
    
    
    280,000
    
    
    
    410,000$610.0 million Senior Secured Revolving Credit Facility, LIBOR + applicable margin (1.50% at December 31, 2006 and 2007), due through 2013
    
    
    390,000
    
    
    
    490,000Euro 624.0 million Norwegian Pearland Norwegian GemRevolving Credit Facility, EURIBOR + applicable margin (1.2375% at December 31, 2006 and 2007), due through 2019
    
    
    410,753
    
    
    
    880,146$250.0 million 10 5/8% Senior Notes due through 2014
    
    
    250,000
    
    
    
    250,000Euro 258.0 million (currently U.S. dollar-denominated) Pride of AmericaHermes Loan, 5.715%, due through 2017
    
    
    266,808
    
    
    
    241,398Euro 40.0 million (currently U.S. dollar-denominated) Pride of AmericaCommercial Loan, 6.595%, due through 2017
    
    
    40,557
    
    
    
    36,694$334.1 million Norwegian JewelLoan, 6.1075%, due through 2017
    
    
    297,239
    
    
    
    270,218Euro 308.1 million Pride of HawaiiLoan, EURIBOR + 0.75%, due through 2018
    
    
    378,209
    
    
    
    381,713Other long-term debt
    
    
    16,429
    
    
    
    13,8912,559,995
    
    
    
    3,169,060Less: Current portion
    
    
    (154,638
    )
    
    
    (191,172
    )$
    2,405,357
    
    
    $
    2,977,888
  Norwegian Dawn Norwegian Sun
 F-15




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NCL Corporation Ltd.  Notes to the Consolidated Financial Statements
 At December 31, 2006 and 2007, we had long-term debt denominated in Euro with a balance of
$789.0 million and $1.3 billion, respectively. As a result of the translation of these
borrowings, we recognized a foreign currency translation gain of $29.4 million, a loss of
$35.1 million and a loss of $92.0 for the years ended December 31, 2005, 2006 and 2007,
respectively. These amounts were recorded as a component of other expenses, net, in the
consolidated statements of operations.Our availability under our $500.0 million and $610.0 million senior secured revolving credit
facilities at December 31, 2007, was $90 million and $20 million, respectively (we refer you
to Note 12 Subsequent Events).There are no restrictions in the agreements that limit intercompany borrowings or dividends
between our subsidiaries that would impact our ability to meet our cash obligations.Costs incurred in connection with the arranging of loan financing have been deferred and are
amortized over the life of the loan agreement. The amortization included in interest expense
for the years ended December 31, 2005, 2006 and 2007 was $3.9 million, $5.5 million and $7.0
million, respectively.Our debt agreements contain covenants that require us, among other things, to maintain a
minimum level of free liquidity, limit our net funded debt-to-capital ratio, and restrict our
ability to pay dividends. We were in compliance with all covenants as of December 31, 2006
and 2007. Our ships and substantially all other property are pledged as collateral for our
debt.The following is a schedule of principal repayments of the long-term debt based on the
Euro/U.S. dollar exchange rate at December 31, 2007 (in thousands of dollars):
 2008
    
    
    191,1722009
    
    
    191,1802010
    
    
    741,9292011
    
    
    206,4342012
    
    
    204,889
 We had an accrued interest liability of $35.1 million and $41.4 million at December 31,
2006 and 2007, respectively.For more on our Debt we refer you to Note 12 Subsequent Events.5.
    
    Related Party DisclosuresIn April 2004, Star Cruises Limited completed a reorganization transaction (the
Reorganization) which included the formation of NCL Corporation Ltd. (we refer you to Note
1). As part of the Reorganization, we transferred six ships to Star Cruises Limited and
entered into charter agreements for the six ships with Star Cruises Limited for periods
ranging from one to six years. As of December 31, 2007, we have three ships remaining under
the charter agreements, Norwegian Majesty, Norwegian Dreamand Marco Polo.We are required to
return the ships at the end of the term of the charter agreements in the same condition as
when the ships were delivered to us at the commencement of the charter term. In March 2008,
the charter agreement for Marco Polowill expire and we will no longer operate under the
Orient Lines brand name.Amounts due from Star Cruises Limited at December 31, 2006 and 2007 of $5.0 million and $0.2
million, respectively, are non-interest bearing and represent short-term intercompany
transactions.
 F-16




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##### Table of Contents



NCL Corporation Ltd.  Notes to the Consolidated Financial Statements
 In 2006, we transferred the Orient Lines tradename to Star Cruises Limited for $16.0 million
and recognized an impairment loss of $8.0 million. The proceeds received from the transfer in
excess of the net book value of the Orient Lines tradename have been recorded as a capital
contribution from Star Cruises Limited in our consolidated statement of changes in
shareholders equity for the year ended December 31, 2006. During 2006, we received $208.0
million in capital contributions from Star Cruises Limited including the amount related to the
Orient Lines tradename.In addition, for the years ended December 31, 2005 and 2006 we recorded legal and other costs
in the amounts of $10.1 million and $0.2 million, respectively, all of which was reimbursed to
us by Star Cruises Limited. For the year ended December 31, 2007, we received $3.7 million
reimbursed to us by Star Cruises Limited for ship-related costs.At December 31, 2007, the Lim Family directly and indirectly controls approximately 53% of
Star Cruises Limited, which in turn owns 100% of our equity (we refer you to Note 12
Subsequent Events).6.
    
    Financial InstrumentsReported fair values are 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
realized as of the balance sheet date or that will be realized in the future and do not
include expenses that could be incurred in an actual sale or settlement. Our financial
instruments are not held for trading or speculative purposes.Our exposure under foreign currency contracts, interest rate and fuel hedging agreements is
limited to the cost of replacing the contracts in the event of non-performance by the
counterparties to the contracts. To minimize this risk, we select counterparties with credit
risks acceptable to us. Furthermore, foreign currency forward contracts are denominated in
primary currencies.The following are the fair values and methods used to estimate the fair values of our
financial instruments:Cash and Cash EquivalentsThe carrying amounts of cash and cash equivalents approximate their fair values due to the
short term maturity of these instruments.Long-Term DebtAs of December 31, 2006 and 2007, the fair value of our long-term debt, including the current
portion, was $2,579.2 million and $3,193.4 million, respectively, which was $19.2 million more
and $24.4 million more, respectively, than the carrying values. The difference between the
fair value and carrying value of our long-term debt is due to our variable rate debt
obligations carrying interest rates that are above or below market rates at the measurement
dates. The fair value of our long-term debt is estimated based on rates currently available
to us for the same or similar terms and remaining maturities.Market risk associated with our long-term fixed rate debt is the potential increase in fair
value resulting from a decrease in interest rates. Market risk associated with our long-term
floating rate debt is the potential increase in interest expense from an increase in interest
rates.
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NCL Corporation Ltd.  Notes to the Consolidated Financial Statements
 Foreign Currency ContractsAs of December 31, 2007, we had foreign currency forward contracts related to Euro-denominated
contractual obligations with an aggregate notional amount of $108.8 million maturing through
April 2008. We had no contracts as of December 31, 2006. The fair values of our foreign
currency forward contracts are estimated using current market prices for similar instruments.
Our exposure to market risk for fluctuations in foreign currency exchange rates primarily
relates to the debt being used to finance two ship construction contracts and forecasted
transactions. We use foreign currency forward contracts and purchase options to mitigate the
impact of fluctuations in foreign currency exchange rates. During 2007, we included a $4.6
million gain related to forward contracts in our consolidated statement of operations.Fuel Swap AgreementsThe fair values of our fuel swap agreements were estimated based on quoted market prices for
similar or identical financial instruments to those we hold. Our exposure to market risk for
changes in fuel prices relates to the forecasted consumption of fuel on our ships. We use
fuel swap agreements to mitigate the impact of fluctuations in fuel prices. As of December
31, 2006, we had fuel swap agreements to pay fixed prices for fuel with an aggregate notional
amount of $18.9 million and an unrealized unfavorable fair value of $1.6 million maturing
through June 2007. As of December 31, 2007, we had fuel swap agreements to pay fixed prices
for fuel with an aggregate notional amount of $32.1 million and an unrealized favorable fair
value of $1.3 million maturing through December 2008.7.
    
    Employee Benefits and Share Option PlansEmployee Share Option PlansIn November 2000, Star Cruises Limited adopted a Post-listing Employee Share Option Scheme
(Share Option Scheme) for the employees of Star Cruises Limited and our employees that
provides for the granting of share options in Star Cruises
Limiteds common shares. The share
options are exercisable over a ten year period from the date the share options are awarded.
Fifty percent of the total share options granted vests as follows: 30% two years from the
award date, 20% three years from the award date and an additional 10% annually in the
subsequent years until the options are fully vested. The other 50% of
the total share options
granted vests pursuant to the same schedule assuming that we achieve certain performance
targets, as defined in the Share Option Scheme. Pursuant to the terms of the grant award, the
employee is required to sign and return documentation of acceptance
of the share option award
along with U.S. $1.00 consideration.In August 2004, Star Cruises Limited authorized the additional grant of approximately
7,974,000 share options to our management under the Post-Listing Employee Share Option Scheme.
The terms and conditions are consistent with the previous options granted under the
Post-Listing Employee Share Option Scheme with the exception that the options vest two years
from the award date.On December 28, 2006, Star Cruises Limited completed the
issuance of 1,484,084,467 rights shares. As a result of the rights issue, the exercise price and the number of ordinary shares
issuable upon exercise in full of the outstanding share options have been adjusted
accordingly. At such date, 499 employees received 3,073,108 incremental shares due to the
rights offering. This rights offering has been accounted for as a modification under SFAS
123R and has resulted in an incremental expense of $0.3 million as of the modification date,
December 28, 2006. The extended
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NCL Corporation Ltd.  Notes to the Consolidated Financial Statements
 binomial options pricing model was used to estimate the incremental fair value, (i.e., the
difference between the fair value of the modified share options and that of the original share
options).As of December 31, 2007, outstanding share options granted to NCLs employees (including
directors) under the Pre-listing Employee Share Option Scheme and the Post-listing Employee
Share Option Scheme totaled 519,170 at an exercise price of $0.40 per share and 50,364,470
with a weighted-average exercise price of $0.34 per share, respectively, including 2,595,853
and 1,687,305 granted to directors and executive officers, respectively.Pertinent information covering the options granted pursuant to the Share Option Scheme is as
follows:
 WeightedWeighted
    
    AverageAverage
    
    RemainingNumber of
    
    Option
    
    Exercise
    
    ContractualShares
    
    Price
    
    Price
    
    Life
    
    DateOutstanding at
December 31, 2006
    
    
    50,988,055
    
    
    $
    0.21-$0.36
    
    
    $
    0.34
    
    
    
    5.92
    
    
    
    2012-14Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    (623,585
    )
    
    $
    0.21-$0.36
    
    
    $
    0.34
    
    
    
    4.64
    
    
    
    2012-14Outstanding at
December 31, 2007
    
    
    50,364,470
    
    
    $
    0.21-$0.36
    
    
    $
    0.34
    
    
    
    4.92
    
    
    
    2012-14Options exercisable at
December 31, 2007
    
    
    36,831,725
    
    
    $
    0.21-$0.36
    
    
    $
    0.33
 Significant option groups outstanding at December 31, 2007 and related price and life
information is as follows:
 Options Outstanding
    
    Options ExercisableWeightedWeighted
    
    Average
    
    Exercisable
    
    WeightedOutstanding at
    
    Average
    
    Remaining
    
    at
    
    AverageDecember 31,
    
    Exercise
    
    Contractual
    
    December 31,
    
    ExerciseExercise Price
    
    2007
    
    Price
    
    Life
    
    2007
    
    Price$0.36
    
    
    43,687,964
    
    
    $
    0.36
    
    
    
    4.66
    
    
    
    30,155,219
    
    
    $
    0.36$0.21
    
    
    6,676,506
    
    
    $
    0.21
    
    
    
    6.65
    
    
    
    6,676,506
    
    
    $
    0.2150,364,470
    
    
    $
    0.34
    
    
    
    4.92
    
    
    
    36,831,725
    
    
    $
    0.33
 As of December 31, 2007, the aggregate intrinsic value of options outstanding and exercisable
are $425,506 and $586,546, respectively.As of December 31, 2007, there was $1.8 million of total unrecognized compensation cost
related to unvested share options. This cost is expected to be recognized over a
weighted-average period of 2.4 years.The Share Option Scheme provides that a former employee must pay in cash to us liquidated
damages, as defined, in the Share Option Scheme, if the employee leaves us and engages in
any trade, employment, business or activity for six months after leaving us that would be
considered in competition with the work done for us. The liquidated damages is equivalent to
a percentage of the capital appreciation of the share option, defined as the difference
between the market price of the
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NCL Corporation Ltd.  Notes to the Consolidated Financial Statements
 shares on the date of the exercise of the share option and
the exercise price of the share
option, less the amount of any income taxes paid.Benefit PlansIncentive Bonus Plans. We maintain annual and long-term incentive bonus plans for our senior
executives and other key employees. Bonuses under these plans become earned and payable based
on both the Companys and each individuals performance during the applicable performance
period. Company performance criteria include attainment of EBITDA and revenue targets, and
the attainment of other strategic objectives.We have a frozen defined contribution plan (the Plan) for our shoreside employees.
Effective January 1, 2002, the Plan was amended to cease future employer contributions. The
Plan is subject to the provisions of the Employment Retirement Income Security Act of 1974
(ERISA).In addition, we maintain a 401(k) Plan (the 401(k) Plan). The 401(k) Plan covers
substantially all our shoreside employees. Participants may contribute up to 100% of eligible
compensation each pay period, subject to certain limitations. We make matching contributions
equal to 100% of the first 3% and 50% of the next 7% of the participants contributions and
such contributions shall not exceed 6.5% of each participants compensation. Our matching
contributions are vested according to a five-year schedule.We maintain an unfunded Supplemental Executive Retirement Plan (SERP Plan), a defined
contribution plan, for certain of our key employees whose benefits are limited under the Plan
and the 401(k) Plan. We record an expense for amounts due to the SERP Plan on behalf of each
participant that would have been contributed without regard to any limitations imposed by the
U.S. Internal Revenue Code (the Code).Our contributions are reduced by contributions forfeited by those employees who leave the
schemes prior to vesting fully in the contributions. Approximately $0.10 million, $0.13
million and $0.22 million of the forfeited contributions were utilized in each of the years
ended December 31, 2005, 2006 and 2007, respectively. As of December 31, 2006 and 2007,
approximately $0.04 million were available to reduce future contributions.In addition, we maintain an unfunded Supplemental Senior Executive Retirement Plan (SSERP
Plan), a defined benefit plan, for selected senior executives. We have recorded an accrual
at December 31, 2006 and 2007 of approximately $8.6 million and $9.5 million, respectively,
with respect to the SSERP Plan in the accompanying consolidated balance sheets. We record an
expense related to the SSERP Plan for such amounts based on the following actuarial
assumptions: 5% discount rate and 5% annual increase in compensation.We recorded expenses related to the above described defined contribution plans and SSERP Plan
of approximately $3.2 million, $1.6 million and $4.2 million for the years ended December 31,
2005, 2006 and 2007, respectively. No amounts are required to be or were contributed under
the SERP or SSERP Plan by us as of December 31, 2005, 2006 and 2007 as the SERP and SSERP
Plans are unfunded.
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NCL Corporation Ltd.  Notes to the Consolidated Financial Statements
 8.
    
    Income TaxesWe are incorporated in Bermuda. Our subsidiary, Arrasas Limited, which is
incorporated in the Isle of Man, is not subject to income tax in respect of activities
undertaken outside the Isle of Man.Historically, NCL Holdings ASA (NCLH) and its subsidiaries were subject to tax in Norway.
However, during 2001, Arrasas Limited completed a restructuring of NCLH and its subsidiaries.
In connection with the restructuring, Norwegian Cruise Line Limited (NCLL), a Bermuda based
operating subsidiary, became a directly held subsidiary of Arrasas and accordingly the profits
of NCLL are no longer subject to taxation in Norway. NCLH and NCL Cruises Ltd. remain within
the Norwegian tax regime and are currently dormant.Deferred tax assets and liabilities that relate to our Norwegian taxes comprised the following
at December 31, 2006 and 2007 (in thousands of dollars):
 2006
    
    
    2007Deferred tax assets:Loss carryforwards
    
    $
    59,560
    
    
    $
    62,419Shares in NCL Cruises Ltd.
    
    
    56,184
    
    
    
    86,258Pension obligation
    
    
    589
    
    
    
    641Others
    
    
    458
    
    
    
    369116,791
    
    
    
    149,687Valuation allowance
    
    
    (116,791
    )
    
    
    (149,687
    )Total net deferred taxes
    
    $
    
    
    
    $
    
 Due to recently enacted legislation, taxable losses can be carried forward indefinitely.
Total losses available for carry forward related to NCLH as of December 31, 2006 and 2007 are
$212.7 million and $222.9 million, respectively.The valuation allowance for deferred tax is in respect of future tax benefits attributable to
NCLH and arising prior to its acquisition by us. If these assets are realized, the benefit
will be allocated to reduce goodwill arising on the acquisition of NCLH.In addition, we are subject to U.S. federal income taxation with respect to certain income
derived from our foreign-flagged operations and the income derived from our U.S. subsidiaries.Our foreign-flagged operations derive income from the international operation of ships
(Shipping Income). Under section 883 of the Code, certain foreign corporations, though
engaged in the conduct of a trade or business within the U.S., are exempt from U.S. federal
income taxes on (or in respect of) gross income derived from the international operation of
ships. We believe that substantially all of our income from the international operation of
ships is properly categorized as exempt Shipping Income.Effective for taxable years beginning after September 24, 2004, the Internal Revenue Service
issued final regulations interpreting section 883 of the Code. These final regulations list
several items of income which are not considered to be incidental to the international
operation of ships and, to the extent derived from U.S. sources, are subject to U.S. federal
income taxes. Income items considered non-incidental to the international operation of ships
include income from the sale of single-day cruises, shore excursions, air and other
transportation, and pre- and post-cruise land packages. We recorded an income tax provision
of $1.2 million, a benefit of $1.2 million and
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NCL Corporation Ltd.  Notes to the Consolidated Financial Statements
 income tax provision of $0.7 million for the years ended December 31, 2005, 2006 and 2007,
respectively (we refer you to Note 12 Subsequent Events for changes in tax status due to the
Apollo transactions effective January 2008).Income derived from our U.S. subsidiaries generally is subject to U.S. federal income taxation
at graduated rates of up to 39%, after an allowance for deductions. U.S.-source dividends
paid by NCL America generally would be subject to a 30% withholding tax.Deferred tax assets and liabilities that relate to our U.S. subsidiaries are comprised of the
following at December 31, 2006 and 2007 (in thousands of dollars):
 2006
    
    
    2007Deferred tax assets:Loss carryforwards
    
    $
    154,198
    
    
    
    229,574Start-up expenses
    
    
    12,063
    
    
    
    10,641Disallowed interest
    
    
    16,975
    
    
    
    25,323Translation loss and other
    
    
    6,057
    
    
    
    18,565Allowances and accruals
    
    
    2,678
    
    
    
    2,383Total deferred tax assets
    
    $
    191,971
    
    
    $
    286,486Deferred tax liabilities:Deprecation and amortization
    
    
    (98,991
    )
    
    
    (149,172
    )Capital leases and other
    
    
    (401
    )
    
    
    (425
    )Total deferred tax liabilities
    
    
    (99,392
    )
    
    
    (149,597
    )Net deferred tax assets
    
    
    92,579
    
    
    
    136,889Valuation allowance
    
    
    (92,579
    )
    
    
    (136,889
    )Total net deferred taxes
    
    $
    
    
    
    $
    
 A valuation allowance has been provided against the net deferred tax asset since these
operations do not have a history of profitable operations. Therefore, realization of the
deferred tax asset can not be assured at this time. We continue to evaluate the realizability
of the deferred tax assets and this estimate is subject to change.Our U.S. subsidiaries have cumulative operating loss carryforwards for federal and state tax
purposes of approximately $393.8 million and $586.2 million at December 31, 2006 and 2007,
respectively, originally expiring at various times commencing in 2024
(we refer you to Note 12
Subsequent Events).
 9
    
    Commitments and Contingencies
 (a)
    
    Operating leasesWe operate principally in leased premises. Rent payable under non-cancelable operating
lease commitments, primarily for offices and motor vehicles, was $6.9 million, $9.0
million and $10.6 million for the years ended December 31, 2005, 2006 and 2007,
respectively.At December 31, 2007, minimum annual rentals for non-cancelable leases with initial or
remaining terms in excess of one year were as follows (in thousands of dollars):
 2008
    
    $
    6,6512009
    
    
    6,2082010
    
    
    4,807
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NCL Corporation Ltd.  Notes to the Consolidated Financial Statements
 2011
    
    
    4,0212012
    
    
    3,789Total
    
    $
    25,476
 Rental payments applicable to such operating leases are recognized on a straight-line
basis over the term of the lease.(b)
    
    Ship chartersWe have charter agreements with Star Cruises Limited for ships in connection with the
Reorganization (we refer you to Note 5). Charter expenses for these ships were $28.6
million, $26.2 million and $20.4 million for the years ended December 31, 2005, 2006 and
2007, respectively.At December 31, 2007, remaining charter payments are $12.4 million in 2008 and $4.8
million in 2009.(c)
    
    Capital expendituresAs of December 31, 2007, we had two ships on order for additional capacity of
approximately 8,400 berths with scheduled deliveries in the first and third quarters of
2010. The aggregate cost of the ships under construction and on firm order is
approximately $2.4 billion, of which we have paid $0.2 billion based on the Euro/U.S.
dollar exchange rate at December 31, 2007. The remaining costs of the ships on order as
of December 31, 2007 are exposed to fluctuations in the Euro/U.S. dollar exchange rate
at December 31, 2007.As of December 31, 2007, we anticipate that capital expenditures, including the two ships
under construction and on firm order, will be approximately $0.2 billion, $0.4 billion
and $2.0 billion for the years ending December 31, 2008, 2009 and 2010, respectively.(d)
    
    Material litigation
 (i)
    
    A proposed class action suit was filed on August 1, 2000 in the
U.S. District Court for the Southern District of Texas against us, alleging that
we violated the Americans with Disabilities Act of 1990 (ADA) in our treatment
of physically impaired passengers. The same plaintiffs also filed on the same
date a proposed class action suit in a Texas state court alleging that we and a
third party violated Texas Deceptive Trade Practices and Consumer Protection
Act. The state courts grant of our motion for summary judgment was reversed in
part on appeal and remanded for trial. On June 6, 2005, the U.S. Supreme Court
ruled in the Federal matter that the ADA is applicable to foreign-flagged cruise
ships that operate in U.S. waters to the same extent that it applies to
U.S.-flagged ships. The U.S. Supreme Court remanded the case to the Fifth
Circuit Court of Appeals to determine which claims in the lawsuit remain and the
Fifth Circuit remanded the case to the trial court. We believe that we have
meritorious defenses to these claims and, accordingly, are defending vigorously
this action.(ii)
    
    A proposed class action suit was filed on May 17, 2001 in the U.S.
District Court for the Southern District of New York alleging that during the
period from January 1998 through March 2005, we failed to pay unlicensed seafarers
overtime wages in accordance with their contracts of employment. The court
entered an order certifying
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NCL Corporation Ltd.  Notes to the Consolidated Financial Statements
 the case as a class action. In March 2005, the parties reached a settlement
which was subsequently approved by the court. We have fulfilled our obligations
under the settlement agreement. The satisfaction of the settlement did not have
a material impact on our financial position, results of operations or cash flows.(iii)
    
    In May 2003, an explosion in the boiler room onboard Norway
resulted in the death of eight crew members and the injury of approximately 20
other crew members. All personal injury claims stemming from this incident have
been resolved. The National Transportation Safety Board has concluded its
investigation and issued its final report and the incident remains under criminal
investigation by the United States Attorneys Office for the Southern District of
Florida through an impaneled grand jury proceeding. We are cooperating with this
investigation.(iv)
    
    On June 16, 2006, a complaint was filed against us in the Circuit
Court of Miami-Dade County, Florida, alleging breach of contract and fraudulent
misrepresentation stemming from two 2004 charter sailings of Pride of Aloha. We
believe that we have meritorious defenses to these claims and, accordingly, are
defending vigorously this action.(v)
    
    On August 24, 2006, we were served with a complaint by the U.S.
Equal Employment Opportunity Commission to correct alleged unlawful employment
practices on the basis of national origin and religion and to provide relief to
seven former employees who were allegedly terminated as a result of same. The
seven former employees joined the action as Plaintiff-Intervenors. The case has
been set for trial in the United States District Court for the District of
Hawaii on May 6, 2008. We believe that we have meritorious defenses to these
claims and, accordingly, are defending vigorously this action.(vi)
    
    In 2008, several proposed class action suits were filed in the
U.S. District Court for the Southern District of Florida alleging violations of
the Sherman Antitrust Act and the Florida Deceptive and Unfair Trade Practices
Act stemming from the Companys implementation of a passenger fuel supplement.
We believe that we have meritorious defenses to these claims and accordingly,
are defending vigorously this action.(x)
    
    In the normal course of our business, various other claims and
lawsuits have been filed or are pending against us. Most of these claims and
lawsuits are covered by insurance and, accordingly, the maximum amount of our
liability is typically limited to our deductible amount. Nonetheless, the
ultimate outcome of these claims and lawsuits that are not covered by insurance
cannot be determined at this time. We have evaluated our overall exposure with
respect to all of our threatened and pending litigation. To the extent
required, we have accrued amounts for all estimable probable losses associated
with our deemed exposure. We are currently unable to estimate any other
potential contingent losses beyond those accrued, as discovery is not complete
nor is adequate information available to estimate such range of loss or
potential recovery. As discussed above, we intend to vigorously defend our
legal position on all claims and, to the extent necessary, seek recovery. At
December 31, 2007, we had accrued amounts of approximately $6.6 million for the
above pending legal matters.
 (e)
    
    Commitments
 We have future commitments to pay for usage of certain port facilities as follows at
December 31, 2007 (in thousands of dollars):
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NCL Corporation Ltd.  Notes to the Consolidated Financial Statements
 2008
    
    $
    7,8152009
    
    
    14,0852010
    
    
    14,1692011
    
    
    13,9742012
    
    
    14,500Thereafter
    
    
    80,333Total
    
    $
    144,876
 (f)
    
    Credit Card Processor
 As of December 31, 2007 we had a letter of credit facility not to exceed $100 million,
which collateralized the risk in processing our credit card sales transactions (we refer
you to Note 12 Subsequent Events.)
 (g)
    
    Other
 Certain contracts we enter into include indemnification
provisions that obligate us to make payments to the counterparty if
certain events occur. The indemnification clauses are often standard
contractual terms that are entered into in the normal course of
business. There are no stated or notional amounts included in the
indemnification clauses and we are not able to estimate the maximum
potential amount of future payments, if any, under these
indemnification clauses. We have not been required to make any
payments under such clauses in the past, and do not believe that,
under current circumstances, a request for indemnification is
probable.
 10.
    
    Insurance Arbitration AwardIn June 2007, we received an arbitration award in connection with a claim brought against our
former insurer. Accordingly, we recorded $3.5 million as income in other operating in our
consolidated statements of operations.11.
    
    Supplemental Cash Flow InformationFor the years ended 2005, 2006 and 2007 we had interest expense paid of $106.8 million, $139.0
million and $175.9 million, respectively.For the years ended 2005, 2006 and 2007 we had non-cash investing activities related to
capital leases of $10.3 million, $8.4 million and $0.6 million, respectively.12.
    
    Subsequent Events(a) Apollo Transactions:On January 7, 2008, Apollo became the owners of 50% of our outstanding
ordinary share capital through an equity investment of $1.0 billion made pursuant to the
Subscription Agreement, described below and an assignment agreement dated January 7, 2008 by
and among us, Apollo and Star Cruises Limited. The net proceeds of the equity investment
(approximately $948 million) have been used to repay existing indebtedness of $900.0 million
on our revolving credit facilities and will be available for general corporate purposes.On January 8, 2008, TPG acquired, in the aggregate, 12.5% of our outstanding ordinary share
capital from Apollo, the TPG Investment pursuant to a Master Agreement. However, each TPG
affiliate purchasing ordinary shares is considered a member of Apollo (as defined in the
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NCL Corporation Ltd.  Notes to the Consolidated Financial Statements
 Shareholders Agreement) described below and all ordinary shares purchased by TPG are deemed
owned by Apollo for all purposes under the Shareholders Agreement. In connection with the TPG
Investment, TPG signed a joinder to the Shareholders Agreement pursuant to which, among other
things, TPG agreed that, subject to certain specified limitations, Apollo shall have the right
to vote the ordinary shares held by TPG and consent to proposed
dispositions of their ordinary shares.In connection with the transactions described above, we entered into a reimbursement and
distribution agreement, a shareholders agreement and a subscription agreement each of which
are described below.The Reimbursement and Distribution AgreementOn August 17, 2007 Star Cruises Limited, NCL Investment Ltd. and we entered into a
reimbursement and distribution agreement (the Reimbursement and Distribution Agreement)
which sets out arrangements in relation to the business of NCLA (the NCLA Business). The
Reimbursement and Distribution Agreement became effective on January 7, 2008.The main purpose of the agreement is to allow for time to assess the viability of the NCLA
Business after certain structural and operational changes have been implemented.As part of the Reimbursement and Distribution Agreement, Star Cruises Limited had agreed to
subsidize certain cash losses of NCLA and NCL Investment Ltd. had agreed to jointly evaluate
with Star Cruises Limited the business operations of NCLA before making a decision as to
whether or not to continue the NCLA Business.We anticipate funding any payments to Star Cruises Limited under the Reimbursement and
Distribution Agreement by the use of funds generated from the incurrence of additional
indebtedness from existing or new debt facilities.The Shareholders AgreementOn August 17, 2007 we, NCL Investment Ltd. and Star Cruises Limited entered into the
Shareholders Agreement to regulate the affairs relating to our management and the rights and
obligations of Apollo and Star Cruises Limited as shareholders. The Shareholders Agreement
became effective on January 7, 2008. Both NCL Investment II Ltd. and Star NCLC Holdings Ltd.
(on January 7, 2008), a wholly-owned subsidiary of Star Cruises Limited, along with TPG (on
January 8, 2008) have become parties to the Shareholders Agreement through separate joinder
agreements.Apollo and Star Cruises Limited are entitled to appoint three and two members to our Board of
Directors, respectively. Pursuant to a separate agreement between Apollo and TPG, TPG shall
be entitled to designate a non-voting observer who is permitted to attend meetings of our
Board of Directors.Subject to Star Cruises Limiteds consent rights as described below, Apollo has the right to
vote the shares held by Star Cruises Limited. In the event that the ratio of the aggregate
holding of equity securities of Apollo (and certain of their
permitted transferees) to the
holding of equity securities of Star Cruises Limited (and certain of their permitted
transferees, including TPG) falls below 0.6, these rights will cease.Provided the shareholding ratios (as described above) remain, certain reserved matters may not
be carried out without the prior consent of Star Cruises Limited, which include, among others,
the following:
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NCL Corporation Ltd.  Notes to the Consolidated Financial Statements
  any acquisitions or divestitures with the aggregate consideration paid or received
exceeding $200 million; the primary issuance by us of equity securities in a public offering (other than in
the case of the initial public offering of primary ordinary shares, if the number of ordinary shares proposed to be issued in the initial public offering does not exceed 20% of the
ordinary shares that would be outstanding after giving effect to the initial public offering); subject to limited exceptions, the issuance by us of equity securities in a private
offering to third parties; any capital expenditures with the aggregate amount exceeding $20 million; declaring or paying any non-pro rata dividends or distributions; any changes to our memorandum of association or bye-laws.Subject to limited exceptions, each shareholder shall have the right to participate on a pro
rata basis in any issue of new shares. In addition, at any time after 24 months from January
7, 2008, Apollo and Star Cruises Limited will have the right to make written requests to us to
register and thereby transfer all or a portion of its equity securities in us through share
offerings, provided that the initial registration may only be made in connection with an
underwritten public offering of ordinary shares in which the managing underwriter is a
nationally recognized bulge bracket investment bank and following which (i) we reasonably
expect to qualify for the exemption from US federal income tax set forth in Section 883 of the
Internal Revenue Code of 1986, as amended, or any successor provision and (ii) such ordinary shares are listed on the New York Stock Exchange, Nasdaq or the London Stock Exchange (a
Qualified Public Offering). Following an initial public offering, TPG also have certain
registration rights.Unless a Qualified Public Offering has occurred whereby Apollo sell any of their shares or any
initial public offering of our primary ordinary shares has occurred to which Star Cruises
Limited has not given its prior written consent, at any time after 54 months from January 7,
2008, Apollo shall be entitled to sell all, but not less than all, of its equity securities to
a third party in cash, provided that Apollo shall first offer Star Cruises Limited the right
to acquire (or cause one or more of its designees to acquire) such equity securities on such
terms and conditions as may be specified by Apollo. Additionally, the Shareholders Agreement
contains certain drag along and tag along rights.Our shareholders and we are also parties to a United States Tax Agreement in which certain tax
matters are addressed.The Subscription AgreementOn August 17, 2007, Star Cruises Limited, NCL Investment Ltd. and we entered into a
subscription agreement (the Subscription Agreement) which set out the terms for the $1
billion equity investment by, and issuance of shares, to NCL Investment Ltd. NCL Investment
Ltd. assigned to NCL Investment II Ltd. a portion of its rights and obligations under the
Subscription Agreement pursuant to an assignment agreement dated January 7, 2008.Under the Subscription Agreement, we and Star Cruises Limited have agreed to cooperate with
each other in developing our respective cruise line businesses, provided that such obligations
to
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NCL Corporation Ltd.  Notes to the Consolidated Financial Statements
 cooperate do not extend to any such efforts that could reasonably be expected to have an
adverse effect on the operation or prospects of such partys respective cruise line business.In addition, subject to the terms below, NCL Investment Ltd. and Star Cruises Limited have
also indemnified each other for certain losses arising from breaches of representations,
warranties and covenants made by us, Star Cruises Limited and NCL Investment Ltd. Both NCL
Investment Ltd.s and Star Cruises Limiteds indemnity obligations relating to breaches of
representations and warranties are limited to losses relating to breaches of fundamental
representations and warranties to the extent such breaches occurred prior to or on April 30,
2008, subject to certain exceptions for fraudulent or knowing and intentional
misrepresentations and except as set forth in the following. In addition, Star Cruises Limited
is obligated to indemnify NCL Investment Ltd. and its affiliates for losses relating to
certain undisclosed liabilities, provided that such obligations are limited to those
undisclosed liabilities that existed as of January 7, 2008 and of which Star Cruises Limited
had actual knowledge on such date. Star Cruises Limiteds indemnity obligations relating to
undisclosed liabilities shall not exceed $20 million, either individually or in the aggregate,
subject to certain exceptions for fraudulent or knowing and intentional misrepresentations.Star Cruises Limited may elect in its sole discretion to satisfy all or a portion of its
indemnity obligations in cash or by issuing additional ordinary shares of the Company to NCL
Investment Ltd.(b) Tax considerations:In general, Section 382 of the Internal Revenue Code, or IRC Section
382, places annual limitations on the use of net operating loss carryovers in existence at
the time of an ownership change. The change in ownership on January 7, 2008 resulted in an
IRC Section 382 limitation on the entire amount of the loss carryforwards of the U.S.
subsidiaries. The utilization of these loss carryforwards in future years is limited to an
annual limitation increased by the amount of any net unrealized built-in gain, or NUBIG
which is realized during a five year period ending five years after the change in ownership.
We estimate the NUBIG on January 7, 2008 will exceed the cumulative net operating loss
carryovers.Effective January 7, 2008, NCL became classified as a partnership for U.S. federal tax
purposes (other than for U.S. federal employment and excise tax purposes) and, generally, for
state income tax purposes. (For the period from January 1, 2008,
until January 7, 2008, NCL was classified as a disregarded entity for U.S. federal tax purposes (other than for U.S.
federal employment and excise tax purposes) and, generally, for state income tax purposes.)
As a result of NCLs classification as a partnership for U.S. federal tax purposes, its
non-U.S. partners, and not NCL itself, are required to satisfy the Stock Ownership Test or
another section 883 stock ownership test. As a partnership with non-U.S. partners, NCL is
subject to certain withholding obligations under section 1446, relating to a partnerships
obligation to withhold on certain income that is effectively connected with a U.S. trade or
business and that is allocable to any non-U.S. partner. NCL is not required to withhold under
section 1446 with respect to income allocable to a partner that is excluded from gross income
and is exempt from U.S. federal income tax pursuant to section 883. If section 883 of the
Code does not apply to NCLs non-U.S. partners for the 2008 and future taxable years, they may
be subject to U.S. corporate income tax, as described above in respect of NCL for past taxable
years.(c) 10 5/8% Senior Notes and Long-Term Debt:Under the terms of the indenture dated July 15,
2004 between us and The Bank of New York Trust Company, N.A. (as successor to JPMorgan Chase
Bank), as trustee, governing our 10 5/8% Senior Notes due 2014 (the Notes), the Apollo
investment constitutes a change of control requiring us, within 30 days of the closing of
the investment, to offer to repurchase any and all of the outstanding Notes at a purchase
price equal to
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NCL Corporation Ltd.  Notes to the Consolidated Financial Statements
 101% of the outstanding principal amount of the Notes, together with all accrued but unpaid
interest up to but not including the date of repurchase. Accordingly, we offered to
repurchase these Notes on February 5, 2008 with expiration of the offer to repurchase on March
7, 2008. During this period, the purchase price of the Notes tendered was
$246.6 million paid through a draw down from our available
revolving credit facilities.As a result of the equity investment by Apollo, under the terms of the facility, our availability under the
$610 million revolving credit facility increased by $100 million to the full $610 million.(d) Transfer of Pride of Aloha: On February 11, 2008 we announced the withdrawal of Pride of
Alohafrom the Hawaii market effective May 11, 2008. The ship is being transferred to Star
Cruises and will be reflagged and deployed in Asia in the summer of 2008. The remaining
year-round ship in Hawaii will be Pride of America.As a result of the decision to withdraw Pride of Alohafrom the Hawaii market and pursuant to
the terms of the Reimbursement and Distribution Agreement, Star Cruises Limited is liable for
certain cash losses of NCLA and is also liable for certain expenses following the transfer of
Pride of Alohato Star Cruises Limited through December 31, 2008. Reimbursement by Star
Cruises Limited of these losses and expenses shall not exceed $85 million. In addition to
transferring Pride of Alohato Star Cruises Limited, we expect to pay Star Cruises Limited
approximately $197 million in connection with Pride of America.The transfer of Pride of Alohain May 2008 reduces the pledged collateral on our $800 million
senior secured revolving credit/term loan facility. As a result, we will pay down
approximately $53.5 million of our $300 million term loan and the amount available under our
$500 million revolving credit facility will be lowered by approximately $150.6 million.(e) Other:Also, as a result of the Apollo transactions and under the terms of a new agreement,
we are no longer required to maintain our $100 million letter of credit facility to
collateralize the risk in processing certain of our credit card sales transactions. However,
if certain covenant restrictions are triggered we may be required to post collateral again.
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