NCL Corporation Ltd.

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.

None

Securities registered or to be registered pursuant to Section 12(g) of the Act.

None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

Title of Class

None

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: 10,000,000 ordinary shares

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

o Yes þ No

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 Yes o No

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 Yes þ No

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):

Large accelerated filer o Accelerated filer o Non-accelerated filer þ

Indicate by check mark which financial statement item the registrant has elected to follow:

o Item 17 þ Item 18

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 Yes þ No

“Forward Looking” Statements

This annual report including the documentation incorporated herein by reference contains statements that are, or may be deemed to be, “forward-looking” statements, within the meaning of Section 21E of the U.S. Securities Exchange Act of 1934, as amended, or the Exchange Act, and the Private Securities Litigation Reform Act of 1995, or the PSLRA. All statements other than statements of historical facts included in this annual report, including, without limitation, those regarding our business strategy, financial position, results of operations, plans, prospects and objectives of management for future operations (including development plans and objectives relating to our activities), are “forward-looking” statements. Certain statements under “Item 3—Key Information—Risk factors,” “Item 4—Information on the Company,” “Item 5—Operating and Financial Review and Prospects” and elsewhere in this annual report constitute “forward-looking” statements. Some of these statements can be identified by “forward-looking” terms such as “expect,” “anticipate,” “goal,” “project,” “plan,” “believe,” “seek,” “will,” “may,” “forecast,” “estimate,” “intend” and “future” and for similar words. However, these words are not the exclusive means of identifying “forward-looking” statements. These “forward-looking” statements and any other projections contained in this annual report (whether made by us or by any third party) involve known and unknown risks, uncertainties and other factors which may cause our actual results or performance or industry results to differ materially from those expressed or implied by such “forward-looking” statements. These factors include, but are not limited to:

	•		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;

	•		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.

Such “forward-looking” statements are based on current beliefs, assumptions, expectations, estimates and projections regarding our present and future business strategies and the environment in which we will operate in the future. These “forward-looking” statements speak only as of the date of this annual report. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any “forward-looking” statement contained herein to reflect any change in our expectations with regard thereto or any change of events, conditions or circumstances or as a result of new information, future events or otherwise on which any such statement was based.

Industry and market data

This annual report includes market share and industry data and forecasts that we obtained from industry publications, third-party surveys and internal company surveys. Industry publications, including those from the Cruise Lines International Association, or CLIA, and surveys and forecasts generally state that the information contained therein has been obtained from sources that we believe are reliable, but there can be no assurance as to the accuracy or completeness of included information. All CLIA information relates to CLIA member lines, which represent 24 of the major North American cruise lines including NCL, which together represented 97% of the North American cruise capacity as of December 31, 2007. We have not independently verified any of the data from third-party sources nor have we ascertained the underlying economic assumptions relied upon therein. We use the most currently available industry and market data to support statements as to our market position. While we are not aware of any misstatements regarding our industry data presented herein, our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under “Item 3—Key Information—Risk factors” and “Forward Looking Statements” in this annual report.

PART I

Item 1. Identity of Directors, Senior Management and Advisers

Not applicable.

Item 2. Offer Statistics and Expected Timetable

Not applicable.

Item 3. Key Information

Selected Financial Data

The selected consolidated financial and operating data presented below are for the years 2003 through 2007 and as of the end of each such year. Our consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the U.S. We refer you to “Item 18— Financial Statements.”


	Years ended December 31,
(Dollars in thousands)	2003			2004			2005			2006			2007

Statement of Operations data
Revenues:
Passenger ticket revenues	$	976,124		$	990,758		$	1,194,461		$	1,438,996		$	1,571,772
Onboard and other revenues		321,909			353,238			435,262			537,313			601,043

Total revenues		1,298,033			1,343,996			1,629,723			1,976,309			2,172,815


Cruise operating expenses:
Commissions, transportation and other		292,453			257,947			328,899			425,648			430,670
Onboard and other		112,942			120,250			141,957			186,240			204,768
Payroll and related		204,365			243,355			323,621			412,943			436,843
Fuel		77,088			78,013			119,412			164,530			193,173
Food		79,154			81,448			94,105			102,324			120,633
Ship charter costs		—			22,046			28,603			26,226			20,384
Other operating		191,384			204,030			211,929			249,471			286,469

Total cruise operating expenses		957,386			1,007,089			1,248,526			1,567,382			1,692,940

Marketing, general and administrative expenses		186,923			204,560			225,240			249,250			287,093
Depreciation and amortization expenses		95,765			76,937			85,615			119,097			148,003
Impairment loss (1)		18,155			14,500			—			8,000			2,565

Total operating expenses		1,258,229			1,303,086			1,559,381			1,943,729			2,130,601

Operating income		39,804			40,910			70,342			32,580			42,214


Non-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			175,409
Other expenses (income), net (2)		2,165			11,548			(28,096	)		30,393			95,151

Total non-operating expenses		52,212			59,000			54,107			163,479			269,176

Net (loss) income	$	(12,408	)	$	(18,090	)	$	16,235		$	(130,899	)	$	(226,962	)


(Dollars in thousands, except	As of or for the years ended December 31,
operating data and ratios)	2003			2004			2005			2006			2007

Balance sheet data Assets:
Cash and cash equivalents	$	199,141		$	172,424		$	60,416		$	63,530		$	40,291
Property and equipment, net		2,660,991			2,529,739			3,113,229			3,816,292			4,243,872
Total assets		3,593,676			3,464,546			3,984,227			4,629,624			5,033,698

Liabilities and shareholder’s equity:
Advance ticket sales		188,364			226,081			276,644			314,050			332,802
Other current liabilities (3)		529,758			191,225			220,571			298,768			291,509
Current portion of long-term debt		476,995			86,198			140,694			154,638			191,172
Long-term debt		1,019,392			1,604,331			1,965,983			2,405,357			2,977,888
Other long-term liabilities (3)		372,589			5,734			2,631			1,744			4,801
Ordinary shares (4)		12			12			12			12			12
Total shareholder’s equity		1,006,578			1,350,977			1,377,704			1,455,067			1,235,526

Operating data
Passengers carried		878,067			874,926			981,665			1,153,844			1,304,385
Passenger cruise days (5)		6,543,896			6,744,609			7,613,100			8,807,632			9,857,946
Capacity days (6)		6,277,888			6,370,096			7,172,040			8,381,445			9,246,715
Occupancy percentage (7)		104.2	%		105.9	%		106.1	%		105.1	%		106.6	%
Total number of cruise ships		10			11			12			14			13

Other financial data
Net cash provided by operating activities		86,310			153,758			136,828			147,504			36,331
Net 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			522,008
Capital 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.


(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

The specific risk factors set forth below, as well as the other information contained in this annual report on Form 20-F, are important factors, among others, that could cause our actual results to differ from our expected or historical results. It is not possible to predict or identify all such factors. Consequently, this list should not be considered a complete statement of all potential risks or uncertainties. We refer you to “Item 5—Operating and Financial Review and Prospects” for a note regarding “forward-looking” statements.

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.

Historically, cruise capacity has grown to meet the growth in demand. According to CLIA, North American cruise capacity, in terms of berths, has increased at a compound annual growth rate of approximately 7% from 1981 to 2007. CLIA estimates that, between the end of 2007 and 2012, the CLIA member line fleet will increase by approximately 35 additional ships, an approximate 29% increase in capacity from 2007, which have either been contracted for or are planned. In order to profitably utilize this new capacity, the cruise industry will likely need to improve its percentage share of the U.S. population who has cruised at least once, which is approximately 17%, according to CLIA. If there is such an industry-wide increase in capacity without a corresponding increase in public demand, we, as well as the entire cruise industry, could experience reduced occupancy rates or be forced to discount our prices, which could adversely affect our financial condition and results of operations.

We face intense competition.

We face intense competition from other cruise companies in North America where the cruise market is mature and developed. The North American cruise industry is highly concentrated and dominated by three players. As of December 31, 2007, Carnival Corporation and Royal Caribbean Cruises Ltd., each of which may possess greater financial resources than we do, together accounted for approximately 82% of North American cruise passenger capacity in terms of berths while we, as of the same date, operating under all of our brands accounted for approximately 11% of North American cruise passenger capacity in terms of berths. We also face competition for many itineraries from other cruise operators, such as MSC Cruises and Disney Cruise Line.

We also face competition from non-cruise vacation alternatives, including beach resorts, golf and tennis resorts, theme parks, land-based casino operations, and other hotels and tourist destinations. In the event we do not compete effectively, our financial condition and results of operations could be adversely affected.

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.

For each of the years ended December 31, 2005, 2006 and 2007 approximately 90%, 87% and 86%, respectively, of our revenues were derived from passengers residing in North America. Past acts of terrorism have had an adverse effect on tourism, travel and the availability of air service and other forms of transportation in North America. The possibility of future terrorist activities and other geo-political uncertainties may have a negative impact on our financial condition and results of operations in the short term. There can be no certainty that North America, and the U.S. in particular, will experience economic growth in the future, nor can there be any assurance that external events similar to those experienced in the past will not recur. Due to our reliance on passengers from the U.S., any such events would likely have an adverse effect on 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.

In 2007, the vast majority of our passengers on our fleet booked their cruises through independent travel agents and wholesalers. These independent travel agents generally sell and market our cruises on a nonexclusive basis. Although we offer incentives to travel agents for booking our cruises that are comparable to those offered by others in the industry, there can be no guarantee that our competitors will not offer other incentives in the future. Travel agents may face increasing pressure from our competitors, particularly in North America and Europe, to sell and market these competitors’ cruises exclusively. If such exclusive arrangements were introduced, there can be no assurance that we will be able to find alternative distribution channels to ensure that our customer base would not be affected.

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.

Some of our passengers depend on scheduled commercial airline services to transport them to ports of embarkation for our cruises. Increases in the price of airfare, due to increases in fuel prices or otherwise, would increase the overall vacation cost to our customers and may adversely affect demand for our cruises. Changes in commercial airline services as a result of strikes, weather or other events, or the lack of availability due to schedule changes or a high level of airline bookings could adversely affect our ability to deliver passengers to our cruises and increase our cruise operating expenses which would, in turn, have an adverse effect on our financial condition and results of operations.

Increases in fuel prices or other cruise operating costs would have an adverse impact on our financial condition and results of operations.

Fuel costs accounted for 9.6% of our total cruise operating expenses in 2005, 10.5% in 2006 and 11.4% in 2007. Economic and political conditions in certain parts of the world make it difficult to predict the price of fuel in the future. Future increases in the cost of fuel globally would increase the cost of our cruise ship operations. In addition, we could experience increases in other cruise operating costs, such as crew, insurance and security costs, due to market forces and economic or political instability beyond our control. Accordingly, increases in fuel prices or other cruise operating costs could have a material adverse effect on our financial condition and results of operations. In 2007, we introduced a new fuel supplement charged per person per day for the first and second passengers in a cabin and a lesser fee per person per day for any additional passengers in the same cabin. The Office of the Attorney General for the State of Florida is conducting an investigation into the implementation of our fuel supplement and that

of other cruise lines. We are cooperating with the Attorney General’s office in connection with this investigation. At this time, we are unable to determine what impact, if any, this matter will have on our consolidated financial statements.

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.

The cruise industry in North America, our principal market, is seasonal, with greatest demand generally occurring during the months of June through August. This seasonality in demand has resulted in fluctuations in our revenues and results of operations. The seasonality of our results is increased due to ships being taken out of service for dry-docking, which we typically schedule during non-peak demand periods for such ships. Accordingly, seasonality in demand and dry-docking could adversely affect our ability to generate sufficient revenues to cover expenses and particularly so 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.

Building a ship is subject to risks similar to those encountered in other sophisticated and lengthy projects. Delivery delays can occur as a result of problems with our shipbuilders such as insolvency, labor actions or “force majeure” events that are beyond our control and the control of the shipbuilders. We expect to take delivery of two newbuilds during 2010, with approximately 8,400 berths, representing approximately 32% of our current total berths. We have developed our current business strategy on the assumption that these ships will be delivered on time and that they will perform in the manner indicated by their design specifications. For further discussion on the newbuilds, we refer you to “Item 4—Information on the Company—The fleet—Current new ships on order”. A significant delay in the delivery of these new ships, or a significant performance deficiency or significant mechanical failure on or of a ship, particularly in light of decreasing availability of dry-docking facilities, could have a material adverse effect on our business, financial condition and results of operations.

We are dependent upon the services of key management personnel.

We are dependent upon the collective services of all of the members of our senior management team, including Colin Veitch, our President and Chief Executive Officer. The loss of the services of any such person or several of such persons could have an adverse effect on our business. We refer you to “Item 6—Directors, Senior Management and Employees” for additional information about our management personnel.

Conducting business internationally and development of information technology areas may result in increased costs and risks.

We operate our business internationally and plan to continue to develop our international presence. Operating internationally exposes us to a number of risks. Examples include political risks and risks of increase in duties and taxes as well as changes in laws and policies affecting cruising, vacation or maritime businesses, or governing the operations of foreign-based companies. Because some of our expenses are incurred in foreign currencies, we are exposed to exchange rate risks. We have ship construction contracts that are denominated in Euro and a significant portion of our debt is denominated in Euro. Additional risks include interest rate movements, imposition of trade barriers and restrictions on repatriation of earnings. In addition, we are exposed to increased costs and risks associated with complying with increasing and new regulation of corporate governance and disclosure standards,

including certain provisions under the Sarbanes-Oxley Act of 2002 including its requirements under Section 404 relating to internal controls over financial reporting. Furthermore, our operations utilize information technology resources in performing a number of functions, some of which resources may be costly, as a result of which we must update and acquire new information resources over time. The failure to successfully implement or acquire such information resources could expose us to additional risks. If we are unable to address these risks adequately, our financial condition and results of operations could be adversely affected.

Future epidemics and viral outbreaks may have an adverse effect on our financial condition and results of operations.

Public perception about the safety of travel and adverse publicity related to passenger illness may impact demand for cruises and adversely affect our future sales, financial condition and results of operations. If any wide-ranging health scare should occur, our financial condition and results of operations would likely be adversely affected.

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.

We operate in waters and call at ports throughout the world, including geographic regions that, from time to time, have experienced political and civil unrest and armed hostilities. Historically, adverse international events have affected demand for cruise products generally and have had an adverse effect on us.

Adverse incidents involving cruise ships may have an adverse impact on our financial condition and results of operations.

The operation of cruise ships involves the risk of accidents, mechanical failures and other incidents at sea or while in port that may bring into question passenger safety, may adversely affect future industry performance and may lead to litigation against us. Although we place passenger safety as a high priority in the design and operation of our fleet, we have experienced accidents and other incidents involving our cruise ships. In addition, we offer itineraries in certain parts of the world that may present challenges specific to that region. There can be no assurance that similar events will not occur in the future. It is possible that we could be forced to cancel a cruise or a series of cruises due to these factors, which could have an adverse effect on our sales, financial condition and results of operations. Any such event involving our cruise ships or other passenger cruise ships may adversely affect passengers’ perceptions of safety or result in increased governmental or other regulatory oversight and may therefore affect our results of operations. An adverse judgment or settlement in respect of any of the ongoing claims against us may also lead to negative publicity about us. We refer you to “Item 4—Information on the Company—Company operations and cruise infrastructure—Crew and passenger safety” and “Item 8—Financial Information—Legal proceedings” for additional information about our safety provisions and litigation in which we are involved.

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.

Currently, we are a party to six collective bargaining agreements. Three of these agreements with the Norwegian Seafarer’s Union shall be reviewed annually by us and the Union. If at any time we and the Union mutually agree on amendments and/or additions to the Protocol, such amendments and additions shall be agreed in writing and signed by the parties and considered incorporated in the International Transport Workers’ Federation Special Agreement.

The three remaining collective bargaining agreements are scheduled to expire in 2009. Amendments to such collective bargaining agreements in favor of the union members may increase labor costs and could have an additional adverse impact on our financial condition and results of operations.

In May 2008, we will have only one ship remaining in Hawaii, Pride of America. However, currently, our U.S.-flagged ships sail in the Hawaii islands under the NCL America brand. Pride of Aloha commenced sailing in the summer of 2004, Pride of America commenced sailing in the summer of 2005 and Pride of Hawai’i commenced sailing in the spring of 2006. Under U.S. law, we have been obligated to employ a certain percentage of U.S. crew members onboard these U.S.-flagged ships and have complied with U.S. federal labor laws and regulations and Hawaii state laws and regulations. The collective bargaining agreements with unions resulted in U.S. labor as well as international labor permitted to serve on the U.S.- flagged ships to be more expensive than on internationally-flagged ships. We incurred higher expenses for benefits for the crews on our U.S.-flagged ships. Also, the higher costs of hiring, training and retaining U.S. crews have had an adverse effect on our financial condition and results of operations. In 2007, we continued to experience a very competitive pricing environment in Hawaii and accordingly, the Pride of Hawai’i has been reflagged and renamed Norwegian Jade and will sail in Europe year-round and in May 2008, Pride of Aloha will be withdrawn from the Hawaii market and transferred to Star Cruises Limited.

Unavailability of ports of call may adversely affect our financial condition and results of operations.

We believe that attractive port destinations are a major reason why passengers choose to go on a particular cruise or on a cruise vacation. The availability of ports is affected by a number of factors, including, among others, existing capacity constraints, security concerns, adverse weather conditions and natural disasters, financial limitations on port development, local governmental regulations and local community concerns about port development and other adverse impacts on their communities from additional tourists. Any limitations on the availability of our ports of call could 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.

The operation of ocean-going ships carries an inherent risk of loss caused by adverse weather conditions, marine disaster, including oil spills and other environmental mishaps, fire, mechanical failure, collisions, human error, war, terrorism, piracy, political action in various countries and other circumstances or events. Any such event may result in loss of life or property, loss of revenues or increased costs and could result in significant litigation against us.

We seek to maintain comprehensive insurance coverage at commercially reasonable rates. We believe that our current coverage is adequate to protect against most of the accident-related risks involved in the conduct of our business. We are not protected against all lawsuits brought against us, although certain individual claims may be covered by insurance, depending on their subject matter.

There can be no assurance that all risks are fully insured against, that any particular claim will be fully paid or that we will be able to procure adequate insurance coverage at commercially reasonable rates in the future. We may also be subject to calls, or premiums, in amounts based not only on our own claim records, but also the claim records of all other members of the protection and indemnity associations through which we receive indemnity coverage for tort liability. Our payment of these calls could result in significant expenses to us which could reduce our cash flows. If we were to sustain significant losses in

the future, our ability to obtain insurance coverage or coverage at commercially reasonable rates could be materially adversely affected.

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.

To fund our capital expenditures and scheduled debt payments, we have relied primarily on cash generated from operations, bank and other borrowings and equity infusions and loans from Star Cruises Limited. Our forecasted cash flow from future operations may be adversely affected by various factors, including, among others, declines in customer demand, increased competition, overcapacity, a deterioration in general economic and business conditions, terrorist attacks, ship accidents and other incidents, adverse publicity and increases in fuel prices, as well as other factors noted under these “Risk factors” that are beyond our control. To the extent that we are required, or choose, to fund future cash requirements, including future shipbuilding commitments, from sources other than cash flow from operations, cash on hand, committed financings and equity infusions or loans from Apollo and/or Star Cruises Limited, we will have to secure such financing from banks or through the offering of debt and/or equity securities in the public or private markets. Our access to, and the cost of, financing will depend on, among other things, the maintenance of adequate credit ratings. Any lowering of our credit ratings may have adverse consequences on our ability to access the financial markets and/or on our cost of financings. In addition, interest rates and our ability to obtain financing are dependent on many economic and political factors beyond our control. Accordingly, we cannot be sure that our cash flows from operations and additional financings will be available in accordance with 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.

As of December 31, 2007, we had $3.2 billion of total debt, of which $191.2 million is the current portion of long-term borrowings. As of the same date, we had $1.2 billion in shareholder’s equity. Most of our debt has been incurred to finance ship construction. Our high level of indebtedness may adversely affect our future strategy and operations in a number of ways, including:

	•		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.

With respect to our projections for 2008, a 1% increase in annual LIBOR and EURIBOR interest rates would increase our annual interest expense in 2008 by approximately $11.5 million. In addition, future financings we may undertake may also provide for rates that fluctuate with prevailing interest rates.

Subject to compliance with various financial and other covenants imposed by our credit facilities and the agreements governing our indebtedness, we and our subsidiaries may incur additional indebtedness from time to time, including debt to finance the purchase or completion of new ships. Our incurrence of

additional debt could further exacerbate the risks described in this annual report and could result in a material adverse effect on our business, financial condition and results of operations. Our ships and substantially all our other property are pledged as collateral for our debt. We refer you to “Item 5—Operating and Financial Review and Prospects—Liquidity and capital resources.”

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.

As we generally derive revenue from shipboard activity in international waters and not in a particular jurisdiction, our exposure to tax is limited in some instances. Bermuda, the jurisdiction of formation of NCL and certain of our operating subsidiaries, and the Isle of Man, the jurisdiction of incorporation of certain of our operating subsidiaries, impose no tax on our income. We do, however, submit to the tax regimes of the jurisdictions in which we operate and pay taxes as required by those regimes.

The income that we derive from the international operation of ships, as well as certain income that is considered to be incidental to such income (“Shipping Income”), is exempt from U.S. federal income taxes under section 883 of the Internal Revenue Code of 1986, as amended, or the Code, based upon certain assumptions as to shareholdings and other information as of December 31, 2005, 2006 and 2007, as more fully described in “Item 4—Information on the Company—Taxation—U.S. federal income taxation.” We believe that substantially all of our income from the international operation of ships is properly categorized as Shipping Income. The U.S.-source portion of our income from the international operation of ships that is not Shipping Income is subject to U.S. taxation. We believe that, if our Shipping Income were not exempt from federal income taxation under section 883 of the Code, that income, as well as any other income from cruise operations of NCL that is not Shipping Income, to the extent derived from U.S. sources, generally would be taxed on a net basis to our shareholders as discussed below, at graduated U.S. federal corporate income tax rates (currently, a maximum of 39%) and we would make a distribution to our shareholders to pay such tax. They also would be subject to a 30% federal branch profits tax under section 884 of the Code, generally on the after tax portion of such income that was from U.S. sources each year to the extent that such income was not properly viewed as reinvested and maintained in our U.S. business. Interest paid or accrued by us to some extent could be treated as U.S.-source interest and also could be subject to a 30% withholding tax and/or branch interest taxes under section 884 of the Code. If section 883 of the Code had not applied to us in 2005, 2006 and 2007, we would have been subject to U.S. corporate income tax only on the portion of our income derived from U.S. sources. Further, a change in our operations could result in a change in the amount of source income subject to U.S. federal income tax. Moreover, the income that we derive from our U.S.-flagged operations under the NCL America brand is subject to tax on a net basis at the graduated U.S. federal corporate and state income tax rates generally applicable to corporations organized in the U.S. U.S.-source dividends and interest paid by NCL America generally would be subject to a 30% withholding tax unless exempt under one of various exceptions. At December 31, 2005, 2006 and 2007, our U.S.-flagged operations were not in a U.S. income tax paying position because they had substantial net operating loss carry-forwards.

shareholder will need to meet the requirements of section 883 discussed above in order for the exemption to apply to the income allocated to such shareholder. NCL may distribute to its shareholders annually an amount equal to the US tax liability it would have incurred directly as if it was taxed as a corporation for US tax purposes.

Certain State, Local and Non-U.S. Tax Matters. NCL may be subject to state and local non-income taxes or non-U.S. taxation in various jurisdictions, including those in which we transact business, own property, or reside. We may be required to file tax returns in some or all of those jurisdictions. The state, local or non-U.S. tax treatment of us may not conform to the U.S. Federal income tax treatment discussed above. We may be required to pay non-U.S. taxes on dispositions of foreign property, or operations involving foreign property may give rise to non-U.S. income or other tax liabilities in amounts that could be substantial.

The various tax regimes to which we are currently subject result in a relatively low effective tax rate on our world-wide income. These tax regimes, however, are subject to change. Moreover, we may become subject to new tax regimes and may be unable to take advantage of favorable tax provisions afforded by current or future law.

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.

Some environmental groups have lobbied for more onerous oversight of cruise ships and have generated negative publicity about the cruise industry and its environmental impact. Increasingly stringent federal, state, local and international laws and regulations on environmental protection and health and safety of workers could affect our operations. The U.S. Environmental Protection Agency, the International Maritime Organization, commonly referred to as the IMO, the Council of the European Union and individual States are considering, as well as implementing, new laws and rules to manage cruise ship waste. In addition, many aspects of the cruise industry are subject to governmental regulation by the U.S. Coast Guard as well as international treaties such as the International Convention for the Safety of Life at Sea, commonly referred to as SOLAS, the International Convention for the Prevention of Pollution from Ships, commonly referred to as MARPOL, and the Standard of Training Certification and Watchkeeping for Seafarers, commonly referred to as STCW, and the recently adopted Manning Convention. In addition, international regulations regarding ballast water and security levels are pending. Compliance with such laws and regulations may entail significant expenses for ship modification and changes in operating procedures.

By virtue of our operations in the U.S., the U.S. Federal Maritime Commission, commonly known as the FMC, requires us to maintain a $15.0 million third party performance guarantee on our behalf in respect of liabilities for non-performance of transportation and other obligations to passengers. The FMC has proposed rules that would significantly increase the amount of our required guarantees and accordingly our cost of compliance. There can be no assurance that such an increase in the amount of our guarantees, if required, would be available to us. For additional discussion of the FMC’s proposed requirements, we refer you to “Item 4—Information on the Company—Regulatory issues.”

In 2007, the State of Alaska implemented new taxes which have impacted the cruise industry operating in Alaska. It is possible that other states, countries or ports of call that our ships regularly visit may also decide to assess new taxes or fees or change existing taxes or fees specifically applicable to the cruise industry and its employees and/or guests, which could increase our operating costs and/or could decrease

the demand for cruises and ultimately could adversely affect our financial condition and results of operations.

U.S. Customs and Border Protection proposed an interpretative rule to the Passenger Vessel Services Act (“PVSA”), requiring that all roundtrip U.S. cruises to Hawaii by foreign-flagged vessels stay at least 48 hours in a foreign port on the cruise and require that the time spent in a foreign port must be more than 50% of the time spent in all U.S. ports on the cruise. While we do not believe the proposed rule is intended to or does apply to non-Hawaii itineraries, if the proposed rule is implemented as currently drafted, it could impact our non-Hawaii itineraries such as Seattle-based Alaska, which may no longer qualify under the PVSA.

New health, safety, security and other regulatory issues could adversely affect our business prospects, financial condition and results of operations.

We are subject to various international, national, state and local health, safety and security laws and regulations. For additional discussion of these requirements, we refer you to “Item 4—Information on the Company—Regulatory issues.” Changes in existing legislation or regulations and the imposition of new requirements could adversely affect our business prospects, financial condition and results of operations.

Implementation of U.S. federal regulations, requiring U.S. citizens to obtain passports for seaborne travel to all foreign destinations, could adversely affect our financial condition and results of operations. Many cruise customers may not currently have passports or may not obtain a People Access Security Card (PASS) card, if and when available. A PASS card system is currently being developed by the State Department and the Department of Homeland Security as a secure credential that verifies the citizenship and identity of U.S. nationals who re-enter the U.S. and it may be a less expensive alternative to a passport.

Item 4. Information on the Company

History and development of the Company

The Norwegian Cruise Line brand commenced operations in 1966. In February 2000, Star Cruises Limited, a Bermuda company with limited liability, acquired control of and subsequently became the sole owner of the Norwegian Cruise Line’s operations through its subsidiary Arrasas Limited, an Isle of Man company.

In December 2003, the Company was incorporated in Bermuda as a wholly-owned subsidiary of Star Cruises Limited. In connection with our formation, Star Cruises Limited contributed its 100% ownership interest in Arrasas Limited to us. Various subsidiaries were reorganized so that the entities owning or operating Bahamas-flagged ships became subsidiaries of NCL International, Ltd., also a Bermuda company, and the entities owning or operating U.S.-flagged ships became subsidiaries of NCL America Holdings, Inc., a Delaware corporation. NCL International, Ltd. and NCL America Holdings, Inc. are wholly-owned by Arrasas Limited. We refer you to “Item 4—Information on the Company—Organizational structure” for a diagram of our organization.

At December 31, 2007, approximately 33.8% of the shareholding interests in Star Cruises Limited were held by Golden Hope Limited (“GHL”), as trustee of the Golden Hope Unit Trust, a private unit trust held directly and indirectly by GZ Trust Corporation as trustee of a discretionary trust established for the benefit of certain members of the family of one of our board members, Tan Sri KT Lim (the “Lim Family”). In addition, Resorts World Bhd (“RWB”), a Malaysian company listed on Bursa Malaysia Securities Berhad, in which the Lim Family has a substantial indirect beneficial interest, held

approximately 19.3% of the shareholding interests in Star Cruises Limited. Star Cruises Limited’s shares are listed on the Stock Exchange of Hong Kong Limited and quoted on the Central Limit Order Book International of the Singapore Exchange Securities Trading Limited. We refer you to “Item 4—Information on the Company—Business overview” for further information.

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 share capital from Apollo. We refer you to “Item 7—Major Shareholders and Related Party Transactions” for more information on our shareholding and the equity investment by Apollo and TPG.

The Company’s registered offices are located at Milner House, 18 Parliament Street, Hamilton HM 12, Bermuda. Our principal executive offices are located at 7665 Corporate Center Drive, Miami, Florida 33126, U.S. and the main telephone number at that address is (305) 436-4000. The websites for Norwegian Cruise Line and NCL America (“NCLA”) are located at www.ncl.com and www.ncl.com/ncla, respectively. Information contained on our websites is not incorporated by reference into this or any other report filed with or furnished to the U.S. Securities and Exchange Commission (“SEC”). Daniel S. Farkas, our Senior Vice President and General Counsel, is our agent for service of process at our principal executive offices.

Business overview

We are one of the leading cruise ship operators in the world and are increasing the capacity and modernity of our fleet. Our fleet is the youngest in the industry among the major operators. We currently operate 13 ships with a total of over 26,200 berths, which represents approximately 11% of the overall cruise capacity in North America in terms of berths. We are in the midst of a fleet renewal program which, by the end of 2010, will add two new ships to our fleet with approximately 8,400 berths. During the same period, three ships which we currently charter from Star Cruises Limited will be withdrawn from our fleet. We offer a wide variety of itineraries focused on North America, including year-round cruises from New York, the only seven-day inter-island itineraries in Hawaii and a variety of itineraries in Alaska. We also offer numerous mainstream itineraries in the Caribbean, Europe and South America. We currently operate under three brands: Norwegian Cruise Line, NCL America and Orient Lines. However, in March 2008, the charter agreement for Marco Polo will expire and we will no longer operate under the Orient Lines’ brand name. Also, based on our results for NCLA, in February 2008 we have made certain adjustments which will result in only one ship remaining in the Hawaii market, Pride of America. We refer you to “Item 4—Information on the Company—Our business strategies—Hawaii,” for a discussion of our development of U.S.-flagged ships for cruising in Hawaii.

Segment Reporting

We currently operate under three brand names, Norwegian Cruise Line, NCL America and Orient Lines. The brands have been aggregated as a single reportable segment based on the similarity of their economic characteristics, as well as products and services provided.

Although we sell cruises on an international basis, our passenger ticket revenue is primarily attributed to passengers who made reservations in North America. For the years ended December 31, 2005, 2006 and 2007, revenues attributable to North American passengers were approximately 90%, 87% and 86%, respectively.

Our business strategies

We seek to attract vacationers by pioneering new products and services, exploring new markets and adding modern ships to our fleet. Our objective is to offer vacation products, unique in the cruise industry and which offer better value and more attractive characteristics than the broader, land-based leisure alternatives with which we compete. We have a long tradition of product innovation within the cruise industry: Norwegian Cruise Line is the oldest established consumer brand in Caribbean cruising; we became the first cruise operator to buy a private island in the Bahamas to offer a private beach experience to our passengers; and we were the first to introduce a 2,000-berth megaship into the Caribbean market in 1980. This tradition of innovation has continued in recent years with the launch of “Freestyle Cruising,” the development of “Homeland Cruising,” including the initiation of year-round cruises from New York.

“Freestyle Cruising” One of our most significant initiatives has been the introduction of a new style of cruising, called “Freestyle Cruising,” onboard all Norwegian Cruise Line and NCL America ships. Our primary aim has been to eliminate the traditional cruise ship practice of fixed dining schedules, assigned dinner seating, formal dress codes, and cash tipping of service staff. Additionally, we have increased the number of activities and dining facilities available onboard, allowing passengers to organize their onboard experience according to their own schedules and tastes. The key elements of “Freestyle Cruising” include:

	•		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.

Our new ships have been designed and built for “Freestyle Cruising,” which we believe differentiates us significantly from our major competitors. We further believe that “Freestyle Cruising” attracts a passenger base that prefers the less structured, resort-style experience of our cruises.

With the success of “Freestyle Cruising” we are implementing across our fleet “Freestyle 2.0” featuring significant enhancements in our onboard product which we expect will further improve the cruise experience. The enhancements include a major investment in the total dining experience; upgrading the stateroom experience across the ship; new wide-ranging onboard activities for all ages; additional recognition, service and amenities for balcony, suite and villa passengers; and a re-launch of a tiered loyalty recognition program. We expect many of these upgrades to be in place in time for the 2008 summer season.

Hawaii We are one of the pioneers of the Hawaii cruise market and have offered cruises in Hawaii since 1998 and have been the industry leader in Hawaii since 2001. Initially, our cruises were on non-U.S.-flagged ships and were required to call on a foreign port during each cruise to comply with the provisions

of the U.S. Jones Act. As a result, since 1998, our Hawaii cruises called on Fanning Island in the Republic of Kiribati, which is the closest foreign port that complies with the Jones Act provisions and is located approximately 900 nautical miles south of the Big Island of Hawaii. We retain the exclusive right to call at Fanning Island through March 2009 with an option to extend the agreement for an additional two years. In February 2003, we sought and received U.S. Congressional permission to operate in the Hawaii inter-island trade. Pursuant to federal law, we were permitted to re-flag an existing non-U.S.-flagged ship in our fleet as a U.S.-flagged ship and complete the construction of two additional U.S.-flagged ships outside the U.S. As a result, three of our ships had the ability to cruise between and among ports in Hawaii without the need to call at a foreign port.

With the additional capacity introduced to the Hawaii market, our results in 2007 indicate that we have experienced a very competitive pricing environment in Hawaii, and in response to the unsatisfactory result, we have decided to withdraw Pride of Hawai’i from the market in 2008. The ship has been reflagged and renamed Norwegian Jade and will be deployed in Europe year-round. We have also decided to withdraw Pride of Aloha in May 2008 and it will be transferred to Star Cruises Limited. The remaining year-round ship in Hawaii will be Pride of America (we refer you to our consolidated financial statements Note 12 “Subsequent Events” on page F-25 for a discussion on recent developments in connection with NCLA).

Fleet renewal We have the youngest fleet in the industry among the major operators. An important element of our strategy since our acquisition by Star Cruises Limited in 2000 has been to make significant investments in the renewal of our fleet. We are in the midst of a fleet renewal program, which, by the end of 2010, will add two new ships to our fleet, for a total of 12 modern ships added to our fleet since 1999. These two ships have approximately 8,400 berths, representing approximately 32% of our total berths of our existing fleet. The total cost of these two new ships is currently estimated to be $2.4 billion based on the Euro/U.S. dollar exchange rate on December 31, 2007, of which we had paid $0.2 billion as of December 31, 2007. Renewal of our fleet is expected to enhance our results because:

	•		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.”

In 2004, we transferred ownership of six of our older cruise ships to Star Cruises Limited and we currently continue to operate three of these ships under charter agreements. These charter agreements afford us the flexibility to return our older ships to Star Cruises Limited as new, modern ships enter our fleet over time, without relying on the secondary sale market.

“Homeland Cruising” We are one of the industry leaders in offering cruises from a wide variety of North American homeports close to major population centers, thus eliminating the need for vacationers to fly to distant ports to board a ship and reducing the overall cost and duration of a vacation. We branded this initiative as “Homeland Cruising” in response to changing consumer travel patterns in recent years. We are, for example, the only brand operating year-round from Honolulu and New York, the largest

population center in the U.S., and we offer Bermuda cruises from major northeastern ports, Baltimore, Boston, Charleston, New York and Philadelphia.

The fleet

As of December 31, 2007, we operated a fleet of 13 cruise ships with a total of over 26,200 berths. We are one of the industry leaders in offering cruises from a wide variety of North American homeports close to major population centers on ships specifically designed or re-configured to offer our unique “Freestyle Cruising” product.

Most of our ships are characterized by state-of-the-art passenger amenities including multiple dining choices in up to 11 restaurants on each ship, together with hundreds of standard private balcony cabins on each ship. Private balcony cabins are very popular with passengers and offer the opportunity for potential increased revenues by allowing us to charge a premium. Additionally, Norwegian Jade, Norwegian Gem, Norwegian Pearl, Norwegian Jewel, Norwegian Star and Norwegian Dawn each have a “ship within a ship” of luxury garden villas with up to approximately 5,750 square feet. These garden villas contain three separate bedroom areas, spacious living and dining room areas, as well as butler and concierge service. In addition, Norwegian Jade, Norwegian Gem, Norwegian Pearl, and Norwegian Jewel each have 10 courtyard villas, with up to approximately 572 square feet, which provide access to an exclusive private courtyard area with a private pool.

Norwegian Cruise Line’s ships

The table below provides a brief description of the Norwegian Cruise Line’s ships and areas of operations based on 2007 itineraries:


	Year Built/				Crew		Gross		Primary Areas of
Ship	Rebuilt		Berths		Capacity		Tons		Operation
Norwegian Gem		2007		2,400		1,200		93,500	Europe, Bahamas
Norwegian Pearl		2006		2,400		1,200		93,500	Alaska, Caribbean, Pacific
									Coastal and Panama Canal
Norwegian Jewel		2005		2,380		1,100		93,500	Caribbean and Europe
Norwegian Dawn		2002		2,220		1,100		92,300	Bahamas, Bermuda,
									Caribbean, Canada and New
									England
Norwegian Star		2001		2,240		1,100		91,700	Alaska, Mexico and Pacific
									Coastal
Norwegian Sun		2001		1,940		900		78,300	Alaska, Caribbean, Pacific
									Coastal and Panama Canal
Norwegian Majesty		1992/1999		1,460		700		40,900	Bahamas, Bermuda and
									Caribbean
Norwegian Wind (1)		1993/1998		1,740		700		50,800	Alaska and Hawaii
Norwegian Dream (1)		1992/1998		1,740		700		50,800	Caribbean, Europe, Panama
									Canal and South America
Norwegian Spirit		1998		1,980		1,000		75,300	Caribbean, Bahamas, Canada
									and New England
Norwegian Crown (1)		1988		1,080		550		34,200	Panama Canal, South
									America and Bermuda


(1)		Norwegian Wind and Norwegian Crown left the fleet in April 2007 and November 2007, respectively. Norwegian Dream is scheduled to leave the fleet in 2008.

NCL America’s ships

During 2007, NCLA operated three ships, with a total of over 6,600 berths. The table below provides a brief description of the NCLA ships:


									Primary
					Crew		Gross		Areas of
Ship	Year Built		Berths		Capacity		Tons		Operation
Pride of Hawai’i		2006		2,460		950		93,600	Hawaii
Pride of America		2005		2,140		950		80,400	Hawaii
Pride of Aloha		1999		2,000		900		77,100	Hawaii

In 2008, Pride of Hawai’i, was reflagged and renamed Norwegian Jade. The ship will be deployed in Europe year-round. In May 2008, Pride of Aloha will be transferred to Star Cruises Limited 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 (we refer you to our consolidated financial statements Note 12 “Subsequent Events” on page F-25 for a discussion on recent developments in connection with NCLA).

Orient Lines’ ship

During 2007, Orient Lines operated Marco Polo with 840 berths. In March 2008, the charter agreement will expire and we will no longer operate under the Orient Lines’ brand name.

Current new ships on order

We currently have two ships on order for our fleet. The planned berth capacity and expected delivery dates of these two ships are as follows:


	Expected Delivery			Gross
Ship	Date	Berths		Tons
F3 One	First Quarter 2010		4,200		150,000
F3 Two	Third Quarter 2010		4,200		150,000

United States

In 2003, we purchased a U.S.-flagged ship, United States. Under current U.S. law, existing U.S.-flagged ships may be upgraded to a modern ship in a foreign shipyard so long as any hull and superstructure work is completed in a domestic U.S. yard. Currently, we have not determined whether to upgrade this ship.

Ship deployment

We offer cruise itineraries ranging from one day to approximately one month and call at approximately 190 destinations worldwide, including destinations in the Caribbean, Bermuda, the Bahamas, Mexico, Alaska, Europe, Hawaii, New England, Central and South America, Scandinavia and Antarctica. We have developed, and are continuing to develop, innovative itineraries to position our ships in new and niche markets as well as in the mainstream markets throughout the Americas and Europe. We believe this strategy allows us to maintain our status as one of the three major North American cruise operators while diversifying our deployment rather than relying as heavily on the traditional mass market trades in the Caribbean and the Bahamas out of South Florida.

Ports and facilities

We have an agreement with the Government of Bermuda whereby two of our ships, including, but not limited to, Norwegian Majesty, Norwegian Spirit, Norwegian Dawn, and Norwegian Dream, are permitted weekly calls in Bermuda through 2018 from Boston, Baltimore, Charleston, New York and Philadelphia. In addition, we own a private island in the Bahamas, Great Stirrup Cay, which we utilize as a port-of-call on some of our itineraries.

We have an agreement for the exclusive right to call at Fanning Island, an island approximately 900 nautical miles south of Hawaii, until April 1, 2009, with an option to extend the agreement for an additional two years. For a number of years, we have operated a round-trip Honolulu-Fanning Island cruise itinerary in Hawaii.

In June 2004, we entered into a contract with the City of New York pursuant to which we receive preferential berths on specific piers at the city’s passenger ship terminal. Furthermore, in September 2006, we entered into a contract with the city of Los Angeles pursuant to which we receive preferential use of a berth at the city’s cruise ship terminal.

We have a concession permit with the U.S. National Park Service (“Park Service”) whereby our ships are permitted to call on Glacier Bay 13 times during each season. These permits have been extended by the Park Service until September 30, 2008. Our expectation is that the current permit will be extended through at least the end of the 2009 cruise season for Glacier Bay. The Park Service has not yet established the process by which the permits would be issued for visits to Glacier Bay after the end of the 2009 cruise season for Glacier Bay.

Except as discussed above, we do not lease any port facilities and have no other fixed arrangements to call at other ports. At present, we do not intend to acquire any port facilities. We believe that our facilities are adequate for our current needs, and that we are capable of obtaining additional facilities as necessary.

Company revenue management

Cruise pricing and revenue management

Our cruise prices generally include cruise fare and a wide variety of onboard activities and amenities, including meals and entertainment. In some instances, cruise prices include round-trip airfare to and from the port of embarkation. Prices vary depending on the particular cruise itinerary, cabin category selected and the time of year that the voyage takes place. Additional charges are levied for dining in specialty restaurants, certain beverages, gift shop purchases, spa services, shore excursions and other similar purchases.

We base our pricing and revenue management on a strategy that encourages travelers to book early and secure attractive savings. This is accomplished through a revenue management system designed to maximize net revenue per Capacity Day by matching projected availability to anticipated future passenger demand. We perform extensive analyses of our databases in order to determine booking history and trends by market segment and distribution channel. In addition, we establish a set of cabin categories throughout each cruise ship and price our cruise fares on the basis of these cabin categories—the better the cabin category, the higher the cruise fare. Typically, the published fares are established months in advance of the departure of a cruise at a level which, under normal circumstances, would provide a high level of occupancy. If the rate at which cabin inventory is sold differs from expectations, we gradually and systematically adjust the number of cabins assigned for different fares for sale as the departure date

approaches. Our yield management system is designed to encourage earlier booking of higher category cabins and a more orderly booking of lower category cabins, thereby reducing the need for last minute price cuts to fill ships.

We are further developing a sophisticated revenue management system, typical of other systems used by competitors within the North American cruise market. This system tracks and forecasts demand and provides optimal pricing and selling limit recommendations. The system will also shorten the time to implement pricing decisions.

Onboard and other revenues

Cruise prices typically include cruise accommodation, meals in certain dining facilities and many onboard activities. We earn additional revenues principally from shore excursions, food and beverage sales, gaming, retail sales, and spa services. Onboard and other revenue is an important component of our revenue base. To maximize onboard revenues, we utilize point-of-sale computer hardware and operating systems on our ships to permit “cashless” transactions for many of the products and services that our ships offer. Although we run the casinos onboard all our ships (other than the ships operating in Hawaii, where gambling is prohibited) and onshore excursion sales onboard all our ships, we generally enter into concession contracts for retail shops, spa services, photography and art auctions. These contracts generally entitle us to a fixed percentage of the gross or net sales derived from these concessions. We refer you to “Item 5—Operating and Financial Review and Prospects.”

Seasonality

The seasonality of the North American cruise industry generally results in the greatest demand for cruises during the months of June through August. This predictable seasonality in demand has resulted in fluctuations in our revenues and results of operations. The seasonality of our results is increased due to ships being taken out of service for dry-docking, which we typically schedule during non-peak demand periods for such ships.

Sales and marketing

Travel agent relationships

In 2007, a vast majority of our passengers booked their cruises through independent travel agents who sell our itineraries on a non-exclusive basis. Since almost all of our sales are made through independent travel agents, a major focus of our marketing strategy is motivating and supporting the retail travel agent community. Our marketing is supported by an extensive network of approximately 20,000 independent travel agencies including brick and mortar, internet-based and home-based operators located in North America, South America, Europe, Asia and Australia.

In 2007, we converted to an electronic documentation process for cruise bookings. We built this system to provide as much flexibility as possible to assist our travel partners. A new initiative in 2008 named “Partnership 2.0” includes an overhaul of reservations and customer service processes which we expect will also enhance our travel agent relationships.

Our call centers are located in Miami, Phoenix, the United Kingdom and Germany with over 650 personnel oriented towards servicing travel agents and direct customer calls. Additionally, we have outsourced relationships with firms that manage two additional locations for us in Louisiana and Guatemala. We believe that our diverse locations should minimize risks associated with natural disasters, labor markets and other factors which could impact the operation.

Marketing, brand communications and advertising

Our marketing department has been staffed and organized into core areas to support a continued awareness of our brand identity and increase in consumer marketing, while continuing trade and travel partner marketing. The core areas are: marketing communications, direct marketing and loyalty and website/interactive.

In late 2006, we unveiled a new, comprehensive brand identity created expressly to capture and articulate our “Freestyle Cruising”. The marketing plan featured national television, radio, print, newspaper, out-of-home and online advertising, along with a redesigned website. Our media activity was also supported by newly developed fulfillment materials, sales collateral, national sales promotions and product brochures, in the new brand look and tone of voice. This branding effort has also extended to our passengers and travel agents’ correspondence, onboard and in-cabin elements and port signage and terminal décor.

Sustainable customer loyalty of our past passengers is an important element of our marketing strategy. We believe that attending to our past passengers’ needs and motivations creates a cost-effective means of attracting business, particularly to our new itineraries, because past passengers are familiar with our brands, products and services. Norwegian Cruise Line’s program, which includes NCLA, is known as the Latitudes Club. Members of this program receive periodic mailings with informative destination information and cruise promotions that include special pricing, shipboard credits, cabin upgrades and onboard recognition. Avid cruisers can use our co-brand credit card to earn upgrades and discounts. Also, we have established a variety of interactive dialogue opportunities through periodic market research, polling e-mails and annual contests. With enhancements to our loyalty program in 2008, we expect our program to be even more attractive to members.

In the past year, we have made significant progress in expanding our marketing reach with our online products and services. Our website, www.ncl.com, serving both our passengers and travel agency partners, has been a major focus of this momentum. In 2006, we launched our redesigned website that aligns with our new brand look and further promotes our “Freestyle Cruising” program. We also launched a consumer and travel agency partner booking engine which provides passengers and travel agency partners the ability to shop and purchase any of our worldwide cruise itineraries with a more intuitive and informative online experience. We plan to further develop our website throughout 2008.

Company operations and cruise infrastructure

Ship maintenance

In addition to routine maintenance and repairs performed on an ongoing basis and in accordance with applicable requirements, each of our ships is generally taken out of service, approximately every 24 to 60 months, for a period of one or more weeks for maintenance work, repairs and improvements performed in dry-dock. Dry-dock duration is a statutory requirement controlled under the chapters of SOLAS and to some extent the International Load Lines Convention. Under these regulations, it is required that a passenger ship dry-dock twice in 5 years and the maximum duration between each dry-dock cannot exceed 3 years. However, a certain number of ships within our fleet qualify under a special exemption provided by the Bahamas (Flag State) after meeting certain criteria set forth by the Bahamas to dry-dock once in every 5 years. To the extent practical, each ship’s crew, catering and hotel staff remain with the ship during the dry-docking period and assist in performing maintenance and repair work. We lose revenue earning opportunities while ships are dry-docked. Accordingly, dry-docking work is typically performed during non-peak demand periods to minimize the adverse effect on revenues that results from ships being out of service. Dry-dockings are typically scheduled in spring or autumn and depend on shipyard availability which may impact the itinerary of the ship.

Information technology

Information technology is essential at all levels of our operations, from our corporate headquarters to our ships. Computer systems and solutions are widely used to support the expanding global information technology requirements for various functions and locations.

We have implemented an integrated computerized reservation system, called “Freestyle Connect,” which is designed to maximize inventory use together with a variety of controls and functions. “Freestyle Connect” supports revenue maximization with sophisticated features providing selling limits and probability of sales information. It includes tools designed to optimize cabin inventory and provide flexible customization capabilities to manage our cruise revenue goals. “Freestyle Connect” interfaces with our air management system, “AirWare,” which manages our air transportation logistics. We use an integrated airline computerized reservation system, or CRS, that is designed to directly access the reservation systems of most major airlines from a single terminal. The system has eliminated the need for multi-CRS systems and provides more efficient reporting of, and control over, airline ticket purchasing when booking a cruise. We also support booking capabilities through major airline computer reservation systems, including Amadeus.

Onboard the ships, the Fidelio Cruise Shipboard Property Management System is an integrated cruise management system which facilitates front-office and back-office operations in servicing passengers and crew members. It also provides a “one-card-fits-all” concept, offering passengers the convenience of using their Onboard Access Card for ID gangway transit, cabin entry and purchases and charges onboard.

The Manpower Analysis Planning System, or MAPS, provided by Manpower Software, Ltd., is a crew information and scheduling system. The system enables us to track relevant information for all active crew, retain historic personnel information and provide assistance in the complex task of scheduling crew onboard our ships. In addition, MAPS enables us to automate several processes that were performed manually, including travel requests, tracking required training and creating crew manifest lists.

Suppliers

Our largest purchases are for ship construction and acquisition. Our largest operating purchases are for fuel and oil, travel agent services, passenger airfare, passenger food and beverages, advertising and marketing, and hotel supplies for our ships. Most of the supplies that we require are available from numerous sources at competitive prices. In addition, owing to the large quantities that we purchase, we can obtain favorable prices for many of our supplies. Our purchases are denominated primarily in U.S. dollars and Euro. Payment terms granted by the suppliers are generally customary terms for the cruise industry.

Crew and passenger safety

We place the utmost importance on the safety of our passengers and crew. We conduct an ongoing safety campaign, with the objective of training ship personnel to enhance their awareness of safety practices and policies onboard.

Our fleet is equipped with modern navigational control and fire prevention and control systems. Our ships have continuously been upgraded since the acquisition of NCL Holding ASA by Star Cruises Limited in 2000. We have installed high-fog sprinklers in the engine rooms of the cruise ships in our fleet, as required by International Maritime Organization, commonly referred to as the IMO, regulation. The navigation centers on our ships are also equipped with voyage data recorders, or VDRs, which are

similar in concept to the black boxes used in commercial aircraft. The VDRs permit us to analyze safety incidents.

We have developed the Safety and Environmental Management System or SEMS. This advanced, intranet-based system establishes the policies, procedures, training, qualification, quality, compliance, audit, and self-improvement standards for all employees, both shipboard and shoreside. It also provides real-time reports and information to support decisions, fleet support, and risk management throughout the company. Through this system, our senior managers, as well as ship management, can focus on consistent, high quality operation of the fleet. The SEMS is approved and routinely audited by Det Norske Veritas, an outside consultant.

We screen and train our crew to ensure crew familiarity and proficiency with the safety equipment onboard. Various safety measures have been implemented on all of our ships and additional personnel have been appointed in our ship operations departments. Such safety initiatives include:

	•		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.

Insurance

We maintain marine insurance on the hull and machinery of our ships, which are maintained in amounts related to the estimated market value of each ship. The coverage for each of the hull and machinery policies is maintained with syndicates of insurance underwriters from the European and U.S. insurance markets.

In addition to the marine insurance coverage in respect of the hull and machinery of our ships discussed above, we seek to maintain comprehensive insurance coverage at commercially reasonable rates and believe that our current coverage is adequate to protect against most of the accident-related risks involved in the conduct of our business. We carry:

	•		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.

We believe that all of our insurance coverage, including those noted above, is subject to market-standard limitations, exclusions and deductible levels. We will endeavor to obtain insurance coverage in amounts and at premiums that are commercially acceptable to us.

The Athens Convention Relating to the Carriage of Passengers and Their Luggage by Sea (1974) and the Protocol to the Athens Convention Relating to the Carriage of Passengers and Their Luggage by Sea (1976) are generally applicable to passenger ships. The U.S. has not ratified the Athens Convention. However, with limited exceptions, the 1976 Protocol to the Athens Convention may be contractually enforced with respect to cruises that do not call at a U.S. port. The International Maritime Organization Diplomatic Conference agreed to a new protocol to the Athens Convention on November 1, 2002 (the “2002 Protocol”). The 2002 Protocol, which has not yet been entered into force, establishes for the first time a level of compulsory insurance which must be maintained by passenger ship operators with a right of direct action against the insurer. The timing of the entry into force of the 2002 Protocol, if achieved at all, is unknown. No assurance can be given that affordable and secure insurance markets will be available to provide the level and type of coverage required under the 2002 Protocol. If the 2002 Protocol enters into force, we expect insurance costs would increase.

Trademarks

We own a number of registered trademarks relating to, among other things, the names “NORWEGIAN CRUISE LINE,” “NCL AMERICA,” “NCL” and the NCL logo, the names of our cruise ships (except where trademark applications for these have been filed and are pending), incentive programs and specialty services rendered onboard our ships. In addition, we own registered trademarks relating to the “FREESTYLE” family of names, including, “FREESTYLE CRUISING,” “FREESTYLE DINING” and “FREESTYLE VACATION”. Other significant marks include our “SCHOOL OF FISH DESIGN” marks that display one fish swimming against a school of fish and NCL slogan marks, e.g., “NCL. WHERE YOU’RE FREE TO WHATEVER,” which underscore our “FREESTYLE” message. We believe our NORWEGIAN CRUISE LINE, NCL AMERICA, NCL, FREESTYLE CRUISING,

FREESTYLE DINING and FREESTYLE VACATION and “NCL” slogan trademarks, as well as the SCHOOL OF FISH DESIGN, NCL and NCL AMERICA logos are widely recognized throughout North America and Europe and have considerable value.

Regulatory issues

Registration of our ships

Eleven of the ships that we currently operate are registered in the Bahamas. Two of our ships, Pride of Aloha and Pride of America, are U.S.-flagged ships. Our ships registered in the Bahamas are inspected at least annually pursuant to Bahamian requirements. Our U.S.-registered ships are subject to laws and regulations of the U.S. federal government and to various U.S. federal regulatory agencies, including but not limited to the U.S. Public Health Service and the U.S. Coast Guard. U.S.-flagged ships are also regulated by FDA and U.S. Department of Labor.”

Both our U.S.-flagged and Bahamas-flagged fleets are also subject to the health and safety laws and regulations of the various port states where the ships dock. The U.S. and the Bahamas are members of the IMO and have adopted and put into effect the IMO conventions relating to ocean-going passenger ships.

U.S. law generally requires ships transporting passengers exclusively between and among ports in the U.S. to be built entirely in the U.S, documented under U.S. law, crewed by Americans and owned by entities that are at least 75% owned and controlled by U.S. citizens. We have been granted specific authority to operate in and among the islands of Hawaii under legislation, known as the “Hawaii Cruise Ship Provision,” which was part of the “Consolidated Appropriations Resolution, 2003” enacted in 2003 (Public Law 108-7, Division B, Title II, General Provisions—Department of Commerce, Section 211 (February 20, 2003) (117 Stat. 11,79)). The Hawaii Cruise Ship Provision permitted two partially completed cruise ships (originally contracted for construction in a U.S. shipyard by an unrelated party), to be completed in a shipyard outside of the U.S. and documented under the U.S. flag even if the owner does not meet the 75% U.S. ownership requirement, provided that the direct owning entity is organized under the laws of the U.S. and meets certain U.S. citizen officer and director requirements. Presently, only one of the two ships completed in compliance with the Hawaii Cruise Ship Provision, Pride of America, operates as a U.S.-flagged ship. The other, Pride of Hawai’i, has been transferred to the Bahamas registry and operates under the name Norwegian Jade. The Hawaii Cruise Ship Provision also authorizes the re-documentation under the U.S. flag of one additional foreign-built cruise ship for operation between U.S. ports in the islands of Hawaii, Pride of Aloha. Pride of Aloha will be transferred to Star Cruises Limited in May 2008. The Hawaii Cruise Ship Provision imposes certain requirements, including that any non-warranty work performed on any of the three ships be performed in the U.S., except in case of emergency or lack of availability, and that the ships operate primarily between and among the islands of Hawaii. As a result of this exemption, our U.S.-flagged ships deployed in Hawaii are able to cruise between U.S. ports in Hawaii without the need to call at a foreign port. We refer you to “Item 4—Information on the Company—Our business strategies—Hawaii,” for a discussion of our development of U.S.-flagged ships for cruising in Hawaii and recent developments for redeployment.

Non-Resident Alien Crew (NRAC)

NRAC employees who meet all U.S. legislation and Coast Guard Merchant Mariner requirements become certified U.S. Merchant Mariners (with limitations) in accordance with section 3509, Sub-Section 8103 of title 46, United States Code and may be employed on NCLA ships with certain limitations. Not more than 25% of the total unlicensed crew on a NCLA ship may be NRAC and ARC (Alien Resident Crew), combined. They may not perform watch-standing, automated engine room duty watch, vessel navigation functions, or certain other specific safety and security related functions, and may only perform

steward department functions. They are licensed only once with a Merchant Mariners Document by the U.S. Coast Guard for a period of five years and can only be employed for a service period not exceeding 36 months at sea in the aggregate.

Health and environment

Our various ports of call subject our ships to international and U.S. laws and regulations relating to environmental protection, including but not limited to MARPOL. Under such laws and regulations, we are prohibited from, among other things, discharging certain materials, such as petrochemicals and plastics, into the waterways.

In the U.S., we must meet the U.S. Public Health Service’s requirements, including ratings by inspectors from the Centers for Disease Control and Prevention, or the CDC, and the Food and Drug Administration, or the FDA. We believe we rate at the top of the range of CDC and FDA scores achieved by the major cruise lines. In addition, the cruise industry and the U.S. Public Health Service have agreed on regulations for food, water and hygiene to assist cruise lines in achieving the highest health and sanitation standards on cruise ships.

Pursuant to FMC and U.S. Coast Guard regulations, we have covered our financial responsibility with respect to death or injury to passengers and water pollution by providing required guarantees from our insurers with respect to such potential liabilities. In addition, we are required to obtain certificates from the U.S. Coast Guard relating to our ability to satisfy liabilities in cases of water pollution.

We currently operate under a U.S. Government-approved Environmental Management Plan that is incorporated into the SEMS program. Among the achievements under this system are:

	•		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

In connection with certain of our Alaska cruise operations, we rely on concession permits from the U.S. National Park Service to operate our cruise ships in Glacier Bay National Park and Preserve. Such permits must be periodically renewed and there can be no assurance that they will continue to be renewed or that regulations relating to the renewal of such permits will remain unchanged in the future.

Security and safety

With effect from July 1, 1998, pursuant to provisions adopted by the IMO, all cruise ships were required to be certified as having safety procedures that comply with the requirements of the International Safety Management Code for the Safe Operation of Ships and for Pollution Prevention, or the ISM Code. We have obtained certificates certifying that our ships are in compliance with the ISM Code. Each such certificate is granted for a five-year period and is subject to periodic verification.

We believe that our ships currently comply with all requirements of the IMO and the U.S. and Bahamian flags, including but not limited to SOLAS, MARPOL, and STCW. The SOLAS requirements are amended and extended by the IMO from time to time. For example, The International Port and Ship Facility Code, or the ISPS Code, was adopted by the IMO in December 2002. The ISPS Code provides for measures strengthening maritime security and places new requirements on governments, port authorities and shipping companies in relation to security issues onboard ships and in ports. We have been in compliance with all requirements of the ISPS Code imposed upon us as of the implementation date of July 1, 2004.

In addition to the requirements of the ISPS Code, the U.S. Congress enacted The Maritime Transportation Security Act of 2002, commonly known as the MTSA, which implements a number of security measures at ports in the U.S. including measures that apply to ships registered outside the United States docking at ports in the U.S. The U.S. Coast Guard has published its own set of MTSA regulations that require a security plan for every ship entering the territorial waters of the U.S., provide for identification requirements for ships entering such waters and establish various procedures for the identification of crew members onboard such ships. Our fleet is in compliance with the requirements imposed upon it by the MTSA and the U.S. Coast Guard regulations.

Amendments to SOLAS required that ships constructed in accordance with pre-SOLAS, 1974 requirements install automatic sprinkler systems by year-end 2005. Failure to comply with the SOLAS requirements with respect to any ship will, among other things, restrict the operations of such ship in the U.S. and many other jurisdictions. We are in compliance with these requirements.

Also, in response to concerns raised in connection with a balcony fire in 2006, IMO adopted an amendment to SOLAS which requires partial bulkheads on cabin balconies to be of non-combustible construction. Existing ships are required to comply with this SOLAS amendment by the first statutory survey after July 1, 2008. At December 31, 2007, nine of our ships were in compliance with the SOLAS amendment. We plan to upgrade the remaining vessels to comply with the SOLAS amendment no later than their first statutory survey after July 1, 2008.

The new SOLAS regulation on long-range identification and tracking (LRIT) entered into force on January 1, 2008. This allows SOLAS contracting governments a year to set up and test the LRIT system and ship operators a year to start fitting the necessary equipment or upgrading so that their ships can transmit LRIT information. Ships constructed on or after December 31, 2008 must be fitted with a system to transmit automatically the identity of the ship, the position of the ship (latitude and longitude) and the date and time of the position. Ships constructed before December 31, 2008 must be fitted with the equipment not later than the first survey of the radio installation after December 31, 2008. We plan to comply with this SOLAS regulation no later than their first survey of the radio installation after December 31, 2008.

Financial requirements

The FMC requires evidence of financial responsibility for those offering transportation onboard passenger ships operating out of U.S. ports to indemnify passengers in the event of non-performance of the transportation. Proposed regulations would revise the financial requirements with respect to both death/injury and non-performance coverages. We are also required to establish financial responsibility by other jurisdictions to meet liability in the event of non-performance of our obligations to passengers from those jurisdictions.

From time to time, various other regulatory and legislative changes have been or may in the future be proposed that may have an effect on our operations in the U.S. and the cruise industry in general.

Taxation

U.S. federal income taxation — foreign-flagged operations

The following discussion of the application to us of U.S. federal income tax laws is based upon current provisions of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), legislative history, U.S. Treasury regulations, administrative rulings and court decisions. The following description is subject to change and any change could affect the continuing accuracy of this discussion. In particular, the Tax Reform Act of 1986 (the “1986 Act”) significantly changed the U.S. federal income tax treatment of shipping income. In August 2003, the U.S. Internal Revenue Service, or the IRS, issued final regulations (the “Final Regulations”) interpreting section 883 of the Code, as amended by the 1986 Act. The Final Regulations were originally effective for taxable years beginning on or after September 25, 2003. However, pursuant to The American Jobs Creation Act of 2004, the effective date of the Final Regulations was delayed to taxable years of a foreign corporation beginning after September 24, 2004. Therefore, the Final Regulations apply to our year ended December 31, 2005 and subsequent years. On June 25, 2007, the IRS, issued new final and temporary Regulations, which will apply to our year ended December, 31, 2007 (the “New Regulations”).

Our foreign-flagged operations derive income from the international operation of ships. 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. A foreign corporation will qualify for the section 883 exemption if: (i) the foreign country in which the foreign corporation is organized grants an equivalent exemption for income from the international operation of ships (“Shipping Income”) of sufficiently broad scope to U.S. corporations (“Equivalent Exemption”) and (ii) (a) more than 50% in value of its stock is directly or indirectly owned by individuals who are residents of one or more foreign countries that grant an Equivalent Exemption (“Stock Ownership Test”) or (b) the corporation is a controlled foreign corporation as defined in Section 951(a) (a “CFC”) and more than 50% of the total value of all of the outstanding shares of the CFC is owned by one or more U.S. citizen, resident alien, domestic corporation, or domestic trust described in Section 501(a). In addition, both the Final Regulations and New Regulations require a foreign corporation and certain of its direct and indirect shareholders to satisfy detailed substantiation requirements (“Substantiation Requirements”) in order to establish that it meets the Stock Ownership Test.

In applying the Stock Ownership Test, under section 883(c) of the Code, stock of a foreign corporation owned directly or indirectly by a corporation (i) organized in a foreign country which grants an Equivalent Exemption and (ii) whose stock is “primarily and regularly traded on an established securities market” in an Equivalent Exemption jurisdiction or in the U.S., is treated as owned by individuals resident in such foreign country of organization.

The 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 believe that substantially all of our income from the international operation of ships is properly categorized as Shipping Income. The U.S.-source portion of our income from the international operation of ships that is not Shipping Income will be subject to U.S. taxation. We believe that, if our Shipping Income were not exempt from federal income taxation under section 883 of the Code, that income, as well as any other income from cruise operations of NCL that is not Shipping Income, to the extent derived from U.S.-sources, generally would be taxed on a net basis at graduated U.S. federal corporate income tax rates (currently, a maximum of 39%). A 30% federal branch profits tax would also apply under section 884 of the Code, generally on the after tax portion of such income that was from U.S.-sources each year to the extent that such income was not properly viewed as reinvested and maintained in our U.S. business. Interest paid or accrued by us to some extent could be treated as U.S.-source interest and also could be subject to a 30% withholding tax and/or branch interest taxes under section 884 of the Code. We believe that NCL would not be subject to the 4% gross basis tax under section 887 of the Code on certain U.S.-source transportation income.

Income of NCL derived from U.S.-sources includes 100% of its income, if any, from transportation that begins and ends in the U.S., and 50% of its income from transportation that either begins or ends in the U.S. Income from transportation that neither begins nor ends in the U.S. would not be taxable. There are indications in the legislative history of the transportation income source rules that suggest that a cruise that begins and ends in a U.S. port, but that calls on one or more foreign ports, will derive U.S.-source income only from the first and last legs of such cruise. However, since there are no regulations or other IRS guidance with respect to these rules, the applicability of the transportation income source rules in the aforesaid manner is not free from doubt. If this application of the rules is correct and if section 883 of the Code did not apply to NCL at all, NCL would be subject to U.S. taxation on a smaller portion of its income than described above.

In January 2008, NCL elected to be treated as a partnership and not as a corporation for U.S. Federal income tax purposes. An entity that is treated as a partnership for U.S. Federal income tax purposes is not a taxable entity and incurs no U.S. Federal or state income tax liability. Instead, each partner is required to take into account its allocable share of items of income, gain, loss and deduction of the partnership in computing its U.S. Federal income tax liability, regardless of whether or not cash distributions are then made. The applicability of the exemption under section 883 of the Code, for NCL’s international shipping income for the 2008 tax year and onwards, will apply to our shareholders rather than to us. Each shareholder will need to meet the requirements of section 883 discussed above in order for the exemption to apply to the income allocated to such shareholder. NCL may distribute to its shareholders annually an amount equal to the US tax liability it would have incurred directly as if it were taxed as a corporation for US tax purposes.

Certain State, Local and Non-U.S. Tax Matters. NCL may be subject to state, local non-income taxes or non-U.S. taxation in various jurisdictions, including those in which we transact business, own property, or reside. We may be required to file tax returns in some or all of those jurisdictions. The state, local or non-U.S. tax treatment of us may not conform to the U.S. Federal income tax treatment discussed above. We may be required to pay non-U.S. taxes on dispositions of foreign property, or operations involving foreign property may give rise to non-U.S. income or other tax liabilities in amounts that could be substantial.

U.S. federal income taxation — U.S.-flagged operations

Income derived from our U.S.-flagged operations (under the NCL America brand) generally is subject to U.S. federal and state income taxation at combined graduated rates of up to 39%, after an allowance for deductions. U.S.-source dividends and interest paid by NCL America generally would be subject to a 30% withholding tax, unless exempt under one of various exceptions.

Organizational structure

Our corporate structure is as follows¹:


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

Information about our cruise ships, including their size and primary areas of operation, as well as information regarding our cruise ships under construction, estimated expenditures and financing may be found under “Item 4—Information on the Company—The fleet” and “Item 5—Operating and Financial Review and Prospects—Liquidity and capital resources”.

Our principal executive offices are located at 7665 Corporate Center Drive, Miami, Florida, where we lease approximately 233,000 square feet of facilities. We also lease approximately (i) 11,500 square feet of office space in Honolulu, Hawaii for administrative operations of NCL America; (ii) 14,000 square feet of office space in London, England for sales and marketing in the United Kingdom and Ireland; (iii) 8,800 square feet of office space in Germany for sales and marketing in Europe; and (iv) 42,000 square feet of office space in Phoenix, Arizona for a call center. In addition, we own a private island in the Bahamas,

Great Stirrup Cay, which we utilize as a port-of-call on some of our itineraries. We believe that our facilities are adequate for our current needs, and that we are capable of obtaining additional facilities as necessary.

Industry

Industry background

We provide cruise vacations primarily in North America, which represents the largest vacation market in the world. According to CLIA, 10.3 million North American passengers took a cruise in 2007.

Estimates of North American-sourced cruise passengers and the number of berths marketed in North America compiled by CLIA from 2003 to 2007 are as follows:


	Cruise Passengers
	Sourced in
Calendar Year	North America (1)	Berths (2)
2003	8,195,000	215,397
2004	9,107,000	220,187
2005	9,670,000	227,717
2006	10,180,000	246,759
2007	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.

The principal itineraries visited by North American cruise passengers in recent years were the Caribbean, Europe, the Mediterranean and Alaska. In addition, North American cruise passengers visited Mexico, Hawaii, Bermuda, the Panama Canal and other exotic locations, including South America, North Africa, the South Pacific, the Far East and India.

Based on the number of ships that are currently on order worldwide, the net capacity serving North American consumers is expected to increase over the next several years. Projections compiled by CLIA indicated that at the end of 2007 and 2008, CLIA member lines have and will have an aggregate passenger capacity of 262,690 and 285,965 berths, respectively. These figures include ships that are expected to be marketed in North America and elsewhere. CLIA’s estimates of capacity do not include assumptions related to unannounced ship withdrawals due to factors such as the age of ships or changes in the location from where ships’ passengers are predominantly sourced and, accordingly, may indicate a higher percentage growth in North American capacity than will actually occur. Nonetheless, the net capacity serving North American-sourced cruise passengers is expected to increase over the next several years.

Item 4A. Unresolved Staff Comments

None.

Item 5. Operating and Financial Review and Prospects

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

Certain statements under this caption “Item 5—Operating and Financial Review and Prospects—Management’s discussion and analysis of financial condition and results of operations,” and elsewhere in this annual report, constitute “forward-looking” statements within the meaning of Section 21E of the Exchange Act and the PSLRA. Many, but not all of these statements can be found by looking for terms like “expect,” “anticipate,” “goal,” “project,” “plan,” “believe,” “seek,” “will,” “may,” “forecast,” “estimate,” “intend” and “future” and for similar words. “Forward-looking” statements do not guarantee future performance and may involve risks, uncertainties and other factors which could cause our actual results, performance or achievements to differ materially from the future results, performance or achievements expressed or implied in those “forward-looking” statements. Examples of these risks, uncertainties and other factors include, but are not limited to:

	•		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;

	•		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.

The above examples are not exhaustive and new risks emerge from time to time. We undertake no obligation to publicly update or revise any “forward-looking” statements, whether as a result of new information, future events or otherwise.

Such “forward-looking” statements are based on current beliefs, assumptions, expectations, estimates and projections of our management regarding our present and future business strategies and the environment in which we will operate in the future. These “forward-looking” statements speak only as of the date of this annual report. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any “forward-looking” statement contained herein to reflect any change in our expectations with regard thereto or any change of events, conditions or circumstances on which any such statement was based.

Terminology and Non-GAAP Financial Measures

Capacity Days represent double occupancy per cabin multiplied by the number of cruise days for the period.

Gross Cruise Costs represent the sum of total cruise operating expenses and marketing, general and administrative expenses.

Gross Yields represent total revenues per Capacity Day.

Net Yields represent total revenues less commissions, transportation and other expenses, and onboard and other expenses per Capacity Day. We utilize Net Yields to manage our business on a day-to-day basis and believe that it is the most relevant measure of our pricing performance and is commonly used in the cruise industry to measure pricing performance. We have not provided a quantitative reconciliation of projected Gross Yields to projected Net Yields due to the significant uncertainty in projecting the costs deducted to arrive at this measure. Accordingly, we do not believe that reconciling information for such projected figures would be meaningful.

Net Cruise Costs represent Gross Cruise Costs excluding commission, transportation and other expenses and onboard and other expenses. In measuring our ability to control costs in a manner that positively impacts net income (loss), we believe changes in Net Cruise Costs and Net Cruise Costs Excluding Fuel to be the most relevant indicators of our performance and are commonly used in the cruise industry as a measurement of costs.

Passenger Cruise Days represent the number of passengers carried for the period, multiplied by the number of days in their respective cruises.

Occupancy Percentage, in accordance with cruise industry practice, 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.

Please see a reconciliation of these measures to items in our consolidated financial statements on page 39.

Overview

Revenues from our cruise and cruise-related activities are categorized by us as “passenger ticket revenues” and “onboard and other revenues”. Passenger ticket revenues and onboard revenues vary according to the size of the ship in operation, the length of cruises operated and the markets in which the ship operates. Our revenues are seasonal based on demand for cruises. Historically, demand for cruises has been strongest during the summer months. In December 2007, we introduced a new fuel supplement charged per person per day for the first and second passengers in a cabin and a lesser fee per person per day for any additional passengers in the same cabin.

Passenger ticket revenues primarily consist of payments for accommodations, meals in certain restaurants on the ship, certain onboard entertainment, and include payments for service charges and air and land transportation to and from the ship, to the extent passengers purchase those items from us. Passenger ticket revenues are generally collected from passengers prior to their departure on the cruise.

Onboard and other revenues consist of revenues primarily from shore excursions, food and beverage sales, gaming, retail sales, and spa services. We record onboard revenues from onboard activities we perform directly or that are performed by independent concessionaires, from which we receive a percentage of their revenues.

Our cruise operating expenses are classified as follows:

	•		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.

We do not allocate payroll and related costs, food costs, or other ship operating costs to passenger ticket costs or to onboard and other cruise costs, since they are incurred to support the total cruise experience.

Critical accounting policies

Our consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the U.S. The preparation of these consolidated financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the periods presented. We rely on historical experience and on various other assumptions that we believe to be reasonable under the circumstances to make these estimates and judgments. Actual results could differ materially from these estimates. We believe that the following critical accounting policies affect the more significant estimates used in the preparation of our consolidated financial statements. These critical accounting policies, which are presented in detail in the notes to our audited consolidated financial statements, relate to ship accounting, asset impairment and contingencies.

Ship accounting

Ships represent our most significant assets, and we record them at cost less accumulated depreciation. Depreciation of ships is computed on a straight-line basis over the estimated service lives of primarily 30 years after a 15% reduction for the estimated salvage value of the ship. Improvement costs that we believe add value to our ships are capitalized as additions to the ship and depreciated over the improvements’ estimated useful lives. Repairs and maintenance activities are charged to expense as incurred. We account for dry-docking costs under the direct expense method which requires us to expense all dry-docking costs as incurred.

We determine the useful life of our ships based primarily on our estimates of the average useful life of the ships’ major component systems, such as cabins, main diesels, main electric, superstructure and hull. In addition, we consider the impact of anticipated changes in the vacation market and technological conditions and historical useful lives of similarly-built ships. Given the large and complex nature of our ships, our accounting estimates related to ships and determinations of ship improvement costs to be capitalized require considerable judgment and are inherently uncertain. Should certain factors or circumstances cause us to revise our estimate of ship service lives or projected residual values, depreciation expense could be materially lower or higher. If circumstances cause us to change our assumptions in making determinations as to whether ship improvements should be capitalized, the amounts we expense each year as repairs and maintenance costs could increase, partially offset by a decrease in depreciation expense. If we reduced our estimated average 30-year ship service life by one year, depreciation expense for the year ended December 31, 2007 would have increased by approximately $3.9 million. In addition, if our ships were estimated to have no residual value, depreciation expense for the same period would have increased by approximately $19.8 million.

Our estimates for ship accounting, we believe, are reasonable and our methods are consistently applied. We believe that depreciation expense is based on a rational and systematic method to allocate our ships’ costs to the periods that benefit from the ships’ usage.

Asset impairment

We review our long-lived assets, principally ships, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Assets are grouped and evaluated at the lowest level for which there are identifiable cash flows that are largely independent

of the cash flows of other groups of assets. We consider historical performance and future estimated results in our evaluation of potential impairment and then compare the carrying amount of the asset to the estimated future cash flows expected to result from the use of the asset. If the carrying amount of the asset exceeds the estimated expected undiscounted future cash flows, we measure the amount of the impairment by comparing the carrying amount of the asset to its fair value. We estimate fair value based on the best information available making whatever estimates, judgments and projections are considered necessary. The estimation of fair value is generally measured by discounting expected future cash flows at discount rates commensurate with the risk involved.

Goodwill and other indefinite-lived assets, principally tradenames, are reviewed for impairment on an annual basis or earlier if there is an event or change in circumstances that would indicate that the carrying value of these assets could not be fully recovered.

We believe our estimates and judgments with respect to our long-lived assets, principally ships, and goodwill and other indefinite-lived intangible assets are reasonable. Nonetheless, if there were a material change in assumptions used in the determination of such fair values or if there is a material change in the conditions or circumstances that influence such assets, we could be required to record a material impairment charge.

Contingencies

Periodically, we assess potential liabilities related to any lawsuits or claims brought against us or any asserted claims, including tax, legal and/or environmental matters. Although it is typically very difficult to determine the timing and ultimate outcome of such actions, we use our best judgment to determine if it is probable that we will incur an expense related to the settlement or final adjudication of such matters and whether a reasonable estimation of such probable loss, if any, can be made. In assessing probable losses, we take into consideration estimates of the amount of insurance recoveries, if any. In accordance with the guidance in SFAS No. 5, “Accounting for Contingencies,” as amended, we accrue a liability when we believe a loss is probable and the amount of loss can be reasonably estimated. Due to the inherent uncertainties related to the eventual outcome of litigation and potential insurance recoveries, although we believe that our estimates and judgments are reasonable, it is possible that certain matters may be resolved for amounts materially different from any estimated provisions or previous disclosures.

Recent accounting pronouncements

In September 2006, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. SFAS No. 157, as issued, is effective for financial statements issued for our fiscal year beginning in 2008 and interim periods within that year. However, a FASB Staff Position (“FSP”) was issued which delays the effective date for all non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (that is, at least annually). This deferral is to fiscal years beginning after November 15, 2008, and interim periods for items within the scope of the proposed FSP. In February 2008, an FSP was issued to exclude from SFAS No. 157 leasing transactions accounted under SFAS No. 13, “Accounting for Leases,” and its related interpretive accounting guidance. We adopted the required provisions of SFAS 157 as of January 1, 2008. We do not expect the adoption of SFAS 157 to have a material impact on our consolidated financial position and results of operations.

Results of operations

We reported historical total revenues, total operating expenses, operating income and net income (loss) as shown in the following table (in thousands):


	Years Ended December 31,
	2005		2006			2007
Total revenues	$	1,629,723	$	1,976,309		$	2,172,815

Total cruise operating expenses	$	1,248,526	$	1,567,382		$	1,692,940

Operating income	$	70,342	$	32,580		$	42,214

Net income (loss)	$	16,235	$	(130,899	)	$	(226,962	)

The following table presents operating data as a percentage of revenues:


	Years Ended December 31,
	2005			2006			2007
Revenues
Passenger 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 expenses
Commissions, 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) expenses
Interest 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	)%

The following table sets forth selected statistical information for the periods presented:


	Years Ended December 31,
	2005			2006			2007
Passengers Carried		981,665			1,153,844			1,304,385
Passenger Cruise Days		7,613,100			8,807,632			9,857,946
Capacity Days		7,172,040			8,381,445			9,246,715
Occupancy Percentage		106.1	%		105.1	%		106.6	%

Gross Yields and Net Yields were calculated as follows (in thousands, except Capacity Days and Yields):


	Years Ended December 31,
	2005		2006		2007
Passenger ticket revenues	$	1,194,461	$	1,438,996	$	1,571,772
Onboard and other revenues		435,262		537,313		601,043

Total revenues		1,629,723		1,976,309		2,172,815

Less:
Commissions, transportation and other		328,899		425,648		430,670
Onboard and other		141,957		186,240		204,768

Net revenues	$	1,158,867	$	1,364,421	$	1,537,377


Capacity Days		7,172,040		8,381,445		9,246,715
Gross Yields	$	227.23	$	235.80	$	234.98
Net Yields	$	161.58	$	162.79	$	166.26

Gross Cruise Costs and Net Cruise Costs were calculated as follows (in thousands, except Capacity Days and per Capacity Day data):


	Years Ended December 31,
	2005		2006		2007
Total cruise operating expenses	$	1,248,526	$	1,567,382	$	1,692,940
Marketing, general and administrative expenses		225,240		249,250		287,093

Gross Cruise Costs		1,473,766		1,816,632		1,980,033

Less:
Commissions, transportation and other		328,899		425,648		430,670
Onboard and other		141,957		186,240		204,768

Net Cruise Costs	$	1,002,910	$	1,204,744	$	1,344,595


Capacity Days		7,172,040		8,381,445		9,246,715
Gross Cruise Costs per Capacity Day	$	205.49	$	216.74	$	214.13
Net Cruise Costs per Capacity Day	$	139.84	$	143.74	$	145.41

Year ended December 31, 2006 compared to year ended December 31, 2007

Revenues

Net revenues increased 12.7% in 2007 compared to 2006 primarily due to a 10.3% increase in Capacity Days and a 2.1% increase in Net Yields. The increase in Capacity Days was primarily due to the additions of Pride of Hawai’i, Norwegian Pearl and Norwegian Gem which entered service in May 2006, November 2006, and October 2007, respectively, partially offset by Norwegian Wind and Norwegian Crown which left the fleet upon expiration of the relevant charter agreements in April 2007 and November 2007, respectively. The increase in Net Yields in 2007 was primarily the result of an increase in passenger ticket prices and to a lesser extent, an increase in onboard revenues. The increase in passenger ticket prices was primarily due to an increase in demand. The increase in onboard revenues was primarily due to an increase in amounts spent per passenger on onboard activities partially offset by lower amounts spent per passenger on art due to transitions in our art concessionaire. Gross Yields were relatively unchanged compared to the year ended December 31, 2006 primarily due to the same reasons discussed above for Net Yields.

Expenses

Net Cruise Costs increased 11.6% in 2007 compared to 2006 primarily due to the 10.3% increase in Capacity Days mentioned above and a 1.2% increase in Net Cruise Costs per Capacity Day. The increase in Net Cruise Costs per Capacity Day was primarily attributable to higher marketing, general and administrative expenses, fuel costs, and other operating expenses partially offset by lower payroll costs. The increase in marketing, general and administrative expenses was primarily due to an increase in media marketing and advertising. Average fuel costs for 2007 increased 11.8% to $396 per metric ton from $355 per metric ton for 2006. Higher other operating expenses, were primarily due to the timing of repairs and maintenance expenses partially offset by operating efficiencies and receipt of certain proceeds from an insurance arbitration award. Payroll and related costs in 2006 included start-up costs associated with the introduction of Pride of Hawai’i in May 2006. The absence of start-up costs in 2007 and a decrease in crew turnover in our Hawaii operations resulting in lower recruiting and training costs were the primary drivers for the improvement in payroll and related costs per Capacity Day. Gross Cruise Costs per Capacity Day decreased 1.2%.

Depreciation and amortization expenses increased 24.3% in 2007 compared to 2006. The increase was primarily due to the additions of Pride of Hawai’i, Norwegian Pearl and Norwegian Gem which entered service in May 2006, November 2006, and October 2007, respectively.

In July 2007, we finalized the sale of Oceanic, formerly known as Independence. In order to reflect this asset at its net realizable value, we recorded an impairment loss of $2.6 million in our consolidated statements of operations.

Other (Income) Expense

Interest income decreased from $3.4 million in 2006 to $1.4 million in 2007. The decrease was due to lower average cash balances during 2007 compared to 2006. Interest expense, net of capitalized interest, increased from $136.5 million in 2006 to $175.4 million in 2007, primarily as a result of an increase in average outstanding borrowings (primarily related to the acquisition of new ships). Other expenses, net increased from a loss of $30.4 million in 2006 to a loss of $95.2 million in 2007. The losses were primarily due to foreign currency translation losses of $38.9 million in 2006 compared to foreign currency translation losses of $94.5 million in 2007 primarily due to revaluation of our Euro-denominated debt to U.S. dollars. Also, in 2006 we received $7.3 million in connection with a settlement agreement for claims against the builder of Pride of America for post-delivery costs incurred by us.

Year ended December 31, 2005 compared to year ended December 31, 2006

Revenues

Net revenues increased 17.7% in 2006 compared to 2005 primarily due to a 16.9% increase in Capacity Days and a 0.7% increase in Net Yields. The increase in Capacity Days was primarily due to the additions of Pride of America, Norwegian Jewel, Pride of Hawai’i and Norwegian Pearl which entered service in June 2005, August 2005, May 2006 and November 2006, respectively, partially offset by the return of Norwegian Sea to Star Cruises Limited upon expiration of the relevant charter agreement in August 2005. The increase in Net Yields in 2006 was primarily due to a slight increase in onboard and other revenues while passenger ticket prices remained relatively unchanged. The increase in net onboard and other revenues was due to the increase in amounts spent per passenger primarily due to revenues related to Polynesian Adventure Tours, Inc., a tour bus operator in Hawaii, which we acquired in November 2004. Although passenger ticket prices for our international-flagged fleet slightly increased,

this increase was partially offset by downward pricing pressure related to our inter-island cruises in Hawaii. Gross Yields increased 3.8% compared to the year ended December 31, 2005.

Expenses

Net Cruise Costs increased 20.1% in 2006 compared to 2005 primarily due to the 16.9% increase in capacity mentioned above and a 2.8% increase in Net Cruise Costs per Capacity Day. The increase in Net Cruise Costs was primarily due to increases in both payroll and related expenses and fuel costs. The increase in payroll and related expenses was primarily due to higher crew costs related to the U.S. crew deployed on our inter-island cruises in Hawaii, which expanded to three ships during 2006. Average fuel costs for 2006 increased 22% to $355 per metric ton from $291 per metric ton for 2005. The increase in marketing, general and administrative expenses was primarily attributable to increases in shoreside expenses for our reservation centers. These increases were partially offset by certain operating efficiencies. On a Capacity Day basis, marketing, general and administrative expenses decreased 5.3% primarily due to the benefits of certain economies of scale. In 2006, we incurred an impairment loss of $8.0 million related to the Orient Lines’ tradename, which was transferred to Star Cruises Limited in the fourth quarter of 2006. Gross Cruise Costs per Capacity Day increased 5.5%.

Depreciation and amortization expense increased 39.1% in 2006 compared to 2005. The increase was primarily due to the additions of Pride of America, Norwegian Jewel, Pride of Hawai’i and Norwegian Pearl which entered service in June 2005, August 2005, May 2006 and November 2006, respectively.

Other (Income) Expense

Interest income decreased from $4.8 million in 2005 compared to $3.4 million in 2006. The decrease was due to lower average cash balances during 2006 compared to 2005. Interest expense, net of capitalized interest, increased from $87.0 million in 2005 to $136.5 million in 2006, primarily as a result of higher interest rates and an increase in average outstanding borrowings primarily related to the acquisition of new ships. Other income decreased from a gain of $28.1 million in 2005 to a loss of $30.4 million in 2006. The decrease was due primarily to foreign exchange translation gains of $28.7 million in 2005 compared to foreign exchange translation losses of $38.9 million in 2006 primarily due to fluctuations in the Euro/U.S. dollar exchange rate, partially offset by approximately $7.3 million in connection with a settlement agreement for claims against the builder of Pride of America for post-delivery costs incurred by us.

Liquidity and capital resources

Net cash provided by operating activities was $136.8 million, $147.5 million and $36.3 million for the years ended December 31, 2005, 2006 and 2007, respectively. The changes in cash provided by operating activities primarily related to timing differences in cash payments relating to operating assets and liabilities.

Net cash used in investing activities was $678.3 million, $756.2 million and $581.6 million for the years ended December 31, 2005, 2006 and 2007, respectively. Capital expenditures were $658.8 million, $809.4 million and $582.8 million for the years ended December 31, 2005, 2006 and 2007, respectively. The capital expenditures were primarily related to the deliveries of Pride of America and Norwegian Jewel in 2005, Pride of Hawai’i and Norwegian Pearl in 2006 and Norwegian Gem in 2007 as well as progress payments for ships under construction in all years.

Cash from financing activities was $429.5 million, $611.9 million and $522.0 million for the years ended December 31, 2005, 2006 and 2007, respectively. In 2005, we drew on committed loan facilities to fund

progress payments on ships under construction and to fund the deliveries of Pride of America and Norwegian Jewel for a total of $485.3 million. We also drew $230.0 million on our $500.0 million revolver and made repayments on our facilities including our revolver of $280.4 million. In 2006, we drew 130.0 million Euro in conjunction with the delivery of Pride of Hawai’i ($157.4 million as of drawdown date). In 2006, we drew $260.0 million on our revolving credit facility for general corporate purposes, including progress payments on ships. We drew 311.2 million Euro ($410.8 million at drawdown date) of a Euro 624.0 million revolving credit facility to fund the delivery of Norwegian Pearl. We also entered into a $610.0 million senior secured revolving credit facility and drew $390.0 million which refinanced two loans secured by Norwegian Dawn and Norwegian Sun. In 2006, we made total payments of $809.6 million in connection with our various facilities and our revolver. We received $208.0 million in capital contributions from Star Cruises Limited including the amount related to the Orient Lines’ tradename. In 2007, we made total payments of $323.5 million in connection with our various facilities and our revolver. In 2007, we drew 312.8 million Euro ($445.2 million at drawdown date) under our Euro 624.0 million revolving credit facility and Euro 5.0 million ($7.1 million at delivery) in cash to fund the delivery of Norwegian Gem. We also drew $394.7 million on our revolving credit facilities.

Capitalized interest decreased to $21.9 million for the year ended December 31, 2006 from $32.2 million for the year ended December 31, 2005 primarily due to a lower level of investment in ships under construction. Capitalized interest decreased to $18.8 million for the year ended December 31, 2007 from $21.9 million for the year ended December 31, 2006 primarily due to a lower level of investment in ships under construction.

Future capital commitments

The planned berths and expected delivery dates of our ships under construction and on firm order are as follows:


	Expected Delivery			Gross
Ship	Date	Berths		Tons
F3 One	First Quarter 2010		4,200		150,000
F3 Two	Third Quarter 2010		4,200		150,000

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 as of December 31, 2007 are exposed to fluctuations in the Euro/U.S. dollar exchange rate.

We anticipate that capital expenditures will be approximately $0.2 billion, $0.4 billion and $2.0 billion for the years ending December 31, 2008, 2009 and 2010, respectively, and will principally relate to payments for ships under construction.

Contractual Obligations:

As of December 31, 2007, our contractual obligations, with initial or remaining terms in excess of one year, including interest expense on long-term debt obligations, were as follows (in thousands):


			Less than 1		1-3		3-5		More than 5
	Total		year		years		years		years
Long-term debt obligations(1)	$	4,292,370	$	395,793	$	1,300,307	$	697,126	$	1,899,144
Operating lease obligations(2)		48,820		6,651		11,016		7,810		23,343
Ship 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		80,333
Capital 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.

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.

As a routine part of our business, depending on market conditions, exchange rates, pricing and our strategy for growth, we regularly consider opportunities to enter into contracts for the building of additional ships. We may also consider the sale of ships, potential acquisitions and strategic alliances. If any of these were to occur, they may be financed through the incurrence of additional indebtedness, through cash flows from operations, or through the issuance of debt, equity or equity-related securities.

Funding sources

As of December 31, 2007, our liquidity was $150.3 million consisting of $40.3 million in cash and cash equivalents and $110.0 million available to draw down under our revolving credit facilities. Under one of our revolving credit facilities, the availability increased by $100.0 million to the full $610.0 million after we received more than the required minimum of an additional $200.0 million of equity in January 2008.

2008 by and among us, Apollo and Star Cruises Limited. The net proceeds of the equity investment was approximately $948 million. The net proceeds of the equity investment have been used to repay existing indebtedness of $900 million and will be available for general corporate purposes. On January 8, 2008, TPG acquired, in the aggregate, 12.5% of our outstanding share capital from Apollo (we refer you to our consolidated financial statements Note 12 “Subsequent Events” on page F-25).

In February we announced we will transfer Pride of Aloha to Star Cruises Limited in May 2008. The transfer of Pride of Aloha reduces the pledged collateral of our $800 million senior secured revolving credit/term loan facility. As a result, we will pay down approximately $53.5 million of the $300 million term loan and the amount available under the $500 million revolving credit facility will be lowered by approximately $150.6 million.

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 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 Notes tendered had a total purchase price of $246.6 million paid through a draw down from our available revolving credit facilities.

We have export credit financing for 80% of the contract amount, with an allowance for change orders, of each of the two F3 ships scheduled for delivery in 2010. These financings cannot exceed approximately $967.2 million each, based on the Euro/U.S. dollar exchange rate at December 31, 2007.

Our debt agreements contain covenants that require us, among other things, to maintain a minimum level of 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, 2007. Our ships and substantially all other property are pledged as collateral for our debt.

We have commitments of approximately $0.6 billion due during the 12-month period ending December 31, 2008. We believe our cash on hand, expected future operating cash inflows, additional borrowings under existing credit facilities and our ability to issue debt securities or raise additional equity, including capital contributions, will be sufficient to fund operations, debt payment requirements, capital expenditures and maintain compliance with debt covenants under our debt agreements over the next twelve-month period. There can be no assurances that cash flows from operations and additional financing from external sources will be available in accordance with our expectations.

For further information about our long-term debt, we refer you to our consolidated financial statements Note 4. “Long-Term Debt” on page F-15 and Note 12 “Subsequent Events” on page F-28.

Financial instruments and other

General

We are exposed to market risk attributable to changes in interest rates, foreign currency exchange rates and fuel prices. We attempt to minimize these risks through a combination of our normal operating and financing activities and through the use of derivative financial instruments. The financial impacts of these hedging instruments are primarily offset by corresponding changes in the underlying exposures being hedged. We achieve this by closely matching the amount, term and conditions of the derivative instrument with the underlying risk being hedged. We do not hold or issue derivative financial instruments for trading or other speculative purposes. Derivative positions are monitored using techniques including market valuations and sensitivity analyses. We refer you to our consolidated financial statements Note 7, “Financial Instruments,” on page F-18 for further detail.

Interest rate risk

From time to time, we consider entering into interest rate swap agreements to modify our exposure to interest rate movements and to manage our interest expense. At December 31, 2007, 26% of our debt was fixed and 74% was floating, and we had no interest rate swap agreements in place. In January 2008,

following repayment of $900.0 million on our revolving credit facilities, 64% of our debt was floating rate. Based on our projections for 2008, a hypothetical one percentage point increase in interest rates would increase our 2008 interest expense by approximately $11.5 million.

Foreign currency exchange rate risk

As 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. Our exposure to foreign currency exchange rate risk relates primarily to our ship building contracts and to our Euro-denominated debt. Our ship contracts are denominated in Euro and the associated debt agreements are denominated in either U.S. dollars or Euro with certain conversion options. If denominated in Euro, our principal and interest payments for the debt will be payable in Euro, and will be subject to the exchange rate of the Euro at the time these payments are due. From time to time, we enter into foreign currency forward contracts and/or options contracts for these payments. During 2007, we included a $4.6 million gain related to forward contracts in our consolidated statements of operations.

We are also exposed to foreign currency exchange rate fluctuations on the U.S. dollar value of our foreign currency denominated forecasted transactions. Our principal net foreign currency exposure relates to the Euro. To manage this exposure, we take advantage of any natural offsets of our foreign currency revenues and expenses and from time to time enter into foreign currency forward contracts and/or option contracts for a portion of the remaining exposure related to these forecasted transactions.

Fuel price risk

Our exposure to market risk for changes in fuel prices relates to the consumption of fuel on our ships. Fuel cost, as a percentage of our total cruise operating expenses, was 9.6% in 2005, 10.5% in 2006 and 11.4% in 2007. From time to time, we use fuel hedging agreements to mitigate the financial impact of fluctuations in fuel prices. As of December 31, 2007, we had fuel swap agreements to pay fixed prices for fuel with an aggregate notional amount of approximately $32.1 million maturing through December 2008. The estimated fair value of these contracts at December 31, 2007 was an unrealized gain of $1.3 million. We estimate that a hypothetical 10% increase in our weighted-average fuel price for the year ended December 31, 2007 would increase our anticipated 2008 fuel cost by approximately $23.9 million. This increase would be partially offset by an increase in the fair value of our fuel swap agreements of approximately $3.3 million.

Related party transactions

We refer you to “Item 7—Major Shareholders and Related Party Transactions—Related party transactions” for details of our related party transactions.

Item 6. Directors, Senior Management and Employees

Directors and senior management

The members of our Board of Directors and our executive officers as of March 1, 2008 are:


Name	Age		Position with NCL
Tan Sri Lim Kok Thay		56	Chairman of the Board of Directors
David Colin Sinclair Veitch		52	President and Chief Executive Officer
Marc J. Rowan		45	Director
Steve Martinez		39	Director
Adam M. Aron		53	Director
Walter L. Revell		73	Director, Chairman of the Audit Committee
Kevin M. Sheehan		54	Executive Vice President and Chief Financial Officer
Gregory W. Hunt		51	Executive Vice President Strategic and Commercial Development
William A. Hamlin		55	Executive Vice President of Newbuilding and Global Strategic Sourcing
Andrew Stuart		44	Executive Vice President of Sales, Marketing and Passenger Services
Daniel S. Farkas		39	Senior Vice President and General Counsel

Tan Sri Lim Kok Thay became the Chairman of the Board of Directors of the Company on December 16, 2003. Tan Sri Lim is Chairman, President and Chief Executive of Genting Berhad, a company listed on Bursa Malaysia Securities Berhad. Genting Berhad is an investment holding company and is principally involved, through its subsidiaries and associated companies, in leisure and hospitality; gaming and entertainment businesses; plantations; property development and management; tours and travel-related services; investments; manufacturing and trading in paper and paper-related products; generation and supply of electric power and oil and gas exploration activities. Tan Sri Lim is also Chairman, President and Chief Executive of RWB and Joint Chief Executive of Asiatic Development Berhad, both of which are publicly listed companies in Malaysia and subsidiaries of Genting Berhad; a director of Resorts World Limited, Joondalup Limited, Cove Investments Limited, and GHL acting as trustee of the Golden Hope Unit Trust, which are substantial shareholders of Star Cruises Limited; the Chairman of Genting International PLC, a public company listed on the Singapore Stock Exchange and a subsidiary of Genting Berhad; and Chairman, President and Chief Executive Officer of Star Cruises Limited, where he focuses on long-term policies and new shipbuildings. Tan Sri Lim was involved with Star Cruises Limited since its formation in 1993. Tan Sri Lim was also involved in the development of the Genting Highlands Resort in Malaysia and the overall concept and development of the Burswood Resort in Perth, Australia, the Adelaide casino in South Australia and Foxwoods Casino Resort in Connecticut. Tan Sri Lim graduated with a Bachelor of Science (Civil Engineering) degree from the University of London in 1975 and attended the Program for Management Development at the Harvard Graduate School of Business in 1979.

David Colin Sinclair Veitch became the Deputy Chairman of the Board of Directors of the Company on December 16, 2003. Mr. Veitch is the President and Chief Executive Officer of NCL and is a Director of Star Cruises Limited. In connection with the Apollo investment, Mr. Veitch resigned as a director of NCL and remains as a non-voting observer of the Board of Directors of NCL. Before he joined our management in January 2000, Mr. Veitch was the Chief Financial Officer and Senior Vice President of Marketing and Corporate Development of Princess Cruises for approximately eight years, with responsibility at varying times for finance, marketing, international sales, strategic planning and corporate development. In addition, beginning in mid-1998, he was also the executive in charge of Princess

Cruises’ sister company, P&O Cruises (Australia). Mr. Veitch graduated with a Master in Business Administration degree from the Harvard Graduate School of Business in 1984 and also holds a Bachelor of Science degree with First Class Honours from the University of London.

Marc J. Rowan became a Director of the Company in January 2008. He is a founding partner of Apollo Management, L.P., a private investment partnership that manages a series of institutional funds focused on complex equity investments, leveraged buyouts and corporate reorganizations. Mr. Rowan currently serves on the board of directors of AAA, an Apollo-sponsored multi-billion dollar alternative investment manager and MSV LP, a North American provider of mobile satellite communications services. He has previously served on the boards of directors of National Cinemedia, Unity Media SCA, AMC Entertainment, Wyndham International, Vail Resorts, Inc., Samsonite Corporation, SkyTerra Communications Inc., Quality Distribution, Inc., National Financial Partners, Inc., New World Communications, Inc., Furniture Brands International and Culligan Water Technologies. Mr. Rowan is also active in charitable activities. He is a founding member and serves on the executive committee of the Youth Renewal Fund and is a member of the Board of Directors of the National Jewish Outreach Program, Riverdale Country School and the Undergraduate Executive Board of The Wharton School. Prior to joining Apollo, Mr. Rowan was a member of the mergers and acquisitions department of Drexel Burnham Lambert, Incorporated, with responsibilities in high yield financing, transaction idea generation and merger structure negotiation. Mr. Rowan graduated Summa Cum Laude from The University of Pennsylvania’s Wharton School of Business with a Bachelor of Science and a Masters in Business Administration in Finance.

Steve Martinez became a Director of the Company in January 2008. He joined Apollo Management, LP in 2000. Prior to that time, Mr. Martinez was employed by Goldman Sachs & Co. in its Mergers & Acquisitions Group. Before that Mr. Martinez was an associate with Bain & Company. Mr. Martinez serves on the boards of directors of Jacuzzi Brands, Rexnord Industries and Prestige Cruise Holdings, the owner of a controlling stake in Oceania Cruises and Regent Seven Seas Cruises. Mr. Martinez received a Masters in Business Administration from the Harvard Business School and a Bachelor of Arts and Bachelor of Science from the University of Pennsylvania and the Wharton School of Business, respectively, graduating Magna Cum Laude.

Adam M. Aron became a Director of the Company in January 2008. Adam M. Aron is Chairman and CEO of World Leisure Partners, Inc., a personal consultancy for matters related to travel and tourism and high-end real estate development and which acts in partnership with Apollo Management L.P. Mr. Aron has previously served as President and CEO of NCL, Senior Vice President of Marketing for United Airlines, Senior Vice President-Marketing for Hyatt Hotels Corporation, and Chairman of the Board and Chief Executive Officer of Vail Resorts, Inc. Mr. Aron currently serves on the board of directors of Starwood Hotels and Resorts Worldwide, FTD and Marathon Acquisition Corp., and Prestige Cruise Holdings, the owner of a controlling stake in Oceania Cruises and Regent Seven Seas Cruises. Mr. Aron also serves on the board of directors of a number of non-profit organizations. He is a member of the Council on Foreign Relations, Business Executives for National Security, and is a former member of the Young Presidents’ Organization. In addition Mr. Aron serves as First Vice Chairman of the Travel Industry Association of America and as Vice Chairman of the National Finance Committee of the Democratic Senatorial Campaign Committee for the 2008 election cycle. Mr. Aron has worked in the federal government and was previously selected by the U.S. Secretary of Defense to participate in the Joint Civilian Orientation Conference in 2004, was appointed by the U.S. Secretary of Agriculture to serve on the Board of Directors of the National Forest Foundation in 2000 and was a delegate to President Clinton’s White House Conference on Travel and Tourism. Mr. Aron received a Masters of Business Administration with distinction from the Harvard Business School and a Bachelor of Science Cum Laude from Harvard College.

Walter L. Revell became a member of our Board of Directors and Chairman of the Audit Committee in June 2005. Mr. Revell is Chairman of the Board and Chief Executive Officer of Revell Investments International, Inc., a diversified investment, development and management company located in Coral Gables, Florida. Mr. Revell also serves as a Director and Chairman of the Audit Committee of The St. Joe Company, a publicly traded company that is Florida’s largest land owner and real estate developer and as a Director of International Finance Bank in Miami, Florida. Mr. Revell served as Secretary of Transportation for the State of Florida in the Askew Administration. He served as Chairman and CEO of H.J. Ross Associates, Inc., consulting engineers, planners and scientists, and continues as Senior Advisor to T.Y. Lin International, in San Francisco.

Kevin M. Sheehan is the Executive Vice President and Chief Financial Officer of the Company. Prior to joining us in November 2007, Mr. Sheehan served a nine-year career with Cendant including five years as President and CFO of Avis, two years as Cendant Chief Financial Officer and two years as Chairman and Chief Executive Officer of Cendant’s Vehicle Services Division including responsibility for Avis Rent A Car, Budget Rent A Car, Budget Truck, PHH Fleet Management and Wright Express. He has spent the past two and a half years consulting to private equity firms and lecturing at Adelphi University in New York as Distinguished Visiting Professor of Accounting, Finance and Economics. He is a graduate of Hunter College and the New York University Graduate School of Business and is a Certified Public Accountant. Mr. Sheehan serves on the Board of Directors, as Chairman of the Audit Committee and as a member of the Compensation Committee of GateHouse Media (NYSE “GHS”).

Gregory W. Hunt is the Executive Vice President Strategic and Commercial Development of the Company. He oversees on-board revenue including casino operations. He also spearheads a new strategic planning initiative as well as the commercial development of licensing opportunities and business partnerships. Prior to joining us in December 2007, Mr. Hunt had held senior operating positions at companies owning and developing such household names as Culligan, Samsonite, Coldwell Banker and Century 21. Most recently, he has been working for Apollo in the United Kingdom and prior to that was Senior Vice President and Chief Financial Officer at Tweeter Home Entertainment Group. He is a graduate of the University of Vermont and is a Certified Public Accountant.

William A. Hamlin is the Executive Vice President of Newbuilding and Global Strategic Sourcing of the Company. He has previously served the Company as Executive Vice President of Fleet Operations. Prior to joining us in June 2004, Mr. Hamlin served as President of the America Region of APL Limited, which is part of the NOL Group based in Oakland, California. He also served as President of North American Operations, and Vice President of Operations for the America Region. Prior to joining APL, Mr. Hamlin held positions with Sea-Land, United States Line and other marine organizations. Mr. Hamlin has over 25 years of marine and logistics experience. Mr. Hamlin attended the University of Maine in Orono.

Andrew Stuart is the Executive Vice President of Sales, Marketing and Passenger Services of the Company. He previously held the position of Senior Vice President of Marketing and Sales since August 1998 and, prior to that, he was our Senior Vice President of Passenger Services. He joined us in August 1988 in our London office holding various Sales and Marketing positions before relocating to our headquarters in Miami. Mr. Stuart earned a Bachelor of Science degree in Catering Administration from Bournemouth University, United Kingdom.

Daniel S. Farkas is the Senior Vice President and General Counsel of the Company who joined us in January 2004. He previously held the positions of Vice President and Assistant General Counsel and prior to that was our Assistant General Counsel. Mr. Farkas was formerly a partner in the Miami offices of the law firm Mase and Gassenheimer specializing in maritime litigation. Before that he was an Assistant State Attorney for the Eleventh Judicial Circuit in and for Miami Dade County, Florida. Mr.

Farkas earned a Bachelor of Arts degree Cum Laude with honors in English and American Literature from Brandeis University and a Juris Doctorate degree from the University of Miami.

Dana Bean is the Secretary of the Company. She is a corporate administrator employed by Coson Corporate Services Limited. Wendell M. Hollis is the Resident Representative of the Company. He is a Partner of Cox Hallett Wilkinson.

Compensation of directors and executive officers

The aggregate cash compensation paid to our directors and executive officers for the year ended December 31, 2007 was $9.5 million.

Share option scheme for shares of Star Cruises Limited

Share options have been granted to certain directors of Star Cruises Limited and employees of Star Cruises Limited under the Star Cruises Limited Employees Share Option Scheme for Executives adopted by Star Cruises Limited on April 16, 1997 prior to the listing of its ordinary shares on The Stock Exchange of Hong Kong Limited (the “Pre-listing Employee Share Option Scheme”) and the share option scheme adopted by Star Cruises Limited on August 23, 2000 (as effected on November 30, 2000 and amended on May 22, 2002) (the “Post-listing Employee Share Option Scheme”) entitling them to subscribe for ordinary shares of Star Cruises Limited.

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

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

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 were adjusted accordingly. 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. Such amounts exclude outstanding share options granted to Tan Sri Lim. At December 31, 2007, he had outstanding share options under the Pre-listing Employee Share Option Scheme and the Post-listing Employee Share Option Scheme of 4,542,734 and 4,218,261, respectively.

Incentive Bonus Plans, qualified and non-qualified benefit plans

Incentive 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.

Defined Contribution Plan. We maintain a frozen qualified defined contribution plan (the “Plan”) for our shoreside employees. Effective January 1, 2002, the Plan was amended to cease all future employer contributions. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and is intended to be qualified under section 401(a) of the Code.

401(k) Plan. In addition, we maintain a 401(k) Plan (the “401(k) Plan”). The 401(k) Plan covers substantially all of 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 each participant’s contributions, and our matching contributions may not exceed 6.5% of each participant’s compensation. Our matching contributions are vested according to a five-year schedule. The 401(k) Plan is subject to the provisions of ERISA and is intended to be qualified under section 401(a) of the Code.

Supplemental Executive Retirement Plan. We also maintain a Supplemental Executive Retirement Plan (“SERP Plan”), an unfunded 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 credited to the SERP Plan on behalf of each participant that would have been contributed without regard to any limitations imposed by the Code.

Supplemental Senior Executive Retirement Plan. We maintain a Supplemental Senior Executive Retirement Plan (“SSERP Plan”), an unfunded 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 our balance sheet. 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 were contributed under the SERP Plan or SSERP Plan by us as of December 31, 2005, 2006 and 2007 as the SERP Plan and SSERP Plans are unfunded.

Board practices

Terms of directors and executive officers

At the time of filing of this annual report, all of our current directors serve until re-elected or their successors are appointed at our annual general meeting. Currently, two committees have been established by our Board of Directors: the Audit Committee and the Compensation Committee.

The Audit Committee is responsible for overseeing our accounting, auditing and financial reporting processes, including the appointment of our independent auditor, determination of its compensation and oversight of its work. At the time of filing of this annual report, Mr. Revell is the chair of, and he, and

Mr. Martinez serve on our Audit Committee. The Board of Directors has determined that Mr. Revell meets the requirements for being an “audit committee financial expert” as defined by SEC regulations.

The Compensation Committee of our Board of Directors evaluates our CEO’s and CFO’s performance and, based on such evaluation, recommends to the Board the compensation of our CEO and CFO. The Compensation Committee also reviews and makes recommendations to the Board regarding compensation of our Executive Vice Presidents and our Board Members. The Compensation Committee also administers our incentive compensation plans and equity-based plans (but our Board retains the authority to interpret those plans). At the time of filing of this annual report, Tan Sri Lim, Marc Rowan and Steve Martinez serve on our compensation committee.

Our executive officers have employment agreements with us that provide for benefits upon termination of employment by us without cause, by the executive for good reason (and in some cases, without good reason) and in connection with a change in control. We have not entered into any service agreement that provides for benefits upon termination of service with any of our directors.

Employees

The following table shows the divisional allocation of our employees as of December 31, 2005, 2006 and 2007.


	December 31,
	2005		2006		2007
Shipboard (1)		10,088		12,145		12,115
Shoreside		1,860		2,052		2,175

Total		11,948		14,197		14,290


(1)		Does not include crew members that were on leave as of the respective dates.

We refer you to “Item 3—Key Information—Risk factors—Risks relating to our business” for more information regarding our relationships with union employees and our collective bargaining agreements that are currently in place.

Share Ownership

Item 7. Major Shareholders and Related Party Transactions

Major shareholders

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 and an assignment agreement dated January 7, 2008 by and among us, Apollo and Star Cruises Limited. On January 8, 2008, TPG acquired, in the aggregate, 12.5% of our outstanding ordinary shares from Apollo for $250 million. Prior to the transactions, Star Cruises Limited owned 100% of our ordinary shares. As of March 1, 2008, our principal shareholders are:


Shareholder	Number of Shares(4)		Percentage Ownership
Star 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.

Pursuant to a shareholders’ agreement, dated August 17, 2007, among us, Star Cruises Limited and NCL Investment Ltd. (the “Shareholders’ Agreement”), Star Cruises Limited, subject to certain consent rights, has granted to Apollo the right to vote its ordinary shares. The Shareholders’ Agreement became effective on January 7, 2008. Both NCL Investment II Ltd. and Star NCLC Holdings Ltd. (on January 7, 2008) along with TPG (on January 8, 2008) have become parties to the Shareholders’ Agreement through separate joinder agreements. Each TPG affiliate purchasing ordinary shares is considered a permitted transferee of Apollo and all ordinary shares purchased by TPG are deemed owned by Apollo under the Shareholders’ Agreement. We refer you to “Related party transactions” below, for more details on the Shareholders’ Agreement.

As of March 1, 2008, the principal shareholders of Star Cruises Limited are:


	Percentage Ownership in Star
Shareholder	Cruises Limited
GHL ⁽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.

As a result, an aggregate of approximately 53% of Star Cruises Limited’s outstanding shares is owned by RWB and GHL as trustee of the Golden Hope Unit Trust, directly or indirectly, as of March 1, 2008.

Related party transactions

Transactions in connection with the Reorganization

In April 2004, Star Cruises Limited completed a reorganization transaction (the “Reorganization”) which included the formation of NCL Corporation Ltd. in December 2003.

As part of the Reorganization, $366.6 million of our liabilities that were recorded as amount due to Star Cruises Limited were capitalized as equity. In addition, substantially all of the guarantees and mortgages that had been provided by ship-owning subsidiaries of Arrasas Limited to the lenders of Star Cruises

Limited were released, while substantially all of the guarantees provided by Star Cruises Limited to these subsidiaries’ lenders were also released and replaced with guarantees from us.

In addition, we transferred six of our ships, Norwegian Crown, Norwegian Dream, Norwegian Majesty, Norwegian Sea, Marco Polo and Norwegian Wind, to Star Cruises Limited at their existing net book values of $778.0 million along with their $403.2 million of secured indebtedness. The difference of $374.8 million reduced our intercompany debt owed to Star Cruises Limited by the same amount. After the transfer, we entered into arrangements with Star Cruises Limited to charter-in these six ships from Star Cruises Limited for periods ranging from one to six years to continue operating them under the Norwegian Cruise Line and Orient Lines brands. These charter arrangements provide us with greater flexibility in removing older ships from our fleet as new ships that are custom designed for “Freestyle Cruising” enter our fleet over time. We believe that our arrangements with Star Cruises Limited are on terms substantially the same as arms-length transactions. We currently have three ships under the charter agreements, Norwegian Majesty, Norwegian Dream and Marco Polo. In March 2008, the charter agreement for Marco Polo will expire and we no longer operate under the Orient Lines’ brand name. In November, 2008 we will return Norwegian Dream.

The amounts payable by us annually to Star Cruises Limited for the three charters are set forth under “Item 5—Operating and Financial Review and Prospects—Contractual obligations” above, within the line item “Ship Charter Obligations.”

Transactions with Star Cruises Limited, Apollo and TPG

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.

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.

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 this 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 also received a $200.0 million capital contribution from Star Cruises Limited.

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 and an assignment agreement dated January 7, 2008 by and among us, Apollo and Star Cruises Limited. The net proceeds of the equity investment are being used to repay existing indebtedness and will be available for general corporate purposes. On January 8, 2008, TPG acquired, in the aggregate, 12.5% of our outstanding ordinary shares from Apollo for $250 million.

In connection with the transactions described above, we entered into a reimbursement and distribution agreement, a shareholders’ agreement and subscription agreement, each of which are described below.

The Reimbursement and Distribution Agreement

On 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.

On February 11, 2008 we announced the withdrawal of Pride of Aloha from 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 the Pride of America.

As a result of the decision to withdraw Pride of Aloha from 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 Aloha to 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 Aloha to Star Cruises Limited, we expect to pay Star Cruises Limited approximately $197 million in connection with Pride of America.

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’ Agreement

On 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:

	•		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 has certain registration rights.

Unless a Qualified Public Offering has occurred whereby Apollo sells any of its 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.

We refer you to our consolidated financial statements Note 5, “Related Party Disclosures” on page F-16, for a further discussion of our related party transactions and Note 12 “Subsequent Events” on page F-25.

The Subscription Agreement

On 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 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.

Item 8. Financial Information

We refer you to Item 18—Financial Statements beginning on page F-2.

Legal proceedings

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 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.

	(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.

Other

Dividends

We intend to retain all currently available funds and as much as necessary of future earnings in order to fund the continued development and growth of our business. The indenture governing our 10 5/8% Senior Notes due 2014 prohibits, among other things, our ability to pay cash dividends to our shareholders above specified levels. In addition, any determination to pay dividends in the future will be at the discretion of our board of directors and will depend upon our results of operations, financial condition, restrictions imposed by applicable law and other factors that our Board of Directors deems relevant.

Significant changes

Except as identified in this annual report, no significant change in our financial condition has occurred since the date of the most recent consolidated audited financial statements contained in this annual report.

Item 9. Offer and Listing Details

Not applicable.

Item 10. Additional Information

General

We are an exempted company incorporated under the laws of Bermuda. We are registered with the Registrar of Companies in Bermuda under registration number 34678. We were incorporated on December 15, 2003 under the name NCL Holdings, Ltd. which was changed to NCL Corporation Ltd. on March 26, 2004. We have a general corporate purpose. We are owned by Star Cruises Limited, Apollo and TPG, holding 50.0%, 37.5 % and 12.5% of our issued ordinary shares, respectively.

Share capital

All of our issued and outstanding ordinary shares are fully paid. Subject to our bye-laws and to any resolution of our shareholders to the contrary, and without prejudice to any special rights previously conferred on the holders of any existing shares or class of shares, our Board of Directors is authorized to issue any of our authorized but unissued shares. There are no limitations on the right of non-Bermudians or non-residents of Bermuda to hold or vote our shares.

Holders of ordinary shares have no pre-emptive, redemption, conversion or sinking fund rights. Holders of ordinary shares are entitled to one vote per share on all matters submitted to a vote of holders of ordinary shares. Unless a different majority is required by law or by our bye-laws, resolutions to be approved by holders of ordinary shares require approval by a simple majority of votes cast at a meeting at which a quorum is present and in the case of an equality of votes, the resolution will fail.

In the event of our liquidation, dissolution or winding up, the holders of ordinary shares are entitled to share equally and ratably in our surplus assets, if any, remaining after the payment of all of our debts and liabilities. If we are wound up, the liquidator may, with the sanction of a resolution of our shareholders, divide amongst our shareholders all or any part of our assets and determine how such division shall be carried out as between our shareholders or different classes of shareholders.

Dividend rights

Under Bermuda law, a company’s board of directors may declare and pay dividends from time to time unless there are reasonable grounds for believing either that the company is, or after the payment would be, unable to pay its liabilities as they become due or that the realizable value of its assets would thereby be less than the sum of its liabilities and issued share capital (par value) and share premium accounts (share premium being the amount of consideration paid for the subscription of shares in excess of the par value of those shares). Under our bye-laws, each ordinary share is entitled to dividends if and when dividends are declared by our Board of Directors, subject to any preferred dividend right of the holders of any preference shares. There are no restrictions on our ability to transfer funds (other than funds denominated in Bermuda dollars) in and out of Bermuda or to pay dividends to non-Bermuda residents.

Variation of shareholder rights

If at any time we have more than one class of shares, the rights attaching to any class, unless otherwise provided for by the terms of issue of the relevant class, may be varied either: (i) with the consent in writing of the holders of 75% of the issued shares of that class; or (ii) with the sanction of a resolution passed by a majority of the votes cast at a general meeting of the relevant class of shareholders at which a quorum consisting of at least two persons holding or representing the issued shares of the relevant class is present. Our bye-laws specify that the creation or issue of shares ranking equally with existing shares will not, unless expressly provided by the terms of issue of those shares, vary the rights attached to existing shares. In addition, the creation or issue of preferred shares ranking prior to ordinary shares will not be deemed to vary the rights attached to ordinary shares.

Transfer of shares

Our Board of Directors may in its absolute discretion and without assigning any reason refuse to register the transfer of a share that is not fully paid. Our Board of Directors may also refuse to recognize an instrument of transfer of a share unless it is accompanied by the relevant share certificate and such other evidence of the transferor’s right to make the transfer as our Board of Directors shall reasonably require.
In addition, the Board of Directors are required to refuse to register a transfer unless all applicable consents have been obtained. As a matter of Bermuda law, a transfer of shares will require prior approval from the Bermuda Monetary Authority. Subject to these restrictions, a holder of ordinary shares may transfer the title to all or any of his or her or its ordinary shares by completing a form of transfer in the form set out in our bye-laws (or as near thereto as circumstances admit) or in such other form as the Board of Directors may accept. The instrument of transfer must be signed by both the transferor and

transferee, although in the case of a fully paid share our Board of Directors may accept the instrument signed only by the transferor.

Meetings of shareholders

Our bye-laws provide that any resolution required or permitted to be passed by our shareholders must be passed at an annual or special general meeting of our shareholders or by the written resolution of our shareholders, except that the removal of directors and auditors cannot be done by written resolution. Under Bermuda law, a company is required to convene at least one general meeting of shareholders each calendar year. Bermuda law provides that a special general meeting of shareholders may be called by the board of directors of a company and must be called upon the request of shareholders holding not less than 10% of the paid-up capital of the company carrying the right to vote at general meetings. Bermuda law also requires that shareholders be given at least five days’ advance notice of a general meeting, but the accidental omission to give notice to any person does not invalidate the proceedings at a meeting. Our bye-laws provide that our Board of Directors may convene an annual general meeting or a special general meeting. The notice requirement for general meetings is subject to the ability to hold such meetings on shorter notice if such notice is agreed: (i) in the case of an annual general meeting by all of the shareholders entitled to attend and vote at such meeting; or (ii) in the case of a special general meeting by a majority in number of the shareholders entitled to attend and vote at the meeting holding not less than 95% in nominal value of the shares entitled to vote at such meeting. The quorum required for a general meeting of shareholders is two or more shareholders present, in person or by proxy, and representing in excess of 50% of the total issued voting shares.

Access to books and records and public dissemination of information

Members of the general public have the right to inspect the public documents of a company available at the office of the Registrar of Companies in Bermuda. These documents include the Company’s memorandum of association (which include its objects and powers) and certain alterations to its memorandum of association. The shareholders have the additional right to inspect the bye-laws of the Company, minutes of general meetings of shareholders and the Company’s audited financial statements, which must be presented at the annual general meeting. The register of members of a company is also open to inspection by shareholders without charge and by members of the general public on the payment of a fee. The register of members is required to be open for inspection for not less than two hours in any business day (subject to the ability of a company to close the register of shareholders for not more than thirty days in a year). A company is required to maintain its share register in Bermuda but may, subject to the provisions of the Companies Act 1981, establish a branch register outside Bermuda. A company is required to keep at its registered office a register of directors and officers that is open for inspection for not less than two hours in any business day by members of the public without charge. Bermuda law does not, however, provide a general right for shareholders to inspect or obtain copies of any other corporate records.

Election and removal of directors

Our bye-laws provide that our Board of Directors shall consist of not less than five directors. Our bye-laws do not provide for cumulative voting in the election of directors. Subject to the provisions of our bye-laws, the shareholders by resolution may determine such other minimum or maximum numbers of directors.

Our bye-laws provide that the shareholders entitled to vote for the election of directors may, at any special general meeting called for that purpose, remove a director for any reason, provided that the notice of any such meeting convened for the purpose of removing a director contains a statement of the intention to

remove the director and is served on that director at least 14 days before the meeting. The director is entitled to be heard at the meeting on the motion for his or her removal. Any vacancy created by the removal of a director at a special general meeting may be filled at the meeting by a resolution of the shareholders, or, in the absence of such election, by the Board of Directors.

Proceedings of the Board of Directors

Our bye-laws provide that our business is to be managed and conducted by our Board of Directors and our Board may exercise all powers of the Company to borrow money and mortgage any of our property and assets. Bermuda law requires that our directors be individuals, but there is no requirement in our bye-laws or Bermuda law that directors hold any of our shares. There is also no requirement in our bye-laws or Bermuda law that our directors must retire at a certain age.

Our directors may also be paid all reasonable travel, hotel and other expenses properly incurred by them in attending and returning from meetings of the Board or general meetings of the Company, acting as committee members appointed by the Board or otherwise in connection with our business or their duties as directors. Under Bermuda law, a director shall be deemed not to be acting honestly and in good faith if he fails to disclose at the first opportunity at a meeting of directors or by writing to the directors: (i) his or her interest in any material contract or proposed material contract with the Company or any of its subsidiaries; or (ii) his or her material interest in any person that is a party to a material contract or proposed material contract with the Company.

Indemnification of directors and officers

Our bye-laws indemnify our directors and officers in respect of their actions and omissions, except in respect of their fraud or dishonesty. The indemnification provided in our bye-laws is not exclusive of other indemnification rights to which a director or officer may be entitled, provided these rights do not extend to his or her fraud or dishonesty.

Amendment of memorandum of association and bye-laws

Bermuda law provides that the memorandum of association of a company may be amended by a resolution passed at a general meeting of shareholders of which due notice has been given. Our bye-laws may be amended in the manner provided for in the Companies Act 1981.

Under Bermuda law, the holders of an aggregate of not less than 20% in par value of a company’s issued share capital have the right to apply to the Supreme Court of Bermuda for an annulment of any amendment of the memorandum of association adopted by shareholders at any general meeting, other than an amendment which alters or reduces a company’s share capital as provided in the Companies Act 1981. Where such an application is made, the amendment becomes effective only to the extent that it is confirmed by the Bermuda court. An application for an annulment of an amendment of the memorandum of association must be made within twenty-one days after the date on which the resolution altering the company’s memorandum of association is passed and may be made on behalf of persons entitled to make the application by one or more of their number as they may appoint in writing for the purpose. No application may be made by shareholders voting in favor of the amendment.

Appraisal rights and shareholder suits

Under Bermuda law, in the event of an amalgamation of a Bermuda company with another company or corporation, a shareholder of the Bermuda company who is not satisfied that fair value has been offered

for such shareholder’s shares may apply to the Supreme Court of Bermuda within one month of notice of the shareholders’ meeting to appraise the fair value of those shares.

Class actions and derivative actions are generally not available to shareholders under Bermuda law. The Bermuda courts, however, would ordinarily be expected to permit a shareholder to commence an action in the name of a company to remedy a wrong to the company where the act complained of is alleged to be beyond the corporate power of the company or is illegal or would result in the violation of the company’s memorandum of association or bye-laws. Furthermore, consideration would be given by a Bermuda court to acts that are alleged to constitute a fraud against the minority shareholders or, for instance, where an act requires the approval of a greater percentage of the company’s shareholders than that which actually approved it.

Capitalization of profits and reserves

Pursuant to our bye-laws, our shareholders may, upon the recommendation of our Board of Directors, (i) capitalize any part of the amount of our share premium or other reserve accounts or otherwise available for distribution by applying such sum in paying up unissued shares to be allotted as fully paid bonus shares pro-rata (except in connection with the conversion of shares) to the shareholders; or (ii) capitalize any sum standing to the credit of a reserve account or sums otherwise available for dividend or distribution by paying up in full partly paid or nil paid shares of those shareholders who would have been entitled to such sums if they were distributed by way of dividend or distribution.

Material contracts

On September 7, 2006, we entered into a contract with Aker Yards S.A. to build a 4,200-berth ship, F3 One, for 735.0 million Euro ($1,072.4 million as of December 31, 2007), including an allowance for buyer’s items. Pursuant to subsequent modification agreements, the contract price was increased to 755.9 million Euro ($1,102.9 million as of December 31, 2007). The ship is anticipated to be delivered in the first quarter of 2010.

On September 7, 2006, we entered into a contract with Aker Yards S.A. to build a 4,200-berth ship, F3 Two, for 735.0 million Euro ($1,072.4 million as of December 31, 2007), including an allowance for buyer’s items. Pursuant to subsequent modification agreements, the contract price was increased to 779.1 million Euro ($1,136.8 million as of December 31, 2007). The ship is anticipated to be delivered in the third quarter of 2010.

On September 22, 2006, we signed a loan agreement with BNP Paribas, as agent for BNP Paribas, Calyon, HSBC France and Societe Generale, allowing us to borrow up to 80% of the contract price with allowance for change orders of F3 One upon its delivery date, or up to 662.9 million Euro ($967.2 million as of December 31, 2007). We expect to make payments due during construction from cash flows from operations and borrowings under our revolving credit facilities.

On September 22, 2006, we signed a loan agreement with BNP Paribas, as agent for BNP Paribas, Calyon, HSBC France and Societe Generale, allowing us to borrow up to 80% of the contract price with an allowance for change orders of F3 Two upon its delivery date, or up to 662.9 million Euro ($967.2 million as of December 31, 2007). We expect to make payments due during construction from cash flows from operations and borrowings under our revolving credit facilities.

Both of the above described financings are term loans, each collateralized by the respective ship and are repayable in 24 semi-annual installments, commencing six months from the relevant ship’s delivery date, through 2022. The financing for F3 One is denominated in U.S. dollars bearing a fixed interest rate of

6.05% and the financing for F3 Two is denominated in Euros bearing a fixed interest rate of 4.89%. Under the terms of each loan agreement, we have the ability to cancel the financing up to 60 days prior to the delivery date for the ship.

On November 27, 2006, we entered into a 146-month lease agreement commencing December 1, 2006 with Hines Reit Airport Corporate Center LLC with respect to our Miami corporate headquarters, which lease provides for 233,000 rentable square feet.

On December 22, 2006, we entered into a $610.0 million senior secured revolving credit facility with DnB NOR Bank ASA, as agent for DnB NOR Bank ASA, Citibank N.A., Commerzbank Aktiengesellschaft, KfW, Norddeutsche Landesbank Girozentrale, and Nordea Bank Norge ASA. The facility refinanced two existing loans collateralized by Norwegian Dawn and Norwegian Sun and provides additional borrowing capacity for general corporate purposes. The facility is available in two tranches of $510 million and $100 million, each having a condition precedent of $200 million in equity being raised by us. The facility has no amortization for the first 36 months, bears interest at LIBOR plus a margin of 150 basis points at December 31, 2006 and 2007 (which margin is subject to certain adjustments) and matures in 2013. In January, 2008, as a result of the equity investment by Apollo, our availability under the $610 million revolving credit facility increased by $100 million to the full $610 million (we refer you to “Item 7—Major Shareholders and Related Party Transactions” for more information on the material contracts entered into in connection with the equity investment by Apollo and the related transactions).

Exchange controls

None.

Documents on display

We are subject to the information requirements of the Exchange Act. In accordance with these requirements, we file reports, including annual reports on Form 20-F, and other information with the SEC. These materials, including this annual report, and the exhibits thereto, may be inspected and copied at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. In addition, any filings we make electronically with the SEC will be available to the public over the Internet at the SEC’s website at http://www.sec.gov and are also available on our www.ncl.com website.

Item 11. Quantitative and Qualitative Disclosures About Market Risk

We refer you to “Item 5—Operating and Financial Review and Prospects—Financial instruments and other,” for information about our market risk.

Item 12. Description of Securities Other than Equity Securities

None.

PART II

Item 13. Defaults, Dividend Arrearages and Delinquencies

None.

Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds

None.

Item 15. Controls and Procedures

We have evaluated, with the participation of our Chief Executive Officer and our Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of December 31, 2007. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon our evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control-Integrated Framework issued by the committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control-Integrated Framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2007.

This annual report does not include an attestation report of our independent registered certified public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.

There has been no change in our internal control over financial reporting during 2007 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there is only the reasonable assurance that our controls will succeed in achieving their goals under all potential future conditions.

Item 16. Reserved

Item 16A. Audit Committee Financial Expert

Our Board of Directors has determined that Mr. Walter L. Revell qualifies as an “audit committee financial expert” and is independent within the meaning of the rules, of the New York Stock Exchange (a national securities exchange registered pursuant to Section 6 of the Exchange Act).

Item 16B. Code of Ethics

Our code of conduct and ethics as defined in Item 16B of Form 20-F, is applicable to all of our directors, officers and employees, and is publicly available on our website at www.ncl.com.

Item 16C. Principal Accountant Fees and Services

The following table sets forth the fees incurred by us for services provided to us by our principal accounting firm, PricewaterhouseCoopers LLP, during the years ended December 31, 2006 and 2007.


	Total Fees
	For the years ended December 31,
	2006		2007
	(in thousands of dollars)
Fees
Audit fees	$	1,025	$	973
Audit related fees		37		37
Tax fees		145		73
All other fees		2		2

Total	$	1,209	$	1,085

Audit fees in the above table are the aggregate fees billed by PricewaterhouseCoopers LLP in connection with the audit of our annual consolidated financial statements, the review of our quarterly financial statements and other statutory audit reports. The 2006 audit fees were increased by approximately $152,000 from what was reported in our Form 20-F for the year ended December 31, 2006 because these fees were approved after the filing of the 2006 Form 20-F.

Audit-related fees in 2006 and 2007 are in connection with the audit of our employee benefit plan.

Tax fees in 2006 and 2007 were in connection with tax return preparation and other tax services related to United States and foreign jurisdictions.

All Other Fees for 2006 and 2007 related to the PricewaterhouseCoopers LLP annual on-line subscription research tool.

Audit Committee pre-approval policies and procedures

Our Audit Committee approves all audit, audit-related services, tax services and other services provided by PricewaterhouseCoopers LLP. Any services provided by PricewaterhouseCoopers LLP that are not specifically included within the scope of the audit must be pre-approved by the Audit Committee prior to any engagement.

PART III

Item 17. Financial Statements

The Registrant has responded to Item 18 in lieu of this Item.

Item 18. Financial Statements

Reference is made to pages F-1 to F-29 of this annual report.

Item 19. Exhibits

A list of exhibits included as part of this annual report is set forth in the Exhibit Index and is hereby incorporated by reference herein. These agreements may contain representations and warranties by the parties. These representations and warranties have been made solely for the benefit of the other party or parties to such agreements and (i) may have been qualified by disclosures made to such other party or parties, (ii) were made only as of the date of such agreements or such other date(s) as may be specified in such agreements and are subject to more recent developments, which may not be fully reflected in our public disclosure, (iii) may reflect the allocation of risk among the parties to such agreements and (iv) may apply materiality standards different from what may be viewed as material to investors. Accordingly, these representations and warranties may not describe our actual state of affairs at the date hereof and should not be relied upon.

Glossary

Berths. The number of passenger beds on a cruise ship, calculated, in accordance with industry practice, by multiplying the number of passenger cabins by two beds per cabin. Berths do not represent the actual number of passenger beds on a cruise ship. The actual number of beds may be different because it is possible to furnish a cabin on a cruise ship with more or fewer than two beds per cabin.

Charter. The hire of a ship for a specified period of time. The contract for a charter is called a charterparty. A ship is “chartered in” by an end user and “chartered out” by the provider of the vessel.

CLIA. Cruise Lines International Association, a marketing and training organization formed in 1975 to promote cruising. CLIA is composed of 24 of the major North American cruise lines, including NCL, which together represent 97% of the cruise capacity marketed from North America as of December 31, 2007.

Single-day cruises. Cruises which do not enter a foreign port and vary in length from one night to several nights.

Dry-dock. Large basin where all the fresh/sea water is pumped out to allow a ship to dock in order to carry out cleaning and repairs of those parts of a ship which are below the water line.

Gross Tons. Is a unit of enclosed passenger space on a cruise ship, such that gross ton = 100 cubic feet or 2.831 cubic meters.

IMO. International Maritime Organization, a United Nations agency that sets international standards for shipping.

Jones Act. A common name for the coastwise laws in the U.S. including the U.S. Merchant Marine Act of 1920, as amended, with regard to the transportation of merchandise and the Passenger Vessel Services Act with regard to the transportation of passengers.

MARPOL. The International Convention for the Prevention of Pollution from Ships, an international environmental regulation.

SOLAS. The International Convention for the Safety of Life at Sea, an international environmental regulation.

Terminal. A building in a port through which ship passengers arrive and depart.


Exhibit
number		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.*


Exhibit
number		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


Exhibit
number		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. ***+


Exhibit
number		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. ++


Exhibit
number		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).

Report of Independent Registered Certified Public Accounting Firm

To the Board of Directors and Shareholders of NCL Corporation Ltd.

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of cash flows and of changes in shareholder’s equity present fairly, in all material respects, the financial position of NCL Corporation Ltd. and its subsidiaries (the “Company”) at December 31, 2007 and 2006, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2007 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

Miami, Florida
February 22, 2008 except as to
Note 12 (c), for which the date is March 10, 2008

F-1

NCL Corporation Ltd.
Consolidated Statements of Operations
(in thousands of dollars)


	Years Ended December 31,
	2005			2006			2007
Revenues
Passenger ticket revenues	$	1,194,461		$	1,438,996		$	1,571,772
Onboard and other revenues		435,262			537,313			601,043

Total revenues		1,629,723			1,976,309			2,172,815


Cruise operating expenses
Commissions, transportation and other		328,899			425,648			430,670
Onboard and other		141,957			186,240			204,768
Payroll and related		323,621			412,943			436,843
Fuel		119,412			164,530			193,173
Food		94,105			102,324			120,633
Ship charter costs		28,603			26,226			20,384
Other operating		211,929			249,471			286,469

Total cruise operating expenses		1,248,526			1,567,382			1,692,940

Marketing, general and administrative expenses		225,240			249,250			287,093
Depreciation and amortization expenses		85,615			119,097			148,003
Impairment loss		—			8,000			2,565

Total operating expenses		1,559,381			1,943,729			2,130,601

Operating income		70,342			32,580			42,214


Non-operating (income) expenses
Interest income		(4,803	)		(3,392	)		(1,384	)
Interest expense, net of capitalized interest		87,006			136,478			175,409
Other (income) expenses, net		(28,096	)		30,393			95,151

Total non-operating expenses		54,107			163,479			269,176

Net income (loss)	$	16,235		$	(130,899	)	$	(226,962	)

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

F-2

NCL Corporation Ltd.
Consolidated Balance Sheets
(in thousands of dollars, except share data)


	December 31,
	2006			2007
Assets
Current assets:
Cash and cash equivalents	$	63,530		$	40,291
Restricted cash		1,226			1,375
Accounts receivable, net		10,244			8,173
Amount due from Star Cruises Limited		5,033			235
Consumable inventories		33,392			41,997
Prepaid expenses and other		24,211			27,353

Total current assets		137,636			119,424

Property and equipment, net		3,816,292			4,243,872
Restricted cash		1,650			1,682
Goodwill		400,254			400,254
Tradenames		202,538			202,538
Other assets		71,254			65,928

Total assets	$	4,629,624		$	5,033,698


Liabilities and Shareholder’s Equity
Current liabilities:
Current portion of long-term debt	$	154,638		$	191,172
Accounts payable		116,947			88,715
Accrued expenses and other liabilities		181,821			202,794
Advance ticket sales		314,050			332,802

Total current liabilities		767,456			815,483

Long-term debt		2,405,357			2,977,888
Other long-term liabilities		1,744			4,801

Total liabilities		3,174,557			3,798,172


Commitments and contingencies (Note 9)

Shareholder’s equity
Ordinary shares, $.0012 par value; 25,000,000 shares authorized; 10,000,000 shares issued and outstanding (Note 2)		12			12
Additional paid-in capital		1,711,114			1,715,718
Accumulated other comprehensive (loss) income		(1,516	)		1,301
Accumulated deficit		(254,543	)		(481,505	)

Total shareholder’s equity		1,455,067			1,235,526

Total liabilities and shareholder’s equity	$	4,629,624		$	5,033,698

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

F-3

NCL Corporation Ltd.
Consolidated Statements of Cash Flows
(in thousands of dollars)


	Years Ended December 31,
	2005			2006			2007
Cash flows from operating activities
Net 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			148,003
Impairment loss		—			8,000			2,565
(Gain) loss on translation of debt		(29,418	)		35,122			92,024
Other		3,359			1,347			843
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable		(885	)		1,447			2,071
Increase in consumable inventories		(10,732	)		(3,932	)		(8,605	)
(Increase) decrease in prepaid expenses and other assets		(1,300	)		(535	)		8,013
Increase (decrease) in accounts payable		3,128			43,944			(28,232	)
Increase in accrued expenses and other liabilities		20,263			36,507			27,859
Increase in advance ticket sales		50,563			37,406			18,752

Net cash provided by operating activities		136,828			147,504			36,331


Cash flows from investing activities
Capital 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		—			—			1,440

Net cash used in investing activities		(678,309	)		(756,245	)		(581,578	)


Cash flows from financing activities
Principal repayments on long-term debt		(280,440	)		(809,740	)		(323,464	)
Proceeds from debt		715,696			1,219,557			839,925
Proceeds from Star Cruises Limited		1,868			4,151			8,454
Contribution 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			522,008

Net (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			63,530

Cash and cash equivalents at end of period	$	60,416		$	63,530		$	40,291

Supplemental disclosures (Note 11)

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

F-4

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)


									Accumulated
			Additional			Unamortized			other
	Ordinary		paid-in			share option			comprehensive			Accumulated
	shares		capital			expense			(loss) income			deficit			Total
Balance, December 31, 2004	$	12	$	1,491,623		$	(779	)	$	—		$	(139,879	)	$	1,350,977
Issuance of share options		—		94			(38	)		—			—			56
Accretion of share option expense		—		—			224			—			—			224
Adjustments to variable share options		—		64			—			—			—			64
Contribution from Star Cruises Limited (Note 5)		—		10,148			—			—			—			10,148
Net income		—		—			—			—			16,235			16,235

Balance, December 31, 2005		12		1,501,929			(593	)		—			(123,644	)		1,377,704
Non-cash share-based compensation		—		1,559			—			—			—			1,559
Reclassification of unamortized share option expense		—		(593	)		593			—			—			—
Contribution from Star Cruises Limited (Note 5)		—		208,219			—			—			—			208,219
Changes 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	)		1,455,067
Non-cash share-based compensation		—		948			—			—			—			948
Contribution from Star Cruises Limited (Note 5)		—		3,656			—			—			—			3,656
Changes related to cash flow derivative hedges		—		—			—			2,817			—			2,817
Net loss		—		—			—			—			(226,962	)		(226,962	)

Balance, December 31, 2007	$	12	$	1,715,718		$	—		$	1,301		$	(481,505	)	$	1,235,526

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.

F-5

NCL Corporation Ltd.
Notes to the Consolidated Financial Statements

1.		Description of Business and Organization

		On 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 Polo will 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 Policies

		The following accounting policies have been used consistently in the preparation of the consolidated financial statements:

		Basis of Presentation

		The 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 Recognition

		Deposits 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

NCL Corporation Ltd.
Notes to the Consolidated Financial Statements

Cash and Cash Equivalents

Cash and cash equivalents include cash and investments with original maturities of three months or less when purchased.

Restricted Cash

Restricted cash consists of cash collateral in respect of certain agreements.

Accounts Receivable

Accounts receivable are shown net of an allowance of $2.5 million and $2.7 million at December 31, 2006 and 2007, respectively.

Foreign Currency

The majority of our transactions are settled in U.S. dollars. Gains or losses resulting from transactions denominated in other currencies are recognized in the consolidated statements of operations at each balance sheet date.

Property and Equipment

Property and equipment are recorded at cost. Major renewals and improvements are capitalized while the cost of repairs and maintenance, including dry-docking costs, are charged to expense as incurred. Gains or losses on the sale of property and equipment are recorded as a component of operating income in the consolidated statements of operations.

Depreciation is computed on the straight-line basis over the estimated useful lives of the assets and after a 15% reduction for the estimated salvage values of ships as follows:


		Useful Life
Cruise ships		30 years
Other property and equipment		3-20 years

Leasehold improvements are amortized on a straight-line basis over the shorter of lease term or related asset life.

Long-lived assets are reviewed for impairments, based on estimated future cash flows, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Assets are grouped and evaluated at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets. We consider historical performance and future estimated results in our evaluation of potential impairment and then compare the carrying amount of the asset to the estimated future cash flows expected to result from the use of the asset. If the carrying amount of the asset exceeds estimated expected undiscounted future cash flows, we measure the amount of the impairment by comparing the carrying amount of the asset to its fair value. We estimate fair value based on the best information available making whatever estimates, judgments and projections are considered necessary. The estimation of fair value is generally measured by discounting expected future cash flows at discount rates commensurate with the risk involved.

F-8

NCL Corporation Ltd.
Notes to the Consolidated Financial Statements

Goodwill and Tradenames

Goodwill represents the excess of cost over the fair value of net assets acquired. We review goodwill and tradenames for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of goodwill and tradenames may not be fully recoverable.

We have concluded that our business has a single reportable segment, with each ship considered to be a component. Each component constitutes a business for which discrete financial information is available and management regularly reviews the operating results and, therefore, each component is considered a reporting unit. Our reporting units have similar economic characteristics, including similar margins and similar products and services, therefore, we aggregate all of the reporting units in assessing goodwill.

The impairment review of goodwill is based on the expected future cash flows of the ships. The impairment review considers fair value estimated by our guideline method which utilizes market values of companies with similar operations and the transaction approach whereby we estimate fair value based on a recent sale transaction of a similar company.

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.

Consumable Inventories

Consumable inventories mainly consist of provisions and supplies and are carried at the lower of cost determined on a weighted-average basis or net realizable value.

Advertising Costs

Advertising costs incurred that result in tangible assets, including brochures, are treated as prepaid supplies and charged to expense as consumed. Television production costs are recorded as prepaid expenses and expensed when the television advertisement is initially run. Advertising costs of approximately $3.8 million and $1.7 million as of December 31, 2006 and 2007, respectively, are included in prepaid expenses and other. Advertising costs totaled $79.1 million, $76.8 million and $86.2 million for the years ended December 31, 2005, 2006 and 2007, respectively.

Insurance

We use a combination of insurance and self-insurance for a number of risks including claims related to crew and passengers, hull and machinery, war risk, workers’ compensation, property damage and general liability. Liabilities associated with certain of these risks, including crew and passenger claims, are estimated based upon known facts, historical trends and a reasonable estimate of future expenses. Certain accruals are based on estimates and while we believe these accruals are adequate, the ultimate amounts incurred may differ from those recorded.

F-9

NCL Corporation Ltd.
Notes to the Consolidated Financial Statements

		Income Taxes

		Deferred 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 Compensation

		Effective 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):

F-10

NCL Corporation Ltd.
Notes to the Consolidated Financial Statements


	2005
Net income	$	16,235
Add:
Total share-based employee compensation expense included in net income		343
Deduct:
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

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 were adjusted accordingly. At such time, 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 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).

Total compensation expense recognized under SFAS 123R for options issued under the Pre-Listing Employee Share Option Scheme and the Post-Listing Share Option Scheme was $1.6 million and $0.9 million for the years ended December 31, 2006 and 2007, respectively. The amount in 2006 includes the $0.3 million for the incremental expense due to the modification discussed above.

In January 2000, Star Cruises Limited granted a share option to an executive to purchase 200,000 shares of Star Cruises Limited’s common shares at $2.275 per share under Star Cruises Limited’s Pre-Listing Employee Share Option Scheme. The option vests over a period through 2009. The number of common shares subject to the share option was adjusted for the rights offerings. At December 31, 2007, the executive had a share option to purchase 519,170 shares of Star Cruises Limited’s common shares at a price of $0.40 per share. No further options can be granted under the Pre-Listing Employee Share Option Scheme.

In November 2000, Star Cruises Limited adopted a Post-Listing Employee Share Option Scheme for the employees of Star Cruises Limited and our employees that provides for the granting of stock options in Star Cruises Limited’s common shares. The maximum number of share options available for issue under the Post-Listing Employee Share Option Scheme and options granted under any other schemes of Star Cruises Limited is 132,733,953. 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 Post-Listing Employee 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 $1.00 consideration. Generally, options issued under the Post-Listing Employee Share Option Scheme are granted at a price not less than the fair value of the shares on the date of grant.

F-11

NCL Corporation Ltd.
Notes to the Consolidated Financial Statements

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 of this grant 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.

The Post-Listing Employee Share Option Scheme provides that a former employee must pay in cash to us liquidated damages, as defined, in the Post-Listing 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 are equivalent to a percentage of the capital appreciation of the share option, defined as the difference between the market price of the 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.

The weighted-average fair value of options granted to employees during the year ended December 31, 2005 was $0.16. The weighted-average fair value of options granted to employees as of the modification date, December 28, 2006, was $0.11. There were no options granted or modified during 2007. The fair value of options on the grant and modification dates was estimated using an extended binomial options pricing model with the following assumptions:


	Years Ended December 31,
	2005			2006
Dividend yield		—			—
Expected share price volatility		40.2	%		49.9	%
Risk-free interest rate		3.4	%		3.7	%
Expected option life	10 years			10 years

Expected volatility was based on historical volatility. The risk-free interest rate was based on the Hong Kong government bond rate with a remaining term equal to the expected option life assumed at the date of grant. The expected option life was calculated based on the contractual term of the option, historical exercise experience and the underlying terms of the respective options.

Upon adoption of SFAS 123R, $0.6 million in unamortized share option expense related to awards that had been subject to variable accounting under APB 25 was eliminated against additional paid-in capital for the year ended December 31, 2006.

Segment Reporting

In 2007, we operated under three brand names, Norwegian Cruise Line, NCL America, and Orient Lines. The brands have been aggregated as a single reportable segment based on the similarity of their economic characteristics, as well as products and services provided. In March 2008, the charter agreement for Marco Polo will expire and we will no longer operate under the Orient Lines’ brand name.

F-12

NCL Corporation Ltd.
Notes to the Consolidated Financial Statements

Financial Instruments

From time to time, we enter into derivative instruments, primarily forward contracts, swaps and options, to reduce our exposure to fluctuations in foreign currency exchange, interest and fuel rates. The criteria used to determine whether a transaction qualifies for hedge accounting include correlation between fluctuations in the fair value of the hedged item and the fair value of the related derivative instrument and the effectiveness of the hedge. To the extent that an instrument is not effective as a hedge, gains and losses are recognized in the consolidated statements of operations as a gain or loss in other (income) expenses, net (we refer you to Note 6).

Recent Accounting Pronouncements

In September 2006, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. SFAS No. 157, as issued, is effective for financial statements issued for our fiscal year beginning in 2008 and interim periods within that year. However, a FASB Staff Position (“FSP”) was issued which delays the effective date for all non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (that is, at least annually). This deferral is to fiscal years beginning after November 15, 2008, and interim periods for items within the scope of the proposed FSP. In February 2008, an FSP was issued to exclude leasing transactions accounted under SFAS No. 13, “Accounting for Leases,” and its related interpretive accounting guidance. We adopted the required provisions of SFAS 157 as of January 1, 2008. We do not expect the adoption of SFAS 157 to have a material impact on our consolidated financial position and results of operations.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities—Including an amendment of FASB Statement No. 115” (“SFAS No. 159”). SFAS No. 159 permits all entities to choose to elect, at specified election dates, to measure eligible financial instruments at fair value. An entity shall report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date, and recognize upfront costs and fees related to those items in earnings as incurred and not deferred. SFAS No. 159 applies to fiscal years beginning after November 15, 2007. Although we adopted SFAS 159 as of January 1, 2008, we do not expect to elect the fair value option for any items permitted under SFAS 159.

Share Split

F-13

NCL Corporation Ltd.
Notes to the Consolidated Financial Statements

3.		Property and Equipment

		Property and equipment at December 31, 2006 and 2007 consists of the following (in thousands of dollars):


	2006			2007
Cruise ships	$	3,876,857		$	4,469,520
Cruise ships under construction		223,945			178,445
Other property and equipment		115,813			136,024

		4,216,615			4,783,989
Less: accumulated depreciation		(400,323	)		(540,117	)

Total	$	3,816,292		$	4,243,872

Depreciation and amortization expense for the years ended December 31, 2005, 2006 and 2007 was $85.6 million, $119.1 million and $148.0 million, respectively. Repairs and maintenance expenses including dry-docking expenses were $57.0 million, $62.6 million and $80.5 million for the years ended December 31, 2005, 2006 and 2007, respectively.

Ships under construction include progress payments for the construction of new ships as well as planning, design, interest, commitment fees and other associated costs.

Interest costs associated with the construction of the cruise ships are capitalized during the construction period and amounted to $32.2 million, $21.9 million and $18.8 million for the years ended December 31, 2005, 2006 and 2007, respectively.

In September 2006, we entered into a 29.0 million Euro or $36.8 million, based on the Euro/U.S. dollar exchange rate at September 30, 2006, settlement agreement in connection with our pre- and post-ship delivery claims against the builder of Pride of America. Settlement amounts of $7.3 million related to our claims for post-delivery costs incurred by us have been included as other income in our consolidated statements of operations.

F-14

NCL Corporation Ltd.
Notes to the Consolidated Financial Statements

4.		Long-Term Debt

		Long-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			490,000
Euro 624.0 million Norwegian Pearl and Norwegian Gem Revolving 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			250,000
Euro 258.0 million (currently U.S. dollar-denominated) Pride of America Hermes Loan, 5.715%, due through 2017		266,808			241,398
Euro 40.0 million (currently U.S. dollar-denominated) Pride of America Commercial Loan, 6.595%, due through 2017		40,557			36,694
$334.1 million Norwegian Jewel Loan, 6.1075%, due through 2017		297,239			270,218
Euro 308.1 million Pride of Hawai’i Loan, EURIBOR + 0.75%, due through 2018		378,209			381,713
Other long-term debt		16,429			13,891

		2,559,995			3,169,060
Less: Current portion		(154,638	)		(191,172	)

	$	2,405,357		$	2,977,888

In September 2006, we obtained export credit financing for 80% of the contract amount, with an allowance for change orders, of each of the two F3 ships scheduled for delivery in 2010. These financings cannot exceed approximately $967.2 million each, based on the Euro/U.S. dollar exchange rate at December 31, 2007. These financings are term loans each collateralized by the respective ship and are due 12 years from delivery date, through 2022. The financing for the first ship is denominated in U.S. dollars bearing a fixed interest rate of 6.05% and the financing for the second ship is denominated in Euro bearing a fixed interest rate of 4.89%. Under the terms of each loan agreement, we have the ability to cancel the financing up to 60 days prior to the delivery date for the ship.

In December 2006, we entered into a $610.0 million senior secured revolving credit facility. The facility refinanced two existing loans collateralized by Norwegian Dawn and Norwegian Sun and provides additional borrowing capacity for general corporate purposes. The facility is available in two tranches of $510.0 million and $100.0 million. Under the terms of this facility, the availability under the facility increased by $100.0 million to the full $610.0 million after we received more than the required minimum of an additional $200.0 million of equity in January 2008 (we refer you to Note 12 “Subsequent Events”). The facility has no amortization for the first 36 months, bears interest at LIBOR plus a margin of 150 basis points at December 31, 2007 (subject to certain adjustments) and matures in 2013.

F-15

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			191,172
2009			191,180
2010			741,929
2011			206,434
2012			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 Disclosures

		In 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 Dream and 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 Polo will 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

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 Instruments

		Reported 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 Equivalents

		The carrying amounts of cash and cash equivalents approximate their fair values due to the short term maturity of these instruments.

		Long-Term Debt

		As 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.

F-17

NCL Corporation Ltd.
Notes to the Consolidated Financial Statements

		Foreign Currency Contracts

		As 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 Agreements

		The 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 Plans

		Employee Share Option Plans

		In 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

F-18

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:


								Weighted
						Weighted		Average
						Average		Remaining
	Number of			Option		Exercise		Contractual
	Shares			Price		Price		Life		Date
Outstanding at December 31, 2006		50,988,055		$	0.21-$0.36	$	0.34		5.92		2012-14
Granted		—			—		—		—		—
Forfeited		(623,585	)	$	0.21-$0.36	$	0.34		4.64		2012-14

Outstanding at December 31, 2007		50,364,470		$	0.21-$0.36	$	0.34		4.92		2012-14

Options 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 Exercisable
					Weighted
			Weighted		Average		Exercisable		Weighted
	Outstanding at		Average		Remaining		at		Average
	December 31,		Exercise		Contractual		December 31,		Exercise
Exercise 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	$	0.21

		50,364,470	$	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

F-19

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 Plans

		Incentive 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.

F-20

NCL Corporation Ltd.
Notes to the Consolidated Financial Statements

8.		Income Taxes

		We 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			2007
Deferred tax assets:
Loss carryforwards	$	59,560		$	62,419
Shares in NCL Cruises Ltd.		56,184			86,258
Pension obligation		589			641
Others		458			369

		116,791			149,687
Valuation 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

F-21

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			2007
Deferred tax assets:
Loss carryforwards	$	154,198			229,574
Start-up expenses		12,063			10,641
Disallowed interest		16,975			25,323
Translation loss and other		6,057			18,565
Allowances and accruals		2,678			2,383

Total deferred tax assets	$	191,971		$	286,486

Deferred 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			136,889
Valuation 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”).

Commitments and Contingencies

	(a)		Operating leases

			We 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	$	6,651
2009		6,208
2010		4,807

F-22

NCL Corporation Ltd.
Notes to the Consolidated Financial Statements


2011		4,021
2012		3,789

Total	$	25,476

			Rental payments applicable to such operating leases are recognized on a straight-line basis over the term of the lease.

	(b)		Ship charters

			We 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 expenditures

			As 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

F-23

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):

F-24

NCL Corporation Ltd.
Notes to the Consolidated Financial Statements


2008	$	7,815
2009		14,085
2010		14,169
2011		13,974
2012		14,500
Thereafter		80,333

Total	$	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

10.		Insurance Arbitration Award

		In 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 Information

		For 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

F-25

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 Agreement*

		On 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’ Agreement*

		On 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:

F-26

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 Agreement*

		On 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

F-27

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

F-28

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 Aloha* from 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 Aloha from 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 Aloha to 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 Aloha to Star Cruises Limited, we expect to pay Star Cruises Limited approximately $197 million in connection with Pride of America.

		The transfer of Pride of Aloha in 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.

F-29


NCL Corporation Ltd.
By:	/s/ Kevin M. Sheehan
Name:		Kevin M. Sheehan
Title:		Executive Vice President and Chief Financial Officer


***		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.


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


	Page(s)
Report of Independent Registered Certified Public Accounting Firm		F-1

Consolidated Financial Statements

Consolidated Statements of Operations for the years ended December 31, 2005, 2006 and 2007		F-2

Consolidated Balance Sheets as of December 31, 2006 and 2007		F-3

Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2006 and 2007		F-4

Consolidated Statements of Changes in Shareholder’s Equity for the years ended December 31, 2005, 2006 and 2007		F-5

Notes to the Consolidated Financial Statements	F-7 to F-29