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Annual Report 1998 CORPORATE INFORMATION Board of Directors Dato’ Lim Kok Thay Chairman Mr Colin Au Fook Yew President and Chief Executive Officer Mr Lee Swee Hing Mr William Ng Ko Seng Mr Cong Ong Secretary Mr Raymond E. Befroy , F.C.C.A., F.C.I.S. Assistant Secretary Mr Tan Wooi Meng Registered Office International House, Castle Hill, Victoria Road, Douglas, Isle of Man, IM2 4RB, British Isles Head Office Suite 1503, Ocean Centre, 5 Canton Road, Tsimshatsui, Kowloon, Hong Kong SAR Registrars and Transfer Office IFG International (Registrars) Limited International House, Castle Hill, Victoria Road, Douglas, Isle of Man, IM2 4RB, British Isles Paying, Listing and Sub-Transfer Agent Banque Générale du Luxembourg S.A., 50 Avenue J.F. Kennedy, L-2951 Luxembourg Transfer Agent M & C Services Private Limited 16 Raffles Quay, #23-01 Hong Leong Building, Singapore 048581 Auditors Messrs Price Waterhouse, Certified Public Accountants 22nd Floor, Prince’s Building, Hong Kong SAR Internet Homepage http://www.starcruises.com 1 Annual Report 1998 NOTICE OF ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN THAT the Fifth Annual General Meeting of the Company will be held at Suite 1503, Ocean Centre, 5 Canton Road, Tsimshatsui, Kowloon, Hong Kong SAR on Monday, 24 May 1999 at 9.00 a.m. BUSINESS 1. To receive and adopt the Audited Financial Statements for the year ended 31 December 1998 and the Directors’ and Auditors’ Reports thereon. (Resolution 1) 2. To sanction the declaration of a final dividend. (Resolution 2) 3. To approve Directors’ fees of US$34,466 for the year ended 31 December 1998. (Resolution 3) 4. To re-elect Directors: Dato’ Lim Kok Thay (Resolution 4) Mr William Ng Ko Seng (Resolution 5) Mr Cong Ong (Resolution 6) 5. To appoint Auditors and to authorise the Directors to fix their remuneration. Notice of Nomination pursuant to Section 13(1) of the Companies Act, 1982 has been received by the Company for the nomination of Messrs PricewaterhouseCoopers who have given their consent to act, for appointment as Auditors and of the intention to propose the following ordinary resolution :- “That Messrs PricewaterhouseCoopers be and are hereby appointed as Auditors of the Company in place of the retiring Auditors, Messrs Price Waterhouse to hold office until the conclusion of the next Annual General Meeting at a remuneration to be determined by the Directors.” (Resolution 7) 6. To transact any other business of which due notice shall have been given. By Order of the Board Raymond E. Befroy, F.C.C.A., F.C.I.S. Secretary 30 April 1999 Registered Office: International House, Castle Hill, Victoria Road, Douglas, Isle of Man, IM2 4RB, British Isles. NOTES 1. A member entitled to attend and vote at this meeting is entitled to appoint a proxy or proxies to attend and vote instead of him. A proxy need not be a member of the Company. 2. The form of proxy in the case of an individual shall be signed by the appointor or his attorney, and in the case of a corporation, either under its common seal or under the hand of an officer or attorney duly authorised. 3. If the form of proxy is returned without any indication as to how the proxy shall vote, the proxy will vote or abstain as he thinks fit. 4. If no name is inserted in the space for the name of your proxy on the form of proxy, the Chairman of the Meeting will act as your proxy. 5. The form of proxy or other instruments of appointment shall not be treated as valid unless deposited at the Registered Office, International House, Castle Hill, Victoria Road, Douglas, Isle of Man, IM2 4RB, British Isles, not less than 48 hours before the time appointed for holding the meeting and at any adjournment thereof. 2 Annual Report 1998 CHAIRMAN’S STATEMENT On behalf of the Board of Directors, I am pleased to present the Financial Statements and Annual Report of the Star Cruises PLC Group of companies ("Star Cruises" or "the Group") for the year ended 31 December 1998. REVIEW OF RESULTS Although 1998 was a difficult year for most companies in Asia due to the economic crisis, the Group was able to achieve record operating income from continuing operations of US$50.0 million in 1998 as compared to US$32.9 million in 1997, an increase of 52%. 1999 first quarter operating income of US$19.1 million was also a record, an increase of 163% compared to the operating income from continuing operations of US$7.3 million in the first quarter of 1998. The excellent performance was due to the following reasons: (1) The SuperStar Leo The launch of the SuperStar Leo, the first megaship in Asia-Pacific created enormous consumer interest and the number of cruise passengers on her exceeded expectations. More importantly, SuperStar Leo was able to stimulate cruise passengers from different source markets such as Australia, Europe, India, Japan, Hong Kong, Taiwan and other Asean countries. Many of them were experienced cruise passengers who were delighted with the level of service and facilities on the ship. (2) Brand Leadership Star Cruises has a dominant share of the Asia-Pacific cruise market and is a household name in the region. As reported in the March 1999 edition of "Asian Brand News", Star Cruises was rated as one of the top 50 brands in Asia by the international consultancy, "Interbrand". Star Cruises was mentioned as one of 3 brands with the most potential to move upwards in terms of brand recognition in Asia. This brand leadership permits Star Cruises to achieve better yields. (3) Economies of Scale With the increase to 1.3 million passenger cruise days in 1998 and more than 2 million passenger cruise days expected in 1999, Star Cruises is now enjoying significant economies of scale and marketing, selling and administrative costs can be amortized over more passenger cruise days. The megaships also have lower operating costs per passenger cruise day. (4) Creative Itineraries Before the arrival of SuperStar Leo, Star Aquarius sailed during the summer months to various islands in Malaysia and Thailand in the South China Sea. The change in ports of call stimulated repeat cruisers and drew first-time cruisers. These new itineraries are now adopted by SuperStar Leo with sailings to the South China Sea in Summer and the Straits of Malacca in Winter. (5) Benchmark Against Major Cruise Companies Management is focussed on achieving the same rates of return on capital employed, comparable profitability on a per passenger cruise day basis and similar operating margins to the three major cruise lines. This focus and benchmarking have| ensured marketing and operating policies are designed to achieve the financial goals. During the year, the Group completed the issuance of 125 million new ordinary shares of US$0.10 each ("New Shares") to Resorts World Limited ("RWL"), a wholly-owned subsidiary of Resorts World Bhd, at a price of US$2.10 per share. The allotment and issuance of the New Shares to RWL was completed on 30 June 1998. The proceeds of US$262.5 million from the issue of shares to RWL were used to repay the Group's entire short-term borrowings and the balance has been earmarked for progress payments for the two "Libra-Class" ships scheduled for delivery in the years 2001 and 2002. In line with major international cruise companies, we will present our financial statements in accordance with the US Generally Accepted Accounting Principles in 1999. 3 Annual Report 1998 1998 versus 1997 Results The operating income from continuing operations before exceptional items for 1998 is US$50.0 million, an increase of 52% compared with US$32.9 million for 1997. Passenger cruise days of 1,280,967 in 1998 increased by 17% from 1,095,979 in 1997. Unaudited Proforma US$ Million 1998 1997 Revenue from continuing operations 282.6 310.8 Cost and Expenses operating cost 161.9 197.3 Marketing, selling and administrative 36.0 51.7 Depreciation and amortisation 34.7 28.9 -------------------------------------- -------------------------------------- 232.6 277.9 -------------------------------------- -------------------------------------- Operating income from continuing operations before exceptional items 50.0 32.9 Passenger Cruise Days 1,280,967 1,095,979 Occupancy as percentage of total capacity 88% 88% Revenue from continuing operations of US$282.6 million for 1998 is a decrease of 9% compared with US$310.8 million for 1997 mainly due to the devaluation of regional currencies in Asia. Total expenses for 1998 in respect of continuing operations also decreased by US$45.3 million or 16% compared with 1997 mainly due to both the devaluation of regional currencies and better cost control. Total expenses decreased despite increased cruise capacity. As a result, Star Cruises was able to increase its operating income and improvements were achieved for all ships in the fleet and in all the key markets of Singapore, Hong Kong, Taiwan, Australia and Europe. For 1998, Star Cruises incurred a loss of US$25.9 million from discontinued operations in relation to a cruise venture in the United States and an exceptional charge of US$21.2 million. Unaudited Proforma US$ Million 1998 1997 operating income from continuing operations before exceptional items 50.0 32.9 (Loss) from discontinued operations (25.9) - Net interest expense, net of capitalised interest (0.8) (0.4) Exceptional items (21.2) 104.5 Taxation (0.5) (1.4) Minority interest 0.8 (0.1) -------------------------------------- -------------------------------------- Net income 2.4 135.5 -------------------------------------- -------------------------------------- The exceptional item of US$21.2 million relates to the following: (a) write-off of start-up costs for SuperStar Leo of US$6.1 million; (b) reimbursement of US$7.9 million for the reduction in value of non-cruise property at the Port Klang Cruise Centre which was sold on the basis of "commercial" land use but was subsequently approved as "industrial" land use; and 4 Annual Report 1998 (c) net foreign exchange losses of US$7.2 million mainly relating to a Yen Loan taken up in anticipation of Yen proceeds from the positioning of a ship in Japan in 1998.

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