Chairman’s Statement

Dear Valued Shareholders, (Asia Pacific) operations

On behalf of the Board of Directors, I am For the year ended 31 December 2000, revenue pleased to present the Financial Statements from Star Cruises (Asia Pacific) operations and Annual Report of the Star Cruises Group increased by 28% to US$500.5 million compared of Companies (“the Group”) for the year to US$391.7 million in 1999. Available capacity ended 31 December 2000. days increased by 48% from 2,022,404 to 2,997,349 due to the full year operation of REVIEW OF FINANCIAL RESULTS SuperStar Virgo and SuperStar Aries, added capacity with the purchase of 2 megastar ships For the year ended 31 December 2000, the and the introduction of SuperStar Taurus and Group recorded an operating profit (before in Japan and Taiwan adjusting for asset impairment loss) of US$198.5 respectively. million compared to US$106.9 million for the same period in 1999. The results for the year The Star Cruises (Asia Pacific) operations ended 31 December 2000 is not comparable to recorded an occupancy of 91% for the full year 1999 as the acquisition of a majority interest in ended 31 December 2000 compared to 101% NCL Holding ASA (“NCL”) occurred in February in 1999. The lower load factor in 2000 was 2000. largely due to the low occupancy experienced in the new markets of Japan and Thailand.

The Group net profit for the year before adjusting Total operating costs and selling, general and for financing charges and amortisation of administrative costs for the year on a per capacity goodwill, trade names and trademarks arising days basis were 3.4% and 15.4% lower from the acquisition and asset impairment loss compared to the same period in 1999, due to was US$99.2 million. The acquisition led to economies of scale and cost control measures US$84.2 million of additional interest expense implemented during the year. arising from the financing of the acquisition, US$13.9 million of amortisation of goodwill, trade Given the lower yields and load factor experienced names and trademarks and US$6.4 million of in the developing market, operating profit (before other fair value adjustments arising from the adjusting for impairment loss on Star Aquarius of consolidation of NCL. The Group recently US$37.7 million and other assets of US$1.0 million) announced the sale of Star Aquarius as part of increased marginally by 1% compared to 1999. the fleet modernisation plan resulting in an Operating margins in Singapore and Hong Kong impairment loss of US$37.7 million. The Group continue to perform in line with expectations. also recorded a revaluation loss on fixed assets of US$1.0 million. As a result of these The Group has announced the relocation of forementioned factors, the Group recorded a net SuperStar Aries from Fukuoka, Japan to loss of US$44.0 million. Bangkok in April 2001 to replace Star Aquarius’ itineraries in Thailand. SuperStar Taurus, For the year ended 31 December 2000, the homeported in Kobe since March 2000 has been Group recorded an occupancy of 97% compared relocated to Fukuoka in April 2001. The Group with 101% in 1999. believes that SuperStar Taurus in Fukuoka will be more attractive to the contemporary Japanese as well as the Korean markets as she will be able to operate shorter and lower priced cruise itineraries.

4 Following the acquisition of NCL, the Group markets its cruises under three brand names, For the twelve months ended 31 December “Star Cruises”, “Norwegian Cruise Line” and 2000, NCL’s revenue increased by 15% to “Orient Lines”. US$970.7 million compared to US$844.2 million in 1999 due to higher yields, added capacity, all Twelve cruise ships were operated in the Asia ships in service and consolidation of Norwegian Pacific region under the brand name “Star Capricorn Line operations in Australia. Available Cruises”, while “Norwegian Cruise Line” and capacity days increased by 21% from 3,865,753 “Orient Lines” brands consist of eight cruise to 4,669,892. Occupancy increased 1.9% to ships operating in the Caribbean, Bermuda, 100.2%; net per diem was up by 2.8% resulting Alaska, Europe, Hawaii, New England, Central in yields increasing 5.6% year on year. and South America. Two ships were bareboat chartered to independent operators. NCL’s operating and selling, general and administrative expenses for the full year ended 31 December 2000 reduced by 8% and 13% respectively on a per capacity day basis.

The combination of Star Cruises and NCL has brought about tremendous fleet deployment synergies. The Group has announced the deployment of SuperStar Libra, the 2,300 lower Norwegian Wind berth ship to Hawaii. This replaces the previous in Puerto Rico plan to deploy SuperStar Leo to Hawaii. Libra is a brand new ultra-modern ship and purpose-built for freestyle cruising in the North American market. In addition, with the planned delivery of SuperStar Scorpio in the fall of 2002, NCL will have both Libra-class ships operating in North America under the Norwegian Cruise Line brand. Together with the and the (due for delivery in August 2001), this redeployment will dramatically change the profile of the NCL fleet and at the same time continue to maintain the Group’s competitive edge.

NCL Acquisition

Upon acquiring approximately 10.9% equity interest in NCL on 29 November 2000, resulting in the Group holding approximately 95.4% equity interest in NCL, the Group exercised its right under the Norwegian Law to initiate a compulsory acquisition of the remaining NCL shares.

Norwegian Sky

5 South China Morning Post, 1 December 2000

Hong Kong iMail 29 November 2000

LISTING ON THE STOCK EXCHANGE OF HONG KONG LIMITED

Star Cruises Limited has successfully listed its entire share capital on The Stock Exchange of Hong Kong iMail, 1 December 2000 Hong Kong Limited on 30 November 2000. The Company ceased to be listed on the The high level of service onboard the ships was Luxembourg Stock Exchange with effect from recognised by industry peers when the Group’s th the commencement of the trading day in Hong chefs bagged six medals at the 12 FHA Kong on 30 November 2000. The Company International Salon Culinaire in Singapore. continues to be traded in Singapore CLOB.

INDUSTRY RECOGNITION

As a major cruise operator acclaimed for providing high service standards and recognised as contributing significantly towards tourism development, the Board is pleased to announce that in the year 2000, the Group has been awarded “Best Cruise Operator in Asia-Pacific” by Travel Trade Gazette Asia, “Cruise Line of the Year” by Travel Asia, “International Tour Operator, Friends of Thailand” by Thailand Tourism Authority, “Outstanding Contribution to Tourism” by Singapore Tourism Board and the Japan 7th Travel Management Grand Prix Awards for the “International Carrier” category.

Dato’ KT Lim delivering his speech on the listing day.

6 “Best Cruise Operator” TTG Asia (1997 - 2000)

Out of Africa, SuperStar Virgo

The Group’s ongoing will operate in the North American market. The commitment to training and two newbuildings will in total increase the development was recognised capacity of the fleet by 4,300 lower berths. when Star Cruises was awarded the Third Annual Salute to Youth and Training Award by Lloyd’s List and The International Maritime Industry.

Testifying to Star Cruises’ well regarded safety training programme, Star Cruises was also accredited by the Panama Maritime Authority to conduct the STCW-95, a “safety at sea” certified training which was previously organised only by established maritime training institutes. The Library, SuperStar Virgo FLEET DEPLOYMENT Asia Pacific In Asia Pacific, the Group will continue to secure its market position through priority or favourable SuperStar Virgo and SuperStar Gemini berthing arrangements and extend its market continued to successfully expand the local and reach by introducing cruising to new markets. fly-cruise markets in Singapore. SuperStar Leo In the Americas and Europe, the Group’s and operated in Hong Kong strategy focuses on deploying ships in less throughout 2000 with high rate of repeat competitive, higher yielding ports and developing passengers experienced. innovative cruise itineraries.

The acquisition of NCL, which nearly doubled the number of cruise ships in the Group’s fleet, provides the Group with greater flexibility in re- deploying its ships within markets where Star Cruises, Norwegian Cruise Line and Orient Lines currently operate and in new markets. This flexibility will allow the Group to rationalise its fleet by disposing of older and smaller vessels and re-deploying ships to markets where the size, speed and other characteristics of the ships suggest that they will produce higher yields and with higher operational efficiency.

The Group has three new ships under construction. In 2001, the Group will be taking delivery of SuperStar Libra (fourth quarter) and Norwegian Sun (third quarter). SuperStar Libra will be deployed to Hawaii while Norwegian Sun

Norwegian Sun (arriving 2001)

7 Swimming Pool

The Group has developed, and is continuing to develop, innovative itineraries to position its Norwegian Cruise Line and Orient Lines ships in less competitive niche markets throughout the Americas and Europe, such as South America, New England, Scandinavia and the Mediterranean. This strategy reduces the Group’s exposure to the traditional mass market- oriented Caribbean cruises departing from South Norwegian Sea Florida and Puerto Rico, and the Group SuperStar Taurus commenced operations in anticipates that these new itineraries will produce March 2000 calling at well-known destinations higher yields than the traditional Caribbean in Japan and Korea, pioneering a regular itineraries. itinerary with homeport in Kobe. SuperStar Aries complemented the Kobe cruise itineraries in The Group has announced unique and diverse October 2000, with short cruises operating from itineraries for Norwegian Cruise Line in 2001 and Fukuoka, Japan to Korea. With the disposal of 2002. The Norwegian Sky will feature cruises Star Aquarius in early 2001 in line with the from Seattle to Alaska, and following the Alaska Group’s fleet modernisation strategy, the cruise cruise season (in May to September every year), operations in Japan will be focused in Fukuoka will offer a series of 10-day Hawaiian Island with SuperStar Taurus after the relocation of cruises. After its Alaska summer season in 2001, SuperStar Aries to Bangkok. the Norwegian Wind will feature a series of South East Asia cruises and cruise tours between Hong In October 2000, the Group discontinued the Kong, Bangkok and Singapore. In December operations of Norwegian Capricorn Line, a 2001, the Norwegian Wind will offer a 19-day former joint venture in Australia that operated cruise from Singapore to Sydney, followed by the ship Norwegian Star. Norwegian Star was cruises to Australia, New Zealand, the South deployed to Taiwan in October 2000. Pacific and Hawaii. The Norwegian Dream cruised to South America from December 2000 The Americas and Europe through March 2001 and, following a series of three repositioning cruises, will offer European In 2000, Norwegian Cruise Line offered cruise and Mediterranean cruises in the summer and itineraries ranging from three days to over one fall of 2001. The Norwegian Sea will offer a series month, and called at over 200 destinations in of New England/Canada cruises out of New York the Caribbean, Bermuda, Bahamas, Mexico, city in the summer and fall of 2001. Upon delivery Alaska, Europe, Hawaii, New England, Central in September 2001, Norwegian Cruise Line’s and South America, Antarctica, Africa, Australia newest ship, the Norwegian Sun, will cruise from and New Zealand. London to New York and will feature a series of 12-day Canada/New England cruises round trip from New York.

8 REVENUE MANAGEMENT hours, with the main dining rooms serving dinner from 5:30pm until midnight. In addition to the main Repositioning the brand through “Freestyle dining rooms, several small gourmet and speciality Cruising” restaurants provide fine a la carte dining.

The Directors believe that growth in the cruise A more relaxed dress code is adopted industry will come from vacationers accustomed throughout the cruise. Staffing level onboard the to land-based resort vacations switching to ships is increased to one crew per cabin, cruise vacations. To attract vacationers ensuring the consistency of a high service level accustomed to land-based resort vacations, the which is the hallmark of the “Freestyle Cruising” Directors believe that a cruise experience should concept. Discretionary tipping is abolished, with contain the desirable aspects of a good land- tips built into the passengers’ bill at the end of based resort vacation. the cruise. On the final day of the cruise, passengers are invited to disembark with the The Group is actively repositioning the NCL convenience akin to land-based hotel-like check brand in the Americas and Europe along the out procedures. innovative “Freestyle Cruising” concept, leveraging on its success in Star Cruises’ Asia NCL’s introduction of “Freestyle Cruising” in the operations. Americas and Europe has been very well accepted within the travel industry. The growing The “Freestyle Cruising” concept, which popularity of this innovative cruising concept is reinforces the vacationing concept generally evidenced by the emulation of certain facets of found in popular premium Asian land-based the “Freestyle Cruising” theme by other cruise resorts, will be introduced on board all NCL’s operators. newbuildings and onboard most of the existing NCL fleet by summer 2001.

This concept hinges on providing passengers with the flexibility to organise their own cruise experience. Unlike traditional cruising which typically revolves around strict meal regimes, passengers on “Freestyle Cruising” ships can enjoy open-seating dining at extended dining

Gymnasium

9 Las Vegas-style entertainment competitive markets. Adoption of an integrated yield management system across the fleet will ensure maximisation of revenue for these different markets.

NCL will tap into Star Cruises’ established priority berthing and land tours network in Asia, and Star Cruises will benefit from sharing the huge American/European distribution network of NCL for its fly-cruise operations in Asia.

SuperStar Gemini The Group shall continuously upgrade and standardise Norwegian Cruise Line/Orient Lines fleet and implement Star Cruises’ well regarded Yield Management safety and security standards - including zero alcohol tolerance policy for crew on duty, The Group has developed a complex yield implementing high-fog sprinklers, installation of management system to significantly improve Voyage Data Recorders in the navigational yield and maximise revenue growth. The system, centre and two officers on watch on the bridge. which utilises a greater number of price points for each cruise/cabin category and entails detailed analysis of booking patterns, is designed to encourage earlier bookings of higher category cabins and a more orderly booking of lower category cabins. This system aims to secure higher yielding early bookings and avoid the need to cut prices to fill the ships.

PROSPECTS

Improved Profitability with Synergies between Star Cruises and NCL

The Directors believe that the Group will benefit from certain synergies between Star Cruises and NCL.

As a global cruise operator, the Group has the flexibility of deploying its fleet to markets that can maximise its yield. The deployment of the three newbuildings to NCL operations in the Americas and Europe ensure a level playing field against competition in these markets, while smaller or older vessels can be deployed to less Ocean Palace, SuperStar Gemini

10 The Group is also considering integrating certain aspects of its operations to achieve a higher level of cost efficiency. This move will see the consolidation of some sales and marketing offices and sharing of certain administrative functions within the Group. With the established network of suppliers globally, the Group can buy goods and services from wherever most cost effective.

Information technology is seen as the key Stardust Lounge, SuperStar Taurus element in the integration of Star Cruises and NCL. The Group is continuously standardising and upgrading its information technology On the American and European front, the systems. Cost-effective telecommunication tie- deployment of ships to less competitive yet lines have been established between Miami with innovative new itineraries holds promising higher the rest of Star Cruises operations, including yield potentials. Leveraging on the high brand satellite communication to and from ships recognition of NCL and repositioning the brand through the leased MEASAT facility. Operating along the “Freestyle Cruising” concept for its interfaces in the various systems used by the newer and bigger ships, the Group is poised to Group will be implemented in stages to achieve promote higher market share in the established operational efficiency. cruise markets.

Developing New Cruising Potentials ACKNOWLEDGEMENT

The cruise industry accounts for just over 1% of On behalf of the Board of Directors, I would like the global vacation industry. The growth potential to express our gratitude and heartfelt is tremendous, predominantly from converting appreciation to the management and staff for land-based vacationers to cruising. their hard work and dedication that have contributed significantly to the Group’s immense Within the Asia Pacific market, Star Cruises is expansion over the year. currently the leading cruise operator with over 50% of the regional cruise market capacity by Our sincerest thanks also to the various lower berth and commanding in excess of 70% Governments, authorities, business partners, of the market share. Following the successful consultants, travel agents, customers and loyal development of Hong Kong and Singapore as shareholders for their support and cooperation the cruising hubs in Asia, the Group has rapidly throughout the year. expanded into the new cruising markets of Japan, Korea, Taiwan and Thailand. Dato’ Lim Kok Thay The Group is promoting fly-cruises from the Chairman, President and Chief Executive Officer largely untapped cruising markets in China and India into Hong Kong and Singapore. 18 April 2001

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