Demand in the cruise line industry during 2H 08 was adversely affected by recessionary pressure in North America and Europe. As a result, RCL experienced a slowdown in bookings as consumers deferred travelling decisions in light of the prevailing economic slowdown. RCL’s revenue yields are set to decline in light of the withdrawal of fuel supplements in 1Q 09 given the recent drop in crude oil prices, and consequently fuel prices. We also expect a downward revision in ticket prices, due to slowing demand; and declining Onboard revenues, given reduced spending by the lower number of passengers; to drive down overall revenues over our investment horizon. While, RCL is experiencing price declines, general industry booking and pricing levels seems to be stabilizing. This stabilization will allow the company to improve its yield management going forward. Furthermore, RCL is continuing to diversify its business internationally and is increasing its presence outside of the US market. We believe this will hedge the company against any further drastic decline in US passenger traffic. Moreover, we feel cruise liners such as RCL can only benefit from the US easing travel restrictions to Cuba. While we expect FY 2009 earnings to decline y-o-y due to lower revenues, partially offset by the company’s cost savings program, we foresee significant revenue recovery and margin improvement in FY 2010 relative to FY 2009. The company’s FY 2010 performance is set to benefit from RCL’s planned increase in fleet size, the company’s annual US$125 mn cost savings program and, in particular, our expectation of the beginnings of an economic recovery in FY 2010. Moreover, given that RCL has US$1 bn available in cash and unsecured revolving credit, and as RCL has government financing institutes guarantees to fund some of its fleet expansions, coupled with its cost cutting initiatives, we believe RCL has sufficient liquidity and we hold a positive outlook for the company over our longer term investment horizon.

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