UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended November 30, 20082009

ORor

For the transition period from                                to                                 

Commission file number: 1-9610				Commission file number: 1-15136
Carnival Corporation			Carnival plc
(Exact name of registrant as specified in its charter)				Carnival plc (Exact name of registrant as
specified in its charter)			specified in its charter)
Republic of Panama (State or other jurisdiction of incorporation or organization)			England and Wales
(State or other jurisdiction of			(State or other jurisdiction of
incorporation or organization)
			incorporation or organization)
59-1562976 (I.R.S. Employer Identification No.)59-1562976			98-0357772
(I.R.S. Employer		98-0357772	(I.R.S. Employer
Identification No.)			Identification No.)
3655 N.W. 87th Avenue Miami, Florida 33178-2428 (Address of principal executive offices) (Zip Code)				Carnival House, 5 Gainsford Street,
Miami, Florida 33178-2428			London SE1 2NE, United Kingdom
(Address of principal executive offices)			(Zip Code) Address of principal
executive offices)			executive offices)
(Zip code)			(Zip code)
(305) 599-2600 (Registrant’s telephone number, including area code)				011 44 20 7940 5381
(Registrant’s telephone number,			(Registrant’s telephone number,
including area code)			including area code)
Securities registered pursuant			Securities registered pursuant
to Section 12(b) of the Act:				Securities registered pursuant to Section 12(b) of the Act:
Title of each class Common Stock ($.01 par value)				Title of each class
Common Stock			Ordinary Shares each represented
($.01 par value)			by American Depositary Shares
			($1.66 par value), Special Voting
			Share, GBP 1.00 par value and Trust
			Shares of beneficial interest in the
			P&O Princess Special Voting Trust
Name of each exchange on which registered New York Stock Exchange, Inc.				Name of each exchange on which registered New York Stock Exchange, Inc.

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrants are well-known seasoned issuers, as defined in Rule 405 of the Securities Act.    Yes  þ    No  ¨

Indicate by check mark if the registrants are not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  þ

Indicate by check mark whether the registrants (1) have 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 registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.    Yes  þ    No�� ¨

Indicate by check mark whether the registrants have submitted electronically and posted on their corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrants were required to submit and post such files).    Yes  þ    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants’ knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    ¨þ

Indicate by check mark whether the registrants are large accelerated filers, accelerated filers, non-accelerated filers, or non-accelerated filers.small reporting companies. See definitionthe definitions of “large accelerated filer,” “accelerated filerfiler” and large accelerated filer”“smaller reporting company” in
Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  þ

DOCUMENTS INCORPORATED BY REFERENCE

The information described below and contained in the Registrants’ 20082009 annual report to shareholders to be furnished to the U.S. Securities and Exchange Commission pursuant to Rule 14a-3(b) of the Securities Exchange Act of 1934 is shown in Exhibit 13 and is incorporated by reference into this joint Annual Report on Form 10-K (“Form 10-K”).

Part and Item of the Form 10-K

Part II

Portions of the Registrants’ 20092010 joint definitive proxy statement, to be filed with the U.S. Securities and Exchange Commission, are incorporated by reference into this Form 10-K under the items described below.

Part and Item of the Form 10-K

Part III

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PART I

Carnival Corporation is incorporated in Panama, and Carnival plc is incorporated in England and Wales. Carnival Corporation and Carnival plc operate a dual listed company (“DLC”), whereby the businesses of Carnival Corporation and Carnival plc are combined through a number of contracts and through provisions in Carnival Corporation’s articlesArticles of incorporationIncorporation and by-lawsBy-Laws and Carnival plc’s memorandumArticles of association and articles of association.Association.

Carnival Corporation and Carnival plc are both public companies, with separate stock exchange listings and their own shareholders. The two companies operate as if they are a single economic enterprise, with a single executive management team and identical Boards of Directors, but each has retained its separate legal identity. See Note 3, “DLC Structure” to our Consolidated Financial Statements in Exhibit 13 to this Form 10-K. Together with their consolidated subsidiaries Carnival Corporation and Carnival plc are referred to collectively in this Form 10-K as “Carnival Corporation & plc,” “our,” “us,” and “we.”

We are the largest cruise company and one of the largest vacation companies in the world. We have a portfolio of widely recognized cruise brands and are a leading provider of cruises to all major vacation destinations. See Part I, Item 1. Business. B. – “Cruise Operations” for additional information.

As of January 28, 2009,2010, the summary by brand of our passenger capacity, the number of cruise ships we operate, and the primary areas in which they are marketed is as follows:

As of January 28, 2009,2010, we had signed agreements with three shipyards providing for the construction of 1713 additional cruise ships scheduled to enter service between March 2009February 2010 and June 2012. These additions, net of the two withdrawals mentioned above, are expected to result in an increase in our passenger capacity of 38,05627,754 lower berths. The net impact of these net additions is a 22.5%15.3% increase in passenger capacity as compared to our January 28, 20092010 passenger capacity. It is possible that some of our other older ships may also be sold, chartered or retired during the next few years, thus reducing the size of our fleet over this period. Alternatively, it is also possible that we could order more ships, which could enter service as early as 2012, or acquire more ships, thus increasing the size of our fleet over this period. See Part I, Item 1. Business. B. “Cruise Operations – Ship Information” and Note 6, “Commitments” to our Consolidated Financial Statements in Exhibit 13 to this Form 10-K for additional information regarding our ship commitments.

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In addition to our cruise operations, we own Holland America Tours and Princess Alaska Tours, the leading cruise/tour operators in the State of Alaska and the Yukon Territory of Canada, which primarily complement their respective cruise operations and own substantially all of the assets noted below. These tour companies currently market and operate:

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Mission, Primary Financial Goal and Related Strategies

Our mission is to deliver exceptional vacation experiences through some of the world’s best-known cruise brands that cater to a variety of different lifestylesgeographic regions and budgets,lifestyles, all at an outstanding value unrivalled on land or at sea. In orderOur primary financial goal is to accomplish this mission, we believe we must profitably grow our cruise business, while maintaining a strong balance sheet, which isenhances our primary financial goal.flexibility. Our ability to generate significant operating cash flows has allowed us to internally fund the majority of our capital investment program.

Our first strategy toTo achieve this goal is toour goals we build new and innovative ships and continuallycontinue to invest in our existing ships to strengthen the leadership position of each of our brands. Our newbuilding program is the primary platform for growth for our brands’ growth. Secondly,brands that are operating in established cruise markets. We currently have 13 cruise ships scheduled to enter service between February 2010 and June 2012, six of which will enter service in 2010. Our current intention is to have an average of two to three new cruise ships enter service annually in 2012 and beyond. Based on our current ship orders, our growth rate in North America, which is the most developed cruise region, is 3%, compounded annually through 2012. However, the majority of our growth over the next three years will come from our European brands, which are in an earlier stage of market development, and are expected to grow by 9%, compounded annually through 2012. As previously announced, we also intend to redeploygrow our presence in emerging growth markets, such as Australia and New Zealand, Asia and South America, by redeploying some of our existing ships to emerging growththese markets in order to develop an increasing awareness and appetite and awareness for cruising within these markets. After establishing a viable presence in a geographic area, we may add capacity to grow the business, and then we may further segment the market using multiple brands that target different demographic groups to achieve maximum penetration.cruising.

Our operating structure is decentralized, with each of our major brands having its own headquarters and operating team.team, which we believe helps create an ownership culture that is an important driver of our performance. We believe this decentralized approach results in delivering a product that is specifically tailored to identifiable geographic regions and economic markets andlifestyles, which allows us to more effectively penetrate these individual markets.each market. Although we operate under this decentralized structure, we leverage our size to obtain economies of scale and synergies, which reduces costs by consolidating our purchasing power and implementing common cost-containment initiatives, such as common reservation systems, coordinated media buying, tour business integration, cross-selling, shared data centers and shared port facilities.

We believe the successful execution of these and other ongoing strategies havehas enabled us to become one of the most profitable companies in the vacation industry. This success has given usindustry, while maintaining the ability to fund the majority of our large capital spending program, while still maintaining a strong balance sheet. Maintenance of a strong balance sheet has always been and continues to be the primary objective of our capital structure policy. In light of the current uncertainties in the global economy, the highly volatile state of the financial markets, continuing concerns about financial institution liquidity and the unusually high cost of obtaining new debt, we believe preserving cash and liquidity at this point in time is a prudent step, which will further strengthen our balance sheet and enhance our financial flexibility. Accordingly in October 2008, the Board of Directors voted to suspend our quarterly dividend beginning March 2009. We intend to maintain the dividend suspension throughout 2009, but will reevaluate our dividend policy based on the circumstances prevailing during the year.industry’s highest credit rating.

Health, Environment, Safety and Security Policy

We and our cruise brands are committed to:

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The multi-night cruise industry has grown significantly over the past decade, but still remains a relatively small part of the wider global vacation market in which cruise companies compete for the discretionary income spent by vacationers. WeAccording to G.P. Wild (International) Limited (“G.P. Wild”), an independent cruise research company, the global cruise industry carried 16.2 million passengers in 2008 and we estimate, based on internally developed global capacity growth rates, that the global cruise industry carried approximately 16.817.2 million passengers in 2008.2009. The principal regions from which cruise passengers are sourced from are North America, which has increased by an estimated compound annual growth rate of 6.5%4.6% between 20022003 and 2007,2008, and Western Europe where cruise passengers have increased by a compound annual growth rate of approximately 11.4% between 2002 and 2007.10.2%. In Europe, cruising represents a smaller proportion of the overall vacation market than it does in North America and, accordingly, we believe the European market has significant growth potential. We also believe that the North American market continues to have considerable growth potential. Other areas such as Asia, the South Pacific, including Australia and New Zealand, Asia and South America are currently a source of much lower numbers offewer cruise passengers, and we also believe these regions also have significant growth potential. For a discussion of the favorable characteristics of the cruise industry, which we believe enables it to have these favorable growth prospects, see Part I, Item 1. Business. B. “Cruise Operations - Characteristics of the Cruise Vacation Industry.” During 2009, 2008 and 2007, 48%, 45% and 40% of our revenues were generated from passengers sourced outside North America, respectively, as we continue to expand our global presence. See Note 11, “Segment Information” to our Consolidated Financial Statements in Exhibit 13 to this Form 10-K for financial information regarding our cruise segment.

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Cruising offers a broad range of products to suit vacationing guests of many ages, backgrounds and interests. Cruise brands can be broadly characterizedclassified as offering contemporary, premium and luxury cruise experiences. The contemporary experience typically includes cruises on larger ships that last seven days or less, have a more casual ambiance and are less expensive than premium or luxury cruises. The premium experience typically includes cruises on more intermediate-sized ships that last from seven to 14 days and appeal to the more experienced cruise guest who is usually more affluent and older. Premium cruises emphasize quality, comfort, style, more destination-focused itineraries and the average pricing is typicallynormally higher than contemporary cruises. The luxury experience is typicallyusually characterized by small vessel size, very high standards of accommodation and service, higher prices and exotic itineraries to ports which are inaccessible to biggerlarger ships. Notwithstanding these broad classifications, there generally is significant overlap and competition among all cruise products.

We are a leading provider of cruise vacations in most ofall the largest vacation markets in the world, includingwhich are comprised of North America, the UK, southern Europe, Germany, Asia/PacificAustralia and New Zealand, Asia and South America, with significantAmerica. We have product offerings in each of the three classifications noted above. A brief description of the principal vacation areas where we source substantially all of our guests and our brands that market primarily to these vacationers is discussed below.

Approximately 66%63% of the cruise passengers in the world are sourced from North America, where cruising has developed into a mainstream alternative to land-based resort and sightseeing vacations. Approximately 10.510.3 million North American-sourced cruise passengers took cruise vacations for two or more consecutive nights in 2007,2008, and we estimate that approximately the same number of10.4 million passengers cruised in 2008.2009. This market has grown significantly in prior years and we expect that it will continue to grow in the future as new capacity is introduced.

At the end of 2008, 122 ships with anThe weighted-average aggregate passenger capacity of approximately 211,000 lower berths were marketed primarily in North America. Based on the number of ships that are currently on order worldwide and scheduled for delivery between 2009 and 2012, we expect that the net capacity serving North America will continue to increase. Our projections indicate that by the end of 2009, 2010, 2011 and 2012, North America will be served by 124, 130, 136 and 138 ships, respectively, having an aggregate passenger capacity of approximately 213,000, 233,000, 248,000 and 253,000 lower berths, respectively. These figures include some ships that were,has been or areis expected to be marketed by the total cruise industry and us in both North America is as follows(a):

In 2007, Carnival Cruise Lines announced its $250 million product enhancement initiative to its eight Fantasy Class ships under the “Evolutions of Fun” program, which is expected to be completed over a period of several years. This ship refurbishment and product enhancement initiative includes upgrades to all guest accommodations and a variety of public areas, introducing new water parksspirit, when combined with a four deck-high waterslide, an 82-foot long racing waterslideculture that prides itself on innovation, positions the brand well to continue to grow and retain its standing as a fun-filled spray park, redesigning the mid-ship pool area and the creation of “Serenity,” an adults-only deck area. Carnival Splendor is the newest ship in the fleet and it includes many of the features of Evolutions of Fun. Carnival Cruise Lines is continually seeking to introduce ways to keep its cruise experience fresh and exciting, including expanded dining choices, spacious staterooms featuring the Carnival Comfort Bed sleep system, spectacular entertainment, innovative children’s programming, revitalizing spa services and action-packed casinos.market leader.

Princess, whose brand name was made famous by theLove Boat television show, recently celebrated its 43^rd anniversary.has been providing cruises since 1965. Princess, the world’s third largest cruise line, operates a fleet of 17 modern ships. Princess offers over 115125 unique itineraries to more than 350330 destinations, with cruises generally offrom seven to 14 days, and threetwo world cruises in 2009 that exceed 1002010 of 104 and 107 days. Princess is a leading cruise line in international and exotic regions all over the world, including Alaska, Africa, Asia, Europe, the South Pacific includingislands, Australia, and South America. Some of Princess’ Caribbean cruise offerings feature a private island destination that Princess leases and operates, known as Princess Cays which Princess leases and operates, that is located on the island of EleuthraEleuthera in the Bahamas.

Princess is widely recognized among travel agents as an innovative, premium cruise line. Substantially all of Princess’line committed to helping its guests Escape Completely^® from their daily routine and responsibilities. Princess ships reflect an innovative design philosophy called “Big Ship Choice, Small Ship Feel,have a warm, welcoming “comfortable elegance,” emphasizingproviding a broad variety of amenities combined withrelaxed, rejuvenating retreat from which to explore the more intimate ambience found on smaller vessels. Virtually all of Princess’ ships feature the Personal Choice Dining program, offering guests flexibility, convenience and quality in an array of anytime, traditional, specialty and casual dining options. A quality service program entitled C.R.U.I.S.E. (Courtesy, Respect, Unfailing In Service Excellence) helps ensure extremely high standards of service throughout the fleet.world, befitting its mission to be The Consummate Host^® to its guests.

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The introduction ofRuby Princessrepresentsin 2008 represented the ninth ship in the evolving Grand Class series of vessels, featuring signatures such as “Movies Under the Stars” outdoor theaters showing first-run Hollywood hits on a 330 square foot outdoor poolside LED screen, the adults-only sanctuary retreat deck and the adults’ only sanctuary retreat deck.Piazza atrium experience. While these innovations were launched on Grand Class vessels, Princess is now introducing these amenities throughout its fleet. At least 57%56% of each of these Grand Class ship’s staterooms have balconies;balconies, another hallmarkcharacteristic of Princess’ ships. Princess attracts consumers through a highly integrated brand campaign, encouraging them to “escape completely^®” with a direct marketing effort supported by a range of advertising and point-of-sale materials.

Holland America Line, with 135136 years of cruising experience, operates a premium fleet of 14 ships, with anone additional ship,Nieuw Amsterdamcontracted for delivery in 2010. Holland America Line cruises call at more than 320 destinations in more than 100 countries and territories on all seven continents. Homeports include New York, Boston, Fort Lauderdale, Tampa, San Diego, Seattle, Vancouver, Copenhagen, Amsterdam, Rotterdam, Rome, Rio de Janeiro, Valparaiso, Auckland, Sydney and Hong Kong. The majority of Holland America Line’s cruise lengthscruises are from seven to 21 days, howeverdays. However there are several longer and more exotic cruises, such as the world cruise which lasts over 118114 days. Most sailings in the Caribbean visit Holland America Line’s private island in the Bahamas, Half Moon Cay. Holland America’s fleet of mid-sized ships which tend to be smaller andis designed for more intimate than the bigger contemporary cruisecruising. The spacious, classically-designed ships were designed withfeature airy viewing lounges, wraparound teak decks and private, roomy verandahs that offer guests the chance to experience wildlife and scenery, which is especially important during its Alaska cruises.scenery.

As Holland America Line introduces new guests to its premium brand, the brand also continues to enjoy one of the highest rates of repeat cruisers in the cruise industry. Its onboard experience is distinguished by warm, welcoming personalized service, a timelessclassic and elegant approach to interior design and one of the most extensive collections of art and antiques at sea. The five areas identified as pillars of the Holland America guest experience are (1)spacious, elegant ships and accommodations, (2)sophisticated five-star dining, (3)gracious, unobtrusiveaward-winning service, (4)extensive enrichment programs and activities and (5)compelling worldwide itineraries.

The brand’s $525 millionSignature of Excellence^® product enhancement initiative “Signatureannounced over six years ago has evolved into an ongoing and comprehensive review of Excellence,” continues with ongoing refinements to serviceevery aspect of the Holland America Line guests’ experience and enrichment activities onboard and ashore.represents a $525 million investment in the brand. Signature of Excellence includes the Culinary Arts Center, a^® features and amenities include upgrades to all guest accommodations, such as new flat panel televisions and plush Euro-top “Dream Beds,” resort-style pools with giant LED screens overlooking them, state-of-the-art onboard show kitchen where visiting chefskitchens, more enticing destinations, enhanced dining experiences, such as the popular casual Canaletto Restaurant, more creative activities and culinary experts provide cooking demonstrations and classes to our guests, three specialty theme bars that feature a multitudeeven higher levels of martinis and champagnes, as well as an international selection of beers and premium whiskeys and brandies, and many other enhancements.service.

Seabourn provides ultra luxuryultra-luxury cruising vacations in a unique, small-shipsmall-yacht style that focuses on personalized services, all-suite accommodations, superb cuisine and unique experiences. Consistently rated among the top vacation choices, Seabourn pampers its’its guests with complimentary open bars, open-seating diningrestaurants and value-added extras such as Massage Moments^SM on deck, Caviar in the Surf^SM beach parties and water sports from the yachts’ fold-down marina. Seabourn’s ships offer destinations throughout the world, including Europe, Asia, the South Pacific islands, Australia and the Americas, with cruises generally from seven to 14 days, with some of longer length.length, including a 108 day world cruise. Seabourn currently operates three 208-guest yachts and one 450-guest yacht and will begin acontinue its fleet expansion that is contracted to add threewith two additional 450-guest sisters,yachts, one in each of 2009, 2010 and 2011. The new vessels willone in 2011, Seabourn Sojourn andSeabourn Quest, respectively. These larger yachts offer more categories of luxury suites, more dining alternatives and an 11,400-square foot spa facility that will beis the largest on any ultra-luxury vessel. They will maintainAll the Seabourn yachts have a service ratio of nearly one staff member per guest, and the intimate, sociable atmosphere that ishas been the hallmark of the Seabourn yachting lifestyle for over 2021 years. During 2009 and 2010, the original three 208-guest yachts,Seabourn Pride,Seabourn Spirit andSeabourn Legend,are each scheduled for an interior refurbishment of public areas to more closely match the recently deliveredSeabourn Odyssey.

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We believe that Europe is one of the largest single leisure travel vacation markets,market in the world, but to date cruising in Europe has achieved a much lower level of market penetration rate than in North America, and represents a relatively small percentage of the European vacation market.

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Approximately 4.04.4 million European-sourced passengers took cruise vacations for two or more consecutive nights in 20072008 compared to approximately 10.510.3 million North American-sourced passengers. Additionally, we estimate that about 4.64.9 million European-sourced passengers took a cruise in 2008.2009, which was approximately the same size as the North American market in 1997. The number of European cruise passengers increased by a compound annual growth rate of approximately 11.4%10.8% between 20022003 and 2007.2008. We believe that the European market represents a significant growth opportunity for us, and we plan to introduce a number of new or existing ships into Europe over the next several years. ThisIn addition to increasing our European revenues, these capacity increases should enablefurther benefit us by enabling us to achieve increasing economies of scale. Approximately 72%,Over 20,000 berths, or 27,296 berths,66%, of our passenger capacity under construction has been designated for our European brands. Our European brands represent 32%33% of our total capacity at November 30, 2008,2009, and we expect them to increase to 39%37% of our total capacity by 2012, assuming no additional shipsnew acquisitions, transfers or withdrawals are ordered for 2012 delivery.announced other than as previously discussed.

At the end of 2008, 117 ships with anThe weighted-average aggregate passenger capacity of approximately 130,000 lower berths were marketed primarily in Europe. Our projections indicate that by the end of 2009, 2010, 2011 and 2012, Europe will be served by 122, 127, 130 and 133 ships, respectively, having an aggregate passenger capacity of approximately 144,000, 156,000, 164,000 and 172,000 lower berths, respectively. These figures include some ships that were,has been or areis expected to be marketed by the total cruise industry and us in both Europe is as follows(a):

The industry’s and elsewhere during different times of the year. Netour net capacity serving European-sourced cruise guests has increased at a compound annual growth rate of 9.8%12.0% and 13.6%, respectively, for the past three years. The futureindustry’s and our compound annual net capacity growth rate is currently expected to be 8.1%5.8% and 8.9%, respectively, for the next three years. Our estimates of European capacity are based on similar assumptions as discussed previously for our North American estimates and do not consider any older ship withdrawals as a result of their noncompliance with mandated maritime regulations that become effective in 2010. See Part I, Item l. Business. B. – “Cruise Operations – Governmental Regulations – Maritime Regulations”.

The principal itinerarieslocations visited by European-sourced cruise guests in 2008 were2009 included the Mediterranean, the Caribbean, (including the Bahamas), Bermuda, northernNorthern Europe (including Scandinavia and the Baltic) and, the Atlantic Isles (including the Canary Islands and Madeira). In addition, European cruise guests visited, the Arabian Gulf theand Indian Ocean, New England and Canada and other exotic locations around the world.

The United Kingdom (“UK”)UK is one of the largest regions from which cruise passengers are sourced in Europe. Approximately 1.31.5 million UK passengers took cruises in 2007.2008, and we estimate that a similar number also took cruises in 2009. Cruising in the UK has becomeis an established alternative to land-based resort and sightseeing vacations. The number of UK cruise passengers increased by a compound annual growth rate of approximately 10.2%8.9% between 20022003 and 2007.2008. We believe that the UK has additional growth potential for the cruise industry asbecause the level of market penetration level is estimated at approximately 70%80% of North America.America’s market penetration level.

P&O Cruises and Ocean Village sourcesources substantially all of theirits guests from the UK. Cunard sources most of its guests from the UK, North America, Germany and Australia. Our North American brands and Costa also source some guests from the UK. For example, Princess Cruises’Sea Princesshas been homeportedOur UK Ocean Village brand is being phased-out with the transfer of its ships to P&O Cruises Australia. The first ship was transferred in Southampton duringNovember 2009 and the summer months and has Fort Lauderdale as its homeport during the winter season, has been primarily marketedsecond ship is planned to UK vacationers who desire an American style of cruising.be transferred in November 2010.

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P&O Cruises, with over 170 years of cruising experience, is the largest cruise operator and best known cruise brand in the UK, with six premium ships, and anone additional ship,Azura, contracted for delivery in 2010. Artemiswill leave the fleet in April 2011, as it was sold in October 2009 and is currently being chartered back. Artemis will be replaced byAdonia, which is currently sailing asRoyal Princess. She will be the smallest ship in the fleet with a 710-passenger capacity, and will take over the small ship, traditional, adult-only product offering. These ships cruise to over 235205 destinations in more than 8274 countries, with most cruises ranginggenerally from twoseven to 16 days, but with some cruises lasting longer, including three world cruises in 2009 and two in 2010. The P&O Cruises fleet is the youngest multi-ship UK brand, and their latest additions have enabled P&O Cruisesranging from 84 to offer a more modern style of cruising to its UK cruise guests and broaden their appeal, reaching younger guests with and without families, while retaining older and more traditional British guests. Artemis andArcadia are child-free ships, which generally appeal to an older demographic, while the rest of the fleet is well-equipped for families.104 days. P&O Cruises offers cruises from Southampton, England to the Mediterranean, the Atlantic Isles, the Baltic, Scandinavia and the Norwegian Fjords for the majority of the year, and primarily operates Caribbean cruises and a choice of world cruises during the fall and winter.

The recent P&O Cruises fleet expansion has enabled P&O Cruises to offer a more modern style of cruising to its UK cruise guests and broaden its appeal, reaching younger guests with and without families, while retaining older and more traditional British guests. Artemis andArcadia are adult-only ships, which generally appeal to an older demographic, while the rest of the fleet is well-suited towards families.

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P&O Cruises’ ships deliver a world of extraordinary experiences for guests by ensuring that they offer a high quality a distinctly British experience, andwhich is described by regular guests as “like coming home” every time they return for a variety of choices. Their fleet ofP&O Cruises holiday. The P&O Cruises ships are distinctly different from one another, in both personality and facilities. Thiswhich allows the British guest to tailor their holiday by selecting the ship that best reflects their own personality and matches their holiday requirements. It also means that repeat customers can enjoy a new and exciting experiencedifferent P&O Cruises ship experiences each time they sail.

VenturaandOceana offer a more contemporary and innovative experience with ana more informal atmosphere and range of alternative dining venues, from restaurants and food courtsbuffets to grills and bistros. The elegant superlinersArcadia, Aurora andOriana offer a stylish and classic cruise experience with their broad decks, traditional artwork and blend of formal and informal onboard experiences. As Artemis,the smallest ship in the P&O Cruises fleet,Artemisoffers a more traditional and intimate experience, her size enabling her to visitcalling on ports not chartedvisited by larger vessels as well asand fostering a real sense of camaraderie.camaraderie between her guests.

Cunard, which was launched in 1839 and has the Most Famous Ocean Liners In The World^SM, operates two premium/luxury ships that evoke a golden era of luxurious cruising with anone additional ship,Queen Elizabeth, contracted for delivery in 2010. Cunard’s flagship,Queen Mary 2, is the largest and grandest ocean liner in the world and operates the northern transatlantic crossing route as well as a 90 day world cruise.cruise, Mediterranean and Northern European voyages and a fall Caribbean program. Cunard’s newest ship,Queen Victoria, is a marriage of heritage and innovation with a three tier grand lobby that offers a sense of the lavish lifestyle that its guests will experience onboard. In 2009,Queen Victoriawill embark on a 107 day world cruise prior to sailing out of Southampton throughout the summer of 20092010 on a series of Northern Europe and Mediterranean voyages.voyages followed by a fall Mediterranean program. Most of Cunard’s non-world cruise voyages are six orrange from seven to 14 days with two world cruises of 96 and 101 days.

The Ocean Village brand will be phased-out with the transfer of both its ships to P&O Cruises Australia. The first ship will be transferred in November 2009.The second ship will be transferred in November 2010. We have recognized the growth potential in the Australian cruise market, and this decision is consistent with our strategy of redeploying ships to growth markets to invest in brands which show the greatest potential.

Prior to the transfer, the two ships will offer one or two week cruises, together with cruise and stay holidays, and operate out of Palma Majorca, Spain and Heraklion, Crete in the Mediterranean for the 2009 summer season. The remaining ship will operate from Barbados in the Caribbean during the winter 2009-2010 season and return to the Mediterranean for the 2010 summer season.

The main countries in southerncontinental Europe for sourcing cruise passengers are Germany, Italy, France and Spain. Together, these main countries generated approximately 1.52.4 million cruise passengers in 2007.2008 and we estimate that approximately 2.8 million passengers took a cruise in 2009. Cruising by passengers from Italy, France and Spain combinedthese countries increased by a compound annual growth rate of approximately 12.6%11.7% between 20022003 and 2007.2008. We believe that southerncontinental Europe has significant growth potential for the cruise industry asbecause the level of market penetration level is estimated at approximately 26%one-third of North America.America’s market penetration level. We intend to increase our penetration in southerncontinental Europe primarily through Costa, one of the most recognized cruise brands marketed in Europe, which currently has the most cruise ships on order of any cruise brand,AIDA and Ibero.

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Costa is ItalyItaly’s and Europe’s #1 Cruise Line based on guests carried and ship capacity, of its ships, and boasts over 6061 years of cruising history. Costa is one of the most recognized cruise brands marketed in Europe. In 2009 Costa took delivery of two new cruise ships and now operates 1214 contemporary ships, with twothree additional ships,Costa Deliziosa,Costa FavolosaandCosta Fascinosa,contracted for delivery, in 2009 and one ship in each of 2010, 2011 and 2012. This is the largest increase in passenger capacity currently on order by any cruise brand. With these fivethree new ship additions, net ofCosta Europaleaving the fleet in 2010, Costa’s existing capacity will grow by 58%24%.

Costa offers guests an international and multi-lingual ambiance with an Italian touch. Costa principally serves customers in Italy, France, SpainGermany and Germany,Spain, but its 1.21.3 million 2008 guests in 2009 came from over 160 different170 countries. The Costa brand offers a more traditional product catering to an older demographic in Germany and a higher-end contemporary product in Germany and Spain and thus segments these markets where we also own and operate the more mid-contemporary AIDA and Ibero brands.

The Costa ships call on 250 ports around the world, with 100 different itineraries, most from seven to 11 days. Costa’s ships operate in Europe from spring to fall. From fall 2009 to spring 2010 Costa repositions tworepositioned three of its ships to the Caribbean, three of its ships to South America, two of its ships to the Arabian Gulf to homeportbe based in Dubai, United Arab Emirates (“U.A.E.”), one of its ships to the Indian Ocean to homeportbe based from the Island of Mauritius, one ship offering 18-day winter cruises between Savona, Italy and Dubai, U.A.E. and maintains a year-round presence with three of its ships in the Mediterranean. See Part I, Item 1. Business. B.-B. “Cruise Operations – Australia, New Zealand and Asia” for additional discussion of Costa’s expanding operations in Asia.

We have a joint venture agreement with Orizonia Corporation, Spain’s largest travel company, under which we operate Ibero, a Spanish cruise line that began operations in 2003. Ibero currently operates three contemporary cruise ships. Substantially all of Ibero’s guests are sourced from Spain, Brazil and Portugal. Their ships are especially tailored to the Spanish market, including Spanish speaking officers and crew as well as Mediterranean and Spanish style food and entertainment. From March to October, Ibero’s ships offer seven-day Mediterranean and Northern European sailings homeported in Barcelona, Spain, Venice, Italy, Athens, Greece, Istanbul, Turkey, Copenhagen, Denmark and Helsinki, Finland. From November 2008 to February 2009 two of its ships are time-chartered to an unaffiliated Brazilian tour operator. In November 2009, we expect to transfer Carnival Cruise Lines’ 1,450-passenger capacityHoliday to Ibero.Holiday will undergo a multi-million dollar refurbishment before being renamed theGrand Holidayfor her first Ibero sailing expected in spring 2010.

Germany is the largest source market for cruise passengers in continental Europe, with approximately 0.8 million cruise passengers in 2007. Germany had a compound annual growth rate in the number of cruise passengers carried of approximately 12.2% between 2002 and 2007. We believe that Germany has significant growth potential for the cruise industry as the level of market penetration is estimated at approximately 29% of North America. We intend to increase our penetration in Germany through AIDA, the most recognized cruise brand marketed in Germany.

AIDA, which began operating in 1996, sources substantially all of its guests from Germany, and German speaking Austria, and German-speaking Switzerland, and is the leader and most recognized cruise brand in the German cruise market. AIDA operates fivesix contemporary ships, with onethree additional shipships contracted for delivery, one in each of fiscal 2009, 2010, 2011 and 2012. With these fourthree new ship additions, AIDA’s existing capacity will grow by 110%67%. AIDA’s newcurrent generation of vessels, including theAIDAdiva, AIDAbellaandAIDAbella,AIDAluna,which AIDA took delivery of in 2007, 2008 and 2008,2009, respectively, are innovative. For example, theyAIDA introduced the “Theatrium,” a completely new space concept that provides guests a central meeting space and an enhanced entertainment venue. For the next three newbuilds, commencing with theAIDAblu in 2010, the spa concept has been further developed, including 30 spa suites and veranda cabins. Additional product innovations onAIDAblu will be the Brauhaus, the first brewery on a cruise ship.

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AIDA’s product is especially tailored for the German-speaking market and offers an exceptionally relaxed, yet active, cruising experience with an emphasis on lifestyle, choice, informality, friendliness and activity. Spa and fitness areas and a variety of dining options, ranging from informal, but excellent quality buffets, to grills and exclusive restaurants, characterize the experience onboard the vessels.

AIDA offers its guests cruises varying in lengthgenerally from threefour to 14 days, while calling on approximately 140 ports. During the summer, the AIDA ships sail in the Mediterranean, the North Sea, and the Baltic Sea and Canada/New England, while itineraries for the winter include the Caribbean, Central America, the Western Mediterranean, the Atlantic Isles, the Arabian Gulf and Trans-Suez Canal passages. In the fall of 2008,2009, AIDA began offering New EnglandSoutheast Asia cruises, which visit Singapore, Thailand, Vietnam, India and Canadaother countries in this region.

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In July 2009, we purchased the remaining 25% minority interest in Ibero, which is our wholly-owned Spanish cruise line that began operations in 2003. Ibero currently operates three contemporary cruise ships and generally offers cruises of seven days. In November 2009, we transferred Carnival Cruise Lines’ 1,440-passenger capacityHolidayto Ibero. The renamedGrand Holiday is currently undergoing a multi-million dollar refurbishment, which includes, among other things, the remodeling of guest accommodations and public areas and enhancing the spa facilities, before her first sailing in May 2010. Substantially all of Ibero’s guests substantially allare sourced from German speaking countries.Spain and Brazil. Ibero’s ships are especially tailored to the Spanish market, including Spanish-speaking officers and crew as well as Mediterranean and Spanish-style food and entertainment. Ibero’s three ships in operation were repositioned to South America in November 2009 to operate Ibero cruises along the Brazilian coast through March 2010. Eight different itineraries are being offered from the homeports of Santos and Rio de Janeiro, Brazil. From March/May to October 2010, all of Ibero’s ships will offer seven-day Mediterranean and Northern European sailings from Barcelona and Malaga, Spain; Venice, Italy; Athens, Greece; Istanbul, Turkey; Copenhagen, Denmark and Helsinki, Finland.

Cruising in Australia and New Zealand continues to develop. Approximately 280,000We estimate that approximately 340,000 Australians and New Zealanders took cruise vacations in 2007.2008 and we estimate that approximately 425,000 passengers cruised in 2009. Cruising by passengers from these countries increased by a compound annual growth rate of approximately 15.1% between 2003 and 2008. We serve this region primarily through the contemporary P&O Cruises Australia brand, which is athe leading cruise line in Australia and New Zealand. In addition, our premium brand Princess Cruises has a very significant presence in the Australian market.

From Asia, we began sourcing passengers in 2006. Tourism is one of the most rapidly growing sectors in the Chinese economy. More than 35 million Chinese tourists traveled abroad in 2007. This figure is forecastmarket, thus allowing us to increase to over 50 million by 2010.segment this market. We believe thisthat the Australian and New Zealand market has significant growth potential given its large population and expanding international tourist travel.for the cruise industry because the market penetration level is estimated at approximately 44% of North America’s market penetration level.

P&O Cruises Australia, with over 75 years of cruising experience, caters specifically to Australians and New Zealanders. P&O Cruises Australia is more than doubling its fleet capacity with the transfer of the two Ocean Village ships. The first ship was transferred in November 2009 and was renamedPacific Jewel.Pacific Jewelhas just completed a multi-million dollar refurbishment and has more balconies than any contemporary ship deployed year-round from Australia, an on-deck high wire circus show and the “Salt Grill” restaurant, a new dining concept developed with Australia’s first cruise celebrity chef, Luke Mangan. The second ship is planned to be transferred in November 2010 and will be renamedPacific Pearl. Pacific Pearl will also undertake a major refurbishment prior to her deployment in the Australian and New Zealand markets with an emphasis on tailoring the vessel for family cruising.

Its three contemporary ships,Pacific Dawn, Pacific Jewel andPacific Sun, typicallygenerally offer cruises from seven to 14 days10 days. The ships are homeported from Sydney and Brisbane, Australia and Auckland, New Zealand. In 2010, with the introduction of thePacific Jewel, P&O Cruises Australia will also start homeporting from Newcastle and Fremantle, Australia. These cruises enable its guests to discover the islands of the South Pacific from New Caledonia to Tahiti, as well as exploring Australia’s magnificent coast line, New Zealand and New Zealand’s Fjords. In response to growing demand, in October 2008, P&O Cruises Australia announced the more than doubling of their fleet with the transfer of the two Ocean Village ships. The first ship will be transferred in November 2009 and it will be renamedPacific Jewel.The second ship will be transferred in November 2010.Asia.

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In November 2008, Princess deployeddeploys bothSun PrincessandDawn Princess the second Princess ship to be based in the Australian market on a year-round basis.Dawn Princess’ arrival has confirmed Princess as a substantial cruise line in the growing Australian cruise market and allowed us to enhance our market segmentation there. Both theSun Princess andDawn Princess are time chartered from Princess to P&O Cruises Australiabasis for cruises departing from the homeports of Fremantle, Melbourne and Sydney, Australia. The doubling of this fleet allowed the expansion of homeporting out of Melbourne, Australia’s second largest city. Princess’ cruises visit the South Pacific islands, Australia, New Zealand and AsiaAsia; and average 18generally range from 13 to 17 days, in length with one world cruise lastingof 104 days.

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Costa Asia began its contemporary cruise operations in July 2006 with theCosta Allegra being homeported out of China to cater primarily to the Chinese and surrounding markets. Costa was the first international cruise line to homeport a ship in China. During 2009,Costa Classica began operating cruises tailored specifically to Chinese guests; more than doubling Costa Asia’s capacity in this market. The Chinese vacation market is highly seasonal. Inseasonal with short cruises offered primarily to Chinese and surrounding market vacationers during the peak Chinese vacationholiday seasons during part of February and May, and from July through mid-October, theCosta Allegra sails from Hong Kong, Shanghai and Beijing, China, for 5-day cruises, with guests primarily sourced from China and surrounding markets. During the remaining non-peak vacation months, theCosta Allegra sails 14-daylonger Far East cruises sourcing guestsoffered principally to Europeans during the non-peak Chinese vacation months. Costa Allegrawill be offering 14-day cruises from Europe. In April 2009, Costa CruisesSingapore until the end of March 2010. Then she will deploy a second ship,move to Europe and be replaced by the 1,302-passengerlarger 1,344-passenger capacityCosta ClassicaRomantica,. Costa Romanticawill be dedicated mainly to Asia for 4-day and 5-daythe local market offering from three to six-day cruises sailing from Tianjin and Shanghai, during the peak Chinese vacation seasonsChina until October 2010, and 14-daythen offering two longer cruises to Singapore before repositioning to Mauritius in late November 2010. Costa Classicawill be offering 14 and 15-day cruises from Hong Kong in January, March and April 2010 and will be the first ship offering four-day cruises from Hong Kong in February. In May, July, August, September and October 2010 she will be offering from three to six-day cruises from Shanghai. In June 2010,Costa Classica will be sailing from 4 to 6-day cruises out of Hong Kong Singaporeoffering cruises direct from mainland China to Taiwan.

These ships are tailored to the Chinese market, serving Chinese style food and Shanghai duringbeverages, offering mah-jongg tables in the remaining non-peak vacation months.casino and providing high-end well-known luxury brands in their retail shops. The additionCosta Asia product is unique, bringing a high European standard ofCosta Classicawill more than double Costa’s capacity holiday cruising to Chinese and surrounding market guests in this market.their own locality.

CruiseFor many years cruise vacations have been marketed by Costa in South America, principally to Brazilian and Argentinean-sourced passengers, for many years, although cruising as a vacation alternative remains in a relatively early stage of development in the region. ApproximatelyBrazil has a population of slightly under 200 million, and their discretionary incomes are expected to grow significantly in the future. Based on our internal estimates, approximately 380,000 Brazilians and Argentineans took a cruise vacationsvacation in 2008. 2008 and almost half of these guests sailed on a Carnival Corporation & plc brand, and we estimate 550,000 took a cruise vacation in 2009, which is approximately 5% of North America’s market penetration level. Accordingly, we believe this region has significant cruise growth potential.

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Cruises from South America typically occur during the Southern Hemisphere summer months of November through March. OurFor many years our presence iswas primarily represented through the Costa brand, which will operateis operating three vessels in 2009winter 2010 in this region, theCosta Concordia,Costa Magica,Costa MediterraneaandCosta RomanticaVictoria, collectively offering 6,160totaling 7,608 lower berths. These ships primarily offer seven to 14 day cruises visiting ports primarily indepart from Santos and Rio de Janeiro, Brazil Argentina,and Buenos Aires, Argentina; with itineraries that put the spotlight on discovering Northeast and Southern Brazil, Uruguay and Chile.Argentina. In addition, as previously mentioned, Ibero currently time charters twohas deployed three of its ships to an unaffiliated Brazilian tour operator and is directly offering three ships to this market forBrazil from November 2009 throughto March 2010, cruises.offering eight different Brazilian coast itineraries from the homeports of Santos and Rio de Janeiro, Brazil.

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Summary information of our ships in service as of January 28, 20092010 is as follows:

For example, the blog of Carnival Cruise LinesLines’ Senior Cruise Director, John Heald, has attracted over 3.65.5 million visits since being launched two years ago and was named “Best Cruise Line Blog” in Porthole Magazine’s 2009 Editor-In-Chief Awards. This popular blog provides readers with a unique behind-the-scenes look at the Carnival Cruise Lines experience while sharing John’s humorousLines’ website receives more visits per month than any other cruise company website, based on Hitwise analysis, a leading independent online measurement provider. In addition, our brands have accumulated a database containing information on about 50 million past guests and insightful observations on a wide range of topics.prospects that we believe we can utilize to more efficiently and effectively market our products.

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To further stimulate demand, we offer a number of homeports that are closer to guests’ homes as this enables certain guests to lower the price of their cruise vacation by substantially reducing or eliminating the cost of air travel to and from the port.

In the UK and Australia we have formed a sales alliance known as the “Complete Cruise Solution,” whereby our UK and Australian sales forces and back-office operations are able to provide their gueststravel agents with one-stop cruise shopping for a number of our brands. WeIn North America and the UK, we also raise consumer and travel agent awareness through the “World’s Leading Cruise Lines” alliancealliances for our familyfamilies of North American and UK cruise brands, as well as Costa and Cunard.brands. Finally, most of our cruise brands offer their own past guest recognition programs, such as Carnival’s “Concierge Club”, Princess’ “Captain’s Circle”, Costa’s “CostaClub” or Holland America Line’s “Mariner Society,” through which they reward repeat guests with special incentives such as discounted fares, expedited ship embarkation and disembarkation and onboard activities.

XIII.    Seasonality

Our revenues from the sale of passenger tickets are seasonal. Historically, demand for cruises has been greatest during our third fiscal quarter, which includes the Northern Hemisphere summer months, and holidays.months. This higher demand during the third quarter and holidays results in higher net revenue yields and, accordingly, the largest share of our net income is earned during these periods.this period. The seasonality of our results is increased due to ships being taken out of service for maintenance, which we typically schedule during non-peak demand periods. In addition, substantially all of Holland America Tours’ and Princess Alaska Tours’ revenues and net income areis generated from May through September in conjunction with the Alaska cruise season.

XIV.    Competition

We compete with land-based vacation alternatives throughout the world, including, among others, hotels, resorts (including all-inclusives), theme parks, organized tours, land-based casino operations and vacation ownership properties located in Las Vegas, Nevada, Orlando, Florida, the Bahamas,Caribbean (including the Bahamas), France, Dubai, Canary Islands and various Caribbean, Mediterranean, Mexican, and Hawaiian Island destinations, as well as numerous other vacation choices throughout the world.

Our primary cruise competitors for North American-sourced guests are RCCL, which owns Royal Caribbean International (“RCI”), Celebrity Cruises (“Celebrity”) and Azamara Club Cruises; Norwegian Cruise Line (“NCL”), Oceania Cruises and Regent Seven Seas Cruises, all three of which are controlled by Apollo Management LP; Disney Cruise Line (“Disney”), MSC Cruises (“MSC”), Crystal Cruises, Oceania Cruises, Regent Seven Seas Cruises, Silversea Cruises and Windstar Cruises.

Our primary cruise competitors for European-sourced guests in the UK are Royal Caribbean International,RCI, Celebrity, Cruises, Norwegian Cruise Line,NCL, MSC, Cruises, Thomson Cruises, which is owned by TUI AG (“TUI”); Fred Olsen Cruise Lines Discovery Cruises and Saga Cruises; and in Germanycontinental Europe they are MSC, Cruises,Louis Cruise Line, and CDF Croisieres de France, Pullmantur and RCI, all three owned by RCCL; TUI Cruises, which is jointly owned by TUIRCCL and RCCL,TUI; Hapag-Lloyd, which is also owned by TUI,TUI; and Phoenix Reisen and Transocean Cruises; and in southern Europe they are MSC Cruises, Louis Cruise Line, and Pullmantur and CDF Croisieres de France, both owned by RCCL.Reisen. We also compete for guests throughout Europe with other North American cruise competitors, including Celebrity, Cruises, Disney Cruise Line and Norwegian Cruise Line.NCL.

Our primary cruise competitors for guests sourced from other parts of the world, such as Australia, New Zealand, Asia and South America, are Royal Caribbean International,RCI, Celebrity, Cruises,Pullmantur, Star Cruises, Norwegian Cruise Line,NCL, CVC Cruise MSC Cruises and Pullmantur.MSC.

Our North American, European and Australian brands also compete among themselves for guests.

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Our ships are regulated by various international, national, state and local laws, regulations and treaties in force in the jurisdictions in which our ships operate. In addition, ourOur ships, which are registered in the Bahamas, Bermuda, Italy, Portugal, the Netherlands, Panama, Portugal and the UK, and are regulated by these jurisdictions. Theyjurisdictions and are required to comply with the international conventions that govern the safety of our ships, guests and crew and the protection of the environment. Each country of registry conducts periodic inspections to verify compliance with these regulations as discussed more fully below. In addition, the directives and regulations of the European Union (“EU”), the U.S. and the many other international ports that our ships visit are applicableapply to some aspects of our ship operations.

Specifically,Our ships are subject to annual, intermediate, dry-docking and class renewal surveys by ship classification societies. These surveys ensure that our ships comply with international conventions adopted by the countries of registry and domestic rules and regulations, and verify that our ships have been maintained in accordance with the rules of the classification society and that recommended repairs have been satisfactorily completed.

Our ships are subject to inspection by the port regulatory authorities in the various countries that they visit. Such inspections include verification of compliance with the maritime safety, security, environmental, customs, immigration, health and labor regulations applicable to each port. For example, in U.S. ports these authorities include the U.S. Coast Guard and U.S. Customs and Border Protection. In EU ports, the Paris Memorandum of Understanding enforces internationally accepted conventions through Port State Control Inspections by 27 Marine Administrations. In UK ports, these authorities include the Maritime & Coastguard Agency, TRANSEC and the Port Health Authority.

We believe maritime safety, security, environmental, health and labor issues will continue to be areas of focus by relevant government authorities in the U.S., the EU and elsewhere where our cruise ships operate. Legislation, regulations or treaties, or changes thereto, in these areas could impact our operations and have and will likely subject us to increasing compliance costs in the future.

The International Maritime Organization (“IMO”), which operates under the auspicesa specialized agency of the United Nations, has adopted safety standards as part of the International Convention for Safety of Life at Sea sometimes referred to as SOLAS,(“SOLAS”), which is applicableapply to all of our ships. Among other things, SOLAS establishes requirements for vessel design, structural features, materials, construction, life saving equipment, safe management and operation and security in order to help ensure guest and crew safety and security. The SOLAS requirements are periodically revised from timefor both new and existing ships. One significant set of modifications entered into force in 2010 that requires all existing passenger ships to time,comply with the most recent modifications being phased-in through 2010.current standards regarding fire safety. Our existing fleet is compliant with these 2010 requirements.

In 1993, SOLAS was amended to incorporate the International Safety Management Code (“ISM Code”). The ISM Code, which provides an international standard for the safe management and operation of ships and for pollution prevention. The ISM Code is mandatory for passenger vessel operators. All of our operations and ships have obtainedare regularly audited by national authorities and maintain the required certificates demonstratingof compliance with the ISM Code and are regularly inspected and controlled by the national authorities, as well as the internationalCode. National authorities, acting under the provisions of the international agreements related to Port State Control, the process by which a nation exercises authority over foreignregularly inspect our ships when the shipsthey are in that nation’s waters.

In December 2004, the IMO’s Maritime Safety Committee approved for adoption amendments toamended SOLAS chapter II-I Parts A & B that relaterequirements related to the damage stability of new passenger cruise passenger vessels. These regulations, which were adopted in May 2005, and are applicableapply to those vessels whose keels arewere laid after January 1, 2009. These new standards2009, and thus do not affect our existing fleet or our vessels currently under contract whose keels were laid prior to January 1, 2009.contract. For vessels with keels laid after January 1, 2009, compliance with these standards will require the development of new designs,designs. The Maritime Safety Committee also amended SOLAS to require new passenger cruise vessels whose keels are laid after July 1, 2010, to comply with the “safe return to port” requirements, which may significantly increaserelate to the costs fordevelopment of vessel survivability standards, and will also require the development of new ship designs. Compliance with both these ships.regulations is not expected to result in significant cost increases.

The most important convention regulating and preventing marine and air pollution by ships is the IMO International Convention for the Prevention of Pollution from Ships (“MARPOL”), as amended. This convention applies to all of our ships and covers accidental and operational oil pollution as well as pollution by various items including, but not limited to, sewage, garbage and air emissions.

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Our ships are subject to a program of periodic inspection by ship classification societies who conduct annual, intermediate, dry-docking and class renewal surveys. Classification societies conduct these surveys not only to ensure that our ships comply with international conventions adopted by their respective countries of registry and domestic rules and regulations, but also to verify that our ships have been maintained in accordance with the rules of the society and that recommended repairs have been satisfactorily completed.

Our ships are also subject to various security requirements, including the International Ship and Port Facility Security Code (“ISPS Code”), which is part of SOLAS. Among other things, the ISPS Code requires vessel owners to implement security measures, conduct vessel security assessments, and develop security plans. Under these requirements, we have prepared and submitted security plans for all our ships to their respective countries of registry, and International Ship Security Certificates have been issued demonstrating compliance with the ISPS Code. For ships that are registered in the

The U.S. or have operations located in the U.S. the Maritime Transportation Security Act of 2002 (“MTSA”) is the governing regulation. Theregulation for ships that operate in U.S. ports. MTSA establishes Area Maritime Security requirements for geographic port areas that provide authority for the U.S. Coast Guard to implement operational and physical security measures on a port area basis that could affect our operation in those areas.

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Our ships that call at U.S. portsWe are subject to inspectionnumerous international, national, state and local environmental laws, regulations and treaties that govern, among other things, air emissions, waste discharge, water management and disposal, and the storage, handling, use and disposal of hazardous substances, such as chemicals, solvents, paints and asbestos. We are committed to helping to preserve the environment, not only because of the existing legal requirements, but because a pristine environment is one of the key elements that bring our guests on board our ships.

If we violate or fail to comply with environmental legislation, regulations or treaties, we could be fined or otherwise sanctioned by regulators. We have made, and will continue to make, capital and other expenditures to comply with environmental legislation, regulations and treaties.

See Part I, Item 1A. “Risk Factors.” for additional discussion of our environmental risks.

The most important environmental convention governing ships is the IMO International Convention for the Prevention of Pollution from Ships (“MARPOL”). This convention applies to all of our ships and includes requirements designed to prevent and minimize both accidental and operational pollution by oil, sewage, garbage and air emissions. All of our ships must carry an International Oil Pollution Prevention Certificate, an International Sewage Pollution Prevention Certificate, and an International Air Pollution Prevention Certificate. These certificates are issued by the ship’s state of registry indicating that our ships are operating in compliance with the MARPOL regulations regarding oil, sewage and air pollution prevention.

Many countries have ratified and adopted IMO Conventions which, among other things, impose liability for pollution damage, subject to defenses and to monetary limits, which monetary limits do not apply where the spill is caused by the owner’s actual fault or by the owner’s intentional or reckless conduct. In jurisdictions that have not adopted the IMO Conventions, various national, regional or local laws and regulations have been established to address oil and waste pollution.

The International Organization for Standardization (“ISO”) is an international standard-setting body which produces worldwide industrial and commercial standards. ISO 14001, an environmental management standard that was developed to help organizations manage their processes, products and services to minimize environmental impacts, presents a structured approach to setting environmental objectives and targets. It provides a framework for any organization to apply these broad conceptual tools to their own processes. During 2006, we completed corporate-wide implementation of ISO 14001. The environmental management systems of all of our cruise brands are certified in accordance with ISO 14001, with the exception of Ibero, which became fully owned in July 2009. Ibero is currently developing plans to certify its environmental management systems in the near term.

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The U.S. Act to Prevent Pollution from Ships, implementing the MARPOL convention, provides for severe civil and criminal penalties related to ship-generated pollution for incidents in U.S. waters within three nautical miles and in some cases in the 200-mile exclusive economic zone.

The U.S. Oil Pollution Act of 1990 (the “OPA 90”) provides for strict liability for water pollution, such as oil pollution or possible oil pollution incidents in the 200-mile exclusive economic zone of the U.S., subject to defined monetary limits. OPA 90 requires that, in order for us to operate in U.S. waters, we must obtain Certificates of Financial Responsibility from the U.S. Coast Guard for compliance with SOLAS, byeach of our ships operating in U.S. waters. These certificates demonstrate our ability to meet the U.S. Public Health Servicemaximum amount of liability that our ships could be subject to for sanitary standards,removal costs and by other agenciesdamages related to water pollution, such as from an oil spill or a release of a hazardous substance, up to each ship’s statutory liability limit. Our financial responsibility under these certificates is supported by certain of our insurers who provide guarantees aggregating $1.1 billion.

Most U.S. Customsstates that border navigable waterways or seacoasts have also enacted environmental regulations that impose strict liability for removal costs and Border Protection, with regard to customsdamages resulting from a discharge of oil or a release of a hazardous substance. These laws may be more stringent than U.S. federal law and immigration. Our ships are also subject to similar inspections pursuant to the laws and regulationsin some cases have no statutory limits of various other countries our ships visit.liability.

In 2006, the International Labour Organization (“ILO”) adopted a new Consolidated Maritime Labour Convention (the “Convention”). The ILO is also an agency of the United Nations that develops worldwide employment standards. There have been over 60 maritime labor conventions and recommendations developed since 1920 in areas such as minimum age of seafarers, medical certificates, recruitment practices, health and welfare, hours of work, and social security. The Convention is a comprehensive instrument that consolidates all of the existing standards and recommendations into one instrument to reflect modern conditions and language that will govern all aspects of crew management for all ships in international commerce. While many of the practices were widely adhered to by ships registered in different countries, this consolidated Convention will place additional requirements on shipowners not previously in effect. Thirty member countries representing 33% of the world’s merchant ship tonnage will be required to ratify the Convention before it goes into effect 12 months after such ratification. We currently expect the Convention to be ratified in 2010, and to enter into force and require our implementation in 2011. Accordingly, if ratified, the Convention may increase our crew costs from 2011 and beyond.

We believe that maritime health, environmental, safety and security issues will continue to be an area of focus by relevant government authorities in the U.S., the EU and elsewhere. Resulting legislation, regulations or treaties, or changes thereto, could impact our operations and would likely subject us to increasing compliance costs in the future.

In connection with certain of our Alaska cruise operations, Holland America Line, Princess and Carnival Cruise Lines rely on concession permits from the U.S. National Park Service (“NPS”) to operate their cruise ships in Glacier Bay National Park and Preserve. Such permits must be periodically renewed, and werenewed. We cannot be certain that they will continue to be renewed or that regulations relating to the renewal of such permits, including preference or historical rights, will remain unchanged in the future. In January 2009, the NPS renewed our permits through the 2019 Alaska cruise season.

The Statestate of Alaska enacted legislation which prohibits certain discharges in designated Alaskan waters, ports or near shorelines and requires that certain discharges be monitored to verify compliance with the standards established by the legislation. Both the state and federal environmental regimes in Alaska are more stringent than the federal regime under the Federal Water Pollution Control Act with regard to discharge from vessels. The legislation also provides that repeat violators of the regulations could be prohibited from operating in Alaskan waters.

We are subjectIn the past 30 years the EU has adopted a substantial and diverse range of environmental measures aimed at improving the quality of the environment for European citizens and providing them with a high quality of life. To support the implementation and enforcement of Community environmental legislation, the Community has adopted directives on environmental liability and enforcement and a recommendation providing for minimum criteria for environmental inspections.

In November 2002, the European Commission adopted a European Union strategy to various international, national, statereduce atmospheric emissions from seagoing ships. The strategy reports on the magnitude and localimpact of ship emissions in the EU and sets out a number of actions to reduce ship emissions. The EU strategy seeks to implement the Sulfur Oxide (“SOx”) Emission Control Areas set out in MARPOL Annex VI, and to press for tighter Nitrogen Oxide (“NOx”) standards. The Commission also urges Member States to ratify MARPOL Annex VI.

The EU continues to pursue an aggressive policy towards environmental protection and health and safety laws, regulations and treaties that govern, among other things, air emissions, employee health and safety, waste discharge, water management and disposal, and the storage, handling, use and disposal of hazardous substances, such as chemicals, solvents, paints and asbestos. We are committedwe can expect to helping to preserve the environment, not only because of the existing legal requirements, but because a pristine environment is one of the key elements that bring our guests on board our ships.

In particular,see legislation being implemented in the U.S., the Act to Prevent Pollution from Ships, implementing the MARPOL convention, provides for severe civil and criminal penaltiesnear future related to ship-generated pollution for incidents in U.S. waters within three nautical miles and in some caseswaste water discharges in the 200-mile exclusive economic zone.

Furthermore, in the U.S., the Oil Pollution Act of 1990 (the “OPA”) provides for strict liability for water pollution, such as oil pollution or threatened oil pollution incidents in the 200-mile exclusive economic zone of the U.S., subject to monetary limits. These monetary limits do not apply where the discharge is caused by the gross negligence or willful misconduct, or the violation of an applicable safety, construction, or operating regulation by a responsible party. These monetary limits also do not apply where the responsible party fails or refuses to report the incident as required by law, provide all reasonable cooperationBaltic Sea and assistance in connection with removal operations, or without sufficient cause, comply with an order issued by the federal on-scene coordinator. Pursuant to the OPA, in order for us to operate in U.S. waters, we are also required to obtain Certificates of Financialgreenhouse gas reduction.

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Responsibility from the U.S. Coast Guard for each of our ships operating therein. These certificates demonstrate our ability to meet the maximum amount of liability that our ships could be subject to for removal costs and damages related to water pollution, such as from an oil spill or a release of a hazardous substance, up to each ships’ statutory liability limit. Our financial responsibility under these certificates is supported by certain of our insurers who provide guarantees aggregating $957 million.

In addition, most U.S. states that border navigable waterways or seacoasts have enacted environmental pollution laws that impose strict liability on a person for removal costs and damages resulting from a discharge of oil or a release of a hazardous substance. These laws may be more stringent than U.S. federal law and in some cases have no statutory limits of liability.

Furthermore, many countries have ratified and adopted IMO Conventions which, among other things, impose liability for pollution damage, subject to defenses and to monetary limits, which monetary limits do not apply where the spill is caused by the owner’s actual fault or by the owner’s intentional or reckless conduct. In jurisdictions that have not adopted the IMO Conventions, various national, regional or local laws and regulations have been established to address oil pollution.

Limitations on the sulfur content of fuel are part of new regulations approved by the International Convention for the Preventionas part of Pollution from Ships Annex VI (“MARPOL Annex VI”). Ships must carry an International Air Pollution Prevention Certificate issued by its flag state indicating that it is operating in compliance with MARPOL Annex VI. Among other things, MARPOL Annex VI establishes a limit on the sulfur content of fuel oil and calls on the IMO to monitor the worldwide average sulfur content of fuel oil supplied for use aboard vessels.

In addition, MARPOL Annex VI and EU rules also provide for special SOx, or Sulfur Emission Control Areas (“ECAs”) to be established with more stringent limitations on sulfur emissions. There are currently two ECAs in operation, one in the Baltic and the other in the North Sea/English Channel. Compliance with these regulations has increased our operating costs, due to the higher cost of purchasing low sulfur fuel.

In 2008, MARPOL Annex VI was amended to require additional reductions in sulfur emissions by reducing the sulfur content requirements for fuel oil. GlobalAs part of these new requirements, the concept of Emission Control Areas (“ECAs”) was established with stricter limitations on sulfur fuel content limitsemissions in these areas. Currently there are currently 4.5%two ECAs in operation,

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one in the Baltic Sea and are required to be reduced to 3.5% by January 1, 2012. Thereafter, they are to be progressively reduced to 0.5% by January 1, 2020, subject to feasibility review to be completed no later than 2018. In addition,the other in the North Sea/English Channel. Specifically, from July 1, 2010, ships operating in ECAs will have to reduce their fuel sulfur content from the current 1.5% to 1.0%;, and from January 1, 2015 this content requirementand thereafter it will be further reduced to 0.1%. Compliance with these requirements in the existing ECAs has increased our fuel costs and, beginning July 1, 2010 will further increase our fuel costs, however, we do not expect that this increase will be significant.

On January 1, 2010, an EU directive became effective that requires the use of 0.1% sulfur content in all marine fuels used while ships are at berth or anchored in EU ports. This requires the use of distillate fuels, such as marine gas oil, further increasing fuel costs. However, the impact of compliance with this directive is not expected to be significant.

Global sulfur fuel content limits are currently 4.5% and are required to be reduced by these 2008 MARPOL regulations to 3.5% by January 1, 2012, which will not have a significant impact on our fuel costs.

The U.S. and Canada have applied to the IMO for an ECA out to 200 nautical miles on their east, west and gulf coasts, as well as the Hawaiian Islands, all of which could be in force by 2012. Additional ECAs may also be established in the future.future, such as for areas around the Bahamas, Mexico, Norway and in the Mediterranean. Compliance in this proposed U.S. and Canadian ECA with these new standardsthe 1.0% low sulfur content requirement will increase our fuel costs in 2012 and operatingbeyond. Based on current itineraries, fuel prices and technologies and our 2010 capacities and fuel consumption, we estimate that the implementation of the proposed U.S. and Canadian ECA would increase our annual fuel costs by approximately $50 million to $70 million.

Commencing in 2015, based on current itineraries, fuel prices and may resulttechnologies and our estimated 2010 capacities and fuel consumption, we estimate that the implementation of the 0.1% low sulfur content requirement in the use of newtwo existing ECAs and the proposed U.S. and Canadian ECA would additionally increase our annual fuel costs by approximately $100 million to $130 million.

Global sulfur abatement technologies, which may also increase costs. The MARPOL Annex VI amendments also introduce further progressive reductions in NOx, or nitrogen oxide, emissions from both existing and new marine diesel engines, withfuel content limits, excluding the most stringent requirements for those engines installed on ships contracted on or afterECA limits that will remain at 0.1%, will be reduced to 0.5% by January 1, 2016 operating2020, subject to a feasibility review to be completed no later than 2018. If this reduction is implemented in ECAs. These 20162020 it will significantly increase our fuel costs. However, the amount of such increases in 2020 and thereafter is not reasonably determinable at this time, given the length of time until such possible implementation date and other mitigating factors discussed below.

The cost impacts from implementing progressively lower sulfur content requirements will necessitateglobally and in ECAs may be mitigated by, among other things, the developmentfavorable impact of new engine designs orfuture changes in the supply and demand balance for marine and other fuels, future developments of and investments in sulfur emission abatement and propulsion technologies, including more advanced engines and enhanced exhaust gas treatment systems, which may result in significant additional costs.

A further EU directive regarding the use of low sulfurand new fuel for passenger ships on regular service between EU ports was introduced in 2005. The application of this legislation to cruise ships is unclear and varies among EU member states, leading to potentially higher fuel costs where it is applicable. In January 2010, a 0.1% sulfur limit on all marine fuels used in EU ports enters into force. This will require distillate fuels such as marine gas oil, to be used, further increasing fuel costs.

The California Air Resources Board (“CARB”) has adopted regulations for ocean-going ship auxiliary engines, shore power requirements for commercial marine vessels, and ship onboard incineration. CARB is also developing regulations for ocean-going ship main engines. These requirements will require use of lower sulfur fuels and eventually distillate fuels, and limit in-port operations, further increasing fuel and operational costs.

If we violate or fail to comply with environmental legislation, regulations or treaties, we could be fined or otherwise sanctioned by regulators. We have made, and will continue to make, capital and other expenditures to comply with environmental legislation and regulations.

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The International Organization for Standardization (“ISO”) is an international standard-setting body which produces worldwide industrial and commercial standards. ISO 14001 is one of the series of ISO 14000 environmental management standards that were developed to help organizations manage their processes, products and services to minimize environmental impacts. ISO 14001 presents a structured approach to setting environmental objectives and targets, and provides a framework for any organization to apply these broad conceptual tools to their own processes. During 2006, we completed our corporate-wide implementation and received certification of our ISO 14001 Environmental Management System at all our then existing brands. With the exception of two Ibero ships, which we acquired in September 2007, all our ships are currently ISO 14001 certified.

Several safety related amendments to SOLAS will enter into force in July 2010 including requirements for safety centers, emergency cabin lighting, local sounding audible alarm and amendments to fire detection and firefighting systems. Many of these requirements have already been incorporated into our current newbuilds. In addition, the enhanced safe return to port requirements related to the development of survivability standards for a vessel also enter into force for keels laid after July 1, 2010, and will require development of new designs to meet these new requirements for future ship orders. All of our ships under contract to be built are expected to have the keels laid before July 1, 2010.

From time to time, health, environmental, safety and security regulators consider more stringent regulations which may affect our operations and increase our compliance costs. As evidenced from certain of the preceding paragraphs, the cruise industry is affected by a substantial amount of environmental rules and regulations. We believe that the impact of cruise ships on the global environment will continue to be an area of focus by the relevant authorities throughout the world and, accordingly, this will likely subject us to increasing compliance costs in the future.

See Part 1, Item 1A. “Risk Factors.” for additional discussion of our environmental risks.conservation initiatives.

We are committed to providing a healthy environment for all of our guests and crew. We voluntarily work with public health agencies throughout the world to monitor health and sanitary conditions on all of our ships. As an example, for ships visiting U.S. ports we collaborate with the Centers for Disease Control and Prevention (“CDC”) - Vessel Sanitation Program of the Department of Health and Human Services. The CDC established the Vessel Sanitation Program (“VSP”) in the early 1970s as a cooperative activity with the cruise industry.

We maintain frequent communication with the appropriate public health authorities and, as required, proactively report any communicable illnesses that are of public health concern. Through our collaborative efforts we work with the authorities to develop and revise guidelines, review plans and conduct on-site inspections for all newbuilds and significant existing ship renovations. In addition, we continue to maintain our ships by meeting, and often exceeding, applicable public health guidelines and requirements, complying with inspections, and conducting crew training and guest education programs regularly throughout the life of the ship.

See “Maritime Labor Regulations” below for additional discussion of health regulations.

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In 2006, the International Labour Organization (“ILO”), an agency of the United Nations that develops and oversees international labor standards, adopted a new Consolidated Maritime Labour Convention (“MLC 2006”). MLC 2006 contains a comprehensive set of global standards based on those that are already found in 68 maritime labor Conventions and Recommendations adopted by the ILO since 1920. It brings almost all of these Conventions and Recommendations together in a single new Convention that uses a new format with some updating, where necessary, to reflect modern conditions and language. MLC 2006 includes a broad range of requirements in areas such as the definition of a seafarer, minimum age of seafarers, medical certificates, recruitment practices, training, repatriation, recreational facilities, health and welfare, hours of work and rest, accommodations and wages and entitlements. While many of the practices were widely adhered to by ships registered in different countries, MLC 2006 will add requirements not previously in effect, particularly in the area of occupational safety and health. The detailed requirements of MLC 2006 directly address many seafarers’ issues and, therefore, if effectively implemented will provide worldwide standards to improve the health, safety and status of seafarers.

Thirty member countries representing 33% of the world’s merchant ship tonnage are required to ratify the MLC 2006 before it goes into effect 12 months after such ratification. We currently expect ratification in late 2010, and entry into force, requiring our implementation in late 2011 or early 2012. Implementation may increase our crew and newbuilding costs. However, the amount of such increase is not determinable at this time since the enacting countries’ legislation has not yet been published to enable us to determine the impact of compliance.

Our ships that call on U.S. ports are regulated by the Federal Maritime Commission (“FMC”). Public Law 89-777, which is administered by the FMC, requires most cruise line operators who embark guests in U.S. ports to establish financial responsibility for their liability to passengers for non-performance of transportation, as well as for casualtypersonal injury and personal injury.for loss of life. The FMC’s regulations require that a cruise line demonstrate its financial responsibility for non-performance of transportation through a guarantee, escrow arrangement, surety bond or insurance. Currently, the amount required must equal 110% of the cruise line’s highest amount of customer deposits over a two-year period, up to a maximum coverage level of $15 million. WeIn order to comply with this requirement, we have an aggregate of $65$90 million of guarantees provided by some of our insurers. See Part 1, Item 1. Business. B. “Cruise Operations – E. – Insurance – Other Insurance”Our Protection and Indemnity (“P&I”) coverages are used to establish our financial responsibility for additional information.personal injury and loss of life.

In the UK, in some cases we are currently required to obtain licenses and/orfrom and post bonds in some cases, fromwith various organizations in connection with the conduct of our business and our ability to meet liabilityour liabilities in the event of non-performance of obligations to consumers. These organizations includeThe most significant requirement relates to Abta, (formerly the Associationwhich requires us to maintain approximately $130 million of British Travel Agents) and the Civil Aviation Authority. See Part 1, Item 1. Business. B. “Cruise Operations – E. – Insurance – Other Insurance” for additional information.sterling-denominated bonds to cover our brands’ UK passenger deposit liabilities.

We are also required by German and French law to obtain a guarantee from a reputable insurance company to ensure that, in case of insolvency, our customers will be refunded any monies they have paid on account of a booking and, in addition, that they will be repatriated without additional cost if insolvency occurs after a cruise starts. Additionally, in Australia we are a member of the Travel Compensation Fund which provides compensation, as a last resort, to consumers who suffer losses in their dealings with travel agents. Finally, other jurisdictions including Argentina and Brazil,may require the establishment of financial responsibility for passengers from their jurisdictions.

We believe we have all material licenses to conduct our business. From time to time, various other regulatory and legislative changes may be proposed or adopted that could have an effect on the cruise industry, in general, and our business, in particular.

XVI.    Financial Information

For financial information about our cruise reporting segment and geographic information with respect to each of the three years in the period ended November 30, 2008,2009, see Note 11, “Segment Information” to our Consolidated Financial Statements in Exhibit 13 to this Form 10-K.

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Our shoreside operations have approximately 10,70010,600 full-time and 4,7004,200 part-time/seasonal employees. We also employ approximately 70,50070,000 crew, including officers, and staff onboard our 8893 ships at any one time. Due to the highly seasonal nature of our Alaskan and Canadian operations, Holland America Princess Alaska Tours and Princess Tours increase theirincreases its work force during

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the late spring and summer months in connection with the Alaskan cruise season, employing additional seasonal personnel, which have been included above. We have entered into agreements with unions covering certain employees in our hotel, transportation and shipshipboard operations. We consider our employee and union relations generally to be good.

We source our shipboard officers primarily from Italy, the UK, Holland, Germany and Norway. The remaining crew positions are manned by persons from around the world. We utilize various manning agencies in many countries and regions to help secure our shipboard employees.

Our largest purchases are for fuel, travel agency services, fuel, advertising, food and beverages, airfare, port facility utilization, repairs and maintenance, including dry-docking, advertising and marketing, hotel and restaurant products and supplies, airfare, repairs and maintenance, including dry-docking, port facility utilization, communication services and for the construction and refurbishment of our ships. Although we utilize a select number of suppliers for most of our food and beverages, communication services, air transportation services and hotel and restaurant products and supplies, most of these products and services are available from multiple sources at competitive prices. The use of a select number of suppliers enables us to, among other things, obtain volume discounts. We purchase fuel and port facility services at some of our ports of call from a limited number of suppliers. In addition, we perform our major dry-dock and ship improvement work at a limited number of dry-dock facilities in Australia, the Bahamas, British Columbia, Canada, the Caribbean (including the Bahamas), Europe, Singapore, and the U.S. Finally, as of January 28, 2009,2010, we have agreements in place for the construction of 1713 cruise ships with three shipyards. We believe there are sufficient dry-dock and shipbuilding facilities to meet our anticipated repair, maintenance, refurbishment and newbuild requirements.

General

We maintain insurance to cover a number of risks associated with owning and operating our vessels in international trade.and other non-ship related risks. All such insurance policies are subject to coverage limits, exclusions and deductible levels. Insurance premium increases are dependent on our own loss experience and the general premium requirements of our underwriters.insurers. We cannot be certain that affordable and viable direct and reinsurance markets will be available to us in the future. We maintain certain levels of self-insurance for some ofall the below-mentioned risks,coverages, some of which have increased in recent years, and we may increase our self-insurance levels further in the future to mitigate premium increases. We do not carry coverage related to loss of earnings or revenues from our ships.ships or other operations.

Protection and Indemnity (“P&I”) Coverage

Third-party liabilities in connection with our cruise activities are covered by entry in P&I clubs, which are mutual indemnity associations owned by ship owners. Our vessels are entered in threetwo P&I clubs as follows: The West of England Ship Owners Mutual Insuranceclubs; Standard Steamship Owners’ Protection and Indemnity Association (Luxembourg),(Europe) Ltd. and The Steamship Mutual Underwriting Association (Bermuda) Limited and the United Kingdom Mutual Steam Ship Assurance Association (Bermuda) Limited. The P&I clubs in which we participate are part of a worldwide group of P&I clubs, known as the International Group of P&I Clubs (the “IG”). The IG insures directly, and through reinsurance markets, a large portion of the world’s shipping fleets. Coverage is subject to the P&I clubs’ rules and the limit of coverage is determined by the IG. P&I coverage includes legal, statutory or pre-approved contract liabilities and other expenses related to crew, guests and other third parties. This coverage also includes shipwreck removal, pollution and damage to third party property.

Hull and Machinery Insurance

We maintain insurance on the hull and machinery of each of our ships in amounts equal to the estimated market value of each ship. The coverage for hull and machinery is provided by international marine insurance carriers.insurers. Most insurance underwritersinsurers make it a condition for insurance coverage that a ship be certified as “in class” by a classification society that is a member of the International

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Association of Classification Societies (“IACS”). All of our ships are currentlyhave been certified aswithin the last twelve months to be in class by an IACS member. These certifications have either been issued or endorsed within the last twelve months.

War Risk Insurance

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We maintain war risk insurance coverage for liability and physical damage, subject to coverage limits, deductibles and exclusions for claims such as those arising from chemical, nuclear and biological attacks, on all of our ships covering our legal liability to crew, guests and other third parties as well as loss or damage to our vessels arising from war or war-like actions, including terrorist incidents. ThisItems excluded from this coverage are claims arising from chemical, nuclear and biological attacks. War risk insurance coverage is provided by international marine insurance carriersinsurers and Mutual War Risk Clubs. In addition, excess war risk insurance is provided by our threetwo P&I clubs for all our ships. Under the terms of our war risk insurance coverage, which is typical for war risk policies in the marine industry, underwritersinsurers can give seven days notice to the insured that the liability and physical damage policies can be cancelled. However, the policy can be reinstated at different premium rates. This gives underwritersinsurers the ability to increase our premiums following events that they determine have increased their risk.

Other Insurance

As required by the FMC, we maintain performance bonds or insurance in the aggregate amount of $105 million for ships operated by our brands which embark guests in U.S. ports to cover guest ticket liabilities in the event of a cancelled or interrupted cruise. We also maintain other performance bonds or guarantees as required by various U.S. and foreign authorities that regulate certain of our operations in their jurisdictions; the most significant of which are required by Abta, which total $123 million of sterling-denominated bonds to cover our brands’ UK passenger deposit liabilities.

We maintainhave standard property and casualty insurance policies to covercoverage for certain shoreside assets and liabilities to third parties, including our tour business, shoreside and certain port facility assets, as well as appropriate workers’ compensation and certainemployee health insurance policies.

The Athens Convention

Current conventions generally in force applying to passenger ships are the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea, 1974, the 1976 Protocol to the Athens Convention and the Convention on Limitation of Liability for Maritime Claims 1976. The U.S. has not ratified any Athens Convention Protocol. However, a vessel’s flag state or the port state that has ratified it may enforce the 1976 Athens Convention Protocol with regard to vessels registered under its flag or visiting a port located in its jurisdiction.

The IMO Diplomatic Conference agreed to a new protocol to the Athens Convention on November 1, 2002. The new protocol, which has not yet been ratified by the U.S. or any of our flag states, requires substantial levels of compulsory insurance which must be maintained by passenger ship operators and provides a direct action provision, which will allow claimants to proceed directly against insurers. This new protocol requires passenger ship operators to maintain insurance or some other form of financial security, such as a guarantee from a bank, to cover the limits of liability under the Athens Convention with regards to the death or personal injury of passengers. It is not certain when or if this new protocol will come into force. We cannot be certain that affordable and viable direct and reinsurance markets will be available to provide the level of coverage required under the new protocol. If the new protocol is ratified, we expect insurance costs will increase.coverages.

We own and have registered or licensed, numerous trademarks and have also registered various domain names, which we believe are widely recognized throughout the world and have considerable value, which enablesvalue. These intangible assets enable us to distinguish our cruise product, ships and programs from thatthose of our competitors. TheseOur trademarks include the trade names of our cruise lines, each of which we believe is a widely-recognized brand name in the cruise vacation industry, as well as “World’s Leading Cruise Lines.”our ship names and a wide variety of cruise services and products. We have entered into licenses, including a license to use the P&O name, the P&O flag and other relevant trademarks and domain names in relation to cruisescruising and related activities. Finally, weWe also have a license to use the “Love BoatBoat”” name and related marks. See Note 2, “Goodwill10, “Fair Value Measurements, Derivatives Instruments and Trademarks”Hedging Activities” to our Consolidated Financial Statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates – Asset Impairment”Impairments” in Exhibit 13 to this Form 10-K.10-K for additional discussion of our trademarks.

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U.S. Federal Income Tax

We are primarily foreign corporations engaged in the business of operating passenger vessels in international transportation. We also own and operate, among other businesses, the hotel, transportation and tour businessesbusiness of Holland America Tours and Princess Alaska Tours through U.S. corporations. See Part I, Item 1A. “Risk Factors.”

Our North American passenger vessel business and certain ship-owning subsidiaries are engaged in a trade or business within the U.S. Depending on the itinerary of any particular vessel, that vessel may generate income from sources within the U.S. We believe that under Section 883 of the Internal Revenue Code and applicable income tax treaties, our U.S. source income and the income of our ship-owning subsidiaries, to the extent derived from or incidental to the international operation of a ship or ships, is currently exempt from U.S. federal income tax. Regulations under Section 883 list items that the Internal Revenue Service (“IRS”) does not consider to be incidental to ship operations. Among the items identified as not incidental are income from the sale of air transportation, shore excursions and pre-and post-cruise land packages to the extent earned from sources within the U.S.

Our domestic U.S. operations, principally the hotel, transportation and tour businessesbusiness of Holland America Tours and Princess Alaska Tours, are subject to normal state and federal income taxation in the U.S.

Application of Section 883 of the Internal Revenue Code