RCL (UK) Ltd.

RCL (UK) Ltd.

Bremen

RCL (UK) LTD., BROOKLANDS

Registered no: 04458603

RCL (UK) LTD.

Annual report and financial statements for the year ended 31 December 2013

RCL (UK) LTD.

Registered no: 04458603

Annual report and financial statements for the year ended 31 December 2013

Contents

RCL (UK) LTD.

Registered no: 04458603

Directors and advisers

Directors

Company secretary

Registered office

Independent auditors

Bankers

Strategic report for the year ended 31 December 2013

Strategy

RCL (UK) LTD. ("the Company") is a cruise ship operator and provider of services to its ultimate parent company, Royal Caribbean Cruises Ltd ("RCL"). The Company operates one ship, Brilliance of the Seas, which is leased via an operating lease. The services that the Company provides to RCL include technical shipbuilding services at shipyards in Germany, Finland and France, procurement services in Germany and acting as a manning agent in the provision of marine officers.

The general business environment for the operation of cruises remains challenging. This is due to a slowly improving, but still challenging, global economy. The Company's ship, Brilliance of the Seas, was out of service for three weeks during 2013 for its routine dry dock. At this dry dock, revitalisation work was carved out to improve the ship's appearance and facilities for guests inboard. Despite the effect of these, the Company's ticket and onboard revenues grew in 2013 and 2014 bookings continue to improve.

The directors believe that the long term success of the Company will be best achieved by continuing to operate its ship as part of the Royal Caribbean International brand and by continuing to provide services such as technical shipbuilding to its fellow group companies.

During the year, the Company opened a new branch in St Nazaire, France, to be able to offer additional technical shipbuilding services.

Objectives

The Company's principal operating strategies are to:

Key performance indicators

The nature of the business of the Company is such that it is integrated with that of the RCL Group as a whole. For this reason, the directors believe that analysis using key performance indicators for the Company is not necessary or appropriate for an understanding of the development, performance or position of the business of the Company. Further information can be found in pages 35-59 of RCL's 10-K for the year ended 31 December 2013.

Business model

The Company will continue to grow its business by focusing on increasing profitability from guest ticket and onboard revenues and by optimal deployment of its ship.

Principal risks and uncertainties

The management of the business and the execution of the Company's strategy are subject to a number of risks. The key business risks and uncertainties affecting the Company are considered below:

Operational risks

The operation of cruise ships involves risks of accidents, illnesses and other incidents, which may bring into question safety, health, security and vacation satisfaction which could negatively impact our reputation. Incidents involving cruise ships, and, in particular the safety and security of guests and crew, media coverage thereof, as well as adverse media publicity concerning the cruise vacation industry have impacted and could in the future impact demand for our cruises and pricing in the cruise industry. If any such incident occurs during a time of high seasonal demand, the effect could disproportionately impact our results of operations for the year. In addition, incidents involving cruise ships may result in additional costs to our business, increasing government or other regulatory oversight and, in the case of incidents involving our ships, potential litigation.

Our cruise ships may also be adversely impacted by unusual weather patterns or natural disasters or disruptions, such as hurricanes and earthquakes. It is possible that we could be forced to alter itineraries or cancel a cruise or a series of cruises due to these or other factors, which would have an adverse effect on our sales and profitability.

Events such as terrorist and pirate attacks, war and other hostilities and the resulting political instability, travel restrictions, the spread of contagious diseases and concerns over safety, health and security aspects of travelling or the fear of any of the foregoing have had, and could have in the future, a significant adverse impact on demand and pricing in the travel and vacation industry.

Tax legislation

The Company has elected to be subject to the United Kingdom tonnage tax regime. Changes in the corporation tax laws could result in higher income taxes being charged against our cruise operations and impact the Company's profitability.

Foreign legislation

The Company is subject to various international, national, state and local laws, regulations and treaties that govern, amongst other things, the safety standards applicable to our ship/port interface areas, and our financial responsibilities to our passengers. These issues are, and the directors believe continue to be, an area of focus by the relevant authorities throughout the world, especially in light of several recent incidents involving cruises ships. This could result in the enactment of more stringent regulation of cruise ships that would subject the Company to increased compliance costs in the future.

Geopolitical events

The demand for cruises is affected by international, national and local economic and geopolitical conditions. In recent years, we have been faced with very challenging global economic conditions, which have adversely affected vacationers' discretionary income and consumer confidence. This, in turn, resulted in cruise booking slowdowns, decreased cruise prices and inboard revenues for us and others in the cruise industry as compared to more robust economic times. Although the cruise industry continued to recover in 2013, recovery remains slow in certain key markets, including Southern Europe, and has been hindered in some other markets by ongoing economic instability.

Demand for the Company's cruises is also influenced by geopolitical events. Unfavourable conditions, such as cross-border conflicts, civil unrest and government changes, especially in regions with popular ports of call, can undermine consumer demand and/or pricing for itineraries featuring these ports. Continued unrest and instability could materially impact our operating results.

Competition and substitutes

The Company operates in the vacation market and cruising is one of many alternatives for people choosing a vacation. The Company therefore risks losing business not only to other cruise lines, but also to other vacation operators, which provide other leisure options including hotels, resorts and package holidays and tours. An increase in capacity worldwide or excess capacity in a particular market could adversely impact the Company's cruise sales and/or pricing. Although the Company's ships can be redeployed, cruise sales and/or pricing may be impacted both by the introduction of new ships into the marketplace and by deployment decisions of the Company and its competitors.

Financial risk management

The Company's operations expose it to a variety of financial risks that include price risk, liquidity risk, interest rate cash flow risk and foreign exchange rate risk. The Company has in place a risk management programme that seeks to limit adverse effects of these risks on the financial performance of the Company.

Price risk

Operating costs, including fuel, payroll, insurance and security costs, are subject to increases due to market forces and economic or political instability or other factors beyond the control of the Company. Increases in these costs could adversely affect the Company's profitability. Management continues to ensure that competitive prices are obtained from suppliers.

RCL uses a range of financial instruments including fuel swap agreements to mitigate the financial impact of fluctuations in fuel prices, across the entire RCL fleet, for which the Company receives an appropriate share of the benefit or charge.

Liquidity risk

The Company retains sufficient cash, balances due from group companies or is provided financial support from the Company's parent, RCL, to ensure it has funds available to meet its liabilities as they fall due.

Interest rate cash flow risk

The Company has interest bearing assets and liabilities, comprising cash and balances due from and to Group companies, which earn interest at market rates.

Foreign exchange rate risk

The Company conducts its business internationally, which exposes it to foreign exchange risks. The Company does not use derivative financial instruments to manage foreign currency rate risk, and as such, no hedge accounting is applied.

The directors will revisit the appropriateness of the above policies should the Company's operations change in size or in nature.

Results

The Company recorded turnover of $156.3m (2012: $152.3m) and a loss before taxation of $14.2m (2012: profit $8.8m) for the year. This loss includes dividends received from its subsidiary of $5.6m (2012: $30.5m).

In common with other UK shipping companies, RCL (UK) LTD's shipping profits are taxed under the UK tonnage tax regime. All other profits are taxed under Corporation tax at a standard rate of 23.25%.

No dividends have been paid or proposed in respect of the year ending 31 December 2013 (2012: $Nil).

Directors' report for the year ended 31 December 2013

The directors present their annual report and the audited financial statements of the Company for the year ended 31 December 2013.

Dividends

The directors did not approve or pay any dividend in the year (2012: $nil)

Directors

The directors who held office during the year and up to the date of signing these financial statements were:

The directors are covered by indemnity insurance held by the ultimate parent company Royal Caribbean Cruises Ltd.

Company secretary

RG Marshall

Employees

It is the Company's policy not to discriminate against any qualified employee or applicant with regard to any terms or conditions of employment because of such individual's disability or perceived disability so long as the employee can perform the essential functions of the job.

The Company will provide reasonable accommodations to a qualified individual with a disability provided that such accommodation does not constitute an undue hardship on the Company. In the event of any staff becoming disabled while with the Company, their needs and abilities would be assessed and the Company would, where possible, seek to offer alternative employment to them if they were no longer able to continue in their current role.

Management regularly updates employees through a variety of media regarding the progress of the business of the Company. There is regular consultation so that employees' views may be taken into account in making decisions that are likely to affect their interests.

Statement of directors' responsibilities

The directors are responsible for preparing the strategic report, directors' report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, the directors are required to:

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Statement of disclosure of information to auditors

So far as each of the directors are aware, there is no relevant audit information of which the Company's auditors are unaware, and they have each taken all the steps that they ought to have taken as directors in order to make themselves aware of any relevant audit information and to establish that the Company's auditors are aware of that information.

Independent auditors

The auditors, PricewaterhouseCoopers LLP, have indicated their willingness to continue in office and a resolution concerning their reappointment will be proposed at the Annual General Meeting.

Independent auditors' report to the members of RCL (UK) Ltd

Report on the financial statements

Our oрinion

In our opinion the financial statements, defined below:

This opinion is to be read in the context of what we say in the remainder of this report.

What we have audited

The financial statements, which are prepared by RCL (UK) Ltd, comprise:

The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).

In applying the financial reporting framework, the directors have made a number of subjective judgements, for example in respect of significant accounting estimates. In making such estimates, they have made assumptions and considered future events.

What an audit of financial statements involves

We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) ("ISAs (UK & Ireland)"). An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of:

In addition, we read all the financial and non-financial information in the Annual Report and financial statements (the "Annual Report") to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on other matter prescribed by the Companies Act 2006

In our opinion the information given in the Strategic Report and the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements.

Other matters on which we are required to report by exception

Adequacy of accounting records and information and ехрlanations received

Under the Companies Act 2006 we are required to report to you if, in our opinion:

We have no exceptions to report arising from this responsibility.

Directors' remuneration

Under the Companies Act 2006 we are required to report to you if, in our Opinion, certain disclosures of directors' remuneration specified by law are not made. We have no exceptions to report arising from this responsibility.

Responsibilities for the financial statements and the audit

Our responsibilities and those of the directors

As explained more fully in the Statement of directors' responsibilities set out on page 6, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view.

Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and ISAs (UK & Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.

This report, including the opinions, has been prepared for and only for the company's members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Profït and loss account for the year ended 31 December 2013

The above results are derived from continuing operations.

Statement of total recognised gains and losses for the year ended 31 December 2013

Balance sheet as at 31 December 2013

The financial statements on pages 10 to 21 were approved by the Board of Directors on 29. SEPTEMER 2014 and ere signed on behalf by:

Notes to the financial statements

1 Principal accounting policies

These financial statements are prepared on the going concern basis under the historical cost convention in accordance with the Companies Act 2006 and applicable accounting standards in the United Kingdom. The principal accounting policies, which have been applied consistently, are set out below:

Basis of preparation

RCL (UK) LTD. ("the Company") has net current liabilities of $65.7m as at 31 December 2013 (2012: $19.6m). The financial statements have been prepared on a going concern basis, which is dependent on the continuing financial support of the ultimate parent company, Royal Caribbean Cruises Ltd. ("RCL"). RCL has confirmed that it will provide financing to the Company, if required, to allow the Company to pay its debts as they fall due, for a period of at least twelve months following the signing of these financial statements.

The financial statements contain information about the Company as an individual company and do not contain consolidated financial information as the parent of a group. The Company is exempt under section 401 of the Companies Act 2006 from the requirement to prepare consolidated financial statements as it and its subsidiary undertakings are included by full consolidation in the consolidated financial statements of its parent, RCL, a company incorporated in Liberia.

Cash flow statement and related party disclosures

Consolidated financial statements of RCL and its subsidiaries, including this Company and Royal Caribbean Cruise Line AIS, are publicly available. Asa wholly owned subsidiary of RCL, the Company has taken advantage of the exemption from the requirement to prepare a cash flow statement under the terms of Financial Reporting Standards ("FRS") 1 (revised 1996) "Cash Flow Statements". Also, under the terms of FRS 8 "Related Party Disclosures", the Company has taken advantage of the exemption not to disclose related party transactions with entities that are part of the RCL Group.

Share-based payments

Employees of the Company participate in share option and restricted share unit plans operated by RCL. The value of benefits received under these plans are recognised over the period of vesting at fair value when received. The charge under the plan has been accounted for by the Company's ultimate parent company, RCL, and has been recharged to the Company. The share-based payment charge is not material to the financial statements and therefore the full disclosures required under FRS 20 have not been included.

Tangible fixed assets

Tangible fixed assets are stated at historical purchase cost less accumulated depreciation. The cost of tangible assets is their purchase cost, together with any costs of acquisition. Depreciation is calculated so as to write off the cost of tangible assets over their expected useful economic life, which are re-assessed periodically, as follows:

Dry docking costs are capitalised when incurred and amortised over the period until the next scheduled dry dock.

Investments

Investments in subsidiary undertakings are stated at cost less any provision for impairment. Impairment reviews are performed by the directors when there has been an indication of potential impairment.

Stocks

Stocks consist of fuel and are carried at the lower of cost (weighted-average) or net realisable value.

Turnover

Turnover, which excludes value added tax, represents gross ticket and shipboard revenues and fees for technical shipbuilding, procurement and other services provided. Deposits received on sales of passenger cruises are initially recorded as customer deposit liabilities on the balance sheet and recognised as turnover in the profit and loss account on a pro rata basis over the duration of the voyage. Gross ticket, charter and shipboard revenues in respect of voyages spanning the year end are recognised evenly over the duration of the voyage to the extent that it falls within the accounting period. Fees in respect of other services provided are recognised in the profit and loss account according to the accounting period in which they are earned.

Taxation

The charge for taxation is based on the profit for the period and the tonnage of the ship operated by the Company that falls under the UK tonnage tax regime.

Deferred taxation is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date, where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date.

A net deferred tax asset is recognised as recoverable and therefore recognised only when, on the basis of all available evidence, it can be regarded as more likely than not there will be suitable taxable profits against which to recover carried forward tax losses and from which the future reversal of underlying timing differences can be deducted.

Deferred tax is measured at the average tax rates that are expected to apply in the periods in which the timing differences are expected to reverse, based on tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax is measured on an undiscounted basis.

Pension arrangements

The Company operates defined contribution schemes in respect of certain of its employees. The pension charge in respect of the defined contribution schemes represents the amount payable by the Company in the period. The assets of the schemes are held separately from those of the Company in independently administered funds.

Operating leases

Costs in respect of operating leases are charged on a straight-line basis over the lease term.

Foreign currency

The functional and reporting currency of the Company is the United States dollar ("$"). Transactions in currencies other than the functional and reporting currency are translated at the rates of exchange ruling at the transaction date or at an average rate for the period if this is not materially different. Monetary assets and liabilities are translated at the exchange rate at the balance sheet date. All exchange gains and losses arising are taken to the profit and loss account in the period in which they arise. The year end sterling/dollar exchange rate was £1:$1.6563 (2012: £1: $1.6255).

Dividends paid

Dividend distribution to the Company's shareholders is recognised as a liability in the group's financial statements in the year in which the dividends are approved by the Company's shareholders.

Dividends received

Dividend income is recognised when the right to receive payment is established.

Provisions

Provisions are recognised when the Company has a present obligation as a result of a past event, it is probable that a transfer of economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

Financial instruments

Financial assets and financial liabilities are recognised on the Company balance sheet when the Company becomes a party to the contractual provisions of the instrument.

a) Debtors

Trade debtors are non-interest bearing and are stated at their nominal value, as reduced by appropriate allowances for estimated irrecoverable amounts.

Amounts owed by Group entities are interest bearing and accrue interest at a market rate.

b) Financial liabilities and equity instruments

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements catered into. An equity instrшnent is any contract that gives a residual interest in the assets of the Company after deducting all of its liabilities.

c) Creditors

Trade creditors are non-interest bearing and are stated at their nominal value.

Amounts owed to Group entities are interest bearing and accrue interest at a market rate.

2 Turnover

Turnover arising wholly in respect of the principal activities of the Company and by residence of customer is derived as follows:

Given the activities of the Company, it is not practical to analyse turnover by origin, other than for technical shipbuilding and procurement services, which are undertaken in Europe.

3 Operating loss

4 Directors' emoluments

None of the directors who served in the current or prior year were employees of the Company, none of them received any remuneration from the Company or other Group companies in their specific capacity as directors fir this Company and no amounts have been recharged to the Company in this respect.

5 Employee information

The monthly average number of persons employed by the Company during the year was:

Total employee costs were:

6 Interest receivable and similar income

7 Interest payable and similar charges

8 Tax on (loss)/profit on ordinary activities

The tax assessed for the year is higher (2012: lower) than the standard effective rate of corporation tax in the UK for the year ended 31 December 2013 of 23.25% (2012: 24.5%). The differences are explained below:

The Company has no provided or unprovided deferred tax assets or liabilities.

On 1 April 2013, the UK tax rate changed from 24% to 23%.

Further reductions will be made to the main rate of Corporation Tax, which will reduce it to 21% by 1 April 2014 and 20% from 1 April 2015.

The effect of these changes enacted in the Finance Act 2013 are not expected to have a material impact in the tax charge and associated profitability in future years.

9 Tangible fixed assets

10 Investments

The investment in the subsidiary company is stated at cost. In the opinion of the directors, the aggregate value of the Company's investment at 31 December 2013 is not worth less than the net book value stated above.

Particulars of subsidiary company Company name:

11 Stocks

The replacement cost of raw materials and consumables is not materially different from the amounts disclosed above.

12 Debtors

Amounts owed by Group entities are unsecured, have no fixed date of repayment and are repayable on demand. Interest earned on intercompany balances was earned at an average interest rate of 0.9% for the year ended 31 December 2013 (2012: 0.9%).

13 Creditors: amounts falling due within one year

Amounts owed to Group entities are unsecured, have no fixed date of repayment and are payable on demand. Interest payable on certain balances was paid at an average interest rate of 0.9% for the year ended 31 December 2013 (2012: 0.9%).

14 Called up share capital

15 Reserves

16 Reconciliation of movement in shareholders' (deficit) / funds

The dividend per share for the year ended 31 December 2013 was $nil (2012: $ nil)

17 Financial commitments

At 31 December 2013 the Company had annual commitments under non-cancellable operating leases expiring as follows:

18 Defined contribution pension schemes

The Company operates defined contribution pension schemes for the benefit of certain of its employees. These schemes require contributions to be made into independently administered funds. Contributions to these funds are charged to the profit and loss account in the year in which they become payable under the rules of the schemes. The amount charged to the profit and loss account in the year was $131k (2012: $173k). No amounts in respect of these contributions were prepaid or outstanding as at 31 December 2013 (2012: $nil).

19 Ultimate parent company

The ultimate parent undertaking and controlling party is Royal Caribbean Cruises Ltd. ("RCL"), a company incorporated in Liberia.

RCL is the only parent undertaking to consolidate these financial statements at 31 December 2013. The consolidated financial statements of RCL are available at www.rclinvestor.com or upon written request at: 1050 Caribbean Way, Miami, Florida 33132, USA.