AS FILED WITH THE
QuickLinks-- Click here to rapidly navigate through this documentAs filed with the Securities and Exchange Commission on June 19, 2003
Registration No. 333
SECURITIES AND EXCHANGE COMMISSION
ON NOVEMBER 29, 2001 REGISTRATION STATEMENT NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549------------------------FORM S-3 and FORM F-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933------------------------ CARNIVAL CORPORATION (Exact name of registrant as specified in its charter)
REPUBLIC OF PANAMA 4400 59-1562976 (StateS-3
CARNIVAL CORPORATIONS-3
CARNIVAL PLCF-3
P&O PRINCESS CRUISES
INTERNATIONAL LIMITED(Exact name of registrant as specified in its charter)
Republic of Panama
England and Wales
England and Wales(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employerincorporation or organization)Classification Code Number)
59-1562976
None
None(I.R.S. Employer Identification Number)3655 N.W. 87TH AVENUE MIAMI, FLORIDA 33178-2428 (305) 599-2600 (Address,No.)
3655 N.W. 87th Avenue
Miami, Florida 33178-2428
(305) 599-2600
Carnival House
5 Gainsford Street
London, SE1 2NE
011 44 20 7805 1200
Richmond House
Terminus Terrace
Southampton, SO14 3PN
011 44 20 78051200(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)
Arnaldo Perez, Esq.
Senior Vice President,
General Counsel and Secretary
Carnival Corporation
3655 N.W. 87th Avenue
Miami, Florida 33178-2428
(305) 599-2600(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
John C. Kennedy, Esq.
Paul, Weiss, Rifkind, Wharton & Garrison LLP
1285 Avenue of the Americas
New York, NY 10019
(212) 373-3000Approximate date of
registrant's principal executive office) ------------------------------ ARNALDO PEREZ, ESQ. GENERAL COUNSEL CARNIVAL CORPORATION 3655 N.W. 87TH AVENUE MIAMI, FLORIDA 33178-2428 (305) 599-2600 (Name, address, including zip code, and telephone number, including area code, of agent for service) ------------------------------ WITH COPIES TO: JOHN C. KENNEDY, ESQ. PAUL, WEISS, RIFKIND, WHARTON & GARRISON 1285 AVENUE OF THE AMERICAS NEW YORK, NEW YORK 10019-6064 (212) 373-3000 ------------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:commencement ofproposed sale to public: From time to time after the effective date of thisRegistration Statement.registration statement as determined by market conditions.If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box.
/ /oIf any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415
ofunder the Securities Act of 1933, as amended, other than securities offered only in connection with dividend or interest reinvestment plans, please check the following box./X/ýIf this
Formform is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the sameoffering. / /offering: oIf this
Formform is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the sameoffering. / /offering: oIf delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box.
/ / ------------------------------o
CALCULATION OFTHEREGISTRATION FEE
PROPOSED MAXIMUM PROPOSED MAXIMUM TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF SECURITIES REGISTERED REGISTERED(1) PER SECURITY PRICE REGISTRATION FEELiquid Yield Option-TM- Notes due 2021......... 1,051,175,000 47.566% 500,001,900 119,501 Common Stock................................... 17,446,000(2) (3) -0-(3) -0-(3)(-TM-) Trademark of Merrill Lynch & Co., Inc.
Title of Securities to be Registered Amount to be
RegisteredProposed Maximum
Aggregate Offering PriceAmount of
Registration FeeCarnival Corporation Senior Convertible Debentures due 2033 $ 889,000,000 $ 575,076,320 (1) $ 46,524 Carnival Corporation common stock, par value $0.01 per share 20,896,657 (2) — — (3) Trust shares of beneficial interest in the P&O Princess Special Voting Trust 20,896,657 (4) — — (3) Carnival plc Special Voting Share, nominal value £1 per share 1 (5) — — (3) Carnival plc Guarantee(6) $ 889,000,000 — — (3) P&O Princess Cruises International Limited Guarantee(7) $ 889,000,000 — — (3)
- (1)
- The
LYONsSenior Convertible Debentures were issued at an original price of$475.66$646.88 per $1,000 principal amount at maturity, which represents an aggregate initial issue price of$500,001,900$575,076,320 and an aggregate principal amount at maturity of$1,051,175,000.$889,000,000.- (2)
- Includes the shares of Carnival Corporation common stock and trust shares initially issuable upon conversion of the
LYONsSenior Convertible Debentures atthea maximum rate of16.596423.5058 shares of Carnival Corporation common stock and trust shares per $1,000 principal amount at maturity ofLYONs.Senior Convertible Debentures. Pursuant to Rule 416 under the Securities Act, such number of shares of common stock and trust shares registered hereby shall also include an indeterminate number of additional shares of common stock and trust shares that may be issued from time to time upon conversion of theLYONsSenior Convertible Debentures by reason of adjustment of the conversion price or upon repurchaseor redemption,of the Senior Convertible Debentures, in each case in certain circumstances outlined in the prospectus. See "Description ofLYONs--Conversionthe Debentures—Conversion Rights."- (3)
Pursuant to Rule 457(i) under the Securities Act, there- No additional fee is
no filing fee withpayable in respectto the sharesofcommon stock issuable upon the conversion of the LYONsthese securities because no additional consideration is payable in respect of these securities.- (4)
- Represents trust shares of beneficial interest in the P&O Princess Special Voting Trust, and such trust shares represent a beneficial interest in the special voting share of Carnival plc. (See Note 5) As a result of the dual listed company transaction between Carnival Corporation and Carnival plc, one trust share is paired with each share of Carnival Corporation common stock and is not transferable separately from the share of Carnival Corporation common stock. Upon each issuance of shares of Carnival Corporation common stock under the terms of the Senior Convertible Debentures, recipients will
be receivedreceive both shares of Carnival Corporation common stock and an equivalent number of paired trust shares.- (5)
- One special voting share of Carnival plc was issued to the P&O Princess Special Voting Trust in connection with the
exercisedual listed company transaction completed by Carnival plc and Carnival Corporation on April 17, 2003.- (6)
- Under the P&O Princess Deed of Guarantee entered into between Carnival Corporation and Carnival plc (formerly known as P&O Princess Cruises plc) on April 17, 2003, Carnival plc has agreed, subject to some exceptions, to guarantee all of the
conversion privilege. ------------------------------ THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILEindebtedness of Carnival Corporation incurred under agreements entered into after April 17, 2003, including the Senior Convertible Debentures.- (7)
- Under the P&O Princess Cruises International Limited ("POPCIL") Deed of Guarantee entered into among Carnival Corporation, Carnival plc and P&O Princess Cruises International Limited on June 19, 2003, POPCIL has agreed, subject to some exceptions, to guarantee all of the indebtedness of Carnival Corporation incurred under agreements entered into after April 17, 2003, including the Senior Convertible Debentures.
The registrants hereby amend this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. We may not sell these securtities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not solicitating an offer to buy these securities in any state where the offer or sale is not permitted.
Subject to completion, dated June 19, 2003
P R O S P E C T U S
U.S. $889,000,000
C A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------Senior Convertible Debentures due 2033 THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE SELLING SECURITYHOLDERS IDENTIFIED IN THIS PROSPECTUS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.SUBJECT TO COMPLETION, DATED NOVEMBER 29, 2001 CARNIVAL CORPORATION --------------- $1,051,175,000 LIQUID YIELD OPTION-TM- NOTES DUE 2021 (ZERO COUPON--SENIOR) 17,446,000 SHARES OF COMMON STOCK ------------------R N I V A L C O R P O R A T I O N
Guaranteed by Carnival plc and P&O Princess Cruises International LimitedThis prospectus relates to
$1,051,175,000the resale of $889,000,000 aggregate principal amount at maturity of ourLiquid Yield Option-TM- NotesSenior Convertible Debentures due2021 (the "LYONs") held2033 bycertainvarious selling securityholders. Each debenture was originally issued at a price of $646.88 per debenture and will have a principal amount at maturity of $1,000. TheLYONsdebentures may be sold from time to time by or on behalf of the selling securityholders named in this prospectus or in supplements to this prospectus. The debentures have been guaranteed by Carnival plc and P&O Princess Cruises International Limited, or POPCIL, on an unsecured and unsubordinated basis. See "Description of the Debentures," "Description of the Carnival plc Guarantee" and "Description of the POPCIL Guarantee."This prospectus also relates to
17,446,000the resale by those selling securityholders of up to 20,896,657 shares of our common stock issuable upon conversion of theLYONsdebentures held bycertainthe selling securityholders, plussuch additionalan indeterminate number of shares as may become issuable upon conversion of theLYONsdebentures by reason of adjustment to the conversionpriceprice. As a result of the completion on April 17, 2003 of a dual-listed company transaction between us and Carnival plc, upon each issuance of shares of our common stock to a person, including to a holder of debentures upon conversion of debentures, an equivalent number of non-detachable trust shares of beneficial interest incertain circumstances.the P&O Princess Special Voting Trust, a trust established under the laws of the Cayman Islands, will be issued to such person. Therefore, references in this prospectus to shares of common stock issuable upon conversion or repurchase of the debentures shall be deemed to include both shares of our common stock and trust shares in the P&O Princess Special Voting Trust. See "Description of Carnival Corporation Capital Stock" and "Description of Trust Shares."The selling securityholders may sell all or a portion of the
LYONssecurities offered by this prospectus in market transactions, negotiated transactions or otherwise and at prices which will be determined by the prevailing market price for theLYONssecurities or in negotiated transactions. The selling securityholders may also sell all or a portion of the shares of common stock from time to time on the New York Stock Exchange, in negotiated transactions or otherwise, and at prices which will be determined by the prevailing market price for the shares or in negotiated transactions. The selling securityholders will receive all of the proceeds from the sale of theLYONs and the common stock.securities under this prospectus. We will not receive any proceeds from the sale ofLYONs or common stocksecurities under this prospectus by the selling securityholders.Our common stock
is tradedand the trust shares are listed and trade together on the New York Stock Exchange under the symbolCCL."CCL." OnNovember 28, 2001,June 18, 2003, the last reportedsalessale price of our common stock was$25.47 per share.$32.35.There is no public market for the
LYONs,debentures and we do not intend to apply for listing of themoron any securities exchange orto seeksuch approval for quotation of them through any automatedquotationsystem.WE URGE YOU TO CAREFULLY READ THE "RISK FACTORS" SECTION BEGINNING ON PAGE 11, WHERE WE DESCRIBE SPECIFIC RISKS ASSOCIATED WITH THESE SECURITIES, BEFORE YOU MAKE YOUR INVESTMENT DECISION.Investing in the securities offered by this prospectus involves risks that are described in the "Risk Factors" section beginning on page of this prospectus.
Neither the Securities and Exchange Commission, nor any state securities commission, has approved or disapproved of
these LYONs or common stockthe securities offered by this prospectus or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.- ------------------------ (-TM-) Trademark of Merrill Lynch & Co., Inc.The date of this prospectus is
November,2001.2003.
PAGE --------Where You Can Find More Information.........................Page About This Prospectus 2 Incorporation of Documents by Reference.....................Summary 3 Summary..................................................... 4 Securities Being Offered.................................. 6Risk Factors................................................ 10 Risks Related to our Business............................. 10 Risks Relating to our Corporate Structure................. 12 Risks Relating to the LYONs and our Common Stock.......... 14 Special Note RegardingFactors11 Forward-Looking Statements........... 14Statements21 Ratio of Earnings to Fixed Charges.......................... 16 Price Range of Common Stock and Dividends................... 16 Selected Consolidated Financial Data........................ 18 Capitalization.............................................. 19Charges23 Use of Proceeds............................................. 20Proceeds24 Description of the DLC Transaction 25 Description of the Debentures 27 Description of the Carnival plc Guarantee 48 Description of the POPCIL Guarantee 51 Description of Carnival Corporation Capital Stock 56 Description of Trust Shares 72 Selling Securityholders..................................... 20Securityholders74 Plan of Distribution........................................ 21 Description of LYONs........................................ 23 Description of Capital Stock................................ 41Distribution76 Certain Panamanian and United States Federal Income Tax Considerations............................................ 44 Experts..................................................... 47Consequences78 Legal Matters............................................... 47matters85 Experts 85 Where You Can Find More Information 86 Incorporation by Reference 86 Consolidated Financial Statements of POPCIL F-1 ------------------------ WHERE YOU CAN FIND MORE INFORMATION WeReferences in this prospectus to "we," "us," "our" and "Carnival Corporation" are
subjectto Carnival Corporation including, unless otherwise expressly stated or the context otherwise requires, its subsidiaries. References to "Carnival plc" are to Carnival plc (formerly known as P&O Princess Cruises plc) including, unless otherwise expressly stated or the context otherwise requires, its subsidiaries. References to "POPCIL" are to P&O Princess Cruises International Limited including, unless otherwise expressly stated or the context otherwise requires, its subsidiaries. References to theinformational requirements of the Securities Exchange Act of 1934, and file reports, proxy statements and other information with the SEC. We have also filed with the SEC a registration statement on Form S-3"Carnival Corporation & plc" are toregister the LYONs and the underlying common stock. This prospectus, which forms part of the registration statement, does not contain all of the information included in that registration statement. For further information aboutboth Carnival Corporation and Carnival plc collectively, following thesecurities offered in this prospectus, you should refer to the registration statement and its exhibits. You may read and copy any document we file with the SEC at the SEC's Public Reference Room, 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of these reports, proxy statements and information may be obtained at prescribed rates from the Public Reference Sectionestablishment of theSEC at 450 Fifth Street, N.W., Washington, D.C. 20549. Please calldual listed company structure. For more information about theSEC at 1-800-SEC-0330 for further information on the operationdual listed company structure, please see "Summary—Carnival Corporation & plc" and "Description of thePublic Reference Room. In addition,DLC Transaction."2
The following summary is qualified in its entirety by the
SEC maintains a web site that contains reports, proxy statements and othermore detailed informationregarding registrants, such as us, that file electronically with the SEC. The address of this web site is http://www.sec.gov. You should only rely on the information contained in this prospectus andincluded elsewhere or incorporatedby reference therein. 2INCORPORATION OF DOCUMENTS BY REFERENCE We are incorporatingby reference into this prospectus. Because this is a summary, it may not contain all the information that may be important to you. You should read the entire prospectus, as well as thedocuments listed below and any other filings madeinformation incorporated byus with the SEC under Section 13(a), 13(c), 14 or 15(d)reference, before making an investment decision. Some of theExchange Act prior tostatements in this "Summary" are forward-looking statements. Please see "Forward-Looking Statements" for more information regarding these statements.Carnival Corporation & plc
On April 17, 2003, Carnival Corporation and Carnival plc (formerly known as P&O Princess Cruises plc) completed a dual listed company transaction, or DLC transaction which implemented Carnival Corporation & plc's DLC structure. Carnival Corporation and Carnival plc are both public companies, with separate stock exchange listings and different shareholders. The two companies have a single senior executive management team and identical boards of directors and are operated as if they were a single economic enterprise. On a pro forma basis in accordance with accounting principles generally accepted in the
terminationUnited States, or US GAAP, Carnival Corporation & plc would have reported revenues ofthe offering: - Our Annual Report on Form 10-K$6.9 billion and $1.7 billion and net income of $1.3 billion and $138 million for the fiscal year ended November 30,2000. - Our Quarterly Reports on Form 10-Q for2002 and thefiscal quartersthree months ended February 28,2001, May 31, 2001 and August 31, 2001. - Our Current Reports on Form 8-K filed on December 21, 2000,2003, respectively. On the same basis, Carnival Corporation & plc would have reported shareholders' equity of $12.8 billion as at February26, 2001, April 27, 2001, June 29, 2001, September 21, 2001, October 19, 2001, October 23, 2001, October 25, 2001 and October 29, 2001 with the SEC. Any statement contained in this prospectus or in a document incorporated or deemed to be incorporated by reference in this prospectus shall be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained in this prospectus or in any other document subsequently filed with the SEC which is or is deemed to be incorporated by reference in this prospectus modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this prospectus. We will provide without charge to you, upon your written or oral request a copy of any or all28, 2003. See "Description of thedocuments incorporated by reference in this prospectus, not includingDLC Transaction" for a more detailed description of theexhibits to these documents, unless such exhibits are specifically incorporated by reference in these documents. Requests for such copies should be directed to Investor Relations,transaction.Carnival Corporation
3655 N.W. 87th Avenue, Miami, Florida 33178-2428. Except as provided above, no other information, including information on our web site,& plc isincorporated by reference into this prospectus. 3SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION INCLUDED ELSEWHERE OR INCORPORATED BY REFERENCE INTO THIS PROSPECTUS. BECAUSE THIS IS A SUMMARY, IT MAY NOT CONTAIN ALL THE INFORMATION THAT MAY BE IMPORTANT TO YOU. YOU SHOULD READ THE ENTIRE PROSPECTUS, AS WELL AS THE INFORMATION INCORPORATED BY REFERENCE, BEFORE MAKING AN INVESTMENT DECISION. SOME OF THE STATEMENTS IN THIS "SUMMARY" ARE FORWARD-LOOKING STATEMENTS. PLEASE SEE "SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS" FOR MORE INFORMATION REGARDING THESE STATEMENTS. IN THIS PROSPECTUS, UNLESS OTHERWISE STATED OR THE CONTEXT OTHERWISE REQUIRES, THE TERMS "WE," "US" AND "OUR" REFER TO CARNIVAL CORPORATION, A PANAMANIAN CORPORATION, AND ITS CONSOLIDATED SUBSIDIARIES. CARNIVAL CORPORATION We aretheworld'slargestmultiple-nightcruisecompanyvacation group in the world, based onthe number ofrevenues, passengers carriedrevenues generatedand available capacity.We offerCarnival Corporation & plc had, as at June 17, 2003, abroad rangecombined fleet ofcruise products, serving the contemporary cruise market through Carnival Cruise Lines and Costa Cruises, the premium market through Holland America Line and the luxury market through Cunard Line, Seabourn Cruise Line and Windstar Cruises. In total, we own and operate 4268 cruise ships offering 105,812 lower berths, withan aggregate capacity15 additional cruise ships having 36,906 lower berths scheduled to be added over the next three years, and is the leading provider of58,342cruises to all major destinations outside the Far East. Carnival Corporation & plc carried approximately 4.7 million passengersbased onin fiscal 2002. Carnival Corporation & plc also operates twopassengers per cabin. The fifteen Carnival Cruise Lines ships have an aggregate capacityprivate destination ports of31,122 passengers with itineraries primarilycall in the Caribbean for the exclusive use of its passengers and three riverboats on Europe's Danube River and offers land-based tour packages as part of its vacation product alternatives.Carnival Corporation & plc offers thirteen complementary brands with leading positions in North America, the UK, Germany, Italy, France, Spain, Brazil, Argentina and Australia. Carnival Corporation & plc has multi-brand strategies that are intended to differentiate it from its competitors and provide products and services appealing to the widest possible target audience across all major segments of the vacation industry. Carnival Corporation & plc is the leading global cruise vacation operator with brands appealing to the widest target audience, focused on sourcing passengers from developed vacation markets where cruising is one of the fastest growing vacation alternatives.
In addition to Carnival Corporation & plc's cruise operations, Carnival Corporation & plc operates the leading tour companies in Alaska and the
Mexican Riviera. The seven Costa ships have an aggregate capacity of 9,276 passengers with itineraries primarily in Europe, the Caribbean and South America. The ten Holland America ships have an aggregate capacity of 13,348 passengers, with itineraries primarily in the Caribbean, Europe and Alaska. Windstar operates four luxury, sail-powered ships with an aggregate capacity of 756 passengers, primarily in the Caribbean, Europe and Central America. The four Seabourn ships have an aggregate capacity of 1,382 passengers and the two Cunard ships have an aggregate capacity of 2,458 passengers, each with worldwide itineraries. We have signed agreements with three shipyards providing for the construction of additional cruise ships as set forth in the following table:
EXPECTED ESTIMATED TOTAL SERVICE PASSENGER COST ($ IN SHIP DATE (1) SHIPYARD CAPACITY (2) MILLIONS) (3) - ---- --------- ------------------- ------------- ---------------CARNIVAL CRUISE LINES Carnival Pride................ 1/02 Masa-Yards (4) 2,124 $ 375 Carnival Legend............... 8/02 Masa-Yards (4) 2,124 375 Carnival Conquest............. 12/02 Fincantieri 2,974 500 Carnival Glory................ 8/03 Fincantieri 2,974 500 Carnival Miracle.............. 4/04 Masa-Yards (4) 2,124 375 Carnival Valor................ 11/04 Fincantieri (4) 2,974 500 ------ ------ TOTAL CARNIVAL CRUISE LINES... 15,294 2,625 ------ ------ HOLLAND AMERICA LINE Zuiderdam..................... 11/02 Fincantieri (4) 1,848 410 Oosterdam..................... 7/03 Fincantieri (4) 1,848 410 Newbuild...................... 2/04 Fincantieri (4) 1,848 410 Newbuild...................... 10/04 Fincantieri (4) 1,848 410 Newbuild...................... 6/05 Fincantieri (4) 1,848 410 ------ ------ TOTAL HOLLAND AMERICA LINE.... 9,240 2,050 ------ ------4
EXPECTED ESTIMATED TOTAL SERVICE PASSENGER COST ($ IN SHIP DATE (1) SHIPYARD CAPACITY (2) MILLIONS) (3) - ---- --------- ------------------- ------------- ---------------COSTA CRUISES Costa Mediterranea............ 7/03 Masa-Yards (5) 2,114 340 Costa Fortuna................. 1/04 Fincantieri (6) 2,720 395 Costa Magica.................. 12/04 Fincantieri (6) 2,720 395 ------ ------ TOTAL COSTA CRUISES........... 7,554 1,130 ------ ------ CUNARD LINE Queen Mary 2.................. 12/03 Chantiers de 2,620 780 l'Atlantique (4) ------ ------ TOTAL CUNARD LINE............. 2,620 780 ------ ------ TOTAL......................... 34,708 $6,585 ====== ======- -------------------------- (1) The expected service date is the date the ship is currently expected to begin revenue generating activities. (2) In accordance with cruise industry practice, passenger capacity is calculated based on two passengers per cabin even though some cabins can accommodate three or four passengers. (3) Estimated total cost of the completed ship includes the contract price with the shipyard, design and engineering fees, capitalized interest, various owner supplied items and construction oversight costs. (4) These construction contracts are denominated in either German marks, Italian lira or euros and have been fixed into U.S. dollars through the utilization of forward foreign currency contracts. (5) This construction contract is denominated in German marks which has a fixed exchange rate with Costa's functional currency, which is the Italian lira. The estimated total cost has been translated into U.S. dollars using the August 31, 2001 exchange rate. (6) These construction contracts are denominated in Italian lira, and the estimated total costs have been translated into U.S. dollars using the August 31, 2001 exchange rate. In connection with the ships under contract for construction, we have paid approximately $547 million through August 31, 2001, and we anticipate paying approximately $940 million during the twelve months ending August 31, 2002 and approximately $5.1 billion thereafter. We also operate a tour businessCanadian Yukon, through Holland America Tourswhich markets sightseeing tours both separatelyandas part of its cruise/tour packages.Princess Tours. Holland America Tours operates1213 hotels in Alaska and the Canadian Yukon, two luxury dayboatsoffering tours to the glaciersand a fleet of motorcoaches and McKinley Explorer rail cars. Princess Tours is a tour operator in Alaska with five riverside lodges, a fleet of motorcoaches andthe Yukon River, over 300 motor coaches usedMidnight Sun Express Rail cars. Carnival Corporation & plc also owns a business-to-business travel agency, P&O Travel, which is responsible forsightseeing and charters in the statespurchasing part ofWashington and Alaska and 13 private domed rail cars which are run on the Alaska railroad between Anchorage and Fairbanks. We wereCarnival plc's air travel requirements.Carnival Corporation
Carnival Corporation was incorporated under the laws of the Republic of Panama in November 1974. Our common stock and the paired trust shares, which trade together with the common stock, are listed on the NYSE under the symbol "CCL." Our principal executive offices are located at
3
Carnival Place, 3655 N.W. 87th Avenue, Miami, Florida
33178-2428,33178-2428. The telephone number of our principal executive offices is (305)599-2600.599-2600Carnival plc
Carnival plc was incorporated and registered in England and Wales as P&O Princess Cruises plc in July 2000 and was renamed "Carnival plc" on April 17, 2003, the date on which the DLC transaction with Carnival Corporation closed. Carnival plc's ordinary shares are listed on the London Stock Exchange, and Carnival plc's American Depositary Shares, or ADSs, are listed on the NYSE. Effective April 22, 2003, Carnival plc ordinary shares trade under the ticker symbol "CCL" (formerly trading under "POC") on the London Stock Exchange. Effective April 21, 2003, Carnival plc ADSs trade under the ticker symbol "CUK" (formerly trading under "POC") on the NYSE. Carnival plc's principal executive offices are located at Carnival House, 5
SECURITIES BEING OFFEREDGainsford Street, London, SE1 2NE. The telephone number of Carnival plc's principal executive offices is 011 44 20 7805 1200.P&O Princess Cruises International Limited
P&O Princess Cruises International Limited, or POPCIL, is a wholly owned direct subsidiary of Carnival plc. Carnival plc conducts all of its business through POPCIL and its direct or indirect wholly-owned subsidiaries. POPCIL owns and operates the businesses of P&O Cruises, Ocean Village and Swan Hellenic in the United Kingdom, Seetours, including AIDA and A'ROSA in Germany, and P&O Cruises in Australia. POPCIL is also the holding company for the entities that own and operate the Princess Cruises business. The sole directors and executive officers of POPCIL are Peter G. Ratcliffe, who serves as Chief Executive Officer, and Gerald R. Cahill, who serves as Chief Financial and Accounting Officer. POPCIL was incorporated and registered in England and Wales as a private company limited by shares under registered number 3902746 pursuant to the UK Companies Act 1985 on January 5, 2000. POPCIL's principal executive offices are located at Richmond House, Terminus Terrace, Southampton, SO14 3PN. The telephone number of POPCIL's principal executive office is 011 44 20 7805 1200.
Securities Being Offered
This prospectus covers the sale of
$1,051,175,000$889,000,000 aggregate principal amount at maturity ofLYONsdebentures and17,446,00020,896,657 shares of our common stock, plus anindeterminateundetermined number of additional shares of common stock that may be issuedformfrom time to time upon conversion of theLYONsdebentures by reason of adjustment to the conversion price or upon repurchaseor redemption,of the debentures, in each case in certain circumstances described in this prospectus. The debentures have been guaranteed by Carnival plc and POPCIL on an unsecured and unsubordinated basis.We issued and sold
$840,940,000$889,000,000 aggregate principal amount at maturity ofLYONs,debentures onOctober 24, 2001,April 29, 2003, in a private offering toMerrill Lynch & Co., as thean initial purchaser.On October 26, 2001, upon exercise of its overallotment option by Merrill Lynch & Co., we issued and sold to Merrill Lynch & Co., as the initial purchaser, an additional $210,235,000 aggregate principal amount at maturity of LYONs.TheseLYONsdebentures were simultaneously resold by the initial purchaser in transactions exempt from registration requirements of the Securities Act to persons reasonably believed by the initial purchaser to be "qualified institutional buyers"(as, as defined in Rule 144A under the SecuritiesAct).Act.The shares of common stock may be offered by the selling securityholders following the conversion or repurchase of the
LYONs. TERMS OF THE LYONSdebentures from time to time.4
LYONs.......................... $1,051,175,000Debentures $889,000,000 aggregate principal amount at maturity of LYONsSenior Convertible Debentures due2021. We do not pay interest on the LYONs prior to maturity.2033. EachLYONdebenture was issued at a price of$475.66$646.88 perLYON (plus accrued original issue discount, if any)debenture andhaswill have a principal amount at maturity of $1,000.
Maturity ofLYONs..............Debentures
April 29, 2033.
Cash Interest
1.132% per year on the principal amount at maturity, payable semiannually in arrears in cash on April 29 and October24, 2021.29 of each year, beginning October 29, 2003, until April 29, 2008. This cash interest will be taxable to holders as original issue discount for United States federal income tax purposes and, accordingly, will be taxed to a holder as it accrues regardless of the holder's method of tax accounting. However, a holder will not recognize additional income upon the actual payment of such cash interest. See "Certain Panamanian and United States Federal Income Tax Consequences—United States—US Holders—Original Issue Discount."
Yield to Maturity ofLYONs..... 3.75%Debentures
1.75% per year,(computedcomputed on a semi-annual bond equivalentbasis)basis, calculated fromOctober 24, 2001.April 29, 2003.
Original IssueDiscount........Discount
TheLYONsdebentures were originally issued at an issue price significantly below the principal amount at maturity of theLYONs. The difference between the issue price and the principal amount at maturity of a LYON is referred to as original issue discount. This originaldebentures. Original issue discountaccrueswill accrue daily at a rate of3.75%1.75% per year beginning onOctober 24, 2001,April 29, 2008, calculated on a semi-annual bond equivalent basis using a 360-day year comprised of twelve 30-day months.You should be aware that although we do not pay interest on the LYONs, United States holders must include original issue discount, as it accrues, in their gross income forFor United States federal income taxpurposes.purposes, original issue discount accrues from April 29, 2003 at a constant rate per year, calculated in the manner described under "Certain Panamanian and United States Federal Income Tax Consequences—United States—US Holders—Original Issue Discount," and US holders are required to include original issue discount in their gross income as it accrues from the issue date regardless of their method of tax accounting. See "Certain Panamanian and United States Federal Income TaxConsiderations--United States--United States Holders--OriginalConsequences—United States—US Holders—Original Issue Discount."6
ConversionRights..............Rate
Prior to April 29, 2008:
• the conversion rate is the base conversion rate, if the applicable stock price is less than or equal to the base conversion price; or
• if the applicable stock price is greater than the base conversion price, the conversion rate is determined in accordance with the following formula:5
Base Conversion Rate +[(Applicable Stock Price — Base Conversion Price) × Incremental Share Factor] Applicable Stock Price
From and after April 29, 2008, the conversion rate will be fixed for remainder of the term of the debentures at the conversion rate termined as set forth above assuming a conversion date that is eight trading days prior to April 29, 2008, which we refer to as the fixed conversion rate, subject to the same adjustments as the base conversion rate.
The "base conversion rate" is 12.1800 shares per $1,000 principal amount at maturity of debentures, subject to adjustment as described under "Description of the Debentures—Conversion Rights—Conversion Rate Adjustments." The "base conversion price" is a dollar amount, initially $53.11, derived by dividing the issue price per debenture, $646.88, by the base conversion rate. The "incremental share factor" is 11.3258, subject to the same adjustments as the base conversion rate. The "applicable stock price" is equal to the average of the closing sale prices of our common stock over the five-trading day period starting the third trading day following the conversion date of the debentures, subject to certain adjustments. See "Description of the Debentures—Conversion Rights."
Conversion Rights
For eachLYON$1,000 principal amount at maturity of debentures surrendered for conversion, if specified conditions are satisfied, a holder will receive16.5964a number of shares of our commonstock.stock equal to the conversion rate. Upon conversion, we will have the right to deliver, in lieu of our common stock, cash or a combination of cash and common stock. If we elect to pay holders cash for theirLYONs,debentures, the payment will be based on theaverage sale price of our commonapplicable stockfor the five consecutive trading days immediately following either: - the date of our notice of our election to deliver cash, which we must give within two business days after receiving a conversion notice, unless we have earlier given notice of redemption as described in this prospectus; or - the conversion date, if we have given notice of redemption specifying that we intend to deliver cash upon conversion thereafter.price.
The base conversion rate may be adjusted for certain reasons specified in the indenture but will not be adjusted for accrued original issuediscount.discount or accrued cash interest. Upon conversion, a holder will not receive any cash payment representing accrued original issuediscount.discount or any accrued cash interest, except in the limited circumstances described in "Description of the Debentures—Conversion Rights." Instead, accrued original issue discount or accrued cash interest generally will be deemed paid by the shares of common stock received by the holder on conversion. See "Description ofLYONs--Conversionthe Debentures—Conversion Rights."
Commencing afterFebruary 28, 2002,August 31, 2003, holders may surrenderLYONsdebentures for conversion into shares of common stock in any fiscal quarter,(andand only during such fiscalquarter),quarter, if the closing sale price of our common stock for at least 20 trading days in a period of 30 consecutive trading days ending on the last trading day of the preceding fiscal quarter is more than110%120% of the accreted conversion price per share of common stock on the last day of such preceding fiscal quarter.Our fiscal quarters end on the last day of February, May, August and November.The "accreted conversion price" per share will initially be the base conversion price and as of any day will equal the issue price of aLYONdebenture plus the6
accrued original issue discount to that day, with that sum divided by the numberbase conversion rate.
Holders may also surrender debentures for conversion during any period in which the credit rating assigned to the debentures by Standard & Poor's Ratings Services, a division ofshares of common stock issuable upon conversion of a LYON. LYONsThe McGraw-Hill Companies, Inc., and its successors, or S&P is at or below BBB- and the credit rating assigned to the debentures by Moody's Investors Service and its successors, or Moody's is at or below Baa3.
Debentures or portions ofLYONsdebentures in integral multiples of $1,000 principal amount at maturity called for redemption may be surrendered for conversion until the close of business on the redemption date, even if theLYONsdebentures are not otherwise convertible. In addition, if we make a significant distribution to our shareholders or if we are a party to certain consolidations, mergers or binding share exchanges,LYONsdebentures may be surrendered for conversion as provided in "Description ofLYONs--Conversionthe Debentures—Conversion Rights." The ability to surrenderLYONsdebentures for conversion will expire at the close of business on the business day immediately precedingOctober 24, 2021,April 29, 2033, unless they have previously been redeemed or repurchased. See "Description ofLYONs--Conversion Rights--Conversionthe Debentures—Conversion Rights—Conversion Rights Upon Notice of Redemption."7
Ranking........................
Paired Trust Shares
As a result of the DLC transaction, one trust share of beneficial interest in the P&O Princess Special Voting Trust, which represents an equal, undivided beneficial interest in the special voting share issued by Carnival plc, is paired with each share of our common stock. TheLYONstrust shares are not detachable from the corresponding shares of our common stock. Upon each issuance to a person of new shares of our common stock, the non-detachable paired trust shares will also be acquired by that same person. Therefore, references in this prospectus to shares of our common stock issuable upon conversion, redemption or repurchase of the debentures shall be deemed to include both shares of our common stock and non-detachable trust shares in the P&O Princess Special Voting Trust. For a description of the pairing arrangement of our common stock and the trust shares, see "Description of Carnival Corporation Capital Stock" and "Description of Trust Shares."
Guarantees
Carnival plc and POPCIL have guaranteed our monetary obligations under the debentures on an unsecured and unsubordinated basis. See "Description of the Carnival plc Guarantee" and "Description of the POPCIL Guarantee."7
Ranking
The debentures, the Carnival plc guarantee and the POPCIL guarantee are unsecured and unsubordinated obligations and rank equal in right of payment to allourthe existing and future unsecured and unsubordinatedindebtedness.indebtedness of us, Carnival plc and POPCIL, respectively. However, theLYONsdebentures, the Carnival plc guarantee and the POPCIL guarantee are effectively subordinated to all existing and future obligations of oursubsidiaries. Assubsidiaries, the non-guarantor subsidiaries ofAugust 31, 2001, we hadCarnival plc, respectively, and to any secured debt of us, Carnival plc and POPCIL, respectively, to the extent of any security. On a pro forma basis after giving effect to the DLC transaction, as of February 28, 2003, there would have been approximately$2.66$6.0 billion of total indebtedness outstandingwhich includedof us and Carnival plc based on our indebtedness at February 28, 2003 and the indebtedness of Carnival plc at March 31, 2003. Of this amount, there would have been approximately$1.21$1.1 billion of secured indebtedness of us, Carnival plc and P&O Princess Cruises International Limited outstanding and approximately $1.4 billion of indebtedness of non-guarantor subsidiaries outstanding, on a pro forma basis, based on ourconsolidated subsidiaries. See "Capitalization."indebtedness Carnival Corporation at February 28, 2003 and the indebtedness of Carnival plc at March 31, 2003.
SinkingFund...................Fund
None.
Redemption ofLYONsDebentures
at OurOption.......................Option
We may redeem all or a portion of theLYONsdebentures at any time on or afterOctober 24,April 29, 2008 at the redemption prices set forth in this prospectus under the caption, "Description ofLYONs--Redemptionthe Debentures—Redemption ofLYONsDebentures atourOur Option." Holders may convert theirLYONsdebentures after they are called for redemption at any time prior to the close of business on the redemption date.OurIn the event that a holder elects to convert debentures in connection with the redemption, the notice of redemption will inform theholdersholder of our election to deliver shares of our common stock or to pay cash or a combination of cash and common stock. See "Description ofLYONs--Redemptionthe Debentures—Redemption ofLYONsDebentures at Our Option."
Purchase ofLYONsDebentures by Us
at the Option ofHolder....................Holder
Holders may require us to purchase all or a portion of theirLYONsdebentures on the following dates at the followingprices: - On October 24, 2006 for a price equalprices, plus accrued cash interest, if any, to$572.76 per LYON, - On October 24,the purchase date:
• on April 29, 2008 for a price equal to$616.94$646.88 perLYON, - On October 24, 2011debenture,
• on April 29, 2013 for a price equal to$689.68$705.76 perLYON, and - On October 24, 2016debenture,
• on April 29, 2018 for a price equal to$830.47$770.01 perLYON.debenture,
• on April 29, 2023 for a price equal to $840.10 per debenture, and
• on April 29, 2028 for a price equal to $916.57 per debenture.8
We may choose to pay the purchase price in cash, shares of common stock or a combination of cash and shares of common stock. After receiving notice of such choice,youholders may withdrawyour election.their elections. We may also add additional purchase dates on which holders may require us to purchase all or a portion of theirLYONs.debentures. See "Description of theLYONs--PurchaseDebentures—Purchase ofLYONsDebentures by Us at the Option of the Holder."
Change inControl..............Control
Upon a change in control,(asas defined in the indenture governing theLYONs)debentures, of our company occurring at any time on or beforeOctober 24,April 29, 2008, each holder may require us to purchase all or a portion of such holder'sLYONsdebentures for cash at a price equal to 100% of the issue price of theLYONsdebentures to be purchased plus accrued original issue discount and accrued cash interest, if any, to, but excluding, the date of purchase. See "Description ofLYONs--Changethe Debentures—Change in Control Permits Purchase ofLYONsDebentures by Us at the Option of the Holder."
OwnershipLimitation on LYONs........................ In orderLimitations
Pursuant topermit us to retain our status as a publicly traded corporation undertheproposed Treasury regulations to Section 883terms of theCode, LYONs generally may notindenture, no debenture holder will betransferred ifentitled to convert debentures into shares of our common stock, which, when added to shares of our common stock already owned or deemed owned by thetransferdebenture holder, wouldresult in ownership, including LYONs and other convertible securities on an as-converted basis, by one person or groupexceed 4.9% ofrelated persons by virtueall shares of our outstanding common stock. For more information regarding this limitation, please see "Description of theattribution provisionsDebentures—Conversion Rights—Ownership Limitations." Our common stock is also subject to restrictions on transfer and ownership such that no holder or deemed holder ofthe Code, ofour common stock may hold more than 4.9% of all shares of our outstanding commonstock. Seestock, subject to certain exceptions. For more information regarding this limitation, please see "Description ofLYONs--Ownership Limitation on LYONs.Carnival Corporation Capital Stock—Certain Provisions of Carnival Corporation's Articles and By-laws—Takeover Restrictions—Ownership Limitations and Transfer Restrictions."8
Use ofProceeds................Proceeds
The selling securityholders will receive all of the proceeds from the sale of the securities sold under this prospectus. We will not receive any of the proceeds from sales by the selling securityholders ofthe offered securities. DTC Eligibility................ The LYONs were issuedsecurities under this prospectus.
Registration Rights
We, Carnival plc and POPCIL filed a registration statement of which this prospectus is a part inbook-entry form and are represented by one or more permanent global certificates deposited withsatisfaction of an obligation to do so under acustodian for and registered in the name of a nominee of DTC in New York, New York. Beneficial interests in any such securities are shown on, and transfers are effected only through, records maintained by DTC and its direct and indirect participants, and any such interest may not be exchanged for certificated securities, except in limited circumstances. See "Description of LYONs--Book-Entry System." Shelf Registration Statement... Under theregistration rightsagreement, dated October 24, 2001, between Merrill Lynch & Co.agreement. We andus, weCarnival plc have agreed under this registration rights agreement to use commercially reasonable efforts tocause akeep this shelf registration statement,to become effective within 180 days after the dateoforiginal issuance of the LYONs. We are required to keep such shelf registration statementwhich this prospectus is a part, effective until the earlier of(i)
• the sale pursuant to the shelf registration statement of all of theLYONsdebentures and the shares of common stock issuable upon conversion of theLYONs, which together we refer to as "registrable securities," and (ii)debentures,9
• the expiration of the holding period applicable to such securities held by non-affiliates of ours under Rule 144(k) under the Securities Act, or any successor provision and(iii)
• the second anniversary of the effective date of the shelf registration statement, subject tocertainsome permitted exceptions.
See "Description ofLYONs--Registrationthe Debentures—Registration Rights."We are permitted to suspend the use of this prospectus under certain circumstances. We agreed to pay predetermined liquidated damages to selling securityholders if this prospectus is unavailable for periods in excess to those described elsewhere in this prospectus. Purchasers of the registrable securities offered by means of this prospectus will not have any rights under the registration rights agreement, although once sold under this registration statement the registrable securities should be freely tradable except by purchasers who are our "affiliates" or are "underwriters" of the registrable securities for purposes of the Securities Act.
Trading Symbol forourOur
CommonStock........................Stock
Our shares of common stockis tradedand the paired trust shares of beneficial interest in the P&O Princess Special Voting Trust, including the beneficial interest in the Carnival plc special voting share, are listed and trade together on the New York Stock Exchange under the symbol "CCL."910
RISK FACTORSYOU SHOULD CAREFULLY CONSIDER THE FOLLOWING SPECIFIC RISK FACTORS AS WELL AS THE OTHER INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS BEFORE DECIDING TO INVEST IN THE LYONS AND OUR COMMON STOCK. SOME STATEMENTS IN THIS SECTION ARE "FORWARD-LOOKING STATEMENTS." FORAn investment in the securities offered by this prospectus involves a number of risks. You should consider carefully the following information about these risks, together with the other information contained in this prospectus, before making an investment in the securities. A
DISCUSSION OF THOSE STATEMENTS AND OF OTHER FACTORS FOR INVESTORS TO CONSIDER, SEE "SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS.number of the statements in this section are forward-looking statements. See "Forward-Looking Statements."RISKS RELATED TO OUR BUSINESS DEMAND FOR CRUISES CAN BE AND HAS BEEN AFFECTED BY MANY FACTORS THAT ARE OUTSIDE OUR CONTROL, INCLUDING THE ONGOING EFFECTS OF THE SEPTEMBERRisks Relating to Carnival Corporation & plc's Businesses
Carnival Corporation & plc may lose business to competitors throughout the vacation market.
Carnival Corporation & plc operates in the vacation market, and cruising is one of many alternatives for people choosing a vacation. Carnival Corporation & plc therefore risks losing business not only to other cruise lines, but also to other vacation operators that provide other leisure options, including hotels, resorts and package holidays and tours.
Carnival Corporation & plc faces significant competition from other cruise lines, both on the basis of cruise pricing and also in terms of the nature of ships and services it will offer to cruise passengers. Carnival Corporation & plc's principal competitors within the cruise vacation industry include:
- •
- Royal Caribbean Cruises Ltd., which owns Royal Caribbean International and Celebrity Cruises;
- •
- Norwegian Cruise Line and Orient Lines;
- •
- Disney Cruise Line;
- •
- My Travel's Sun Cruises, Thomson, Saga and Fred Olsen in the UK;
- •
- Festival Cruises, Hapag-Lloyd, Peter Deilmann and Phoenix Reisen in Germany;
- •
- Festival Cruises, Mediterranean Shipping Cruises, Royal Olympia Cruises and Louis Cruise Line in southern Europe;
- •
- Crystal Cruises;
- •
- Radisson Seven Seas Cruise Line; and
- •
- Silversea Cruises.
Carnival Corporation & plc also competes with land-based vacation alternatives throughout the world, including, among others, resorts and hotels located in Las Vegas, Nevada, Orlando, Florida, various Caribbean, Mexican, Bahamian and Hawaiian Island destination resorts and numerous vacation destinations throughout Europe and the rest of the world.
In the event that Carnival Corporation & plc does not compete effectively with other vacation alternatives and cruise companies, its results of operations and financial condition could be adversely affected.
Overcapacity within the cruise and competing land-based vacation industry could have a negative impact on net revenue yields, increase operating costs, result in ship asset impairments and could adversely affect profitability.
Cruising capacity has grown in recent years and Carnival Corporation & plc expects it to continue to increase over the next three years as all of the major cruise vacation companies are expected to introduce new ships. In order to utilize new capacity, the cruise vacation industry will need to increase its share of the overall vacation market. The overall vacation market is also facing increases in land-based vacation capacity, which also will impact Carnival Corporation & plc. Failure of the cruise vacation industry to increase its share of the overall vacation market could have a negative impact on Carnival Corporation & plc's net revenue yields. Should net revenue yields be negatively impacted,
11
2001 TERRORIST INCIDENTS; AND OUR OPERATING RESULTS AND REVENUES DEPEND IN LARGE PART ON DEMAND FOR CRUISES.Carnival Corporation & plc's results of operations and financial condition could be adversely affected, including the impairment of the value of its ship assets. In addition, increased cruise capacity could impact Carnival Corporation & plc's ability to retain and attract qualified crew at competitive costs and, therefore, increase Carnival Corporation & plc's shipboard employee costs.
The international political and economic climate and other world events affecting safety and security could adversely affect the demand for cruises and could harm Carnival Corporation & plc's future sales and profitability.
Demand for cruises
mayand other vacation options has been, and is expected to continue to be, affected by the public's attitude towards the safety of travel, the international political climate and the political climate of destination countries. Events such as the terrorist attacks in the US on September 11, 2001, the threat of additional attacks, the recent military action in Iraq, concerns of an outbreak of additional hostilities and national government travel advisories, together with the resulting political instability and concerns over safety and security aspects of traveling, have had anumber of factors. For example, our sales aresignificant adverse impact on demand and pricing in the travel and vacation industry and may continue to do so in the future. Demand for cruises is also likely to be increasingly dependent on the underlying economic strength of the countriesinfrom whichwe operate. Adverse economic conditions cancruise companies source their passengers. Economic or political changes that reducethe level ofdisposable incomeof consumers available for vacations. In addition, armed conflictsorpolitical instabilityconsumer confidence inareas where our ships cruise can adverselythe countries from which Carnival Corporation & plc will source its passengers may affect demand forour cruisesvacations, including cruise vacations, which are a discretionary purchase. Decreases in demand could lead tothose areas. Also, actsprice discounting which, in turn, could reduce the profitability ofterrorism canits business.Carnival Corporation & plc may not be able to obtain financing on terms that are favorable or consistent with its expectations due to, among other reasons, the lowering of the debt ratings of Carnival Corporation as a result of the DLC transaction.
Access to financing for Carnival Corporation & plc will depend on, among other things, the maintenance of strong long-term credit ratings. Carnival Corporation's debt was, prior to the closing of the DLC transaction, rated "A" by Standard & Poor's, "A2" by Moody's Investors Service and "A" by FitchRatings. Carnival plc's debt was, shortly prior to the closing of the DLC transaction, rated "BBB" by Standard & Poor's, "Baa3" by Moody's and "BBB+" by FitchRatings. On April 14, 2003, Moody's downgraded the long-term ratings of Carnival Corporation from "A2" to "A3" and its short-term rating from "Prime-1" to "Prime-2" to reflect the expected completion of the DLC transaction, and stated that this rating remains on review for further possible downgrade pending final resolution of Carnival Corporation & plc's capital structure. In addition, Moody's stated that the ratings for Carnival plc remain on review for possible upgrade pending final resolution of Carnival Corporation & plc's capital structure. On April 16, 2003, Standard & Poor's lowered its long-term corporate credit ratings for Carnival Corporation from "A" to "A-" and its short-term corporate credit ratings for Carnival Corporation from "A-1" to "A-2". Concurrently, Standard & Poor's withdrew its "BBB" corporate credit rating for Carnival plc and raised its unsubordinated unsecured debt ratings for Carnival plc from "BBB" to "A-." On April 29, 2003, FitchRatings lowered the rating on Carnival Corporation's unsubordinated, unsecured debt to "A-" and raised the rating on Carnival plc's unsubordinated, unsecured debt to "A-".
The forecasted cash flow from future operations for Carnival Corporation & plc may be adversely affected by various factors, including, but not limited to, declines in customer demand, increased competition, overcapacity, the deterioration in general economic and business conditions, terrorist attacks, the recent military action with Iraq, ship incidents, adverse publicity and increases in fuel prices, as well as other factors noted under these risk factors and under the "Forward-Looking Statements" section below. To the extent that Carnival Corporation & plc is required, or chooses, to fund future cash requirements, including future shipbuilding commitments, from sources other than cash flow from operations, cash on hand and current external sources of liquidity, including committed
12
financings, Carnival Corporation & plc will have
an adverse effectto secure such financing from banks or through the offering of debt and/or equity securities in the public or private markets.The future operating cash flow of Carnival Corporation & plc may not be sufficient to fund future obligations, and Carnival Corporation & plc may not be able to obtain additional financing, if necessary, at a cost that meets its expectations. Accordingly, the financial results of Carnival Corporation & plc could be adversely affected.
If Carnival plc loses eligibility for inclusion in the FTSE 100 or Carnival Corporation is removed from the S&P 500, it may become more difficult for Carnival Corporation & plc to access the equity capital markets.
Carnival Corporation's common stock remains listed on
tourism, travelthe NYSE and is expected to continue to be included in the S&P 500. Carnival plc's ordinary shares remain listed on the London Stock Exchange and remain eligible for inclusion in the FTSE series of indices and are included with full weighting in the FTSE 100. If Carnival plc loses eligibility for inclusion in the FTSE 100 or Carnival Corporation is removed from the S&P 500, it may become more difficult for Carnival Corporation & plc to access the equity capital markets, and theavailabilityliquidity and the value ofair serviceyour securities may be adversely affected.Conducting business internationally can result in increased costs.
Carnival Corporation & plc operates its business internationally and plans to continue to develop its international presence. Operating internationally exposes Carnival Corporation & plc to a number of risks, including:
- •
- currency fluctuations;
- •
- interest rate movements;
- •
- the imposition of trade barriers and restrictions on repatriation of earnings;
- •
- political risks;
- •
- risk of increases in duties, taxes and governmental royalties; and
- •
- changes in laws and policies affecting cruising, vacation or maritime businesses or governing the operations of foreign-based companies.
If Carnival Corporation & plc is unable to address these risks adequately, its results of operations and financial condition could be adversely affected.
Accidents and other
forms of transportation. In particular, the recent terrorist attacks and subsequent actions have impacted negatively our revenues and operating results since September 11, 2001. Given the uncertainty regarding the future impact of these events on tourism and travel, we are unable to quantify their long-term impact on our future operationsincidents atthis time. Finally,sea or adverseincidents involving cruise ships and adverse mediapublicity concerning the cruise industryin general can impact demand.or Carnival Corporation & plc could affect Carnival Corporation & plc's reputation and harm its future sales and profitability.The operation of cruise ships involves the risk of accidents, illnesses, mechanical failures and other incidents at sea, which may bring into question passenger safety, health, security and vacation satisfaction and thereby adversely affect future industry performance.
While we makeIncidents involving passengersafety a high priority in the design and operation of our ships, accidents and other incidents involvingcruise ships could occur and could adversely affectourfuture sales and profitability.Any reductionIn addition, adverse publicity concerning the vacation industry indemand may have a negative impact on our net revenue yields, which would also have a negative impact on our net income. OVERCAPACITY WITHIN THE CRUISE BUSINESS COULD HAVE A NEGATIVE IMPACT ON OUR NET REVENUE YIELDS. Cruising capacity has grown in recent years, and we expect it to continue to increase over the next five years as all of the major cruise companies, including our own, are expected to introduce new ships into service. In order to utilize new capacity,general or the cruise industrymust increase its share of the overall vacation market. Any imbalances between cruise industry supplyor Carnival Corporation & plc in particular could impact demand and,demand couldconsequently, havea negativean adverse impact onour net revenue yields,Carnival Corporation & plc's profitability.13
Operating, financing and tax costs are subject to many economic and political factors that are beyond Carnival Corporation & plc's control, which
wouldcould result in increases in operating and financing costs.Some of Carnival Corporation & plc's operating costs, including fuel, food, insurance and security costs, are subject to increases because of market forces and economic or political instability beyond Carnival Corporation & plc's control. In addition, interest rates and Carnival Corporation & plc's ability to secure debt or equity financing, including in order to finance the purchase of new ships, are dependent on many economic and political factors. Actions by US and non-US taxing jurisdictions could also
have a negative impact on our net income. ENVIRONMENTAL AND HEALTH AND SAFETY LEGISLATION COULD INCREASE OPERATING COSTS.cause an increase in Carnival Corporation & plc's costs. Increases in operating, financing and tax costs could adversely affect Carnival Corporation & plc's results because Carnival Corporation & plc may not be able to recover these increased costs through price increases of its cruise vacations.Environmental legislation and regulations could affect operations and increase operating costs.
Some environmental groups have lobbied for more stringent regulation of cruise ships. Some groups also have generated negative publicity about the cruise industry and its environmental impact.
As a result, governmental authorities around the world may enact new environmental and health and safety legislation. For instance, the United StatesThe US Environmental Protection Agency is considering new laws and rules to manage cruise ship waste.StricterAlaskan authorities are currently investigating an incident that occurred in August 2002 on board Holland America's Ryndam involving a wastewater discharge from the ship. As a result of this incident, various Ryndam ship officers have received grand jury subpoenas from the US Attorney's office in Alaska. If the investigation results in charges being brought, sanctions could include a prohibition of operations in Alaska's Glacier Bay National Park and Preserve for a period of time.In addition, pursuant to a settlement with the US government in April 2002, Carnival Corporation pled guilty to certain environmental violations. Carnival Corporation was sentenced under a plea agreement pursuant to which Carnival Corporation paid fines in fiscal 2002 totaling $18 million to the US government and
healthother parties. Carnival Corporation accrued for these fines in fiscal 2001. Carnival Corporation was also placed on probation for a term of five years. Under the terms of the probation, any future violation of environmental laws by Carnival Corporation may be deemed a violation of probation. In addition, Carnival Corporation was required as a special term of probation to develop, implement andsafetyenforce a worldwide environmental compliance program. Carnival Corporation is in the process of implementing the environmental compliance program and expects to incur approximately $10 million in additional annual environmental compliance costs in 2003 and yearly thereafter as a result of the program. Since the completion of the DLC transaction, the terms of the environmental compliance program have become applicable to Carnival plc, which will result in higher environmental compliance costs for Carnival plc as well.Carnival Corporation & plc's costs of complying with current and future environmental laws and regulations, or liabilities arising from past or future releases of, or exposure to, hazardous substances or to vessel discharges, could increase the cost of compliance or otherwise materially adversely affect Carnival Corporation & plc's business, results of operations or financial condition.
New regulation of health, safety and security issues could increase operating costs and adversely affect
the cruise industry. WE FACE SIGNIFICANT COMPETITION FROM BOTH CRUISE LINES AND OTHER VACATION OPERATORS. We operate in the vacation market. We compete for consumer disposable leisure-time dollars with both other cruise operators and a wide array of vacation operators, including numerous land destinations and timeshare vacation operators located throughout the world. These operators attempt to obtain a competitive advantage by lowering prices and by improving their products by offering 10different vacation experiences, itineraries and locations. Since September 11, 2001, the major cruise lines, including our own, have announced the movement of some of their vessels from European to North American ports. The redeployment of such vessels may result in increased competition among the cruise lines with respect to Caribbean, Mexican Riviera and Alaska cruises. Our principal competitors include Royal Caribbean Cruise Ltd., which owns Royal Caribbean International and Celebrity Cruises, P&O Princess Cruisesnet income.Carnival Corporation & plc
which owns Princess Cruises, P&O Cruises and Aida Cruises, and Norwegian Cruise Line and Orient Lines, which are both owned by Star Cruises plc. On November 20, 2001, Royal Caribbean Cruise Ltd. and P&O Princess Cruises plc announced their intention to combine their businesses,is subject toshareholdervarious international, national, state andregulatory approvals. In the event that we do not compete effectively with other cruise companies and other vacation operators, our market share could decrease and our net revenue yields could be adversely affected. OUR OPERATING COSTS ARE SUBJECT TO MANY ECONOMIC AND POLITICAL FACTORS THAT ARE BEYOND OUR CONTROL. Some of our operating costs, including fuel costs, insurance premiumslocal health, safety and securitycosts,laws, regulations and treaties. The International Maritime Organization, sometimes referred to as the IMO, which operates under the United Nations, has adopted safety standards as part of the International Convention for the Safety of Life at Sea, sometimes referred to as SOLAS, which is applicable to all of Carnival Corporation & plc's ships. Generally SOLAS establishes vessel design, structural features, materials, construction and life saving equipment requirements to improve passenger safety and security.14
In addition, ships that call on US ports are subject to
increases becauseinspection by the US Coast Guard for compliance with SOLAS and by the US Public Health Service for sanitary standards. Carnival Corporation & plc's ships are also subject to similar inspections pursuant to the laws and regulations ofeconomic or political instability. Since September 11, 2001, our insurance costs have increased, and we have also incurred additional expense due to heightened security for our operations. Additional political instability or terrorist incidents could result in further increases to operating costs. Increases in operating costs could adversely affect our operating results because we may not be able to increasevarious other countries such ships visit. Finally, theprices on our cruise vacations to recover these increased costs. CONDUCTING BUSINESS INTERNATIONALLY MAY RESULT IN INCREASED COSTS. We operate our business internationally, and we plan to continue to develop our international presence, especially in Europe. Operating internationally exposes us toUS Congress recently enacted the Maritime Transportation Security Act of 2002 which implements a number ofrisks. Examples include currency fluctuations, interest rate movements, increasessecurity measures at US ports, including measures that relate to foreign flagged vessels calling at US ports.Carnival Corporation & plc believes that health, safety and security issues will continue to be areas of focus by relevant government authorities both in
dutiesthe US andtaxes, political uncertainty, andabroad. Resulting legislation or regulations, or changes inlaws and policies affecting cruising, vacationexisting legislation ormaritime businesses orregulations, could impact thegoverningoperations offoreign-based companies. If we are unableCarnival Corporation & plc and would likely subject Carnival Corporation & plc toaddress these risks adequately, our financial resultsincreasing compliance costs in the future.Delays in ship construction and problems encountered at shipyards could
be adversely affected. DELAYS OR FAULTS IN SHIP CONSTRUCTION COULD REDUCE OUR PROFITABILITY. Cruisereduce Carnival Corporation & plc's profitability.The construction of cruise ships
are largeis a complex process andcomplicated vessels, and building theminvolves risks similar to those encountered insimilarother sophisticated construction projects, including delays indeliverycompletion andfaulty construction. Delaysdelivery. In addition, industrial actions and insolvency orfaults in ship construction may result in delays or cancellations of scheduled cruises, necessitate unscheduled repairs and drydockingfinancial problems of theship and increase our shipbuilding costs and/or expenses. Industrial action, insolvency ofshipyardsor other eventsbuilding Carnival Corporation & plc's ships could also delay orindefinitely postponeprevent the delivery ofnew ships.its ships under construction. These events could adversely affect Carnival Corporation & plc's profitability. However, the impact from a delay inturn,delivery could be mitigated by contractual provisions and refund guarantees obtained by Carnival Corporation & plc.In addition, Carnival Corporation & plc has entered into forward foreign currency contracts to fix the cost in US dollars of some of Carnival Corporation & plc's foreign currency denominated shipbuilding contracts. If any of the shipyards are unable to perform under the related contract, the foreign currency forward contracts related to that shipyard's shipbuilding contracts would still have to be honored. This might require Carnival Corporation & plc to realize a loss on an existing contract without having the ability to have an offsetting gain on its foreign currency denominated shipbuilding contract, thus adversely affecting the financial results of Carnival Corporation & plc.
Risks Relating to the DLC Transaction
Benefits from the DLC structure may not be achieved to the extent or within the time period currently expected, which could eliminate, reduce and/or delay the improvements in cost savings and operational efficiencies expected to be generated by the DLC structure.
Since completion of the DLC transaction, Carnival Corporation and Carnival plc have been managed as if they
arewere a single economic enterprise. Carnival Corporation and Carnival plc expect their combination under the DLC structure to enable them to achieve cost savings through synergies as well as enhanced operational efficiencies. However, both may encounter substantial difficulties during this process that could eliminate, reduce and/or delay the realization of the cost savings and synergies that both currently expect. Among other things, these difficulties could include:
- •
- loss of key employees;
- •
- inconsistent and/or incompatible business practices, operating procedures, information systems, financial controls and procedures, cultures and compensation structures between Carnival Corporation and Carnival plc;
- •
- unexpected integration issues and higher than expected integration costs; and
- •
- the diversion of management's attention from day-to-day business as a result of the need to deal with integration issues.
15
As a result of these difficulties, the actual cost savings and synergies generated by the DLC structure may be less, and may take longer to realize, than Carnival Corporation and Carnival plc currently expect.
The structure of the DLC transaction involves risks not
coveredassociated with the more common ways of combining the operations of two companies and these risks may have an adverse effect on the economic performance of the companies and/or their respective share prices.The DLC structure is a relatively uncommon way of combining the management and operations of two companies and it involves different issues and risks from those associated with the other more common ways of effecting such a combination, such as a merger or exchange offer to create a wholly owned subsidiary. In the DLC transaction, the combination was effected primarily by means of contracts between Carnival Corporation and Carnival plc and not by operation of a statute or court order. The legal effect of these contractual rights may be different from the legal effect of a merger or amalgamation under statute or court order and there may be difficulties in enforcing these contractual rights. Shareholders and creditors of either company might challenge the validity of the contracts or their lack of standing to enforce rights under these contracts, and courts may interpret or enforce these contracts in a manner inconsistent with the express provisions
or insurance, adversely affect our financial results. THE INABILITY OF QUALIFIED SHIPYARDS TO BUILD OUR SHIPS COULD REDUCE OUR FUTURE PROFITABILITY. We believeand intentions of Carnival Corporation and Carnival plc expressed in such contracts. In addition, shareholders and creditors of other companies might successfully challenge other dual listed company structures and establish legal precedents thatthere arecould increase the risk of alimited number of shipyardssuccessful challenge to the DLC transaction. Carnival Corporation & plc is maintaining two separate public companies and complies with both Panamanian corporate law and English company and securities laws and different regulatory and stock exchange requirements in theworld capableUK and the US. This structure is likely to require more administrative time and cost than was the case for each company individually, which may have an adverse effect on Carnival Corporation & plc's operating efficiency.Courts may interpret or enforce the contracts and other instruments that effect the DLC structure in a manner inconsistent with the express provisions and intentions of Carnival Corporation and Carnival plc.
Various provisions of the
quality constructionconstituent documents oflarge passenger cruise ships. We currentlyCarnival Corporation and Carnival plc, the equalization and governance agreement and the deeds of guarantee, which were entered into by Carnival Corporation and Carnival plc on April 17, 2003, are intended to ensure that, as far as practicable, the shareholders and creditors of Carnival Corporation and Carnival plc are treated equitably in the event of insolvency of either or both companies and in accordance with the equalization ratio, regardless of where the assets of Carnival Corporation & plc reside. Courts may interpret or enforce these contracts in a manner inconsistent with the express provisions and intentions of Carnival Corporation and Carnival plc expressed in those contracts and other instruments. For instance, a bankruptcy court may not choose to follow the companies' contractual way of allocating liabilities and assets. Therefore, if assets were transferred between the two companies, a court, faced with the liquidation or dissolution of either company, may not adhere to the intentions of Carnival Corporation and Carnival plc to treat both companies' creditors as creditors of Carnival Corporation & plc under their respective deeds of guarantee. As a result, the rights of creditors of a company that transfers assets to the other member of Carnival Corporation & plc may be adversely affected if a court determines that those creditors only havecontracts with threerecourse to the assets of that company and not the other company.Economic returns on shares of Carnival Corporation and Carnival plc will be dependent upon the economic performance of Carnival Corporation & plc, and the inability of one company to pay dividends may limit or prevent the payment of dividends by the other.
Under the DLC structure, the dividends paid on shares of Carnival Corporation and Carnival plc will depend primarily on the economic performance of the assets of both companies of Carnival
16
Corporation & plc. Therefore, the past performance of Carnival plc shares and Carnival Corporation shares may not reflect the future performance of these
shipyards forshares. Additionally, if one company is unable to pay dividends on its shares, theconstruction of 15 shipsother company must make such payments toenter service overthenext four years. Our primary competitors also have contractsother and/or scale back its dividend in order toconstruct new cruise ships. If we electequalize the distributions in accordance with the equalization ratio. After taking into consideration the actions necessary tobuild additional shipsequalize such distributions, both companies may be limited in their ability, or unable, to pay dividends.Changes under the
future, which we expect to do, there is no assurance that any of these shipyards will have the available capacity to build additional new ships for us at the times desired by us or that the shipyards will agree to build additional ships at a cost acceptable to us. Additionally, there is no assurance that ships under contract for construction will be delivered. These events, in turn, could adversely affect our financial results. 11RISKS RELATING TO OUR CORPORATE STRUCTURE ANY CHANGE OF OUR TAX STATUS UNDER THE UNITED STATES INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), COULD HAVE AN ADVERSE EFFECT ON OUR NET INCOME AND SHAREHOLDERS. We are a foreign corporation engaged in a trade or business in the United States, and our ship-owning subsidiaries are foreign corporations that, in many cases, depending upon the itineraries of their ships, receive income from sources within the United States. To the best of our knowledge, we believe that, under Section 883 of theInternal Revenue Code,andapplicable US income tax treaties,our incomeand the uncertainty of the DLC structure under the Internal Revenue Code may adversely affect the US federal income taxation of the US source shipping income ofour ship-owning subsidiaries, in each case derived from or incidental to the international operation of a ship or ships, is currently exempt from United States federal income tax. WeCarnival Corporation & plc.Carnival Corporation & plc believe that substantially all of
our income, andthe US source shipping income ofour ship-owning subsidiaries, with the exceptioneach of Carnival Corporation and Carnival plc qualifies for exemption from US federal income tax, under:
- •
- Section 883 of the
United States sourceInternal Revenue Code;- •
- as appropriate in the case of Carnival plc and its UK resident subsidiaries, the US-UK Income Tax Treaty that entered into force on April 25, 1980, which is referred to below as the "old US-UK treaty", and, when applicable, the new US-UK Income Tax Treaty that entered into force on March 31, 2003, which is referred to as the "new US-UK treaty"; or
- •
- other applicable US income
fromtax treaties,and should continue to so qualify now that the
transportation, hotelDLC transaction has been completed. The new US-UK treaty contains some limitations that would deny the availability of treaty benefits for income earned through some entities, including some Carnival plc entities. However, the relevant provisions of the new US-UK treaty will not become effective until 2004 andtour businessCarnival plc and its UK resident subsidiaries may elect, in some circumstances, to continue application ofHolland America Tours, is derived from or incidentalthe old US-UK treaty until twelve months beyond the date on which it would otherwise be effective. Carnival plc believes that it will be able to reorganize prior to theinternational operationdate on which new US-UK treaty becomes applicable such that the relevant US source shipping income should qualify for exemption from US federal income tax under the new US-UK treaty or Section 883. There is, however, no existing US federal income tax authority that directly addresses the tax consequences of implementation of aship or ships withindual listed company structure such as themeaningDLC structure for purposes of Section 883and applicableor any other provision of the Internal Revenue Code or any income taxtreaties. We believe that wetreaty and,many of our ship-owning subsidiaries currently qualify forconsequently, theSection 883 exemption since each of us is incorporated in qualifying jurisdictions and our common stock is primarily and regularly traded on an established securities market in the United States.matters discussed above are not free from doubt.To date,
however,no final US Treasury regulations or other definitive interpretations of the relevant portions of Section 883 have been promulgated, although regulations have been proposed.See the risk factor immediately below for a discussion of the proposed regulations under Section 883. ThoseAny such final regulations or official interpretations could differ materially fromourCarnival Corporation's and Carnival plc's interpretation of this Internal Revenue Code provision and, even in the absence of differing regulations or official interpretations, the Internal Revenue Service might successfully challengeour interpretation.either or both interpretations. In addition, the provisions of Section 883 are subject to change at any time by legislation. Moreover, changes could occur in the future with respect to the trading volume or trading frequency of Carnival Corporation shares and/or Carnival plc shares on their respective exchanges or with respect to the identity, residence, or holdings ofourCarnival Corporation's and/or Carnival plc's direct or indirect shareholders that could affectourthe eligibility of Carnival Corporation andour subsidiaries' eligibilityits subsidiaries and/or certain members of the group consisting of Carnival plc, its subsidiaries and its subsidiary undertakings which are otherwise eligible for the benefits of Section 883 to qualify for the benefits of the Section 883 exemption. Accordingly, it is possible thatweCarnival Corporation andourits ship-owning or operating subsidiarieswill not be exempt from United States federal incomeand/or certain members of the group consisting of Carnival plc, its subsidiaries and its subsidiary undertakings whose tax exemption is based onUnited States-source shipping income.Section 883 may lose this exemption. Ifwe and our ship-owning subsidiariesany such corporation were not entitled to thebenefitbenefits of Section 883,weit would be subject toUnited StatesUS federal income taxation on a portion ofourits income, which would reduceourthe netincome. We believe that theincome ofsomesuch corporation.17
As noted above, Carnival plc believes that substantially all of
our ship-owningthe US source shipping income of Carnival plc and its UK resident subsidiariescurrentlyqualifies for exemption fromUnited StatesUS federal income tax underbilateraleither the old or new US-UK treaties, as applicable. In addition, certain companies of Carnival Corporation & plc may rely on other US income taxtreaties.treaties for similar exemptions from US taxation on US source shipping income. Carnival Corporation and Carnival plc do not believe that the DLC transaction will affect the ability of these corporations to continue to qualify for such treaty benefits. There is, however, no authority that directly addresses the effect, if any, of DLC arrangements or the availability of benefits under the treaties and, consequently, the matter is not free from doubt.These treaties may be
cancelledabrogated by either applicable country, replaced orreplacedmodified withanewagreementagreements thattreatstreat shipping income differently than under the agreements currently in force. Ifthese subsidiariesany of the corporations discussed in the paragraph above that currently qualify for exemption from US source shipping income under any applicable US income tax treaty do not qualify for benefits under the existing treaties or if the existing treaties arecancelledabrogated, replaced or materially modified in a manner adverse toourthe interests of any such corporation and,the subsidiaries dowith respect to US federal income tax only, such corporation does not qualify fortheSection 883 exemption,the ship-owning subsidiaries wouldsuch corporation may be subject toUnited StatesUS federal income taxation on a portion oftheirits income, which would reduceourthe netincome. FAILURE TO COMPLY WITH THE PROPOSED TREASURY REGULATIONS COULD HAVEincome of any such corporation.A
NEGATIVE IMPACT ON OUR NET INCOME AND STOCK PRICE. ALSO, IN ORDER TO COMPLY WITH PROPOSED TREASURY REGULATIONS, YOUR ABILITY TO ACQUIRE OR TRANSFER OUR COMMON STOCK AND THE LYONS IS RESTRICTED. On February 8, 2000, the United States Treasury Department issued proposed Treasury regulations to Section 883small group of shareholders collectively owns approximately 33% of theCode, relating to income derived by foreign corporations from the international operation of ships and aircraft. The proposed regulations provide, in general, that a corporation organized in a qualified foreign country and engaged in the international operation of ships or aircraft shall exclude qualified income from gross income for purposes of United States federal income taxation provided that the corporation can satisfy certain ownership requirements, including, among other things, that its stock is publicly traded. A publicly traded corporation will satisfy this requirement if more than 50% of its stock is owned by persons who each own less than 5%total combined voting power of thevalue of the 12outstanding shares of the corporation's capital stock. To the best of our knowledge, after due investigation, we believe that we currently qualify as a publicly traded corporation under these proposed regulations. However, because various members of the Arison familyCarnival Corporation & plc andcertain trusts established for their benefit currently own approximately 47% of our common stock, there is the potential that another shareholder could acquire 5% or more of our common stock, which could jeopardize our qualification as a publicly traded corporation. If, in the future, we were to fail to qualify as a publicly traded corporation, we would be subject to United States federal income tax on our income associated with our cruise operations in the United States. In such event, our net income and stock price would be negatively impacted. As a precautionary matter, we amended our second amended and restated articles of incorporation to ensure that we will continue to qualify as a publicly traded corporation under the proposed regulations. This amendment provides that no one person or group of related persons, other than certain members of the Arison family and certain trusts established for their benefit, may own or be deemed to own by virtue of the attribution provisions of the Code more than 4.9% of our common stock, whether measured by vote, value or number of shares. Any shares of our common stock acquired in violation of this provision will be transferred to a trust and, at the direction of our board of directors, sold to a person whose shareholding does not violate that provision. No profit for the purported transfereemay berealized from any such sale. In addition, under specified circumstances,able to effectively control thetrust may transfer the common stock at a loss to the purported transferee. Because the LYONs are convertible into common stock, the transferoutcome ofthe LYONs will be subject to similar restrictions. See "Description of LYONs--Ownership Limitation on LYONs." These transfer restrictions may also have the effect of delaying or preventing a change in our control or other transactions in which the shareholders might receive a premium for their shares of our common stock over the then prevailing market price or which the shareholders might believe to be otherwise in their best interest. A GROUP OF PRINCIPAL SHAREHOLDERS EFFECTIVELY CONTROLS US AND HAS THE POWER TO CAUSE OR PREVENT A CHANGE OF CONTROL.shareholder voting.A group of shareholders,
comprising certainconsisting of some members of the Arison family, including Micky Arison,our chairman and chief executive officer,and trusts established for their benefit, beneficiallyown, asowns approximately 44% of thedateoutstanding common stock of Carnival Corporation and owns shares entitled to constitute a quorum at shareholder meetings and to cast approximately 33% of the total combined voting power of the outstanding shares of Carnival Corporation & plc. Depending upon the nature and extent of the shareholder vote, thisprospectus,group of shareholders may have the power to effectively control, or at least to influence substantially, the outcome of shareholder votes and, therefore, the corporate actions requiring such votes.Provisions in the Carnival Corporation and Carnival plc governing documents may prevent or discourage takeovers and business combinations that shareholders in Carnival Corporation & plc might consider in their best interests, and may prevent you from converting your debentures.
Carnival Corporation's articles and by-laws and Carnival plc's articles contain provisions that may delay, defer, prevent or render more difficult a
totaltakeover attempt that shareholders in Carnival Corporation & plc might consider to be in their best interests. For instance, these provisions may prevent shareholders in Carnival Corporation & plc from receiving a premium to the market price ofapproximately 47%Carnival Corporation shares and/or Carnival plc shares offered by a bidder in a takeover context. These additional takeover restrictions provide, generally, that no person will be able to obtain control of Carnival Corporation & plc without making an offer to the shareholders of both companies on equivalent terms. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of Carnival Corporation shares or Carnival plc shares if they are viewed as discouraging takeover attempts in the future.Specifically, Carnival Corporation's articles contain provisions that prevent third parties, other than the Arison family and trusts for their benefit, from acquiring beneficial ownership of more than 4.9% of the outstanding Carnival Corporation shares without the consent of our board of directors and provide for the lapse of rights, and sale, of any shares acquired in excess of that limit. In addition, because the debentures are convertible into our common stock, pursuant to the terms of the indenture, no debenture holder will be entitled to convert debentures into shares of our common stock, which, when added to shares of our common stock already owned or deemed owned by the debenture holder,
18
would exceed 4.9% of all shares of our outstanding common stock.
AsFor more information regarding this limitation, please see "Description of the Debentures—Conversion Rights—Ownership Limitations." Furthermore, Carnival Corporation's and Carnival plc's governing documents contain provisions that would apply some of the anti-takeover protections provided by the UK Takeover Code to both companies. No third party, other than the Arison family and trusts for their benefit, may acquire additional shares or voting control over shares in either company, if such person would then be able to cast 30% or more of the votes which could be cast on aresult, this groupjoint electorate action, without making an equivalent offer for the other company. Carnival Corporation's articles and by-laws provide that Carnival Corporation shareholders cannot act by written consent. The combined effect of these provisions may preclude third parties from seeking to acquire a controlling interest in either company in transactions that shareholders might consider to be in their best interests and may prevent them from receiving a premium above market price for their shares. These provisions may only be amended by both sets of shareholders,has the power to substantially influence the electionvoting separately as a class, in a class rights action. See "Description ofdirectorsCarnival Corporation Capital Stock."We are not a US corporation, and our
affairs and policies withoutshareholders may be subject to theconsentuncertainties ofour other shareholders. In addition, this group has the power to prevent or causeachangeforeign legal system incontrol. WE ARE NOT A UNITED STATES CORPORATION, AND OUR SHAREHOLDERS MAY BE SUBJECT TO THE UNCERTAINTIES OF A FOREIGN LEGAL SYSTEM IN PROTECTING THEIR INTERESTS.protecting their interests.Our corporate affairs are governed by our
secondthird amended and restated articles of incorporation and amended and restated by-laws and by the corporate laws of Panama.Thus, our public shareholdersThe corporate laws of Panama mayhave more difficultydiffer inprotecting their interestssome respects from the corporate laws in thefaceUnited States.Risks Relating to the Debentures and Our Common Stock
You should consider the United States federal income tax consequences of
actions byowning themanagement, directorsdebentures.The debentures were issued with "original issue discount" for US federal income tax purposes, and are subject to US federal income tax regulations applicable to debt instruments issued with original issue discount. Under that characterization and treatment, you will be required each year to include amounts in income as interest income, regardless of whether actual cash payments of interest are made in such year. A discussion of the US federal income tax consequences of ownership of the debentures is contained in this prospectus under the heading "Certain Panamanian and United States Federal Income Tax Consequences."
We may not have the ability to raise the funds necessary to finance the change in control repurchase option or
controlling shareholdersthe repurchase at the option of the holder provision in the debentures.Upon the occurrence of specific kinds of change in control events occurring on or before April 29, 2008, and on the April 29, 2008, 2013, 2018, 2023 and 2028 purchase dates, we may be required to repurchase all outstanding debentures. In addition, we have other outstanding convertible debt instruments that have change in control repurchase obligations, and we may in the future issue additional similar securities. It is possible that we will not have sufficient funds to make the required repurchase of debentures in cash or that restrictions in our debt instruments will not allow such repurchases. Under the debentures, we may pay the purchase price described above, other than
would shareholdersin the case of acorporation incorporatedchange of control, ina United States jurisdiction. 13RISKS RELATING TO THE LYONS AND OUR COMMON STOCK AN ACTIVE TRADING MARKET FOR THE LYONS MAY NOT DEVELOP.shares of common stock. See "Description of the Debentures—Purchase of Debentures by Us at the Option of the Holder" and "Description of the Debentures—Change in Control Permits Purchase of Debentures by Us at the Option of the Holder."An active trading market for the debentures may not develop.
The
LYONsdebentures are a new issue of securities for which there is currently no public market and no active trading market might ever develop.If the LYONs are traded, theyThe debentures may trade at a discount from their initial offering price, depending on prevailing interest rates, the market for similar securities, the price, and19
volatility in the price, of our shares of common stock, our performance and other factors. In addition, we do not know whether an active trading market will develop for the
LYONs.debentures. To the extent that an active trading market does not develop, the liquidity and trading prices for theLYONsdebentures may be harmed.WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO FINANCE THE CHANGE IN CONTROL REPURCHASE OPTION OR THE REPURCHASE AT THE OPTION OF THE HOLDER PROVISION IN THE LYONS. UponRisks Relating to the
occurrenceGuaranteesCarnival plc's guarantee and POPCIL's guarantee are governed by the laws of
specific kindsa foreign jurisdiction, and an action to enforce either guarantee must be brought in the courts ofchangeEngland.Unlike the debentures offered by this prospectus, which are governed by the laws of the State of New York, Carnival plc's guarantee and POPCIL's guarantee of Carnival Corporation's debt securities are issued under separate deeds of guarantee that are governed by the laws of the Isle of Man. An action to enforce either guarantee must be brought exclusively in
control events occurring on or before October 24, 2008, and onthe2006, 2008, 2011 and 2016 purchase dates, wecourts of England. Because of the exclusive jurisdiction of English courts, an action to enforce either guarantee may berequiredseparate from an action torepurchase all outstanding LYONs. However, it is possible that we will not have sufficient funds at such time to makeenforce therequired repurchase of LYONs in cash or that restrictions in our debt instruments will not allow such repurchases. See "Description of LYONs--Purchase of LYONs by Us at the Optionterms of theHolder"debentures or related indenture. Furthermore, the Carnival plc deed of guarantee was executed in connection with the DLC transaction. DLC transactions are relatively unusual and"--Changethere is little or no case law inControl Permits Purchasethe Isle ofLYONsMan or the United Kingdom relating to DLC transactions or the agreements related to them. As a result of all of these factors, it may be more difficult, expensive and time consuming for holders to enforce the guarantees of Carnival plc and POPCIL than a guarantee governed byUs at the OptionNew York law in a more traditional financing.Furthermore, because a substantial portion of Carnival Corporation's assets are located outside of the
Holder." THE HOLDERS OF OUR COMMON STOCK MAY EXPERIENCE A DILUTION IN THE VALUE OF THEIR EQUITY INTEREST AS A RESULT OF THE ISSUANCE AND SALE OF ADDITIONAL SHARES OF OUR COMMON STOCK. A substantial numberUnited Kingdom, any judgment related to the guarantee in England would then need to be enforced in other countries, such as the United States, which may require further litigation.Carnival plc's guarantee and POPCIL's guarantee may be unenforceable due to fraudulent conveyance statutes and, accordingly, you could have no claim against either, as guarantor of
sharesany Carnival Corporation debt securities.Although laws differ among various jurisdictions, a court could, under fraudulent conveyance laws, subordinate or avoid the guarantees of
our common stockCarnival plc or POPCIL if it found that the guarantee was incurred with actual intent to hinder, delay or defraud creditors, or if the relevant guarantor did not receive fair consideration or reasonably equivalent value for the guarantee and that the relevant guarantor:
- •
- was insolvent or rendered insolvent because of the guarantee;
- •
- was engaged in a business or transaction for which its remaining assets constituted unreasonably small capital; or
- •
- intended to incur, or believed that it would incur, debts beyond the relevant guarantor's ability to pay at maturity.
Neither Carnival plc nor POPCIL believe that the issuance of their guarantee will be a fraudulent conveyance because, among other things, both Carnival plc and POPCIL will receive benefits. Carnival plc will receive a reciprocal guarantee by Carnival Corporation of its indebtedness, a major portion of which is currently guaranteed by POPCIL. In addition, Carnival plc and POPCIL receive the benefit of a streamlining and unification of the debt capital structure of Carnival Corporation & plc as a whole. However, if a court were
issuedto void the guarantee of a specific guarantor as the result of a fraudulent conveyance byussuch guarantor or hold it unenforceable for any other reason, you would cease to have a claim against that guarantor based on its guarantee and would solely be a creditor of Carnival Corporation and the remaining guarantor.20
Some of the statements contained in
privatethis prospectus or incorporated by reference into this prospectus are "forward-looking statements" that involve risks, uncertainties and assumptions with respect to Carnival Corporation, Carnival plc and Carnival Corporation & plc, including some statements concerning the transactions described in this prospectus, future results, plans, goals and other events which have notinvolving a public offering andyet occurred. These statements aretherefore treated as "restricted securities"intended to qualify forpurposesthe safe harbors from liability provided by Section 27A ofRule 144 underthe Securities Actor are held by our affiliatesandtherefore, treated as "restricted securities" or "control securities." Some membersSection 21E of theArison family and related entities beneficially own approximately 47%Exchange Act. You can find many, but not all, ofour outstanding common stock. No predictions can be made as to the effect, if any, that the issuance and availability for future market sales of shares of our common stock will have on the market price of our common stock prevailing from time to time. Sales of substantial amounts of our common stock (including shares issued upon the exercise of stock options), or the perception that such sales could occur, could materially adversely affect the prevailing market price for our common stock and could impair our future ability to raise capital through an offering of equity securities. SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS Certain statements in this prospectus constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. We have tried, wherever possible, to identify suchthese statements byusinglooking for wordssuch as "anticipate,like "will,""assume,"may,""believe,"believes,""expect,"expects,""intend,"anticipates,""plan""forecast," "future," "intends," "plans" andwords"estimates" andterms offor similarsubstance in connection with any discussion of future operating or financial performance. Theseexpressions.Because forward-looking statements, including those which may impact the forecasting of
ournet revenue yields, booking levels, pricing, occupancy, operating, financing and tax costs, estimates of ship depreciable lives and residual value or business prospects, involveknownrisks andunknown risks,uncertainties, there are many factors that could cause Carnival Corporation's, Carnival plc's andother factors, which may cause ourCarnival Corporation & plc's actual results,performancesperformance or achievements tobediffer materiallydifferentfromany future results, performances or achievementsthose expressed or impliedby such forward-looking statements. Suchin this prospectus. These factors include,among others,but are not limited to the following:-
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- achievement of expected benefits from the DLC transaction;
- •
- risks associated with the DLC structure;
- •
- liquidity and index inclusion as a result of the implementation of the DLC structure, including a possible mandatory exchange of Carnival plc shares that may occur under Carnival plc's constituent documents;
- •
- risks associated with the uncertainty of the tax status of the DLC structure;
- •
- general economic and business conditions which may impact levels of disposable income of consumers and the net revenue yields for
ourthe cruiseproducts; - consumer demand for cruises; - effects on consumer demandbrands of Carnival Corporation & plc;- •
- conditions in the cruise and land-based vacation industries, including competition from other cruise ship operators and providers of other vacation alternatives and increases in capacity offered by cruise ship and land-based vacation alternatives;
- •
- the impact of operating internationally;
- •
- the international political and economic climate, the recent military action in Iraq, other armed conflicts,
political instability, terrorism, theterrorist attacks, availability of air service, andadverse media publicity; 14- increases in cruise industry capacity; - cruiseother world events and negative publicity and their impact on the demand for cruises;- •
- accidents and other incidents at sea affecting the health, safety, security and vacation
industry competition; -satisfaction of passengers;- •
- the ability of Carnival Corporation & plc to implement its shipbuilding program and brand strategies and to continue to expand its businesses worldwide;
- •
- the ability of Carnival Corporation & plc to attract and retain shipboard crew and maintain good relations with employee unions;
- •
- the ability to obtain financing on terms that are favorable or consistent with Carnival Corporation & plc's expectations;
- •
- the impact of changes in operating and financing costs, including changes in foreign currency and interest rates and fuel, food, insurance and security costs;
- •
- changes in the tax, environmental, health, safety, security and other regulatory regimes under which Carnival Corporation & plc operates;
21
- •
- continued availability of attractive port destinations;
- changes in tax laws and regulations; - our- •
- the ability to successfully implement
our shipbuilding programcost improvement plans and tocontinueintegrate business acquisitions;- •
- continuing financial viability of Carnival Corporation & plc's travel agent distribution system;
- •
- weather patterns or natural disasters; and
- •
- the ability of a small group of shareholders effectively to
expand our business outsidecontrol theNorth American market; - our ability to attractoutcome of shareholder voting.These risks and
retain shipboard crew; - changesother risks are detailed inforeign currency rates, security expenses, food, fuel, insurancethe section entitled "Risk Factors" andcommodity pricesin the SEC reports of Carnival Corporation andinterest rates; - deliveryCarnival plc. That section and those reports contain important cautionary statements and a discussion ofnew ships on schedulemany of the factors that could materially affect the accuracy of Carnival Corporation & plc's forward-looking statements and/or adversely affect Carnival Corporation & plc's businesses, results of operations andat the contracted prices; - weather patterns; - unscheduled ship repairsfinancial positions, which statements anddrydocking; - incidents involving cruise ships; - impact of pending or threatened litigation; and - changesfactors are incorporated inlaws and regulations applicable to us. We caution the reader that these risks may not be exhaustive. We operate in a continually changing business environment, and new risks emerge from time to time. We cannot predict such risks nor can we assess the impact, if any, of such risks on our business or the extent to which any risk, or combination of risks may cause actual results to differ from those projected in any forward-looking statements. Accordingly, forward-lookingthis prospectus by reference.Forward-looking statements should not be relied upon as a prediction of actual results.
We undertake noSubject to any continuing obligations under applicable law or any relevant listing rules, Carnival Corporation & plc expressly disclaims any obligation topublicly updatedisseminate, after the date of this prospectus, any updates orreviserevisions to any such forward-looking statementswhether as a result of new information, futureto reflect any change in expectations or events, conditions orotherwise. 15circumstances on which any such statements are based. 22
RATIO OF EARNINGS TO FIXED CHARGESCarnival Corporation
The following table sets forth our ratio of earnings to fixed charges on a historical basis for the periods
indicated and on an unaudited pro forma basis for the nine months ended August 31, 2001 and the fiscal year ended November 30, 2000. The pro forma data give effect to the application of the proceeds of the LYONs and the amortization of deferred financing expenses.indicated. Earnings include net income, adjusted for income taxes, minority interest andincomeloss (income) from affiliated operationsnet ofand dividends received, plus fixed charges and exclude capitalized interest. Fixed charges include gross interest expense, amortization of deferred financing expenses and an amount equivalent to interest included in rental charges. We have assumed that one-third of rental expense is representative of the interestfactor.portion of rent expense.
HISTORICAL PRO FORMA -------------------------------------------------------------------------- ------------------------------- NINE MONTHS ENDED AUGUST 31, YEARS ENDED NOVEMBERThree Months
Ended
February 28,Years Ended November 30, NINE MONTHS YEAR ENDED ------------------- ---------------------------------------------------- ENDED AUGUST 31, NOVEMBER 30,2003 2002 2001 2000 20001999 1998 1997 1996 2001 2000 -------- -------- -------- -------- -------- -------- -------- ---------------- ------------Ratio of earnings to fixed charges...... 8.3x 13.6xcharges(1)3.8x 6.9x 7.1x 11.5x 11.3x 8.8x 9.0x 6.4x 7.7x 9.5xPRICE RANGE OF COMMON STOCK AND DIVIDENDS Our common stock is traded on the New York Stock Exchange under the symbol "CCL". The intra-day high and low of our common stock sales prices for the periods indicated were as follows:
HIGH LOW -------- --------FISCAL 1999 First Quarter............................................. $49.125 $34.875 Second Quarter............................................ $53.500 $38.500 Third Quarter............................................. $50.500 $39.750 Fourth Quarter............................................ $51.875 $38.125 FISCAL 2000 First Quarter............................................. $51.250 $27.250 Second Quarter............................................ $29.063 $21.188 Third Quarter............................................. $27.500 $18.313 Fourth Quarter............................................ $25.875 $19.563 FISCAL 2001 First Quarter............................................. $34.938 $21.938 Second Quarter............................................ $33.400 $23.600 Third Quarter............................................. $33.740 $25.890 Fourth Quarter (through November 28, 2001)................ $31.450 $16.950As of November 28, 2001, there were approximately 4,594 holders of record of our common stock. We declared cash dividends on all of our common stock in the amount of $.09 per share in each of the first three quarters of fiscal 1999 and $.105 for each subsequent quarter through and including the fourth quarter of fiscal 2001. Payment of future dividends on the common stock will depend upon, among other factors, our earnings, financial condition and capital requirements. We may also declare special dividends to all shareholders in the event that members of the Arison family and certain related entities, as a result of any future income tax audit, are required to pay additional income taxes by reason of their ownership of our common stock. 16The Republic of Panama does not currently have tax treaties with any other country. Under current law, we believe that distributions to our shareholders, other than residents of Panama or other business entities conducting business in Panama, are not subject to taxation under the laws of the Republic of Panama. Dividends that we pay to United States citizens, residents, corporations and to foreign corporations doing business in the United States, to the extent treated as "effectively connected" income, will be taxable as ordinary income for United States federal income tax purposes to the extent of our current or accumulated earnings and profits, but generally will not qualify for any dividends-received deduction. The payment and amount of any dividend is within the discretion of our board of directors, and it is possible that the amount of any dividend may vary from the levels discussed above. 17SELECTED CONSOLIDATED FINANCIAL DATA The selected consolidated financial data presented below for the fiscal years ended November 30, 2000, 1999, 1998, 1997 and 1996, and as of the end of each such fiscal year, are derived from our audited financial statements and should be read in conjunction with those financial statements and the related notes. The selected financial data presented below for the nine month periods ended August 31, 2001 and 2000, are derived from our unaudited financial statements and should be read in conjunction with those financial statements and related notes.
NINE MONTHS ENDED AUGUST 31, YEARS ENDED NOVEMBER 30, ----------------------- -------------------------------------------------------------- 2001 2000 2000 1999 1998 1997 1996 ---------- ---------- ---------- ---------- ---------- ---------- ---------- (IN THOUSANDS, EXCEPT PER SHARE DATA)INCOME STATEMENT AND OTHER DATA (3): Revenues...................... $3,576,649 $2,928,216 $3,778,542 $3,497,470 $3,009,306 $2,447,468 $2,212,572 Operating income before income from affiliated operations.................. 816,218 778,756 945,130 943,941 819,792 660,979 551,461 Operating income.............. 772,194 774,395 982,958 1,019,699 896,524 714,070 597,428 Net income.................... 809,888 (4) 771,663 965,458 1,027,240 835,885 666,050 566,302 Earnings per share (1): Basic....................... $ 1.39 $ 1.28 $ 1.61 $ 1.68 $ 1.40 $ 1.12 $ 0.98 Diluted..................... 1.38 1.27 1.60 1.66 1.40 1.12 0.96 Dividends declared per share (1)......................... 0.315 0.315 0.420 0.375 0.315 0.240 0.190 Capital expenditures.......... 713,328 882,460 1,003,348 872,984 1,150,413 497,657 901,905 Available lower berth days.... 15,500 11,808 15,888 14,336 12,237 10,992 9,838 Occupancy percentage (2)...... 107.0% 106.1% 105.4% 104.3% 106.3% 108.3% 107.6%
AS OF AUGUST 31, AS OF NOVEMBER 30, ------------------------ -------------------------------------------------------------- 2001 (3) 2000 2000 (3) 1999 1998 1997 1996 ----------- ---------- ---------- ---------- ---------- ---------- ---------- (IN THOUSANDS)BALANCE SHEET DATA: Total assets................. $11,275,806 $8,592,170 $9,831,320 $8,286,355 $7,179,323 $5,426,775 $5,101,888 Long-term debt (excluding portion due within one year).......... 2,478,482 1,475,831 2,099,077 867,515 1,563,014 1,015,294 1,316,632 Total shareholders' equity... 6,546,416 5,769,186 5,870,617 5,931,247 4,285,476 3,605,098 3,030,884- ------------------------------
- (1)
All per share amounts have- This ratio has been
adjusted as of such date to reflect a two-for-one stock split effective June 12, 1998. (2) In accordance with cruise industry practice, occupancy percentage iscalculated basedupon two passengers per cabin even though some cabins can accommodate three or four passengers. The percentages in excess of 100% indicate that more than two passengers occupied some cabins. (3) Since June 1997, we owned 50% of Costa. On September 29, 2000, we completed the acquisition of the remaining 50% interest in Costa. We accounted for this transaction using the purchase accounting method. Prior to the fiscal 2000 acquisition, we accounted for our 50% interest in Costa using the equity method. Commencing in fiscal 2001, Costa's results of operations have been consolidatedona current month basis in the same manner as our other wholly-owned subsidiaries. Our November 30, 2000 and August 31, 2001 consolidated balance sheets include Costa's balance sheet. See Note 3 to our financial statements for the year ended November 30, 2000, which are incorporated by reference in this prospectus. (4) Our net income for the nine months ended August 31, 2001 includes an impairment loss of approximately $101 million and a nonoperating net gain of approximately $100 million from the sale of our investment in Airtours plc. See Notes 8 and 9 to our financial statements for the nine months ended August 31, 2001, which are incorporated by reference in this prospectus. 18CAPITALIZATIONUS GAAP.Carnival plc
The following table sets forth
our capitalization asCarnival plc's ratio ofAugust 31, 2001earnings to fixed changes on a historical basis for the periods indicated. Earnings include net income, adjusted for income taxes andasminority interest, plus fixed charges and exclude capitalized interest. Fixed charges include gross interest expense, amortization of deferred financing expenses and an amount equivalent to interest included in rental charges. Carnival plc has assumed that one-third of rent expense is representative of the interest portion of rent expense.
Three Months
Ended
March 31,Years Ended 31 December, 2003 2002 2001 2000 1999 1998 Ratio of earnings to fixed changes(1) 1.4x 2.6x 3.4x 4.5x 7.8x 6.2x
- (1)
- This ratio has been calculated based on generally accepted accounting principles in the United Kingdom, which differ in some respects from US GAAP.
POPCIL
The following table sets forth POPCIL's ratio of earnings to fixed changes on a historical basis for the periods indicated. Earnings include net income, adjusted
asfor income taxes and minority interest, plus fixed charges and exclude capitalized interest. Fixed charges include gross interest expense, amortization ofsuch datedeferred financing expenses and an amount equivalent togiveinterest included in rental23
charges. POPCIL has assumed that one-third of rent expense is representative of the interest portion of rent expense.
Three Months
Ended
March 31,Years Ended 31 December, 2003 2002 2001 2000 1999 1998 Ratio of earnings to fixed charges(1) 2.8x 5.5x 8.1x 4.7x 7.8x 6.2x
- (1)
- This ratio has been calculated based on generally accepted accounting principles in the United Kingdom, which differ in some respects from US GAAP.
Carnival Corporation & plc
On a pro forma combined basis, giving effect to the
LYONs andDLC transaction as if it had occurred at theapplicationbeginning of thegross proceedsrelevant periods, Carnival Corporation & plc's ratio ofthat offering. See "Use of Proceeds."
AS OF AUGUST 31, 2001 ------------------------------------- ACTUAL AS ADJUSTED ----------------- ----------------- (in thousands, except per share data)Long-term debt (1): LYONs net of discount....................................... $ -- $ 500,000 2% convertible senior debentures due 2021................... 600,000 600,000 Unsecured debentures and notes, bearing interest at rates ranging from 6.15% to 7.7%, due through 2028.............. 848,749 848,749 Euro note, secured by one ship, bearing interest at euribor plus 0.5% (4.8% at August 31, 2001), due through 2008..... 128,554 128,554 Unsecured euro notes, bearing interest at rates ranging from euribor plus 0.19% to euribor plus 1.0% (4.7% to 5.4% at August 31, 2001), due 2001, 2005 and 2006 (2)............. 780,743 621,039 Unsecured euro notes, bearing interest at 5.57%, due in 2006...................................................... 272,074 272,074 Other....................................................... 30,210 30,210 ----------- ----------- Total long-term debt...................................... 2,660,330 3,000,626 Less portion due within one year.......................... (181,848) (22,144) ----------- ----------- Total long-term debt (excluding portion due within one year)................................................... 2,478,482 2,978,482 ----------- ----------- Shareholders' equity: Common stock; $.01 par value; 960,000 shares authorized; 620,006 shares issued..................................... 6,200 6,200 Additional paid-in capital.................................. 1,805,050 1,805,050 Retained earnings........................................... 5,501,532 5,501,532 Unearned stock compensation................................. (13,590) (13,590) Accumulated other comprehensive loss........................ (25,139) (25,139) Treasury stock; 33,848 shares at cost....................... (727,637) (727,637) ----------- ----------- Total shareholders' equity................................ 6,546,416 6,546,416 ----------- ----------- Total capitalization (excluding portion of long-term debt due within one year).................................... $ 9,024,898 $ 9,524,898 =========== ===========- ------------------------ (1) All borrowings are in U.S. dollars unless otherwise noted. Euro denominated notesearnings to fixed charges would have beentranslated to U.S. dollars at August5.3x for the year ended December 31,2001 exchange rate. (2) In May 2001, we entered into a five-year $235 million unsecured euro denominated revolving credit facility, of which $207 million was available at August 31, 2001. We intend to refinance a $70 million unsecured euro note, due in 2001, with proceeds from this revolver2002 andaccordingly, have classified this $70 million of outstanding debt as long-term at August 31, 2001. 192.6x for the three months ended February 28, 2003. The selling securityholders will receive all of the proceeds from the sale of the securities sold under this prospectus. We will not receive any of the proceeds from sales by the selling securityholders of
the offered securities. SELLING SECURITYHOLDERS The following table provides, as of November 28, 2001, the name of each selling securityholder, the principal amount at maturity of the LYONs held by such selling securityholder, the number of shares of common stock owned by such securityholder prior to its purchase of the LYONs and the common stock issuable upon conversion of the LYONs (based upon the initial conversion price). This information has been obtained from the selling securityholders. Selling securityholders representing an amount of up to an additional $817,138,000 aggregate principal amount at maturity of the LYONs will be added to the table prior to or after the effectiveness of the registration statement of which this prospectus is a part.
(2) PRINCIPAL AMOUNT AT MATURITY OF (3) (4) (5) LYONS PERCENT OF COMMON STOCK COMMON STOCK (1) BENEFICIALLY TOTAL ISSUABLE UPON OWNED PRIOR TO SELLING OWNED AND OUTSTANDING CONVERSION OF CONVERSION OF SECURITYHOLDER OFFERED LYONS THE LYONS LYONS* - --------------------------------- ------------- -------------- ----------------- -----------------BNP Paribas Equity Strategies SNC............................ $ 5,500,000 0.52% 91,281 241,406 First Union Securities, Inc...... 39,400,000 3.75% 653,908 0 Global Bermuda Limited Partnership.................... 3,300,000 0.31% 54,769 -- HBK Master Fund L.P.............. 9,000,000 0.86% 149,370 7,200 Highbridge International LLC..... 26,500,000 2.52% 439,811 -- J.P. Morgan Securities Inc....... 2,050,000 0.20% 34,023 187,218 Lakeshore International, Ltd..... 13,200,000 1.26% 219,076 -- MLQA Convertible Securities Arbitrage Ltd.................. 52,500,000 4.99% 871,325 -- Shepherd Investments International, Ltd............. 58,087,000 5.53% 964,050 -- St. Albans Partners Ltd.......... 10,000,000 1.00% 165,966 -- Triborough Partners QP, LLC...... 2,500,000 0.24% 41,491 -- Yield Strategies Fund I, LP...... 12,000,000 1.14% 199,160 --- -------------------------- * Assuming the sale of all LYONs and common stock issuable upon conversion of the LYONs, selling securityholders will not hold any LYONs and will hold the number of our common stock set forth in column (5) "Common Stock Owned Prior to Conversion of LYONs". At that time, no selling securityholder will hold more than 1% of our outstanding common stock. Except as described below, none of the selling securityholders listed above has, or within the past three years had, any position, office or any material relationship with us or any of our affiliates. Because the selling securityholders may offer all or some portion of the above-referencedsecurities under thisprospectus or otherwise, no estimate canprospectus.24
DESCRIPTION OF THE DLC TRANSACTIONThe DLC transaction combined the businesses of Carnival Corporation and Carnival plc through a number of contracts and amendments to Carnival Corporation's articles of incorporation and by-laws and to Carnival plc's memorandum of association and articles of association. The two companies have retained their separate legal identities, and each company's shares continue to be
givenpublicly traded on the NYSE for Carnival Corporation and the London Stock Exchange for Carnival plc, as well as Carnival plc's ADSs on the NYSE. However, both companies operate as if they were a single economic enterprise. The contracts governing the DLC transaction provide that Carnival Corporation and Carnival plc each continue to have separate boards of directors, but the boards and senior executive management of both companies are identical. In addition to their normal fiduciary duties to their respective companies and obligation to have regard to theamount of percentage that will be held by the selling securityholders upon termination of any sale. In addition, the selling securityholders identified above may have sold, transferred or otherwise disposed of all or a portion of such securities since October 24, 2001, in transactions exempt from the registration requirementsinterests of theSecurities Act. Generally, only selling securityholders identified in the foregoing table who beneficially own the securities set forth oppositeshareholders of their respectivenames in columns (2)companies, the directors of each company are entitled to have regard to the interests of the other company and(5) may sell offered securities underits shareholders. The amendments to theregistration statementconstituent documents ofwhich this prospectus forms a part. We may from time to time include additional selling securityholders in supplements to this prospectus. 20PLAN OF DISTRIBUTION The LYONs and underlying common stock, which we will refer to as offered securities, are being registered to permiteach of theresale of such securities bycompanies also provide that, on most matters, the holders ofthemthe common equity of both companies effectively vote as a single body. On specified matters where the interests of Carnival Corporation shareholders may differ fromtimethe interests of Carnival plc shareholders, each shareholder body will vote separately as a class. These matters are called class rights actions and include, among others:
- •
- transactions primarily designed to
timeamend or unwind the DLC structure;- •
- adjustments to the equalization ratio, which reflects the relative economic and voting interests represented by an individual share in each company, not in accordance with the equalization and governance agreement described below; and
- •
- amendments to tax-related provisions in Carnival Corporation's articles of incorporation.
No class rights action generally may be implemented unless approved by both shareholder bodies, which means that each shareholder body generally has a veto with respect to class rights actions. The current equalization ratio is 1:1, so one Carnival plc ordinary share is entitled to the same economic and voting interests in Carnival Corporation & plc as one share of Carnival Corporation common stock.
Carnival Corporation's constituent documents and Carnival plc's constituent documents have been harmonized, to the extent practicable and permitted by law, to ensure that Carnival Corporation's and Carnival plc's corporate procedures are substantially similar. As part of the DLC transaction, Carnival plc changed its name from P&O Princess Cruises plc to Carnival plc.
The shareholders of Carnival Corporation hold approximately 79% of the economic interests in Carnival Corporation & plc, and the shareholders of Carnival plc hold approximately 21% of the economic interests in Carnival Corporation & plc.
Carnival plc and Carnival Corporation executed deeds of guarantee at the closing of the DLC transaction. Under Carnival plc's deed of guarantee, Carnival plc has agreed to guarantee all indebtedness and certain other monetary obligations of Carnival Corporation that are incurred under agreements entered into on or after the date of
this prospectus. We will not receive anythe closing of theproceeds fromDLC transaction, along with all other obligations of Carnival Corporation that Carnival Corporation and Carnival plc specify in a separate agreement relating to thesale bydeed of guarantee. As a result, Carnival plc is guaranteeing theselling securityholdersdebentures under the deed of guarantee. The terms of Carnival Corporation's deed of guarantee are substantially similar to those contained in Carnival plc's. As a result, subject to the terms of theLYONsguarantee, the holders of indebtedness andcommon stock. We will bear the fees and expenses incurred in connection with our obligation to register the LYONs and underlying common stock. These fees and expenses include registration and filing fees, printing and duplication expenses, fee and disbursement of our counsel. However, the selling securityholders will pay all underwriting discounts and selling commissions, if any, and their own legal expenses. The selling securityholders may sell the LYONs and common stock from time to time, at market prices prevailing at the time of sale, at prices related to market prices, at fixed prices, pricesother obligations that are subject tochange or at negotiated prices, bythe guarantees will have recourse to both Carnival plc and Carnival Corporation, though avarietyCarnival plc creditor must first make written demand on Carnival plc and vice-versa. For more information regarding the Carnival plc deed ofmethods including the following: - in market transactions; - in privately negotiated transactions; - through broker-dealers, which may act as agents or principals; - in a block trade in which a broker-dealer will attempt to sell a block of securities as agent but may position and resell a portionguarantee, please see "Description of theblock as principal to facilitateCarnival plc Guarantee."25
Upon the
transaction; - if we agree to it priorclosing of the DLC transaction, Carnival plc and Carnival Corporation also executed an equalization and governance agreement, which provides for the equalization of dividends and liquidation distributions based on the equalization ratio, and contains various other provisions relating to thedistribution, through one or more underwriters on a firm commitment or best-efforts basis; - directly to one or more purchasers; - through agents; - in any combinationgovernance of theabove; or - by any other legally available means. In effecting sales, brokers or dealers engaged byDLC structure. Because theselling securityholders may arrange for other brokers or dealers to participate. Broker-dealer transactions may include: - purchases of the LYONs and common stock by a broker-dealer as principal and resales of them by the broker-dealer for its account pursuant to this prospectus; -current equalization ratio is 1:1, one Carnival plc ordinarybrokerage transactions; or - transactions in which the broker-dealer solicits purchasers. - If a material arrangement with any underwriter, broker, dealer or other agent is entered into for the sale of any LYONs and common stock through a secondary distribution or a purchase by a broker or dealer, or if other material changes are made in the plan of distribution of the LYONs and common stock, a prospectus supplement will be filed, if necessary, under the Securities Act disclosing the material terms and conditions of such arrangement. The underwriter or underwriters with respect to an underwritten offering of LYONs and common stock and the other material terms and conditions of the underwriting will be set forth in a prospectus supplement relating to such offering and, if an underwriting syndicate is used, the managing underwriter or underwriters will be set forth on the cover of the prospectus supplement. In connection with the sale of LYONs and common stock, underwriters will receive compensation in the form of underwriting discounts or commissions and may also receive commissions from purchasers of LYONs and underlying common stock for whom they may act as agent. Underwriters may sell to or through dealers, and such dealers may receive compensation in the form of discounts, concessions or commissions from the underwriters and/or commissions from the purchasers for whom they may act as agent. 21In addition, any securities covered by this prospectus which can be sold under Rule 144 under the Securities Act may be sold under Rule 144 rather than in a registered offering contemplated by this prospectus. The selling securityholders and any underwriters, broker-dealers or agents participating in the distribution of the securities may be deemed to be "underwriters" within the meaning of the Securities Act, and any profit on the sale of the LYONs and/or common stock by the selling securityholders and any commissions received by any such underwriters, broker-dealers or agents may be deemed to be underwriting commissions under the Securities Act. The selling securityholders and any other person participating in the distribution will be subject to applicable provisions of the Exchange Act and the rules and regulations under the Exchange Act, including without limitation, Regulation M, which may limit the timing of purchases and sales of any of the LYONs and common stock by the selling securityholders and any other relevant person. Furthermore, Regulation M may restrict the ability of any person engaged in the distribution of the LYONs and common stock to engage in market-making activities with respect to the particular LYONs and common stock being distributed. All of the above may affect the marketability of the LYONs and common stock and the ability of any person or entity to engage in market-making activities with respect to the LYONs and common stock. Under the securities laws of certain states, the LYONs and underlying common stock may be sold in those states only through registered or licensed brokers or dealers. In addition, in certain states the LYONs and common stock may not be sold unless the LYONs and common stock have been registered or qualified for sale in the state or an exemption from registration or qualification is available and is complied with. We have agreed to indemnify the selling securityholders against certain civil liabilities, including certain liabilities arising under the Securities Act, and the selling securityholders willshare would be entitled tocontribution from usthe same distributions, subject to the terms of the equalization and governance agreement, as one share of Carnival Corporation common stock. In a liquidation of either company or both companies, if the hypothetical potential per share liquidation distributions to each company's shareholders are not equivalent, taking into account the relative value of the two companies' assets and the indebtedness of each company, to the extent that one company has greater net assets so that any liquidation distribution to its shareholders would not be equivalent on a per share basis, the company with the ability to make a higher net distribution is required to make a payment to the other company to equalize the possible net distribution to shareholders. The requirement to make an equalizing payment is subject to some limitations. First, a reorganization under Chapter 11 of the US Bankruptcy Code or a similar statute would not be considered a "liquidation," so such a reorganization would not result inconnection with those liabilities. The selling securityholders will indemnify us against certain civil liabilities, including liabilities arising under the Securities Act, andequalizing payments. Second, neither company will be required to make the equalizing payment if the payment would result in neither group of shareholders being entitled tocontribution from the selling securityholders in connection with those liabilities. We are permitted to suspend the use of this prospectus under certain circumstances relating to pending corporate developments, public filings with the SEC and similar events for a period not to exceed 60 days inanythree-month period and not to exceed an aggregate of 90 days in any 12-month period. However,liquidation proceeds. Therefore, if thedurationassets ofsuch suspension exceeds anyCarnival Corporation & plc are not sufficient to satisfy all of theperiods above-mentioned, we have agreedcreditors of Carnival Corporation & plc, no equalization payment would be required topay liquidated damages. Please refer to the section entitled "Description of LYONs--Registration Rights." The outstanding common stock is listed for trading on the New York Stock Exchange under the symbol "CCL." We do not intend to apply for listing of the LYONs on any securities exchange or for quotation through the National Association of Securities Dealers Automated Quotation System. Accordingly, we cannot assure you about the development of liquidity or any trading market for the LYONs. Please refer to the section entitled "Risk Factors." 22be made. 26
DESCRIPTION OFLYONS We haveTHE DEBENTURESThe debentures were issued
the LYONs pursuant to theunder an indenture dated as of April 25, 2001, between us and US BankTrustNational Association, as trustee, as supplemented by asecondthird supplemental indenture datedOctober 24, 2001, governing the LYONs.April 29, 2003. We refer to the indenture, as so supplemented, as the "indenture."The following summary does not purport to be complete, and is subject to, and is qualified in its entirety by reference to, all of the provisions of the
LYONsdebenture and the indenture. We urge you to read the indenture,andthe form of theLYONs,debentures and the registration rights agreement, which you may obtain from us upon request. As used in this description, all references to "our company," "we," "us" or "our" mean Carnival Corporation, excluding, unless otherwise expressly stated or the context otherwise requires, itssubsidiaries. GENERAL The LYONs were limitedsubsidiaries, and all references to$1,051,175,000Carnival plc mean Carnival plc, excluding, unless otherwise expressly stated or the context otherwise requires, its subsidiaries.General
We issued $889,000,000 aggregate principal amount at
maturity.maturity of the debentures on April 29, 2003. TheLYONsdebentures will mature onOctober 24, 2021.April 29, 2033. The principal amount at maturity of eachLYONdebenture is $1,000. TheLYONs will bedebentures are payable at the office of the paying agent, whichinitially will beis an office or agency of the trustee, or an office or agency maintained by us for such purpose, in the Borough of Manhattan, The City of New York.The
LYONs weredebentures bear cash interest at the rate of 1.132% per year on the principal amount at maturity from the original issue date, or from the most recent date to which interest has been paid or provided for, until April 29, 2008. During such period, cash interest will be payable semi-annually in arrears on April 29 and October 29 of each year, commencing on October 29, 2003, to holders of record at the close of business on the April 14 or October 14 immediately preceding such interest payment date. Each payment of cash interest on the debentures will include interest accrued through the day before the applicable interest payment date (or purchase, redemption or, in certain circumstances, conversion date, as the case may be). Any payment required to be made on any day that is not a business day will be made on the next succeeding business day.We offered the debentures at a substantial discount from their $1,000 principal amount at maturity.
We do not make periodic payments of interest on the LYONs. Each LYON wasThe debentures were issued at an issue price of$475.66$646.88 perLYON. However, the LYONs accrue originaldebenture. Original issue discountwhile they remain outstanding. Originalwill accrue daily at a rate of 1.75% per year beginning on April 29, 2008, the last cash interest payment date, calculated on a semi-annual bond equivalent basis using a 360-day year comprised of twelve 30-day months. For United States federal income tax purposes, original issue discount is the difference between the issue price and theprincipal amountstated redemption price at maturity,of a LYON.which will include the semi-annual cash interest payments payable through April 29, 2008. Original issue discountisaccrues from April 29, 2003 at a constant rate per year, calculatedon a semi-annual bond equivalent basis atin theyieldmanner described under "Certain Panamanian and United States Federal Income Tax Consequences—United States—US Holders—Original Issue Discount." Thus, US holders are required tomaturity ofaccrue theLYONs, using a 360-day year comprised of twelve 30-day months. The issue date for the LYONs and the commencement date for the accrual ofcash interest as original issue discount regardless of their method of tax accounting but will not recognize additional income when such interest isOctober 24, 2001. Maturity,actually paid. See "Certain Panamanian and United States Federal Income Tax Consequences—United States—US Holders—Original Issue Discount.Original issue discount or cash interest, as the case may be, will cease to accrue on a debenture upon its maturity, conversion, purchase by us at the option of a holder or
redemption of a LYON at our option will cause original issue discount to cease to accrue on such LYON.redemption. We may not reissue aLYONdebenture that has matured or been converted, purchased by us at your option, redeemed or otherwise cancelled, except for registration of transfer, exchange or replacement of suchLYON. LYONsdebenture.Debentures may be presented for conversion at the office of the conversion agent, and for exchange or registration of transfer at the office of the registrar, each such agent initially being the trustee. We
dowill not charge a service fee for any registration of transfer or exchange of theLYONs. RANKING OF LYONSdebentures.27
Guarantee
Carnival plc and POPCIL have guaranteed Carnival Corporation's monetary obligations under the debentures on an unsecured and unsubordinated basis. See "Description of the Carnival plc Guarantee" and "Description of the POPCIL Guarantee."
Ranking
The
LYONsdebentures, the Carnival plc guarantee and the POPCIL guarantee are unsecured and unsubordinatedobligations. The LYONsobligations and rank equal in right of payment to allof ourthe existing and future unsecured and unsubordinatedindebtedness.indebtedness of Carnival Corporation, Carnival plc and POPCIL, respectively. However, theLYONsdebentures, the Carnival plc guarantee and the POPCIL guarantee are effectively subordinated to all existing and future obligations ofour subsidiaries. Asthe subsidiaries ofAugust 31, 2001, we hadCarnival Corporation and the non-guarantor subsidiaries of Carnival plc, respectively, and to any secured debt of Carnival Corporation, Carnival plc and POPCIL, respectively, to the extent of any security.On a pro forma basis after giving effect to the DLC transaction, as of February 28, 2003, there would have been approximately
$2.66$6.0 billion of total indebtedness outstandingwhich includedof Carnival Corporation and Carnival plc based on the indebtedness of Carnival Corporation at February 28, 2003 and the indebtedness of Carnival plc at March 31, 2003. Of this amount, there would have been approximately$1.21$1.1 billion of secured indebtedness of Carnival Corporation, Carnival plc and P&O Princess Cruises International Limited outstanding and approximately $1.4 billion of indebtedness ofour consolidated subsidiaries. See "Capitalization." CONVERSION RIGHTS Holdersnon-guarantor subsidiaries outstanding, on a pro forma basis, based on the indebtedness of Carnival Corporation at February 28, 2003 and Carnival plc at March 31, 2003.Conversion Rights
Subject to certain conditions, a holder of debentures may
surrender LYONs for conversionconvert its debentures into a number of shares of our common stockonly if at least oneequal to the conversion rate, calculated as of theconditions described below is satisfied. The initialconversion date. Prior to April 29, 2008, (1) the conversion rate is16.5964the base conversion rate, if the applicable stock price is less than or equal to the base conversion price, or (2) if the applicable stock price is greater than the base conversion price, the conversion rate is determined in accordance with the following formula:
Base ConversionRate + [(Applicable Stock Price-Base Conversion Price)x Incremental Share Factor]
Applicable Stock PriceFrom and after April 29, 2008, the conversion rate will be fixed for the remainder of the term of the debentures at the conversion rate determined as set forth above assuming a conversion date that is eight trading days prior to April 29, 2008, which we refer to as the fixed conversion rate, subject to the same adjustments as the base conversion rate.
The "base conversion rate" is 12.1800 shares
of common stockper $1,000 principal amount at maturity ofLYONs,debentures, subject to adjustmentuponas described under "—Conversion Rate Adjustment." The "base conversion price" is a dollar amount (initially $53.11) derived by dividing the issue price per debenture, $646.88, by the base conversion rate. The "incremental share factor" is 11.3258, subject to the same adjustments as the base conversion rate. The "applicable stock price" is equal to the average of the closing sale prices of our common stock over the five-trading day period starting the third trading day following the conversion date of the debentures appropriately adjusted to take into account the occurrence, during such five-trading day period, of certain eventsdescribed below.with respect to the common stock listed under "—Conversion Rate Adjustment."A holder of a
LYONdebenture otherwise entitled to a fractional share will receive cash in an amount equal to the value of such fractional share based on thesale price, as defined below, 23on the trading day immediately preceding the conversion date.applicable stock price. Upon a conversion, we28
will have the right to deliver cash or a combination of cash and shares of our common stock, as described below.
CONVERSION RIGHTS BASED ON COMMON STOCK PRICE.Holders may surrender debentures for conversion into shares of our common stock only if at least one of the conditions described below is satisfied. In addition, a debenture for which a holder has delivered a purchase notice or change in control purchase notice requiring us to purchase the debentures may be surrendered for conversion only if such notice is withdrawn in accordance with the indenture.
Conversion Rights Based on Common Stock Price. Commencing after
February 28, 2002,August 31, 2003, holders may surrenderLYONsdebentures in integral multiples of $1,000 principal amount at maturity for conversion into shares of our common stock in any fiscal quarter (and only during such fiscal quarter), if the closing sale price of our common stock for at least 20 trading days in a period of 30 consecutive trading days ending on the last trading day of the preceding fiscal quarter is more than110%120% of the accreted conversion price per share of common stock on the last day of such preceding fiscalquarter (the "conversion trigger price"). Our fiscal quarters end on the last day of February, May, August and November.quarter. The "accreted conversion price" per share will initially be the base conversion price and as of any day will equal thesum of theissue price of aLYONdebenture plus the accrued original issue discount to that day, with that sum divided by thenumber of shares of common stock issuable upon abase conversionof a LYON.rate."Trading
Day"day" means a day during which trading in securities generally occurs on the New York Stock Exchange or, if the common stock is not listed on the New York Stock Exchange, on the principal other national or regional securities exchange on which the common stock is then listed or, if the common stock is not listed on a national or regional securities exchange, onthe National Association of Securities Dealers Automated Quotation SystemNASDAQ or, if the common stock is not quoted onthe National Association of Securities Dealers Automated Quotation System,NASDAQ, on the principal other market on which the common stock is then traded.The
table below shows theconversion trigger price per share of our common stock for each of the first 20 fiscalquarters. These prices reflectquarters following the original issuance of the debentures is $63.73. This conversion trigger price reflects the initial accreted conversion price per share of $53.11 multiplied by 120%. Thereafter, the accreted conversion price per share of common stockmultipliedincreases each fiscal quarter by110%.the accreted original issue discount on such price per share of common stock for the quarter. The conversion trigger price per share for thefourthfiscal quarter of20212033 beginningSeptemberMarch 1is $65.92,will be $98.25, assuming no adjustment to the conversion rate.
(2) (1) CONVERSION ACCRETED TRIGGER CONVERSION PRICE FISCAL QUARTER* PRICE (1) X 110% --------------- ---------- -------------2002 Second Quarter............................................ $29.04 $31.94 Third Quarter............................................. 29.31 32.24 Fourth Quarter............................................ 29.58 32.54 2003 First Quarter............................................. 29.86 32.85 Second Quarter............................................ 30.14 33.15 Third Quarter............................................. 30.42 33.46 Fourth Quarter............................................ 30.70 33.77 2004 First Quarter............................................. 30.99 34.09 Second Quarter............................................ 31.28 34.41 Third Quarter............................................. 31.57 34.73 Fourth Quarter............................................ 31.87 35.05 2005 First Quarter............................................. 32.16 35.38 Second Quarter............................................ 32.46 35.71 Third Quarter............................................. 32.77 36.04 Fourth Quarter............................................ 33.07 36.3824
(2) (1) CONVERSION ACCRETED TRIGGER CONVERSION PRICE FISCAL QUARTER* PRICE (1) X 110% --------------- ---------- -------------2006 First Quarter............................................. 33.38 36.72 Second Quarter............................................ 33.69 37.06 Third Quarter............................................. 34.01 37.41 Fourth Quarter............................................ 34.32 37.76 2007 First Quarter............................................. 34.64 38.11- ------------------------ * This table assumes no events have occurred that would require an adjustment to the conversion rate. Our fiscal quarters end on the last daysConversion Rights Upon Notice of
February, May, August and November. CONVERSION RIGHTS UPON NOTICE OF REDEMPTION.Redemption. A holder may surrender for conversion aLYONdebenture called for redemption at any time prior to the close of business on the redemption date, even if it is not otherwise convertible at such time. ALYONdebenture for which a holder has delivered a purchase notice or a change in control purchase notice as described below requiring us to purchase theLYONdebenture may be surrendered for conversion only if such notice is withdrawn in accordance with the indenture.CONVERSION RIGHTS UPON OCCURRENCE OF CERTAIN CORPORATE TRANSACTIONS.Conversion Rights Upon Occurrence of Certain Corporate Transactions. If we are party to a consolidation, merger or binding share exchange pursuant to which our shares of common stock would be converted into cash, securities or other property, the
LYONsdebentures may be surrendered for conversion at any time from and after the date which is 15 days prior to the anticipated effective date of the transaction until 15 days after the actual date of such transaction and, at the effective time, the right to convertLYONsdebentures into shares of common stock will be changed into a right to convert it into the kind and amount of cash, securities or other property ofour companyCarnival or another person which the holder would have received if the holder had converted the holder'sLYONsdebentures immediately prior to the transaction. If such transaction also constitutes a change in control, the holder will be able to require us to purchase all or a portion of such holder'sLYONsdebentures as described under"--Change"—Change in Control Permits Purchase ofLYONsDebentures by Us at the Option of the Holder."29
In the event we elect to make a distribution described in the third or fourth bullet of the paragraph under the caption,
"--Conversion Rights--Conversion"—Conversion Rate Adjustment" below describing adjustments to the conversion rate which, in the case of the fourth bullet, has a per share value equal to more than7.5%15% of the sale price of our shares of common stock on the day preceding the declaration date for such distribution,weCarnival will be required to give notice to the holders of theLYONsdebentures at least 20 days prior to the ex-dividend date for such distribution and, upon the giving of such notice, theLYONsdebentures may be surrendered for conversion at any time until the close of business on the business day prior to the ex-dividend date or untilwe announceCarnival announces that such distribution will not take place.Notwithstanding anything to the contrary, no
LYONsdebentures may be surrendered for conversion pursuant to the first paragraph under this caption, and no corporate transaction requiring an adjustment to the conversion price will be deemed to have occurred by reason of the completion of a merger, consolidation or other transaction effected with one of our affiliates for the purposeof: -of
- •
- changing our jurisdiction of organization; or
-- •
- effecting a corporate reorganization, including, without limitation, the implementation of a holding company
structure. DELIVERY OF COMMON STOCK.structure (except for a corporate reorganization involving Carnival plc that would require Carnival Corporation shareholder approval).Conversion Rights Upon Credit Rating Downgrade. Holders may also surrender debentures for conversion during any period in which the credit rating assigned to the debentures by S&P is at or below BBB- and the credit rating assigned to the debentures by Moody's is at or below Baa3.
Delivery of Common Stock. On conversion of a
LYON,debenture, a holder will not receive any cash payment of interest representing accrued original issuediscount.discount or, except as described below, accrued cash interest. Our delivery to the holder of the full number25of shares of common stock into which the LYONdebenture is convertible, together with any cash payment for such holder's fractional shares, will be deemed:-
- •
- to satisfy our obligation to pay the principal amount at maturity of the
LYON;debenture; and-- •
- to satisfy our obligation to pay accrued original issue discount or accrued cash interest attributable to the period from the issue date through the conversion date.
As a result, accrued original issue discount or accrued cash interest is deemed
to bepaid in full rather than cancelled, extinguished or forfeited.Notwithstanding the above, if debentures are converted after a record date but prior to the next succeeding interest payment date, holders of such debentures at the close of business on the record date will receive the cash interest, if any, payable on such debentures on the corresponding interest payment date notwithstanding the conversion. Such debentures, upon surrender for conversion, must be accompanied by funds equal to the amount of interest payable on the debentures so converted, unless such debentures have been called for redemption on a redemption date that occurs between a regular record date and the third business day after the interest payment date to which it relates, in which case no such payment shall be required.
The conversion rate will not be adjusted for accrued original issue discount or accrued cash interest. A certificate for the number of full shares of common stock into which any
LYONsdebentures are converted, together with any cash payment for fractional shares, will be delivered through the conversion agent as soon as practicable following the conversion date. For a discussion of the tax treatment of a holder receiving shares of common stock upon conversion, see "Certain Panamanian and United States Federal Income TaxConsiderations.Consequences."In lieu of delivery of shares of our common stock upon notice of conversion of any
LYONsdebentures (for all or any portion of theLYONs)debentures), we may elect to pay holders surrenderingLYONsdebentures an amount30
in cash per
LYONdebenture (or a portion of aLYON)debenture) equal to theaverage saleapplicable stock priceof our common stock for the five consecutive trading days immediately following either (a) the date of our notice of our election to deliver cash as described below if we have not given notice of redemption, or (b) the conversion date, in the case of conversion following our notice of redemption specifying that we intend to deliver cash upon conversion, in either casemultiplied by the conversion rate in effect on that date. We will inform the holders through the trustee no later than two business days following the conversion date of our election to deliver shares of our common stock or to pay cash in lieu of delivery ofthesuch shares, unless we have already informed holders of our election in connection with our optional redemption of theLYONsdebentures as described under"--Redemption"—Redemption ofLYONsDebentures at Our Option." If we elect to deliver all of such payment in shares of our common stock, the shares will be delivered through the conversion agent no later than the fifth business day following theconversion date.determination of the applicable stock price. If we elect to pay all or a portion of such payment in cash, the payment, including any delivery of our common stock, will be made to holders surrenderingLYONsdebentures no later than the tenth business day following the applicable conversion date. If an event of default, as described under"--Events"—Events of Default; Waiver and Notice" below (other than a default in a cash payment upon conversion of theLYONs)debentures), has occurred and is continuing, we may not pay cash upon conversion of anyLYONsdebentures or portion of aLYONdebenture (other than cash for fractional shares).To convert a
LYONdebenture into shares of common stock, a holder must:-
- •
- complete and manually sign the conversion notice on the back of the
LYONdebenture or complete and manually sign a facsimile of the conversion notice and deliver the conversion notice to the conversion agent;-- •
- surrender the
LYONdebenture to the conversion agent;-- •
- if required by the conversion agent, furnish appropriate endorsements and transfer documents; and
-- •
- if required, pay all transfer or similar taxes.
Pursuant to the indenture, the date on which all of the foregoing requirements have been satisfied is the conversion date.
CONVERSION RATE ADJUSTMENT. TheConversion Rate Adjustment. Each of the base conversion rate, the incremental share factor and any fixed conversion rate will be adjusted for:
-
- •
- dividends or distributions on our shares of common stock payable in shares of our common stock or other capital
stock of our company; -stock;- •
- subdivisions, combinations or certain reclassifications of shares of our common stock;
26-- •
- distributions to all holders of shares of common stock of certain rights to purchase shares of common stock for a period expiring within 60 days at less than the sale price at the time;
and -- •
- distributions to all holders of our shares of common stock of our assets (including shares of capital stock, of or similar equity interests in, a subsidiary or other business unit of ours) or debt securities or certain rights to purchase our securities (excluding any consideration paid in connection with a tender offer described in the bullet below and any cash dividends or other cash distributions,
from current or retained earningsother than, with respect to any consecutive 12-month period, the amount, if any, by which the aggregate amount of all cash dividendson theand distributions occurring during such 12-month period together with cash or other consideration payable in respect of certain tender offers for our common stockoccurring duringconsummated in such 12-month period exceeds on a per share basis 7.5% of thesalemarket price of the shares of common stock on the day preceding the date of declaration of such dividend or other distribution).; and- •
- any expired tender offer made by us or any of our subsidiaries for our common stock that involved the payment of aggregate consideration in an amount that (together with cash or other consideration payable in respect of certain tender offers for our common stock consummated, and all other cash distributions to all or substantially all holders of our common stock made, in
31
the 12 months preceding the expiration of such expired tender offer) exceeded an amount equal to 7.5% of the product of the market price per share of our common stock on the last day of such expired tender offer and the number of shares of common stock outstanding at the expiration of such expired tender offer.
In the event that we pay a dividend or make a distribution on shares of our common stock consisting of capital stock of, or similar equity interests in, a subsidiary or other business unit of ours, the conversion rate will be adjusted based on the market value of the securities so distributed relative to the market value of our common stock, in each case based on the average sale prices of those securities for the 10 trading days commencing on and including the fifth trading day after the date on which "ex-dividend trading" commences for such dividend or distribution on the New York Stock Exchange or such other national or regional exchange or market on which the securities are then listed or quoted.
No adjustment to the conversion rate or the ability of a holder of a
LYONdebenture to convert will be made ifwe provideCarnival provides that holders ofLYONsdebentures will participate in the transaction without conversion or in certain other cases.The indenture permits us to increase the conversion rate from time to time.
In the event of:
-
- •
- a taxable distribution to holders of shares of common stock which results in an adjustment of the conversion rate; or
-- •
- an increase in the conversion rate at our discretion, the holders of the
LYONsdebentures may, in certain circumstances, be deemed to have received a distribution subject to federal income tax as a dividend. See "Certain Panamanian and United States Federal Income TaxConsiderations.Consequences."Upon determination that
LYONdebenture holders are or will be entitled to convert theirLYONsdebentures into shares of common stock in accordance with the foregoing provisions, we will issue a press release and publish such information on our website on the World Wide Web.REDEMPTION OF LYONS AT OUR OPTIONOwnership Limitations. Pursuant to the terms of the indenture, no debenture holder will be entitled to convert debentures into shares of our common stock, which, when added to shares of our common stock already owned (or deemed to be so owned pursuant to specific attribution provisions in the Internal Revenue Code) by the debenture holder, would exceed 4.9% of all shares of our outstanding common stock. Our common stock is also subject to restrictions on transfer and ownership such that no holder or deemed holder of our common stock may hold more than 4.9% of all shares of our outstanding common stock, subject to certain exceptions. For more information regarding this limitation, please see "Description of Carnival Corporation Capital Stock—Certain Provisions of Carnival Corporation's Articles and By-laws—Takeover Restrictions—Ownership Limitations and Transfer Restrictions."
Redemption of Debentures at Our Option
Prior to
October 24,April 29, 2008, theLYONsdebentures will not be redeemable at our option. Beginning onOctober 24,April 29, 2008, we may redeem theLYONsdebentures at any time as a whole, or from time to time in part. We will give not less than 30daysdays' nor more than 60daysdays' notice of redemption by mail to holders of theLYONs. Thedebentures. In the event that a holder elects to convert debentures in connection with the redemption, the notice of redemption will inform theholdersholder of our election to deliver shares of our common stock or to pay cash or a combination of cash and commonstock. 27stock in connection with such conversion. 32
If redeemed at our option, the debentures will be redeemed at a price equal to the sum of the issue price plus accrued original issue discount and accrued cash interest, if any, on such debentures to the applicable redemption date. The table below shows the redemption prices of a
LYONdebenture onOctober 24,April 29, 2008,aton eachOctober 24April 29 thereafter prior to maturity and atstatedmaturity onOctober 24, 2021. The redemption price equalsApril 29, 2033. In addition, theoriginal issue price plus accrued original issue discount to the redemption date. Theredemption price of aLYONdebenture redeemed betweensuchthe dates listed would include an additional amount reflecting the additional accrued original issue discount that has accrued on such debenture since the immediately preceding date in thetable.table below.
(1) (2) (3) ACCRUED ORIGINAL REDEMPTION PRICE REDEMPTION DATE LYON ISSUE PRICE ISSUE DISCOUNT (1) + (2) --------------- ---------------- ---------------- ----------------October 24, 2008............................... $475.66 $141.28 $ 616.94 October 24, 2009............................... 475.66 164.63 640.29 October 24, 2010............................... 475.66 188.87 664.53 October 24, 2011............................... 475.66 214.02 689.68 October 24, 2012............................... 475.66 240.13 715.79 October 24, 2013............................... 475.66 267.22 742.88 October 24, 2014............................... 475.66 295.34 771.00 October 24, 2015............................... 475.66 324.52 800.18 October 24, 2016............................... 475.66 354.81 830.47 October 24, 2017............................... 475.66 386.24 861.90 October 24, 2018............................... 475.66 418.87 894.53 October 24, 2019............................... 475.66 452.73 928.39 October 24, 2020............................... 475.66 487.87 963.53 At stated maturity............................. 475.66 524.34 1,000.00
Redemption Date (1)
Debenture Issue
Price(2)
Accrued Original
Issue Discount(3)
Redemption Price
(1) + (2)April 29, 2008 $ 646.88 $ 0.00 $ 646.88 April 29, 2010 $ 646.88 $ 11.37 $ 658.25 April 29, 2010 $ 646.88 $ 22.94 $ 669.82 April 29, 2009 $ 646.88 $ 11.37 $ 658.25 April 29, 2011 $ 646.88 $ 34.71 $ 681.59 April 29, 2012 $ 646.88 $ 46.69 $ 693.57 April 29, 2013 $ 646.88 $ 58.88 $ 705.76 April 29, 2014 $ 646.88 $ 71.29 $ 718.17 April 29, 2015 $ 646.88 $ 83.91 $ 730.79 April 29, 2016 $ 646.88 $ 96.76 $ 743.64 April 29, 2017 $ 646.88 $ 109.83 $ 756.71 April 29, 2018 $ 646.88 $ 123.13 $ 770.01 April 29, 2019 $ 646.88 $ 136.66 $ 783.54 April 29, 2020 $ 646.88 $ 150.43 $ 797.31 April 29, 2021 $ 646.88 $ 164.45 $ 811.33 April 29, 2022 $ 646.88 $ 178.71 $ 825.59 April 29, 2023 $ 646.88 $ 193.22 $ 840.10 April 29, 2024 $ 646.88 $ 207.98 $ 854.86 April 29, 2025 $ 646.88 $ 223.01 $ 869.89 April 29, 2026 $ 646.88 $ 238.30 $ 885.18 April 29, 2027 $ 646.88 $ 253.86 $ 900.74 April 29, 2028 $ 646.88 $ 269.69 $ 916.57 April 29, 2029 $ 646.88 $ 285.80 $ 932.68 April 29, 2030 $ 646.88 $ 302.19 $ 949.07 April 29, 2031 $ 646.88 $ 318.87 $ 965.75 April 29, 2032 $ 646.88 $ 335.85 $ 982.73 At stated maturity $ 646.88 $ 353.12 $ 1,000.00 If we decide to redeem fewer than all of the outstanding
LYONs,debentures, the trustee will select theLYONsdebentures to be redeemed in principal amounts at maturity of $1,000 or integral multiples of $1,000. In this case, the trustee may select theLYONsdebentures by lot, pro rata, or by another method the trustee considers fair and appropriate.If the trustee selects a portion of your
LYONsdebentures for partial redemption and you convert a portion of yourLYONs,debentures, the converted portion will be deemed to be the portion selected for redemption.PURCHASE OF LYONS BY US AT THE OPTION OF THE HOLDERPurchase of Debentures by Us at the Option of the Holder
You have the right to require us to purchase your
LYONsdebentures on anyOctober 24April 29 occurring in the years2006,2008,20112013, 2018, 2023 and2016.2028 at the purchase price set forth below plus accrued cash interest, if any, to the purchase date. We will be required to purchase any outstandingLYONdebenture for which a33
written purchase notice has been properly delivered by the holder to the paying agent and not withdrawn, subject to certain additional conditions. We may also add additional dates on which you may require us to purchase all or a portion of your
LYONs.debentures. However, we cannot assure you that we will add any purchase dates. You may submit yourLYONsdebentures for purchase to the paying agent at any time from the opening of business on the date that is 20 business days prior to the purchase date until the close of business on the purchase date. Also, our ability to satisfy our purchase obligations may be affected by the factors described in "Risk Factors" under the heading"We"—Risks Relating to the Debentures and Our Common Stock—We may not have the ability to raise the funds necessary to finance the change in control repurchase option or the repurchase at the option of the holder provision in theLYONs.debentures."The purchase price of a
LYONdebenture will be:- $572.76
- •
- $646.88 per
LYONdebenture onOctober 24, 2006; - $616.94April 29, 2008;- •
- $705.76 per
LYONdebenture onOctober 24, 2008; - $689.68April 29, 2013;- •
- $770.01 per
LYONdebenture onOctober 24, 2011;April 29, 2018;- •
- $840.10 per debenture on April 29, 2023; and
- $830.47- •
- $916.57 per
LYONdebenture onOctober 24, 2016. 28April 29, 2028. The purchase prices shown above are equal to the issue price plus accrued original discount, if any, to the purchase date. We may, at our option, elect to pay the purchase price in cash or shares of common stock, or any combination thereof. For a discussion of the tax treatment of a holder receiving cash, shares of common stock or any combination thereof, see "Certain Panamanian and United States Federal Income Tax
Considerations.Consequences."We will be required to give notice on a date not less than 20 business days prior to the purchase date to all holders at their addresses shown in the register of the registrar, and to beneficial owners as required by applicable law, stating among other things:
-
- •
- whether we will pay the purchase price of the
LYONsdebentures in cash or shares of common stock or any combination thereof, and specifying the percentages of each;-- •
- if we elect to pay in shares of common stock, the method of calculating the market price of the common stock; and
-- •
- the procedures that holders must follow to require us to purchase their
LYONs.debentures.Your purchase notice electing to require us to purchase your
LYONsdebentures must state:-
- •
- if certificated
LYONsdebentures have been issued, theLYONsdebentures certificate numbers, or if not, such information as may be required under appropriate DTC procedures;-- •
- the portion of the principal amount of
LYONsdebentures to be purchased, in integral multiples of $1,000 principal amount at maturity;-- •
- that we are to purchase the
LYONsdebentures pursuant to the applicable provisions of theLYONsdebentures and the indenture; and-- •
- in the event we elect, pursuant to the notice that we are required to give, to pay the purchase price in shares of common stock, in whole or in part, but the purchase price is ultimately to be paid to you entirely in cash because any of the conditions to payment of the purchase price or portion of the purchase price in shares of common stock is not satisfied prior to the close of business on the purchase date, as described below, whether you elect:
- 1.
- to withdraw the purchase notice as to some or all of the
LYONsdebentures to which it relates; or34
- 2.
- to receive cash in respect of the entire purchase price for all
LYONsdebentures or portions of theLYONsdebentures subject to such purchase notice.If you fail to indicate your choice with respect to the election described in the final bullet point above, you will be deemed to have elected to receive cash in respect of the entire purchase price for all
LYONsdebentures subject to the purchase notice in these circumstances. For a discussion of the tax treatment of a holder receiving cash instead of shares of common stock, see "Certain Panamanian and United States Federal Income TaxConsiderations.Consequences."You may withdraw any purchase notice by a written notice of withdrawal delivered to the paying agent prior to the close of business on the purchase date. The notice of withdrawal must state:
-
- •
- the principal amount at maturity of the withdrawn
LYONs; -debentures;- •
- if certificated
LYONsdebentures have been issued, the certificate numbers of the withdrawnLYONs,debentures, or if not, such information as may be required under appropriate DTC procedures; and-- •
- the principal amount at maturity, if any, of
LYONsdebentures that remain subject to your purchase notice.If we elect to pay the purchase price, in whole or in part, in shares of common stock, the number of shares to be delivered by us will be equal to the portion of the purchase price to be paid in shares of common stock divided by the market price of one share of common stock. We will pay cash based
29on the market price for all fractional shares in the event we elect to deliver shares of common stock in payment, in whole or in part, of the purchase price. The "market price" means the average of the sale prices of the common stock for the five trading day period ending on the third business day (if the third business day prior to the purchase date is a trading day or, if not, then on the last trading day prior to the third business day) prior to the purchase date, appropriately adjusted to take into account the occurrence, during the period commencing on the first of such trading days during such five trading day period and ending on such purchase date, of certain events with respect to the common stock
that would result in an adjustment of the conversion rate.listed under "—Conversion Rights—Conversion Rate Adjustment."The "sale price" of the common stock on any date means the closing sale price per share (or if no closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and the average ask prices) on such date as reported in composite transactions for the principal United States securities exchange on which the common stock is traded or, if the common stock is not listed on a United States national or regional securities exchange, as reported by
the National Association of Securities Dealers Automated Quotation SystemNASDAQ or by the National Quotation Bureau Incorporated.Because the market price of the common stock is determined prior to the purchase date, holders of
LYONsdebentures exercising the purchase right bear the market risk with respect to the value of the common stock to be received from the date such market price is determined to the purchase date. We may pay the purchase price or any portion of the purchase price in shares of common stock only if the information necessary to calculate the market price is published in a daily newspaper of national circulation or is otherwise readily publicly available.Upon determination of the actual number of shares of common stock to be issued for each $1,000 principal amount at maturity of
LYONsdebentures in accordance with the foregoing provisions, we will publish such information on our Web site on the World Wide Web or through such other public medium as we may use at that time.35
Our right to purchase
LYONs,debentures, in whole or in part, with shares of common stock is subject to our satisfying various conditions, including:-
- •
- the listing of such shares of common stock on the principal United States securities exchange on which the common stock is then listed or, if not so listed, on
Nasdaq; -NASDAQ;- •
- the registration of the shares of common stock under the Securities Act and the Exchange Act, if required; and
-- •
- any necessary qualification or registration under applicable state securities law or the availability of an exemption from such qualification and registration.
If such conditions are not satisfied with respect to a holder prior to the close of business on the purchase date, we will pay the purchase price of the
LYONsdebentures of the holder entirely in cash. See "Certain Panamanian and United States Federal Income TaxConsiderations.Consequences." We may not change the form or components or percentages of components of consideration to be paid for theLYONsdebentures once we have given the notice that we are required to give to holders ofLYONs,debentures, except as described in the first sentence of this paragraph.Our ability to purchase
LYONsdebentures with cash may be limited by the terms of our then existing borrowing agreements. The indentureprohibitswill prohibit us from purchasingLYONsdebentures for cash in connection with your purchase right if any event of default under the indenture has occurred and is continuing, except a default in the payment of the purchase price with respect to theLYONs.debentures.You must either effect book-entry transfer or deliver the
LYONsdebentures to be purchased, together with necessary endorsements, to the office of the paying agent after delivery of the purchase notice to30receive payment of the purchase price. You will receive payment in cash on the later of the purchase date or the time of book-entrybook entry transfer or the delivery of yourLYONs.debentures. If the paying agent holds money or securities sufficient to pay the purchase price of theLYONdebenture on the business day following the purchase date, then, immediately after the purchase date:-
- •
- your
LYONsdebentures will cease to be outstanding;-- •
- original issue discount will cease to accrue; and
-- •
- all other rights of the holder will terminate.
This will be the case whether or not book-entry transfer of your
LYONsdebentures is made and whether or not yourLYONsdebentures are delivered to the paying agent.We will comply with the provisions of Rule 13e-4, Rule 14e-1 and any other tender offer rules under the Exchange Act that may be applicable at the time. We will file Schedule TO or any other schedule under the Exchange Act required in connection with any offer by us to purchase the
LYONsdebentures at your option.CHANGE IN CONTROL PERMITS PURCHASE OF LYONS BY US AT THE OPTION OF THE HOLDERChange in Control Permits Purchase of Debentures by Us at the Option of the Holder
In the event of a change in control, which occurs on or before
October 24,April 29, 2008, you will have the right, at your option, subject to the terms and conditions of the indenture, to require us to purchase for cash any or all of yourLYONsdebentures in integral multiples of $1,000 principal amount at maturity. We will purchase theLYONsdebentures at a price equal to 100% of the issue price of theLYONsdebentures to be purchased plus accrued original issue discount or accrued cash interest, if any, to, but excluding, the change in control purchase date.We will be required to purchase the
LYONsdebentures as of the date that is 35 business days after the occurrence of such change in control (a "change in control purchase date").36
A change of control occurs in the following situations:
-
- •
- any person or group, other than our subsidiaries, any of our or their employee benefit plans or permitted holders, after the first issuance of
LYONsdebentures files a Schedule TO or a Schedule 13D (or any successors to those Schedules) stating that it has become and actually is the beneficial owner of our voting stock representing more than 50% of the total voting power of all of our classes of voting stock entitled to vote generally in the election of the members of our board ofdirectors; or -directors (which is a joint electorate action under the agreements governing our DLC transaction);- •
- permitted holders file a Schedule TO or a Schedule 13D (or any successors to those Schedules) stating that they have become and actually are beneficial owners of our voting stock representing more than 80%, in the aggregate, of the voting power of all of our classes of voting stock entitled to vote generally in the election of the members of our board of
directors;directors (which is a joint electorate action under the agreements governing our DLC transaction); or-- •
- we consolidate with or merge with or into another person (other than a subsidiary), we sell, convey, transfer or lease our properties and assets substantially as an entirety to any person (other than a subsidiary), or any person (other than a subsidiary) consolidates with or merges with or into our company, and our outstanding common stock is reclassified into, exchanged for or converted into the right to receive any other property or security, provided that none of these circumstances will be a change in control if the persons that beneficially own our voting stock immediately prior to a transaction beneficially own, in substantially the same proportion, shares with a majority of the total voting power of all outstanding voting securities of the surviving or transferee person that are entitled to vote generally in the election of that person's board of directors.
For purposes of this provision, a "permitted holder" means each of Marilyn B. Arison, Micky Arison, Shari Arison, Michael Arison or their spouses, children or lineal descendants of Marilyn B. Arison, Micky Arison, Shari Arison, Michael Arison or their spouses, any trust established for the
31benefit of any Arison family member mentioned in this paragraph, or any "person" (as such term is used in Section 13(d) or 14(d) of the Exchange Act), directly or indirectly, controlling, controlled by or under common control with any Arison family member mentioned in this paragraph or any trust established for the benefit of any such Arison family member or any charitable trust or non-profit entity established by a permitted holder. Notwithstanding anything to the contrary, the completion of a merger, consolidation or other transaction effected with one of our affiliates for the purpose of:
-
- •
- changing our jurisdiction of organization; or
-- •
- effecting a corporate reorganization, including, without limitation, the implementation of a holding company structure
shall not be deemed to be a "change of control."
Within 15 business days after the occurrence of a change in control, we are obligated to mail to the trustee and to all holders of
LYONsdebentures at their addresses shown in the register of the registrar and to beneficial owners as required by applicable law a notice regarding the change in control, stating, among other things:-
- •
- the events causing a change in control;
-- •
- the date of such change in control;
-- •
- the last date on which the purchase right may be exercised;
-37
- •
- the change in control purchase price;
-- •
- the change in control purchase date;
-- •
- the name and address of the paying agent and the conversion agent;
-- •
- the conversion rate and any adjustments to the conversion rate;
-- •
- that
LYONsdebentures with respect to which a change in control purchase notice is given by the holder may be converted only if the change in control purchase notice has been withdrawn in accordance with the terms of theLYONsdebentures and the indenture; and-- •
- the procedures that holders must follow to exercise these rights.
To exercise this right, you must deliver a written notice to the paying agent prior to the close of business on the business day immediately before the change in control purchase date. The required purchase notice upon a change in control must state:
-
- •
- if certificated
LYONsdebentures have been issued, theLYONdebenture certificate numbers, or if not, must comply with appropriate DTC procedures;-- •
- the portion of the principal amount of
LYONsdebentures to be purchased, in integral multiples of $1,000 principal amount at maturity; and-- •
- that we are to purchase such
LYONsdebentures pursuant to the applicable provisions of theLYONsdebentures and the indenture.You may withdraw any change in control purchase notice by a written notice of withdrawal delivered to the paying agent prior to the close of business on the business day before the change in control purchase date. The notice of withdrawal must state:
-
- •
- the principal amount at maturity of the withdrawn
LYONs,debentures, in integral multiples of $1,000 principal amount at maturity;32-- •
- if certificated
LYONsdebentures have been issued, the certificate numbers of the withdrawnLYONs,debentures, or if not, must comply with appropriate DTC procedures; and-- •
- the principal amount at maturity, if any, of
LYONsdebentures that remain subject to your change in control purchase notice.A holder must either effect book-entry transfer or deliver the
LYONsdebentures to be purchased, together with necessary endorsements, to the office of the paying agent after delivery of the change in control purchase notice to receive payment of the change in control purchase price. You will receive payment in cash on the change in control purchase date or the time of book-entry transfer or the delivery of yourLYONs.debentures. If the paying agent holds money or securities sufficient to pay the change in control purchase price of yourLYONsdebentures on the business day following the change in control purchase date, then, immediately after the change in control purchase date:-
- •
- your
LYONsdebentures will cease to be outstanding;-- •
- original issue discount will cease to accrue; and
-- •
- all other rights of the holder will terminate.
This will be the case whether or not book-entry transfer of your
LYONsdebentures is made or whether or not yourLYONsdebentures is delivered to the paying agent.We will comply with the provisions of Rule 13e-4, Rule 14e-1 and any other tender offer rules under the Exchange Act that may be applicable at the time. We will file Schedule TO or any other schedule under the Exchange Act required in connection with any offer by us to purchase the
LYONsdebentures at your option.38
The change in control purchase feature of the
LYONsdebentures may in certain circumstances make more difficult or discourage a takeover of us. The change in control purchase feature, however, is not the result of our knowledge of any specific effort:-
- •
- to accumulate shares of common stock;
-- •
- to obtain control of us by means of a merger, tender offer, solicitation or otherwise; or
-- •
- by management to adopt a series of anti-takeover provisions.
Instead, the terms of the change in control purchase feature resulted from negotiations between
Merrill Lynchthe initial purchaser of the debentures and us.We could, in the future, enter into certain transactions, including certain recapitalizations, that would not constitute a change in control with respect to the change in control purchase feature of the
LYONsdebentures but that would increase the amount of our (or our subsidiaries') outstanding indebtedness.No
LYONsdebentures may be purchased by us at the option of holders upon a change in control if there has occurred and is continuing an event of default with respect to theLYONs,debentures, other than a default in the payment of the change in control purchase price with respect to theLYONs.debentures.For purposes of defining a change of control:
-
- •
- the term "person" and the term "group" have the meanings given by Sections 13(d) and 14(d) of the Exchange Act or any successor provisions;
-- •
- the term "group" includes any group acting for the purpose of acquiring, holding or disposing of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act or any successor provision; and
-- •
- the term "beneficial owner" is determined in accordance with Rules 13d-3 and 13d-5 under the Exchange Act or any successor provision, except that a person will be deemed to have beneficial
33ownership of all shares that person has the right to acquire irrespective of whether that right is exercisable immediately or only after the passage of time. CONSOLIDATION, MERGER, SALE OR CONVEYANCEConsolidation, Merger, Sale or Conveyance
The indenture provides that we may not consolidate with or merge into any other entity or convey or transfer our properties and assets substantially as an entirety to any entity, unless:
-
- •
- the successor or transferee entity is a corporation, limited liability company trust or partnership organized under the laws of the United States or any State of the United States or the District of Columbia or the Republic of Panama or any other country recognized by the United States and all political subdivisions of such countries;
-- •
- the successor or transferee entity, if other than us, expressly assumes by a supplemental indenture executed and delivered to the trustee, in form reasonably satisfactory to the trustee, the due and punctual payment of the principal of, any premium on and any interest or accrued original issue discount on, all the outstanding
LYONsdebentures and the performance of every covenant in the indenture to be performed or observed by us and provides for conversion rights in accordance with applicable provisions of the indenture;-- •
- immediately after giving effect to the transaction, no Event of Default, as defined in the indenture, and no event which, after notice or lapse of time or both, would become an Event of Default, has happened and is continuing; and
-- •
- we have delivered to the trustee an officers' certificate and an opinion of counsel, each in the form required by the indenture and stating that such consolidation, merger, conveyance or
39
transfer and such supplemental indenture comply with the foregoing provisions relating to such transaction.
In case of any such consolidation, merger, conveyance or transfer, the successor entity will succeed to and be substituted for us as obligor on the
LYONs,debentures, with the same effect as if it had been named in the indenture as our company.EVENTS OF DEFAULT; WAIVER AND NOTICEEvents of Default; Waiver and Notice
An event of default is defined in the indenture as:
(a) default for 30 days in payment of any Liquidated Damages under the registration rights agreement described below;
(b) default in payment of principal of or any premium on the
LYONsdebentures at maturity, redemption price, purchase price or change in control purchase price, when the same becomes due and payable;(c) default in the payment (after any applicable grace period) of any indebtedness for money borrowed by our company, Carnival plc or a Subsidiary of either in excess of $50 million in aggregate principal amount (excluding such indebtedness of any Subsidiary other than a Significant Subsidiary, all the indebtedness of which Subsidiary is nonrecourse to our company or any other Subsidiary) or default on such indebtedness that results in the acceleration of such indebtedness prior to its express maturity, if such indebtedness is not discharged, or such acceleration is not annulled, by the end of a period of 30 days after written notice to us by the trustee or to us and the trustee by the holders of at least 25% in principal amount at maturity of the outstanding
LYONs;debentures;(d) default by us in the performance of any other covenant contained in the indenture for the benefit of the
LYONsdebentures that has not been remedied by the end of a period of 60 days after notice is given as specified in the indenture;(e) unless Carnival plc has become or has been merged with or has been otherwise consolidated with the primary obligor under the debentures and
(e)the indenture, Carnival plc's guarantee ceases to be in full force and effect or is declared null and void or Carnival plc denies that it has any further liability under its guarantee to the debenture holders, or gives notice to such effect (other than by reason of the termination of the indenture or the release of such guarantee in accordance with the indenture), and such condition shall have continued for a period of 30 days after written notice of such failure requiring Carnival plc or us to remedy the same shall have been given to us by the trustee or to us and the trustee by the holders of 25% in aggregate principal amount at maturity of the debentures outstanding; and(f) certain events of bankruptcy, insolvency and reorganization of our company, Carnival plc or a Significant
Subsidiary. 34Subsidiary of either. When we refer to a "Significant Subsidiary," we mean any Subsidiary, the Net Worth of which represents more than 10% of the Consolidated Net Worth of our company, Carnival plc and our combined Subsidiaries. The terms "Subsidiary," "Net Worth" and "Consolidated Net Worth" are defined in the indenture.
The indenture provides that:
-
- •
- if an event of default described in clause (a), (b), (c), (d) or
(d)(e) above has occurred and is continuing, either the trustee or the holders of not less than 25% in aggregate principal amount at maturity of theLYONsdebentures may declare the accreted principal amount (the original issue price of theLYONsdebentures plus accrued original issue discount thereon through the date of such40
declaration) of the
LYONsdebentures then outstanding, and any accrued and unpaid cash interest through the date of such declaration, to be due and payable immediately;-
- •
- upon certain conditions such declarations may be annulled and past defaults (except for defaults in the payment of principal of, any premium on or interest on, the
LYONsdebentures and in compliance with certain covenants) may be waived by the holders of a majority in aggregate principal amount at maturity of theLYONsdebentures thenoutstanding. -outstanding; and- •
- if an event of default described in clause
(e)(f) occurs and is continuing, then the accreted principal amount of allLYONsdebentures issued under the indenture and then outstanding, together with any accrued cash interest through the occurrence of such event, shall become and be due and payable immediately, without any declaration or other act by the trustee or any other holder.In case of default in payment of the accreted principal amount of the
LYONs,debentures, whether at the stated maturity or upon acceleration or redemption, from and after the maturity date, theLYONsdebentures will bear interest, payable upon demand of their beneficial owners, at the rate of3.75%1.75% per year, to the extent that payment of any interest is legally enforceable, on the unpaid amount due and payable on that date in accordance with the terms of theLYONsdebentures to the date payment of that amount has been made or duly provided for.Under the indenture, the trustee must give to the holders of
LYONsdebentures notice of all uncured defaults known to it with respect to theLYONsdebentures within 90 days after such a default occurs (the term default to include the events specified above without notice or grace periods); provided that, except in the case of default in the payment of principal of, any premium on, any of theLYONs,debentures, the trustee will be protected in withholding such notice if it in good faith determines that the withholding of such notice is in the interests of the holders of theLYONs.debentures.No holder of any
LYONsdebentures may institute any action under the indenture unless:-
- •
- such holder has given the trustee written notice of a continuing event of default with respect to the
LYONs; -debentures;- •
- the holders of not less than 25% in aggregate principal amount at maturity of the
LYONsdebentures then outstanding have requested the trustee to institute proceedings in respect of such event of default;-- •
- such holder or holders have offered the trustee such reasonable indemnity as the trustee may require;
-- •
- the trustee has failed to institute an action for 60 days thereafter; and
-- •
- no inconsistent direction has been given to the trustee during such 60-day period by the holders of a majority in aggregate principal amount at maturity of
LYONs.debentures.The holders of a majority in aggregate principal amount at maturity of the
LYONsdebentures affected and then outstanding will have the right, subject to certain limitations, to direct the time, method and place of conducting any proceeding for any remedy available to the trustee or exercising any trust or power conferred on the trustee with respect to theLYONs.debentures. The indenture provides that, if an event of default occurs and is continuing, the trustee, in exercising its rights and powers under the indenture, will be35required to use the degree of care of a prudent man in the conduct of his own affairs. The indenture further provides that the trustee shall not be required to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties under the indenture unless it has reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is reasonably assured to it. We must furnish to the trustee within 120 days after the end of each fiscal year a statement of our company signed by one of the officers of our company to the effect that a review of our activities
41
during such year and of our performance under the indenture and the terms of the
LYONsdebentures has been made, and, to the knowledge of the signatories based on such review, we have complied with all conditions and covenants of the indenture or, if we are in default, specifying such default.For the purposes of determining whether the holders of the requisite principal amount at maturity of
LYONsdebentures have taken any action herein described, the principal amount ofLYONsdebentures will be deemed to be the portion of such principal amount that would be due and payable at the time of the taking of such action upon a declaration of acceleration of maturity thereof.MODIFICATION OF THE INDENTUREModification of the Indenture
We and the trustee may, without the consent of the holders of the debt securities issued under the indenture, enter into supplemental indentures for, among others, one or more of the following purposes:
-
- •
- to evidence the succession of another corporation to our company, and the assumption by such successor of our obligations under the indenture and the
LYONs; -debentures;- •
- to add covenants of our company, or surrender any rights of our company, or add any rights for the benefit of the holders of
LYONs; -debentures;- •
- to cure any ambiguity, omission, defect or inconsistency in such indenture;
-- •
- to establish the form or terms of any other series of debt securities, including any subordinated securities;
-- •
- to evidence and provide for the acceptance of any successor trustee with respect to the
LYONsdebentures or one or more other series of debt securities or to facilitate the administration of the trusts thereunder by one or more trustees in accordance with such indenture; and-- •
- to provide any additional events of default.
With certain exceptions, the indenture, the Carnival plc guarantee or the rights of the holders of the
LYONsdebentures may be modified by us and the trustee with the consent of the holders of a majority in aggregate principal amount at maturity of theLYONsdebentures then outstanding, but no such modification may be made without the consent of the holder of each outstandingLYONdebenture affected thereby that would:-
- •
- change the maturity of any payment of principal of, or any premium on, any
LYONs,debentures, or reduce the principal amount at maturity or the rate of accrual of original issue discount of anyLYON,debenture, or change any place of payment where, or the coin or currency in which, anyLYONdebenture or any premium is payable, or impair the right to institute suit for the enforcement of any such payment on or after the maturity thereof (or, in the case of redemption or repayment, on or after the redemption date or the repayment date, as the case may be) or adversely affect the conversion or repurchase provisions in the indenture;-- •
- reduce the percentage in principal amount at maturity of the outstanding
LYONs,debentures, the consent of whose holders is required for any such modification, or the consent of whose holders is required for any waiver of compliance with certain provisions of the indenture or certain defaults thereunder and their consequences provided for in the indenture; or36-- •
- modify any of the provisions of certain sections of the indenture, including the provisions summarized in this paragraph, except to increase any such percentage or to provide that certain other provisions of the indenture cannot be modified or waived without the consent of the holder of each outstanding
LYONdebenture affected thereby.DISCHARGE OF THE INDENTURE42
Discharge of the Indenture
We may satisfy and discharge our obligations under the indenture by delivering to the trustee for cancellation all outstanding
LYONsdebentures or by depositing with the trustee, the paying agent or the conversion agent, if applicable, after theLYONsdebentures have become due and payable, whether at stated maturity, or any redemption date, or any purchase date, or a change in control purchase date, or upon conversion or otherwise, cash or common stock (as applicable under the terms of the indenture) sufficient to pay all of the outstandingLYONsdebentures and paying all other sums payable under the indenture by our company.OWNERSHIP LIMITATION ON LYONS In order to permit us to retain our status as a publicly traded corporation under the proposed Treasury regulations to Section 883 of the Code, LYONs may not be transferred if the transfer would result in ownership by one person or group of related persons by virtue of the attribution provisions of the Code, other than certain members of the Arison family and certain trusts established for their benefit, of more than 4.9% of our common stock, whether measured by vote, value or number of shares. The calculation of a holder's stockholdings assumes the conversion of the LYONs and other convertible securities issued by us held by that person or group. See "Description of Capital Stock--Common Stock--Transfer Restrictions" for a discussion of the attribution provisions. If a person attempts to acquire LYONs in violation of the 4.9% ownership limitation, the putative transfer to that person would be void, and the intended transferee would acquire no rights to the LYONs. For purposes of this 4.9% limitation, a "transfer" will include any sale, transfer, gift, assignment, devise or other disposition, whether voluntary or involuntary, whether of record, constructively or beneficially, and whether by operation of law or otherwise. If a prohibited transfer of LYONs results in the ownership of LYONs and shares of common stock by any shareholder in violation of the 4.9% limit or would cause us to be subject to United States federal shipping or aircraft income tax, those LYONs the ownership of which is in excess of the 4.9% limit or would cause us to be subject to United States federal shipping or aircraft income tax will automatically be designated as "excess LYONs." Our board of directors may waive the 4.9% limit or transfer restrictions in any specific instance if evidence satisfactory to our board of directors and our tax counsel is presented that such ownership will not jeopardize our status as exempt from United States income taxation on gross income from the international operation of a ship or ships, within the meaning of Section 883 of the Code. The board of directors may also terminate the limit and transfer restrictions generally at any time for any reason. Excess LYONs will be transferred to a trust. The trustee of the trust will be appointed by us and will be independent of us and the purported holder of the excess LYONs. The beneficiary of such trust will be one or more charitable organizations selected by the trustee of such trust. The trust will be deemed to own the LYONs for the beneficiary of such trust on the day prior to the date of the putative violative transfer. At the direction of our board of the directors, the trustee of such trust will transfer the excess LYONs held in trust to a person or persons (including us) whose ownership of such excess LYONs will not violate the 4.9% limit or otherwise cause us to become subject to United States shipping income tax within 180 days after the later of the transfer or other event that resulted in such excess LYONs or we become aware of such transfer or event. If such a transfer is made, the interest of the charitable beneficiary will terminate, the designation of such shares as excess LYONs will cease and the prohibited holder of the excess LYONs will receive the payment that reflects a price per LYON for such excess 37LYONs equal to the lesser of (i) the price received by the trustee of such trust for the sale or other disposition of the LYONs held in trust, and (ii) the price paid by the prohibited transferee for the LYONs, or, if the prohibited transferee did not give value for such LYONs, the market price of the LYONs on the date of the event that resulted in the excess LYONs. A prohibited transferee or holder of the excess LYONs will not be permitted to receive an amount that reflects any appreciation in the excess LYONs during the period that such excess LYONs were outstanding. Any amount received in excess of the amount permitted to be received by the prohibited transferee or holder of the excess LYONs must be turned over to the charitable beneficiary of the trust. If the foregoing restrictions are determined to be void or invalid by virtue of any legal decision, statute, rule or regulation, then the intended transferee or holder of any excess LYONs may be deemed, at our option, to have acted as an agent on our behalf in acquiring or holding such excess LYONs and to hold such excess LYONs on our behalf. We have the right to purchase any excess LYONs held by the trust for a period of 90 days from the later of (i) the date the transfer or other event resulting in excess LYONs has occurred and (ii) the date the board of directors determines in good faith that a transfer or other event resulting in excess LYONs has occurred. The price per excess LYON to be paid by us will be equal to the lesser of (i) the price per LYON paid in the transaction that created such excess LYONs (or, in the case of certain other events, the market price per LYON for the excess LYONs on the date of such event), or (ii) the lowest market price for the excess LYONs at any time after their designation as excess LYONs and prior to the date we accept such offer. GOVERNING LAWGoverning Law
The indenture and the
LYONsdebentures are governed by and construed in accordance with the laws of the State of New York.BOOK-ENTRY SYSTEMBook-Entry System
The
LYONs that were sold to qualified institutional buyersdebentures areevidencedrepresented by globalsecurities, which weresecurities. We deposited each global security with, or on behalf of, DTC and registered each global security in the name of Cede & Co.as DTC's nominee., a nominee of DTC. Exceptas set forthunder the circumstances described below,thea globalsecuritiessecurity may be transferred, in whole or in part, only to another nominee of DTCnomineeor to a successor of DTC or its nominee.AfterUpon the issuance of a
saleglobal security, DTC credited on its book-entry registration and transfer system the accounts ofLYONs under this shelf registration statement, LYONspersons designated by the initial purchaser with the respective principal amounts at maturity of the debentures represented by the global security. Ownership of beneficial interests in a global security will be limited to persons thatwere held ashave accounts with DTC or its nominee ("participants") or persons that may hold interests through participants. Owners of beneficial interests in the debentures represented by the global securitieswith DTCwillremain ashold their interests pursuant to the procedures and practices of DTC. Ownership of beneficial interests in a global security will be shown on, and theglobal securities. Persons may hold their interests in the global securities directly through DTC if they are participants in DTC, or indirectly through organizationstransfer of thatare participants in DTC. Transfers between participantsownership will be effected only through, records maintained by DTC or its nominee (with respect to interests of persons other than participants). The laws of some states require that certain purchasers of securities take physical delivery of such securities inaccordance with DTC rulesdefinitive form. Such limits andwill be settled in clearing house funds. Persons who are not DTC participantssuch laws mayownimpair the ability to transfer beneficial interests inthea globalsecurities only through DTC participants or certain banks, brokers, dealers, trust companies and other parties that clear through or maintain a custodial relationship with a DTC participant.security.So long as
Cede & Co., as theDTC or its nomineeof DTC,is the registered owner of a global security, DTC or its nominee, as the case may be, will be considered the sole owner or holder of the debentures represented by that globalsecurities, we will consider Cede & Co.security for all purposesto beunder thesole holder of the global securities.indenture. Except as providedin this section or as described in "Exchange of Beneficial Interests in the Global Securities for Certificated LYONs,"below, owners of beneficial interests inthea globalsecuritiessecurity will not be entitled to havecertificatesdebentures represented by that global security registered in their names, will not receive or be entitled to receive physical delivery ofcertificatesdebentures in definitiveregisteredform and will not be considered the owners or holders thereof under the indenture. Beneficial owners will not be holders and will not be entitled to any rights provided to the holders ofthe LYONs. We will pay interest on and the redemption price or repurchase price ofdebentures under the global securities or the indenture. Payment of principal amounts at maturity on debentures registered in the name of DTC or its nominee will be made toCede & Co.,DTC or its nominee, as the case may be, as the registered ownerby wire transferofimmediately available funds on each interest payment, redemption or repurchase date. We andthe relevant global security. None of our company, Carnival plc, the trustee, any paying agent or the registrar for the debentures will havenoany responsibility or liability for any38aspect of the records relating to or payments made on account of beneficial ownershipinterests in a global security or for maintaining, supervising or reviewing any records relating to such beneficial interests.We expect that DTC or its nominee, upon receipt of any payment of the
global securities. DTC has informed us that its practice is toprincipal amount at maturity will credit immediately participants' accountson the payment datewith payments in amounts proportionate to their respective beneficial interestsin the global securities, unless it has reason to believe that it will not receive payment. Only the DTC participants are responsible for payments to owners of beneficial interests held through them. Because DTC can only act on behalf of participants, who in turn act on behalf of indirect participants and certain banks, a person having a beneficial interestin the principal amount at maturityrepresented byof the relevant globalsecurities may be unable to pledge its interest to persons or entities that do not participate insecurity as shown on theDTC system, due to the lackrecords ofa physical certificate evidencing its interest. We are not responsible for the performance byDTC or its nominee. We also expect that payments by participantsor indirect participantsto owners oftheir obligations. The trustee is also not responsible for such performance. DTC has advised us that it will take any action permitted to be taken by a holder of LYONs, only at the direction of one or more participants with an interestbeneficial interests in a global security held through such participants will be governed by standing43
instructions and
onlycustomary practices, as is the case withrespect to the principal amount at maturity as to which the participants have given it a direction. DTC has advised us that it is a limited purpose trust company organized under the laws of New York, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the Uniform Commercial Code and a "clearing agency" registered under the provisions of Section 17A of the Exchange Act. DTC was created to holdsecurities held forits participants and to facilitate the clearance and settlement of securities transactions between participants through electronic book-entry changes tothe accounts ofits participants, thereby eliminatingcustomers in bearer form or registered in "street name," and will be theneed for physical movementresponsibility ofcertificates. Participants include securities brokers and dealers, banks, trust companies and clearing corporations and may include certain other organizationssuchas the initial purchasers of the debentures. Certain participants (or their representatives), together with other entities, own DTC. Indirect access to theparticipants.If DTC
systemisavailable to others such as banks, brokers, dealers and trust companies that clear through, or maintain a custodial relationship with, a participant, either directly or indirectly. Although DTC has agreed to the foregoing procedures to facilitate transfers of interests in global securities among participants, it has no obligation to perform or continue to perform these procedures. These procedures may be discontinuedat anytime. EXCHANGE OF BENEFICIAL INTERESTS IN THE GLOBAL SECURITY FOR CERTIFICATED LYONS A global security is exchangeable for definitive convertible LYONs in registered certificated form if DTC notifies us that it istime unwilling or unable to continue asdepositary for the global securitya depository andwe fail to appointa successordepositarydepository is not appointed by us within 90 days or if an event of default has occurred and is continuing, we will issue debentures in definitive form in exchange for the entire global security for the debentures. In any such instance, an owner of a beneficial interest in a global security will be entitled to physical delivery in definitive form of debentures represented by such global security equal in principal amount at maturity to such beneficial interest and to have such debentures registered in its name. Debentures so issued in definitive form will be issued as registered debentures in denominations of $1,000 principal amount at maturity and integral multiples thereof, unless otherwise specified by us.Payment of Additional Amounts
We have agreed that any amounts payable on the debentures will be paid without deduction or withholding for any taxes, levies, imposts or other governmental charges imposed, assessed, levied or collected by or for the account of the Republic of Panama or any of its political subdivisions or taxing authorities or by or for the account of the jurisdiction of incorporation (other than the United States) of a successor corporation to us, to the extent that such taxes first become applicable as a result of the successor corporation becoming the obligor on the debentures ("foreign taxes"). In addition, if deduction or withholding of any foreign taxes is ever required by the Republic of Panama or any of its political subdivisions or taxing authorities (or the jurisdiction of incorporation (other than the United States) of a successor corporation to us), we will pay any additional amounts ("additional amounts") required to make the net amounts paid to the holders of the debentures or the trustee under the indenture, as the case may be, after such deduction or withholding, equal to the amounts of principal, premium, if any, interest, if any, and sinking fund or analogous payments, if any, to which those holders or the trustee are entitled. We are not required to pay additional amounts in respect of the following taxes ("excluded taxes"):
- •
- any present or future foreign taxes which would not have been so imposed, assessed, levied or collected if the holder or beneficial owner of the relevant debenture did not have some present or former connection with the Republic of Panama (or jurisdiction of incorporation of a successor corporation to us) or any such political subdivision of any such jurisdiction other than holding or owning a debenture, or collecting principal and interest, if any, on, or the enforcement of such debenture, which connection may include its domicile, residence or physical presence in such jurisdiction, or its conduct of a business or maintenance of a permanent establishment therein;
- •
- any present or future foreign taxes which would not have been so imposed, assessed, levied or collected but for the fact that, where presentation is required, the relevant debenture was presented for payment on a date more than thirty days after the date the payment became due or was provided for, whichever is later; or
- •
- any present or future foreign taxes which would not have been so imposed, assessed, levied or collected but for the failure by the holder to comply with any certification, identification or other reporting requirements concerning the nationality, residence, identity or connection with the Republic of Panama (or the jurisdiction of incorporation of a successor corporation to us) or any of its political subdivisions of the holder or beneficial owner of the relevant debenture, if compliance is required by statute or by rules or regulations of any such jurisdiction as a condition to relief or exemption from foreign taxes.
44
We or any successor to us, as the case may be, will indemnify and hold harmless each holder of the debentures and upon written request reimburse each holder for the amount of:
- •
- any foreign taxes levied or imposed and paid by the holder of the debentures (other than excluded taxes) as a result of payments made with respect to the debentures;
- •
- any liability (including penalties, interest and expenses) arising from or in connection with the levying or imposing of any foreign taxes; and
- •
- any foreign taxes levied or imposed with respect to payment of additional amounts or any reimbursement pursuant to this list.
We or our successor, as the case may be, will also (1) make such withholding or deduction and (2) remit the full amount deducted or withheld, to the relevant authority in accordance with applicable law. We or any successor to us, as the case may be, will furnish the trustee within 30 days after the date the payment of any foreign taxes is due, certified copies of tax receipts evidencing the payment by us or any successor to us, as the case may be. The trustee will forward copies of the tax receipts to the holders of the debentures.
At least 30 days prior to each date on which any payment under or with respect to the debentures is due and payable, if we are obligated to pay additional amounts with respect to those payments, we will deliver to the trustee an officers' certificate stating that additional amounts will be payable, stating the amounts that will be payable, and setting forth any other information necessary to enable the trustee to pay the additional amounts to holders of the debentures on the payment date.
Redemption or Assumption of Debentures Upon Changes or Amendment to Laws
If as the result of any change in or any amendment to the laws, including any regulations and any applicable double taxation treaty or convention, of the Republic of Panama (or any jurisdiction of incorporation of a successor corporation to us other than the United States), or of any of its political subdivisions or taxing authorities affecting taxation, or any change in an application or interpretation of those laws, which change, amendment, application or interpretation becomes effective on or after the original issuance date of the debentures (or, in certain circumstances, the later date on which a corporation becomes a successor corporation to us), we determine based upon an opinion of independent counsel of recognized standing that (i) we would be required to pay additional amounts on the next succeeding date for the payment thereof, or (ii) any taxes would be imposed (whether by way of deduction, withholding or otherwise) by the Republic of Panama (or the jurisdiction of incorporation, other than the United States, of a successor corporation to us) or by any of its political subdivisions or taxing authorities, upon or with respect to any principal, premium, if any, interest, if any, or sinking fund or analogous payments, if any, then we may, at our option, on giving not less than 30 nor more than 60 days irrevocable notice, redeem the debentures in whole at any time
and in our sole discretion, decide notat a redemption price equal tohave the LYONs represented by global securities. REGISTRATION RIGHTS The summary herein of certain provisions100% of theregistration rights agreement is subject to, and is qualified in its entirety by reference to, all the provisionsissue price of theregistrationdebentures to be purchased plus accrued original issue discount or accrued cash interest, if any, to the redemption date. No notice of redemption may be given more than 90 days prior to the earliest date on which we would be obligated to pay the additional amounts or the tax would be imposed, as the case may be. Also, at the time that the notice of redemption is given, the obligation to pay additional amounts or tax, as the case may be, must be in effect.In the event that the debentures are called for redemption pursuant to the terms of this provision, the holders of debentures shall have all rights
agreement,whichis incorporatedsuch holders would have had if the debentures had been called for redemption byreference intous pursuant to our rights to redeem theregistration statement of which this prospectus forms a part.debentures at any time on or after April 29, 2008.45
Registration Rights
We and Carnival plc entered into a registration rights agreement with
Merrill Lynch pursuant tothe initial purchaser under which we,agreed to file with the SEC,at our expense,andfor the benefit of the holders, filed with the SEC a shelf registration statement covering the resale of theLYONsdebentures, the Carnival plc guarantee, the POPCIL guarantee and the shares ofcommonstock issuable upon conversion of theLYONs, as soon as practicable, but in any event within 90 days after the date of original issuance of the LYONs.debentures. We and Carnival plc will use commercially reasonablebesteffortsto cause the shelf registration statement to become effective as promptly as practicable but in any event within 180 days of such date of original issuance, andto keep the shelf registration statement effective until the earlier of(i)
- •
- the transfer pursuant to Rule 144 under the Securities Act or the sale pursuant to the shelf registration statement of all the securities registered
thereunder, (ii)thereunder;- •
- the expiration of the holding period applicable to such securities held by persons that
39are not affiliates of ours under Rule 144(k) under the Securities Act or any successor provisionprovision; and(iii)- •
- the second anniversary of the effective date of the registration statement, subject to certain permitted exceptions.
We are permitted to suspend the use of this prospectus that is part of the shelf registration statement under certain circumstances relating to pending corporate developments, public filings with the SEC and similar events for a period not to exceed 60 days in any three-month period and not to exceed an aggregate of 90 days in any 12-month period. We have agreed to pay predetermined liquidated damages as described
herein ("Liquidated Damages")in this prospectus, and to which we refer to as "Liquidated Damages," to holders of transfer restrictedLYONs and holders of transfer restricted common stock issued upon conversion of the LYONs,debentures, if a shelf registration statement is not timely filed or made effective or if the prospectus is unavailable for the periods in excess of those permitted above. Such Liquidated Damages shall accrue until such failure to file or become effective or unavailability is cured,(i)in respect of anyLYONsdebentures at a rate per year equal to 0.25% for the first90 day90-day period after the occurrence of such event and 0.50% thereafter of the applicable principal amount (as defined below)thereof and, (ii) in respect of any shares of common stock issued upon conversion, at a rate per year equal to 0.25% for the first 90 day period and 0.50% thereafter of the then applicable conversion price (as defined below).thereof. So long as the failure to file or become effective or unavailability continues, we will pay Liquidated Damages in cash on April2429 and October2429 of each year to the holder of record of the transfer restrictedLYONs or shares of common stockdebentures on the immediately preceding April1014 or October10.14. When such registration default is cured, accrued and unpaid Liquidated Damages will be paid in cash to the record holder as of the date of such cure.A holder
who sells LYONsof debentures or shares of common stock issued upon conversion of theLYONs pursuantdebentures to be sold under theshelfregistration statement must complete and deliver to us a notice and questionnaire, at least 10 business days prior to any distribution of the securities so offered. A holder who sells debentures or shares of common stock issued upon conversion of the debentures under the shelf registration statement generallyiswill be required to
- •
- be named as a selling securityholder in the
prospectus or in any supplements to such prospectus, at the time of effectiveness,related prospectus;- •
- deliver a prospectus to purchasers and be bound by
thecertain provisions of the registration rights agreement that are applicable to such holder, includingthecertain indemnificationprovisions,provisions; andwill- •
- be subject to certain civil liability provisions under the Securities Act.
IfUnder the registration rights agreement, we will
- •
- pay all of our expenses of the shelf registration statement;
- •
- provide copies of such prospectus to each holder that has notified us of
offeredits acquisition of debentures or shares of common stock issued upon conversion of the debentures;- •
- notify each such holder when the shelf registration statement has become effective; and
- •
- take certain other actions as are required to permit, subject to the foregoing, unrestricted resales of the debentures and the shares of common stock issued upon conversion of the debentures.
46
The term "applicable principal amount" means, as of any date of determination, with respect to each $1,000 principal amount at maturity of debentures, the sum of the initial issue price of such debentures, $646.88 per $1,000 principal amount at maturity, plus accrued original issue discount with respect to such debentures through such date of determination.
For holders of securities
isare not a named selling securityholder in this prospectus at the time of effectiveness of the shelf registration statement, we will prepare and file, if required, as promptly as practicable after the receipt ofsuchthe holder's questionnaire, amendments to the shelf registration statement containing this prospectus and/or supplements tothethis prospectus asarenecessary to permitsuch holderholders to deliver this prospectus, including any supplements, to purchasers of the offered securities, subject to our right to suspend the use of this prospectus as described above.The above summary of some of the provisions of the registration rights agreement is subject to, and is qualified in its entirety by reference to, all the provisions of the registration rights agreement, a copy of which has been filed as an exhibit to the registration statement of which this prospectus forms a part.
47
DESCRIPTION OF THE CARNIVAL PLC GUARANTEECarnival plc has guaranteed our monetary obligations under the debentures on an unsecured and unsubordinated basis. Carnival plc's guarantee was issued under its deed of guarantee, which Carnival plc and we executed at the closing of the DLC transaction on April 17, 2003. At the closing of the DLC transaction, Carnival plc and we also executed a separate deed of guarantee reciprocal to Carnival plc's, under which we guaranteed specified obligations of Carnival plc owed to creditors. The following description is a summary of the material provisions of Carnival plc's deed of guarantee. The summary is not complete and may not cover information that you may find important. Accordingly, this summary is subject to, and qualified in its entirety by reference to, the detailed provisions of Carnival plc's deed of guarantee, which is an exhibit to the registration statement containing this prospectus. You should read Carnival plc's deed of guarantee carefully and in its entirety because it, and not this description, defines your rights under the Carnival plc deed of guarantee.
Form of Guarantee
The Carnival plc guarantee is in uncertificated form.
Obligations Guaranteed
Under Carnival plc's deed of guarantee, Carnival plc has fully, unconditionally and irrevocably undertaken and promised to us that Carnival plc will, as a continuing obligation, make to the creditor to whom or to which it is owed the proper and punctual payment of each of the following obligations, following written demand on the relevant primary obligor, if for any reason we do not make such payment on the relevant due date:
- •
- any contractual monetary obligations owed to our creditors incurred under an agreement entered into since completion of the DLC transaction;
- •
- any contractual monetary obligations of other persons, referred to as principal debtors, which are guaranteed by us and incurred under an agreement entered into since completion of the DLC transaction; and
- •
- any other obligation of any kind that may be agreed in writing between us and Carnival plc.
Carnival plc's deed of guarantee provides that the creditors to whom our obligations are owed are intended third party beneficiaries of Carnival plc's deed of guarantee. Subject to protective procedures for existing and new beneficiaries of Carnival plc's guarantee, we and Carnival plc may exclude obligations from coverage under Carnival plc's deed of guarantee by agreement, as described below under "—Exclusions from the Guarantee."
Should any obligation not be recoverable from Carnival plc as a result of the obligation becoming void, voidable or unenforceable against us, Carnival plc also has agreed that it will, as sole, original and independent obligor, make payment on such obligation by way of a full indemnity. Unless otherwise provided in Carnival plc's deed of guarantee, Carnival plc's liabilities and obligations under Carnival plc's deed of guarantee will remain in force notwithstanding any act, omission, neglect, event or matter which would not affect or discharge our liabilities owed to the relevant creditor, including, without limitation:
- •
- anything which would have discharged Carnival plc, wholly or in part, but not us;
- •
- anything which would have offered Carnival plc, but not us, any legal or equitable defense; and
- •
- any winding-up, insolvency, dissolution and/or analogous proceeding of, or any change in constitution or corporate identity or loss of corporate identity by, us or any other person or entity.
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In the event that Carnival plc is required under the Carnival plc guarantee to make a payment to a creditor, we will reimburse Carnival plc for those payments.
Exclusions from the Guarantee
We and Carnival plc may, by entering into a supplemental deed of guarantee and by giving the required notice, exclude from the scope of Carnival plc's deed of guarantee obligations of a particular type, or a particular obligation or obligations, incurred after a specified date. The specified date must be:
- •
- in the case of obligations of a particular type, at least three months after the date on which notice of the relevant exclusion is given, or
- •
- in the case of a particular obligation, at least five business days, or such shorter period as the relevant creditor may agree, after the date on which notice is given to the relevant creditor.
However, no such agreement or exclusion shall be effective with respect to any obligation incurred before, or arising out of, any credit or similar facility available for use at, the time at which the relevant agreement or exclusion becomes effective. Therefore, under this provision we and Carnival plc would not be able to exclude the debentures or the indenture governing such debentures from the scope of Carnival plc's deed of guarantee without the consent of the trustee under the indenture and the requisite holders of the debentures.
No Defense, Set-off and Counterclaim
In respect of any claim against Carnival plc by a creditor under Carnival plc's deed of guarantee, Carnival plc will
paynot have available to it:
- •
- by way of defense or set-off, any matter that arises from or in connection with Carnival plc's deed of guarantee, and which would have been available to Carnival plc by way of defense or set-off if the proceedings had been brought against Carnival plc by us,
- •
- by way of defense or set-off, any matter that would have been available to Carnival plc by way of defense or set-off against a creditor if the creditor had been a party to Carnival plc's deed of guarantee, or
- •
- by way of counterclaim any matter not arising from Carnival plc's deed of guarantee that would have been available to Carnival plc by way of counterclaim against a creditor if the creditor had been a party to Carnival plc's deed of guarantee.
Governing Law and Jurisdiction
Carnival plc's deed of guarantee is governed and construed in accordance with the laws of the Isle of Man. All actions or proceedings arising out of or in connection with Carnival plc's deed of guarantee must be exclusively brought in courts in England. In addition, the issuance of the Carnival plc guarantee does not affect the governing law of the debentures, which are governed by the laws of the State of New York. It is therefore likely that the governing law and the jurisdiction in which actions may be brought in respect of the Carnival plc guarantee will be different from those for the debentures. See "Risk Factors—Risks Relating to the Guarantees—Carnival plc's guarantee and POPCIL's guarantee are governed by the laws of a foreign jurisdiction, and an action to enforce either guarantee must be brought in the courts of England."
Termination
No termination of Carnival plc's deed of guarantee will be effective with respect to any obligation under Carnival plc's deed of guarantee incurred before, or arising out of, any credit or similar facility
49
available for use at, the time at which the termination becomes effective. Therefore, the termination provisions described below will not apply to the debentures or the related indenture without the consent of the trustee under the indenture and the requisite holders of the debentures.
Subject to that limitation, Carnival plc's deed of guarantee will terminate:
- •
- automatically upon the termination or the discontinuance of effectiveness of the Equalization and Governance Agreement, which was entered into by us and Carnival plc at the closing of the DLC transaction and is the primary agreement governing the ongoing relationship between us and Carnival plc as a dual listed company operating as a single economic entity,
- •
- automatically upon the termination or discontinuance of effectiveness of our deed of guarantee, or
- •
- on such future date as Carnival plc may determine with the giving of three months' notice following our consenting to such termination, although our consent shall not be required if prior to the date of such notice a resolution is passed or an order is made for the liquidation of us.
Amendment
We and Carnival plc may amend Carnival plc's deed of guarantee by entering into a supplemental deed. However, no amendment of Carnival plc's deed of guarantee will be effective with respect to any obligation under Carnival plc's deed of guarantee incurred before, or arising out of, any credit or similar facility available for use at, the time at which the amendment becomes effective. Therefore, no such amendment with respect to the debentures or the related indenture may become effective without the consent of the trustee and the requisite holders of the debentures.
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DESCRIPTION OF THE POPCIL GUARANTEEPOPCIL has guaranteed all of our
expenses relatingindebtedness and related obligations to that indebtedness under the debentures on an unsecured and unsubordinated basis. POPCIL's guarantee is being issued under its deed of guarantee, which it executed with Carnival plc and us on June 19, 2003. Under POPCIL's deed of guarantee, on terms substantially the same as those described below, POPCIL has also agreed to guarantee all of Carnival plc's indebtedness and related obligations to that indebtedness incurred under agreements entered into after April 17, 2003. The following description is a summary of the material provisions of POPCIL's deed of guarantee. The summary is not complete and may not cover information that you may find important. Accordingly, this summary is subject to, and qualified in its entirety by reference to, theshelf registration statement, provide copiesdetailed provisions of POPCIL's deed of guarantee. You should read POPCIL's deed of guarantee carefully and in its entirety because it, and not this description, defines your rights under POPCIL's deed of guarantee.Form of Guarantee
The POPCIL guarantee is in uncertificated form.
Obligations Guaranteed
Under POPCIL's deed of guarantee, POPCIL has fully, unconditionally and irrevocably undertaken and promised to Carnival Corporation that POPCIL will, as a continuing obligation, make to the creditor to whom or to which it is owed the proper and punctual payment of each of the following obligations, following written demand on the relevant primary obligor, if for any reason Carnival Corporation does not make such payment on the relevant due date:
- •
- any Indebtedness and Related Obligations to that Indebtedness incurred by us under an agreement entered into since April 17, 2003;
- •
- any other Indebtedness and Related Obligations to that Indebtedness that we agree to cover under our deed of guarantee related to the DLC transaction; and
- •
- any other obligation of any kind that may be agreed in writing among us, Carnival plc and POPCIL.
We refer to the obligations listed in the three bullets above in this description of POPCIL's guarantee as the "Obligations."
POPCIL's deed of guarantee provides that the creditors to whom the Obligations are owed are intended third party beneficiaries of POPCIL's deed of guarantee. Subject to protective procedures for existing and new beneficiaries of POPCIL's guarantee, we, POPCIL and Carnival plc may exclude obligations from coverage under POPCIL's deed of guarantee by agreement, as described below under "—Exclusions from the Guarantee."
Should any Obligation not be recoverable from POPCIL as a result of the Obligation becoming void, voidable or unenforceable against us, POPCIL also has agreed that it will, as sole, original and independent obligor, make payment on such obligation by way of a full indemnity. Unless otherwise provided in POPCIL's deed of guarantee, POPCIL's liabilities and obligations under POPCIL's deed of guarantee will remain in force notwithstanding any act, omission, neglect, event or matter which would not affect or discharge our liabilities owed to the relevant creditor, including, without limitation:
- •
- anything which would have discharged POPCIL, wholly or in part, but not us;
51
- •
- anything which would have offered POPCIL, but not us, any legal or equitable defense; and
- •
- any winding-up, insolvency, dissolution and/or analogous proceeding of, or any change in constitution or corporate identity or loss of corporate identity by, us or any other person or entity.
In the event that POPCIL is required under POPCIL's deed of guarantee to make a payment to a creditor, we will reimburse POPCIL for those payments.
Exclusions from the Guarantee
We, Carnival plc and POPCIL may, by entering into a supplemental deed of guarantee and by giving the required notice, exclude from the scope of POPCIL's deed of guarantee obligations of a particular type, or a particular obligation or obligations, incurred after a specified date. The specified date must be:
- •
- in the case of obligations of a particular type, at least five business days after the date on which notice of the relevant exclusion is given, or
- •
- in the case of a particular obligation, at least five business days, or such shorter period as the relevant creditor may agree, after the date on which notice is given to the relevant creditor.
However, no such agreement or exclusion shall be effective with respect to any Obligation incurred before, or arising out of, any credit or similar facility available for use at, the time at which the relevant agreement or exclusion becomes effective. Therefore, under this provision we, POPCIL and Carnival plc would not be able to exclude the debentures or the indenture governing such debentures from the scope of POPCIL's deed of guarantee without the consent of the trustee under the indenture and the requisite holders of the debentures.
No Defense, Set-off and Counterclaim
In respect of any claim against POPCIL by a creditor under POPCIL's deed of guarantee, POPCIL will not have available to it:
- •
- by way of defense or set-off, any matter that arises from or in connection with POPCIL's deed of guarantee, and which would have been available to POPCIL by way of defense or set-off if the proceedings had been brought against POPCIL by us,
- •
- by way of defense or set-off, any matter that would have been available to POPCIL by way of defense or set-off against a creditor if the creditor had been a party to POPCIL's deed of guarantee, or
- •
- by way of counterclaim any matter not arising from POPCIL's deed of guarantee that would have been available to POPCIL by way of counterclaim against a creditor if the creditor had been a party to POPCIL's deed of guarantee.
Governing Law and Jurisdiction
POPCIL's deed of guarantee is governed and construed in accordance with the laws of the Isle of Man. All actions or proceedings arising out of or in connection with POPCIL's deed of guarantee must be exclusively brought in courts in England. In addition, the issuance of the POPCIL guarantee will not affect the governing law of the debentures, which will continue to be governed by the laws of the State of New York. Any jurisdictional provisions contained in the debentures and the Indenture will also be unaffected by POPCIL's deed of guarantee. It is therefore likely that the governing law and the jurisdiction in which actions may be brought in respect of POPCIL's deed of guarantee will be different from those for the debentures. See "Risk Factors—Risks Relating to the Guarantees—Carnival plc's
52
guarantee and POPCIL's guarantee are governed by the laws of a foreign jurisdiction, and an action to enforce either guarantee must be brought in the courts of England."
Merger, Consolidation and Significant Asset Transfers
Upon any consolidation, merger or other combination of POPCIL into or with or any Significant Asset Transfer to, a subsidiary of us or Carnival plc, POPCIL shall use all reasonable efforts to procure that the successor Person formed by that consolidation or into or with which POPCIL is merged or to which that Significant Asset Transfer is made, if other than POPCIL, shall execute a supplemental deed to POPCIL's deed of guarantee so as to succeed to, and be substituted for, and be able to exercise every right and power of, POPCIL under POPCIL's deed of guarantee with the same effect as if the successor Person had been named as the guarantor under POPCIL's deed of guarantee.
Termination
The POPCIL deed of guarantee will terminate automatically, without the consent of any holder of debentures or other Obligations, with respect to all Obligations, including the debentures and other Obligations existing on the date of termination:
- •
- upon any consolidation, merger or other combination of POPCIL with or into any Person, including Carnival plc or us but excluding any subsidiary of Carnival plc or us;
- •
- upon any sale of voting securities or other capital stock of POPCIL to any Person other than Carnival plc, us or any of its or our respective subsidiaries such that after such sale, POPCIL is no longer a subsidiary of Carnival plc, us or any of its or our respective subsidiaries;
- •
- upon any sale, assignment, transfer, lease, conveyance or other disposition of assets by POPCIL to any Person, including Carnival plc or us but excluding any subsidiary of Carnival plc or us, if the POPCIL Remaining Consolidated Assets represent 3% or less of the Carnival Corporation & plc Remaining Consolidated Assets; or
- •
- if the consolidated Indebtedness of POPCIL and its subsidiaries (excluding Indebtedness represented by POPCIL's deed of guarantee), determined as of the most recently completed fiscal quarter of POPCIL in accordance with US GAAP, represents less than 3% of the consolidated Indebtedness of Carnival Corporation & plc, determined as of the most recently completed fiscal quarter of Carnival Corporation in accordance with US GAAP.
Subject to the limitation described below, the POPCIL deed of guarantee will also terminate:
- •
- automatically upon the termination or the discontinuance of effectiveness of the Equalization and Governance Agreement, which was entered into by us and Carnival plc at the closing of the DLC transaction and is the primary agreement governing the ongoing relationship between us and Carnival plc as a dual listed company operating as a single economic entity,
- •
- automatically upon the termination or discontinuance of effectiveness of our deed of guarantee or the Carnival plc deed of guarantee, or
- •
- on such future date as POPCIL may determine with the giving of five business days' notice following Carnival plc and our consenting to such termination, although if prior to the date of such
prospectus to each holder that has notifiednotice a resolution is passed or an order is made for the liquidation of either of usof its acquisition of LYONsorshares of common stock issued upon conversionCarnival plc, the consent of theLYONs, notify each such holder when the shelf registration statement has become effective and take certain other actions as are required to permit,company subject to theforegoing, unrestricted resales oforder or resolution shall not be required.No termination described in the
LYONs and the shares of common stock issued upon conversion of the LYONs. The term "applicable principal amount" means, as of any date of determination,immediately preceding sentence will be effective with respect toeach $1,000 principal amountan Obligation incurred before, or arising out of, any credit or similar facility available for use at,maturity of LYONs,thesumtime at which the termination becomes effective. Therefore, these termination provisions will not apply to53
the debentures or the related indenture without the consent of the
initial issue pricetrustee under the indenture and the requisite holders ofsuch LYONs, $475.66 per $1,000 principal amount at maturity, plus accrued original issue discountthe debentures.Amendment
We, POPCIL and Carnival plc may amend POPCIL's deed of guarantee by entering into a supplemental deed. However, no amendment of POPCIL's deed of guarantee will be effective with respect to any Obligations incurred before, or arising out of, any credit or similar facility available for use at, the time at which the amendment becomes effective. Therefore, no such
LYONs through such dateamendment may become effective with respect to the debentures or the related indenture without the consent ofdetermination.the trustee and the requisite holders of the debentures.Definitions
The
term "applicable conversion price"following terms, as used in this description, have the following definitions:"Carnival Corporation & plc Remaining Consolidated Assets" means, in respect of a sale, assignment, transfer, lease, conveyance or other disposition of assets, the consolidated assets of Carnival plc, us and its and our respective subsidiaries, determined in accordance with US GAAP, as of the most recently completed fiscal quarter of Carnival Corporation, giving pro forma effect to such sale, assignment, transfer, lease, conveyance or other disposition of assets and any
daterelated transactions."Hedging Obligations" means, with respect to any person or entity, the obligations of
determination,that person or entity under:
- (1)
- currency exchange or interest rate swap agreements, currency exchange or interest rate cap agreements and currency exchange and interest rate collar agreements; and
- (2)
- other agreements or arrangements designed to protect that person or entity against fluctuations in currency exchange or interest rates.
"Indebtedness" means, with respect to any specified Person, any indebtedness of such Person, whether or not contingent:
- (1)
- in respect of borrowed money;
- (2)
- evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect of any of those);
- (3)
- in respect of banker's acceptances;
- (4)
- representing capital lease obligations;
- (5)
- representing the
applicable principal amountbalance deferred and unpaid of the purchase price of any property;- (6)
- representing any hedging obligations; or
- (7)
- in respect of guarantees of any obligations described in items (1) to (6), above;
if and to the extent any of the preceding items (other than letters of credit, Hedging Obligations and guarantees) would appear as a liability upon a balance sheet of the specified Person prepared in accordance with generally accepted accounting principles in the United States. Notwithstanding the foregoing, Indebtedness shall not include:
- (a)
- trade accounts payable and accrued expenses or liabilities arising in the ordinary course of business;
- (b)
- any liability for federal, state or local taxes or other taxes or by such Person; or
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- (c)
- obligations of such Person with respect to performance and surety bonds and completion guarantees in the ordinary course of business.
"Person" includes an individual, company, limited liability company, corporation, firm, partnership, joint venture, association, trust, state or agency of a state (in each
LYONcase, whether or not having a separate legal personality)."POPCIL Remaining Consolidated Assets" means, in respect of any sale, assignment, transfer, lease, conveyance or other disposition of assets, the consolidated assets of POPCIL, determined in accordance with US GAAP, as of the most recently completed fiscal quarter of POPCIL, giving pro forma effect to such
datesale, assignment, transfer, lease, conveyance or other disposition ofdetermination dividedassets and any related transactions and excluding (1) any receivables from or Indebtedness owed by Carnival plc, us or any of its or our respective subsidiaries, other than subsidiaries of POPCIL and (2) any investments in Carnival plc, us or any of its or our respective subsidiaries, other than subsidiaries of POPCIL."Related Obligations" means, with respect to Indebtedness, all obligations for principal, premium, interest, penalties, fees, indemnifications, reimbursements and other amounts payable pursuant to the
conversion rate in effectdocumentation evidencing such Indebtedness."Significant Asset Transfer" means the sale, assignment, transfer, lease, conveyance or other disposition (in a single transaction or series of related transactions) of assets of POPCIL representing 90% or more of the book value of the consolidated assets of POPCIL, determined as of
such datethe most recently completed fiscal quarter ofdetermination or, if no LYONs are then outstanding, the conversion rate that would bePOPCIL, ineffect were LYONs then outstanding. 40accordance with US GAAP.
DESCRIPTION OF CARNIVAL CORPORATION CAPITAL STOCKGENERAL
GeneralThe following is a description of the material terms of our capital stock. Because it is a summary, the following description is not complete and is subject to and qualified in its entirety by reference to our third amended and restated articles of incorporation, or articles, our amended and restated by-laws, or by-laws, and the other agreements specifically referenced in this section.
Our authorized capital stock consists of
960,000,0002,000,000,000 shares, of which 1,959,999,998 are shares of common stock,and40,000,000 are shares of preferred stock, one share is a special voting stock and one share is a special stock.On November 28, 2001,As of June 17, 2003, there were586,171,547628,728,973 shares of common stock,andno shares of preferred stock, one share of special voting stock and one share of special stock outstanding. The one share of special voting stock, which we refer to in this prospectus as the special voting share, and the one share of special stock, which we refer to in this prospectus as the equalization share, were issued in connection with the DLC transaction, which was completed on April 17, 2003. See "—Special Voting Share" and "—Equalization Share."Our common stock and the trust shares of beneficial interest in the P&O Princess Special Voting Trust, including the beneficial interest in the Carnival plc special voting share, are listed and trade together on the NYSE under the ticker symbol "CCL."
Voting Rights
At any meeting of shareholders, all matters, except as otherwise expressly provided by Panamanian law, our articles or our by-laws, are decided by a majority of the votes cast by all shareholders entitled to vote, including, where applicable, the Carnival Corporation Special Voting Entity, as described below, who are present in person or by proxy at such meeting. In connection with the DLC transaction, special voting arrangements were implemented so that our shareholders and Carnival plc's shareholders vote together as a single decision-making body on all actions submitted to a shareholder vote other than matters designated as "class rights actions" or resolutions on procedural or technical matters.
These are calledjoint electorate actions and include:
- •
- the appointment, removal or re-election of any director of us, Carnival plc or both;
- •
- if required by law, the receipt or adoption of the financial statements of us or Carnival plc or the annual accounts of both companies;
- •
- the appointment or removal of the auditors of either company;
- •
- a change of name by Carnival plc or us, or both; or
- •
- the implementation of a mandatory exchange based on a change in tax laws, rules or regulations.
The following
descriptiontable illustrates how these voting arrangements would affect joint electorate actions needing to be passed by a majority vote, assuming 100% of each company's shareholders vote:
Carnival Corporation Carnival plc Outcome 64% or more approve 100% disapprove Action taken 63% or less disapprove 100% approve Action taken 51% or less approve 55% or more disapprove Action not taken 51% or less disapprove 54% or more approve Action taken The relative voting rights of the Carnival plc shares and our shares are determined by the equalization ratio. Based on the current equalization ratio of 1:1, each of our shares has the same voting rights as one Carnival plc share on joint electorate actions.
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A change in the equalization ratio resulting from a share reorganization or otherwise would only affect voting rights on a per share basis. In the aggregate, such a change would not affect the relative weighting between the current shareholders of us and Carnival plc.
In the case of class rights actions, the company wishing to carry out the class rights action would require the prior approval of shareholders of both companies, each voting separately as a class. If shareholders of either company do not approve the action, it generally will fail.
Class rights actions include:
- •
- the voluntary liquidation, dissolution or winding up, or equivalent, of either company for which shareholder approval is
qualifiedrequired, other than as part of a voluntary liquidation, dissolution or winding up, or equivalent, of both companies at or about the same time provided that such liquidation is not for the purpose of reconstituting all or a substantial part of the business of the two companies in one or more successor entities;- •
- the sale, lease, exchange or other disposition of all
respectsor substantially all of the assets of either company other than a bona fide commercial transaction for valid business purposes and at fair market value and not as part of a proposal the primary purpose of which is to collapse or unify the DLC structure;- •
- an adjustment to the equalization ratio, other than in accordance with the equalization and governance agreement entered into by
referenceus and Carnival plc on April 17, 2003;- •
- any amendment, removal or alteration of any of the provisions of Carnival plc's articles of association and our articles and by-laws which entrench specified core provisions of the DLC structure;
- •
- any amendment or termination of the principal agreements under which the DLC structure is implemented, except where otherwise specifically provided in the relevant agreement;
- •
- any amendment to, removal or alteration of the effect of certain tax-related provisions of our articles of incorporation that would be reasonably likely to cause a mandatory exchange; and
- •
- anything which the boards of both companies agree should be approved as a class rights action.
The following table illustrates how these voting arrangements would affect class rights actions:
Carnival Corporation shareholders Carnival plc shareholders Outcome Approve(1) Disapprove Action not taken Disapprove Disapprove Action not taken Disapprove Approve(2) Action not taken Approve Approve Action taken
- (1)
- Assumes that holders of at least approximately 2% or more of our outstanding shares do not cast votes on the action. In contrast, if all of our shareholders voted in favor of the action, it would be taken.
- (2)
- Assumes that holders of at least approximately 2% or more of the outstanding Carnival plc shares do not cast votes on the action, or in the case of a special resolution that at least one vote is cast against the action. In contrast, if all Carnival plc shareholders voted in favor of the action, it would be taken.
- •
- No resolution to approve a class rights action or joint electorate action will be approved unless a parallel Carnival plc shareholders' meeting is held to vote on any equivalent resolution.
Our board and the Carnival plc board may:
- •
- decide to seek approval from shareholders for any matter that would not otherwise require such approval;
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- •
- require any joint electorate action to instead be approved as a class rights action; or
- •
- specify a higher majority vote than the majority that would otherwise be required by applicable laws and regulations.
Reflecting votes of Carnival plc shareholders at Carnival Corporation meetings
Our articles authorize one special voting share. The special voting share is merely a mechanism to give effect to shareholder votes at parallel shareholder meetings on joint electorate actions and class rights actions as described above under "—Common Stock—Voting Rights" and quorum provisions as described below under "—Certain Provisions of Carnival Corporation's Articles and By-laws—Quorum Requirements." The special voting share has no rights to income or capital and no voting rights except as described below. Upon completion of the DLC transaction, Carnival issued the special voting share to DLC SVC Limited. DLC SVC Limited is a newly formed company incorporated in England and Wales whose shares are legally and beneficially owned by The Law Debenture Trust Corporation p.l.c., an independent trustee company incorporated in England and Wales. At all meetings at which a joint electorate action or a class rights action will be considered, the holder of the Carnival Corporation special voting share must be present.
For joint electorate actions, the Carnival Corporation special voting share will represent the number of votes cast at the parallel meeting of Carnival plc shareholders, as adjusted by the equalization ratio and rounded up to the nearest whole number, and will represent "yes" votes, "no" votes and abstentions at our meeting in accordance with votes cast at the Carnival plc meeting.
For class rights actions, DLC SVC Limited, as holder of the Carnival Corporation special voting share, will only vote if the proposed action has not been approved at the parallel Carnival plc meeting. In that event, the Carnival Corporation special voting share will represent that number of votes equal to the largest whole percentage that is less than the percentage of the number of votes necessary to defeat the resolution at our meeting if the total votes capable of being cast by all of our outstanding shares able to vote were cast in favor of the resolution. In most cases, this will be 49%, for a majority vote, 49% is the largest whole percentage that is less than the 50% needed to defeat the resolution. As a result, in the case of a majority vote, the Carnival Corporation special voting share will represent a number of votes equal to 98% of the votes capable of being cast by all our shares, excluding the votes represented by the Carnival Corporation special voting share. Therefore, assuming holders of approximately 2% or more of our shares do not cast votes on such class rights action, it will fail. If the Carnival plc shareholders approve the proposed action, the Carnival Corporation special voting share will not represent any votes.
The Carnival Corporation special voting share will not represent any votes on any resolution of a procedural or technical nature, which we refer to in this prospectus as "procedural resolutions." Procedural resolutions are those that do not adversely affect the shareholders of Carnival plc in any material respect and are put to our
second amendedshareholders at a meeting. The Chairman of our board will, in his absolute discretion, determine whether a resolution is a procedural resolution. To the extent that such matters require the approval of our shareholders, any of the following will be procedural resolutions:
- •
- that certain people be allowed to attend or be excluded from attending the meeting;
- •
- that discussion be closed and
restatedthe question put to the vote, provided no amendments have been raised;- •
- that the question under discussion not be put to the vote, where a shareholder feels the original motion should not be put to the meeting at all, if such original motion was brought during the course of that meeting;
- •
- to proceed with matters in an order other than that set out in the notice of the meeting;
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- •
- to adjourn the debate, for example, to a subsequent meeting; and
- •
- to adjourn the meeting.
Reflecting votes of Carnival Corporation shareholders at Carnival plc meetings
As part of the DLC transaction, Carnival plc issued a special voting share to us, and we transferred such share to the trustee of the P&O Princess Special Voting Trust, a trust established under the laws of the Cayman Islands for the purpose of holding the Carnival plc special voting share. For joint electorate actions, the Carnival plc special voting share represents the number of votes cast at the parallel meeting of our shareholders, as adjusted by the equalization ratio and rounded to the nearest whole number, and will represent "yes" votes, "no" votes and abstentions at the Carnival plc meeting in accordance with votes cast at our meeting.
For class rights actions, the trustee of the P&O Princess Special Voting Trust, as holder of the Carnival plc special voting share, will only vote if the proposed action has not been approved at our parallel meeting. In that event, the Carnival plc special voting share will represent that number of votes equal to the largest whole percentage that is less than the percentage of the number of votes, or, in the case of a special resolution, such percentage less one vote, necessary to defeat the resolution at the Carnival plc meeting if the total number of votes capable of being cast by all outstanding Carnival plc shares, and other Carnival plc shares able to vote, were cast in favor of the resolution. In most cases, this will be 49%, for a majority vote, 49% is the largest whole percentage that is less than the 50% needed to defeat the resolution. As a result, in the case of a majority vote, the Carnival plc special voting share will represent a number of votes equal to 98% of the votes capable of being cast by all Carnival plc shares excluding the votes represented by the Carnival plc special voting share. Therefore, assuming holders of approximately 2% or more of Carnival plc shares do not cast votes on such class rights action, it will fail. If our shareholders approve the proposed action, the Carnival plc special voting share will not represent any votes.
The Carnival plc special voting share will not represent any votes on any procedural resolutions.
In connection with the DLC transaction, trust shares of beneficial interest in the P&O Princess Special Voting Trust were transferred to us. Immediately following this transfer, we distributed such trust shares by way of dividend to our shareholders of record at the close of business on April 17, 2003. Under the Pairing Agreement entered into by us, the trustee of the P&O Princess Special Voting Trust and SunTrust Bank on April 17, 2003, and our articles, the trust shares of beneficial interest in the P&O Princess Special Voting Trust are paired with, and evidenced by, certificates representing shares of our common stock on a one-for-one basis.
Our shares trade in units consisting of one share of our common stock and one trust share of beneficial interest in the P&O Princess Special Voting Trust. Each share of our common stock shall not and cannot be transferred without the corresponding paired trust share. The trust shares of beneficial interest in the P&O Princess Special Voting Trust entitle our shareholders to receive any distributions made by the P&O Princess Special Voting Trust. As the sole purpose of the P&O Princess Special Voting Trust relates to the holding of the Carnival plc special voting share, it is not expected to make any distributions. See "Description of Trust Shares."
Equalization Share
Our articles authorize one equalization share. The equalization share:
- •
- has rights to dividends in accordance with the equalization and governance agreement as declared and paid by the board of directors;
- •
- has no rights to receive notice of, attend or vote at any shareholder meeting; and
- •
- in the event of our voluntary or involuntary liquidation, ranks after all other holders of shares.
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Equalization Ratio
The equalization and governance agreement, which was executed on April 17, 2003 by us and Carnival plc in connection with the DLC transaction, governs the equalization ratio, which reflects the relative economic and voting interests represented by an individual share of common equity in each company. As of June 1, 2003, the "equalization ratio" between shares of our common stock and Carnival plc ordinary shares was 1:1, so one share of our common stock is entitled to the same economic and voting interests in Carnival Corporation & plc as one Carnival plc ordinary share.
In order to effect the relative rights of our shares and Carnival plc shares under the DLC transaction, we and Carnival plc agreed in the equalization and governance agreement that Carnival Corporation & plc would be operated under the following DLC equalization principles:
- •
- the equalization ratio will effectively govern the proportion in which distributions of income and capital are made to the holders of our shares relative to the holders of Carnival plc shares, and vice versa, and the relative voting rights of the holders of our shares and the holders of Carnival plc shares on joint electorate actions;
- •
- issuances of or transactions affecting the share capital of us or Carnival plc will be implemented in a way which will not give rise to a materially different financial effect as between the interests of the holders of our shares and the interests of the holders of Carnival plc shares. If any such issue or transaction involves any of the following:
- •
- a rights issue of shares at less than market value;
- •
- an offer of any securities, or a grant of any options, warrants or other rights to subscribe for, purchase or sell any securities, to shareholders by way of rights;
- •
- non-cash distributions to shareholders and share repurchases involving an offer made to all or substantially all of the shareholders of a company to repurchase their shares at a premium to market value;
- •
- a consolidation or subdivision of shares; or
- •
- an issue of shares to shareholders for no consideration or solely by way of capitalization of profits or reserves,
then an automatic adjustment to the equalization ratio will occur, unless our board of directors and Carnival plc's board of directors, in their sole discretion, undertake:
- •
- an offer or action which having regard to the then existing equalization ratio; the timing of the offer or action; and any other relevant circumstances, is in the reasonable opinion of the boards of us and Carnival plc financially equivalent (but not necessarily identical) in respect of, on the one hand holders of our shares, and on the other hand holders of Carnival plc shares, and does not materially disadvantage either company's shareholders, which we refer to as a "matching action"; or
- •
- an alternative to such automatic adjustment that has been approved as such by a class rights action.
Any adjustments to the equalization ratio will be communicated to shareholders through a press release.
Our board and Carnival plc's board will be under no obligation to undertake any such matching action or to seek approval of an alternative as a class rights action if any issue or transaction referred to above is not covered by an automatic adjustment to the equalization ratio, and no automatic adjustment to the equalization ratio will then occur, but our board and Carnival plc's board will have the right, in their sole discretion, but not the obligation, to undertake a matching action, or to seek approval of an adjustment to the equalization ratio as a class rights action.
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No adjustment to the equalization ratio will be required in respect of:
- •
- scrip dividends or dividend reinvestments at market price; issuances of Carnival plc shares or our shares or securities convertible into, or exercisable or exchangeable for, such shares pursuant to employee share plans;
- •
- issuances of our shares under our $600,000,000 2% Convertible Senior Debentures due 2021 and the $1,051,175,000 Liquid Yield Option Notes™ due 2021;
- •
- issuances of shares or securities convertible into, or exercisable or exchangeable for, such shares other than to all or substantially all shareholders of either company, including for acquisitions;
- •
- a buy-back or repurchase of any shares:
- •
- in the market by means of an offer
- (1)
- not open to all or substantially all shareholders of either company or
- (2)
- in compliance with Rule 10b-18 under the Exchange Act;
- •
- at or below market value;
- •
- by either company pursuant to the provisions in such company's governing documents; or
- •
- pro rata to the shareholders of Carnival Corporation & plc at the same effective premium to the market price, taking into account the equalization ratio;
- •
- matching actions;
- •
- the issue of an equalization share by either company to the other; and
- •
- any purchase, cancellation or reduction of disenfranchised shares.
Sources and Payment of Dividends
Under Panamanian law, a corporation may pay dividends to the extent of a corporation's net earnings or capital surplus.
We expect to pay quarterly dividends. There has been no change in the entitlement of quarterly dividends for shareholders of either company following the completion of the DLC transaction. Our shareholders and Carnival plc shareholders have rights to income and capital distributions from Carnival Corporation & plc based on the equalization ratio. In order for the companies to pay a dividend or make a distribution, the ratio of dividends and distributions paid per share of our common stock to dividends and distributions paid per Carnival plc ordinary share must equal the equalization ratio, taking account the applicable currency exchange rate.
Dividends are equalized according to the equalization ratio, and any balancing transactions between the companies will be determined and made, before deduction of any amounts in respect of the tax required to be deducted or withheld and excluding the amounts of any tax credits or other tax benefits.
If one company has insufficient profits or is otherwise unable to pay a dividend, we and Carnival plc will, as far as practicable, enter into such balancing transactions as are necessary to enable both companies to pay dividends in accordance with the equalization ratio. This may take the form of a payment from one company to the other or a dividend payment on an equalization share. We and Carnival plc expect that dividends received by Carnival plc shareholders will be made to be consistent with our regular quarterly dividend.
Our articles provide that the holders of our common stock be entitled, in accordance with the equalization and governance agreement and to the exclusion of the holders of shares of preferred stock, to receive such dividends as from time to time may be declared by the board of directors, except as otherwise provided by the board resolution or resolutions providing for the issue of any series of shares of preferred stock.
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Liquidation
Under Panamanian law, if the board of directors deems it advisable that the corporation be dissolved, it is to propose by a majority of the votes of the members of the board an Agreement of Dissolution and within 10 days shall call or cause to be called, in accordance with law, a meeting of stockholders, to vote on the resolution passed by the board of directors proposing the dissolution. At the stockholders' meeting, the holders of a majority of shares with voting rights on the matter can adopt the resolution for the dissolution of the company. The dissolution of the company may also be adopted by written consent in lieu of meeting of the holders of all shares having voting power.
Pursuant to the equalization and governance agreement, in the event of a voluntary or involuntary liquidation of either us or Carnival plc, or both companies, if the hypothetical potential per share liquidation distributions to each company's shareholders are not equivalent, taking into account the relative value of the two companies' assets and the indebtedness of each company, to the extent that one company has greater net assets so that any liquidation distribution to its shareholders would not be equivalent on a per share basis, the company with the ability to make a higher net distribution is required to make a payment to the other company to equalize the possible net distribution to shareholders. The requirement to make an equalizing payment is subject to some limitations. First, a reorganization under Chapter 11 of the US Bankruptcy Code or a similar statute would not be considered a "liquidation," so such a reorganization would not result in equalizing payments. Second, neither company will be required to make the equalizing payment if the payment would result in neither group of shareholders being entitled to any liquidation proceeds. Therefore, if the assets of the combined group are not sufficient to satisfy all of the creditors of Carnival Corporation & plc, no equalization payment would be required to be made.
In giving effect to the principles regarding a liquidation of us, we may:
- •
- make a payment to Carnival plc in accordance with the provisions of the equalization and governance agreement;
- •
- issue shares to Carnival plc or to holders of Carnival plc ordinary shares and make a distribution or return on such shares; or
- •
- take any other action that the boards of directors of each of us and Carnival plc consider appropriate to give effect to such principles.
Any action other than a payment of cash by one company to the other company will require the prior approval of the board of directors of each company.
Appraisal Rights
Under Panamanian law, shareholders of a corporation do not have appraisal rights.
Pre-emptive Rights
Under Panamanian law, a shareholder is entitled to pre-emptive rights to subscribe for additional issuances of common stock or any security convertible into stock in proportion to the shares that are owned unless there is a provision to the contrary in the articles of incorporation.
COMMON STOCK VOTING. Holders of common stock vote as a single class on all matters submitted to a vote of theOur articles provide that our shareholderswith each share of common stock entitled to one vote. In the annual election of directors, the holders of common stockare not entitled to pre-emptive rights.62
Certain Provisions of Carnival Corporation's Articles and By-lawsQuorum Requirements
The presence in person or by proxy at any meeting of our shareholders holding at least one-third of the total votes entitled to be cast constitutes a quorum for the transaction of business at such meeting, except as otherwise required by applicable law or regulation, the articles of incorporation or the by-laws.
For purposes of determining whether a quorum exists at any meeting of shareholders where a joint electorate action or a class rights action is to be considered:
- •
- if the meeting of our shareholders convenes before the parallel shareholder meeting of Carnival plc, the Carnival Corporation special voting share will, at the commencement of the meeting, have no votes and therefore will not be counted for purposes of determining the total number of shares entitled to vote
cumulatively. DIVIDENDS.at such meeting or whether a quorum exists at such meeting, although the Carnival Corporation special voting share itself must be present, either in person, through a representative of DLC SVC Limited, or by proxy;- •
- if the meeting of our shareholders convenes at substantially the same time as or after the parallel shareholder meeting of Carnival plc with respect to one or more joint electorate actions, the Carnival Corporation special voting share will have the maximum number of votes attached to it as were cast on such joint electorate actions, either for, against or abstained, at the parallel shareholder meeting of Carnival plc, and such maximum number of votes, including abstentions, will constitute shares entitled to vote and present for purposes of determining whether a quorum exists at such meeting; and
- •
- if the meeting of our shareholders convenes at substantially the same time as or after the parallel shareholder meeting of Carnival plc with respect to a class rights action, the Carnival special voting share will, at the commencement of the meeting, have no votes and therefore will not be counted for purposes of determining the total number of shares entitled to vote at such meeting or whether a quorum exists at such meeting, although the Carnival Corporation special voting share itself must be present, either in person, through a representative of DLC SVC Limited, or by proxy.
In addition, in order for a quorum to be validly constituted with respect to meetings of shareholders convened to consider a joint electorate action or class rights action, DLC SVC Limited must be present at such meeting.
Shareholder Action By Written Consent
Our by-laws provide that shareholders may not act by written consent.
Shareholder Proposals
Panamanian law does not specifically address the issue of shareholder proposals and our by-laws do not expressly permit shareholder proposals to be considered at the annual meeting of shareholders. Panamanian law requires that prior notice of a meeting must set out the purpose or purposes for which the meeting is convened. Any proposal to be discussed at a meeting should be included in the notice of the meeting, unless the notice reserves time for any other matters which the shareholders may which to discuss.
Under the rules of the Exchange Act, shareholders may submit proposals, including director nominations, for consideration at shareholder meetings. Such proposals will need to comply with SEC regulations regarding the inclusion of shareholder proposals in company-sponsored proxy materials. In order for shareholder proposals to be considered for inclusion in our proxy statement/prospectus for an
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annual meeting, the written proposals must be received by us not less than 120 calendar days before the first anniversary of the date of mailing of the proxy statement from the previous year's annual meeting.
Our by-laws provide that at any special meeting of shareholders only such business may be transacted as is related to the purpose or purposes of such meeting set forth in the notice of the special meeting. Our by-laws provide that special meetings of shareholders may only be called by our board or our President or Secretary.
Standard of Conduct for Directors
Panamanian law imposes a general fiduciary duty on directors to act prudently and in the best interests of the company. Among other things, directors are responsible for the authenticity of the payments which appear to have been made on behalf of the company, for the validity of dividends to be paid, general book-keeping and for effecting the operation of the company in accordance with applicable laws, its articles of incorporation, its by-laws, and resolutions of the General Assembly of shareholders.
Our articles provide that our board of directors is authorized to operate and carry into effect the equalization and governance agreement, the SVE Special Voting Deed, which regulates the manner in which the votes attaching to the Carnival Corporation special voting share and the P&O Princess special voting share are exercised, and the Carnival Corporation Deed of Guarantee each of which was entered into on April 17, 2003, and, subject to applicable laws and regulations, nothing done by any director in good faith pursuant to such authority and obligations constitutes a breach of the fiduciary duties of such director to us or our shareholders. In particular, the directors are, in addition to their duties to us, entitled to consider the interests of our shareholders and the Carnival plc shareholders as if we and Carnival plc were a single entity. As a result of, and following completion of the DLC transaction, our board of directors and that of Carnival plc are identical.
Meetings of Shareholders
If we propose to undertake a joint electorate action or class rights action at a meeting of shareholders, we must immediately give notice to Carnival plc of the nature of the joint electorate action or the class rights action it proposes to take. Unless such action is proposed to be taken at the annual meeting of shareholders, the board of directors must convene a special meeting for the purpose of considering a resolution to approve the joint electorate action or class rights action. Such meeting will be held as close in time as practicable with the parallel shareholder meeting convened by Carnival plc for purposes of considering such joint electorate action or class rights action. If we receive notice from Carnival plc that Carnival plc proposes to undertake a joint electorate action or a class rights action, our board of directors must convene a meeting of our shareholders as close in time as practicable to the Carnival plc meeting and must propose an equivalent resolution as that proposed at the Carnival plc meeting. We must cooperate fully with Carnival plc in preparing resolutions, explanatory memoranda or any other information or material required in connection with the proposed joint electorate action or class rights action.
Amendment of Governing Instruments
Under Panamanian law, unless the articles of incorporation require a greater vote, an amendment to the articles of incorporation may be made:
- •
- by the holders or their proxies of all the issued and outstanding stock of the corporation entitled to vote;
64
- •
- by means of a resolution passed by holders or their proxies of the majority of the outstanding stock of the corporation entitled to vote; and
- •
- in case the amendment to the articles consists in any change in the preference of shares of any class, by means of a resolution passed by holders or their proxies of majority of the outstanding stock of the corporation entitled to vote of each class.
Any amendment to the provisions of our articles which entrench the DLC structure requires approval as a class rights action. The entrenched provisions of the articles include matters relating to:
- •
- the special voting share;
- •
- anti-takeover provisions;
- •
- dividends and distributions;
- •
- amendments to our articles and by-laws; and
- •
- liquidation.
All other provisions of our articles, except as provided below, may be amended by the shareholders of Carnival Corporation and Carnival plc voting together in a joint electorate action. Amendments to our articles require approval, whether in a class rights action or joint electorate action, of a majority of all votes entitled to be cast with respect thereto, including votes entitled to be cast by the Carnival Corporation special voting share, at a meeting of our shareholders.
Notwithstanding the foregoing, any amendment of the articles to:
- •
- specify or change the location of the office or registered agent of us, or
- •
- to make, revoke or change the designation of a registered agent, or to specify or change the registered agent, may be approved and effected by the board of directors without the approval of our shareholders or the shareholders of Carnival plc.
Under Panamanian law, the board of directors of a corporation has the power to adopt, amend or repeal the by-laws of the corporation, unless specifically provided to the contrary by the articles of incorporation or in the by-laws approved by the shareholders. Our by-laws provide that the by-laws may be altered, amended, supplemented or repealed or new by-laws may be adopted, by the board of directors or by vote of the holders of the
common stock areshares entitled toreceive such dividends, if any, asvote in the election of directors. Any by-laws adopted, altered or supplemented by the board of directors may bedeclaredaltered, amended, supplemented or repealed by the shareholders entitled to vote thereon.Any amendment to or repeal of the provisions of our by-laws which entrench the DLC structure will also require approval as a class rights action. Any amendment to or repeal of our by-laws other than any of our entrenched by-laws may be approved and effected by our board of directors without the approval of our shareholders or the shareholders of Carnival plc. The entrenched provisions of the by-laws include matters relating to:
- •
- the transferability of the special voting share;
- •
- the scope of, and voting rights and procedures in
its discretion outrelation to, joint electorate actions, class rights actions and procedural resolutions; and- •
- election, qualification and disqualification of
funds legally availabledirectors.In limited circumstances since the implementation of the DLC structure, Carnival plc shares, other than those held by us, may be subject to a mandatory exchange for our shares at the then prevailing equalization ratio. A mandatory exchange can occur if there is a change in applicable tax laws, rules or regulations that the board of directors of Carnival plc reasonably determines is reasonably likely to
65
have a material adverse effect on Carnival Corporation & plc and the exchange is approved by 662/3% of the, shareholders of Carnival plc and us voting on a joint electorate action. A mandatory exchange can also be triggered if there is a change in the applicable non-tax laws, rules or regulations, as a result of which the board of directors of Carnival plc reasonably determines that it is reasonably likely that all or a substantial portion of the agreements that give effect to the DLC structure are unlawful, illegal or unenforceable. Were either of these changes to occur, we would issue additional shares to deliver to Carnival plc shareholders in accordance with the then prevailing equalization ratio and we would own 100% of Carnival plc. Our shares are not subject to any mandatory exchange for Carnival plc shares. If such a mandatory exchange is triggered, our articles and by-laws will be automatically amended upon completion of the mandatory exchange, without any further action of us or our shareholders, to conform to our articles of incorporation and our by-laws prior to the implementation of the DLC structure.
Election of Directors
Resolutions relating to the appointment, removal and re-election of directors will be considered as a joint electorate action and voted upon by the shareholders of each company effectively voting together as a single decision-making body. Our articles provide that the number of directors will be no less than three and no more than 25. Within said minimum and maximum, the total number of directors may be fixed from time to time by resolution of the shareholders or by resolution of the board. A change in the minimum and maximum number of directors will require an amendment to the articles. No person may be elected or appointed to serve on our board unless that person is also elected to be
paid as dividends.a member of the Carnival plc board. Any of our directors who resign from our board must also resign from the Carnival plc board and vice versa.Removal of Directors
Panamanian law
permitsprovides that a director may be removed with or without cause by thepaymentholders ofdividendsa majority in voting power of the shares entitled to vote at an election of directors.Our by-laws provide that, subject to the provisions of Panamanian law, directors may be removed with or without cause only by a majority vote of a quorum of the shareholders.
Vacancies on the Board of Directors
Our by-laws provide that vacancies on the board of directors will be filled by a majority of the directors then in office, even though less than a quorum, provided that any such person is appointed to both our board and the Carnival plc board at the same time. If only one director remains in office, the director will have the power to fill all vacancies. If there are no directors, our Secretary may call a meeting at the request of any two shareholders for the purpose of appointing one or more directors.
Indemnification of Directors and Officers
Panamanian law does not specifically address the issue of indemnification of directors and officers. We may indemnify any officer or director who is made a party to any suit or proceeding on account of being a director, officer or employee of the corporation against expenses, including attorneys' fees, judgments, fines and amounts paid in settlement reasonably incurred by him/her in connection with the action, through, among other things, a majority vote of a quorum consisting of directors who were not parties to the suit or proceeding if the officer or director acted in good faith and in a manner he/she reasonably believed to be in the best interests of the corporation. In a criminal proceeding, the standard is that the director or officer had no reasonable cause to believe his/her conduct was unlawful.
Our articles provide that each person, and the heirs, executors or administrators of such person, who was or is a party to or is threatened to be made a party to any threatened, pending or completed
66
action, suit or proceeding, by reason of the fact that such person is or was a director or an officer of us or Carnival plc or is or was serving at the request of us or Carnival plc as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, shall be indemnified and held harmless by us against expenses, including attorneys' fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding to the fullest extent and in the manner set forth in and permitted by Panamanian law, and any other applicable law, as from time to time in effect. This right of indemnification is not exclusive of any other rights to which a director or officer may be entitled. Any repeal or modification of the applicable provisions of the General Corporation Law of Panama will not affect any rights or obligations then existing with respect to any state of facts then or theretofore existing or any action, suit or proceeding theretofore or thereafter brought or threatened based in whole or in part on any such state of facts. We have the power to purchase and maintain insurance in respect of its indemnification obligations.
A member of the board of directors, or a member of any committee designated by the board of directors, will, in the performance of his duties, be fully protected in relying in good faith upon the records of us or Carnival plc and upon such information, opinions, reports or statements presented to us by any of our
retained earnings. TRANSFER RESTRICTIONS.or Carnival plc's officers or employees, or committees of the board of directors, or by any other person as to matters the member reasonably believes are within such other person's professional or expert competence and who has been selected with reasonable care by or on behalf of us. In discharging their duties, directors and officers, when acting in good faith, may rely upon financial statements of us or Carnival plc represented to them to be correct by the chief financial officer or the controller or other officer of us or Carnival plc having charge of its books or accounts, or stated in a written report by an independent public or certified public account or firm of such accountants fairly to reflect the financial condition of us or Carnival plc.Takeover Restrictions
Under Panamanian law, directors are responsible for the good management and in general for the execution or faulty fulfillment of their obligations to administer the corporation's affairs. There is limited legislative or judicial guidance on takeover issues in Panama and it is difficult to anticipate how a Panamanian court will react or resolve a matter concerning application of a policy of judicial deference to board of directors decisions to adopt anti-takeover measures in the face of a potential takeover where the directors are able to show that:
- •
- they had reasonable grounds for believing that there was a danger to corporate policy and effectiveness from an acquisition proposal; and
- •
- the board action taken was reasonable in relation to the threat posed.
Our articles contain provisions which would apply to any person, or group of persons acting in concert, that acquires shares in Carnival Corporation & plc which would trigger a mandatory offer obligation as if the UK Takeover Code applied to Carnival Corporation & plc on a combined basis. Where:
- •
- a person or group of persons acquired, or acquires voting rights over 30% or more of the combined votes which would be cast on a joint electorate action; or
- •
- any person or group of persons that already holds not less than 30% but not more than 50% of the combined votes which would be cast on a joint electorate action, acquired, or acquires voting rights over, any shares which increase the percentage of votes which such person(s) could cast on a joint electorate action,
such shares acquired would be disenfranchised, that is, the owner of those shares could cease to have any economic or voting rights on those shares, unless an offer for all the shares in Carnival
67
Corporation & plc at a price equivalent to that applicable to the acquisition has been made by the person or group. These takeover restrictions would not apply to:
- •
- acquisitions of shares of the other company by either Carnival plc or us;
- •
- if the restrictions are prohibited by applicable law and regulations;
- •
- any acquisition by the Arison family and various trusts for their benefit within the thresholds described below; and
- •
- any acquisition pursuant to a mandatory exchange.
There are some exceptions to these provisions in the case of the Arison family and trusts for their benefit, which together, hold approximately 33% of the total voting power of Carnival Corporation & plc. The Arison family and various trusts for their benefit can acquire shares in Carnival Corporation & plc without triggering these provisions provided that, as a result, their aggregate holdings do not increase by more than 1% of the voting power of Carnival Corporation & plc in any period of 12 consecutive months, subject to their combined holdings not exceeding 40% of the voting power of Carnival Corporation & plc. However, these parties may acquire additional shares or voting power without being subject to these restrictions if they comply with the offer requirement described above. These restrictions do not apply to acquisitions of shares by either Carnival plc or us.
Ownership Limitations and Transfer Restrictions
On
February 8, 2000,August 2, 2002, the United States Treasury Department issued proposed TreasuryregulationsRegulations to Section 883 of the Internal Revenue Code relating to income derived by foreign corporations from the international operation of a ship or ships (which includes certain cruise ship and aircraft income). Theproposedregulations provide, in general, that a foreign corporation organized in a qualified foreign country and engaged in the international operation of ships and aircraft shall exclude such income from gross income for purposes of federal income taxation provided that the corporation can satisfy certain ownership requirements, including, among other things, that its stock be publicly traded. A corporation's stock that is otherwise publicly traded will fail to satisfy this requirement if it is closely held, i.e., that 50% or more of its stock is owned by persons who each own 5% or more of the value of the outstanding shares of the corporation's stock.To the best of our knowledge, after due investigation, we currently qualify as a publicly traded corporation under the
proposedregulations. However, becausecertainsome members of the Arison family andcertainvarious trusts established for their benefit beneficially own approximately47%44% of our common stock, or approximately 33% of the total voting power of Carnival Corporation & plc, there is the potential that another shareholder could acquire 5% or more of our common stock which could jeopardize our qualification as a publicly traded corporation. If we in the future were to fail to qualify as a publicly traded corporation, we would be subject to United States income tax on income associated with our cruise operations in the United States. As a precautionary matter, in 2000, we amended our articles of incorporation to ensure that wewillcontinue to qualify as a publicly traded corporation under theproposedregulations.Our articles
have been amended toprovide that no one person or group of related persons, other thancertainsome members of the Arison family andcertainvarious trusts established for their benefit, may own, or be deemed to own by virtue of the attribution provisions of the Internal Revenue Code, more than 4.9% of our common stock, whether measured by vote, value or number. In addition, the articles generally restrict the transfer of any shares of our common stock if such transfer would cause us to be subject to United States shipping income tax. In general, the attribution rules under the Internal Revenue Code applicable in determining whether a person is a 5% shareholder under theproposedregulations attribute stock:-
- •
- among specified members of the same family,
-68
- •
- to shareholders owning 50% or more of a corporation
fromform that corporation,-- •
- among corporations that are members of the same controlled group,
-- •
- among grantors, beneficiaries and fiduciaries of trusts, and
-- •
- to partners of a partnership from that partnership.
For purposes of this 4.9% limit, a "transfer" will include any sale, transfer, gift, assignment, devise or other disposition, whether voluntary or involuntary, whether of record, constructively or beneficially, and whether by operation of law or otherwise. The 4.9% limit
willdoes not apply tocertainsome members of the41Arison family and certainvarious trusts established for their benefit. These shareholders will be permitted to transfer their shares of our common stock without complying with the limit so long as transfer does not cause us to be subject to United States income tax on shipping operations.Our second amended and restatedThe articles
of incorporationprovide that the board of directors may waive the 4.9% limit or transfer restrictions,(inin any specificinstance)instance, if evidence satisfactory to our board of directors and our tax counsel is presented that such ownership will not jeopardize our status as exempt from United States income taxation on gross income from the international operation of a ship or ships, within the meaningofto Section 883 of the Internal Revenue Code. The board of directors may also terminate the limit and transfer restrictions generally at any time for any reason.If a purported transfer or other event,
(includingincluding owning shares of common stock in excess of the 4.9% limit on the effective date of the proposedamendment)amendment, results in the ownership of common stock by any shareholder in violation of the 4.9% limit,(oror causes us to be subject to United States income tax on shippingoperations),operations, such shares of common stock in excess of the 4.9% limit, or which would cause us to be subject to United States shipping income tax will automatically be designated as "excess shares" to the extent necessary to ensure that the purported transfer or other event does not result in ownership of common stock in violation of the 4.9% limit(oror causes us to become subject to United States income tax on shippingoperations)operations, and any proposed transfer that would result in such an event would be void. Any purported transferee or other purported holder of excess shares will be required to give us written notice of a purported transfer or other event that would result in excess shares. The purported transferee or holders of such excess shares shall have no rights in such excess shares, other than a right to the payments described below.Excess shares will not be treasury stock but rather will continue to be issued and outstanding shares of our common stock. While outstanding, excess shares will be transferred to a trust. The trustee of such trust will be appointed by us and will be independent of us and the purported holder of the excess shares. The beneficiary of such trust will be one or more charitable organizations selected by the trustee. The trustee will be entitled to vote the excess shares on behalf of the beneficiary. If, after
thepurported transfer or other event resulting in excess shares and prior to the discovery by us of such transfer or other event, dividends or distributions are paid with respect to such excess shares, such dividends or distributions will be repaid to the trustee upon demand for payment to the charitable beneficiary. All dividends received or other income declared by the trust will be paid to the charitable beneficiary. Upon our liquidation, dissolution or winding up, the purported transferee or other purported holder will receive a payment that reflects a price per share for such excess shares generally equal to the lesser of(i)
- •
- in the case of excess shares resulting from a purported transfer, the price per share paid in the transaction that created such excess shares,
(or,or, in the case of certain other events, the market price per share for the excess shares on the date of suchevent),event, or(ii)- •
- in the case of excess shares resulting from an event other than a purported transfer, the market price for the excess shares resulting from an event other than a purported transfer, the market price for the excess shares on the date of such event.
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At the direction of the board of the directors, the trustee will transfer the excess shares held in trust to a person or persons,
(including us)including us, whose ownership of such excess shares will not violate the 4.9% limit or otherwise cause us to become subject to United States shipping income tax within 180 days after the later of the transfer or other event that resulted in such excess shares or we become aware of such transfer or event. If such a transfer is made, the interest of the charitable beneficiary will terminate, the designation of such shares as excess shares will cease and the purported holder of the excess shares will receive the payment described below. The purported transferee or holder of the excess shares will receive a payment that reflects a price per share for such excess shares equal to the lesser of(i)
- •
- the price per share received by the trustee, and
(ii)- •
- the price per share such purported transferee or holder paid in the purported transfer that resulted in the excess shares,
(or,or, if the purported transferee or holder did not give value for such excess shares,(throughthrough a gift, devise or otherevent)event, a price per share equal to the market price on the date of the purported transfer or other event that resulted in the excessshares).shares.A purported transferee or holder of the excess shares will not be
42permitted to receive an amount that reflects any appreciation in the excess shares during the period that such excess shares were outstanding. Any amount received in excess of the amount permitted to be received by the purported transferee or holder of the excess shares must be turned over to the charitable beneficiary of the trust. If the foregoing restrictions are determined to be void or invalid by virtue of any legal decision, statute, rule or regulation, then the intended transferee or holder of any excess shares may be deemed, at our option, to have acted as an agent on our behalf in acquiring or holding such excess shares and to hold such excess shares on our behalf.
We will have the right to purchase any excess shares held by the trust for a period of 90 days from the later of
(i)
- •
- the date the transfer or other event resulting in excess shares has occurred, and
(ii)- •
- the date the board of directors determines in good faith that a transfer or other event resulting in excess shares has occurred.
The price per excess share to be paid by us will be equal to the lesser of
(i)
- •
- the price per share paid in the transaction that created such excess shares,
(or,or, in the case of certain other events, the market price per share for the excess shares on the date of suchevent),event, or(ii)- •
- the lowest market price for the excess shares at any time after their designation as excess shares and prior to the date we accept such offer.
These provisions in our
second amended and restatedarticlesof incorporationcould have the effect of delaying, deferring or preventing a change in our control or other transaction in which our shareholders might receive a premium for their shares of common stock over the then-prevailing market price or which such holders might believe to be otherwise in their bestinterests.interest. To the extent that the proposed regulations areeither not adoptedamended orare adoptedfinalized informa manner which, in the opinion of our board of directors, does not requirethe proposed amendmentthese provisions in our articles to ensure that we will maintainitsour income tax exemption foritsour shipping income, our board of directors may determine, in its sole discretion, to terminate the 4.9% limit and the transfer restrictions of these provisions.While both the mandatory offer protection and 4.9% protection remain in
the amendment. TRANSFER AGENT AND REGISTRAR. The transfer agent and registrar for our common stock is First Union National Bank. OTHER PROVISIONS. Upon liquidation or dissolution, the holders of shares of common stock are entitled to receive on a proportionate basis all of our assets remaining for distribution to common stockholders. The common stock hasplace, nopreemptive or other subscription rights and there are no other conversion rights or redemption or sinking fund provisions with respect to the shares. All shares of common stock that are currently outstanding are fully paid for and may not be assessed. Neither Panamanian law nor our by-laws limit the right of non-resident or foreign owners to hold or vote shares of the common stock. While no tax treaty currently exists between the Republic of Panama and the United States, under current law we believe that distributions to our shareholdersthird party other thanresidentsthe Arison family and certain trusts for their benefit will be able to acquire control ofPanama or other business entities conducting business in Panama, are not subject to taxation under the laws of the Republic of Panama. Under Panamanian law, our directors may vote by proxy. PREFERRED STOCKCarnival Corporation & plc.70
Preferred Stock
Our board of directors may issue, without further authorization from our
stockholders,shareholders, up to 40,000,000 shares of preferred stock in one or more series. Our board of directors may determine, at the time of creating each series, the distinctive designation of and the number of shares in, the series, its dividend rate, the number of votes, if any, allocated to each share of the series, the price and terms on which the shares may be redeemed, the terms of any applicable sinking fund, the amount payable upon liquidation, dissolution or winding up, the conversion rights, if any, and any other rights, preferences and priorities of the shares as our board of directors may be permitted to fix under the laws of the Republic of Panama in effect at the time the series is created. The issuance of preferred stock could adversely affect the voting power of holders of common stock and could delay, defer or prevent a change in control.43Transfer Agent and Registrar
The transfer agent and registrar for our common stock and paired trust shares is SunTrust Bank.
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Generally
On April 17, 2003, we completed the DLC transaction with Carnival plc. As part of the DLC transaction, Carnival plc issued a special voting share to us, and we transferred such share to the trustee of the P&O Princess Special Voting Trust, a trust established under the laws of the Cayman Islands. Trust shares of beneficial interest in the property subject to the P&O Princess Special Voting Trust were issued to us. The trust shares represent a beneficial interest in the Carnival plc special voting share. Immediately following such issue, we distributed such trust shares by way of a dividend to our common stockholders. Under the Pairing Agreement, dated as of April 17, 2003, between us, The Law Debenture Trust Corporation (Cayman) Limited, as trustee of the P&O Princess Special Voting Trust, and SunTrust Bank, as transfer agent, the trust shares of beneficial interest in the P&O Princess Special Voting Trust are paired with, and evidenced by, certificates representing shares of our common stock on a one-for-one basis. In addition, under the Pairing Agreement, when a share of our common stock is issued to a recipient after the closing of the DLC transaction, a paired trust share will be issued at the same time initially to us, which will immediately transfer such trust share to the same recipient, whereupon such trust share will be paired with the share of our common stock. Upon each issuance of shares of our common stock to a holder in connection with conversion of the debentures, an equivalent number of trust shares, which represent a beneficial interest in the special voting share of Carnival plc, or trust shares, will be issued to such holder as described in the preceding sentence. Therefore, references in this prospectus to shares of common stock issuable upon conversion or repurchase of the debentures shall be deemed to include both shares of our common stock and trust shares in the P&O Princess Special Voting Trust.
Since completion of the DLC transaction, our shares of common stock have traded together with the paired trust shares on the NYSE under the ticker symbol "CCL." The paired trust shares entitle our shareholders to receive any distributions made by the P&O Princess Special Voting Trust. As the sole purpose of the P&O Princess Special Voting Trust relates to the holding of the Carnival plc special voting share, it is not expected to make any distributions.
The Carnival plc special voting share will be voted based upon the outcome of voting at the relevant parallel meeting of our shareholders, based on the number of votes cast by our shareholders voting their shares of our common stock. See "Description of Carnival Corporation Capital Stock—Special Voting Share."
Pairing Agreement
Pursuant to the Pairing Agreement, which was entered into by us, the trustee of the P&O Princess Special Voting Trust and a transfer agent at the closing of the DLC transaction:
- •
- trust shares and shares of our common stock are not transferable unless the transferee acquires the same number of trust shares and our shares;
- •
- we and the transfer agent will not agree to any transfer of our shares unless the transferee agrees to acquire the corresponding trust shares;
- •
- trust shares and our shares are not represented by separate certificates, but by one certificate of our common stock, which represents an equal number of our shares and trust shares;
- •
- upon each issuance of additional shares of our common stock, including pursuant to the exercise of any existing option or convertible security, the trustee of the P&O Princess Special Voting Trust will issue an equal number of additional trust shares;
- •
- if we declare or pay any distribution consisting in whole or in part of shares of our common stock, or subdivide or combine shares of our common stock, then the trustee of the P&O
72
Princess Special Voting Trust will effect corresponding adjustments to maintain the pairing relationship of one share of our common stock to each trust share;
- •
- if we otherwise reclassify shares of our common stock, then the trustee of the P&O Princess Special Voting Trust will effect such transactions as are necessary to maintain the pairing relationship of the securities into which one share of our common stock was so reclassified to each trust share; and
- •
- if we cancel or retire any shares of our common stock, the trustee of the P&O Princess Special Voting Trust will cancel or retire the corresponding trust shares.
Voting Trust Deed
The voting trust deed of the P&O Princess Special Voting Trust governs the administration of the P&O Princess Special Voting Trust. The trust property consists of the Carnival plc special voting share, all payments or collections in respect of the Carnival plc special voting share and all other property from time to time deposited in the trust. The SVE Special Voting Deed provides that at every meeting of Carnival plc shareholders at which a resolution relating to a joint electorate action or a class rights action is to be considered, the trustee of the P&O Princess Special Voting Trust will be present by corporate representative or by proxy. The trustee has no discretion as to how the Carnival plc special voting share is to be voted at any Carnival plc shareholders meeting. The trustee will vote the Carnival plc special voting share at any Carnival plc shareholders meeting in accordance with the requirements of:
- •
- the Carnival plc articles,
- •
- the special voting deed entered into on April 17, 2003 by us, Carnival plc, DLC SVC Limited, as holder of the Carnival Corporation special voting share, the trustee of the P&O Princess Special Voting Trust, as holder of the Carnival plc special voting share and The Law Debenture Trust Corporation p.l.c., as the legal and beneficial owner of DLC SVC Limited, and
- •
- the DLC equalization principles, in effect, to reflect the outcome of votes at parallel meetings of our shareholders for purposes of joint electorate actions and class rights actions.
The P&O Princess Special Voting Trust has a single class of trust shares of beneficial interest. Each trust share represents an equal, absolute, identical, undivided interest in the trust property. The trustee of the P&O Princess Special Voting Trust is authorized to issue an unlimited number of trust shares.
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We originally sold the debentures to the initial purchaser in a private placement. The debentures were subsequently resold by the initial purchaser to purchasers, including the selling securityholders listed below, in transactions exempt from registration. The following table provides, as of June 19, 2003, the principal amount at maturity of debentures held by such selling securityholder, the number of shares of common stock owned by such securityholder prior to its conversion of any debentures and the number of shares of our common stock issuable upon conversion of the debentures (based upon the initial conversion price). This information has been obtained from the selling securityholders. Selling securityholders representing an amount of up to an additional $777,225,000 aggregate principal amount at maturity of debentures will be added to the table prior to the effectiveness of the registration statement of which this prospectus is a part.
Selling
SecurityholderPrincipal
Amount at
Maturity of
Debentures
Beneficially
Owned And
OfferedPercent of
Total
Outstanding
DebenturesNumber of Shares
of Common Stock
Issuable Upon
Initial Conversion
of Debentures(1)Number of Shares
of Common Stock
Owned Prior to
Conversion of
Debentures(1)Highbridge International LLC $ 50,000,000 5.62 % 1,175,290 0 Continental Casualty Company $ 24,400,000 2.74 % 573,542 0 Argent Classic Convertible Arbitrage (Bermuda) Fund Ltd. $ 6,600,000 0.74 % 155,138 0 Argent LowLev Convertible Arbitrage Fund Ltd. $ 6,300,000 0.71 % 148,087 0 KBC Financial Products (Cayman
Island) Ltd.$ 5,500,000 0.62 % 129,282 0 Hamilton Multi-Strategy Master Fund, LP $ 4,300,000 0.48 % 101,075 0 Fore Convertible Masterfund Ltd. $ 4,270,000 0.48 % 100,370 0 Continental Assurance Company On Behalf Of Its Separate Account (E) $ 3,100,000 0.35 % 132 0 Argent Classic Convertible Arbitrage
Fund L.P.$ 2,800,000 0.31 % 65,816 0 Lyxor Master Fund $ 2,100,000 0.24 % 49,362 0 Argent LowLev Convertible Arbitrage Fund LLC $ 1,100,000 0.12 % 25,856 0 S.A.C. Capital Associates, LLC $ 500,000 0.06 % 11,753 7,500 Xavex Risk Arbitrage Fund 2 $ 400,000 0.04 % 9,402 0 Zurich Institutional Benchmark Master Fund LTD $ 300,000 0.03 % 7052 0 Sturgeon Limited $ 105,000 0.01 % 2,468 0
- (1)
- Also includes an equivalent number of non-detachable trust shares of beneficial interest in P&O Princess Special Voting Trust, a trust established under the laws of the Cayman Islands. See "Description of Trust Shares."
This table assumes that the debentures will be convertible at the maximum conversion rate of 23.5058 shares of our common stock for each $1,000 principal amount at maturity of debentures, which conversion rate is subject to adjustment as described under "Description of the Debentures— Conversion Rights—Conversion Rate Adjustment." Accordingly, the number of shares of our common stock issuable upon conversion of the debentures may increase or decrease from time to time. Under the terms of the indenture, we will have the right to deliver, in lieu of our common stock, cash or a
74
combination of cash and our common stock upon conversion. If we elect to pay holders cash for their debentures, the payment will be based on the applicable stock price.
Assuming the sale of all of the debentures and shares of our common stock issuable upon conversion of the debentures, selling securityholders will not hold any debentures and will hold the number of shares of our common stock set forth in column, "Common Stock Owned Prior to Conversion of Debentures." At that time, no selling securityholder will hold more than 1% of our outstanding common stock.
Except as described below, none of the selling securityholders listed above has, or within the past three years had, any position, office or any material relationship with us or any of our affiliates. Because the selling securityholders may offer all or some portion of the above-referenced securities under this prospectus or otherwise, no estimate can be given as to the amount of percentage that will be held by the selling securityholders upon termination of any sale. In addition, the selling securityholders identified above may have sold, transferred or otherwise disposed of all or a portion of such securities since April 29, 2003, in transactions exempt from the registration requirements of the Securities Act.
Generally, only selling securityholders identified in the above table who beneficially own the securities set forth opposite their respective names in the second and fourth columns may sell offered securities under the registration statement of which this prospectus forms a part. We may, from time to time, include additional selling securityholders in supplements to this prospectus.
75
The securities offered by this prospectus are being registered to permit the resale of such securities by the holders of them from time to time after the date of this prospectus. We will not receive any of the proceeds from the sale by the selling securityholders of the offered securities. We will bear the fees and expenses incurred in connection with our obligation to register the offered securities. These fees and expenses include registration and filing fees, printing and duplication expenses and fees and disbursement of our counsel. However, the selling securityholders will pay all underwriting discounts and selling commissions, if any, and their own legal expenses.
The selling securityholders may sell the securities from time to time directly or through underwriters, in accordance with registration rights agreement, broker-dealers or agents, in one or more transactions at fixed prices, at prevailing market prices at the time of sale, at varying prices determined at the time of sale, or at negotiated prices. Such sales may be effected in transactions, which may involve block transactions:
- •
- on any national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale;
- •
- in the over-the-counter market;
- •
- in transactions otherwise than on such exchanges or services or in over-the-counter market; or
- •
- through the writing of options.
In connection with sales of the securities or otherwise, the securityholders may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the securities and deliver securities to close out such short positions, or loan or pledge securities to broker-dealers that in turn may sell such securities.
If a material arrangement with any underwriter, broker, dealer or other agent is entered into for the sale of any offered securities through a secondary distribution or a purchase by a broker or dealer, or if other material changes are made in the plan of distribution of the offered securities, a prospectus supplement will be filed, if necessary, under the Securities Act disclosing the material terms and conditions of arrangement. The underwriter or underwriters with respect to an underwritten offering of offered securities and the other material terms and conditions of the underwriting will be set forth in a prospectus supplement relating to such offering and, if an underwriting syndicate is used, the managing underwriter or underwriters will be set forth on the cover of the prospectus supplement. In connection with the sale of offered securities, underwriters will receive compensation in the form of underwriting discounts or commissions and may also receive commissions from purchasers of offered securities for whom they may act as agent. Underwriters may sell to or through dealers, and such dealers may receive compensation in the form of discounts, concessions or commissions from the underwriters and/or commissions from the purchasers for whom they may act as agent.
In addition, any offered securities which can be sold under Rule 144 under the Securities Act may be sold under Rule 144 rather than in a registered offering contemplated by this prospectus.
The selling securityholders and any underwriters, broker-dealers or agents participating in the distribution of the securities may be deemed to be "underwriters" within the meaning of the Securities Act, and any profit on the sale of the offered securities by the selling securityholders and any commissions received by any such underwriters, broker-dealers or agents may be deemed to be underwriting commissions under the Securities Act.
The selling securityholders and any other person participating in the distribution will be subject to applicable provisions of the Exchange Act and the rules and regulations under the Exchange Act, including without limitation, Regulation M, which may limit the timing of purchases and sales of any of
76
the offered securities by the selling securityholders and any other relevant person. Furthermore, Regulation M may restrict the ability of any person engaged in the distribution of the offered securities to engage in market-making activities with respect to the particular offered securities being distributed. All of the above may affect the marketability of the offered securities and the ability of any person or entity to engage in market-making activities with respect to the offered securities.
Under the securities law of various states, the offered securities may be sold in those states only through registered or licensed brokers or dealers. In addition, in various states the offered securities may not be sold unless the offered securities have been registered or qualified for sale in the state or an exemption from registration or qualification is available and is complied with.
We have agreed to indemnify the selling securityholders against some civil liabilities, including some liabilities arising under the Securities Act, and the selling securityholders will be entitled to contribution from us in connection with those liabilities. The selling securityholders will indemnify us against some civil liabilities, including liabilities arising under the Securities Act, and will be entitled to contribution from the selling securityholders in connection with those liabilities.
We are permitted to suspend the use of this prospectus under some circumstances relating to pending corporate developments, public filings with the SEC and similar events for a period not to exceed 60 days in any three-month period and not to exceed an aggregate of 90 days in any 12-month period. However, if the duration of such suspension exceeds any of the periods above-mentioned, we have agreed to pay liquidated damages. Please refer to the section entitled "Description of the Debentures—Registration Rights."
Our outstanding common stock, together with the paired trust shares of beneficial interest, is listed for trading on the New York Stock Exchange under the symbol "CCL." We do not intend to apply for listing of the debentures on any securities exchange or for quotation through the National Association of Securities Dealers Automated Quotation System. Accordingly, we cannot assure you about the development of liquidity or any trading market for the debentures.
77
CERTAIN PANAMANIAN AND UNITED STATES FEDERAL
INCOME TAXCONSIDERATIONS PANAMACONSEQUENCESUnder current Panamanian law, because we conduct all of our operations outside of Panama, we believe that no Panamanian taxes or withholding will be imposed on payments to holders of our securities.
UNITED STATES GENERAL. ThisThe following is a general summary of certain United States federal income tax
considerationsconsequences that may be relevant toholdersan investment in the debentures but does not purport to be a complete analysis ofLYONs.the potential tax considerations that you may need to consider before investing based on your particular circumstances. Thissummarydiscussion is baseduponon existing provisions of the Internal Revenue Code,of 1986, as amended,Treasuryregulations, IRSRegulations promulgated thereunder, judicial decisions and administrative rulings andjudicial decisions now in effect,practice, all of which are subject to change(possiblywith possible retroactiveeffect) or different interpretations. There can be no assurance thateffect. This summary applies to you only if you hold theIRS will not challenge one or moredebentures and common stock as capital assets within the meaning of theconclusions described herein,Internal Revenue Code. This summary does not discuss any estate, gift, state, local or foreign considerations andwe havedoes notobtained, nor do we intend to obtain, a ruling from the IRS with respect to the United Statesaddress all federal income tax consequences applicable to all categories ofacquiringinvestors, some of which may be subject to special rules, such as life insurance companies, tax-exempt organizations, dealers in securities orholding LYONs. This summary does not purport to deal with all aspects of United Statescurrency, regulated investment companies, banks or other financial institutions, partnerships, S corporations and other flow-through entities for federal incometaxation that may be relevant to a holder, such as personstax purposes, holders subject to the alternative minimum tax,provisions ofexpatriates, investors whose functional currency is not theCode. Also, it does not purport to deal with persons in special tax situations, such as insurance companies, tax-exempt organizations, mutual funds, retirement plans, financial institutions, dealers in securities or foreign currency, United States expatriates, persons thatUS dollar and investors who hold theLYONsdebentures as part of a"straddle"hedge, straddle oras a "hedge" against currency risk or in connection with aconversionor another integrated transaction for tax purposes, and persons that have functional currency other than the United States dollar. This summary also does not discuss the tax consequences arising under the laws of any state, local or foreign jurisdiction.transaction. In addition, this summaryis limited to original purchasers of LYONs who acquire LYONsdeals only with debentures acquired in the initial offering at their original issue price within the meaning of Section 1273 of the Internal Revenue Code andwho will holddoes not discuss theLYONs and common stock into which the LYONs may be converted as "capital assets" within the meaning of Section 1221tax considerations applicable to subsequent purchasers of theCode. The "issue price"debentures, including the "market discount" and "acquisition premium" rules of theLYONsInternal Revenue Code. We have not obtained, nor do we intend to obtain, any ruling from the internal Revenue Service (the "IRS") with respect to the statements made and the conclusions reached in the following summary, and we can not assure you it the IRS willequalagree with these statements and conclusions. This summary does not discuss thefirst price at whichconsequences to you of any transaction that would constitute asubstantial amountchange in control, as defined in "Description of theLYONs are sold for cashDebentures" above, including but not limited to thepublic, not including salestax consequences of adjustments tobond houses, brokers or similar persons or organizations actingthe debentures in thecapacityevent ofunderwriters, placement agentsa consolidation, merger orwholesalers. Personsother corporate transaction.If you are considering the purchase
ownership, conversion or other dispositionofLYONsthe debentures, you should consulttheiryour own taxadvisors regardingadvisor with respect to the application of the United Statesfederal incomeFederal taxconsequences and thelaws to your particular situation as well as any tax consequences arising under the laws of anystate,State, local or foreign taxingjurisdiction. Whilejurisdiction or under any applicable tax treaty.US Holders
This summary applies to you if you are a US Holder. For purposes of this summary, the
following does not purport to discuss all tax matters relating to the LYONs, and assuming the LYONs will be treated as indebtedness, the following are the material federal income tax consequences of the LYONs, subject to the qualifications described above. Theterm"United States holder""US Holder" means a beneficial owner ofLYONsdebentures or common stockinto which LYONs have been convertedthatis, for United States federal income tax purposes: -is:
- •
- a citizen or individual resident of the United States;
-- •
- a corporation, partnership or other entity
that has elected to be treated as a corporation,created or organized in or under the laws of the United States or anypolitical subdivision thereof; -State thereof, including the District of Columbia, or a- •
- partnership otherwise treated as a United States person under applicable Treasury Regulations;
- •
- an estate the income of which is subject to United States federal income
taxtaxation regardless of its source;or -and78
- •
- a trust if
- •
- a court within the United States is able to exercise primary
jurisdictionsupervision overitsthe administration of the trust, and- •
- one or more
United Statespersons have the authority to control allof itssubstantial decisions of the trust; orifan electing trust in existence on August 20, 1996 to thetrust has otherwise elected to be a United States personextent provided inaccordance with applicableTreasuryregulations. 44The term "non-United States holder" means a beneficial owner, other thanRegulations.If a partnership
of LYONsholds debentures or common stock,into which LYONs have been converted that is not a United States holder for United States federal incomethe taxpurposes. If a partnership, including for this purpose any entity treated as a partnership for United States tax purposes, is a beneficial owner of LYONs or common stock into which LYONs have been converted, thetreatment of a partnerin the partnershipwill generally depend upon the status of the partner and upon the activities of the partnership.A holder of LYONs that isIf you are apartnership, and partnerspartner in such a partnership, you should consulttheiryour own taxadvisors about theadvisor.Original Issue Discount. The debentures will be treated as indebtedness for United States federal income tax
consequences of holding and disposing of LYONs and common stock into which LYONspurposes. The debentures will havebeen converted. UNITED STATES HOLDERS ORIGINAL ISSUE DISCOUNT. The LYONs are being issued at a substantial discount from their principal amount at maturity. For United States federal income tax purposes, the difference between the issue price and the stated principal amount at maturity of each LYON constitutes original issue discount. United States holders of the LYONs will be required to includeoriginal issue discount,in income periodically over the term of the LYONs before receipt of the cashorother payment attributable to such income. A United States holder of a LYON must include in gross income"OID," for United States federal income tax purposes, and accordingly, US Holders of debentures will be subject to special rules relating to the accrual of income for such purposes. US Holders of debentures generally must include OID in gross income for US federal income tax purposes on an annual basis under a constant yield accrual method regardless of their regular method of tax accounting. As a result, US Holders may be required to include OID in income in advance of the receipt of cash attributable to such income.The debentures will be treated as issued with OID equal to the excess of a debenture's "stated redemption price at maturity" over its "issue price." The stated redemption price at maturity of a debenture will include all payments of principal and stated interest on the debenture. The debentures provide for payment of interest in cash through April 29, 2008. Such interest will be included in the stated redemption price at maturity and taxed as part of OID and will not be again included separately in gross income of US Holders when accrued or paid. The issue price is the first price at which a substantial amount of the debentures are sold for money excluding sales to bond houses, brokers or similar persons or organizations acting as underwriters, placement agents or wholesalers. The amount of OID includible in income by an initial US Holder of a debenture is the sum of the
daily portions"daily portions" oforiginal issue discountOID with respect to theLYONdebenture for eachdaydate during the taxable year or portionof a taxable year onthereof in which suchholderUS Holder holdsthe LYON. Thesuch note, which we refer to as "accrued OID". A daily portion is determined by allocating to each dayof an accrual periodin any "accrual period" a pro rata portion ofan amount equal totheadjusted issue price of the LYON at the beginning of the accrual period multiplied by the yield to maturity of the LYON.OID that accrued in such period. Theaccrual period"accrual period" of aLYONdebenture may be of any length and may vary in length over the term of theLYON,debenture, provided that each accrual period isnonot longer than oneyear.year and each scheduled payment of principal or interest occurs either on the first or last day of an accrual period. The amount of OID that accrues with respect to any accrual period is the product of the debenture's adjusted issue price at the beginning of such accrual period and its yield to maturity, determined on theLYONbasis of compounding at the close of each accrual period and properly adjusted for the length of such period. The "adjusted issue price" of a debenture at the start of any accrual period istheequal to its issue price,of the LYONincreased by the accruedoriginal issue discountOID for each prior accrualperiod. Underperiod and reduced by any actual payments of interest and principal made on such debenture. Based on the issue price as discussed above, the yield to maturity for theserules, United States holders will havepurposes is 1.796%, calculated on a semi-annual bond equivalent basis. We intend toinclude in gross income increasingly greater amountstreat payments oforiginal issue discount in each successive accrual period. Any amount included in incomeinterest, including OID, asoriginal issue discount will increase a United States holder's tax basis in the LYON.US source income.We will be required to furnish annually to the IRS and to
certain noncorporate United States holdersUS Holders of the notes, informationregarding the amount ofwith respect to the original issue discountattributableaccruing during the taxable year.Constructive Dividends. Pursuant to
that year. For this purpose, we will use a six-month accrual period which ends on the day in each calendar year corresponding to the maturity dayTreasury regulations issued under section 305 of theLYON or the date six months before such maturity date. DISPOSITION OR CONVERSION. Except as described below, gain or loss upon a sale or other disposition of a LYON will generally be capital gain or loss, which will be long-termCode, ifthe LYON is held for more than one year. Net capital gains of a non-corporate United States holder are, under certain circumstances, taxed at lower rates than items of ordinary income. In the case of a non-corporate United States holder, long-term capital gains are generally taxed at a maximum 20% federal tax rate. Net capital gains of a corporate United States holder are taxed at the same rates as ordinary income, with a maximum federal rate of 35%. The deductibility of capital losses is subject to limitations. A conversion of a LYON into common stock, and the use of common stock to repurchase a LYON, whether at the option of the holder or us, will not be a taxable event except with respect to cash received in lieu of a fractional share. The United States holder's obligation to include in gross income the daily portions of original issue discount with respect to a LYON will terminate prospectively on the date of conversion. The United States holder's basis in the common stock received for a LYON will be the same as the United States holder's basis in the LYON at the time of conversion or exchange, exclusive of any tax basis allocable to a fractional share. If a United States holder elects to exercise its option to tender a LYON to us and the purchase price is paid in a combination of shares of common stock and cash (other than cash received in lieu of 45a fractional share), gain (but not loss) realized by the United States holder will be recognized, but only to the extent such gain does not exceed that cash. Generally, that gain will be capital gain and will be long-term if the holding period for that LYON is more than one year. A United States holder's tax basis in the common stock received in the exchange will equal the United States holder's tax basis in the LYON tendered to us, exclusive of any tax basis allocable to a fractional share interest as described below, decreased by the amount of cash (other than cash received in lieu of a fractional share), if any, received in exchange and increased by the amount of any gain recognized by the United States holder on the exchange (other than gain with respect to a fractional share). If a United States holder elects to exercise its option to tender a LYON to us and we deliver cash in satisfaction of the purchase price, the United States holder will recognize gain or loss, measured by the difference between the amount of the cash and the United States holder's basis in the tendered LYON. Gain or loss recognized by the United States holder will generally be capital gain or loss, which gain or loss will be long-term if the holding period for such LYON is more than one year. Cash received in lieu of a fractional share of common stock upon conversion of a LYON or upon a put of a LYON to us on a purchase date should be treated as a payment in exchange for the fractional share. Accordingly, the receipt of cash in lieu of a fractional share of common stock should generally result in capital gain or loss, if any, measured by the difference between the cash received for the fractional share and the holder's basis in the fractional share. Gain or loss upon a sale or other disposition of the common stock received upon conversion of a LYON or in satisfaction of the purchase price of a LYON put to us generally will be capital gain or loss (which gain or loss will be long-term if the holding period for such common stock is more than one year). The holding period for common stock received in exchange will include the holding period for the LYON tendered to us in exchange for the common stock. However, the holding period for common stock attributable to accrued original issue discount may commence on the day following the conversion or purchase date. DIVIDENDS. If a United States holder receives common stock, in general, distributions on the common stock that are paid out of our current or accumulated earnings and profits (as defined for United States federal income tax purposes) will constitute taxable dividends and will be includible in income by a holder in accordance with that holder's method of accounting for United States federal income tax purposes. CONSTRUCTIVE DIVIDEND. Ifat any time we were to make a distribution of property to our stockholders that would be taxable to the stockholders as a dividend for United States federal income tax purposes and, in accordance with the anti-dilution or other provisions of theLYONs,debentures, the conversion rate of theLYONs isdebentures were increased,(or if the conversion rate is increased at our discretion), thesuch increasemaymight be deemed to be the payment of a taxable dividend to holders of theLYONs.debentures. For example, under these regulations an increase in the conversion rate inthe eventconnection with79
any distribution of
distributions ofour evidences of indebtedness or our assets or an increase in the event of an extraordinary cash dividendwillgenerally would result in deemed dividend treatment to holders of theLYONs,debentures, butgenerallyan increase in the event of stock dividends or the distribution of rights to subscribe for common stock generally would not.Sale, Exchange, Redemption and Other Disposition of Debentures or Shares of Common Stock. You generally will
not. See "Description of LYONs--Conversion Rights." BACKUP WITHHOLDING AND INFORMATION REPORTING. Information reporting will apply to payments of interest (including accruals of original issue discount)recognize gain ordividends, if any, made by us on, or the proceeds ofloss upon the sale, exchange, redemption, retirement or other disposition of debentures, other than a conversion, measured by the difference between
- •
- the amount of cash proceeds and the fair market value of any property you receive, except to the extent attributable to accrued OID not previously taken into income, which will generally be taxable as ordinary income, and
- •
- your adjusted tax basis in the debentures.
In general, if you hold common stock, and paired trust shares, into which the debentures have been converted, you will recognize gain or loss upon the sale, exchange or other disposition of the
LYONscommon stock, and paired trust shares, measured by the difference between
- •
- the amount of cash and the fair market value of any property you receive, and
- •
- your adjusted basis in the common stock and paired trust shares.
For a discussion of the basis and holding period of shares of common stock, and paired trust shares, see "—Conversion of Debentures," below. Gain or loss on the disposition of debentures or common stock, and paired trust shares, will generally be capital gain or loss and will be long-term gain or loss if the debentures or shares of common stock have been held for more than one year at the time of such disposition.
Conversion of Debentures. As discussed above, in "Description of the Debentures—Conversion Rights," upon conversion of a debenture, you will receive shares of our common stock and paired trust shares, determined in accordance with the formula described therein. You generally will not recognize gain or loss on the receipt of our common stock upon conversion of the debentures, except with respect to
certain non-corporate United States holders,cash received in lieu of fractional shares andbackup withholding may apply unlessexcept for common stock attributable to accrued OID not previously taken into income, which will be taxable as OID as discussed above. You will, however, recognize gain or loss on receipt of therecipient United States holderpaired trust shares upon conversion of the debentures, in an amount equal to the fair market value of the paired trust shares so received. We believe, however, that the paired trust shares have only nominal value, and thus, it is likely that receipt of the paired trust shares upon conversion of your debenture would result in recognition of only a nominal amount of gain. Except for common stock attributable to any accrued OID not previously taken into income, your tax basis in the shares of common stock, and paired trust shares, received upon conversion of the debentures will be equal to your adjusted tax basis in the debentures exchanged therefor, less any portion thereof allocable to cash received in lieu of a share of common stock, increased by any gain recognized with respect to the receipt of the paired trust shares on the conversion. Except for common stock attributable to any accrued OID not previously taken into income, the holding period of the common stock will generally include the period during which you held the debentures prior to conversion. Cash received in lieu of a fractional share of common stock should generally be treated as a payment in exchange for such fractional share rather than as a dividend. You generally will recognize gain or loss on the receipt of cash paid in lieu of suchpayment supplies a taxpayer identification number, certified under penaltiesfractional shares equal to the difference between the amount ofperjury, as well as certain other information or otherwise establishes an exemption from backup withholding. Anycash received and the amountwithheld underof tax basis allocable to thebackup withholding rulesfractional shares. Your basis in the common stock attributable to accrued OID not previously taken into income generally should equal the value of the common stock on the date of conversion and your holding period in such common stock may commence on the day following the date of delivery of such common stock, although there is no authority precisely on point.80
Dividends on Common Stock. Distributions on shares of our common stock will be
allowabletaxed asa credit against the United States holder'sdividends for United States federal income taxprovided that the required information is providedpurposes to theIRS. 46NON-UNITED STATES HOLDERS ORIGINAL ISSUE DISCOUNT AND DISPOSITION. In generalextent of our current or accumulated earnings andsubject to the discussion belowprofits as determined under"--Backup Withholding and Information Reporting," a non-United States holder will not be subject toUnited States federal incomeor withholding taxprinciples. Dividends paid to those of you that are United States corporations will not qualify for the dividends-received deduction. We expect that a substantial portion of our dividends will be treated as United States source income based on the proportion of our income that is effectively connected withrespectour conduct of business in the United States tooriginal issue discount with respect to LYONs or gain uponour gross income. To thedisposition of LYONs orextent that you receive distributions on shares of common stockunless: -that would otherwise constitute dividends for United States federal income tax purposes but that exceed our current and accumulated earnings and profits, such distributions will be treated first as a non-taxable return of capital reducing your adjusted tax basis in the shares of common stock. Any such distributions in excess of your adjusted tax basis in the shares of common stock will generally be treated as capital gain.A failure to fully adjust the conversion price of the debentures to reflect a stock dividend or other event increasing the proportionate interest of holders of our common stock in our earnings and profits or assets could, in some circumstances, be deemed to result in the payment of a taxable dividend to the holders of our common stock.
Exercise of the Optional Redemption or Repurchase Right. If a US Holder requires us to repurchase a debenture on a repurchase date and we issue shares of our common stock in satisfaction of the repurchase price, the exchange of a debenture for shares of our common stock should be treated in the same manner as a conversion as described above under "—Conversion of Debentures".
If a US Holder requires us to repurchase a debenture on a repurchase date and if we deliver a combination of cash and shares of our common stock in payment of the repurchase price, then, in general:
- •
- a US Holder should recognize gain, but not loss, to the extent that the cash and the value of the shares exceed its adjusted tax basis in the debenture, but in no event should the amount of recognized gain exceed the amount of cash received;
- •
- a US Holder will be required to include in gross income daily portions of the OID not previously included in gross income with respect to the notes, up to the date of conversion;
- •
- a US Holder's basis in the shares received should be the same as its basis in the debenture repurchased by us, exclusive of any basis allocable to a fractional share, decreased by the amount of cash received, other than cash received in lieu of a fractional share, and increased by the amount of gain, if any, recognized by such holder, other than gain with respect to a fractional share; and
- •
- the holding period of the shares received in the exchange should include the holding period for the debenture that was repurchased, except that the holding period of shares attributable to accrued OID may commence on the day following the date of delivery of common stock, although there is no authority precisely on point.
If we elect to exercise our option to purchase a debenture or
gainif a US Holder requires us to repurchase a debenture on a repurchase date and if, in either event, we deliver to a holder cash in full satisfaction of the repurchase price or redemption price, the repurchase or redemption will be treated the same as a sale of the debenture, as described above under "—Sale, Exchange, Redemption and other Disposition of Debentures or Shares of Common Stock."Non-US Holders
The following is
"Uniteda summary of material US federal tax consequences that will apply to you if you are a non-US Holder of debentures or common stock. The term "non-US Holder" means a beneficial81
owner of a debenture or common stock that is not a US Holder. Special rules may apply to certain non-US Holders such as "controlled foreign corporations", "passive foreign investment companies", "foreign personal holding companies", persons eligible for benefits under income tax conventions to which the United States is a party and certain US expatriates. Non-US Holders should consult their own tax advisers to determine the US federal, state, local and other tax consequences that may be relevant to them.
Payments of Interest. The 30% US federal withholding tax will not apply to any payment to you of interest, including OID, on a debenture provided that:
- •
- you do not actually or constructively own 10% or more of the total combined voting power of all classes of our stock that are entitled to vote within the meaning of section 871(h)(3) of the Code;
- •
- you are not a "controlled foreign corporation" that is related to us within the meaning of section 864(d)(4) of the Code;
- •
- you are not a bank whose receipt of interest on a debenture is described in section 881(e)(3)(A) of the Code; and
- •
- (a) you provide your name and address, and certify, under penalties of perjury, that you are not a U.S. person, which certification may be made on an IRS Form W-8BEN, or successor form, or (b) you hold your notes through certain foreign intermediaries, and you and the foreign intermediary satisfy the certification requirements of applicable US Treasury regulations.
Special certification rules apply to non-US Holders that are pass-through entities rather than corporations or individuals.
If you cannot satisfy the requirements described above, payments of interest will be subject to the 30% US federal withholding tax, unless you provide us with a properly executed:
(1) IRS Form W-8BEN (or successor form) claiming an exemption from or reduction in withholding under the benefit of any applicable tax treaty or
(2) IRS Form W8ECI (or successor form) stating that interest paid on the note is not subject to withholding tax because it is effectively connected with your conduct of a trade or business
income," which means incomein the United States.If you are engaged in a trade or
gain thatbusiness in the United States and interest on a note is effectively connected with the conductbyof that trade or business, you will be subject to US federal income tax on that interest on a net income basis, although you will be exempt from thenon-United States holder30% withholding tax, provided you satisfy the certification requirements described above, in the same manner as if you were a US person as defined under the Code. In addition, if you are a foreign corporation, you may be subject to a branch profits tax equal to 30%, or lower applicable treaty rate, of your earnings and profits for the taxable year, subject to adjustments, that are effectively connected with your conduct of a trade or businessor,in thecaseUnited States.Absent further relevant guidance from the IRS, we intend to treat payments of liquidated damages made to non-US Holders as subject to a US withholding tax. Therefore, we intend to withhold on such payments at a rate of 30% unless we receive an IRS Form W-8BEN or an IRS Form W-8ECI from the non-US Holder claiming, respectively, that such payments are subject to reduction or elimination of withholding under an applicable treaty or that such payments are effectively connected with the conduct of a
treaty resident, attributableUS trade or business. A non-US Holder that is subject to the withholding tax should consult its own tax advisers as to whether it can obtain apermanent establishmentrefund for all or afixed base,portion of the withholding tax on the grounds that the liquidated damages qualify for the exemption applicable to interest, described above, within the meaning of the Code or some other grounds.82
Conversion of the Debentures. A non-US Holder generally will not recognize any income, gain or loss on converting a debenture into common stock. Any gain recognized as a result of the holder's receipt of cash in lieu of a share of stock would also generally not be subject to US federal income tax. See "—Sale, Exchange or Redemption of Debentures or Common Stock," below.
Dividends on Common Stock. A portion of dividends paid to you with respect to our common stock, and any deemed dividends resulting from some adjustments, or failure to make adjustments, to the number of shares of common stock to be issued on conversion, see "—US Holders—Constructive Dividend" above, that is treated as US source income, as determined above under "—US Holders—Dividends on Common Stock," will be subject to withholding tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty. However, dividends that are effectively connected with the conduct of a trade or business within the United States are not subject to the withholding tax, but instead are subject to US federal income tax on a net income basis at applicable graduated individual or corporate rates. Some certification and disclosure requirements must be complied with in order for effectively connected income to be exempt from withholding. Any such effectively connected dividends received by a foreign corporation may, under certain circumstances, be subject to an additional branch profits tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty. A non-US Holder of common stock who wishes to claim the benefit of an applicable treaty rate is required to satisfy applicable certification and other requirements. If you are eligible for a reduced rate of US withholding by filing an appropriate claim for refund with the IRS.
Sale, Exchange or Redemption of Debentures or Common Stock. Any gain realized upon the sale, exchange, redemption or other disposition of a debenture or share of common stock for cash, including by means of a redemption at our option or repurchase at the holder's option, generally will not be subject to U.S. federal income tax unless:
- •
- that gain is effectively connected with the conduct of a trade or business in the United States by you, or
- such non-United States holder is- •
- you are an individual who is present in the United States for 183 days or more in the taxable year of that disposition, and certain other conditions are met.
United States trade or business income of a non-United States holderA non-US Holder whose gain is described in the first bullet point above will
generallybe subject toregular United StatesUS federal income tax on the net gain derived from the sale at the applicable graduated rate(s). A corporate non-US Holder whose gain is described in thesame manner as if it were realized by a United States holder. Non-United States holders that realize United States trade or business income with respect to the LYONs or shares of common stock should consult their tax advisers as to the treatment of such income or gain. In addition, United States trade or business income of a non-United States holder that is a non-United States corporationfirst bullet point above may also be subject to a branch profits tax at a 30% rateof 30%,orsucha lower rateprovided byif anapplicableincome taxtreaty. BACKUP WITHHOLDING AND INFORMATION REPORTING.treaty applies. An individual non-US Holder described in the second bullet point above will be subject to a flat 30% US federal income tax on the gain derived from the sale, which may be offset by US source capital losses, even though the holder is not considered a resident of the United States.If a non-US Holder requires us to repurchase a debenture on a repurchase date and we issue shares of our common stock in full satisfaction of the
LYONs,repurchase price, the exchange of a debenture for our common stock should be treated in the same manner as a conversion above described under "—Conversion of the Debentures."Information Reporting and Backup Withholding
If you are a US Holder, in general, information reporting requirements will apply to certain payments of principal and interest on the debentures, dividends paid on the common stock, and the proceeds of sale of a debenture or
sharesshare of common stockinto which LYONs have been converted,unless you areheld byan exempt recipient, such as anon-United States holder throughcorporation. Backup withholding tax will apply to such payments if you fail to provide your taxpayer identification number or certification of foreign or other exempt status or fail to report in full dividend and interest income.83
If you are a
non-United States,non-US Holder, in general, you will not be subject to backup withholding andnon-United States related, broker or financial institution,information reporting with respect to payments that we make to you provided that we do not have actual knowledge or reason to know that you are a US person and you have given us the statement described above under "—Non-US Holders—Payments of Interest." In addition, you will not be subject to backup withholdinggenerally would not be required. Informationor information reportingand possibly backup withholding, may apply ifwith respect to theLYONsproceeds of the sale of a debenture orsharesshare of common stockare held by a non-United States holder through awithin the United States or conducted through certain US-related financial intermediaries, if the payor receives the statement described above and does not have actual knowledge or reason to know that you are a US person, as defined under the Code, or you otherwise establish an exemption. However, we may be required to report annually to the IRS and to you the amount of, and the tax withheld respect to, any interest or dividends paid to you, regardless of whether any tax was actually withheld. Copies of these information returns may also be made available under the provisions of a specific treaty or agreement to the tax authorities of the country in which the non-US Holder resides.Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against your US federal income tax liability provided the required information is furnished timely to the IRS.
The United States
related, broker or financial institutionFederal income tax discussion set forth above is included for general information only and may not be applicable depending upon your particular situation. You should consult your own tax advisor with respect to the tax consequences to you of the ownership and disposition of the debentures and common stock, including the tax consequences under state, local, foreign and other tax laws and thenon-Unitedpossible effects of changes in United Statesholder fails to provide appropriate information. Non-United States holders should consult theiror other taxadvisers. EXPERTS The financial statements incorporated in this prospectus by reference to the Annual Report on Form 10-K for the year ended November 30, 2000 have been so incorporated in reliance on the report of PricewaterhouseCoopers LLP, independent certified public accountants, given on the authority of said firm as experts in auditing and accounting.laws.84
LEGAL MATTERSThe validity of the offered LYONs has been passed upon byPaul, Weiss, Rifkind, Wharton & Garrison
New York, New York.LLP has passed upon the validity of the debentures offered by this prospectus for us. Dickinson Cruickshank & Co. has passed upon the validity of the guarantees offered by this prospectus by Carnival plc and POPCIL. The validity of the shares ofthe offeredour common stockhasoffered by this prospectus and certain other matters with respect to Panamanian law have been passed upon for us by Tapia Linares y Alfaro. The validity of the trust shares of beneficial interest in the P&O Princess Special Voting Trust and certain other matters with respect to Cayman Islands law have been passed upon byTapia Linares y Alfaro, Panama City, RepublicMaples and Calder. The validity ofPanama.the Carnival plc special voting share and certain other matters with respect to the laws of England and Wales have been passed upon for Carnival plc and POPCIL by Freshfields Bruckhaus Deringer.James M. Dubin, a partner of Paul, Weiss, Rifkind, Wharton & Garrison
and one of our directors,LLP, is the solestockholdersecurityholder of three corporations which act as trustees or protectors of various trusts established for the benefit of members of the Arison family. In this capacity, Mr. Dubin has shared voting or dispositive rightsforover approximately24.9%23% of our outstanding common stock. This represents approximately 18% of the total voting power of Carnival Corporation & plc. Paul, Weiss, Rifkind, Wharton & Garrison LLP also serves as counsel to Micky Arison,ourwho is the chairman and chief executive officerShari Arison, oneofour directors,us and Carnival plc, and other Arison family members and trusts.47The consolidated financial statements of Carnival Corporation incorporated in this prospectus by reference to Carnival Corporation's Annual Report on Form 10-K for the year ended November 30, 2002 have been so incorporated in reliance on the report of PricewaterhouseCoopers LLP, independent certified public accountants, given on the authority of said firm as experts in auditing and accounting.
The consolidated financial statements of Carnival plc, formerly known as P&O Princess Cruises plc, as of December 31, 2002 and 2001 and for each of the years in the three year period ended December 31, 2002, have been incorporated by reference herein in reliance upon the report of KPMG Audit Plc, chartered accountants and registered auditor, incorporated by reference herein and upon the authority of said firm as experts in auditing and accounting. The audit report covering the December 31, 2002 financial statements refers to the adoption of FRS 19 Deferred Tax.
The consolidated financial statements of P&O Princess Cruises International Limited, as of December 31, 2002 and 2001 and for each of the years in the three year period ended December 31, 2002, have been included herein in reliance upon the report of KPMG Audit Plc, chartered accountants and registered auditor, appearing elsewhere herein and upon the authority of said firm as experts in auditing and accounting. The audit report covering the December 31, 2002 financial statements refers to the adoption of FRS 19 Deferred Tax.
85
WHERE YOU CAN FIND MORE INFORMATIONCarnival Corporation, Carnival plc and POPCIL have jointly filed a Registration Statement on Form S-3 and Form F-3 with the Securities and Exchange Commission regarding the offering of the securities offered by this prospectus. This prospectus, which forms part of the registration statement, does not contain all of the information included in the registration statement. For further information about Carnival Corporation, Carnival plc, POPCIL and the securities offered by this prospectus, you should refer to the registration statement and its exhibits.
You may read and copy any document previously filed by each of Carnival Corporation and Carnival plc with the Securities and Exchange Commission at the Commission's Public Reference Room, 450 Fifth Street, N.W., Washington, D.C. 20549. In the future, Carnival Corporation and Carnival plc will be filing combined reports, proxy statements and other information with the Commission. Copies of such information filed with the Commission may be obtained at prescribed rates from the Public Reference Section. Please call the Commission at 1-800-SEC-0330 for further information on the operation of the Public Reference Room. In addition, the Commission maintains a web site (www.sec.gov) that contains reports, proxy statements and other information regarding registrants, such as Carnival Corporation, Carnival plc and POPCIL that file electronically with the Commission. Materials that Carnival Corporation and Carnival plc have filed may also be inspected at the library of the NYSE, 20 Broad Street, New York, New York 10005.
The periodic reports of Carnival Corporation and Carnival plc under the Exchange Act will contain the combined financial statements of Carnival Corporation & plc. POPCIL, if required to do so in the future by the Exchange Act, will provide, as a foreign private issuer, its separate consolidated financial statements in periodic reports filed under the Exchange Act.
Carnival Corporation (file number 1-9610), Carnival plc (file number 1-15136) and POPCIL are incorporating by reference into this prospectus the following documents or portions of documents filed with the Commission:
- •
- Carnival Corporation's Annual Report on Form 10-K, as amended by Form 10-K/As filed on March 12, 2003, March 27, 2003 and May 7, 2003 for the fiscal year ended November 30, 2002;
- •
- Carnival Corporation's Quarterly Report on Form 10-Q for the quarter ended February 28, 2003;
- •
- Carnival Corporation's Current Reports on Form 8-K filed on December 2, 2002, December 19, 2002, January 8, 2003 and March 21, 2003;
- •
- Carnival plc's Annual Report on Form 20-F for the fiscal year ended December 31, 2002 (filed under its then name, P&O Princess Cruises plc);
- •
- Carnival Corporation's and Carnival plc's joint Current Reports on Form 8-K filed on April 17, 2003 (as amended on April 29, 2003), April 23, 2003, April 30, 2003, May 7, 2003, May 19, 2003, May 23, 2003, May 29, 2003 and May 30, 2003;
- •
- The description of common stock of Carnival Corporation in the Registration Statement on Form 8-A, filed pursuant to Section 12 of the Exchange Act on July 2, 1987, and any amendment or report filed for the purpose of updating such description;
- •
- The pro forma financial information required by Article 11 of Regulation S-X contained in the section entitled "Unaudited Pro Forma Financial Information of the Combined Group," in the joint Registration Statement of Carnival Corporation and P&O Princess Cruises plc on Form S-4/F-4, (Registration No. 333-102443); and
86
- •
- All other documents filed by Carnival Corporation, Carnival plc or POPCIL pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after the date of this prospectus and prior to the termination of the offering.
You should rely only on the information contained in this document or that information to which this prospectus refers you. Carnival Corporation, Carnival plc and POPCIL have not authorized anyone to provide you with any additional information.
Any statement contained in this prospectus or a document incorporated or deemed to be incorporated by reference into this prospectus will be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained in this prospectus or any other subsequently filed document that is deemed to be incorporated by reference into this prospectus modifies or supersedes the statement. Any statement so modified or superseded will not be deemed, except as so modified or superseded, to constitute a part of this prospectus.
The documents incorporated by reference into this prospectus are available from Carnival Corporation, Carnival plc and POPCIL upon request. Carnival Corporation, Carnival plc and POPCIL will provide a copy of any and all of the information that is incorporated by reference in this prospectus to any person, without charge, upon written or oral request. If exhibits to the documents incorporated by reference in this prospectus are not themselves specifically incorporated by reference in this prospectus, then the exhibits will not be provided. Requests for such copies should be directed to the following:
Carnival Corporation
Carnival plc
P&O Princess Cruises International Limited
3655 N.W. 87th Avenue
Miami, Florida 33178-2428
Attention: Corporate Secretary
Telephone: (305) 599-2600, Ext. 18018.Except as provided above, no other information, including information on the web sites of Carnival Corporation or Carnival plc, is incorporated by reference into this prospectus.
87
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page P&O Princess Cruises International Limited
Independent Auditors' Report
F-2
Consolidated Profit and Loss Accounts for the years ended
December 31, 2000, 2001 and 2002
F-3
Consolidated Balance Sheets at December 31, 2001 and 2002
F-4
Group Cash Flow Statements for the years ended December 31, 2000,
2001 and 2002
F-5
Consolidated Statements of Total Recognised Gains and Losses for
the years ended December 31, 2000, 2001 and 2002
F-6
Reconciliation of Movements in Shareholders' Funds for the years ended
December 31, 2000, 2001 and 2002
F-6
Notes to the Consolidated Financial Statements
F-7F-1
The Board of Directors of P&O Princess Cruises International Limited
We have audited the accompanying consolidated balance sheets of P&O Princess Cruises International Limited as of December 31, 2002 and 2001, and the related consolidated profit and loss accounts, cash flow statements, statements of total recognized gains and losses and reconciliation of movements in shareholders' funds for each of the years in the three year period ended December 31, 2002. These financial statements are the responsibility of P&O Princess Cruises International Limited's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United Kingdom and the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of P&O Princess Cruises International Limited as of December 31, 2002 and 2001, and the results of their operations and its cash flows for each of the years in the three year period ended December 31, 2002 in conformity with generally accepted accounting principles in the United Kingdom.
As described more fully in the "Prior Year Adjustment on implementation of FRS19" paragraph of the accounting policies note 1 to the consolidated financial statements, P&O Princess Cruises International Limited has adopted FRS19 Deferred Tax in the year ended December 31, 2002. Consequently, the consolidated financial statements of P&O Princess Cruises International Limited as of December 31, 2001 and 2000 and for each of the years in the two year period ended December 31, 2001 have been restated.
Accounting principles generally accepted in the United Kingdom vary in certain respects from accounting principles generally accepted in the United States of America. Application of accounting principles generally accepted in the United States would have affected results of operations for each of the years in the three-year period ended December 31, 2002 and shareholders' funds as of December 31, 2002 and 2001, to the extent summarized in note 26 to the consolidated financial statements.
KPMG Audit Plc
Chartered Accountants
Registered Auditor
London, England
June 13, 2003F-2
P&O Princess Cruises International Limited
Consolidated profit and loss accounts
Year ended 31 December Note 2002
U.S. $m2001
U.S. $m2000
U.S. $mRestated
note 1Restated
note 1Turnover 2 2,526.8 2,451.0 2,423.9 Cost of sales (1,904.3 ) (1,889.2 ) (1,842.0 ) Administrative expenses Administrative expenses before exceptional transaction costs (214.8 ) (208.1 ) (208.8 ) Exceptional transaction costs (117.0 ) — — (331.8 ) (208.1 ) (208.8 ) Operating costs 3 (2,236.1 ) (2,097.3 ) (2,050.8 ) Group operating profit 290.7 353.7 373.1 Share of operating results of joint ventures — 0.1 0.5 Total operating profit 2 290.7 353.8 373.6 Loss on disposal of ships — (1.9 ) (6.7 ) Profit on sale of business 1.2 — 0.2 Profit on ordinary activities before interest 291.9 351.9 367.1 Net interest and similar items 4 (2.3 ) 9.5 (45.6 ) Profit on ordinary activities before taxation 289.6 361.4 321.5 Taxation 5 (17.1 ) 81.7 (57.4 ) Profit on ordinary activities after taxation 272.5 443.1 264.1 Equity minority interests 17 — (0.1 ) (2.6 ) Profit for the financial period attributable to shareholders 272.5 443.0 261.5 Dividends 6 (150.0 ) (201.3 ) (90.0 ) Retained profit for the financial year 16 122.5 241.7 171.5 �� In all years profits and losses arise from continuing activities.
See accompanying notes to the consolidated financial statements.
F-3
P&O Princess Cruises International Limited
Consolidated balance sheets
As at 31 December Note 2002
U.S. $m2001
U.S. $mRestated
note 1Fixed assets Intangible assets Goodwill 7 127.1 112.9 Tangible assets Ships 8 5,225.9 3,892.4 Properties and other fixed assets 9 249.4 248.0 5,475.3 4,140.4 Investments 10 16.3 19.0 5,618.7 4,272.3 Current assets Stocks 11 87.4 74.3 Debtors 12 309.4 256.7 Cash at bank and in hand 162.1 120.4 558.9 451.4 Creditors: amounts falling due within one year 13 (2,031.7 ) (1,801.6 ) Net current liabilities (1,472.8 ) (1,350.2 ) Total assets less current liabilities 4,145.9 2,922.1 Creditors: amounts falling due after one year 13 (1,395.9 ) (326.9 ) Provisions for liabilities and charges 14 (13.7 ) (21.7 ) 2,736.3 2,573.5 Capital and reserves Called up share capital 15 331.0 331.0 Share premium account 16 1,078.9 1,078.9 Merger reserve 16 (70.9 ) (70.9 ) Profit and loss account 16 1,397.1 1,234.3 Equity shareholders' funds 2,736.1 2,573.3 Equity minority interests 17 0.2 0.2 2,736.3 2,573.5 See accompanying notes to the consolidated financial statements.
F-4
P&O Princess Cruises International Limited
Group cash flow statements
Years ended 31 December Note 2002
U.S. $m2001
U.S. $m2000
U.S. $mNet cash inflow from operating activities 18 561.4 484.4 520.0
Returns on investments and servicing of finance
Interest received 5.9 6.6 2.6 Interest paid (109.9 ) (86.8 ) (78.5 ) Net cash outflow for returns on investments and servicing of finance (104.0 ) (80.2 ) (75.9 ) Taxation 6.4 (171.0 ) (34.3 )
Capital expenditure
Purchase of ships (1,124.1 ) (579.3 ) (749.8 ) Purchase of other fixed assets (32.4 ) (53.5 ) (45.9 ) Disposal of ships — 46.6 14.7 Disposal of other fixed assets — — 0.2 Net cash outflow for capital expenditure (1,156.5 ) (586.2 ) (780.8 ) Acquisitions and disposals Disposal/(purchase) of subsidiaries and long term investments 10, 19 3.1 (6.3 ) (14.7 ) Equity dividends paid (150.0 ) (201.2 ) (90.0 ) Net cash outflow before financing (839.6 ) (560.5 ) (475.7 )
Financing
Loan drawdowns 879.4 320.5 247.7 Loan repayments (65.4 ) (277.3 ) (39.6 ) Repayment of finance lease (2.6 ) — — Intercompany movements 83.6 532.9 295.0 Net cash inflow from financing 895.0 576.1 503.1 Increase in cash in the year 18 55.4 15.6 27.4 The restatement for FRS19 'Deferred Taxation' has no impact on the cash flow for the year ended 31 December 2001 and 31 December 2000.
See accompanying notes to the consolidated financial statements.
F-5
P&O Princess Cruises International Limited
Consolidated statements of total recognised gains and losses
Years ended 31 December 2002
U.S. $m2001
U.S. $m2000
U.S. $mRestated
(note 1)Restated
(note 1)Profit for the year 272.5 443.0 261.5 Exchange movements on foreign currency net investments 40.3 (20.5 ) (5.5 ) Total recognised gains and losses relating to the year 312.8 422.5 256.0 Prior year adjustment (note 1) (108.1 ) Total gains and losses since last financial statements 204.7
Reconciliations of movements in shareholders' funds
Years ended 31 December 2002
U.S. $m2001
U.S. $m2000
U.S. $mRestated
(note 1)Restated
(note 1)Total recognised gains and losses for the year 312.8 422.5 256.0 Dividends (150.0 ) (201.3 ) (90.0 ) New shares issued — — 88.1 Investment in P&O Princess Cruises by P&O — — 1.2 162.8 221.2 255.3
Shareholders' funds at beginning of year (The shareholders' funds at the beginning of 2001, as previously reported, were $2,460.2m (2000: $2,188.8m) before deducting the prior year adjustment of $108.1m (2000: $92.0m))
2,573.3
2,352.1
2,096.8
Shareholders' funds at end of year 2,736.1 2,573.3 2,352.1 See accompanying notes to the consolidated financial statements.
F-6
P&O Princess Cruises International Limited
Notes to the consolidated financial statements1 Accounting policies
The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the Group.
Basis of preparation of financial statements
P&O Princess Cruises International Limited ("POPCIL") is a wholly owned subsidiary of P&O Princess Cruises plc. The POPCIL accounts comprise the consolidation of the accounts of the Company and all its subsidiaries and incorporate the Group's interest in its joint ventures. The accounts of its subsidiaries and joint ventures and associates are made up to 31 December.
The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United Kingdom under the historical cost convention, and in accordance with applicable U.K. accounting standards. These principles differ in certain significant respects from accounting principles generally accepted in the United States ("U.S. GAAP"). Application of U.S. GAAP would have affected shareholders' funds at 31 December 2002 and 2001 and profit attributable to shareholders for the year ended 31 December 2002, 2001 and 2000, to the extent summarized in note 26, summary differences between U.K. and U.S. GAAP.
Basis of consolidation
POPCIL acquired the cruise business of The Peninsular and Oriental Steam Navigation Company ("P&O") during the period from incorporation up to 26 September 2000. The acquisition was effected by way of a share exchange between POPCIL and P&O.
The consolidated financial statements have been prepared using merger accounting principles as if the businesses comprising POPCIL had been part of the same group for all periods presented, since they have been under common control throughout this period. Businesses acquired from or disposed of to third parties during the periods presented have been accounted for using acquisition accounting, from or to the date control passed.
Prior year adjustment on implementation of FRS 19
The Accounting Standards Board issued Financial Reporting Standard No. 19 "Deferred Tax" (FRS 19) in December 2000. The standard is effective for accounting periods ending on or after 23 January 2002. The standard requires full provision to be made for deferred tax assets and liabilities arising from most types of timing difference between the recognition of gains and losses in the financial statements and their recognition in a tax computation. Deferred tax assets are, however, only to be recognized to the extent that it is regarded as more likely than not that they will be recovered. POPCIL has adopted the standard as of 1 January 2002 resulting in the restatement of comparative data from partial provisioning for deferred tax to the full provision basis.
As a result of the implementation of FRS 19, the balance sheet as at 31 December 1999 was restated to reflect full provision for deferred tax, an increase in deferred tax liabilities of $92.0m.
The net effect on net assets and shareholders' funds as of 31 December 2000 as a result of implementing FRS 19 is a reduction of $108.1 million with a charge to the profit and loss account for the year ended 31 December 2001of $16.1 million.
F-7
The tax credit in the profit and loss account for the year to 31 December 2001 has increased by $96.8 million to reflect the elimination of the majority of future potential tax liabilities upon POPCIL's election to enter the U.K. tonnage tax regime. This is consistent with the elimination of the partially provided deferred tax in the 2001 audited financial statements. The net effect on net assets and shareholders' funds as of 31 December 2001 as a result of implementing FRS 19 is a reduction of $11.3 million.
Use of estimates
Preparation of financial statements in conformity with U.K. GAAP and U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of turnover and expenses for an accounting period. Actual results could differ from these estimates.
Goodwill arising on acquisitions
Goodwill arising on business acquisitions being the difference between the fair value of consideration compared to the fair value of net assets acquired represents the residual purchase price after allocation to all identifiable net assets. Goodwill is included within intangible fixed assets and is stated at cost less accumulated amortization. Amortization is calculated to write off goodwill on a straight line basis over its expected useful life, which can be up to 40 years. A life of more than 20 years is adopted when the directors consider the period for which the value of the underlying business acquired exceeds the value of the identifiable net assets is demonstrably longer than 20 years. Goodwill with an expected useful life of more than 20 years is reviewed annually for any impairment, by comparing carrying value with discounted cashflows.
Joint ventures
A joint venture is an entity in which the Group has a long term interest and shares control with one or more co-venturers. Joint ventures are stated at the Group's share of underlying net assets. The Group's share of the profits or losses of joint ventures is included in the consolidated profit and loss account on an equity accounting basis.
Investments
Investments in subsidiary undertakings are held at cost less provisions for impairment.
Shares in P&O Princess Cruises plc, the ultimate parent of POPCIL during the year, held for the purpose of long term incentive plans (LTIPs) are held within fixed asset investments. To the extent that these shares have been identified for bonus awards, provision is made for the difference between the book value of these shares and their residual value, if any.
Tangible fixed assets
Ships are stated at cost less accumulated depreciation. Any subsequent expenditure on ships, to the extent that it represents an improvement costs is capitalized as additions to the ship, whilst other costs are treated as repairs and maintenance or dry docking costs.
F-8
Properties and other fixed assets, including computer hardware and software, are stated at cost less accumulated depreciation.
Interest incurred in respect of payments on account of assets under construction is capitalized to the cost of the assets concerned.
Depreciation is calculated to write off the cost to estimated residual value on a straight line basis over the expected useful life of the asset concerned as follows:
Cruise ships 30 years Freehold buildings 40 years Other fixed assets 3–16 years Freehold land and ships under construction are not depreciated.
Dry-docking costs
Dry-docking costs are capitalized and expensed on a straight line basis to the date of the next scheduled drydock.
Impairment of fixed assets
The Group reviews all fixed assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable based on estimated future cash flows. Provision for impairment in value of fixed assets is made in the profit and loss account.
Stocks
Stocks consist of provisions, supplies, fuel and gift shop merchandise and are stated at the lower of cost or net realizable value.
Cash and borrowings
Cash and cash equivalents consist of cash, money market deposits and certificates of deposit. All cash equivalents have original maturities of 90 days or less. Cash and cash equivalents at the balance sheet date are deducted from bank loans and overdrafts where formal rights of set-off exist.
Turnover
Turnover comprises sales to third parties (excluding VAT and similar sales taxes). Turnover includes air and land supplements and on board sales and is taken before deducting travel agents' commission.
Deposits received on sales of cruises are initially recorded as deferred income and are recognized, together with revenues from shipboard activities and all associated direct costs of a voyage, on a pro rata basis over the period of the cruise.
F-9
Marketing and promotion costs
Marketing and promotion costs are expensed over the period of benefit, not exceeding one year from the end of the year the cost is incurred.
Leases
Assets acquired under finance leases are capitalized and the outstanding future lease obligations are shown in creditors. Rentals under operating leases are charged to the profit and loss account on a straight line basis over the life of the lease.
Pension costs
Contributions in respect of defined contribution pension plans are charged to the profit and loss account when they are payable. Contributions in respect of defined benefit pension plans are calculated as a percentage, agreed on actuarial advice, of the pensionable salaries of employees. The cost of providing defined benefit pensions is charged to the profit and loss account on a systematic basis over the periods benefiting from the services of employees, and is calculated with the advice of an independent qualified actuary, using the projected unit method. This is in accordance with Statement of Standard Accounting Practice 24 "Accounting for pension costs", the basis on which the Group accounts for pension costs. Additional disclosure as required by FRS17 is also provided.
Deferred taxation
Deferred tax is recognized without discounting, in respect of all timing differences between the treatment of certain items for taxation and accounting purposes which have arisen but not reversed by the balance sheet date, except as otherwise required by FRS 19. A net deferred tax asset is regarded as recoverable and therefore recognized only when, on the basis of all available evidence, it can be regarded as more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted.
Derivatives and other financial instruments
The Group uses currency swaps, interest rate swaps and forward currency contracts to manage its exposure to certain foreign currency and interest rate risks and to hedge its major capital expenditure or lease commitments by businesses in currencies other than their functional currency. Gains and losses on instruments used for hedging are not recognized until the exposure that is being hedged is itself recognized.
Foreign currencies
The functional and reporting currency of the Group is the U.S. dollar as the majority of its trade and assets are denominated in that currency. Transactions in currencies other than a business' functional currency are recorded at the rate of exchange ruling at the date of the transaction. Profits and losses of subsidiaries, branches, and joint ventures which have functional currencies other than U.S. dollars are translated into U.S. dollars at average rates of exchange. Assets and liabilities denominated in foreign currencies are translated at the year end exchange rates.
F-10
Exchange differences arising from the retranslation of the opening net assets of subsidiaries, branches, and joint ventures which have currencies of operation other than U.S. dollars and any related loans are taken to reserves, together with the differences arising when the profit and loss accounts are translated at average rates and compared with rates ruling at the year end. Other exchange differences are taken to the profit and loss account.
2 Segmental analysis
The Group has a single business of operating cruise ships and related landside assets under various brand names including; Princess Cruises, P&O Cruises, Swan Hellenic, Ocean Village, AIDA, A'ROSA and P&O Cruises (Australia). These brand names are marketed by operations in North America, Europe and Australia.
2002
U.S. $m2001
U.S. $m2000
U.S. $mTurnover (by origin) North America 1,698.8 1,754.9 1,796.7 Europe and Australia 828.0 696.1 627.2 2,526.8 2,451.0 2,423.9 Turnover in Europe and Australia includes turnover in relation to the United Kingdom of $525.8m (2001: $476.3m and 2000: $454.0m).
2002
U.S. $m2001
U.S. $m2000
U.S. $mTotal operating profit North America 292.5 254.1 279.6 Europe and Australia 115.2 99.7 94.0 Exceptional transaction costs (117.0 ) — — 290.7 353.8 373.6
Depreciation and amortization
North America 114.9 102.1 100.4 Europe and Australia 51.6 38.9 44.2 166.5 141.0 144.6
Profit on ordinary activities before interest
North America 292.5 252.2 279.8 Europe and Australia 116.4 99.7 87.3 Exceptional transaction costs (117.0 ) — — 291.9 351.9 367.1
Which is stated after crediting/(charging):
Non-operating items North America — (1.9 ) 0.2 Europe and Australia 1.2 — (6.7 ) 1.2 (1.9 ) (6.5 ) F-11
Non-operating items for Europe and Australia include a $1.2m profit on sale of an investment (2001: $1.9m, 2000: $6.0m, loss on disposal of vessels).
2002
U.S. $m2001
U.S. $m2000
U.S. $mCapital additions North America 1,107.2 465.4 500.1 Europe and Australia 223.5 57.9 321.2 1,330.7 523.3 821.3
2002
U.S. $m2001
U.S. $mNet operating assets excluding goodwill and ships under construction North America 2,606.6 2,599.0 Europe and Australia 1,420.8 586.8 4,027.4 3,185.8
The net operating assets are reconciled to net assets as follows:
Net operating assets
4,027.4
3,185.8
Goodwill 127.1 112.9 Ships under construction 907.4 508.0 Group share of joint ventures' non-operating assets 3.5 8.6 Net borrowings (2,262.5 ) (1,198.1 ) Corporation tax and deferred tax (66.6 ) (43.7 ) Net assets 2,736.3 2,573.5
Total assets
North America 3,914.7 3,411.0 Europe and Australia 2,262.9 1,312.7 6,177.6 4,723.7 3 Operating costs
2002
U.S. $m2001
U.S. $m2000
U.S. $mDirect operating costs 1,592.0 1,598.8 1,558.0 Selling and administration expenses (including exceptional transaction costs for 2002) 477.6 357.5 348.2 Depreciation and amortization 166.5 141.0 144.6 2,236.1 2,097.3 2,050.8 F-12
Operating costs include:
2002
U.S. $m2001
U.S. $m2000
U.S. $m
Advertising and promotion costs
145.8
149.4
139.4Exceptional transaction costs 117.0 — — Operating lease costs: Ships 36.3 33.3 13.3 Property 14.2 11.2 10.5 Other 3.3 3.3 2.9
Auditors' remuneration:
Audit 0.7 0.6 0.6 Stock exchange reporting 2.6 1.8 — 3.3 2.4 0.6 Tax advice 3.1 3.5 5.1 Other non-audit fees 0.2 0.5 0.2 Total fees paid to the auditors and their associates 6.6 6.4 5.9 Of the $5.9m (2001: $5.8m and 2000: $5.3m) charged for non-audit services provided by the Company's auditors $4.5m (2001: $3.8m and 2000: $0.1m) was for services in the U.K.
4 Net interest and similar items
2002 U.S. $m 2001 U.S. $m 2000 U.S. $m Interest payable on: Bank loans and overdrafts (39.4 ) (30.9 ) (24.1 ) Loans from P&O — — (39.7 ) Loans from parent undertaking — — (6.8 ) (39.4 ) (30.9 ) (70.6 )
Interest capitalized
31.0
33.1
23.5
Interest receivable on other deposits 6.0 7.2 1.3 (2.4 ) 9.4 (45.8 )
Joint ventures
0.1
0.1
0.2
(2.3 ) 9.5 (45.6 ) F-13
4 Net interest and similar items (Continued)
Interest capitalized relates to tangible fixed assets under construction. The capitalization rate is based on the weighted average of interest rates applicable to the Group's borrowings as a whole during each year. The aggregate interest capitalized at each year end was:
2002 U.S. $m 2001 U.S. $m 2000 U.S. $m Ships 204.1 173.4 140.8 Properties 4.4 4.1 3.5 208.5 177.5 144.3 5 Taxation
The taxation charge/(credit) is made up as follows:
2002
U.S. $m2001
U.S. $m2000
U.S. $mRestated
(note 1)Restated
(note 1)Current taxation: U.K. Corporation tax (0.2 ) — — Overseas taxation (16.4 ) (110.8 ) (40.2 ) (16.6 ) (110.8 ) (40.2 )
Deferred taxation:
Origination/reversal of timing differences (0.5 ) 192.5 (17.2 ) (17.1 ) 81.7 (57.4 ) The current taxation charge is reconciled to the U.K standard rate as follows:
2002
U.S. $m2001
U.S. $m2000
U.S. $mRestated
(note 1)Restated
(note 1)Profit on ordinary activities before tax 289.6 361.4 321.5 Notional tax charge at U.K standard rate (2002: 30.0%; 2001:30.0%; 2000: 30.0%) (86.9 ) (108.4 ) (96.5 ) Effect of overseas taxes at different rates 61.4 59.9 41.0 Permanent differences (17.1 ) (62.3 ) (1.6 ) Effect of tonnage tax 26.0 — — Other — — 16.9 (16.6 ) (110.8 ) (40.2 ) There was no charge or credit in respect of profits and losses on sale of ships and other fixed assets. The effective tax rate for the Group is expected to remain low following entry into the U.K. tonnage tax regime. The exceptional transaction costs had no effect on the tax charge for the year.
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6 Dividends
2002
U.S. $m2001
U.S. $m2000
U.S. $mDividends paid, declared, proposed and accrued are as follows: First interim dividend paid (65 cents per share) 100.0 150.0 90.0 Second interim dividend paid (22 cents per share) 50.0 — — Final dividend proposed (nil cents per share) — 51.3 — 150.0 201.3 90.0 7 Goodwill
U.S. $m Cost Cost at 31 December 2001 128.5 Exchange movements 20.9 Additions — Cost at 31 December 2002 149.4 Amortization Amortization at 31 December 2001 (15.6 ) Exchange movements (2.4 ) Amortization charge for year (4.3 ) Amortization at 31 December 2002 (22.3 ) Net book value At 31 December 2002 127.1 At 31 December 2001 112.9 $128.0m of goodwill in respect of AIDA ($106.5) and Seetours ($21.5) is being amortized over 40 years and 20 years, respectively. The directors consider that 40 years represents the useful economic life of the AIDA business and all other goodwill being amortized over 20 years.
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8 Ships
Owned
U.S. $mLeased
U.S. $mTotal
U.S. $mCosts Cost at 31 December 2001 4,585.9 — 4,585.9 Exchange movements 206.5 — 206.5 Additions 1,157.4 148.1 1,305.5 Cost at 31 December 2002 5,949.8 148.1 6,097.9 Depreciation �� Depreciation at 31 December 2001 (693.5 ) — (693.5 ) Exchange movements (42.5 ) — (42.5 ) Charge for year (135.4 ) (0.6 ) (136.0 ) Depreciation at 31 December 2002 (871.4 ) (0.6 ) (872.0 ) Net book value At 31 December 2002 5,078.4 147.5 5,225.9 At 31 December 2001 3,892.4 — 3,892.4 Ships under construction included in the above totaled $907.4m (2001: $508.0m). Included within ships under construction at 31 December 2002 is the final payment in respect of Coral Princess which was delivered in December 2002, but did not enter operational service until January 2003.
9 Properties and other fixed assets
Freehold
properties
U.S. $mOffice equipment,
plant and
motor vehicles
U.S. $mTotal
U.S. $mCost Cost at 31 December 2001 123.7 214.7 338.4 Exchange movements — 5.1 5.1 Additions 5.2 20.0 25.2 Cost at 31 December 2002 128.9 239.8 368.7 Depreciation Depreciation at 31 December 2001 (5.9 ) (84.5 ) (90.4 ) Exchange movements — (2.7 ) (2.7 ) Charge for year (3.4 ) (22.8 ) (26.2 ) Depreciation at 31 December 2002 (9.3 ) (110.0 ) (119.3 ) Net book value At 31 December 2002 119.6 129.8 249.4 At 31 December 2001 117.8 130.2 248.0 The book value of freehold land is $3.4m (2001: $3.4m), which is not depreciated.
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10 Investments
Own
shares held
U.S. $mJoint
ventures
U.S. $mOther
investments
U.S. $mTotal
U.S. $mCost or valuation at 31 December 2001 5.0 8.8 6.9 20.7 Exchange movements 0.5 — (0.4 ) 0.1 Disposals (1.1 ) — (1.9 ) (3.0 ) Cost or valuation at 31 December 2002 4.4 8.8 4.6 17.8 Provision for share options granted at 31 December 2001 (1.7 ) — — (1.7 ) Exchange movements (0.2 ) — — (0.2 ) Disposals 1.1 — — 1.1 Charge for year (0.7 ) — — (0.7 ) Provision for share options granted at 31 December 2002 (1.5 ) — — (1.5 ) Net book value At 31 December 2002 2.9 8.8 4.6 16.3 At 31 December 2001 3.3 8.8 6.9 19.0 At 31 December 2002 the P&O Princess Cruises Employee Benefit Trust held 1,540,483 (2001: 1,981,616) shares in P&O Princess Cruises, with an aggregate nominal value of $1m. At 31 December 2002 the market value of these shares was $10.7m (2001: $11.5m). If they had been sold at this value there would have been no tax liability (2001: $nil) on the capital gain arising from the sale.
The Ms Arkona was sold by the owner Ms Arkona GmbH & Co KG to Transocean Tours on 30 January 2002. A profit of $1.2m was made on this transaction.
The principal joint ventures are P&O Travel Limited (Hong Kong) and Joex Limited. P&O Travel Limited (Hong Kong) is a travel agency incorporated in Hong Kong in which P&O Princess Cruises had a 50% interest at 31 December 2002.
P&O Princess Cruises' share of turnover for the year ended 31 December 2002 and share of gross assets and gross liabilities as of 31 December 2002 of P&O Travel Limited (Hong Kong) are as follows:
2002
U.S. $m2001
U.S. $mTurnover 4.9 5.6 Gross assets 6.8 6.7 Gross liabilities (3.0 ) (2.9 ) 3.8 3.8 F-17
Joex Limited (Joex) is a company incorporated in the Isle of Man, in which P&O Princess Cruises had a 50% interest at 31 December 2002. Joex was incorporated during 2001 and has not traded since incorporation. P&O Princess Cruises' share of its gross assets and liabilities at 31 December 2002 were $5m and $nil respectively. On 25 October 2002, the shareholders agreed to terminate the joint venture with effect from 1 January 2003 at no cost to P&O Princess Cruises and, on 2 January 2003, P&O Princess Cruises confirmed that the joint venture had been terminated. Accordingly, the shareholders are proceeding with the dissolution of Joex.
11 Stocks
2002
U.S. $m2001
U.S. $mRaw materials and consumables 45.7 39.5 Goods for resale 41.7 34.8 87.4 74.3 12 Debtors
2002 U.S. $m 2001 U.S. $m Amounts recoverable within one year Trade debtors 66.4 45.2 Other debtors 39.1 37.8 Prepayments and accrued income 183.5 165.1 Total amounts recoverable within one year 289.0 248.1 Amounts recoverable after more than one year Other debtors 0.1 0.4 Prepayments and accrued income 20.3 8.2 Total amounts recoverable after more than one year 20.4 8.6 Total debtors 309.4 256.7 F-18
13 Creditors
Group
2002
U.S. $mGroup
2001
U.S. $mAmounts falling due within one year Overdrafts (14.5 ) (16.7 ) Bank loans (98.0 ) (158.4 ) Finance lease creditors (7.8 ) — Amounts owed to parent undertaking (1,084.8 ) (1,017.3 ) Trade creditors (184.2 ) (147.2 ) Corporation tax (54.8 ) (32.4 ) Other creditors (5.5 ) (3.8 ) Accruals (114.9 ) (88.7 ) Deferred income (467.2 ) (337.1 ) (2,031.7 ) (1,801.6 ) Amounts falling due after more than one year Bank loans, loan notes, finance lease creditors and bonds: Between one and five years Bank loans (790.9 ) (131.4 ) Finance lease creditors (119.5 ) — Over five years Bank loans (482.4 ) (184.1 ) Accruals and deferred income (3.1 ) (11.4 ) (1,395.9 ) (326.9 ) Group bank loans and overdrafts include amounts of $840.5m (2001: $368.6m) secured on ships and other assets.
Included within amounts owed to parent undertaking is $911.5m (2001: $827.9m) of inter-group financing.
14 Provisions for liabilities and charges
Deferred
taxation
U.S. $mOther
U.S. $mTotal
U.S. $mAt 31 December 2001 — (10.4 ) (10.4 ) Prior year adjustment (note 1) (11.3 ) — (11.3 ) At 31 December 2001 (as restated) (11.3 ) (10.4 ) (21.7 ) Exchange differences — (1.8 ) (1.8 ) Released — 10.7 10.7 Charged to profit and loss (0.5 ) (0.4 ) (0.9 ) At 31 December 2002 (11.8 ) (1.9 ) (13.7 ) F-19
During 2001 the Group elected to enter the U.K. tonnage tax regime which eliminated future potential tax liabilities on its profits in the U.K. The regime includes provision whereby a proportion of capital allowances previously claimed by the Group may be subject to tax in the event that a significant number of vessels are sold and not replaced. This contingent liability decreases over the first seven years following entry into tonnage tax to nil. The contingent tax liability at 31 December 2002 was $173.8m (2001: $262.0m) assuming all vessels on which capital allowances had been claimed were sold for net book value and not replaced. No provision has been made as no liability is expected to arise.
$10.7 million of contingent consideration has been reclassified into creditors.
Other provisions principally relate to contingent consideration payable on the acquisition of subsidiaries.
Deferred taxation comprises:
2002 U.S. $m 2001
U.S. $mRestated (note 1) Accelerated capital allowances 11.8 11.3 Distributable reserves of overseas subsidiaries and joint ventures comprising approximately $1,417.3m (2001: $1,197.5m) would be subject to tax if paid as dividends. No deferred taxation is provided in respect of these.
15 Called up share capital
The authorised share capital is 229,055,000 £1 ordinary shares.
The allotted, called up and fully paid ordinary share capital is as follows:
No of
SharesU.S. $m At 31 December 2001 and at 31 December 2002 229,051,002 331.0 16 Reserves
Share premium
account
U.S. $mMerger
reserve
U.S. $mProfit and
loss account
U.S. $mTotal
U.S. $mAt 31 December 2001 1,078.9 (70.9 ) 1,245.6 2,253.6 Prior year adjustment (note 1) — — (11.3 ) (11.3 ) At 31 December 2001 (as restated) 1,078.9 (70.9 ) 1,234.3 2,242.3 Exchange movements — — 40.3 40.3 Retained profit for the financial year — — 122.5 122.5 At 31 December 2002 1,078.9 (70.9 ) 1,397.1 2,405.1 F-20
17 Equity minority interests
U.S. $m At 31 December 2001 0.2 Proportion of profit on ordinary activities after taxation — At 31 December 2002 0.2 18 Notes to the consolidated cash flow statement
- (a)
- Reconciliation of operating profit to net cash inflow from operating activities
2002
U.S. $m2001
U.S. $m2000
U.S. $mGroup operating profit 290.7 353.7 373.1 Depreciation and amortization 166.5 141.0 144.6 Increase in stocks (11.1 ) (11.6 ) (1.6 ) (Increase)/decrease in debtors (31.5 ) 42.2 (40.8 ) Increase/(decrease) in creditors and provisions 146.8 (40.9 ) 44.7 Net cash inflow from operating activities 561.4 484.4 520.0
- (b)
- Reconciliation of net cash flow to movement in net debt
2002
U.S. $m2001
U.S. $m2000
U.S. $mIncrease in net cash in the year 55.4 15.6 27.4 Cash outflow/(inflow) from changes in short term borrowings 26.1 (50.0 ) (20.6 ) Cash inflow from changes in inter-group financing (83.6 ) (532.9 ) (295.0 ) Cash (inflow)/outflow from third party debt and lease financing (837.5 ) 6.8 (187.5 ) Change in net debt resulting from cash flows (839.6 ) (560.5 ) (475.7 ) Inception of finance leases (129.9 ) — — Exchange movements in net debt (94.9 ) 12.0 12.6 Movement in net debt in the year (1,064.4 ) (548.5 ) (463.1 ) Net debt at the beginning of the year (1,198.1 ) (649.6 ) (186.5 ) Net debt at the end of the year (2,262.5 ) (1,198.1 ) (649.6 )
- (c)
- Analysis of net debt
At
1 Jan. 2002
U.S. $mCash flow
U.S. $mOther
non-cash
movements
U.S. $mExchange
movements
U.S. $mAt
31 Dec. 2002
U.S. $mCash available on demand 120.4 53.2 — (11.5 ) 162.1 Less: bank overdrafts (16.7 ) 2.2 — — (14.5 ) 103.7 55.4 — (11.5 ) 147.6 Short term debt (158.4 ) 26.1 48.7 (14.4 ) (98.0 ) Inter-group financing (827.9 ) (83.6 ) — — (911.5 ) Medium and long term debt (315.5 ) (840.1 ) (48.7 ) (69.0 ) (1,273.3 ) Finance leases — 2.6 (129.9 ) — (127.3 ) Net debt (1,198.1 ) (839.6 ) (129.9 ) (94.9 ) (2,262.5 ) F-21
19 Acquisitions
There were no significant business acquisitions during 2002.
The business acquired during 2001 was Basté & Lange GmbH, a German procurement company. Net assets of $0.2m were acquired for $1.7m in cash, giving rise to goodwill of $1.5m with an estimated useful life of 20 years. All book values approximate to fair values at acquisition.
20 Employees
2002 2001 The average number of employees was as follows:
Shore staff
3,654
3,623Sea staff 16,298 15,833 19,952 19,456
2002
U.S. $m2001
U.S. $mThe aggregate payroll costs were:
Wages and salaries
307.5
279.1Social security costs 12.1 11.2 Pension costs 12.1 9.8 331.7 300.1 Directors' remuneration
The aggregate emoluments of the directors for the year to 31 December 2002 was as follows:
2002
U.S. $'0002001
U.S. $'000Directors' emoluments in respect of services provided 3,942 2,851 Company contributions to defined benefit pension schemes 268 255 4,210 3,106 The emoluments of P G Ratcliffe, who is the highest paid director, are disclosed in the full annual report and accounts of P&O Princess Cruises plc, together with those of NL Luff and Lord Sterling of Plaistow.
During the year one director (2000: none) exercised share options over shares of the ultimate holding company.
The following number of directors were part of the group company pension schemes.
2002 2001 Number of directors 4 4 F-22
N L Luff, P G Ratcliffe and Lord Sterling of Plaistow were also members of the board of directors of the ultimate holding company, P&O Princess Cruises plc, at 31 December 2002, of which this company is a wholly owned subsidiary. Their interests in shares and debentures of group companies are disclosed in the directors' report of that company. The value of awards granted during the year under the Group's long term incentive plan are included in the aggregate emoluments disclosed above.
Employee Option Schemes
Options under the P&O Princess Cruises Executive Share Option Plan (the "Option Plan") are exercisable in a period beginning not normally earlier than three years and ending no later than ten years from the date of the grant. Options granted immediately after the demerger from P&O in October 2000 as replacements of options over P&O deferred stock previously held by P&O Princess employees are exercisable over the same period as the options replaced. The exercise price is set at the closing market price on the day the option was granted.
Options granted to POPCIL employees over shares of the ultimate holding company, under the Option Plan are as set out below:
Weighted average exercise
price per shareNumber of options Shares ADS Shares ADS Options outstanding at 1 January 2002 293p $ 17.14 6,551,662 952,717 Options granted during the year 408p $ 23.85 2,856,082 505,150 Options exercised during the year 292p $ 16.97 (613,523 ) (53,917 ) Options lapsed or cancelled 292p — (171,572 ) — Options outstanding at 31 December 2002 318p $ 19.56 8,622,649 1,403,950 Options exercisable at 31 December 2002 293p $ 16.97 1,038,955 54,874 On completion of the DLC transaction with Carnival Corporation all options existing at 31 December 2002 vested and became exercisable and any performance conditions ceased to apply.
21 Pensions
The Group is a contributing employer to various pension schemes, including some multi-employer merchant navy industry schemes.
In the U.K. the Group operates its own defined benefit pension scheme, the assets of which are managed on behalf of the trustee by independent fund managers. This scheme is closed to new membership. As of 31 March 2001, the date of the most recent formal actuarial valuation, the scheme had assets with a market value of $60.9m, representing 102 percent of the benefits accrued to members
F-23
allowing for future increases in earnings. Approximately 70 percent of the scheme's assets are invested in bonds and 30 percent in equities. The principal valuation assumptions were as follows:
% Rate of salary increases 4.0 Rate of pension increases 2.5 Discount rate 5.25 Expected return on assets 5.25 The Merchant Navy Ratings Pension Fund ("MNRPF") is a defined benefit multi-employer scheme in which sea staff employed by companies within the Group have participated. The scheme has a significant funding deficit and has been closed to further benefit accrual. Companies within the Group, along with other employers, are making payments into the scheme under a non-binding Memorandum of Understanding to reduce the deficit. Payments by Group companies to the scheme in 2002 totaled $2.0m, which represented 7 percent of the total payments made by all employers. As of 31 March 2002, the date of the most recent formal actuarial valuation, the scheme had assets with a market value of $814m, representing 84 percent of the benefits accrued to members. Approximately 68 percent of the scheme's assets were invested in bonds, 25 percent in equities and 7 percent in property. The valuation assumptions were as follows:
% Rate of salary increases 4.0 Rate of pension increases (where increases apply) 2.5 Discount rate 5.8 Expected return on assets 5.8 The Merchant Navy Officers Pension Fund ("MNOPF") is a defined benefit multi-employer scheme in which officers employed by companies within the Group have participated and continue to participate. This scheme is closed to new membership. The share of contributions being made to the scheme by Group companies (based on the year to 31 December 2002) was approximately 7 percent. However, the extent of each participating employer's liability for any deficit in the scheme is uncertain. Accordingly, POPCIL accounts for the scheme on a contributions paid basis, as if it were a defined contribution scheme. The scheme is divided into two sections the New Section and the Old Section. As of 31 March 2000, the date of the most recent formal actuarial valuation, the New Section had assets with a market value of $2,680m, representing approximately 100 percent of the benefits accrued to members. The valuation assumptions were as follows:
% Rate of salary increases 4.0 Rate of pension increases (where increases apply) 2.5 Discount rate 5.75 Expected return on assets 5.75 At the date of the valuation, approximately 77 percent of the New Section's assets were invested in equities, 14 percent in bonds and 9 percent in property and cash. As a result of this asset distribution,
F-24
it is expected that the fall in equity markets since March 2000 will have resulted in the New Section now showing a significant funding deficit. The estimated current position is discussed below with the additional information presented under FRS17. The Old Section has been closed to benefit accrual since 1978. As of 31 March 2000, the date of the most recent formal actuarial valuation, it had assets with a market value of $2,233m representing approximately 111 percent of the benefits accrued to members. The assets of the Old Section are substantially invested in bonds. Contributions from Group companies to the MNOPF during the year to 31 December 2002 were $1.2m.
The Group also operates a number of smaller defined benefit schemes in the U.S. which are unfunded, other than assets in a Rabbi Trust held on the Group's balance sheet, and makes contributions to various defined contribution schemes in various jurisdictions.
The pension charges arising from the schemes described above were:
2002
U.S. $m2001
U.S. $m2000
U.S. $mThe P&O Princess Cruises Pension Scheme 5.5 4.3 4.0 Merchant Navy Pension funds 2.8 2.7 2.7 Overseas plans 3.8 2.8 3.0 12.1 9.8 9.7 (In 2000, the P&O Princess Cruises Pension Scheme figure includes $3.1m in respect of payments to the P&O Pension Scheme prior to demerger in October 2000.)
Differences between the amounts charged and the amounts paid by The Group are included in prepayments or creditors as appropriate. At 31 December 2002 total prepayments amounted to $6.3m (2001: $7.3m), and total creditors amounted to $14.3m (2001: $13.1m), giving a net pension liability in the balance sheet of $8.0m.
Additional information presented under FRS17 "Retirement Benefits"
While the group continues to account for pension costs in accordance with Statement of Standard Accounting Practice 24 "Accounting for Pension costs", under FRS17 "Retirement Benefits" the following additional information has been presented in respect of the Group's principal pension fund, the Group's share of the MNRPF and the U.S. defined benefit schemes. In accordance with FRS17, the MNOPF is not included in this analysis as POPCIL's share of its underlying assets and liabilities cannot be identified with certainty. However, some additional information on the overall funding position of this scheme is provided.
The actuarial valuations of the Group schemes and POPCIL's share of the MNRPF were updated to 31 December 2002 and 2001 by the Group's qualified independent actuary. The assumptions used are best estimates chosen from a range of possible actuarial assumptions which may not necessarily be
F-25
borne out in practice. Using weighted averages, these assumptions for the U.K. and U.S. schemes together were:
2002
%2001
%Rate of increase in salaries 4.1 4.1 Rate of increase in pensions (where increases apply) 2.5 2.5 Discount rate 5.2 5.6 Expected return on assets (only relevant for U.K. schemes) 5.1 5.5 The aggregated assets and liabilities in the schemes as of 31 December 2002 and 2001 were:
2002 2001 U.S. $m Expected
rate of return
%U.S. $m Expected
rate of return
%Equities 42.9 5.1 34.1 5.5 Bonds 93.8 5.1 86.9 5.5 Total market value of assets 136.7 121.0 Present value of the schemes' liabilities (178.0 ) 5.5 (146.2 ) 5.5 Net pension liability (41.3 ) (25.2 ) (This analysis excludes pension assets held in a Rabbi Trust of $4.8m.)
The net pension liability of $41.3m (2001: $25.2m) represents pension prepayments of $nil (2001: $7.3m) and pension liabilities of $41.3m (2001: $32.5m). This compares with the net pension liability accounted for under SSAP 24 of $8.0m.
On full compliance with FRS17, the amounts that would have been charged to the consolidated profit and loss account and consolidated statement of total recognized gains and losses for these schemes for the year ended 31 December 2002 are set out below:
2002
U.S. $mAnalysis of amounts charged to operating profits: Current service cost (7.3 ) Past service costs — Total charged to operating profit (7.3 ) Analysis of amount credited to other finance income: Interest on pension scheme liabilities (8.9 ) Expected return on assets in the pension schemes 7.0 Net charge to other finance income (1.9 ) F-26
The total profit and loss charge of $9.2m compares with $12.1m under SSAP 24
2002
U.S. $m
Analysis of amounts recognized in Statement of Recognized Gains and Losses (STRGL):Loss on assets (11.4 ) Experience gain on liabilities 9.4 Loss on change of assumptions (financial and demographic) (11.8 ) Total loss recognized in STRGL before adjustment for tax (13.8 )
2002 History of experience gains and losses Loss on scheme assets ($11.4m ) As a % of scheme assets at end of year 8.3% Experience gain on scheme liabilities $9.4m As a % of scheme liabilities at end of year 5.3% Total actuarial loss recognized in STRGL ($13.8m ) As a % of scheme liabilities at end of year 7.8%
2002
U.S. $m
Movement in net pension liability in the scheme during the year
Net pension liability at 1 January 2002
(25.2
)Contributions paid 6.1 Current service cost (7.3 ) Other finance charge (1.9 ) Actuarial loss (13.8 ) Exchange 0.8 Net pension liability at 31 December 2002 (41.3 ) It is estimated that the funding position of the MNOPF has changed significantly since the valuation as at 31 March 2000 referred to above and that the New Section is now in deficit. The Annual Report of the MNOPF for the year ended 31 March 2002 showed that the market value of the assets of the New Section at that date was $2,404m, of which 66 percent was invested in equities, 22 percent in bonds and 12 percent in property and cash. The Group's actuary has estimated the deficit in the New Section at 31 December 2002, based on the estimated movement in assets since 31 March 2002 and in liabilities since 31 March 2000 and applying a discount rate to the liabilities, of 5.1% in accordance with FRS17. As noted above, the extent of each employer's liability with respect to the deficit in the fund is uncertain. Based on the share of current contributions made to the scheme by the Group, its share of the estimated deficit would be approximately U.S.$85.0m although the appropriate share of the deficit actually attributable to the Group is believed to be lower than this.
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On full adoption of FRS17 "Retirement benefits", in future years the difference between the fair value of the assets held in the Group's defined benefit pension schemes and the value of the schemes' liabilities measured on an actuarial basis, using the projected unit method, will be recognized in the balance sheet as a pension scheme asset or liability, as appropriate, which would have a consequential effect on reserves. The carrying value of any resulting pension scheme asset would be restricted to the extent that the Group is able to recover the surplus either through reduced future contributions or refunds. The pension scheme asset or liability would be recognized net of any related deferred tax. However, this is expected to be minimal due to the tax structure of the group. Movements in the defined benefit pension scheme asset or liability would be taken to the profit and loss account or directly to reserves.
22 Related party transactions
Mr. Horst Rahe, a non-executive director of the ultimate parent company, has an interest in a deferred consideration arrangement relating to the Group's purchase of AIDA Cruises Limited in November 2000. Amounts provided for as of 31 December 2002 in respect of this deferred consideration were $57.5m in aggregate (2001: $57.0m).
In July 2002, P&O Princess Cruises International Limited, entered into, on an arms-length basis, a lease on an office property in Germany with a company in which Horst Rahe, a director of the Company, has an interest. The lease is for a term of 10 years, commencing in 2004, with options to extend. The rent payable under the lease each year varies over the term of the lease, within the range Euro350,000 to Euro500,000. These figures are net of relevant regional government grants.
23 Commitments
Capital
2002
U.S. $m2001
U.S. $mContracted Ships and riverboats 1,790.0 2,721.6 Other — 3.8 1,790.0 2,725.4 Capital commitments related to ships and riverboats include contract stage payments, design and engineering fees and various owner supplied items but exclude interest that will be capitalized. As of 31 December 2002, the Group had future capital commitments in respect of the five ocean cruise ships and two riverboats on order at that date of $1,790.0m. Of the total commitment as of 31 December 2002, it is expected that the Group will incur $610.0m in 2003 and $1,180.0m in 2004.
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Revenue
The minimum annual lease payments to which the Group was committed under non-cancellable operating leases were as follows:
Property
2002
U.S. $mOther
2002
U.S. $mTotal
2002
U.S. $mProperty
2001
U.S. $mOther
2001
U.S. $mTotal
2001
U.S. $mWithin one year 10.2 12.4 22.6 9.5 21.4 30.9 Between one and two years 9.8 11.5 21.3 9.1 3.7 12.8 Between two and three years 9.8 11.8 21.6 8.9 0.4 9.3 Between three and four years 9.7 1.9 11.6 8.8 0.5 9.3 Between four and five years 9.7 — 9.7 8.7 0.1 8.8 In more than five years 56.6 — 56.6 59.4 — 59.4 105.8 37.6 143.4 104.4 26.1 130.5 Future minimum annual lease payment due within one year are analyzed as follows:
Property
2002
U.S. $mOther
2002
U.S. $mTotal
2002
U.S. $mProperty
2001
U.S. $mOther
2001
U.S. $mTotal
2001
U.S. $mOn leases expiring: Within one year 0.4 0.4 0.8 0.3 8.7 9.0 Between one and five years 0.2 12.0 12.2 0.4 12.7 13.1 After five years 9.6 — 9.6 8.8 — 8.8 10.2 12.4 22.6 9.5 21.4 30.9 In addition to the above, at 31 December 2002 the Group had future commitments to pay for our usage of certain port facilities as follows:
U.S. $m Within one year 6.4 Between one and five years 27.4 After five years 5.6 39.4 24 Contingent liabilities
The Group's parent has provided counter indemnities of $213.4m (2001: $179.7m) relating to bonds provided by third parties in support of the Group's obligations arising in the normal course of business. Generally, these bonds are required by travel industry regulators in the various jurisdictions in which the Group operates.
At 31 December 2002, POPCIL unconditionally guaranteed $1,118.6m (2001: $1,086.8) principle value of notes and bonds held by P&O Princess Cruises plc. The notes and bonds mature from 2007 through 2027.
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The Group is a party to a purported class action litigation relating to alleged inappropriate assessing of passengers with certain port charges in addition to their cruise fare. The plaintiffs have not claimed a specific damage amount but settlement of this litigation had been agreed in principle with the plaintiffs for coupons for future travel in amounts between $5 and $24 with a total face value of approximately $13.4 million. However, on 17 January 2002, a Los Angeles Superior Court Judge ruled that he would not consider the class-wide settlement agreed by the parties on the grounds that he had previously ruled that there was no appropriate class. As a result of this ruling, the case remains pending. Notwithstanding this development, the board does not believe that a material liability will arise with respect to this case and no provision has been made in the accounts for this contingency. However, if there is a settlement, there can be no guarantee that it would be of an amount previously indicated.
In the normal course of business, various other claims and lawsuits have been filed or are pending against the Group. The majority of these claims and lawsuits are covered by insurance. POPCIL management believes the outcome of any such suits, which are not covered by insurance, would not have a material adverse effect on the Group's financial statements.
25 Investments
The principal subsidiaries at 31 December 2002 were:
Country of
incorporation/
registrationPercentage of
equity share
capital owned at
31 December 2002Business Description Alaska Hotel Properties LLC U.S.A. 100 % Hotel operations Brittany Shipping Corporation Ltd Bermuda 100 % Shipowner Corot Shipping Corporation (Sociedade Unipessoal) Lda Portugal 100 % Shipowner CP Shipping Corporation Ltd Bermuda 100 % Shipowner Fairline Shipping Corporation Ltd Bermuda 100 % Shipowner Fairline Shipping International Corporation Ltd Bermuda 100 % Shipowner GP2 Ltd Bermuda 100 % Shipowner GP3 Ltd Bermuda 100 % Shipowner Princess Cruises (Shipowners) Ltd England 100 % Passenger cruising P&O Travel Ltd England 100 % Travel agent Princess Cruise Lines Ltd Bermuda 100 % Passenger cruising Princess Tours Ltd England 100 % Shipowner Royal Hyway Tours Inc U.S.A. 100 % Land tours Sitmar International SRL Panama 100 % Holding company Tour Alaska LLC U.S.A. 100 % Rail tours F-30
26 Summary differences between U.K. and U.S. GAAP
Accounting principles
These financial statements have been prepared in accordance with U.K. GAAP, which differs in certain significant respects from U.S. GAAP. A description of the relevant accounting principles which differ materially is given below.
Treasury stock
Under U.K. GAAP, the parent company's shares held by employee share trusts are included at cost in fixed asset investments and are written down to the amount payable by employees over the vesting period of the options. Under U.S. GAAP, such shares are treated as treasury shares and are included in shareholders' equity.
Depreciation
Under U.K. GAAP, until 31 December 1999 certain freehold properties were not depreciated. Under U.S. GAAP useful economic lives have been applied to these properties and a depreciation expense recorded based on these lives.
Goodwill and contingent consideration
Under U.K. GAAP, if an acquirer makes an acquisition for contingent consideration, provision is made at the outset where it is probable that it will be paid and the amount can be measured reliably. Under U.S. GAAP this consideration is not recognized until the consideration is settled.
In June 2001 the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 141—Business Combinations and SFAS No. 142—Goodwill and Other Intangible Assets. SFAS No. 141 requires that the purchase method of accounting be used for all business combinations. SFAS No. 141 specifies criteria that intangible assets acquired in a business combination must meet to be recognized and reported separately from goodwill. SFAS No. 142 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually in accordance with the provisions of SFAS No. 142.
The Group adopted the provisions of SFAS No. 141 as at 1 July 2001 and SFAS No. 142 as of 1 January 2002. Goodwill and intangible assets determined to have an indefinite useful economic life are not amortized. Goodwill and indefinite life intangible assets acquired in business combinations completed before 1 July 2001 continued to be amortized through to 31 December 2001. Amortization of such assets ceased on 1 January 2002 upon adoption of SFAS No. 142. Accordingly, goodwill amortization recognized under UK GAAP from 1 January 2002 has been reversed for the purposes of U.S. GAAP.
Upon adoption of SFAS No. 142 the Group was required to evaluate its existing intangible assets and goodwill that were acquired in purchase business combinations, and to make any necessary reclassifications in order to conform with the new classification criteria SFAS No. 141 for recognition separate from goodwill. The Group was also required to reassess the useful lives and residual values of all intangibles acquired and to make any necessary amortization period adjustments by the end of the first interim period after adoption. For intangible assets identified as having indefinite useful economic lives, the Group was required to test those intangible assets for impairment in accordance with the provisions of SFAS No. 142 within the first interim period. Impairment is measured as the excess
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carrying value over the fair value of an intangible asset with an indefinite life. The results of this analysis did not require the Group to recognize an impairment loss.
In connection with the SFAS No. 142 transitional goodwill impairment evaluation, the Statement required the Group to perform an assessment of whether there was an indication that goodwill is impaired as of date of adoption. To accomplish this the Group was required to identify its reporting units and determine the carrying value of each reporting unit by assigning the assets and liabilities, including the existing goodwill and intangible assets, to those reporting units as of 1 January 2002. The Group was required to determine the fair value of each reporting unit and compare it with the carrying value of the reporting unit within six months of 1 January 2002. This transitional impairment test upon the adoption of SFAS No. 142 did not result in an impairment charge. The Group performed the annual impairment test in December 2002 and determined that goodwill was not impaired.
Marketing and promotion costs
Under U.K. GAAP, marketing and promotion costs have been expensed over the period of benefit, not exceeding one year from the end of the year the cost is incurred. U.S. GAAP requires that these costs are expensed in the financial year incurred.
Relocation costs
The Group had accrued expenses relating to the relocation of employees which under U.K. GAAP are recognizable as liabilities. Under U.S. GAAP these costs may not be recognized until incurred by the employees.
Employee share incentives
The Executive schemes
Under U.K. GAAP the intrinsic value of shares or rights to acquire shares when the rights are granted, less contributions by employees, is charged in arriving at operating profit. If this forms part of a long term incentive scheme the charge in the profit and loss account is spread over the period to which the schemes' performance criteria relate, otherwise recognition occurs when shares or rights are granted. Under U.S. GAAP, compensation expense is recognized for the difference between the market price of the shares and the exercise price for performance plans and variable plans. The amount of compensation expense is adjusted each accounting period based on the value of shares for both types of plan and also upon the estimated achievement of the performance criteria for the performance plans, until the date at which the number of shares and the exercise price are known.
SAYE scheme
When employed by P&O, certain employees of P&O Princess were eligible to participate in the P&O save as you earn ("SAYE") share option scheme. P&O Princess does not operate a SAYE scheme. U.K. GAAP does not recognize the cost of SAYE discounts in financial statements. U.S. GAAP requires the full discount given to employees on the market price of shares provided as part of a "non-compensatory plan" (such as the SAYE scheme) to be charged to the profit and loss account when it is greater than that which would be reasonable in an offer of shares to shareholders or others.
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Pensions
Under U.K. GAAP, pension costs include the regular cost of providing the benefits as a level percentage of current and expected future earnings of the employees covered. Variations from the regular pension cost are spread on a systematic basis over the estimated average remaining service lives of current employees in the plans.
U.S. GAAP requires that the projected benefit obligation (pension liability) be compared with the market value of the underlying plan assets, and the difference may be adjusted to reflect any unrecognized obligations or assets in determining the pension cost or credit for the period. The actuarial method and assumptions used in determining the pension expense can be significantly different from that computed under current U.K. GAAP. U.S. GAAP also requires the actuarial valuation to be prepared as of a more recent date than U.K. GAAP.
During 2001 one of the multi-employer schemes in which the Group participates, the MNRPF, closed its fund for future benefit accrual. Under U.K. GAAP, the Group is recognizing this liability over the period in which the funding deficit is being made good, which approximates to expected remaining service lives of employees in the scheme. Under U.S. GAAP, the Group has accounted for its share of the scheme's net pension liability with an expense of $3.7m being recognized in 2002 (2001: $15.1m).
Derivative instruments and hedging activities
Under U.K. GAAP, gains and losses on instruments used for hedging are not recognized until the exposure that is being hedged is itself recognized. Under U.S. GAAP, Statement of Financial Accounting Standards No. 133 (SFAS No. 133), "Accounting for Derivative Instruments and Hedging Activities", as amended, requires that all derivative instruments be recorded on the balance sheet at their fair value. Changes in the fair value of derivatives will either be recognized in earnings as offsets to the changes in fair value of related hedged items, or, for forecast transactions, deferred and recorded as a component of other comprehensive income until the hedged transactions occur and are recognized in earnings. The ineffective portion of a hedging derivative's change in fair value is recognized immediately in earnings.
This statement became effective for POPCIL on 1 January 2001, and a transition adjustment of $9.0m was debited to reserves on implementation as the cumulative effect of U.S. GAAP accounting policy change.
In accordance with SFAS 133, U.S. GAAP assets are increased by $71.5m and liabilities by $77.9m at 31 December 2002 (2001 U.S. GAAP assets increased by $214.3m and liabilities by $219.8m). Cash flow hedges of $1.6m have been taken to other comprehensive income.
Taxes
Deferred Tax
Following the implementation of FRS19 "Deferred tax", under both U.K. and U.S. GAAP deferred taxes are accounted for on all timing differences. Deferred tax can also arise in relation to the tax effect of the other U.S. GAAP adjustments. During 2001, the Group elected to enter the U.K. tonnage tax regime, as a result of which temporary timing differences in respect of fixed assets within
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the scheme became permanent differences. The deferred tax liabilities in respect of these assets have therefore been released under both U.K. and U.S. GAAP.
Implementation of FRS 19 "Deferred Tax"
Following the implementation of FRS 19 "Deferred tax", as detailed in note 1, the reconciliation of U.K. profit and shareholders' funds to U.S. GAAP has been restated for 2001 and 2000. In 2001, the impact on the U.S. GAAP reconciliation is a decrease in the "Taxes" U.S. GAAP adjustment to profit of $96.8m and an increase of $11.3m in the "Taxes" U.S. GAAP adjustment to shareholders' funds. In 2000, the effect is a reduction in the "Taxes" U.S. GAAP adjustment to profit of $16.1m and a reduction in the "Taxes" U.S. GAAP adjustment to shareholders' funds to $108.1m.
Other taxes
The Group incurred income tax in 2001 as a result of taxable gains on intercompany transactions that were undertaken to maximize its tax efficiency. Under U.K. GAAP, this was charged to the profit and loss account. Under U.S. GAAP, income taxes paid on intercompany profits on assets remaining within the Group must be deferred. This deferred charge is being amortized over 25 years.
Transaction costs
In 2001, it was expected that the proposed dual listed company transaction with Royal Caribbean Cruises Ltd would be accounted for under U.K. GAAP using merger accounting principles with the costs of carrying out the combination being expensed to the profit and loss account when the combined group came into existence. When the P&O Princess Board withdrew its recommendation for this proposed transaction in October 2002, these costs were expensed under U.K. GAAP. Under U.S. GAAP it was intended that the proposed transaction would be accounted for using the purchase method of accounting with P&O Princess being treated as the acquiree. Accordingly, under U.S. GAAP the costs incurred by P&O Princess in connection with the proposed combination were expensed to the profit and loss account as incurred.
Assets and liabilities
Current assets under U.K. GAAP of $20.4m (2001 $8.6m) would be reclassified as non current assets under U.S. GAAP.
Provisions for liabilities and charges under U.K. GAAP of $nil (2001 $0.2m) would be reclassified as Creditors—amounts falling due within one year under U.S. GAAP.
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The effects of these differing accounting principles are shown below:
Summary Group income statement
2002
U.K.GAAP
U.S. $m2002
Adjustments
U.S. $m2002
U.S.GAAP
U.S. $m2001
U.S.GAAP
U.S. $m2000
U.S.GAAP
U.S. $mRevenues 2,526.8 — 2,526.8 2,451.0 2,423.9
Expenses
Operating (1,592.0 ) — (1,592.0 ) (1,598.8 ) (1,558.0 ) Marketing, selling and administrative (477.6 ) 5.5 (472.1 ) (381.5 ) (353.7 ) Depreciation and amortization (166.5 ) 4.7 (161.8 ) (139.4 ) (143.9 ) (2,236.1 ) 10.2 (2,225.9 ) (2,119.7 ) (2,055.6 ) Operating income before income from affiliated operations 290.7 10.2 300.9 331.3 368.3 Income from affiliated operations — — — 0.1 0.5 Operating income 290.7 10.2 300.9 331.4 368.8
Non-operating income (expense)
Interest income 6.0 — 6.0 7.2 1.3 Interest expense, net of capitalized interest (8.3 ) 0.7 (7.6 ) 5.7 (46.9 ) Other income (expense) 1.2 — 1.2 (1.8 ) (6.5 ) Income tax (expense) credit (17.1 ) (2.8 ) (19.9 ) 151.2 (56.9 ) Minority interest — — — (0.1 ) (2.6 ) (18.2 ) (2.1 ) (20.3 ) 162.2 (111.6 ) Profit attributable to ordinary shareholders in accordance with U.S. GAAP before cumulative effect of accounting
policy change272.5 8.1 280.6 493.6 257.2 Cumulative effect of accounting policy change in respect of derivative instruments and hedging activities — — — (9.0 ) — Profit attributable to ordinary shareholders in accordance with U.S. GAAP 272.5 8.1 280.6 484.6 257.2 F-35
Adjustments to profit attributable to ordinary shareholders
2002
U.S.$m2001
U.S.$m2000
U.S.$mRestated
(note 1)Restated
(note 1)Profit attributable to ordinary shareholders in accordance with U.K. GAAP 272.5 443.0 261.5 U.S. GAAP adjustments Depreciation 0.4 0.4 0.4 Goodwill and contingent consideration 4.3 1.2 0.3 Marketing and promotion costs (3.2 ) 5.2 (8.3 ) Relocation costs (2.0 ) 2.0 — Employee share incentives 1.8 (5.1 ) 1.9 Pensions (3.0 ) (14.2 ) 0.9 Derivative instruments and hedging activities 0.7 3.5 — Tax effect of U.S. GAAP adjustments — (3.9 ) 0.5 Taxes (2.8 ) 73.4 — Transaction costs 11.9 (11.9 ) — Profit attributable to ordinary shareholders in accordance with U.S. GAAP before cumulative effect of accounting policy change 280.6 493.6 257.2 Cumulative effect of U.S. GAAP accounting policy change in respect of derivative instruments and hedging activities — (9.0 ) — Profit attributable to ordinary shareholders in accordance with U.S. GAAP 280.6 484.6 257.2 Goodwill and other intangible assets—adoption of SFAS No. 142
2002
U.S.$m2001
U.S.$m2000
U.S.$mReported profit attributable to ordinary shareholders in accordance with U.S. GAAP 280.6 484.6 257.2 Add back goodwill amortization — 2.9 2.0 Adjusted profit attributable to ordinary shareholders in accordance with U.S. GAAP 280.6 487.5 259.2 F-36
Adjustments to shareholders' funds 2002
U.S. $m2001
U.S. $m2000
U.S. $mRestated
(note 1)Restated
(note 1)Shareholders' funds in accordance with U.K. GAAP 2,736.1 2,573.3 2,352.1
U.S. GAAP adjustments
Treasury stock (2.9 ) (3.3 ) — Depreciation (10.9 ) (11.3 ) (11.7 ) Goodwill and contingent consideration (41.0 ) (45.3 ) (46.5 ) Marketing and promotion costs (87.9 ) (84.7 ) (89.9 ) Relocation costs — 2.0 — Pensions (15.3 ) (12.3 ) 1.9 Derivative instruments and hedging activities (6.4 ) (5.5 ) — Tax effect of U.S. GAAP adjustments — — 3.9 Taxes 70.6 73.4 — Transaction costs — (11.9 ) — Shareholders' funds in accordance with U.S. GAAP 2,642.3 2,474.4 2,209.8
2002
U.S. $m2001
U.S. $m2000
U.S. $mThe following table reconciles shareholders' funds under U.S. GAAP
Shareholders' funds opening balance
2,474.4
2,209.8
1,960.0
Profit for year under U.S. GAAP 280.6 484.6 257.2 Add back share options as taken through reserves (1.8 ) 5.1 (1.2 ) Treasury stock — (3.3 ) — Foreign exchange reserve movement 40.7 (20.5 ) (5.5 ) Dividend (150.0 ) (201.3 ) (90.0 ) Investment by P&O — — 1.2 New shares issued — — 88.1 FAS 133 cash flow hedge (1.6 ) — — Shareholders' funds closing balance 2,642.3 2,474.4 2,209.8 F-37
Cash flow statements
The cash flow statements have been prepared in conformity with U.K. Financial Reporting Standard 1 (Revised) "Cash Flow Statements". The principal differences between these statements and cash flow statements presented in accordance with SFAS No. 95 are as follows:
- (a)
- Under U.K. GAAP net cash flow from operating activities is determined before considering cash flows from (a) returns on investments and servicing of finance (b) taxes paid and (c) dividends received from joint ventures. Under U.S. GAAP, net cash flow from operating activities is determined after these items.
- (b)
- Under U.K. GAAP, capital expenditure is classified separately while under U.S. GAAP, it is classified as an investing activity.
- (c)
- Under U.K. GAAP movements in bank overdrafts are classified as movements in cash while under U.S. GAAP they are classified as a financing activity.
- (d)
- Under U.K. GAAP equity dividends paid to shareholders are classified separately, under U.S. GAAP they are classified as a financing activity.
Set out below is a summary cash flow statement under U.S. GAAP:
2002
U.S. $m2001
U.S. $m2000
U.S. $mNet cash inflow from operating activities 463.5 233.3 410.1 Net cash outflow from investing activities (1,153.4 ) (592.5 ) (795.5 ) Net cash inflow from financing activities 743.1 391.2 411.8 Exchange translation effect on cash (11.5 ) 5.9 (7.1 ) Net increase in cash and cash equivalents under U.S. GAAP 41.7 37.9 19.3 Cash and cash equivalents at beginning of year 120.4 82.5 63.2 Cash and cash equivalents at end of year 162.1 120.4 82.5 New U.S. Accounting Standards
In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No. 143—"Accounting for Asset retirement obligations". SFAS No. 143 requires the Group to record the fair value of asset retirement obligations associated with the retirement of tangible long-lived assets and the associated retirement costs in the period in which it is incurred, if a reasonable estimate of fair value can be made. SFAS No. 143 will be adopted by the Group in the 2003 fiscal year. The Group has not yet determined the impact of adopting SFAS No. 143.
In April 2002, the FASB issued SFAS No. 145 "Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections." SFAS No. 145 provides for the rescission of several previously issued accounting standards, new accounting guidance for the accounting for certain lease modifications and various technical corrections that are not substantive in nature to existing pronouncements. SFAS No. 145 will be adopted beginning January 1, 2003, except for the provisions relating to the amendment of SFAS No. 13, which was adopted for transactions occurring
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subsequent to May 15, 2002. The impact of adopting SFAS No. 145 on the results of operations and financial position of the Group remains to be evaluated.
In July 2002, the FASB issued SFAS No. 146 ("SFAS 146"), "Accounting for Costs Associated with Exit or Disposal Activities." SFAS 146 nullifies Emerging issues Task Force No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." SFAS 146 requires that a liability for a cost associated with an exit or disposal activity should be recorded when it is incurred and initial measurement be at fair value. The statement is effective for exit or disposal activities that are initiated after December 31, 2002, although earlier adoption is encouraged. The impact of adopting SFAS No. 146 on the results of operations and financial position of the Group remains to be evaluated.
In November 2002, the Financial Accounting Standards Board issued interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, including indirect Guarantees of Indebtedness of Others" (FIN45), which addresses, among other things, the disclosure to be made by a guarantor in its interim and annual financial statements about its obligations under guarantees. The Interpretation also requires the recognition of a liability by a guarantor at the inception of certain guarantees.
The Interpretation requires the guarantor to recognize a liability for the non-contingent component of the guarantee, this is the obligation to stand ready to perform in the event that specified triggering events or conditions occur. The initial measurement of this liability is the fair value of the guarantee at inception. The recognition of the liability is required even if it is not probable that payments will be required under the guarantee or if the guarantee was issued with a premium payment or as part of a transaction with multiple elements.
The Company has adopted the disclosure requirements of the Interpretation and will apply the disclosure recognition and measurement provisions for all guarantees entered into or modified after December 31, 2002.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock Based Compensation—Transition and Disclosure—an amendment of FASB statement No. 123". SFAS 148 permits two additional transition methods for entities that adopt the fair value based method of accounting for stock-based employee compensation. The Statement also requires new disclosures about the ramp-up effect of stock-based employee compensation on reported results. The Statement also requires that those effects be disclosed more prominently by specifying the form, content and location of those disclosures. The transition guidance and annual disclosure provisions of SFAS No. 148 are effective for fiscal years ending after December 15, 2002, with earlier application permitted in certain circumstances. The interim disclosure provisions are effective for financial reports containing financial statements for interim periods beginning after December 5, 2002. The Company has not decided yet if it will adopt the transition provisions of SFAS 148.
In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation of Variable Interest Entities" (FIN 46) which interprets Accounting Research Bulletin (ARB) No. 51, Consolidated Financial Statements. FIN 46 clarifies the application of ARB No. 51 with respect to the consolidation of certain entities (variable interest entities—"VIES") to which the usual condition for consolidation described in ARB No. 51 does not apply because the controlling financial interest in VIE's may be achieved through arrangements that do not involve voting interests. In addition, FIN 46 requires the
F-39
primary beneficiary of VIE's and the holder of a significant variable interest in VIE's to disclose certain information relating to their involvement with the VIE's. The provisions of FIN 46 apply immediately to VIE's created after January 31, 2003, and to VIE's in which an enterprise obtains an interest after that date, FIN 46 applies in the first fiscal year beginning after June 15, 2003, to VIE's in which an enterprise holds an interest that it acquired before February 1, 2003. The Group is currently evaluating the impact the adoption of FIN 46 will have on its financial statements.
On 30 April 2003, the FASB issued Statement of Financial Accouting Standards No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities" (the "Statement"). The purpose of the Statement is to amend and clarify financial accounting and reporting for derivative instruments and hedging activities under Statement 133. The Statement amends Statement 133 to clarify the definition of a derivative, expand the nature of exemptions from Statement 133, clarify the application of hedge accounting when using certain instruments, clarify the application of paragraph 13 of Statement 133 to embedded derivative instruments in which the underlying is an interest rate, and modify the cash flow presentation of derivative instruments that contain financing elements. The company is currently considering the impact of this Standard.
On 15 May 2003, the FASB issued Statement No. 150 "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity". The provisions of the Statement will change the classification of certain freestanding financial instruments that are now classified as equity. Generally, the Statement is effective for financial instrument arrangements entered into or modified after 31 May 2003, and otherwise effective at the beginning of the first interim period beginning after 15 June 2003.
27 Ultimate holding company
As at 31 December 2002, the Company's ultimate holding company was P&O Princess Cruises plc. This is the largest and smallest group into which the results of POPCIL were consolidated. Its accounts are available to the public from The Registrar of Companies, Companies House, Crown Way, Cardiff CF4 3UZ.
As described in note 28 below, on 17 April 2003 the DLC transaction with Carnival Corporation was completed. On that date, P&O Princess Cruises plc changed its name to Carnival plc.
28 Post balance sheet event
On 7 January 2003, the board of the parent company, P&O Princess Cruises plc approved the proposed DLC transaction with Carnival Corporation and agreed to recommend to the P&O Princess shareholders that they vote in favour of the resolution to implement the DLC structure. In the early morning of 8 January, 2003, Carnival and P&O Princess signed the implementation agreement setting out the terms and conditions for the implementation of the DLC structure.
The DLC transaction with Carnival Corporation completed on 17 April 2003. On this date, P&O Princess Cruises plc changed its name to Carnival plc. Following completion, Carnival Corporation and Carnival plc will function as a single economic business through contractual agreement between the two separate legal entities and provisions within the two companies' constitutional documents.
F-40
PART II
INFORMATION NOT REQUIRED IN PROSPECTUSITEMItem 14.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.Other Expenses of Issuance and DistributionThe following
tablestatement sets forth thevariousestimated amounts of expensespayableto be borne by the registrant in connection with theissuance anddistribution of thedebenturesoffered securities.
Filing fee for Registration Statement $ 46,524 Printing fees and expenses $ 20,000 * Legal fees and expenses $ 60,000 * Accounting fees and expenses $ 20,000 * Miscellaneous $ 20,000 * Total $ 166,524 *
- *
- Estimated and
underlying common stock being registered hereby, other than underwriting discountssubject to future contingencies.Item 15. Indemnification of Directors and
commissions (which will be described in the applicable prospectus supplement). All the amounts shown are estimates, except the SEC registration fee. All of such expenses are being borne by us.
SEC Registration Fee........................................ $119,501 New York Stock Exchange Listing Fee......................... $ Accounting Fees and Expenses................................ $ Legal Fees and Expenses..................................... $ Printing and Engraving Expenses............................. $ -------- Total....................................................... $ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Our secondOfficers.Carnival Corporation's third amended and restated articles of incorporation and by-laws provide, subject to the requirements set forth therein, that with respect to any person who was or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative,
weCarnival Corporation shall indemnify such person by reason of the fact that he is or was one ofour directorCarnival Corporation's oran officer,Carnival plc's directors or officers, and may indemnify such person by reason of the fact that he is or was one ofourCarnival Corporation's or Carnival plc's employees or agents or is or was serving atourCarnival Corporation's or Carnival plc's request as a director, officer, employee or agent in another corporation, partnership, joint venture, trust or other enterprise, in either case against expenses (including attorney's fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed toourCarnival Corporation's or Carnival plc's best interests and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.We haveCarnival Corporation has entered intoindemnityagreements withShari Arison, Maks L. Birnbach, Richard G. Capen, Jr., Arnold W. Donald, James M. Dubin, Modesto Maidique, Stuart Subotnick, Sherwood M. Weiser, Meshulam Zonis and Uzi Zuckereach of its directors providing essentially the same indemnities as are described inthe our secondCarnival Corporation's third amended and restated articles ofincorporation.incorporation in the event that such director or such director's heirs, executors or administrators are made a party to threatened, pending or completed actions, suits or proceedings as described above.Article 288 of Carnival plc's articles of association provides:
"Subject to the provisions of the Companies Acts but without prejudice to any indemnity to which a director may otherwise be entitled, every director or other officer of Carnival plc or of Carnival Corporation shall be indemnified out of the assets of Carnival plc against any liability incurred by him to the fullest extent permitted under the law."
Under the UK Companies Act 1985, a
registration rights agreement among us and certain irrevocable trusts (the "Trusts"), the Trusts have agreedUK company is not permitted to indemnifyus, our directorsa director or officer of the company (or any person employed by the company as an auditor) against any liability inII-1
respect of any negligence, default, breach of duty or breach of trust of which he may be guilty in relation to the company. UK companies, however, may:
- •
- purchase and maintain liability insurance for officers and directors; and
- •
- indemnify officers and directors against any liability incurred by him either in defending any proceedings in which judgment is given in his favor or he is acquitted, or in connection with the court granting him relief from liability in the case of honest and reasonable conduct.
Carnival plc has entered into agreements with each
person who controls us withinof its directors providing essentially themeaningsame indemnities as are described in Carnival plc's articles of association as described above.Article 130 of POPCIL's Articles of Association provides:
"Subject to the provisions of the
ExchangeAct but without prejudice to any indemnity to which a director may otherwise be entitled, every director or other officer of auditor of the company shall be indemnified out of the assets of the company againstcertain liabilities.any liability incurred by him in defending any proceedings, whether civil or criminal, in which judgment is given in his favor or in which he is acquitted or in connection with any application in which relief is granted to him by the court from liability for negligence, default, breach of duty or breach of trust in relation to the affairs of the company."Under the UK Companies Act 1985, a
registration agreement between us and selling holders of our 2% convertible senior debentures due 2021, these selling holders have agreedUK company is not permitted to indemnifyus, our directorsa director or officer of the company (or any person employed by the company as an auditor) against any liability in respect of any negligence, default, breach of duty or breach of trust of which he may be guilty in relation to the company. UK companies, however, may:
- •
- purchase and maintain liability insurance for officers an directors; and
- •
- indemnify officers and
each person who controls us withindirectors against any liability incurred by him either in defending any proceedings in which judgment is given in his favor or he is acquitted, or in connection with themeaningcourt granting him relief from liability in the case ofthe Exchange Act against certain liabilities. Finally, under a registration agreement between ushonest andthe selling securityholders, the selling securityholders have agreed to indemnify us, our directors and officers and each person who controls us within the meaning of the Exchange Act against certain liabilities. II-1ITEMreasonable conduct.Item 16.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.Exhibits
4.1 SecondThird Amended and Restated Articles of Incorporation of the RegistrantCarnival Corporation (incorporated by reference toExhibit No. 3 totheRegistrant's registration statementjoint Current Report on FormS-3, File No. 333-68999,8-K of Carnival Corporation and Carnival plc, filedwith the Securities and Exchange Commission)on April 17, 2003).
4.2Amendment to Second
Amended and RestatedArticlesBy-laws ofIncorporation of the RegistrantCarnival Corporation (incorporated by reference toExhibit 3.1 totheRegistrant's quarterly reportjoint Current Report on Form10-Q for the quarter ended May 31, 1999,8-K of Carnival Corporation and Carnival plc, filedwith the Securities and Exchange Commission)on April 17, 2003).
4.3Certificate of Amendment of
Articles ofIncorporationAssociation ofthe RegistrantCarnival plc (incorporated by reference toExhibit 3.1 totheRegistrant's quarterlyCarnival plc's current report on Form10-Q for the quarter ended May 31, 2000,8-K, filedwith the Securities and Exchange Commission)on April 17, 2003).
4.4Form
Memorandum ofBy-lawsAssociation ofthe RegistrantCarnival plc (incorporated by reference toExhibit 3.2Carnival plc's current report on Form 8-K, filed on April 17, 2003).
4.5
Articles of Association of P&O Princess Cruises International Limited (formerly P&O Cruises Limited).
4.6
Memorandum of Association of P&O Princess Cruises International Limited (formerly P&O Cruises Limited).
4.7
Voting Trust Deed, dated as of April 17, 2003, between Carnival Corporation and The Law Debenture Trust Corporation (Cayman) Limited, as trustee (incorporated by reference to theRegistrant's registration statementjoint Current Report on FormS-1, File No. 33-14844,8-K of Carnival Corporation and Carnival plc, filedwithon April 17, 2003).II-2
4.8
Pairing Agreement, dated as of April 17, 2003, between Carnival Corporation, The Law Debenture Trust Corporation (Cayman) Limited, as trustee, and SunTrust Bank, as transfer agent (incorporated by reference to theSecuritiesjoint Current Report on Form 8-K of Carnival Corporation andExchange Commission)Carnival plc, filed on April 17, 2003).4.5
4.9
SVE Special Voting Deed, dated as of April 17, 2003 between Carnival Corporation, DLS SVC Limited, P&O Princess Cruises, plc, The Law Debenture Trust Corporation (Cayman) Limited, as trustee, and The Law Debenture Trust Corporation, P.L.C. (incorporated by reference to the joint Current Report on Form 8-K of Carnival Corporation and Carnival plc, filed on April 17, 2003).
4.10
Carnival plc (formerly P&O Princess Cruises plc) Deed of Guarantee between Carnival Corporation and Carnival plc, dated as of April 17, 2003.
4.11
P&O Princess Cruises International Limited Deed of Guarantee among P&O Princess Cruises International Limited, Carnival Corporation and Carnival plc, dated as of June 19, 2003.
4.12
Indenture, dated as of April 25, 2001, between Carnival Corporation and U.S. Bank Trust National Association, as trustee, relating to unsecured and unsubordinated debt securities (incorporated by reference to Exhibit No. 4.5 to the Registrant's registration statement on Form S-3, File No. 333-62950, filed with the Securities Exchange Commission).4.6 Second
4.13
Third Supplemental Indenture, dated as ofOctober 24, 2001,April 29, 2003, between Carnival Corporation and U.S. BankTrustNational Association, as trustee, creating a series of securities designatedLiquid Yield Option-TM-NotesSenior Convertible Debentures due2021 (Zero Coupon--Senior). 4.72033.
4.14
Registration Rights Agreement, dated as ofOctober 24, 2001, betweenApril 29, 2003, by and among Carnival Corporation, Carnival plc and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated.
4.15
Form of Senior Convertible Debenture (included in Exhibit 4.13).
4.16
Specimen Common Stock Certificate.
5.1
Opinion of Paul, Weiss, Rifkind, Wharton &Garrison.Garrison LLP.
5.2
Opinion of Tapia Linares y Alfaro.
5.3
Opinion of Dickinson Cruickshank & Co.
5.4
Opinion of Maples and Calder.
5.5
Opinion of Freshfields Bruckhaus Deringer.
8.1
Opinion of Paul, Weiss, Rifkind, Wharton & Garrison LLP.
8.2
Opinion of Tapia Linares y Alfaro (included in Exhibit 5.2).
12.1Ratios
Ratio of Earnings to Fixed Charges of Carnival Corporation (incorporated by reference to Exhibit 12 tothe Registrant's quarterly reportCarnival Corporation's Quarterly Report on Form 10-Qfor the quarter ended August 31, 2001,filedwith the Securities and Exchange Commission)on April 14, 2003).
12.2Ratios
Ratio of Earnings to Fixed Charges of Carnival plc (incorporated by reference to Exhibit1212.2 to theRegistrant's annual reportJoint Registration Statement of Carnival Corporation and Carnival plc on Form10-K forS-4, File No. 333-105671).
12.3
Pro Forma Ratio of Earnings to Fixed Charges of Carnival Corporation & plc (incorporated by reference to Exhibit 12.3 to thefiscal year ended November 30, 2000, filed with the SecuritiesJoint Registration Statement of Carnival Corporation andExchange Commission)Carnival plc on Form S-4, File No. 333-105671).
12.4
Ratio of Earnings to Fixed Charges of POPCIL.
23.1
Consent of PricewaterhouseCoopersLLP.LLP, Independent Certified Public Accountants.II-3
23.2
Consent of KPMG Audit Plc, Chartered Accountants, Registered Auditor of Carnival plc.
23.3
Consent of KPMG Audit Plc, Chartered Accountants, Registered Auditor of POPCIL.
23.4
Consent of Paul, Weiss, Rifkind, Wharton & Garrison LLP (included in Exhibit5.1)5.1 and Exhibit 8.1).23.3
23.5
Consent of Tapia Linares y Alfaro (included in Exhibit 5.2).24 Power
23.6
Consent ofAttorney.Dickinson Cruickshank & Co. (included in Exhibit 5.3).
23.7
Consent of Maples and Calder (included in Exhibit 5.4).
23.8
Consent of Freshfields Bruckhaus Deringer (included in Exhibit 5.5).
24.1
Powers of Attorney of certain officers and directors of Carnival Corporation (included on the signature pages hereof).
24.2
Powers of Attorney of certain officers and directors of Carnival plc (included on the signature pages hereof).
25.1
Statement of Eligibility under the Trust Indenture Act of 1939 on Form T-1 ofU.SU.S. Bank Trust National Association to act as Trustee under the Indenture, dated as of April 25, 2001, as supplemented by theSecondThird Supplemental Indenture, dated as ofOctober 24, 2001April 29, 2003 (incorporated by reference to ExhibitNo.25.1 tothe Registrant's registration statementCarnival Corporation's Registration Statement on Form S-3, File No.333-62950, filed with the Securities Exchange Commission)333-62950).II-2ITEMItem 17.
UNDERTAKINGSUndertakingsThe
RegistrantRegistrants herebyundertakes:undertake:(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information
set forthin the Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form ofaprospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effectiveregistration statement;Registration Statement; and(iii) to include any material information with respect to the plan of distribution not previously disclosed in
thisthe Registration Statement or any material change to such information inthisthe Registration Statement;provided, however, that paragraphs (1)(i) and (1)(ii) of this Section do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in
thisthe Registration Statement;(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities
II-4
offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof;
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering;
(4) If the registrant is a foreign private issuer, to file a post-effective amendment to the registration statement to include any financial statements required by Item 8.A of Form 20-F (17 CFR 249.220f) at the start of any delayed offering or throughout a continuous offering. Financial statements and information otherwise required by Section 10(a)(3) of the Act need not be furnished, provided that the registrant includes in the prospectus, by means of a post-effective amendment, financial statements required pursuant to this paragraph (a)(4) and other information necessary to ensure that all other information in the prospectus is at least as current as the date of those financial statements. Notwithstanding the foregoing, with respect to registration statements on Form F-3 (§ 239.33 of this chapter), a post-effective amendment need not be filed to include financial statements and information required by Section 10(a)(3) of the Act or § 210.3-19 of this chapter if such financial statements and information are contained in periodic reports filed with or furnished to the Commission by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the Form F-3.
(5) That, for purposes of determining any liability under the Securities Act of 1933, each filing of
the Registrant'seach Registrants' annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference inthisthe Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; and(5)(6) To file an application for the purpose of determining the eligibility of the trustee to act under subsection (a) of Section 310 of the Trust Indenture Act of 1939 in accordance with the rules and regulations prescribed by the Commission under Section 305(b)(2) of the Trust Indenture Act of 1939.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers, and controlling persons of the
RegistrantRegistrants pursuant to the foregoing provisions, or otherwise, theRegistrant hasRegistrants have been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by theRegistrantRegistrants of expenses incurred or paid by a director, officer, or controlling person of theRegistrantRegistrants in the successful defense of any action, suit or proceeding) is asserted by such director, officer, or controlling person in connection with the securities being registered, theRegistrantRegistrants will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.II-3II-5
SIGNATURES OF CARNIVAL CORPORATIONPursuant to the requirements of the Securities Act of 1933,
as amended,the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused thisRegistration Statementregistration statement to befiledsigned on its behalf by the undersigned, thereunto duly authorized, in the City of Miami, State of Florida, on the29th18th day ofNovember, 2001.June, 2003.
CARNIVAL CORPORATION
By:/s/ Micky Arison ---------------------------------------------
/s/ MICKY ARISON
Name: Micky Arison
Title:Chairman of the Board of Directors
and Chief Executive Officerand DirectorKNOW TO ALL MEN BY THESE PRESENTS, that each person whose signature appears belowEach of the undersigned directors and officers of Carnival Corporation hereby severally constitutes and appoints
Micky Arison,Howard S. Frankandor Gerald R. Cahill,such person's trueandlawful attorney-in-facteach of them, as attorneys-in-fact for the undersigned, in any andagents,all capacities, with full power of substitution,and revocation for such person and in such person's name, place and stead, in any and all capacitiesto sign anyand allamendments to this registration statement (including post-effective amendments)to this Registration Statement or any registration statement filed pursuant to Rule 462 under the Securities Act of 1933,, and to file the same withallexhibits thereto andtheother documents in connection therewith with the Securities and Exchange Commission, granting unto saidattorney-in-fact and agents,attorneys-in-fact, and each of them, full power and authority to do and perform each and every act andthingsthing requisite and necessary to be done in and about the premises, as fully to all intents and purposes assuch personhe or she might or could do in person, hereby ratifying and confirming all that each said attorney-in-fact,and agents,or any of them,or their and his substitute or substitutes,may lawfully do or cause to be done by virtue hereof.Pursuant to the requirements of the Securities Act of 1933, this
Registration Statementregistration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ----/s/Signature Title Date /s/ MICKY ARISON
Micky ArisonChairman of the Board of Directors and Chief November 29, 2001 ------------------------------------Executive Officerand Director Micky Arison(Principal Executive Officer)/s/June 18, 2003
/s/ HOWARD S. FRANK
Howard S. Frank
Vice-Chairman of the Board of Directors and Chief Operating Officer
June 18, 2003
/s/ GERALD R. CAHILL
Gerald R. Cahill
Senior Vice President—Finance and Chief Financial and Accounting Officer (Principal Financial Officer and Principal Accounting Officer)
June 18, 2003
/s/ RICHARD G. CAPEN, JR.
Richard G. Capen, Jr.
Director
June 14, 2003II-6
/s/ ROBERT H. DICKINSON
Robert H. Dickinson
Director
June 18, 2003
/s/ ARNOLD W. DONALD
Arnold W. Donald
Director
June 17, 2003
/s/ PIER LUIGI FOSCHI ��
Pier Luigi Foschi
Director
June 16, 2003
Baroness Hogg
Director
A. Kirk Lanterman
Director
/s/ MODESTO A. MAIDIQUE
Modesto A. Maidique
Director
June 16, 2003
/s/ SIR JOHN PARKER
Sir John Parker
Director
June 16, 2003
/s/ PETER G. RATCLIFFE
Peter G. Ratcliffe
Director
June 17, 2003
Stuart Subotnick
Director
Uzi Zucker
DirectorII-7
Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Miami, State of Florida, on the 18th day of June, 2003.
CARNIVAL PLC
By:
/s/ MICKY ARISON
Name: Micky Arison
Title:Chairman of the Board of Directors
and ChiefNovember 29, 2001 ------------------------------------ OperatingExecutive OfficerEach of the undersigned directors and officers of Carnival plc hereby severally constitutes and appoints Howard S. Frank or Gerald R. Cahill, and each of them, as attorneys-in-fact for the undersigned, in any and all capacities, with full power of substitution, to sign any amendments to this registration statement (including post-effective amendments), and to file the same with exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, granting unto said attorneys-in-fact, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that each said attorney-in-fact, or any of them, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
Signature Title Date /s/ MICKY ARISON
Micky ArisonChairman of the Board of Directors and DirectorChief Executive Officer (Principal Executive Officer)June 18, 2003
/s/ HOWARD S. FRANK
Howard S. Frank/s/
Vice-Chairman of the Board of Directors and Chief Operating Officer
June 18, 2003
/s/ GERALD R. CAHILL
Gerald R. Cahill
Senior VicePresident--FinancePresident—Finance andNovember 29, 2001 ------------------------------------Chief Financial and AccountingGerald R. CahillOfficer/s/ SHARI ARISON Director November 29, 2001 ------------------------------------ Shari Arison /s/ MAKS L. BIRNBACH Director November 29, 2001 ------------------------------------ Maks L. Birnbach Director November 29, 2001 ------------------------------------(Principal Financial Officer and Principal Accounting Officer)
June 18, 2003
/s/ RICHARD G. CAPEN, JR.
Richard G. Capen, Jr.
Director
June 14, 2003II-4II-8
SIGNATURE TITLE DATE --------- ----- ----/s/
/s/ ROBERT H. DICKINSONDirector November 29, 2001 ------------------------------------
Robert H. Dickinson/s/
Director
June 18, 2003
/s/ ARNOLD W. DONALDDirector November 29, 2001 ------------------------------------
Arnold W. Donald/s/ JAMES M. DUBIN
DirectorNovember 29, 2001 ------------------------------------ James M. Dubin /s/ A. KIRK LANTERMAN
June 17, 2003
/s/ PIER LUIGI FOSCHI
Pier Luigi Foschi
DirectorNovember 29, 2001 ------------------------------------
June 16, 2003
Baroness Hogg
Director
A. Kirk Lanterman
DirectorNovember 29, 2001 ------------------------------------
/s/ MODESTO A. MAIDIQUE
Modesto A. Maidique
Director
June 16, 2003
/s/ SIR JOHN PARKER
Sir John Parker
Director
June 16, 2003
/s/ PETER G. RATCLIFFE
Peter G. Ratcliffe
Director
June 17, 2003
Stuart Subotnick
Director
Uzi Zucker
DirectorII-9
SIGNATURES OF P&O PRINCESS CRUISES INTERNATIONAL LIMITEDPursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Southampton, England, on the 17th day of June, 2003.
P&O PRINCESS CRUISES
INTERNATIONAL LIMITED
By:
/s/ PETER G. RATCLIFFE
Name: Peter G. Ratcliffe
Title:Director and Chief Executive OfficerEach of the undersigned directors and officers of Carnival Corporation hereby severally constitutes and appoints Howard S. Frank, Gerald R. Cahill or Arnaldo Perez, and each of them, as attorneys-in-fact for the undersigned, in any and all capacities, with full power of substitution, to sign any amendments to this registration statement (including post-effective amendments), and to file the same with exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, granting unto said attorneys-in-fact, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that each said attorney-in-fact, or any of them, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
Signature Title Date /s/ PETER G. RATCLIFFE
Peter G. RatcliffeDirector and Chief Executive Officer (Principal Executive Officer) June 17, 2003
/s/ GERALD R. CAHILL
Gerald R. Cahill
Director, Chief Financial and Accounting Officer (Principal Financial Officer and Principal Accounting Officer)
June 18, 2003
AUTHORIZED
REPRESENTATIVE IN THE
UNITED STATES
By: /s/STUART SUBOTNICKGERALD R. CAHILL
Name: Gerald R. Cahill
Title: Director,November 29, 2001 ------------------------------------ Stuart Subotnick /s/ SHERWOOD M. WEISER Director November 29, 2001 ------------------------------------ Sherwood M. Weiser Director November 29, 2001 ------------------------------------ Meshulam Zonis Director November 29, 2001 ------------------------------------ Uzi ZuckerChief Financial and Accounting Officer (Principal Financial Officer and Principal Accounting Officer)
June 18, 2003II-5II-10
4.1Second
Third Amended and Restated Articles of Incorporation ofthe RegistrantCarnival Corporation (incorporated by reference toExhibit No. 3 totheRegistrant's registration statementjoint Current Report on FormS-3, File No. 333-68999,8-K of Carnival Corporation and Carnival plc, filedwith the Securities and Exchange Commission)on April 17, 2003).
4.2Amendment to Second
Amended and RestatedArticlesBy-laws ofIncorporation of the RegistrantCarnival Corporation (incorporated by reference toExhibit 3.1 totheRegistrant's quarterly reportjoint Current Report on Form10-Q for the quarter ended May 31, 1999,8-K of Carnival Corporation and Carnival plc, filedwith the Securities and Exchange Commission)on April 17, 2003).
4.3Certificate of Amendment of
Articles ofIncorporationAssociation ofthe RegistrantCarnival plc (incorporated by reference toExhibit 3.1 totheRegistrant's quarterlyCarnival plc's current report on Form10-Q for the quarter ended May 31, 2000,8-K, filedwith the Securities and Exchange Commission)on April 17, 2003).
4.4Form
Memorandum ofBy-lawsAssociation ofthe RegistrantCarnival plc (incorporated by reference toExhibit 3.2Carnival plc's current report on Form 8-K, filed on April 17, 2003).
4.5
Articles of Association of P&O Princess Cruises International Limited (formerly P&O Cruises Limited).
4.6
Memorandum of Association of P&O Princess Cruises International Limited (formerly P&O Cruises Limited).
4.7
Voting Trust Deed, dated as of April 17, 2003, between Carnival Corporation and The Law Debenture Trust Corporation (Cayman) Limited, as trustee (incorporated by reference to theRegistrant's registration statementjoint Current Report on FormS-1, File No. 33-14844,8-K of Carnival Corporation and Carnival plc, filedwithon April 17, 2003).
4.8
Pairing Agreement, dated as of April 17, 2003, between Carnival Corporation, The Law Debenture Trust Corporation (Cayman) Limited, as trustee, and SunTrust Bank, as transfer agent (incorporated by reference to theSecuritiesjoint Current Report on Form 8-K of Carnival Corporation andExchange Commission)Carnival plc, filed on April 17, 2003).4.5
4.9
SVE Special Voting Deed, dated as of April 17, 2003 between Carnival Corporation, DLS SVC Limited, P&O Princess Cruises, plc, The Law Debenture Trust Corporation (Cayman) Limited, as trustee, and The Law Debenture Trust Corporation, P.L.C. (incorporated by reference to the joint Current Report on Form 8-K of Carnival Corporation and Carnival plc, filed on April 17, 2003).
4.10
Carnival plc (formerly P&O Princess Cruises plc) Deed of Guarantee between Carnival Corporation and Carnival plc, dated as of April 17, 2003.
4.11
P&O Princess Cruises International Limited Deed of Guarantee among P&O Princess Cruises International Limited, Carnival Corporation and Carnival plc, dated as of June 19, 2003.
4.12
Indenture, dated as of April 25, 2001, between Carnival Corporation and U.S. Bank Trust National Association, as trustee, relating to unsecured and unsubordinated debt securities (incorporated by reference to Exhibit No. 4.5 to the Registrant's registration statement on Form S-3, File No. 333-62950, filed with the Securities Exchange Commission).4.6 Second
4.13
Third Supplemental Indenture, dated as ofOctober 24, 2001,April 29, 2003, between Carnival Corporation and U.S. BankTrustNational Association, as trustee, creating a series of securities designatedLiquid Yield Option-TM-NotesSenior Convertible Debentures due2021 (Zero Coupon--Senior). 4.72033.
4.14
Registration Rights Agreement, dated as ofOctober 24, 2001, betweenApril 29, 2003, by and among Carnival Corporation, Carnival plc and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated.
4.15
Form of Senior Convertible Debenture (included in Exhibit 4.13).
4.16
Specimen Common Stock Certificate.
5.1
Opinion of Paul, Weiss, Rifkind, Wharton &Garrison.Garrison LLP.
5.2
Opinion of Tapia Linares y Alfaro.
5.3
Opinion of Dickinson Cruickshank & Co.
5.4
Opinion of Maples and Calder.
5.5
Opinion of Freshfields Bruckhaus Deringer.
8.1
Opinion of Paul, Weiss, Rifkind, Wharton & Garrison LLP.
8.2
Opinion of Tapia Linares y Alfaro (included in Exhibit 5.2).
12.1Ratios
Ratio of Earnings to Fixed Charges of Carnival Corporation (incorporated by reference to Exhibit 12 tothe Registrant's quarterly reportCarnival Corporation's Quarterly Report on Form 10-Qfor the quarter ended August 31, 2001,filedwith the Securities and Exchange Commission)on April 14, 2003).
12.2Ratios
Ratio of Earnings to Fixed Charges of Carnival plc (incorporated by reference to Exhibit1212.2 to theRegistrant's annual reportJoint Registration Statement of Carnival Corporation and Carnival plc on Form10-K forS-4, File No. 333-105671).
12.3
Pro Forma Ratio of Earnings to Fixed Charges of Carnival Corporation & plc (incorporated by reference to Exhibit 12.3 to thefiscal year ended November 30, 2000, filed with the SecuritiesJoint Registration Statement of Carnival Corporation andExchange Commission)Carnival plc on Form S-4, File No. 333-105671).
12.4
Ratio of Earnings to Fixed Charges of P&O Princess Cruises International Limited.
23.1
Consent of PricewaterhouseCoopersLLP.LLP, Independent Certified Public Accountants.
23.2
Consent of KPMG Audit Plc, Chartered Accountants, Registered Auditor of Carnival plc.
23.3
Consent of KPMG Audit Plc, Chartered Accountants, Registered Auditor of POPCIL.
23.4
Consent of Paul, Weiss, Rifkind, Wharton & Garrison LLP (included in Exhibit5.1)5.1 and Exhibit 8.1).23.3
23.5
Consent of Tapia Linares y Alfaro (included in Exhibit 5.2).24 Power
23.6
Consent ofAttorney.Dickinson Cruickshank & Co. (included in Exhibit 5.3).
23.7
Consent of Maples and Calder (included in Exhibit 5.4).
23.8
Consent of Freshfields Bruckhaus Deringer (included in Exhibit 5.5).
24.1
Powers of Attorney of certain officers and directors of Carnival Corporation (included on the signature pages hereof).
24.2
Powers of Attorney of certain officers and directors of Carnival plc (included on the signature pages hereof).
25.1
Statement of Eligibility under the Trust Indenture Act of 1939 on Form T-1 ofU.SU.S. Bank Trust National Association to act as Trustee under the Indenture, dated as of April 25, 2001, as supplemented by theSecondThird Supplemental Indenture, dated as ofOctober 24, 2001April 29, 2003 (incorporated by reference to ExhibitNo.25.1 tothe Registrant's registration statementCarnival Corporation's Registration Statement on Form S-3, File No.333-62950, filed with the Securities Exchange Commission)333-62950).