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Sorry that I have not had chance to post on this topic before now, but I did go to the annual meeting last week. Royal Caribbean's meetings draw a relatively small crowd, but it's usually a very good opportunity to chat informally with the company's senior executives.

First, there were no real surprises in the formal part of the meeting. All of the votes went with the directors' recommendations.

>> The father and son shareholders who submitted the shareholder proposal to require senior officers and directors to hold a portion of their stock compensation for some period beyond their termination of employment. I think that it's a good idea in principle, but that their proposal was poorly crafted and went too far.

>> During the formal presentation, the executives noted that about 50% of the company's business is now sales outside of North America. This is partly due to acquisition or start-up of European-based cruise lines (Pulmantur SA in Spain, CDF Croisiers de France in France, and the TUI Cruises joint venture in Germany) and partly due to successful marketing of the Azamara Club, Celebrity Cruises, and Royal Caribbean International products outside of North America.

>> The subject of shareholder returns came up, in the form of a question about either resumption of dividends or possible share buybacks (the latter actually being more favorable to investors with the expration of the 15% rate on dividends at the end of this year, as they instead provide returns in the form of long-term capital gains). Mr. Fain replied that the deterioration of revenues with the 2008-2009 economic crash caused certain ratios to deteriorate to a point where the bond rating agencies had lowered the company's bond rating below investment grade, and that first priority needed to be to restore that rating to investment grade by using cash to retire debt. He went on to explain that the lowering of the credit rating has not materially affected terms on which the company has been able to borrow money for purchase of new ships to date, but that he was deeply concerned about an adverse potential impact in the future. He also indicated that this year's return of revenues to normal levels is having a favorable impact, but that the company is not "out of the woods" yet and that it probably will be another year or two before the company can look at returns to shareholders.

>> There were several questions pertaining to cruise itineraries and deployment of cruise ships. In response to a specific question about the redeployment of cruise ships away from the Mexican Riviera, Mr. Fain noted that their obligation as executives is to deploy ships where they will generate the most revenue (highest per deims) for shareholders and that the Mexican Riviera has become the "bargain basement" of cruise destinations. Thus, he said, it simply no longer makes economic sense to deploy ships there. There was also a question specifically about itineraries for cruises to Alaska, noting that Glacier Bay (noted for abundant wildlife as well as some impressive glaciers) and College Fjord (noted for sixteen spectacular glaciers named for the sixteen colleges that sponsored the expedition that discovered the fjord) are not on any of the company's itineraries. The general indication was that the lines are satisfied with their present itineraries, and did not see a need to compete for permits to visit Glacier Bay when they become available, but that they do review them and consider changes periodically. In a post-meeting conversation, I remarked to Mr. Hanrahan (President of Celebrity Cruises) that about 70% of the replies posts asking "Which cruise should I take to Alaska?" on discussion boards various web sites devoted to cruising invariably advised the posters to make sure that they found an itinerary that includes Glacier Bay. He seemed surprised, saying that he had flown through Glacier Bay and did not see anything to recommend going there over the line's present itineraries. I responded with an "Aha, yes, I'm sure that you would get that impression from an airplane, because from an airplane you would not see much of the wildlife, but it's really the wildlife of that area that is the major attraction!" and went on to explain that the rangers from the National Park Service really presented outstanding programs and drew attention to the wildlife as it came into view. I suspect that he'll look into this a bit more closely now.

Overall, the tone of the meeting and the formal presentation were pretty upbeat, with ships generally sailing pretty full, revenues back on track, and costs cut substantially in several areas.

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