Disney Cruise Line Fiscal Year 2022 Annual Report & Financials – Directors’ Strategic Report

This week, Disney Cruise Line’s annual report for fiscal year 2022 was made public. Within the 51-page filing, the document contains a strategic report compiled by the directors which discusses the significant impact of the coronavirus pandemic on the cruise line during the industry shutdown. Additionally, there is some insight on new projects including the purchase of the partially completed, and yet to be renamed GLOBAL DREAM. The company shared the shipbuilding delays at Meyer Werft have been attributed in the report to both the COVID-19 pandemic and the war in Ukraine. The cruise line anticipates its financial performance will continue to improve and return to profitability in financial year 2023 as the industry recovers from a prolonged impact of COVID-19 and the business benefits from expanded capacity with the introduction of the Disney Wish which occurred in the second half of the fiscal year.

Before we get into the details, it is worth mentioning The Walt Disney Company released their FY22 earnings report back in November 2022. Disney Cruise Line is part of the Disney Parks, Experiences and Products division, More often than not, there is very little mention of the cruise line during the quarterly earnings webcast and report. Due to the company’s size, Disney Cruise Line’s financials are bundled in the Disney Parks, Experiences and Products line item leaving little insight into the cruise line’s business. Since, Disney Cruise Line is actually Magical Cruise Company, Limited registered in London, it is required to submit an annual report to the United Kingdom.

Remember, the financial information in the annual report is for FY22 (year ending October 1, 2022), we will get to this eventually. The interesting information, prepared on behalf of the Board dated June 29, 2023 from the strategic report is transcribed below.

Magical Cruise Company, Limited
Strategic report
For the period from 3 October 2021 to 1 October 2022

The Directors present their strategic report of Magical Cruise Company, Limited (the ‘Company’) (trade name “Disney Cruise Line”) for the period from 3 October 2021 to 1 October 2022 (prior financial period from 4 October 2020 to 2 October 2021).

The financial statements on pages 24 to 27 were approved by the Board ofDirectors on 29 June 2023 and signed on its behalf by the Director stated below.

Principal activities and business review
The principal activity of the Company is the operation of Disney themed luxury cruise vessels. It is considered that the Company’s activities will remain unchanged for the foreseeable future.

The Company’s loss for the financial year is $325,799,000 (2021: $629,475,000).

Revenue and operating losses have improved year over year due to resumed sailings, following a reduction in COVID-19 related restrictions and the addition of a new ship to the fleet, the Disney Wish, which was delivered in June 2022.

The Company experienced cancellations and booking postponements in the prior year due to COVID-19 which led to refunds, cruise credits of 125% of the reservation amount, as well as future booking payment deferrals. These future cruise credits expired 30 September 2022 (except for Disney Wish delays and Hurricane Ian related
cancellations, which expire 31 December 2023 and 30 September 2024, respectively). The Company has also continued a short-term cruise date flexibility booking policy for reservations booked before 9 December 2022, allowing guests to change their sail date up to 15 days before departure where thereare qualifying COVID-19 related health concerns.

On March 17, 2016, The Walt Disney Company (TWDC), through-subsidiary, DCL Maritime LLC, entered a contract with the German Shipyard Meyer Werft GmbH &CO. KG (Meyer Werft) to build and deliver the Disney Wish (~144,000-ton ship). At the time of entering into the agreement, DCL Maritime LLC contemporaneously entered into an internal contract to sell the ship to the Company to coincide with the timing of completion of the ship by Meyer Werft. As a result of COVID-19 the Disney Wish was delayed and ultimately delivered 9 June 2022.

As part of Disney Wish purchase, the Company issued 874,403,815 ordinary shares to Wedco Global Ventures LLP in exchange for cash in the amount of $1,100,000,000. Concurrently, the Company received an additional $500,000,000 promissory note from Disney Enterprises, Inc at an annual interest rate equal to the lesser of: (i) the maximum rate permitted by applicable law; and (ji) Libor Rate plus 50 basis points. Interest is payable semi-annually; and the maturity date is 15 June 2023 (1-year from the date of the agreement).

The Company also has committed to purchasing its sixth and seventh ships originally contracted to be delivered in calendar year 2022 and 2023. The impact of COVID-19 and the war in Ukraine has resulted in a delay to the delivery of these cruise ships. The Company now expects to the sixth and seventh ship to be delivered in 2024 and 2025, respectively. During September 2022, Disney announced the name of the 6th ship in their fleet as ‘Disney Treasure’.

In November 2022, the Company purchased a partially completed ship, to expand its fleet and travel to new destinations from 2025 – the ship will be approximately 200,000 tons. Disney Cruise Line will incur the cost to complete construction. This ship is expected to be delivered in 2025.

The Directors are managing day to day working capital requirements closely with its related parent entity in order to meet the Company’s liabilities as they fall due. As the impacts of COVID-19 on the cruise industry have continued to subside in fiscal 2023, it is anticipated that the unfavorable impacts on future financial performance will be less significant.

Future developments
The Company anticipates its financial performance will continue to improve and return to profitability in financial year 2023 as the industry recovers from a prolonged impact of COVID-19 and the business benefits from expanded capacity with the introduction of the Disney Wish, the Company’s fifth cruise ship. In fiscal 2023, the Company has seen a continued increase in occupancy and booking levels, with occupancy exceeding the comparable actual financial year 2022 quarterly levels on a year over year basis.

We continue to remain optimistic about the future as the Company continues to advance the development of its next two new cruise ships and the recently acquired partially completed ship. All are in active construction and expected to be delivered in 2024 and 2025 time frames. In addition, DCL Island Development Limited (the Company’s 100% owned subsidiary company) is advancing the development of its second private island, Lighthouse Point in Eleuthera, The Bahamas, which is planned to open in Summer 2024. The Directors have reviewed a cash flow forecast extending to a period no less than 12 months from the date of the financial statements, including consideration of severe yet plausible financial downsides. Based onthis, whilst the Directors expect to be able to meet the day to day cashflow needs of the Company, they have received assurances of continued financial support from a fellow Group undertaking, in the form of a letter of support, to allow the Company to meet its liabilities as they fall due, as set out in Note 2, Going Concern.

Principal risks and uncertainties
From the perspective of the Company, its principal risks and uncertainties and future outlook are integrated with those of The Walt Disney Company (‘Group’) and are not managed separately. Accordingly, the risks and uncertainties of the Group, which include those of the Company, are discussed in the Group’s annual report which does not form part of this report. However, the Directors view the following as being the principal risks facing the Company:

1. Our sales may be adversely affected by changes in economic factors, political uncertainty and changes in consumer spending patterns
   Many economic and other factors outside our control, including consumer confidence, consumer spending levels, political uncertainty, employment levels, consumer debt levels, inflation and deflation, as well as the availability of consumer credit, affect consumer spending habits. A significant deterioration in the global financial markets and economic environment, recessions or an uncertain economic outlook adversely affects consumer spending habits and results ni lower levels of economic activity. In addition, an increase ni price levels generally, or in price levels in a particular sector such as the energy sector, could result in a shift in consumerdemand away from the entertainment and consumer products we offer, which could also adversely affect our revenues and, at the same time, increase our costs. Any of these events and factors could cause consumers to curtail spending and could have a negative impact on our financial performance and position in future financial years. The impact of pandemics on consumer confidence and ultimately occupancy levels could also affect our financial performance. However, regarding the recent Covid-19 related pandemic, sailings have fully resumed and we are seeing occupancy recover in 2022 and 2023 toward pre-pandemic levels.
2. Our industry is highly competitive and competitive conditions may adversely affect our revenues and overall profitability
   The cruise industry is highly competitive and our results of operations are sensitive to, and may be adversely affected by, competitive pricing and other factors.
3. A variety of uncontrollable events may reduce demand for our products and services, impair our ability to provide our products and services or increase the cost ofproviding our products and services
   Demand for and consumption of our products and services, is highly dependent on the general environment for travel and tourism. The environment for travel and tourism, as well as demand for and consumption of other entertainment products, can be significantly adversely affected in the U.S., globally or in specific regions as a result of a variety of factors beyond ourcontrol, including: adverse weather conditions arising from short-term weather patterns or long-term change, catastrophic events or natural disasters (such as excessive heat or rain, hurricanes, typhoons, floods, tsunamis and earthquakes); health concerns (including as it has been by COVID-19); international, political ormilitary developments; and terrorist attacks.These events and others, such as fluctuations in travel and energy costs and computer virus attacks, intrusions or other widespread computing or telecommunications failures, may also damage our ability to provide our products and services or to obtain insurance coverage with respect to some of these events. An incident that affected our property directly would have adirect impact on ourability to provide goods and services and could have an extended effect ofdiscouraging consumers from attending our facilities. Moreover, the costs of protecting against such incidents, including the costs of protecting against the spread of COVID- 19, reduces the profitability of our operations.
4. Changes in regulations applicable to o u rbusinesses may impair the profitability of our businesses. These regulations may include, but are not limited to:
   • Federal,State and foreign privacy and data protection laws and regulations.
   • Regulation of the safety and supply chain of consumer products and Cruise Line operations.
   • Domestic and international wage laws, tax laws or currency controls.
   • Environmental protection regulations.
5. Fuel prices
   Our objectives in managing exposure to commodity fluctuations are to use commodity derivatives to reduce volatility of earnings and cash flows arising from commodity price changes. The amounts hedged using commodity swap contracts are based on forecasted levels of consumption of certain commodities, such as fuel oil and gasoline. With respect to the risks the Directors regularly review such matters to mitigate their respective impact on the Company.
6. Protection of electronically stored data and other cybersecurity is costly, and if our data or systems are materially compromised in spite of this protection, we may incur additional costs, lost opportunities, damage to our reputation, disruption of service or theft of our assets
   We maintain information necessary to conduct our business, including confidential and proprietary information as well as personal information regarding our customers and employees, ni digital form. We also use computer systems to deliver our products and services and operate our business. Data maintained in digital form is subject to the risk of unauthorized access, modification, exfiltration, destruction or denial of access and our computer systems are subiect to cyberattacks that may result in disruptions in service. If our information or cyber security systems or data are compromised in a material way, our ability to conduct our business may be impaired, we may lose profitable opportunities or the value of those opportunities may be diminished. If personal information of our customers or employees is misappropriated, our reputation with our customers and employees may be damaged resulting in loss of business or morale, and we may incur costs to remediate possible harm to our customers and employees or damages arising from litigation and/or to pay fines or take other action with respect to judicial or regulatory actions arising out of the incident.
7. Damage to our reputation or brands may negatively impact ourCompany
   Our reputation and globally recognizable brands are integral to the success ofour business. Because our brands engage consumers across our businesses, damage to our reputation or brands in one business may have an impact on our other brands.

Key performance indicators (“KPIs”)
The Company’s KPI’s are as follows:

As the cruise industry continues to recover from the COVID-19 pandemic, we have seen an increase in occupancy levels in FY22 to 55% as of June 2022 that continued to improve for the full fiscal year to 63%. We have seen a further increase in occupancy levels in FY23 to 96% as of March 2023.

Section 172(1)statement
As asubsidiary within the group of companies of which TheWalt Disney Company is the ultimate parent company (the “Group”), the Company is subject to organisational and management systemswhich enable the Board of Directors (“the Board”) to oversee governanceofthe activities ofthe Company. As is normal for large companies, the Board delegates authority for day-to-day management of the Company to the managers responsible for management of the Company. The Board ensures that when applying group policies and delegating responsibility for operational matters to the managers, it does so with due regard to its fiduciary duties and responsibilities.

The Directors of the Company are aware of their duty under section 172 of the Companies Act 2006 to act in a way that they consider, in good faith, would be most likely to promote the success of the Company for the benefit of its members as a whole. In doing so they have considered (amongst other matters) factors (a) to (f) listed below:

(a) the likely consequences ofany decision in the long term;
(b) the interests of the Company’s employees (also known as”Cast Members”);
(c) the need to foster the Company’s business relationships with suppliers, customers known as”Guests”) and others;
(d) the impact ofthe Company’s operations on the community and the environment;
(e) the desirability of the Company maintaining a reputation for high standards of business conduct; and
(f) the need to act fairly between members of the Company.

In performing their duties under section 172, the Directors ofthe Company have had regard to the matters set out in section 172(1) as follows:

a). The likely consequences of any decision in the long term
We are aware that our decisions and strategies can have long-term effects on our business and its stakeholders. Therefore we aim to make well informed, fair and balanced decisions. Our key stakeholders. include Crew Members, Cast Members, Guests, home ports and ports of call, regulators and suppliers who are at the forefront of our minds when making decisions. We set out below some of the decisions the Board has taken during the course ofthe year with a view to creating long term success for the Company and its stakeholders as a whole.

After voluntarily suspending all voyages in 2020 in response to the global pandemic, Disney Cruise Line worked with governmental authorities and industry partners to resume passenger operations in a phased manner starting in July 2021. Disney Cruise Line’s fleet continued to operate with health and safety protocols throughout fiscal 2022 including requiring Guests and Crew Members to be fully vaccinated and tested for COVID-19 before boarding. Health and safety is a top priority for Disney Cruise Line and we continue to operate in a responsible manner and effectively manage any cases of COVID-19 aboard our ships. On the publishing date of this document, numerous healthand safety requirements including Guest vaccination and testingare no longer required by health authorities or Disney Cruise Line. Vaccination continues to be required for all Crew Members.

In December 2021, the Broward County Commission approved an amendment to the October 2021 agreement with Disney Cruise Line naming Port Everglades in Fort Lauderdale, Florida, USA, as our second year-round homeport. The 15-year partnership commits to a minimum of 10.6 million passenger movements, and three 5-year extension options that could add another 11.25 million passenger movements. The agreement provides for one ship to be homeported in Port Everglades year-round beginning fall 2023, joined by a second, seasonal ship in March 2025.

In the summer of 2022, Disney Cruise Line took delivery of its fifth ship, the Disney Wish – the first of three new Wish-class vessels announced previously.The Wish made her transatlantic voyage from the Meyer Weft shipyard in Germany to her homeport in Port Canaveral, Florida, USA, followed by its maiden voyage on July 14, 2022. The Wish offers three- and four-night cruises to Nassau, Bahamas, and Disney’s Castaway Cay, a Disney destination located in the Abaco chain of The Bahamas. With the theme of enchantment, it showcases the immersive family entertainment, distinctly Disney storytelling, and unparalleled service that only Disney can deliver.

Disney Cruise Line also announced first details on the fleet’s sixth ship, the Disney Treasure. Inspired by Walt Disney’s love of exploration, it will be designed with the theme of adventure and is scheduled for delivery in 2024; with the third Wish-class ship expected to be delivered in 2025. All three Wish-class ships in the current fleet are powered by liquified natural gas (LNG), one of the cleanest-burning fuels available. At approximately 144,000 gross tons and 1,250 Guest staterooms, they are slightly larger than other ships in the fleet, namely the Disney Dream and Disney Fantasy.

Plans continued in fiscal 2022 for Disney Cruise Line’s second island destination, Lighthouse Point, in Eleuthera, The Bahamas. Disney is working closely with Bahamian artists and advisors to create a destination that represents the natural beauty and rich culture of the Bahamas, brought to life through Disney storytelling and the unparalleled service of local Cast and Crew. Disney has committed to develop less than 20 percent of the property, supply 90 percent of the site’s power from solar energy, employ sustainable building practices, and donate more than 190 acres of privately owned land to the government.

The Bahamas Department of Environmental Planning and Protection issued a Certificate of Environmental Clearance for the project in November 2021, and construction commenced in Spring of 2022. In May, the Bahamas National Economic Council, made up of Members of the Bahamian Cabinet, approved the seabed lease for the project. It was the last significant approval for the project and allowed construction to begin on the marine facilities. Disney’s Lighthouse Point is expected to open in Summer 2024.

The destination will create sustainable economic opportunities for Bahamians, protect and sustain the natural beautyof the site, celebrate culture, and help strengthen the community in Eleuthera. It will complement Castaway Cay, giving families the opportunity to enjoy the site’s beautiful beaches and explore nature, as well as enjoy the broader tourism offerings in Eleuthera.

In September 2022, Disney Cruise Line announced it’s bringing the magic of a Disney vacation to Guests in Australia and New Zealand during brand-new “Disney Magic at Sea” cruises beginning late October 2023. The limited-time voyages are specially created to immerse local Guests in their favorite Disney, Pixar, Marvel and Star Wars stories through enchanting entertainment and enhanced experiences throughout each cruise. During the repositioning voyages between Honolulu and Sydney, the Disney Wonder will offer the fleet’s first-ever South Pacific itineraries, offering Guests the chance to experience exotic destinations like Fiji and Samoa.

b). The interests of the Company’s employees
Since its launch in 1998, Disney Cruise Line is a well-established name in the cruise industry, providing a setting where families can reconnect, adults can recharge and children can experience all Disney has to offer. We strive to provide exceptional service that reflects our iconic brand, enabled by the passion and hard work of our Cast and Crew. We understand the importance ofour employees to our long-term success and are committed toproviding asafe working environment, adiverse and inclusiveculture andappropriate training and development.

Disney Cruise Line also complies with, and in some cases exceeds, the requirements set forth in the International Labour Organization’s (ILO’s) Maritime Labour Convention (MIC) which governs almost all aspects of working aboard a ship. Crew Members are organized through a collective bargaining unit (union) through the Federazione Italiana Transporti (FIT). The current union agreement went into effect on 1 January, 2020 and is binding for four years. It stipulates compensation, benefits, working hours, and contract lengths for the range of work positions on-board.

Disney Cruise Line Cast and Crew Members receive a wide range of employment benefits. While on contract in service of the ship, Crew Members receive medical care by the on-board medical team. Officers are offered full health benefits year-round when signed to a contract. Crew Members have access to mental health resources through an Employer Assistance Program offered ni multiple languages, as wel as access to online resources and wellness content offered on-demand via Crew stateroom TVs.

Disney has an ongoing commitment to diversity, equity and inclusion (DE&I) through a company-wide initiative composed of six pillars focused on People, Culture, Content, Community, Transparency, and Accountability.

c). The need to foster the Company’s business relationships with suppliers, customers and others
We pride ourselves on delivering exceptional service and world-class family holidays. We have strong relationships with our suppliers and work closely with them to provide our Guests with high quality experiences and products.

Guests
Creating unforgettable holiday experiences for our Guests is the primary motivation of our dedicated Disney Cruise Line Cast and Crew Members. Disney Cruise Line is considered a leader in the cruise industry by travel professionals, hospitality industry groups, and most importantly – by our Guests. Families sailing with Disney Cruise Line expect a unique holiday experience that only Disney can deliver. At the heart of all we do is the Guest experience and satisfaction with the Disney Cruise Line product. Multiple touch points provide us with the opportunity to hear directly from our Guests about what we’re doing right and areas for improvement. Our Call Center and Guest Communications team resolves issues brought to our attention in a timely manner, corresponding directly with any Guest who reaches out to us for assistance before, during and after their cruise. Our team is specifically trained to assist our Guests with their holiday needs and consistently receives some of the highest Guest Service satisfaction ratings within our Company.

Suppliers
Disney Cruise Line has high standards for suppliers and has a thorough process for sourcing products and services of the best quality and value. Suppliers are held toTWDC’s International Labour Standards and Code of Conduct for Suppliers. Our supply chains follow Disney policies andcomply with UK government regulations. Food and beverage suppliers must follow a uniform set of TWDC guidelines that meet both Company and local standards, including conducting periodic sanitation and safety audits and maintaining liability insurance.

Disney Cruise Line also partners with travel agents for a significant source ofcruise bookings. Travel agents must be a registered Member supplier in good standing with the Cruise Line Industry Association or the International Air Transport Association (IATA), and supply proof of all qualifying tax and other documentation required to d o business as a travel agent/agency in its domestic and international markets. Travel agents and agencies must operate ethically, representing the Disney Cruise Line brand in good faith and providing accurate marketing and information about Disney Cruise Line’s products.

Disney Cruise Line is committed to conducting business and providing products and services in an ethical manner. We also believe that including diverse suppliers in our sourcing process provides us the greatest opportunity to develop the most innovative, highestquality, andmost cost-effective business solutions. We know this strengthens our Company as well as supporting our communities.

Port Communities
Disney Cruise Line is very mindful of our impact on local communities. We engage in an ongoing basis with all our relevant stakeholders whether port authorities, ministers of tourism, shore excursion operators, and other in-destination partners to best understand how we can best collaborate with them to maximize the positive impacts of our business on their communities. Today, more than 70 percent of the cruises offered by Disney Cruise Line have at least one stop in The Bahamas. Disney Cruise Line has made significant economic contributions to The Bahamas while demonstrating a strong commitment to the environment and the community. It is estimated that Disney Cruise Line operations contribute more than $70 million toward the Bahamas gross domestic product annually.

Disney Cruise Line takes careful steps to ensure it respects the communities, environment and culture of each of its destinations through collaboration with stakeholders and relevant partners in ports of call. This includes understanding how to introduce our brand most appropriately to those communities, as well as introduce the unique character and culture of each destination to Disney Cruise Line Guests. We source products in our ports of call when it meets our quality standards, and we work with a variety oftour providers in each destination to diversify our products.

d). The impact of the Company’s operations on the community and the environment

Community
Since The Walt Disney Company’s founding nearly 100 years ago, operating responsibly has been an integral part o f our DNA. Our corporate social responsibility (CS) efforts address the expectations of our people, consumers, communities, and investors, and help us to attract, retain, and develop talented and diverse creators and Cast Members, all of whom contribute to our business success. We take a strategic approach to setting our CSR priorities, addressing issues that are important to our businesses and to the communities where we operate. We regularly monitor issues and evolve our efforts to ensure we remain focused on the economic, environmental, and societal matters that impact those we serve.

Disney strives to inspire a world of belonging by embracing broad representation and respect for every individual in our workplace, storytelling, and communities; a world in balance by taking action to create ac leaner, safer, and healthier world; and a world of hope by supporting our communities, especially children. We are also investing
in our people and operating responsibly.

Disney Cruise Line strives to make a positive impact in the many places around the world it calls home. The Disney Cruise Line Cast and Crew Members support many charitable organizations that nurture the lives of children and enrich the environment. Crew Members lead reading education programs in schools, give to local youth organizations and bring Disney characters to entertain children in port communities around the globe. Disney VoluntEARS also donate their time to plant micro-gardens at underserved schools, lead career exploration conversations for students interested in maritime careers, raise funds for worldwide disaster relief efforts, and host quarterly shore clean-ups to remove litter and debris from fragile coastlines. Each year, Cast and Crew Members donate thousands of hours of their personal time to benefit worthwhile causes in port communities around the world.

For more than 25 years, Disney Cruise Line has made significant contributions to support communities in The Bahamas. Recent key initiatives focus on supporting entrepreneurs and small businesses, workforce development starting at a young age, conservation and timely community needs. Disney Cruise Line is a founding sponsor of the Eleuthera Business Hub, in partnership with the Eleuthera Chamber of Commerce and the Small Business Development Center and is providing financial support to small and medium-sized businesses.

During the Disney Wish unveiling event in April 2021, The Walt Disney Company announced a $1 million donation to Make-A-Wish®. The funding will help deliver magic to even more Make-A-Wish® kids from all backgrounds,supporting Disney’s ongoing commitment to diversity and inclusion. As part of this, Disney Cruise Line announced that all Make-A-Wish® children, including past, present and future wish recipients, are honored as godchildren of the Disney Wish. Redefining the longstanding maritime tradition of appointing a ship “godmother,” this was the first time in Disney Cruise Line history that children are being recognized in this prestigious role which symbolically bestows good fortune on the vessel and its travelers. Disney Cruise Line continues to support the transformative work that wish-granting organizations do every day through newly announced initiatives which include an exclusive merchandise collection and the donation of a stateroom aboard a sailing of the Disney Wish.

In celebration of the Disney Wish’s inaugural sailings, in July 2022 Disney Cruise Line launched its “Wishes Set Sail” program, an all-new initiative developed to support various youth activities in key port communities. In total, Disney Cruise Line distributed $400,000 to local youth organizations throughout the Disney Wish’s inaugural season as part ofthis campaign. This includes partnerships with Junior Achievement Bahamas, Ranfurly Home for Children Bahamas, LJM Maritime Academy in Nassau, and the Boys& Girls Clubs of Central Florida Brevard County Branches. The “Wishes Set Sail” campaign also supported back-to-school efforts in the Bahamas. More than 1,300 students in Abaco and Eleuthera received backpacks containing school supplies, courtesy of Disney Cruise Line. Crew Members based both in Florida and The Bahamas volunteered their time over several days filling the bags with pencils, notebooks, and other supplies.

Disney is committed to supporting education in The Bahamas and continues to work with the Ministry of Education to inspire and educate the next generation of professionals. In 2019, Disney Cruise Line introduced a scholarship program in partnership with the LJM Maritime Academy for female cadets aspiring to become ship captains and shipboard leaders.

Environmental
The Walt Disney Company is committed to taking meaningful and measurable action to support a healthier planet for future generations as we operate and grow our business. Our commitment to environmental stewardship goes back to our founding nearly 100 years ago. Walt Disney himself said that “conservation isn’t just the business of a few people. It’s a matter that concerns all of us.”

The environmental commitments detailed below represent some of the ways we are focused on helping to build on that legacy, for every community and across the globe, generation after generation. Our environmental policies are based on a set of guiding principles intended to drive both our long-term environmental strategy and the everyday decision-makingo four leadership and Cast Members around the world.

The Walt Disney Company has made a 2030 net zero pledge and aims to establish and sustain a positive environmental legacy for Disney and for future generations. The Company has ambitious environmental goals for 2030 focused on key areas of ourbusiness where we believe we can have a significant, lasting impact and make a positive difference in protecting our planet.Goals include:

• Have a positive impact on the communities where w eoperate our businesses
• Create unique content and experiences that inspire connection with our planet and all who call it home;
• Reduce the environmental impacts of our operations, products, services, suppliers, licensees and value chains;
• Promote a culture of consideration, appreciation and respect for the environment among our leaders, CastMembers and Guests;
• Work with industry partners, non-governmental organizations, academia and others to create a cleaner, safer, healthier world for future generations.

At Disney Cruise Line, we are dedicated to minimizing our impact on the environment through efforts focused on utilizing new technologies, increasing fuel efficiency, minimizing waste and promoting conservation worldwide. We strive to instill positive environmental stewardship in our Cast and Crew Members and seek to inspire others through programs that engage our Guests and the communities in our ports of call. Disney Cruise Line is consistently recognized as an industry leader and regularly wins awards such as the Blue Circle Award from Port of Vancouver for voluntary efforts to conserve energy and reduce emissions.

As of 1 January 2020, the International Maritime Organization instituted a regulation that requires all ships to use 0.5% sulfur fuel compared to 3.5% previously. Disney Cruise Line has taken this a step further by using 0.1% low sulfur fuel fleet wide at all times. As previously mentioned, our Wish class of cruise ships will be powered by liquefied natural gas, or LNG, one of the cleanest-burning fuels available. Currently, four Disney Cruise Line ships have the equipment necessary to plug into shore power if the option is available at the port. Disney Cruise Line coordinates itineraries to be sure shore power-capable ships sail to ports of call that offer this technology.

As part of The Walt Disney Company’s overall efforts to reduce the amount of single-use plastics, Disney Cruise Line has taken great measures to eliminate single-use plastics on-board and on Disney Castaway Cay, Disney’s private island destination in The Bahamas. This effort has resulted in removing an annual volume of more than 14.7 million plastic straws and 2.2 million plastic amenity containers. Disney Cruise Line has also gone from annually distributing nearly 1million plastic merchandise bags fleetwide annually to nearly zero. Other measures include the removal of plastic cutlery, stirrers and condiment packets. Disney Cruise Line is committed to diverting waste from traditional waste streams. Shipboard recycling processes have helped to eliminate on average more than 2,500 tons of metals, glass, plastic and paper from traditional waste streams each year.
Disney Cruise Line has invested in technology to ensure water purity and taken steps to select earth-friendly cleaners. All Disney Cruise Line ships feature Advanced Wastewater Purification Systems (AWPS that utilize natural processes to treat and purify on-board wastewater to levels far exceeding international shipping standards, and in some cases shore side potable water standards.

The Disney Conservation Fund (“DCF”) was created more than 25 years ago to build on Walt Disney’s legacy of saving wildlife, inspiring action, and helping to protect the planet. Disney Conservation is focused on saving wildlife forfuture generations through grants to leading conservation organizations working together tostabilize and increase the populations of at-risk animals including coral reefs, sea turtles, butterflies, cranes, elephants, gorillas and monkeys. In fiscal 2022, the DCF continued to provide financial support through grants helping more than 60 nonprofit organizations working across 32 countries. A Disney conservationist works with each organization to identify where Disney expertise can also play a role in reversing the decline of these animals and their habitats.

In collaboration with Disney Cruise Line and The Disney Conservation Fund, a team of Disney researchers has worked since 2007 to rehabilitate coral reefs in The Bahamas. They’ve planted more than 1,800 corals to rehabilitate five coral reefs, providing important habitat for the marine species, including endangered Nassau grouper and lobster, who call coral reefs home. To protect these reefs from excess algae growth, the team also relocates native long-spined sea urchins to the reefs to graze on algae, restoring balance to the ecosystem and allowing new corals to grow. This knowledge helped establish the Florida Coral Rescue Center in Orlando, the largest facility of its kind in the U.S. to care for and safeguard some of the most vulnerable species of Florida coral. The Disney Conservation Fund is also supporting the Perry Institute for Marine Science to address coral conservation and restoration acrossThe Bahamas alongside more than 30 partner organizations. Disney Cruise Line also supports summer eco camps and community engagement efforts in Abaco, and helps provide conservation curriculum support for Bahamian school children.

More details on Disney Cruise Line’s dedication to minimizing its impact on the environment is available at: https://dclnews.com/fact-sheets/2022/07/01/disney-wish-environmental-fact-sheet/

More details on TWDC’s environmental goals can be found at: https://thewaltdisneycompany.com/environmental-sustainability

e). The desirability of the Company maintaining a reputation for high standards of business conduct

We are committed to operating our businesses with integrity and adopting governance policies that promote the thoughtful and independent representation of our stakeholders’ interests. The Board of Directors has adopted Corporate Governance Guidelines which address, among other things, the composition and functions of the Board of Directors. Our Board of Directors is also expected to uphold our Code of Business Conduct. Similarly, the Group Company’s Standards of Business Conduct are applicable to all Cast Members of the Company including Board Members.

We regularly engage our leaders and Cast Members on these Standards through training and other forms of communication. It is compulsory that all office based Cast Members complete the mandatory online courses, examples include: Standards of Business Conduct, Bribery and Avoiding Corrupt Business Practices.

Acting responsibly and conducting our business ethically is an integral part of our brand.

f. The need to act fairly as between members of the Company

We are a wholly owned subsidiary of Wedco Global Ventures LLP, whose ultimate parent Company is The Walt Disney Company (TWDC). Magical Cruise Company is consolidated within TWDC results as part of the Disney Parks, Experiences, and Products Segment. Our parent company as well as TWDC are aware of key decisions and financial performance of the Company and take a keen interest in the strategies and future outlook of the Company.

The Strategic report is authorised by the Board of Directors and signed on its behalf on 29 June 2023 by:

TL Wilson
Director

For FY22, Disney Cruise Line reported a loss of $325,799,000 primarliy attributed to the impact of the COVID-19 pandemic which shutdown cruise operations. As the cruise industry continues to recover from the COVID-19 pandemic, Disney Cruise Line reports an increase in occupancy levels in FY22 to 55% as of June 2022 that continued to improve for the full fiscal year to 63%. Disney Cruise Line has seen a further increase in occupancy levels in FY23 to 96% as of March 2023.

Furthermore, the Company’s principal activity is the operation of luxury cruise vessels. It is considered that the Company’s activities will remain unchanged for the foreseeable future.

Historical Magic Cruise Company, Limited Annual Report and Financial Statements

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