• Aggregate revenues of over $5 billion in the 12 months to 30 September 2001
• Served some 3 million customers in 2000 on a combined basis
• 41 ships and some 75,000 berths with presence in key vacation markets
• Leading positions in the Caribbean trade and destination trades, including Alaska, the Mediterranean, the Baltic and the Panama Canal 
• Well known brands, including Royal Caribbean, Princess, Celebrity, P&O Cruises, Swan Hellenic, AIDA and A�ROSA
• Youngest fleet of the major cruise companies with an average age of six years, and largest ships, with an average of over 1,800 berths 
• Estimated annualised operational synergies in excess of $100 million 
• Combined group to be renamed on completion with the corporate entities of P&O Princess and Royal Caribbean each taking the new group name 

Peter Ratcliffe, Chief Executive Officer of P&O Princess Cruises and Managing Director and Chief Operating Officer designate of the combined group, said: �Our industry has sustainable long term growth characteristics, despite the impact of recent events on short term trading.  The key indicators of demographics, penetration, high levels of customer satisfaction and trends in leisure spend point to significant growth over the long term and the increasing globalisation of the industry.  We will be well placed to benefit from this while reducing unit costs.  With a high-quality fleet of over 40 ships, we will have the flexibility to respond to changes in demand around the world, open new markets, maximise the potential of our brands and benefit our customers and shareholders alike.  These operational and strategic advantages will underpin this combination, both now and in the longer term.�

Lord Sterling of Plaistow, Chairman of P&O Princess Cruises, said: �This is an outstanding opportunity for both companies and a natural strategic combination.  We obviously know each other well and I feel that our European and American heritages are a key to the future.  Having personally been involved in the creation of P&O Princess out of the great liner division of The Peninsular and Oriental Steam Navigation Company, when I step down as Chairman in the next few months, I will have the pleasure of knowing that our people, both at sea and on shore, will have a tremendous future working together in this new global cruising enterprise.  I have no doubt whatsoever that it will go from strength to strength.�

Introduction

P&O Princess Cruises plc (�P&O Princess�) and Royal Caribbean Cruises Ltd.  (�Royal Caribbean�) have agreed to combine in a merger of equals, creating the world�s largest cruise vacation group.  The combined group will have the most modern fleet of the major cruise companies, comprising 41 ships operating in key vacation markets.  The combined group served some 3 million customers in 2000 and had aggregate revenues for the 12 months to 30 September 2001 of over $5 billion.

Structure

The combination will be achieved through a dual listed company (�DLC�) structure.  The combined entity will be managed as a single, unified business with principal corporate headquarters in Miami, Florida and a significant corporate office in London.  Appendix C contains a summary of the principal terms of the DLC.  Richard D. Fain, currently Chairman and Chief Executive Officer of Royal Caribbean, will be Chairman and Chief Executive Officer of the combined group.  Peter Ratcliffe, currently Chief Executive Officer of P&O Princess, will be Managing Director and Chief Operating Officer of the combined group.

Existing P&O Princess shareholders will, in aggregate, have economic ownership of 50.7% of the combined entity and existing Royal Caribbean shareholders will, in aggregate, have economic ownership of 49.3% of the combined entity.  No shareholders in either company will need to exchange or tender their shares in order to effect the combination.  Contractual arrangements between the two companies will ensure that distributions of both income and capital to shareholders take place in a �fixed equalization ratio�, subject to adjustment for certain events, which reflects the respective economic interest of the shareholders in the combined group.  Under the terms of the combination, an existing Royal Caribbean share will have an economic interest equivalent to 3.46386 existing P&O Princess shares.

Principal trading markets following completion of the transaction will continue to be the New York and Oslo stock exchanges for Royal Caribbean and the London Stock Exchange for P&O Princess.  Based on the closing prices of P&O Princess and Royal Caribbean shares on 19 November 2001, the aggregate market capitalisation of the combined entity is approximately $6.0 billion and the aggregate enterprise value of the combined group, based on 30 September 2001 balance sheets, is $11.8 billion.  Aggregate EBITDA for the 12 months to 30 September 2001 exceeded $1.2 billion.

RATIONALE FOR THE COMBINATION

Demographic changes and consumer appetite for leisure activities, coupled with high levels of customer satisfaction, support a positive long-term outlook for the cruise industry.  Through the combination, both Royal Caribbean and P&O Princess believe they will be able to benefit from this long-term growth trend and create value for all the combined group�s shareholders.
Through its well known global brands, the combined group will be a strong competitor in all the major vacation markets in the US and Europe.  The combined group will have an enhanced product offering in the vacation markets already served by the two existing companies and will be able to expand into new vacation markets through enhanced redeployment flexibility offered by its large, modern fleet.

The combined group will have a fleet of 41 ships offering approximately 75,000 berths, with a further 14 ships on order for delivery over the next three years, offering over 30,000 additional berths.  The combined fleet will be the youngest of the major cruise operators with an average age of just six years, featuring the highest proportion of cabins with balconies.  The combined, modern fleet will also have a highly efficient operating cost structure.

The combined group carried some 3 million customers in 2000 and generated aggregate revenue during the 12 months ended 30 September 2001 of over $5 billion.  Brands operated by the two companies include Royal Caribbean International, Princess Cruises and Celebrity Cruises, all aimed primarily toward North American customers, P&O Cruises and Swan Hellenic in the UK, AIDA Cruises and the recently launched A�ROSA brand in Germany and P&O Cruises in Australia.  The combined group will have a strong position in the Caribbean trade, and in the larger destination trades including Alaska, the Mediterranean, the Baltic, the Panama Canal and other exotic destinations world-wide.  The combined group will benefit from a substantial tour operation infrastructure in Alaska, including five wilderness lodges, and will also have three private destination ports of call in the Caribbean islands.

By combining, the two companies expect to:

• maximise the potential of their ships through strategic redeployment;
• enhance their product offerings in existing vacation markets;
• accelerate the geographic penetration of cruising into new global vacation markets; 
• realise significant cost savings.

BOARD AND MANAGEMENT

Following completion, the combined group will be managed on a unified basis and in effect will have a single board, as the composition of the boards of Royal Caribbean and P&O Princess will be identical.  Initially, the boards will comprise twelve directors, half of which will be nominated by P&O Princess and half by Royal Caribbean.  These will include Richard D. Fain, currently Chairman and Chief Executive Officer of Royal Caribbean, who will be Chairman and Chief Executive Officer of the combined group and Peter Ratcliffe, currently Chief Executive Officer of P&O Princess, who will be Managing Director and Chief Operating Officer of the combined group.

Following completion of the transaction, Nick Luff, currently Chief Financial Officer of P&O Princess, will become Chief Financial Officer of the combined group and Richard Glasier, currently Chief Financial Officer of Royal Caribbean, will assume a new operational role within the combined group.

The principal corporate headquarters of the combined group will be in Miami, Florida, with a significant corporate office in London.  The combined operation will maintain a substantial presence in Los Angeles and Seattle, as well as other offices in the US, UK, Germany and Australia.

The combined group will be renamed on completion with P&O Princess and Royal Caribbean each taking the new group name.

FINANCIAL INFORMATION

For the four quarters ended 30 September 2001, P&O Princess and Royal Caribbean (on their respective accounting policies and under UK GAAP and US GAAP respectively) had the following results:
                                            P&O Princess   Royal Caribbean
                                                      $m                $m
     Gross revenue                                 2,451             3,131
     EBITDA                                          494               781
     Net income                                      266               324
     Net assets                                    2,633             3,833
Royal Caribbean and P&O Princess intend to prepare a single set of combined accounts, denominated in US dollars, presenting both UK and US GAAP figures.  They will also prepare other financial information as necessary for statutory purposes.

The combined group expects to retain the majority of the debt facilities currently in place for P&O Princess and Royal Caribbean.  It is intended to put in place additional debt facilities in due course to fund the new ships on order that do not already have financing in place.

DIVIDEND POLICY

Following completion, dividends will be paid in accordance with the equalisation ratio on a quarterly basis.  The combined group will set future dividends taking into account trading conditions, balance sheet considerations and future prospects.  It is expected that the tax treatment of dividends will remain unchanged.

APPROVAL PROCESS AND TIMETABLE

Documents will be posted to the shareholders of Royal Caribbean and P&O Princess as soon as practicable, setting out further information on the proposed transaction and seeking shareholders� approval for the transaction.  Shareholder meetings for both companies will be held approximately three weeks later.  Completion of the transaction is expected to take place, subject to, inter alia, shareholder and regulatory approvals, in the second quarter of 2002.

Royal Caribbean has agreed to use its reasonable best efforts to deliver shareholder voting agreements representing at least 44.5% of the voting control of Royal Caribbean on or before 3 December 2001.  Procuring certain of these shareholder agreements may be dependent upon such shareholders obtaining satisfactory comfort with respect to the Norwegian tax treatment of the transaction.  If these voting agreements have not been delivered by such date, P&O Princess has the right to terminate all agreements related to the combination.

JOINT VENTURE

As an initial step in combining the two companies� operations and to accelerate the development of cruising within European vacation markets, the two companies have also entered into a joint venture agreement that will become effective immediately.  The joint venture company will target customers in southern Europe.

The joint venture company is owned 50% by P&O Princess and 50% by Royal Caribbean.  It is expected to commence cruise operations in 2003, deploying four new ships, with two contributed by Royal Caribbean and two by P&O Princess.  The four new ships are currently on order and are scheduled for delivery in 2003 and 2004.  The joint venture will have an asset base, after delivery of the initial four ships, in excess of $2 billion.

Initial equity commitments of $1 billion will be made to the joint venture on a 50/50 basis by P&O Princess and Royal Caribbean.  The remaining capital requirements will be debt financed.  The joint venture will provide a product tailored for southern European customers, primarily from Italy, France and Spain.

Under the agreement, all material decisions will require the consent of both parent companies and each company has agreed that it will not compete with the joint venture.  In certain circumstances, including a change of control, Royal Caribbean or P&O Princess would lose management and voting rights in the joint venture.  On a change of control, there are put and call arrangements over the shares of the affected party in the joint venture company, where the consideration can be satisfied by the acquiring party issuing either preferred equity or 20 year subordinated loan notes with a coupon of 5%.  If certain commercial targets are not met, the joint venture may, unless either party has been subject to change of control, be terminated in January 2003.  The joint venture agreement is not conditional on the approval of the shareholders of P&O Princess or Royal Caribbean or any regulatory approval.

OTHER INFORMATION

Principal trading markets following completion of the transaction will continue to be the New York and Oslo Stock Exchanges for Royal Caribbean and the London Stock Exchange for P&O Princess.  It is expected that P&O Princess will continue to be included in the FTSE series of indices post completion and Royal Caribbean will continue to be included in its existing indices post completion.

An amount of $62.5 million will be payable by either Royal Caribbean or P&O Princess, in certain circumstances, if the transaction does not proceed.

Schroder Salomon Smith Barney acts as financial advisor and joint corporate broker to P&O Princess and Goldman Sachs acts as financial advisor and joint corporate broker to Royal Caribbean.  Credit Suisse First Boston (Europe) Limited acts as joint corporate broker to P&O Princess and Cazenove acts as joint corporate broker to Royal Caribbean.  Freshfields Bruckhaus Deringer and Sullivan & Cromwell act as legal advisors to P&O Princess and Davis Polk & Wardwell and Slaughter and May act as legal advisers to Royal Caribbean.

Certain statements contained in this release are �forward-looking statements� that involve risks, uncertainties and assumptions with respect to P&O Princess and Royal Caribbean and their respective subsidiaries, including certain statements concerning the transactions described herein, future results, plans and goals and other events which have not yet occurred.