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 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 fleet will be the youngest of the major cruise operators with an average age of just six years.

The combination is being effected based on current market capitalizations, resulting in Royal Caribbean representing 49.3% of the equity value of the combined group and P&O Princess representing 50.7% of the equity value of the combined group. Royal Caribbean and P&O Princess have also today established a joint venture to target customers in Southern Europe.

Completion of the transaction is expected to take place, subject to, inter alia, shareholder and regulatory approvals, in the second quarter of 2002. Combined group to be renamed on completion with the corporate entities of P&O Princess and Royal Caribbean each taking the new group name

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, maintaining a substantial presence in Los Angeles and Seattle, as well as other offices in the US, UK, Germany and Australia.

By combining, the two companies expect to:

- Maximize 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; and

- Realize significant cost savings.

The combination is expected to deliver significant cost savings, estimated to be at least $100 million on an annualized basis, expected to come primarily from marketing efficiencies, improved purchasing, rationalizing offices in various locations, reduced information systems costs and combining Alaska tour operations.

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.

Richard D. Fain, Chairman and CEO of Royal Caribbean Cruises and Chairman and Chief Executive Officer designate of the combined group, said: "The combination of Royal Caribbean and P&O Princess will maximize our ability to take advantage of the long-term potential of our industry. This deal brings together well known brands and the youngest fleet in the industry to create a strong customer offering that will drive future growth both in existing and new markets.

Peter Ratcliffe, CEO of P&O Princess Cruises and Managing Director and Chief Operating Officer designate of the combined group, said: 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, maximize the potential of our brands and benefit our customers and shareholders alike"

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."

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 and will target customers in southern Europe primarily from Italy, France and Spain. 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.

About Royal Caribbean

Royal Caribbean Cruises Ltd. is a global cruise vacation company that operates Royal Caribbean International, Celebrity Cruises, and Royal Celebrity Tours. In addition, the company owns a 50% share of Island Cruises, a cruise joint venture with First Choice Holidays in Europe. Royal Caribbean International and Celebrity Cruises have a combined total of 23 ships in service with a passenger capacity of 47,400 berths. In addition, the company has six ships on order offering an additional 14,600 berths. Royal Celebrity Tours operates land-tour vacations in Alaska, Florida, British Columbia, and Europe.

About P&O Princess

P&O Princess Cruises PLC is a global cruise vacation company operating under the following brand names: Princess Cruises in North America; P&O Cruises in the UK and in Australia; AIDA, A'ROSA and Seetours in Germany and Swan Hellenic also in the UK. It provides cruises to Alaska, the Caribbean, Europe, the Panama Canal and other exotic destinations. The group currently has a fleet of 18 ships offering a total of 27,370 berths, with 8 new ships on order, offering a further 17,520 berths.Princess Tours, is a leading tour operator in Alaska with four riverside lodges (with a fifth being built), a fleet of deluxe motorcoaches and luxury Midnight Sun Express rail cars.

The boards of directors of P&O Princess and Royal Caribbean will be identical and the combined group will be managed as a single enterprise.

P&O Princess and Royal Caribbean will continue to have separate legal identities, tax residencies and stock exchange listings. Each will take the name of the combined group on completion.