LONDON, Jan. 10, 2002 -- The following release was issued today by P&O Princess Cruises plc:

P&O Princess shortly will be posting to Shareholders the attached letter which explains why the P&O Princess Board continues to recommend the Combination with Royal Caribbean; and why it is rejecting the Carnival takeover proposal.

Commenting on the letter, Peter Ratcliffe, CEO of P&O Princess said,

"There has been some misunderstanding on certain aspects of the joint venture with Royal Caribbean. Within the letter we confirm that we may unilaterally terminate the joint venture in January 2003 at no cost as long as no change of control of P&O Princess has been completed before the termination date.

I now look forward to the debate focusing back again on the value which will be created by our combination with Royal Caribbean and which we continue to recommend enthusiastically to our Shareholders. As we have explained previously, we are not in a position to have discussions with Carnival unless and until they make a superior offer. They have until 18 January to do this."

Schroder Salomon Smith Barney and Credit Suisse First Boston (Europe) Limited, which are regulated in the United Kingdom by The Securities and Futures Authority limited, are acting for P&O Princess Cruises plc ("P&O Princess) and no one else in connection with the combination with Royal Caribbean and the pre-conditional takeover proposal from Carnival Corporation and will not be responsible to anyone other than P&O Princess for providing the protections afforded to clients of Schroder Salomon Smith Barney and Credit Suisse First Boston (Europe) Limited, nor for providing advice in relation to the combination with Royal Caribbean, or the pre-conditional takeover proposal from Carnival Corporation

The directors of P&O Princess ("Directors") accept responsibility for the information contained in this document, save that the only responsibility accepted by the Directors in respect of the information relating to Carnival, which has been compiled from public sources, has been to ensure that such information has been correctly and fairly reproduced or presented. To the best of the knowledge and belief of the Directors (who have taken all reasonable care to ensure that such is the case) the information contained in this document for which they are responsible is in accordance with the facts and does not omit anything likely to affect the import of such information. The information relating to the P&O Princess Group contained in this Circular has been provided by P&O Princess and the information relating to the Royal Caribbean Group contained in this document has been provided by Royal Caribbean.

"THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt as to the action you should take, you should seek your own personal financial advice from your stockbroker, bank manager, solicitor, accountant or other independent professional adviser authorised under the Financial Services and Markets Act 2000 immediately.

If you have sold or otherwise transferred all of your shares in P&O Princess Cruises plc ("P&O Princess"), please send this document to the purchaser or transferee, or to the stockbroker, bank or other agent through whom the sale or transfer was effected for delivery to the purchaser or transferee.

Schroder Salomon Smith Barney is acting for P&O Princess and no one else in connection with the Combination and the pre-conditional takeover proposal from Carnival Corporation and will not be responsible to anyone other than P&O Princess for providing the protections afforded to clients of Schroder Salomon Smith Barney, nor for providing advice in relation to the Combination, or the pre-conditional takeover proposal from Carnival Corporation.

To all holders of P&O Princess Shares and P&O Princess ADSs and, for information only, to participants in the P&O Princess Employee Share Incentive Plans.

Dear Shareholder,

By now, you should have received our circular dated 27 December 2001 (the "EGM Circular") regarding P&O Princess' proposed combination with Royal Caribbean (the "Combination") and my letter dated 19 December 2001 concerning your Board's rejection of the pre-conditional takeover proposal from Carnival Corporation ("Carnival").

Today, I am writing to explain in more detail why your Board continues to recommend the Combination with Royal Caribbean and why we have rejected the Carnival takeover proposal.

Our Combination with Royal Caribbean - value creation you can retain

Your Board strongly believes that by combining with Royal Caribbean, P&O Princess will be able to accelerate the delivery of shareholder value by creating a world leading cruise vacation group with strong brands and with one of the most modern fleets of any major cruise operator. The operating efficiencies and strategic benefits expected to be achieved by the Combined Group should enable us to maximise the benefit to P&O Princess Shareholders from the long-term potential of the cruise vacation industry, particularly as it recovers from the low levels reached after the events of 11 September 2001. The Combined Group is expected to deliver significant cost savings, estimated to be at least US$ 100 million on an annualised basis, beginning 12 months after completion of the Combination.

We believe that the Combination with Royal Caribbean offers a unique opportunity for our shareholders. Based upon the average relative market capitalisations of P&O Princess and Royal Caribbean since our demerger in October 2000, P&O Princess Shareholders would have received an economic interest equivalent to approximately 44% of the value in the Combined Group. Instead we were able to strike a deal with Royal Caribbean in which our shareholders will receive 50.7% of the economic value in the Combined Group.

We believe that the positive reaction of our share price following the announcement of the Combination with Royal Caribbean provided an early indication of the market's view that the Combination will generate substantial value for P&O Princess Shareholders following its completion.

Furthermore, our proposed Dual Listed Company structure allows P&O Princess shareholders to retain their existing UK listed shares, included in the FTSE indices, and to benefit from their full share of the upside potential of what we believe will be a truly outstanding combination.

Why we have rejected Carnival's proposal

Your Board recognises its duty to consider alternatives that have real potential to generate more value for P&O Princess Shareholders.

We have carefully considered Carnival's takeover proposal and your Board and its advisers continue to believe that Carnival's proposal to take over your company falls short of the proposed Combination with Royal Caribbean in terms of both value and deliverability. In particular your Board strongly believes that: * even if Carnival made an unconditional takeover offer on the financial terms it has proposed, it would not be as favourable financially as the proposed Combination with Royal Caribbean; * the price offered by Carnival needs to be compared with the price at which P&O Princess shares are likely to trade post completion of the Combination with Royal Caribbean, not with today's share price, and the significant upside potential of the Combination in terms of earnings and valuation need to be taken into account; * contrary to Carnival's assertions, we believe that a takeover of P&O Princess by Carnival carries different anti-trust issues than the proposed Combination with Royal Caribbean. We believe that a combination with Carnival, the largest cruise ship operator in the world, and in particular in the United States and in Europe, necessarily presents greater anti-trust risk as it raises additional anti-trust issues which the regulators would have to investigate; * Carnival is asking our shareholders to adjourn our EGM in favour of a takeover proposal which Carnival may not have any obligation to pursue. In contrast, Royal Caribbean has entered into a binding contract with P&O Princess and holders of 44.5% of Royal Caribbean's Shares have already irrevocably committed to vote in favour of our Combination; and * Carnival may be indifferent as to whether it buys your company or retains its position as the leading cruise ship operator in the world by breaking up our Combination with Royal Caribbean. In effect, Carnival is asking you to bear all the risk that it is both willing and able to complete its takeover proposal, leaving your company to bear all the immediate costs and lost opportunities of terminating its Combination with Royal Caribbean.

We understand that Carnival is claiming that by voting against the Combination or by pushing for our EGM to be adjourned, P&O Princess Shareholders can keep their options open and choose between the two transactions after the completion of all regulatory clearances. Your Board believes that this is unrealistic.

We have agreements with Royal Caribbean and must honour these contractual obligations. Our agreement with Royal Caribbean requires that we hold our EGM as soon as possible. If our shareholders vote against the Combination with Royal Caribbean on 14 February 2002, Royal Caribbean will have the right to terminate its agreements with P&O Princess to implement the Combination.

P&O Princess Shareholders should not assume that Royal Caribbean or its major shareholders would be prepared to reinstate the Combination at all or, if so, on the same terms, given the substantial delay that we expect would be required for the completion of Carnival's anti-trust reviews.

In the event that Royal Caribbean walks away, there would only be one proposal left on the table -- Carnival's highly pre-conditional proposal which it may or may not pursue. Your Board does not believe that this is a risk that shareholders should take.

For the foregoing reasons, your Board continues to recommend that you vote for the Combination with Royal Caribbean.

Securing the deal

In agreeing the Combination, the Board of P&O Princess entered into certain arrangements, including a reciprocal break fee and change of control provisions relating to our joint venture agreement with Royal Caribbean covering southern Europe. Without these arrangements, there would not have been a transaction with Royal Caribbean.

Break fee

A mutual break fee of US$ 62.5 million is payable in certain circumstances, including if P&O Princess Shareholders do not approve the Combination at the forthcoming EGM and if a Carnival takeover proposal remains outstanding at the time of the vote. The break fee represents approximately 6p per P&O Princess Share, around 2% of P&O Princess' market capitalisation.

Joint venture

In connection with the proposed Combination, P&O Princess and Royal Caribbean intend to offer a cruise product tailored for customers primarily from Italy, France and Spain which will compete with Carnival, the clear leader in the cruise business in these countries.

When we entered into the Combination agreement, P&O Princess and Royal Caribbean also agreed to establish a joint venture covering this southern European segment to which each party has agreed to contribute US$ 500 million in equity.

The joint venture can be terminated by either party if certain commercial benchmarks are not met by certain dates as disclosed in the EGM Circular. The effect of this is that P&O Princess has the unilateral right to terminate the joint venture agreement, on or after 1 January 2003, and have its equity investment returned, with no penalty, as long as no change of control of P&O Princess has occurred prior to the termination date. In the event of such a termination, the joint venture company would be wound up and P&O Princess would have no future obligations to lend to or guarantee debt of the joint venture company.

If a change of control of P&O Princess has been completed prior to 1 January 2003, then P&O Princess will lose its termination right and certain management and shareholder rights, and will be subject to put and call arrangements as described in the EGM Circular.

Contact with Carnival

There has also been some public speculation as to the nature and extent of the contact between P&O Princess and Carnival. Since P&O Princess became publicly listed in October 2000, the only contact from Carnival regarding any form of business combination came on 24 September 2001 -- when P&O Princess' share price was at an all time low of 180p. This brief telephone inquiry was not followed up by Carnival. It was only after the announcement of the proposed combination with Royal Caribbean that Carnival made its takeover proposal on 13 December 2001.

Timetable for Extraordinary General Meeting

Our agreement with Royal Caribbean prohibits either party from soliciting an alternative proposal. However, subject to giving 10 business days prior notice to the other party, the agreement does allow either of us to discuss any proposal that we believe is superior to the Combination, taking into account both value and deliverability. As described above, we determined and now reaffirm our view that Carnival's current proposal falls short in both these areas.

With the consent of Royal Caribbean, we decided to extend the period between posting the EGM Circular and holding the EGM to approve the Combination to seven weeks rather than the standard three week period. Accordingly, our EGM will take place on 14 February 2002. This allows Carnival sufficient time to review all the documents that were made available when the EGM Circular was posted and to consider whether it is willing and able to make a proposal that is both financially superior and deliverable, without placing an unacceptable allocation of completion risks onto our shareholders.

If Carnival makes such an offer before 18 January 2002, your Board will have sufficient time to consider it and hold discussions with Carnival, as appropriate. We would then be in a position to make the appropriate recommendation to P&O Princess Shareholders, who would have sufficient time to assess the position in advance of the EGM.

The choice facing shareholders

At this point, the choice facing shareholders is clear on the following issues: Commitment Royal Caribbean -- a firm contract signed, with irrevocable undertakings to vote in favour of the Combination already secured in respect of 44.5% of Royal Caribbean Shares Carnival -- no firm commitment to proceed with its proposal. Is owning P&O Princess more important to Carnival, already the largest cruise ship operator in the world, than preserving the status quo by blocking the Combination? Competition/anti-trust risk Royal Caribbean -- combination of number 2 and number 3 -- less anti-trust risk Carnival -- Carnival is already number 1 in the world and in the US and Europe in particular -- greater anti-trust risk Value participation Royal Caribbean -- over 50% participation in upside potential for P&O Princess Shareholders. No requirement to tender or exchange your shares Carnival -- Less than 14% participation in any upside potential and even then only if you can hold Carnival shares Index inclusion Royal Caribbean -- P&O Princess Shares will continue to be included in FTSE UK Indices Carnival - Carnival shares are not eligible for inclusion in the FTSE UK Indices

If the Combination is not approved at the EGM on 14 February 2002, then Carnival would effectively have an option over whether or not to proceed, and if so on what terms. Your Board does not believe that this is a risk that our shareholders should take.

Recommendation of the P&O Princess Directors

The P&O Princess Directors, who have received financial advice from Schroder Salomon Smith Barney, continue to consider that the Combination with Royal Caribbean is in the interests of P&O Princess. In providing advice to the P&O Princess Directors, Schroder Salomon Smith Barney placed reliance upon the P&O Princess Directors' commercial assessment of the Combination.

The P&O Princess Directors continue to consider that the Combination is in the best interests of the P&O Princess Shareholders as a whole and unanimously recommend you to vote in favour of the resolutions to be proposed at the Extraordinary General Meeting as they intend to do in respect of their beneficial holdings, being in aggregate 12,454,075 P&O Princess Shares. Yours sincerely, Lord Sterling of Plaistow Chairman" Appendix I - Sources of Information References to share prices and exchange rates used in the analysis within this circular have been taken from Datastream. (a) P&O Princess average relative market capitalisations At market prices share of equity value calculated with the following formula: (Average P&O Princess market value) / (Average P&O Princess market value +Average Royal Caribbean market value). Averages are taken over a period since 23 October 2000 to 19 November 2001. Market values are calculated using shares outstanding of 692.6 million and 192.3 million for P&O Princess and Royal Caribbean, respectively. (b) Break fee of approximately 6p per P&O Princess' Share and around 2% of P&O Princess' market capitalisation Based on P&O Princess shares outstanding of 692.6 million, an exchange rate of 1 Pound Sterling: US$1.4144, and a P&O Princess closing share price of 317p as of 19 November 2001 (the day prior to the announcement of the Combination with Royal Caribbean). (c) Over 50% upside potential 50.7% economic ownership of the Combined Group (see page 6 of the EGM Circular). (d) Less than 14% participation in any upside potential Carnival's pre-conditional offer includes 0.1361 Carnival shares per P&O Princess Share. Based on 692.6 million P&O Princess Shares outstanding, this equates to a total of 94.3 million new Carnival shares. 94.3 million new Carnival shares would be 13.9% of pro forma Carnival shares outstanding (assuming Carnival has 586.2 million current shares outstanding). Appendix II - Definitions

The following definitions apply in this document unless the context otherwise requires;

Board means the board of directors of P&O Princess;

Combination means the proposed combination of P&O Princess and Royal Caribbean described in the EGM Circular as the "DLC Combination";

Combined Group means the P&O Princess Group and the Royal Caribbean Group after the Combination has been implemented;

EGM or Extraordinary General Meeting means the extraordinary general meeting of P&O Princess to be held at the Westboune Suite, Royal Lancaster Hotel, Lancaster Terrace, London W2 2TY on 14 February 2002;

EGM Circular means the circular sent to the holders of P&O Princess Shares, P&O Princess ADSs and the participants in the P&O Princess Employee Share Incentive Plans dated 27 December 2001;

P&O Princess ADS means American Depositary Shares, each representing four underlying P&O Princess Shares;

P&O Princess Director means a director of P&O Princess;

P&O Princess Employee Share Incentive Plans mean the P&O Princess Deferred Bonus and Co-Investment Matching Plan and the P&O Princess Executive Share Option Plan;

P&O Princess Group means P&O Princess and its subsidiaries, partnership interests and joint ventures from time to time;

P&O Princess Shares means ordinary shares of US $0.50 each in the capital of P&O Princess; P&O Princess Shareholder means a holder of P&O Princess Shares; Royal Caribbean means Royal Caribbean Cruises Ltd.;

Royal Caribbean Group means Royal Caribbean and its subsidiaries, partnership interests and joint ventures from time to time;

Royal Caribbean Shares means the shares of common stock with a par value of UK $0.01 in the capital of Royal Caribbean.

Forward-looking Statements

Certain statements contained in this document are "forward-looking statements" that involve risks, uncertainties and assumptions with respect to P&O Princess and Royal Caribbean Cruises Ltd. ("Royal Caribbean") and their respective subsidiaries and the Combined Group, including certain statements concerning the transactions described herein, profit forecasts, working capital, future results, plans and goals and other events which have not yet occurred. These statements are intended to qualify for the safe harbours from liability provided by Section 27A of the US Securities Act of 1933, as amended, and Section 21E of the US Securities Exchange Act of 1934, as amended, which are part of the US Private Securities Litigation Reform Act of 1995. You can find many (but not all) of these statements by looking for words like "will", "may", "believes", "expects", "anticipates", "plans" and "estimates" and for similar expressions. Because forward-looking statements involve risks and uncertainties, there are many factors that could cause the transactions described herein not to occur and/or each of P&O Princess', Royal Caribbean's and the Combined Group's actual results, performance or achievements to differ materially from those expressed or implied in this document. These include, but are not limited to, regulatory and shareholder approvals, achievement of planned synergies, general economic and business conditions and, in particular, conditions in the cruise, travel and vacation industries, including changes in industry cruise ship capacity and competition from other cruise ship operators and other vacation alternatives, safety and security concerns, incidents at sea and weather conditions and their impact on the foregoing, the political climate, fluctuations in interest rates, fluctuations in the price of oil, changes in the tax and regulatory regimes under which each company operates, capital expenditures, and factors impacting each of P&O Princess', Royal Caribbean's and the Combined Group's international operations. In addition, the paragraph entitled "Risk Factors" in Section 5 of the EGM Circular dated 27 December 2001 and the sections entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" in each of P&O Princess' and Royal Caribbean's Annual Report on Form 20-F for the year ended 31 December 2000 filed with the US Securities and Exchange Commission contain important cautionary statements and a discussion of many of the factors that could materially affect the accuracy of each company's forward-looking statements and/or adversely affect their respective businesses, results of operations and financial position, which statements and factors are incorporated herein by reference.

Subject to any continuing obligations under applicable law or any relevant listing rules, P&O Princess and Royal Caribbean expressly disclaim any obligation to disseminate, after the date of this document, any updates or revisions to any such forward-looking statements to reflect any change in expectations or events, conditions or circumstances on which any such statements are based.