UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] Confidential, For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Under 14a-12
CARNIVAL CORPORATION
CARNIVAL PLC
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No:
(3) Filing Party:
(4) Date Filed:
[CARNIVAL CORPORATION AND CARNIVAL PLC LOGOS]
May ____, 2003
MICKY ARISON
Chairman of the Boards
Chief Executive Officer
To our Shareholders:
As you know, on April 17, 2003, Carnival Corporation and Carnival plc (formerly
P&O Princess Cruises plc), together referred to as "Carnival," implemented a
dual listed company, or DLC, structure. Under the DLC structure, the businesses
of Carnival Corporation and Carnival plc have been combined principally through
a series of contracts. Each company has retained its separate legal identity,
but the two companies now share a single senior executive management team, have
identical boards of directors and are run as if they were a single economic
enterprise.
On behalf of the boards of directors of each of Carnival Corporation and
Carnival plc, it is my pleasure to invite you to attend our first annual
meetings of shareholders under the DLC structure. The annual meetings will be
held at 11:00 a.m on Monday, June 23, 2003 at Southampton Guildhall in
Southampton, England. Although there technically will be two different meetings
(the Carnival plc meeting will be first), shareholders of Carnival Corporation
may attend the Carnival plc meeting and vice-versa.
As a result of the DLC structure, the conduct of shareholders meetings will
differ from prior practice of both companies. Please see "QUESTIONS AND ANSWERS
ABOUT THE PROXY MATERIALS AND ANNUAL MEETINGS" for an overview of the main
differences. The content of this proxy statement has also changed as a result of
the DLC structure to reflect the new way in which we will conduct shareholder
meetings, in particular, voting at such meetings. As a result of the DLC
structure, Carnival Corporation shareholders will be voting on some items that
are new to them but customary for shareholders of UK companies, while Carnival
plc shareholders will be voting on some items that are new to them but customary
for shareholders of companies that follow US practice. In addition, because this
proxy statement complies with the requirements of the U.S. Securities and
Exchange Commission, the format of the information for the Carnival plc annual
general meeting differs significantly from the format of the information that
shareholders of Carnival plc are accustomed to receiving.
You will find information regarding the matters to be voted on in the attached
notices of annual meetings of shareholders and proxy statement. THE CARNIVAL
CORPORATION NOTICE OF ANNUAL MEETING BEGINS ON PAGE 1 AND THE CARNIVAL PLC
NOTICE OF ANNUAL GENERAL MEETING BEGINS ON PAGE 3. Carnival Corporation is also
pleased to offer most Carnival Corporation shareholders the opportunity to
receive future shareholder communications electronically. By signing up for
electronic delivery, Carnival Corporation shareholders can receive shareholder
communications faster and can help us reduce our printing and mailing costs.
Carnival plc shareholders already have this ability and can access it on
Carnival plc's website, www.carnivalplc.com.
Under the DLC structure, shareholders of both companies effectively vote
together on all significant matters. All of the resolutions proposed for this
year's annual meetings are joint
electorate actions, which means that Carnival Corporation shareholders will be
asked to vote on resolutions for Carnival plc as well on resolutions for
Carnival Corporation, and Carnival plc shareholders will be asked to vote on
resolutions for Carnival Corporation as well on resolutions for Carnival plc.
Please see "QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND ANNUAL MEETINGS"
for a discussion of the voting procedures under the DLC structure.
The overall results of the joint electorate vote will be announced to the media
and the relevant stock exchanges and posted on the website of each of Carnival
Corporation (www.carnivalcorp.com) and Carnival plc (www.carnivalplc.com), after
both shareholder meetings have closed.
Your vote is important. Whether or not you plan to attend the annual meetings in
person, please submit your vote using one of the voting methods described in the
attached materials. Submitting your voting instructions by any of these methods
will not affect your right to attend the meetings in person should you so
choose.
THE BOARDS OF DIRECTORS RECOMMEND THAT YOU VOTE "FOR" PROPOSALS 1-9, WHICH ARE
RESOLUTIONS 1-22, AND "AGAINST" PROPOSAL 10, WHICH IS RESOLUTION 23.
Thank you for your ongoing support of, and continued interest in, Carnival.
Sincerely,
/s/ Micky Arison
----------------
[signature]
Micky Arison
TABLE OF CONTENTS
PAGE
----
Questions and Answers about The Proxy Materials and The Annual Meetings.......10
Questions Specific to Shareholders of Carnival Corporation....................15
Questions Specific to Shareholders of Carnival Plc............................20
Common Stock Ownership of Certain Beneficial Owners and Management............23
Section 16(A) Beneficial Ownership Reporting Compliance.......................30
Proposal 1 (Resolutions 1-13) Election or Re-election of Directors...........31
Proposal 2 (Resolution 14) Approval of Amended and Restated Carnival
Corporation 2002 Stock Plan................35
Other Information on Carnival Corporation's Equity Compensation Plans.........42
Proposal 3 (Resolution 15) Ratification of Independent Certified
Public Accountants for Carnival Corporation..............................43
Proposal 4 (Resolutions 16 & 17) Appointment of Independent Auditors
for Carnival plc..........................43
Proposal 5 (Resolution 18) Receipt of Accounts and Reports of Carnival plc...45
Proposal 6 (Resolution 19) Approval of Directors' Remuneration Report........45
Proposals 7 & 8 (Resolutions 20 & 21) Approval of limits on the
authority to allot Carnival plc shares and the disapplication
of pre-emption rights for Carnival plc...................................46
Proposal 9 (Resolution 22) Authorize Carnival plc to purchase
Carnival plc's own shares................................................47
Proposal 10 (Resolution 23) Carnival Corporation Shareholder Proposal........49
Board Structure And Committee Meetings........................................53
Compensation Of Directors.....................................................57
Executive Compensation........................................................58
Summary Compensation Table....................................................58
Option Grants in Last Fiscal Year.............................................60
Aggregated Option Exercises in Last Fiscal Year and Fiscal
Year-End Option Values ...............................61
Executive Long-Term Compensation Agreements...................................62
Compensation Committee Interlocks and Insider Participation...................63
Defined Benefit and Other Plans...............................................64
Report of the Compensation Committee..........................................66
Stock Performance Graphs......................................................68
Independent Certified Public Accountants......................................69
Report of the Audit Committee.................................................70
Transactions of Management and Directors with Carnival Corporation............72
Transactions of Management and Directors with Carnival Plc....................75
Change in Independent Public Accountants......................................76
Form of Carnival Corporation Proxy Card ......................................77
Form of Carnival plc Proxy Card ..............................................81
i
PAGE
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Annex A Form of Amended and Restated Carnival Corporation 2002 Stock Plan
Annex B Audit Committee Charter for Carnival Corporation and Carnival plc
Annex C P&O Princess Cruises plc (now called Carnival plc) UK Report and
Accounts (excluding Remuneration Report)
Annex D P&O Princess Cruises plc (now called Carnival plc) Remuneration Report
ii
[CORP LOGO]
3655 N.W. 87TH AVENUE
MIAMI, FLORIDA 33178-2428
--------------------
NOTICE OF ANNUAL MEETING OF CARNIVAL CORPORATION SHAREHOLDERS
------------------
DATE Monday, June 23, 2003
TIME 11:00 a.m. (London time)
The Carnival Corporation Annual Meeting will
start directly following the Annual General
Meeting of Carnival plc.
PLACE Southampton Guildhall
West Marlands Road
Civic Center
Southampton, Hants SO 14 7LP
England
ITEMS OF BUSINESS 1. To elect or re-elect 13 directors to the
boards of each of Carnival Corporation
and Carnival plc;
2. To consider and approve the Amended and
Restated Carnival Corporation 2002 Stock
Plan;
3. To ratify the selection of independent
certified public accountants for
Carnival Corporation;
4. To appoint the independent auditors for
Carnival plc and authorize the audit
committee of Carnival plc to agree the
remuneration of the independent
auditors;
5. To receive the accounts and reports for
P&O Princess Cruises plc (now called
Carnival plc) for the year ended
December 31, 2002 (in accordance with
legal requirements applicable to UK
companies);
6. To approve the remuneration policy and
approve the remuneration report of P&O
Princess Cruises plc (now called
Carnival plc) (in accordance with legal
requirements applicable to UK
companies);
7. To approve limits on the authority to
allot shares by Carnival plc (in
accordance with
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customary practice for UK companies);
8. To approve the disapplication of
pre-emption rights for Carnival plc (in
accordance with customary practice for
UK companies);
9. To authorize Carnival plc's purchases of
its own shares (in accordance with
customary practice for UK companies);
10. To consider a shareholder proposal; and
11. To transact such other business as may
properly come before the meeting.
RECORD DATE You are entitled to vote your Carnival
Corporation shares if you were a shareholder
at the close of business on April 30, 2003.
MEETING ADMISSION Attendance at the meeting is limited to
shareholders. Each Carnival Corporation
shareholder may be asked to present valid
picture identification, such as a driver's
license or passport. Shareholders holding
shares in brokerage accounts ("under a
street name") will need to bring a copy of a
brokerage statement reflecting share
ownership as of the record date.
VOTING BY PROXY Please submit a proxy as soon as possible so
that your shares can be voted at the meeting
in accordance with your instructions. For
specific instructions, please refer to the
Questions and Answers beginning on page 9 of
this proxy statement and the instructions on
your proxy card.
On behalf of the Board of Directors
Arnaldo Perez
Senior Vice President,
General Counsel & Secretary
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A proxy statement and proxy card are enclosed. All Carnival Corporation
shareholders are urged to follow the instructions attached to the proxy card and
complete, sign, date and mail the proxy card promptly. The enclosed envelope for
return of the proxy card requires no postage. Any shareholder attending the
meeting may personally vote on all matters that are considered, in which event
the signed proxy will be revoked.
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2
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This proxy statement and accompanying proxy card are being distributed on or
about May __, 2003.
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[PLC LOGO]
CARNIVAL HOUSE
5 GAINSFORD STREET
LONDON SE1 2NE
ENGLAND
--------------------
NOTICE OF ANNUAL GENERAL MEETING OF CARNIVAL PLC SHAREHOLDERS
------------------
NOTICE IS HEREBY GIVEN that an ANNUAL GENERAL MEETING of Carnival plc (formerly
P&O Princess Cruises plc) will be held at Southampton Guildhall, West Marlands
Road, Civic Center, Southampton, Hants SO 14 7LP, England on June 23, 2003 at
11:00 a.m. (London time) for the purpose of considering and, if thought fit,
passing the resolutions described below:
o Resolutions 1 through 20 and 23 will be proposed as ordinary
resolutions. For ordinary resolutions, the required majority is more
than 50% of the combined votes cast at this meeting and Carnival
Corporation's annual meeting.
o Resolutions 21 and 22 will be proposed as special resolutions. For
special resolutions, the required majority is not less than 75% of
the combined votes cast at this meeting and Carnival Corporation's
annual meeting.
TO CONSIDER THE FOLLOWING RESOLUTIONS AS ORDINARY RESOLUTIONS:
ELECTION AND RE-ELECTION OF DIRECTORS
1. To re-elect Micky Arison as a director of Carnival Corporation and to
elect Micky Arison as a director of Carnival plc.
2. To re-elect Howard S. Frank as a director of Carnival Corporation and
to elect Howard S. Frank as a director of Carnival plc.
3. To re-elect Robert H. Dickinson as a director of Carnival Corporation
and to elect Robert H. Dickinson as a director of Carnival plc.
4. To elect Pier Luigi Foschi as a director of Carnival Corporation and as
a director of Carnival plc.
5. To re-elect A. Kirk Lanterman as a director of Carnival Corporation and
to elect A. Kirk Lanterman as a director of Carnival plc.
6. To re-elect Ambassador Richard G. Capen Jr. as a director of Carnival
Corporation and to elect Ambassador Richard G. Capen Jr. as a director
of Carnival plc.
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7. To re-elect Arnold W. Donald as a director of Carnival Corporation and
to elect Arnold W. Donald as a director of Carnival plc.
8. To re-elect Modesto A. Maidique as a director of Carnival Corporation
and to elect Modesto A. Maidique as a director of Carnival plc.
9. To re-elect Stuart Subotnick as a director of Carnival Corporation and
to elect Stuart Subotnick as a director of Carnival plc.
10. To re-elect Uzi Zucker as a director of Carnival Corporation and to
elect Uzi Zucker as a director of Carnival plc.
11. To elect Peter Ratcliffe as a director of Carnival Corporation and to
re-elect Peter Ratcliffe as a director of Carnival plc.
12. To elect Sir John Parker as a director of Carnival Corporation and to
re-elect Sir John Parker as a director of Carnival plc.
13. To elect Baroness Hogg as a director of Carnival Corporation and to
re-elect Baroness Hogg as a director of Carnival plc.
AMENDED AND RESTATED CARNIVAL CORPORATION 2002 STOCK PLAN
14. To consider and approve the Amended and Restated Carnival Corporation
2002 Stock Plan.
RATIFICATION OF CARNIVAL CORPORATION AUDITOR
15. To ratify the selection of PricewaterhouseCoopers LLP as independent
certified public accountant of Carnival Corporation for the period
commencing upon the conclusion of the meeting until the conclusion of
the next annual meeting of Carnival Corporation after the date on which
this resolution is passed.
AUDITOR'S APPOINTMENT AND REMUNERATION
16. To appoint PricewaterhouseCoopers LLP as independent auditors of
Carnival plc for the period commencing upon the conclusion of the
meeting until the conclusion of the next general meeting at which the
accounts of Carnival plc are laid.
17. To authorize the audit committee of the board of directors of Carnival
plc to agree the remuneration of the independent auditors.
ACCOUNTS AND REPORT
18. To receive the accounts of P&O Princess Cruises plc (now called
Carnival plc) and the reports of the directors and the auditors of P&O
Princess Cruises plc for the year ended December 31, 2002.
5
DIRECTORS' REMUNERATION REPORT
19. To approve the remuneration report of the board of P&O Princess Cruises
plc (now called Carnival plc) as set out in the accounts and the
reports of the directors and the auditors for the year ended December
31, 2002.
ALLOTMENT OF SHARES
20. THAT the authority and power conferred on the directors by Article 30
of Carnival plc's articles of association be renewed for a period
commencing at the end of the meeting and expiring at the end of the
next annual general meeting of Carnival plc after the date on which
this resolution is passed and for that period the section 80 amount
shall be U.S. $29,055,630.
TO CONSIDER THE FOLLOWING RESOLUTIONS AS SPECIAL RESOLUTIONS:
DISAPPLICATION OF PRE-EMPTION RIGHTS
21. THAT the power conferred on the directors by Article 31 of Carnival
plc's articles of association be renewed for a period commencing at the
end of the meeting and expiring at the end of the next annual general
meeting of Carnival plc after the date on which this resolution is
passed and for that period the section 89 amount shall be U.S.
$17,300,000.
PURCHASES OF CARNIVAL PLC'S OWN SHARES
22. THAT Carnival plc be and is hereby generally and unconditionally
authorized for the purposes of section 166 of the UK Companies Act 1985
(the "UK Companies Act") to make market purchases (within the meaning
of section 163(3) of the UK Companies Act) on the London Stock Exchange
of ordinary shares of 166 U.S. cents each in the capital of Carnival
plc provided that:
(a) the maximum aggregate number of ordinary shares hereby
authorized to be purchased is 20,840,022 (representing
approximately ten per cent. of Carnival plc's issued and fully
paid ordinary share capital);
(b) the minimum price which may be paid for ordinary shares is 166
U.S. cents per ordinary share (exclusive of expenses);
(c) the maximum price (exclusive of expenses) which may be paid
for an ordinary share shall not be more than five per cent.
above the average of the middle market quotations for an
ordinary share as derived from the London Stock Exchange Daily
Official List for the five business days immediately preceding
the date on which the ordinary share is purchased;
(d) unless previously revoked, varied or renewed, the authority
hereby conferred shall expire at the conclusion of the next
annual general meeting of Carnival plc after
6
the date on which this resolution is passed or fifteen months
from the date of passing this resolution, if earlier; and
(e) Carnival plc may make a contract or, contracts to purchase
ordinary shares under the authority and power hereby conferred
prior to the expiry of such authority which will or may be
executed wholly or partly after the expiry of such authority
and may make a purchase of ordinary shares in pursuance of any
such contract or contracts.
This authority shall also apply (and shall be deemed amended accordingly) to any
ordinary shares of 166 U.S. cents each in the capital of Carnival plc which are
consolidated or sub-divided into ordinary shares in the capital of Carnival plc
of a different nominal amount.
TO CONSIDER THE FOLLOWING RESOLUTION AS AN ORDINARY RESOLUTION:
CARNIVAL CORPORATION SHAREHOLDER PROPOSAL
23. To authorize the board of directors to take the measures necessary to
change Carnival Corporation's jurisdiction of incorporation from Panama
to one of the states of the United States.
By Order of the Board
Simon Pearce
Secretary
May __, 2003
Registered Office:
Carnival House
5 Gainsford Street
London SE1 2NE
England
Registered Number 4039524
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VOTING ARRANGEMENTS FOR CARNIVAL PLC SHAREHOLDERS
Carnival plc shareholders can vote in either of two ways:
o by attending the meeting and voting in person or by attorney or, in
the case of corporate shareholders, by corporate representatives; or
o by appointing a proxy to attend and vote on their behalf, using the
proxy form enclosed with this notice of annual general meeting.
VOTING IN PERSON (OR BY ATTORNEY)
If you come to the annual general meeting, please bring the attendance card
(attached to the enclosed proxy form) with you. This will mean you can register
more quickly. If you appoint an attorney to attend instead of you they should
bring an original or certified copy of the power of attorney under which you
have authorized them to attend and vote.
In order to attend and vote at the annual general meeting, a corporate
shareholder may appoint an individual to act as its representative. The
appointment must comply with the requirements of the UK Companies Act. The
representative should bring evidence of their appointment, including any
authority under which it is signed, to the meeting. If you are a corporation and
considering appointing a corporate representative to represent you and vote your
shareholding in Carnival plc at the annual general meeting you are strongly
encouraged to pre-register your corporate representative to make registration on
the day of the meeting more efficient. You may obtain a pre-registration pack by
contacting Carnival plc's registrar, Computershare Investor Services PLC, on
0870 703 0055 from within the UK or +44 870 703 0055 from elsewhere.
VOTING BY PROXY
A shareholder entitled to attend and vote at the meeting is entitled to appoint
one or more proxies to attend and (on a poll) vote instead of him. A proxy need
not be a shareholder of Carnival plc.
To be effective, a duly completed proxy form and the authority (if any) under
which it is signed, or a notarially certified copy of such authority, must be
deposited (whether delivered personally or by post) at the offices of Carnival
plc's registrars, Computershare Investor Services PLC, The Pavilions, Bridgwater
Road, Bristol BS-13 8FB, UK as soon as possible and in any event no later than
11:00 a.m. on June 21, 2003. Alternatively, a proxy vote may be submitted via
the Internet in accordance with the instructions set out on the proxy form.
In the case of joint registered holders, the signature of one holder on a proxy
card will be accepted and the vote of the senior holder who tenders a vote,
whether in person or by proxy, shall be accepted to the exclusion of the votes
of the other joint holders. For this purpose, seniority shall be determined by
the order in which names stand on the register of members of Carnival plc in
respect of the relevant joint holding.
To appoint a proxy or to give an instruction to a previously appointed proxy via
the CREST system, the CREST message must be received by the issuer's agent
([INSERT ID NUMBER]) by [LATEST TIME]. For this
8
purpose, the time of receipt will be taken to be the time (as determined by the
timestamp applied to the message by the CREST Applications Host) from which the
issuer's agent is able to retrieve the message. CREST Personal Members or other
CREST sponsored members, and those CREST Members who have appointed voting
service provider(s) should contact their CREST sponsor or voting service
provider(s) for assistance with appointing proxies via CREST. For further
information on CREST procedures, limitations and system timings, please refer to
the CREST Manual. We may treat as invalid a proxy appointment sent by CREST in
the circumstances set out in Regulation 35(5)(a) of the Uncertificated
Securities Regulations 2001.
SHAREHOLDERS WHO ARE ENTITLED TO VOTE
Carnival plc, pursuant to Regulation 41 of the Uncertificated Securities
Regulations 2001, specifies that only those shareholders registered in the
register of members of Carnival plc at 11.00 p.m. on June 21, 2003 shall be
entitled to attend or vote at the meeting in respect of the number of shares
registered in their name at that time. Changes to the entries on the register of
members after 11.00 p.m. on June 21, 2003 shall be disregarded in determining
the rights of any person to attend or vote at the meeting.
DOCUMENTS AVAILABLE FOR INSPECTION
Copies of the following documents will be available for inspection during normal
business hours on any weekday (public holidays excluded) at the registered
office of Carnival plc from the date of this notice until and including the date
of the meeting and at the place of the meeting for at least 15 minutes prior to
and during the meeting:
o the register of interests of directors in the share capital of
Carnival plc; and
o copies of all service agreements between each director and Carnival
plc.
If you have any queries in relation to Carnival plc's annual general meeting,
the proposed resolutions or the explanatory notes, please call the shareholder
helpline on 0870 703 0055 from within the UK or +44 870 703 0055 from elsewhere.
* * *
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There are 23 Resolutions that require shareholder approval at the annual
meetings this year. The directors unanimously recommend taht you vote in favour
of Resolutions 1-22 (inclusive) and AGAINST Resolution 23, and encourage you to
submit your vote using one of the voting methods described in the attached proxy
statement. Submitting your voting instructions by any of those methods will not
affect your right to attend the meeting in person should you so choose.
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9
QUESTIONS AND ANSWERS
ABOUT THE PROXY MATERIALS AND THE ANNUAL MEETINGS
Q: WHY AM I RECEIVING THESE MATERIALS?
A: The board of directors of each of Carnival Corporation and Carnival plc
(together, "Carnival," "we" or "us") is providing these proxy materials
to you in connection with our annual meetings of shareholders which
will take place in Southampton, England on Monday, June 23, 2003 at
11:00 a.m. (London time). The Carnival plc meeting will be first and
the Carnival Corporation meeting will commence immediately thereafter.
As a shareholder, you are invited to attend both meetings and are
requested to vote on the proposals described in this proxy statement.
Q: WHAT INFORMATION IS CONTAINED IN THESE MATERIALS?
A: The information included in this proxy statement relates to the
proposals to be voted on at the meetings, the voting process, the
compensation of directors and our most highly paid executive officers
and certain other required information.
Q: WHAT PROPOSALS WILL BE VOTED ON AT EACH OF THE MEETINGS?
A: The proposals to be voted on at each of the meetings are set out in the
notices of meetings starting on pages 1 and 3 of this proxy statement.
Q: WHAT IS THE VOTING RECOMMENDATION OF THE BOARDS OF DIRECTORS?
A: Your boards of directors recommend that you vote your shares as
follows:
o "FOR" Proposals 1-9 (which are Resolutions 1-22); and
o "AGAINST" Proposal 10 (Resolution 23).
Q: HAVE MY VOTING RIGHTS CHANGED BECAUSE OF THE DLC STRUCTURE?
A: Yes. On most matters that affect all of the shareholders of Carnival
Corporation and Carnival plc, the shareholders of both companies
effectively vote together as a single decision-making body. These
matters are called "joint electorate actions." Combined voting is
accomplished through the special voting shares that have been issued by
each company. Certain matters where the interests of the two
shareholder bodies may diverge are called "class rights actions." These
class rights actions will be voted on separately by the shareholders of
each company. If either group of shareholders does not approve a class
rights action, that action generally cannot be taken by either company.
All of the proposals to be voted on at our first annual meetings are
joint electorate actions, and there are no class rights actions.
Q: GENERALLY, WHAT ACTIONS ARE JOINT ELECTORATE ACTIONS?
A: Any resolution to approve an action other than a class rights action or
a procedural resolution (described below) will be designated as a joint
electorate action. The actions that would be designated as joint
electorate actions include:
10
o the appointment, removal or re-election of any director of either or
both companies;
o if required by law, the receipt or adoption of the annual accounts
of both companies;
o the appointment or removal of the auditors of either company;
o a change of name by either or both companies; or
o the implementation of a mandatory exchange of Carnival plc shares
for Carnival Corporation shares based on a change in tax laws, rules
or regulations.
The relative voting rights of Carnival plc shares and Carnival
Corporation shares have been equalized based on a ratio which we refer
to as the "equalization ratio." Based on the current equalization ratio
of 1:1, each Carnival Corporation share has the same voting rights as
one Carnival plc share on joint electorate actions.
Q: WHAT PROPOSALS TO BE VOTED ON AT THE MEETINGS ARE JOINT ELECTORATE
ACTIONS?
A: All of the proposals to be voted on at the annual meetings are joint
electorate actions.
Q: HOW WILL JOINT ELECTORATE ACTIONS BE VOTED ON?
A: Joint electorate actions will be voted on as follows:
o Carnival plc shareholders will vote at the annual general meeting of
Carnival plc (whether in person or by proxy). Voting will be on a
poll (or ballot) which will remain open for sufficient time to allow
the vote at the Carnival Corporation meeting to be held and
reflected in the Carnival plc meeting through the mechanism of the
special voting share. An equivalent vote will be cast at the
subsequent Carnival Corporation meeting on each of the corresponding
resolutions through a special voting share issued by Carnival
Corporation; and
o at the immediately following Carnival Corporation annual meeting,
Carnival Corporation shareholders will vote (whether in person or by
proxy) and an equivalent vote will be cast on the corresponding
resolutions at the Carnival plc meeting through a special voting
share issued by Carnival plc.
A joint electorate action will be approved if it is approved by:
o a simple majority of the votes cast in the case of an ordinary
resolution (or not less than 75% of the votes cast in the case of a
special resolution if required by applicable law and regulations or
Carnival plc's articles) by the holders of Carnival plc's shares and
the holder of the Carnival plc special voting share as a single
class at a meeting at which a quorum was present and acting;
o a simple majority of the votes cast (or other majority if required
by applicable law and regulations or the Carnival Corporation
articles and by-laws) by the holders of Carnival Corporation shares
and the holder of the Carnival Corporation special voting share,
voting as a single class at a meeting which a quorum was present and
acting; and
11
o a minimum of one-third of the total votes available to be voted by
the combined shareholders must be cast on each resolution for it to
be effective. Formal abstentions (or votes withheld) by a
shareholder on a resolution will be counted as having been "cast"
for this purpose.
Q: HOW WILL THE DIRECTORS OF EACH COMPANY BE ELECTED OR RE-ELECTED?
A: Resolutions relating to the election or re-election of directors are
considered as a joint electorate action. No person may be a member of
the board of directors of Carnival Corporation or Carnival plc without
also being a member of the board of directors of the other company.
There are 13 nominees for election or re-election to the board of
directors of each company this year. Each nominee currently serves as a
director of Carnival Corporation and Carnival plc and (other than Pier
Luigi Foschi) was a director of one of the two companies prior to April
17, 2003 (the date we implemented the DLC structure). All directors are
to be elected or re-elected to serve until the next annual meetings and
until their successors are elected.
Q: WHAT VOTES ARE REQUIRED TO ELECT DIRECTORS OR APPROVE THE OTHER
PROPOSALS?
A: Proposals 8 and 9 (which are Resolutions 21 and 22) are required to be
approved by 75% of the combined votes cast at both meetings. Each of
the other proposals, including the election of directors, requires the
approval of a majority of the combined votes cast at both meetings.
Abstentions (including votes withheld) and broker non-votes are not
deemed votes cast for purposes of calculating the vote, but do count
for the purpose of determining whether a quorum is present.
Q: GENERALLY, WHAT ACTIONS ARE CLASS RIGHTS ACTIONS?
A: Actions designated as class rights actions are set forth below:
o the voluntary liquidation, dissolution or winding up of either
company;
o the sale, lease, exchange or other disposition of all or
substantially all of the assets of either company other than a bona
fide commercial transaction for valid business purposes and at fair
market value and not as part of a proposal, the primary purpose of
which is to collapse or unify the DLC structure;
o an adjustment to the equalization ratio, other than in accordance
with the Equalization and Governance Agreement signed by Carnival
Corporation and Carnival plc on April 17, 2003;
o any amendment, removal or alteration of any of the provisions of the
governing documents of Carnival plc or Carnival Corporation which
entrench specified core provisions of the DLC structure;
o any amendment or termination of the principal agreements under which
the DLC structure is implemented (except where otherwise
specifically provided in the relevant agreement);
12
o any amendment to, removal or alteration of the effect of certain
tax-related provisions of Carnival Corporation's articles of
incorporation that would be likely to cause a mandatory exchange;
and
o anything which the boards of both companies agree should be approved
as a class rights action.
Q: GENERALLY, WHAT ARE PROCEDURAL RESOLUTIONS?
A: Procedural resolutions are those that do not adversely affect the
shareholders of the other company in any material respect and are put
to the shareholders at a meeting. The special voting shares do not
represent any votes on resolutions of a procedural or technical nature,
or "procedural resolutions." The chairman of each of the boards,
currently Micky Arison, will determine whether a resolution is a
procedural resolution.
To the extent that such matters require the approval of the
shareholders of either company, any of the following will be procedural
resolutions:
o that certain people be allowed to attend or be excluded from
attending the meeting;
o that discussion be closed and the question put to the vote (provided
no amendments have been raised);
o that the question under discussion not be put to the vote (where a
shareholder feels the original motion should not be put to the
meeting at all, if such original motion was brought during the
course of that meeting);
o to proceed with matters in an order other than that set out in the
notice of the meeting;
o to adjourn the debate (for example, to a subsequent meeting); and
o to adjourn the meeting.
Q: WHERE CAN I FIND THE VOTING RESULTS OF THE MEETING?
A: The voting results will be announced to the media and the relevant
stock exchanges and posted on the website of Carnival Corporation
(www.carnivalcorp.com) and Carnival plc (www.carnivalplc.com), after
both shareholder meetings have closed. The results will also be
published in our quarterly report on Form 10-Q for the second quarter
of fiscal 2003 ending May 31, 2003.
Q: WHAT IS THE QUORUM REQUIREMENT FOR THE MEETINGS?
A: The quorum requirement for holding the meetings and transacting
business at the meetings is one-third of the total votes of all
shareholders of both companies entitled to be voted. Shareholders may
be present in person (or by attorney) or represented by proxy at the
meetings.
Q: HOW IS THE QUORUM DETERMINED?
A: For purposes of determining a quorum with respect to joint electorate
actions, the special voting shares will have the maximum number of
votes attached to them as were cast on such joint electorate actions,
either for, against or abstained, at the parallel shareholder meeting
of the other company, and such maximum number of votes (including
abstentions) will constitute
13
shares entitled to vote and present for purposes of determining whether
a quorum exists at such meeting.
In order for a quorum to be validly constituted with respect to
meetings of shareholders convened to consider a joint electorate action
or class rights action, the special voting entities must be present.
Abstentions (including votes withheld) and broker non-votes are counted
as present for the purpose of determining the presence of a quorum.
Generally, broker non-votes occur when shares held by a broker for a
beneficial owner are not voted with respect to a particular proposal
because (1) the broker has not received voting instructions from the
beneficial owner and (2) the broker lacks discretionary voting power to
vote such shares.
Q: IS MY VOTE CONFIDENTIAL?
A: Proxy instructions, ballots and voting tabulations that identify
individual shareholders are handled in a manner that protects your
voting privacy. Your vote will not be disclosed either within Carnival
or to third parties except (1) as necessary to meet applicable legal
requirements, (2) to allow for the tabulation of votes and
certification of the vote, or (3) to facilitate a successful proxy
solicitation by our boards of directors. Occasionally, shareholders
provide written comments on their proxy card which are then forwarded
to management.
Q: WHO WILL BEAR THE COST OF SOLICITING VOTES FOR THE MEETINGS?
A: Carnival Corporation and Carnival plc will pay the entire cost of
preparing, assembling, printing, mailing and distributing these proxy
materials and soliciting votes for the meetings. Carnival Corporation
and Carnival plc will also reimburse brokerage houses and other
custodians, nominees and fiduciaries for their reasonable out-of-pocket
expenses for forwarding proxy materials to shareholders.
Q: CAN I VIEW THE PROXY MATERIALS ELECTRONICALLY?
A: This proxy statement and each of Carnival Corporation's and Carnival
plc's 2002 annual reports are posted on their websites at
www.carnivalcorp.com and www.carnivalplc.com. We encourage you to take
advantage of the convenience of accessing these materials through the
Internet as it is simple and fast to use, saves time and money, and is
environmentally friendly.
14
QUESTIONS SPECIFIC TO SHAREHOLDERS OF CARNIVAL CORPORATION
Carnival plc shareholders should refer to the "QUESTIONS SPECIFIC TO
SHAREHOLDERS OF CARNIVAL PLC" beginning on page 20.
Q: WHAT CARNIVAL CORPORATION SHARES OWNED BY ME CAN BE VOTED?
A: All Carnival Corporation shares owned by you as of April 30, 2003, the
record date, may be voted by you. These shares include those (1) held
directly in your name as the shareholder of record, including shares
purchased through Carnival Corporation's Dividend Reinvestment Plan and
its Employee Stock Purchase Plan and (2) held for you as the beneficial
owner though a stockbroker, bank or other nominee.
Q: WILL I BE ASKED TO VOTE AT THE CARNIVAL PLC ANNUAL MEETING?
A: No. Your vote at the Carnival Corporation annual meeting, for purposes
of determining the outcome of combined voting, will automatically be
reflected as appropriate at the annual meeting of Carnival plc through
the mechanism of the special voting share issued by Carnival plc.
Q: WHAT IS THE DIFFERENCE BETWEEN HOLDING SHARES AS A SHAREHOLDER OF
RECORD AND AS A BENEFICIAL OWNER?
A: Most of the shareholders of Carnival Corporation hold their shares
through a stockbroker, bank or other nominee rather than directly in
their own name. As summarized below, there are some distinctions
between shares held of record and those owned beneficially.
SHAREHOLDER OF RECORD
If your shares are registered directly in your name with Carnival
Corporation's Transfer Agent, SunTrust Bank, you are considered, with
respect to those shares, the shareholder of record, and these proxy
materials are being sent directly to you by us. As the shareholder of
record, you have the right to grant your voting proxy directly to the
persons named in the proxy or to vote in person at the meeting.
Carnival Corporation has enclosed a proxy card for you to use.
BENEFICIAL OWNER
If your shares are held in a stock brokerage account or by a bank or
other nominee, you are considered the beneficial owner of shares held
in street name, and these proxy materials are being forwarded to you by
your broker or nominee who is considered, with respect to those shares,
the shareholder of record. As the beneficial owner, you have the right
to direct your broker on how to vote and are also invited to attend the
meeting. However, since you are not the shareholder of record, you may
not vote these shares in person at the meeting. Your broker or nominee
has enclosed a voting instruction card for you to use.
Q: HOW CAN I VOTE MY CARNIVAL CORPORATION SHARES IN PERSON AT THE MEETING?
A: Shares held directly in your name as the shareholder of record may be
voted
15
in person at the annual meeting. If you choose to do so, please bring
the enclosed proxy card or proof of identification.
Even if you plan to attend the annual meeting, we recommend that you
also submit your proxy as described below so that your vote will be
counted if you later decide not to attend the meeting. Shares held in
street name may be voted in person by you only if you obtain a signed
proxy from the record holder giving you the right to vote the shares.
Please refer to the voting instruction card included by your broker or
nominee.
Q: HOW CAN I VOTE MY CARNIVAL CORPORATION SHARES WITHOUT ATTENDING THE
MEETING?
A: Whether you hold shares directly as the shareholder of record or
beneficially in street name, you may direct your vote without attending
the meeting. You may vote by granting a proxy or, for shares held in
street name, by submitting voting instructions to your broker or
nominee. For shareholders of record, you may do this by signing your
proxy card and mailing it in the enclosed envelope. If you provided
specific voting instructions, your shares will be voted as you
instruct. If you sign but do not provide instructions, your shares will
be voted as described below in "HOW ARE VOTES COUNTED?"
In most instances, where your shares are held in street name, you will
be able to do this over the Internet at www.proxyvote.com, by telephone
or by mail. Please refer to the voting instruction card included by
your broker or nominee.
Q: CAN I CHANGE MY VOTE?
A: You may change your proxy instruction at any time prior to the vote at
the annual meeting. For shares held directly in your name, you may
accomplish this by granting a new proxy bearing a later date (which
automatically revokes the earlier proxy) or by attending the annual
meeting and voting in person. Attendance at the meeting will not cause
your previously granted proxy to be revoked unless you specifically so
request. For shares owned beneficially by you, you may accomplish this
by submitting new voting instructions to your broker or nominee.
Q: WHAT DOES IT MEAN IF I RECEIVE MORE THAT ONE PROXY OR VOTING
INSTRUCTION CARD?
A: It means your shares are registered differently or are in more than one
account. Please provide voting instructions for all proxy and voting
cards you receive.
Q: WHO CAN ATTEND THE CARNIVAL CORPORATION MEETING?
A: All Carnival Corporation shareholders of record as of April 30, 2003,
or their duly appointed proxies, may attend and vote at the meeting.
Each shareholder may be asked to present valid picture identification,
such as a driver's license or passport.
All holders of Carnival plc shares as of 11.00 p.m. on June 21, 2003
may also
16
attend, but not vote at, the Carnival Corporation annual meeting.
If you hold your shares through a stockbroker or other nominee, you
will need to provide proof of ownership by bringing either a copy of
the voting instruction card provided by your broker or a copy of a
brokerage statement showing your share ownership as of April 30, 2003
together with proof of identification. Cameras, recording devices and
other electronic devices will not be permitted at the meeting.
Q: WHAT CLASS OF SHARES ARE ENTITLED TO BE VOTED AT THE CARNIVAL
CORPORATION MEETING?
A: Carnival Corporation has only one class of common stock outstanding.
Each share of Carnival Corporation common stock outstanding as of the
close of business on April 30, 2003, the record date, is entitled to
one vote at the annual meeting. On the record date, Carnival
Corporation had approximately 628,661,981 shares of common stock issued
and outstanding. The trust shares of beneficial interest in the P&O
Princess Special Voting Trust that are paired with your shares of
common stock do not give you separate voting rights.
Q: HOW ARE VOTES COUNTED?
A: You may vote "FOR," "AGAINST" or "ABSTAIN" for each of the proposals.
If you "ABSTAIN," it has no effect on the outcome of the votes,
although abstentions will be counted for purposes of determining a
quorum for joint electorate actions. If you sign your proxy card or
broker voting instruction card with no further instructions, your
shares will be voted in accordance with the recommendations of boards
of directors.
Q: WHAT VOTES ARE REQUIRED TO ELECT DIRECTORS OR APPROVE THE OTHER
PROPOSALS?
A: Under the DLC structure, all proposals are voted on by the shareholders
of both companies voting together as a joint electorate. See "HOW WILL
JOINT ELECTORATE ACTIONS BE VOTED ON?" for an explanation of joint
electorate voting. Proposals 8 and 9 (which are Resolutions 21 and 22)
are required to be approved by 75% of the combined votes cast at both
meetings. Each of the other proposals, including the election of
directors, requires the approval of a majority of the combined votes
cast at the annual meetings.
If you are a beneficial owner of Carnival Corporation shares and do not
provide the shareholder of record with a signed voting instruction
card, your shares may constitute broker non-votes, as described in "HOW
IS THE QUORUM DETERMINED?" In tabulating the voting result for any
particular proposal, shares which constitute broker non-votes are not
deemed cast for purposes of calculating the vote.
Q: WHAT HAPPENS IF ADDITIONAL PROPOSALS ARE PRESENTED AT THE MEETING?
A: Other than the proposals described in this proxy statement, Carnival
Corporation does not expect any matters to be presented for a vote at
the annual meeting. If you grant a
17
proxy, the persons named as proxy holders, Micky Arison, our Chairman
of the Board and Chief Executive Officer, and Arnaldo Perez, Carnival
Corporation's Senior Vice President, General Counsel and Secretary,
will have the discretion to vote your shares on any additional matters
properly presented for a vote at the meeting. If for any unforeseen
reason any of our nominees is unable to accept nomination or election
(which is not anticipated), the persons named as proxy holders will
vote your proxy for such other candidate or candidates as may be
nominated by the boards of directors.
Q: WHO WILL COUNT THE VOTE?
A: A representative of SunTrust Bank, our transfer agent, will tabulate
the votes and act as the inspector of elections.
Q: MAY I PROPOSE ACTIONS FOR CONSIDERATION AT NEXT YEAR'S ANNUAL MEETING
OR NOMINATE INDIVIDUALS TO SERVE AS DIRECTORS?
A: You may submit proposals for consideration at future shareholder
meetings, including director nominations. In order for shareholder
proposals to be considered for inclusion in our proxy statement for
next year's annual meeting, the written proposals must be received by
our Secretary no later than October 31, 2003. Such proposals also will
need to comply with U.S. Securities and Exchange Commission regulations
regarding the inclusion of shareholder proposals in company sponsored
proxy materials. Any proposal of shareholders to be considered at next
year's meeting, but not included in the proxy statement, must be
submitted in writing by January 10, 2004. If received after such date,
the proposal will be deemed to be received in an untimely fashion.
You may also propose director candidates for consideration by our
Board's Nominating & Governance Committee. In order to have a nominee
considered by the Nominating & Governance Committee for election at the
2004 annual meeting of shareholders, a shareholder must submit its
recommendation in writing to the attention of our Secretary at our
headquarters not later than January 1, 2004.
Q: HOW CAN I OBTAIN COPIES OF CARNIVAL CORPORATION'S ANNUAL REPORT ON FORM
10-K AND 10-K/A?
A: Copies of Carnival Corporation's Annual Report on Form 10-K and 10-K/A
for Carnival Corporation's fiscal year ended November 30, 2002 (not
including documents incorporated by reference) as filed with the U.S.
Securities and Exchange Commission can be viewed or obtained without
charge through the U.S. Securities and Exchange Commission's website
www.sec.gov or at Carnival Corporation's home page on the Internet at
www.carnivalcorp.com. Copies will also be provided to shareholders
without charge upon written request to Investor Relations, Carnival
Corporation, 3655 N.W. 87th Avenue, Miami, Florida 33178-2428. We
encourage you to take advantage of the convenience of accessing these
materials through the Internet as it is simple and fast to use, saves
time and
18
money, and is environmentally friendly.
19
QUESTIONS SPECIFIC TO SHAREHOLDERS OF CARNIVAL PLC
Carnival Corporation shareholders should refer to "QUESTIONS SPECIFIC TO
SHAREHOLDERS OF CARNIVAL Corporation" beginning on page 15.
Q: WHO IS ENTITLED TO ATTEND AND VOTE AT THE ANNUAL GENERAL MEETING OF
CARNIVAL PLC?
A: If you are a Carnival plc shareholder registered in the register of
members of Carnival plc at 11:00 p.m. (London time) on June 21, 2003,
you will be entitled to attend in person and vote at the annual general
meeting in respect of the number of Carnival plc shares registered in
your name at that time. You may also appoint one or more proxies to
attend and (on a poll) vote instead of you. If you are a corporation
you may appoint a corporate representative to represent you and vote
your shareholding in Carnival plc at the annual general meeting. For
further details regarding appointing a proxy or corporate
representative please see below.
Carnival Corporation shareholders as of April 30, 2003, may also
attend, but may not vote at, the Carnival plc annual general meeting.
Q: WILL I BE ASKED TO VOTE AT THE CARNIVAL CORPORATION ANNUAL MEETING?
A: No. Your vote at the Carnival plc annual general meeting, for purposes
of determining the outcome of combined voting, will automatically be
reflected as appropriate at the subsequent annual meeting of Carnival
Corporation through the mechanism of a special voting share issued by
Carnival Corporation.
Q: HOW DO I VOTE MY CARNIVAL PLC SHARES WITHOUT ATTENDING THE ANNUAL
GENERAL MEETING?
A: You may vote your Carnival plc shares at the annual general meeting by
completing and signing the enclosed form of proxy in accordance with
the instructions set out on the form and returning it as soon as
possible, but in any event so as to be received by Carnival plc's
registrar, Computershare Investor Services PLC, The Pavilions,
Bridgwater Road, Bristol, BS13 8FB, by not later than 11:00 a.m.
(London time) on June 21, 2003. Alternatively, a proxy vote may be
submitted via the Internet in accordance with the instructions set out
in the proxy form. It is also possible to appoint a proxy via the CREST
system, please see page [9] for further details. Voting by proxy does
not preclude you from attending the annual general meeting and voting
in person should you wish to do so.
If you are a corporation you can vote your Carnival plc shares at the
annual general meeting by appointing a corporate representative. You
are strongly encouraged to pre-register your corporate representative
to make registration on the day of the annual meeting more efficient.
You may obtain a pre-registration pack by contacting Carnival plc's
registrar, Computershare Investor Services PLC, on 0870 703 0055 from
within the UK or +44 870 703 0055 from elsewhere. Corporate
representatives
20
themselves are urged to arrive at least two hours before commencement
of the annual general meeting to assist Carnival plc's registrar with
the appropriate registration formalities. Whether or not you intend to
appoint a corporate representative, you are strongly encouraged to
return the enclosed form of proxy to Carnival plc's registrar.
Q: CAN I CHANGE MY VOTE GIVEN BY PROXY OR BY MY CORPORATE REPRESENTATIVE?
A: Yes, in certain circumstances. You may change your proxy vote by either
completing, signing and dating a new form of proxy in accordance with
its instructions and returning it to Carnival plc's registrars by no
later than 11:00 a.m. (London time) on June 21, 2003, or by attending
and voting in person at the annual general meeting. If you do not
attend and vote in person at the annual general meeting and wish to
revoke the appointment of your proxy or corporate representative you
must do so by delivering a notice of such revocation to Carnival plc's
registrars at least three hours before the start of the annual general
meeting.
Q: WHAT CLASS OF SHARES ARE ENTITLED TO BE VOTED AT THE CARNIVAL PLC
MEETING?
A: Carnival plc has only one class of ordinary shares in issue. Each
Carnival plc ordinary share in issue as of the close of business on
June 21, 2003, is entitled to one vote at the annual general meeting.
Q: WHAT VOTES ARE REQUIRED TO ELECT DIRECTORS OR APPROVE THE OTHER
PROPOSALS?
A: Under the DLC structure, all proposals are voted on by the shareholders
of both companies voting together as a joint electorate. Resolutions 21
and 22 (which are proposals 8 and 9) are required to be approved by 75%
of the combined votes cast at both meetings. Each of the other
resolutions, including the election or re-election of directors,
requires the approval of a majority of the combined votes cast at the
annual general meetings. See "HOW WILL JOINT ELECTORATE ACTIONS BE
VOTED ON?" for an explanation of joint electorate voting. Abstentions
are not deemed votes cast for purposes of calculating the vote.
Q: MAY I PROPOSE ACTIONS FOR CONSIDERATION AT NEXT YEAR'S ANNUAL GENERAL
MEETING OR NOMINATE INDIVIDUALS TO SERVE AS DIRECTORS?
A: You may, to the extent permitted under Carnival plc's governing
documents and UK law, submit proposals for consideration at future
shareholder meetings, including director nominations. In order for
shareholder proposals to be considered for inclusion in our proxy
statement for next year's annual general meeting, the written proposals
must be received by our Secretary no later than October 31, 2003. Such
proposals also will need to comply with U.S. Securities and Exchange
Commission regulations regarding the inclusion of shareholder proposals
in company sponsored proxy materials. Any proposal of shareholders to
be considered at next year's meeting, but
21
not included in the proxy statement, must be submitted in writing by
January 10, 2004.
You may also propose director candidates for consideration by our
Board's Nominating & Governance Committee. In order to have a nominee
considered by the Nominating & Governance Committee for election at the
2004 annual general meeting of shareholders, a shareholder must submit
its recommendation in writing to the attention of our Secretary at our
headquarters not later than January 1, 2004.
Q: HOW CAN I OBTAIN COPIES OF CARNIVAL PLC'S ANNUAL REPORT ON FORM 20-F?
A: Copies of Carnival plc's Annual Report on Form 20-F for its fiscal year
ended December 31, 2002 (not including documents incorporated by
reference) as filed with the SEC can be viewed or obtained without
charge through the SEC's website at www.sec.gov or at Carnival plc's
home page on the Internet www.carnivalplc.com. Copies will also be
provided to shareholders without charge upon written request to
Investor Relations, Carnival plc, Carnival House, 5 Gainsford Street,
London SE1 2NE, England. We encourage you to take advantage of the
convenience of accessing these materials through the Internet as it is
simple and fast to use, saves time and money, and is environmentally
friendly.
22
COMMON STOCK OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
Set forth below is information concerning the share ownership of (1) all persons
known by us to be the beneficial owners of 5% or more of the 628,661,981 shares
of Carnival Corporation common stock and trust shares of beneficial interest in
the P&O Princess Special Voting Trust outstanding as of April 30, 2003, (2) all
persons known by us to be the beneficial owners of 5% or more of the 208,400,223
ordinary shares of Carnival plc outstanding as of April 30, 2003, (3) each of
our executive officers named in the Carnival Corporation Summary Compensation
Table which appears elsewhere in this proxy statement, (4) each other of our
directors and (5) all directors and executive officers as a group.
Micky Arison, Chairman of the board and Chief Executive Officer of each of
Carnival Corporation and Carnival plc, certain other members of the Arison
family and trusts for their benefit (collectively, the "Principal
Shareholders"), beneficially own shares representing approximately 33% of the
combined voting power of Carnival and have informed us that they intend to cause
all such shares to be voted in favor of the 13 nominees to the boards of
directors named in this proxy statement, in favor of Proposals 2 through 9 and
against Proposal 10 listed in the accompanying Carnival Corporation Notice of
Meeting. The table begins with ownership of the Principal Shareholders. See
footnote (2) below for a description of the group comprised of members of the
Arison family and other persons and entities affiliated with them.
The number of shares beneficially owned by each entity, person, director,
nominee or executive officer is determined under rules of the U.S. Securities
and Exchange Commission, and the information is not necessarily indicative of
beneficial ownership for any other purpose. Under such rules, beneficial
ownership includes any shares as to which the individual has the sole or shares
voting power or investment power and also any shares which the individual has
the right to acquire as of June 29, 2003 (60 days after the record date of April
30, 2003) through the exercise of any stock option or other right.
23
BENEFICIAL OWNERSHIP TABLE
NAME AND ADDRESS OF BENEFICIAL AMOUNT AND NATURE PERCENT OF AMOUNT AND PERCENT OF PERCENT OF
OWNERS OR IDENTITY OF GROUP (1) OF BENEFICIAL CARNIVAL NATURE OF CARNIVAL COMBINED
OWNERSHIP OF CORPORATION BENEFICIAL PLC VOTING
CARNIVAL COMMON STOCK OWNERSHIP OF ORDINARY POWER**
CORPORATION SHARES CARNIVAL PLC SHARES
AND TRUST SHARES* ORDINARY SHARES
Micky Arison......................... 224,010,503(3)(4) 35.6% 0 0 26.7%
Shari Arison......................... 7,353,908(3)(5) 1.2% 0 0 ***
c/o Israel Arison Foundation
Marcaz Golda Center
23 Shaul Hamelech Blvd.
Tel Aviv, Israel 64367
James M. Dubin....................... 147,214,270(3)(7) 23.4% 0 0 17.6%
c/o Paul, Weiss, Rifkind, Wharton
& Garrison LLP
1285 Avenue of the Americas
New York, New York 10019
MA 1994 B Shares, L.P................ 106,114,284(3)(6) 16.9% 0 0 12.7%
MA 1994 B Shares, Inc................ 106,114,284(3)(6) 16.9% 0 0 12.7%
MA 1997 Holdings, L.P................ 6,102,187(3)(7) 1% 0 0 ***
MA 1997 Holdings, Inc................ 6,102,187(3)(7) 1% 0 0 ***
JMD Delaware, Inc.................... 6,102,187(3)(7) 1% 0 0 ***
as Trustee for the Micky Arison
1997 Holdings Trust
The Royal Bank of Scotland Trust
Company.......................... 46,145,830(3)(8) 7.3% 0 0 5.5%
(Jersey) Limited
as Trustee of the Ted Arison 1992
Irrevocable Trust for Lin No. 2
P.O. Box 298, St. Helier
Jersey, Channel Islands
Balluta Limited...................... 5,102,708(3)(9) *** 0 0 ***
as Trustee for the Shari Arison
Irrevocable Guernsey Trust
St. James Chambers, Athol Street
Douglas, Isle of Man
Cititrust (Jersey) Limited........... 76,787,525(3)(8) 12.2% 0 0 9.2%
as Trustee for the Ted Arison 1994
Irrevocable Trust For Shari No. 1
P.O. Box 728, 38 Esplanade, St.
Helier, Jersey, Channel Islands
JE4-8ZT
24
NAME AND ADDRESS OF BENEFICIAL AMOUNT AND NATURE PERCENT OF AMOUNT AND PERCENT OF PERCENT OF
OWNERS OR IDENTITY OF GROUP (1) OF BENEFICIAL CARNIVAL NATURE OF CARNIVAL COMBINED
OWNERSHIP OF CORPORATION BENEFICIAL PLC VOTING
CARNIVAL COMMON STOCK OWNERSHIP OF ORDINARY POWER**
CORPORATION SHARES CARNIVAL PLC SHARES
AND TRUST SHARES* ORDINARY SHARES
JMD Protector, Inc................... 122,933,355(3)(7) 19.5% 0 0 14.7%
c/o Paul, Weiss, Rifkind, Wharton
& Garrison LLP
1285 Avenue of the Americas
New York, New York 10019
JMD Delaware, Inc.................... 2,124,560(3) *** 0 0 ***
as Trustee for the Continued Trust
for Micky Arison
JMD Delaware, Inc.................... 3,759,010(3) *** 0 0 ***
as Trustee for the Continued Trust
for Shari Arison Dorsman
JMD Delaware, Inc.................... 4,759,010(3) *** 0 0 ***
as Trustee for the Continued Trust
for Michael Arison
JMD Delaware, Inc.................... 1,432,440(3)(10) *** 0 0 ***
as Trustee for the Marilyn B. Arison
Irrevocable Delaware Trust
JMD Delaware, Inc.................... 1,000,000(3) *** 0 0 ***
as Trustee for the Michael Arison
1999 Irrevocable Delaware Trust
MBA I, L.L.C......................... 1,432,440(3)(10) *** 0 0 ***
TAMMS Investment Company............. 3,653,168(3) *** 0 0 ***
Limited Partnership
TAMMS Management Corporation......... 3,653,168(3) *** 0 0 ***
The Ted Arison Family Foundation
USA, Inc......................... 2,250,000(3) *** 0 0 ***
3655 N.W. 87 Avenue
Miami, Florida 33178
Robert H. Dickinson.................. 501,465(11) *** 0 0 ***
Pier Luigi Foschi.................... 50,000(12) *** 0 0 ***
Howard S. Frank...................... 1,073,628(13) *** 0 0 ***
A. Kirk Lanterman.................... 170,595(14) *** [16] *** ***
c/o Holland America Line Inc.
300 Elliott Avenue West
Seattle, Washington 98119
Ambassador Richard G. Capen, Jr...... 41,402(15) *** 0 0 ***
6077 San Elijo
Rancho Santa Fe, California 92067
25
NAME AND ADDRESS OF BENEFICIAL AMOUNT AND NATURE PERCENT OF AMOUNT AND PERCENT OF PERCENT OF
OWNERS OR IDENTITY OF GROUP (1) OF BENEFICIAL CARNIVAL NATURE OF CARNIVAL COMBINED
OWNERSHIP OF CORPORATION BENEFICIAL PLC VOTING
CARNIVAL COMMON STOCK OWNERSHIP OF ORDINARY POWER**
CORPORATION SHARES CARNIVAL PLC SHARES
AND TRUST SHARES* ORDINARY SHARES
Arnold W. Donald..................... 5,400(16) *** 0 0 ***
c/o Merisant Company
1 North Brentwood Blvd.
Suite 510
Clayton, Missouri 63105
Baroness Sarah Hogg................. 0 *** [6,240] *** ***
c/o 3i Group plc
91 Waterloo Road
London SE1 8XP
England
Modesto A. Maidique.................. 23,600(17) *** 0 0 ***
Florida International University
Office of the President
University Park Campus
107th Avenue and S.W. 8th Street
Miami, Florida 33199
Sir John Parker...................... 0 *** 10,000 *** ***
c/o National Grid Transco plc
1-3 Strand
London WC2N 5EH
England
Peter Ratcliffe...................... 0 *** [731,238(19)] *** ***
c/o Carnival plc
Carnival House, 5 Gainsford Street
London SE1 2NE
England
Stuart Subotnick..................... 63,600 (20) *** 0 0 ***
c/o Metromedia Company
810 7th Avenue, 29th Floor
New York, New York 10019
Uzi Zucker........................... 63,600 (21) *** 0 0 ***
c/o Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
Capital Research and Management Company... 38,362,900 (22) 6.1% 0 0 4.6%
333 South Hope Street
Los Angeles, California 90071
Deutsche Bank AG..................... 0 0 [75,971,531] [ __ ]% 9.1%
23 Great Winchester Street
London EC2P 2AX (23)
England
26
NAME AND ADDRESS OF BENEFICIAL AMOUNT AND NATURE PERCENT OF AMOUNT AND PERCENT OF PERCENT OF
OWNERS OR IDENTITY OF GROUP (1) OF BENEFICIAL CARNIVAL NATURE OF CARNIVAL COMBINED
OWNERSHIP OF CORPORATION BENEFICIAL PLC VOTING
CARNIVAL COMMON STOCK OWNERSHIP OF ORDINARY POWER**
CORPORATION SHARES CARNIVAL PLC SHARES
AND TRUST SHARES* ORDINARY SHARES
All directors and executive officers as
a group (20 persons)............... 226,687,165 35.9% [747,494] *** 27%
------------------------
* On April 17, 2003, Carnival plc and Carnival Corporation implemented a dual
listed company, or "DLC" structure. As part of the DLC structure, Carnival plc
issued a special voting share to Carnival Corporation, which transferred such
share to the trustee of the P&O Princess Special Voting Trust (the "Trust"), a
trust established under the laws of the Cayman Islands. Trust shares of
beneficial interest in the Trust were transferred to Carnival Corporation. The
trust shares represent a beneficial interest in the Carnival plc special voting
share. Immediately following the transfer, Carnival Corporation distributed such
trust shares by way of a dividend to holders of shares of common stock of
Carnival Corporation. Under a pairing agreement, the trust shares of beneficial
interest in the Trust are paired with, and evidenced by, certificates
representing shares of Carnival Corporation common stock on a one-for-one basis.
In addition, under the pairing agreement, when a share of Carnival Corporation
common stock is issued to a person after the implementation of the DLC
structure, a paired trust share will be issued at the same time to such person.
Each share of Carnival Corporation common stock and the paired trust share may
not be transferred separately. The Carnival Corporation common stock and the
trust shares (including the beneficial interest in the Carnival plc special
voting share) are listed and trade together on the New York Stock Exchange under
the ticker symbol "CCL." Accordingly, each holder of Carnival Corporation common
stock is also deemed to be the beneficial owner of an equivalent number of trust
shares.
** As a result of the DLC structure, on most matters that affect all of the
shareholders of Carnival Corporation and Carnival plc, the shareholders of both
companies effectively vote together as a single decision-making body. Combined
voting is accomplished through the special voting shares that have been issued
by each company.
*** Less than one percent.
(1) The address of each natural person named, unless otherwise noted, is
3655 N.W. 87 Avenue, Miami, Florida 33178-2428. The address of all
other entities, unless otherwise noted, is 1201 North Market Street,
Wilmington, Delaware 19899.
(2) Micky Arison and the other members of the Arison family and trusts for
their benefit (collectively, the "Principal Shareholders"),
beneficially own shares representing approximately 44% of the voting
power of Carnival Corporation and approximately 33% of the combined
voting power. The Principal Shareholders have filed a joint statement
on Schedule 13D with respect to the shares of Carnival Corporation
common stock and trust shares (representing a beneficial interest in a
special voting share) held by such persons.
(3) TAMMS Investment Company Limited Partnership ("TAMMS") owns 3,653,168
shares of common stock. TAMMS' general partner is TAMMS Management
Corporation ("TAMMS Corp."), which is wholly-owned by MBA I, L.L.C.
("MBA I"). TAMMS' limited partners are various trusts established for
the benefit of certain members of Micky Arison's family, including
Shari Arison (the "Family Trusts"). By virtue of the limited
partnership agreement of TAMMS, TAMMS Corp. may also be deemed to
beneficially own such 3,653,168 shares of common stock. By virtue of
its interest in TAMMS, JMD Delaware, Inc. and Balluta Limited as
trustees of certain of the Family Trusts, may be deemed to beneficially
own the portion of the 3,653,168 shares of common stock held by TAMMS
which corresponds to their partnership interest in TAMMS. Such amounts
are included in the number of shares set forth next to its name in the
table above. Because of his position as President of TAMMS Corp., Micky
Arison may be deemed to beneficially own the 3,653,168 shares of common
stock owned by TAMMS; however, Micky Arison
27
disclaims beneficial ownership of all such shares which are
beneficially owned by TAMMS. Accordingly, Micky Arison has not reported
beneficial ownership of any of the shares owned by TAMMS.
(4) Includes (i) 408,000 shares of common stock issuable to Micky Arison
upon his exercise of stock options granted to him in May 1995, January
1998, 1999, 2000 and 2001, and October 2001, (ii) 6,102,187 shares of
common stock held by the MA 1997 Holdings, L.P., (iii) 106,114,284
shares of common stock held by the MA 1994 B Shares, L.P., (iv)
93,847,639 shares of common stock held by the Ted Arison 1992
Irrevocable Trust for Lin No. 2, Ted Arison 1994 Irrevocable Trust For
Shari No. 1 and the Michael Arison 1999 Irrevocable Delaware Trust by
virtue of the authority granted to Micky Arison under the last will of
Ted Arison, and (v) 17,538,393 shares of common stock held by The 1997
Irrevocable Trust for Micky Arison, all of which may be deemed to be
beneficially owned by Micky Arison.
(5) Under the terms governing the Shari Arison Irrevocable Guernsey Trust,
Shari Arison has the sole right to vote and direct the sale of the
4,000,000 shares of common stock held directly by such trust and the
1,102,708 shares of common stock held by TAMMS which corresponds to
such trust's respective ownership interest in TAMMS. In addition, the
shares described above include 2,250,000 shares owned by The Ted Arison
Family Foundation USA, Inc. (the "Foundation") and 1,200 shares of
common stock owned by Shari Arison's children. Because Shari Arison is
Chairman and President of the Foundation, she may be deemed to
beneficially own the common stock held by the Foundation. Shari Arison
disclaims beneficial ownership of the shares owned by the Foundation
and her children.
(6) MA 1994 B Shares, L.P. ("MA 1994, L.P.") owns 106,114,284 shares of
common stock. The general partner of MA 1994, L.P. is MA 1994 B Shares,
Inc. ("MA 1994, Inc."), which is wholly-owned by the Micky Arison 1994
"B" Trust, a trust established for the benefit of Micky Arison and his
heirs (the "B Trust"). The sole limited partner of MA 1994, L.P. is the
B Trust. Under the terms of the instrument governing the B Trust, Micky
Arison has the sole right to vote and direct the sale of the common
stock indirectly held by the B Trust. By virtue of the limited
partnership agreement of MA 1994, L.P., MA 1994, Inc. may be deemed to
beneficially own all such 106,114,284 shares of common stock. By virtue
of Micky Arison's interest in the B Trust and the B Trust's interest in
MA 1994, L.P., Micky Arison may be deemed to beneficially own all such
106,114,284 shares of common stock. The trustee of the B Trust is JMD
Delaware, Inc., a corporation wholly-owned by James M. Dubin.
(7) MA 1997 Holdings, L.P. ("MA 1997, L.P.") owns 6,102,187 shares of
common stock. The general partner of MA 1997, L.P. is MA 1997 Holdings,
Inc. ("MA 1997, Inc."), which is wholly-owned by the Micky Arison 1997
Holdings Trust, a trust established for the benefit of Micky Arison and
his heirs (the "MA 1997 Trust"). The sole limited partner of MA 1997,
L.P. is the MA 1997 Trust. By virtue of the limited partnership
agreement of MA 1997, L.P., MA 1997, Inc. may be deemed to beneficially
own all of such 6,102,187 shares of common stock. By virtue of the MA
1997 Trust's interest in MA 1997, L.P., the MA 1997 Trust may be deemed
to beneficially own all such 6,102,187 shares of common stock. Under
the terms of the instrument governing the MA 1997 Trust, Micky Arison
has the sole right to vote the common stock indirectly held by the MA
1997 Trust. The trustee of the MA 1997 Trust is JMD Delaware, Inc., a
corporation wholly-owned by James M. Dubin.
(8) JMD Protector, Inc., a Delaware corporation, is the protector of the
Ted Arison 1994 Irrevocable Trust for Shari No. 1 and the Ted Arison
1992 Irrevocable Trust for Lin No. 2 and has certain voting and
dispositive rights with respect to the common stock held by such
trusts.
(9) Balluta Limited, an Isle of Man corporation, is the sole trustee of the
Shari Arison Irrevocable Guernsey Trust.
(10) MBA I owns 400,000 shares of common stock and a limited partnership
interest in TAMMS (See Note 2 above). MBA I may be deemed to own
1,032,440 shares of common stock held by TAMMS which corresponds to its
respective partnership interest in TAMMS and TAMMS Corp. The Marilyn B.
Arison
28
Irrevocable Delaware Trust (the "Irrevocable Trust") owns a controlling
interest in MBA I; therefore, the Irrevocable Trust may be deemed to
beneficially own all such 1,432,440 shares of common stock.
(11) Includes 278,400 shares of common stock issuable to Mr. Dickinson upon
exercise of stock options granted to him in August 1997, 1998, 1999,
2000 and 2001 and January and October 2001. Also includes 221,622
shares of common stock owned by Dickinson Enterprises Limited
Partnership (the "Dickinson Partnership"). The general partner of the
Dickinson Partnership is Dickinson Enterprises, Inc., which is wholly
owned by a revocable trust established for the benefit of Mr. Dickinson
and his heirs (the "Dickinson Trust"). Under the terms of the
instrument governing the Dickinson Trust, Mr. Dickinson has the sole
right to vote and direct the sale of the common stock indirectly held
by the Dickinson Trust.
(12) Includes 30,000 shares of common stock issuable to Mr. Foschi upon his
exercise of stock options granted to him in January and October 2001.
Also includes 20,000 shares of common stock owned by Atlantic Ventures.
(13) Includes (i) 740,000 shares of common stock issuable to Mr. Frank upon
his exercise of stock options granted to him in May 1995, January 1998,
1999, 2000 and 2001 and October 2001, (ii) 9,600 shares of common stock
owned by Mr. Frank's wife as to which he disclaims beneficial
ownership, and (iii) 4,002 shares of common stock owned by the Jackson
S. Woolworth Irrevocable Trust and the Cassidy B. Woolworth Trust (Mr.
Frank is trustee), as to which Mr. Frank disclaims beneficial
ownership.
(14) Includes 8,000 shares of common stock held by the Helen K. Lanterman
Trust (Mr. Lanterman is trustee).
(15) Includes 23,600 shares of common stock issuable to Ambassador Capen
upon his exercise of stock options granted to him in April 1999 and
April and October 2001. Also includes 17,000 shares owned by the Capen
Trust, of which Mr. Capen is co-trustee. Also includes 802 shares of
common stock owned by Ambassador Capen's wife as to which he disclaims
beneficial ownership.
(16) Includes 3,600 shares of common stock issuable to Mr. Donald upon his
exercise of stock options granted to him in April and October 2001.
Also includes 1,800 shares owned by The Arnold and Hazel Donald
Charitable Trust (Mr. Donald is trustee).
(17) By virtue of being the sole shareholder of JMD Delaware, Inc., JMD
Protector, Inc. and Balluta Limited, Mr. Dubin may be deemed to own the
aggregate of 147,213,270 shares of common stock beneficially owned by
such entities, as to which he disclaims beneficial ownership.
(18) Includes 23,600 shares of common stock issuable to Dr. Maidique upon
his exercise of stock options granted to him in April 1999 and 2001 and
October 2001.
(19) Includes 917,872 ordinary shares issuable to him upon exercise of share
options.
(20) Includes 3,600 shares of common stock issuable to Mr. Subotnick upon
his exercise of stock options granted to him in April and October 2001.
(21) Includes 3,600 shares of common stock issuable to Mr. Zucker upon his
exercise of stock options granted to him in April and October 2001.
(22) As reflected in Amendment No. 2 to Schedule 13G, dated February 10,
2003, as filed with the U.S. Securities and Exchange Commission.
(23) Based on notifications to Carnival plc of interests of 3% or more in
the share capital of Carnival plc as required by the UK Companies Act
1985.
29
(24) Includes an aggregate of 2,002,594 shares of common stock issuable to
directors and executive officers upon their exercise of previously
granted stock options.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based upon a review of Forms 3 and 4 and amendments thereto furnished to
Carnival Corporation during and with respect to its most recent fiscal year and
upon written representations from persons known to Carnival to be subject to
Section 16 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") (a "reporting person") that no Form 5 is required to be filed for such
reporting person, all reporting persons filed on a timely basis reports required
by Section 16(a) of the Exchange Act during the fiscal year ended November 30,
2002, with the exception of one late report for the Continued Trust for Micky
Arison.
Carnival plc was a foreign private issuer during fiscal 2002 and holders of
Carnival plc shares were not subject to Section 16 of the Exchange Act for
fiscal 2002. Accordingly, no Section 16 filings were made with respect to
Carnival plc in fiscal 2002, its most recently completed fiscal year.
30
PROPOSAL 1 (RESOLUTIONS 1-13)
ELECTION OR RE-ELECTION OF DIRECTORS
The DLC structure requires the boards of Carnival plc and Carnival Corporation
to be identical. Shareholders are required to approve the election or
re-election of directors to each board.
CARNIVAL CORPORATION DIRECTORS: There are 13 nominees for election or
re-election to the board of directors. Each nominee currently serves as a
director. All directors are to be elected to serve until the next annual meeting
and until their successors are elected.
CARNIVAL PLC DIRECTORS: Carnival plc's articles of association state that any
director appointed to the board of Carnival plc during the year can only hold
office until the next annual general meeting, and if not re-appointed at such
annual general meeting, must vacate office at its conclusion. Micky Arison,
Howard S. Frank, Ambassador Richard G. Capen, Jr., Robert H. Dickinson, Arnold
W. Donald, A. Kirk Lanterman, Modesto A. Maidique, Stuart Subotnick, Uzi Zucker
and Pier Luigi Foschi were appointed directors of Carnival plc on April 17, 2003
in connection with the implementation of the DLC structure. It is proposed that
they be elected to Carnival plc's board by the shareholders.
Four of Carnival plc's seven directors have retired from Carnival plc's board in
connection with the implementation of the DLC structure. They were The Lord
Sterling of Plaistow, Nick Luff, Peter Foy and Horst Rahe. Sir John Parker,
Peter Ratcliffe and Baroness Hogg remain on Carnival plc's board and were
appointed directors of Carnival Corporation on April 17, 2003. It is proposed
that they be re-elected to Carnival plc's board.
With respect to each nominee set forth below, the information presented includes
such person's age, the month and year in which such person first became a
director, any other position held with Carnival, such person's principal
occupations during the past five years and any directorships held by such
nominee in public or certain other companies.
THE BOARDS OF DIRECTORS UNANIMOUSLY RECOMMEND A VOTE FOR THE ELECTION OF EACH OF
THE FOLLOWING NOMINEES:
MICKY ARISON, age 53, has been Chairman of the board of directors of Carnival
Corporation since October 1990 and a director since June 1987. He has been Chief
Executive Officer of Carnival Corporation since 1979 and became Chief Executive
Officer of Carnival plc on April 17, 2003. On April 17, 2003, he also became a
director and Chairman of the board of directors of Carnival plc.
AMBASSADOR RICHARD G. CAPEN, JR., age 68, has been a director of Carnival
Corporation since April 1994. On April 17, 2003, he became a director of
Carnival plc. He is currently a corporate director, author and business
consultant. From 1992 to 1993, Ambassador Capen served as United States
Ambassador to Spain. From 1989 to 1991, Ambassador Capen served as Vice Chairman
of Knight-Ridder, Inc. Ambassador Capen was the Chairman and Publisher of the
Miami Herald from 1983 to 1989. Ambassador Capen is a member of the board of
directors of
31
the Fixed Income Funds of The Capital Group, the New Economy Fund and Smallcap
World Fund.
ROBERT H. DICKINSON, age 60, has been a director of Carnival Corporation since
June 1987. On April 17, 2003, he became a director of Carnival plc. Mr.
Dickinson was Senior Vice President-Sales and Marketing of the Carnival Cruise
Lines division of Carnival Corporation ("CCL") from 1979 through May 1993. Since
May 1993, Mr. Dickinson has served as President and Chief Operating Officer of
CCL.
ARNOLD W. DONALD, age 48, has been a director of Carnival Corporation since
January 2001. On April 17, 2003, he became a director of Carnival plc. Since
March 2000, Mr. Donald has been the Chairman and Chief Executive Officer of
Merisant Company, a manufacturer and marketer of tabletop sweetener products,
including the Equal(R) and Canderel(R) brands. From January 1998 to March 2000
he was Senior Vice-President of Monsanto Company, a company which develops
agricultural products and consumer goods, and president of its nutrition and
consumer sector. Prior to that he was President of Monsanto Company's
agricultural sector. He is a member of the board of directors of Belden, Inc.,
Crown Cork & Seal Company, Inc., The Laclede Group, Oil-Dri Corporation of
America and The Scotts Company.
PIER LUIGI FOSCHI, age 56, has been a director of Carnival Corporation and of
Carnival plc since April 17, 2003. He has been Chief Executive Officer of Costa
Crociere S.p.A. ("Costa"), a subsidiary of Carnival Corporation, since October
1997 and chairman of its board since January 2000. From 1974 to 1997, he held
senior positions with OTIS, a world leader in the field of elevators, which is a
subsidiary of United Technologies Corporation, and from 1990 - 1997 he was
Executive Vice President of Otis's Asia-Pacific operations.
HOWARD S. FRANK, age 62, has been Vice Chairman of the board of directors of
Carnival Corporation since October 1993 and a director since April 1992. On
April 17, 2003, he became a director and Vice Chairman of the board of directors
of Carnival plc and Chief Operating Officer of Carnival plc. He was appointed
Chief Operating Officer of Carnival Corporation in January 1998. From July 1989
to January 1998, he was Chief Financial Officer and Chief Accounting Officer of
Carnival Corporation. From July 1975 through June 1989, he was a partner with
Price Waterhouse.
BARONESS HOGG, age 56, has been a director of Carnival plc since the demerger of
P&O Princess Cruises plc from The Penisular and Oriental Steam Navigation
Company ("P&O") in October 2000. On April 17, 2003, she became a director of
Carnival Corporation. She is Chairman of 3i Group Plc and Frontier Economics and
a non-executive director of GKN plc, a Governor of the British Broadcasting
Corporation and a member of the House of Lords Economic Affairs Committee. Sarah
Hogg was Head of the Prime Minister's Policy Unit, with the rank of Second
Permanent Secretary, from 1990-1995 and served as a non-executive director of
P&O between 1999 and October 2000.
A. KIRK LANTERMAN, age 71, has been a director of Carnival Corporation since
April 1992. On April 17, 2003, he became director of Carnival plc. He has been
Chairman of the Board, President and Chief Executive Officer of Holland America
Line Inc. ("HAL") (formerly known
32
as Holland America Line-Wetours Inc.), a subsidiary of Carnival Corporation,
since August 1999. From March 1997 to August 1999, he was Chairman of the Board
and Chief Executive Officer of HAL. From December 1989 to March 1997, he was
President and Chief Executive Officer of HAL. From 1983 to 1989, he was
President and Chief Operating Officer of HAL. From 1979 to 1983 he was President
of Westours, Inc., which merged with Holland America Line in 1983.
MODESTO A. MAIDIQUE, age 63, has been a director of Carnival Corporation since
April 1994. On April 17, 2003, he became a director of Carnival plc. He has been
President of Florida International University ("FIU") since 1986. Prior to
assuming the presidency of FIU, Dr. Maidique taught at the Massachusetts
Institute of Technology, Harvard University and Stanford University. Dr.
Maidique has also served as Vice President and General Manager of the
Semiconductor Division of Analog Devices, Inc. which he co-founded in 1969, as
President and Chief Executive Officer of Gerome Therapeutics Collaborative
Research, Inc., a genetics engineering firm, and as General Partner of Hambrecht
& Quist, a venture capital firm. Dr. Maidique is a director of National
Semiconductor, Inc.
SIR JOHN PARKER, age 60, has been a non-executive director of Carnival plc since
the demerger of P&O Princess Cruises plc from P&O in October 2000 and was Deputy
Chairman from September 2002 to April 17, 2003. On April 17, 2003, Sir John
Parker became a director of Carnival Corporation. He is the non-executive
Chairman of National Grid Transco plc, and RMC Group plc. He is non-executive
director of Brambles Industries plc. He was formerly Chairman of Babcock
International Group plc and a past President of the Royal Institution of Naval
Architects. Sir John Parker has been a member of the General Committee of Lloyds
Register of Shipping since 1983 and Chairman of its Technical Committee from
1993 until 2002. He is Vice-President of the Engineering Employers' Federation.
PETER RATCLIFFE, age 54, has been a director of Carnival plc since the demerger
of P&O Princess Cruises plc from P&O in October 2000 and was its Chief Executive
Officer until April 17, 2003. He is now Chief Executive Officer of P&O Princess
Cruises International Limited, a subsidiary of Carnival plc. On April 17, 2003,
he became a director of Carnival Corporation and continued as an executive
director of Carnival plc. He was previously an executive director of P&O and
head of its cruise division, having served as President of Princess Cruises
since 1993 and its Chief Operating Officer since 1989. His early career was
spent with P&O Containers Limited in London and Sydney.
STUART SUBOTNICK, age 61, has been a director of Carnival Corporation since July
1987. On April 17, 2003, he became a director of Carnival plc. Mr. Subotnick has
been a general partner and the Executive Vice President of Metromedia Company
since July 1986. He was a director of Metromedia Inc., a predecessor company,
from 1982 and its Executive Vice President from 1986. Prior to 1986, Mr.
Subotnick was Senior Vice President-Finance of Metromedia Inc. from October 1983
and a member of the Office of the President from 1982. He is a director of Big
City Radio Inc., Metromedia Fiber Networks Inc. and Metromedia International
Group, Inc.
UZI ZUCKER, age 67, has been a director of Carnival Corporation since July 1987.
On April 17, 2003, he became a director of Carnival plc. Mr. Zucker joined Bear,
Stearns & Co. in 1967 and
33
was a Limited Partner until 1982 and has been a General Partner thereafter. Mr.
Zucker has been a Senior Managing Director of Bear, Stearns & Co. Inc. since
1985. He is a director of Alliance Tire Company Ltd., Cathay Investment Fund and
Conair Corporation.
34
PROPOSAL 2 (RESOLUTION 14)
APPROVAL OF AMENDED AND RESTATED CARNIVAL CORPORATION 2002 STOCK PLAN
On January 14, 2002, the Carnival Corporation board of directors adopted the
Carnival Corporation 2002 Stock Option Plan and its shareholders approved it on
April 15, 2002. On April 17, 2003, the Carnival Corporation board of directors
amended and restated the 2002 Stock Option Plan, as amended (the "2002 Plan"),
subject to approval of our shareholders, primarily in order (i) to permit awards
under the 2002 Plan to be granted to employees or directors of, or consultants
or advisors to, Carnival plc (formerly P&O Princess Cruises plc), in addition to
employees or directors of, or consultants or advisors to, Carnival Corporation;
(ii) to permit awards of restricted shares of Carnival Corporation common stock
and (iii) to reflect the changes to Carnival Corporation common stock as result
of the DLC transaction. The 2002 Plan is attached as Annex A to this proxy
statement. Carnival Corporation, Carnival plc and their respective affiliates
are collectively referred to as the "Combined Group."
The principal provisions of the 2002 Plan are summarized below. This summary is
not complete and is qualified in its entirely by the literal terms of the 2002
Plan. Approval of the 2002 Plan is required in order (i) to permit awards under
the 2002 Plan to be granted to employees or directors of, or consultants or
advisors to, Carnival plc, (ii) to meet the requirements of the New York Stock
Exchange in respect of restricted share awards granted under the 2002 Plan to
officers and directors of the Combined Group to be listed, (iii) to the extent
applicable, to assure that restricted share awards granted under the 2002 Plan
are qualified "performance-based compensation" and thereby exempt from the
application of Section 162(m) of the Internal Revenue Code (the "Code") and (iv)
to reflect the changes to the Carnival Corporation common stock as a result of
the DLC structure, which requires that each share of Carnival Corporation common
stock be paired with a share of beneficial interest (a "trust share") in the P&O
Princess Special Voting Trust. A share of Carnival Corporation common stock and
the paired trust share is collectively referred to in this section as a "Share."
DESCRIPTION OF THE 2002 PLAN
The purpose of the 2002 Plan is to create an employment incentive by providing
an opportunity to selected employees, directors, consultants and advisors who
are important to the success of the Combined Group to own Shares. The number of
Shares reserved for issuance under the 2002 Plan is 40 million, but only 2
million of such Shares are available for awards of restricted shares. In no
event may the aggregate number of Shares with respect to which awards are
granted under the 2002 Plan to any individual exceed 2 million in any one
calendar year. As described more fully in the 2002 Plan, if an award expires or
terminates for any reason prior to the holder of such award receiving any
economic benefit therefrom, the number of Shares previously subject to, but not
delivered under, such award shall be available to be awarded thereafter.
The 2002 Plan provides that awards may be granted to directors or employees of,
or consultants and advisors to, the Combined Group and its affiliates,
regardless of whether such persons otherwise hold or have held options or
similar awards under the 2002 Plan or any other plan. It
35
is anticipated that awards will be granted primarily to management and
supervisory level employees, including executive officers. To date under the
2002 Plan:
o Mr. Arison (Chairman and CEO) has been granted 120,000 stock
options;
o Mr. Frank (Vice Chairman and COO) has been granted 100,000
stock options;
o Mr. Dickinson (President and COO of CCL) has been granted no
stock options;
o Mr. Lanterman (Chairman and CEO of HAL) has been granted no
stock options;
o Mr. Foschi (Chairman and CEO of Costa) has been granted 50,000
stock options;
o the current executive officers as a group, including the five
named executive officers listed above, have been granted a
total of 152,000 stock options;
o no non-employee directors have been granted stock options; and
o a total of 2,669,150 stock options (before giving effect to
any forfeitures on account of termination prior to vesting)
have been granted to employees who are not executive officers.
The 2002 Plan is administered by the Compensation Committee of Carnival
Corporation, which is currently comprised of two independent members of the
Carnival Corporation board of directors, Mr. Maidique and Sir John Parker (the
"Committee"). The Committee may issue awards of incentive stock options within
the meaning of Section 422(b) of the Code ("Incentive Options"), options that do
not qualify as Incentive Options ("Nonqualified Options"), and restricted share
awards. The Committee has the discretion to determine the persons to whom awards
are granted (although Incentive Options may only be granted to employees of
Carnival Corporation), the type of award, the number of Shares to be covered by
each award and, with respect to options, the option price.
Nonqualified Options may be issued at any option exercise price determined by
the Committee not less than 85% of the fair market value of the Shares on the
date an option is granted. The option exercise price for Incentive Options is to
be no less than the fair market value of the Shares on the date the option is
granted (or no less than 110% of the fair market value on the date of grant for
a 10% or greater shareholder). The fair market value of a Share on April 30,
2003, as determined in accordance with the 2002 Plan, was $_____ per Share.
Awards shall vest as determined by the Committee and shall become null and void
upon the occurrence of certain conditions as determined by the Committee,
including, with respect to Incentive Options and Nonqualified Options, the
expiration of no more than 10 years after the date of the grant (or five years
in the case of an Incentive Option granted to a 10% shareholder).
36
Options granted under the 2002 Plan may be exercised upon (a) delivery by the
optionee of written notice of exercise, (b) tender of full payment in cash or
"mature" Shares, (c) with the Committee's consent, in other property or through
a broker-assisted cashless exercise mechanism or (d) by such other method as the
Committee may determine.
An award of restricted Shares is a grant of Shares on terms and conditions
determined by the Committee. The grant or the vesting of an award of restricted
Shares may be conditioned upon service to a member of the Combined Group or any
of their affiliates or the attainment of performance goals or other factors, as
determined in the discretion of the Committee. Holders of an award of restricted
Shares will have, with respect to the restricted Shares granted, all of the
rights of a shareholder of Carnival Corporation, including the right to vote the
Shares. However, the Committee has discretion to determine whether cash and
stock dividends with respect to the restricted Shares will be currently paid to
the participant or withheld by Carnival Corporation and credited for the
participant's account, and interest may be credited on such dividends at a rate
determined by the Committee. Any cash or stock dividends withheld by the
Committee (and any earnings thereon, if applicable) will be distributed to the
participant upon the release of the restrictions on the Shares to which the
dividends are attributable, and if the Shares are forfeited, the participant
shall also forfeit his or her right to any cash or stock dividends attributable
to the forfeited Shares.
The Committee may, in its discretion, condition the vesting of any restricted
share award granted under the 2002 Plan on the satisfaction of certain
performance goals. To the extent an award is intended to qualify as
"performance-based compensation" under Section 162(m) of the Code, the
performance goals shall be established by the Committee with reference to one or
more of the following, either on a Combined Group-wide basis or, as relevant, in
respect of Carnival Corporation, Carnival plc or one or more affiliates,
divisions or operations of a member of the Combined Group:
(i) earnings (gross, net or per share);
(ii) stock price (absolute or relative to other companies);
(iii) market share;
(iv) gross or net profit margin;
(v) costs or expenses;
(vi) productivity improvements; or
(vii) total shareholder return (absolute or relative to other
companies).
With respect to an award of restricted Shares which is intended to qualify as
"performance-based compensation" under Section 162(m) of the Code, the timing,
establishment and adjustment of the performance goals shall be implemented by
the Committee in a manner designed to preserve
37
the treatment of such award as "performance-based compensation" for purposes of
Section 162(m) of the Code.
Unless the Committee determines otherwise in a particular award agreement, in
the event of a Change of Control of Carnival Corporation (i) all awards granted
under the 2002 Plan will become fully vested and exercisable, and (ii) Carnival
Corporation may cancel outstanding awards upon at least 10 days' advance notice
and pay the holder of the award the value of the award based on the
consideration received by the other shareholders in connection with the Change
of Control transaction (and this cashout provision also applies in the event of
certain significant events involving Carnival Corporation which otherwise do not
constitute a Change of Control).
The maximum number of Shares subject to awards available under the 2002 Plan and
the maximum number of Shares with respect to which any one person may be granted
awards during any calendar year shall be subject to adjustment or substitution,
as determined by the Committee in its sole discretion, as to the number, price
or kind of a share of stock or other consideration subject to such awards or as
otherwise determined by the Committee to be equitable (i) in the event of
changes in the outstanding Shares or in Carnival Corporation's capital structure
by reason of stock or extraordinary cash dividends, stock splits, reverse stock
splits, recapitalizations, reorganizations, mergers, consolidations,
combinations, exchanges, a termination of the pairing of the shares of common
stock and the trust shares, or any other relevant changes in capitalization
occurring after the date of grant of any award or (ii) in the event of any
change in applicable laws or any change in circumstances which results in or
would result in any substantial dilution or enlargement of the rights granted
to, or available for, persons granted awards under the 2002 Plan, or which
otherwise warrants equitable adjustment because it interferes with the intended
operation of the 2002 Plan.
Awards granted under the 2002 Plan generally may not be transferred during a
participant's lifetime, except that the Committee may in its discretion allow
certain transfers of Nonqualified Options and restricted shares by gift for
estate planning purposes. The delivery of Shares pursuant to an award granted
under the 2002 Plan is subject to the satisfaction by the participant of all
applicable tax withholding requirements.
The 2002 Plan provides that it will terminate, unless earlier terminated as
provided therein, on January 14, 2012. The 2002 Plan provides that it may be
amended or terminated at any time by the Carnival Corporation board of
directors; provided that no such amendment or termination shall be made without
shareholder approval if such approval is necessary to comply with any tax or
regulatory requirement applicable to the 2002 Plan (including as necessary to
prevent us from being denied a tax deduction on account of Section 162(m) of the
Code). The Committee is authorized to amend the terms of any award granted under
the 2002 Plan, provided that the amendment does not impair the rights of any
participant without his or her consent. In addition, the Committee may not take
any action that results in the "repricing" of any options granted under the 2002
Plan without shareholder approval. For purposes of the 2002 Plan, a "repricing"
means any of the following:
38
o amending or modifying the terms of an option after the date of
grant in a manner that reduces the option price;
o amending or modifying the terms of an option in a manner that
would be reportable in our proxy statement as having been
repriced or results in an option being considered repriced
under U.S. generally accepted accounting principles; or
o canceling an option at a time when its option price is equal
to or less than the fair market value of the Shares subject to
the option, in exchange for another option, restricted share
award or any other equity-based award. A cancellation and
exchange described in the preceding sentence will be
considered a "repricing" regardless of whether (i) the option,
restricted share award or other equity-based award is
delivered simultaneously with the cancellation of the option,
(ii) it is reportable as a repricing on Carnival Corporation's
proxy statement or under generally accepted accounting
principles, and (iii) the cancellation of the option was
voluntary on the part of the optionee.
TAX EFFECTS OF PLAN PARTICIPATION
The following summary generally describes the principal U.S. federal (and not
foreign, state and local) income tax consequences of awards granted under the
2002 Plan. It is general in nature and is not intended to cover all tax
consequences that may apply to a particular participant or to Carnival
Corporation. The provisions of the Code and the regulations thereunder relating
to these matters ("Treasury Regulations") are complicated and their impact in
any one case may depend upon the particular circumstances. Each holder of an
award under the 2002 Plan should consult his or her own accountant, legal
counsel or other financial advisor regarding the tax consequences of
participation in the 2002 Plan. This discussion is based on the Code as
currently in effect.
OPTIONS. If an option is granted to an participant in accordance with the terms
of the 2002 Plan, no income will be recognized by such participant at the time
the option is granted. Generally, on exercise of a Nonqualified Option, the
amount by which the fair market value of the Shares on the date of exercise
exceeds the purchase price of such Shares (the "Spread") will be taxable to the
participant as ordinary income. The Spread will be deductible by Carnival
Corporation for federal income tax purposes, subject to the possible limitations
on deductibility under Sections 280G and 162(m) of the Code for compensation
paid to executives designated in those Sections. The disposition of Shares
acquired upon exercise of a Nonqualified Option under the 2002 Plan will
ordinarily result in long-term or short-term capital gain or loss (depending on
the applicable holding period) in an amount equal to the difference between the
amount realized on such disposition and the sum of the purchase price and the
amount of ordinary income recognized in connection with the exercise of the
Nonqualified Option.
Pursuant to currently applicable rules under Section 16(b) of the Exchange Act,
the grant of an option (and not its exercise) to a person who is subject to the
reporting and short-swing profit provisions under Section 16 of the Exchange Act
(a "Section 16 Person") begins the six-month period of potential short-swing
liability. The taxable event for the exercise of an option that has
39
been outstanding at least six months ordinarily will be the date of exercise. If
an option is exercised by a Section 16 Person within six months after the date
of grant, however, taxation ordinarily will be deferred until the date which is
six months after the date of grant, unless the person has filed a timely
election pursuant to Section 83(b) of the Code to be taxed on the date of
exercise. However, the six month period of potential short-swing liability may
be eliminated if the option grant (i) is approved in advance by the Carnival
Corporation board of directors (or a committee composed solely of two or more
non-employee directors) or (ii) is approved in advance, or subsequently ratified
by our shareholders no later than the next annual meeting of shareholders.
Consequently, the taxable event for the exercise of an option that satisfies
either of the conditions described in clauses (i) or (ii) above will be the date
of exercise.
Generally, on exercise of an Incentive Option, an employee will not recognize
any income and neither Carnival Corporation nor any of its subsidiaries will be
entitled to a deduction for tax purposes. However, the difference between the
purchase price and the fair market value of the Shares received on the date of
exercise will be treated as a positive adjustment in determining alternative
minimum taxable income and the employee may be subject to the alternative
minimum tax. The disposition of Shares acquired upon exercise of an Incentive
Option under the 2002 Plan will ordinarily result in long-term or short-term
capital gain or loss (depending on the applicable holding period). Generally,
however, if the employee disposes of Shares acquired upon exercise of an
Incentive Option within two years after the date of grant or within one year
after the date of exercise (a "disqualifying disposition"), the employee will
recognize ordinary income in the amount of the excess of the fair market value
of the Shares on the date of exercise over the purchase price (or, in certain
circumstances, the gain on sale, if less). Any excess of the amount realized by
the holder on the disqualifying disposition over the fair market value of the
Shares on the date of exercise of the Incentive Option will ordinarily
constitute capital gain.
If an option is exercised through the use of Shares previously owned by the
participant, such exercise (i) will generally have the same tax consequences as
if the option had been exercised with cash and (ii) generally will not be
considered a taxable disposition of the previously owned Shares and, thus, no
gain or loss will be recognized with respect to such Shares upon such exercise.
Upon such exercise, the Shares received by the optionee, equal in number to the
previously surrendered Shares, will have the same tax basis as the Shares
surrendered to Carnival Corporation and will have a holding period that includes
the holding period of the Shares surrendered. Shares received in excess of the
number of Shares surrendered have a zero basis and have a holding period
beginning on the date of exercise. However, if the previously owned Shares were
acquired on the exercise of an Incentive Option or other tax-qualified stock
option and the holding period requirement for those Shares was not satisfied at
the time they were used to exercise an option, such use would constitute a
disqualifying disposition of such previously owned Shares resulting in the
recognition of ordinary income (but, under proposed Treasury Regulations, not
any additional capital gain) in the amount described above. If any otherwise
qualifying Incentive Option becomes first exercisable in any one year for Shares
having a value in excess of $100,000 (grant date value), the portion of the
option in respect of such excess Shares will be treated as a Nonqualified
Option.
40
RESTRICTED SHARES. A participant will not be subject to tax upon the grant of an
award of restricted Shares unless the participant otherwise elects to be taxed
pursuant to Section 83(b) of the Code. On the date an award of restricted Shares
becomes transferable or is no longer subject to a substantial risk of
forfeiture, the participant will have taxable compensation equal to the
difference between the fair market value of the Shares on that date over the
amount the participant paid for such Shares, unless the participant made an
election under Section 83(b) of the Code to be taxed at the time of grant.
(Special rules apply to the receipt and disposition of restricted Shares
received by a Section 16 Person.) The participant will have a tax basis in the
Shares equal to the amount the participant paid for such Shares plus the amount
taxable as compensation to the participant. Upon the sale of the Shares, any
gain or loss is generally long-term or short-term capital gain or loss,
depending on the holding period. The amount of taxable compensation to the
participant will be deductible by Carnival Corporation for federal income tax
purposes, subject to the possible limitations on deductibility under Sections
280G and 162(m) of the Code for compensation paid to executives designated in
those Sections.
In general, Section 162(m) of the Code denies a publicly held corporation a
deduction for federal income tax purposes for compensation in excess of
$1,000,000 per year per person to its chief executive officer and the four other
officers whose compensation is disclosed in its proxy statement, subject to
certain exceptions. Options will generally qualify under the "performance-based
compensation" exception if they are granted under a plan that states the maximum
number of Shares with respect to which options may be granted to any participant
during a specified period, the exercise price is not less than the fair market
value of the Shares at the time of grant, and the plan under which the options
are granted is approved by shareholders and is administered by a committee
comprised of two or more outside directors. The 2002 Plan is intended to satisfy
these requirements with respect to grants of options to covered employees.
With respect to awards of restricted Shares, in order to satisfy the
"performance-based compensation" exception to the deduction limitation of
Section 162(m) of the Code, the vesting of the award must be contingent on the
attainment of one or more performance goals determined by a committee comprised
of two or more outside directors. The award must also be granted pursuant to a
shareholder approved plan containing, in pertinent part, a specified limit on
the number of Shares a participant may receive in a specified period. The 2002
Plan is intended to satisfy these requirements with respect to awards of
restricted Shares to covered employees.
NEW PLAN BENEFITS. Because awards to be granted in the future under the 2002
Plan are at the discretion of the Committee, it is not possible to determine the
benefits or amounts which will be received in the future under the 2002 Plan by
the directors, executive officers or other employees.
THE BOARDS OF DIRECTORS UNANIMOUSLY RECOMMEND A VOTE FOR THE APPROVAL OF THE
AMENDED AND RESTATED CARNIVAL CORPORATION 2002 STOCK PLAN.
41
OTHER INFORMATION ON CARNIVAL CORPORATION'S EQUITY COMPENSATION PLANS
Set forth below is a table which summarizes compensation plans (including
individual compensation arrangements) under which Carnival Corporation equity
securities are authorized for issuance as of November 30, 2002.
(A) (B) (C)
NUMBER OF SECURITIES
REMAINING AVAILABLE FOR
FUTURE ISSUANCE UNDER
NUMBER OF SECURITIES TO WEIGHTED-AVERAGE EQUITY COMPENSATION
BE ISSUED UPON EXERCISE EXERCISE PRICE OF PLANS (EXCLUDING
OF OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, SECURITIES REFLECTED IN
PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS COLUMN (A))
Equity compensation
plans approved by
security holders 11,828,958 $29.26 41,596,426
Equity compensation
plans not approved by
security holders -- -- --
---------- ------ ----------
Total 11,828,958 $29.26 41,596,426
========== ====== ==========
42
PROPOSAL 3 (RESOLUTION 15)
RATIFICATION OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
FOR CARNIVAL CORPORATION
The audit committee of the board of directors of Carnival Corporation has
selected PricewaterhouseCoopers LLP as Carnival Corporation's independent
certified public accountants for the fiscal year ending November 30, 2003,
subject to approval of our shareholders. A representative of
PricewaterhouseCoopers LLP will be present at the annual meetings and will have
an opportunity to make a statement if he or she desires to do so. The
PricewaterhouseCoopers LLP representative is expected to respond to appropriate
questions from shareholders.
Although ratification by our shareholders of the appointment of independent
certified public accountants is not legally required, our boards of directors
believe that such action is desirable. If our shareholders do not ratify the
appointment, the audit committee will consider the selection of another
accounting firm for 2003 and future years.
THE BOARDS OF DIRECTORS UNANIMOUSLY RECOMMEND A VOTE FOR RATIFICATION OF THE
SELECTION OF PRICEWATERHOUSECOOPERS LLP AS CARNIVAL CORPORATION'S INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS FOR THE 2003 FISCAL YEAR.
PROPOSAL 4 (RESOLUTIONS 16 & 17)
APPOINTMENT OF INDEPENDENT AUDITORS FOR CARNIVAL PLC
The audit committee of the board of directors of Carnival plc has selected
PricewaterhouseCoopers LLP as Carnival plc's independent auditors for the fiscal
year ending November 30, 2003, subject to approval of our shareholders. In April
2003, the audit committee of the board of directors of Carnival plc engaged
PricewaterhouseCoopers LLP to serve as Carnival plc's independent auditors for
the fiscal year ended November 30, 2003, pending shareholder approval. A
representative of PricewaterhouseCoopers LLP will be present at the annual
meetings and will have an opportunity to make a statement if he or she desires
to do so. The PricewaterhouseCoopers LLP representative is expected to respond
to appropriate questions from shareholders.
This resolution would appoint PricewaterhouseCoopers LLP as the independent
auditors of Carnival plc until the conclusion of the next general meeting at
which accounts are laid. It is a requirement of section 385(2) of the UK
Companies Act 1985 that Carnival plc appoint its independent auditors at a
general meeting at which accounts are laid. You are also being asked to
authorize the audit committee of Carnival plc to determine the remuneration of
PricewaterhouseCoopers LLP as independent auditors of Carnival plc.
Carnival plc's previous independent auditors, KPMG Audit plc, has resigned with
effect from April 17, 2003. A notice of resignation and a statement stating no
circumstances connected with
43
its ceasing to hold office has been deposited at Carnival plc's registered
office. A representative of KPMG Audit plc will be present at the annual
meetings and will have the opportunity to make a statement if he or she desires
to do so. The KPMG representative is expected to be available to respond to
appropriate questions from shareholders.
THE BOARDS OF DIRECTORS UNANIMOUSLY RECOMMEND A VOTE FOR THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP AS CARNIVAL PLC'S INDEPENDENT AUDITORS FOR THE 2003
FISCAL YEAR AND THE AUTHORIZATION OF THE AUDIT COMMITTEE OF CARNIVAL PLC TO
AGREE THE REMUNERATION OF PRICEWATERHOUSECOOPERS LLP.
44
PROPOSAL 5 (RESOLUTION 18)
RECEIPT OF ACCOUNTS AND REPORTS OF P&O PRINCESS CRUISES PLC
(NOW CALLED CARNIVAL PLC)
The directors of Carnival plc are required by the UK Companies Act to present
the financial statements, the directors' report and the auditor's report
relating to those accounts to their shareholders. Accordingly, the directors of
Carnival plc lay before the annual meetings the P&O Princess Cruises plc
accounts and the reports of the directors and auditors for the year ended
December 31, 2002, following which they will be approved by and signed on behalf
of Carnival plc's board of directors and delivered to Companies House in the UK.
Shareholders are voting to approve receipt of these documents, as UK law does
not require shareholder approval of the substance and content of these
documents. The UK statutory directors report and the accounts for the year ended
December 31, 2002, together with the auditors' report, is attached to this proxy
statement as Annex C.
Carnival Corporation is not subject to these rules and, accordingly, no action
is required in respect of Carnival Corporation's financial statements.
THE BOARDS OF DIRECTORS UNANIMOUSLY RECOMMEND A VOTE FOR THE RECEIPT OF THE
ACCOUNTS AND REPORTS OF P&O PRINCESS CRUISES PLC FOR THE YEAR ENDED DECEMBER 31,
2002.
PROPOSAL 6 (RESOLUTION 19)
APPROVAL OF DIRECTORS' REMUNERATION REPORT
The UK Directors' Remuneration Report Regulations 2002 (the "Regulations")
require companies listed on the Official List of the UK Listing Authority with
year ends on or after December 31, 2002 to prepare a directors' remuneration
report, which must be put to a shareholder vote. In addition, the Combined Code
appended to the Listing Rules of the UK Listing Authority (the "Combined Code")
also requires a directors' remuneration report to be presented to shareholders.
Shareholders are voting to approve adoption of the remuneration report. UK law
does not require shareholders approval of the substance and content of the
directors' remuneration report.
In compliance with the Combined Code and the Regulations, the board of Carnival
plc has presented its remuneration report to Carnival plc shareholders in P&O
Princess Cruises plc's annual report and accounts sent to Carnival plc
shareholders in February of 2003. The directors' remuneration report is attached
as Annex D to this proxy statement. The remuneration report sets out the board's
remuneration policy for the next and subsequent financial years and other
details required by the Regulations, the Combined Code and the Association of
British Insurer Guidelines 2002. Note however that as a result of the DLC
structure, changes will be made to these policies.
45
Carnival Corporation is not subject to these rules and, accordingly, no action
is required in respect of the Report of the Compensation Committee of Carnival
Corporation.
THE BOARDS OF DIRECTORS UNANIMOUSLY RECOMMEND A VOTE FOR THE APPROVAL OF THE
DIRECTORS' REMUNERATION REPORT.
PROPOSALS 7 & 8 (RESOLUTIONS 20 & 21)
APPROVAL OF LIMITS ON THE AUTHORITY TO ALLOT CARNIVAL PLC SHARES
AND THE DISAPPLICATION OF PRE-EMPTION RIGHTS FOR CARNIVAL PLC
At the last Carnival plc annual general meeting, the shareholders of Carnival
plc approved appropriate limits on the authority and power granted to directors
by Carnival plc's articles of association to allot ordinary shares of Carnival
plc and to allot shares for cash without making a pre-emptive offer to existing
shareholders. These prior authorizations lapse at the upcoming annual general
meeting.
Under Article 30 of Carnival plc's articles of association, the directors have,
for a "prescribed period," unconditional authority to allot ordinary shares in
Carnival plc up to an aggregate nominal amount known as the "section 80 amount."
The prescribed period and the section 80 amount are approved by shareholders
passing an ordinary resolution. By passing an ordinary resolution, shareholders
are authorizing the board of Carnival plc to issue, during the prescribed
period, up to an amount of shares having an aggregate nominal value equal to the
section 80 amount, without further shareholder approval. In the absence of such
approval, the issuance of any additional shares would require shareholder
approval.
Under Article 31, the directors have, for the same prescribed period, power to
allot ordinary shares for cash without making a pre-emptive offer to existing
shareholders up to an aggregate nominal amount known as the "section 89 amount."
The section 89 amount is approved by shareholders passing a special resolution.
By passing a special resolution, shareholders are authorizing the board of
Carnival plc to issue, during the same prescribed period, an amount of shares
having an aggregate nominal value equal to the section 89 amount, for cash
without first offering them to existing shareholders of Carnival plc.
Carnival Corporation's articles of incorporation do not contain provisions
similar to Articles 30 and 31 of Carnival plc's articles of association and
holders of Carnival Corporation shares do not have pre-emption rights.
Accordingly, no action is required in respect of Carnival Corporation's
authority to allot shares or to disapply pre-emption rights.
In common with many UK companies, resolutions to renew the prescribed period and
re-establish the section 80 amount and the section 89 amount are normally
proposed each year as the directors believe occasions may arise from time to
time when it would be beneficial for shares to be allotted and for shares to be
allotted for cash without making a pre-emptive offer. This is the purpose of
Resolution 20 (an ordinary resolution) and Resolution 21 (a special
46
resolution). As usual, the prescribed period is the period from the passing of
the resolutions until the next annual general meeting.
Guidelines issued by the Association of British Insurers, whose member insurance
companies are some of the largest institutional investors in UK listed
companies, require the section 80 amount to be limited to the lesser of (a) the
authorized but unissued ordinary share capital and (b) one-third of the issued
ordinary share capital. By reference to Carnival plc's issued ordinary share
capital immediately following its share reorganization on April 17, 2003, the
maximum section 80 amount is US$29,055,630, which is the nominal value of the
authorized but unissued ordinary share capital of Carnival plc and is equivalent
to approximately 8.4% of Carnival plc's issued share capital.
Guidelines issued by the Pre-emption Group, a group comprising representatives
of UK listed companies, investment institutions and corporate finance
practitioners and formed under the support of the London Stock Exchange to
monitor the operation of the Guidelines, recommend that a resolution to disapply
section 89 of the UK Companies Act should be limited to an amount of equity
securities not exceeding 5% of the nominal value of the company's issued
ordinary share capital. By reference to Carnival plc's latest annual report and
accounts, the maximum section 89 amount is US$17,300,000.
The directors have no commitment or plans to allot additional shares of Carnival
plc.
Carnival plc's authorized share capital is $375 million and (pound)100,002
divided into 225,903,614 ordinary sHARes of $1.66 each, two subscriber shares,
99,998 preference shares, a special voting share of (pound)1 aND an equalization
share of (pound)1. As of April 30, 2003, there were 208,400,223 ordinary shares
allotted and isSUEd. The proposals you are voting on do not increase the
authorized share capital of Carnival plc.
THE BOARDS OF DIRECTORS UNANIMOUSLY RECOMMEND A VOTE FOR THE APPROVAL OF LIMITS
ON THE AUTHORITY TO ALLOT CARNIVAL PLC SHARES AND THE DISAPPLICATION OF
PRE-EMPTION RIGHTS FOR CARNIVAL PLC.
PROPOSAL 9 (RESOLUTION 22)
AUTHORIZE CARNIVAL PLC TO PURCHASE CARNIVAL PLC'S OWN SHARES
There may be circumstances when, having regard to gearing levels (leverage
ratios), other investment opportunities and the effect on earnings per share, it
would be advantageous for Carnival plc to purchase its own shares. Any shares
purchased by Carnival plc would be cancelled and the number of shares in issue
reduced accordingly.
The UK Listing Rules state that any purchase of less than 15% can be made
through the market only if the price to be paid is not more than 5% of the
average market value of those shares for the five business days before the
purchase is made. Further, the Association of British Insurers advised that
authority to purchase up to 5% of the ordinary share capital was unlikely to
cause concern. Some offices of the Association of British Insurers have
indicated a reluctance to accept
47
own share purchase powers over share capital in excess of 10% of the issued
ordinary share capital.
Accordingly, shareholders' consent is sought in Resolution 35 to enable the
directors to purchase up to 20,840,022 ordinary shares (approximately 10% of the
Carnival plc ordinary shares currently in issue), subject to the limits
expressed in the resolution. The authority will expire at the conclusion of the
next annual meeting or 15 months from the date of passing the resolution,
whichever is the earlier. As at the date of this document, there are options
outstanding to subscribe for [o] ordinary shares and [o] American Depositary
Receipts. Together these are equivalent to approximately [o]% of Carnival plc's
issued share capital and would represent approximately [o]% if the proposed
power to repurchase shares were to be exercised in full.
The directors have no present intention to exercise this authority and it will
only be exercised if there is a resultant increase in earnings per share and if
implementation of the proposal is for the benefit of shareholders generally.
Purchases by Carnival Corporation of its own shares would not be subject to
these rules and, accordingly, no action is required in respect of Carnival
Corporation's authority to purchase its own shares.
We note that for two years following the implementation of the DLC structure on
April 17, 2003, unless approved as a class rights action, neither Carnival
Corporation nor Carnival plc is able to:
o purchase any Carnival plc shares; nor
o issue any shares (or other shares carrying voting rights or securities
convertible into shares carrying voting rights) to Carnival plc or
Carnival Corporation or any of their respective subsidiaries (other
than as part of pre-emptive issue to all shareholders of either company
or the issue of an equalization share).
After expiration of the initial two year period, for each of the subsequent
three years, Carnival Corporation will be permitted to purchase up to 5% of the
issued Carnival plc shares (and other shares carrying voting rights) during each
12 month period commencing after the second anniversary of April 17, 2003 and
each company is entitled to issue shares, up to an aggregate of 5% of its
outstanding or issued share capital (or other shares carrying voting rights or
securities convertible into shares carrying voting rights) to either company or
their respective subsidiaries during each 12 month period commencing after the
second anniversary of April 17, 2003. All restrictions lapse on the fifth
anniversary of the implementation of the DLC structure, or April 17, 2008.
THE BOARDS OF DIRECTORS UNANIMOUSLY RECOMMEND A VOTE FOR THE APPROVAL OF THE
AUTHORITY OF CARNIVAL PLC TO PURCHASE ITS OWN SHARES.
48
PROPOSAL 10 (RESOLUTION 23)
CARNIVAL CORPORATION SHAREHOLDER PROPOSAL
The following shareholder proposal contains assertions about Carnival
Corporation that we believe are incorrect. We have not attempted to refute all
of these inaccuracies. The boards of directors recommend a vote AGAINST the
shareholder proposal for the reasons outlined in our opposition statement below.
We will supply the share holdings of the shareholder proponent upon oral or
written request.
The American Federation of Labor and Congress of Industrial Organizations, 815
Sixteenth Street, N.W., Washington, D.C. 20006, has notified us that it intends
to present the following proposal at this year's annual meetings:
"The shareholders of Carnival Corporation (the "Company") request the board of
directors to take the measures necessary to change the Company's jurisdiction of
incorporation from Panama to one of the states of the United States."
SUPPORTING STATEMENT
"In 1974 Carnival [Corporation] incorporated in Panama in part to avoid paying
some corporate income taxes in the U.S. but maintained its headquarters in
Miami, Florida. Recently several companies, including Tyco International and
Global Crossing, changed their jurisdiction of incorporation from the U.S. to
tax havens, which brought significant attention to the lack of investor
protection in these jurisdictions such as Panama and Bermuda.
"Reincorporation in the U.S. would improve the Company's corporate governance
and reassure its investors that they enjoy the necessary legal protections. In
addition, reincorporation would benefit the Company's standing with regulatory
authorities and its customers.
"Companies incorporated in Panama do not enjoy the same legal protection than
those incorporated in the U.S. Unlike U.S. corporate law, Panama law does not
generally allow shareholders to sue officers and directors derivatively on
behalf of the corporation. Carnival Corporation believes that shareholder
derivative suits are a critical mechanism for remedying breaches of fiduciary
duty, especially breaches of the duty of loyalty.
"Moreover, the Company's jurisdiction of incorporation may affect the
enforceability of certain judgments and liabilities, including judgments for
security fraud. With the Company incorporated in Panama, it may be difficult for
shareholders who commence litigation in the U.S. to effect service of process
and to enforce in Panama judgments obtained in any such litigation.
"The obstacles Panama law poses to shareholder derivative lawsuits and the
enforceability of shareholder lawsuits reduces management accountability to
shareholders. The ability of shareholders to bring such litigation can be an
important deterrent against misconduct by executives, such as those allegedly
engaged in by the former key management members of Tyco and Global Crossing.
49
"In addition, corporations incorporated in offshore tax havens have been
strongly criticized by elected officials and the media in the U.S. As a cruise
ship and hotel operator, the Company is subject to various international,
national, state and local regulations, laws and treaties as well as public
pressure. Managing operations effectively and increasing shareholder value
depend in part on public and governmental goodwill. For example, the U.S.
Congress is considering excluding companies incorporated in tax havens from
defense and homeland security related government contracts.
"Finally, a significant majority of the company's revenues come from the U.S.,
according to its most recent 10-K filing. The Company also reports in its 10-K
that it principally sources passengers from North America, the largest cruise
sector in the world. Carnival Corporation fears that any negative publicity
associated with our Company's Panama incorporation could erode customer loyalty
and depress sales.
"In sum, Carnival Corporation feel the disadvantages of Panama incorporation
outweigh any potential tax savings or flexibility in running the Company's
business and that reincorporation to the U.S. will increase investor confidence
in the Company and bolster its reputation in capital markets, with its customers
and regulators."
OPPOSITION STATEMENT
The boards of directors believe that the shareholder proposal is not in the best
interests of Carnival and its shareholders and therefore unanimously recommends
a vote AGAINST the proposal.
Carnival Corporation was incorporated in Panama in 1974. Under Section 883
("Section 883") of the Internal Revenue Code of 1986, as amended, certain
non-United States corporations incorporated in certain qualifying jurisdictions
are not subject to United States federal income tax or branch profits tax on
certain United States source income derived from the international operation of
ships. Panama is a qualifying jurisdiction for these purposes and, therefore,
Carnival Corporation's incorporation in Panama is one of the factors that makes
it eligible to qualify for Section 883. As noted above, United States
corporations are not eligible for the benefits of Section 883. Therefore,
changing Carnival Corporation's jurisdiction of incorporation from Panama to a
United States jurisdiction would result in a very significant decrease in
Carnival Corporation's after-tax income and would likely have a severe and
material adverse effect on shareholder value. We also note that, unlike the
so-called inversion transactions mentioned in the shareholder proposal that have
attracted significant scrutiny in recent months, the United States federal
income tax benefits provided by Section 883 to certain non-United States
corporations have been explicitly granted by Congress and recognized by the
United States Internal Revenue Service as legitimate.
Furthermore, the shareholder proposal alleges a number of benefits based on
incorrect statements. The shareholder proposal claims that Carnival
Corporation's incorporation in Panama makes it more difficult for shareholders
who commence litigation in the United States to effect service of process.
However, a shareholder commencing litigation in the United States may effect
service of process on Carnival Corporation at its Miami, Florida headquarters.
50
Furthermore, the majority of Carnival Corporation's officers and directors are
United States residents. Also, the shareholder proposal claims that Carnival
Corporation's incorporation in Panama would make it more difficult to enforce
judgments against it. However, Panamanian law provides that foreign judgments
are enforceable in Panama. Also, it is highly unlikely that any judgment would
be required to be enforced in Panama because most of Carnival Corporation's
assets are not located there.
Contrary to what is asserted in the shareholder proposal, Carnival Corporation's
incorporation in Panama is unlikely to influence customer loyalty or to depress
sales. Carnival Corporation competes in the vacation market, and, because of the
necessarily international scope of the vacation market, many of the providers of
vacation alternatives are not companies or entities that are incorporated in the
United States. Furthermore, a number of Carnival Corporation's competitors
within the cruise vacation industry are incorporated outside the United States,
including the two largest, Royal Caribbean Cruises Ltd. (Liberia) and Star
Cruises (which includes Norwegian Cruise Lines and Orient Lines) (Bermuda).
Because of corporate governance standards that apply or will apply to Carnival
Corporation irrespective of its jurisdiction of incorporation, the Board does
not believe that reincorporating in the United States will have a material
effect on the corporate governance of Carnival Corporation. Carnival
Corporation's stock is currently listed on the New York Stock Exchange. As a
result, Carnival Corporation is subject to the NYSE's listing rules, including
the rules relating to corporate governance standards. Although Carnival
Corporation is a foreign corporation, it is not a foreign private issuer for
purposes of the SEC's rules and NYSE listing standards and, accordingly, is not
entitled to, and has never sought, waivers from NYSE listing standards that
would be available to foreign private issuers. Carnival Corporation has an audit
committee with a written charter that fully complies with the NYSE's current
listing rules for domestic issuers, and Carnival Corporation is making
arrangements to comply fully with the listing requirements that have been
proposed by the NYSE since August 2002 (which are not yet effective), including,
majority board independence, fully independent audit, compensation and
nominating/corporate governance board committees with written charters, a
written code of business conduct and ethics and a written set of corporate
governance principles.
Carnival Corporation is also subject to the requirements of the Sarbanes-Oxley
Act of 2002 and the Securities Exchange Act of 1934 to the same extent as a
domestic U.S. issuer. For example, Carnival Corporation is fully subject to the
corporate governance and disclosure requirements of the Sarbanes-Oxley Act and,
as a result, Carnival Corporation's CEO and CFO are subject to quarterly
certification requirements and related affirmative obligations, and it has
affirmative obligations to maintain disclosure controls and procedures and
internal controls and procedures. Carnival Corporation will be required to make
disclosures regarding its audit committee financial expert, its codes of ethics
for senior financial officers and its internal controls and procedures and the
related auditor assessments. Also, because Carnival Corporation is subject to
the reporting requirements and liability provisions of the Exchange Act,
investors are currently protected by the same disclosure rules and anti-fraud
provisions to which Carnival Corporation would be subject if it were
incorporated in the United States. Carnival Corporation's liability for failure
to comply with its obligations under the Exchange Act could subject it to
enforcement by the SEC, and there is also a private right of action for
individuals who purchase or sell
51
Carnival Corporation securities in reliance on misleading material statements or
material omissions in a reports filed by Carnival Corporation under the Exchange
Act.
Accordingly, the boards of directors believe that reincorporation into the
United States would cause a significant decline in Carnival Corporation's stock
price and result in a material adverse impact on Carnival Corporation's
shareholders while providing no significant benefits.
THE BOARDS OF DIRECTORS UNANIMOUSLY RECOMMEND A VOTE AGAINST THE CARNIVAL
CORPORATION SHAREHOLDER PROPOSAL.
52
BOARD STRUCTURE AND COMMITTEE MEETINGS
CARNIVAL CORPORATION
During the fiscal year ended November 30, 2002, the board of directors of
Carnival Corporation held a total of eight meetings. The board of directors of
Carnival Corporation has established standing Executive, Audit, Nominating &
Governance and Compensation Committees. The membership during fiscal 2002 and
the function of each committee are described below. During the fiscal year ended
November 30, 2002, except for Shari Arison, each director attended either
telephonically or in person at least 75% of all board of directors and
applicable committee meetings.
NUMBER OF
MEETINGS/
CONSENT
NAME OF COMMITTEE AND ACTIONS IN
MEMBERS FUNCTIONS OF THE COMMITTEE FISCAL 2002
EXECUTIVE: o Exercises the authority of the full board 16
Micky Arison, Chair of directors in between board meetings
Howard S. Frank
Maks L. Birnbach*
Uzi Zucker
AUDIT: o Inspects the work and written reports of 7
Stuart Subotnick, Chair our internal audit department
Richard G. Capen, Jr.
Arnold W. Donald o Reviews submissions from independent
auditors
o Selects independent auditors and approves
audit and non-audit fee services
o Assists board oversight of:
- the integrity of our financial
statements;
- our compliance with legal and regulatory
requirements;
- the independent auditor's qualifications
and independence; and
- the performance of the internal audit
function and the independent auditors
53
NUMBER OF
MEETINGS/
CONSENT
NAME OF COMMITTEE AND ACTIONS IN
MEMBERS FUNCTIONS OF THE COMMITTEE FISCAL 2002
o Prepares the annual report of the audit
committee to be included in our proxy statement
NOMINATING & GOVERNANCE: o Identifies individuals qualified to become 1
Uzi Zucker, Chair board members
Sherwood M. Weiser*
Stuart Subotnick o Selects the slate of director nominees for the
annual meeting of shareholders
o Develops and recommends corporate
governance principles
COMPENSATION: 3
Sherwood M. Weiser, Chair* o Discharges the board's responsibilities
Modesto A. Maidique relating to the compensation of independent
Uzi Zucker directors and executive officers
o Administers stock incentive plans
o Makes grants of stock and option awards
o Prepares the annual report on executive
compensation to be included in our proxy
statement
o Makes recommendations to the board with respect
to incentive compensation and equity-based plans
* Resigned from the board of directors, effective April 17, 2003.
54
CARNIVAL PLC
During the fiscal year ended December 31, 2002, the board of directors of
Carnival plc (then known as P&O Princess Cruises plc) held a total of 17
meetings. The board of directors of Carnival plc has established standing Audit,
Remuneration and Nomination Committees. The membership during 2002 and the
function of each committee are described below. During the fiscal year ended
December 31, 2002, except for Peter Foy, each director attended either
telephonically or in person at least 75% of all board of directors and
applicable committee meetings.
NUMBER OF
MEETINGS/
CONSENT
NAME OF COMMITTEE AND ACTIONS IN
MEMBERS FUNCTIONS OF THE COMMITTEE 2002
AUDIT: o Examines the process of financial 4
Baroness Hogg, Chair reporting, reviews accounting policies and
Sir John Parker monitors integrity of the financial statements
Peter Foy
o Reviews system of internal control and the
processes for monitoring and evaluating risks
facing the company and its subsidiaries
o Responsible for:
- Appointment of external
independent auditors;
- reviewing scope and results of
audit with external auditors;
- monitoring independence of
external auditor; and
- the terms of reference and results
of the work of the internal audit department
55
NUMBER OF
MEETINGS/
CONSENT
NAME OF COMMITTEE AND ACTIONS IN
MEMBERS FUNCTIONS OF THE COMMITTEE 2002
REMUNERATION: 5
Peter Foy, Chair o Makes recommendations and approves on behalf
Baroness Hogg of the board of directors the salaries,
Sir John Parker incentive and other benefit arrangements of
the Chairman and executive directors
o Oversees incentive schemes
o Fees payable to non-executive directors are
determined by the board of directors
NOMINATION: o Assess and recommend candidates for 1
Lord Sterling, Chair appointment as executive and non-executive
Sir John Parker directors
Peter Ratcliffe
Peter Foy o Makes recommendations to the board of
directors on its composition and balance
o Reviews proposals for changes in
responsibilities of directors
56
COMPENSATION OF DIRECTORS
CARNIVAL CORPORATION
The following table provides information on Carnival Corporation's compensation
and reimbursement practices during fiscal 2002 for non-employee directors.
Directors who are employed by us or our subsidiaries do not receive any
compensation for their board activities.
--------------------------------------------------------------------------------
Annual Director Retainer $38,000
--------------------------------------------------------------------------------
Additional Retainer for Committee Chair $4,000
--------------------------------------------------------------------------------
Additional Retainer for Committee Membership $2,000
--------------------------------------------------------------------------------
Board Meeting Attendance Fees (per meeting) $2,000
--------------------------------------------------------------------------------
Committee Meeting Attendance Fees (per meeting) $1,000
--------------------------------------------------------------------------------
Reimbursement for Expenses Attendant to Board Membership Yes
--------------------------------------------------------------------------------
Stock Options* 6,000 annually
--------------------------------------------------------------------------------
Based upon various surveys of directors' compensation, the Compensation
Committee of the board recommended to the board and the board approved an
increase in the annual retainer for members of the board to $40,000 per year and
an increase in the attendance fee per board meeting to $5,000 ($2,000 if meeting
attended by telephone). In addition, the board authorized increases in the
retainers and attendance fees for board committees as follows:
--------------------------------------------------------------------------------
RETAINER ATTENDANCE FEE
--------------------------------------------------------------------------------
CHAIR MEMBER IN PERSON BY TELEPHONE
--------------------------------------------------------------------------------
Audit Committee $10,000 $5,000 $2,500 $1,000
--------------------------------------------------------------------------------
All other Committees $5,000 $2,500 $2,000 $1,000
--------------------------------------------------------------------------------
* Non-employee directors receive options under the 2001 Outside Director
Stock Option Plan (the "Outside Director Plan"). The Outside Director Plan was
adopted by the board on February 16, 2001 to provide additional compensation to
non-employee directors. Currently, each non-employee director is granted an
option to purchase 6,000 shares of common stock annually at the time he or she
is elected to the board of directors by the shareholders or at such other time
during the year approved by the board of directors. The exercise price of each
option granted under the Outside Director Plan is equal to the average of the
high and the low sales price of a share of common stock on the New York Stock
Exchange Composite Tape on the date an option is granted. Options granted under
the Outside Director Plan vest and become exercisable in five equal annual
installments beginning on the first anniversary of the grant date and expire ten
years from the date of grant. The maximum number of shares of common stock which
may be made subject to options under the Outside Director Plan is 800,000. The
Outside Director Plan expires on January 1, 2011.
During fiscal 2002, no options were granted under the Outside Director Plan.
57
CARNIVAL PLC
Information with respect to Carnival plc's compensation and reimbursement
practices during fiscal 2002 for non-employee directors is included under the
heading "Details of Directors' Remuneration" in the Remuneration Report attached
as Annex D to this proxy statement.
EXECUTIVE COMPENSATION
CARNIVAL CORPORATION
The following table sets forth all compensation awarded to, earned by, or paid
to our Chief Executive Officer and our four other most highly compensated
executive officers for the year ended November 30, 2002, as well as their
compensation for each of the years ended November 30, 2001 and November 30,
2000.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION AWARDS
------------------- -----------------------------
NUMBER OF
NAME AND PRINCIPAL OTHER ANNUAL RESTRICTED SECURITIES
POSITION COMPENSATION STOCK AWARDS UNDERLYING ALL OTHER
OPTIONS(#)(3) YEAR SALARY ($) BONUS($) ($)(1) ($)(2) AWARDS($)(2) COMPENSATION($)
Micky Arison 2002 $501,000 $1,675,000 $73,000 $1,546,200 120,000 --
Chairman, CEO 2001 501,000 1,675,000 72,000 1,570,200 120,000 --
and Director 2000 501,000 1,450,000 51,500 1,785,000 240,000 --
Howard S. Frank 2002 409,000 1,645,000 60,000 1,288,500 100,000 --
Vice Chairman, COO 2001 408,000 1,645,000 1,308,500 100,000 --
and Director 2000 412,000 1,430,000 1,487,500 200,000 --
Robert H. 2002 411,000 1,264,300(4) 1,028,000 -- --
Dickinson 2001 410,000 1,327,000(4) 1,312,800 160,000 --
President and COO 2000 411,000 1,126,500(4) 757,500 160,000 --
of CCL and Director
A. Kirk Lanterman 2002 214,000 2,425,000(5) -- -- $15,700(6)
Chairman and CEO 2001 214,000 3,223,000(5) -- -- 13,600(6)
of HAL and Director 2000 214,000 3,597,500(5) -- -- 17,000(6)
Pier Luigi Foschi 2002 769,000 472,600(8) -- 50,000 --
(7) 2001 573,000 890,000(8) -- 50,000 --
Chairman and CEO of 2000 561,000 912,000(8) -- 50,000 --
Costa
-------------------------
(1) Represents the fair market value of personal use of corporate aircraft
and tax return preparation and tax planning services provided by a
third party. For the other named executive officers listed in the
table, personal benefits for each executive officer did not
58
exceed the lesser of $50,000 or 10% of such executive officer's total
annual salary and bonus for the years ended November 30, 2002, 2001 and
2000, respectively.
(2) Represents the value, based on the closing market price of the common
stock on the New York Stock Exchange on the date of grant. As of
November 29, 2002, Messrs. Arison, Frank and Dickinson owned 300,000
shares, 250,000 shares and 200,000 shares of restricted common stock,
respectively. Neither Mr. Lanterman nor Mr. Foschi owned any shares of
restricted common stock. At November 29, 2002, based on the closing
price of the common stock on such date of $28.05, such restricted
shares of common stock owned by Messrs. Arison, Frank and Dickinson had
a value of $8,415,000, $7,012,500, and $5,610,000, respectively. The
restricted shares of common stock held by such executive officers have
the same rights with respect to dividends and other distributions as
all other outstanding shares of our common stock.
(3) No stock appreciation rights were granted to any of the named executive
officers. In certain instances, options are granted to executive
officers during the subsequent fiscal year in recognition of services
rendered during the prior fiscal year.
(4) Represents payments to Mr. Dickinson pursuant to the 1994 Carnival
Cruise Lines Key Management Incentive Plan (the "CCL Plan") which
allows key management employees of CCL to participate in an incentive
award pool based upon the net income of CCL reaching certain
predetermined levels.
(5) Represents amounts payable to Mr. Lanterman under an arrangement
pursuant to which he receives a bonus based on a specified percentage
of the consolidated net income of HAL Antillen N.V., our subsidiary.
(6) Represents amounts paid on behalf of Mr. Lanterman pursuant to the
Holland America Line Inc. Profit Sharing Plan (the "Profit Sharing
Plan") and the Holland America Line Inc. Employee Savings Plan (the
"Savings Plan"). The amounts paid or accrued to Mr. Lanterman under the
Profit Sharing Plan in fiscal 2002, 2001 and 2000 were $12,000, $10,200
and $13,600 respectively. The employer contributions made on behalf of
Mr. Lanterman under the Savings Plan for fiscal 2002, 2001 and 2000
were $3,700, $3,400 and $3,400 respectively. The Profit Sharing Plan
and the Savings Plan are generally available to all employees of HAL.
(7) Mr. Foschi's compensation was payable in Italian lira in fiscal 2000
and 2001 and in euro in fiscal 2002. His compensation has been
translated to United States dollars at the average exchange rate of the
dollar for each fiscal year.
(8) Represents amounts payable to Mr. Foschi under an agreement pursuant to
which he receives a bonus contingent upon the net income of Costa,
reaching certain predetermined levels.
CARNIVAL PLC
Information with respect to Carnival plc's compensation and reimbursement
practices during fiscal 2002 for non-employee (or non-executive) directors is
included under the heading "Details
59
of Directors' Remuneration" in the Remuneration Report attached as Annex D to
this proxy statement.
OPTION GRANTS IN LAST FISCAL YEAR
No stock options were granted to the Chief Executive Officer of Carnival
Corporation or its four other most highly compensated executive officers during
fiscal 2002.
Information with respect to options grants during fiscal 2002 to the Chairman,
Chief Executive Officer and Chief Financial Officer of Carnival plc is included
under the heading "Directors' Interest in Shares" in the Remuneration Report
attached as Annex D to this proxy statement.
60
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES (1)
CARNIVAL CORPORATION
The following table provides information on the values of the exercised and
unexercised options held by the Chief Executive Officer and the four other most
highly compensated executive officers of Carnival Corporation at November 30,
2002.
Number of Securities Underlying Value of Unexercised
Unexercised Options at In-the-Money Options at
Fiscal Year End Fiscal Year End ($)(2)
Name Exercisable Unexercisable Exercisable Unexercisable
----------------------------------------------------------------------------------------------------------------------
Micky Arison 288,000 432,000 285,720 561,930
Howard S. Frank 640,000 360,000 6,946,100 468,275
Robert H. Dickinson 262,400 281,600 925,440 786,260
A. Kirk Lanterman -- -- -- --
Pier Luigi Foschi 20,000 80,000 54,500 218,000
-------------------------
(1) No options were exercised by these executive officer during fiscal
2002. No stock appreciation rights are held by any of the named
executive officers.
(2) The value of the unexercised options is based upon the difference
between the exercise price and the average of the high and low market
prices of the common stock on November 29, 2002 of $28.02.
61
CARNIVAL PLC
Information with respect to option values for the Chairman, Chief Executive
Officer and Chief Financial Officer of Carnival plc at December 31, 2002 is
included under the heading "Directors' Interest in Shares" in the Remuneration
Report attached as Annex D to this proxy statement.
EXECUTIVE LONG-TERM COMPENSATION AGREEMENTS
CARNIVAL CORPORATION
Carnival Corporation entered into Executive Long-Term Compensation Agreements
(the "Compensation Agreements") with Micky Arison, its Chairman of the Board and
Chief Executive Officer, Howard S. Frank, our Vice Chairman of the Board and
Chief Operating Officer, and Robert H. Dickinson, President and Chief Operating
Officer of CCL (each an "Officer"). The Compensation Agreements provide that
during the term of such Officer's employment, Carnival Corporation will provide
long-term compensation (in addition to his annual compensation consisting of a
base salary and annual bonus, which in the case of Mr. Dickinson is awarded
under the 1994 Carnival Cruise Lines Key Management Incentive Plan) in the form
of annual grants to each Officer, contingent upon satisfactory performance, as
follows: Mr. Arison, 60,000 restricted shares of common stock and 120,000
options to purchase common stock; Mr. Frank, 50,000 restricted shares of common
stock and 100,000 options to purchase common stock; and Mr. Dickinson, 40,000
restricted shares of common stock and 80,000 options to purchase common stock.
The options vest in five equal annual installments beginning one year from the
date of grant and the restricted shares of common stock vest five years from the
date of grant. Unvested options and restricted shares of common stock are
forfeited if an Officer's employment is terminated for cause, if he engages in
competition with Carnival Corporation or if he violates the nondisclosure
provisions of the Compensation Agreement.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Effective December 1, 1999, Carnival Corporation established the Supplemental
Executive Retirement Plan (the "SERP") to provide benefits to a select group of
management or highly compensated employees. Currently, only Robert H. Dickinson
and Howard S. Frank are eligible to participate. The SERP provides a benefit
equal to 50% of cash compensation (as defined in the SERP) reduced
proportionately for each year of service less than 25. The SERP provides an
early retirement benefit at age 55 after completion of 15 years of service,
subject to a reduction of 3% for each year that the participant retires before
age 65. The SERP benefit is offset for any benefit payable under the Pension
Plan described above and for Social Security benefits. The form of payment is
either a lump-sum, life annuity (with either a 5-year or 10-year certain
benefit) or a joint and survivor annuity for married participants.
EMPLOYMENT AGREEMENT
In May 2002, Carnival Corporation entered into a five-year employment agreement
with Mr. Foschi, the Chairman and Chief Executive Officer of Costa. The
employment agreement
62
provides that during its term Carnival Corporation will provide a base salary of
(euro)657,000 per year, which may be subject to increases at the discretion of
Costa's board, performance based compensation based on the net income of Costa,
non-competition compensation of (euro)115,000 per year and certain fringe
benefits. The employment agreement also contains confidentiality provisions.
RETIREMENT AND CONSULTING AGREEMENT
In 1999 and years prior thereto, Mr. Lanterman deferred receipt of a portion of
his bonus. In exchange, Carnival Corporation and Mr. Lanterman entered into a
Retirement and Consulting Agreement which provides that Carnival Corporation
will pay him the deferred amounts plus interest in monthly installments over the
15 years following his retirement. Mr. Lanterman is also required to provide
Carnival Corporation with up to five hours of consulting services per month
during the term of the Retirement and Consulting Agreement.
CARNIVAL PLC
Long term compensation information for the Chairman, Chief Executive Officer and
Chief Financial Officer of Carnival plc with respect to fiscal 2002 is included
under the heading "Details of Directors' Remuneration" in the Remuneration
Report attached as Annex D to this proxy statement.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
CARNIVAL CORPORATION
During the year ended November 30, 2002, Messrs. Sherwood M. Weiser, Uzi Zucker
and Modesto A. Maidique served as members of the Compensation Committee of the
board of directors of Carnival Corporation. Mr. Weiser resigned from the board
of directors of Carnival Corporation and the Compensation Committee on April 17,
2003.
TRANSACTIONS WITH SHERWOOD M. WEISER. Mr. Weiser is currently a managing member
of and owns a membership interest in Continental Hospitality Holdings, LLC
("CHH"). In June 2002, CHH redeemed Carnival Corporation's entire 55% interest
in CHH for $1.1 million paid in cash, a $4.3 million interest-bearing promissory
note and certain additional contingent consideration. The note is personally
guaranteed by Mr. Weiser and certain other owners of CHH. During fiscal 2002,
Carnival Corporation received interest payments of approximately $100,650 under
the promissory note.
On October 31, 1997, Crowne Plaza Holdings, Inc., our subsidiary ("CPH"),
together with Mr. Weiser and the other former members of CHH (collectively, the
"Principals") entered into a transaction to purchase the Crowne Plaza Hotel in
Miami, Florida. The Principals are the owners of CP Miami Holdings, L.L.C.
("Holdings"), a limited liability company which owns a 17.49% limited
partnership interest in CP Miami Hospitality, L.P. ("Hospitality"), the limited
partnership established by the Principals to purchase the Crowne Plaza Hotel.
CPH owns a 48% interest in
63
Holdings. During fiscal 2002, Carnival Corporation funded Holdings in the
aggregate amount of approximately $700,000.
TRANSACTIONS WITH UZI ZUCKER. Mr. Zucker, a director of Carnival Corporation, is
a Senior Managing Director of Bear, Stearns & Co. Inc. ("Bear Stearns"). It is
expected that Bear Stearns may provide investment banking and consulting
services to us upon our request.
DEFINED BENEFIT AND OTHER PLANS
CARNIVAL CORPORATION
The following table sets forth estimated pension benefits payable at age 65 (the
"Normal Retirement Date"), pursuant to Carnival Corporation's nonqualified
pension plan effective January 1, 1989 (the "Pension Plan"). The Pension Plan
provides an early retirement benefit at age 55 after completion of 15 years of
service, subject to a reduction of .5% for each month that distribution of
benefits precedes the participant's Normal Retirement Date.
YEARS OF SERVICE
--------------------------------------------------------------------------------
PAY 15 20 25 30 35
--- -- -- -- -- --
$ 125,000 $ 24,218 $ 32,290 $ 40,363 $ 48,435 $ 48,435
$ 150,000 $ 30,218 $ 40,290 $ 50,363 $ 60,435 $ 60,435
$ 175,000 $ 36,218 $ 48,290 $ 60,363 $ 72,435 $ 72,435
$ 200,000 $ 42,218 $ 56,290 $ 70,363 $ 84,435 $ 84,435
$ 225,000 $ 48,218 $ 64,290 $ 80,363 $ 96,435 $ 96,435
$ 250,000 $ 54,218 $ 72,290 $ 90,363 $ 108,435 $ 108,435
$ 300,000 $ 66,218 $ 88,290 $ 110,363 $ 132,435 $ 132,435
$ 350,000 $ 78,218 $ 104,290 $ 130,363 $ 156,435 $ 156,435
$ 400,000 $ 90,218 $ 120,290 $ 150,363 $ 180,435 $ 180,435
$ 450,000 $ 102,218 $ 136,290 $ 170,363 $ 204,435 $ 204,435
$ 500,000 $ 114,218 $ 152,290 $ 190,363 $ 228,435 $ 228,435
$ 750,000 $ 174,218 $ 232,290 $ 290,363 $ 348,435 $ 348,435
$ 1,000,000 $ 234,218 $ 312,290 $ 390,363 $ 468,435 $ 468,435
$ 1,250,000 $ 294,218 $ 392,290 $ 490,363 $ 588,435 $ 588,435
$ 1,500,000 $ 354,218 $ 472,290 $ 590,363 $ 708,435 $ 708,435
$ 1,750,000 $ 414,218 $ 552,290 $ 690,363 $ 828,435 $ 828,435
$ 2,000,000 $ 474,218 $ 632,290 $ 790,363 $ 948,435 $ 948,435
$ 2,250,000 $ 534,218 $ 712,290 $ 890,363 $1,068,435 $1,068,435
A participant's benefits under the Pension Plan are calculated based on an
employee's length of service with Carnival Corporation and the average of the
participant's five highest consecutive years of compensation (including base
pay, overtime, bonuses and commissions) out of the last ten years of service.
The eligible compensation with respect to the individuals named in the Summary
Compensation Table would include substantially the same types and amounts of
annual compensation shown in the Summary Compensation Table.
64
The normal form of payment is a straight life annuity with benefits ceasing at
the later of the death of the participant or five years from the date of first
payment. If the employee is married, pension benefits are presumptively payable
on a reduced 50% joint and survivor annuity basis with the employee's spouse as
the contingent annuitant. If the employee is not married, pension benefits are
paid as a lump sum to the participant's beneficiary or estate, as applicable.
For retired or terminated employees, other forms of distribution are available
under the Pension Plan.
The Pension Plan does not reduce benefits on account of Social Security (or any
other benefit), other than as reflected in the benefit formula which is
integrated with Social Security.
As of December 31, 2002, the years of credited service under the Pension Plan
for each of the executive officers named in the Summary Compensation Table,
except for A. Kirk Lanterman and Pier Luigi Foschi who are not eligible for
participation in the Pension Plan, was as follows: Micky Arison, age 53, with 28
credited years of service; Robert H. Dickinson, age 60, 28 years; and Howard S.
Frank, age 62, 14 years. In consideration of Mr. Frank's forfeiture of
retirement benefits from his prior employer, on April 17, 1995, the Compensation
Committee approved an agreement with Mr. Frank whereby Carnival Corporation
agreed to compensate Mr. Frank upon his retirement for benefits he would have
received under the Pension Plan if he had been credited with an additional 13
years of service in addition to the actual years of credited service, reduced by
the amounts payable to him under the Pension Plan.
Carnival Corporation has also established a 401(k)/profit sharing plan and a
nonqualified savings/profit sharing plan. At the time of its establishment,
participants in the nonqualified employee pension plan chose either to remain in
the nonqualified employee pension plan with limited participation in the
nonqualified savings plan or to freeze participation in the nonqualified pension
plan and fully participate in the nonqualified savings/profit sharing plan.
CARNIVAL PLC
Information with respect to pension plan arrangements for Carnival plc for the
year ended December 31, 2002 is included under the heading "Details of
Directors' Remuneration--Pensions" in the Remuneration Report attached as Annex
D to this proxy statement.
65
REPORT OF THE COMPENSATION COMMITTEE
The three-member Compensation Committee of Carnival Corporation's board of
directors is responsible for annually recommending to the board of directors the
cash compensation payable to the executive officers named in the Summary
Compensation Table and for the administration of Carnival Corporation's
stock-based incentive plans. Compensation decisions by the Compensation
Committee are submitted to the board of directors for approval.
The Compensation Committee for each of Carnival Corporation and Carnival plc is
currently comprised of Mr. Maidique and Sir John Parker, each of whom are
outside directors. During fiscal 2002, the Compensation Committee for Carnival
Corporation was comprised of Messrs. Sherwood M. Weiser, Uzi Zucker and Modesto
A. Maidique, each of whom were outside directors.
Set forth below is the report of the Compensation Committee of Carnival
Corporation for fiscal 2002. The report of the Remuneration Committee of
Carnival plc for fiscal 2002 is attached as Annex D to this proxy statement.
COMPENSATION STRUCTURE
The key components of the compensation of the Chief Executive Officer and the
other executive officers are base salary, annual bonus and stock-based
incentives. The objective of Carnival Corporation is to create compensation
packages for executive officers that are competitive with compensation payable
by comparable high performing companies, as well as to provide both short-term
rewards and long-term incentives for positive individual and corporate
performance. The various components of Carnival Corporation's executive
compensation are discussed below.
BASE SALARIES
The base salaries of Carnival Corporation executive officers, including the base
salary of the Chief Executive Officer, are set at a level Carnival Corporation
believes to be below the median of salaries paid to executives of comparable
high performing companies. The objective of Carnival Corporation is to emphasize
the variable annual bonus as the most important cash compensation feature of
executive compensation as a reward for contributions made towards achieving
Carnival Corporation's goals, including profitability.
BONUSES
The emphasis on the annual discretionary bonus for the Chief Executive Officer
and other corporate level executive officers allows Carnival Corporation greater
flexibility in rewarding favorable individual and corporate performance than
possible under a salary-oriented structure. The annual bonus to Robert Dickinson
is based on the financial performance of Carnival Cruise Lines and is determined
pursuant to the terms of the 1994 Carnival Cruise Lines Key Management Incentive
Plan (the "CCL Plan"). The annual bonus for Mr. Lanterman, who is employed by
Holland America Line Inc. ("HAL"), a subsidiary of Carnival Corporation, is
based on the financial performance of HAL. The annual bonus for Mr. Foschi, who
is employed by Costa is based on the financial performance of Costa.
66
Although there is no specific relationship between the bonus recommendations of
the Chief Executive Officer for himself and the Chief Operating Officer and the
performance of Carnival Corporation for the 2002 fiscal year, the Compensation
Committee considered generally in reviewing such recommendations the financial
performance of Carnival Corporation for fiscal 2002 and the shareholder return
reflected in the Performance Graph appearing elsewhere in this proxy statement.
STOCK-BASED INCENTIVES
The third component of Carnival Corporation's executive compensation is
comprised of stock-based incentive plans. Whereas the cash bonus payments are
intended to reward positive short-term individual and corporate performance,
grants under the stock-based plans are intended to provide executives with
longer term incentives which appreciate in value with the continued favorable
future performance of Carnival Corporation. Based on the individual performance
of the executive officers, the Chief Executive Officer recommends to the
Compensation Committee grants of stock options pursuant to the 2002 Stock Option
Plan and restricted stock pursuant to the 1993 Restricted Stock Plan.
OTHER COMPENSATION
Carnival Corporation has entered into various compensation-related agreements
with individual officers. See "Executive Compensation - Executive Long-Term
Compensation Agreements" and "Executive Compensation - Employment Agreement."
Such agreements include stock compensation agreements and employment agreements.
The Committee and the boards of directors will continue to consider such
arrangements in the future in connection with circumstances that warrant an
individualized compensation arrangement.
In fiscal 2002, some of Carnival Corporation's executive officers also
participated in Carnival Corporation's nonqualified defined benefit pension plan
and all were able to participate in Carnival Corporation's nonqualified
401(k)/profit sharing plan. In addition, two of Carnival Corporation's executive
officers participated in Carnival Corporation's supplemental executive
retirement plan.
THE COMPENSATION COMMITTEE
Sherwood M. Weiser, Chairman
Modesto A. Maidique
Uzi Zucker
67
STOCK PERFORMANCE GRAPHS
CARNIVAL CORPORATION
The following graph compares the Price Performance of U.S.$100 if invested in
Carnival Corporation common stock with the Price Performance of U.S.$100 if
invested in each of the S&P 500 Index and the Dow Jones Industry Group REQ
(leisure services and products). The Price Performance, as used in the
Performance Graph, is calculated by assuming U.S.$100 is invested at the
beginning of the period in Carnival Corporation common stock at a price equal to
the market value. At the end of each fiscal year the total value of the
investment is computed by taking the number of shares owned, assuming Carnival
Corporation dividends are reinvested on an annual basis, times the market price
of the shares at the end of each fiscal year.
--------------------------------------------------------------------------------------------------------------------
1997 1998 1999 2000 2001 2002
--------------------------------------------------------------------------------------------------------------------
Carnival Corporation 100 129 166 87 102 111
--------------------------------------------------------------------------------------------------------------------
Dow Jones Industry 100 112 122 96 98 107
Group/REQ
--------------------------------------------------------------------------------------------------------------------
S&P 500 Index 100 124 150 143 126 105
--------------------------------------------------------------------------------------------------------------------
CARNIVAL PLC
The following graph compares the Price Performance of $100 invested in Carnival
plc American Depositary Shares ("ADSs"), each representing four ordinary shares
of Carnival plc (as of April 17, 2003 each ADS represents one ordinary share of
Carnival plc), with the Price Performance of U.S.$100 invested in each of the
NYSE Market Index and the Dow Jones Industry Group REQ (leisure services and
products). The Price Performance, as used in the Performance Graph, is
calculated by assuming U.S.$100 was invested in Carnival plc ADSs at a price
equal to the market value on October 23, 2000, the date on which Carnival plc
ordinary shares and ADSs were originally listed on the London Stock Exchange and
the New York Stock Exchange, respectively, upon the demerger of the cruise
business of The Peninsular and Oriental Steam Navigation Company. Prior to
October 23, 2000, there was no public market for Carnival plc equity securities.
The total value of the investment at the end of each subsequent fiscal year is
computed by taking the number of ADSs owned, assuming Carnival plc dividends are
reinvested on an annual basis, times the market price of ADSs at the end of each
fiscal year.
-----------------------------------------------------------------------------------------------------------
Oct. 23, 2000 Dec. 29, 2000 Dec. 31, 2001 Dec. 31, 2002
-----------------------------------------------------------------------------------------------------------
Carnival plc 100 92 137 168
-----------------------------------------------------------------------------------------------------------
Dow Jones Industry 100 109 110 105
Group/REQ
-----------------------------------------------------------------------------------------------------------
NYSE Market Index 100 99 90 73
-----------------------------------------------------------------------------------------------------------
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INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
CARNIVAL CORPORATION
AUDIT FEES
Aggregate fees for professional services rendered by PricewaterhouseCoopers LLP
in connection with its audit of Carnival Corporation's consolidated financial
statements as of and for the year ended November 30, 2002 and its reviews of
Carnival Corporation's consolidated financial statements included in Carnival
Corporation's Form 10-Q's filed during fiscal 2002 were $868,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
During the year ended November 30, 2002, PricewaterhouseCoopers LLP rendered no
professional services to us in connection with the design and implementation of
financial information systems.
ALL OTHER FEES
In addition to the fees described above, aggregate fees of $1,429,000 were
billed by PricewaterhouseCoopers LLP during the year ended November 30, 2002,
primarily for the following professional services:
Other accounting and audit related services (a) $444,000
Income tax compliance and planning and other tax services $215,000
Other (b) $770,000
-------------------------
(a) Consists of fees for assistance with regulatory filings related to the
DLC combination of Carnival Corporation and Carnival plc, statutory
audits not relied upon in the audit of Carnival Corporation's
consolidated financial statements, audits of Carnival Corporation's
employee benefit plans.
(b) Consists primarily of fees for Carnival Corporation's new corporate
procurement system and actuarial services and benefit plan consulting.
The Audit Committee considered whether the provision of these non-audit services
is compatible with maintaining PricewaterhouseCoopers LLP's independence.
CARNIVAL PLC
The report of KPMG Audit plc, Carnival plc's independent auditors for the year
ended December 31, 2002 is included under the heading "Report of the Independent
Auditors" in the UK Report and Accounts attached as Annex C to this proxy
statement.
69
REPORT OF THE AUDIT COMMITTEE
CARNIVAL CORPORATION
The Audit Committee of the Carnival Corporation board of directors, currently
consisting of three independent (as defined under the listing standards of the
New York Stock Exchange), non-employee directors, assists the board of directors
in carrying out its oversight responsibilities for Carnival Corporation's
financial reporting process, audit process and internal controls. The Audit
Committee reviewed and recommended to the board of directors (i) that the
audited financial statements be included in Carnival Corporation's Annual Report
on Form 10-K; and (ii) the selection of the independent public accountants to
audit the books and records of Carnival Corporation.
The Audit Committee (i) reviewed and discussed Carnival Corporation's audited
financial statements for the year ended November 30, 2002 with Carnival
Corporation's management and with Carnival Corporation's independent auditors;
(ii) discussed with Carnival Corporation's independent auditors the matters
required to be discussed by Statement on Auditing Standards No. 61; and (iii)
received the written disclosures and the letter from Carnival Corporation's
independent accountants required by Independence Standards Board Statement No. 1
(Independence Discussions with Audit Committees) and have discussed with
Carnival Corporation's independent accountants the independent accountant's
independence. Based on the reviews and discussions described above, the Audit
Committee recommended to the board of directors that the audited financial
statements be included in Carnival Corporation's Annual Report on Form 10-K for
the year ended November 30, 2002 for filing with the U.S. Securities and
Exchange Commission.
Management is responsible for Carnival Corporation's financial reporting process
including its system of internal control, and for the preparation of
consolidated financial statements in accordance with generally accepted
accounting principles. Carnival Corporation's independent certified public
accountants are responsible for auditing those financial statements. Our
responsibility is to monitor and review these processes. We have relied, without
independent verification, on management's representation that the consolidated
financial statements have been prepared with integrity and objectivity and in
conformity with accounting principles generally accepted in the United States of
America and on the report of the independent certified public accountants
included on Carnival Corporation's consolidated financial statements. Our
oversight does not provide us with an independent basis to determine that
management has maintained appropriate accounting and financial reporting
principles or policies, or appropriate internal controls and procedures designed
to assure compliance with accounting standards and applicable laws and
regulations. Furthermore, Carnival Corporation's considerations and discussions
with management and the independent certified public accountants do not assure
that Carnival Corporation's consolidated financial statements are presented in
accordance with generally accepted accounting principles, that the audit of
Carnival Corporation's consolidated financial statements has been carried out in
accordance with generally accepted auditing standards or that Carnival
Corporation's independent certified public accountants are in fact
"independent."
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THE AUDIT COMMITTEE
Stuart Subotnick, Chairman
Richard G. Capen, Jr.
Arnold W. Donald
CARNIVAL PLC
Matters relating to the audit committee of Carnival plc are included under the
heading "Corporate Governance - Part D: Accountability and Audit" in the UK
Report and Accounts attached as Annex C to this proxy statement.
The board of directors of Carnival Corporation has adopted a written charter
setting forth the responsibilities of its Audit Committee. This charter will
also be adopted by the board of directors of Carnival plc. The charter is
attached as Annex B to this proxy statement.
71
TRANSACTIONS OF MANAGEMENT AND DIRECTORS WITH CARNIVAL
CORPORATION
TRANSACTIONS WITH MICKY ARISON. Mr. Arison, our Chairman and Chief Executive
Officer is also the Chairman and Chief Executive Officer and the indirect sole
shareholder of Florida Basketball Associates, Inc., the sole general partner of
the Miami Heat Limited Partnership ("MHLP"), the majority owner of the Miami
Heat, a professional basketball team. Pursuant to a sponsorship agreement
between Carnival Corporation and MHLP, Carnival Corporation paid MHLP
approximately $357,000 during fiscal 2002 in exchange for various sponsorship,
marketing and advertising services and the use of floor level season tickets.
Carnival Corporation also provided aircraft management services to MHLP. During
fiscal 2002, Carnival Corporation received approximately $1.5 million from MHLP
as compensation for providing such services and reimbursement of costs. It is
expected that Carnival Corporation will continue to provide such aircraft
management services to MHLP in the future.
From time to time Carnival Corporation charters the aircraft owned by MHLP under
an arrangement whereby it pays estimated fair market charter rates. During
fiscal 2002, Carnival Corporation incurred $208,000 for charters of this
aircraft.
TRANSACTIONS WITH FUNAIR CORPORATION. Carnival Corporation provided aircraft
management services to Funair Corporation ("Funair"), a company beneficially
owned by a trust established for the benefit of Shari Arison, a former member of
Carnival Corporation's board of directors. During fiscal year 2002, Carnival
Corporation received approximately $1.5 million from Funair as compensation for
providing such services and reimbursement of costs. It is expected that Carnival
Corporation will continue to provide such aircraft management services to Funair
in the future.
YACHT MANAGEMENT AND PERSONNEL SERVICES. Carnival Corporation provided yacht
management and personnel services to companies controlled by Micky Arison and to
a company controlled by Shari Arison. During fiscal 2002, Carnival Corporation
received approximately $186,000 and $86,000 from these companies, respectively,
as compensation for providing such services and reimbursement of costs. It is
expected that we will continue to provide such personnel services to Micky
Arison in the future.
TRANSACTIONS WITH THE TED ARISON FAMILY FOUNDATION USA, INC. Shari Arison is the
Chairman of the Board of Trustees and President of the Ted Arison Family
Foundation USA, Inc. (the "Foundation"), a charitable foundation established by
Carnival Corporation's founder, Ted Arison. Carnival Corporation leases
approximately 100 square feet of office space to the Foundation and employs one
of its employees. During fiscal 2002, the Foundation paid Carnival Corporation
approximately $81,000 for both lease payments and for all costs incurred by
Carnival Corporation related to this employee. It is expected that Carnival
Corporation will continue these arrangements with the Foundation in the future.
REGISTRATION RIGHTS. Pursuant to a letter agreement (the "Trust Registration
Rights Agreement") dated July 11, 1989, Carnival Corporation granted to the Ted
Arison Irrevocable Trust (the "Irrevocable Trust") and the Arison Children's
Irrevocable Trust (the "Children's Trust," and together with the Irrevocable
Trust, the "Trusts") certain registration rights with
72
respect to the 28,554,056 shares of Carnival Corporation common stock held for
investment by the Trusts (the "Shares"). The beneficiaries of the Trusts
included the children of Ted Arison, including Micky Arison, our Chairman of the
Board and Chief Executive Officer, and Shari Arison, a former director.
Effective December 26, 1991, the Children's Trust was divided into three
separate continued trusts, including continued trusts for Micky Arison and Shari
Arison.
The Trust Registration Rights Agreement provides that if, at any time, any of
the Trusts makes a written demand for the registration of its Shares, Carnival
Corporation will within 90 days prepare and file with the U.S. Securities and
Exchange Commission a registration statement, subject to certain limitations.
Carnival Corporation is not required to effect any demand registration pursuant
to the Trust Registration Rights Agreement unless all of the Shares owned by
either of the Trusts are included in the demand for registration. In addition,
if Carnival Corporation determines to file a registration statement on its
behalf or on behalf of any security holders (other than a registration statement
filed for the purpose of registering shares issuable to employees under an
employee benefit plan, or in connection with a business combination) relating to
Carnival Corporation's common stock or any class of securities convertible into
Carnival Corporation's common stock, either of the Trusts may register its
Shares pursuant to such registration statement, subject to certain limitations.
Carnival Corporation has agreed to bear all expenses relating to such demand and
piggyback registrations, except for fees and disbursements of counsel for the
Trusts, underwriting discounts and applicable filing fees.
Under a registration rights agreement (the "Arison Registration Rights
Agreement"), Carnival Corporation granted certain registration rights to Ted
Arison with respect to the shares of common stock beneficially owned by him (the
"Arison Shares") in consideration for $10,000. The registration rights were held
by the Estate of Ted Arison. The Estate of Ted Arison subsequently transferred
the Arison Shares to The 1997 Irrevocable Trust of Micky Arison, the Ted Arison
1992 Irrevocable Trust for Lin No. 2, the Ted Arison 1994 Irrevocable Trust for
Shari No. 1 and the Michael Arison 1999 Irrevocable Delaware Trust
(collectively, the "Family Trusts"). The registration rights specified in the
Arison Registration Rights Agreement apply to the Arison Shares that were
transferred to the Family Trusts and can be exercised by the Family Trusts. If,
at any time, a Family Trust makes a written demand for the registration of any
number of the Arison Shares, subject to a minimum amount of 2,000,000 shares,
Carnival Corporation will within 90 days prepare and file with the U.S.
Securities and Exchange Commission a registration statement, subject to certain
limitations. In addition, if Carnival Corporation determines to file a
registration statement on Carnival Corporation's behalf or on behalf of any
security holders (other than a registration statement filed for the purpose of
registering shares issuable to employees under an employee benefit plan or in
connection with a business combination) relating to Carnival Corporation's
common stock or any class of securities convertible into common stock, a Family
Trust may register its Arison Shares pursuant to such registration statement,
subject to certain limitations. Carnival Corporation has agreed to bear all
expenses relating to such demand and piggyback registrations, except for fees
and disbursements of counsel for the Family Trusts, selling costs, underwriting
discounts and applicable filing fees.
TRANSACTIONS WITH CRUISE SPECIALISTS. Janet Olczak Lanterman, the wife of A.
Kirk Lanterman, one of our executive officers and a director, is the owner of a
travel agency located in Seattle, Washington, named Cruise Specialists. Under
the laws of the State of Washington, Ms. Lanterman's ownership interest in
Cruise Specialists is her separate property and, accordingly,
73
Mr. Lanterman does not have any ownership interest in the agency. Cruise
Specialists sells cruises and other similar products for various travel
providers, including us, under arrangements that are common throughout the
travel industry whereby Cruise Specialists receives a commission based on sales
generated. In fiscal 2002, Cruise Specialists generated approximately $16.6
million of gross revenues (before commission) for Carnival Corporation. In
connection with such revenues, Cruise Specialists received commissions of
approximately $2.6 million from Carnival Corporation. Carnival Corporation
believes that the commissions paid to Cruise Specialists are comparable to those
paid to other travel agents for comparable services.
LOAN TO PAMELA C. CONOVER. On July 22, 2002, Carnival Corporation entered into a
loan agreement with Pamela C. Conover, President and Chief Executive Officer of
Cunard Line Limited. The loan is set up as a line of credit for $250,000. Repaid
amounts may not be reborrowed. Interest accrues on the loan at the rate of 2.82%
per annum. Principal and accrued interest due under the loan are payable upon
demand.
TRANSACTIONS WITH TRUSTEES. James M. Dubin is the sole shareholder of JMD
Delaware, Inc., JMD Protector, Inc. and Balluta Limited, which act either as
trustee or protector of certain Arison family trusts. By virtue of being the
sole shareholder of JMD Delaware, Inc., JMD Protector Inc., and Balluta Limited.
Mr. Dubin may be deemed to own the aggregate of 147,213,270 shares of Carnival
Corporation common stock beneficially owned by such entities, as to which he
disclaims beneficial ownership. Mr. Dubin resigned as one of Carnival
Corporation's directors on April 17, 2003. He is a partner in the New York law
firm of Paul, Weiss, Rifkind, Wharton & Garrison LLP, which firm serves as
counsel to Carnival, Micky Arison and Shari Arison.
OTHER TRANSACTIONS. Certain transactions involving Sherwood M. Weiser and Uzi
Zucker are described in "COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION."
TRANSACTIONS WITH AFFILIATED ENTITIES. Carnival Corporation has adopted a policy
of dealing with affiliated entities on an arms-length basis and Carnival
Corporation may not engage in business transactions with any affiliate on terms
and conditions less favorable to Carnival Corporation than terms and conditions
available at the time for comparable transactions with unaffiliated persons.
74
TRANSACTIONS OF MANAGEMENT AND DIRECTORS WITH CARNIVAL PLC
P&O PRINCESS CRUISES INTERNATIONAL LIMITED OFFICE LEASE. In July 2002, P&O
Princess Cruises International Limited ("POPCIL"), a subsidiary of Carnival plc,
entered into, on an arms-length basis, a lease on an office property in Germany
with a company in which Horst Rahe, a former director of Carnival plc, has an
interest. The lease is for a term of 10 years, commencing in 2004, with options
to extend. The rent payable under the lease each year varies over the term of
the lease, within the range (euro)350,000 to (euro)500,000. These figures are
net of relevant regional government grants.
SHARE TRANSACTION BY HORST RAHE. On December 18, 2002, Deutsche Seereederei GmbH
("DS"), a company wholly owned by Mr. Horst Rahe and his family, entered into a
share sale agreement (the "Agreement") with Commerzbank AG ("Commerzbank") for
German tax-planning purposes. The Agreement is in respect of the 11,366,415
ordinary shares of Carnival plc owned by DS (the "Relevant Shares") which
comprise 1.64 percent of the total of, and the whole of Mr. Rahe's interest in,
the issued share capital of Carnival plc. It will result in DS disposing of its
interest in the Relevant Shares on June 23, 2003, or earlier if it so elects,
but until then, through DS, Mr. Rahe retains full economic interest in the
Relevant Shares.
Under the Agreement, on December 18, 2002, DS transferred the Relevant Shares to
Commerzbank for (pound)50,580,547 ((pound)4.45 per share). At the same time, DS
entered into a total return swap agreement with Commerzbank under which the
Relevant Shares will be valued on June 23, 2003 or earlier, if DS so elects (the
"Valuation Date"). To the extent that the valuation of the Relevant Shares on
the Valuation Date (the "Final Price") exceeds (pound)4.478 per share (the
"Initial Price"), Commerzbank will pay the difference to DS. Conversely, if the
Final Price is less than the Initial Price, DS will pay the difference to
Commerzbank. Any dividends receivable in respect of the Relevant Shares prior to
the Valuation Date will be for the benefit of DS.
Under the total return swap agreement, the Valuation Date was not to be earlier
than April 16, 2003. Furthermore, Commerzbank irrevocably agreed with Carnival
plc that at the Carnival plc EGM on April 16, 2003 it would exercise the votes
attaching to the Relevant Shares it then holds in accordance with the Carnival
plc recommendation to shareholders.
In a related transaction on December 18, 2002, DS assigned its right to receive
deferred consideration from POPCIL, in respect of the purchase by POPCIL of Aida
Cruises Limited pursuant to a sale and purchase agreement dated September 25,
2000, to Paradies Touristik AG ("PT"). PT is a Swiss company also wholly-owned
by Mr. Rahe and his family.
LETTER CONFIRMATION WITH RESPECT TO AIDA CRUISES SALE AND PURCHASE AGREEMENT. On
March 12, 2003, Carnival plc, POPCIL and DS each signed a letter confirming
certain rights and obligations of the parties to the Aida Sale and Purchase
Agreement (the "Aida Sale and Purchase Agreement"), dated September 25, 2000,
between Carnival plc (substituted for P&O on October 23, 2000), POPCIL
(substituted for ACL Limited on October 31, 2001) and DS (as successor by
operation of law to Arkona Touristik GmbH).
75
Under the letter DS irrevocably exercised its right to give Carnival plc an
accelerated notice with respect to an option payment under the Aida Sale and
Purchase Agreement conditional on completion of the DLC transaction.
Accordingly, Carnival plc confirmed that within 14 days of completion of the DLC
transaction, it will pay DS (euro)58,798,566 (equal to the equivalent of DM115
million) in respect of the option payment in accordance with the terms of the
Aida Sale and Purchase Agreement, which payment has been made. The parties
acknowledged that following such payment, Carnival plc's and POPCIL's
obligations under the Aida Sale and Purchase Agreement will be satisfied and,
subject to clause 21 thereof, the Aida Sale and Purchase Agreement will
terminate.
CHANGE IN INDEPENDENT PUBLIC ACCOUNTANTS
On April 17, 2003, KPMG Audit Plc ("KPMG") resigned as the independent public
accountants for Carnival plc. The report of KPMG on Carnival plc's financial
statements for the fiscal years ended December 31, 2002 and December 31, 2001
contained no adverse opinion or disclaimer of opinion and was not qualified or
modified as to uncertainty, audit scope or accounting principles. During the
fiscal years ended December 31, 2001 and December 31, 2002 and the subsequent
interim period through April 17, 2003, there were no disagreements with KPMG on
any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedures, which disagreements, if not
resolved to the satisfaction of KPMG, would have caused it to make reference
thereto in its reports on the financial statements for such periods.
On April 17, 2003, Carnival plc engaged PricewaterhouseCoopers LLP to serve as
its independent certified public accountants for the fiscal year ended November
30, 2003, subject to shareholder approval. The decision to engage
PricewaterhouseCoopers LLP was approved by the audit committee of the board of
directors of Carnival plc.
During the years ended December 31, 2001 and 2002 and the subsequent interim
period through April 17, 2003, Carnival plc did not consult
PricewaterhouseCoopers LLP with respect to the application of accounting
principles to a specified transaction, either completed or proposed, or the type
of audit opinion that might be rendered on Carnival plc's financial statements,
or any other matters or reportable events as set forth in Item 304(a)(1)(v) of
Regulation S-K.
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FORM OF CARNIVAL CORPORATION PROXY CARD
CARNIVAL CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JUNE 23, 2003
The undersigned shareholders of Carnival Corporation hereby revoke all prior
proxies and appoint Micky Arison and Arnaldo Perez, and each of them, proxies
and attorneys in fact, each with full power of substitution, with all the powers
the undersigned would possess if personally present, to vote all shares of
common stock of Carnival Corporation which the undersigned is entitled to vote
at the annual meeting of shareholders to be held on June 23, 2003 or any
postponement or adjournment of the annual meeting.
Please mark your vote as indicated in this example: [X]
A vote "FOR" Proposals 1 through 9 and "AGAINST" Proposal 10 is recommended by
the Board of Directors.
1. To elect 13 directors to the boards of each of Carnival Corporation and
Carnival plc.
To elect/re-elect Micky Arison as a director of Carnival FOR AGAINST ABSTAIN
Corporation and Carnival plc. [_] [_] [_]
To elect/re-elect Howard S. Frank as a director of Carnival FOR AGAINST ABSTAIN
Corporation and Carnival plc. [_] [_] [_]
To elect/re-elect Robert H. Dickinson as a director of FOR AGAINST ABSTAIN
Carnival Corporation and Carnival plc. [_] [_] [_]
To elect/re-elect Pier Luigi Foschi as a director of FOR AGAINST ABSTAIN
Carnival Corporation and Carnival plc. [_] [_] [_]
To elect/re-elect A. Kirk Lanterman as a director of FOR AGAINST ABSTAIN
Carnival Corporation and Carnival plc. [_] [_] [_]
77
To elect/re-elect Ambassador Richard G. Capen Jr. as a FOR AGAINST ABSTAIN
director of Carnival Corporation and Carnival plc. [_] [_] [_]
To elect/re-elect Arnold W. Donald as a director of FOR AGAINST ABSTAIN
Carnival Corporation and Carnival plc. [_] [_] [_]
To elect/re-elect Modesto A. Maidique as a director of FOR AGAINST ABSTAIN
Carnival Corporation and Carnival plc. [_] [_] [_]
To elect/re-elect Stuart Subotnick as a director of FOR AGAINST ABSTAIN
Carnival Corporation and Carnival plc. [_] [_] [_]
To elect/re-elect Uzi Zucker as a director of Carnival FOR AGAINST ABSTAIN
Corporation and Carnival plc. [_] [_] [_]
To elect/re-elect Peter Ratcliffe as a director of Carnival FOR AGAINST ABSTAIN
Corporation and Carnival plc. [_] [_] [_]
To elect/re-elect Sir John Parker as a director of Carnival FOR AGAINST ABSTAIN
Corporation and Carnival plc. [_] [_] [_]
To elect/re-elect Baroness Hogg as a director of Carnival FOR AGAINST ABSTAIN
Corporation and Carnival plc. [_] [_] [_]
2. To approve the Amended and Restated Carnival Corporation 2002 Stock
Plan.
FOR AGAINST ABSTAIN
[_] [_] [_]
78
3. To ratify the selection of PricewaterhouseCoopers LLP as independent
certified public accountants for Carnival Corporation.
FOR AGAINST ABSTAIN
[_] [_] [_]
4. To appoint PricewaterhouseCoopers LLP as independent auditors for
Carnival plc and authorize the audit committee of Carnival plc to agree
the remuneration of the independent auditors.
FOR AGAINST ABSTAIN
[_] [_] [_]
5. To receive the accounts and reports for P&O Princess Cruises plc (now
called Carnival plc) for the year ended December 31, 2002.
FOR AGAINST ABSTAIN
[_] [_] [_]
6. To approve the directors' remuneration report of P&O Princess Cruises
plc (now called Carnival plc).
FOR AGAINST ABSTAIN
[_] [_] [_]
7. To approve limits on the authority to allot shares by Carnival plc.
FOR AGAINST ABSTAIN
[_] [_] [_]
8. To approve the disapplication of pre-emption rights for Carnival plc.
FOR AGAINST ABSTAIN
[_] [_] [_]
9. To authorize Carnival plc's purchases of its own shares.
FOR AGAINST ABSTAIN
[_] [_] [_]
10. To approve the shareholder proposal authorizing the board of directors
to take the measures necessary to change Carnival Corporation's
jurisdiction of incorporation to one of the states of the United
States.
79
AGAINST FOR ABSTAIN
[_] [_] [_]
11. In their discretion, the proxies are authorized to vote upon such other
business as may come before the annual meeting, or any adjournment(s)
thereof.
I will be attending the annual meeting [_]. Print name below.
______________________________
PERSONS WHO DO NOT INDICATE ATTENDANCE AT THE ANNUAL MEETING ON THIS PROXY CARD
WILL BE REQUIRED TO PRESENT PROOF OF STOCK OWNERSHIP TO ATTEND.
The shares represented by this Proxy will be voted as specified herein. If not
otherwise specified, such shares will be voted by the proxies FOR Proposals 1
through 9 and AGAINST Proposal 10.
Dated: __________________, 2003
Signature _____________________________
Signature _____________________________
(Please sign exactly as name appears to the left.)
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
80
FORM OF CARNIVAL PLC PROXY CARD
Carnival plc (the "Company")
Annual General Meeting Proxy Card
________________________________________
NAME & ADDRESS
________________________________________
APPOINTMENT OF A PROXY
I/We hereby appoint as my/our proxy
THE CHAIRMAN OF THE MEETING
OR
The following person:-
________________________________________
________________________________________
PLEASE LEAVE THIS BOX BLANK IF YOU WISH THE CHAIRMAN OF THE MEETING TO BE YOUR
PROXY. DO NOT INSERT YOUR OWN NAME. A PROXY NEED NOT BE A SHAREHOLDER IN THE
COMPANY.
to attend and vote an my/our behalf at the Annual General Meeting of the Company
to be held on 23 June 2003 at 11.00am and at any adjournment of the meeting.
I/We would like my/our proxy to vote on the resolutions proposed at the meeting
as indicated on this form. Unless otherwise instructed, the proxy may vote as he
or she sees fit or withhold his or her vote in relation to any business of the
meeting.
TO BE VALID THIS PROXY MUST BE SIGNED AND DATED.
_______________________________________ __________
SIGNATURE OR COMMON SEAL DATE
ONCE COMPLETED THIS PROXY CARD SHOULD BE DELIVERED IN PERSON OR BY POST TO
COMPUTERSHARE INVESTOR SERVICES PLC IN THE ENCLOSED REPLY-PAID ENVELOPE SO AS TO
BE RECEIVED BY THEM NO LATER THAN 11.00AM ON 21 JUNE 2003.
ALTERNATIVE VOTING METHOD
INTERNET VOTING - If you prefer, you may submit your proxy vote via the Internet
(see Guidance Notes overleaf). You will need your PIN and Shareholder Reference
Number (SRN) shown below.
______________ ______________
PIN SRN
______________ ______________
______________ ______________
CAR001 BARCODE
______________ ______________
IMPORTANT - PLEASE ENSURE THAT YOU HAVE SIGNED AND DATED YOUR PROXY
PLEASE DETACH THE ATTANDANCE CARD AND FOLD WHERE INDICATED PRIOR TO POSTING
RESOLUTIONS
VOTE
ORDINARY RESOLUTIONS FOR AGAINST WITHHELD
1 [_] [_] [_]
2 [_] [_] [_]
3 [_] [_] [_]
4 [_] [_] [_]
5 [_] [_] [_]
6 [_] [_] [_]
7 [_] [_] [_]
8 [_] [_] [_]
9 [_] [_] [_]
10 [_] [_] [_]
11 [_] [_] [_]
12 [_] [_] [_]
13 [_] [_] [_]
14 [_] [_] [_]
15 [_] [_] [_]
16 [_] [_] [_]
17 [_] [_] [_]
18 [_] [_] [_]
19 [_] [_] [_]
20 [_] [_] [_]
SPECIAL RESOLUTIONS
21 [_] [_] [_]
22 [_] [_] [_]
ORDINARY RESOLUTION
VOTE
AGAINST FOR WITHHELD
23 [_] [_] [_]
PLEASE NOTE: This form should be used only by the shareholder named above and in
respect of the pre-printed designated shareholding. This personalised form is
not transferable between shareholders or differing shareholder accounts.
Carnival plc and Computershare Investor Services plc accept no liability for any
instruction that does not comply with these conditions.
ANNEX A
CARNIVAL CORPORATION
2002 STOCK PLAN
-----------------------------
(Effective as of January 14, 2002,
as amended as of September 25, 2002,
and as further amended and restated as of April 14, 2003)
1. PURPOSE
The purpose of the Plan is to provide a means through which
each member of the Combined Group and their respective Affiliates may attract
able persons to enter and remain in the employ of members of the Combined Group
and their Affiliates and to provide a means whereby employees, directors and
consultants of each member the Combined Group and their Affiliates can acquire
and maintain Share ownership, thereby strengthening their commitment to the
welfare of the members of the Combined Group and their Affiliates and promoting
an identity of interest between shareholders and these persons.
The Plan provides for granting of Incentive Stock Options,
Nonqualified Stock Options and Restricted Stock Awards.
2. DEFINITIONS
The following definitions shall be applicable throughout the
Plan.
(a) "Affiliate" means (i) any entity that
directly or indirectly is controlled by, controls or is under common control
with the Company or Carnival plc, and (ii) to the extent provided by the
Committee, any entity in which the Company or Carnival plc has a significant
equity interest.
(b) "Award" means, individually or collectively,
any Incentive Stock Option, Nonqualified Stock Option or Restricted Stock Award.
(c) "Award Agreement" means a Stock Option
Agreement or Restricted Stock Agreement.
(d) "Board" means the Board of Directors of the
Company.
(e) "Carnival plc" means the entity previously
known as P&O Princess Cruises plc, a public limited company incorporated under
the laws of England and Wales, and any successor thereto.
(f) "Cause" means a member of the Combined Group
or an Affiliate having "cause" to terminate a Participant's employment or
service, as defined in any existing employment, consulting or any other
agreement between the Participant and
1
a member of the Combined Group or an Affiliate or, in the absence of such an
employment, consulting or other agreement, upon (i) the determination by the
Committee that the Participant has ceased to perform his duties to a member of
the Combined Group or an Affiliate (other than as a result of his incapacity due
to physical or mental illness or injury), which failure amounts to an
intentional and extended neglect of his duties to such party, (ii) the
Committee's determination that the Participant has engaged or is about to engage
in willful misconduct or conduct which causes or may reasonably be expected to
cause substantial damage to a member of the Combined Group or an Affiliate,
(iii) the Participant having been convicted of, or plead guilty or no contest
to, a felony or any crime involving as a material element fraud or dishonesty,
(iv) the failure of the Participant to follow the lawful instructions of the
Board or any of his superiors or (v) in the case of a Participant who is a
non-employee director, the Participant ceasing to be a member of the Board in
connection with the Participant engaging in any of the activities described in
clauses (i) through (iv) above.
(g) "Change of Control" means, unless in the
case of a particular Award the applicable Award Agreement states otherwise or
contains a different definition of "Change of Control," the occurrence of any of
the following:
(i) the acquisition by any individual,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person")
of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 50% or more (on a fully diluted basis) of either (A) the then
outstanding shares of common stock of the Company, taking into account as
outstanding for this purpose such common stock issuable upon the exercise of
options or warrants, the conversion of convertible stock or debt, and the
exercise of any similar right to acquire such common stock (the "Outstanding
Company Common Stock") or (B) the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); PROVIDED, HOWEVER, that
for purposes of this Plan, the following acquisitions shall not constitute a
Change of Control: (I) any acquisition by the Company or any Affiliate, (II) any
acquisition by any employee benefit plan sponsored or maintained by the Company
or any Affiliate, (III) any acquisition by Marilyn B. Arison, Micky Arison,
Shari Arison, Michael Arison or their spouses or lineal descendents, any trust
established for the benefit of any of the aforementioned Arison family members,
or any Person directly or indirectly controlling, controlled by or under common
control with any of the aforementioned Arison family members or any trust
established for the benefit of any of the aforementioned Arison family members
or any charitable trust or non-profit entity established by any person or entity
described in this clause (III), (IV) any acquisition by any Person which
complies with clauses (A), (B) and (C) of subsection (v) of this Section 2(g),
or (V) in respect of an Award held by a particular Participant, any acquisition
by the Participant or any "affiliate" (within the meaning of 17 C.F.R.
ss.230.405) of the Participant (persons described in clauses (I), (II), (III)
(IV) and (V) being referred to hereafter as "Excluded Persons");
(ii) individuals who, on the date hereof,
constitute the Board (the "Incumbent Directors") cease for any reason to
constitute at least a majority of
2
the Board, provided that any person becoming a director subsequent to the date
hereof, whose election or nomination for election was approved by a vote of at
least two-thirds of the Incumbent Directors then on the Board (either by a
specific vote or by approval of the proxy statement of the Company in which such
person is named as a nominee for director, without written objection to such
nomination) shall be an Incumbent Director; PROVIDED, HOWEVER, that no
individual initially elected or nominated as a director of the Company as a
result of an actual or threatened election contest, as such terms are used in
Rule 14a-11 of Regulation A promulgated under the Exchange Act, with respect to
directors or as a result of any other actual or threatened solicitation of
proxies or consents by or on behalf of any person other than the Board shall be
deemed to be an Incumbent Director;
(iii) the dissolution or liquidation of
the Company;
(iv) the sale, transfer or other
disposition of all or substantially all of the business or assets of the
Company; or
(v) the consummation of a
reorganization, recapitalization, merger, consolidation, statutory share
exchange or similar form of corporate transaction involving the Company that
requires the approval of the Company's shareholders, whether for such
transaction or the issuance of securities in the transaction (a "Business
Combination"), unless immediately following such Business Combination: (A) more
than 50% of the total voting power of (x) the corporation resulting from such
Business Combination (the "Surviving Company"), or (y) if applicable, the
ultimate parent corporation that directly or indirectly has beneficial ownership
of sufficient voting securities eligible to elect a majority of the directors of
the Surviving Company (the "Parent Company"), is represented by the Outstanding
Company Voting Securities that were outstanding immediately prior to such
Business Combination (or, if applicable, is represented by shares into which the
Outstanding Company Voting Securities were converted pursuant to such Business
Combination), and such voting power among the holders thereof is in
substantially the same proportion as the voting power of the Company's Voting
Securities among the holders thereof immediately prior to the Business
Combination, (B) no Person (other than any Excluded Person), is or becomes the
beneficial owner, directly or indirectly, of 50% or more of the total voting
power of the outstanding voting securities eligible to elect directors of the
Parent Company (or, if there is no Parent Company, the Surviving Company) and
(C) at least a majority of the members of the board of directors of the Parent
Company (or, if there is no Parent Company, the Surviving Company) following the
consummation of the Business Combination were Board members at the time of the
Board's approval of the execution of the initial agreement providing for such
Business Combination.
(h) "Code" means the Internal Revenue Code of
1986, as amended. Reference in the Plan to any section of the Code shall be
deemed to include any amendments or successor provisions to such section and any
regulations under such section.
3
(i) "Committee" means the Compensation Committee
of the Board. Unless the Board determines otherwise, each member of the
Committee shall, at the time he takes any action with respect to an Award under
the Plan, be an Eligible Director. However, the mere fact that a Committee
member shall fail to qualify as an Eligible Director shall not invalidate any
Award granted by the Committee which Award is otherwise validly granted under
the Plan.
(j) "Common Stock" means the common stock, par
value $0.01 per share, of the Company and any stock into which such common stock
may be converted or into which it may be exchanged.
(k) "Combined Group" means the Company and
Carnival plc and any successor thereto.
(l) "Company" means Carnival Corporation, a
corporation organized under the laws of the Republic of Panama, and any
successor thereto.
(m) "Date of Grant" means the date on which the
granting of an Award is authorized, or such other date as may be specified in
such authorization or, if there is no such date, the date indicated on the
applicable Award Agreement.
(n) "Disability" means, unless in the case of a
particular Award, the applicable Award Agreement states otherwise, a condition
entitling a person to receive benefits under the long-term disability plan of a
member of the Combined Group or an Affiliate, as may be applicable to the
Participant in question, or, in the absence of such a plan, the complete and
permanent inability by reason of illness or accident to perform the duties of
the occupation at which a Participant was employed or served when such
disability commenced, as determined by the Committee based upon medical evidence
acceptable to it.
(o) "Effective Date" means January 14, 2002.
(p) "Eligible Director" means a person who is
(i) a "non-employee director" within the meaning of Rule 16b-3 under the
Exchange Act, or a person meeting any similar requirement under any successor
rule or regulation and (ii) an "outside director" within the meaning of Section
162(m) of the Code, and the Treasury Regulations promulgated thereunder;
PROVIDED, HOWEVER, that clause (ii) shall apply only with respect to grants of
Awards with respect to which the Company's tax deduction could be limited by
Section 162(m) of the Code if such clause did not apply.
(q) "Eligible Person" means any (i) individual
regularly employed by a member of the Combined Group or an Affiliate who
satisfies all of the requirements of Section 6; PROVIDED, HOWEVER, that no such
employee covered by a collective bargaining agreement shall be an Eligible
Person unless and to the extent that such eligibility is set forth in such
collective bargaining agreement or in an agreement or instrument relating
thereto; (ii) director of a member of the Combined Group or an Affiliate or
(iii) consultant or advisor to a member of the Combined Group or an Affiliate
who may be offered securities pursuant to Form S-8 (which, as of the Effective
Date,
4
includes only those who (A) are natural persons and (B) provide BONA FIDE
services to a member of the Combined Group other than in connection with the
offer or sale of securities in a capital-raising transaction, and do not
directly or indirectly promote or maintain a market for the Company's
securities).
(r) "Exchange Act" means the Securities Exchange
Act of 1934, as amended.
(s) "Fair Market Value", on a given date means
(i) if the Shares are listed on a national securities exchange, the average of
the highest and lowest sale prices reported as having occurred on the primary
exchange with which the Shares are listed and traded on such date, or, if there
is no such sale on that date, then on the last preceding date on which such a
sale was reported; (ii) if the Shares are not listed on any national securities
exchange but is quoted in the Nasdaq National Market ("Nasdaq") on a last sale
basis, the average between the high bid price and low ask price reported on the
date prior to such date, or, if there is no such sale on that date, then on the
last preceding date on which a sale was reported; or (iii) if the Shares are not
listed on a national securities exchange nor quoted in the Nasdaq on a last sale
basis, the amount determined by the Committee to be the fair market value based
upon a good faith attempt to value the Shares accurately and computed in
accordance with applicable regulations of the Internal Revenue Service.
(t) "Incentive Stock Option" means an Option
granted by the Committee to a Participant under the Plan which is designated by
the Committee as an incentive stock option as described in Section 422 of the
Code and which otherwise meets the requirements set forth herein.
(u) "Mature Shares" means Shares owned by a
Participant which are not subject to any pledge or other security interest and
have either been held by the Participant for six months, previously acquired by
the Participant on the open market or meet such other requirements as the
Committee may determine are necessary in order to avoid an accounting earnings
charge on account of the use of such Shares to pay the Option Price or satisfy a
withholding obligation in respect of an Option.
(v) "Nonqualified Stock Option" means an Option
granted by the Committee to a Participant under the Plan, which is not
designated by the Committee as an Incentive Stock Option.
(w) "Option" means an Award granted under
Section 7.
(x) "Option Period" means the period described
in Section 7(c).
(y) "Option Price" means the exercise price for
an Option as described in Section 7(a).
(z) "Pairing Agreement" means the Pairing
Agreement, dated April 17, 2003, among Carnival Corporation, The Law Debenture
Trust Corporation
5
(Cayman) Limited, as trustee of the Carnival plc Special Voting Trust, and Sun
Trust Bank, as transfer agent, as it may be amended from time to time.
(aa) "Participant" means an Eligible Person who
has been selected by the Committee to participate in the Plan and to receive an
Option pursuant to Section 6 or a Restricted Stock Award pursuant to Section 8.
(bb) "Performance Goals" means the performance
objectives which may be established by the Committee for the purpose of
determining whether, and to what extent, Awards will be earned for a Restricted
Period. To the extent an Award is intended to qualify as "performance-based
compensation" under Section 162(m) of the Code, the Performance Goals shall be
established with reference to one or more of the following, either on a Combined
Group-wide basis or, as relevant, in respect of the Company, Carnival plc or one
or more Affiliates, divisions or operations of a member of the Combined Group:
(i) earnings (gross, net or per share)
(ii) stock price (absolute or relative to
other companies)
(iii) market share
(iv) gross or net profit margin
(v) costs or expenses
(vi) productivity improvements
(vii) total shareholder return (absolute
or relative to other companies).
(cc) "Plan" means this Carnival Company 2002
Stock Plan, as amended.
(dd) "Restricted Period" means, with respect to
any share of Restricted Stock, the period of time determined by the Committee
during which such Award is subject to the restrictions set forth in Section 8.
(ee) "Restricted Stock" means Shares issued or
transferred to a Participant subject to forfeiture and the other restrictions
set forth in Section 8.
(ff) "Restricted Stock Award" means an Award of
Restricted Stock granted under Section 8.
(gg) "Retirement" means a termination of
employment with a member of the Combined Group and all Affiliates by a
Participant on or after the earlier of (i) age 65 with at least five years of
employment with a member of the Combined Group and/or its Affiliates or (ii) age
55 with at least 15 years of employment with a member of the Combined Group
and/or its Affiliates.
(hh) "Securities Act" means the Securities Act of
1933, as amended.
6
(ii) "Share" means the aggregate of one share of
Common Stock and one Trust Share.
(jj) "Stock Option Agreement" means any agreement
between the Company and a Participant who has been granted an Option pursuant to
Section 7 which defines the rights and obligations of the parties thereto.
(kk) "Subsidiary" means any subsidiary of the
Company as defined in Section 424(f) of the Code.
(ll) "Trust Share" shall have the meaning
assigned to it in the Pairing Agreement.
3. EFFECTIVE DATE, DURATION AND SHAREHOLDER APPROVAL
The Plan is effective as of the Effective Date, and the Plan
was approved by shareholders at a meeting held on April 15, 2002 in a manner
intended to comply with the shareholder approval requirements of Sections
422(b)(1) and 162(m) of the Code and the New York Stock Exchange. The validity
of any and all Restricted Stock Awards and any Award granted to an Eligible
Person who is an employee or a director of, or a consultant or advisor to
Carnival plc and its Affiliates (but not the Company) are contingent upon
approval of the April 14, 2003 amendment and restatement of this Plan by the
shareholders of the Company in a manner intended to comply with the shareholder
approval requirements of Section 162(m) of the Code and the New York Stock
Exchange.
The expiration date of the Plan, on and after which no Awards
may be granted hereunder, shall be the tenth anniversary of the Effective Date;
PROVIDED, HOWEVER, that the administration of the Plan shall continue in effect
until all matters relating to Awards previously granted have been settled.
4. ADMINISTRATION
The Committee shall administer the Plan. The majority of the
members of the Committee shall constitute a quorum. The acts of a majority of
the members present at any meeting at which a quorum is present or acts approved
in writing by a majority of the Committee shall be deemed the acts of the
Committee.
Subject to the provisions of the Plan and applicable law, the
Committee shall have the power, in addition to other express powers and
authorizations conferred on the Committee by the Plan, to: (i) designate
Participants; (ii) determine the type or types of Awards to be granted to a
Participant; (iii) determine the number of Shares to be covered by, or with
respect to which payments, rights, or other matters are to be calculated in
connection with, Awards; (iv) determine the terms and conditions of any Awards;
(v) determine whether, to what extent, and under what circumstances Awards may
be settled or exercised in cash, Shares, other securities, other Awards or other
property, or canceled, forfeited or suspended and the method or methods by which
7
Awards may be settled, exercised, canceled, forfeited or suspended; (vi)
determine whether, to what extent, and under what circumstances the delivery of
cash, Shares, other securities, other Awards, other property and other amounts
payable with respect to an Award shall be deferred either automatically or at
the election of the holder thereof or of the Committee; (vii) interpret,
administer reconcile any inconsistency, correct any defect and/or supply any
omission in the Plan and any instrument or agreement relating to, or Award
granted under, the Plan; (viii) establish, amend, suspend, or waive such rules
and regulations and appoint such agents as it shall deem appropriate for the
proper administration of the Plan; and (ix) make any other determination and
take any other action specified under the Plan or that the Committee deems
necessary or desirable for the administration of the Plan.
(b) The Committee shall have the authority to amend the
Plan (including by the adaptation of appendices or subplans) and/or the terms
and conditions relating to an Award to the extent necessary to permit
participation in the Plan by Eligible Persons who are located outside of the
United States on terms and conditions comparable to those afforded to Eligible
Persons located within the United States; provided, however, that no such action
shall be taken without shareholder approval if such approval is necessary to
comply with any tax or regulatory requirement applicable to the Plan (including
as necessary to prevent the Company from being denied a tax deduction on account
of Section 162(m) of the Code).
(c) Unless otherwise expressly provided in the Plan, all
designations, determinations, interpretations and other decisions under or with
respect to the Plan or any Award or any documents evidencing Awards shall be
within the sole discretion of the Committee, may be made at any time and shall
be final, conclusive and binding upon all parties, including, without
limitation, each member of the Combined Group, their respective Affiliates, any
Participant, any holder or beneficiary of any Award, and any shareholder.
5. GRANT OF AWARDS; SHARES SUBJECT TO THE PLAN
The Committee may, from time to time, grant Awards of Options
or Restricted Stock to one or more Eligible Persons; PROVIDED, HOWEVER, that:
(a) Subject to Section 10, the aggregate number
of Shares in respect of which Awards may be granted under the Plan shall not
exceed 40,000,000; provided, however, that only 2,000,000 of such Shares shall
be available for Awards of Restricted Stock.
(b) Shares shall be deemed to have been used in
settlement of Awards whether they are actually delivered. In the event any Award
shall be surrendered, terminate, expire, forfeited or cancelled for any reason
whatsoever without the Participant having benefited from therefrom, the number
of Shares no longer subject thereto shall thereupon be released and shall
thereafter be available for new Awards under the Plan. For purposes of the
foregoing sentence, a Participant shall not be deemed
8
to have received any "benefit" in the case of forfeited Restricted Stock Awards
by reason of having enjoyed voting rights and dividend rights prior to the date
of forfeiture;
(c) Shares delivered by the Company in
settlement of Awards may be authorized and unissued Shares or Shares held in the
treasury of the Company or purchased on the open market or by private purchase;
and
(d) Subject to Section 10, no person may be
granted an Award under the Plan during any calendar year with respect to more
than 2,000,000 Shares; provided that such number shall be adjusted pursuant to
Section 10, and Shares otherwise counted against such number, only in a manner
which will not cause the Awards granted under the Plan to fail to qualify as
"performance-based compensation" under Section 162(m) of the Code.
6. ELIGIBILITY
Participation shall be limited to Eligible Persons who have
received written notification from the Committee, or from a person designated by
the Committee, that they have been selected to participate in the Plan.
7. TERMS OF OPTIONS
The Committee is authorized to grant one or more Incentive
Stock Options or Nonqualified Stock Options to any Eligible Person; PROVIDED,
HOWEVER, that no Incentive Stock Option shall be granted to any Eligible Person
who is not an employee of the Company or a Subsidiary. Each Option so granted
shall be subject to the conditions set forth in this Section 7, or to such other
conditions as may be reflected in the applicable Stock Option Agreement.
(a) OPTION PRICE. The Option Price per Share for
each Option shall be set by the Committee at the time of grant but shall not be
less than (i) in the case of an Incentive Stock Option, and subject to Section
7(f), the Fair Market Value of a Share on the Date of Grant, and (ii) in the
case of a Non-Qualified Stock Option, 85% of the Fair Market Value of a Share on
the Date of Grant; PROVIDED, HOWEVER, that all Options intended to qualify as
"performance-based compensation" under Section 162(m) of the Code shall have an
Option Price per Share no less than the Fair Market Value of a Share on the Date
of Grant.
(b) MANNER OF EXERCISE AND FORM OF PAYMENT. No
Shares shall be delivered pursuant to any exercise of an Option until payment in
full of the Option Price therefor is received by the Company. Options which have
become exercisable may be exercised by delivery of written notice of exercise to
the Company accompanied by payment of the aggregate Option Price. The Option
Price shall be payable in cash and/or Shares valued at the Fair Market Value at
the time the Option is exercised (including by means of attestation of ownership
of a sufficient number of Shares in lieu of actual delivery of such Shares to
the Company), provided that such Shares are Mature Shares, or, in the discretion
of the Committee, either (i) in other
9
property having a fair market value on the date of exercise equal to the Option
Price, (ii) by delivering to the Committee a copy of irrevocable instructions to
a stockbroker to deliver promptly to the Company an amount of loan proceeds, or
proceeds of the sale of the Shares subject to the Option, sufficient to pay the
Option Price or (iii) by such other method as the Committee may allow.
(c) VESTING, OPTION PERIOD AND EXPIRATION.
Options shall vest and become exercisable in such manner and on such date or
dates determined by the Committee and shall expire after such period, not to
exceed ten years, as may be determined by the Committee (the "Option Period");
provided, however, that notwithstanding any vesting dates set by the Committee,
the Committee may, in its sole discretion, accelerate the exercisability of any
Option, which acceleration shall not affect the terms and conditions of such
Option other than with respect to exercisability. If an Option is exercisable in
installments, such installments or portions thereof which become exercisable
shall remain exercisable until the Option expires.
Unless otherwise stated in the applicable Stock
Option Agreement, an Option shall expire earlier than the end of the Option
Period in the following circumstances:
(i) If prior to the end of the Option
Period, the Participant's employment or service with each member of the
Combined Group and all Affiliates is terminated by a member of the
Combined Group without Cause or by the Participant for any reason other
than Retirement, the Option shall expire on the earlier of the last day
of the Option Period or the date that is three months after the date of
such termination; PROVIDED, HOWEVER, that any Participant whose
employment or service with a member of the Combined Group or any
Affiliate is terminated and who is subsequently rehired or reengaged by
a member of the Combined Group or any Affiliate prior to the expiration
of the Option shall not be considered to have undergone a termination.
In the event of a termination described in this clause (i), the Option
shall remain exercisable by the Participant until its expiration only
to the extent the Option was exercisable at the time of such
termination.
(ii) If the Participant dies or is
terminated on account of Disability prior to the end of the Option
Period and while still in the employ or service of a member of the
Combined Group or an Affiliate, or dies following a termination
described in clause (i) above but prior to the expiration of an Option,
the Option shall expire on the earlier of the last day of the Option
Period or the date that is one year after the date of death or
termination on account of Disability of the Participant, as applicable.
In such event, the Option shall remain exercisable by the Participant
or his or her beneficiary determined in accordance with Section 9(p),
as applicable, until its expiration only to the extent the Option was
exercisable by the Participant at the time of such event.
(iii) If the Participant ceases employment
or service with a member of the Combined Group and Affiliates due to a
termination by a
10
member of the Combined Group or an Affiliate for Cause, the Option
shall expire immediately upon such cessation of employment or service.
Unless stated otherwise in an applicable Stock Option
Agreement, if the Participant terminates by reason of Retirement prior to the
end of the Option Period, the Option shall (i) expire at the end of the Option
Period and (ii) continue vesting in accordance with the vesting schedule set
forth in the Stock Option Agreement, without regard to any requirement in such
vesting schedule that the Participant remain employed with a member of the
Combined Group or an Affiliate as a condition to vesting.
(d) OTHER TERMS AND CONDITIONS. Each Option
granted under the Plan shall be evidenced by a Stock Option Agreement. Except as
specifically provided otherwise in a Stock Option Agreement, each Option granted
under the Plan shall be subject to the following terms and conditions:
(i) Each Option or portion thereof that
is exercisable shall be exercisable for the full amount or for any part
thereof.
(ii) Each Share purchased through the
exercise of an Option shall be paid for in full at the time of the
exercise. Each Option shall cease to be exercisable, as to any Share,
when the Participant purchases the share or when the Option expires.
(iii) Subject to Section 8(h), Options
shall not be transferable by the Participant except by will or the laws
of descent and distribution and shall be exercisable during the
Participant's lifetime only by him.
(iv) Each Option shall vest and become
exercisable by the Participant in accordance with the vesting schedule
established by the Committee and set forth in the Stock Option
Agreement.
(v) At the time of any exercise of an
Option, the Committee may, in its sole discretion, require a
Participant to deliver to the Committee a written representation that
the Shares to be acquired upon such exercise are to be acquired for
investment and not for resale or with a view to the distribution
thereof. Upon such a request by the Committee, delivery of such
representation prior to the delivery of any Shares issued upon exercise
of an Option shall be a condition precedent to the right of the
Participant or such other person to purchase any Shares. In the event
certificates for Shares are delivered under the Plan with respect to
which such investment representation has been obtained, the Committee
may cause a legend or legends to be placed on such certificates to make
appropriate reference to such representation and to restrict transfer
in the absence of compliance with applicable federal or state
securities laws.
(vi) Each Participant awarded an
Incentive Stock Option under the Plan shall notify the Company in
writing immediately after the date he
11
makes a disqualifying disposition of any Shares acquired pursuant to
the exercise of such Incentive Stock Option. A disqualifying
disposition is any disposition (including any sale) of such Shares
before the later of (a) two years after the Date of Grant of the
Incentive Stock Option or (b) one year after the date the Participant
acquired the Shares by exercising the Incentive Stock Option.
(vii) Except as specifically provided
otherwise in a Stock Option Agreement, any Participant who is
classified as a "shipboard employee," and who has not otherwise
evidenced a specific intent to permanently terminate his employment
with each member of the Combined Group and all Affiliates (as
reasonably determined by the Committee) shall not be considered to have
terminated employment with each member of the Combined Group and all
Affiliates until a six-month period has expired from his signing off of
a ship without physically signing on to another ship.
(e) INCENTIVE STOCK OPTION GRANTS TO 10%
SHAREHOLDERS. Notwithstanding anything to the contrary in this Section 7, if an
Incentive Stock Option is granted to a Participant who owns stock representing
more than ten percent of the voting power of all classes of stock of the Company
or of a Subsidiary or a parent of the Company, the Option Period shall not
exceed five years from the Date of Grant of such Option and the Option Price
shall be at least 110 percent of the Fair Market Value (on the Date of Grant) of
the Shares subject to the Option.
(f) $100,000 PER YEAR LIMITATION FOR INCENTIVE
STOCK OPTIONS. To the extent the aggregate Fair Market Value (determined as of
the Date of Grant) of Shares for which Incentive Stock Options are exercisable
for the first time by any Participant during any calendar year (under all plans
of the Company) exceeds $100,000, such excess Incentive Stock Options shall be
treated as Nonqualified Stock Options.
8. RESTRICTED STOCK AWARDS
(a) AWARDS OF RESTRICTED STOCK.
(i) The Committee shall have the
authority (A) to grant Restricted Stock Awards to Eligible Persons, (B)
to issue or transfer Restricted Stock to Participants, and (C) to
establish terms, conditions and restrictions applicable to such
Restricted Stock, including the Restricted Period, which may differ
with respect to each Participant, the time or times at which Restricted
Stock shall be granted or become vested and the number of Shares to be
covered by each grant.
(ii) Each Participant granted a
Restricted Stock Award shall execute and deliver to the Company a
Restricted Stock Agreement with respect to the Restricted Stock setting
forth the restrictions applicable to such Restricted Stock. If the
Committee determines that the Restricted Stock shall be held in escrow
rather than delivered to the Participant pending the release of the
12
applicable restrictions, the Committee may require the Participant to
additionally execute and deliver to the Company (A) an escrow agreement
satisfactory to the Committee and (B) the appropriate blank stock
powers with respect to the Restricted Stock covered by such agreement.
If a Participant shall fail to execute an agreement evidencing an Award
of Restricted Stock and, if applicable, an escrow agreement and stock
powers, the Award shall be null and void. Subject to the restrictions
set forth in Section 8(b), the Participant generally shall have the
rights and privileges of a stockholder as to such Restricted Stock,
including the right to vote such Restricted Stock. At the discretion of
the Committee, cash dividends and stock dividends with respect to the
Restricted Stock may be either currently paid to the Participant or
withheld by the Company for the Participant's account, and interest may
be credited on the amount of cash dividends withheld at a rate and
subject to such terms as determined by the Committee. The cash
dividends or stock dividends so withheld by the Committee and
attributable to any particular share of Restricted Stock (and earnings
thereon, if applicable) shall be distributed to the Participant upon
the release of restrictions on such share and, if such share is
forfeited, the Participant shall have no right to such cash dividends
stock dividends.
(iii) Upon the grant of an Award of
Restricted Stock, the Committee shall cause a stock certificate
registered in the name of the Participant to be issued and, if it so
determines, deposited together with the stock powers with an escrow
agent designated by the Committee. If an escrow arrangement is used,
the Committee may cause the escrow agent to issue to the Participant a
receipt evidencing any stock certificate held by it registered in the
name of the Participant.
(b) RESTRICTIONS.
(i) Restricted Stock awarded to a
Participant shall be subject to the following restrictions until the
expiration of the Restricted Period, and to such other terms and
conditions as may be set forth in the applicable Restricted Stock
Agreement: (A) if an escrow arrangement is used, the Participant shall
not be entitled to delivery of the stock certificate; (B) the Shares
shall be subject to the restrictions on transferability set forth in
the Restricted Stock Agreement; (C) the Shares shall be subject to
forfeiture to the extent provided in the applicable Restricted Stock
Agreement and, to the extent such Shares are forfeited, the stock
certificates shall be returned to the Company, and all rights of the
Participant to such Shares and as a shareholder shall terminate without
further obligation on the part of the Company.
(ii) The Committee shall have the
authority to remove any or all of the restrictions on the Restricted
Stock whenever it may determine that, by reason of changes in
applicable laws or other changes in circumstances arising after the
date of the Restricted Stock Award, such action is appropriate.
13
(c) RESTRICTED PERIOD. The Restricted Period of
Restricted Stock shall commence on the Date of Grant and shall expire from time
to time as to that part of the Restricted Stock indicated in a schedule
established by the Committee in the applicable Restricted Stock Agreement.
(d) DELIVERY OF RESTRICTED STOCK. Upon the
expiration of the Restricted Period with respect to any Shares covered by an
Award of Restricted Stock, the restrictions set forth in Section 8(b) and the
Restricted Stock Agreement shall be of no further force or effect with respect
to shares of Restricted Stock which have not then been forfeited. If an escrow
arrangement is used, upon such expiration, the Company shall deliver to the
Participant, or his beneficiary, without charge, the stock certificate
evidencing the shares of Restricted Stock which have not then been forfeited and
with respect to which the Restricted Period has expired (to the nearest full
share) and any cash dividends or stock dividends credited to the Participant's
account with respect to such Restricted Stock and the interest thereon, if any.
(e) STOCK RESTRICTIONS. Each certificate
representing Restricted Stock awarded under the Plan shall bear a legend until
the lapse of all restrictions with respect to the Shares subject to the Award
substantially in the form set forth below, as well as containing any other
information the Company deems appropriate:
Transfer of this certificate and the shares represented hereby
is restricted pursuant to the terms of the Carnival Corporation 2002
Stock Plan, as amended from time to time, and a Restricted Stock
Agreement, dated as of _____________, between Carnival Corporation and
__________________. Copies of such Plan and Agreement are on file at
the offices of Carnival Corporation.
Stop transfer orders shall be entered with the Company's transfer agent and
registrar against the transfer of legended securities.
(f) APPLICABILITY OF SECTION 162(M). With
respect to Awards of Restricted Stock intended to qualify as "performance-based
compensation" under Section 162(m) of the Code, this Section 8 (including the
substance of the Performance Goals, the timing of establishment of the
Performance Goals, the adjustment of the Performance Goals and determination of
the Award) shall be implemented by the Committee in a manner designed to
preserve such Awards as such "performance-based compensation."
9. GENERAL
(a) ADDITIONAL PROVISIONS OF AN AWARD. Awards
granted to a Participant under the Plan also may be subject to such other
provisions (whether or not applicable to Awards granted to any other
Participant) as the Committee determines appropriate including, without
limitation, provisions to assist the Participant in financing the purchase of
Shares upon the exercise of Options (provided that the Committee determines that
providing such financing does not violate the Sarbanes-Oxley Act of
14
2002), provisions for the forfeiture of or restrictions on resale or other
disposition of Shares acquired under any Award, provisions giving the Company
the right to repurchase Shares acquired under any Award in the event the
Participant elects to dispose of such Shares, provisions allowing the
Participant to elect to defer the receipt of Shares upon the exercise of Awards
for a specified period or until a specified event, and provisions to comply with
Federal and state securities laws and Federal and state tax withholding
requirements. Any such provisions shall be reflected in the applicable Award
Agreement.
(b) PRIVILEGES OF STOCK OWNERSHIP. Except as
otherwise specifically provided in the Plan, no person shall be entitled to the
privileges of ownership in respect of Shares which are subject to Awards
hereunder until such Shares have been issued to that person.
(c) GOVERNMENT AND OTHER REGULATIONS. The
obligation of the Company to issue Shares upon the exercise of Options or
otherwise settle Awards in Shares shall be subject to all applicable laws,
rules, and regulations, and to such approvals by governmental agencies as may be
required. Notwithstanding any terms or conditions of any Award to the contrary,
the Company shall be under no obligation to offer to sell or to sell and shall
be prohibited from offering to sell or selling any Shares pursuant to an Award
unless such Shares have been properly registered for sale pursuant to the
Securities Act with the Securities and Exchange Commission or unless the Company
has received an opinion of counsel, satisfactory to the Company, that such
Shares may be offered or sold without such registration pursuant to an available
exemption therefrom and the terms and conditions of such exemption have been
fully complied with. The Company shall be under no obligation to register for
sale under the Securities Act any of the Shares to be offered or sold under the
Plan. If the Shares offered for sale or sold under the Plan are offered or sold
pursuant to an exemption from registration under the Securities Act, the Company
may restrict the transfer of such Shares and may legend the stock certificates
representing such Shares in such manner as it deems advisable to ensure the
availability of any such exemption.
(d) TAX WITHHOLDING.
(i) A Participant may be required to
pay to a member of the Combined Group or any Affiliate, and each member of the
Combined Group or any Affiliate shall have the right and is hereby authorized to
withhold from any Shares or other property deliverable under any Award or from
any compensation or other amounts owing to a Participant the amount (in cash,
Shares or other property) of any required tax withholding and payroll taxes in
respect of an Award, its exercise, or any payment or transfer under an Award or
under the Plan and to take such other action as may be necessary in the opinion
of the Company to satisfy all obligations for the payment of such taxes.
(ii) Without limiting the generality of
clause (i) above, the Committee may, in its sole discretion, permit a
Participant to satisfy, in whole or in part, the foregoing withholding liability
(but no more than the minimum required
15
withholding liability if using method (B) or (C) of this subsection) by (A)
payment in cash; (B) delivery of Shares owned by the Participant (which Shares
must be Mature Shares) with a Fair Market Value equal to such withholding
liability or (C) having the Company withhold from the number of Shares otherwise
issuable pursuant to the exercise of the Award a number of Shares with a Fair
Market Value equal to such withholding liability.
(e) CLAIM TO OPTIONS AND EMPLOYMENT RIGHTS. No
employee of a member of the Combined Group, an Affiliate, or other person, shall
have any claim or right to be granted an Award under the Plan or, having been
selected for the grant of an Award, to be selected for a grant of any other
Award. Neither the Plan nor any action taken hereunder shall be construed as
giving any Participant any right to be retained in the employ or service of a
member of the Combined Group or an Affiliate.
(f) NO LIABILITY OF COMMITTEE MEMBERS. No member
of the Committee shall be personally liable by reason of any contract or other
instrument executed by such member or on his behalf in his capacity as a member
of the Committee nor for any mistake of judgment made in good faith, and the
Company shall indemnify and hold harmless each member of the Committee and each
other employee, officer or director of the Company to whom any duty or power
relating to the administration or interpretation of the Plan may be allocated or
delegated, against any cost or expense (including counsel fees) or liability
(including any sum paid in settlement of a claim) arising out of any act or
omission to act in connection with the Plan unless arising out of such person's
own fraud or willful bad faith; PROVIDED, HOWEVER, that approval of the Board
shall be required for the payment of any amount in settlement of a claim against
any such person. The foregoing right of indemnification shall not be exclusive
of any other rights of indemnification to which such persons may be entitled
under the Company's Articles of Incorporation or By-Laws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold them
harmless.
(g) GOVERNING LAW. The Plan shall be governed by
and construed in accordance with the internal laws of the State of Florida
without regard to the principles of conflicts of law thereof, or principles of
conflicts of laws of any other jurisdiction which could cause the application of
the laws of any jurisdiction other than the State of Florida.
(h) NONTRANSFERABILITY.
(i) Each Award shall be exercisable
only by a Participant during the Participant's lifetime, or, if permissible
under applicable law, by the Participant's legal guardian or representative. No
Award may be assigned, alienated, pledged, attached, sold or otherwise
transferred or encumbered by a Participant otherwise than by will or by the laws
of descent and distribution and any such purported assignment, alienation,
pledge, attachment, sale, transfer or encumbrance shall be void and
unenforceable against each member of the Combined Group or an Affiliate;
provided that the designation of a beneficiary shall not constitute an
assignment, alienation, pledge, attachment, sale, transfer or encumbrance.
16
(ii) Notwithstanding the foregoing, the
Committee may, in its sole discretion, permit Nonqualified Stock Options and
Restricted Stock to be transferred by a Participant, without consideration,
subject to such rules as the Committee may adopt consistent with any applicable
Award Agreement to preserve the purposes of the Plan, to:
(A) any person who is a "family member" of the
Participant, as such term is used in the
instructions to Form S-8 (collectively, the
"Immediate Family Members");
(B) a trust solely for the benefit of the
Participant and his or her Immediate Family
Members;
(C) a partnership or limited liability company
whose only partners or shareholders are the
Participant and his Immediate Family
Members; or
(D) any other transferee as may be approved
either (a) by the Board or the Committee in
its sole discretion, or (b) as provided in
the applicable Award Agreement;
(each transferee described in clauses (A), (B), (C) and (D) above is hereinafter
referred to as a "Permitted Transferee"); PROVIDED that the Participant gives
the Committee advance written notice describing the terms and conditions of the
proposed transfer and the Committee notifies the Participant in writing that
such a transfer would comply with the requirements of the Plan.
(iii) The terms of any Nonqualified Stock
Option or Restricted Stock transferred in accordance with the immediately
preceding sentence shall apply to the Permitted Transferee and any reference in
the Plan, or in any applicable Award Agreement, to a Participant shall be deemed
to refer to the Permitted Transferee, except that (A) Permitted Transferees
shall not be entitled to transfer any Nonqualified Stock Option or Restricted
Stock, other than by will or the laws of descent and distribution; (B) Permitted
Transferees shall not be entitled to exercise a transferred Nonqualified Stock
Option unless there shall be in effect a registration statement on an
appropriate form covering the Shares to be acquired pursuant to the exercise of
such Nonqualified Stock Option if the Committee determines, consistent with any
applicable Stock Option Agreement, that such a registration statement is
necessary or appropriate, (C) the Committee or any member of the Combined Group
shall not be required to provide any notice to a Permitted Transferee, whether
or not such notice is or would otherwise have been required to be given to the
Participant under the Plan or otherwise, and (D) the consequences of a
Participant no longer being employed by, or in the services of, the a member of
the Combined Group or an Affiliate under the terms of the Plan and the
applicable Award Agreement shall continue to be applied with respect to the
Participant, including, without limitation, that a Nonqualified Stock Option
shall be exercisable by the Permitted Transferee only to the extent, and for the
periods, specified in the Plan and the applicable Stock Option Agreement.
17
(i) RELIANCE ON REPORTS. Each member of the
Committee and each member of the Board shall be fully justified in acting or
failing to act, as the case may be, and shall not be liable for having so acted
or failed to act in good faith reliance upon any report made by the independent
public accountant of the Combined Group and its Affiliates and upon any other
information furnished in connection with the Plan by any person or persons other
than himself.
(j) RELATIONSHIP TO OTHER BENEFITS. No payment
under the Plan shall be taken into account in determining any benefits under any
pension, retirement, profit sharing, group insurance or other benefit plan of a
member of the Combined Group or any Affiliate except as otherwise specifically
provided in such other plan.
(k) EXPENSES. The expenses of administering the
Plan shall be borne by the Company and Affiliates.
(l) GENDER AND NUMBER. Where the context admits,
masculine pronouns and other words of masculine gender shall refer to both men
and women, words in the singular shall include the plural and words in the
plural shall include the singular.
(m) TITLES AND HEADINGS. The titles and headings
of the sections in the Plan are for convenience of reference only, and in the
event of any conflict, the text of the Plan, rather than such titles or headings
shall control.
(n) TERMINATION OF EMPLOYMENT. For all purposes
herein, a person who transfers from employment or service with a member of the
Combined Group to employment or service with an Affiliate or vice versa shall
not be deemed to have terminated employment or service with a member of the
Combined Group or such Affiliate.
(o) SEVERABILITY. If any provision of the Plan
or any Award Agreement is or becomes or is deemed to be invalid, illegal, or
unenforceable in any jurisdiction or as to any person or Award, or would
disqualify the Plan or any Award under any law deemed applicable by the
Committee, such provision shall be construed or deemed amended to conform to the
applicable laws, or if it cannot be construed or deemed amended without, in the
determination of the Committee, materially altering the intent of the Plan or
Award, such provision shall be stricken as to such jurisdiction, person or Award
and the remainder of the Plan and any such Award shall remain in full force and
effect.
(p) BENEFICIARY DESIGNATION. Each Participant
may designate one or more beneficiaries by delivering a signed written
designation thereof to the Committee. Upon the death of a Participant, his
beneficiaries shall be entitled to the Awards granted to such Participant under
the terms of this Plan. A Participant may change his beneficiary designation at
any time by delivering a new designation in accordance with the first sentence
of this paragraph. Any designation shall become
18
effective only upon its receipt by the Committee. In the absence of an effective
beneficiary designation in accordance with this Section 9(p), a Participant's
beneficiary shall be his estate. After the receipt of Options in accordance with
this paragraph, beneficiaries will only be able to exercise such Options in
accordance with Section 7(c)(ii) of this Plan.
10. CHANGES IN CAPITAL STRUCTURE
Awards granted under the Plan and any Award Agreements, the
maximum number of Shares subject to all Awards stated in Section 5(a) and the
maximum number of Shares with respect to which any one person may be granted
Awards during any period stated in Section 5(d) shall be subject to adjustment
or substitution, as determined by the Committee in its sole discretion, as to
the number, price or kind of a share of stock or other consideration subject to
such Awards or as otherwise determined by the Committee to be equitable (i) in
the event of changes in the outstanding Shares or in the capital structure of
the Company by reason of stock or extraordinary cash dividends, stock splits,
reverse stock splits, recapitalization, reorganizations, mergers,
consolidations, combinations, exchanges, an unpairing of the shares of Common
Stock from the Trust Shares, or other relevant changes in capitalization
occurring after the Date of Grant of any such Awards or (ii) in the event of any
change in applicable laws or any change in circumstances which results in or
would result in any substantial dilution or enlargement of the rights granted
to, or available for, Participants, or which otherwise warrants equitable
adjustment because it interferes with the intended operation of the Plan. Any
adjustment in Incentive Stock Options under this Section 10 shall be made only
to the extent not constituting a "modification" within the meaning of Section
424(h)(3) of the Code, and any adjustments under this Section 10 shall be made
in a manner which does not adversely affect the exemption provided pursuant to
Rule 16b-3 under the Exchange Act. Further, with respect to Awards intended to
qualify as "performance-based compensation" under Section 162(m) of the Code,
such adjustments or substitutions shall be made only to the extent that the
Committee determines that such adjustments or substitutions may be made without
causing the Company to be denied a tax deduction on account of Section 162(m) of
the Code. The Company shall give each Participant notice of an adjustment
hereunder and, upon notice, such adjustment shall be conclusive and binding for
all purposes.
Notwithstanding the above, in the event of any of the
following:
A. The Company is merged or consolidated with another
corporation or entity and, in connection therewith, consideration is received by
shareholders of the Company in a form other than stock or other equity interests
of the surviving entity;
B. All or substantially all of the assets of the Company
are acquired by another person;
C. The reorganization or liquidation of the Company; or
19
D. The Company shall enter into a written agreement to
undergo an event described in clauses A, B or C above,
then the Committee may, in its discretion and upon at least 10 days advance
notice to the affected persons, cancel any outstanding Awards and cause the
holders thereof to be paid, in cash or stock, or any combination thereof, the
value of such Awards based upon the price per share of the shares of stock or
other consideration received or to be received by other shareholders of the
Company in the event. The terms of this Section 10 may be varied by the
Committee in any particular Award Agreement.
11. EFFECT OF CHANGE OF CONTROL
Except to the extent reflected in a particular Award
Agreement:
(a) In the event of a Change of Control,
notwithstanding any provision of the Plan to the contrary, all Options shall
become immediately exercisable with respect to 100 percent of the Shares subject
to such Option, and the Restricted Period shall expire immediately with respect
to 100 percent of the shares of Restricted Stock (including a waiver of any
applicable Performance Goals) and, to the extent practicable, such acceleration
of exercisability and expiration of the Restricted Period (as applicable) shall
occur in a manner and at a time which allows affected Participants the ability
to participate in the Change in Control transaction with respect to the Shares
subject to their Awards.
(b) In addition, in the event of a Change of
Control, the Committee may in its discretion and upon at least 10 days' advance
notice to the affected persons, cancel any outstanding Award and pay to the
holders thereof, in cash or stock, or any combination thereof, the value of such
Awards based upon the price per Share received or to be received by other
shareholders of the Company in the event.
(c) The obligations of the Company under the
Plan shall be binding upon any successor corporation or organization resulting
from the merger, consolidation or other reorganization of the Company, or upon
any successor corporation or organization succeeding to substantially all of the
assets and business of the Company. The Company agrees that it will make
appropriate provisions for the preservation of Participants' rights under the
Plan in any agreement or plan which it may enter into or adopt to effect any
such merger, consolidation, reorganization or transfer of assets.
12. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of this Plan by the Board nor the
submission of this Plan to the shareholders of the Company for approval shall be
construed as creating any limitations on the power of the Board to adopt such
other incentive arrangements as it may deem desirable, including, without
limitation, the granting of stock options otherwise than under this Plan, and
such arrangements may be either applicable generally or only in specific cases.
13. AMENDMENTS AND TERMINATION
20
(a) AMENDMENT AND TERMINATION OF THE PLAN. The Board may
amend, alter, suspend, discontinue, or terminate the Plan or any portion thereof
at any time; PROVIDED that no such amendment, alteration, suspension,
discontinuation or termination shall be made without shareholder approval if
such approval is necessary to comply with any tax or regulatory requirement
applicable to the Plan (including as necessary to prevent the Company from being
denied a tax deduction on account of Section 162(m) of the Code); and PROVIDED
FURTHER that any such amendment, alteration, suspension, discontinuance or
termination that would impair the rights of any Participant or any holder or
beneficiary of any Option theretofore granted shall not to that extent be
effective without the consent of the affected Participant, holder or
beneficiary.
(b) AMENDMENT OF AWARD AGREEMENTS. The Committee may
waive any conditions or rights under, amend any terms of, or alter, suspend,
discontinue, cancel or terminate, any Award theretofore granted or the
associated Award Agreement, prospectively or retroactively; PROVIDED that any
such waiver, amendment, alteration, suspension, discontinuance, cancellation or
termination that would impair the rights of any Participant, holder or
beneficiary in respect of any Award theretofore granted shall not to that extent
be effective without the consent of the affected Participant; and PROVIDED
FURTHER that, without stockholder approval, the Committee may not take any
action that results in the "repricing" of any Option granted under the Plan. For
purposes of this Section 13(b) a "repricing" means any of the following (or any
other action that has the same effect of any of the following): (i) amending or
modifying the terms of an Option after the Date of Grant in a manner that
reduces the Option Price of such Option; (ii) any other action that would either
(A) be reportable on the Company's proxy statement as Options which have been
"repriced" (as such term is used in Item 402 of Regulation S-K promulgated under
the Exchange Act) or (B) results in an Option being considered repriced under
generally accepted accounting principles; or (iii) canceling an Option at time
when its Option Price is equal to or less than the Fair Market Value of the
Shares subject to the Option, in exchange for another Option, Restricted Stock
Award or any other equity-based award. A cancellation and exchange described in
clause (iii) of the preceding sentence will be considered a "repricing"
regardless of whether (x) the Option, Restricted Stock Award or other
equity-based award is delivered simultaneously with the cancellation of the
Option, (y) it is reportable as a repricing in the Company's proxy statement or
under generally accepted accounting principles, and (z) the cancellation of the
Option was voluntary on the part of the Participant.
* * *
As adopted by the Board of Directors of Carnival Corporation as of
January 14, 2002 and amended as of September 25, 2002, and further amended and
restated as of April 14, 2003.
21
ANNEX B
CARNIVAL CORPORATION
CARNIVAL PLC
AUDIT COMMITTEE CHARTER
The Audit Committee is a committee of the Board of Directors. The purpose of the
Audit Committee shall be to (a) assist the Board of Directors oversight of (i)
the integrity of the Company's financial statements, (ii) the Company's
compliance with legal and regulatory requirements, (iii) the independent
auditor's qualifications and independence, and (iv) the performance of the
Company's internal audit functions and independent auditors; and (b) prepare the
report that the SEC rules require be included in the Company's annual proxy
statement.
The members of the Audit Committee shall meet the independence and experience
requirements of the New York Stock Exchange. In particular, at least one member
shall qualify as a "financial expert" as defined in SEC regulations. The members
of the Audit Committee shall be appointed by the Board on the recommendation of
the Nominating and Governance Committee. The duties and responsibilities of a
member of the Audit Committee are in addition to duties set out for a member of
the Board of Directors.
In meeting its responsibilities, the Audit Committee is expected to:
1. Provide an open avenue of communications between Financial Management,
Management Advisory Services/Audit Services ("MAS/AS") Environmental
Compliance ("EC",) the external auditors, the Audit Committee and the
Board of Directors.
2. Review and reassess the adequacy of this Charter annually.
3. Appoint, oversee, evaluate the performance of and approve the
compensation for the independent auditors annually, and, where
appropriate, review and approve the discharge of the external auditors.
The Chief Financial Officer ("CFO") will provide the Audit Committee
with the independent auditor's fee proposal, for approval, at the
October meeting of the Audit Committee. The external auditors are
ultimately accountable to the Board of Directors and the Audit
Committee.
4. Review and concur in the appointment, replacement, reassignment, or
dismissal of the Senior Vice President - MAS/AS.
5. Set hiring policies for employees or former employees of the
independent auditors.
6. At least annually, obtain and review a report by the independent
auditor describing: the firm's internal quality control procedures; any
material issues raised by the most recent internal quality-control
review or peer review of the firm, or by any inquiry or investigation
by the governmental or professional authorities, within the preceding
five years, respecting one or more independent
22
audits carried out by the firm, and any steps taken to deal with any
such issues and (to assess the auditor's independence) all
relationships between the independent auditor and any of the Company's
significant shareholders/affiliates, executive officers and/or
directors. The Audit Committee should engage in a dialogue with the
independent auditor with respect to any disclosed relationships that
may impact the objectivity and independence of the auditor.
7. Review and pre-approve the retention and fee of the independent
auditors for any statutorily permitted non-audit services.
(a) The Audit Committee will pre-approve at its October meeting a
budget for certain categories of permissible services.
(b) The independent auditor will include in their quarterly
report, all non-audit fees incurred for the quarter and
year-to-date.
(c) Any allowed service that has not been pre-approved must be
approved by the Chairman of the Audit Committee on a project
by project basis followed by full Audit Committee approval
quarterly.
8. Evaluate together with the Board the performance of the independent
auditor and determine whether it is appropriate to adopt a policy of
rotating independent auditors on a regular basis.
9. Review with management, the Senior Vice President - MAS/AS,
Vice President-EC and the external auditors:
(a) Significant risks or exposures and assess the steps management
has taken to minimize such risks to the Company.
(b) The audit scope and plan of Audit Services, EC and external
auditors, and the coordination of any audits between them,
including the review by the external auditors of the Company's
Quarterly Reports on Form 10-Q prior to the Company's filing
such reports with the Securities and Exchange Commission.
(c) The coordination of audit effort to assure completeness of
coverage, reduction of redundant efforts, and the effective
use of audit resources.
(d) The adequacy of the Company's internal controls, including
computerized information system controls and security.
(e) The adequacy of compliance with Environmental Compliance plan.
(f) Any significant findings and recommendations of the external
auditors, MAS/AS and EC together with management's responses
thereto.
23
10. Review with CFO and the external auditors at the completion of the
quarterly and annual examination:
(a) The Company's financial statements and related footnotes,
including the disclosures under "Management's Discussion and
Analysis of Financial Condition and Results of Operations,"
prior to release to shareholders.
(b) External auditors' audit of the financial statements and their
report thereon.
(c) Any significant changes required in external auditors' audit
plan.
(d) Any problems, difficulties or disputes with management
encountered during the course of the audit and management's
response.
(e) Other matters related to the conduct of the audit which are to
be communicated to the Committee under generally accepted
auditing standards.
(f) Any changes in significant accounting principles or FASB's.
(g) The Company's critical accounting policies and estimates and
unusual transactions.
11. Consider and review with management and the Senior Vice President -
MAS/AS:
(a) Significant findings during the year and management's
responses thereto.
(b) Any difficulties encountered in the course of their audits,
including any restrictions on the scope of their work or
access to required information.
(c) The MAS/AS department budget and staffing.
(d) The MAS/AS department charter.
(e) MAS/AS compliance with the IIA's Standards for the
Professional Practice of Internal Auditing (Standards).
(f) Any changes in the annual proposed audit plan with an
explanation of deviations.
12. Discuss with CFO earnings press releases, as well as financial
information and earnings guidance provided to analysts and rating
agencies (which discussions may occur after issuance).
24
13. Review with the Senior Vice President - MAS and external auditors the
results of the Company's monitoring compliance with the Company's code
of conduct including disclosure of insider and affiliated party
transactions. Review periodically the Company's policy statements in
terms of representing the code of conduct.
14. Review with the General Counsel legal and regulatory matters that may
have a material impact on the financial statements, the Company's
compliance policies, and any material inquiries or reports received
from regulators or governmental agencies.
15. Periodically meet separately, with the Senior Vice President - MAS/AS,
Vice President - EC, external auditors, and management in separate
executive sessions to discuss any matters that the Committee believes
should be discussed privately. The Senior Vice President - MAS/AS, Vice
President - EC, and the external auditors should have sufficient
opportunity to initiate meetings with the Audit Committee without
management present.
16. Report regularly to the Board of Directors with such recommendations as
the Committee may deem appropriate, including any recommendations to
ensure the independence of the external auditors.
17. The Audit Committee shall have the power to conduct or authorize
investigations into any matters within the Committee's scope of
responsibilities. The Committee shall be empowered to retain
independent counsel, accountants, or others to assist it in the conduct
of any investigation or to otherwise carry out its duties.
18. The Committee shall meet at least four times per year or more
frequently as circumstances require. The Committee may ask members of
management or others to attend the meeting and provide pertinent
information as necessary. Minutes of the Audit Committee shall be
submitted to the Board of Directors.
19. The Committee will perform such other functions and prepare such other
reports, as assigned by law or required under applicable stock exchange
regulations, the Company's charter or bylaws, or the Board of
Directors.
20. Prepare a written report, to be published in the Company's proxy
statement and/or information statement, to the extent required under
any applicable securities laws and stock exchange regulations.
21. Prepare a written report, to be published in the Company's proxy
statement and/or information statement, to the extent required under
any applicable securities laws and stock exchange regulations.
22. No member of the Audit Committee may receive any compensation from the
Company other than director's fees.
25
23. Prepare and review with the Board of Directors an annual performance
evaluation of the Audit Committee. The performance evaluation by the
Audit Committee shall be conducted in such manner as the Audit
Committee deems appropriate. The report to the Board may take the form
of an oral report by the chairperson of the Audit Committee or any
other member of the Audit Committee designated by the committee to make
the report.
24. Establish and monitor policies and procedures for (i) the receipt,
retention and treatment of complaints received by the Company regarding
accounting, internal accounting controls and auditing matters and (ii)
the confidential, anonymous submission by employees of concerns
regarding questionable accounting or other matters.
26
ANNEX C
UK REPORT AND ACCOUNTS
SET FORTH BELOW ARE EXTRACTS FROM THE FINANCIAL AND STATUTORY INFORMATION OF THE
UK REPORT AND ACCOUNTS FOR CARNIVAL PLC EXTRACTED FROM CARNIVAL PLC'S (THEN
KNOWN AS P&O PRINCESS CRUISES PLC) 2002 ANNUAL REPORT AND ACCOUNTS. REFERENCES
TO "WE," "US," "OUR" OR "THE COMPANY" ARE TO CARNIVAL PLC.
DIRECTORS' REPORT
The directors of P&O Princess Cruises plc [now called Carnival plc] present
their report to shareholders together with the audited financial statements for
the year ended December 31, 2002.
PRINCIPAL ACTIVITIES
The Group's principal activities during the year were the international
operation of cruise ships and the provision of related land-based tourist
services, including tours and accommodation in Alaska.
BUSINESS REVIEW AND FUTURE DEVELOPMENTS
A review of Group activities during the year and likely future developments is
provided in the Chairman's statement, the Chief Executive's review, the overview
of the brands and the operating and financial review on pages 2 to 24 [of our
2002 Annual Report and Accounts].
DIVIDEND
The Company has paid three interim dividends during the year totalling 9 U.S.
cents per share (2001 9 U.S. cents). A fourth interim dividend of 3 U.S. cents
per ordinary share (2001 3 U.S. cents paid as a final dividend) will be paid on
March 14, 2003 to shareholders on the register at the close of business on
February 21, 2003. No final dividend is proposed so the total dividends for the
year will be 12 U.S. cents per share (2001 12 U.S. cents).
Although the dividend is declared in U.S. cents, it will be paid in sterling
unless shareholders elect to receive their dividends in U.S. dollars. The
dividend will be converted into sterling at an exchange rate set on March 4,
2003.
Holders of the Company's American Depositary Shares (ADSs) will receive their
fourth interim dividend of 12 U.S. cents per ADS in U.S. dollars.
27
DUAL LISTED COMPANY TRANSACTIONS
On November 20, 2001, the Company announced that it had entered into agreements
to combine with Royal Caribbean Cruises Ltd. (Royal Caribbean) under a dual
listed company (DLC) structure. On December 13, 2001, Carnival Corporation
(Carnival) submitted a proposal to the board of the Company regarding an offer
to acquire the entire issued share capital of the Company. Carnival also
proposed the possibility of effecting a combination of Carnival and P&O Princess
Cruises by other means, including a DLC structure. The board of P&O Princess
Cruises carefully considered Carnival's proposal and determined that it was not
more favourable from a financial point of view to the Company's shareholders
than the proposed transaction with Royal Caribbean and that there was reasonable
doubt as to its deliverability. On January 30, 2002, Carnival revised its offer
to acquire P&O Princess Cruises but, for reasons as before, the board of the
Company continued to recommend the Royal Caribbean proposal.
On February 7, 2002, Carnival announced the terms of a further increased offer
of 0.3004 shares in Carnival for each share in P&O Princess Cruises plc. The
Board considered the offer from Carnival but, in view of its concerns about the
structure and deliverability of the proposal, the Board continued to recommend
the proposal to enter into a dual listed company combination with Royal
Caribbean. On February 14, 2002, at an Extraordinary General Meeting convened to
consider the Royal Caribbean proposal, shareholders voted to adjourn the meeting
until such time as the outcome of the reviews by the relevant competition
regulators of both the Royal Caribbean proposal and the Carnival proposal were
known.
On October 4, 2002, the Federal Trade Commission of the United States announced
that it would not oppose a combination of the Company with either Royal
Caribbean or Carnival. The regulatory authorities of the European Commission,
the United Kingdom and Germany had previously cleared both proposals. Following
the Federal Trade Commission's announcement, the Company entered into talks with
Carnival. On October 24, 2002, Carnival announced the terms of a pre-conditional
proposal to enter into a DLC transaction with P&O Princess on the same economic
terms as its latest previously-announced share exchange offer. As part of the
transaction, Carnival proposed a Partial Share Offer for up to, in aggregate, 20
per cent. of the issued share capital of the Company. On October 25, 2002, the
Board announced that it was withdrawing its recommendation of the Royal
Caribbean proposal. The Board also announced that, on payment of the agreed fee
of $62.5m, it had agreed with Royal Caribbean to terminate the implementation
agreement between the companies and, subject to there being no change of control
of P&O Princess prior to January 1, 2003, to terminate the joint-venture
agreement between the two companies on that date. On January 2, 2003, the
Company announced that the joint-venture agreement had been terminated.
On January 8, 2003, the Board announced that it recommended the proposal to
enter into a DLC transaction with Carnival. It is expected that an Extraordinary
General Meeting of shareholders to consider the proposed transaction with
Carnival will be held in April 2003.
28
DIRECTORS
The names of the persons who served as directors of the Company during the
financial year, and biographical notes about each of the directors, are set out
on page 16 [of our 2002 Annual Report and Accounts]. Details of the directors'
membership of board committees are set out in the Corporate Governance report
below. Details of the directors' remuneration and their interests in the shares
of the Company are set out in the Remuneration report attached as Annex D to
this proxy statement or on pages 35 to 40 [of our 2002 Annual Report and
Accounts].
STATEMENT OF DIRECTORS' RESPONSIBILITIES
Company law requires the directors to prepare financial statements for each
financial year which give a true and fair view of the state of affairs of the
Company and Group as at the end of the year and of the profit or loss of the
Group for that period. The directors are also responsible for the maintenance of
adequate accounting records in compliance with the Act, for safeguarding the
assets of the Group, and for preventing and detecting fraud and other
irregularities. In preparing the financial statements on pages 42 to 73
inclusive [of our 2002 Annual Report and Accounts], the directors consider that
appropriate accounting policies have been used and applied in a consistent
manner, supported by reasonable and prudent judgements and estimates, and that
all relevant accounting standards have been followed.
SHARE CAPITAL
Changes in the Company's share capital during the year are given in note 16 to
the accounts.
SUBSTANTIAL SHAREHOLDINGS
As at the date of this report, the Company had been notified of the following
interests of 3% or more in the Company's issued share capital:
PERCENTAGE OF
NO. OF SHARES ISSUED CAPITAL
--------------------------------------------------------------------------------
Deutsche Bank AG................................ 75,971,531 11.0%
Henderson Global Investors Limited.............. 31,337,762 4.5%
Lehman Brothers International................... 26,794,356 3.9%
Legal & General Investment Management Limited... 25,197,288 3.6%
Barclays Global Investors Limited............... 24,201,310 3.5%
Baillie Gifford & Co............................ 23,531,595 3.4%
Cater Allen International Limited............... 21,849,000 3.2%
M&G Investment Management Limited............... 21,516,184 3.1%
Credit Suisse First Boston Equities Limited..... 21,184,897 3.0%
--------------------------------------------------------------------------------
29
HEALTH, SAFETY, WELFARE AND THE ENVIRONMENT
There is a Group policy for health, safety, welfare and the environment, which
is reviewed each year by the board and communicated to all staff. Each business
unit is required to produce its own policy and management systems to reflect
Group policy and best industry practice in its sector of business.
Monitoring of compliance with Group policy is maintained by periodic assessment.
Reports are reviewed by the director responsible for safety and environmental
matters and a monthly report is submitted to the board.
The Group's response to environmental issues is set out in more detail in the
statement on page 17 [of our 2002 Annual Report and Accounts].
CREDITOR PAYMENT POLICY
The Company's policy is to pay suppliers in accordance with terms and conditions
agreed when the orders are placed. Although the Company does not follow a
particular code or standard on payment policy, where payment terms have not been
specifically agreed invoices dated in one calendar month are paid close to the
end of the following month. These policies are understood by the purchasing and
finance departments. The Company has procedures for dealing promptly with
complaints and disputes. The Company had no trade creditors outstanding at
December 31, 2002 (2001 nil).
EMPLOYEES
The Company is committed to keeping employees informed of the performance,
development and progress of the Group. This is primarily achieved through
management briefings and widely-distributed news and information bulletins.
The Company aims to meet the objective of the code of good practice on the
employment of disabled people. Full and fair consideration is given to disabled
applicants for employment and training, and career development is encouraged on
the basis of aptitude and abilities. It is the policy of the Company to retain
employees who become disabled whilst in its service and to provide specialist
training where appropriate.
Employees are able to share in the results of the Group through
performance-related bonus schemes which are widely applied.
CHARITABLE DONATIONS
During the year ended December 31, 2002, the Group made charitable donations
totalling $0.2m (2001 $0.2m).
30
POLITICAL CONTRIBUTIONS
The Group did not make any contributions to U.K. political parties during the
year ended December 31, 2002 (2001 nil).
By order of the Board
Simon Pearce
Company Secretary
February 6, 2003
31
CORPORATE GOVERNANCE
The Principles of Good Governance and Code of Best Practice (the `Combined
Code') are incorporated into the Listing Rules of the U.K. Listing Authority.
Section 1 of the Combined Code contains 14 principles of good governance and 45
code provisions which are applicable to listed companies.
The provisions of the Combined Code applicable to the Company are divided into
four parts:
Part A: Directors
Part B: Directors' Remuneration
Part C: Relations with Shareholders
Part D: Accountability and Audit
Set out below is a statement of how the Company has applied the principles of
the Combined Code during the year.
PART A: DIRECTORS
BOARD OF DIRECTORS
The business of the Company is managed by the board of directors. The board has
seven members; the Chairman, two executive directors and four non-executive
directors. One of the non-executive directors, Horst Rahe, is not considered to
be independent on account of his interest in a deferred consideration
arrangement relating to the Group's purchase of AIDA Cruises Limited, described
in note 23 to the financial statements. The roles of Chairman and Chief
Executive Officer are separate and no individual or group of individuals
dominates the board's decision making. The directors have wide ranging
experience and all have occupied, or currently occupy, senior positions in
industry or government.
In accordance with the articles of association of the Company, directors are
required to submit themselves for re-election at intervals of no more than three
years. The biographical details of the board members are set out on page 16 [of
our 2002 Annual Report and Accounts]. On joining the board, directors are
briefed on the Company and its activities. Arrangements are made for senior
executives not on the board to attend board meetings and make presentations on
the results and strategies of their business units.
The non-executive directors other than Horst Rahe are independent of management
and have no relationships which could materially interfere with the exercise of
their independent judgement. Sir John Parker was appointed Deputy Chairman on
September 26, 2002, in succession to Peter Foy, and has been identified as the
senior independent director. Board members are given appropriate documentation
in advance of
32
each board and committee meeting. All directors have access to the
Company Secretary and are able to take independent professional advice, at the
Company's expense, if required. The board has a formal schedule of matters
reserved to it for decision. This includes the approval of annual and interim
results, acquisitions and disposals, as well as material agreements, major
capital expenditure, budgets and strategic plans. Other matters are delegated to
board committees including those detailed below.
Generally, the board meets monthly, but additional meetings were held during the
year to consider the proposed transactions with Royal Caribbean and Carnival.
The following table sets out the number of meetings of the Board, and of the
principal committees of the Board, during 2002 together with details of
attendance. In addition to formal board meetings, the Chairman and Chief
Executive Officer maintain regular contact with all directors and hold informal
meetings with the non-executive directors to discuss issues affecting the
Company.
NUMBER OF BOARD AUDIT REMUNERATION NOMINATION
MEETINGS 17 4 5 1
--------------------------------------------------------------------------------
Attendance:
Lord Sterling 14 n/a n/a 1
Sir John Parker 16 3 5 1
Peter Ratcliffe 17 n/a n/a 1
Nick Luff 17 n/a n/a n/a
Baroness Hogg 16 4 4 1
Peter Foy 11 3 4 1
Horst Rahe 13 n/a n/a n/a
PRINCIPAL COMMITTEES OF THE BOARD
The following committees of the board, which have written terms of reference
setting out their authority and duties, have operated throughout the year.
AUDIT COMMITTEE
Chairman: Baroness Hogg
Other members: Sir John Parker, Peter Foy
The audit committee is scheduled to meet four times a year and at other times if
required. The Chief Financial Officer normally attends meetings at the
invitation of the committee.
33
The audit committee examines the process of financial reporting within the
Group, reviews the Group's accounting policies and monitors the integrity of the
financial statements. It also reviews the Group's system of internal control and
the processes for monitoring and evaluating the risks facing the Group. The
committee is responsible for the appointment of the independent external
auditors, reviewing the scope and results of the audit with the external
auditors and monitoring the independence of the external auditors. Further
details of this are set out below. The Committee is also responsible for
monitoring the terms of reference and results of the work of the internal audit
department.
REMUNERATION COMMITTEE
Chairman: Peter Foy
Other members: Baroness Hogg, Sir John Parker
The remuneration committee is scheduled to meet at least twice a year and at
other times as required. Executive directors are invited to attend for
appropriate items but are excluded when their own performance and remuneration
are under review.
The remuneration committee makes recommendations and approves on behalf of the
board the salaries, incentives and other benefit arrangements of the Chairman
and executive directors and oversees the Company's incentive schemes. Fees
payable to non-executive directors are determined by the board.
NOMINATION COMMITTEE
Chairman: Lord Sterling
Other members: Baroness Hogg, Sir John Parker, Peter Ratcliffe, Peter Foy
The nomination committee meets periodically as required. Its function is to
assess and recommend to the board candidates for appointment as executive and
non-executive directors of the Company. It makes recommendations to the board on
its composition and balance and also reviews proposals for changes in
responsibilities of directors.
PART B: DIRECTORS' REMUNERATION
The remuneration report is set out on pages 35 to 40 [of our 2002 Annual Report
and Accounts and attached as Annex D to this proxy statement].
PART C: RELATIONS WITH SHAREHOLDERS
The formal channels of communication by which the board accounts to shareholders
for the overall performance of the Company are the annual report and accounts,
the Form 20-F filed with the U.S. Securities and Exchange Commission and the
yearly and quarterly
34
announcements made through the stock exchanges on which the Company's shares are
listed.
The Chief Executive Officer and the Chief Financial Officer meet frequently with
representatives of institutional shareholders to discuss their views and to
ensure that the strategies and objectives of the Company are well understood.
Issues discussed with institutional shareholders include the Company's
performance, the impact of major transactions such as acquisitions or disposals
and any corporate governance concerns.
Presentations are made to representatives of the investment community at
appropriate intervals in the U.K., the U.S. and elsewhere and are simultaneously
made available to shareholders by telephone and by live broadcast over the
internet.
ANNUAL GENERAL MEETING ("AGM")
The date, time and location of the third AGM of the Company have not yet been
set, pending the outcome of the Extraordinary General Meeting convened to
consider the proposed transaction with Carnival, which is expected to be held in
April 2003. The AGM will be held before July 31, 2003 and shareholders will
receive notice of the meeting in due course.
PART D: ACCOUNTABILITY AND AUDIT
DIRECTORS' RESPONSIBILITY
The statement of directors' responsibilities in relation to financial statements
is set out on page 30 [of our 2002 Annual Report and Accounts].
INDEPENDENCE OF AUDITORS
The Audit Committee is responsible for recommending a firm of auditors of
appropriate independence and experience and for the approval of all audit fees
and terms. The Committee's policy is to undertake a formal assessment of the
auditors' independence each year which includes:
o a review of non-audit services provided to the Group and related fees;
o discussion with the auditors of a written report detailing all
relationships with the Company and any other parties that could affect
independence or the perception of independence;
o a review of the auditors' own procedures for ensuring the independence
of the audit firm and partners and staff involved in the audit,
including the regular rotation of the audit partner; and
o obtaining written confirmation from the auditors that, in their
professional judgement, they are independent.
35
During the year, the Audit Committee implemented procedures relating to the
provision of non-audit services by the Company's auditor. These include:
o the maintenance of a schedule of certain non-audit services, including
consultancy, investment banking and legal services, which the Company
is specifically prohibited from obtaining from the audit firm;
o requiring the selection of providers of permitted non-audit services to
be subject to a tender process, where appropriate;
o requiring non-audit work and the fees involved to be approved in
advance; and
o procedures which control, and in certain circumstances, prohibit, the
recruitment by group companies of staff formerly employed by the
external audit firm and involved in the audit of the group.
An analysis of the fees payable to the external audit firm in respect of both
audit and non-audit services during the year is set out in note 3 to the
accounts.
GOING CONCERN
On the basis of current financial projections and facilities available, the
directors have a reasonable expectation that the Company and the Group have
adequate resources to continue in operational existence for the foreseeable
future and, accordingly, consider that it is appropriate to adopt the going
concern basis in preparing the financial statements.
INTERNAL CONTROL AND RISK MANAGEMENT
Internal control and risk management within the Group's business units is a
well-defined, ongoing process embedded in each of the operations. It is designed
to identify, evaluate and manage the significant risks faced by the Group. A
system of controls designed to be capable of responding quickly to evolving
risks in the business has been established, comprising procedures for the prompt
reporting of significant control weaknesses, together with the appropriate
corrective action.
Each principal business activity is controlled by a local executive committee,
which receives detailed reports so that issues can be discussed and corrective
action determined at the appropriate level to remedy identified control
weaknesses. The executive committees are supported by risk management committees
which focus on the business unit concerned but draw on Group-wide technical and
auditing resources. In addition to an internal audit function, such resources
include specialised technical audit teams and centralised control of health,
safety, welfare and environmental issues.
The Group executive management team receives information on the issues arising
at the business units, together with regular trading, operations, finance and
business risk updates. This is provided via formal reporting processes and the
close involvement of relevant individuals in the management of the business
units. The primary focus of this
36
aspect of the system are the executive directors, with a head office executive
committee monitoring the process, ensuring that issues common to more than one
business unit are identified and that all relevant matters are brought to the
attention of the board as a whole.
The directors are responsible for the Group's system of internal control, but
recognise that any such system can provide only reasonable, and not absolute,
assurance against material misstatement or loss.
STATEMENT OF COMPLIANCE WITH THE COMBINED CODE
The system of internal control was in place throughout the year and has
continued in place up to the date of approval of this annual report. The system
is designed to manage rather than eliminate the risk of failure to achieve
business objectives. The board confirms that it has reviewed its effectiveness
and that it accords with the Turnbull guidance.
Throughout the period from January 1, 2002 to the date of approval of the
financial statements, P&O Princess Cruises plc has complied with the provisions
set out in Section 1 of the Combined Code.
COMPLIANCE WITH OTHER CORPORATE GOVERNANCE REQUIREMENTS
In addition to complying with the Combined Code, as a company listed on the New
York Stock Exchange, P&O Princess Cruises plc also complies with the applicable
rules and regulations of the NYSE, the U.S. Securities and Exchange Commission
and other legislation applicable to overseas companies listed in the U.S.,
including the recently-enacted Sarbanes-Oxley Act of 2002. These rules and
regulations impose requirements on the Company related to good corporate
governance practices.
37
REPORT OF THE INDEPENDENT AUDITORS
Report of the independent auditors to the members of P&O Princess Cruises plc
We have audited the financial statements on pages 42 to 73 [of the 2002 Annual
Report and Accounts]. We have also audited the information in the directors'
remuneration report that is described as having been audited.
This report is made solely to the Company's members, as a body, in accordance
with section 235 of the Companies Act 1985. Our audit work has been undertaken
so that we might state to the Company's members those matters we are required to
state to them in an auditor's report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone
other than the Company and the Company's members as a body, for our audit work,
for this report, or for the opinions we have formed.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
The directors are responsible for preparing the Annual Report and the directors'
remuneration report. As described on page 30 [of the 2002 Annual Report], this
includes responsibility for preparing the financial statements in accordance
with applicable United Kingdom law and accounting standards. Our
responsibilities, as independent auditors, are established in the United Kingdom
by statute, the Auditing Practices Board, the Listing Rules of the Financial
Services Authority, and by our profession's ethical guidance.
We report to you our opinion as to whether the financial statements give a true
and fair view and whether the financial statements and the part of the
directors' remuneration report to be audited have been properly prepared in
accordance with the Companies Act 1985. We also report to you if, in our
opinion, the directors' report is not consistent with the financial statements,
if the Company has not kept proper accounting records, if we have not received
all the information and explanations we require for our audit, or if information
specified by law or the Listing Rules regarding directors' remuneration and
transactions with the Group is not disclosed.
We review whether the Corporate governance statement on pages 32 to 34 [of our
2002 Annual Report] reflects the Company's compliance with the seven provisions
of the Combined Code specified for our review by the Listing Rules, and we
report if it does not. We are not required to consider whether the Board's
statements on internal control cover all risks and controls, or form an opinion
on the effectiveness of the Group's corporate governance procedures or its risk
and control procedures.
We read the other information contained in the Annual Report, including the
Corporate governance statement and the unaudited part of the directors'
remuneration report, and consider whether it is consistent with the audited
financial statements. We consider the implications for our report if we become
aware of any apparent misstatements or material inconsistencies with the
financial statements.
38
BASIS OF AUDIT OPINION
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the financial statements and
the part of the directors' remuneration report to be audited. It also includes
an assessment of the significant estimates and judgements made by the directors
in the preparation of the financial statements, and of whether the accounting
policies are appropriate to the Group's circumstances, consistently applied and
adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
and the part of the directors' remuneration report to be audited are free from
material misstatement, whether caused by fraud or other irregularity or error.
In forming our opinion we also evaluated the overall adequacy of the
presentation of information in the financial statements and the part of the
directors' remuneration report to be audited.
OPINION
In our opinion:
o the financial statements give a true and fair view of the state of
affairs of the Company and the Group as at December 31, 2002 and of the
profit of the Group for the year then ended; and
o the financial statements and the part of the directors' remuneration
report to be audited have been properly prepared in accordance with the
Companies Act 1985.
KPMG Audit Plc
Chartered Accountants
Registered Auditor
London
February 6, 2003
39
GROUP PROFIT AND LOSS ACCOUNT
Years ended December 31
2001 2000
U.S. $M U.S. $M
2002 RESTATED RESTATED
NOTE U.S. $M (NOTE 1) (NOTE 1)
Turnover 2 2,526.8 2,451.0 2,423.9
Cost of sales (1,896.3) (1,881.6) (1,842.0)
Administrative expenses:
Administrative expenses before (214.8) (208.1) (208.8)
exceptional transaction costs
Exceptional transaction costs 2.3 (117.0) -- --
-----------------------------------------------------------------------------------------------------------
(331.8) (208.1) (208.8)
Operating costs 3 (2,228.1) (2,089.7) (2,050.8)
-----------------------------------------------------------------------------------------------------------
Group operating profit 298.7 361.3 373.1
Share of operating results of -- 0.1 0.5
joint ventures
-----------------------------------------------------------------------------------------------------------
Total operating profit 2 298.7 361.4 373.6
Loss on disposal of ships 2 -- (1.9) (6.7)
Profit on sale of business 2 1.2 -- 0.2
-----------------------------------------------------------------------------------------------------------
Profit on ordinary activities 2 299.9 359.5 367.1
before interest
Net interest payable and similar 4 (74.0) (58.0) (49.1)
items
-----------------------------------------------------------------------------------------------------------
Profit on ordinary activities 225.9 301.5 318.0
before taxation
Taxation 5 (17.1) 81.7 (57.4)
-----------------------------------------------------------------------------------------------------------
Profit on ordinary activities 208.8 383.2 260.6
after taxation
Equity minority interests 18 -- (0.1) (2.6)
-----------------------------------------------------------------------------------------------------------
Profit for the financial year 208.8 383.1 258.0
attributable to shareholders
Dividends 6 (83.2) (83.2) (83.1)
-----------------------------------------------------------------------------------------------------------
Retained profit for the financial 17 125.6 299.9 174.9
year
-----------------------------------------------------------------------------------------------------------
Earnings per share
Basic earnings per share
(in cents) 7 30.2c 55.4c 37.7c
Diluted earnings per share
(in cents) 7 30.0c 55.1c 37.7c
Adjusted basic earnings per
share (in cents) 7 47.1c 41.3c 37.7c
Adjusted diluted earnings per
share (in cents) 7 46.8c 41.1c 37.7c
Each ADS represents an interest in four ordinary shares.
In all three years all profits and losses arise from continuing activities.
Adjusted earnings per share excludes exceptional transaction costs in 2002 and
exceptional tax items in 2001 (see note 7)
See accompanying notes to the financial statements
40
GROUP BALANCE SHEET
AS AT DECEMBER 31
2001 2000
U.S. $M U.S. $M
2002 RESTATED RESTATED
NOTE U.S. $M (NOTE 1) (NOTE 1)
Fixed assets
Intangible assets
Goodwill 8 127.1 112.9 121.0
Tangible assets
Ships 9 5,380.0 4,038.4 3,608.0
Properties and other fixed
assets 10 249.4 248.0 219.6
-----------------------------------------------------------------------------------------------------------
5,629.4 4,286.4 3,827.6
Investments 11 16.3 19.0 10.9
-----------------------------------------------------------------------------------------------------------
5,772.8 4,418.3 3,959.5
-----------------------------------------------------------------------------------------------------------
Current assets
Stocks 12 87.4 74.3 79.8
Debtors 13 309.4 256.7 322.3
Cash at bank and in hand 162.1 120.4 247.2
-----------------------------------------------------------------------------------------------------------
558.9 451.4 649.3
-----------------------------------------------------------------------------------------------------------
Creditors: amounts falling due 14 (987.2) (825.3) (975.7)
within one year
-----------------------------------------------------------------------------------------------------------
Net current liabilities (428.3) (373.9) (326.4)
-----------------------------------------------------------------------------------------------------------
Total assets less current
liabilities 5,344.5 4,044.4 3,633.1
-----------------------------------------------------------------------------------------------------------
Creditors: amounts falling due 14 (2,516.8) (1,393.1) (1,062.7)
after more than one year
Provisions for liabilities and
charges 15 (13.7) (21.7) (214.7)
-----------------------------------------------------------------------------------------------------------
2,814.0 2,629.6 2,355.7
-----------------------------------------------------------------------------------------------------------
Capital and reserves
Called up share capital 16 346.7 346.3 346.3
Share premium account 17 3.7 0.2 --
Other reserves 17 93.1 82.4 82.4
Merger reserve 17 910.3 910.3 910.3
Profit and loss account 17 1,460.0 1,290.2 1,016.5
-----------------------------------------------------------------------------------------------------------
Equity shareholders' funds 2,813.8 2,629.4 2,355.5
Equity minority interests 18 0.2 0.2 0.2
-----------------------------------------------------------------------------------------------------------
2,814.0 2,629.6 2,355.7
-----------------------------------------------------------------------------------------------------------
See accompanying notes to the financial statements.
Approved by the Board of directors on February 6, 2003 and signed on its behalf
by:
Peter Ratcliffe
Nick Luff
41
GROUP CASH FLOW STATEMENT
YEARS ENDED DECEMBER 31
2001 2000
U.S. $M U.S. $M
2002 RESTATED RESTATED
NOTE U.S. $M (NOTE 1) (NOTE 1)
Net cash inflow from operating 19 576.1 507.0 532.3
activities
Returns on investments and
servicing of finance
Interest received 5.9 6.6 2.6
Interest paid (109.9) (87.1) (78.5)
-----------------------------------------------------------------------------------------------------------
Net cash outflow for returns on (104.0) (80.5) (75.9)
investments and servicing of
finance
-----------------------------------------------------------------------------------------------------------
Taxation 6.4 (171.0) (34.3)
-----------------------------------------------------------------------------------------------------------
Capital expenditure
Purchase of ships (1,124.1) (579.3) (749.8)
Purchase of other fixed asset (32.4) (53.5) (45.9)
Disposal of ships -- 46.6 14.7
Disposal of other fixed assets -- -- 0.2
-----------------------------------------------------------------------------------------------------------
Net cash outflow for capital (1,156.5) (586.2) (780.8)
expenditure
Acquisitions and disposals
Disposal/(purchase) of 3.1 (6.3) (14.7)
subsidiaries and long term 11, 20
investments
Equity dividends paid (85.0) (145.5) --
-----------------------------------------------------------------------------------------------------------
Net cash outflow before financing (759.9) (482.5) (373.4)
-----------------------------------------------------------------------------------------------------------
Financing
Issues of stock 3.9 0.2 --
Movement on loans from P&O -- 3.7 356.2
Loan drawdowns 879.4 606.3 247.7
Loan repayments (65.4) (277.1) (39.3)
Net investment by P&O -- -- 1.2
Repayment of finance lease (2.6) -- --
-----------------------------------------------------------------------------------------------------------
Net cash inflow from financing 815.3 333.1 565.8
-----------------------------------------------------------------------------------------------------------
Increase/(decrease) in cash in 19 55.4 (149.4) 192.4
the year
-----------------------------------------------------------------------------------------------------------
See accompanying notes to the financial statements.
The restatement for FRS19 "Deferred Taxation" has no impact on the cash flow as
previously reported for the years ended December 31, 2001 and December 31, 2000.
42
COMPANY BALANCE SHEET
AS AT DECEMBER 31
2002 2001
NOTE U.S. $M U.S. $M
Fixed assets 9 154.1 146.0
Tangible assets - ships 27 428.7 428.7
Investments - subsidiaries
---------------------------------------------------------------------------------------------------------
582.8 574.7
---------------------------------------------------------------------------------------------------------
Current assets
Debtors 13 1,084.8 1,017.3
Creditors: amounts falling due within one year 14 (40.3) (41.0)
---------------------------------------------------------------------------------------------------------
Net current assets 1,044.5 976.3
---------------------------------------------------------------------------------------------------------
Total assets less current liabilities 1,627.3 1,551.0
Creditors: amounts falling due after more than one
year 14 (1,120.9) (1,066.2)
---------------------------------------------------------------------------------------------------------
506.4 484.8
---------------------------------------------------------------------------------------------------------
Capital and reserves
Called up share capital 16 346.7 346.3
Share premium account 17 3.7 0.2
Other reserves 17 93.1 82.4
Profit and loss account 17 62.9 55.9
---------------------------------------------------------------------------------------------------------
Equity shareholders' funds 506.4 484.8
---------------------------------------------------------------------------------------------------------
See accompanying notes to the financial statements.
Approved by the Board of directors on February 6, 2003 and signed on its behalf
by:
Peter Ratcliffe
Nick Luff
43
GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
YEARS ENDED DECEMBER 31
2001 2000
U.S. $M U.S. $M
2002 RESTATED RESTATED
U.S. $M (NOTE 1) (NOTE 1)
Profit for the year 208.8 383.1 258.0
Exchange movements on foreign currency net 44.2 (26.2) (5.5)
investments
-------------------------------------------------------------------------------------------------------
Total recognised gains and losses relating to the 253.0 356.9 252.5
year
Prior year adjustment (note 1) (108.1) -- --
-------------------------------------------------------------------------------------------------------
Total gains and losses recognized since last 144.9
annual report
-------------------------------------------------------------------------------------------------------
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS FUNDS'
YEARS ENDED DECEMBER 31
GROUP 2001 GROUP 2000
U.S. $M U.S. $M
GROUP 2002 RESTATED RESTATED COMPANY 2002 COMPANY 2001
U.S. $M (NOTE 1) (NOTE 1) U.S. $M U.S. $M
Total recognised gains and
losses for the year 253.0 356.9 252.5 90.2 135.7
Dividends (83.2) (83.2) (83.1) (83.2) (83.2)
New shares issued 3.9 0.2 41.3 3.9 0.2
Shares to be issued 10.7 -- 46.8 10.7 --
Investment in P&O Princess
Cruises by P&O -- -- 1.2 -- --
----------------------------------------------------------------------------------------------------------
184.4 273.9 258.7 21.6 52.7
Shareholders' funds at
beginning of the year
(The shareholders'
funds for the Group
at the beginning of 2001,
as previously reported,
were $2,463.6m (2000:
$2,188.8m) before
deducting the prior year
adjustment of $108.1m
(2000: $92.0m) 2,629.4 2,355.5 2,096.8 484.8 432.1
----------------------------------------------------------------------------------------------------------
Shareholders' funds at end 2,813.8 2,629.4 2,355.5 506.4 484.8
of the year
See accompanying notes to the financial statements.
44
1. ACCOUNTING POLICIES
The following accounting policies have been applied consistently in dealing with
items which are considered material in relation to the Group.
BASIS OF PREPARATION OF FINANCIAL STATEMENTS
The Group financial statements comprise the consolidation of the accounts of the
Company and all its subsidiaries and incorporate the Group's interest in its
joint ventures. The accounts of its subsidiaries and joint ventures are made up
to December 31.
The consolidated financial statements have been prepared in conformity with
accounting principles generally accepted in the United Kingdom ("U.K. GAAP")
under the historical cost convention, and in accordance with applicable U.K.
accounting standards. These principles differ in certain significant respects
from accounting principles generally accepted in the United States ("U.S.
GAAP"). Application of U.S. GAAP would have affected shareholders' funds at
December 31, 2002 and 2001 and profit attributable to shareholders for the years
ended December 31, 2002, 2001 and 2000, to the extent summarised in note 28,
additional information for U.S. investors.
BASIS OF CONSOLIDATION
P&O Princess Cruises plc acquired the cruise business of The Peninsular and
Oriental Steam Navigation Company ("P&O") on October 23, 2000. The acquisition
was effected by the issue of ordinary shares in P&O Princess Cruises plc to the
holders of deferred stock in P&O in settlement of a dividend declared by P&O.
The consolidated financial statements have been prepared using merger accounting
principles as if the businesses comprising P&O Princess Cruises had been part of
P&O Princess Cruises for all periods presented, since they have been under
common control throughout this period. Businesses acquired from or disposed of
to third parties during the periods presented have been accounted for using
acquisition accounting, from or to the date control passed.
PRIOR YEAR ADJUSTMENT ON IMPLEMENTATION OF FRS19
The Accounting Standards Board issued Financial Reporting Standard No. 19
"Deferred Tax" (FRS19) in December 2000. The standard is effective for
accounting periods ending on or after January 23, 2002. The standard requires
full provision to be made for deferred tax assets and liabilities arising from
most types of timing difference between the recognition of gains and losses in
the financial statements and their recognition in a tax computation. Deferred
tax assets are, however, only to be recognised to the extent that it is regarded
as more likely than not that they will be recovered. P&O Princess Cruises has
adopted the standard as of January 1, 2002 resulting in the restatement of
comparative data from partial provisioning for deferred tax to the full
provision basis.
45
1. ACCOUNTING POLICIES (CONTINUED)
As a result of the implementation of FRS19, the balance sheet as at December 31,
1999 was restated to reflect full provision for deferred tax, an increase in
deferred tax liabilities of $92.0m.
The net effect on net assets and shareholders' funds as at December 31, 2000 as
a result of implementing FRS19 is a reduction of $108.1m with a charge to the
profit and loss account for the year of $16.1m.
The tax credit in the profit and loss account for the year to December 31, 2001
has increased by $96.8m to reflect the elimination of the majority of future
potential tax liabilities upon P&O Princess Cruises' election to enter the U.K.
tonnage tax regime. This is consistent with the elimination of the partially
provided deferred tax in the 2001 audited financial statements. The net effect
on net assets and shareholders' funds as at December 31, 2001 as a result of
implementing FRS 19 is a reduction of $11.3m.
USE OF ESTIMATES
Preparation of financial statements in conformity with U.K. GAAP and U.S. GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
turnover and expenses for an accounting period. Actual results could differ from
these estimates.
GOODWILL ARISING ON ACQUISITIONS
Goodwill arising on business acquisitions being the difference between the fair
value of consideration compared to the fair value of net assets acquired
represents the residual purchase price after allocation to all identifiable net
assets. Goodwill is included within intangible fixed assets and is stated at
cost less accumulated amortisation. Amortisation is calculated to write off
goodwill on a straight line basis over its expected useful life, which can be up
to 40 years. A life of more than 20 years is adopted when the directors consider
the period for which the value of the underlying business acquired exceeds the
value of the identifiable net assets is demonstrably longer than 20 years.
Goodwill with an expected useful life of more than 20 years is reviewed annually
for any impairment, by comparing carrying value with discounted cashflows.
JOINT VENTURES
A joint venture is an entity in which the Group has a long term interest and
shares control with one or more co-venturers. Joint ventures are stated at P&O
Princess Cruises' share of underlying net assets. P&O Princess Cruises' share of
the profits or losses of joint ventures is included in the consolidated profit
and loss account on an equity accounting basis.
46
1. ACCOUNTING POLICIES (CONTINUED)
INVESTMENTS
Investments in subsidiary undertakings are held at cost less provisions for
impairment.
Shares in P&O Princess Cruises plc held for the purpose of long term incentive
plans (LTIPs) are held within fixed asset investments. To the extent that these
shares have been identified for bonus awards, provision is made for the
difference between the book value of these shares and their residual value, if
any.
TANGIBLE FIXED ASSETS
Ships are stated at cost less accumulated depreciation. Subsequent ship
improvement costs are capitalised as additions to the ship, while costs of
repairs and maintenance are accounted for as dry docking costs.
Properties and other fixed assets, including computer hardware and software, are
stated at cost less accumulated depreciation.
Interest incurred in respect of payments on account of assets under construction
is capitalised to the cost of the assets concerned.
Depreciation is calculated to write off the cost to estimated residual value on
a straight line basis over the expected useful life of the asset concerned as
follows:
Cruise ships 30 years
Freehold buildings 40 years
Other fixed assets 3 - 16 years
Freehold land and ships under construction are not depreciated.
DRY-DOCKING COSTS
Dry-docking costs are capitalised and expensed on a straight line basis to the
date of the next scheduled drydock.
IMPAIRMENT OF FIXED ASSETS
P&O Princess Cruises reviews all fixed assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of the assets may not
be fully recoverable based on estimated future cash flows. Provision for
impairment in value of fixed assets is made in the profit and loss account.
47
1. ACCOUNTING POLICIES (CONTINUED)
STOCKS
Stocks consist of provisions, supplies, fuel and gift shop merchandise and are
stated at the lower of cost or net realisable value.
CASH AND BORROWINGS
Cash and cash equivalents consist of cash, money market deposits and
certificates of deposit. All cash equivalents have original maturities of 90
days or less. Cash and cash equivalents at the balance sheet date are deducted
from bank loans and overdrafts where formal rights of set-off exist.
TURNOVER
Turnover comprises sales to third parties (excluding VAT and similar sales
taxes). Turnover includes air and land supplements and on board sales and is
taken before deducting travel agents' commission.
Deposits received on sales of cruises are initially recorded as deferred income
and are recognised, together with revenues from shipboard activities and all
associated direct costs of a voyage, on a pro rata basis over the period of the
cruise.
MARKETING AND PROMOTION COSTS
Marketing and promotion costs are expensed over the period of benefit, not
exceeding one year from the end of the year the cost is incurred.
LEASES
Assets acquired under finance leases are capitalised and the outstanding future
lease obligations are shown in creditors. Rentals under operating leases are
charged to the profit and loss account on a straight line basis over the life of
the lease.
PENSION COSTS
Contributions in respect of defined contribution pension plans are charged to
the profit and loss account when they are payable. Contributions in respect of
defined benefit pension plans are calculated as a percentage, agreed on
actuarial advice, of the pensionable salaries of employees. The cost of
providing defined benefit pensions is charged to the profit and loss account on
a systematic basis over the periods benefiting from the services of employees,
and is calculated with the advice of an independent qualified actuary, using the
projected unit method. This is in accordance with Statement of Standard
Accounting Practice 24 `Accounting for pension costs', the basis on which the
Group accounts for pension costs. Additional disclosure as required by FRS17 is
also provided.
48
1. ACCOUNTING POLICIES (CONTINUED)
DEFERRED TAXATION
Deferred tax is recognised without discounting, in respect of all timing
differences between the treatment of certain items for taxation and accounting
purposes which have arisen but not reversed by the balance sheet date, except as
otherwise required by FRS19. A net deferred tax asset is regarded as recoverable
and therefore recognised only when, on the basis of all available evidence, it
can be regarded as more likely than not that there will be suitable taxable
profits from which the future reversal of the underlying timing differences can
be deducted.
DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS
P&O Princess Cruises uses currency swaps, interest rate swaps and forward
currency contracts to manage its exposure to certain foreign currency and
interest rate risks and to hedge major capital expenditure or lease commitments
by businesses in currencies other than their functional currency. Gains and
losses on instruments used for hedging are not recognised until the exposure
that is being hedged is itself recognised.
FOREIGN CURRENCIES
The functional and reporting currency of the Group is the U.S. dollar as the
majority of its trade and assets are denominated in that currency. Transactions
in currencies other than a business' functional currency are recorded at the
rate of exchange ruling at the date of the transaction. Profits and losses of
subsidiaries, branches, and joint ventures which have functional currencies
other than U.S. dollars are translated into U.S. dollars at average rates of
exchange. Assets and liabilities denominated in foreign currencies are
translated at the year end exchange rates.
Exchange differences arising from the retranslation of the opening net assets of
subsidiaries, branches and joint ventures which have currencies of operation
other than U.S. dollars and any related loans are taken to reserves, together
with the differences arising when the profit and loss accounts are translated at
average rates and compared with rates ruling at the year end. Other exchange
differences are taken to the profit and loss account.
2. SEGMENTAL ANALYSIS
P&O Princess Cruises has a single business of operating cruise ships and related
landside assets under various brand names including; Princess Cruises, P&O
Cruises, Swan Hellenic, Ocean Village, AIDA, A'ROSA and P&O Cruises (Australia).
These brand names are marketed by operations in North America, Europe and
Australia.
49
2. SEGMENTAL ANALYSIS (CONTINUED)
2002 2001 2000
U.S.$M U.S. $M U.S.$M
Turnover (by origin)
North America 1,698.8 1,754.9 1,796.7
Europe and Australia 828.0 696.1 627.2
================================================= ============== ================= =================
2,526.8 2,451.0 2,423.9
================================================= ============== ================= =================
Turnover in Europe and Australia
includes turnover in relation to
the United Kingdom of $525.8m
(2001 $476.3m, 2000 $454.0m.)
Total operating profit
North America 292.5 254.1 279.6
Europe and Australia 123.2 107.3 94.0
Exceptional transaction costs (117.0) -- --
================================================= ============== ================= =================
298.7 361.4 373.6
================================================= ============== ================= =================
Depreciation and amortisation
North America 114.9 102.1 100.4
Europe and Australia 59.0 46.0 44.2
================================================= ============== ================= =================
173.9 148.1 144.6
================================================= ============== ================= =================
Profit on ordinary activities before
interest
North America 292.5 252.2 279.8
Europe and Australia 124.4 107.3 87.3
Exceptional transaction costs (117.0) -- --
================================================= ============== ================= =================
299.9 359.5 367.1
================================================= ============== ================= =================
Which is stated after crediting/(charging):
Non-operating items
North America -- (1.9) 0.2
Europe and Australia 1.2 -- (6.7)
================================================= ============== ================= =================
1.2 (1.9) (6.5)
================================================= ============== ================= =================
Non-operating items for Europe and Australia include a $1.2m profit on sale of
an investment (2001 $1.9m, 2000 $6.0m, loss on disposal of vessels).
Capital additions
North America 1,107.2 618.5 500.1
Europe and Australia 223.5 57.9 321.2
================================================= ============== ================= =================
1,330.7 676.4 821.3
================================================= ============== ================= =================
2002 2001
U.S. $M U.S. $M
Net operating assets excluding
goodwill and ships under
construction
North America 2,606.6 2,599.0
Europe and Australia 1,728.7 902.0
============================================= ============== ==============
4,335.3 3,501.0
============================================= ============== ==============
50
2. SEGMENTAL ANALYSIS (CONTINUED)
2002 2001
U.S.$M U.S.$M
RESTATED
(NOTE 1)
The net operating assets are reconciled to net assets as follows:
Net operating assets 4,335.3 3,501.0
Goodwill 127.1 112.9
Ships under construction 907.4 508.0
Group share of joint ventures' non-operating assets 3.5 8.6
Net borrowings (2,471.9) (1,436.4)
Corporation tax and deferred tax (66.6) (43.7)
Dividends payable (20.8) (20.8)
=================================================================== =============== ==============
Net assets 2,814.0 2,629.6
=================================================================== =============== ==============
Total assets
North America 3,914.7 3,411.0
Europe and Australia 2,417.0 1,458.7
=================================================================== =============== ==============
6,331.7 4,869.7
=================================================================== =============== ==============
3. OPERATING COSTS
2002 2001 2000
U.S.$M U.S.$M U.S.$M
Direct operating costs 1,576.6 1,584.1 1,558.0
Selling and administration 477.6 357.5 348.2
expenses
Depreciation and amortisation 173.9 148.1 144.6
==================================== =============== =============== ===============
2,228.1 2,089.7 2,050.8
==================================== =============== =============== ===============
2002 2001 2000
U.S.$M U.S.$M U.S.$M
Operating costs include:
Advertising and promotion costs 145.8 149.4 139.4
Exceptional transaction costs 117.0 -- --
Operating lease costs 20.9 18.6 13.3
- ships
- property 14.2 11.2 10.5
- other 3.3 3.3 2.9
Auditors' remuneration:
Audit 0.9 0.8 0.8
Stock exchange reporting 2.6 1.8 --
==================================== =============== =============== ===============
3.5 2.6 0.8
==================================== =============== =============== ===============
Tax advice 3.1 3.5 5.1
Other non-audit fees 0.2 0.5 0.2
==================================== =============== =============== ===============
Total fees paid to the 6.6 6.1 6.8
auditors and their
associates
51
3. OPERATING COSTS (CONTINUED)
Of the $5.9m (2001 $5.8m, 2000 $5.3m) charged for non-audit services provided by
the Company's auditors $4.5m (2001 $3.8m, 2000 $0.1m) was for services in the
U.K. The audit fee of the Company was $0.2m (2001 $0.2m, 2000 $0.2m).
Transaction costs of $117.0m consist of the $62.5m break-fee relating to the
Royal Caribbean proposed transaction together with $54.5m legal and professional
fees in connection with this transaction and the proposed Carnival transaction.
4. NET INTEREST PAYABLE AND SIMILAR ITEMS
2002 2001 2000
U.S.$M U.S.$M U.S.$M
Interest payable on:
Bank loans and overdrafts (111.1) (98.9) (35.6)
Loans from P&O -- -- (39.7)
------------------------------------------------------------------------------
(111.1) (98.9) (75.3)
Interest capitalised 31.0 33.1 23.5
Interest receivable on other deposits 6.0 7.7 2.5
------------------------------------------------------------------------------
(74.1) (58.1) (49.3)
Joint ventures 0.1 0.1 0.2
------------------------------------------------------------------------------
(74.0) (58.0) (49.1)
------------------------------------------------------------------------------
Interest capitalised relates to tangible fixed assets under construction. The
capitalisation rate is based on the weighted average of interest rates
applicable to the Group's borrowings (excluding loans for specific purposes)
during each year. The aggregate interest capitalised at each year end was:
2002 2001 2000
U.S.$M U.S.$M U.S.$M
Ships 204.1 173.4 140.8
Properties 4.4 4.1 3.5
------------------------------------------------------------------------------
208.5 177.5 144.3
------------------------------------------------------------------------------
5. TAXATION
2002 2001 2000
U.S.$M U.S.$M U.S.$M
RESTATED RESTATED
(NOTE 1) (NOTE 1)
The taxation charge/(credit) is made up as follows:
Current taxation:
U.K. Corporation tax (0.2) -- --
Overseas taxation (16.4) (110.8) (40.2)
--------------------------------------------------------------------------------
(16.6) (110.8) (40.2)
Deferred taxation:
Origination/reversal of timing differences (0.5) 192.5 (17.2)
--------------------------------------------------------------------------------
(17.1) 81.7 (57.4)
--------------------------------------------------------------------------------
52
5. TAXATION (CONTINUED)
The current taxation charge is reconciled to the U.K. standard rate as follows:
2002 2001 2000
U.S.$M U.S.$M U.S.$M
RESTATED RESTATED
(NOTE 1) (NOTE 1)
Profit on ordinary activities before tax 225.9 301.5 318.0
Notional tax charge at U.K. standard rate
(2002: 30.0%; 2001: 30.0%; 2000: 30.0%) (67.8) (90.5) (95.4)
Effect of overseas taxes at different rates 61.4 59.9 41.0
Permanent differences (17.1) (80.2) (2.7)
Effect of tonnage tax 6.9 -- --
Other -- -- 16.9
--------------------------------------------------------------------------------
(16.6) (110.8) (40.2)
--------------------------------------------------------------------------------
There was no charge or credit in respect of profits and losses on sale of ships
and other fixed assets. The effective tax rate for the Group is expected to
remain low following entry into the U.K. tonnage tax regime. The exceptional
transaction costs had no effect on the tax charge for the year.
6. DIVIDENDS
2002 2001 2000
U.S.$M U.S.$M U.S.$M
Dividends paid, declared, proposed and accrued are as follows:
Equity share capital
First interim paid 3 cents per share (2001 3 cents, 2000 nil) 20.8 20.8 --
Second interim paid 3 cents per share (2001 3 cents, 2000 nil) 20.8 20.8 --
Third interim paid 3 cents per share (2001 3 cents, 2000 nil) 20.8 20.8 --
Fourth interim proposed at 3 cents per share (2001 nil, 2000 nil) 20.8 -- --
Final proposed at nil cents per share (2001 3 cents, 2000 12 cents) -- 20.8 83.1
----------------------------------------------------------------------------------------------------------
83.2 83.2 83.1
----------------------------------------------------------------------------------------------------------
7. EARNINGS PER ORDINARY SHARE
2002 2001 2000
RESTATED RESTATED
(NOTE 1) (NOTE 1)
Weighted average number of shares (million)
Basic 692.4 691.5 684.2
Dilutive shares 3.2 3.3 --
Diluted 695.6 694.8 684.2
BASIC DILUTED BASIC DILUTED BASIC DILUTED
CENTS CENTS CENTS CENTS CENTS CENTS
PER PER PER PER PER PER
U.S.$M SHARE SHARE U.S.$M SHARE SHARE U.S.$M SHARE SHARE
Basic earnings 208.8 30.2 30.0 383.1 55.4 55.1 258.0 37.7 37.7
Exceptional transaction costs 117.0 16.9 16.8 -- -- -- -- -- --
Exceptional tax items -- -- -- (97.5) (14.1) (14.0) -- -- --
Adjusted earnings 325.8 47.1 46.8 285.6 41.3 41.1 258.0 37.7 37.7
------------------------------------------------------------------------------------------------------------------
53
7. EARNINGS PER ORDINARY SHARE (CONTINUED)
The weighted average number of shares for the period up to October 23, 2000
represents the number of shares issued on demerger. The weighted average number
of shares has been adjusted for shares in the Company held by the employee
benefit trust for the satisfaction of incentive scheme awards that have not
vested unconditionally.
Each ADS represents an interest in four ordinary shares.
The dilutive shares relate to ordinary shares to be issued on the exercise of
employee share options.
Adjusted earnings per share reflects the elimination of exceptional transaction
costs of $117.0m in 2002 and exceptional tax items of $97.5m in 2001, comprising
a credit from the release of deferred tax on entry into the tonnage tax regime
of $192.5m and tax charges arising from internal corporate restructuring of
$95.0m.
8. GOODWILL
U.S.$M
Cost
Cost at December 31, 2001 128.5
Exchange movements 20.9
--------------------------------------------------------------------------------
Cost at December 31, 2002 149.4
--------------------------------------------------------------------------------
Amortisation
Amortisation at December 31, 2001 (15.6)
Exchange movements (2.4)
Amortisation charge for year (4.3)
--------------------------------------------------------------------------------
Amortisation at December 31, 2002 (22.3)
--------------------------------------------------------------------------------
Net book value
At December 31, 2002 127.1
--------------------------------------------------------------------------------
At December 31, 2001 112.9
--------------------------------------------------------------------------------
$128.0m of goodwill costs in respect of Aida is being amortised over 40 years as
the directors consider that 40 years represents the useful economic life of that
business. All other goodwill is amortised over 20 years.
54
9. SHIPS
GROUP COMPANY
-------------------------------------------------
OWNED LEASED TOTAL OWNED
U.S.$M U.S.$M U.S.$M U.S.$M
Cost
Cost at December 31, 2001 4,739.0 -- 4,739.0 153.1
Exchange movements 222.8 -- 222.8 16.3
Additions 1,157.4 148.1 1,305.5 --
--------------------------------------------------------------------------------------------------
Cost at December 31, 2002 6,119.2 148.1 6,267.3 169.4
--------------------------------------------------------------------------------------------------
Depreciation
Depreciation at December 31, 2001 (700.6) -- (700.6) (7.1)
Exchange movements (43.3) -- (43.3) (0.8)
Charge for year (142.8) (0.6) (143.4) (7.4)
--------------------------------------------------------------------------------------------------
Depreciation at December 31, 2002 (886.7) (0.6) (887.3) (15.3)
--------------------------------------------------------------------------------------------------
Net book value
At December 31, 2002 5,232.5 147.5 5,380.0 154.1
--------------------------------------------------------------------------------------------------
At December 31, 2001 4,038.4 -- 4,038.4 146.0
--------------------------------------------------------------------------------------------------
Ships under construction included in the above for Group totalled $907.4m (2001
$508.0m). Included within ships under construction at December 31, 2002 is the
final payment in respect of Coral Princess which was delivered in December 2002,
but did not enter operational service until January 2003.
10. PROPERTIES AND OTHER FIXED ASSETS
OFFICE
EQUIPMENT,
FREEHOLD PLANT AND
PROPERTIES MOTOR VEHICLES TOTAL
GROUP U.S.$M U.S.$M U.S.$M
Cost
Cost at December 31, 2001 123.7 214.7 338.4
Exchange movements -- 5.1 5.1
Additions 5.2 20.0 25.2
--------------------------------------------------------------------------------
Cost at December 31, 2002 128.9 239.8 368.7
--------------------------------------------------------------------------------
Depreciation
Depreciation at December 31, 2001 (5.9) (84.5) (90.4)
Exchange movements -- (2.7) (2.7)
Charge for the year (3.4) (22.8) (26.2)
--------------------------------------------------------------------------------
Depreciation at December 31, 2002 (9.3) (110.0) (119.3)
--------------------------------------------------------------------------------
Net book value
At December 31, 2002 119.6 129.8 249.4
--------------------------------------------------------------------------------
At December 31, 2001 117.8 130.2 248.0
--------------------------------------------------------------------------------
55
The book value of freehold land is $3.4m (2001 $3.4m), which is not depreciated.
11. INVESTMENTS - GROUP
OWN JOINT OTHER
SHARES HELD VENTURES INVESTMENTS TOTAL
U.S.$M U.S.$M U.S.$M U.S.$M
Cost or valuation at December 31, 2001 5.0 8.8 6.9 20.7
Exchange movements 0.5 -- (0.4) 0.1
Disposals (1.1) -- (1.9) (3.0)
---------------------------------------------------------------------------------------------------------
Cost or valuation at December 31, 2002 4.4 8.8 4.6 17.8
---------------------------------------------------------------------------------------------------------
Provision at December 31, 2001 (1.7) -- -- (1.7)
Exchange movements (0.2) -- -- (0.2)
Disposals 1.1 -- -- 1.1
Charge for year (0.7) -- -- (0.7)
---------------------------------------------------------------------------------------------------------
Provision at December 31, 2002 (1.5) -- -- (1.5)
---------------------------------------------------------------------------------------------------------
Net book value
At December 31, 2002 2.9 8.8 4.6 16.3
---------------------------------------------------------------------------------------------------------
At December 31, 2001 3.3 8.8 6.9 19.0
---------------------------------------------------------------------------------------------------------
As at December 31, 2002 the P&O Princess Cruises Employee Benefit Trust held
1,540,483 (2001: 1,981,616) shares in P&O Princess Cruises, with an aggregate
nominal value of $1m. At December 31, 2002 the market value of these shares was
$10.7m (2001 $11.5m). If they had been sold at this value there would have been
no tax liability (2001 nil) on the capital gain arising from the sale.
The Ms Arkona was sold by the owner Ms Arkona GmbH & Co KG to Transocean Tours
on January 30, 2002. A profit of $1.2m was made on this transaction.
The principal joint ventures are P&O Travel Limited (Hong Kong) and Joex
Limited. P&O Travel Limited (Hong Kong) is a travel agency incorporated in Hong
Kong, in which P&O Princess Cruises had a 50% interest at December 31, 2002.
P&O Princess Cruises' share of turnover for the year ended December 31, 2002 and
share of gross assets and gross liabilities as at December 31, 2002 of P&O
Travel Limited (Hong Kong) are as follows:
2002 2001
U.S.$M U.S.$M
Turnover 4.9 5.6
--------------------------------------------------------------------------------
Gross assets 6.8 6.7
Gross liabilities (3.0) (2.9)
--------------------------------------------------------------------------------
3.8 3.8
--------------------------------------------------------------------------------
Joex Limited (Joex) is a company incorporated in the Isle of Man, in which P&O
Princess Cruises had a 50% interest at December 31, 2002. Joex was incorporated
during
56
2001 and has not traded since incorporation. P&O Princess Cruises' share
of its gross assets and liabilities at December 31, 2002 were $5m and $nil
respectively. On October 25, 2002, the shareholders agreed to terminate the
joint venture with effect from January 1, 2003 at no cost to P&O Princess
Cruises and, on January 2, 2003, P&O Princess Cruises confirmed that the joint
venture had been terminated. Accordingly, the shareholders are proceeding with
the dissolution of Joex.
12. STOCKS
GROUP GROUP
2002 2001
U.S.$M U.S.$M
Raw materials and consumables 45.7 39.5
Goods for resale 41.7 34.8
--------------------------------------------------------------------------------
87.4 74.3
--------------------------------------------------------------------------------
13. DEBTORS
GROUP GROUP COMPANY COMPANY
2002 2001 2002 2001
U.S.$M U.S.$M U.S.$M U.S.$M
Amounts recoverable within one year
Trade debtors 66.4 45.2 -- --
Amounts owed by subsidiary undertakings -- -- 1,084.8 1,017.3
Other debtors 39.1 37.8 -- --
Prepayments and accrued income 183.5 165.1 -- --
---------------------------------------------------------------------------------------------------------------
Total amounts recoverable within one year 289.0 248.1 1,084.8 1,017.3
---------------------------------------------------------------------------------------------------------------
Amounts recoverable after more than one year
Other debtors 0.1 0.4 -- --
Prepayments and accrued income 20.3 8.2 -- --
---------------------------------------------------------------------------------------------------------------
Total amounts recoverable after more than one year 20.4 8.6 -- --
---------------------------------------------------------------------------------------------------------------
Total debtors 309.4 256.7 1,084.8 1,017.3
---------------------------------------------------------------------------------------------------------------
14. CREDITORS
GROUP GROUP COMPANY COMPANY
2002 2001 2002 2001
U.S.$M U.S.$M U.S.$M U.S.$M
Amounts falling due within one year
Overdrafts (14.5) (16.7) -- --
Bank loans (98.0) (158.4) -- --
Finance lease creditors (7.8) -- -- --
Trade creditors (184.2) (147.2) -- --
Corporation tax (54.8) (32.4) -- --
Other creditors (5.5) (3.8) -- --
Accruals (134.4) (108.9) (19.5) (20.2)
Deferred income (467.2) (337.1) -- --
Dividends payable (20.8) (20.8) (20.8) (20.8)
---------------------------------------------------------------------------------------------------------------
(987.2) (825.3) (40.3) (41.0)
---------------------------------------------------------------------------------------------------------------
57
14. CREDITORS (CONTINUED)
GROUP GROUP COMPANY COMPANY
2002 2001 2002 2001
U.S.$M U.S.$M U.S.$M U.S.$M
Amounts falling due after more than one year
Bank loans, finance lease creditors, loan notes and
bonds:
Between one and five years
U.S. dollar bonds 2007 (302.7) -- (302.7) --
Finance lease creditors (119.5) -- -- --
Over five years
U.S. dollar notes 2008 (107.8) (107.8) (107.8) (107.8)
U.S. dollar notes 2010 (91.6) (91.0) (91.6) (91.0)
U.S. dollar notes 2015 (69.8) (69.5) (69.8) (69.5)
U.S. dollar notes 2016 (41.9) (41.9) (41.9) (41.9)
U.S. dollar bonds 2007 -- (280.8) -- (280.8)
U.S. dollar bonds 2027 (189.5) (189.4) (189.5) (189.4)
Sterling bond 2012 (317.6) (285.8) (317.6) (285.8)
Bank loans (482.4) (184.1) -- --
Accruals and deferred income (3.1) (11.4) -- --
----------------------------------------------------------------------------------------------------------------
(2,516.8) (1,393.1) (1,120.9) (1,066.2)
----------------------------------------------------------------------------------------------------------------
Bank loans and overdrafts include amounts of $840.5m (2001 $368.6m) secured on
ships and other assets. Further details of interest rates on bank borrowings are
given in note 26. $1,118.6m principal value of notes and bonds (2001 $1,086.8m)
are unconditionally guaranteed by P&O Princess Cruises International Limited. At
the year end P&O Princess Cruises plc had no independent operations and P&O
Princess Cruises International Limited was the sole direct operating subsidiary
of P&O Princess Cruises plc.
The maturity of bank loans, loan notes, bonds, finance lease creditors and
overdrafts is as follows:
GROUP GROUP COMPANY COMPANY
2002 2001 2002 2001
U.S.$M U.S.$M U.S.$M U.S.$M
Within one year (120.3) (175.1) -- --
Between one and two years (72.9) (53.4) -- --
Between two and five years (1,140.2) (78.0) (302.7) --
Between five and ten years (860.0) (616.8) (517.1) (479.6)
Over ten years (440.6) (633.5) (301.1) (586.6)
--------------------------------------------------------------------------------------------------
(2,634.0) (1,556.8) (1,120.9) (1,066.2)
--------------------------------------------------------------------------------------------------
58
15. PROVISIONS FOR LIABILITIES AND CHARGES - GROUP
DEFERRED
TAXATION TOTAL
U.S.$M U.S.$M
RESTATED OTHER RESTATED
(NOTE 1) U.S.$M (NOTE 1)
At December 31, 2001 -- (10.4) (10.4)
Prior year adjustment (note 1) (11.3) -- (11.3)
--------------------------------------------------------------------------------
At December 31, 2001 (as restated) (11.3) (10.4) (21.7)
Exchange differences -- (1.8) (1.8)
Release -- 10.7 10.7
Charged to profit and loss (0.5) (0.4) (0.9)
--------------------------------------------------------------------------------
At December 31, 2002 (11.8) (1.9) (13.7)
--------------------------------------------------------------------------------
During 2001 P&O Princess Cruises elected to enter the U.K. tonnage tax regime
which eliminated future potential tax liabilities on its profits in the U.K. The
regime includes provision whereby a proportion of capital allowances previously
claimed by the Group may be subject to tax in the event that a significant
number of vessels are sold and not replaced. This contingent liability decreases
over the first seven years following entry into tonnage tax to nil. The
contingent tax liability at December 31, 2002 was $186.3m (2001: $262.0m)
assuming all vessels on which capital allowances had been claimed were sold for
net book value and not replaced. No provision has been made as no liability is
expected to arise.
$10.7m of contingent consideration, payable in cash in relation to the purchase
of 49% of AIDA Cruises Limited in November 2000, has been released as the
condition requiring its payment did not arise. The total estimated amount
contingently payable is unchanged, but the whole of the remaining consideration
is payable in cash or shares at the Company's option, and therefore an
adjustment has been made to shares to be issued.
Deferred taxation comprises:
GROUP GROUP
2002 2001
U.S.$M U.S.$M
RESTATED
(NOTE 1)
Accelerated capital allowances 11.8 11.3
--------------------------------------------------------------------------------
Distributable reserves of overseas subsidiaries and joint ventures comprising
approximately $1,417.3m (2001 $1,197.5m) would be subject to tax if paid as
dividends. No deferred taxation is provided in respect of these.
59
16. CALLED UP SHARE CAPITAL
The authorised share capital comprises 750,000,000 ordinary shares of 50 U.S.
cents each, 49,998 preference shares of (pound)1 each and 2 subscriber shares of
(pound)1 each.
The allotted, called up and fully paid ordinary share capital is as follows:
NO OF SHARES U.S.$M
At December 31, 2001 692,643,428 346.3
Shares issued 829,191 0.4
--------------------------------------------------------------------------------
At December 31, 2002 693,472,619 346.7
--------------------------------------------------------------------------------
During 2002 the Company issued 829,191 ordinary shares of 50 U.S. cents each
following the exercise of share options for total consideration of $3.9m.
The preference shares, which have been allotted but not issued, are entitled to
a cumulative fixed dividend of 8% per annum and are entitled to one vote per
share. The preference shares rank behind other classes of shares in relation to
the payment of capital on certain types of distribution of the Company. The
subscriber shares have no dividend rights nor voting rights nor any rights to
payment of capital upon a distribution of assets by the Company. The preference
shares and subscriber shares are unlisted.
Details of options over ordinary shares granted to employees are given in note
21. Details of contingent rights to shares in relation to the acquisition of
subsidiaries are given in note 17.
60
17. RESERVES
SHARE
PREMIUM OTHER MERGER PROFIT AND
ACCOUNT RESERVES RESERVE LOSS ACCOUNT TOTAL
U.S.$M U.S.$M U.S.$M U.S.$M U.S.$M
Group
At December 31, 2001 0.2 82.4 910.3 1,301.5 2,294.4
Prior year adjustment (note 1) -- -- -- (11.3) (11.3)
-----------------------------------------------------------------------------------------------------------
At December 31, 2001 (as restated) 0.2 82.4 910.3 1,290.2 2,283.1
Exchange movements -- -- -- 44.2 44.2
Other -- 10.7 -- -- 10.7
Issue of shares 3.5 -- -- -- 3.5
Retained profit for the financial year -- -- -- 125.6 125.6
-----------------------------------------------------------------------------------------------------------
At December 31, 2002 3.7 93.1 910.3 1,460.0 2,467.1
-----------------------------------------------------------------------------------------------------------
SHARE PROFIT AND
PREMIUM OTHER LOSS
ACCOUNT RESERVES ACCOUNT TOTAL
U.S.$M U.S.$M U.S.$M U.S.$M
Company
At December 31, 2001 0.2 82.4 55.9 138.5
Exchange movements -- -- 3.9 3.9
Other (see note 15) -- 10.7 -- 10.7
Issue of shares 3.5 -- -- 3.5
Retained profit for the financial year -- -- 3.1 3.1
---------------------------------------------------------------------------------------------------
At December 31, 2002 3.7 93.1 62.9 159.7
---------------------------------------------------------------------------------------------------
In accordance with s230 of the Companies Act 1985 the Company has not presented
its own profit and loss account. The profit attributable to shareholders of the
Company for the year was $86.3m (2001 $135.3m).
Group and Company `Other reserves' represent the difference between the market
and nominal value of shares issued as initial consideration of $35.6m together
with the estimated value of outstanding consideration ($57.5m) in respect of the
purchase of 49% of AIDA Cruises Limited in November 2000. The shares issued in
respect of the initial consideration have been accounted for in accordance with
the merger relief provisions of the Companies Act 1985. The outstanding
consideration is mainly dependent on the future results of the Seetours business
and may be payable between 2003 and 2006. The Company has the option to settle
the outstanding consideration in either cash or new P&O Princess Cruises plc
ordinary shares. The purchase agreement provides that in the event of a change
in control of P&O Princess Cruises plc payment of the outstanding consideration
can be accelerated by the vendor of AIDA Cruises Limited. In such an event, the
minimum amount payable would be approximately 59m ($61.9m), payable in cash.
61
18. EQUITY MINORITY INTERESTS
U.S.$M
At December 31, 2001 0.2
Proportion of profit on ordinary activities after taxation --
--------------------------------------------------------------------------------
At December 31, 2002 0.2
--------------------------------------------------------------------------------
19. NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT
(a) Reconciliation of operating profit to net cash inflow from operating
activities
2002 2001 2000
U.S.$M U.S.$M U.S.$M
Group operating profit.............. 298.7 361.3 373.1
Depreciation and amortisation....... 173.9 148.1 144.6
Increase in stocks.................. (11.1) (11.6) (1.6)
(Increase)/decrease in debtors...... (31.5) 42.2 (40.8)
Increase/(decrease) in creditors
and provisions................. 146.1 (33.0) 57.0
-------------- ------------ ------------
Net cash inflow from operating
activities..................... 576.1 507.0 532.3
============== ============ ============
(b) Reconciliation of net cash flow to movement in net debt
2002 2001 2000
U.S.$M U.S.$M U.S.$M
Increase/(decrease) in net cash in
the year....................... 55.4 (149.4) 192.4
Cash inflow from loans to and from
P&O............................ -- (3.7) (356.2)
Cash outflow/(inflow) from changes
in short term borrowings....... 26.1 (50.0) (20.6)
Cash inflow from third party debt
and lease financing............ (837.5) (279.2) (187.8)
-------------- ------------ ------------
Change in net debt resulting from
cash flows..................... (756.0) (482.3) (372.2)
Inception of finance leases......... (129.9) -- --
Amortisation of bond issue costs.... (1.9) (1.7) (0.2)
Exchange movements in net debt...... (147.7) 14.6 37.5
-------------- ------------ ------------
Movement in net debt in the year.... 1,035.5) (469.4) (334.9)
Net debt at the beginning of the
year........................... 1,436.4) (967.0) (632.1)
-------------- ------------ ------------
Net debt at the end of the year..... 2,471.9) (1,436.4) (967.0)
============== ============ ============
62
(c) Analysis of net debt
OTHER
NON--CASH AT EXCHANGE DEC 31,
AT JAN 1, CASH FLOW MOVEMENTS MOVEMENTS 2002
2002 U.S.$M U.S.$M U.S.$M U.S.$M U.S.$M
Cash available on demand.......... 120.4 53.2 -- (11.5) 162.1
Less: bank overdrafts............. (16.7) 2.2 -- -- (14.5)
---------------- ----------- ------------ ------------ -------------
103.7 55.4 -- (11.5) 147.6
Short term debt................... (158.4) 26.1 48.7 (14.4) (98.0)
Medium and long term debt......... (1,381.7) (840.1) (50.6) (121.8) (2,394.2)
Finance leases.................... -- 2.6 (129.9) -- (127.3)
---------------- ----------- ------------ ------------ -------------
Net debt.......................... (1,436.4) (756.0) (131.8) (147.7) (2,471.9)
================ =========== ============ ============ =============
20. ACQUISITIONS
There were no significant business acquisitions during 2002.
The business acquired during 2001 was Baste & Lange GmbH, a German procurement
company. Net assets of $0.2m were acquired for $1.7m in cash, giving rise to
goodwill of $1.5m with an estimated useful life of 20 years. All book values
approximated to fair value at acquisition.
21. EMPLOYEES
2002 2001 2000
The average number of employees was as follows:
Shore staff........................ 3,654 3,623 3,567
Sea staff.......................... 16,298 15,833 15,461
--------- -------- ---------
19,952 19,456 19,028
2002 2001 2000
U.S.$M U.S.$M U.S.$M
The aggregate payroll costs were:
Wages and salaries................. 307.5 279.1 258.0
Social security costs.............. 12.1 11.2 12.2
Pension costs...................... 12.1 9.8 9.7
--------- -------- ---------
331.7 300.1 279.9
Details of directors' remuneration, including share options, long term incentive
plans and pension entitlements, are set out in the Remuneration report on pages
35 to 40 [of our 2002 Annual Report].
EMPLOYEE OPTION SCHEMES
Options under the P&O Princess Cruises Executive Share Option Plan ("the Option
Plan"), are exercisable in a period normally beginning not earlier than three
years and ending no later than ten years from the date of the grant. Options
granted immediately after the demerger from P&O in October 2000 to replace
options over P&O deferred stock previously held by P&O Princess Cruises
employees are exercisable over the same
63
period as the options replaced. The exercise price is set at the closing market
price on the day the option was granted.
Options granted to P&O Princess Cruises employees under the Option Plan are as
set out below:
WEIGHTED AVERAGE EXERCISE NUMBER OF OPTIONS
PRICE PER SHARE
SHARES ADS SHARES ADS
Options outstanding at January 1, 2002. 293p $17.14 6,551,662 952,717
Options granted during the year........ 408p $23.85 2,856,082 505,150
Options exercised during the year...... 292p $16.97 (613,523) (53,917)
Options lapsed or cancelled............ 292p -- (171,572) --
Options outstanding at December 31,
2002.............................. 318p $19.56 8,622,649 1,403,950
---------- ------------ --------------- --------------
Options exercisable at December 31,
2002.............................. 293p $16.97 1,038,955 54,874
---------- ------------ --------------- --------------
Under the proposed DLC transaction with Carnival Corporation all the above
options would vest on completion and become exercisable and any performance
conditions would cease to apply (see note 29).
22. PENSIONS
P&O Princess Cruises is a contributing employer to various pension schemes,
including some multi-employer merchant navy industry schemes.
In the UK, P&O Princess Cruises operates its own defined benefit pension scheme,
the assets of which are managed on behalf of the trustee by independent fund
managers. This scheme is closed to new membership. As at March 31, 2001, the
date of the most recent formal actuarial valuation, the scheme had assets with a
market value of $60.9m, representing 102 per cent of the benefits accrued to
members allowing for future increases in earnings. Approximately 70 per cent of
the scheme's assets are invested in bonds and 30 per cent in equities. The
principal valuation assumptions were as follows:
%
Rate of salary increases........................... 4.0
Rate of pension increases.......................... 2.5
Discount rate...................................... 5.25
Expected return on assets.......................... 5.25
The Merchant Navy Ratings Pension Fund ("MNRPF") is a defined benefit
multi-employer scheme in which sea staff employed by companies within the P&O
Princess Cruises group have participated. The scheme has a significant funding
deficit and has been closed to further benefit accrual. Companies within the P&O
Princess Cruises group, along with other employers, are making payments into the
scheme under a non-binding Memorandum of Understanding to reduce the deficit.
Payments by P&O Princess Cruises' group companies to the scheme in 2002 totalled
$2.0m, which represented 7 per cent of the total payments made by all employers.
As at March 31,
64
2002, the date of the most recent formal actuarial valuation,
the scheme had assets with a market value of $814m, representing 84 per cent of
the benefits accrued to members. Approximately 68 per cent of the scheme's
assets were invested in bonds, 25 per cent in equities and 7 per cent in
property. The valuation assumptions were as follows:
%
Rate of salary increases.................................... 4.0
Rate of pension increases (where increases apply)........... 2.5
Discount rate............................................... 5.8
Expected return on assets................................... 5.8
The Merchant Navy Officers Pension Fund ("MNOPF") is a defined benefit
multi-employer scheme in which officers employed by companies within the P&O
Princess Cruises group have participated and continue to participate. This
scheme is closed to new membership. The share of the contributions being made to
the scheme by P&O Princess Cruises group companies (based on the year to
December 31, 2002) was approximately 7 per cent. However, the extent of each
participating employer's liability for any deficit in the scheme is uncertain.
Accordingly, P&O Princess Cruises accounts for the scheme on a contributions
paid basis, as if it were a defined contribution scheme. The scheme is divided
into two sections - the New Section and the Old Section. As at March 31, 2000,
the date of the most recent formal actuarial valuation, the New Section had
assets with a market value of $2,680m, representing approximately 100 per cent
of the benefits accrued to members. The valuation assumptions were as follows:
%
Rate of salary increases.................................... 4.0
Rate of pension increases (where increases apply)........... 2.5
Discount rate............................................... 5.75
Expected return on assets................................... 5.75
At the date of the valuation, approximately 77 per cent of the New Section's
assets were invested in equities, 14 per cent in bonds and 9 per cent in
property and cash. As a result of this asset distribution, it is expected that
the fall in equity markets since March 2000 will have resulted in the New
Section now showing a significant funding deficit. The estimated current
position is discussed below with the additional information presented under
FRS17. The Old Section has been closed to benefit accrual since 1978. As at
March 31, 2000, the date of the most recent formal actuarial valuation, it had
assets with a market value of $2,233m representing approximately 111 per cent of
the benefits accrued to members. The assets of the Old Section are substantially
invested in bonds. Contributions from P&O Princess Cruises group companies to
the MNOPF during the year to December 31, 2002 were $1.2m.
P&O Princess Cruises also operates a number of smaller defined benefit schemes
in the U.S. which are unfunded, other than assets in a Rabbi Trust held on the
Group's balance sheet, and makes contributions to various defined contribution
schemes in various jurisdictions.
65
The pension charges arising from the schemes described above were:
2002 2001 2000
U.S.$M U.S.$M U.S.$M
The P&O Princess Cruises Pension Scheme....... 5.5 4.3 4.0
Merchant Navy pension funds................... 2.8 2.7 2.7
Overseas plans................................ 3.8 2.8 3.0
--------- --------- -------
12.1 9.8 9.7
----------------------
(in 2000 the P&O Princess Cruises Pension Scheme figure includes $3.1m in
respect of payments to the P&O Pension scheme prior to demerger in October 2000)
Differences between the amounts charged and the amounts paid by P&O Princess
Cruises are included in prepayments or creditors as appropriate. At December 31,
2002 total prepayments amounted to $6.3m (2001 $7.3m), and total creditors
amounted to $14.3m (2001 $13.1m), giving a net pension liability in the balance
sheet of $8.0m.
ADDITIONAL INFORMATION PRESENTED UNDER FRS17 `RETIREMENT BENEFITS'
Whilst the group continues to account for pension costs in accordance with
Statement of Standard Accounting Practice 24 `Accounting for Pension Costs',
under FRS17 `Retirement Benefits' the following additional information has been
presented in respect of the P&O Princess Cruises Pension Scheme, P&O Princess
Cruises' share of the MNRPF and the unfunded U.S. defined benefit schemes. In
accordance with FRS17, the MNOPF is not included in this analysis as P&O
Princess Cruises' share of its underlying assets and liabilities cannot be
identified with certainty. However, some additional information on the overall
funding position of this scheme is provided.
The actuarial valuations of the P&O Princess Cruises schemes and P&O Princess
Cruises' share of the MNRPF were updated to December 31, 2002 and 2001 by P&O
Princess Cruises' qualified independent actuary. The assumptions used are best
estimates chosen from a range of possible actuarial assumptions which may not
necessarily be borne out in practice. Using weighted averages, these assumptions
for the U.K. and U.S. schemes together were:
2002 2001
% %
Rate of increase in salaries................................... 4.1 4.1
Rate of increase in pensions (where increases apply)........... 2.5 2.5
Discount rate.................................................. 5.2 5.6
Expected return on assets (only relevant for U.K. schemes)..... 5.1 5.5
The aggregated assets and liabilities in the schemes as at December 31, 2002 and
2001 were:
66
2002 2002 2001 2001
VALUE U.S.$M EXPECTED VALUE U.S.$M EXPECTED
RATE OF RATE OF
RETURN RETURN
% %
Equities.................................... 42.9 5.1 34.1 5.5
Bonds....................................... 93.8 5.1 86.9 5.5
------------ ------------ ------------- ----------
Total market value of assets................ 136.7 5.1 121.0 5.5
Present value of the schemes' liabilities... (178.0) (146.2)
------------ ------------ ------------- ----------
Net pension liability....................... (41.3) (25.2)
============ ============ ============= ==========
------------------------------
(this analysis excludes pension assets held in a Rabbi Trust of $4.8m)
The net pension liability of $41.3m (2001 $25.2m) represents pension prepayments
of $nil (2001 $7.3m) and pension liabilities of $41.3m (2001 $32.5m). This
compares with the net pension liability accounted for under SSAP 24 of $8.0m.
On full compliance with FRS17, the amounts that would have been charged to the
consolidated profit and loss account and consolidated statement of total
recognised gains and losses for these schemes for the year ended December 31,
2002 are set out below:
2002
U.S.$M
Analysis of amounts charged to operating profits:
Current service cost................................................... (7.3)
Past service costs..................................................... --
--------
Total charged to operating profit...................................... (7.3)
========
Analysis of amount credited to other finance income:
Interest on pension scheme liabilities................................. (8.9)
Expected return on assets in the pension schemes....................... 7.0
--------
Net charge to other finance income..................................... (1.9)
========
The total profit and loss charge of $9.2m compares with $12.1m under SSAP 24.
Analysis of amounts recognised in Statement of Recognised Gains and Losses
(STRGL):
Loss on assets........................................................ (11.4)
Experience gain on liabilities........................................ 9.4
Loss on change of assumptions (financial and demographic)............. (11.8)
--------
Total loss recognised in STRGL before adjustment for tax.............. (13.8)
========
HISTORY OF EXPERIENCE GAINS AND LOSSES 2002
Loss on scheme assets................................................. ($11.4m)
As a % of scheme assets at end of year................................ 8.3%
Experience gain on scheme liabilities................................. $9.4m
As a % of scheme liabilities at end of year........................... 5.3%
Total actuarial loss recognised in STRGL.............................. ($13.8m)
As a % of scheme liabilities at end of year........................... 7.8%
MOVEMENT IN NET PENSION LIABILITY IN THE SCHEME DURING THE YEAR 2002
U.S.$M
Net pension liability at January 1, 2002.............................. (25.2)
Contributions paid.................................................... 6.1
Current service cost.................................................. (7.3)
Other finance charge.................................................. (1.9)
Actuarial loss........................................................ (13.8)
Exchange.............................................................. 0.8
--------
Net pension liability at December 31, 2002............................ (41.3)
========
67
It is estimated that the funding position of the MNOPF has changed significantly
since the valuation as at March 31, 2000 referred to above and that the New
Section is now in deficit. The Annual Report of the MNOPF for the year ended
March 31, 2002 showed that the market value of the assets of the New Section at
that date was $2,404m, of which 66 per cent was invested in equities, 22 per
cent in bonds and 12 per cent in property and cash. P&O Princess Cruises'
actuary has estimated the deficit in the New Section at December 31, 2002 based
on the estimated movement in assets since March 31, 2002 and in liabilities
since March 31, 2000, and applying a discount rate to the liabilities of 5.1% in
accordance with FRS 17. As noted above, the extent of each employer's liability
with respect to the deficit in the fund is uncertain. Based on the share of
current contributions made to the scheme by the P&O Princess Cruises group, its
share of the estimated deficit would be approximately $85m, although the
appropriate share of the deficit actually attributable to the P&O Princess
Cruises group is believed to be lower than this.
On full adoption of FRS17 `Retirement benefits', in future years the difference
between the fair value of the assets held in the Group's defined benefit pension
schemes and the value of the schemes' liabilities measured on an actuarial
basis, using the projected unit method, will be recognised in the balance sheet
as a pension scheme asset or liability, as appropriate, which would have a
consequential effect on reserves. The carrying value of any resulting pension
scheme asset would be restricted to the extent that the Group is able to recover
the surplus either through reduced future contributions or refunds. The pension
scheme asset or liability would be recognised net of any related deferred tax.
However, this is expected to be minimal due to the tax structure of the group.
Movements in the defined benefit pension scheme asset or liability would be
taken to the profit and loss account or directly to reserves.
23. RELATED PARTY TRANSACTIONS
Mr Horst Rahe, a non-executive director of the Company, has an interest in a
deferred consideration arrangement relating to the Group's purchase of AIDA
Cruises Limited in November 2000. Amounts provided for as at December 31, 2002
in respect of this deferred consideration were $57.5m in aggregate (2001 $57.0m)
(see note 17).
In July 2002, P&O Princess Cruises International Limited, a subsidiary of the
Company, entered into, on an arms-length basis, a lease on an office property in
Germany with a company in which Horst Rahe, a director of the Company, has an
interest. The lease is for a term of 10 years, commencing in 2004, with options
to extend. The rent payable under the lease each year varies over the term of
the lease, within the range e350,000 to e500,000. These figures are net of
relevant regional government grants.
68
24. COMMITMENTS
CAPITAL
2002 2001
U.S.$M U.S.$M
Contracted
Ships and riverboats........................ 1,790.0 2,721.6
Other....................................... -- 3.8
----------- ----------
1,790.0 2,725.4
Capital commitments related to ships and riverboats include contract stage
payments, design and engineering fees and various owner supplied items but
exclude interest that will be capitalised.
As at December 31, 2002, the Group had future capital commitments in respect of
the five ocean cruise ships and two riverboats on order at that date of
$1,790.0m. Of the total commitment as at December 31, 2002, it is expected that
P&O Princess Cruises will incur $610.0m in 2003 and $1,180.0m in 2004. Company
capital commitments at December 31, 2002 were nil (2001: nil).
REVENUE
The minimum annual lease payments to which P&O Princess Cruises was committed
under non-cancellable operating leases were as follows:
PROPERTY OTHER TOTAL PROPERTY OTHER TOTAL
2002 2002 2002 2001 2001 2001
U.S.$M U.S.$M U.S.$M U.S.$M U.S.$M U.S.$M
Within one year 10.2 12.4 22.6 9.5 21.4 30.9
Between one and two years.. 9.8 11.5 21.3 9.1 3.7 12.8
Between two and three years 9.8 11.8 21.6 8.9 0.4 9.3
Between three and four 9.7 1.9 11.6 8.8 0.5 9.3
years.................
Between four and five years 9.7 -- 9.7 8.7 0.1 8.8
In more than five years.... 56.6 -- 56.6 59.4 -- 59.4
---------- --------- ---------- --------- ---------- -----------
105.8 37.6 143.4 104.4 26.1 130.5
========== ========= ========== ========= ========== ===========
69
Future minimum annual lease payments due within one year are analysed as
follows:
PROPERTY OTHER TOTAL PROPERTY OTHER TOTAL
2002 2002 2002 2001 2001 2001
U.S.$M U.S.$M U.S.$M U.S.$M U.S.$M U.S.$M
On leases expiring:
Within one year............ 0.4 0.4 0.8 0.3 8.7 9.0
Between one and five years. 0.2 12.0 12.2 0.4 12.7 13.1
After five years........... 9.6 -- 9.6 8.8 -- 8.8
---------- --------- ---------- --------- ---------- -----------
10.2 12.4 22.6 9.5 21.4 30.9
========== ========= ========== ========= ========== ===========
In addition to the above, at December 31, 2002 we had future commitments to pay
for our usage of certain port facilities as follows:
U.S.$M
Within one year............................................ 6.4
Between one and five years................................. 27.4
After five years........................................... 5.6
--------
39.4
========
25. CONTINGENT LIABILITIES
P&O Princess Cruises has provided counter indemnities of $213.4m (2001 $179.7m)
relating to bonds provided by third parties in support of P&O Princess Cruises'
obligations arising in the normal course of business. Generally these bonds are
required by travel industry regulators in the various jurisdictions in which P&O
Princess Cruises operates.
An Italian subsidiary of P&O Princess Cruises made a claim for a tax allowance
for the 1995 financial year under the Italian Tremonti law, reducing taxable
profits by just over 250 billion Lire. Qualification for the allowance is
dependent on ownership of relevant assets. The subsidiary in question bare-boat
chartered a vessel it owned to a fellow subsidiary. In December 2001, the
Italian tax authorities submitted an assessment for tax of e70.7m ($74 m) with
penalties of e70.7m ($74 m) on the grounds that the subsidiary had finance
leased, rather than chartered, the vessel and therefore did not qualify for such
an allowance. The Italian subsidiary has appealed against the assessment and the
outcome of court proceedings in the Low Tax Court of Palermo is awaited. The P&O
Princess Cruises board, which has been so advised by its Italian advisers,
believes that the relevant assets were owned and not the subject of a finance
lease and that the allowance is due.
Princess Cruises is party to a purported class action litigation relating to
alleged inappropriate assessing of passengers with certain port charges in
addition to their cruise fare. The plaintiffs have not claimed a specific damage
amount but settlement of this litigation had been agreed in principle with the
plaintiffs for coupons for future travel in amounts between $5 and $24 with a
total face value of approximately $13.4m. However,
70
on January 17, 2002, a Los Angeles Superior Court Judge ruled that he would not
consider the class-wide settlement agreed by the parties on the grounds that he
had previously ruled that there was no appropriate class. As a result of this
ruling, the case remains pending. Notwithstanding this development, the P&O
Princess Cruises board does not believe that a material liability will arise
with respect to this case and no provision has been made in the accounts for
this contingency. However, if there is a settlement, there can be no guarantee
that it would be of an amount previously indicated.
In the normal course of business, various other claims and lawsuits have been
filed or are pending against P&O Princess Cruises. The majority of these claims
and lawsuits are covered by insurance. P&O Princess Cruises management believes
the outcome of any such suits, which are not covered by insurance, would not
have a material adverse effect on P&O Princess Cruises' financial statements.
26. FINANCIAL INSTRUMENTS
P&O Princess Cruises uses financial instruments to finance its operations. The
financial instruments held by P&O Princess Cruises include cash, overdrafts,
bonds and loans. Derivative financial instruments are used to manage the
currency and interest rate risks arising from its operations and its sources of
finance. The derivatives used for this purpose are principally currency swaps,
interest rate swaps and forward currency contracts.
The main financial risks to which P&O Princess Cruises is exposed are summarised
below. No transactions of a speculative nature are undertaken.
The accounting policies for financial instruments are described in note 1.
For the purpose of this note, other than currency disclosures, the only debtors
and creditors included are deferred consideration receivable or payable, loans,
bank overdrafts and short term borrowings, in accordance with FRS13.
FOREIGN CURRENCY RISK
P&O Princess Cruises has international business operations. Its principal
operating currency is the U.S. dollar, but it also operates in a number of other
currencies, the most important of which are sterling and the euro. In general,
P&O Princess Cruises' profits and shareholders' funds benefit if sterling or the
euro are strong against the U.S. dollar. The U.S. dollar/sterling and the U.S.
dollar/euro exchange rates at the respective period ends were
71
AVERAGE EXCHANGE PERIOD END
RATES FOR PERIODS EXCHANGE RATES
ENDED
December 31, 2002
U.S.$:(pound)................ 1.504 1.609
U.S.$:euro................... 0.941 1.049
December 31, 2001
U.S.$:(pound)................ 1.440 1.450
U.S.$:euro................... 0.894 0.897
Approximately 40% of P&O Princess Cruises' net operating assets are denominated
in non U.S. dollar currencies with the result that P&O Princess Cruises' U.S.
dollar consolidated balance sheet, and in particular shareholders' funds, can be
affected by currency movements. P&O Princess Cruises partially mitigates the
effect of such movements by borrowing in the same currencies as those in which
the assets are denominated. An analysis of financial liabilities by currency is
shown below.
In addition, approximately 30% of P&O Princess Cruises' operating profit is
currently generated by businesses with functional currencies other than U.S.
dollars. The results of these businesses are translated into U.S. dollars at
average exchange rates for the purposes of consolidation. The impact of currency
movements on operating profit is mitigated partially by some interest costs
being incurred in non U.S. dollar currencies.
P&O Princess Cruises' businesses generally generate their turnover and incur
costs in their main functional currency. Exceptions to this include:
o Princess Cruises generates some revenue in Canadian dollars and in
sterling.
o Princess Cruises incurs some costs in euros.
o U.K., German and Australian businesses incur costs in U.S.$, including
fuel and some crew costs.
The following table shows P&O Princess Cruises' currency exposures that give
rise to the net currency gains and losses recognised in the profit and loss
account. Such exposures comprise the monetary assets and liabilities of P&O
Princess Cruises that are not denominated in the functional currency of the
operating unit concerned, excluding certain non U.S. dollar borrowings treated
as hedges of net investments in non U.S. dollar functional currency operations.
72
NET FOREIGN CURRENCY MONETARY ASSETS/(LIABILITIES)
U.S. DOLLAR STERLING EURO OTHER TOTAL
U.S.$M U.S.$M U.S.$M U.S.$M U.S.$M
Functional currency of Group
operation:
U.S. dollars.......... -- (26.4) (5.0) (20.5) (51.9)
Sterling.............. -- -- (0.6) 0.7 0.1
Other................. 0.7 -- -- 2.2 2.9
------------- ----------- ----------- ----------- -----------
Total at December 31, 2002 0.7 (26.4) (5.6) (17.6) (48.9)
Functional currency of Group
operation:
U.S. dollars.......... -- (0.9) (2.1) 5.7 2.7
Sterling.............. (0.9) -- -- -- (0.9)
------------- ----------- ----------- ----------- -----------
Total at December 31, 2001 (0.9) (0.9) (2.1) 5.7 1.8
INTEREST RATE RISK
The interest rate profile of the financial liabilities of P&O Princess Cruises
is set out in the table below:
TOTAL VARIABLE FIXED RATE WEIGHTED AVERAGE TIME
U.S.$M RATE FINANCIAL AVERAGE OVER WHICH
FINANCIAL LIABILITIES INTEREST INTEREST
LIABILITIES U.S.$M RATE FOR RATE IS
U.S.$M FIXED RATE FIXED
FINANCIAL MONTHS
LIABILITIES
%
Currency:
U.S. dollars.............. 1,309.6 880.7 428.9 5.4 176.5
Sterling.................. 759.9 291.1 468.8 7.2 93.3
Euro 564.5 514.5 50.0 4.6 28.0
------------ ------------- ------------ ------------ -------------
Total at December 31, 2002 2,634.0 1,686.3 947.7 6.3 127.5
============ ============= ============ ============ =============
Currency:
U.S. dollars.............. 713.1 412.4 300.7 7.7 260.0
Sterling.................. 753.4 293.9 459.5 7.2 103.0
Euro 90.3 90.3 -- -- --
------------ ------------- ------------ ------------ -------------
Total at December 31, 2001 1,556.8 796.6 760.2 7.4 165.1
============ ============= ============ ============ =============
The variable rate financial liabilities comprise bank borrowings and overdrafts
bearing interest at rates fixed in advance for periods ranging from one to six
months by reference to the applicable reference rate, primarily LIBOR for U.S.
dollar, sterling and euro borrowings.
The interest rate profile of the financial assets of P&O Princess Cruises is set
out in the table below:
73
TOTAL VARIABLE FINANCIAL FIXED RATE WEIGHTED AVERAGE
U.S.$M RATE ASSETS ON FINANCIAL AVERAGE TIME OVER
FINANCIAL WHICH NO ASSETS INTEREST WHICH
ASSETS INTEREST U.S.$M RATE FOR INTEREST
U.S.$M IS RECEIVED FIXED RATE RATE IS
U.S.$M FINANCIAL FIXED
ASSETS MONTHS
%
Currency:
U.S. dollars.......... 54.9 35.5 19.4 -- -- --
Sterling 100.9 95.4 5.5 -- -- --
Euro 2.8 1.5 1.3 -- -- --
Other................. 8.1 7.6 0.5 -- -- --
---------- ----------- ----------- ----------- ---------- -----------
Total at December 31,
2002.............. 166.7 140.0 26.7 -- -- --
========== =========== =========== =========== ========== ===========
Currency:
U.S. dollars.......... 16.0 1.5 14.5 -- -- --
Sterling.............. 81.2 73.4 7.8 -- -- --
Euro 8.4 6.4 -- 2.0 6.0 48.0
Other................. 21.7 20.3 1.4 -- -- --
---------- ----------- ----------- ----------- ---------- -----------
Total at December 31,
2001.............. 127.3 101.6 23.7 2.0 6.0 48.0
========== =========== =========== =========== ========== ===========
The majority of variable rate financial assets comprise bank accounts bearing
interest at the applicable money market deposit rates. Fixed rate financial
assets include deferred consideration relating to the sale of fixed assets.
LIQUIDITY RISK
At December 31, 2002 P&O Princess Cruises had committed financing arranged of
$1,210m (2001 $1,657m) to fund the delivery payments on four of its five ocean
cruise ships on order, of which $475m relates to ship deliveries in 2003 and
$735m to ship deliveries in 2004. In addition, at December 31, 2002 it had $444m
(2001 $605m) of undrawn committed bank facilities with a weighted average life
of five years and a further $162.1m (2001 $120.4m) of cash available for general
corporate purposes, including ship purchases.
CREDIT RISK
Management does not consider there to be any significant concentration of credit
risk. Potential concentrations comprise principally cash and cash equivalents
and trade debtors. P&O Princess Cruises enters into derivative transactions and
maintains cash deposits with several major banks. Management periodically
reviews the credit rating of the institutions and believes that any credit risk
is minimal. Concentration of credit risk with respect to trade debtors is
limited due to the large number of debtors comprising P&O Princess Cruises'
customer base.
The immediate credit exposure of financial instruments is represented by those
financial instruments that have a positive fair value at December 31, 2002.
74
FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES
A comparison by category of book value and fair value of P&O Princess Cruises'
financial assets and liabilities is as follows:
AT DECEMBER 31
2002 2001
BOOK VALUE FAIR VALUE BOOK VALUE FAIR VALUE
U.S.$M U.S.$M U.S.$M U.S.$M
Primary financial instruments held or
issued to finance P&O Princess
Cruises operations:
Notes and bonds......................... (1,120.9) (1,177.2) (1,066.2) (957.0)
Other loans............................. (1,498.6) (1,510.9) (473.9) (484.0)
Cash 162.1 162.1 120.4 120.4
Bank overdrafts......................... (14.5) (14.5) (16.7) (16.7)
Other investments and deferred
consideration...................... 4.6 4.6 6.9 6.9
Derivative financial instruments held
or issued to hedge currency
exposure on expected future
transactions:
Forward foreign currency contracts...... -- (16.7) -- (208.5)
Interest rate swaps..................... -- 49.6 -- 13.6
------------- -------------- -------------- --------------
(2,467.3) (2,503.0) (1,429.5) (1,525.3)
============= ============== ============== ==============
The notional principal amount of derivative financial instruments held as hedges
against currency exposures on ship capital expenditure is $690.2m (2001 $924.2m)
in respect of forward foreign currency contracts and $798.3m (2001 $741.8m) in
respect of currency and interest rate swaps providing hedges against currency
and interest rate exposure on loans.
The fair value of notes and bonds is based on quoted market price or if these
are not available the quoted market price of comparable debt.
Other loans, which include short term borrowings and bank term loans, are
largely at variable interest rates and therefore the book value approximates to
the fair value.
The fair value of cash and bank overdrafts approximates to the book value due to
the short term maturity of the instruments.
The fair value of other investments and deferred consideration is based on the
estimated recoverable amount.
The fair values of derivative financial instruments are discounted to the net
present value using prevailing market rates and foreign currency rates at the
balance sheet date.
HEDGING
When P&O Princess Cruises' businesses enter into capital expenditure or lease
commitments in currencies other than their main functional currency, these
commitments
75
are normally hedged using forward contracts and currency swaps in order to fix
the cost when converted to the functional currency. The most significant of P&O
Princess Cruises' foreign currency commitments of this nature are in respect of
certain cruise ships under construction. The periods of the forward contracts
match the expected cash flows of the capital commitments, usually between three
and five years. Other cruise ships have been ordered in currencies matching the
main functional currencies in which these ships will generate their revenue.
Gains and losses on instruments used for hedging are not recognised until the
exposure that is being hedged is itself recognised. Unrecognised gains and
losses on currency swaps, interest rate swaps and forward currency contracts are
as follows:
GAINS (LOSSES) NET GAINS/
U.S.$M U.S.$M (LOSSES)
U.S.$M
At January 1, 2002............................... 18.1 (213.0) (194.9)
(Gains)/losses arising before January 1, 2002
that were recognised during the year ended
December 31, 2002........................... (1.5) 57.9 56.4
------------- -------------- ---------------
Gains/(losses) arising before January 1, 2002
that were not recognised during the year
ended December 31, 2002..................... 16.6 (155.1) (138.5)
Gains/(losses) arising in the year that were not
recognised during the year ended
December 31, 2002........................... 62.7 108.7 171.4
------------- -------------- ---------------
Gains/(losses) at December 31, 2002.............. 79.3 (46.4) 32.9
============= ============== ===============
Of which:
Gains/(losses) expected to be recognised in less
than one year............................... 9.4 (43.9) (34.5)
Gains/(losses) expected to be recognised after
more than one year.......................... 69.9 (2.5) 67.4
------------- -------------- ---------------
Gains/(losses) at December 31, 2002.............. 79.3 (46.4) 32.9
============= ============== ===============
Of which:
Gains/(losses) on contracted capital expenditure
on ships.................................... 27.6 (42.7) (15.1)
Gains/(losses) on other hedges................... 51.7 (3.7) 48.0
------------- -------------- ---------------
Gains/(losses) at December 31, 2002.............. 79.3 (46.4) 32.9
============= ============== ===============
The underlying commitments, after taking these contracts into account, are
reflected within note 24.
27. INVESTMENT IN SUBSIDIARIES
U.S.$M
Cost at December 31, 2001 and 2002....................... 428.7
===========
76
The principal operating subsidiaries at December 31, 2002 were:
COUNTRY OF PERCENTAGE OF BUSINESS DESCRIPTION
INCORPORATION/ EQUITY SHARE
REGISTRATION CAPITAL OWNED
AT
DECEMBER 31,
2002
P&O Princess Cruises International Ltd England 100%+ Passenger cruising
Alaska Hotel Properties LLC U.S.A. 100% Hotel operations
Brittany Shipping Corporation Ltd Bermuda 100% Shipowner
Corot Shipping Corporation (Sociedade Portugal 100% Shipowner
Unipessoal) Lda
CP Shipping Corporation Ltd Bermuda 100% Shipowner
Fairline Shipping Corporation Ltd Bermuda 100% Shipowner
Fairline Shipping International Corporation Bermuda 100% Shipowner
Ltd
GP2 Ltd Bermuda 100% Shipowner
GP3 Ltd Bermuda 100% Shipowner
Princess Cruises (Shipowners) Ltd England 100% Passenger cruising
P&O Travel Ltd England 100% Travel agent
Princess Cruise Lines Ltd Bermuda 100% Passenger cruising
Princess Tours Ltd England 100% Shipowner
Royal Hyway Tours Inc U.S.A. 100% Land tours
Sitmar International SRL Panama 100% Holding company
Tour Alaska LLC U.S.A. 100% Rail tours
------------------------
+ Held directly by the Company.
28. ADDITIONAL INFORMATION FOR U.S. INVESTORS
ACCOUNTING PRINCIPLES
These financial statements have been prepared in accordance with U.K. GAAP,
which differs in certain significant respects from U.S. GAAP. A description of
the relevant accounting principles which differ materially is given below.
TREASURY STOCK
Under U.K. GAAP, the Company's shares held by employee share trusts are included
at cost in fixed asset investments and are written down to the amount payable by
employees over the vesting period of the options. Under U.S. GAAP, such shares
are treated as treasury shares and are included in shareholders' equity.
DEPRECIATION
Under U.K. GAAP, until December 31, 1999 certain freehold properties were not
depreciated. Under U.S. GAAP useful economic lives have been applied to these
properties and a depreciation expense recorded based on these lives.
77
GOODWILL AND CONTINGENT CONSIDERATION
Under U.K. GAAP, if an acquirer can satisfy contingent consideration by the
issue of shares at its option, this element of the consideration is not a
liability as there is no obligation to transfer future economic benefits.
Consequently this element of the purchase price is accounted for within
shareholders' funds. Under U.S. GAAP this consideration is not recognised until
the consideration is settled.
In June 2001 the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 141 `Business Combinations' and
SFAS No. 142 `Goodwill and Other Intangible Assets'. SFAS No. 141 requires that
the purchase method of accounting be used for all business combinations. SFAS
No. 141 specifies criteria that intangible assets acquired in a business
combination must meet to be recognised and reported separately from goodwill.
SFAS No. 142 requires that goodwill and intangible assets with indefinite useful
lives no longer be amortised, but instead tested for impairment at least
annually in accordance with the provisions of SFAS No. 142.
The Group adopted the provisions of SFAS No. 141 as at July 1, 2001 and SFAS No.
142 as at January 1, 2002. Goodwill and intangible assets determined to have an
indefinite useful economic life are not amortised. Goodwill and indefinite life
intangible assets acquired in business combinations completed before July 1,
2001 continued to be amortised through to December 31, 2001. Amortisation of
such assets ceased on January 1, 2002 upon adoption of SFAS No. 142.
Accordingly, goodwill amortisation recognised under U.K. GAAP from January 1,
2002 has been reversed for the purposes of U.S. GAAP.
Upon adoption of SFAS No. 142, the Group was required to evaluate its existing
intangible assets and goodwill that were acquired in purchase business
combinations, and to make any necessary reclassifications in order to conform
with the new classification criteria SFAS No. 141 for recognition separate from
goodwill. The Group was also required to reassess the useful lives and residual
values of all intangibles acquired and to make any necessary amortisation period
adjustments by the end of the first interim period after adoption. For
intangible assets identified as having indefinite useful economic lives, the
Group was required to test those intangible assets for impairment in accordance
with the provisions of SFAS No. 142 within the first interim period. Impairment
is measured as the excess carrying value over the fair value of an intangible
asset with an indefinite life. The results of this analysis did not require the
Group to recognise an impairment loss.
In connection with the SFAS No. 142 transitional goodwill impairment evaluation,
the Statement required the Group to perform an assessment of whether there was
an indication that goodwill is impaired as of date of adoption. To accomplish
this the Group was required to identify its reporting units and determine the
carrying value of each reporting unit by assigning the assets and liabilities,
including the existing goodwill and intangible assets, to those reporting units
as of January 1, 2002. The Group was required to determine the fair value of
each reporting unit and compare it with the carrying value
78
of the reporting unit within six months of January 1, 2002. This transitional
impairment test upon the adoption of SFAS No. 142 did not result in an
impairment charge. The Group performed the annual impairment test in December
2002 and determined that goodwill was not impaired.
MARKETING AND PROMOTION COSTS
Under U.K. GAAP, marketing and promotion costs have been expensed over the
period of benefit, not exceeding one year from the end of the year the cost is
incurred. U.S. GAAP requires that these costs are expensed in the financial year
incurred.
RELOCATION COSTS
The Group had accrued expenses relating to the relocation of employees which
under U.K. GAAP are recognisable as liabilities. Under U.S. GAAP these costs may
not be recognised until incurred by the employees.
EMPLOYEE SHARE INCENTIVES
THE EXECUTIVE SCHEMES
Under U.K. GAAP the intrinsic value of shares or rights to acquire shares when
the rights are granted, less contributions by employees, is charged in arriving
at operating profit. If this forms part of a long term incentive scheme the
charge in the profit and loss account is spread over the period to which the
schemes' performance criteria relate, otherwise recognition occurs when shares
or rights are granted. Under U.S. GAAP, compensation expense is recognised for
the difference between the market price of the shares and the exercise price for
performance and variable plans. The amount of compensation expense is adjusted
each accounting period based on the value of the shares for both types of plan
and also upon the estimated achievement of the performance criteria for the
performance plans, until the date at which the number of shares and the exercise
price are known.
SAYE SCHEME
When employed by P&O, certain employees of P&O Princess Cruises were eligible to
participate in the P&O save as you earn ("SAYE") share option scheme. P&O
Princess Cruises does not operate a SAYE scheme. U.K. GAAP does not recognise
the cost of SAYE discounts in financial statements. U.S. GAAP requires the full
discount given to employees on the market price of shares provided as part of a
`non-compensatory plan' (such as the SAYE scheme) to be charged to the profit
and loss account when it is greater than that which would be reasonable in an
offer of shares to shareholders or others.
PENSIONS
Under U.K. GAAP, pension costs include the regular cost of providing the
benefits as a level percentage of current and expected future earnings of the
employees covered. Variations from the regular pension cost are spread on a
systematic basis over the estimated average remaining service lives of current
employees in the plans.
79
U.S. GAAP requires that the projected benefit obligation (pension liability) be
compared with the market value of the underlying plan assets, and the difference
may be adjusted to reflect any unrecognised obligations or assets in determining
the pension cost or credit for the period. The actuarial method and assumptions
used in determining the pension expense can be significantly different from that
computed under current U.K. GAAP. U.S. GAAP also requires the actuarial
valuation to be prepared as at a more recent date than U.K. GAAP.
During 2001, one of the multi-employer schemes in which the Group participates,
the MNRPF, closed its fund for future benefit accrual. Under U.K. GAAP, the
Group is recognising this liability over the period in which the funding deficit
is being made good which approximates to expected remaining service lives of
employees in the scheme. Under U.S. GAAP, the Group has accounted for its share
of the scheme's net pension liability with an expense of $3.7m being recognised
in 2002 (2001: $15.1m).
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
Under U.K. GAAP, gains and losses on instruments used for hedging are not
recognised until the exposure that is being hedged is itself recognised. Under
U.S. GAAP, Statement of Financial Accounting Standards No. 133 (SFAS No. 133)
`Accounting for Derivative Instruments and Hedging Activities', as amended,
requires that all derivative instruments be recorded on the balance sheet at
their fair value. Changes in the fair value of derivatives will either be
recognised in earnings as offsets to the changes in fair value of related hedged
items or, for forecast transactions, deferred and recorded as a component of
other comprehensive income until the hedged transactions occur and are
recognised in earnings. The ineffective portion of a hedging derivative's change
in fair value is recognised immediately in earnings. This statement became
effective for P&O Princess Cruises on January 1, 2001, and a transition
adjustment of $9.0m was debited to reserves on implementation as the cumulative
effect of the U.S. GAAP accounting policy change.
In accordance with SFAS No. 133, U.S. GAAP assets are increased by $68.7m and
liabilities by $80.3m as at December 31, 2002 (2001 U.S. GAAP assets increased
by $214.3m and liabilities by $219.3m.) Cash flow hedges, of $3.3m have been
taken to other comprehensive income.
TAXES
DEFERRED TAX
Following the implementation of FRS 19 `Deferred Tax', under both U.K and U.S.
GAAP deferred taxes are accounted for on all temporary differences. Deferred tax
can also arise in relation to the tax effect of the other U.S. GAAP adjustments.
During 2001, the Group elected to enter the U.K. tonnage tax regime, as a result
of which temporary timing differences in respect of fixed assets within the
scheme became permanent differences. The deferred tax liabilities in respect of
these assets have therefore been released under both U.K. and U.S. GAAP.
80
IMPLEMENTATION OF FRS 19 `DEFERRED TAX'
Following the implementation of FRS 19 `Deferred Tax', as detailed in note 1,
the reconciliation of U.K. profit and shareholders' funds to U.S. GAAP has been
restated for 2001 and 2000. In 2001, the impact on the U.S. GAAP reconciliation
is a decrease in the `Taxes' U.S. GAAP adjustment to profit of $96.8m and an
increase of $11.3m in the `Taxes' U.S. GAAP adjustment to shareholders' funds.
In 2000, the effect is a reduction in the `Taxes' U.S. GAAP adjustment to profit
of $16.1m and a reduction in the `Taxes' U.S. GAAP adjustment to shareholders'
funds of $108.1m.
OTHER TAXES
The Group incurred income tax in 2001 as a result of taxable gains on
intercompany transactions that were undertaken to maximise its tax efficiency.
Under U.K. GAAP, this was charged to the profit and loss account. Under U.S.
GAAP, income taxes paid on intercompany profits on assets remaining within the
Group must be deferred. This deferred charge is being amortised over 25 years.
DIVIDENDS
Under U.K. GAAP dividends are accounted for in the period to which they pertain,
which may be earlier than the date of declaration. Under U.S. GAAP dividends are
accounted for in the period in which they are declared.
TRANSACTION COSTS
In 2001, it was expected that the proposed dual listed company transaction with
Royal Caribbean Cruises Ltd. would be accounted for under U.K. GAAP using merger
accounting principles with the costs of carrying out the combination being
expensed to the profit and loss account when the combined group came into
existence. When the P&O Princess Cruises Board withdrew its recommendation for
this proposed transaction in October 2002, these costs were expensed under U.K.
GAAP. Under U.S. GAAP, it was intended that the proposed transaction would be
accounted for using the purchase method of accounting with P&O Princess Cruises
being treated as the acquiree. Accordingly, under U.S. GAAP the costs incurred
by P&O Princess Cruises in connection with the proposed combination were
expensed to the profit and loss account as incurred.
ASSETS AND LIABILITIES
Current assets under U.K. GAAP of $20.4m (2001 $8.6m) would be reclassified as
non current assets under U.S. GAAP.
Provisions for liabilities and charges under U.K. GAAP of $nil (2001 $0.2m)
would be reclassified as `Creditors - amounts falling due within one year' under
U.S. GAAP
81
Deferred financing costs of $17.6m included within Creditors `amounts falling
due after more than one year' under U.K. GAAP would be reclassified as `other
assets' under U.S. GAAP.
The effects of these differing accounting principles are shown below:
SUMMARY GROUP INCOME STATEMENT
2002 2002 2002 2001 2000
U.K. GAAP ADJUSTMENTS U.S. GAAP U.S. GAAP U.S. GAAP
U.S.$M U.S.$M U.S.$M U.S.$M U.S.$M
Revenues....................... 2,526.8 -- 2,526.8 2,451.0 2,423.9
Expenses.......................
Operating...................... (1,576.6) -- (1,576.6) (1,584.1) (1,558.0)
administrative............ (477.6) 5.5 (472.1) (381.5) (353.7)
Depreciation and amortisation.. (173.9) 4.7 (169.2) (146.5) (143.9)
--------- ---------- --------- --------- ---------
(2,228.1) 10.2 (2,217.9) (2,112.1) (2,055.6)
========= =========== ========= ========= =========
Operating income before income
from affiliated operations 298.7 10.2 308.9 338.9 368.3
operations................ -- -- -- 0.1 0.7
Operating income............... 298.7 10.2 308.9 339.0 369.0
Non--operating income (expense).
Interest income................ 6.0 -- 6.0 7.7 2.5
capitalised interest...... (80.0) (3.3) (83.3) (61.8) (51.8)
Other income/ (expense)........ 1.2 -- 1.2 (1.8) (6.5)
Income tax (expense)/ credit... (17.1) (2.8) (19.9) 151.2 (56.9)
Minority interest.............. -- -- -- (0.1) (2.6)
--------- ---------- --------- --------- ---------
(89.9) (6.1) (96.0) 95.2 (115.3)
========= =========== ========= ========= =========
Profit attributable to
ordinary shareholders in
accordance with U.S. GAAP
before cumulative effect
of accounting policy
change.................... 208.8 4.1 212.9 434.2 253.7
--------- ---------- --------- --------- ---------
Cumulative effect of
accounting policy change
in respect of derivative
instruments and hedging
activities................ -- -- -- (9.0) --
Profit attributable to
ordinary shareholders in
accordance with U.S. GAAP. 208.8 4.1 212.9 425.2 253.7
--------- ---------- --------- --------- ---------
82
Adjustments to profit attributable to ordinary shareholders:
2002 2001 2000
U.S.$M U.S.$M RESTATED U.S.$M RESTATED
(NOTE 1) (NOTE 1)
Profit attributable to ordinary shareholders in
accordance with U.K. GAAP................... 208.8 383.1 258.0
U.S. GAAP adjustments
Depreciation..................................... 0.4 0.4 0.4
Goodwill and contingent consideration............ 4.3 1.2 0.3
Marketing and promotion costs.................... (3.2) 5.2 (8.3)
Relocation costs................................. (2.0) 2.0 --
Employee share incentives (i).................... 1.8 (5.1) 1.9
Pensions (ii).................................... (3.0) (14.2) 0.9
Derivative instruments and hedging activities.... (3.3) 4.0 --
Tax effect of U.S. GAAP adjustments.............. -- (3.9) 0.5
Taxes............................................ (2.8) 73.4 --
Transaction costs................................ 11.9 (11.9) --
------------ -------------- -------------
Profit attributable to ordinary shareholders in
accordance with U.S. GAAP before cumulative
effect of accounting policy change.......... 212.9 434.2 253.7
------------ -------------- -------------
Cumulative effect of U.S. GAAP accounting policy
change in respect derivative instruments
and hedging activities...................... -- (9.0) --
------------ -------------- -------------
Profit attributable to ordinary shareholders in
accordance with U.S. GAAP................... 212.9 425.2 253.7
------------ -------------- -------------
Earnings per share
Basic earnings per share in accordance with U.S.
GAAP (in cents)
before cumulative effect of accounting
policy change........................... 30.7 62.8 37.1
After cumulative effect of accounting
policy change........................... 30.7 61.5 37.1
Diluted earnings per share in accordance with
U.S. GAAP (in cents) before cumulative effect of accounting
policy change........................... 30.6 62.5 37.1
After cumulative effect of accounting
policy change........................... 30.6 61.2 37.1
------------ -------------- -------------
Weighted average number of shares used in basic
earnings per share calculation (millions)... 692.4 691.5 684.2
Weighted average number of shares used in
diluted earnings per share calculation
(millions).................................. 695.6 694.8 684.2
------------ -------------- -------------
83
Goodwill and other intangible assets -- adoption of SFAS No. 142
2002 2001 2000
U.S.$M U.S.$M U.S.$M
Reported profit attributable to ordinary
shareholders in accordance with U.S. GAAP... 212.9 425.2 253.7
Add back goodwill amortisation................... -- 2.9 2.0
----------- -------------- --------------
Adjusted profit attributable to ordinary
shareholders in accordance with U.S. GAAP... 212.9 428.1 255.7
=========== ============== ==============
Basic earnings per share in accordance with U.S.
GAAP (cents)
Reported basic earnings per share in accordance
with U.S. GAAP.............................. 30.7 61.5 37.1
Add back goodwill amortisation................... -- 0.4 0.3
----------- -------------- --------------
Adjusted basic earnings per share in accordance
with U.S. GAAP.............................. 30.7 61.9 37.4
=========== ============== ==============
Diluted earnings per share in accordance with
U.S. GAAP (cents)
Reported diluted earnings per share in
accordance with U.S. GAAP................... 30.6 61.2 37.1
Add back goodwill amortisation................... -- 0.4 0.3
----------- -------------- --------------
Adjusted diluted earnings per share in
accordance with U.S. GAAP................... 30.6 61.6 37.4
=========== ============== ==============
Adjustments to shareholders' funds:
2002 2001 2000
U.S.$M U.S.$M RESTATED U.S.$M RESTATED
(NOTE 1) (NOTE 1)
Shareholders' funds in accordance with U.K. GAAP. 2,813.8 2,629.4 2,355.5
U.S. GAAP adjustments............................
Treasury stock................................... (2.9) (3.3) --
Depreciation..................................... (10.9) (11.3) (11.7)
Goodwill and contingent consideration............ (51.7) (45.3) (46.5)
Marketing and promotion costs.................... (87.9) (84.7) (89.9)
Relocation costs................................. -- 2.0 --
Pensions (ii).................................... (15.3) (12.3) 1.9
Derivative instruments and hedging activities.... (11.6) (5.0) --
Tax effect of U.S. GAAP adjustments.............. -- -- 3.9
Taxes............................................ 70.6 73.4 --
Dividends........................................ 20.8 20.8 83.1
Transaction costs................................ -- (11.9) --
----------- -------------- --------------
Shareholders' funds in accordance with U.S. GAAP. 2,724.9 2,551.8 2,296.3
=========== ============== ==============
84
The following table reconciles shareholders' funds under U.S. GAAP
2002 2001 2000
U.S.$M U.S.$M U.S.$M
Shareholders' funds opening balance 2,551.8 2,296.3 2,006.8
Profit for the year under U.S. GAAP 212.9 434.2 253.7
Add back share options as taken through reserves (1.8) 5.1 (1.2)
Treasury stock -- (3.3) --
Foreign exchange reserve movement 44.6 (26.2) (5.5)
Dividend (83.2) (145.5) --
Investment by P&O -- -- 1.2
New shares issued 3.9 0.2 41.3
Implementation of FAS 133 -- (9.0) --
FAS 133 cash flow hedge (3.3) -- --
------- ------- -------
Shareholders' funds closing balance 2,724.9 2,551.8 2,296.3
======= ======= =======
(i) EMPLOYEE SHARE INCENTIVES
The profit and loss account charge/(credit) in respect of employee share
compensation schemes was $0.7m in 2002 and nil in each of the two years ended
December 31, 2001 under U.K. GAAP, and $(1.1)m (2001 $5.1m, 2000 $(1.9)m) under
U.S. GAAP.
P&O Princess Cruises has adopted the disclosures of SFAS No. 123 `Accounting for
Stock-Based Compensation', but continues to measure its share-based compensation
expense under U.S. GAAP in accordance with APB 25 and its related
interpretations. If P&O Princess Cruises had measured compensation costs for the
P&O Princess Cruises share options that were granted to its employees in 2002,
2001 and 2000 under the fair value based method prescribed by SFAS No. 123, the
net profit would have been the illustrative amounts shown below.
2002 2001 2000
U.S.$M U.S.$M RESTATED U.S.$M RESTATED
(NOTE 1) (NOTE 1)
Profit attributable to ordinary shareholders.....
As reported under U.S. GAAP...................... 212.9 425.2 253.7
Pro forma under U.S. GAAP........................ 208.5 421.6 250.2
The weighted average fair value of options granted to P&O Princess Cruises
employees in 2002 was $2.84. Equivalent fair values in 2001 and 2000 in respect
of options over P&O Princess Cruises ordinary shares were $3.78 and $1.91
respectively.
These pro forma amounts may not be representative of the effect on pro forma net
income in future years, since the estimated fair value of stock options is
amortised over the vesting period and additional options may be granted in
future years.
The fair value of grants during the year has been estimated using the
Black-Scholes option pricing model with the following weighted average
assumptions; expected dividend yields of 1.7% (2001 3.0%, 2000 2.5%); expected
volatility of 51.4% (2001 72.5%, 2000 42.0%); risk free interest rates of 3.75%
(2001 5.0%, 2000 5.8%) and expected option lives of up to six years.
85
(ii) PENSIONS
For the purposes of U.S. GAAP, the pension costs of The P&O Pension Scheme and
of its successor, The P&O Princess Cruises Pension Scheme have been restated in
the following tables in accordance with the requirements of SFAS No. 87. The
changes in projected benefit obligations, plan assets and details of the funded
status of the plan, under SFAS No. 87 and SFAS No. 132 are as follows:
2002 2001 2000
U.S.$M U.S.$M U.S.$M
Change in projected benefit obligation:
Benefit obligation at beginning of year.......... 58.7 50.9 49.0
Service cost..................................... 5.0 4.9 4.8
Interest cost 3.3 2.8 2.7
Exchange......................................... 7.6 (1.8) (3.7)
Actuarial loss................................... 5.5 1.9 (1.9)
------ ------ ------
Benefit obligation at end of year................ 80.1 58.7 50.9
====== ====== ======
2002 2001 2000
U.S.$M U.S.$M U.S.$M
Change in plan assets:
Fair value at beginning of year.................. 66.1 58.4 49.4
Actual return on plan assets..................... (1.7) 4.4 0.7
Group contribution............................... 3.0 4.4 11.0
Participant contributions........................ 1.0 1.1 1.0
Exchange......................................... 7.4 (2.2) (3.7)
------ ------ ------
Fair value of plan assets at end of year......... 75.8 66.1 58.4
====== ====== ======
2002 2001 2000
U.S.$M U.S.$M U.S.$M
Reconciliation of funded status:
Funded status of the plan........................ (4.3) 7.4 7.5
Unamortised transition asset..................... (0.1) (0.2) (0.3)
Unamortised actuarial net loss................... 14.4 2.5 1.8
------ ------ ------
Prepaid pension cost............................. 10.0 9.7 9.0
====== ====== ======
2002 2001 2000
U.S.$M U.S.$M U.S.$M
Components of net periodic benefit cost:
Service cost..................................... 6.0 4.9 4.8
Interest cost.................................... 3.3 2.8 2.7
Expected return on assets........................ (3.8) (3.4) (3.4)
Members' contribution............................ (1.0) (1.0) (0.9)
Net amortisations................................
Transition asset................................. (0.1) (0.1) (0.1)
Actuarial loss................................... 0.3 0.2 --
------ ------ ------
Net periodic benefit cost........................ 4.7 3.4 3.1
====== ====== ======
Assumed discount rates and rates of increase in remuneration used in calculating
the projected benefit obligations together with long-term rates of return on
plan assets vary according to the economic conditions of the United Kingdom, in
which the plan is
86
situated. The rates used for calculation of period end benefit obligations and
forecast benefit cost in the plan for SFAS No. 132 purposes were as follows:
2002 2001 2000
% % %
Discount rate.................................... 5.1 5.5 5.8
Long-term rate of increase in remuneration....... 4.0 4.0 4.0
Expected long-term return on assets.............. 5.1 5.5 6.8
P&O Princess Cruises has no material liabilities for post-retirement benefits
other than pensions.
(iii) DEFERRED TAXES
The following table sets out the significant components of P&O Princess Cruises'
deferred tax liability determined on a U.S. GAAP basis:
2002 2001 2000
U.S.$M RESTATED RESTATED
U.S.$M U.S.$M
Deferred tax liabilities:
Accelerated capital allowances on fixed assets 7.2 6.7 203.8
------- --------- ----------
Net deferred tax liability under U.S. GAAP 7.2 6.7 203.8
------- --------- ----------
Net deferred tax liability under U.K. GAAP 11.8 11.3 203.8
------- --------- ----------
CASH FLOW STATEMENTS
The cash flow statements have been prepared in conformity with U.K. Financial
Reporting Standard 1 (Revised) `Cash Flow Statements'. The principal differences
between these statements and cash flow statements presented in accordance with
SFAS No. 95 are as follows:
(a) Under U.K. GAAP, net cash flow from operating activities is determined
before considering cash flows from (a) returns on investments and
servicing of finance (b) taxes paid and (c) dividends received from
joint ventures. Under U.S. GAAP, net cash flow from operating
activities is determined after these items.
(b) Under U.K. GAAP, capital expenditure is classified separately while
under U.S. GAAP it is classified as an investing activity.
(c) Under U.K. GAAP, movements in bank overdrafts are classified as
movements in cash while under U.S. GAAP they are classified as a
financing activity.
(d) Under U.K. GAAP, equity dividends paid to shareholders are classified
separately while under U.S. GAAP they are classified as a financing
activity.
87
Set out below is a summary cash flow statement under U.S. GAAP:
2002 2001 2000
U.S.$M U.S.$M U.S.$M
Net cash inflow from operating activities 478.5 255.5 422.1
Net cash outflow from investing activities (1,153.4) (592.5) (795.5)
Net cash inflow from financing activities 728.1 204.0 564.8
Exchange translation effect on cash (11.5) 6.2 (7.4)
-------- ------ ------
Net increase/(decrease) in cash and cash 41.7 (126.8) 184.0
equivalents under U.S. GAAP
Cash and cash equivalents at beginning of year 120.4 247.2 63.2
-------- ------ ------
Cash and cash equivalents at end of year 162.1 120.4 247.2
======== ====== ======
NEW U.S. ACCOUNTING STANDARDS
In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No.
143 `Accounting for Asset retirement obligations'. SFAS No. 143 requires the
Group to record the fair value of asset retirement obligations associated with
the retirement of tangible long-lived assets and the associated retirement costs
in the period in which it is incurred, if a reasonable estimate of fair value
can be made. SFAS No. 143 will be adopted by the Group in the 2003 fiscal year.
The Group has not yet determined the impact of adopting SFAS No. 143.
In April 2002, the FASB issued SFAS No. 145 `Rescission of FASB Statements No.
4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections.'
SFAS No. 145 provides for the rescission of several previously-issued accounting
standards, new accounting guidance for the accounting for certain lease
modifications and various technical corrections that are not substantive in
nature to existing pronouncements. SFAS No. 145 will be adopted with effect from
January 1, 2003, except for the provisions relating to the amendment of SFAS No.
13, which was adopted for transactions occurring subsequent to May 15, 2002. The
impact of adopting SFAS No. 145 on the results of operations and financial
position of the Group remains to be evaluated.
In July 2002, the FASB issued SFAS No. 146 `Accounting for Costs Associated with
Exit or Disposal Activities.' SFAS No. 146 nullifies Emerging issues Task Force
No. 94-3 `Liability Recognition for Certain Employee Termination Benefits and
Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)'. SFAS No. 146 requires that a liability for a cost associated
with an exit or disposal activity should be recorded when it is incurred and
initial measurement be at fair value. The statement is effective for exit or
disposal activities that are initiated after December 31, 2002, although earlier
adoption is encouraged. The impact of adopting SFAS No. 146 on the results of
operations and financial position of the Group remains to be evaluated.
In November 2002, the Financial Accounting Standards Board issued Interpretation
No. 45, `Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others' (FIN45), which
addresses, among other things, the disclosure to be made by a guarantor in its
interim and annual financial statements about its obligations under guarantees.
The Interpretation also requires the recognition of a liability by a guarantor
at the inception of certain guarantees.
88
The Interpretation requires the guarantor to recognise a liability for the
non-contingent component of the guarantee, this is the obligation to stand ready
to perform in the event that specified triggering events or conditions occur.
The initial measurement of this liability is the fair value of the guarantee at
inception. The recognition of the liability is required even if it is not
probable that payments will be required under the guarantee or if the guarantee
was issued with a premium payment or as part of a transaction with multiple
elements.
As noted above the Company has adopted the disclosure requirements of the
Interpretation and will apply the recognition and measurement provisions for all
guarantees entered into or modified after December 31, 2002.
In December 2002, the FASB issued SFAS No. 148 `Accounting for Stock Based
Compensation - Transition and Disclosure - an amendment of FASB statement No.
123'. SFAS No. 148 permits two additional transition methods for entities that
adopt the fair value based method of accounting for stock-based employee
compensation. The Statement also requires new disclosures about the ramp-up
effect of stock-based employee compensation on reported results. The Statement
also requires that those effects be disclosed more prominently by specifying the
form, content and location of those disclosures. The transition guidance and
annual disclosure provisions of SFAS No. 148 are effective for fiscal years
ending after December 15, 2002, with earlier application permitted in certain
circumstances. The interim disclosure provisions are effective for financial
reports containing financial statements for interim periods beginning after
December 15, 2002. The Company has not decided yet if it will adopt the
transition provisions of SFAS No. 148.
In January 2003, the FASB issued FASB Interpretation No. 46, `Consolidation of
Variable Interest Entities' (FIN 46) which interprets Accounting Research
Bulletin (ARB) No. 51, Consolidated Financial Statements. FIN 46 clarifies the
application of ARB No. 51 with respect to the consolidation of certain entities
(variable interest entities - `VIE's") to which the usual condition for
consolidation described in ARB No. 51 does not apply because the controlling
financial interest in VIE's may be achieved through arrangements that do not
involve voting interests. In addition, FIN 46 requires the primary beneficiary
of VIE's and the holder of a significant variable interest in VIE's to disclose
certain information relating to their involvement with the VIE's. The provisions
of FIN 46 apply immediately to VIE's created after January 31, 2003, and to
VIE's in which an enterprise obtains an interest after that date. FIN 46 applies
in the first fiscal year beginning after June 15, 2003, to VIE's in which an
enterprise holds a variable interest that it acquired before February 1, 2003.
The Group is currently evaluating the impact the adoption of FIN 46 will have on
its financial statements.
29. POST BALANCE SHEET EVENT
On January 7, 2003, the P&O Princess Cruises board approved the proposed DLC
transaction with Carnival Corporation and agreed to recommend to the P&O
Princess Cruises shareholders that they vote in favour of the resolution to
implement the DLC structure. In the early morning of January 8, 2003, Carnival
and P&O Princess Cruises
89
signed the implementation agreement setting out the terms and conditions for the
implementation of the DLC structure. Completion of the DLC transaction is
conditional on certain events, including approval by the shareholders of both
P&O Princess Cruises and Carnival.
90
SHAREHOLDER INFORMATION
P&O PRINCESS CRUISES WEBSITE
In addition to the information set out below, the P&O Princess Cruises website
(www.poprincesscruises.com) contains a great deal of information about the
Company and the Group, including this annual report, the Form 20-F, other
financial information, the trading price of the shares and ADSs, copies of press
releases and links to the websites of the Group's brands. Shareholders may use
the website to obtain information from the Company in electronic form and may
obtain forms to initiate changes to their account.
Secretary and Registered Office
Simon Pearce
Company Secretary
P&O Princess Cruises plc
77 New Oxford Street
London WC1A 1PP
U.K.
Registered in England and Wales No. 4039524
Telephone: in the U.K. 020 7805 1200
outside the U.K. +44 20 7805 1200
Fax: in the U.K. 020 7805 1240/1241
outside the U.K. +44 20 7805 1240/1241
REGISTRARS
Shareholder records are maintained on the register by the P&O Princess Cruises
Registrar at Computershare Investor Services PLC. The Registrar should be
notified in writing of changes to name or address, loss of a share certificate
or dividend warrant or a change to or notification of a dividend mandate. All
such communications should be addressed to:
Computershare Investor Services PLC
P.O. Box 435
Owen House
8 Bankhead Crossway North
Edinburgh EH11 4BR
U.K.
Shareholder helpline: in the U.K. 0870 703 0055
outside the U.K. +44 870 703 0055
91
Shareholders with more than one account, arising from inconsistencies in name or
address details, may request the Registrar to amalgamate the holdings in order
to avoid the receipt of duplicate mailings.
FINANCIAL TIMES CITYLINE SERVICES
Shareholders in the U.K. may also obtain the latest P&O Princess Cruises share
price from the Financial Times Cityline Service by telephoning 0906 843 5544 or
0906 003 5544. Calls are charged at 60p per minute at all times.
U.K. TAX ON CAPITAL GAINS
The market quotations of P&O Princess Cruises plc ordinary shares and The
Peninsular and Oriental Steam Navigation Company deferred stock on October 23,
2000, the first day of dealing in P&O Princess Cruises shares following the
demerger, as calculated in accordance with section 272(3) of the Taxation of
Chargeable Gains Act 1992, were:
P&O Princess Cruises plc ordinary shares.............................. 291.75p
The Peninsular and Oriental Steam Navigation Company deferred stock... 241.25p
DIVIDEND REINVESTMENT PLAN
P&O Princess Cruises operates a dividend reinvestment plan (DRIP) under which
shareholders can mandate to reinvest their cash dividends in P&O Princess
Cruises shares. Any new shareholder who would like to receive details of the
DRIP should contact the Registrar (see above) or download the relevant form from
www.poprincesscruises.com.
SHARE DEALING SERVICE
Computershare Investor Services PLC provides a low-cost telephone dealing
service which offers shareholders in the U.K. holding certificated shares a
cost-effective means of purchasing or selling shares in P&O Princess Cruises
plc. Shareholders outside the U.K. may be permitted to use the service subject
to Computershare Investor Services PLC being satisfied it may provide services
in accordance with local laws and regulations. A commission of 1% is charged,
subject to a minimum commission of (pound)15. The terms and conditions of the
service are available on request from Computershare Investor Services PLC, who
may be contacted on 0870 703 0084.
SHAREHOLDER ANALYSIS
Holdings of ordinary shares at December 31, 2002:
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SHAREHOLDERS SHARES
HOLDINGS NUMBER % NUMBER (000S) %
1 - 500 47,094 64.1 8,897 1.3
501 - 1,000 13,445 18.3 9,733 1.4
1,001 - 5,000 10,982 15.0 20,898 3.0
5,001 - 50,000 1,320 1.8 17,985 2.6
50,001 - 100,000 166 0.2 12,094 1.7
100,001 - 500,000 258 0.3 61,070 8.8
500,001 - 1,000,000 64 0.1 46,800 6.8
above 1,000,000 119 0.2 515,995 74.4
------ ----- ------- ------
Total 73,448 100.0 693,472 100.0
====== ===== ======= =====
PAYMENT OF DIVIDENDS TO MANDATED ACCOUNTS
Shareholders may give instruction for the payment of dividends to be made direct
into a bank or building society through the Bankers Automated Clearing System
(BACS). Dividend Mandate Forms for this service are available from the Registrar
or can be downloaded from www.poprincesscruises.com. The associated tax voucher
showing the tax credit attributable to the dividend payment is normally sent
direct to the shareholder at the address shown on the register. If you wish the
tax voucher to be sent to another address, please inform the Registrar.
UNITED STATES OF AMERICA
P&O Princess Cruises plc American Depositary Shares ("ADS") are quoted on the
New York Stock Exchange. One ADS represents four ordinary shares. The ticker
symbol is `POC'. JPMorgan Chase Bank is Depositary for the ADS and may be
contacted at:
JPMorgan Chase Bank
ADR Service Centre
PO Box 4301
02940-3013
USA
Telephone: in the U.S. (toll-free) 1 800 428 4237
outside the U.S. +1 781 575 4328
Information about the ADS may also be obtained from: www.adr.com.
In accordance with U.S. legislation, the Company is filing a Form 20-F with the
Securities and Exchange Commission ("SEC") in Washington DC, and a copy of this
Report is being filed as an exhibit to a Form 6-K filed with the SEC. This
filing is available for public inspection.
GLOBAL INVEST DIRECT
Global Invest Direct ("GID") is a program established by JPMorgan Chase Bank for
existing holders of ADSs and those persons making a purchase for the first time.
GID
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provides a convenient and economical way for investors to increase their ADS
investment in the Company.
Further information about GID may be obtained from JPMorgan Chase Bank by
ringing 1 800 428 4237 (8.30am - 6pm Eastern Standard Time, Monday to Friday).
94
ANNEX D
CARNIVAL PLC REMUNERATION REPORT
SET FORTH BELOW IS THE REMUNERATION REPORT FOR CARNIVAL PLC (THEN CALLED P&O
PRINCESS CRUISES PLC) SET OUT IN CARNIVAL PLC'S 2002 ANNUAL REPORT AND ACCOUNTS.
REFERENCES TO "WE," "US," "OUR" OR "THE COMPANY" ARE TO CARNIVAL PLC.
REMUNERATION REPORT
CONSIDERATION OF MATTERS RELATING TO DIRECTORS' REMUNERATION
The remuneration policy of the Company is set by the board. The remuneration
committee makes recommendations to the board, within agreed terms of reference,
on the Company's framework of executive remuneration and its cost. The members
of the remuneration committee, all of whom are independent non-executive
directors, are set under the heading "Details of Directors' Remuneration." The
committee is also responsible for the implementation of remuneration policy and
determining on behalf of the board specific remuneration packages for each of
the executive directors. To assist in reaching its decisions, the committee has
access to survey information and independent advice where it considers it
appropriate. The remuneration policy was established at the time of the demerger
with advice from independent remuneration consultants. As the policy and its
implementation have not subsequently been changed significantly, the committee
has not needed to take specific advice from external consultants during the
year. The committee consults with the Chairman or Chief Executive Officer as
appropriate with regard to its proposals relating to the remuneration of the
executive directors. In framing the policy, the board has regard to the views of
shareholders and seeks to ensure that contact with shareholders is maintained on
remuneration as with other matters.
The board has considered the principles and provisions of the Combined Code and
this report explains how the Company has applied the principles in the code
which relate to directors' remuneration.
POLICY ON DIRECTORS' REMUNERATION
The Company's policy with respect to directors' remuneration is to maintain a
remuneration structure capable of attracting, motivating and retaining
high-quality individuals within a cost-effective framework. It seeks to reward
executive directors and senior employees within the Group competitively, taking
into account the Company's performance, the markets in which the Group operates,
and pay and conditions elsewhere in the Group.
In constructing the remuneration packages, the emphasis is on linking reward to
both short-term and long-term performance objectives and accordingly, as
explained in more detail below, for each of the executive directors a
significant proportion of the
95
remuneration package is performance related. The packages include participation
in the company's long-term incentive plans, which comprise a deferred bonus and
co-investment matching plan and an executive share option plan. The plans are
designed to align the interests of participants with those of shareholders. The
remuneration committee seeks to ensure that the operation of the plans in
practice is consistent with their overall objectives, recommending changes to
achieve this if necessary. During the year, on the recommendation of the
committee, changes were made to the rules of the deferred bonus and
co-investment matching plan and discretion was exercised in respect of the
executive share option plan so that the effect on the plans of the proposed dual
listed company transaction with Carnival is substantially the same as would have
been the case had Carnival's previously-announced share-exchange offer
proceeded.
The main components of remuneration for executive directors and, where relevant,
the performance criteria on which they are based, are set out below. In agreeing
the level of base salaries and the annual performance bonus, the committee takes
into consideration the total remuneration available to executives and has the
discretion to vary individual elements of the remuneration package.
BASE SALARY
Base salaries are set at levels competitive with pay for directors and
executives based in similar locations and holding equivalent positions in
comparable companies.
BENEFITS IN KIND
These principally comprise car benefits, life assurance and membership of the
Group's healthcare insurance schemes. The level of benefits provided to
executive directors is consistent with that provided by other major companies.
These benefits do not form part of pensionable earnings.
ANNUAL BONUS
The annual bonus earned in any year is dependent on the extent to which
performance targets are achieved. Targets for directors, which are common to
each director and approved by the remuneration committee, are based on the
Group's earnings per share, as the committee is of the view that this is the
most appropriate measure of the performance of the executive directors The
targets, which are set at the beginning of the relevant year based on group
budgets, are designed to take account of the anticipated trading environment.
For example, in 2002, the targets took account of the difficult trading
conditions faced by the Group in the aftermath of the terrorist incidents on
September 11, 2001. The maximum annual bonus that can be earned by directors is
75% of base salary (100% in the case of the Chief Executive Officer). Subject to
the discretion of the remuneration committee, half of the bonus is paid in cash
with the balance awarded in shares as a share award for the purpose of the
deferred bonus and co-investment matching plan, as described below.
96
LONG-TERM INCENTIVE PLANS
DEFERRED BONUS AND CO-INVESTMENT MATCHING PLAN
The deferred bonus and co-investment matching plan provides participants with
the opportunity to receive matching awards of shares depending upon the
performance of the Company over a specified retention period.
Share awards granted to participants are automatically invested in the plan and,
in addition, participants may choose to invest all or part of their post-tax
cash bonus, or funds from their own resources, into the plan (invested shares)
subject to an overall limit on the amount invested in the plan in any one year
of 75% of base salary (100% in the case of the Chief Executive Officer). An
award of shares equivalent to the total of a participant's share award and gross
value of invested shares is granted to a participant (a matching award).
The extent to which a new matching award may be exercised is based on the growth
in earnings per share of the Company over the three-year retention period as
disclosed in the audited financial statements. If the Company achieves earnings
per share growth of 15% over this period, participants will be entitled to
exercise 25% of their matching award. If earnings per share growth is 50%, the
entire matching award may be exercised. For growth between 15% and 50%, the
extent to which a matching award may be exercised is determined on a
straight-line basis between these points. Generally, the matching award may only
be exercised if the share award and invested shares are retained throughout the
retention period. The remuneration committee, which regularly reviews these
performance thresholds, believes that they provide appropriately stretching
targets taking account of the Company, its competitors and the nature of the
industry in which it operates.
In framing the deferred bonus and co-investment matching plan when it was
launched in 2000, the board sought to encourage participants to commit their own
resources to the plan, believing this to be an important aspect of aligning
participant's interests with those of shareholders. In addition, the plan was
designed to be competitive in all territories in which participants are based,
including the United States. For these reasons, the plan was based on a two-year
retention period. However, in June 2002, on the recommendation of the
remuneration committee the board agreed that all future share and matching
awards would have retention periods of three years, consistent with the
recommendations of Schedule A to the Combined Code. In addition, the retention
period of existing share and matching awards held by executive directors was
extended to three years. The remuneration committee did not consider it
appropriate to adjust the performance targets for existing matching awards
following extension of the retention periods. Consequently, the thresholds at
which participants will be able to exercise between 25% and 100% of existing
matching awards remain the achievement by the Company of earnings per share
growth of between 10% and 40% respectively over the relevant performance period.
However, if the proposed DLC transaction with Carnival Corporation is completed,
all share awards will vest and be released and all matching awards granted prior
to 2003 and outstanding at completion will be immediately exercisable in full.
In reaching its
97
decision to allow the exercise in full of all matching awards on completion of
the proposed DLC transaction with Carnival Corporation, the remuneration
committee has taken account of the Company's relative total shareholder return
performance as shown below.
EXECUTIVE SHARE OPTION PLAN
Options at market value at the date of grant are granted to eligible employees
based on guidelines approved by the remuneration committee. These guidelines
govern the total number of options which may be granted and the frequency of
awards and ensure that the progression to maximum awards is within individual
and overall limits authorised by shareholders, so phasing grants of options to
executives over a number of years.
Options granted to directors may not be exercised unless the growth in the
Company's earnings per share over a period of at least three years from grant,
as disclosed in the audited financial statements, exceeds the growth in an
appropriate recognised index of retail prices by an average of at least 3% per
annum. The remuneration committee, which regularly reviews performance criteria,
believes targets based on earnings per share growth to be the most suitable in
assessing performance of the executive directors and considers this target to be
appropriate in the context of the aims of the board's remuneration policy.
Options granted to other executives are not subject to any performance
condition. If the proposed DLC transaction with Carnival Corporation is
completed, all share options outstanding at completion will vest and any
performance conditions will cease to apply.
To ensure appropriate phasing of grants of share options, the value of shares
under option granted to directors and certain other senior executives in any
year is normally limited to 150% of base salary. Lower limits apply to other
executives. The remuneration committee reserves the right to vary these limits
if it determines that exceptional circumstances exist. The Company has the
facility to require option holders to assume any liability to employers'
national insurance contributions arising on the exercise of Inland
Revenue-unapproved options, and may grant additional options in recognition of
the liability being assumed.
RETIREMENT BENEFITS
The Group operates various retirement benefit schemes for its executives in
which the executive directors also participate. Further details of these are set
out below. Retirement benefits are based solely on base salary; no other
emoluments are pensionable.
NON-EXECUTIVE DIRECTORS
The remuneration of the non-executive directors is determined by the board
within the limits set out in the articles of association of the Company.
Non-executive directors receive a basic fee and additional fees if they serve as
deputy chairman of the board or as chairman of any board committees.
Non-executive directors are not eligible to participate in the Group's long-term
incentive or pension plans.
98
SERVICE CONTRACTS
It is the policy of the company that service contracts with executive directors
should not be of more than 12 months' duration.
Lord Sterling, who has a service contract with the Company which came into
effect on October 23, 2000 and which is terminable by the Company on 12 months'
notice, was due to retire from the Board on October 23, 2002 but agreed to
continue his service until the Company concluded its proposed transactions with
either Carnival Corporation or Royal Caribbean Cruises Ltd. He will therefore
retire from the board, and, due notice having been given, his service contract
will expire, on completion of the proposed DLC transaction with Carnival
Corporation. Peter Ratcliffe and Nick Luff each have service contracts with the
Company which came into effect on October 23, 2000 and which may be terminated
by the Company on 12 months' notice. In the case of early termination of their
contracts by the Company without cause, these contracts provide for payments in
lieu of notice equivalent to 12 months' base salary, benefits and a bonus
equivalent to that paid in respect of the year preceding the year in which
employment terminates. If the proposed DLC transaction with Carnival Corporation
is completed, Nick Luff's service contract will be terminated by the Company on
this basis with a payment in lieu of notice of (pound)583,250 ($877,200).
Non-executive directors do not have service contracts, but instead have a letter
or agreement setting out the terms and conditions of their appointment. Each of
the non-executive directors has been appointed for an initial term of five
years, although the appointment may be terminated by either the director or the
Company giving 12 months' notice. In addition, the appointments are subject to
the provisions of the articles of association of the Company. In the case of Sir
John Parker, Baroness Hogg and Peter Foy, these agreements and their initial
term came into effect on September 18, 2000. Horst Rahe's appointment and
initial term came into effect on May 16, 2001. On September 26, 2002, Sir John
Parker was appointed as deputy chairman of the board, an appointment that will
terminate automatically, without any notice having to be given, if the proposed
DLC transaction with Carnival Corporation is completed. If the proposed DLC
transaction with Carnival Corporation is completed, the appointments of Peter
Foy and Horst Rahe as non-executive directors will be terminated by the Company
with payments of (pound)32,500 ($48,900) and (pound)25,000 ($ 37,600)
respectively.
[GRAPHIC OMITTED --
LINE CHART]
Cumulative total shareholder return
2000 2001 2002
---- ---- ----
Indexed (October 23, 2000 = 100)
P&O Princess 87 142 158
FTSE All--Share index 100 83 63
TOTAL SHAREHOLDER RETURN
The Company commenced to trade on October 23, 2000 following its demerger from
The Peninsular and Oriental Steam Navigation Company. The chart shows the
cumulative total shareholder return of the company since that date. For
comparison, the chart also
99
shows the total shareholder return of the FTSE All-Share index which provides a
broad representation of the company's peer group in terms of its size and stage
of development.
DETAILS OF DIRECTORS' REMUNERATION
The auditors are required to report on the information contained on pages 37 to
40 of the Remuneration report [contained in our 2002 Annual Report and
Accounts.]
FEES, SALARIES AND BONUSES
The remuneration of the directors, excluding pension benefits, for 2002 is set
out in the following table. As part of their annual bonus for the year, the
Chairman and the other executive directors will receive a share award which will
comprise shares to the value of the amount shown in the table. In accordance
with the terms of the deferred bonus and co-investment matching plan, the share
awards will be subject to a three-year retention period and will be eligible for
a corresponding matching award.
2002 2001
CASH SHARE
FEES U.S. SALARIES BONUS AWARD U.S. BENEFITS TOTAL TOTAL U.S.
$000 $000 U.S. $000 $000 U.S. $000 U.S. $000 $000
Lord Sterling -- 497 186 186 11 880 619
Peter Ratcliffe -- 800 400 400 48 1,648 1,140
Nick Luff -- 406 152 152 26 736 526
Baroness Hogg 49 -- -- -- -- 49 47
Sir John Parker 78 -- -- -- -- 78 36
Peter Foy 156 -- -- -- -- 156 80
Horst Rahe 38 -- -- -- -- 38 23
----------------------------------------------------------------------------------------------------------------
321 1,703 738 738 85 3,585 2,471
----------------------------------------------------------------------------------------------------------------
The base salaries of Lord Sterling, Peter Ratcliffe and Nick Luff during 2002
were (pound)330,450, $800,000 and (pound)270,000 respectively. With effect from
January 1, 2003, Peter Ratcliffe's salary was increased to $832,000 and Nick
Luff's salary was increased to (pound)295,000. Non-executive directors receive a
basic fee of (pound)25,000 and an additional fee of (pound)7,500 per annum if
they serve as chairman of any board committees. Until September 26, 2002, Peter
Foy received fees at a total annual rate of (pound)130,000, representing fees
payable as a non-executive director and as deputy chairman. Following his
decision to step down from the position of deputy chairman on that date, the fee
payable to him was reduced accordingly and Sir John Parker, who took up the
appointment, received fees at the rate of (pound)105,000 per annum in addition
to fees payable as a non-executive director. With the exception of amounts paid
to Peter Ratcliffe, the remuneration of directors was in sterling and has been
converted into U.S. dollars at the average rate for the year of $1.504:(pound)1.
The Company retains a serviced apartment in London at an annual rent of
(pound)120,800 ($181,700). This is available for the use of
100
executives, including Peter Ratcliffe, for accommodation whilst visiting London
on the Company's business.
PENSIONS
The Chairman and the non-executive directors do not receive any pension benefits
from the Company.
Peter Ratcliffe and Nick Luff are each members of the P&O Princess Cruises
Pension Scheme (the "U.K. Scheme"), a U.K. resident defined-benefit scheme
approved by the Inland Revenue. Peter Ratcliffe accrues pension rights under the
U.K. scheme at a rate of up to 1/45th of final salary for each year of service.
For this purpose, final salary is defined as the basic salary received in the
final 12 months of service. Normal retirement age is 60.
The benefits payable to Nick Luff from the U.K. Scheme are restricted by Inland
Revenue limits, including the earnings cap. He accrues pension rights at the
rate of 1/82nd of the earnings cap (currently (pound)97,200 ($146,200)) for each
year of service. The Company also operates a funded unapproved retirement
benefit scheme ("FURBS") for Nick Luff. This operates on a defined contribution
basis and the total amount payable by the Company during the year was
(pound)58,800 ($88,400).
Peter Ratcliffe is also a member of the Princess Cruises Supplemental Executive
Retirement Plan in the U.S. (the "Supplemental Plan"). This plan provides
benefits to supplement those received from other plans, including the U.K.
Scheme. The overall effect is to provide, on retirement, a pension of 65% of
final salary, subject to having completed 15 years' service. For this purpose,
final salary is the average basic salary for the five years immediately
preceding retirement. Normal retirement age is 60 and the pension is payable in
full to Mr. Ratcliffe or, on his death, to his widow. Benefits from the U.K.
Scheme can exceed those resulting from the Supplemental Plan, in which case no
further amounts would be received from the Supplemental Plan. In addition, Peter
Ratcliffe is also a member of the Princess Cruises Retirement Savings Plan in
the U.S. This is a defined-contribution 401(k) plan and the contribution payable
by the Company in respect of the year was $11,000.
Details of the retirement benefits of directors arising from their participation
in defined-benefit pension arrangements are set out below:
101
Transfer value of
increase in accrued
benefits
Increase in Increase in net of inflation
Accrued benefit at accrued benefits accrued benefits and its director's Transfer
value Transfer value at net of director's
DEC. 31,
CONTRIB- 2002
DEC. 31, INCLUDING EXCLUDING UTIONS AT CONTRIB-
2002 INFLATION INFLATION JAN. 1, 2002 UTIONS
U.S. $000 U.S. $000 U.S. $000 U.S. $000 U.S. $000 U.S. $000 U.S. $000
-----------------------------------------------------------------------------------------------------------
Peter Ratcliffe 492 18 10 123 6,571 6,237 (334)
Nick Luff 51 3 2 1 290 237 (60)
The accrued benefit is that pension which would be paid annually on retirement
at 60, the normal retirement age under the pension scheme in the U.K., based on
service to December 31, 2002.
EARLY RETIREMENT
In the event of compulsory early retirement, or voluntary early retirement after
the age of 55, Peter Ratcliffe would receive a minimum pension of two thirds of
final salary. In the event of voluntary retirement before the age of 55, the
minimum pension is reduced pro rata for actual service compared with potential
service to age 60. In the event of voluntary retirement after the age of 50,
Nick Luff would receive a pension determined according to actual pensionable
service, reduced to take account of payment prior to normal retirement age. In
the event of compulsory early retirement after the age of 53, no such reduction
would be made. If compulsory early retirement were to take place between the
ages of 50 and 53, the pension would be reduced to take account of payment prior
to the age of 53.
Peter Ratcliffe's service in the Supplemental Plan commenced on September 1,
1986. As his service exceeds 15 years, the maximum pension would be payable on
retirement. However, there is an actuarial reduction if a pension is drawn under
the age of 55 following voluntary early retirement.
DEATH-IN-SERVICE BENEFITS
The U.K. Scheme provides death-in-service benefits to Peter Ratcliffe and Nick
Luff. In the event of death before retirement, a lump sum is payable (of four
times basic salary or pensionable earnings, whichever is the higher, or, if
applicable, four times the earnings cap at the date of death) together with a
refund of the member's contributions. In addition, a spouse's or dependant's
pension is payable, equivalent to 66% of the pension (prior to commutation) that
would have been payable to the member had he continued in service until normal
retirement date. Children's pensions of 25% of the spouse's pension may also be
payable. As the death-in-service benefits provided by the U.K. Scheme to Nick
Luff are restricted by Inland Revenue limits, and as Lord Sterling is not a
member of the U.K. Scheme, additional life assurance cover is purchased on their
behalf. The relevant premiums are included within the table on page 37 [of our
2002 Annual Report and Accounts] as a benefit-in-kind.
The U.K. Scheme also provides pensions in the event of the total incapacity or
ill-health of a member.
102
PENSION INCREASES IN RETIREMENT
Pensions in payment arising from the U.K. Scheme are increased each year in line
with the Retail Price Index, up to a maximum of 5%. Pensions in payment from the
Supplemental Plan are not increased after retirement.
DIRECTORS' INTEREST IN SHARES
Lord Sterling
P&O P&O LTIP MATCHING
ORDINARY LTIP AWARDS AWARDS
SHARES OPTIONS SHARE AWARDS SHARE OPTIONS TOTAL
----------------------------------------------------------------------------------------------------------------
At Jan 1, 2002.......... 1,021,019 192,216 157,667 7,549 165,703 367,184 1,911,968
Dividend adjustment..... -- 4,509 2,283 377 -- -- 7,169
Grant................... -- -- -- 11,497 60,782 -- 72,279
Lapse................... -- -- -- -- (75,633) -- (75,633)
Exercise
- Mar 4, 2002...... 47,465 -- (79,269) -- -- -- (31,804)
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At Dec 31, 2002......... 1,068,484 196,725 80,681 19,423 150,852 367,814 1,883,979
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Peter Ratcliffe
P&O P&O LTIP MATCHING
ORDINARY LTIP AWARDS AWARDS
SHARES OPTIONS SHARE AWARDS SHARE OPTIONS TOTAL
----------------------------------------------------------------------------------------------------------------
At Jan 1, 2002.......... 2,500 210,916 171,384 59,604 221,594 282,700 948,728
Dividend adjustment..... -- 4,030 2,482 1,860 -- -- 8,372
Grant................... -- -- -- 26,165 112,069 207,500 345,734
Lapse................... -- -- -- -- (82,211) -- (82,211)
Exercise
- Mar 4, 2002...... 42,592 -- (86,165) -- -- -- (43,213)
- Nov 21, 2002..... 107,476 (214,976) -- -- -- -- (107,500)
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At Dec 31, 2002......... 152,928 -- 87,701 87,629 251,452 490,200 1,069,910
----------------------------------------------------------------------------------------------------------------
Nick Luff
P&O P&O LTIP MATCHING
ORDINARY LTIP AWARDS AWARDS
SHARES OPTIONS SHARE AWARDS SHARE OPTIONS TOTAL
----------------------------------------------------------------------------------------------------------------
At Jan 1, 2002.......... 31,451 -- 73,486 24,157 128,925 219,491 477,510
Dividend adjustment..... -- -- 1,064 730 -- -- 1,794
Purchases............... 2,000 -- -- -- -- -- 2,000
Grant................... -- -- -- 9,394 45,599 112,586 171,579
Lapse................... -- -- -- -- (35,251) -- (35,251)
Exercise
- Mar 4, 2002...... 22,123 -- (36,946) -- -- -- (14,823)
----------------------------------------------------------------------------------------------------------------
At Dec 31, 2002......... 55,574 -- 37,604 34,281 143,273 332,077 602,809
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Non-executive directors
AT JAN 1, 2002 AND DEC 31, 2002 ORDINARY SHARES
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Baroness Hogg 6,240
Sir John Parker 10,000
Peter Foy 16,450
Horst Rahe 11,366,415
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103
On March 4, 2002, Lord Sterling, Peter Ratcliffe and Nick Luff acquired 79,269
shares, 86,165 shares and 36,946 shares respectively through the exercise of
2001 LTIP Awards. A nominal consideration of (pound)1 per award was payable to
exercise each award and the value of the shares on exercise was (pound)4.115 per
share. The value of the awards on exercise was therefore (pound)326,191
($490,591), (pound)354,568 ($533,270) and (pound)152,032 ($228,656)
respectively. The exercise of the awards gave rise to an income tax charge which
was financed by the sale, on the same date, of 31,804 shares, 43,213 shares and
14,823 shares by Lord Sterling, Peter Ratcliffe and Nick Luff respectively at a
price of (pound)4.115 pence per share. On March 4, 2002 Nick Luff purchased
2,000 shares at a price of (pound)4.10 per share.
On November 21, 2002, Peter Ratcliffe acquired 214,976 shares through the
exercise of a P&O LTIP Option. A nominal consideration of (pound)1 was payable
to exercise the option and the value of the shares on exercise was (pound)4.905
per share. The value of the option on exercise was therefore (pound)1,054,456
($1,585,902). The exercise of the option gave rise to an income tax charge which
was financed by the sale, on the same date, of 107,500 shares at a price of
(pound)4.905 per share.
On December 18, 2002, Deutsche Seereederei GmbH (`DS'), a company wholly-owned
by Horst Rahe and his family, entered into a share sale agreement (the
"Agreement") with Commerzbank AG ("Commerzbank") for German tax-planning
purposes. The Agreement is in respect of the 11,366,415 ordinary shares of P&O
Princess owned by DS (the "Shares") which comprise Mr Rahe's interest in the
ordinary shares of P&O Princess. It will result in DS disposing of its interest
in the Shares on June 23, 2003, or earlier if it so elects, but until then,
through DS, Mr Rahe retains full economic interest in the Shares.
Under the Agreement, on December 18, 2002, DS transferred the Shares to
Commerzbank for (pound)50,580,547 ($76,073,143) ((pound)4.45 per share). At the
same time, DS entered into a total return swap agreement with Commerzbank under
which the Shares will be valued on June 23, 2003 or earlier, if DS so elects
(the "Valuation Date"). To the extent that the valuation of the Shares on the
Valuation Date (the "Final Price") exceeds (pound)4.478 per share (the "Initial
Price"), Commerzbank will pay the difference to DS. Conversely, if the Final
Price is less than the Initial Price, DS will pay the difference to Commerzbank.
Any dividends receivable in respect of the Shares prior to the Valuation Date
will be for the benefit of DS.
The ordinary shares above include 33,888 shares, 42,952 shares and 45,274
shares, in the case of Lord Sterling, Peter Ratcilffe and Nicholas Luff
respectively, that have been designated as "Invested Shares" for the purpose of
the deferred bonus and co-investment matching plan. As described below, matching
awards have been granted to each individual in respect of the ordinary shares
they have designated as Invested Shares.
104
P&O LTIP OPTIONS
P&O LTIP Options are options over ordinary shares granted on October 24, 2000 to
directors who, through arrangements put in place for the purposes of the
demerger from P&O, exchanged fully-vested awards previously granted under P&O
incentive schemes for such options. The options are exercisable on payment of
(pound)1 and will lapse on March 27, 2005. The market value of the shares at the
date of grant was (pound)2.92 per share. The number of shares to which P&O LTIP
Options relate increased during the year due to shares allocated or purchased by
the Trustee in lieu of dividends foregone.
P&O LTIP AWARDS
P&O LTIP Awards comprise two awards of ordinary shares granted on October 24,
2000 to directors who, through arrangements put in place for the purposes of the
demerger from P&O, exchanged awards granted under P&O incentive schemes for
which the retention period had not been completed for such awards. One half of
the shares comprising an individual's P&O LTIP Award represented a 2001 LTIP
Award and the other half represented a 2002 LTIP Award. The market value of the
shares at the date of grant was (pound)2.92 per share. Each of Lord Sterling,
Peter Ratcliffe and Nick Luff exercised their 2001 LTIP Awards on March 4, 2002.
The 2002 LTIP Awards are exercisable no earlier than the date on which the
Company announces its results for the year ended December 31, 2003, the
retention period having been extended during the year in line with the board's
decision to extend to three years the retention period of awards granted to
directors under the deferred bonus and co-investment matching plan. However, if
and when the proposed DLC transaction with Carnival Corporation is completed,
the 2002 LTIP Awards will vest and become exercisable. Each award lapses three
months after it becomes exercisable. The number of shares to which P&O LTIP
Awards relate increased during the year due to shares allocated by the Trustee
in lieu of dividends foregone. The P&O LTIP Awards are eligible for matching
awards in accordance with the rules of the deferred bonus and co-investment
matching plan.
SHARE AWARDS
Share Awards comprise awards of ordinary shares under the terms of the deferred
bonus and co-investment matching plan. Lord Sterling, Peter Ratcliffe and Nick
Luff were granted awards on March 4, 2002 in respect of their 2001 annual bonus,
the value of which was disclosed in the 2001 Annual Report. The market value of
the shares comprising these awards on the day of grant was (pound)4.0775 per
share. The number of shares to which Share Awards relate increased during the
year due to shares allocated by the Trustee in lieu of dividends foregone. Share
Awards are eligible for Matching Awards in accordance with the rules of the
deferred bonus and co-investment matching plan.
105
Share Awards are subject to a retention period of three years from grant. None
of the awards shown above is currently vested but, if and when the proposed DLC
transaction with Carnival Corporation is completed, the Share Awards will vest
and be released.
MATCHING AWARDS
Matching Awards are granted in respect of P&O LTIP Awards, Share Awards and
Invested Shares. Under the terms of the deferred bonus and co-investment
matching plan, the actual number of shares each director would normally receive
from the exercise of Matching Awards will depend on the extent to which the
relevant performance conditions have been satisfied at the relevant time.
However, if and when the proposed DLC transaction with Carnival Corporation is
completed, the Matching Awards will be released to participants in full.
Matching Awards granted in respect of 2001 LTIP Awards lapsed as the relevant
performance criteria had not been achieved at the time the 2001 LTIP Awards were
exercised on March 4, 2002.
SHARE OPTIONS
Further details of the share options granted to directors under the P&O Princess
Cruises Executive Share Option Plan are set out below.
EXERCISABLE
----------------------------
GRANTED EXERCISE
JAN 1, 2002 MAR 3, 2002 DEC 31, 2002 PRICE FROM TO
-----------------------------------------------------------------------------------------------------------
Lord Sterling * 12,660 -- 12,660 Oct 23, 2000 Apr 14, 2004
* 162,758 -- 162,758 292p Oct 23, 2000 Dec 22, 2004
96,198 -- 96,198 292p Oct 23, 2003 Oct 23, 2010
98,198 -- 96,198 $4.24 Oct 23, 2003 Oct 23, 2010
-----------------------------------------------------------------------------------------------------------
Total 367,814 -- 367,814
-----------------------------------------------------------------------------------------------------------
Peter Ratcliffe 282,700 -- 282,700 $4.24 Oct 23, 2003 Oct 23, 2010
-- 207,500 207,500 $5.78 Mar 3, 2005 Mar 3, 2012
-----------------------------------------------------------------------------------------------------------
Total 282,700 207,500 490,200
-----------------------------------------------------------------------------------------------------------
Nick Luff * 37,144 -- 37,144 292p Oct 23, 2000 Dec 22, 2004
* 26,413 -- 26,413 292p Oct 23, 2000 Oct 24, 2006
77,967 -- 77,967 292p Oct 23, 2003 Oct 23, 2010
77,967 -- 77,967 $4.24 Oct 23, 2003 Oct 23, 2010
-- 56,293 56,293 407.75p March 3, 2005 Mar 3, 2012
-- 56,293 56,293 $5.78 March 3, 2005 Mar 3, 2012
-----------------------------------------------------------------------------------------------------------
Total 219,491 112,586 332,077
-----------------------------------------------------------------------------------------------------------
106
Options marked (*) are replacement options, granted by the Company in accordance
with its obligations under the agreements which governed the demerger of the
company from P&O in October 2000. Replacement options were granted to replace
options over P&O deferred stock held by participants in P&O stock option schemes
prior to the demerger which were exercised or released as part of the demerger
arrangements. The number of shares over which replacement options were granted
was determined by a formula which took into account the exercise price of the
original option. The period in which a replacement option is exercisable is
identical to that of the option it replaced. The exercise of replacement options
is not subject to performance conditions.
The other options shown above were granted as part of general grants of options
to a large number of executives. The exercise of such options by directors is
conditional upon the growth in the Company's earnings per share over a period of
at least three years from grant exceeding the growth in an appropriate
recognised index of retail prices by at least 3% per annum.
If and when the proposed DLC transaction with Carnival Corporation is completed,
all the above options will vest and become exercisable and any performance
conditions will cease to apply.
EMPLOYEE BENEFIT TRUST
As potential beneficiaries of the P&O Princess Cruises Employee Benefit Trust,
Lord Sterling, Peter Ratcliffe and Nick Luff are deemed to be interested in
ordinary shares of the Company held by the Trust. At December 31, 2002, the
Trust held 1,540,483 ordinary shares.
VALUE OF SHARES
The value of the Company's ordinary shares on December 31, 2001 was 400 pence
and on December 31, 2002 was 431 pence. The highest price reached by the shares
during the year was 520.5 pence on November 5, 2002 and the lowest was 350 pence
on July 24, 2002.
OTHER INTERESTS IN SHARES
Nick Luff also holds one (pound)1 non-voting subscriber share. In addition,
49,998 preference shares of (pound)1 each were allotted (but not issued) to him
on September 22, 2000. These shares were allotted in connection with the
formation of the Company in preparation for the demerger.