This confidence has motivated us to move ahead with plans for the next generation of ships code- named Project Eagle. Project Eagle will be a 130,000-ton ship carrying over 3,100 passengers with an unheard of combination of spaciousness, luxury and amenities. As we said at the time, it's not about size, it's about options. We have contracted for the first of these vessels with Kvaerner Masa-Yards of Finland, with an option for a second. Delivery is scheduled for late 1999 and 2000, respectively.

This growth both necessitates and facilitates an equally aggressive effort to strengthen our branding and our distribution. Recently, we launched a new advertising campaign designed to convey our brand's unique personality and to emphasize our product as a relevant vacation choice rather than purely a cruise product. At the same time, we adopted a revised brand name and identity system, both of which appear proudly on the cover of this annual report. The name ­ Royal Caribbean International ­ conveys our increasing presence in the international arena. The identity system ­ comprised of two shades of blue and one of yellow ­ provides a recognizable and consistent presentation of our brand. These programs, along with numerous other marketing initiatives, should help us expand our brand awareness and positioning.

Our activities went well beyond ship construction, brand development and strong financial performance. Royal Caribbean's success has always been a function of its ability to provide an excellent, consistent quality vacation at an affordable price. During 1996, we added new features to excite and pamper our guests, while at the same time improving our operating efficiency. We also built upon our safety and environmental efforts. Det Norske Veritas, the international ship classification society, awarded us its Safety and Environmental Protection (SEP) certification and we are pleased and honored to be the first and only recipient in the cruise industry. The Company also announced the formation of the Royal Caribbean Ocean Fund to protect the oceans. Finally, we have taken steps to further strengthen our balance sheet, which supports our new building program and enables us to pursue other strategic options.

While we moved forward, we were brought back to basics when the U.S. Department of Justice obtained an indictment against the Company and two employees for offenses related to the alleged improper discharge of bilge water from the Company's ships. We have very strict environmental policies at Royal Caribbean and take any such charges very seriously. Any violation of environmental regulation by any of Royal Caribbean's more than 10,000 employees is absolutely not acceptable and we have used the more than two years since the investigation started to strengthen all areas of our enforcement procedures.

Overall, 1996 marked a memorable passage for Royal Caribbean. Perhaps no event captured the year's momentum better than the confluence of three Royal Caribbean ships in the Port of Miami on December 13 (see photo page 19). As the ships left port together, for new homes, new itineraries and new service, it was a powerful reminder of the significant passages Royal Caribbean has traveled over the year and continues to travel into the future.

My thanks go out to our shareholders, our Board of Directors and our more than 10,000 employees for their support and confidence as we progress on our journey

Sincerely,