Kin Group Regulatory News (KIN)

13 Mar 2007 07:03

Kiln PLC13 March 2007 13 March 2007 Kiln plc ("Kiln") - Bermuda Plans The Board of Kiln is pleased to announce Proposals to introduce a new Bermudiandomiciled holding company for the Kiln Group and to establish a new Bermudianinsurer. Transaction overview • A newly formed Bermudian domiciled holding company, Kiln Ltd, will acquire Kiln via a court approved scheme of arrangement ("Scheme") • A capital reduction of Kiln's issued share capital is proposed to be effected as part of the Scheme • A newly formed Bermudian subsidiary of Kiln Ltd, Kiln Re, is expected to be capitalised at £160 million with an intra-group transfer of assets and to apply to the BMA for a license to operate as a Class 3 insurer • Kiln Ltd shares are to be admitted to listing on the Official List and to trading on the London Stock Exchange's main market for listed securities Strategic benefits • Bermuda offers a favourable environment for Kiln to develop a more international business and access quality underwriting opportunities globally • Proximity to the US, already Kiln's principal source of business and an area where Kiln is exploring options for developing an onshore presence • Provides an underwriting platform in Bermuda to complement Lloyd's • Enhanced ability to access alternative sources of capital • Improved ability to deploy capital in response to market conditions Financial benefits • The Proposals are expected to be earnings enhancing for the Group in the short to medium term • Increased capital efficiency and flexibility will allow Kiln Ltd to support a higher annual dividend policy of paying at least 4p per share throughout the cycle In a separate announcement today, Kiln has released its preliminary results forthe year ended 31 December 2006 with record profits before tax of £64.1 million. Edward Creasy, chief executive officer of Kiln said: "2006 was an outstanding year for Kiln, thanks to strong pricing and a benignclaims environment. As well as making good profits for our shareholders, we madestrategic progress, opening new offices in Hong Kong, Singapore and Belgium. "We believe that Bermuda offers a favourable environment in which to develop theGroup as a growing international business and we expect that our new Bermudianoperations will be complementary to Kiln's existing Lloyd's business. Lloyd'sremains, in our view, a commercially advantageous platform which will continueto form an important part of our insurance activities in the future. "2007 has started well and, whilst we are far from complacent, Kiln is wellplaced to continue delivering attractive returns to shareholders." It is anticipated that a Scheme Circular setting out full details of theProposals together with a Prospectus in relation to the admission of Kiln Ltd tolisting and trading on the London Stock Exchange's main market for listedsecurities will be sent to shareholders on or around 23 March 2007. Legal Notice Lexicon, which is regulated in the United Kingdom by the FSA, is acting for Kilnand Kiln Ltd in connection with the Proposals and will not be responsible toanyone other than Kiln and Kiln Ltd for providing the protections afforded tocustomers of Lexicon or for providing advice in relation to the Proposalsdescribed in this announcement. Numis, which is regulated in the United Kingdom by the FSA, is acting for Kilnand Kiln Ltd in connection with the Proposals and will not be responsible foranyone other than Kiln and Kiln Ltd for providing the protection afforded tocustomers of Numis or for providing advice in relation to the Proposalsdescribed in this announcement. The release, publication or distribution of this announcement in certainjurisdictions may be restricted by law and therefore persons in suchjurisdictions into which this announcement is released, published or distributedshould inform themselves about and observe such restrictions. No offer,invitation or inducement to acquire shares or other securities in Kiln, Kiln Ltdor any other company nor any solicitation of any vote or approval in anyjurisdiction pursuant to the Proposals is being made by this announcement. TheScheme will be made solely through the Scheme Circular (incorporating theProspectus), which will contain the full terms and conditions of the Scheme,including details of how to vote in favour of the Scheme. Any acceptance orother response to the Scheme should be made only on the basis of the informationcontained or incorporated in the Scheme Circular. Certain statements contained in this announcement may constitute forward-lookingstatements. Any such forward-looking statements involve risks, uncertaintiesand other factors that may cause the actual results, performance or achievementsof the Kiln Group, or industry results, to be materially different from anyfuture results, performance or achievements expressed or implied by suchforward-looking statements. These forward-looking statements speak only as ofthe date of this announcement and there can be no assurance that the results andevents contemplated by such forward-looking statement will, in fact, occur. Kilnand the Directors expressly disclaim any obligation or undertaking to releasepublicly any updates or revisions to any forward-looking statement containedherein, save as required to comply with any legal or regulatory obligations(including the Listing Rules, the Prospectus Rules and the DTR), to reflect anychange in the Company's expectations with regard thereto or any change inevents, conditions or circumstances on which any such statement is based. This announcement, which is published on behalf of Kiln, is the soleresponsibility of Kiln and its contents have been approved by Lexicon for thepurposes of section 21(2)(b) of FSMA. This announcement is not an invitationnor is it intended to be an inducement to engage in investment activity of thepurpose of Section 21 of FSMA. The Kiln Ltd Common Shares have not been, and norwill they be, registered under the United States Securities Act or qualified forsale under the laws of any state of the United States or under the applicablelaws of any of Canada, Australia, the Republic of South Africa, the Republic ofIreland, Jersey, Guernsey, Isle of Man, France, Belgium, New Zealand or Japanand, subject to certain exceptions, may not be offered or sold in the UnitedStates or to, or for the account or benefit of, US persons (as such term isdefined in Regulation S under the Securities Act) or to any national or residentof Canada, Australia, the Republic of South Africa, the Republic of Ireland,Jersey, Guernsey, Isle of Man, France, Belgium, New Zealand or Japan. EnquiriesKiln 020 7886 9000Edward Creasy / Peter Haynes College Hill 020 7457 2020Tony Friend / Roddy Watt Lexicon Partners 020 7653 6000Angus Winther Numis 020 7260 1000Charles Farquhar Kiln - Bermuda Plans The Board of Kiln is pleased to announce Proposals to introduce a new Bermudiandomiciled holding company for the Kiln Group and to establish a new Bermudianinsurer. Background to and reasons for the Proposals The Group, an international specialist insurance and reinsurance group,currently underwrites a varied portfolio of mainly property related insuranceand reinsurance supported by multiple sources of capital. The Group currentlyoperates primarily in the Lloyd's market where it manages almost £1 billion inunderwriting capacity in 2007. The Proposals will result in the Group operating in the future under a Bermudianholding company, Kiln Ltd, and establishing a newly incorporated Class 3Bermudian insurer, Kiln Re. The Independent Directors of Kiln consider Bermudato be a favourable operating environment from which to continue the developmentof the Group's business for a number of reasons, including those set out below: • A favourable environment from which to develop a more international business The Group's ability to gain cost effective access to quality underwritingopportunities globally is core to its strategy. Over the past twelve months,Kiln has announced a number of initiatives which were designed to enhance theGroup's distribution capabilities in Asia and Europe. Furthermore, the Group isactively exploring options for developing an onshore presence in the US whichthe Independent Directors of Kiln believe would complement the Group's currentoperations in the Lloyd's market by enabling it to access business that is nottypically placed with Lloyd's insurers. The Independent Directors of Kiln haveconcluded that, as the Group seeks to develop a broader international insuranceand reinsurance business, the establishment of the domicile of the Group holdingcompany in Bermuda will provide the Group with a favourable commercial, legal,regulatory and fiscal environment from which to operate. • Positioning the Group amongst a wider peer group of specialist international underwriters An increasing proportion of the specialist international insurance andreinsurance groups which the Independent Directors of Kiln consider to be theGroup's principal competitors have holding companies and insurance operationsdomiciled in Bermuda. The Independent Directors of Kiln believe that positioningKiln Ltd amongst this expanding Bermudian peer group will enhance itscompetitive position, investor profile and prospects. • Bermuda is becoming an increasingly important reinsurance market Bermuda has enjoyed rapid growth and has developed into a premier globalreinsurance market, with a focus on insuring and reinsuring specialist risksand, in the view of the Independent Directors of Kiln, a reputation forunderwriting innovation. The market now represents the third largest reinsurancemarket in the world (after the US and Germany), with 12 of the world's top 40global reinsurance groups based in Bermuda (source: Standard & Poor's GlobalReinsurance Highlights Report 2006). Whilst the Group will continue to have asignificant presence in the Lloyd's market, the Independent Directors of Kilnbelieve that the Group's medium term growth prospects will be enhanced by havingan alternative underwriting platform in Bermuda. • Enhanced access to alternative sources of capital A recent trend within the specialist insurance and reinsurance industry has beenthe increasing involvement of alternative capital providers, through the issueof sophisticated catastrophe bonds, the securitisation of insurance risk, theestablishment of fully collateralised reinsurance vehicles and othernon-traditional investment structures. The Independent Directors of Kiln believethat this trend is set to continue, and that Bermuda will continue to be anattractive market for these alternative capital providers. The IndependentDirectors of Kiln believe that the management of multiple sources of capital isa core skill of the Group and that establishing a presence in Bermuda willenhance the Group's ability to attract a broader spread of capital in support ofits specialist underwriting operations. • The Group will be better positioned to respond rapidly to changes in market conditions Many institutional investors regard Bermudian-based groups as a preferred choiceof investment in the insurance sector, as evidenced by the substantialdeployment of capital into Bermuda subsequent to the 2001 US Terror Attacks andthe 2005 US Hurricanes. The Independent Directors of Kiln believe that theProposals will increase the Group's overall capital flexibility and efficiencyand will enhance the Group's ability to deploy capital more rapidly to takeadvantage of changes in market conditions. • Closer proximity to the US market, the Group's principal source of business The US market remains the largest insurance and reinsurance market in the world(source: Chartered Insurance Institute) and is the Group's principal source ofbusiness (with approximately 44 per cent. of the Group's underwriting portfoliorelating to US risks, based on Group information). The Independent Directors ofKiln believe the establishment of an onshore US presence to be an important andlogical next step in the Group's strategy which will be easier to deliverfollowing the implementation of the Proposals, given Bermuda's proximity andlinks to the US. Nothing in the Proposals alters the Group's continuing strategy of targetingsuperior returns for Shareholders through its specialist underwritingactivities. Furthermore, the Independent Directors of Kiln continue to considerLloyd's to be a commercially advantageous underwriting platform which theyexpect will continue to form an important part of the Group's insuranceoperations for the foreseeable future. Relationship with the W. R. Berkley Group In 2002, BIC (an indirect wholly owned subsidiary of W. R. Berkley Corporation)became a significant shareholder in Kiln and entered into the BerkleyRelationship Deed with Kiln. Pursuant to the Berkley Relationship Deed, BIC hasthe right to appoint two Kiln Directors by virtue of it holding (or the W. R.Berkley Group holding) 20 per cent. or more of the voting rights of Kiln. WhereBIC's holding (or the W. R. Berkley Group's holding) of the voting rights ofKiln is at least 10 per cent. but less than 20 per cent. of the total votingrights of Kiln, BIC is entitled to appoint one Kiln Director. The BerkleyRelationship Deed also imposes certain other rights and obligations on each ofthe parties. All of the Ordinary Shares in which BIC is interested (20.1 percent. of the issued ordinary share capital of Kiln) are currently registered inthe name of Chase Nominees Limited. The two Kiln Directors appointed by BIC areWilliam R. Berkley and W. Robert Berkley, Jr.. William R. Berkley is and hasbeen chairman of the board and chief executive officer of W. R. BerkleyCorporation since its formation in 1967 and W. Robert Berkley, Jr. is executivevice president of W. R. Berkley Corporation. In order for BIC to maintain materially the same rights and obligationsregarding Kiln Ltd following the Scheme, in accordance with Bermudian law, it isproposed that (i) Kiln will allot and issue to BIC the Non-Voting PreferredShare and certain consequential amendments will be made to the BerkleyRelationship Deed (referred to herein as so amended, the "Restated BerkleyRelationship Deed") (following approval by Shareholders of the SpecialResolution); (ii) BIC will exchange the Non-Voting Preferred Share for the KilnLtd Series A Preferred Share under the terms of the Scheme; and (iii) uponAdmission, the Restated Berkley Relationship Deed will terminate in accordancewith its terms and the New Berkley Relationship Deed, which was executed by BICand Kiln Ltd on 13 March 2007, will become effective and will govern therelationship between BIC and Kiln Ltd. As noted above, the Kiln Ltd Series A Preferred Share and the New BerkleyRelationship Deed together will result in BIC having materially the same rightsand obligations regarding Kiln Ltd as BIC has regarding Kiln under the BerkleyRelationship Deed. As a result of the above, for the purposes of the Scheme, the Ordinary Shares inwhich BIC is interested are deemed to constitute a separate class of shares andWilliam R. Berkley and W. Robert Berkley, Jr. are deemed not to be IndependentDirectors of Kiln. Accordingly, William R. Berkley and W. Robert Berkley, Jr.have not been involved in decisions of the Kiln Board in considering theProposals. Furthermore, BIC will not be entitled to attend or vote at the CourtMeeting and currently intends not to vote at the Scheme EGM. BIC currentlyintends, however, to undertake to the Court by Counsel to be bound by the Schemeif the Scheme is approved by the requisite majority of Ordinary Shareholders atthe Court Meeting and at the Scheme EGM. Structure of the Scheme The Scheme is proposed to be effected by means of a Court approved scheme ofarrangement under section 425 of the Act. Upon the Scheme becoming effective,Kiln Ltd will acquire Kiln and become the new holding company of the Group andall existing Ordinary Shares will be cancelled and replaced by Kiln Ltd CommonShares on the following basis: For every Scheme Share cancelled One Kiln Ltd Common Share and the Non-Voting Preferred Share will be cancelled and replaced by the KilnLtd Series A Preferred Share to be issued to BIC. Application will be made for the Kiln Ltd Common Shares to be admitted tolisting on the Official List and to trading on the London Stock Exchange's mainmarket for listed securities, such admission being conditional, inter alia, uponthe Scheme becoming effective. As a result of the Scheme, Ordinary Shareholders will receive the same number ofKiln Ltd Common Shares as the Ordinary Shares which they currently hold. Suchshares will continue to enjoy substantially the same economic rights in Kiln Ltdas the shares which Ordinary Shareholders currently hold. The Kiln Ltd CommonShares to be issued pursuant to the Scheme will, when issued, be credited asfully paid and free from all liens, charges and encumbrances whatsoever andshall rank in full for all dividends or distributions made, paid or declared byKiln Ltd after the Scheme Effective Date in accordance with the Kiln LtdBye-laws. The Independent Directors of Kiln who hold Ordinary Shares, being Messrs. Cosh,Creasy, Haynes, Chase, Hewitt and Ball, have, in their respective capacities asOrdinary Shareholders, indicated in letters of intent addressed to Kiln theirintention to vote in favour of the resolutions to be proposed at the CourtMeeting and Scheme EGM in respect of, in aggregate, 1,030,848 Ordinary Shares,representing approximately 0.35 per cent. of Kiln's entire issued share capital.Robert Chase has indicated that he intends to exercise his 172,400 nil costoptions in full prior to the Scheme Circular and Prospectus being sent toshareholders. At the time of posting, such letters of intent are thereforeexpected to be in respect of 1,203,248 Ordinary Shares representingapproximately 0.41 per cent. of Kiln's entire issued share capital. Pursuant tothese letters of intent, Messrs. Cosh, Creasy, Haynes, Chase, Hewitt and Ballhave also indicated their intention to vote against any resolution or proposalwhich may prevent or impede the passing of the resolutions to be proposed at theCourt Meeting and/or Scheme EGM and/or the implementation of the Scheme. The Scheme and the Capital Reduction are subject to various conditions as setout in Appendix 1, including the passing of the Special Resolution and theapproval of the Court. If these conditions are satisfied and the Scheme isapproved and implemented in full, Kiln Ltd will own the entire issued sharecapital of Kiln. Capital Reduction The Capital Reduction will be implemented at the same time as the Scheme. Underthe Capital Reduction, the issued share capital of Kiln will be reduced bycancelling and extinguishing the Scheme Shares and the Non-Voting PreferredShare in order to implement the Scheme and by cancelling the entire amountsstanding to the credit of Kiln's share premium account and capital redemptionreserve as at the date of the Court Hearing in order to implement theReorganisation. The Capital Reduction will require the confirmation of the Court and, if soconfirmed, will result in a reserve being created equal to the nominal value ofthe Scheme Shares and the Non-Voting Preferred Share and of the amounts standingto the credit of Kiln's share premium account and capital redemption reserve asat the date of the Court Hearing. Of this reserve, £1,000,000 will be used toallot and issue £1,000,000 in aggregate nominal amount of fully paid-up NewOrdinary Shares to Kiln Ltd (and/or its nominee) and the balance will, subjectto appropriate consents from, or protection for, creditors be available fordistribution by Kiln. This reserve is intended to be used to facilitate theimplementation of the subsequent restructuring of the Group and to provideflexibility for Kiln and Kiln Ltd in the future. The Board of Kiln believes thatan issued share capital of £1,000,000 will be sufficient for Kiln's futureoperating requirements. As part of its confirmation of the Capital Reduction,the Court will be invited to permit the re-registration of Kiln as a privatelimited company. It is currently intended that, shortly after the Scheme becomeseffective, Kiln will change its name to Kiln (UK) Holdings Limited. Kiln Re and the expected transfer of Relevant Assets Kiln Re was incorporated by Kiln Ltd in Bermuda on 21 February 2007. It isexpected that shortly after the Scheme Effective Date (and subject to theapproval by the board of directors of Kiln Re) application will be made to theBMA for authorisation of Kiln Re as a Class 3 Bermudian insurer, which theIndependent Directors of Kiln expect will be granted in time for Kiln Re tobegin underwriting business in June 2007. In conjunction with that application, it is also expected that, shortly afterthe Scheme Effective Date (and subject to approval by the boards of directorsand/or shareholders of the various Group companies involved), Kiln Re will becapitalised at approximately £160 million by means of an intra-Group transfer ofcertain Relevant Assets. This will involve a series of transactions which it isproposed will be implemented by way of certain intra-Group dividends and therepayment of certain intra-Group loans (in each case to be satisfied by amixture of the investments, cash deposits at Lloyd's and free cash comprisingthe Relevant Assets). This restructuring, whilst not part of the Scheme, willnot proceed unless the Scheme becomes effective. The capitalisation is notdependent on the raising of any third party funds but is subject to the RelevantAssets being released from certain security in favour of Lloyd's and Lloyds TSBin substitution for new security over such Relevant Assets being granted by KilnLtd to Lloyd's and Lloyds TSB. It is intended that, initially, Kiln Re will only provide reinsurance to KilnUnderwriting Limited, one of the Kiln Corporate Members. With a margin forprudence, the maximum amount out of Kiln Re's expected approximately £160million of capital that would be available to Kiln Re to support an intra-Groupreinsurance would be approximately £150 million, which could support areinsurance of up to 80 per cent. of Kiln Underwriting Limited's insurancebusiness relating to the unexpired part of the 2006 year of account and the 2007year of account. The terms of any reinsurance arrangements between Kiln Re andKiln Underwriting Limited, including both the coverage of that contract and thefinancial terms, will be subject to agreement between the two parties subsequentto the Scheme Effective Date. Kiln Ltd and Kiln Re will review on an ongoing basis the opportunities for KilnRe to underwrite new business which could include supporting any future Kilninsurance operations or an independent reinsurance portfolio. Since Kiln Re willinitially only underwrite intra-Group business, Kiln Ltd does not intend to seeka rating for Kiln Re in the immediate future although this decision may bereviewed as the Group's Bermudian underwriting business develops. Certain existing employees of Kiln with relevant expertise in operational andunderwriting management functions will be transferred to Kiln Re, and Kiln Ltdmay additionally recruit new staff to augment this team. It is anticipated thatmost administrative functions of Kiln Re will be outsourced to third partyadministration providers. Directors, Management and Employees Edward Creasy, Peter Haynes and Robert Chase, Kiln's executive Directors, havebeen appointed as the executive Directors of Kiln Ltd and accordingly the Schemeis expected to have no impact on the composition of the core executivemanagement team of the Group although Peter Haynes, the Group's Chief FinancialOfficer, is relocating from the UK to Bermuda where it is anticipated that hewill spend most of his time. William R. Berkley, W. Robert Berkley, Jr. and Paul Hewitt, currentlynon-executive Directors of Kiln, have each been appointed as non-executiveDirectors of Kiln Ltd together with Elizabeth Murphy and John Wadson (both ofwhom are resident in Bermuda). Nicholas Cosh, Kiln's current Chairman, has beenappointed as Chairman of Kiln Ltd. David Woods and Paul Wilson will continue for a short time as non-executiveDirectors of Kiln after the Scheme Effective Date but will not becomenon-executive Directors of Kiln Ltd. Graham Ball will retire as a Director ofKiln at the AGM, as planned, having completed almost three terms as anon-executive director. Dividend Policy As a result of the Proposals, the Independent Directors of Kiln and the Kiln LtdBoard believe that the Group's capital efficiency and flexibility will increaseand consequently that Kiln Ltd will be capable of supporting a higher annualdividend than historically achieved by the Kiln Group. Assuming the Schemebecomes effective and subject to the conditions (and subjectivities) listedbelow, Kiln Ltd proposes that the Group's revised policy will be to pay a totaldividend of at least 4 pence per Kiln Ltd Common Share (currently 3 pence perOrdinary Share) throughout the cycle, and to pay an interim dividend equal toone third of the preceding total dividend, unless exceptional circumstances makeeither course of action inappropriate. Under the Scheme, certain UK tax-paying Scheme Shareholders may be subject to ahigher effective rate of tax on dividends received from Kiln Ltd compared withdividends received from Kiln because Kiln is a UK tax-resident company whereasthe intention is that Kiln Ltd will be resident in Bermuda for UK tax purposes. All dividends will be subject to the future financial performance of the Group,including results of operations and cash flows, the Group's financial positionand capital requirements, rating agency considerations, general businessconditions, legal, tax, regulatory and any contractual restrictions on thepayment of dividends and any other factors the Kiln Ltd Board deem relevant intheir discretion, which may be taken into account at the time. UK Takeover Code As Kiln Ltd is incorporated in Bermuda, the Takeover Code will not apply to KilnLtd and Bermuda law does not contain any provisions similar to those applicablein the UK which are designed to regulate the way in which takeovers areconducted. Accordingly, any person or persons acting in concert will be able toacquire shares in Kiln Ltd which, when taken together with the shares alreadyheld by them, carry 30 per cent. or more of the voting rights in Kiln Ltdwithout being required to make a general offer for the entire issued sharecapital of Kiln Ltd. Additionally, any party intending to acquire all, or asubstantial part, of the issued share capital of Kiln Ltd will not be obliged tocomply with the provisions of the Takeover Code as to announcements, equality oftreatment for shareholders as to the value and type of consideration offered,and will not be subjected to the scrutiny and sanctions of the Panel. The Kiln Ltd Bye-laws contain certain takeover protections, although these willnot provide the full protections afforded by the Takeover Code. Bye-law 86adopts certain of the provisions of the Takeover Code, including provisionsdealing with compulsory takeover offers and shareholder treatment along thelines of the general principles of the Takeover Code (to the extent permitted byBermuda law), which are to be administered by the Kiln Ltd Board. Bye-law 86 isto have effect only during such times as the Takeover Code does not apply toKiln Ltd. The Kiln Ltd Board has full authority to determine the application of Bye-law86, including the deemed application of the whole or any part of the TakeoverCode, and such authority shall include all the discretion that the Panel wouldexercise if the whole or part of the Takeover Code applied. Any resolution ordetermination made by the Kiln Ltd Board, any Kiln Ltd Director or the chairmanof any meeting acting in good faith is final and conclusive and is not open tochallenge as to its validity or as to any other ground. The Kiln Ltd Board isnot required to give any reason for any decision or determination it makes. For the avoidance of doubt, the Takeover Code does not apply per se to Kiln Ltdor to the Kiln Ltd Common Shares and the Panel will not be responsible forenforcing any Takeover Code provision which is incorporated into the Kiln LtdBye-laws. Accounting Treatment and Dealings Kiln Ltd will report in pounds sterling in accordance with IFRS. This representsno change from Kiln's current financial reporting. Kiln Ltd also has sharecapital denominated in pounds sterling and trading in the Kiln Ltd Common Shareson the London Stock Exchange's main market for listed securities will be inpounds sterling. CREST and Depositary Interests Scheme Shareholders should note that the Kiln Ltd Common Shares will notthemselves be admitted to CREST and hence will not be able to be held and tradeddirectly in uncertificated form. However, Scheme Shareholders who wish to holdand transfer interests in their Kiln Ltd Common Shares within CREST will be ableto do so pursuant to depositary interest arrangements to be established by KilnLtd further details of which will be set out in the Scheme Circular. TheDepositary Interests will be independent securities constituted under Englishlaw which may be held and transferred through the CREST system. In relation tosuch Depositary Interests, although Kiln Ltd's register of members will showCapita IRG Trustees (Nominees) Limited as the legal holder of the relevant KilnLtd Common Shares, the beneficial interest in such shares remains with theholder of the Depositary Interests representing the underlying shares, who willreceive all the rights attaching to the Kiln Ltd Common Shares as he/she/itwould have if such holder of Depositary Interests had been on the Kiln Ltdregister of members himself/herself/itself. Taxation The taxation consequences of the Scheme will depend upon the jurisdiction inwhich the relevant shareholder is resident for tax purposes. Further detailswill be provided in the Scheme Circular to be sent to shareholders in duecourse. Indicative Timetable of Principal Events 23 March 2007 Expected posting date for the Scheme Circular and Prospectus 14 April 2007 6:00 p.m.: Court Meeting Voting Record Time 6:00 p.m.: Scheme EGM Voting Record Time 16 April 2007 11:00 a.m.: Court Meeting 11:10 a.m.: Scheme EGM(1) 18 April 2007 Ex-dividend date for Final Dividend 20 April 2007 Record date for Final Dividend 10:30 a.m. on 16 May 2007 AGM 18 May 2007 Payment date for Final Dividend Court Hearing of the Petition to sanction the Scheme and to confirm the Capital Reduction(2) Last day of dealings in and registrations for transfers of Ordinary Shares 6:00 p.m. on the business day immediately preceding the Scheme Effective Date(2) (i.e. the Scheme Record Time): latest time for transfer of Ordinary Shares prior to the Scheme Effective Date 21 May 2007 Scheme Effective Date(2) 8:00 a.m. on the Scheme Effective Date: Cancellation of listing of Ordinary Shares, Kiln Ltd Common Shares admitted to Official List, crediting of Depositary Interests to CREST stock accounts and commencement of dealings in Kiln Ltd Common Shares on the London Stock Exchange(2) by 4 June 2007 Dispatch of Kiln Ltd share certificates within 14 days after the Scheme Effective Date(2) All time in this announcement are London times unless otherwise stated and aresubject to change. Notes: 1. To commence at the time specified or, if later, immediately following the conclusion or adjournment of the Court Meeting. 2. These dates will depend, inter alia, on the date on which the Court sanctions the Scheme and confirms the Capital Reduction APPENDIX I: Conditions of the Scheme The Scheme and Capital Reduction will not become effective and binding unless: (a) the Scheme and Capital Reduction are approved by a majority in numberrepresenting 75 per cent. by value of the Ordinary Shareholders present andvoting either in person or by proxy at the Court Meeting; (b) the special resolution set out in the notice of Scheme EGM contained in theScheme Circular is passed; (c) the Scheme is sanctioned (with or without modification) and the CapitalReduction is confirmed by the Court at the Court Hearing; (d) an office copy of the Court Order sanctioning the Scheme and confirming theCapital Reduction is registered by the Registrar of Companies; and (e) permission has been granted by the UK Listing Authority to admit the KilnLtd Common Shares to the Official List and by the London Stock Exchange to admitthe Kiln Ltd Common Shares to trading on the London Stock Exchange's main marketfor listed securities. In addition, the Independent Directors of Kiln will not, prior to the CourtHearing, take the steps necessary to enable the Scheme and Capital Reduction tobecome effective unless, at the relevant time prior to the Court Hearing, theyconsider that the Scheme and Capital Reduction continue to be in the bestinterests of Ordinary Shareholders as a whole and that the following conditionshave been satisfied or, so far as possible, waived prior to the Court Hearing: (a) the Scheme is approved in writing by the FSA, Lloyd's, the UK PensionsRegulator and any other regulatory body whose consent is required, or isconsidered by Kiln to be necessary; (b) Kiln has received confirmation and/or consents from relevant third parties(including Lloyd's and Lloyds TSB and the trustee and/or noteholders of theSubordinated Notes) in respect of the proposed change of control of Kiln (or anyof its relevant subsidiary undertakings) and the proposed transfer of RelevantAssets or contracts involved in the corporate reorganisation in each case in aform satisfactory to it, or the Independent Directors of Kiln being satisfiedthat sufficient consents have been received such that the corporatereorganisation is in the best interest of the Group as a whole; (c) no regulatory body has sought, as a result of the transactions to beeffected by the Scheme, any revocation or modification to any licence,appointment or other authorisation held by any member of the Group, except onsatisfactory terms; and (d) no regulatory body has sought, as a result of the transactions to beeffected by the Scheme, undertakings or assurances from any member of the Group,except on satisfactory terms. In this Appendix 1, "on satisfactory terms" means on terms which aresatisfactory to Kiln and Kiln Ltd and which would not, or would not reasonablybe expected by the Independent Directors of Kiln, to have, individually or inaggregate, a material adverse effect on the Group taken as a whole. The consequences of Kiln not having received the third party consents referredto above will vary in relation to each relevant company in the Group, RelevantAsset or relevant contract. Kiln has requested or will shortly be requestingconsents in relation to those of the relevant Group Company's Relevant Assets orrelevant contracts which it believes either alone or together with otherRelevant Assets or relevant contracts are or may be material to the Group. Anumber of third parties will only provide binding consents at or around theScheme Effective Date. Consequently, a number of these consents have not yetbeen received or have been received only in principle subject to the detailedterms of the consent being agreed. It is the Independent Directors of Kiln'sbelief that sufficient of these consents will be obtained in a form satisfactoryto Kiln to enable the Proposals to be implemented but there can be no assurancethat this will be the case. The Scheme contains a provision for Kiln and Kiln Ltd jointly to consent onbehalf of all persons concerned to any modification of or addition to theScheme, or to any condition which the Court may think fit to approve or impose.Kiln has been advised by its legal advisers that the Court would be unlikely toapprove or impose any amendment to the Scheme that might be material to theinterests of Scheme Shareholders unless Ordinary Shareholders were informed ofany such amendment. It will be a matter for the Court to decide, in itsdiscretion, whether or not a further meeting of Ordinary Shareholders should beheld or consent obtained (as the case may be). If the Court does approve orimpose any amendment to the Scheme which, in the opinion of the IndependentDirectors of Kiln, is such as to require consent of the Ordinary Shareholders,the Independent Directors of Kiln will not take steps to enable the Scheme tobecome effective unless and until such consent is obtained. Kiln Ltd will and Berkley Insurance Company currently intends (if the Scheme isapproved by the requisite majority of Ordinary Shareholders) to undertake to theCourt by counsel to be bound by the Scheme. The Court Hearing is expected to beheld on 18 May 2007. Ordinary Shareholders will have the opportunity to attendthe Court Hearing to support or oppose the Scheme and to appear in person or berepresented by counsel. If the Scheme is sanctioned and the Capital Reduction confirmed by the Court andthe conditions to the Scheme are satisfied or, insofar as they are able to be,waived, it is expected that the Scheme will become effective by on or around 21May 2007. If the Scheme has not become effective by 31 July 2007 (or such laterdate as Kiln and Kiln Ltd may agree and the Court may allow), it will lapse, inwhich event the position of Scheme Shareholders will remain unchanged. APPENDIX II: Definitions "Admission" the admission of the Kiln Ltd Common Shares, issued and to be issued pursuant to the Scheme to (i) the Official List becoming effective in accordance with the Listing Rules; and (ii) trading on the London Stock Exchange's market for larger and established companies becoming effective in accordance with the Admission and Disclosure Standards of the London Stock Exchange "Berkley Relationship Deed" the relationship deed dated 25 April 2002 and made between (1) Kiln and (2) BIC (as amended and restated) and (conditional on certain matters) as terminated and restated by the Restated Berkley Relationship Deed "BIC" or "Berkley Insurance Company" Berkley Insurance Company, an indirect wholly owned subsidiary of W. R. Berkley Corporation, and/or its nominee from time to time, currently Chase Nominees Limited "BMA" the Bermuda Monetary Authority "Capital Reduction" the proposed reduction of issued share capital of Kiln under section 135 of the Act and the cancellation of the entire amounts standing to the credit of Kiln's share premium account and capital redemption reserve as at the date of the Court Hearing "Class 3 insurer" a person registered as a Class 3 insurer under the Insurance Act 1978 of Bermuda "corporate member" a member of Lloyd's which is a body corporate or a Scottish limited partnership "Court" the High Court of Justice of England and Wales "Court Hearing" the hearing of the Petition by the Court "Court Meeting" the meeting of the Ordinary Shareholders which it is expected will be convened by direction of the Court pursuant to section 425 of the Act for 11:00 a.m. on 16 April 2007, to consider and, if thought fit, approve the Scheme, including any adjournment thereof "Court Meeting Voting Record Time" 6:00 p.m. (London time) on 14 April 2007 or 6:00 p.m. (London time) on the date two days before the date fixed for any adjourned Scheme EGM "Court Order" the order of the Court sanctioning the Scheme under section 425 of the Act and confirming the Capital Reduction "CREST" the relevant system (as defined in the CREST Regulations) (as defined in the CREST Regulations) in respect of which CRESTCo is the Operator (as defined in the CREST Regulations) in accordance with which securities may be held and transferred in uncertificated form "Directors of Kiln Ltd" or "Kiln Ltd Directors the directors of Kiln Ltd" "DTR" the Disclosure and Transparency Rules of the FSA brought into effect on 20 January 2007 "Final Dividend" the final dividend of 3p per Ordinary Share to be paid by Kiln (subject to Ordinary Shareholders' approval at the AGM) to Ordinary Shareholders on the register of members at 6:00 p.m. on 18 April 2007 "FSA" the Financial Services Authority "FSMA" the Financial Services and Markets Act 2000 (as amended) "Group" or "Kiln Group" before the Scheme Effective Date, Kiln and its subsidiary undertakings and, on and after the Scheme Effective Date, Kiln Ltd and its subsidiary undertakings as the context requires (and "member of the Group" shall be construed accordingly) "IFRS" International Financial Reporting Standards as issued by the International Accounting Standards Board and endorsed by the European Union "Independent Directors of Kiln", "Independent all of the Kiln Board other than William R. Berkley and W. RobertKiln Board" or "Independent Kiln Directors" Berkley, Jr. "Kiln" or "Company" Kiln plc or, following its re-registration as a private limited company, the Scheme becoming effective and the passing of a special resolution to change its name, Kiln (UK) Holdings Limited "Kiln Board", "Kiln Directors" or "Directors the directors of Kilnof Kiln" "Kiln Corporate Members" Kiln Underwriting Limited, Kiln Underwriting (308) Limited, Kiln Underwriting (510) Limited, Kiln Underwriting (807) Limited, Kiln Underwriting (807) no. 2 Limited and RJ Kiln & Co (No. 2) Limited "Kiln Ltd" Kiln Ltd, an exempted company incorporated in Bermuda under the Bermuda Act with limited liability and which, with effect from the Scheme Effective Date, will be the new holding company of the Group "Kiln Ltd Board" the board of directors of Kiln Ltd "Kiln Ltd Bye-laws" the bye-laws of Kiln Ltd "Kiln Ltd Common Shares" or "Common Shares" the common shares of 1p each in the capital of Kiln Ltd "Kiln Ltd Series A Preferred Share" the non-voting series A preferred share of 1p in the capital of Kiln Ltd to be allotted and issued to BIC conditionally upon and simultaneously with the Scheme becoming effective "Kiln Ltd Shareholders" holders of Kiln Ltd Common Shares "Kiln Re" Kiln Reinsurance Ltd, a wholly owned subsidiary of Kiln Ltd, which is an exempted company incorporated in Bermuda under the Bermuda Act with limited liability "Lexicon" Lexicon Partners Limited "Listing Rules" the rules and regulations made by the Financial Services Authority in its capacity as the UK Listing Authority under the FSMA, and contained in the UK Listing Authority's publication of the same name "Lloyd's" the Society and Corporation of Lloyd's created and governed by the Lloyd's Acts 1871-1982, including the Council of Lloyd's (and its delegates and other persons through whom the Council may act), as the context may require "Lloyds TSB" Lloyds TSB Bank plc "London Stock Exchange" London Stock Exchange plc "New Berkley Relationship Deed" the relationship deed dated 13 March 2007 and made between Kiln Ltd and BIC "New Ordinary Shares" the Ordinary Shares to be issued to Kiln Ltd pursuant to the Scheme "Non-Voting Deferred Share" the non-voting deferred share of 1p in the capital of Kiln, to be created pursuant to the Special Resolution "Non-Voting Preferred Share" the non-voting preferred share of 1p in the capital of the Company, to be created pursuant to the Special Resolution and to be allotted and issued to BIC, after the passing of the Special Resolution "Numis" Numis Securities Limited "Official List" the official list of the UK Listing Authority "Ordinary Shares" the ordinary shares of 1p each in the capital of Kiln "Panel" the UK Panel on Takeovers and Mergers "Petition" the petition to the Court to sanction the Scheme and to confirm the Capital Reduction "Proposals" the Reorganisation and the proposed establishment of Kiln Re as a Class 3 insurer "Prospectus" the prospectus relating to Kiln Ltd and the Kiln Ltd Common Shares, prepared in accordance with the Prospectus Rules, which is expected to be posted to shareholders on or around 23 March 2007 "Prospectus Rules" the prospectus rules of the UK Listing Authority made under section 73A of the FSMA "Relevant Assets" certain of the Group's FAL which is being used to support Kiln Underwriting Limited's underwriting for the 2007 year of account and free cash proposed to be transferred ultimately to Kiln Re "Reorganisation" the Scheme, Capital Reduction and the proposed subsequent restructuring of the Group and transfer of Relevant Assets within the Group as referred to in this document "Restated Berkley Relationship Deed" the amended and restated relationship deed between Kiln and BIC dated 13 March 2007, which will (conditional on certain matters) terminate and restate the Berkley Relationship Deed "RJ Kiln" RJ Kiln & Co Limited, a wholly owned subsidiary of the Company and the managing agent of the Syndicates 308, 510, 557 and 807 "Scheme" or "Scheme of Arrangement" the proposed scheme of arrangement under section 425 of the Act in its original form or with or subject to any modification thereof or addition thereto or condition approved or imposed by the Court "Scheme Circular" the Scheme of Arrangement document to be sent to shareholders on or around 23 March 2007 "Scheme Effective Date" the date on which the Scheme becomes effective in accordance with its terms, which, subject to satisfaction of the conditions applying to the Scheme (including the sanction of the Scheme and the confirmation of the Capital Reduction by the Court), is expected to be on or around 21 May 2007 "Scheme EGM" the extraordinary general meeting of Ordinary Shareholders which is expected to be held at 11:10 a.m. (or, if later, immediately following the conclusion or adjournment of the Court Meeting) on 16 April 2007, including any adjournment thereof "Scheme EGM Voting Record Time" 6:00 p.m. (London time) on 14 April 2007 or 6:00 p.m. (London time) on the date two days before the date fixed for any adjourned Scheme EGM "Scheme Record Time" 6:00 p.m. London time on the business day immediately preceding the Scheme Effective Date "Scheme Shares" (a) all Ordinary Shares in issue at the date of posting of the Scheme Circular; (b) all (if any) additional Ordinary Shares issued after the date of Scheme Circular but up to and including the Court Meeting Voting Record Time; and (c) all (if any) further Ordinary Shares which may be issued after the passing of the Special Resolution at the Scheme EGM but at or prior to 6:00 p.m. on the business day prior to the date on which the Court Order is made either on terms that the original or any subsequent holders shall be bound by the Scheme or in respect of which the holders shall have agreed in writing to be bound by the Scheme, but excluding in each case the Non-Voting Deferred Share to be held by Kiln Ltd and the Non-Voting Preferred Share to be held by BIC "Scheme Shareholder" a holder of Scheme Shares and the holder of the Kiln Non-Voting Preferred Share "Securities Act" the United States Securities Act of 1933, as amended "Special Resolution" the special resolution relating to the Scheme and the Capital Reduction to be proposed at the Scheme EGM "Subordinated Notes" the subordinated notes due 2036 issued by Kiln and constituted by trust deeds dated 11 October 2006 and 20 November 2006 "surplus lines insurance" such insurance as is permitted by the laws of a US state to be placed by a properly licensed surplus lines insurance broker with a non-admitted insurer that has met the relevant state's criteria for eligibility to accept such placements "syndicate" a group of underwriting members of Lloyd's or a single corporate member underwriting insurance business at Lloyd's through the agency of a managing agent to which a particular syndicate member is assigned by or with the authority of the Council "Syndicate" syndicates 308, 510, 557, and 807 and "Syndicate" means any one of the Syndicates as the context requires "Takeover Code" The City Code on Takeovers and Mergers "UK Listing Authority" the Financial Services Authority acting in its capacity as the competent authority for the purposes of Part VI of FSMA "United Kingdom" or "UK" the United Kingdom of Great Britain and Northern Ireland "United States" or "US" the United States of America, its territories and possessions, any State of the United States of America and the District of Columbia, and all other areas subject to its jurisdiction "W. R. Berkley Corporation" W. R. Berkley Corporation of 475 Steamboat Road, Greenwich, Connecticut, USA "W. R. Berkley Group" W. R. Berkley Corporation and its subsidiaries and associated undertakings including without limitation Berkley Insurance Company This information is provided by RNS The company news service from the London Stock Exchange