Offer for Kensington Group

30th May 2007 07:03

Investec PLC30 May 2007 Not for release, publication or distribution, in whole or part, in, into or fromany jurisdiction where to do so would constitute a violation of the relevantlaws of such jurisdiction. For immediate release 30 May 2007 RECOMMENDED SHARE OFFER for the acquisition of KENSINGTON GROUP PLC by INVESTEC PLC to be effected by means of a Scheme of Arrangement under section 425 of the Companies Act 1985 Summary • The combined boards of Investec plc ("Investec") and Investec Limited and the board of Kensington Group plc ("Kensington") are pleased to announce that they have reached agreement on the terms of the recommended acquisition of the entire issued and to be issued share capital of Kensington by Investec (the "Offer"). It is intended that the Offer be implemented by way of a scheme of arrangement under section 425 of the Companies Act. • Under the terms of the Offer, each Kensington Shareholder will receive 0.7 Investec Share plus a special dividend of 26 pence (payable by Kensington) for each Kensington Share, valuing each Kensington Share at 519.5 pence per share based on an Investec Share price of 705 pence per share on 29 May 2007, being the last Business Day prior to the making of this announcement, and the entire issued and to be issued share capital of Kensington at approximately £283 million. The new Investec Shares will not qualify for the final dividend of 13p per Investec Share that the combined boards of Investec and Investec Limited have proposed for the financial year ended 31 March 2007. • The new Investec Shares to be issued as part of the Offer are expected to represent approximately 5.8 per cent. of the aggregate issued share capital of Investec and Investec Limited as enlarged by the acquisition of Kensington. • Investec's stronger balance sheet, access to lower cost of funding, and capital markets expertise, together with Kensington's recognised brand, established distribution, innovative product range, prudent risk management and track record for service excellence, create a strong combination for the growing non-standard mortgage marketplace. • The Investec Group is an international specialist banking group that provides a diverse range of financial products and services to niche clients in three principal markets, the United Kingdom, Australia and South Africa, as well as certain other geographies. The Investec Group has five core business divisions: Investment Banking, Capital Markets, Private Client Activities, Asset Management and Property Activities. Upon completion of the Offer, Kensington will become part of Investec's Capital Markets division, which reported strong growth in operating profit before goodwill and non-operating items of 75.3 per cent to £117.3 million in the financial year ended 31 March 2007. • Founded in 1995, Kensington is a specialist lender offering first and second charge mortgages. Kensington specialises in lending to people who do not conform to the rigid criteria of traditional lenders, such as the self-employed, contractors, older borrowers, temporary employees and those with an adverse credit history. The Kensington Group includes two wholly-owned subsidiaries which trade as Kensington Mortgages and Kensington Secured Loans and its Money Partners joint venture; in addition, Kensington also operates in Ireland through its subsidiary Start Mortgages Holding Limited and in Sweden through its associate BlueStep Bostadslan AB. • The combined boards of Investec and Investec Limited expect the acquisition of Kensington to be earnings enhancing before synergies in the first full year after completion. This statement should not be interpreted to mean that per share earnings of the Investec Group for the current or future financial years, or those of the combined group, will necessarily match or exceed the historical published per share earnings of the Investec Group. • The Kensington Directors, who have been so advised by Rothschild, consider the terms of the Offer to be fair and reasonable. In providing its advice to the Kensington Directors, Rothschild has taken into account the commercial assessments of the Kensington Directors. Accordingly, the board of Kensington has unanimously agreed to recommend Kensington Shareholders to vote in favour of the resolutions to be proposed at the Court Meeting and the Extraordinary General Meeting, as they have irrevocably undertaken to do in respect of their own registered shareholdings, and to direct, where possible, or otherwise use their reasonable endeavours to arrange, that the registered holder should vote in favour in relation to their other beneficial shareholdings. The aggregate beneficial holdings of the Kensington Directors amount to 199,566 Kensington Shares, representing approximately 0.4 per cent. of Kensington's entire issued share capital. • Subject to the satisfaction or, where relevant, waiver of the Conditions set out in Appendix I, the Scheme is expected to become Effective by the end of August 2007. Stephen Koseff, Chief Executive of Investec, commented: "The proposed acquisition of Kensington is in line with our stated objectivesand reinforces our successful Capital Markets business. We are confident thatunder our ownership, the Kensington franchise will be reinvigorated and that ourcombined businesses will be well placed to benefit from the growth of thenon-standard mortgage market." Bernard Kantor, Managing Director of Investec, commented: "We look forward to welcoming Kensington, and its employees led by AlisonHutchinson, to the Investec group. We have been impressed by the enthusiasm ofKensington's management and staff, who share our vision of creating adistinctive, specialist banking group delivering superior service and productsto our customers." Peter Birch, Chairman of Kensington, commented: "This offer secures the future of Kensington within a stronger group withcomplementary capabilities and at a fair price, and enables shareholders toshare in the value to be created by the combination. The Investec Group is a strong specialist lender and will be bringing itsentrepreneurial culture, robust risk management discipline and competitivefunding to boost Kensington's acceleration into new products, channels andmarkets. I am confident that Kensington's attractive franchise will prosperunder Investec's ownership, and that it will be well placed to capture theconsiderable opportunities in the specialist lending arena." Citi is acting as sole financial adviser to Investec. Rothschild is acting assole financial adviser to Kensington. Merrill Lynch is acting as broker toInvestec. Panmure Gordon is acting as broker to Kensington. This summary should be read in conjunction with the full text of the attachedannouncement. Appendix I to the announcement contains the conditions to theOffer. Appendix II contains details of the sources of information and basis ofcertain information set out in the announcement. Appendix III details thoseKensington Directors giving irrevocable undertakings and Appendix IV containsdefinitions of certain expressions used in this summary and in the announcement. Enquiries: Investec Tel: +44 20 7597 5546Stephen Koseff, Chief Executive OfficerBernard Kantor, Managing DirectorBradley Fried, Chief Executive Officer, Investec Bank (UK) Limited Citi (financial adviser to Investec) +44 20 7986 4000Christopher WilliamsAndrew ReinigerDavid Plowman Merrill Lynch (corporate broker to Investec) +44 20 7996 1000Andrew FaircloughWill Smith Citigate (public relations adviser to Investec) +44 20 7638 9571Jonathan ClareTom Baldock Kensington +44 20 7297 7834Alison Hutchinson, Group Chief ExecutiveRoger Blundell, Group Finance Director Rothschild (financial adviser to Kensington) +44 20 7280 5000Robert LeitaoStuart Vincent Panmure Gordon (corporate broker to Kensington) +44 20 7614 8300Tim Linacre Financial Dynamics (public relations adviser to Kensington) +44 20 7269 7229Geoffrey Pelham-LaneCharles Gorman Citigroup Global Markets Limited ("Citi"), which is authorised and regulated inthe UK by the Financial Services Authority, is acting exclusively as financialadviser for Investec and no one else in connection with the Offer and will notbe responsible to anyone other than Investec for providing the protectionsafforded to clients of Citigroup Global Markets Limited or for providing advicein relation to the Offer or any other matters referred to in this announcement. Merrill Lynch International ("Merrill Lynch"), which is authorised and regulatedin the UK by the Financial Services Authority, is acting exclusively ascorporate broker for Investec and no one else in connection with the Offer andwill not be responsible to anyone other than Investec for providing theprotections afforded to clients of Merrill Lynch International or for providingadvice in relation to the Offer or any other matters referred to in thisannouncement. N M Rothschild & Sons Limited ("Rothschild"), which is authorised and regulatedin the UK by the Financial Services Authority, is acting exclusively asfinancial adviser for Kensington and no one else in connection with the Offerand will not be responsible to anyone other than Kensington for providing theprotections afforded to clients of Rothschild or for providing advice inrelation to the Offer or any other matters referred to in this announcement. Panmure Gordon (UK) Limited ("Panmure Gordon"), which is authorised andregulated in the UK by the Financial Services Authority, is acting exclusivelyas corporate broker for Kensington and no one else in connection with the Offerand will not be responsible to anyone other than Investec for providing theprotections afforded to clients of Panmure Gordon or for providing advice inrelation to the Offer or any other matters referred to in this announcement. Further information on the Offer This announcement is not intended to and does not constitute an offer orinvitation to purchase, sell or exchange any securities or the solicitation ofany vote or approval in any jurisdiction pursuant to the Offer or otherwise, norshall there be any purchase, sale or exchange of securities or such solicitationin any jurisdiction in which such offer, solicitation or sale or exchange wouldbe unlawful prior to registration or qualification under the laws of suchjurisdiction. This announcement does not constitute a prospectus or prospectus equivalentdocument. The Offer will be made solely through the Scheme Document, which will containthe full terms and conditions of the Scheme, including details of how to vote infavour of the Scheme. Kensington will prepare the Scheme Document to bedistributed to Kensington Shareholders. Kensington and Investec urge KensingtonShareholders to read the Scheme Document when it becomes available because itwill contain important information relating to the Offer. The availability of the Offer to Kensington Shareholders who are not resident inthe United Kingdom may be affected by the laws of the relevant jurisdictions inwhich they are located. Persons who are not resident in the United Kingdomshould inform themselves of, and observe, any applicable requirements. Furtherdetails in relation to overseas persons who are Kensington Shareholders will becontained in the Scheme Document. Any securities to be offered pursuant to the Offer as described in thisannouncement have not been and will not be registered under the US SecuritiesAct, or under the securities laws of any state, district or other jurisdictionof the United States, or of Canada, Japan and Australia. Accordingly, suchsecurities may not be offered, sold or delivered, directly or indirectly, in orinto such jurisdictions except pursuant to exemptions from applicablerequirements of such jurisdictions. The release, publication or distribution of this announcement in jurisdictionsother than the UK may be restricted by law and therefore any persons who aresubject to the laws of any jurisdiction other than the UK should informthemselves about, and observe, any applicable requirements. Any failure tocomply with the applicable restrictions may constitute a violation of thesecurities laws of any such jurisdiction. To the fullest extent permitted byapplicable law, the companies involved in the proposed Offer disclaim anyresponsibility or liability for the violation of such restrictions by anyperson. This announcement has been prepared for the purpose of complying with Englishlaw and the applicable rules and regulations of the Financial ServicesAuthority, the London Stock Exchange and the Panel and the information disclosedmay not be the same as that which would have been disclosed if this announcementhad been prepared in accordance with the laws of jurisdictions outside the UK. US Kensington Shareholders should note that the Scheme will relate to the sharesof a UK company that is a "foreign private issuer" as defined under the Rule3b-4 under the US Securities Exchange Act 1934, as amended (the "Exchange Act"),and will be governed by English law. Accordingly, neither the proxy solicitationnor the tender offer rules under the Exchange Act will apply to the Scheme.Moreover, the Scheme will be subject to the disclosure requirements andpractices applicable in the UK to schemes of arrangement, which differ from thedisclosure requirements of the US proxy solicitation rules and tender offerrules. Financial information included in the Scheme documentation will have beenprepared in accordance with accounting standards applicable in the UK that maynot be comparable to the accounting standards applicable to financial statementsof US companies. If Investec exercises its right to elect to effect the Offer byway of a Takeover Offer, the Offer will be made in compliance with applicable USsecurities laws and regulations. Persons receiving copies of this announcement and all other documents relatingto the Offer (including, without limitation, nominees, trustees and custodians)should observe the above restrictions and must not mail, or otherwise forward,distribute or send such documents in, into or from any such jurisdiction inviolation of these restrictions and applicable laws. Any person (including,without limitation, any custodian, nominee and trustee) who would, or otherwiseintends to, or who may have a contractual or legal obligation to, forward thisannouncement and/or the Scheme Document and/or any other related document to anyjurisdiction outside the United Kingdom should inform themselves of, andobserve, any applicable legal or regulatory requirements of their jurisdiction. Forward-looking statements This announcement, including information included or incorporated by referencein this announcement, may contain "forward-looking statements", including forthe purposes of the US Private Securities Litigation Reform Act of 1995,concerning the Investec Group and the Kensington Group. All statements otherthan statements of historical fact included in this announcement may be forwardlooking statements. Without limitation, any statements preceded or followed byor that include the words "will", "may", "should", "continue", "believes","expects", "intends", "anticipates" or words of similar substance or thenegative thereof, are forward-looking statements. The forward-looking statements are not guarantees of future performance andinvolve known and unknown risks and uncertainties and other factors which couldcause them to differ materially from the actual results, performance orachievements expressed or implied by such forward-looking statements. Many ofthese risks and uncertainties relate to factors that are beyond the companies'abilities to control or estimate precisely, such as future market conditions andthe behaviours of other market participants, and therefore undue reliance shouldnot be placed on such statements. Investec and Kensington assume no obligationand do not intend to update these forward-looking statements, except as requiredpursuant to applicable law. Dealing disclosure requirements Under the provisions of Rule 8.3 of the City Code, if any person is, or becomes,"interested" (directly or indirectly) in 1 per cent. or more of any class of"relevant securities" of Investec or Kensington, all "dealings" in any "relevantsecurities" of that company (including by means of an option in respect of, or aderivative referenced to, any such "relevant securities") must be publiclydisclosed by no later than 3.30 pm (London time) on the Business Day followingthe date of the relevant transaction. This requirement will continue until theEffective Date or the date on which the Scheme is withdrawn. If two or morepersons act together pursuant to an agreement or understanding, whether formalor informal, to acquire an "interest" in "relevant securities" of Investec orKensington, they will be deemed to be a single person for the purpose of Rule8.3. Under the provisions of Rule 8.1 of the City Code, all "dealings" in "relevantsecurities" of Investec or Kensington by Investec or Kensington, or by any oftheir respective "associates", must be disclosed by no later than 12.00 noon(London time) on the Business Day following the date of the relevanttransaction. A disclosure table, giving details of the companies in whose "relevant"securities "dealings" should be disclosed and the number of such securities inissue, can be found on the Panel's website at www.thetakeoverpanel.org.uk. "Interests in securities" arise, in summary, when a person has long economicexposure, whether conditional or absolute, to changes in the prices ofsecurities. In particular, a person will be treated as having an "interest" byvirtue of the ownership or control of securities, or by virtue of any option inrespect of, or derivative referenced to, securities. Terms in quotation marks are defined in the City Code, which can also be foundon the Panel's website. If you are in any doubt as to whether or not you arerequired to disclose a "dealing" under Rule 8, you should consult the Panel. Not for release, publication or distribution, in whole or part, in, into or fromany jurisdiction where to do so would constitute a violation of the relevantlaws of such jurisdiction. For immediate release 30 May 2007 RECOMMENDED SHARE OFFER for the acquisition of KENSINGTON GROUP PLC by INVESTEC PLC to be effected by means of a Scheme of Arrangement under section 425 of the Companies Act 1985 1. Introduction The combined boards of Investec plc ("Investec") and Investec Limited and theboard of Kensington Group plc ("Kensington") are pleased to announce that theyhave reached agreement on the terms of the recommended acquisition of the entireissued and to be issued share capital of Kensington by Investec (the "Offer"). The Investec Group is an international, specialist banking group that provides adiverse range of financial products and services to niche clients in threeprincipal markets, the United Kingdom, Australia and South Africa, as well ascertain other geographies. Founded in 1995, Kensington is a specialist lender offering first and secondcharge mortgages. Kensington specialises in lending to people who do not conformto the rigid criteria of traditional lenders, such as the self-employed,contractors, older borrowers, temporary employees and those with an adversecredit history. The Kensington Group includes two wholly-owned subsidiarieswhich trade as Kensington Mortgages and Kensington Secured Loans and its MoneyPartners joint venture; in addition, Kensington also operates in Ireland throughits subsidiary Start Mortgages Holding Limited and in Sweden through itsassociate BlueStep Bostadslan AB. Further information on the Investec Group is set out in paragraph 8 to thisannouncement and further information on the Kensington Group is set out inparagraph 9. 2. Summary of the Offer It is intended that the Offer be implemented by way of a scheme of arrangementunder section 425 of the Companies Act. Under the Offer, which will be subject to the Conditions set out in Appendix Ito this announcement and to the further terms and conditions to be set out inthe Scheme Document, Kensington Shareholders will receive: For each Kensington Share: 0.7 Investec Share plus a special dividend of 26 pence payable by Kensington The terms of the Offer value each Kensington Share at 519.5 pence and the entireissued and to be issued share capital of Kensington at approximately £283million, based on the closing share price of Investec of 705 pence per share on29 May 2007, being the last Business Day prior to the making of thisannouncement. The value of 519.5 pence for each Kensington Share represents a premium ofapproximately 6.0 per cent. over the closing price of 490 pence per KensingtonShare on 29 May 2007, being the last Business Day prior to the making of thisannouncement. The new Investec Shares to be issued under the Scheme are expected to representapproximately 5.8 per cent. of the aggregate issued share capital of Investecand Investec Limited as enlarged by the acquisition of Kensington. The new Investec Shares will be issued credited as fully paid and will rank paripassu in all respects with existing Investec Shares and will be entitled to alldividends and other distributions declared, made or paid by Investec byreference to a record date on or after the Effective Date, provided that the newInvestec Shares will not qualify for the final dividend of 13p per InvestecShare that the combined boards of Investec and Investec Limited have proposedfor the financial year ended 31 March 2007. The new Investec Shares will beissued on the Scheme becoming effective to Kensington Shareholders on theregister at the close of business on the day prior to the Effective Date.Kensington Shareholders will receive the special dividend of 26 pence perKensington Share payable by Kensington subject to the Scheme becoming effective.The special dividend will be paid within 14 days of the Effective Date toKensington Shareholders on the register at the close of business on the dayprior to the Effective Date. Fractions of new Investec Shares will not be allotted or issued pursuant to theOffer and will be disregarded. 3. Recommendation The Kensington Directors, who have been so advised by Rothschild, consider theterms of the Offer to be fair and reasonable. In providing its advice to theKensington Directors, Rothschild has taken into account the commercialassessments of the Kensington Directors. Accordingly, the board of Kensington has unanimously agreed to recommend thatKensington Shareholders vote in favour of the resolutions to be proposed at theCourt Meeting and the Extraordinary General Meeting, as they have irrevocablyundertaken to do in respect of their own registered shareholdings, and todirect, where possible, or otherwise use their reasonable endeavours to arrange,that the registered holder should vote in favour in relation to their otherbeneficial shareholdings. The aggregate beneficial holdings of the KensingtonDirectors amount to 199,566 Kensington Shares, representing approximately 0.4per cent. of Kensington's entire issued share capital. 4. Background to and reasons for the Offer The Investec Group's mission is to be a distinctive specialist banking group.The Investec Group does not seek to be all things to all people and aims tobuild well-defined, value-added businesses that serve the needs of select marketniches where it can compete effectively. This distinction is embodied in theInvestec Group's entrepreneurial culture, which is balanced by a strong riskmanagement discipline, client-centric approach and ability to be nimble,flexible and innovative. The Investec Group aims to pursue a long-term sustainable growth strategy. TheInvestec Group aims to deliver on its stated financial targets, through a focuson organically enhancing and expanding its position where it has significantscale within its five core areas of activity and three core geographic areas ofoperation. In addition the Investec Group has continued to evaluate and consider"bolt-on" acquisition opportunities that deliver competitive advantages quicklyand efficiently.. In this regard, a core area of focus for the Investec Group has been thedevelopment of specialist principal finance and securitisation activities in theUK, Europe and South Africa. These activities are conducted by Investec'sCapital Markets (formerly known as Treasury and Specialised Finance) division,and have primarily focused on: •the securitisation of assets originated by Investec's Private Banking and Capital Markets division; •structuring, advising on and implementing third party securitisations; and •the development of relationships with third party originators in order to facilitate the warehousing and subsequent securitisation of third party assets. Investec has built its principal finance and securitisation activities over thepast two years through the recruitment of a dedicated team and the establishmentof exclusive relationships with two non-conforming mortgage originators,Infinity Mortgages and Unity Homeloans Group Limited. Investec has a holding of25 per cent in the latter and has provided these lenders with access towarehouse funding. In addition to mortgages originated through Infinity andUnity, Investec has also acquired mortgage portfolios from Amber Homeloans inorder to facilitate the securitisation of these assets. Investec has securitisedmortgages worth £550 million since the launch of the franchise. To date Investechas completed £3 billion of securitisations in its UK principal finance businessacross the entire range of activities. The Capital Markets division has successfully leveraged its platforms andenhanced its capabilities through the introduction of a number of newinitiatives, such as its principal finance and securitisation activities, andachieved a 55 per cent compound annual growth rate in operating profit beforetax over the past four financial years. In the financial year ended 31 March2007, the Capital Markets division posted a significant increase in operatingprofit before goodwill and non-operating items of 75.3 per cent to £117.3million (2006: £66.9 million). Growth was underpinned by a solid performancefrom the division's advisory, structuring, asset creation, trading anddistribution activities, with average advances increasing by 22.2 per cent to£3.0 billion (2006: £2.5 billion). A number of the businesses that have beenestablished over the past two years have generated substantial revenue and haveincreased the scale of the franchise.. The combined boards of Investec and Investec Limited believe that the Offeroffers Investec an attractive bolt-on acquisition that, based on the lastreported full year financial results of both companies, would have represented9 per cent. of the Investec Group's total assets (excluding loans subject tosecuritisation). In addition, Kensington adds a strong mortgage originationplatform and a significantly enhanced presence in the non-standard mortgagemarket in the UK, Ireland and Sweden, and will provide Investec's principalfinance and securitisation activities with a number of attractive opportunities. Investec has a high regard for the Kensington franchise, in particular: • Kensington's strong market position, established distribution capability and innovative product range has enabled it to complete new advances in excess of £4 billion in the financial year ended 30 November 2006; • Kensington's recognised brand and market presence, coupled with its prudent risk management; and • Kensington's track record for service excellence, which has been re-confirmed by Fitch at the highest residential mortgage special servicer rating in Europe granted to date. Investec believes that the transaction represents a compelling strategic fit. Itis a bolt-on acquisition, delivering increased scale in a market in which it isalready present. Investec has undertaken an extensive due diligence of Kensington's existingmortgage book, and operations, and is confident of Kensington's future prospectsunder its ownership. Investec will provide Kensington with access to a strongerbalance sheet, subject to strict allocation criteria, access to lower fundingcosts and capital markets expertise. Investec has identified tangible opportunities for value creation, including theelimination of head office costs and duplicated functions,, in addition to theinitiatives announced by Kensington today, as well as funding cost benefits. Inaddition, leveraging Investec's stronger balance sheet will provide the optionto write higher quality business and to reduce the proportion of whole loansales. Investec believes that integration will be a straightforward process,leveraging Investec's extensive integration experience. The combined boards of Investec and Investec Limited expect the acquisition ofKensington to be earnings enhancing before synergies in the first full yearfollowing completion. This statement should not be interpreted to mean that pershare earnings of the Investec Group for the current or future financial years,or those of the combined group, will necessarily match or exceed the historicalpublished per share earnings of the Investec Group. There will be no changes tothe Investec Group's financial objectives as a result of this transaction. 5. Background to and reasons for the recommendation On 19 February 2007, Kensington announced that it was continuing its review ofthe group considering the best options to maximise shareholder value and on 23March 2007 it confirmed that it was continuing in discussions with a number ofparties who had approached it. The Kensington Directors believe that Investec'soffer secures Kensington's future as part of a stronger group with complementarycapabilities at a fair price. The specialist mortgage market has become increasingly competitive, particularlyfrom providers with access to lower cost funding Together with the high level of"teaser" discounts in the UK market - which reduce the margins paid by customersin the initial lending period - this has put significant downward pressure onnew business margins, whilst at the same time, customer behaviour has changedwith more borrowers waiting until the end of the initial lending period beforeswitching to another product or lender. This has reduced Kensington's incomefrom early redemption charges which has historically been a significant part ofKensington's income. Kensington expects that there will be continued pressure onthe Kensington Group's net interest margin as existing higher margin mortgagesredeem and are replaced by the lower margin loans currently being written. Details on Kensington's trading for the five months ended 30 April 2007 werereleased separately by Kensington today. In that announcement, Kensington statedthat "the board is cautious about the short-term prospects for the Group andexpects 2007 total revenue to be significantly below 2006." As mentioned in that release, the board of Kensington believes that Kensington'scost base is too high as a percentage of income. In addition, restrictions underKensington's warehouse funding arrangements have limited Kensington's ability todevelop new product lines. As a result, Kensington has announced today a numberof immediate important initiatives: • a cost reduction programme targeting annualised savings in the region of £8 million to be delivered by the end of two years, including the elimination of certain duplicated functions across the Kensington Group and the automation of certain business processes; • a £9 million capital investment in information technology to increase automation, enhance efficiency and improve competitiveness at the point of sale; and • entry into a number of market segments where, subject to making appropriate funding arrangements, Kensington will be able to leverage its existing distribution platform and underwriting skills. Kensington's principal funding source of working capital has been to raise debtsecured against the Kensington Group's retained interests in its securitisedmortgage book. This funding has been used to support writing new business,contribute to Kensington overheads and finance investments in new initiatives.Historically, on completion of a securitisation Kensington was able to raisedebt to cover all of the origination costs of the mortgages and thesecuritisation costs including a contribution of collateral to thesecuritisation vehicles. As the value of new business has reduced, Kensington isno longer able to raise sufficient debt to cover all of these initial costs andtherefore requires working capital to be found from other sources. As a resultof this financing constraint, Kensington has increased the proportion of wholeloan sales which generate cash on disposal. The Kensington Directors expect thatin the region of 60 per cent. of Kensington's lending in 2007 (approximately 25per cent. in 2006) will be sold. One consequence of the business review is that the board of Kensington has cometo the view that as an independent entity, the Kensington Group may not be ableto raise sufficient capital in the debt markets to support significant growth inthe size of the managed loan book. The Kensington Directors believe that the combination of Investec's strongerbalance sheet, access to lower cost of funding and capital markets expertise,together with Kensington's recognised brand, established distribution,innovative product range, prudent risk management and track record for excellentservice will create a strong combination for the growing non-standard mortgagemarketplace. As the consideration for Kensington is primarily in the form of shares,Kensington Shareholders will have an opportunity to share in value created fromthe combination and will also benefit from Investec's broader franchise across arange of markets and geographies. 6. Directors' irrevocable undertakings Each of Peter Birch, Alison Hutchinson and Gareth Jones, who are the onlyKensington Directors holding Kensington Shares, has irrevocably undertaken tovote in favour of the resolutions to be proposed at the Court Meeting and theExtraordinary General Meeting in respect of their registered holdings ofKensington Shares, and to direct, where possible, or otherwise use theirreasonable endeavours to arrange, that the registered holder should vote infavour in relation to their other beneficial shareholdings. Further details areset out in Appendix III to this announcement. 7. Implementation Agreement Kensington and Investec have today entered into the Implementation Agreementwhich provides, among other things, for the implementation of the Scheme andcontains assurances and confirmations between the parties, including provisionsto implement the Scheme on a timely basis and governing the conduct of thebusiness of Kensington. In particular, the Implementation Agreement contains thefollowing principal provisions: Termination provisions The Implementation Agreement may, subject to compliance with the City Code andthe requirements of the Panel, terminate in certain circumstances, including: (a) in the event such termination is agreed in writing betweenKensington and Investec at any time before the Effective Date; (b) upon service of a written notice by one party to the otherparty in the event of a material breach by the other party of any of theobligations set out in the Implementation Agreement which, if capable of remedy,it has failed to remedy within seven Business Days of a written notice from theother party requesting the same; (c) upon the delivery of a notice in writing from one party tothe other if it is announced by or on behalf of Kensington that the KensingtonDirectors have determined not to give, or to withdraw, modify or qualify itsrecommendation of the Offer; (d) upon the Offer lapsing; (e) if an Alternative Proposal (or any amendment, variation orrevision of such Alternative Proposal) becomes or is declared whollyunconditional or is completed or a scheme in connection with such AlternativeProposal becomes Effective; (f) if the Kensington Shareholders do not vote to approve theAcquisition at the Court Meeting or the EGM Resolution is not approved at theExtraordinary General Meeting; (g) if the Court Order(s) are not granted or (save as the partiesmay otherwise agree in writing) the Effective Date has not occurred on or before28 September 2007; and (h) if Investec elects, in accordance with the provisions of theImplementation Agreement, to implement the Offer by way of Takeover Offer, ifthe Takeover Offer, once announced under Rule 2.5 of the City Code, lapses inaccordance with its terms or is withdrawn or not made. Break fee arrangements In the event that the Implementation Agreement terminates after the release ofthis announcement as a result of (a) a material beach by Kensington of any ofthe obligations set out in the Implementation Agreement which, if capable ofremedy, it has failed to remedy within seven Business Days of a written noticefrom Investec requesting the same; or (b) the occurrence of any of the eventscontemplated by (i) paragraph (c) or (e) above; or (ii) paragraph (f) or (g)above arising as a result of a material breach by Kensington falling within (a),then Kensington shall pay to Investec a break fee of 1 per cent of the value ofthe Offer. Further information regarding the Implementation Agreement will be set out inthe Scheme Document. 8. Information on the Investec Group The Investec Group is an international, specialist banking group that provides adiverse range of financial products and services to niche clients in threeprincipal markets, the UK, Australia and South Africa, as well as certain othergeographies. The Investec Group comprises the following business divisions: • Investment Banking • Capital Markets • Private Client Activities • Asset Management • Property Activities Since the Investec Group was founded in South Africa in 1974, it has expandedthrough a combination of substantial organic growth and a series of strategicacquisitions in South Africa, the UK and Australia, and other geographies inwhich the Investec Group operates. The Investec Group's strategic goals andobjectives are motivated by the desire to develop an efficient and integratedbusiness on an international scale through the active pursuit of clearlyestablished core competencies in the group's principal business areas. TheInvestec Group's philosophy has been to build well-defined, value-addedbusinesses focusing on serving the needs of select market niches where the groupcan compete effectively. The Investec Group employs approximately 5,400 peopleworld-wide. In July 2002, the Investec Group implemented a dual listed company structurewith listings on the London and Johannesburg Stock Exchanges. The combinedgroup's current market capitalisation is approximately £4.3 billion. For the year ended 31 March 2007, the Investec Group reported total profitbefore tax (before goodwill and exceptional items) of £466.6 million, assets of£26.3 billion and total capital resources of £2.7 billion. 9. Information on the Kensington Group Founded in 1995, Kensington is a specialist lender offering first and secondcharge mortgages. Kensington specialises in lending to people who do not conformto the rigid criteria of traditional lenders, such as the self-employed,contractors, older borrowers, temporary employees and those with adverse credithistory. The Kensington Group includes two wholly-owned subsidiaries which trade asKensington Mortgages and Kensington Secured Loans and its Money Partners jointventure; its subsidiary Start Mortgages in Ireland; and its associate Bluestepin Sweden. Kensington completed £4,066 million of loans in 2006 and has completed over150,000 loans and advanced more than £14 billion of mortgages since 1995. As at30 April, 2007, Kensington had mortgage assets under management of £7.1 billion. For the financial year ended 30 November 2006, Kensington reported total revenueof £202.0 million and generated group profit before tax and goodwill impairmentof £65.2 million and earnings per share (excluding tax adjustments in respect ofprior periods and goodwill impairment) of 86.6 pence. Reported profit beforetaxation amounted to £49.1 million, earnings attributable to shareholdersamounted to £36.3 million and basic earnings per share amounted to 69.5 pence.Kensington reported net assets of £180.3 million as at 30 November 2006 andtotal assets of £8,101.4 million. Excluding mortgage loans subject tosecuritisation less provision for impairment, total assets as at 30 November2006 amounted to £2,481.6 million. 10. Management and employees of Kensington Investec attaches great importance to the skills and experience of the currentmanagement team and employees of Kensington. Accordingly, Investec intends thatAlison Hutchinson and other members of the management team will continue to beinvolved in the ongoing business following the completion of the Offer. Theboard of Investec confirms that it intends to safeguard the existing employmentrights, including pension rights, of all employees of Kensington. 11. Kensington Share Schemes At the same time as, or as soon as practicable following, publication of theScheme Document, Kensington will write to participants in the Kensington ShareSchemes to inform them of the effect of the Offer on their rights under theKensington Share Schemes and to set out appropriate proposals to the holders ofoptions. 12. Structure of the Offer The Offer is to be effected by means of a scheme of arrangement betweenKensington and its Shareholders under section 425 of the Companies Act. Theprocedure involves an application by Kensington to the Court to sanction theScheme and to confirm the cancellation of the existing Scheme Shares and theissue of new Kensington Shares to Investec, in consideration for which SchemeShareholders will receive new Investec Shares. The cancellation and subsequentissue of new Kensington Shares to Investec will result in Kensington becoming awholly-owned subsidiary of Investec. To become Effective, the Scheme requires, amongst other things, the approval ofa majority in number of the Kensington Shareholders present and voting (andentitled to vote) at the Court Meeting, either in person or by proxy, andrepresenting not less than three-fourths in value of the relevant KensingtonShares voted at the Court Meeting (or any adjournment thereof), together withthe sanction of the Court and the passing of the resolutions necessary toimplement the Scheme and sanction the related capital reduction at theExtraordinary General Meeting. The Conditions to the Offer are set out in Appendix I to this announcement. Once the necessary approvals from Kensington Shareholders have been obtained andthe other Conditions have been satisfied or (where applicable) waived, followingsanction of the Court, upon delivery to and, in the case of the associatedreduction of capital, registration of the Court Order by the Registrar ofCompanies of England and Wales the Scheme and associated reduction of capitalwill become Effective. Upon the Scheme becoming Effective, it will be binding onall Kensington Shareholders, irrespective of whether or not they attended orvoted at the Court Meeting or the Extraordinary General Meeting, or those whocould not be traced. The Scheme is expected to become Effective by the end ofAugust 2007. It is expected that, following the Effective Date, Kensington's listing on theOfficial List of the UK Listing Authority and admission to trading on the LondonStock Exchange will be cancelled and Kensington will be re-registered as aprivate company under the relevant provisions of the Companies Act. On theEffective Date, share certificates in respect of Kensington Shares will cease tobe valid and entitlements to Kensington's Shares held within the CREST Systemwill be cancelled. Applications will be made to the UK Listing Authority for the new InvestecShares to be issued pursuant to the Scheme to be admitted to the Official Listand to trading on the London Stock Exchange. A detailed timetable will be included in the Scheme Document. 13. Disclosure of interests in Kensington Neither Investec nor any of the directors of Investec nor, so far as thedirectors of Investec are aware, any other person acting in concert withInvestec for the purposes of the Offer, owns, controls, holds, or has borrowedor lent any Kensington Shares or any securities convertible or exchangeable intoKensington Shares or rights to subscribe for or purchase or options (includingtraded options) in respect of, or derivatives referenced to, any such KensingtonShares. In view of the requirement for confidentiality, Investec have not madeany enquiries in respect of certain parties who may be deemed by the Panel to beacting in concert with either of them for the purposes of the Offer. Neither Investec nor, so far as Investec is aware, any person acting in concertwith Investec, has entered into any arrangement in relation to relevantKensington securities. For these purposes, "arrangement" includes any indemnityor option arrangement, any agreement or understanding, formal or informal, ofwhatever nature, relating to relevant Kensington securities which may be aninducement to deal or refrain from dealing in such securities. 14. Overseas shareholders The availability of the Offer to persons not resident in the United Kingdom maybe prohibited or affected by the laws of the relevant jurisdictions. Suchpersons should inform themselves about, and observe, any applicablerequirements. Further details in relation to overseas shareholders will becontained in the Scheme Document. 15. General Investec reserves the right to elect to implement the acquisition of theKensington Shares by way of a Takeover Offer as an alternative to the Scheme.Any such Takeover Offer will be subject to a 90 per cent. acceptance conditionand will otherwise be implemented on the same terms (subject to appropriateamendments), so far as applicable, as those which would apply to the Scheme andin compliance with applicable laws and regulations. The Offer will be made on the terms and subject to the Conditions set out inAppendix I to this announcement and to be set out in the Scheme Document andForms of Proxy. The Scheme Document will include full details of the Scheme,together with notices of the Court Meeting and the Extraordinary GeneralMeeting, the expected timetable and the Forms of Proxy. These will be despatchedto Kensington Shareholders and for information only, to holders of optionsgranted under Kensington Share Schemes, in due course. The Offer will begoverned by English law. The Scheme will comply with the applicable rules andrequirements of the City Code, the Panel, the London Stock Exchange and theFinancial Services Authority and all applicable securities laws. In deciding whether or not to vote in favour of the Scheme, KensingtonShareholders should rely on the information contained in, and follow theprocedures described in, the Scheme Document and the Forms of Proxy. In accordance with Rule 2.10 of the City Code, as at the date of thisannouncement, the issued share capital of Kensington comprises 52,606,507Kensington Shares. Unexercised options are outstanding over a total of 1,853,719Kensington Shares. Details of the sources of information and basis of calculation of certaininformation set out in this announcement are included in Appendix II. Details ofthe directors' irrevocable undertakings received by Investec in relation to theOffer are set out in Appendix III. Certain expressions used in this announcementare set out in Appendix IV. Enquiries: Investec Tel: +44 20 7597 5546Stephen Koseff, Chief Executive OfficerBernard Kantor, Managing DirectorBradley Fried, Chief Executive Officer, Investec Bank (UK) Limited Citi (financial adviser to Investec) +44 20 7986 4000Christopher WilliamsAndrew ReinigerDavid Plowman Merrill Lynch (corporate broker to Investec) +44 20 7996 1000Andrew FaircloughWill Smith Citigate (public relations adviser to Investec) +44 20 7638 9571Jonathan ClareTom Baldock Kensington +44 20 7297 7834Alison Hutchinson, Group Chief ExecutiveRoger Blundell, Group Finance Director Rothschild (financial adviser to Kensington) +44 20 7280 5000Robert LeitaoStuart Vincent Panmure Gordon (corporate broker to Kensington) +44 20 7614 8300Tim Linacre Financial Dynamics (public relations adviser to Kensington) +44 20 7269 7229Geoffrey Pelham-LaneCharles Gorman Citigroup Global Markets Limited ("Citi"), which is authorised and regulated inthe UK by the Financial Services Authority, is acting exclusively as financialadviser for Investec and no one else in connection with the Offer and will notbe responsible to anyone other than Investec for providing the protectionsafforded to clients of Citi or for providing advice in relation to the Offer orany other matters referred to in this announcement. Merrill Lynch International ("Merrill Lynch"), which is authorised and regulatedin the UK by the Financial Services Authority, is acting exclusively ascorporate broker for Investec and no one else in connection with the Offer andwill not be responsible to anyone other than Investec for providing theprotections afforded to clients of Merrill Lynch International or for providingadvice in relation to the Offer or any other matters referred to in thisannouncement. N M Rothschild & Sons Limited ("Rothschild"), which is authorised and regulatedin the UK by the Financial Services Authority, is acting exclusively asfinancial adviser for Kensington and no one else in connection with the Offerand will not be responsible to anyone other than Kensington for providing theprotections afforded to clients of Rothschild or for providing advice inrelation to the Offer or any other matters referred to in this announcement. Panmure Gordon (UK) Limited ("Panmure Gordon"), which is authorised andregulated in the UK by the Financial Services Authority, is acting exclusivelyas corporate broker for Kensington and no one else in connection with the Offerand will not be responsible to anyone other than Investec for providing theprotections afforded to clients of Panmure Gordon or for providing advice inrelation to the Offer or any other matters referred to in this announcement. Further information on the Offer This announcement is not intended to and does not constitute an offer orinvitation to purchase, sell or exchange any securities or the solicitation ofany vote or approval in any jurisdiction pursuant to the Offer or otherwise, norshall there be any purchase, sale or exchange of securities or such solicitationin any jurisdiction in which such offer, solicitation or sale or exchange wouldbe unlawful prior to registration or qualification under the laws of suchjurisdiction. This announcement does not constitute a prospectus or prospectus equivalentdocument. The Offer will be made solely through the Scheme Document, which will containthe full terms and conditions of the Scheme, including details of how to vote infavour of the Scheme. Any acceptance or other responses to the Offer should bemade only on the basis of the information in the Scheme Document. Kensingtonwill prepare the Scheme Document to be distributed to Kensington Shareholders.Kensington and Investec urge Kensington Shareholders to read the Scheme Documentwhen it becomes available because it will contain important information relatingto the Offer. The availability of the Offer to Kensington Shareholders who are not resident inthe United Kingdom may be affected by the laws of the relevant jurisdictions inwhich they are located. Persons who are not resident in the United Kingdomshould inform themselves of, and observe, any applicable requirements. Furtherdetails in relation to overseas persons who are Kensington Shareholders will becontained in the Scheme Document. Any securities to be offered pursuant to the Offer as described in thisannouncement have not been and will not be registered under the US SecuritiesAct, or under the securities laws of any state, district or other jurisdictionof the United States, or of Canada, Japan or Australia. Accordingly, suchsecurities may not be offered, sold or delivered, directly or indirectly, in orinto such jurisdictions except pursuant to exemptions from applicablerequirements of such jurisdictions. The release, publication or distribution of this announcement in jurisdictionsother than the UK may be restricted by law and therefore any persons who aresubject to the laws of any jurisdiction other than the UK should informthemselves about, and observe, any applicable requirements. Any failure tocomply with the applicable restrictions may constitute a violation of thesecurities laws of any such jurisdiction. To the fullest extent permitted byapplicable law, the companies involved in the proposed Offer disclaim anyresponsibility or liability for the violation of such restrictions by anyperson. This announcement has been prepared for the purpose of complying with Englishlaw and the applicable rules and regulations of the Financial ServicesAuthority, the London Stock Exchange and the Panel and the information disclosedmay not be the same as that which would have been disclosed if this announcementhad been prepared in accordance with the laws of jurisdictions outside the UK. US Kensington Shareholders should note that the Scheme will relate to the sharesof a UK company that is a "foreign private issuer" as defined under the Rule3b-4 under the US Securities Exchange Act 1934, as amended (the "Exchange Act"),and will be governed by English law. Accordingly, neither the proxy solicitationnor the tender offer rules under the Exchange Act will apply to the Scheme.Moreover, the Scheme will be subject to the disclosure requirements andpractices applicable in the UK to schemes of arrangement, which differ from thedisclosure requirements of the US proxy solicitation rules and tender offerrules. Financial information included in the Scheme documentation will have beenprepared in accordance with accounting standards applicable in the UK that maynot be comparable to the accounting standards applicable to financial statementsof US companies. If Investec exercises its right to elect to effect the Offer byway of a Takeover Offer, the Offer will be made in compliance with applicable USsecurities laws and regulations. Persons receiving copies of this announcement and all other documents relatingto the Offer (including, without limitation, nominees, trustees and custodians)should observe the above restrictions and must not mail, or otherwise forward,distribute or send such documents in, into or from any such jurisdiction inviolation of these restrictions and applicable laws. Any person (including,without limitation, any custodian, nominee and trustee) who would, or otherwiseintends to, or who may have a contractual or legal obligation to, forward thisannouncement and/or the Scheme Document and/or any other related document to anyjurisdiction outside the United Kingdom should inform themselves of, andobserve, any applicable legal or regulatory requirements of their jurisdiction. Forward-looking statements This announcement, including information included or incorporated by referencein this announcement, may contain "forward-looking statements", including forthe purposes of the US Private Securities Litigation Reform Act of 1995,concerning the Investec Group and the Kensington Group. All statements otherthan statements of historical fact included in this announcement may be forwardlooking statements. Without limitation, any statements preceded or followed byor that include the words "will", "may", "should", "continue", "believes","expects", "intends", "anticipates" or words of similar substance or thenegative thereof are forward-looking statements. The forward-looking statements are not guarantees of future performance andinvolve known and unknown risks and uncertainties and other factors which couldcause them to differ materially from the actual results, performance orachievements expressed or implied by such forward-looking statements. Many ofthese risks and uncertainties relate to factors that are beyond the companies'abilities to control or estimate precisely, such as future market conditions andthe behaviours of other market participants, and therefore undue reliance shouldnot be placed on such statements. Investec and Kensington assume no obligationand do not intend to update these forward-looking statements, except as requiredpursuant to applicable law. Dealing disclosure requirements Under the provisions of Rule 8.3 of the City Code, if any person is, or becomes,"interested" (directly or indirectly) in 1 per cent. or more of any class of"relevant securities" of Investec or Kensington, all "dealings" in any "relevantsecurities" of that company (including by means of an option in respect of, or aderivative referenced to, any such "relevant securities") must be publiclydisclosed by no later than 3.30 pm (London time) on the Business Day followingthe date of the relevant transaction. This requirement will continue until theEffective Date or the date on which the Scheme is withdrawn. If two or morepersons act together pursuant to an agreement or understanding, whether formalor informal, to acquire an "interest" in "relevant securities" of Investec orKensington, they will be deemed to be a single person for the purpose of Rule8.3. Under the provisions of Rule 8.1 of the City Code, all "dealings" in "relevantsecurities" of Investec or Kensington by Investec or Kensington, or by any oftheir respective "associates", must be disclosed by no later than 12.00 noon(London time) on the Business Day following the date of the relevanttransaction. A disclosure table, giving details of the companies in whose "relevant"securities "dealings" should be disclosed and the number of such securities inissue, can be found on the Panel's website at www.thetakeoverpanel.org.uk. "Interests in securities" arise, in summary, when a person has long economicexposure, whether conditional or absolute, to changes in the prices ofsecurities. In particular, a person will be treated as having an "interest" byvirtue of the ownership or control of securities, or by virtue of any option inrespect of, or derivative referenced to, securities. Terms in quotation marks are defined in the City Code, which can also be foundon the Panel's website. If you are in any doubt as to whether or not you arerequired to disclose a "dealing" under Rule 8, you should consult the Panel. Appendix I Conditions to and Certain Further Terms of the Offer The Offer is conditional upon the Scheme becoming Effective by 28 September 2007or such later date as Investec and Kensington may, with the consent of thePanel, agree and (if required) the Court may allow. 1. The Scheme will be subject to the following conditions: (a) the approval of the Scheme by a majority in number,representing not less than three-fourths in value, of the holders of KensingtonShares present and voting, whether in person or by proxy, at the Court Meeting(or any adjournment thereof); (b) the EGM Resolution being duly passed by the requisitemajority at the Extraordinary General Meeting (or any adjournment thereof); and (c) the sanction of the Scheme (with or without modification onterms acceptable to Investec and Kensington) and the confirmation of theassociated capital reduction by the Court, an office copy of the Court Order andthe minute of such reduction attached thereto being delivered for registrationto the Registrar of Companies and, in relation to the capital reduction, theCourt Order being registered by him. 2. In addition, Investec and Kensington have agreed that,subject to the requirements of the Panel in accordance with the City Code, theOffer will be conditional upon the following matters and, accordingly, the CourtOrder sanctioning the Scheme will not be delivered to the Registrar of Companiesfor registration unless such Conditions have been satisfied or waived: (a) the first to occur of the following: (i) the Competition Authority in Ireland ("CompetitionAuthority") having furnished to Investec and Kensington a copy of itsdetermination, pursuant to section 21(2)(a) or section 22(3)(a) of the (Irish)Competition Act, 2002, as amended ("Competition Act"), that the Offer may be putinto effect; or (ii) the period specified in section 21(2) of the Competition Act(as extended, where relevant, pursuant to section 21(4) of that Act) havingelapsed without the Competition Authority having informed Investec andKensington of the determination (if any) it has made under section 21(2) of thatAct in relation to the Offer; or (iii) the Competition Authority having furnished to Investec andKensington a copy of its determination, pursuant to section 22(3)(c) of theCompetition Act, that the Offer may be put into effect subject to conditionsspecified by the Competition Authority being complied with (such conditionsbeing acceptable to Investec and Kensington); or (iv) the period specified in section 22(4)(a) of the CompetitionAct having elapsed without the Competition Authority having made a determinationunder section 22(3) of the Competition Act in relation to the Offer; (b) the Financial Services Authority having formally (andunconditionally) approved Investec (and any relevant affiliate of Investec whichwould be deemed to be acquiring control (as such term is defined in the FSMA))as a controller of all and any relevant entities within the Kensington Groupwhich are authorised in the UK by the Financial Services Authority under theFSMA (pursuant to the provisions of Part XII of the FSMA); (c) the South African Reserve Bank having formally (andunconditionally) approved the acquisition of Kensington by Investec; (d) the Investec Shares to be issued pursuant to the Scheme beingadmitted to the Official List of the UK Listing Authority (the "UKLA") and beingadmitted to trading on the London Stock Exchange or, if Investec and Kensingtonso determine and subject to the consent of the Panel, the UKLA agreeing to admitsuch shares to the Official List and the London Stock Exchange agreeing to admitsuch shares to trading subject only to (i) the allotment of such shares and/or(ii) the Scheme becoming effective; (e) no Irish Competition Authority or any other court orcompetition, antitrust or supervisory body or other government, governmental orregulatory agency or body in each case in any jurisdiction and whose consent orclearance is required in order for the Offer to proceed (each a "RelevantAuthority") having decided to take, institute, implement or threaten any action,proceeding, suit, investigation, enquiry or reference, or having enacted, madeor proposed, and there not continuing to be outstanding, any statute,regulation, notice, order or decision that would or might be reasonably expectedto: (i) make the Offer or the acquisition or proposed acquisitionof any shares in, or control or management of, Kensington by Investec or anymember of the Investec Group void, unenforceable and/or illegal in anyjurisdiction or directly or indirectly prohibit, restrain, prevent or otherwiserestrict, materially delay or otherwise interfere with the implementation of, orimpose material additional conditions or obligations with respect to, orotherwise challenge or interfere with, the Offer or the acquisition of anyshares in, or control or management of, Kensington by any member of the InvestecGroup; (ii) require, prevent or delay the divestiture (or alter theterms of any proposed divestiture) by the Investec Group or the Kensington Groupof all or any part of their respective businesses, assets or properties, orimpose any limitation on their ownership of any of their respective assets orproperties or any part thereof; (iii) impose any limitation on, or result in any delay in, theability of any member of the Investec Group to acquire or hold or exerciseeffectively, directly or indirectly, all or any rights of ownership of shares orother securities (or the equivalent) in, or to exercise management control over,any member of the Kensington Group or on the ability of any member of theKensington Group to hold or exercise effectively, directly or indirectly, all orany rights of ownership of shares or other securities (or the equivalent) in, orto exercise management control over, any other member of the Kensington Group; (iv) other than in the implementation of the Offer, require anymember of the Investec Group or of the Kensington Group to acquire or offer toacquire any shares or other securities (or the equivalent) or interest in anymember of the Kensington Group or any member of the Investec Group; (v) impose any material limitation on the ability of any memberof the Investec Group to integrate or co-ordinate its business, or any part ofit, with the businesses or any part of the businesses of any member of theKensington Group or conduct all or part of their respective businesses followingthe implementation of the Offer; or (vi) otherwise adversely affect the business, assets, financial ortrading position or profits or prospects of any member of the Kensington Group, in each case to an extent which is material in the context of the Offer or theInvestec Group taken as a whole, and all applicable waiting and other timeperiods during which any such Relevant Authority could decide to take,institute, implement or threaten any such action, proceeding, suit,investigation, enquiry or reference, or take any other step under the laws ofany jurisdiction, having expired, lapsed or been terminated; (f) all necessary filings, applications and/or notificationshaving been made and all appropriate waiting periods (including any extensionsthereof) under any applicable legislation or regulation of any jurisdictionhaving expired, lapsed or been terminated, in each case in respect of the Offerand the acquisition of any shares or other securities in, or control of,Kensington by Investec or any member of the Investec Group and allauthorisations, orders, grants, recognitions, confirmations, licences, consents,clearances, permissions and approvals ("authorisations") necessary in anyjurisdiction for or in respect of the Offer and the proposed acquisition of anyshares or other securities in, or control or management of, Kensington byInvestec or any member of the Investec Group being obtained in terms and in aform satisfactory to Investec, acting reasonably, from appropriate RelevantAuthorities or from any persons or bodies with whom any member of the InvestecGroup or the Kensington Group has entered into contractual arrangements, andsuch authorisations, together with all authorisations necessary or appropriatefor any member of the Kensington Group to carry on its business, remaining infull force and effect, in each case where the absence of such authorisationwould have a material adverse effect on the Kensington Group taken as a whole orthe ability of the Investec Group to implement the Offer, and there being nonotice or other intimation of any intention to revoke, suspend, restrict ormodify or not to renew any of the same having been made; (g) save as disclosed to Investec by or on behalf of Kensington,or as publicly announced by Kensington by the delivery of an announcement to aRegulatory Information Service before the time of the announcement of the Offer(the "Announcement"), or as disclosed in the Annual Report and Accounts for thefinancial year ended 30 November 2006, there being no provision of anyagreement, arrangement, licence, permit, franchise or other instrument to whichany member of the Kensington Group is a party, or by or to which any such memberor any of its assets is or may be bound, entitled or subject, which, as a directresult of the Offer or the acquisition or proposed acquisition by any member ofthe Investec Group of any shares or other securities in, or change in thecontrol or management of, Kensington, would or might result in: (i) any monies borrowed by, or any other indebtedness (actualor contingent) of, or any grant available to, any such member of the KensingtonGroup becoming repayable or capable of being declared repayable immediately orearlier than the stated repayment date, or the ability of such member of theKensington Group to borrow monies or incur any indebtedness being or becomingcapable of being withdrawn or inhibited; (ii) the creation or enforcement of any mortgage, charge or othersecurity interest over the whole or any part of the business, property or assetsof any such member of the Kensington Group or any such security interest(whenever arising or having arisen) becoming enforceable; (iii) any assets or interest of any such member of the KensingtonGroup being or falling to be disposed of or charged, or any right arising underwhich any such asset or interest could be required to be disposed of or charged; (iv) the interest or business of any such member of the KensingtonGroup in or with any other person, firm or company (or any agreements orarrangements relating to such interest or business) being terminated oradversely affected; (v) any such member of the Kensington Group ceasing to be able tocarry on business under any name under which it presently does so; (vi) the value of any such member of the Kensington Group or itsfinancial or trading position or prospects being prejudiced or adverselyaffected; (vii) any such agreement, arrangement, licence, permit, franchise orother instrument or the rights, liabilities, obligations or interests of anysuch member being terminated or adversely modified or any onerous obligationarising or any adverse action being taken or arising thereunder; or (viii) the creation of any liabilities (actual or contingent) by anysuch member of the Kensington Group, and which in each such case would be material in the context of the KensingtonGroup taken as a whole, and no event having occurred which, under any provisionof any agreement, arrangement, licence, permit, franchise or other instrument towhich any member of the Kensington Group is a party or by or to which any suchmember or any of its assets may be bound or be subject, is likely to result inany events or circumstances as are referred to in subparagraphs (i) to (viii) ofthis paragraph (g) and which in each such case would be material in the contextof the Kensington Group taken as a whole; (h) save as disclosed to Investec by or on behalf of Kensingtonor as publicly announced by Kensington by the delivery of an announcement to aRegulatory Information Service before the time of the Announcement, or asdisclosed in the Annual Report and Accounts for the financial year ended 30November 2006, no member of the Kensington Group having since 30 November 2006: (i) issued or agreed to issue or authorised the issue ofadditional shares or securities of any class, or securities convertible into orexchangeable for, or rights, warrants or options to subscribe for or acquire,any such shares or convertible securities (save as between Kensington andwholly-owned subsidiaries of Kensington and save for the issue of KensingtonShares to employees or packagers (as such term is used in the Annual Report andAccounts for the financial year ended 30 November 2006) on the exercise ofoptions granted under, or the grant or vesting of options under, the KensingtonShare Schemes); (ii) implemented or authorised any merger or demerger or, otherthan in the ordinary course of business, acquired or disposed of or transferred,mortgaged or charged, or created any other security interest over, any asset orany right, title or interest in any asset or authorised, proposed or announcedits intention to propose the same in each case which is material in the contextof the Kensington Group taken as a whole; (iii) entered into, implemented or authorised any reconstruction,amalgamation, scheme or other transaction or arrangement (other than the Scheme)which is material in the context of the Kensington Group taken as a whole otherthan transactions between wholly-owned members of the Kensington Group; (iv) made, proposed, authorised or announced its intention to make,propose or authorise any material change in its loan capital or, other than inthe ordinary course of business, issued or authorised the issue of anydebentures or incurred any material indebtedness or increased materially anyindebtedness or become subject to any material contingent liability; (v) entered into, varied or terminated, or authorised the entryinto, variation or termination of, any contract, commitment or arrangement(whether in respect of capital expenditure or otherwise) which is outside theordinary course of business or which is of a long term, onerous or unusualnature or magnitude or which involves or could involve an obligation of a natureor magnitude which is material in the context of the Kensington Group taken as awhole; (vi) save as between Kensington and members of the Kensington Groupentered into any contract, commitment or arrangement which would be restrictiveon the business of any member of the Kensington Group which is material in thecontext of the Kensington Group taken as a whole; (vii) been unable, or admitted in writing that it is unable, to payits debts or having stopped or suspended (or threatened to stop or suspend)payment of its debts generally or having entered into or taken steps to enterinto a moratorium, composition, compromise or arrangement with its creditors inrespect of its debts or ceased or threatened to cease carrying on all or asubstantial part of its business, in each case as would have a material adverseeffect on the Kensington Group taken as a whole; (viii) taken any corporate action or (to an extent which is materialin the context of the Kensington Group taken as a whole) had any step,application, filing in court, notice or legal proceedings started or served orthreatened against it for its winding-up (voluntary or otherwise), dissolutionor reorganisation (or for any analogous proceedings or steps in anyjurisdiction) or for the appointment of a receiver, administrator,administrative receiver, liquidator, trustee or similar officer (or for theappointment of any analogous person in any jurisdiction) of all or any of itsassets and revenues; (ix) waived, compromised or settled any claim to an extent which ismaterial in the context of the Kensington Group taken as a whole; (x) entered into or varied or made an offer (which remains openfor acceptance) to vary the terms of any contract, commitment or arrangementwith any director or senior executive of Kensington or changed or entered intoany commitment to change the terms of any Kensington Share Schemes, in each caseas would be material in the context of the Kensington Group taken as a whole; (xi) made or consented to any change to the terms of the trustdeeds constituting the pension schemes established for its directors and/oremployees and/or their dependants or to the benefits which accrue, or to thepensions which are payable thereunder, or to the basis on which qualificationfor or accrual or entitlement to such benefits or pensions are calculated ordetermined, or to the basis upon which the liabilities (including pensions) ofsuch pension schemes are funded or made, or agreed or consented to, any changeto the trustees in each case as would be material in the context of theKensington Group taken as a whole; or (xii) entered into any contract, commitment or arrangement or passedany resolution or made any offer (which remains open for acceptance) withrespect to, or proposed or announced any intention to effect or propose, any ofthe transactions, matters or events referred to in this condition which in eachcase is material in the context of the Kensington Group taken as a whole; (i) save as disclosed to Investec by or on behalf of Kensingtonor as publicly announced by Kensington by the delivery of an announcement to aRegulatory Information Service before the time of the Announcement, or asdisclosed in the Annual Report and Accounts for the financial year ended 30November 2006: (i) no adverse change or deterioration having occurred in thebusiness, assets, financial or trading position or profits or prospects of anymember of the Kensington Group which in any such case is material in the contextof the Kensington Group taken as a whole; (ii) no litigation, arbitration proceedings, prosecution or otherlegal proceedings having been threatened, announced, instituted or remainingoutstanding by, against or in respect of any member of the Kensington Group orto which any member of the Kensington Group is a party (whether as claimant ordefendant or otherwise) and no investigation by any Relevant Authority or otherinvestigative body against or in respect of any member of the Kensington Grouphaving been threatened, announced, instituted or remaining outstanding by,against or in respect of any member of the Kensington Group which in any suchcase is material in the context of the Kensington Group taken as a whole; (iii) no contingent or other liability having arisen which would,or might reasonably be expected to, materially and adversely affect thebusiness, assets, financial or trading position or profits or prospects of anymember of the Kensington Group to an extent which is material in the context ofthe Kensington Group taken as a whole; and (iv) no steps having been taken which are likely to result in thewithdrawal (without replacement), cancellation or termination of any licence,permit or consent held by any member of the Kensington Group which is necessaryfor the carrying on by the Kensington Group of the business and which ismaterial in the context of the Kensington Group taken as a whole; (j) save as disclosed to Investec by or on behalf of Kensingtonor as publicly announced by Kensington by the delivery of an announcement to aRegulatory Information Service before the time of the Announcement, or asdisclosed in the Annual Report and Accounts for any of the financial years ended30 November 2004, 2005 and 2006, Investec not having discovered: (i) that any financial, business or other informationconcerning the Kensington Group publicly disclosed at any time since 1 December2003 by any member of the Kensington Group is materially misleading, contains amaterial misrepresentation of fact or omits to state a material fact necessaryto make the information contained therein not misleading; (ii) that any member of the Kensington Group or any partnership,company or other entity in which any member of the Kensington Group has aninterest is subject to any liability, contingent or otherwise, which is materialin the context of the Kensington Group taken as a whole; or (iii) any information which affects the import of any informationdisclosed at any time by or on behalf of the Kensington Group and which ismaterial in the context of the Kensington Group taken as a whole. Investec reserves the right to waive all or any of the conditions in 2 (otherthan 2(d)), in whole or in part. If Investec is required by the Panel to make an offer or offers for anyKensington Shares under Rule 9 of the City Code, Investec may make suchalterations to the above conditions as are necessary to comply with theprovisions of that Rule. The Offer will lapse and the Scheme will not proceed if, before the date of theCourt Meeting and the Kensington EGM, the European Commission initiatesproceedings under Article 6(1)(c) of the Regulation in respect of the Offer orany matter arising from or relating to the Offer or, following a referral by theEuropean Commission to a competent authority in the United Kingdom under Article9(1) of the Regulation the Offer or any matter arising from or relating to theOffer is referred to the Competition Commission. Investec reserves the right to elect to effect the Offer by way of a TakeoverOffer. In such event, such offer will be implemented on and subject to the sameterms and conditions (subject to appropriate amendments, including (withoutlimitation) an acceptance condition set at 90 per cent. of the Kensington Sharesto which such offer relates (but capable of waiver in accordance with Rule 10 ofthe City Code) in substitution for condition 1), so far as applicable, to thosethat would apply to the Scheme. The Offer and the Scheme will be governed by English law and will be subject tothe jurisdiction of the English Courts. Appendix II Sources of Information and Basis of Calculation In this announcement: (a) The value placed by the Offer on the existing issued and to be issued sharecapital of Kensington (approximately £283 million) is based on 52,606,507Kensington Shares in issue and unexercised options over a total of 1,853,719Kensington Shares as at 29 May 2007, the last Business Day prior to the date ofthis announcement. (b) The closing prices of the Kensington Shares referred to in this document arederived from the Daily Official List of the London Stock Exchange. (c) Unless otherwise stated, the financial information relating to Kensington isextracted from the Annual Report and Accounts of Kensington for the year ended30 November 2006. (d) Unless otherwise stated, the financial information relating to Investec isextracted from the Investec Annual Results announcement for the year ended 31March 2007. Appendix III Directors' Irrevocable Undertakings Name of Director Number of Kensington Shares which are subject to an irrevocable undertaking Peter Birch CBE 135,000David Gareth Jones 61,471Alison Hutchinson 3,095 Appendix IV The following definitions apply throughout this announcement, the Summary andthe Appendices unless the context requires otherwise: Alternative means a proposed offer, merger, acquisition, scheme ofProposal arrangement, recapitalisation or other business combination relating to any direct or indirect acquisition of fifty per cent. or more of the Kensington Shares or all or any material part of the business or assets of the Kensington Group proposed by any third party which is not a concert party (as defined in the City Code) of Investec; Australia means the Commonwealth of Australia, its territories and possessions; Business Day means a day (other than Saturday or Sunday) on which banks are generally open for business in the City of London and Johannesburg; Canada means Canada, its provinces and territories and all areas subject to its jurisdiction and any political sub-division of such territories and areas; City Code means the UK City Code on Takeovers and Mergers; Companies Act means the Companies Act 1985 (as amended); Conditions means the conditions of the Offer set out in Appendix I to this announcement; Court means the High Court of Justice in England and Wales; Court Meeting means the meeting of the Kensington Shareholders (and any adjournment thereof) to be convened by order of the Court pursuant to section 425 of the Companies Act to consider and, if thought fit, approve the Scheme (with or without amendment); Court Order means the order of the Court sanctioning the Scheme under section 425 of the Companies Act and confirming the reduction of share capital which forms part of it under section 137 of the Companies Act; Daily Official means the daily official list of the London Stock Exchange;List Effective means: if the Offer is implemented by way of the Scheme, the Scheme having become effective pursuant to its terms; or if the Offer is implemented by way of a Takeover Offer, the Takeover Offer having been declared or become unconditional in all respects in accordance with the City Code. Effective Date means the date on which the Offer becomes Effective; EGM Resolution means the special resolution to approve, amongst other things, the cancellation of the entire issued share capital of Kensington, the amendments to Kensington's articles of association and such other matters as may be necessary for, connected with or desirable for, the implementation of the Offer; Extraordinary means the extraordinary general meeting (or any adjournmentGeneral thereof) of the Kensington Shareholders to be convened inMeeting connection with the Scheme, expected to be held as soon as the preceding Court Meeting shall have been concluded or adjourned; Financial means the Financial Services Authority of the UK acting in itsServices capacity as the competent authority for the purposes of Part VIAuthority of FSMA and in the exercise of its functions in respect of admission to the Official List otherwise than in accordance with Part VI of FSMA; FSMA means the Financial Services and Markets Act 2000 (as amended); Forms of Proxy means the forms of proxy to be enclosed with the Scheme Document; Hearing Date means the date of the commencement of the hearing or hearings by the Court of the petition to sanction the Scheme; Implementation means the implementation agreement between Kensington and Agreement Investec dated 30 May 2007; Investec means Investec plc; Investec means the board of directors of Investec;Directors orBoard ofInvestec Investec Group means Investec, Investec Limited and their respective subsidiaries and, where the context permits, each of them; Investec Share means an ordinary share of £0.0002 in the capital of Investec; Investec means a holder of an Investec Share;Shareholder Kensington means Kensington Group plc; Kensington means the board of directors of Kensington;Directors orBoard ofKensington Kensington means Kensington and its subsidiaries and, where the contextGroup permits, each of them; Kensington means an ordinary share of £0.10 in the capital of Kensington;Share Kensington means a holder of a Kensington Share;Shareholder Kensington means the Kensington Inland Revenue Approved Executive ShareShare Schemes Options Scheme 2000, the Kensington (Unapproved) Executive Share Option Scheme 2000, the Kensington Sharesave Option Scheme 2000, the Kensington Performance Share and Investment Plan, the Kensington Long Term Incentive Plan, the Kensington Employee Share Options Scheme and the Norland Packager Share Option Scheme; Listing Rules means the Listing Rules of the Financial Services Authority as amended from time to time and contained in the Financial Services Authority's publication of the same name; London Stock means the London Stock Exchange plc;Exchange Offer means the proposed acquisition of the Kensington Shares by Investec to be implemented by means of the Scheme (or if Investec so elects, a Takeover Offer) on the terms and subject to the conditions set out in this announcement and to be set out in the Scheme Document (or the Offer Document (as the case may be)) and, where the context admits, any subsequent revision, variation, extension or renewal thereof; Offer Document means, in the event Investec elects, to conduct the Offer by means of a Takeover Offer, the document containing the offer to be sent to Kensington Shareholders; Panel means the Panel on Takeovers and Mergers; Part VI Rules means any of the Listing Rules, Disclosure and Transparency Rules or Prospectus Rules made by the Financial Services Authority in exercise of its functions as competent authority pursuant to Part VI of the Financial Services and Markets Act 2000; Regulatory means any of the services set out in Appendix 3 to the ListingInformation Rules;Service Relevant means the Irish Competition Authority and any other court or Authority competition, antitrust or supervisory body or other government, governmental, trade or regulatory agency or body in each case in any jurisdiction whose consent or clearance is required or desirable in connection with the Offer and Relevant Authorities shall mean all of them; Rothschild means N M Rothschild & Sons Limited; Scheme means the acquisition of the Scheme Shares by way of a scheme of arrangement under section 425 of the Companies Act, on the terms and subject to the Conditions set out in this announcement and to be set out in the Scheme Document; Scheme means the document to be sent to Kensington Shareholders whichDocument will, among other things, contain the terms and conditions of the Scheme; Scheme means the holders of Scheme Shares;Shareholders Scheme Shares (a) means Kensington Shares in issue on the date of this announcement together with any further Kensington Shares: (b) issued after the date of this announcement and prior to the Voting Record Time; (c) (if any) issued on or after the Voting Record Time and prior to 6:00p.m. on the day before the Hearing Date either on terms that the original or any subsequent holders thereof shall be bound by the Scheme or in respect of which the holders thereof shall have agreed to be bound by the Scheme; South Africa means the Republic of South Africa; Sterling or £ means pounds sterling; Subsidiary has the meaning given by the Companies Act; Takeover Offer means the implementation of the Offer by means of a takeover offer under the City Code; United Kingdom means the United Kingdom of Great Britain and Northern Ireland;or UK United States means the United States of America (including the States and theor US District of Columbia), its territories, its possessions and other areas subject to its jurisdiction; US Kensington means Kensington Shareholders who are US persons pursuant toShareholders RegulationS under the US Securities Act; US Securities means the United States Securities Act of 1933 (as amended); andAct Voting Record means the time and date to be specified in the Scheme Document.Time This information is provided by RNS The company news service from the London Stock Exchange

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