THE MEMBERS AND CORRESPONDENTS

Dear Sirs

Barings plc

Members will be aware of the collapse of Barings and the appointment of administrators to its subsidiaries.

There has been speculation as to the effect of the collapse of the bank on the P&I clubs. The Association has contacts with Barings in several areas but is largely untouched financially.

The Club had a small amount on deposit with Barings as part of the arrangements whereby Barings issue bank guarantees without holding a general charge over the Association's assets. The amount of money in this account at the time of the collapse was around US$150,000. These funds are now frozen pending the outcome of the administration.

On the investment side, the Association's interest is limited to equity funds under management with Baring Asset Management Ltd. The Association holds no Barings' bonds as investments. The equities are held in custody by State Street Bank & Trust Company of Boston, Massachusetts and are not at risk. There is a possible exposure in two unit trusts managed by Barings but only in relation to the cash element. This exposure is extremely limited and amounts to no more than US$30,000.

Baring Asset Management Ltd has been cleared by the administrator to continue its regular asset management functions as before. The company is likely to be sold in the near future, but meanwhile remains in contact with its clients (including the Association) and continues in business. Some degree of disruption may continue but it does not appear that this will have any material effect on the Association's operations.

The other area of contact between Barings and the Association is Barings' role as the major issuer of bank guarantees in respect of claims where the claimant threatens to arrest or has arrested a ship and the Club's own letter of guarantee is not acceptable.

Barings issue their guarantees against a standard letter of indemnity from the Association which commits the Association to pay in the event of Barings themselves having to pay under the terms of the guarantee they have issued. The Association is taking legal advice as to whether, in the current circumstances, the administrators of Barings could have the right to call upon the Association's indemnity other than in circumstances where the claim itself has been resolved. This is regarded as an unlikely situ ation and in any event would not give rise to additional liabilities beyond those that already exist to claimants, and are provided for in the total of outstanding liabilities appearing in the Association's annual accounts.

The Association also uses another bank for provision of guarantees and this arrangement provides an immediate source of bank guarantees while longer term replacements for Barings are found.

Yours faithfully

THOS R MILLER & SON (BERMUDA)