SECURITY CAPITAL ASSURANCE LTDSYNCORA HOLDINGS LTD.
A.S. Cooper Building, 26 ReidCanon’s Court, 22 Victoria Street
Hamilton, HM 11,12, Bermuda

NOTICE OF ANNUALSPECIAL MEETING OF SHAREHOLDERS
OF SECURITY CAPITAL ASSURANCE LTDSYNCORA HOLDINGS LTD.

Hamilton, Bermuda

April 25, 2008January 14, 2009

TO THE HOLDERS OF COMMON SHARES OF SECURITY CAPITAL ASSURANCE LTD:SYNCORA HOLDINGS LTD.:

Notice is hereby given that the annuala special general meeting of the holders of common shares (the “Shareholders”) of Security Capital Assurance LtdSyncora Holdings Ltd. (the “Company,” or “SCA”“Company”) will be held at the Company’s offices at 1221 Avenue of the A.S. Cooper Building, 26 Reid Street, Hamilton, HM 11, Bermuda,Americas, 31st Floor, New York, NY 10020 on Tuesday, May 20, 2008,February 9, 2009, at 8:3010 a.m. local time, for the following purposes:

The Board of Directors of the Company recommends a vote FOR each of Items 1 through 4.

The Company will also present the Company’s financial statements for the year ended December 31, 2007 at the annual general meeting pursuant to Bermuda Companies Act 1981 and the Company’s amended and restated bye-laws.10.

Only Shareholders of record, as shown by the transfer books of the Company at the close of business on March 25,December 15, 2008, are entitled to receive notice of and to vote at the annualspecial general meeting. The proxy statement and accompanying materials are first being mailed to Shareholders on April 25, 2008.January 14, 2009.

YOU MAY VOTE YOUR PROXY BY TELEPHONE, INTERNET OR MAIL AS DIRECTED ON THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING. YOU MAY ALSO ATTEND

THE MEETING AND VOTE IN PERSON. IF YOU LATER DESIRE TO REVOKE YOUR PROXY FOR ANY REASON, YOU MAY DO SO IN THE MANNER DESCRIBED IN THE ATTACHED PROXY STATEMENT. YOUR SHARES WILL BE VOTED PURSUANT TO THE INSTRUCTIONS CONTAINED IN THE PROXY STATEMENT. IF NO INSTRUCTION IS GIVEN, YOUR SHARES WILL BE VOTED “FOR” ITEMS 1 THROUGH 410 IN THE PROXY.

Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to beBe Held of May 20, 2008:on February 9, 2009:

By Order of The Board of Directors,

/s/ Thomas W.Tom Currie  

Thomas W.Tom Currie

Secretary

Table of Contents

SECURITY CAPITAL ASSURANCE LTDSYNCORA HOLDINGS LTD.

PROXY STATEMENT
FOR
THE ANNUALSPECIAL GENERAL MEETING OF HOLDERS OF COMMON SHARES
TO BE HELD ON MAY 20, 2008FEBRUARY 9, 2009

IMPORTANT INFORMATION ABOUT THE ANNUALSPECIAL GENERAL MEETING
AND PROXY PROCEDURES

The accompanying proxy is solicited by the Board of Directors (the “Board”) of Security Capital Assurance LtdSyncora Holdings Ltd. (the “Company,” or “SCA”“Company”) to be voted at the annualspecial general meeting (“AnnualSpecial General Meeting”) of holders of the Company’s common shares (the “Shareholders” and the “Shares,” respectively) to be held on May 20, 2008,February 9, 2009, beginning at 8:3010 a.m. local time, at the Company’s offices at 1221 Avenue of the A.S. Cooper Building, 26 Reid Street, Hamilton, HM 11, Bermuda,Americas, 31st Floor, New York, NY 10020, and any adjournments thereof. This proxy statement and the accompanying materials are first being mailed to Shareholders on April 25, 2008.January 14, 2009.

The Purpose of the AnnualSpecial General Meeting

At the AnnualSpecial General Meeting, the Shareholders will vote in person or by proxy on the following matterschanges to the Company’s bye-laws (the “Bye-Laws”) as set forth in the notice of the meeting: (1) the electionamendment of Ms. Mary Hennessy, Mr. Coleman Ross and Mr. Fred Corradobye-law 3 so that the Chief Executive Officer need not serve as Class II Directors,a Director of the Company; (2) the appointmentamendment of PricewaterhouseCoopers LLP, New York, New York (the “Independent Auditor”), asbye-law 19 so that remuneration and benefits of Directors will be determined by the Company’s independent registered public accounting firm forNominating & Governance Committee; (3) amendments of bye-laws 1, 18, 27, 38, 44, 45 and 81 to remove references to the year 2008, (3) the approvalXL Group to reflect that XL Capital Ltd is no longer a shareholder of the change of Company’s name from Security Capital Assurance Ltd to Syncora Holdings Ltd andCompany; (4) the approval of amendments to bye-laws 38, 44, 45 and 60 to transfer certain of the Company’s memorandumoriginal rights of association (“Memorandumthe XL Group under the Bye-Laws to CCRA Purpose Trust (the “SCA Shareholder Entity”); (5) the amendment of Association”) in orderbye-law 36 to implementprohibit shareholders of the Company from adopting resolutions by written consent; (6) the amendment of bye-law 50 to allow the Company to hold its own shares,i.e., treasury shares; (7) amendments of bye-laws 3, 53 and 78 to eliminate the requirement that certain deeds and other instruments be executed under the company seal; (8) amendments of bye- laws 75 and 77 to specify certain documents to which the Bermuda Companies Act 1981.

Presentationnotice provisions apply, the methods and time periods for delivery and the proof of Financial Statements

In accordance withsuch delivery; (9) the Bermuda Companies Act 1981 and Bye-Law 71amendment of bye-law 60 to impose a mandatory restriction on the transfer of the Company’s amendedequity securities such that no person or group may become a “Five-Percent Shareholder” as therein defined and restatedno existing “Five-Percent Shareholder” may increase its stock ownership; and (10) amendments of bye-laws (the “Bye-Laws”),31 and 60 to remove references to the Company’s financial statements forCompany having to meet the year ended December 31, 2007 will be presented atrequirements of the Annual General Meeting. The Board of DirectorsNew York Stock Exchange in connection with the delisting of the Company has approved these financial statements. There is no requirement under Bermuda law that these financial statements be approved by Shareholders, and no such approval will be sought at the Annual General Meeting.New York Stock Exchange.

Shareholders Entitled to Vote at the AnnualSpecial General Meeting

Shareholders of record as of the close of business on March 25,December 15, 2008 will be entitled to vote at the AnnualSpecial General Meeting. As of March 25,December 15, 2008, there were 65,275,39064,529,572 outstanding Shares entitled to vote at the AnnualSpecial General Meeting, with each Share entitling the holder of record thereof to one vote at the AnnualSpecial General Meeting (subject to certain limitations set forth in the Company’s Bye-Laws—See footnote 23 to the table under “Security Ownership of Certain Beneficial Owners and Management”).

Voting Procedures; Quorum

A Shareholder of record can vote their Shares at the AnnualSpecial General Meeting by attending the meeting and completing a ballot or by proxy in one of three ways: (1) by dating, signing and

completing the proxy card and returning it without delay in the enclosed envelope, which requires no postage stamp if mailed in the United States; (2) over the telephone by calling a toll-free number provided on the enclosed proxy card; or (3) electronically via the internet as described in the enclosed proxy card.

The electionapproval of each nominee for Director referred to in Item 1of proposals (3), (4) and (10) enumerated above the appointment of the Independent Auditor referred to in Item 2 above, the approval of the change of the Company’s name from Security Capital Assurance Ltd to Syncora Holdings Ltd referred to in Item 3 above and the approval of amendment to the Company’s Memorandum of Association in order to implement certain amendments to the Bermuda Companies Act 1981 referred to in Item 4 above, each requirerequires the affirmative vote of a super majority (66 2/3%) of the votes cast ontotal combined voting power of all issued and outstanding Shares of the Company, whether or not such proposalShares are present at the AnnualSpecial General Meeting, provided there is a quorum (consisting of two or more Shareholders present in person or by proxy holding more than 50% of the issued and outstanding Shares entitled to vote at the AnnualSpecial General Meeting). The approval of each of the other proposals requires the affirmative vote of a majority of the votes cast on such proposal at the Special General Meeting, provided there is a quorum (as defined above). Shares owned by Shareholders electing to abstain from voting with respect to any proposal and “broker non-votes” will be counted towards the presence of a quorum but will not be considered votes cast with respect to the election of nominees for Director and other mattersproposed amendments to the Bye-Laws to be voted upon at the AnnualSpecial General Meeting. Therefore, abstentions and “broker non-votes” will have no effect on the outcome of the mattersproposed changes to the Bye-Laws to be voted upon at the AnnualSpecial General Meeting. A “broker non-vote” occurs when a nominee, such as a broker, holding Shares in “street name” for a beneficial owner, does not vote on a particular proposal because that nominee does not have discretionary voting power with respect to a proposal and has not received instructions from the beneficial owner.

A Shareholder of Shares held in “street name” that would like to instruct their broker how to vote their Shares should follow the directions provided by their broker. Please note that because matters such as the approvals of the proposed changes to the Bye-Laws are not regarded as routine by the New York Stock Exchange (“NYSE”) rules, currently regard matters such as the ratification of independent public accounting firms and the other proposals to be voted on at the Annual General Meetings as “routine,” a broker is not permitted to vote on suchthe proposals presented in this proxy statement if it does not receive instructions from the Shareholder.

None of the Company’s officers, Directors or any of their associates has a substantial interest in the matters to be acted upon at the Special General Meeting other than as a Shareholder of the Company.

Revocation of Proxies

Any Shareholder giving a proxy has the power to revoke it prior to its exercise by: (1) giving notice of such revocation in writing to the Secretary of the Company at Security Capital Assurance Ltd, A.S. Cooper Building, 26 ReidSyncora Holdings Ltd., Canon’s Court, 22 Victoria Street, Hamilton, HM 11,12, Bermuda; (2) by attending and voting in person at the AnnualSpecial General Meeting; or (3) by executing a subsequent proxy, provided that any such action is taken in sufficient time to permit the necessary examination and tabulation of the subsequent proxy or revocation before the votes are taken. Attendance at the AnnualSpecial General Meeting by a Shareholder who has executed and delivered a proxy to usthe Company shall not in and of itself constitute a revocation of such proxy. If a Shareholder holds their Shares in “street name” by a broker and havehas directed their broker to vote their Shares, they should instruct their broker to change their vote or obtain a proxy to vote their Shares if they wish to cast their vote in person at the AnnualSpecial General Meeting.

Proxy Solicitation

The Company will bear the cost of the solicitation of proxies. Proxies may be solicited by Directors, officers and employees of the Company and its subsidiaries, who will not receive additional compensation for such services. In addition, the Company has retained Georgeson & Company Inc. to assist in the solicitation of proxies for a fee of approximately $8,500$11,000 plus reasonable out-of-pocket expenses and disbursements. Upon request, the Company will also reimburse brokers and others holding Shares in their names, or in the names of nominees, for forwarding proxy materials to their customers.

Additional Information

The Company will furnish, without charge, to any Shareholder a copy of its Annual Report on Form 10-K for 2007, which is filed with the Securities and Exchange Commission (the “SEC”) and is available atagm.scafg.com. Additional copies of the Company’s Annual Report on Form 10-K for 2007, and any exhibits thereto that are not included in the Company’s annual report, may be obtained in a reasonable time without charge upon written request to the Company’s Secretary at Security Capital Assurance Ltd, A.S. Cooper Building, 26 Reid Street, Hamilton, HM 11, Bermuda.

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BOARD OF DIRECTORS, BOARD COMMITTEES AND CORPORATE GOVERNANCE

The Board of Directors

The Company’s Bye-Laws provide that the Board of Directors (the “Board”) shall be divided into three classes, designated as “Class I”, “Class II” and “Class III,” with each class consisting as nearly as possible of one-third of the total number of Directors constituting the entire Board. The term of office for each Director in Class I expires at the 2010 Annual General Meeting; the term of office for each Director in Class II expires at the 2008 Annual General Meeting; and the term of office for each Director in Class III expires at the 2009 Annual General Meeting of the Company. At each Annual General Meeting, the successors of the class of Directors whose term expires at that meeting shall be elected to hold office for a term expiring at the Annual General Meeting to be held in the third year following the year of their election.

In 2007, there were eight meetings of the Board and each of our Directors attended 75% or more of such meetings during the period in which he or she was a director. In addition, in 2007, each of our Directors attended 75% or more of the committee meetings for Board committees for which he or she was a member during the period he or she was a member. Formal meetings of the Board and Board committees are supplemented periodically by informational meetings and/or informational telephone calls. In 2007, there were thirteen such informational calls. The Company does not have a policy with regard to Director’s attendance at Annual General Meetings of Shareholders. All of the Company’s Directors attended the 2007 Annual General Meeting of Shareholders.

In connection with each regularly scheduled meeting of the Board, non-management Directors meet in an executive session without any member of management in attendance. The Board considers annually the selection of a non-management Director to serve as presiding Director at the executive sessions of non-management Directors. Michael P. Esposito, Jr. is the non-management Director that the Board has selected to preside over these sessions. In addition, starting in 2007, the independent Directors meet as a group at least annually.

On November 26, 2007, Brian O’Hara resigned without conflict from the Board. Mr. O’Hara, President, Chief Executive Officer and Acting Chairman of the Board of Directors of XL Capital Ltd, had been a member of the Board since August 2006. Mr. O’Hara served as Chairman of the Company’s Compensation Committee. Fred Corrado was appointed by the Board on April 9, 2008 as a Class II Director to fill the vacancy created by the resignation of Mr. O’Hara.

On December 27, 2007 Alan Z. Senter resigned without conflict from the Board. Mr. Senter had been a member of the Board since August 2006. Mr. Senter served as Chairman of the Audit Committee. Paul E. Hellmers was appointed by the Board on April 9, 2008 as a Class I Director to fill the vacancy created by the resignation of Mr. Senter.

Independence Standards

The Board has adopted standards to assist it in making determinations as to whether Directors have any material relationships with the Company for purposes of determining their independence under the listing standards of the NYSE and Rule 10A-3 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Copies of the SCA Director Independence Standards are available under the corporate governance portion of our website, www.scafg.com. In 2007, the Board determined that each of Messrs. Gibbons, Hannon, Lichten and Ross and Ms. Hennessy are independent in accordance with such standards and therefore, the Company is in compliance with the requirement of having a majority of independent directors. In addition, each member of the Audit Committee, the Compensation Committee and the Nominating & Governance Committee is independent as independence for members of a company’s audit committee, compensation committee or nominating and governance committee, as the case may be, is defined in the NYSE listing standards and Rule 10A-3 promulgated under the Exchange Act, as applicable.

In considering the independence of Mr. Gibbons, the Board took into consideration certain relationships between Colonial Pension Funds Services Ltd. (“Colonial Pension Funds”) and the Company. Mr. Gibbons is a Director and Deputy Chairman of the Board of Directors of Colonial

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Pension Funds, which has been contracted by XL Financial Assurance Ltd (“XLFA”), our wholly-owned subsidiary, to provide group pension benefit services to employees of XLFA in Bermuda. Colonial Pension Funds did not receive payments from SCA for services in an amount that, in any of the least three fiscal years, exceeds the greater of $1 million or 2% of Colonial Pension Fund’s consolidated gross revenues.

Code of Conduct

The Company revised its Code of Business Conduct and Ethics, which applies to all of the Company’s Directors, officers and employees, on July 31, 2007 to update and expand its scope in order to implement best corporate practices. The Company has also adopted a Code of Ethics for SCA’s Senior Financial Officers applicable to the Company’s chief financial officer, controller and other persons performing similar functions. Copies of the codes are available on the corporate governance portion of our website, www.scafg.com, and the Company will post on its website any amendment to or waiver under the codes granted to any of its Directors or executive officers.

Committees

The Board has established an Audit Committee, a Compensation Committee, a Nominating & Governance Committee, and a Finance and Risk Oversight Committee.

Audit Committee

Messrs. Ross (Chairman) and Gibbons and Ms. Hennessy comprise the Audit Committee. The Company expects that Mr. Corrado will be appointed to the Audit Committee. The Board has determined that Mr. Ross is an “audit committee financial expert” (as that term is defined in Instruction to Item 407(d)(5)(i) of Regulation S-K) and that Mr. Gibbons and Ms. Hennessy are “financially literate” (as that term is defined in the NYSE rules). The Audit Committee met nine times during 2007 and held one informational meeting in 2007.

The Audit Committee operates under a written charter, which is posted on the Company’s website atwww.scafg.com. Under the charter, the Audit Committee’s primary purpose is to assist in the Board’s oversight of the integrity of the Company’s financial statements, including its system of internal controls, the Independent Auditor’s qualifications, independence and performance, the performance of the Company’s internal audit function and the Company’s compliance with legal and regulatory requirements. The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the work of the Independent Auditor in preparing or issuing an audit report and performing other audit, review or attestation services for the Company.

Compensation Committee

Messrs. Hannon (Chairman), Lichten and Gibbons comprise the Compensation Committee. The Company expects that Mr. Hellmers will be appointed to the Compensation Committee. The Compensation Committee met six times during 2007.

The Compensation Committee operates under a written charter, which is posted on the Company’s website atwww.scafg.com. Under the charter, the Compensation Committee reviews the performance and compensation of the Chief Executive Officer and other senior executives and has overall responsibility for approving and evaluating compensation and benefit plans of the Company. The Compensation Committee may form and delegate authority to subcommittees when appropriate. In addition, the Compensation Committee has sole authority to retain and terminate any compensation consultant to be used to assist in the evaluation of the Chief Executive Officer or senior executive compensation.

Nominating & Governance Committee

Messrs. Lichten (Chairman), Gibbons and Ross and Ms. Hennessy comprise the Nominating & Governance Committee. The Nominating & Governance Committee met five times during 2007.

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The Nominating & Governance Committee operates under a written charter, which is posted on the Company’s website atwww.scafg.com. Under the charter, the Nominating & Governance Committee makes recommendations to the Board as to nominations for the Board and Board committee memberships and compensation for Board and Board committee members, as well as structural, governance and procedural matters. The Nominating & Governance Committee also reviews the performance of the Board and the Company’s succession planning.

Identifying and Evaluating Nominees.The Nominating & Governance Committee is responsible for reviewing with the Board, on an annual basis, the requisite skills and characteristics of new Board members as well as the composition of the Board as a whole. When the Board determines to seek a new member, whether to fill a vacancy or otherwise, the Nominating & Governance Committee will utilize third-party search firms and consider recommendations from Board members, management and others, including Shareholders. In general, the Nominating & Governance Committee will look for new members possessing superior business judgment and integrity who have distinguished themselves in their chosen fields of endeavor and who have knowledge or experience in the areas of insurance, reinsurance, financial services or other aspects of the Company’s business, operations or activities.

Nominees Recommended by Shareholders. The Nominating & Governance Committee will consider for Director nominees persons recommended by Shareholders, who may submit recommendations to the Nominating & Governance Committee in care of the Company’s Secretary at Security Capital Assurance Ltd, A.S. Cooper Building, 26 Reid Street, Hamilton, HM 11, Bermuda. To be considered by the Nominating & Governance Committee, such recommendations must be accompanied by a description of the qualifications of the proposed candidate and a written statement from the proposed candidate that he or she is willing to be nominated and desires to serve if elected. Nominees for Director who are recommended by Shareholders to the Nominating & Governance Committee will be evaluated in the same manner as any other nominee for Director. Nominations by Shareholders may also be made at an Annual General Meeting in the manner set forth under “Shareholder Proposals for 2009 Annual General Meeting.”

Finance and Risk Oversight Committee

Messrs. Esposito (Chairman), Giordano, Hannon and Lichten and Ms. Hennessy comprise the Finance and Risk Oversight Committee. The Company expects that Messrs. Corrado and Hellmers will be appointed to the Finance and Risk Oversight Committee. The Finance and Risk Oversight Committee met seven times during 2007.

The Finance and Risk Oversight Committee establishes and recommends the financial policies of the Company and reviews the Company’s capital structure, issuances of securities, dividend policy, mergers, acquisitions and divestitures, significant strategic investments, overall investment policy and performance, and annual business plan and budget. In addition, the Finance and Risk Oversight Committee oversees the Board’s responsibility in establishing the Company’s risk tolerance and overseeing the proposals for establishment and implementation of standards, controls, limits, guidelines and policies relating to risk assessment and risk management.

Communications with Members of the Board of Directors and its Committees

Shareholders and other interested persons may communicate directly with one or more Directors (including the presiding Director or all non-management Directors as a group) by writing to them in care of the Company’s Secretary at Security Capital Assurance Ltd, A.S. Cooper Building, 26 Reid Street Hamilton, HM 11, Bermuda and specifying the intended recipient(s). All such communications will be preliminarily reviewed by the Secretary and then forwarded to the appropriate Director(s), except that advertisements or other commercial solicitations or communications will not be distributed to Directors.

Website Access to Governance Documents

The Company’s Director Independence Standards, Corporate Governance Guidelines, Code of Business Conduct and Ethics, Code of Ethics for SCA Senior Financial Officers, the charters for the

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Audit Committee, Compensation Committee, Finance and Risk Oversight Committee and Nominating & Governance Committee, and other Company ethics and governance materials are available free of charge on the Company’s website atwww.scafg.comor by writing to Investor Relations, Security Capital Assurance Ltd, A.S. Cooper Building, 26 Reid Street, Hamilton, HM 11, Bermuda.

DIRECTOR COMPENSATION

The following table sets forth the compensation of all the Directors for services rendered in the last completed fiscal year:

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(5)				On May 4, 2007, all Directors (other than Mr. Giordano) were granted 950 restricted Share units, at a fair market value of $32.17 as of the date of the grant. These Shares will vest on the anniversary of the date of grant. In addition, Ms. Hennessey received additional restricted Share units set forth in footnote 3 above which were vested on the date of grant. Amounts are calculated using the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123R, “Share Based Payments.” See “Stock Based and Long-Term Compensation Plans” under Note 20 of the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007 regarding assumptions underlying valuations of equity awards. The aggregate number of restricted Share units held by each Director (other than Mr. Giordano) as of December 31, 2007 is 950, except for Ms. Hennessey who held 3,720 restricted Share units.
(6)				Amounts are calculated using the provisions of SFAS No. 123R, “Share Based Payments”. The aggregate number of options held by each Director (other than Mr. Giordano) as of December 31, 2007 is 25,000 except for Mr. Esposito and Mr. O’Hara who held no options.

Cash Compensation Paid to Board Members

During 2007, all Directors (other than Mr. Giordano who is an officer of the Company) received a portion of an annual retainer of $30,000, (effective May 4, 2007) plus $1,250 per meeting, including most informational meetings. At the May 4, 2007 meeting of the Board, the Board approved an increase in the fees paid to the Chairmen of the various committees. The annual cash retainer fee for the Audit Committee Chairman was increased from $7,500 to $10,000. The annual cash retainer fee for the Chairmen of the other Committees increased from $4,000 to $7,500. All members of Committees received a $1,000 attendance fee for each meeting and for most informational meetings. Mr. O’Hara is an employee of XL Capital Ltd and a director of XL Capital Ltd and was a director of the Company through November 26, 2007. For most of 2007, Mr. Esposito was a director of XL Capital Ltd. Fees earned by Mr. O’Hara during 2007 and fees earned by Mr. Esposito in January 2007 were payable to XL Capital Ltd. Beginning in February 2007, fees earned by Mr. Esposito were paid directly to him. On January 1, 2007, Ms. Hennessy elected to defer receipt of her cash retainer of $30,000 and receive restricted Share units.

Pursuant to the transition agreement between XL Capital Ltd (“XL Capital”) and its subsidiaries and the Company and its subsidiaries entered into in connection with the Company’s initial public offering (the “IPO”) which closed on August 4, 2006 (the “IPO Closing Date”), XL Capital received the right to nominate a certain number of directors to the Board. In March 2008, XL Capital nominated Fred Corrado and Paul E. Hellmers and the Board elected such directors on April 9, 2008. In addition to the compensation to be paid by the Company in 2008 to Messrs. Corrado and Hellmers for their services as Directors, they will also receive certain payments from XL Capital in 2008 for serving on the Company’s Board. See “Certain Relationships and Related Person Transactions—Director Compensation and Indemnification.”

Options Granted to Board Members

No options were granted to Board Members in 2007.

Shares Granted to Board Members

On May 4, 2007, each Director (other than Mr. Giordano) was granted an award of 950 restricted Share units. The Share price on the grant date was $32.17. These Shares vest on the anniversary of the date of grant. In addition, Ms. Hennessey received additional restricted Share units in connection with her election to defer receipt of her cash retainer fee. See footnote 3 above which shows the grant date, number of Shares awarded and the Share price. These Shares vested immediately upon grant.

Director Share Ownership Guidelines

On May 3, 2007, the Company adopted share ownership guidelines for independent Directors. Pursuant to such guidelines, each independent Director will be required to hold three times the annual cash retainer of $30,000. The Directors will have four years to achieve the required ownership level.

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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The following people served on our Compensation Committee during the year 2007: Bruce G. Hannon (Chairman), Robert M. Lichten, E. Grant Gibbons and Brian O’Hara. None of these individuals (1) served as an officer or employee of the Company during 2007, (2) was formerly an officer of the Company or (3) had any relationship otherwise requiring disclosure in this proxy statement, except for Mr. O’Hara who served as President, Chief Executive Officer and Acting Chairman of the Board of Directors of XL Capital. Mr. O’Hara resigned from the Board on November 26, 2007.

During the year 2007, none of our executive officers served as a member of a compensation committee (or other body performing a similar role) of another entity, any of whose executive officers served on our Compensation Committee; none of our executive officers served as a director of another entity, any of whose executive officers served on our Compensation Committee; and none of our executive officers served as a member of the compensation committee (or other body performing a similar role) of another entity, any of whose executive officers served as one of our directors.

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CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

On November 5, 2007, the Board revised its written policies and procedures relating to the approval or ratification of transactions with “Related Persons” to provide clarification and improve efficiency with respect to the approval procedure. Under these policies and procedures, Company management is required to present to the Nominating & Governance Committee any related person transactions other than ordinary course related person transactions proposed to be entered into by the Company. In reviewing proposed related person transactions, the Nominating & Governance Committee considers, among other things, whether such transactions are on terms comparable to those that could be obtained in arm’s-length dealings with an unrelated third party and reviews such transactions to ensure that the terms are arm’s-length or otherwise fair to the Company. The Nominating & Governance Committee then approves or disapproves such transactions and at each subsequent Nominating & Governance Committee meeting, Company management is required to update the Nominating & Governance Committee as to any material change to those transactions that have been previously approved by the Nominating & Governance Committee. On an annual basis, Company management will provide the Nominating & Governance Committee a list of all existing related person transactions and, if applicable, the volume of business transacted thereunder. No Director may participate in any discussion or approval of a related person transaction for which he or she is a related person. Copies of our policy are available without charge under the corporate governance portion of our website, www.scafg.com.

In connection with the Company’s IPO, the Company entered into a number of transactions with affiliates of XL Capital, a major Shareholder of the Company. The Company also has reinsurance agreements in place with affiliates of XL Capital.

Concurrent with the IPO, the Company entered into arrangements with affiliates of XL Capital: (1) to provide it protection with respect to adverse development on certain transactions, (2) to have exposures transferred to it or re-assume exposures under certain financial guarantee policies that were originally reinsured to, or written on behalf of, the Company by XL Insurance (Bermuda) Ltd (“XLI”), an indirect wholly owned subsidiary of XL Capital, due principally to single risk constraints and rating agency capital adequacy requirements applicable to the Company at the time that business was first written, (3) to cancel the Company’s reinsurance of certain non-financial guarantee business ceded to it by XLI, and (4) to govern certain aspects of Company’s relationship with XL Capital after the IPO, including a series of service agreements under which subsidiaries of XL Capital will provide certain services to the Company or receive certain services from the Company for a period of time after the IPO. The aforementioned arrangements are discussed further below.

In addition, in connection with the IPO, XL Capital agreed to fund a portion of long-term compensation awarded by XL Capital to employees of SCA prior to the IPO and which remained outstanding under XL Capital’s long-term compensation plans subsequent to the IPO. XL Capital charges approximately 60% of the periodic charges from such long-term compensation to SCA. The aggregate remaining future cost of such long-term compensation to SCA is approximately $1.0 million at December 31, 2007, of which SCA will pay XL Capital approximately $0.6 million and XL Capital will fund $0.4 million.

Services Agreements with Affiliates

Prior to the IPO, the Company purchased various services from affiliates of XL Capital under various agreements and continued to purchase such services under new agreements that became effective at the date of the IPO. Such services principally include: (1) information technology support, (2) reinsurance and retrocessional consulting and management services and (3) actuarial, finance, legal, internal audit services and certain investment management services. Since the IPO, the Company has undertaken to perform certain of the services itself or to outsource such services to other vendors and has, accordingly, discontinued the purchase of many of the services that were provided by XL Capital. For the year ended December 31, 2007, the Company incurred costs under the aforementioned agreements aggregating $4.3 million.

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Employee Benefit Plans

The Company maintains a qualified defined contribution pension plan for the benefit of all eligible employees and a non-qualified deferred compensation plan for the benefit of certain employees (collectively, the “SCA Plans”). Prior to the IPO, XL America, Inc (“XLA”), an indirect wholly owned subsidiary of XL Capital, maintained plans, with substantially the same terms, which employees of the Company participated in (the “XLA Plans”). Discretionary contributions to the SCA Plans and the XLA Plans are based on a fixed percentage of employee contributions and compensation, as defined in the aforementioned plans. For the year ended December 31, 2007, the Company incurred costs under the aforementioned plans aggregating $5.2 million.

Reinsurance Agreements With Affiliates and Other Guarantees

The Company has the following reinsurance agreements with affiliates. Certain of the agreements discussed below may be terminated under certain conditions, as defined in the agreements.

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				million during the year ended December 31, 2007. There were no losses ceded by XLFA under this agreement prior to 2007. At December 31, 2007, the Company had a recoverable from XLI under this agreement of $259.4 million. The ceded losses of $259.4 million represent the present value (discounted at 5.1%) of the full limit loss of $500 million under this agreement. The Company incurred an expense under the excess of loss reinsurance agreement of $8.2 million for the year ended December 31, 2007. The expense recorded in 2007 reflects all future ceded premium that the Company will be required to pay under the reinsurance agreement over the remaining average life of the loss payments and recoveries noted above, in order for the agreement to remain in-force and the Company recover the aforementioned ceded losses.
•				Effective November 1, 2002 and as amended and restated as of March 1, 2007, XLCA is party to a facultative reinsurance arrangement (the “XL Re Treaty”) with XL RE AM, an affiliate of XL Capital. Under the terms of the XL Re Treaty, XL RE AM agrees to reinsure risks insured by XLCA under financial guarantee insurance policies up to the amount necessary for XLCA to comply with single risk limitations set forth in Section 6904(d) of the New York Insurance Laws. Such reinsurance was on an automatic basis prior to the effective date of the IPO and is on a facultative basis on and after the effective date of the IPO. The reinsurance provided by XL RE AM may be on an excess of loss or quota share basis. The Company is allowed up to a 30% ceding commission (or such other percentage on an arm’s-length basis) on ceded premiums written under the terms of this agreement.
•				Since it commenced operations, XLFA has entered into several reinsurance arrangements with subsidiaries and affiliates of Financial Security Assurance Holdings Ltd. (“FSAH”) (such subsidiaries and affiliates hereafter referred to as “FSA”) to reinsure certain policies issued by FSA which guarantee the timely payment of the principal of and interest on various types of debt obligations. FSAH is the sole shareholder of the Company’s Series A redeemable preferred shares which have a stated value of $39.0 million at December 31, 2007. XLFA’s obligations under certain of these arrangements are guaranteed by XLI. Effective upon the IPO, the guarantee was terminated with respect to all new business assumed by XLFA under such arrangement, but the guarantee remains in effect with respect to cessions under the agreement prior to the IPO. Premiums assumed by XLFA under its reinsurance arrangements with FSA represented 78% of the Company’s total reinsurance premiums assumed for the year ended December 31, 2007.
•				XLFA has guaranteed certain of XLI’s obligations in connection with certain transactions where XLI’s customer required such credit enhancement. Each of these transactions has a “double trigger” structure, meaning that XLFA does not have to pay a claim unless both the underlying transaction and XLI default. For each of these transactions, XLFA has entered into a reimbursement agreement with XLI, pursuant to which XLI pays XLFA a fee for providing its guarantee and XLI grants XLFA a security interest in a portion of the payments received by it from its client. As of December 31, 2007, XLFA’s aggregate net par outstanding relating to such guarantees was $511.1 million.
•				Effective May 1, 2004, XLI entered into an agreement with XLCA which unconditionally and irrevocably guarantees to XLCA the full and complete payment when due of all of XLFA’s obligations under its facultative quota share reinsurance agreement with XLCA, under which agreement XLFA has assumed business from XLCA since December 19, 2000. The par value of business guaranteed by XLI under this agreement was approximately $77.5 billion as of December 31, 2007. The XLI guarantee agreement terminated with respect to any new business produced by XLCA and ceded to XLFA pursuant to the facultative quota share reinsurance agreement after the effective date of the IPO, but the guarantee remains in effect with respect to cessions under the agreement prior to the IPO.
•				The Company provides financial guarantee insurance policies insuring timely payment of investment agreements issued by XL Asset Funding Company I LLC (“XLAF”), a wholly owned subsidiary of XL Capital. These investment agreements contain ratings triggers based on the rating of XLCA, substantially all of which were triggered upon XLCA’s recent

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				downgrades by Moody’s Investors Service, Inc., Standard & Poor’s Ratings Services and Fitch Ratings. XLAF may be required to repay or collateralize these investment agreements, and as guarantor of XLAF’s obligations, XLCA may be required to repay these amounts should the assets in XLAF’s investment portfolio prove insufficient or should XLAF otherwise fail to perform its obligations thereunder. As of December 31, 2007, the aggregate face amount of such investment agreements guaranteed by XLCA was $4.0 billion. To date, XLCA has not had any claim with respect to these investment agreements nor has it been required to collateralize any of these investment agreements. Although XLAF is a wholly-owned subsidiary of XL Capital, XL Capital is not contractually obligated to support XLAF under its obligations under the investment agreements. XL Capital has, however, communicated to XLCA and publicly disclosed its intent to settle all such liabilities by the end of March 2008. Accordingly, XLCA does not expect to incur any claims under its insurance of XLAF’s investment agreements. As of April 4, 2008, the remaining aggregate face amount outstanding of such investment agreements was less than $20 million.
•				In addition, the Company insures XLAF’s obligations under certain derivative contracts issued and purchased by XLAF. As of December 31, 2007, the total notional value of such contracts insured was $162.9 million.

Director Compensation and Indemnification

XL Capital has entered into agreements with Paul Hellmers and Fred Corrado who became members of the Board effective April 9, 2008. Pursuant to these agreements, XL Capital will indemnify Messrs. Hellmers and Corrado for any expenses or losses incurred by them in their capacity as members of the Board. These agreements also provide that XL Capital will pay each of Mr. Hellmers and Mr. Corrado a cash payment of $50,000 upon their appointment to the Board, and, at the beginning of each subsequent three-month period, a cash payment in an amount to be determined by XL Capital based on the time spent on Board matters, but in no event less than $35,000 or greater than $50,000 for each three-month period. In addition, in the event XL Capital requests that Mr. Hellmers or Mr. Corrado resign as a member of the Board prior to April 8, 2009 and such Director resigns, XL Capital will make a cash payment to him equal to $155,000 (provided the Director attended all Board and applicable committee meetings), reduced by any prior payments made by XL Capital pursuant to the agreement.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires the Company’s Directors and executive officers and persons who own more than 10% of a registered class of the Company’s equity securities to file with the SEC and the NYSE reports on Forms 3, 4 and 5 concerning their ownership of the Shares and other equity securities of the Company.

Based on a review of such reports, the Company believes that all of its executive officers, Directors and those greater-than-10% Shareholders filed all reports required to be filed on a timely basis during the year ended December 31, 2007, except that Ms. Hennessy did not timely file one Form 4 due to an administrative error by the Company.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information as of March 25,December 15, 2008 with respect to the ownership of Shares by:

The Shares are currently the only class of voting securities of the Company. As of March 25,December 15, 2008, there were 65,275,39064,529,572 Shares outstanding. The amounts and percentages of Shares beneficially owned are reported on the basis of the SECSecurities and Exchange Commission (“SEC”) regulations governing the determination of beneficial ownership of securities. Under SEC rules, a person is deemed to be a “beneficial owner” of a security if that person has or shares voting power or investment power, which includes the power to dispose of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which that person has a right to acquire beneficial ownership within 60 days. Securities that can be so acquired are deemed to be outstanding for purposes of computing such person’s ownership percentage, but not for purposes of computing any other person’s percentage. Under these rules, more than one person may be deemed to be a beneficial owner of the same securities and a person may be deemed to be a beneficial owner of securities as to which such person has no economic interest.

Except as otherwise indicated in the footnotes to this table, each of the beneficial owners listed has, to the Company’s knowledge, sole voting and investment power with respect to the indicated Shares. Unless otherwise indicated, the address for each individual listed below is c/o Security Capital Assurance Ltd, A.S. Cooper Building, 26 ReidSyncora Holdings Ltd., Canon’s Court, 22 Victoria Street, Hamilton, HM 11,12, Bermuda.

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				vested. For Directors, the amount reflected in this column represents a pro ratathe vesting of options granted on the IPO Closing Date.initial public offering closing date.
(2)				A report on Schedule 13G/A,13D, dated February 14,November 26, 2008, disclosed that XL Insurance (Bermuda) Ltd isSyncora Private Trust Company Limited, as Trustee of the record owner ofSCA Shareholder Entity owns 30,069,049 Shares of the

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				Company and reported that it is a wholly-owned subsidiary of XL Capital and that each of XL Insurance (Bermuda) Ltd and XL Capital havehas shared voting and dispositive power with respect to such Shares. Their addressShares, qualified by the statement that the filing of such Schedule 13D does not constitute, and should not be construed as an admission that either the Trustee or the Trust beneficially owns any securities covered by this Statement or is One Bermudiana Road, Hamilton, HM 11, Bermuda. Includes 16,668 options earned by Messrs. Espositorequired to file this Statement. In the report, the Trustee and O’Hara as XLI appointed Directors at the timeTrust disclaim beneficial ownership of the IPO that were grantedShares, such Shares being held on behalf of certain parties to XLI.the Master Commutation, Release and Restructuring Agreement, dated as of July 28, 2008 (as amended, the “Master Transaction Agreement”), by and among the Company and certain of its subsidiaries, XL Capital Ltd and certain of its subsidiaries and certain counterparties to credit default swap agreements with certain affiliates of the Company. The Master Transaction Agreement is more fully described in the Current Report on Form 8-K filed by the Company on July 30, 2008 and the Current Report on Form 8-K filed on November 3, 2008. The SCA Shareholder Entity was established pursuant to a Declaration of Trust, dated as of November 18, 2008, between the Company and Syncora Private Trust Company Limited, a Bermuda company, as trustee, in accordance with the Master Transaction Agreement, as more fully described in the Current report on Form 8-K filed on November 21, 2008.
(3)				Each Share has one vote, except that pursuant to the Company’s Bye-Laws:

(I)				if and for so long as (and whenever) the votes of a Shareholder, including any votes conferred by Controlled Shares (as defined below), would otherwise represent more than 9.5% of the aggregate voting power of all Shares entitled to vote on a matter, including an election of Directors, the votes conferred by such Shares are reduced by whatever amount is necessary such that, after giving effect to any such reduction (and any other reductions in voting power required by the Company’s Bye-Laws), the votes conferred by such Shares shall represent 9.5% of the aggregate voting power of all Shares of the Company entitled to vote on such matter; provided, however, that, except as provided in paragraph (II) below, no such reduction in votes shall occur with respect to (i) Shares held by any member of the XL Group (as defined below) or (ii) Shares transferred by the XL Group to any person that is not a member of the XL Group in a transaction not registered under the Securities Act of 1933, as amended (the “Securities Act”) (or exempt from registration pursuant to Rule 144 of the Securities Act or any successor provision thereof) and, upon the consummation of such transfer, any Shares previously held or subsequently acquired by such person (or an affiliate thereof), but, in each case, only for so long as such person (or an affiliate thereof) continues to hold such Shares (it being understood that this clause (ii) shall not apply to Shares transferred by such person (or an affiliate thereof) to any non-affiliate thereof). “Controlled Shares” in reference to any person, means all Shares directly, indirectly or constructively owned by (i) such person as determined pursuant to Section 958 of the Internal Revenue Code of 1986, as amended (the “Code”) and Treasury Regulations promulgated thereunder and under Section 957 of the Code (or the relevant successor provisions thereof) or (ii) a “group” of persons within the meaning of Section 13(d)(3) of the Securities Exchange Act.Act of 1934 (the “Exchange Act”). “XL Group” means XL Capital Ltd and its consolidated subsidiaries;
(II)				if and for so long as the votes conferred by Shares held by the XL Group would otherwise represent more than 50.1% of the aggregate voting power of all Shares entitled to vote generally at an election of Directors, the votes conferred by such Shares are reduced by whatever amount is necessary such that, after giving effect to any such reduction, the votes conferred by such Shares shall represent no more than 50.1% of the aggregate voting power of all Shares entitled to vote generally at any election of Directors. If and so long as the votes conferred by Shares held by the XL Group would otherwise represent more than 47.5% of the aggregate voting power of all Shares entitled to vote on a matter (other than the election of Directors), the votes conferred by such Shares held by the XL Group, with respect to voting on such matters, shall represent no more than 47.5% of the aggregate voting power of all Shares entitled to vote on such matter. Either or both of such limitations shall cease to apply, or may be adjusted upwards, upon receipt by the Company of written confirmation from each nationally recognized rating agency then providing a financial strength rating for the Company and/or its subsidiaries that such financial strength rating is

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or will be determined without reference to the ratings of any member of the XL Group or that the then financial strength rating issued by it will not at the time of such confirmation be adversely affected by the elimination or adjustment of such limitation, and, in the case of any adjustment (as opposed to elimination), the applicable percentages set forth in the first sentence of this paragraph (II) shall automatically be adjusted to those percentages as so determined by the foregoing; provided, however, that, in the event that any such written confirmation shall later be rescinded, such limitation shall be reinstated at a percentage equal to the lesser of (i) such percentage as is required by the rescinding rating agency and (ii) the

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				percentage set forth in the first sentence of this paragraph (II) originally applicable to such limitation;
(III)				After having applied the provisions described in paragraphs (I) and (II) above as best as they consider reasonably practicable, the Board may make such final adjustments to the aggregate number of votes conferred, directly or indirectly or by attribution, by the Controlled Shares of any person that they consider fair and reasonable under the circumstances to ensure that such votes represent 9.5%. Such adjustments intended to implement the 9.5% limitation described in paragraph (I) shall be subject to the proviso contained in paragraph (I).

(4)				A report on Schedule 13G/A, dated February 14, 2008,13G, filed on January 12, 2009, disclosed that Legg Mason Capital Management, Inc., 26 Reid100 Light Street, Hamilton, Bermuda, HM 11,Baltimore, MD 21202, an investment adviser, beneficially owns 9,896,885owned 6,484,502 Shares of the Company and reported that it has shared voting and dispositive power with respect to such Shares. It reported that various accounts managed by Legg Mason Capital Management, Inc. have the right to receive or the power to direct the receipt of dividends from or the proceeds from the sale of Shares. One account, Legg Mason Special Investment Trust, Inc., an investment company registered under the Investment Company Act of 1940 and managed by Legg Mason Capital Management, Inc., beneficially holds 6,200,0004,202,041 of the Shares and has shared voting and dispositive power with respect to those Shares.
(5)				A report on Form 13F, filed on November 14, 2008, disclosed that Franklin Resources, Inc., One Franklin Parkway, San Mateo, CA 94403, exercises investment discretion with respect to 4,261,500 shares as of September 30, 2008. Previously, a report on Schedule 13G/A, dated February 4, 2008, disclosed that 4,268,000 Shares are beneficially owned by one or more investment companies or other managed accounts that are investment management clients of investment managers that are direct and indirect subsidiaries of Franklin Resources, Inc., including Franklin Mutual Advisers, LLC. Franklin Mutual Advisers, LLC reported that it hashad (i) sole power to vote or direct the vote of 4,165,100 Shares and (ii) sole power to dispose or direct the disposition of 4,268,000 Shares. Their address is One Parker Plaza, 9th Floor, Fort Lee, NJ 07024.

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COMPENSATION DISCUSSION AND ANALYSIS

1. Introduction

The Compensation Discussion and Analysis describes the Company’s executive compensation programs for 2007 and certain compensation actions taken in 2008.

In 2007, the Compensation Committee determined not to pay annual cash bonuses to certain executive officers who performed services primarily for the principal business operations of the Company due to the failure to achieve both individual and Company performance goals for 2007. Certain other executive officers whose services were critical to the Company’s strategic goals for 2007 and whose contributions to the Company extended beyond the primary business unit or whose business unit exceeded the objectives of its 2007 business plan were awarded annual bonuses. See “Executive Compensation Program Elements” below for a complete description of these bonuses.

However, in 2007, the Company experienced a decline in its stock value due to adverse market conditions. This decline negatively affected the 2007 compensation payable to certain of our executive officers as well as the value of all officers’ long term incentive compensation in a material way. As a result, the long term compensation ceased to be an effective retention and incentive tool. Therefore, in order for the Company to remain competitive in the marketplace and to retain the executive officers whose employment is critical to the future success of the Company, the Compensation Committee deemed it necessary to adopt a retention program in order to encourage these executive officers to remain with the Company through the end of 2008. See “Executive Compensation Philosophy and Core Principles” below for a complete description of this program.

The objectives of the Company’s executive compensation program are to:

2. Executive Compensation Program Review and Oversight

The objectives of our executive compensation programs have been established by the Compensation Committee of the Board. This committee consists of three directors: Bruce G. Hannon (Chairman), Robert M. Lichten and E. Grant Gibbons. All of the members of the Compensation Committee are independent Directors. The Compensation Committee oversees, evaluates and approves all senior executive compensation actions, as well as the Company’s overall compensation and benefits policies, plans and programs for all employees.

Our Chief Executive Officer, Paul S. Giordano, is responsible for providing recommendations to the Compensation Committee with respect to all compensation actions for the named executive officers, other than himself, as well as the cash incentive pools and the long-term incentive pools for all non-executive employees. We refer to the named executive officers, Messrs. Giordano, Shea,

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Hubbard, LeBlanc and Rego, as the “NEOs.” The Compensation Committee expects Mr. Giordano to justify his recommendations based on actual performance, relative performance versus the Company’s peers and its business plan, and relative contributions to the overall Company results. Mr. Giordano meets with the Compensation Committee throughout the year to review: (i) the Company’s operating results each year, (ii) how these results compare to the fiscal year’s business plan, and (iii) how the compensation recommendations relate to such performance.

The Compensation Committee has the authority to retain an outside independent executive compensation consultant to assist in the evaluation of executive officer compensation and in order to ensure the objectivity and reasonableness of the actions of the Compensation Committee. The Compensation Committee has the sole authority to retain and terminate any such consultant, including sole authority to approve such consultant’s fees and other retention terms. The Compensation Committee has selected Frederic W. Cook & Co. Inc. (the “Cook firm”) as its compensation consultant. The Cook firm assists in the development of compensation programs for our executive officers and our non-employee Directors by providing relevant market trend data, regulatory oversight and corporate governance guidance and by providing comparative benchmark data. As part of the Cook firm’s engagement, our management also has access to its services in developing information to assist the Compensation Committee in fulfilling its responsibilities.

At the direction of the Compensation Committee, our management has worked with the Cook firm to develop information about the compensation of our executive officers for the Compensation Committee to use in making decisions about executive compensation. The Chief Executive Officer and the Head of Human Resources attended all of the meetings of the Compensation Committee other than executive sessions. A representative of the Cook firm attended most of the meetings of the Compensation Committee, including executive sessions. On an annual basis, the Compensation Committee reviews and approves the compensation of the Chief Executive Officer and other NEOs provided that the Chief Executive Officer’s compensation is approved by the independent Directors and the compensation of the other NEOs is approved by the Board.

The following benchmark group was reviewed by the Compensation Committee but was not used to determine 2007 compensation consisted of the following companies in the financial guarantee business: ACA Financial Guarantee Corp., Ambac Financial Group, Inc., Assured Guaranty, Financial Security Assurance Inc., MBIA Inc. and RAM Holdings Ltd.

3. Executive Compensation Philosophy and Core Principles

We are a long-term, results-oriented company and we seek to pay for performance. This is achieved through the fixed elements (salary and benefits) of compensation that do not relate to the performance of the Company, line of business or function, and the executive’s contributions, while leveraging the variable elements (cash bonus and long-term incentives) that relate to, and are paid out, based on performance. Since much of our business requires several years to determine whether we have been successful in our risk assessments, we design our senior executive compensation packages to have a majority of their value in long-term vehicles that align the executive’s interests with our Shareholders tying compensation to the performance of the Company. For all NEOs’ compensation (other than his own), Mr. Giordano makes recommendations to the Compensation Committee. Mr. Giordano’s compensation is at the sole discretion of the Board, as recommended by the Compensation Committee.

The Compensation Committee continues to believe it is essential that the Company’s compensation strategy be results-oriented, linked to long-term Shareholder value and designed to reward top performers in an intensely competitive market for executive talent. Accordingly, the Compensation Committee reviews all aspects of each executive’s compensation in comparison to the relevant market and designs total compensation levels to be competitive within the financial guarantee industry, primarily in the New York and Bermuda markets.

The variable compensation components of our executives’ target pay represents the majority of their total compensation package. The annual cash bonus portion is designed to compensate executives for overall Company performance, performance of their business group (if applicable) and the individual’s contribution for the current year. For 2007, bonus targets range from 100% to 200%

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of base salary. The Compensation Committee reviewed performance measures, compared them to the business plan, made relevant comparisons to competitors, and assessed the performance of management for the fiscal year. In 2007, the performance metrics were grouped into three broad categories: (i) Profitability, (ii) Growth and (iii) Strategic and Operational Goals. A description of each of these categories and their weighted percentage are as follows:

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Performance Factor		Weighting/Description		Performance Metric Target 2007 Budget							3Q 2007 YTD							2007
Growth		40%
Growth in Operating Income		Growth in net income excluding realized gains (losses) on investments and realized and unrealized gains (losses) on credit derivatives.			$		26.1					$		31.6							<$0
Adjusted gross premiums written		The sum of: (i) upfront premiums written in such period, (ii) current installment premiums due on business written in such period and (iii) expected future installment premiums on contracts written during such period that remain in force and for which there is a binding obligation on the part of the insured to pay the future installments, discounted at 7%.			$		476.3					$		393.5					$		549.1
Growth in ABV— Cash Bonus		Growth in common shareholders’ equity (book value) excluding capital contributions plus the after-tax value of the deferred premium, net of prepaid reinsurance premiums and deferred acquisition costs plus the after-tax net present value of future installment premiums, discounted at 7%.					N/A					$		174.4							<$0
Strategic & Operational Goals		20%
Strategic Goals		No specific strategic goals were mutually agreed between Management and the Board relating to the annual cash bonus pool. The goals discussed were progress on systems/processes, M&A and joint ventures, financings, new products or asset classes, other business development, etc.

In 2007, the Compensation Committee determined that the performance measurements were not achieved in the primary business unit of the Company and, as a result, no annual bonuses were awarded to Mr. Giordano, Mr. Shea and Mr. Hubbard. However, because Mr. LeBlanc’s role in the Company was critical to the Company’s business strategy for 2007 and extended beyond the primary business unit, the Compensation Committee, on the recommendation of Mr. Giordano, determined to pay Mr. LeBlanc a cash bonus for 2007. As the executive in charge of corporate development, Mr. LeBlanc was primarily responsible for planning and executing the critical Company initiatives in 2007, which were raising capital, liasing with XL Capital, managing the Company’s relationships with rating agencies and negotiating with counterparties on transactions that would greatly enhance the Company’s capital position. The Compensation Committee determined Mr. LeBlanc performed at a high level in each of these enterprises and any limitations on his success were as a result of (i) the Company’s inability to access new capital in an economically efficient manner and (ii) the broad market conditions which were unfavorable to companies in our line of business. Mr. Rego, the Executive Vice President of XLFA, was also awarded a cash bonus for 2007. The Compensation Committee determined that XLFA surpassed the objectives in its 2007 business plan as a result of Mr. Rego’s leadership and marketing efforts.

In 2007, the Compensation Committee’s recommendations for executive LTI awards consist of options and performance Shares. The Compensation Committee determined not to award any time vested restricted Shares to NEOs for 2007. Recommendations for option and performance Share awards were guided by:

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•				Awards geared towards weighting incentives based on performance and to align interests of executives with those of Shareholders.

Consistent with the Company’s philosophy at the time the performance Shares were awarded that executives’ compensation be significantly performance based, in March 2007, the Compensation Committee awarded executives performance Shares which vest in March 2011. The amount of shares which vest at the end of the four year period is based on average operating ROE over the four year period (2007 through 2011). The minimum award that can vest is 50% of target amount and the maximum is 150% of target amount. The Compensation Committee also awarded executives non- qualified stock options in 2007 with an exercise price of $30, which was the fair market value of the Shares at the date of grant. At the time of this award, the Committee believed it to be consistent with Company’s philosophy of aligning its executives’ interests with those of its Shareholders.

The Compensation Committee determines the mix of compensation vehicles to provide to each of our executives, using their judgment and market practice, by assessing the nature of the executive’s role as it relates to its effect on stock price, its contribution to enhancing production levels and ability to impact the Company’s expenses. The Compensation Committee’s conclusion was based on the executives’ ability to significantly affect the share price and overall performance of the Company. In the future, the Compensation Committee may adjust the mix of compensation instruments, consistent with our philosophy, as may be appropriate to reach competitive levels of total compensation for executives, relative to the market, for their functional role, responsibility and experience levels. Specifically, the market for our executives consists of those companies that operate in the global financial guarantee industry. Generally, the Compensation Committee does not assess, or take into account, executives’ historical LTI awards in the granting of future LTI awards.

4. Executive Compensation Program Elements

The Company aims to reward performance based on the executive’s level of responsibility in the Company, achievement of performance goals, and relative contribution to Shareholder value by using two “fixed” elements (base salaries and benefits/perquisites) and two “variable” elements (annual cash bonuses and long-term incentives) in our executive compensation program. For our NEOs, we review competitor information disclosed in public filings and gathered via independent market surveys to benchmark our compensation levels with those companies we view as direct competitors. The Compensation Committee performs this review to understand better the trends in the use of compensation vehicles. Our competitor group used to date consists of the companies identified above under “Executive Compensation Program Review and Oversight”.

Fixed Elements

Base Salaries. Base salaries are established based on the responsibilities and functional role of an executive’s position as well as the experience level, skills and knowledge of the executive as is relevant to our Company. There is some consideration of the salary level relative to salary levels in the geographic location of the executive. Base salaries are intended to compensate executives for executing the basic responsibilities of their jobs. The salaries of the NEOs are reviewed on an annual basis, as well as at the time of promotion or changes in responsibilities. The Compensation Committee reviews the recommendations made by Mr. Giordano with respect to all senior executives other than himself, makes any desired adjustments, and presents the whole package to the Board for their ratification. The Compensation Committee also reviews the base salary of Mr. Giordano, in executive session, and makes a recommendation to the Board with respect to his salary. In this process, the NEOs do not have any input into the setting of their own base salary levels. Since base salaries are paid for executing the basic responsibilities of the job, salaries change infrequently and are adjusted when there has been a change to the salary level being paid for a particular job in the market or when the executive assumes a larger role. Base salaries form the basis for other compensation awards. Specifically, the target cash bonus is expressed as a percentage of salary and the total cash compensation, salary plus cash bonus, is the basis for the target percentage of LTI granted to the Company’s executives.

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•				Perquisites and Benefits. Pursuant to our pay for performance philosophy, executives receive modest perquisites and supplemental benefits, most notably a non-qualified supplemental deferred compensation plan which allows executives subject to U.S. income tax to defer receipt of up to 50% of their base salary and 100% of their annual bonus with notional earnings credited based on the return on a series of mutual funds that are managed by our retirement plan vendor. This type of benefit is provided to executives by many of our competitors. We do not have any defined benefit plans for our NEOs. Health and welfare benefits are provided to all employees based on norms in the local markets in which we operate, and our executives’ health and welfare premiums are subsidized at the same percentage as all other employees. As provided in his employment agreement, which is further described under “Potential Payments Upon Termination or Change in Control—Paul S. Giordano Employment Agreement,” Mr. Giordano receives a housing allowance that will cease on July 1, 2008. In addition, in accordance with the Company’s policy for executives residing in Bermuda, Mr. LeBlanc receives a housing allowance and Mr. Rego receives a mortgage subsidy. In addition, Mr. LeBlanc receives an automobile allowance in the form of a lump sum payment, in accordance with the Company’s policy for executives based in Bermuda. See “Potential Payments Upon Termination or Change in Control” for a description of these perquisites. Change in Control.Upon a change in control of the Company (which is defined to include among other events, the acquisition of 30% or more of the Company’s Shares, a merger, consolidation or similar transaction, a sale of substantially all of the assets of the Company, a liquidation or sale of the Company and a change in the majority of the Board), under the Company’s compensation and benefit plans and the executive’s employment agreement (where applicable) NEOs will receive certain termination payments and benefits. The purpose of these payments and benefits is to assure that key executives remain with the Company during a change in ownership and to provide financial assurances to such executives so they can continue to perform their responsibilities. See “Potential Payments Upon Termination or Change in Control” for a description of these payments.

Variable Elements

Annual Cash Bonuses. Annual cash bonuses to NEOs, which vary from year to year, are approved by the Compensation Committee. In addition, the Compensation Committee approves the size of the annual bonus pool for all employees, including NEOs. Executives have a target bonus percentage that varies based on the executive’s role, with no guarantee of a maximum or minimum payout, other than Mr. LeBlanc who had a guaranteed minimum payout for 2007 pursuant to the terms of his employment agreement. When determining actual cash bonus amounts, the Compensation Committee’s objectives are to reward attainment of (a) individual goals and (b) strategic, operational and financial goals of (i) the Company and (ii) the executive’s business unit. Executives’ cash bonuses are awarded on a discretionary basis, unless a newly hired executive receives a guaranteed minimum bonus, and are paid in cash within the first quarter of the following year. For 2007, our NEOs’ target bonus percentages of salary were as follows: Mr. Giordano, 200%, Mr. Shea 150%, Mr. Hubbard 150%, Mr. LeBlanc 150% and Mr. Rego 100%. As noted above, the primary business of the Company did not achieve its performance targets and as a result, Messrs. Giordano, Hubbard and Shea did not receive annual cash bonuses. Mr. LeBlanc, whose role extended beyond the primary business unit and whose role was critical to the Company’s business strategy in 2007 received an annual bonus, as did Mr. Rego, whose business unit far exceeded its business plan objectives for 2007.

To determine the 2007 cash bonus element of the variable compensation pool, the Compensation Committee reviewed performance measures, compared them to the business plan, made relevant comparisons to competitors and assessed the performance of management for the fiscal year. See “Executive Compensation Philosophy and Core Principles” above for a detailed discussion of these performance measures. The Compensation Committee may also

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take into account market events and other economic trends in the global financial guarantee industry that may have any impact on the business results.

The Compensation Committee reviews the cash bonus recommendations made by Mr. Giordano for each NEO, other than himself, and subsequently approves or adjusts those recommendations. The Compensation Committee, in executive session, then recommends a cash bonus for Mr. Giordano and submits the entire program of compensation recommendations to the Board for ratification, or approval in the case of Mr. Giordano’s cash bonus.

•

Long-Term Incentives. To motivate sustained performance and the creation of long-term value for our Shareholders, as well as to provide retention mechanisms for our executives, both stock- based vehicles (restricted Shares, stock options, performance Shares) and non-equity incentives (long-term, cash-based awards) are used to reward senior executives. Executives are assigned a target LTI amount, expressed as a percentage of targeted total cash compensation, for their annual awards. For 2007, our NEOs’ target LTI percentages of targeted total cash compensation are as follows: Mr. Giordano, 200%; Mr. Shea, 150%; Mr. Hubbard, 150%; Mr. LeBlanc, 150%; and Mr. Rego, 75%. For our NEOs, other than himself, Mr. Giordano recommends an LTI award value, and appropriate long-term vehicles to deliver that value, for each executive. The Compensation Committee reviews Mr. Giordano’s recommendations and may adjust them. The Compensation Committee, in executive session, then develops an LTI award proposal for Mr. Giordano and recommends the entire program of LTI awards for the NEOs to the full Board for ratification, or approval in the case of recommendations with respect to Mr. Giordano. In determining the target amounts, the Committee reviews the executives’ total compensation and determines the relative value of the long-term incentive as it relates to cash bonuses. As a result (other than for Mr. Rego), a majority of the NEOs’ total compensation is a long-term award. At the time the 2007 targets were established the emphasis was on the growth of the Company, newly formed after the IPO and profitability to Shareholders.

Stock Options

When awarded, stock options granted as part of the annual LTI program are granted at the closing market price of the stock on the date of grant. To enhance the retention aspect associated with stock options, they will vest ratably over three years. The Compensation Committee uses a Black-Scholes model to determine the value of the stock options to be awarded. Stock options are exercisable for up to 10 years from the date of grant to allow executives to focus on the creation of long-term Shareholder value. In general, stock options are only awarded to senior executives who have the greatest ability to influence stock price appreciation, and then, only on a limited basis. In February 2007, the following NEOs received stock options: Messrs. Giordano, Hubbard, Shea, LeBlanc and Rego. As noted above, these options were granted at an exercise price of $30 (which was the fair market value on the date of grant) in order to align the executives and Shareholders’ interests. In December 2007, Mr. LeBlanc received an additional stock option grant in connection with his entering into an employment agreement with the Company. These options were granted at an exercise price of $4.50, which was the fair market value on the date of grant.

Restricted Shares

The value and vesting criteria of much of our executive restricted stock awards program is directly tied to the attainment of specified levels of Operating ROE. Any restricted Share award made to an executive as part of the annual program is expected to be granted in the first quarter of the year, immediately following approval by the Board. In 2007, the Compensation Committee granted restricted Share awards with performance conditions and did not grant any time vested restricted Shares. Mr. LeBlanc received an award of time vested restricted Shares in February 2008 in connection with the execution of his employment agreement. See “Mr. LeBlanc’s Employment Agreement” below.

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Performance Shares

These equity grants are made to all NEOs and most middle to senior level managers, with the number of Shares granted to each executive determined by the Compensation Committee. The actual amount of performance Shares varies according to the role of the individual executive. For 2007, performance Shares comprised a significant portion of an eligible NEO’s total compensation.

Performance Shares vest on the fourth anniversary of their grant date provided that performance goals tied to the Company’s average Operating ROE over the four year measuring period are met. For the initial grant of performance Shares in March 2007, the Compensation Committee selected a measuring period of 2007-2010. Based on what the average Operating ROE is over the four year measuring period, executives will receive a payout of between 50% and 150% of their target performance Share grant. The Company feels it is likely that over the four year measuring period the Company will achieve the required average Operating ROE to entitle executives to a 100% payout of their performance Share grant. Vesting for performance Shares may accelerate upon the occurrence of certain events resulting in a change in control of the Company or the termination of the executive. In addition, the Compensation Committee does not intend to adjust the performance metrics other than for significant changes in accounting principles (e.g. FASB rules), rating agency capital requirements, a major merger/acquisition occurrence, or other specified events. In any event, the metrics may be adjusted downwards but in no case increased.

Retention Awards

In 2007, as a result of adverse market conditions, the Compensation Committee determined that our executives’ long term incentive awards no longer had any value and, as such, failed to provide appropriate long term incentives, consistent with our compensation goals. As a result, in order to retain the services of certain of its executives during 2008, which is expected to be a critical year for the Company, the Compensation Committee approved cash retention awards in late February 2008 for its NEOs other than Mr. Giordano and for other key executive officers. The Compensation Committee considered the executives’ base salary in determining an amount that would provide a meaningful retention award to each executive. Payment of these retention awards will be made on a quarterly basis and is generally contingent on the executives’ continued employment with the Company on each such quarterly payment date, except that a full quarterly award will still be payable if the executive is involuntarily terminated without cause prior to the quarterly payment date.

The following retention payments to NEOs were approved by the Compensation Committee:

Executive

2008 Annualized
Retention Payments

Retention
per Quarter

Giordano, Paul S.

$

0

—

Hubbard, Edward B.

$

375,000

$

93,750

Shea, David P.

$

385,000

$

96,250

Rego, Michael E.

$

275,000

$

68,750

LeBlanc, Claude

$

350,000

$

87,500

5. Mr. LeBlanc’s Employment Agreement

The Company entered into an employment agreement on January 1, 2008 with Mr. LeBlanc. Prior to that date, Mr. LeBlanc was employed by the Company in a senior executive position with the same title. As a result of Mr. LeBlanc’s contributions to the Company during his employment and the uncertainty in the market, the Board determined that LeBlanc’s continued employment with the Company was critical to its future success and that it was in the best interests of the Company to enter into an employment agreement.

To induce Mr. LeBlanc to assume significant new responsibilities in his position as Executive Vice President, Corporate Development and Strategy, the Company determined that it needed to

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offer Mr. LeBlanc a market competitive compensation package. The Compensation Committee recommended and the Board approved, an employment agreement with the following terms.

The employment agreement provides for (i) a specified base salary (which is initially not less than $300,000) and is subject to annual review and may be increased by the Company’s Compensation Committee, (ii) a minimum annual bonus for 2007 of $700,000, payable in 2008; Mr. LeBlanc’s annual target bonus for 2008 shall be equal to 150% of his base salary, (iii) an additional long term incentive award, pursuant to the terms of SCA’s long term incentive plan, equal to 150% of base salary plus annual bonus, to be paid at the discretion of the Compensation Committee, (iv) a one-time only grant of 100,000 options to purchase Common Shares of SCA, (v) an additional one-time only grant of 50,000 Shares of restricted stock Shares, and (vi) the right to participate in such other employee or fringe benefit programs for senior executives as are in effect from time to time. The options to purchase 100,000 Shares of SCA were granted on December 20, 2007, at an exercise price of $4.50 per Share. These options vest in three equal installments at the rate of 33.33% per year, on each anniversary of the grant date. The restricted stock Shares will vest at a rate of not less than 25% per year, on the anniversary of the grant date, which was February 2008. The original term of employment is scheduled to expire on June 30, 2009 and will continue to be automatically extended for successive one year periods unless the Company or Mr. LeBlanc provides written notice that the term is not to be extended, as provided in the agreement. The Company’s obligations under Mr. LeBlanc’s employment agreement are guaranteed by SCA Holdings US Inc. and XLFA.

Other Employment Agreement Provisions

The employment agreement also provides for the payment to Mr. LeBlanc of a monthly housing allowance of $11,000 per month. Payment of such amount shall be discontinued immediately upon termination of Mr. LeBlanc’s employment with the Company unless such termination is as a result of death, disability or without cause, in which case payment of the housing allowance shall terminate within three (3) months following Mr. LeBlanc’s termination. In connection with any termination due to death, disability or without cause, Mr. LeBlanc or his beneficiaries, as applicable, shall receive reimbursement of all reasonable and documented moving expenses in an amount not to exceed US$50,000.

The employment agreement also provides for indemnification of Mr. LeBlanc by the Company in the event that his services result in his becoming liable for U.S. federal, state or local income taxes. The employment agreement further provides for indemnification of Mr. LeBlanc in the event that any payment, distribution or benefit provided to Mr. LeBlanc is subject to excise taxes under the golden parachute provisions of the Internal Revenue Code, if such payments to Mr. LeBlanc exceed certain levels.

Mr. LeBlanc also has agreed to certain confidentiality, non-competition and non-solicitation provisions during the term of his employment and for twelve months following termination of employment as well as to confidentiality and director and officer indemnification covenants; provided, however, that such term shall be shortened to six months if Mr. LeBlanc is terminated by SCA without cause or by Mr. LeBlanc with good reason within twenty four months following a Change in Control, if SCA pays him an additional six months base salary and one half of the average annual bonus payable to him in the three years preceding the year of his termination (or, if less, his period of employment).

See “Potential Payments upon Termination or Change in Control—Claude LeBlanc Employment Agreement” for a summary of the payments to Mr. LeBlanc upon termination of employment and change in control under his employment agreement.

6. Tax and Accounting Aspects of Executive Compensation

The Compensation Committee considered the tax and accounting aspects of the executives’ compensation when it designed the executives’ plans and programs. In general, amounts paid to our executives are deductible for Federal income tax purposes. However, the Company reserves the right to pay amounts that are not deductible in certain circumstances where it deems it to be in the best interests of the Company and its Shareholders.

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COMPENSATION COMMITTEE REPORT

The Compensation Committee has reviewed and discussed the preceding Compensation Discussion and Analysis with Company management. Based upon this review and discussions with Company management, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis set forth above be included in this proxy statement and in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007.

Compensation Committee
Bruce G. Hannon, Chairman
Robert M. Lichten
E. Grant Gibbons

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SUMMARY COMPENSATION TABLE

The following table sets forth the compensation of our NEOs which includes our Chief Executive Officer, Chief Financial Officer, and the next three most highly compensated executive officers of the Company (Messrs. Giordano, Shea, Hubbard, LeBlanc and Rego, respectively) for services paid for or rendered with respect to the Company and its subsidiaries in all capacities for the Company’s last fiscal year:

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$132,000 as per the Company’s policy for executives residing in Bermuda, (b) contributions made by the Company to the Bermuda Pension Plan which is a broad based plan and would be viewed as a qualified plan under United States guidelines and (c) for Mr. LeBlanc, as part of the Company’s policy for executives residing in Bermuda, an automobile allowance of $36,192 to be used toward the purchase of a vehicle that would serve as transportation for five years. An additional perquisite that Mr. LeBlanc received pursuant to his employment agreement, but for which no amount is included in this table because the amount of taxes is not known at this time, is a Company reimbursement Mr. LeBlanc is entitled to receive for federal, state and local income taxes he is required to pay. For Mr. Rego the amounts shown include (a) contributions made by the Company to the Bermuda Pension Plan and (b) a mortgage subsidy of $15,455. For each NEO the amounts shown include Company contributions to the qualified and nonqualified retirement plans of the Company and, in the case of Mr. LeBlanc and Mr. Rego, Company contributions to the Bermuda pension fund which is a broad based plan covering all employees. The following table shows specific information with respect to all other compensation amounts paid in 2007.

Other Annual Compensation from Summary Compensation Table

Name

Year

Company
Contributions to
Nonqualified
Retirement
Plan ($)

Company
Contributions to
Qualified
Retirement
Plan ($)

Other Cash
Compensation($)

Paul S. Giordano

2007

155,975

20,229

177,524

David P. Shea

2007

79,160

26,492

—

Edward B. Hubbard

2007

76,631

15,926

—

Claude LeBlanc

2007

—

55,000

168,192

Michael Rego

2007

—

70,000

15,455

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GRANTS OF PLAN-BASED AWARDS TABLE

The following table complements the Summary Compensation Table disclosure by providing information concerning each grant of an award made to the NEOs in the last completed fiscal year under any plan:

Narrative Disclosure to Summary Compensation Table and Grant of Plan-Based Awards Table

The Company has entered into employment agreements with the following NEOs: Paul S. Giordano (Chief Executive Officer), Claude L. LeBlanc (Executive Vice President, Corporate Development & Strategy), David P. Shea (Chief Financial Officer) and Edward B. Hubbard (President and Chief Operating Officer, XLCA).

Each employment agreement provides for (i) a specified base salary, which is subject to annual review and may be increased by the Compensation Committee, (ii) an annual bonus pursuant to the Company’s incentive compensation plan as determined by the Compensation Committee with an annual target bonus equal to the levels set forth in “Compensation Discussion and Analysis,” (iii) reimbursement for or payment of certain travel and other expenses and (iv) the right to participate in such other employee or fringe benefit programs for senior executives as are in effect from time to time. The original term of each executive’s employment expires on August 4, 2009, except for Mr. LeBlanc whose employment agreement expires on June 30, 2009, and will continue to be automatically extended for successive one year periods unless the Company or the executive provides written notice that the term is not to be extended at least three months prior to the then scheduled expiration date. Each executive has agreed to certain confidentiality, non-competition and non-solicitation provisions. Mr. Giordano’s employment agreement also provides for the payment to Mr. Giordano of a monthly housing allowance through July 1, 2008.

The Company granted several plan-based awards during 2007. On February 26, 2007, the Company granted options to its NEOs with an exercise price of $30, which was the fair market

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value on the date of grant. These options vest one third each year on the anniversary of the grant date. On March 1, 2007, the Company granted performance shares to its NEOs at a fair market value per Share of $29.61. These Shares vest on March 1, 2011. The amount which vests depends on the achievement of certain performance targets. See “Compensation Discussion and Analysis—Executive Compensation Program Elements” for a detailed discussion of the performance targets.

Base salaries form the basis for other compensation awards. Specifically, the target cash bonus is expressed as a percentage of salary and the total cash compensation, salary plus cash bonus, is the basis for the target percentage of LTI granted to the Company’s executives.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

The following table shows information concerning unexercised options, stock that has not vested, and equity investment plan awards for the NEOs outstanding as of December 31, 2007.

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				Awards will vest upon a change in control or the termination of the service of the employee due to his or her death, disability or retirement.
(4)				In connection with the Exchange, Mr. Giordano received 110,184 restricted Shares. Each restricted Share grant has the following vesting provisions: 4,692 restricted Shares vest 100% on December 4, 2008, and the remainder of the restricted Shares obtained in connection with the Exchange vest in 4 equal installments (at a rate of 25% per year) from the date of grant. In addition, Mr. Giordano received an IPO Award in the form of 58,537 restricted Shares with the vesting terms described in footnote (3). Vesting dates for each restricted Share award can therefore be calculated accordingly.
(5)				For all NEO’s preference shares granted in the form of restricted Shares will vest in full on March 1, 2011.
(6)				The closing price of the Shares on December 31, 2007, the last business day of the Company’s fiscal year, was $3.89.

OPTION EXERCISES AND STOCK VESTED IN 2007