Have posted questions to Frog for Mike Simpson - 1.6.2009

Dear Frog,

Questions for the Liquidator Provisional and or others now that we are entering Liquidation

1. a. Is the £241m now quoted as due back from KSFUK – a net figure?
   I.e. The previous net book value figure shown on Oct 2008 was £401.8m. So are we now saying the £241m comes from £401.8m - £241 = £160.8m of a difference?

b. If so what has caused this difference of £160.8m?
I saw one explanation that it was due to KSFUK (E&Y) getting their initial figures wrong due to the complexity of untangling the situation. Any truth in that?

c. Does the Liq Prov still expect10p in the £ back from KSFUK in June/July this year?

1. a. Since KSFUK and therefore KSFIOM have won the 1st court case regarding the £10m Cert of Deposit case, when can we expect that £10m back to KSFIOM?

b. Does the £10m just become part of the assets of KSFUK? Or is there a preferential repayment due to the fact that the CD was bought on behalf of KSFIOM and only invested through KSFUK (acting like a broker) for KSFIOM?

c. The other £25m covered by the other 3 outstanding CDs. Do KSFUK/KSFIOM expect any further court cases/or appeals regarding these? Or should the money invested in them also be returned in full to KSFIOM? The same questions asked in 2a and 2b also apply.

1. a. What happens now regarding Dividends under Liquidation?

   b. Under the SoA – IOMG/T were going to put in up to £150m to pay back Protected and Partially Protected Depositors (the up to £20k and up to £50k payments), within the first two dividends due – around Sept/Oct 2009 and May/June 2010.

c. What happens under Liquidation? Will the IOMG/T still put in the £150m, as Alan Bell appears to have stated today – 27.5.2009 in IOM Newspapers?

d. If that quoted against Alan Bell in 3c above is true what is the time span that the IOMG/T has to pay this money? Is it open ended? Although Mr Bell has also been quoted previously on 22.5.2009 as saying that the IOMG/T “will seek to achieve a similar outcome for creditors with claims under £50,000 as would have been achieved under the Scheme of Arrangement, to respond to the clear preference expressed by them in voting for the Scheme”.

1. a. The IOMG/T under the SoA was also going to put in the £19m to cover the first two years of the cash the Banks were due to pay to cover the Protected/Partially Protected Depositors for sums due to depositors from £1 (presumably) up to £20k. What happens now? Will the IOMG/T still put in this £19m or will it have to come from the Banks Now?

b. If it comes from the Banks, obviously the year 2008/09 has passed, so will the Banks start from 2009/10 and put in the £9m levy? And if so, when?

c. Do we know the total amount the Banks are liable for?

d. If so can you please let me know the amount?
· If for example the total due from the Banks is say £45m and they are due to put in £9m per year, does that mean it would take 5 years from 2009/10 top collect and distribute this money?

1. Linked to questions n 4 above is this –

a. When the Liquidator pays out for example a Dividend of say 20p in the £ in August 2009 (within 3 months of Liquidation) – is it done in the following way? Is it given out ‘pari passu’ across all creditors? I.E. so that we all receive 20p in the £ across our investments?

b. Or is it given out only to the Protected/Partially Protected Depositors?
· If for example the Liquidator pays out 20p in the £ late August 2009 and that amounts to £181.2m. If the total owed to the Protected/Partially Protected Depositors comes to

· £181.2m – Does the cash go to these Depositors and all others like myself (Bondholders) and class 3 Depositors (under SoA) get nothing?

· Or does the £181.2m get paid out ‘pari passu’ amongst all creditors

· If all get paid ‘pari passu’ does that mean the fully Protected/Partially Protected Creditors could have to wait 2/3 years, or more, to get their deposits/investments back?

1. Can I ask re the £154m that suddenly appeared in Appendix1 in the Explanatory Statement issued on 27.4.2009. This appeared under ‘Advances to customers’ and was headed ‘share collateral in respect of repo agreement’ - £154m under book value. When this appeared we saw a change from the original Balance statement as at 9.10.2008.
   a. It showed the following
   i. Under balances with KSFUK - £565.7m
   ii. Potential off-set claims against Kaupthing UK - £163.9m
   iii. Estimated net position with KSFUK - £401.8m

b. If we then look at the 3 Balance Sheets Statements in relation to the £154m repo agreement (to my mind) we see the following –

Ist Balance Sheet 2nd Balance Sheet 3rd Balance Sheet

Share /collateral in respect 000.00 154.00 154.00
Of Repo agreement

Balances with KSFUK 565.7 534.6 406.00
Potential Set-Off

Potential set Off (163.9) (164.9) (164.9)

Estimated Net Position 401.8 369.7 241.1
With KSFUK

Net Position Based on Book Value 75.99 (186.2)* 69.7

• I think shows a negative value in error on statement

Therefore – I have asked previously and I ask again – If the £154m repo agreement appearance in the Balance Sheet of 27.4.2009 is related in any way to the original £565.7m and the latest £406.00m (difference of £159.7m against Balances with KSFUK)?

c. Now the liq Prov – mike Simpson – has stated that he has subsequently sold off some of these shares. But it was a complex and involved situation and that because of conditions attached to the sale; monies due from the sale could not be included within the 1st dividend payment. Therefore I would like to ask the following –
i. Is the Repo Agreement in respect of JJB shares or other shares seized as collateral against default by the firms involved?
ii. The Liq Prov also says based on the amount of loans given out (against the shares seized) the proceeds from any sale (and some have been sold) would be worth far less than shown in the Book Values, as they are now worth far less – Is this true?
iii. And if true – The Liq Prov sold some of these shares earlier in the year 2009 (I think). If so what was the Book Value of the shares sold? And what monies was received/will be received when the complex entanglement is unwound and (is it a 6 months moratorium?) Is at an end?
iv. If not 6 months when will this time bar end?
v. And was the sale purely JJB shares or did it include others?

d. Based on the book Value of £154m – what was the book Value of shares sold? I.e. If say £54m worth of shares (Book Value) was sold, does that leave say £100m Book Value of shares to sell? If not would you give updated figures please?

1. When will the 1st Dividend Date take place? Is it as said within 3 months of the winding up of KSFIOM – therefore by the end of August 2009?

2. Is it possible to give the timetables of returns (by book values) and estimates of that actually expected for both KSFUK and KSFIOM Banks? Or if not KSFIOM on it’s own? Something like as below –

Dates Book Capital Int Due Expected* Expected*
Values Due Capital Interest
Returns Returns

2009
2010
2011
2012
2013

• Allowing for expected loss/defaults

1. Will the liquidator give out approx cash repayment (dividend dates) based on the expected return of investments to KSFIOM and KSFUK?

2. Can the liquidator still carry out ‘offsets’ for those depositors/creditors who owe money to KSFIOM and are owed money from KSFIOM under Liquidation?

3. If the liquidator is not yet sure of when the cash from the outstanding 4 CDs will be returned can he say if that depends upon –

a. Any appeals to the UK courts on the 1st CD worth £10m?
b. Is there a time limit within which an appeal must be made?
c. And if there is no appeal will that automatically mean that the remaining 3 CDS worth £25m are safe with regard to return to KSFIOM?
d. And if so when can the liquidator expect this cash?
e. Again assuming based on a previous question that the CDs because they were invested through KSFUK (like a broker), not actually invested in that Bank, does that mean we get this cash back as a preferred creditor? Or only in partial payments in line with all other creditors?

1. a. Can the IOMG/T claim back what they put into the Liquidation/DCS? I.e. £150m that Alan Bell says they will put in?

b. If they can, when do they start to reclaim that cash? After all Protected/Partially Protected depositors are paid out in full?

My apologies for the list of questions, and if they duplicate those you already have for the phone dialogue with Mike Simpson.

Yours,

Gordon 45