Mikeexpat – Re the ‘Real Returns’ to Depositors over the term – perhaps 4.9.2009 till Dec 2017?

  • Gordon 45
  • 22/10/08 n/a (free)
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Posted: Sun, 25/10/2009 - 11:32

Mikeexpat – Re the ‘Real Returns’ to Depositors over the term – perhaps 4.9.2009 till Dec 2017?

This is for Mikeexpat, Conned, Alistair and any other depositor who would like one person’s idea of what we might get back in real terms from the Liquidation.

Mikeexpat had previously asked me on the DAG Chat to do some figures on the likelihood of ‘real returns’ as against what we might get back based on figures used by the Liquidators, taking into account the length of time it will take to get all of our dividends, the lost capital and interest due to the Liquidation and the lost investment opportunities arising from our current situation.

Mikeexpat suggested that the ‘real returns’ might be as low as 50%, and others appeared to agree. I wrote back on the DAG Chat and said I did not think it would be as low as 50% and asked him to contact me through my DAG Chat contact and supply me with some information in order to try and do the best job I could. I also said that I would want to put my data on the DAG chat for all to see. Unfortunately Mikeexpat has not been back on the DAG since I put on my reply to him, or has not felt that he wanted to supply some info that I would use and then show all of us my thoughts.

Although I would rather look forward to what we get and not go crazy looking at what we will not get, I decided that I would have a go at this for him and let everyone see my thoughts.

There has to be a starting base, and I have taken a one year investment starting on 1.5.2008 due up on 30.4.2009 and gone from there. I also have to take some form of basis for returns, and rightly or wrongly I have taken my latest effort – ‘Is it 9 Dividends between 4.9.2009 and Dec 2017 with two zero years at 2014 & 2016 Mr Simpson’, as my basis for returns and the guestimated/estimated % return on the dates shown.

As Mikeexpat suggested I have taken new investments at 5%, with no allowance for any charges or tax deductions.

I have also used the £300k GBP (and all subsequent figures are based on GBP – for convenience) figure suggested by Mikeexpat as the starting investment in KSFIOM and I used a 7% interest figure on that initial sum for the year 1.5.2008 – 30.4.2009.

I have also ignored any cash required out for normal living expenses, so total probably wrong, but it does give one idea of what I think we might get back – 85.94% as against a real figure as Mikeexpat would like.

I have used a spreadsheet to show my calculations, but the initial investment is taken as £300k on 1.5.2008, due up on 30.4.2009, at 7% gross interest - that unfortunately is ‘lost at the beginning of October 2008 (rather than exactly 8.10.2008 to make calcs easier).

  1. So £300k @ 7% would have earned £21,000 in interest: £300,000 + £21,000 = £321,000 as at 30.4.2009.
  2. But since IOM laws said only 5% interest up to the time of Provisional Liquidation we get a figure used by the now Liquidators of: £300,000 @ 5% up until I’m saying 1.10.2008 – 5 months.
    £300,000@5%= £15,000 interest for a year, divide by 12 and multiply by 5 = £6,250.
    Therefore figure used by Prov Liquidators would be £306,250 as capital plus interest.
    Therefore lost interest of £14750.


Therefore based on the figures from above and the excel spreadsheet we can say the following –

  1. Total amount that could have been earned

If you take the £321,000that would have been due on 30.4.2009 and invest it as Mikeexpat suggested at 5% in a 5 year bond compounding interest, then re-invest new total again up until 31.12.2017 you get the following:

1.5.2009 – 30.4.2014 = £321,000 @ 5% compounding = £409686.
1.5.2014 – 31.12.2017 = £409686 @ 5% compounding for 3yrs, 8 months = £490,070

  1. Actual Cash Returns plus Investments up until 31.12.2017

a. 4.9.2009 – 31.12.2017 = £263190
b. Investment opportunities @ 5% on cash returned 4.9.09 – 31.12.2017 = £ 69,729
c. Re-investment for dividends received 4.9.09 – 31.12.2016 @ 5% from 2014
onwards = £ 41,274
Total returns via Dividends + all interest earned £374,193

  1. Loss of net potential Earnings (1)

Potential Earnings from above £490,070
Actual Earnings from above £374,193

Total loss envisaged £115,877

  1. Loss of net potential Earnings (2)

Due £321,000
Received - £263,190
Total £ 57,810 Plus loss of interest from potential investment opportunities £ 66,509

Total loss on potential Earnings £124,319
5. Difference in calculating the loss between £124,319 and £115,877 is £8,442.

Therefore if you take the loss of £115,877 as against £490,070 the loss is 23.64% or a ‘real return’ of 76.36% as against my estimate/guestimate of 85.94% actual return.

If you take the figure of £124,319 as against the £490,070 the loss is 25.36% or a ‘real return’ of 74.64% as against my estimate/guestimate of 85.94%.

Now I accept I will have made mistakes, I accept I am using my guestimate figure of a return of 85.94% through the figures used by the liquidators. But by working out the ‘real losses’ in two different ways we still get between 74.64% and 75.36% in ‘real returns’. So I think Mikeexpat and others who appear to agree with him are way off beam at saying we will only get back 50% in real terms.

So let’s move on and concern ourselves with what we hopefully might get back over the period. Or if not instead of making these very worrying statements with no back up to support them at least sit down and do your own proper calculations based on something tangible.

If I can spend lots of hours doing my best to calculate returns etc or ‘real returns’ in order to try and help Mikeexpat then so can others, or stop the scaremongering.

Once again, I hope what I have done can help others like myself in our current situation,

God bless to all,

Gordon 45

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Gordon, You are assuming all

  • frog
  • 10/10/08 13/09/09
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  • Tue, 27/10/2009 - 13:05


You are assuming all dividends are tax free - which while they may be in some juristrictions, more often they are not. I'd suggest a 'average tax take of 20% - so 4% is the likely interest rate after May 2009.

Thanks for the considered view though - it actually makes me feel better that the drop isn't what I (and it seems many others) felt it would be.

To Frog(Nigel) - Gordon, You are assuming all dividends are tax

  • Gordon 45
  • 22/10/08 n/a (free)
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  • Tue, 27/10/2009 - 21:18

Hi Nigel,

I hate calling you Frog, does not seem right, so hope you are ok with Nigel?

You are totally correct re tax at probably 20%. but if you read my answer to Mikeexpat, I ignored that totally on purpose as I was trying to show real returns as against actual, with no takeoffs in either side. As I am sure there would be charges on investments - if you ask people like myself who are/were through IFAs and life companies the charges even now are horrific although we have lost most of our cash at present. Because these 'nice' Ladies and gents base charges on original investments - tough that you have lost the lot - but that's another scenario for us bondholders.

Also depending on your tax situation you may be able to take interest earned at the gross rate - who knows.

I did want to contact you on another matter - tel conference calls to Mike Simpson. I personally miss them so much - what you managed to glean from the man for our benefit was so crucial and helped me immensely when I tried to give out data on what we might get back from initially the SoA and then the Liquidation. Unfortunately our 4 members on the committee of Inspection appear to have their 'hands tied' and we are getting no info back at all. The last decent info came from Mike simpson and Peter spratt in the 21.7.2009 document and the minutes of the first Committee of Inspection meeting in August. we are now at the end of October - with no new news, an increasingly complicated KSFUK situation, a changed KSFIOM Loan book - now out to Dec 2017 from 2015, no real update on how the interest due back has changed because of that etc, etc.

You asked months ago on peoples view on maintaining these conference calls and the majority wanted them to continue. When I wrote and asked Mike for more info, more often and in detailed format., he said to me that he thought that once the Comittee of Inspection was up and running disemination of info would be discussed and perhaps more info given out - we still wait on this happening.

I ask you as a genuine person who wants clarity in order to allow me to work out more meaningful figures for all our benefits that you seriously consider attempting to restart these conference calls if you can.

Again my apologies for hijacking this thread to ask for your help once again.

One last point, you mention in my latest - 9 dividends table - that I only took the balance of the collateral shares - £54.2m at 50% return and not 60% as I took for the return from the KSFUK loan book. That was because since Mike Simpson mentioned thatscenario (I think through one of your conference Calls, it has never came back up) so I left that return at 50% on purpose as I was less sure we would get 60% from that part.

You would see also if you checked the bit above the 20% return from these shares that I had already shown the other 30% higher up in my table. hope that explains your queries.

Take care,

Gordon 45

Gordon, Thanks for the

  • frog
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  • Tue, 27/10/2009 - 23:24

Thanks for the clarification. The key point about the whole amount deposited in KSFUK apart from the CDs which (totally) belong to KSFIOM, is that the return should be at the net rate of return for the unsecured creditors - so with the repo agreements, KSFUK would pay back the difference between what has been gained from the release of the collateral and the (say) 60%. That's why I was suggesting the 60%. Maybe I'm being too optimistic, but I still believe the returns will be higher than that anyway...

With regard to the calls, I'm on the PPD committee and understand the issues in relation to the lack of info coming back. Thing is though, there isn't much happening outside of the meetings - we could ask the COI for a quarterly statement of account (which is a good idea come to think of it) which would help track your model, but apart from that I'm not sure much else is going to be gained.

Frog re - Gordon, Thanks for the clarification

  • Gordon 45
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  • Wed, 28/10/2009 - 19:50

Nigel (Frog),

Thanks for the reply. I would love you to put forward the suggestion of a quarterly statement of account from the COI. It would allow me anyway, to update my table/s, make them more accurate (for good or bad) and let us all see what has been returned, from where and what has been paid out and to whom.

Thanks again for replying to me,

Gordon 45

@Gordon, you are assuming...

  • IceCrusher
  • 14/10/08 25/10/11
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  • Tue, 27/10/2009 - 19:17

What I believe 'Gordon' has shown is a proof of concept to make people feel a little better about what they might eventually receive compared to what their return would have been been had their money not been stolen in the first place; it is not really about tax, and as Gordon makes clear, he has not considered it. (Neither shall I.)

There are three main players in this concept: time; % of final return; and interest rates. If you had £400K stolen and received £100K back in September and then waited another 7 years until the last dividend was paid (taking you to a total of £320K = 80%) you would be £80K short of your initial savings - provided interest rates remained zero for 7 years.

If it took 25 years to pay back the £320K you would still be £80K short of your initial deposit if interest rates remained zero. Now, if interest rates remain very low, the difference between your initial deposit and your final return will be a bit more than £80K provided the time taken to receive this return is not excessive. If however, interest rates are moderate to high, and the time taken to recover the final return is long, then the difference between your initial deposit and your final return will be greater. This is because your unstolen £400K would be compounding at a faster pace with the higher interest rate, making it impossible for the returning annual dividends of your stolen deposit to 'catch-up'.

The good news (?) is that given the relatively short period of time (7years) before the final dividend is expected, and low current interest rates, the difference between an initial deposit and a final return should not be so large. I calculate that with a final return of 86% repaid over 7 years with interest rates of 3%, the real return would be 77%, at 5% the real return would be 70%, and at 9%, 52% compared to your original deposit remaining in the bank earning these same interest rates (excluding any tax/inflation/deflation issues). If either the estimated % return; term length; or interest rates vary, then this will place a whole new complexion on the matter. As bellyup once commented, its all guesswork because we don't know what we're going to get back anyway. So true.


Well you have to take into

  • frog
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  • Tue, 27/10/2009 - 23:27

Well you have to take into account taxation if you are talking about the 'real' rate of return. The initial model of Gordon's is the best one to work on because everyone can apply their own circumstances to the table.

Key thing though is that the return is nowhere near the 50% 'real' return as has been bandied about - as has been proved.

Gordon 45 - Re the "Real Returns" to Depositors till 2017

  • mikeexpat
  • 31/10/08 31/05/09
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  • Tue, 27/10/2009 - 10:16

Hi Gordon 45,
Thank you for your very detailed calculations.
First I would like to clarify that on 23 October, Friday, I contacted you through DAG Chat contact and also through new DST site. Shown below again is my Letter to you. You can also find this correspondence on both above sites.
Even if we do not agree regarding exact “real return” (you are more optimistic, I am more pessimistic), at least we both agree that “real return” will be much less that numbers stated by Liquidator and others.
We will know the “real return” only in December 2017.
I hope this subject of “real return” will be discussed further.
Gordon, thanks again for your submittal and please read shown below my Letter to you dated 23 October.

"""23 October 2009
Gordon 45 – Real Return Calculations!
Gordon, here is my scenario that will prove that real return for £ 200,000 and more Depositors will be only 50%.
Please assume Depositor with £ 200,000. I picked up this number because for £ 200,000 and more depositors, applying for DCS did not make any sense.
Please also assume following: never applied for EPS or DCS, Non - European Union Resident, no withholding taxes, all £ 200,000 was in standard bank deposit and not in bonds.
Following calculations apply equally to £ 200,000 Depositor, as for £ 3,000,000 Depositor. In both cases real returns will be the same (~50%), but real losses in first case will be “only” £ 100,000, in second case staggering £ 1,500,000.
Please also assume zero investment / real estate / foreign currency opportunities (which really is not right, as a person who invested all his deposit in stock market in March 2009 would have made 50% profit, other person could have switched from £ to Euro etc.).
But here we are talking about very prudent, conservative Depositor only interested in preservation of capital (inflation adjusted).
Our final Dividend will be in December 2017, 9 years after our money was stolen.
If bank robbery was not carried out in October 2008, £ 200,000 could have been deposited at 4%, 5% for 9 years (2017 – 2008). Gordon, you decide what interest to assume, but I do not think that 5% for long term deposit is excessive.
After 9 years of accumulating interest year after year our total amount in year 2017 will be “£A”.
Now let’s do the same exercise with Dividends. Again assume % return. To simplify it I would use the same % interest as above, although again it is very optimistic as it is much more difficult to get good interest rates on small amounts coming as Dividends. Total Amount = 24.8% Dividend x 8 years accumulating interest + 10% Dividend x 7 years accumulating interest + 5% Dividend x 6 years accumulating interest etc., etc. till the last Dividend in 2017. Let’s call this total amount “£B”.
Divide “£B” / “£A” = Real Return (after all above assumptions super optimistic).
Gordon, after these calculations All Depositors should realize that based on present assumptions all of us will suffer gigantic losses by depositing money in UK/ IOM regulated Bank and not in speculative futures, options etc.
All of us are quoting wrongly 72% to 88% return of money, including DAG, DST and PPD Groups, lawyers, IOM Government, Liquidator M. Simpson, newspapers etc.
This quoted return does not take at all into consideration lost interest, lost investment opportunities, inflation etc.
We are dangerously playing into hands of IOM, UK Governments, newspapers etc. claiming that return will be as high as 88%.
Our final Dividend will be in December 2017, 9 years after bank robbery was carried out. What would be the real value of the total Dividends in year 2017?
I'd take 75% of my money now, without any hesitation, rather than wait for 9 years.
I do not know what to do, but I know that a dramatic action is required. Otherwise, we would be forced to accept a cruel reality of 50% of our life savings being stolen by depositing money in a bank in a “well regulated jurisdiction”, as IOM likes to call itself.
These assumptions are based on low interest rates / low inflation realities. If inflation picks up in the next 8 years, and experts do expect it, our real returns could be further reduced to even 35% - 40%.
I would be delighted (as I am one of thousands of Depositors facing 50% or more loss), if somebody could prove me wrong.”””

Hi Mikeexpat - re 'real returns'

  • Gordon 45
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  • Tue, 27/10/2009 - 20:47

Hi Mate,

I held back from doing figures intially hoping you would get back to me - then I did them over a few days. did not check out the DAG Chat before posting my stuff and then found your info as you show above.

I can only apologise for not rechecking again before posting my stuff, but standby my figures based on my 9 dividend recovery between 4.9.2009 and Dec 2017. Obviously if the actual returns are less than what I guessed at it will affect the 'real returns'. And as Icecrusher has once again shown if we see interest rates rising significantly it will also affect 'real returns'. Although my view is if interest rates do rise you will get higher interest on safe? investments. I.e. £50k max in a uk based bank. Although you would not have got 5% before July this year, you are correct as 5% plus became available around then for 5 year bonds both with annual and monthly interest. Although Frog (Nigel) mentions tax at 20% he is correct - but I chose not to take that off as I was trying to show, as Icecrusher said, a principle on actual versus 'real' returns.

I am probably an optimist, as I want to look forward rather than back, but still feel we will get 80% plus actual over the term and if that term is Dec 2017 and interest rates don't jump we will be up around 70/75% return in 'real' terms.

No doubt we will converse again,

Take care,

Gordon 45

Where is anyone

  • bellyup
  • 10/10/08 09/01/10
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  • Tue, 27/10/2009 - 10:30

Getting these high interest rates at the moment?
The reality is bad enough without further doomwatch scenarios.