Talkbook portrait template · 7 Progress update report 31 May 2018. Key tasks completed to date...

31 May 2018

Progress update report

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Progress update report 31 May 2018

Important noticeThis report has been prepared for the Minister for Finance following consultation with the Department of Finance and in response to a request for a detailed update report made under Section 17 (c) of the Ministerial Instructions issued on 7 February 2013.

Our work on Irish Bank Resolution Corporation Limited (In Special Liquidation) (“IBRC in SL”) commenced on 7 February 2013 on the appointment of the Special Liquidators. This report covers the period 1 January to 31 December 2017 (unless otherwise stated) and is an update to the progress report issued on 5 May 2017.

This Report is for the benefit of the Minister for Finance and has been released on the basis that it shall not be copied, referred to or disclosed, in whole or in part, without our prior written consent. This Report is not suitable to be relied on by any party wishing to acquire rights against KPMG or the SLs for any purpose or in any context. Any other party that obtains access to this Report or a copy and chooses to rely on this Report (or any part of it) does so at its own risk. To the fullest extent permitted by law, KPMG and the SLs do not assume any responsibility and will not accept any liability in respect of this Report to any party other than the Minister for Finance.

This Report has been prepared in good faith, however no representation or warranty, expressed or implied, is or will be made and no responsibility or liability is or will be accepted by the SLs or any of their respective representatives or advisers in respect of the truth, accuracy or completeness of the information provided in this Report or its use. In particular, but without prejudice to the generality of the foregoing, no representation of warranty is given as to the ability to achieve or reasonableness of any future projections, prospects or returns (including any estimated outcomes for the unsecured creditors) contained in this Report. Any estimated outcome for unsecured creditors included in this Report (or commentary thereof) is illustrative only and cannot be relied upon as guidance as to the actual outcomes for the unsecured creditors. Any person or creditor that chooses to reply on this Report for any purpose or in any connect, does so at their own risk. Neither IBRC in SL or the SLs, nor any of their respective representatives or advisors accepts any responsibility for any acts or omissions as a result of the information contained within this Report and all liability for damages arising from the information provided is expressly excluded.

Nothing in this Report constitutes legal advice. Where legal issues are discussed, the information is only intended to be of a general nature and not a full review of the issued covered.

This engagement is not an assurance engagement conducted in accordance with any generally accepted assurance standards and consequently no assurance opinion is expressed.

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Glossary of termsALG A&L Goodbody Solicitors Anglo Anglo Irish Bank Corporation Limitedbn BillionCBI Central Bank of IrelandCCR Central Credit RegisterThe Commission The Commission of InvestigationCSO Central Statistics OfficeDGS Deposit Guarantee SchemeDOF Department of FinanceDPO Data Protection OfficerDPP Director of Public ProsecutionsDSAR Data Subject Access RequestELG Eligible Liability GuaranteeFTE Full Times Employees FSPO Financial Services and Pensions OmbudsmanGDPR General Data Protection RegulationsHR Human ResourcesIBRC Irish Bank Resolution Corporation LimitedIBRC in SL/The Bank Irish Bank Resolution Corporation Limited (in Special Liquidation)IBRC Act/The Act Irish Bank Resolution Corporation Act 2013INBS Irish Nationwide Building SocietyIT Information TechnologyKPI Key Performance Indicatorm MillionNARL National Asset Resolution LimitedNALM National Asset Loan Management Designated Activity CompanyNAMA National Asset Management AgencyNTMA National Treasury Management AgencyODCE Office of the Director of Corporate Enforcement PAYE Pay As You EarnPSWT Professional Services Withholding TaxQ QuarterRCT Relevant Contracts TaxROI Republic Of IrelandSL Special LiquidationSLs Special LiquidatorsSMU Service Management UnitTME Tracker Mortgage ExaminationUK United KingdomUS United States of AmericaVAT Value Added Tax

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Contents

Page

Executive summary

‒ Special Liquidation - summary to date ‒ Special Liquidation - outcome to date‒ Key tasks completed to date‒ Tasks to completion‒ Executive summary

5679

10

Creditor adjudication process 13

Legal workstream 16

Tracker mortgage examination 19

Interest overcharging remediation workstream 22

Commission of investigation 26

eDiscovery workstream 28

Tax workstream 32

Costs and fees 35

Appendices 43

Executive summary

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Special Liquidation - summary to date

Liquidation commenced in February 2013.

Largest liquidation ever undertaken in Ireland.

€22bn of assets prepared and brought to the market between

2013 and 2016.

Multiple workstreams being managed across a variety of

complex areas.

Continued responsibility for IBRC regulatory and legal

requirements and resolution of outstanding legacy matters.

Reduction in legal cases involving IBRC from 1,100 in 2013 to

136 today.

IBRC staff reduced from c.1,100 to two remaining IBRC

employees (as at 6 February 2018).

Special Liquidation fees of €247m incurred to end 2017

(c.1.5% of €17bn liquidation inflows since 2013), of which

€24.6m of Special Liquidation fees were incurred for the 12

months to December 2017.

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TOTAL CASH INFLOWS AND OUTFLOWS(five years to 6 February 2018)

Inflows Outflows

€17.0 bn €15.6 bn€67m €360m

Sale of loan books and other assets NARL repayments

Net customer loan and derivative receipts Unsecured creditor interim dividends

Distributions from subsidiaries NAMA repayments

Sale of bonds Administrative and overhead expenses

NAMA funding Settlement of hedging derivative contracts

Fee income Liquidation fees

Tax refunds Legal and other professional advisor fees

Other miscellaneous receipts Other liquidation costs

NET CASH AT 6 FEBRUARY 2018

€1.6bn(opening cash at 7 February 2013: €0.2 billion)

Special Liquidation - outcome to date

(12 months to 6 February 2018)

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Key tasks completed to date (Sales)IBRC sales process by numbers

€21,700,000,000

65 15,900

>130,000 360

755,000

3,500 245 100%

OF LOANS PREPARED AND BROUGHT TO MARKET

LOAN SALES PROCESSES CONDUCTED

LOANS CONSISTED OF OVER

LETTERS ISSUED TO BORROWERS AND GUARANTORS

INTERESTED PARTIES ACROSS 13 COUNTRIES

DOCUMENTS WERE REVIEWED AND UPLOADED TO VIRTUAL DATA ROOMS

(“VDRS”)

PROPERTY VALUATIONS WERE OBTAINED

INDICATIVE BIDS WERE RECEIVED ACROSS 9 PORTFOLIOS

OF THE LOAN BOOK TRANSACTED

DIFFERENT BORROWER GROUPS

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Project PebbleUS CRE, UK hotels and UK & Ireland Shopping Centres■ Ireland/UK (84%)■ US (15%)■ World: other (1%)

Project Sand / PearlIrish originated Residential Mortgages■ Ireland (100%)

Project EvergreenIrish originated Corporate Loans■ Ireland (93%)■ UK (7%)

Project Salt UK originated CRE Loans■ Germany (60%)■ UK (30%)■ Poland (7%)■ Europe: other (3%)

Project Rock UK originated Commercial Real Estate (“CRE”) Loans■ UK (89%)■ US (7%)■ Germany (3%)■ Europe: Other (1%) Project Stone

Irish originated CRE Loans■ Ireland (46%)■ United Kingdom (33%)■ Continental Europe (18%)■ Other (3%)

Project Amber/ Project AmethystCorporate and CRE loans■ UK (78%)■ Ireland (22%)

Project QuartzIrish originated CRE loans■ Ireland (97%)■ UK (1%)■ Other (2%)

178NON DISCLOSURE AGREEMENTS

(“NDA”) SIGNED WITH INTERESTED PARTIES

Dec 2013

Feb 2014

Feb 2014

Jun 2014

Jul 2014

Feb 2014

Evergreen

Rock

Salt

Sand

Stone

Pebble

Feb 2015

Nov 2014

Feb 2015

Mar 2015

Mar 2015

Quartz

Amber

Pearl

Amethyst

Opal (IBRCAC)

IBRC sales process by project

COLLATERAL WAS BASED IN

DIFFERENT JURISDICTIONS

Jun 2016

Delta

Project DeltaIrish originated loan portfolio comprising only three connections, primarily secured by an economic interest in an oil field located in Nigeria.

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Key tasks completed to date (Non-sales)

CREDITOR ADJUDICATION PROCESSCommenced paying a second 25% dividend to admitted unsecured creditors in December 2017, bringing the total dividend announced to date to 50%. This payment will benefit a wide range of unsecured creditors, including the State.

3,099CREDITOR CLAIMS RECEIVED TO DATE

2,408REVIEWED AND ADJUDICATED.

691REMAINING CLAIMS IN PROGRESS.

LEGALReduction in number of legal cases involving IBRC from over 1,100 since the date of SL to approximately 136 sets of current legal proceedings (111 sets as defendant and 25 recovery and enforcement actions) through active ongoing management by IBRC.

GROUP RATIONALISATIONOversight of group rationalisation of 293 subsidiaries in 16 jurisdictions and providing support for the orderly winding up or sale of these entities.

TRACKER MORTGAGE EXAMINATIONManagement and implementation of special project work related to a notice issued by CBI pursuant to Section 22 of the Central Bank (Supervision and Enforcement) Act 2013 requiring IBRC to comply with the CBI’s Tracker Mortgage Examination (“TME”).

ITMigration of “Live” IBRC in SL loans to purpose built Loan Management System. Licence and Support costs savings achieved.

COMMISSION OF INVESTIGATIONIn excess of 300,000 pages (c. 48,000 documents) have been delivered to the Commission, since it was established in June 2015 by the Government to investigate matters which are considered to be of significant public concern in respect of IBRC.

eDISCOVERYIn excess of 55 million items (emails and electronic documents) have been searched and discovered by the eDiscovery team since 2016.

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Tasks to completionOver the past 12 months, the SLs have progressed the outstanding litigation and commenced payment of the second interim unsecured creditor dividend of 25%. A number of key tasks remain, including:

On-going management of wind down process.

Liquidity management of €1.6 billion.

Manage remaining loan book of €3.5 billion.

Complete creditor adjudication process.

Manage on-going and new civil litigation.

Comply and assist with criminal proceedings.

Comply with regulatory inquiries and investigations.

Comply with the Commission, GDPR, CCR and all security release, eDiscovery and DSAR requests.

Sell remaining IBRC assets.

Liquidate remaining subsidiaries.

Resolve outstanding tax issues.

Conclusion of Tracker Mortgage and Interest Overcharge projects.

Complete all statutory liquidation matters.

Total future Special Liquidation fees forecast to range from €51.5m to €67.0m assuming completed by c.2022. This is dependant on future events outside of the SLs’ control.

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Executive summary Area Summary

Finance Liquidity management of €1.6 billion. Management of remaining assets on the balance sheet. Manage hedging of Sterling and US dollar exposures. Preparation and submission of monthly updates and other ad reports to DOF, CBI and CSO. Continued oversight of group rationalisation of subsidiaries and support in the orderly winding up

or sale of these entities. Oversight of the creditor adjudication process (see below).

Creditor adjudication process

3,099 claims have been received to date. 2,408 have been reviewed and adjudicated. The remaining 691 are being reviewed (476) or have

been reviewed and are being queried with the potential creditor (215). We commenced paying a further 25% dividend to admitted unsecured creditors in December

2017, bringing the total dividend to date to 50%. A catch-up payment will be made on a quarterly basis for creditors who are admitted in the quarter.

Responding to creditor appeals and litigation where creditor claims are rejected. There are a number of creditor claims where further legal or tax advice is being sought and these

claims will be finalised when the advice has been received.

Regulatory, Operations and HR

Continue to manage the remaining loan book of approximately €3.5 billion which contains a small number of connections with assets in various jurisdictions which remain with IBRC due to on-going litigation.

Loan Management Team has further reduced from 5 to 3 during the year as a number of agreed repayment plans and enforcement strategies have now been agreed.

All on-going litigation and enforcement strategies continue to be managed and progressed. Continue to engage with borrowers to agree and implement full debt repayment proposals. A total of 46 credit decisions were considered by the Supervisory Committee during 2017. Day to day operations management continues to require significant ongoing support for Residual

Loan Management, Data Subject Access Requests, requests for release of security, support to eDiscovery, remediation projects and the unsecured creditor team.

The last remaining employee pension scheme was wound up in 2016. Submission of Phase 1 of the Central Credit Register (“CCR”) on behalf of IBRC in accordance with

CBI requirements. Monthly reporting of Phase 1 dataset ongoing. Operate with ongoing consent of CBI which is currently in place to 30 June 2018 (request for

consent submitted at six month intervals).

Service Management Unit (“SMU”)

SMU provides a broad range of support services within IBRC including office administration, facilities management, HR, general client related queries, structured data requests, assisting with legal enquiries/litigation, parliamentary questions and the release of Title Deeds and Life Policies. In addition, the following key requests were managed during the year:‒ Discharge of historic security charges:

146 of the new requests received in 2017 were fully resolved during the year. As at 1 January 2018, 66 requests from 2017 were being worked through, with a further 37 requests from 2017 on hold pending receipt of further information from the requestor.

‒ Data Subject Access Requests: 36 DSAR’s received during 2017 including two requests subject to ongoing litigation.

31 DSAR’s were completed and closed, further information requested in three cases and two ongoing due to significant volume of materials involved.

‒ Financial Services and Pensions Ombudsman (“FSPO”): 14 FSPO complaints were ongoing during 2017 (5 carried forward from 2016 and 9 new

cases). All 14 were progressed in 2017.

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Legal Ongoing management of approximately 136 sets of legal proceedings (111 sets as defendant and 25 recovery and enforcement actions).

Since the last report: Four new sets of proceedings (two against and two taken by IBRC); and 43 sets of proceedings substantially concluded since the last report.

Dealing with ODCE/DPP disclosure requests and provision of documentation in the context of criminal investigations/prosecutions.

Addressing regulatory queries. Liaising with SMU Team concerning, inter alia, FSPO complaints; DSARs, security discharges and

other issues/complaints raised by former borrowers. Preparation and submission of monthly Legacy reports to DOF. Liaising with insurers in respect of notification, renewal and recovery under various insurance

policies.

IT Management and Governance of the Managed Service Provider. 12% cost reduction on Year Two contract fees was secured, effective November 2017.

Delivery of a programme of work designed to prepare the IT Infrastructure to support the ongoing operations of IBRC from current date to end date of the Management Wind Down and Final Liquidation. Critical IT Infrastructure systems and Storage environments were at end of life with vendor support no longer available.

Managed the outsourcing of SAN & Storage environments through the RFP process and concluded contract negotiations with IBRC and the chosen provider.

Installation of new storage platforms and Migration of IBRC/SL electronic data was completed. A stringent data migration strategy and project management governance process was in place ensuring the integrity and continued accessibility of IBRC/SL’ s structured and unstructured electronic data.

Upgrade of a number of key IT Infrastructure systems and reduction in overall complexity of IBRC IT Environment, mitigating against current and future risk within the IT Infrastructure.

Commenced the reduction of primary/secondary data centre footprint to result in operational cost savings.

Tracker mortgageexamination (“TME”)

CBI issued a notice pursuant to Section 22 of the Central Bank (Supervision and Enforcement) Act 2013. This required IBRC to comply with the CBI’s Tracker mortgage examination.

Phase I of Examination consisted of preparing a Plan for TME. Phase II (Review) consisted of:

Review of all loans within scope of examination in accordance with TME as set out in the TME CBI Guidance.

Identification of impacted customers 16 customers have been determined to be impacted (accumulative over-charge of €133,191). Phase III (Calculation of Redress and Compensation, where relevant) and Phase IV

(Implementation of Redress Programme, where relevant) has commenced. All purchasers of impacted loans were written to and subsequently met. The calculations of the overpayment on each impacted account has been performed. Appeals process and panel designed and established. Customer letters have been issued to the 16 customers advising them of the issue and the next

steps.

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eDiscovery Dedicated team to ensure Commission of Investigation requirements are met (see below), litigation eDiscovery timelines complied with and assisting on DSAR discovery searches.

Ongoing review and improvements to eDiscovery processes and procedures to improve efficiency and capacity.

An upgrade to the latest version of Clearwell eDiscovery environment to maintain software currency and mitigate operational risks to technology environments was undertaken during the year.

Reduction in dedicated KPMG team from 7 to 3 during the year in line with case load.

Commission of Investigation

One additional Direction was issued by the Commission to the SLs since the last report. Approximately 3,355 documents (17,273 pages) were produced and provided to the Commission

in 2017. The SLs will continue to comply with all Directions and continue to provide all possible assistance

to the Commission in order to allow it to carry out its functions.

Interest overcharging remediation project

Project commenced in May 2016 with Phase 1 completed on 10 March 2017. Phase 1 involved:

‒ Identification of relevant population of potentially impacted customers.‒ Retrieval and manual review of approximately 200,000 documents to confirm whether loans

were in/out of scope. ‒ Approximately 95% of all impacted customers are now confirmed in scope, equating to

approximately 6,600 customers with approximately 16,000 loans.‒ Development of Affidavit to seek Court Directions to confirm certain rules and assumptions

within the Interest Overcharge refund rules and calculations. Court Directions confirmed on 5 December 2016.

‒ Design, build and test of a Case Management Tool (“CMT”) to manage the workflow of remediation and communications activity; and

‒ Significant level of external legal advice to support key decisions. Court directions have been sought in relation to the project by third parties who acquired loans

from IBRC. Once the directions application is fully determined, the project is ready to move into Phase 2

which will involve:‒ Remediation and communication of refunds to relevant affected customers.

Dividendpayment

A further dividend of 25% was announced in December 2017 and payment has commenced. This brings the total announced dividend to admitted unsecured creditors to 50%.

A catch-up payment will be made on a quarterly basis for unsecured creditors who are admitted in the quarter.

It is still expected that the eventual unsecured creditor dividend will be in the range of 75% to 100% subject to a number of assumptions.

The Special Liquidators intend to make a further dividend announcement before the end of the year.

Asset realisations / funds inflow

Release of escrow funds in the UK following the successful outcome of a court case in favour of IBRC.

Successful conclusion of a bankruptcy in Russia resulting in a final dividend to IBRC. Borrower repayments on loans and assets realised during 2017.


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Creditor adjudication process: key highlights

400 claims were reviewed and adjudicated during 2017, bringing the total number to c. 2,408. The remaining 691 claims are currently being reviewed (476) or have been reviewed and are being queried with the potential creditor (215).

The payment of a second interim dividend of 25% to admitted unsecured creditors of IBRC was announced in December 2017and is in progress.

The payment of this second interim dividend will bring the total dividend received by admitted unsecured creditors to 50% following on from the announcement in December 2016 of the first interim dividend of 25%.

Approximately €581 million has been paid to State agencies through the unsecured dividend payment process (as at 6 February 2018).

Creditor appeals on claims rejected are being progressed.

The Special Liquidators intend to make a further dividend announcement before the end of the year.

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Key actions/achievements

Claims are reviewed as submitted. If insufficient information is provided, we write back to the potential creditor requesting additional information. Once all the information has been received, we assess the merits of both the liability and the quantum submitted. If a valid claim can not be demonstrated, the claim is rejected and the potential creditor has 14 days to appeal. In excess of 400 claims were reviewed and adjudicated during 2017, bringing the total number to c. 2,400 (c.2,000 at 31 December 2016). Claims at this stage of the review and adjudication process typically relate to complex financial transactions and consequently require more extensive and detailed reviews prior to bringing to conclusion. The remaining 700 claims are being reviewed (476) or have been reviewed and are being queried with the potential creditor (215). A further dividend of 25% was announced in December 2017 and payment of this amount is ongoing.

Dividend rangeThe SLs’ current best estimate of the dividend available for the eventual unsecured creditors is in the range of 75% to 100%. It is important to note that this is an estimate only based on current information and will be subject to change. The dividend range could be higher or lower depending on future events which are outside the SLs’ control. The Special Liquidators intend to make a further dividend announcement before the end of the year.It is expected that the exact dividend for unsecured creditors will not be known for a number of years, primarily as a result of the large level of litigation outstanding. The dividend range stated is based on a number of assumptions including but not limited to the following: Satisfactory conclusion of the Quinn litigation against

IBRC;

Dividend range (continued) Satisfactory conclusion of all other current defendant

litigation against IBRC; No new material litigation being taken against IBRC; No new material creditors attempt to submit a claim in

the liquidation; Resolution of IBRC plaintiff litigation; Remaining assets realise current estimated values; Satisfactory resolution of intercompany balances; Successful distribution of remaining subsidiary assets

to IBRC; Satisfactory resolution to the Revenue Commissioner

audit; and Satisfactory resolution to technical tax issues with

HMRC in the UK.Work remaining/Key future actions Continue to contact claimants for further information to

substantiate claims being considered for acceptance. The SLs organised a team to assess the impact of a

High Court decision regarding interest overcharging and they have been calculating the impact of this decision. This work is being co-ordinated with the process for adjudicating unsecured creditor claims.

Notification of acceptance of claims to creditors where claims have been agreed by the unsecured creditors review team.

Notification of rejection of claims where entitlement cannot be proven or the figure claimed has not been substantiated by the claimant.

Continue to deal with requests for information and other enquiries received into unsecured creditors email address.

Continue to liaise with ALG and other professional advisors as required for advice and assistance in correct adjudication of claims.

Continue to liaise with relevant State / governmental / regulatory bodies as appropriate in relation to claims.

Liaising with tax advisors regarding the tax treatment of unsecured dividend payments.

Liaising with in house legal team regarding the ongoing legal cases where settlements when finalised will be included as an unsecured creditor.

Process further dividend when legal cases concluded. There are a number of claims which relate to complex

financial transactions and these claims are being reviewed in detail.

Respond to creditor appeals where claims are rejected.

Creditor adjudication process: overview

31-Dec-16 31-Dec-17Claims approved 1,002 1,276 Claims rejected 1,020 1,132 Claims reviewed and adjudicated 2,022 2,408 Claims reviewed and sent back to creditor requesting further documentation

336 215

Claims in progress 555 476 Total claims 2,913 3,099


Legal workstream

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Legal workstream: key highlights

Four new sets of proceedings (two against and two taken by IBRC) noted since 1 January 2017 to 28 February 2018.

On-going management of approximately 136 sets of legal proceedings (111 sets as defendant and 25 recovery and enforcement actions).

43 sets of proceedings substantially concluded since the last progress report.

Managing the conclusion of IBRC’s involvement in proceedings where the underlying loan was sold (through substitution or discontinuance).

Dealing with ODCE/DPP disclosure requests and provision of documentation in the context of criminal investigations / prosecutions.

Liaising with SMU Team concerning, inter alia, FSPO complaints; DSARs, security discharges and other issues/complaints raised by former borrowers.

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IBRC Group Legal and the SLs actively manage allcurrent litigation/legal cases taken by or againstIBRC (in SL). Many of these proceedings are highprofile and/or of significant value, involving formerdirectors and officers of Anglo/INBS, claims ofnegligence by professional advisers, or substantialclaims for and against former borrowers concerningtheir loans and/or related security.

Ongoing litigationIBRC remains party to 136 legal cases, comprising plaintifflitigation and defendant litigation. A table providing abreakdown of the total active cases under management ascompared to the 2016 Report is set out below.

The overall reduction in cases since the last report is 43 -when you take into account the 4 new proceedings asdiscussed below.These figures do not take account of all Quinn relatedlitigation; subrogated claims; UK cases; miscellaneousfinancial leasing litigation and US foreclosure proceedings;or proceedings to which IBRC currently remains a partywhere the benefit has transferred to a loan purchaser andthe purchaser is yet to substitute into the proceedings(addressed opposite).

New ProceedingsFour new cases were issued since the date of the lastreport (two by IBRC and two against IBRC).The general fall in new cases follows a consistent trend inrecent years largely coinciding with statutory limitationperiods. In the short term however, an increase in newlitigation can be anticipated arising from challenges todeterminations made in the unsecured creditoradjudication process.

Plaintiff LitigationIBRC continues to manage 25 recovery and enforcementactions. Many of these cases were instigated prior to theSLs appointment, which IBRC continues to pursue. Inother instances, and in accordance with the SLs strategy,IBRC has issued proceedings with a view to maximisingrecovery, for debt due and owing, to enforce judgmentsobtained, for asset recovery or protection, or seekingdamages for acts of professional negligence.

Legal workstream: overviewDefendant LitigationThe SLs are managing 111 proceedings in which it isdefendant. IBRC continues to actively attempt to reduceits exposure to Defendant Litigation. The SLs assess themerits of defending such litigation and, where deemedappropriate, IBRC Group Legal implements the SLsstrategy of reducing the number of defendant cases in themost cost effective manner possible.

Summary of key issues dealt with since the lastprogress report 43 sets of proceedings concluded since the last report. Defence of various proceedings including concerning

allegations of mis-selling of SWAPS and investments,mismanagement, negligence, breach of contract andbreach of duty.

Continued involvement in residual loan portfoliomanagement and the resolution of outstanding debt.

Liaising with insurers in respect of notification andrenewal of various insurance policies, as well aseengagement to secure cover for certain defendantlitigation and counterclaims.

Providing assistance to the Office of the DPP in respectof on-going prosecutions.

Ongoing work to ensure IBRC’s involvement in anyproceedings against former borrowers (where theunderlying loans/security have been sold) is concludedthrough Purchaser substitution applications ordiscontinuance.

Extensive work on NAMA residual issues, including:substitution into proceedings; agreement in respect offoreign assets; providing assistance in terms of powersof attorney, deeds of release, deeds of transfer of legalinterest/security and statutory declarations.

Liaising with SMU Team concerning, inter alia, FSPOcomplaints; DSARs; security discharges; and otherissues/complaints raised by former borrowers.

Extensive engagement with DPO in relation to variousdata protection issues including GDPR compliance,DSAR policy and ODPC investigations.

Extensive interaction with unsecured claims team andthe Section 6 Project (stayed cases). This involvescertain plaintiffs being notified of the alternative optionof submitting an unsecured claim in the liquidation.

Dealing with a number of ODCE/DPP disclosurerequests and provision of documentation in the contextof criminal investigations/prosecutions.

Preparation and submission of monthly Legacy reportsto DOF.

Group Legal Staff CountGroup Legal comprises 2 people as at February 2018.

2016 Report (as at 1 Jan 17)

2017 Report (as at 28 Feb 18)

Defendant lit igation 143 111

Recovery & Enforcement actions

32 25

Total active cases 175 136

Summary table

Tracker mortgage examination

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Tracker mortgage examination: key highlights

CBI issued a notice pursuant to Section 22 of the Central Bank Notice (Supervision and Enforcement) Act 2013 which required IBRC to conduct the Tracker Mortgage Examination (“TME”) in line with the Central Bank framework for conducting the examination.

INBS and the Anglo originated loans were assessed separately and separate projects worked concurrently in respect of both institutions.

Given its Special Liquidation status, the scope of the IBRC examination was limited to those mortgage accounts which were either in existence or issued on or after 7 February 2007.

36,200 accounts were deemed in scope (loans in issue on or after 7 February 2007).

16 Customers have been determined to be impacted, leading to an accumulative over-charge of €133,191.

Letters to the impacted customers were sent in March 2018.

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Overview of examination In December 2015, the CBI instigated a sector wide

review of tracker mortgage related issues. The Tracker Mortgage Investigation (“TME”) requires all lenders to examine the extent to which they have been meeting their contractual obligations to their customers and their compliance with obligations under relevant consumer protection focused regulation.

IBRC received a Notice of Requirement to submit information pursuant to Section 22 of the Central Bank (Supervision and Enforcement) Act 2013.

For the purpose of the TME and the project initiated in IBRC, the INBS and the Anglo originated loans were assessed separately and separate projects worked concurrently in respect of both institutions.

For the purposes of IBRC, given its Special Liquidation status, the scope of the examination was limited to those mortgage accounts which were either in existence or issued on or after 7 February 2007 (the “Relevant Mortgage Accounts”).

In addition, the Relevant Period for the purposes of the review of any activity relating to the Relevant Mortgage Accounts is the period from 1 January 2002 to 31 December 2015.

Key actions/achievements Phase I of Examination consisted of preparing a Plan

for TME. Phase II (Review) consisted of:

‒ Review of all loans within scope of examination in accordance with TME as set out in the TME CBI Guidance;

‒ Identification of impacted customers;

‒ Performance of regulatory review, influencing factors, transparency considerations, complaints, review and data reconciliations;

‒ Bi-monthly reporting to CBI pursuant to a notice issued under Section 22 of the Central Bank (Supervision and Enforcement) Act 2013; and

‒ PwC independent review completed and reported to CBI.

Phase III (Calculation of Redress and Compensation, where relevant) and Phase IV (Implementation of Redress Programme, where relevant) has commenced.

The following has been achieved to date:‒ All purchasers of impacted loans were written to

and subsequently met. All confirmed that the loans were ring-fenced and that they had stopped the harm;

‒ The calculations of the overpayment on each impacted account has been performed;

‒ Appeals process and panel designed and established; and

‒ Letters issued to customers advising them of their options and the next steps.

Work remaining / key future actions Issue redress payments to customers. Process customer appeals if received.

Tracker mortgage examination: overview

In scope accounts:

Scope Anglo INBS

Loans in issue on or after 7/2/2007

8,070 28,130

Calculated exposure €10,861 €122,330

Impacted customers:

Sold Loan

Redeemed loan

INBS 6 3

Anglo 5 2

Total 11 5

Interest overcharging remediation

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Interest overcharging remediation workstream: key highlights

Given its Special Liquidation status, loandocuments were reviewed for loans open as at or since 7 February 2007.

Finalisation and closure of the Population ID and File Retrieval workstream.

Case Review workstream was completed in April 2017.

Design, build and test activities completed for substantive phase of Interest Overcharge Calculator (IOC). Build and test activities prepared for final phase of IOC.

Design, build and test activities completed for File Retrieval and Case Review Phases of Case Management Tool (CMT). Final build and test activities prepared for the Customer Communication Phase of CMT.

Approach and detailed design prepared for Case Remediation and Customer Communication.

Court directions have been sought in relation to the project by third parties who acquired loans from IBRC.

Once the directions application is fully determined, the Project is ready to move into Phase 2 (remediation and communication of refunds to relevant affected customers).

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Background In proceedings entitled IBRC v John Morrissey, the

High Court delivered a Judgment by Finlay-Geoghegan J. dated 29 October 2014. In that Judgment, the Court considered whether IBRC had incorrectly calculated interest due on Mr Morrissey's borrowings with IBRC.

IBRC had applied an Actual/360 day year method of calculating interest due. The Court however found that this was not in accordance with the relevant Terms and Conditions attached to IBRC loan documents.

Consequently, in general, 5 days additional interest per annum has been charged on impacted accounts.

Any IBRC customers whose loan terms and conditions were similar may potentially be impacted by this issue.

As a result, IBRC commenced a programme of remediation to identify and address any instances where customers were overcharged based on this Judgment.

Potentially impacted population The accounts impacted by the issue identified by the

Judgment are as follows:

The IBRC systems were unable to electronically identify which loans had terms and conditions that were similarly impacted.

This necessitated a manual case review of all relevant loan accounts documentation to establish whether the relevant wording was present in the loan documentation for loans open as at or since 7 February 2007.

Key actions/achievements Finalisation of the potentially impacted customer

population workstream as data extraction from the core IBRC banking systems and testing has been completed.

Finalisation and closure of the File Retrieval workstream as activities are completed including retrieval, storage and consolidation by borrower of all relevant loan documentation required for case review.

The case by case review of retrieved relevant loan documentation to determine if the loans are impacted by the issue identified by the Morrissey Judgment. All relevant documentation has been reviewed and this workstream was completed in April 2017.

Design, build and test of a purpose built Interest Overcharge Calculator (“IOC”) has been completed. Design of the final phase completed with development and testing activities underway. The IOC has been developed to collate all relevant customer transactions on the Bank’s various IT systems and calculate the amount of overcharged interest which has been paid during the relevant claim periods.

Design, build and test activities completed for a Case Management Tool (“CMT”) for the management of file retrieval and case review workflow activities. Build and test activities are underway for CMT functionality to produce customer letters and manage the workflow of customer remediation and communications activity.

Approach and detailed planning commenced for communication of remediation amounts to customers.

Key issues arising/risks/challenges Significant absence of IBRC corporate, business and IT

knowledge resulting in gaps in understanding of legacy processes and documentation/ data associated with impacted loans.

Completion of the file retrieval workstream due to the high volume of documents sourced, scanned, reviewed and consolidated across three different document sources and the manual intervention and oversight required in tracking and processing of retrieved documents.

Court directions were sought to affirm the programme approach to significant challenges associated with the Interest Overcharging remediation programme particularly in relation to interest calculator rules.

No existing system solution was available to carry out remediation activities, therefore a bespoke new system was developed.

IBRC loan portfolio has been either sold, transferred to NAMA or repaid fully. This resulted in increased complexity in designing the remediation approach.

Interest overcharging remediation workstream: summary of issues

Estimate of potentially impacted customers and accounts

Customer group Customers Loans

Loans open as at or since 7 Feb 2007

6,639 16,287

25


Work remaining / Key future actions Completion of IT Build activity on the final CMT and

the IOC. Business readiness activity for communication of

remediation to customers including team setup, procedures, training etc.

Communication of approach with NAMA and Third Party Purchasers.

Notification to CBI on the final approach to be adopted for the communication and remediation of impacted customers.

Project status Court directions have been sought in relation to the

project by third parties who acquired loans from IBRC. Once the directions application is fully determined, the

Project is ready to move into Phase 2 which will involve:‒ Finalisation of customer letters following internal

and external sign-offs;‒ Finalisation of CMT software development;‒ Remediation and communication of refunds to

relevant affected customers;‒ Engagement with customer queries; and‒ Payment of creditor claims.

Interest overcharging remediation workstream: summary of issues

Commission of Investigation

27


Work carried out in 2017The SLs have complied with all directions received to date and continue to assist the Commission with any requests it makes.Direction 11 was formally received in December 2017 and 3,355 documents (17,273 pages) were provided to the Commission under this direction.

Costs in 2017Limited costs (c.€36,000), in line with the reduced workload, were incurred in relation to the Commission in 2017 (c.€0.7 million in 2016).

Future WorkBased on our current understanding we do not envisage significant future work in relation to this workstream.We expect there to be future ad-hoc requests for information from the Commission and expect the SLs to be requested to attend meetings with the Commission.We do not expect costs going forward for the first module to be significant based on current information available to us. The extent of future costs will depend on future modules requested by the Commission and the timeframe of such modules.

Commission of investigation

47 month period to

12 month period to

59 month period to

€000 31 Dec 16 31 Dec 17 31 Dec 17

Commission workstream 2,707 36 2,744

Commission of Investigation costs

eDiscovery workstream

29


eDiscovery workstream: key highlights

Focus on meeting Commission of Investigation requirements, complying with litigation eDiscovery timelines and Data Subject Access Requests (“DSAR”).

Dedicated team from KPMG managing on-going eDiscovery requirements.

Review of eDiscovery processes and procedures to improve eDiscovery efficiency and capacity.

Utilisation of the latest Nuix and Clearwell eDiscovery software platforms to mitigate operational risk and improve efficiency.

Supporting the IT workstream with a significant project to upgrade hardware and mitigate the loss of access to legacy electronic information as a result of the retirement of legacy storage environments.

Significant eDiscovery involvement in IBRC working group to assess the impact of the General Data Protection Regulations (“GDPR”)on ongoing operations.

30


eDiscovery Activity in 2017

PROCESSING OF MORE THAN: Emails Electronic documents

30m 10mRETRIEVAL/SEARCHING: Archive boxes Electronic information

1,500 70Tb(searches conducted from 80,000 boxes archived)

(c. 394 million email files and 135 million electronic documents)

SUPPORT FOR:

5 >35Legal review teams with 60 legal reviewers

General searches and requests for information

24 7Scoping and early case assessment for litigation matters

Full electronic disclosures in support of litigation

DELIVERY OF:Documents Pages

3,355 17,273to the Commission of Investigation

@

31


Workstream overview

H1 focus on meeting requirements of Commission of Investigation with H2 focus on managing the eDiscovery caseload.

Continuous assessment of dedicated KPMG team ongoing and team reduced from 7 to 3 in line with case load.

On going review and improvements to eDiscovery processes and procedures to improve efficiency and capacity.

Upgrade to the latest version of Clearwell eDiscovery environment to maintain software currency and mitigate operational risks to technology environments.

Key issues arising/risks/challenges

Loss of legacy staff knowledge and increasing reliance on historical information.

Risk of loss of access to legacy electronic information arising from retirement of legacy information storage infrastructure.

Prioritising discovery caseload.Key actions/achievements

Deployment of Information Map database to collect corporate knowledge and facilitate searching.

Detailed mitigation plans developed with IT and investment commitment obtained for upgrade of electronic information storage infrastructure.

Detailed plans developed and resources committed for the transition of legacy information to new environments.

eDiscovery workstream: overviewWork remaining/Key future actions

■ Incremental improvements to Information Map as additional sources of corporate knowledge are identified and linkages in information are established.

■ Transition of legacy information from legacy information storage environments to new environments.

■ Continue to manage and support all Criminal, Civil and DSAR requests made against IBRC.

■ On going process efficiency improvements across support to legal teams as part of discovery of information.

■ Facilitate the retirement of legacy application and hardware environments and reduce costs of on-going support of information retention and access.

Tax workstream

33


Tax workstream: key highlights

Working to ensure that IBRC’s tax affairs are managed effectively so that all relevant tax obligations are met on a timely basis.

Ongoing engagement with the Irish Revenue in relation to an open tax audit.

Ongoing engagement with HMRC in relation to an appeal of a tax decision in the UK.

Ensuring that withholding tax obligations are complied with on the payment of dividends to unsecured creditors.

Analysing the tax implications of winding up various Irish subsidiaries and the repatriation of capital from foreign subsidiaries.

Ongoing engagement with foreign tax authorities in relation to the tax position of the IBRC Group.

34


Overview IBRC is a complex organisation which gives rise to tax

obligations under a very broad range of headings in a number of jurisdictions. The key tasks undertaken by the Tax workstream are described below.

Operation of IBRC’s Irish tax function The SLs tax team has been working to ensure that

IBRC’s tax affairs are managed effectively to ensure that all relevant tax obligations are met on a timely basis. This includes:

‒ Preparation and filing of Irish corporation tax returns for IBRC and three of its Irish subsidiaries;

‒ Preparation and filing of tax information returns as required (return of payments to third parties, etc.);

‒ Operation of the VAT tax regime (including related tax filings and payments for IBRC and an Irish subsidiary);

‒ Operation of the PSWT, RCT & Income Tax withholding regimes (including related tax filings and payments);

‒ Operation of the PAYE regime; ‒ Preparation and filing of “Country by Country”

report to the Revenue Commissioners in respect of 81 legal entities in 10 jurisdictions (filed on 6 February 2018);

‒ Ensuring tax compliance in respect of unsecured creditor claim payments; and

‒ Engaging with the Revenue Commissioners in relation to an open tax audit on historic matters.

Asset disposals Analysis of the tax implications of winding down

various subsidiaries.

IBRC’s US tax obligations Ongoing preparation of the 2017 US federal tax return.

Asset recovery Advising on the foreign tax implications of asset

recoveries. Advising on overseas capital repatriation. Tax input into restructuring proposals.

Tax workstream: overviewWork remaining / Key future actions Advising on the disposal of any foreign situated assets

and repatriation of proceeds to Ireland. Ongoing Irish tax compliance obligations in respect of

corporation tax, income tax, VAT, PAYE, RCT, and PSWT.

Ongoing preparation of US federal returns and advice on cessation of taxable presence in US.

Resolution of an appeal of a tax decision in the UK. Addressing the winding up of subsidiaries and the

distribution of remaining assets to IBRC. Management of tax issues related to assets under

enforcement action in in a range of countries including Ireland.

Engagement with the Revenue Commissioners in relation to an open tax audit on historic tax matters.

Advice in relation to various borrower related matters. Advising on the tax treatment of the payment of

distributions to unsecured creditors. Advising on the tax aspects of the recovery of assets.

Costs and fees

36


47 month period to

12 month period to

59 month period to

€'000 31 Dec 16 31 Dec 17 31 Dec 17KPMG SL team- KPMG Ireland 118,791 21,720 140,511- KPMG UK 8,490 93 8,583- KPMG other 825 4 829KPMG SL team total 128,106 21,817 149,923KPMG migration 4,560 0 4,560ALG 36,828 1,677 38,505ALG - Commission work 306 86 392Linklaters 19,992 508 20,499Other legal advisorsArthur Cox 5,683 23 5,706Maples and Calder 2,874 0 2,874Skadden, Arps, Slate, Meagher & Flom LLP

2,763 45 2,808

Byrne Wallace 2,720 5 2,725RDJ 513 32 545PJ O'Driscoll 185 0 185McCann Fitzgerald 0 106 106Other legal firms 39 222 261Other legal advisors total 14,777 433 15,210Professional advisorsPwC 5,459 0 5,459Property valuation fees 4,612 57 4,669Valuer A 3,745 0 3,745Merrills 1,593 1 1,594Savills 966 0 966Goodbody 675 0 675Eastdil 531 0 531Deloitte 435 0 435Other professional advisors 0 85 85Professional advisors total 18,017 142 18,159Total 222,585 24,663 247,248

Special liquidation professional and legal fees (gross fees)

Workstreams Hours €'000Deal and associated activities 253,014 49,450Finance, operations and creditor adjudications

248,546 50,538

Regulatory and other required reviews

215,479 33,461

Legal & litigation 23,876 5,469

Other activities 52,943 11,004

Gross (prior to rebate) 149,923

Rebate applied (5,000)

Total (net of rebate) 793,858 144,923

KPMG SL team by workstream to 31 December 2017

The table below details the actual professional fees associated with the SL since the commencement of the SL on 7 February 2013 to 31 December 2017.

Summary of Special Liquidation fees(to 31 December 2017)

Notes: (a) The fees represented are exclusive of VAT and disbursements;(b) GBP fees have been converted at GBP1:€1.18 for the 14 month

period to 31 March 2014 GBP1:€1.2512 for the 9 month period to 31 December 2014; GBP1:€1.37728 for the 12 month period to 31 December 2015; GBP1:€ 1.22515 for the 12 month period to 31 December 2016; and GBP1:€ 1.14068 for the 12 month period to 31 December 2017

(c) USD fees have been converted at USD1:€0.7485 for the 14 month period and USD1:€0.7613 for the 9 month period to 31 December 2014, USD1:€0.9011 for the 12 month period to 31 December 2015; USD1:€ 0.904 for the 12 month period to 31 December 2016 and USD1:€ 0.8872 for the 12 month period to 31 December 2017.

1

2

3

The table below details the SL professional and legal fees net of the rebates agreed.

Notes KPMG rates are based on NAMA rate cards for the relevant services. This is

the total fee chargeable for the period. There has been no increase to rates applied since start of liquidation on 7 February 2013. This is before a rebate of €5.0 million was agreed following discussions at the request of the Minister. KPMG staff working on the IBRC project was approximately 64 on an annual average full time employee (FTE) basis for the 12 month period to 31 December 2017 (100 for the 12 month period to 31 December 2016).

ALG rates are based on NAMA rate cards for the relevant services. This is the total fee chargeable for the period. This is before a rebate of €2.7 million which was agreed following discussions with the SLs and DOF.

Represents fee for legal work completed in relation to the Commission of Investigation undertaken by ALG.

Please see the Appendix for an analysis of SL fees by period.

1

2

3

1

SL professional and legal fees analysis - gross vs net

€00059 month period to

31 Dec 17SL related professional and legal fees (gross) 247,248

Rebates agreed:- KPMG (5,000)- ALG (2,706)- Linklaters (324)Total rebate (8,030)SL related professional and legal fees (net of rebate) 239,218

4

4

37


€m KPMG SL team totalOther legal & professional

advisors Total2018 15.0 - 17.5 4.0 - 5.0 19.0 - 22.5

2019 10.0 - 12.5 3.0 - 4.0 13.0 - 16.5

2020 7.5 - 10.0 3.0 - 4.0 10.5 - 14.0

2021 4.0 - 5.0 2.0 - 3.0 6.0 - 8.0

2022 2.0 - 4.0 1.0 - 2.0 3.0 - 6.0

38.5 - 49.0 13.0 - 18.0 51.5 - 67.0

Special Liquidation professional and legal fees (forecast)

Estimate of future Special Liquidation fees

Notes Please note that the above forecast table is provided for guidance only as the likely timing and costs to complete the Special

Liquidation are subject to significant change depending on future events which are outside the control of the SLs. As the Special Liquidation of IBRC is ongoing, the ultimate timing and costs of the SL will not be finally determined until such

time as matters such as all loan assets are sold, the total level of adjudicated creditors is finalised and the other contingent creditor claims which may crystallise, including those from litigation, are known.

While the bulk of the liquidation proceeds have been realised and the work involved on a number of workstreams is declining, such as deals and associated activities, there remains a significant amount of work to be completed by the Special Liquidators as outlined inTasks to Completion on page 9 of this report.

Please note the table above only includes an estimate of the KPMG SL fees which are forecast based on current information available to us.

Other legal and professional fees are forecast based on information currently available and have been estimated by the SLs. The fees forecast are subject to the key assumptions below.

Key assumptions The numbers included in “the projected period” (forecast to 31 December 2022) in the above table are based on the following

key assumptions. ‒ The on-going management of c. 136 sets of legal cases to which IBRC (in special liquidation) remains party are concluded

and any appeals heard within the projected period. The majority of proceedings are ones in which IBRC is defendant (111 cases). As such the prosecution of the claim is

not in the control of IBRC. IBRC has taken steps to bring interim applications to strike out proceedings where possible, or to bring them towards conclusion. Please note that the average High Court case takes approximately 18 months to conclude and if successfully defended, IBRC can expect that a cohort of these Plaintiffs will appeal. Currently there is approximately a 12 month wait for Court of Appeal hearing dates.

No new material litigation being taken against IBRC;‒ No new material regulatory reviews or investigations which IBRC would be required to establish a special project team is

assumed. Ongoing day to day regulatory interaction assumed. ‒ No new material creditors attempt to submit a claim in the liquidation. ‒ Liquidation of the remaining subsidiaries in a timely manner with no unexpected issues arising. ‒ Wind down of the remaining loan book of c. €3.5bn during the projected period. ‒ The realisation of all remaining assets during the projected period in an orderly manner.

Total11 month period to 59 month period to

€m Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 31 Dec 17Deal and associated activities 16.5 18.7 8.3 3.2 2.9 49.4Finance, operations and creditor adjudications 18.0 9.5 6.4 8.9 7.8 50.5Regulatory and other required reviews 0.0 0.0 6.8 17.3 9.3 33.5Legal and litigation 1.1 0.7 1.0 1.6 1.2 5.5Other activities 3.8 3.2 2.1 1.3 0.7 11.0Gross (pre rebates agreed) 39.3 32.1 24.5 32.2 21.8 149.9Rebate applied (5.0)

Total (net of rebate) 144.9

Actual

Year to

KPMG Special liquidation (gross fees) - actual to date

Note: (a) The fees represented are exclusive of VAT and disbursements;

Note: (a) The fees represented are exclusive of VAT and disbursements;

38


Notes

The table above details the general overhead costs of IBRC in SL for the period from 1 January 2017 to 31 December 2017. The principal matters to highlight are as follows:

1. Refund of life assurance premia paid in connection with death benefits attaching to the IBRC pension schemes.

2. Contractor costs were €180k or almost 12% higher than forecast as there were additional resources required to assist with the various projects including the TME for the CBI and the interest overcharge remediation project.

3. Legal and professional fees are €15.3 million with the majority of expenditure on the Quinn litigation, ongoing legacy litigation and general legal workload.

Actual overheads analysis

Source: IBRC in SL management accounts

1

2

€m Notes Actual Budget VarianceStaff costsSalaries 1.20 1.13 7%Pensions (0.55) 0.00 n/aContractors costs 1 1.78 1.60 12%Liquidation related redundancy costs

0.00 0.01 (19%)

Other 0.00 0.03 (87%)2.45 2.75 (11%)

Administrative costsLegal and professional 2 15.31 13.06 17%Computer expense 5.86 6.23 (6%)Insurance 0.65 0.78 (17%)Other 0.60 0.70 (14%)

22.41 20.77 8%Premises costsRent and rates 1.44 1.45 (0%)Other occupational costs 0.07 0.06 13%

1.51 1.51 0%Total before SL related costs 26.37 25.04 5%

Overheads analysis from 1 January 2017 to 31 December 2017

2

3

1

3

39


KPMG: workstream structure (1)The table below details the nature and scope of the work streams that comprise the SL engagement

Special Liquidation – KPMG work streams

Work stream Scope of workLoan Management Management of remaining loan portfolios.

Deleveraging of the loan book (other than through loan sales) in an appropriate manner and in line with SL Guidelines.

Developing an appropriate plan to wind down the Loan Management function in a controlled manner as deleveraging is completed.

Finance, Deposits, Regulatory and compliance and operations

Preparation of internal and external financial and regulatory reporting.

Liquidity and Foreign Exchange risk management.

Effective unwind of balance sheet assets not included in the Asset Realisation workstream and development of a value realisation strategy for the subsidiaries and joint ventures interests.

Administration and oversight of the DGS and ELG scheme.

Liaising with relevant regulatory bodies and ensuring IBRC in SL is compliant with all regulatory and compliance requirements.

Ensuring appropriate governance structures are in place in accordance with CBI guidelines.

Manage creditor adjudication process.

Payment of the interim unsecured creditor dividends to admitted unsecured creditors. The total announced dividend to admitted unsecured creditors is currently 50%.

Maintaining compliance with Central Credit Register submission regulations and monthly reporting requirements.

Legal Deal with legal issues arising in the course of the liquidation of IBRC including legacy issues.

Management of legal proceedings involving IBRC, both as a defendant and through recovery and enforcement actions.

Dealing with ODCE/DPP disclosure requests and provision of documentation in the context of criminal investigations/prosecutions.

Addressing regulatory queries and advising in relation to compliance with Court Directions issued to the SLs.

Unsecured creditor desk adjudication process. Liaising with SMU Team concerning, inter alia, FSPO complaints; DSARs, security discharges

and other issues/complaints raised by former borrowers. Preparation and submission of monthly Legacy reports to DOF. Liaising with insurers in respect of notification, renewal and recovery under various

insurance policies.HR/IT/Facilities Management of all HR and employee matters.

This workstream is also responsible for IT, Property, Facilities and the overall Project Management Office.

Deal team Address post completion queries.

File review and collation of key sales documentation for all concluded sale projects.

Sale of other remaining assets.

40


KPMG: workstream structure (2)The table below details the nature and scope of the work streams that comprise the SL engagement


Work stream Scope of workTaxation Effective management of IBRC tax affairs to ensure that:

‒ it meets its tax obligations on a timely basis;

‒ tax assets are realised; and

‒ legacy tax issues are addressed.Interest Overcharging Remediation Project

Remediate customer loan accounts that are deemed to have been overcharged interest, as identified by the High Court “Morrissey Case” ruling of October 2014. This includes:

‒ Identification of customers that have been potentially overcharged;

‒ Validation of the overcharge and calculation of the overcharge amount; and

‒ Remediation of the customer’s account.Tracker Mortgage Examination project

Review Anglo and INBS loans accounts that are within scope of the TME, following a Notice of Requirement from the CBI to submit information pursuant to Section 22 of the Central Bank (Supervision and Enforcement) Act 2013. This includes:

Identification of customers that have been potentially impacted; and

Remediation of the customer’s account.Commission of Investigation

To comply with directions issued by the Commission of Investigation.

Compiling, collation and production of relevant documents as required under each direction.

eDiscovery Management and support of all Criminal, Civil, DSAR and Commission of Investigation eDiscovery requests made in IBRC. This would primarily include the following data sources:

‒ Hard Copy Data;

‒ File Share Data;

‒ Email Data; and

‒ Voice Data.

Preparation and planning for the implementation of the General Data Protection Regulations (GDPR).

41


Principal legal advisorsThe table below details the roles and responsibilities of the principal legal advisors engaged in the SL process for 2017.


ALG Linklaters

Deal Team Dealing with ad hoc queries raised by purchasers and IBRC in connection with the transfer of security over real estate.

Project management team resources.

Advice in relation to ad hoc queries arising in respect of the Rock and Salt portfolios.

Treasury, General Banking, regulatory

Ongoing advice on creditor claims regarding senior and subordinated financial bonds.

Ongoing swaps and derivatives advice, including in relation to the operation of and the requirements under swaps entered into by IBRC.

Ongoing banking and asset management advice.

Advice on regulatory matters.

Not applicable.

Deposits and ELG Advice in relation to creditor claims relating to the Deposit Guarantee Scheme and the ELG.

Set-off analysis on claims under ELG.

Not applicable.

Legal and litigation

Ongoing advice on mis-selling claims. Advising on all legal aspects of the interest

overcharging remediation project. Dealing with litigation against SLs. Managing certain existing litigation. Managing and dealing with purchasers in

relation to all applications for substitution and all litigation queries arising from sales process.

Working with English law advisors on various creditor claims.

Advising on dealing with issues connected with the Commission of Investigation.

Assisting with English law aspects of swaps mis-selling claims.

Advice in respect of a creditor claim made against IBRC.

Acting in respect of a claim by IBRC against an ex-customer.

Advice in relation to obligations of IBRC pursuant to certain bonds issued by Anglo Irish Bank Corporation plc.

Assistance in relation to the identification, and status of, plaintiff proceedings.

Advice to SLs on miscellaneous issues

Full range of legal advice in relation to various creditor claims.

Ongoing advice on foreign recognition. Ongoing advice on IBRC Act and various

Ministerial Instructions.

Not applicable.

42


Cost managementKPMG resourcing reviewed regularly: workstream leads monitor workload and capacity. Resourcing amended as required to ensure efficient delivery of

workstream to the liquidation; monthly review of costs by workstream; budgeted costs set for the liquidation process to 30 April 2018; reviewed actual against plan and investigated variances; and reviewed most efficient method of delivery project and used IBRC staff where appropriate.

KPMG reviewed and monitored third party advisor costs: certain legal advisors signed up to NAMA rate card and/or fixed cost pieces of work; certain other advisors signed up to NAMA rate card; certain other advisors engaged following a competitive tender process with fixed fee quotes; regular review of third party costs against delivery of process to timeline and budget; and review of costs against agreed fixed fees.

KPMG updated DOF regularly: reporting includes analysis of time spent by KPMG, ALG and Linklaters; report on budgeted costs to 30 April 2018 issued to DOF; costs discussed in update meetings with DOF; regular fee update reports issued to DOF as required; and costs managed and minimised where appropriate through the use of IBRC staff to support the winding up.

Cost management

Appendices

44


Summary of Special Liquidation fees by period(to 31 December 2017)

11 month period to

12 month period to

12 month period to

12 month period to

12 month period to

59 month period to

€000 31 Dec 13 31 Dec 14 31 Dec 15 31 Dec 16 31 Dec 17 31 Dec 17KPMG SL team

Deal and associated activities 16,469 18,673 8,266 3,162 2,879 49,450Finance, operations and creditor adjudications

17,968 9,512 6,403 8,884 7,772 50,538

Regulatory and other required reviews

- - 6,827 17,309 9,325 33,461

Legal and litigation 1,071 688 976 1,569 1,165 5,469

Other activities 3,756 3,234 2,067 1,271 676 11,004

KPMG SL team total 39,263 32,107 24,539 32,196 21,817 149,923

KPMG migration 2,458 2,102 - - - 4,560

ALG 19,545 13,323 2,126 1,834 1,677 38,505

ALG - Commission work - - 213 93 86 392

Linklaters 12,613 6,185 432 762 508 20,499

Other legal advisors

Arthur Cox 3,059 2,483 134 8 23 5,706

Maples and Calder 1,652 1,065 157 - - 2,874Skadden, Arps, Slate, Meagher & Flom LLP

941 1,167 528 127 45 2,808

Byrne Wallace 2,106 575 39 - 5 2,725

RDJ 449 64 - - 32 545

PJ O'Driscoll 130 55 - - - 185

McCann Fitzgerald - - - - 106 106

Other legal firms - - - 39 222 261

Other legal advisors total 8,337 5,408 858 174 433 15,210

Professional advisors

PwC 3,928 1,531 - - - 5,459

Property valuation fees 3,275 1,228 109 - 57 4,669

Valuer A 3,461 284 - - - 3,745

Merrills 629 684 281 - 1 1,594

Savills 739 227 - - - 966

Goodbody 60 615 - - - 675

Eastdil 525 6 - - - 531

Deloitte 288 147 - - - 435

Other professional advisors - - - - 85 85

Professional advisors total 12,905 4,722 390 - 142 18,159

Total (pre rebates agreed) 95,121 63,848 28,557 35,059 24,663 247,248

KPMG SL team KPIs

No. of hours 197,852 161,714 129,733 186,912 117,647 793,858

Annual average FTEs* 120 87 70 100 64 88

Special liquidation professional and legal fees (gross fees) - by period

Notes: (a) The fees represented are exclusive of VAT and disbursements;(b) Please see slide 36 for information on FX rates used in the above table.(c) Annual average Full Time Employee (FTE) calculation is shown for indicative purposes and is calculated based on actual number of hours divided by actual working days

per month.

45


Summary of overhead costs by period(to 31 December 2017)

Source: IBRC in SL management accounts, IBRC annual progress reports

14 month period to

9 month period to

12 month period to

12 month period to

12 month period to

59 month period to

€m 31 Mar 14 31 Dec 14 31 Dec 15 31 Dec 16 31 Dec 17 31 Dec 17Staff costsSalaries 63.3 22.3 9.7 2.1 1.2 98.62Pensions 6.3 1.8 0.8 0.1 (0.6) 8.44Contractors costs 10.6 5.2 2.8 1.8 1.78 22.12Liquidation related redundancy costs - 0.5 0.1 - 0.61Other 0.5 0.3 0.1 0.0 - 0.93

80.7 29.5 13.8 4.2 2.4 130.62Administrative costsLegal and professional 46.4 29.8 63.4 16.7 15.31 171.58Computer expense 13.9 5 3.7 3.4 5.86 31.84Insurance 6.3 2.3 0.7 0.7 0.65 10.66Other 5.3 2.6 1.0 1.2 0.6 10.7

71.9 39.6 68.8 21.9 22.4 224.68Premises costsRent and rates 7.2 3.2 1.5 2.2 1.44 15.51Other occupational costs 3.7 2 1.0 0.2 0.07 7.02

10.9 5.3 2.5 2.4 1.51 22.63Other -0.5 3 0 - 2.51Total before SL related costs 163.1 77.4 85.2 28.5 26.4 380.4

Overhead analysis from date of Special Liquidation - by period

The contacts at KPMG in connection with this report are:

Kieran WallaceRestructuring

Partner, Dublin

Tel: + 353 1 410 1932 [email protected]

Eamonn RichardsonRestructuring

Partner, Dublin

Tel: + 353 1 410 1344 [email protected]

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