Foundations Program plc - in liquidation
FPA Limited - in liquidation

Update March 2014

GLOSSARY

Foundations Program plc - in liquidation ("FPP")
FPA Limited - in liquidation ("FPA")
Joint Liquidators and Joint Official Receivers ("JL&JORs")

PROGRESS REPORT

Since the last update there have been two continuing major activities under way.

Points Re-calculations

Participants will recall that in order to perform a complete recalculation of points it would have been necessary to request a historical monthly valuation of every asset within each policy from the inception of the Program (and it was likely such historic information would have been difficult to obtain). The earlier consultation with the Participants strongly favoured the alternative strategy of basing a re-pointing exercise on quarterly policy valuations.

In November the JL&JORs reported that half of the life companies had responded to the request for quarterly policy valuations. It can now be reported that details for all but three policies (out of 208) have been received. Whilst it is disappointing that the details of the last policies have not yet been provided, the impact that these will have on the overall allocation of points is limited as we are able to estimate the valuations from other information in the JL&JORs possession.

Accordingly, we now have an initial allocation of points that will assist the Participants in the general assessment of their share of losses. The JL&JORs propose to send a notice to each Participant detailing the methodology of how the points are calculated together with a summary of the allocation of points for each policy and the range of losses that should be considered likely (this range will also be subject to the impact of the determination of the legal issues referred to below). This will be sent by email for all Participants who have provided addresses and by post for all others.

The JL&JORs expect to distribute these notifications by the end of April 2014.

Legal issues

The JL&JORs explained the circumstances relating to the legal issues in some detail in November 2013. The conclusion was that the settlement of the status of the nature of the assigned assets once released by the Bank was critical before the next phase of the liquidation could be completed. In summary, the issue is to establish whether or not such assets are being held for the benefit of creditors generally or in a trust capacity and if so what form of trust.

Having taken further legal advice the JL&JORs have decided on a course of action to resolve this issue. There are three key classes of creditor who may be impacted:

• Participants whose policies remain intact
• Participants whose policies have matured or been surrendered
• Loan Note Holders

It is not possible for the JL&JORs to represent any one group and therefore it is the JL&JORs view each group of creditors requires separate representation. One member of each group has agreed to act as a 'class' representative. An independent advocate (Manx lawyer) will be provided with Counsel's Opinion which sets out in detail the legal considerations and his conclusion, including areas of doubt. It is anticipated the advocates will advise the 'class' representative whether or not it is appropriate to present arguments to the court in relation to the legal issues arising.

The JL&JORs will then make an application to the Court and, based on the advices given by each advocate, any necessary hearings will be arranged. If representative orders are made by the Court, this will ultimately have the effect of binding all persons represented by each “class representative” subject to certain provisos in accordance with Manx law and procedure.

The JL&JORs will provide a further update when the envisaged application to the Court has been made.

March 2014