Report to LBI’s Creditors Presented at the Creditors Meeting, March 12, 2014 Table of contents 1. Introduction ..................................................................................................................................... 7 2. Legal status and amendments to legislation regarding the winding-up proceedings .................... 9 2.1. On legal status in general ............................................................................................................. 9 2.2. Amendments to the Act on Financial Undertakings .................................................................. 13 2.3. Amendments to the Act on Foreign Currency and LBI's situation in this regard ....................... 13 2.4. Other amendments to legislation .............................................................................................. 14 2.5. Court decisions which affect LBI's legal situation ...................................................................... 15 2.5.1. Judgment of the European Court of Justice on 24 October 2013 ....................................... 15 2.5.2. Judgment of the Supreme Court of Iceland on legal status after the appointment of a Resolution Committee ................................................................................................................... 16 3. Overview of LBI's assets and operations as of 3 December 2013 ................................................. 19 3.1. General ....................................................................................................................................... 19 3.2. Disposition of assets and other rights ........................................................................................ 20 3.2.1. Aurum Holding Limited (“Aurum”) ...................................................................................... 20 3.2.2. Eimskip hf. ........................................................................................................................... 21 3.2.3. Landsbanki Luxembourg (LI Lux) S.A. in liquidation (“LI Lux”) ............................................ 21 3.2.4. Glitnir hf. .............................................................................................................................. 22 3.2.5. Meridian Lightweight Technologies (MLTH Holdings Inc.) (“Meridian”) ............................ 22 3.2.6. LB ......................................................................................................................................... 23 3.2.7. ALMC hf. (formerly known as Straumur-Burdaras Investment Bank) ................................. 25 3.3. Summary of operating costs....................................................................................................... 25 4. List of claims and handling of disputes ......................................................................................... 30 4.1. Process of Lodging Claims .......................................................................................................... 30 4.2. Transfer of claims lodged ........................................................................................................... 31 4.3. The claims decision procedure ................................................................................................... 32 4.4. Decisions on claims .................................................................................................................... 33 4.4.1. Priority claims with reference to Art. 112 of the BA ........................................................... 33 4.4.2. General claims with reference to Art. 113 of the BA .......................................................... 33 4.5. Disagreements due to decisions on claims ................................................................................ 33 4.6. Proprietary claims with reference to art. 109 of the BA ............................................................ 36 4.6.2. Claims rejected .................................................................................................................... 37 4.7. Claims for the administration of the estate with reference to art. 110 ..................................... 39 1 4.7.1. Finally accepted claims with reference to Art. 110 of the BA ............................................. 40 4.7.2. Claims accepted with different priority, with reference to Art. 113 of the BA ................... 41 4.7.3. Claims rejected .................................................................................................................... 41 4.8. Secured claims, art. 111 of the BA ............................................................................................. 42 4.8.1. Claims finally accepted with reference to Art. 111 of the BA ............................................. 43 4.8.2. Claims accepted with a different priority, with reference to Art. 113 of the BA. ............... 43 4.8.3. Claims rejected .................................................................................................................... 43 4.9. Priority claims with reference to art. 112 of the BA .................................................................. 45 4.9.1 Finally accepted with reference to Art. 112 of the BA ......................................................... 46 4.9.2. Accepted but disputed ........................................................................................................ 46 4.9.3. Claims accepted with a different ranking ............................................................................ 46 4.9.4. Claims rejected .................................................................................................................... 47 4.10. General claims art. 113 of the BA ............................................................................................. 49 4.10.1. Finally accepted claims with reference to Art. 113 of the BA ........................................... 50 4.10.2. Claims rejected .................................................................................................................. 52 4.11. Claims lodged after deadline .................................................................................................... 52 4.12. Summary .................................................................................................................................. 53 5. Partial payments ............................................................................................................................ 56 5.1. Basis for partial payments and legal situation ........................................................................... 56 5.2. Winding-up Board's principal considerations in determining partial payments ....................... 57 5.3. Partial payments which have been made to date ...................................................................... 59 5.3.1. First partial payments .......................................................................................................... 59 5.3.2. Second partial payments ..................................................................................................... 60 5.3.3. Third partial payments ........................................................................................................ 60 5.3.4. Fourth partial payments ...................................................................................................... 60 5.3.5. Summary and balance on escrow accounts as of year-end 2013 ....................................... 61 5.4. Reserve fund ............................................................................................................................... 61 6. Suits for damages – voiding ........................................................................................................... 65 6.1. Introduction ................................................................................................................................ 65 6.2. Actions for damages ................................................................................................................... 65 6.2.1. Bank guarantee which was not enforced ............................................................................ 65 6.2.2. Loan to an Icelandic financial undertaking at the beginning of October 2008 ................... 66 6.2.3. Disbursements on 6 October 2008 ...................................................................................... 67 6.2.4. Purchase of shares in LBI in Trading Book II ........................................................................ 68 2 6.2.5. Claims for damages in connection with auditing and consultancy services ....................... 68 6.3. Voiding cases pursuant to Chapter XX of the BA ....................................................................... 69 6.3.1. Payment of bonds and bills prior to maturity – repurchases .............................................. 69 6.3.2. Payment of money market facilities.................................................................................... 71 6.3.3. Payments of salaries, bonuses, premia and stock options.................................................. 72 6.3.4. Payments made by set-off and for purchase of securities .................................................. 73 6.4. Summary..................................................................................................................................... 75 7. In closing .......................................................................................................................................