joint special administrators' proposals on alpari uk

Alpari (UK) Limited in

Special Administration

Joint Special Administrators statement of proposals

13 February 2015

See Notice: About this Statement of Proposal. All rights reserved. 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.

Notice to creditors

We have produced this document as required by law to set out the objectives of the special administration and to explain how we propose to achieve them.

We have also explained why the Company entered special administration and the dividend prospects for each class of creditor.

You will find other important information in the document such as the proposed basis of our remuneration.

A glossary of the abbreviations used throughout this document is attached (Appendix 5).

Finally, we have provided answers to frequently asked questions and a glossary of insolvency terms on the following website, http://www.kpmg.com/uk/alpari. We hope this is helpful to you.

Please also note that an important legal notice about this statement of proposals is attached (Appendix 7).


Contents

1 Executive summary 1

2 Background and events leading to the special administration 3

3 Strategy and progress of the special administration to date 5

4 Dividend prospects 13

5 Ending the special administration 14

6 Approval of proposals and creditors meeting 15

7 Joint Special Administrators remuneration, disbursements and pre-administration costs 16

8 Summary of proposals 17

Appendix 1 Statutory information 20

Appendix 2 Joint Special Administrators receipts and payments account 21

Appendix 3 Joint Special Administrators charging and disbursements policy 25

Appendix 4 Statement of Affairs, including creditor list 33

Appendix 5 Glossary 90

Appendix 6 Information regarding the initial meeting of clients and creditors and the voting process 92

Appendix 7 Notice: About this statement of proposals 97


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1 Executive summary

Alpari (UK) and many of its clients made losses as a result of the decision by the Swiss National Bank (SNB) on 15 January 2015 to remove the informal peg of the Swiss Franc to the Euro. Efforts to sell the Company over the weekend following the SNBs announcement were unsuccessful and the Companys Directors concluded that the Company was insolvent.

In order to protect the Companys position, the Directors applied for and obtained an order from the High Court of Justice appointing us Richard Heis, Mark Firmin and Samantha Bewick as Joint Special Administrators of the Company on 19 January 2015.

Our strategy was to maximise realisations for clients and creditors, including seeking a sale of the Company and/or its business. When it became evident that a sale of the Company or the whole of its business as a going concern was not possible, we entered into discussions with various parties interested in parts of the business. (Section 3.2 Sale of business initial and current strategy).

We have contacted all institutions that held client and house money on behalf of the Company, and the great majority of funds are now in bank accounts under our control. A client who is entitled to client money protection is referred to as a Client; a client who is not entitled to participate in the client money pool is referred to as a Creditor. Other creditors such as utilities and other suppliers are also Creditors. (Section 3.2 Client and House Money).

We are working to confirm final client account balances for all Clients. This includes analysing the pricing of trades that were closed on Thursday 15 and Friday 16 January 2015. We do not expect this to impact Clients who only held cash balances in their account at 9:30am GMT on 15 January 2015 and entered no subsequent trades. (Section 3.2 Close out of open positions).

Since our appointment we have had regular discussions with both the FCA and the FSCS. (Section 3.4 Regulatory matters).

We anticipate that significant funds will be available for Clients. Client monies are likely to be returned to Clients earlier than the payment of dividends to Creditors. Clients who are eligible claimants in respect of the FSCS will be able to obtain compensation from that source subject to a limit of 50,000. (Section 4 - Dividend prospects).

We anticipate that the most likely exit route will be dissolution. (Section 5 - Ending the special administration).

We propose that our remuneration be drawn on the basis of time properly given by us and the various grades of our staff. We will seek approval for this from the Creditors Committee, if one is formed, or alternatively from the Creditors and Clients. (Section 7 - Joint Special Administrators remuneration, disbursements and pre-administration costs).

This document in its entirety is our statement of proposals. A summary list of the proposals is shown in Section 8. All relevant statutory information is included by way of appendices. Unless stated otherwise, all amounts in the proposals and appendices are stated net of VAT.

Creditors meeting

We have convened a meeting of Creditors and Clients with claims to enable Creditors and Clients to consider our Proposals and to decide whether a Creditors Committee should be formed.

The meeting will be held at 11:00am on 12 March 2015 at Central Hall Westminster, Storey's Gate, London, SW1H 9NH, United Kingdom.


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The voting process is different depending on whether you are a Client or a Creditor. Different forms have been provided for each. A full explanation of the conduct of this meeting is attached at Appendix 6

Special Administrators Objectives and Strategy

The Regulations set out the statutory objectives of the special administration, being:

1. to ensure the return of client assets as soon as is reasonably practicable;

2. to ensure timely engagement with market infrastructure bodies and the Authorities; and

3. either to rescue the Company as a going concern or to wind it up in the best interests of the creditors.

There is no priority to the order of the objectives, and as set out in these Proposals, we have focused on all three simultaneously.

Samantha Bewick Joint Special Administrator


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2 Background and events leading to the special administration

2.1 Background information

The Company was incorporated on 11 November 2004 and is a wholly owned subsidiary of Alpari Group Limited, a company registered in the Republic of Cyprus.

The Companys principal activity was the provision of online financial services for trading in CFDs and spread-bets relating to indices, commodities, foreign exchange and other asset classes. The Company is authorised and regulated by the FCA. The Companys registered office and main administrative headquarters is situated in London. The Company had a representative office in Shanghai, five subsidiaries and three sister companies, in summary:

A subsidiary incorporated in Japan, Alpari (Japan) K.K., which operates the same business as the Company. Alpari (Japan) is currently under suspension of business while it seeks a buyer.

Subsidiaries incorporated in Germany (Alpari (Deutschland) AG) and China (Alpari Investment Consulting (Shenzhen) Limited), and a sister company incorporated in Dubai (Alpari ME DMCC) which provided sales and marketing and education services to customers in those jurisdictions. The German subsidiary is currently in an insolvency process in Germany. The Chinese subsidiary is being wound down.

A subsidiary incorporated in India (Alpari Financial Services (India) Pvt. Ltd), which was not operating on our appointment and is currently being wound down, and a subsidiary incorporated in Australia (Alpari (AY) Pvt. Ltd) which is dormant.

Sister companies incorporated in the Republic of Cyprus (Alpari Technologies Limited) and in Russia (Alpari Technology (RU) Limited) which developed and provided technology for the Company.

At the date of appointment the Company had 166 employees.

The Company traded under alternative trading styles, including but not limited to:

Alpari FX AlpariFX AUK Quantum FX QuantumFX

2.2 Funding and financial position of the Company In the year ended 31 December 2013, the Company had turnover of approximately 55.7 million. It made a loss of 6.3 million. On our appointment, the house cash balances of the Company were around 10.9 million. The Company had 12.2 million of non-segregated professional client funds owed to professional clients. The Company had current liabilities (excluding professional clients) falling due of over 22.3 million


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(according to the Statement of Affairs, approximately 5.7 million was owed in respect of losses to the Prime Brokers). The Company held no client assets other than client money. The Company granted a charge to its landlord relating to a rent deposit deed dated 2 March 2009 which remains outstanding. (Section 3.3 Leasehold property).

2.3 Events leading to the administration On Thursday 15 January 2015, the SNB removed the informal peg to the Euro, at around 1.20 Swiss Francs. As a result of extreme market volatility and a lack of liquidity caused by the SNB's announcement, many of the Companys clients sustained losses on their CFD, foreign exchange and spread betting transactions with the Company.

KPMG and Ashurst were engaged by the Company to provide advice on its position on Friday 16 January 2015. The weekend was spent, together with the Directors, in urgent discussions with various parties with a view to selling the Company, and should that not prove possible, in preparing for a potential appointment of special administrators. The efforts to sell the Company were ultimately unsuccessful.

On 19 January 2015, a Board Meeting was held at which, amongst other matters, it was resolved to appoint us - Richard Heis, Mark Firmin and Samantha Bewick as Joint Special Administrators. Bank of England consent was obtained and the FCA indicated that it would raise no objection to the application and did not wish to be heard at any hearing before the High Court of Justice.

Prior to our appointment, no creditor action had been initiated against the Company.

We confirm that before our involvement on 16 January 2015 neither the Joint Special Administrators nor KPMG had a prior professional relationship with the Company.

At the time of our appointment, we disclosed to the Court details of the work carried out by KPMG from 16 January 2015 up to our appointment on 19 January 2015.

We are satisfied that the work carried out by KPMG before our appointment, including the pre-administration work summarised below, has not resulted in any relationships which create a conflict of interest or which threaten our independence.

Furthermore, we are satisfied that we are acting in accordance with the relevant guides to professional conduct and ethics.

2.4 Pre-administration work The following work was carried out prior to our appointment with a view to placing the Company into special administration:

KPMG and Ashurst attended Board meetings to understand the solvency issues faced by the Company, consulted with the FCA and commenced strategy planning for the special administration appointment;

KPMG and Ashurst advised the Board regarding the special administration appointment; KPMG and Ashurst assisted in the preparation of the appointment documents; Ashurst assisted with the filing of the appointment documents.


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This work was necessary in order to place the Company into special administration.

KPMGs work was carried out under an engagement letter dated 16 January 2015 with the Company.

2.5 Appointment of Joint Special Administrators An application was made to the High Court of Justice by the Directors in order for the Company to be placed into special administration. Proceedings were opened under reference number 562 of 2015 and an Administration Order was made at 14.45 GMT on 19 January 2015 by which we were duly appointed as Joint Special Administrators.

3 Strategy and progress of the special administration to date

3.1 Purpose of the special administration Pursuant to Regulation 10, as Joint Special Administrators of the Company we have three special administration objectives:

a) Objective 1 is to ensure the return of client assets as soon as is reasonably practicable.

b) Objective 2 is to ensure timely engagement with market infrastructure bodies and the Authorities pursuant to Regulation 13.

c) Objective 3 is to either:

I. rescue the investment bank as a going concern; or

II. wind it up in the best interests of the creditors.

On insolvency all funds held in segregated accounts, together with all of the Companys client money held in omnibus accounts designated as client monies at banks or exchange/clearing houses, are pooled, pursuant to the FCAs Client Asset rules. Any segregated client is entitled to a share in the pool on a pro-rata basis. Until the overall total of claims against the segregated pool is established, the amount to be paid to individual clients having a claim against the segregated pool cannot be finally determined. Interim payments may, however, be made, based on prudent assumptions..

The Regulations state that the order in which the objectives are listed is not significant, however we are required to commence work on each objective immediately after appointment, prioritising the order of work on each objective as we think fit in order to achieve the best result overall for clients and creditors.

With regard to Objective 3, after the first two weeks it was clear that there was no reasonable prospect of rescuing the Company as a going concern, so the Joint Special Administrators are pursuing Objective 3(II): to wind up the Company in the best interests of the creditors.

3.2 Strategy to date Strategy

From 16 January until the time of our appointment on 19 January 2015 the Directors conducted urgent discussions with various parties with a view to selling the Company. These efforts were ultimately unsuccessful.


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Since our appointment we have been pursuing all options available to maximise realisations for Clients and Creditors. Below is a summary of the work we have undertaken to date.

Close out of open positions At approximately 8:00 GMT on 16 January 2015, the Board resolved to close out all open client positions. We understand that this decision was made as a result of the effect on the Company of the market turmoil following the SNB's announcement the day before. This, combined with no deal being available to rescue the Company, we understand, resulted in the Company being unable to meet its debts as and when they fell due. As such, in the view of the Directors, in order to protect the Company, it was necessary to close out all open trading positions.

The close out process was completed by 19:19 GMT on 16 January. Positions were closed out in line with the available market prices and liquidity at the point in time at which particular positions were closed out.

Prior to the close out of all open Client positions by the Company, a Clients position could have been closed out for, for example, one of the following reasons:

A Client instructed the close out of their own position; A stop out had triggered owing to a client account's equity falling below the minimum of 20% of

the margin requirement causing a close out of a client position;

A Client had placed either a Stop Loss Order or Take Profit Order with respect to their position, which had been triggered.

Following our appointment we immediately began a review of the prices received by Clients, from 9:30 GMT on Thursday 15 January to the completion of the close out of all open Client positions at 19:19 GMT on Friday 16 January, to determine whether:

All transactions in relation to Clients were executed in accordance with the terms of the Customer Agreement (dated October 2014) which governs the contractual relationship between the Company and Clients; and

Clients were treated fairly.

On conclusion of this review, we will consider whether it is appropriate to change any of the close out prices received in certain circumstances by clients on Thursday 15 and Friday 16 January 2015.

We are working with the retained employees (see section 3.3) to produce final statements and balances for all Clients. An internet based Claims Portal is being developed and will be made available to Clients to agree their claims. Clients will be able to view their January statements and final closing balances through the Claims Portal. Some Clients may receive access to the Claims Portal earlier than others depending on whether the pricing review explained above is applicable to them.

The Claims Portal will shortly be open for the majority of Clients (who had cash balances as at 9.00 GMT on 15 January 2015 and entered no further trades). We will send an email to these Clients over the coming days providing details of access to the Claims Portal. We are unable to give definitive timelines for when we will be in a position to agree claims of Clients who held open positions on the 15 and 16 January 2015 due to the ongoing review referred to above. All Clients will receive an email once they are able to access the Claims Portal.


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Client debtors The Companys debtors fall into two main categories as follows:

a) Clients with negative cash balances as at 9:30 GMT, Thursday 15 January 2015 with no open or subsequent trades;

b) Clients with negative balances after trades had been closed out on their accounts during 15 and 16 January 2015.

As detailed above, we are not yet able to confirm balances due from debtors or issue final account statements. We anticipate that we will be able to issue final statements for those Clients falling into category a) above sooner than those in category b). Once we have issued final statements to Clients, those identified as owing money to the Company will be contacted for settlement and payment details. Pending completion of our review, we are available to discuss the situation generally with those Clients who believe that they may have a negative balance.

Client and House Money Prior to our appointment the Company operated:

65 client money trust and 38 house bank accounts with four different UK banks; 26 e-wallet accounts with four institutions in the UK and overseas (which are considered to be

client monies); and

10 accounts at three Prime Brokers. On appointment we contacted all financial institutions which held balances on behalf of the Company with a request to freeze both the Company house and client money accounts with immediate effect. We have set up separate house and client currency accounts in the administration estate to facilitate the repatriation of funds.

Sale of business initial and current strategy

Upon appointment, given the nature of the Companys assets and the corresponding need for speed, we immediately engaged KPMG Corporate Finance to conduct a sale process (building on the work done by the Directors prior to appointment) with a view to maximising recoveries for Creditors and to save as many jobs as possible. We summarise below developments to date, with further information on the sale of intellectual property (IP) given in section 3.5.

Sale of the business as a going concern

Prior to our appointment, the Companys management team had received a number of expressions of interest and had entered into negotiations with a number of parties to try to secure the sale of the business as a going concern.

Two parties were in advanced negotiations and were undergoing due diligence, however it was not possible to complete a deal in the requisite timeframe.

We held discussions with management to understand where value could be realised. We produced a sales document, inviting offers for the shares in the business or the assets, within days.

At this time a significant cash injection, of between 20 and 30 million, would have been required if the Company were to fill the regulatory capital shortfall that had developed which would have been needed to return the business to a going concern.


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Over 60 expressions of interest were received for the Company, its business or its constituent parts (such as its intellectual property, client balances, technology etc.).

We contacted interested parties and sent a process letter and sales document requesting that an indicative offer be submitted by Friday 23 January 2015.

Fourteen parties submitted indicative bids, including one company that offered to inject the required capital to return the business to a going concern. This bid could not be taken forward however, as it did not provide a viable solution that would have been acceptable to the FCA.

As a result, a sale of individual parts of the business was taken forward in order to achieve the best outcome in the circumstances for the Companys Creditors.

Sale of Client List The Company had a diverse client base with some 116,000 clients of which 27,000 were active users (as at December 2014). The customer base was dominated by direct retail customers, however, the business also served 70 professional clients. As the bulk transfer of client balances was not possible for logistic and regulatory reasons, we have pursued a standalone sale of the client list and discussions with buyers are continuing.

Sale of Alpari Japan K.K.

Alpari Japan is a wholly owned subsidiary of Alpari (UK), licensed and regulated by the Japanese Financial Services Authority. Alpari Japan suspended trading on 20 January 2015 and closed out its clients open positions. Offers are being sought for the entire issued share capital of Alpari Japan as part of the sale process for the assets of the Company, and discussions with potential buyers are continuing.

3.3 Management of the Company since appointment Communications Since our appointment, we have sought to provide information to Clients, Creditors, other stakeholders and the media at regular intervals, mindful of their need to understand the impact that the special administration has, in particular regarding the return of client monies. We have provided Clients with as much information as possible. To assist with this we:

established a website relating to the special administration of the Company to include frequently asked questions and updates to Clients when available (www.kpmg.com/uk/alpari);

established a dedicated email enquiry address to handle all enquiries ([email protected]);

set up a dedicated call centre; and utilised the media to provide updates to stakeholders. In the first two weeks of the special administration approximately 10,000 emails were received. We replied to all but the most complex emails within seven days. We continue to receive about 2,000 emails a week, to which we are responding as quickly as possible. We will continue to provide updates on the dedicated website as and when we have further information. These proposals and all associated documents are available on the website.


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Trading and employees As discussed above, the Company closed out all client and house positions prior to our appointment. All trading platforms were closed and therefore no further trades have been placed since our appointment. We have been reviewing and analysing the pricing of the close out of trades as detailed in section 3.2. There were 166 employees (including the Directors) working for the Company when we were appointed. All employees were retained and paid until 31 January 2015 whilst we pursued a sale of the business. As a sale of the Company as a going concern was not achieved, on 30 January 2015, 104 employees were made redundant and 10 employees resigned. Since 30 January 2015, we have made a further eight employees redundant owing to the completion of their individual work streams and four employees have resigned. We initially retained 52 employees to assist us with agreeing Clients positions, completing financial statements, developing the Claims Portal and to assist with our duties. 40 employees continue to be employed as at the date of this report. To convert the Companys systems and procedures so that they are appropriate for the requirements of the special administration, in particular the Claims Portal, is a complex task. We are very grateful for the excellent support we have received from the Directors and employees in this process. We have contacted those suppliers where ongoing provision of their services is required to assist us in the special administration.

Leasehold property The Company is based at leasehold premises at 201 Bishopsgate, London. The Company holds two leases at the property in respect of the areas on the north and south sides of the fifth floor, with one of these areas partially vacant at the time of our appointment. The property remains operational at present whilst the remaining employees assist us in carrying out our functions. At the date of our appointment, the Landlord held rent deposits totalling some 1.4 million. The rent and service charge due under the leases was paid by the Company in December 2014 for the first quarter of 2015. We are currently in discussions with the Landlord regarding the Companys continued occupation of the property, the rent deposit held and the process which we will follow to vacate the property at the appropriate time. The Company also has leasehold interests in properties in China and Germany, which are or were occupied by its subsidiaries or representative agents. We have contacted the respective landlords to confirm that we have no interest in the leases. Other than the rent deposit referred to above, there are no realisable values in any of the above mentioned leases.

IT equipment, software, office furniture The Company owned IT and office equipment consistent with its trading operations. We have appointed Edward Symmons, a firm of independent agents and valuers, to provide an inventory and valuation of this equipment and arrange for its subsequent sale. This work is currently underway.


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The Companys principal trading platforms were operated on licence from third party suppliers and maintained by associated companies within the Group. Accordingly, there is no realisable value in the software previously operated by the Company.

Other assets The Company had other debtors totalling 60,351.35, being largely money due from employees in respect of season ticket loans, cycle to work schemes and student loans. We have written to all those employees who are no longer employed by the Company requesting repayment.

IT infrastructure and information The Company is heavily dependent on its IT infrastructure. We have sought to ensure continuity of the provision of such IT services and related data required to fulfil our objectives including generating an effective audit trail of actions undertaken. This has included collaboration with Company employees and Directors to assume control over IT infrastructure, support, operation and maintenance. Using our in-house specialists and relevant Company employees we have identified key data sources that we need to preserve and identified the mechanisms by which we can communicate with clients and suppliers. The Company ran a dynamic and well-regarded technology platform for its clients. With the employees and Directors we are in the process of adapting these dynamic trading systems into a static claims agreement process which has required considerable additional software development and testing. We have reviewed the dependencies between the Company and its subsidiaries. We have started to decommission or downsize non-essential systems and identified the systems required for the analysis of closed out positions and generation of management information.

3.4 Regulatory matters The Financial Conduct Authority and the Bank of England The FCA were consulted extensively prior to our appointment. The FCA indicated that it would raise no objection to the application for our appointment and did not wish to be heard at any hearing before the High Court of Justice. Bank of England consent was obtained.

We have liaised closely with the FCA in relation to a number of matters including: the close-out of client positions; our work relating to client money; reporting requirements; compliance with other relevant FCA rules and Know Your Client regulations (to which the Company is still subject).

We have provided the FCA with the information which it has requested relating to the Company and its clients. This is an ongoing process which we expect to continue for the duration of the special administration.

We will continue to co-operate with the FCA in all matters where that is necessary or desirable for the purposes of the special administration.

Financial Services Compensation Scheme The FSCS is a statutory compensation scheme which may, among other things, compensate eligible parties who have lost money as a result of the insolvency of a regulated entity. Compensation depends on many factors and is limited to a maximum of 50,000 per person.


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Since our appointment we have liaised closely with the FSCS and ensured that it is kept informed of progress with respect to the claims agreement process which we are putting in place. We have supplied it with all the information it has requested in order for it to conclude on eligibility of client claims for compensation. As eligible clients claims are agreed, we will provide these to the FSCS on a timely basis.

The FSCS will update consumers online at www.fscs.org.uk once it has more information on eligibility and, if appropriate, the claims process it will use.

We are pleased to advise that the FSCS has determined that all of the products offered by the Company are eligible for compensation, although to be eligible a claimant must itself be eligible.

3.5 Asset realisations Realisations from the date of our appointment to 13 February 2015 are set out in the attached receipts and payments account (Appendix 2).

Summaries of the most significant realisations to date are provided below.

Sale of Intellectual Property (IP) Assets

The Company held trademarks, domain names and licences as part of its IP. A sale of these assets entitles the acquiring party to operate under the Alpari name in various jurisdictions, including the UK. We held discussions with the Company to understand the nature and ownership of the IP and to ascertain what value could be realised. We received an initial offer on 20 January 2015, with another party submitting a similar bid on 23 January 2015. After running a competitive process, the initial party increased its offer to USD 6 million and stated that the cash was immediately available for transfer. We accepted this proposal and an agreement was signed on 2 February 2015. Funds were received for the sale on 3 February 2015. It is a condition of the sale that both the Company and the Joint Special Administrators shall be entitled to continue to use any name or mark incorporating the word "Alpari" in connection with the special administration and the Alpari domain names for the purposes of the special administration only.

Client money The trust status of the Company accounts has been identified by way of trust acknowledgement letters provided by the banks, detailing cash accounts which were separately identifiable as relating to client money in accordance with CASS 7 rules. To date, no financial institutions have disputed the legal status of client money.

Funds held at e-wallets were not designated as client monies by the institutions by way of trust acknowledgement letters. However, all funds related to retail client transactions which would have eventually settled into client money accounts. We therefore consider it appropriate to classify these funds as client money in order to mitigate any shortfall in the client money pool, for example as a result of the costs of the special administration.

From our work to date, we have identified balances of approximately USD 99.3 million held in designated client money or trust accounts on the date of appointment. To date, USD 99.6 million has been repatriated to the special administration estate and is held in client money trust bank accounts. A balance of USD 1.3 million is yet to be repatriated. The difference between the balance on appointment and realised is due to exchange rate differences and interest accrued.


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We are required by law to hold the Client Money Pool in a single currency and we consider that USD is the most appropriate currency. All non-USD currency amounts received will be converted to USD as a base currency going forward except a balance held in GBP for ongoing costs.

The operation of the FCA client money rules means that client monies are subject to pooling at the point of insolvency. Individual entitlements to funds disappear on the pooling event and are replaced by a right to a share in the pool. Accordingly there is a requirement to ensure that the amount of client monies and relevant costs is known before the entirety of the client money pool can be distributed pro-rata to clients with claims. This will not prevent an interim distribution to such Clients. Further information on the potential outcome for Clients is included in section 4.1.

Cash at bank house From our work to date, we have identified house balances held at banks and Prime Brokers of approximately 7.4 million on the date of appointment. To date we have repatriated 7.2 million to the special administration estate.

All house balances are required to be exchanged into GBP as distributions from the house estate are legally required to be made in GBP. All non-GBP currency amounts received in respect of the house estate will be converted to GBP as a base currency going forward except a balance held in USD for ongoing costs.

Investigations

We are reviewing the affairs of the Company to find out if there are any actions which can be taken against third parties to increase recoveries for Creditors.

In this regard, if you wish to bring to our attention any matters which you believe to be relevant, please do so by writing to Samantha Bewick at KPMG LLP, 8 Salisbury Square, London, EC4Y 8BB, United Kingdom or alternatively by email at: [email protected].

3.6 Costs Payments made from the date of our appointment to 13 February 2015 are set out in the attached receipts and payments account (Appendix 2).

Summaries of the most significant payments made to date are provided below.

Solicitors fees

Ashurst were the Companys legal advisors prior to our appointment. They have experience of the Companys industry as well as with dealing with formal insolvencies and confirmed they have no conflict of interest in being engaged as our legal advisors. We have a formal engagement letter with Ashurst which details the responsibilities of each party and the basis of their remuneration. We will continue to review both their work and the fees they charge on a monthly basis. Ashurst have assisted us on all key matters set out in this report including, but not limited to:

advice regarding the sale of IP; negotiations on the potential sales of the client list and Alpari Japan; advice on the close out of open positions and clients with negative balances; general advice on various regulatory and post-appointment matters.


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Other Details of other costs paid in the special administration to date, including wages and salaries to the retained employees, are set out in the receipts and payments account attached as Appendix 2.

4 Dividend prospects

4.1 Clients Based on the Directors Statement of Affairs, the amount owed to Clients is 65.3 million. However the final liability to Clients cannot be determined until our review of the close out of open positions (see section 3.2) has concluded and we are able to issue final account statements. Accordingly at the present time we are unable to determine the return to Clients until this position has been concluded. A deficit in client money will rank as an unsecured claim against the Company's general estate. Clients may therefore also receive a dividend from this source. Further information is given below.

Claim agreement: Clients Before client money can be returned to Clients, the Regulations require that each Client agrees their client money entitlement with us. In order to facilitate this process, we are developing a web portal (referred to as the Claims Portal) which will:

give Clients direct access to agree their claims; and provide information that will assist in a process for the payment of distributions.

Given the very large number of Clients that the Company had, we consider the Claims Portal to be a significantly more efficient and cost effective approach for agreeing claims than using a manual paper based system.

The Special Administrators will be sending the majority of Clients (who had cash balances at 9.00 GMT on 15 January 2015 and entered no further trades) an email over the coming days with access details to the Claims Portal. This will allow those Clients to view their statement as at 19 January 2015. A Clients agreement to their claim in the Claims Portal will be accepted for both voting purposes at the Initial Meeting (therefore there is no need for those Clients to submit a statement of claim) and any distribution(s) from the special administration.

For those Clients who have not received an email and do not have access to the Claims Portal, claimants will be permitted to submit claims on an estimated basis which may include the last statement that you received. Please note that submitting an estimated claim for voting purposes is not an agreement of your claim for any other purpose. If you are unable to determine your claim value with any certainty, the Special Administrators request that you submit an estimated claim for voting purposes and submit a formal claim for distribution purposes at a later date.

Once a client has agreed their balance with us, if eligible, they can assign their claim to the FSCS. For further information on the FSCS process please see section 3.4.


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Claim agreement: professional clients, introducing brokers, suppliers and other Creditors Professional clients, introducing brokers, suppliers and other Creditors will be notified in due course of how to submit a claim into the general estate. A notice informing Creditors how to claim will be placed on the website.

4.2 Secured creditor The only security granted by the Company was a rent deposit deed to the Landlord as set out in section 3.3.

4.3 Preferential creditors Claims from employees in respect of (1) arrears of wages up to a maximum of 800 per employee, (2) unlimited accrued holiday pay and (3) certain pension benefits, rank preferentially.

We estimate the amount of preferential claims at the date of our appointment to be 68,276.55.

Funds will be available in the special administration to pay these claims in full.

4.4 Unsecured creditors Based on current estimates, we anticipate that Creditors should receive a dividend. We have yet to determine the amount of this, but we will provide guidance as soon as possible.

5 Ending the special administration

5.1 Exit route from special administration We consider it prudent to retain all of the options available to us, as listed in Section 8, to bring the special administration to a conclusion in due course.

However, at this stage, we anticipate that the most likely exit route will be dissolution. Exit via an application to Court seeking an order for the winding-up of the Company is also a possibility.

5.2 Discharge from liability We will seek approval from the Court that we will be discharged from liability in respect of any action as Joint Special Administrators at a time specified by the Court or immediately on our appointment ceasing to have effect.

Discharge does not prevent the exercise of the Courts power in relation to any misfeasance action against us.


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6 Approval of proposals and creditors meeting

6.1 Creditors meeting Notice of a meeting of Clients and Creditors to be held at 11:00 am on 12 March 2015 at Central Hall Westminster, Storeys Gate, London, SW1H 9NH is attached to the covering letter. We are convening this meeting in order to present our statement of proposals.

Proxy forms are available at www.kpmg.com/uk/alpari for your use. If you wish to vote at the meeting, please return your completed statement of claim if not already provided (see Appendix 6) which must be received by 12 noon on 11 March 2015 in order to be counted. Any proxies that are intended to be used must be submitted to us by the date of the meeting. Please return statement of claims and proxy forms to us as follows:

Where applicable submit your claim via the Claims Portal; By post to Alpari (UK) Limited in special administration, c/o KPMG LLP, 8 Salisbury Square,

London, EC4Y 8BB;

Via email to [email protected].

The Joint Special Administrators will be sending the majority of Clients (who had cash balances at 9.00 GMT on 15 January 2015 and entered no further trades) an email over the coming days with access details to the Claims Portal. This will allow those Clients to view their statement as at 19 January 2015. A Clients agreement to their claim in the Claims Portal will be accepted for both voting purposes at the Initial Meeting (therefore there is no need for those Clients to submit a statement of claim) and any distribution(s) from the special administration. If you believe you are in the above category, you may wish to refrain from submitting a statement of claim by email immediately as, if you are given access to the Claims Portal, submitting once through the Claims Portal will be more efficient.

Those Clients who have not received an email and do not have access to the Claims Portal will be permitted to submit claims on an estimated basis which may include the last statement that they received. Please note that submitting an estimated claim for voting purposes is not an agreement of your claim for any other purpose. If you are unable to determine your claim value with any certainty, the Joint Special Administrators request that you submit an estimated claim for voting purposes and submit a formal claim for distribution purposes at a later date.

If you submit a statement of claim and then agree your claim via the Claims Portal prior to 12.00 noon on 11 March 2015, please note that your agreement to your claim in the Claims Portal will supersede your statement of claim. Your agreement to your claim in the Claims Portal will then be used for both voting purposes at the Initial Meeting and any distribution(s) from the special administration.

Please do not claim for the same amount as both a Client and a Creditor: if we disagree with your own classification we will automatically reclassify your claim into the appropriate estate.

Creditors Committee

A Creditors Committee will be formed if sufficient Clients and Creditors are willing to act. The minimum number of Committee members is three and the maximum is five. We consider a Creditors Committee of three Clients (possibly including the FSCS, whose claim will grow substantially over time) and two Creditors is appropriate in this case.


16

We consider that the FSCS has an interest in the achievement of the special administration objectives, notwithstanding that at the date of these proposals it is neither a Client nor Creditor. Nonetheless it is up to Clients and Creditors whether to vote the FSCS onto the committee.

Function of the Creditors Committee

The Creditors Committee represents the interests of the Clients and Creditors as a whole, rather than the interests of certain parties or individuals.

Its statutory function is to help us to discharge our responsibilities as Joint Special Administrators.

If a Creditors Committee is formed it is for that body to approve, for instance:

the basis of our remuneration the drawing of Category 2 disbursements (i.e. certain expenses incurred by us) Members of the Creditors Committee are not remunerated for their time. Other than receiving travel expenses, they receive no payment from the Company.

6.2 Resolutions Clients and Creditors will be asked to vote on the following matters at the initial meeting of Clients and Creditors:

our proposals; the formation of a Creditors Committee. If a Creditors Committee is not formed the approvals in Section 7 which would have been considered by the Creditors' Committee will be voted on by the Clients and Creditors.

7 Joint Special Administrators remuneration, disbursements and pre-administration costs

7.1 Approval of the basis of remuneration and disbursements Agreement to the basis of our remuneration and the drawing of Category 2 disbursements is subject to specific approval. It is not part of our proposals.

Should a Creditors Committee be formed at the Clients and Creditors meeting, we will seek to obtain approval from the Creditors Committee that:

our remuneration will be drawn on the basis of time properly given by us and the various grades of our staff in accordance with the charge-out rates included in Appendix 3;

disbursements for services provided by KPMG (defined as Category 2 disbursements in Statement of Insolvency Practice 9) will be charged in accordance with KPMGs policy as set out in Appendix 3.

If a Creditors Committee is not formed, the Clients and Creditors represented at the meeting in person or by proxy will be asked to vote on the resolutions with regards to our remuneration and drawing of Category 2 disbursements.


17

Our remuneration incurred in pursuit of Objective 1 is to be paid out of client monies held by the Company, in accordance with Rule 196.

Time costs

From the date of our appointment to 13 February 2015, we have incurred time costs of 1,921,160. These represent 4,144 hours at an average rate of 464 per hour.

Disbursements

We have incurred disbursements of 5,972, none of which are Category 2 disbursements, during the period. These have not yet been paid.

Additional information

We have attached (Appendix 3) an analysis of the time spent, the charge-out rates for each grade of staff and the disbursements paid directly by KPMG for the period from our appointment to 13 February 2015. We have also attached our charging and disbursements recovery policy.

7.2 Pre-administration costs The following pre-administration costs have been incurred in relation to the pre-administration work detailed in Section 2.4:

Pre-administration costs

Paid () Unpaid () Total ()

KPMG fees 0.00 56,521.00 56,521.00

KPMG disbursements 0.00 76.00 76.00

Ashurst legal fees & disbursements 0.00 147,174.95 147,174.95

Total 0.00 203,771.95 203,771.95

The payment of unpaid pre-administration costs as an expense of the special administration is subject to the same approval as our remuneration, as outlined above. It is not part of our proposals.

8 Summary of proposals

In addition to the specific itemised proposals below, this document in its entirety constitutes our proposals.

We propose the following:

Special administration objectives

To pursue the special administration objectives being: 1. Objective 1 to ensure the return of client assets as soon as is reasonably practicable; 2. Objective 2 to ensure timely engagement with market infrastructure bodies and the

Authorities pursuant to Regulation 13;

3. Objective 3 to rescue the investment bank (i.e. the Company) as a going concern or wind it up in the best interests of the creditors.


18

It has not been possible to rescue the Company as a going concern. General matters

To continue to do everything that is reasonable, and to use all our powers appropriately, that we, as Joint Special Administrators, in our discretion consider desirable in order to maximise returns to Clients and the realisations from the assets of the Company in accordance with the objectives as set out above;

To investigate and, if appropriate, to pursue any claims the Company may have; To move funds collected on behalf of Clients into bank accounts controlled by us in their original

currencies or converted into USD as considered appropriate in the circumstances;

To move funds collected as part of the estate into bank accounts controlled by us and convert them into GBP;

Creditors Committee

To seek the election of a Creditors Committee, to consult with it regarding significant issues in the special administration and to seek resolutions from it where appropriate;

To hold regular meetings of the Committee to discuss progress in the special administration and to seek fee approvals (where required).

Distributions

To agree claims of Clients and Creditors as soon as possible, using where appropriate a Client Portal. This will allow eligible claimants to claim from the FSCS;

Client monies are to be paid to Clients as funds and the relevant calculations permit. This is likely to be before payments of dividends to Creditors;

To make distributions to the secured and preferential creditors where funds allow; In accordance with Rule 91 and Rule 166, debt in a foreign currency, the liabilities to creditors in

the general estate in a currency other than Sterling shall be converted into Sterling at the official exchange rate prevailing on the date the Company entered into special administration;

In accordance with case law, different currencies of entitlement to client money shall be converted to the common currency (USD) at the spot rate prevailing at the time of appointment, being 14.45 on Monday 19 January 2015;

Interim payments will be made where final information is unavailable. Ending the administration

We might use any or a combination of the following exit route strategies in order to bring the special administration to an end:

apply to Court for the special administration order to cease to have effect from a specified time and for control of the Company to be returned to the Directors;

formulate a proposal for either a company voluntary arrangement (CVA) or a scheme of arrangement and put it to meetings of the Companys creditors, shareholders or the Court for approval as appropriate;

petition the Court for a winding-up order placing the Company into compulsory liquidation and to consider, if deemed appropriate, appointing us, Richard Heis, Mark Firmin and Samantha Bewick, as Joint Liquidators of the Company without further recourse to Clients and Creditors, taking such steps as are required under the Act as modified by the Regulations and Rules. Any action required or authorised under any enactment to be taken by us as Joint Liquidators may be taken by us individually or together;

file notice of move from special administration to dissolution with the Registrar of Companies if we consider that liquidation is not appropriate because (1) no dividend will become available to Creditors, and (2) there are no other outstanding matters that require to be dealt with in a liquidation. We will take such steps as required to send a copy of the notice to all Creditors and


19

Clients of whom we are aware and to the FCA. The Company will be dissolved three months after the registering of the notice with the Registrar of Companies.

Joint Administrators remuneration

We propose that:

our remuneration will be drawn on the basis of time properly given by us and the various grades of our staff in accordance with the charge-out rates included in Appendix 3. Costs and expenses of dealing with and distributing client monies will be paid out of client monies;

disbursements for services provided by KPMG (defined as Category 2 disbursements in Statement of Insolvency Practice 9) will be charged in accordance with KPMGs policy as set out in Appendix 3;

unpaid pre-administration costs will be paid as an expense of the special administration.

Discharge from liability

We propose that we will be discharged from liability under Paragraph 98 of Schedule B1 of the Act as modified by Regulation 15 upon our appointment as Special Administrators ceasing to have effect at a time specified by the Court and, subject to any order to the contrary that the Court might make, immediately upon our appointment ceasing to have effect.


20

Appendix 1 Statutory information

Company information

Company and Trading name Alpari (UK) Limited

Date of incorporation 11 November 2004

Company registration number 05284142

FCA registration number 448002

Trading address 201 Bishopsgate, London, EC2M 3AB

Previous registered office 201 Bishopsgate, London, EC2M 3AB

Present registered office 8 Salisbury Square, London, EC4Y 8BB

Company Directors David Gabriel Hodge Aytugan Khafizov Diya Patel Jacob Herman Plattner Andrew Anthony Stylianou Andrey Vedikhin

Company Secretary Andrey Vedikhin

Special administration information

Special administration appointment The special administration appointment granted in High Court of Justice, 526 of 2015

Appointor Court (on application by Directors)

Date of appointment 19 January 2015

Joint Special Administrators Richard Heis, Mark Firmin and Samantha Bewick

Purpose of the special administration See objectives as set out in section 3.2

Functions The functions of the Joint Special Administrators are being exercised by them individually or together in accordance with Paragraph 100(2).

Prescribed Part The Prescribed Part is not applicable on this case as there is no qualifying floating charge holder

Application of EC Regulations The EC Regulations on insolvency proceedings does not apply


21

Appendix 2 Joint Special Administrators receipts and payments account

App

endi

x 2

Join

t S

peci

al A

dmin

istr

ator

s r

ecei

pts

and

paym

ents

acc

ount

Join

t S

pec

ial A

dm

inis

trat

ors

' ab

stra

ct o

f re

ceip

ts &

pay

men

ts

ho

use

est

ate

Sta

tem

ent

of

Aff

airs

()

G

BP

()

US

D (

equ

iv)

EU

R (

equ

iv)

CH

F (

equ

iv)

AU

D (

equ

iv)

SG

D (

equ

iv)

JPY

( e

quiv

) ZA

R (

equ

iv)

Tota

l ()

Fr

om 1

9/01

/15

to 1

3/02

/15

FI

XE

D C

HA

RG

E A

SSE

TS

1,44

9,16

1.79

R

ent d

epos

it N

IL

NIL

N

IL

NIL

N

IL

NIL

N

IL

NIL

N

IL

N

IL

FI

XE

D C

HA

RG

E C

RE

DIT

OR

S

(1,4

49,1

61.7

9)

Fix

ed c

harg

e cr

edito

r (L

andl

ord)

N

IL

NIL

N

IL

NIL

N

IL

NIL

N

IL

NIL

N

IL

N

IL

A

SS

ET

RE

ALI

SA

TIO

NS

60,3

51.3

5 O

ther

deb

tors

N

IL

NIL

N

IL

NIL

N

IL

NIL

N

IL

NIL

N

IL

7,21

8,15

5.93

B

ad d

ebt

prov

isio

n (c

lient

s)

NIL

N

IL

NIL

N

IL

NIL

N

IL

NIL

N

IL

NIL

4,42

0,68

6.54

I

nter

com

pany

loan

s &

rec

eiva

bles

N

IL

NIL

N

IL

NIL

N

IL

NIL

N

IL

NIL

N

IL

39,3

46.7

5 B

ook

debt

s N

IL

NIL

N

IL

NIL

N

IL

NIL

N

IL

NIL

N

IL

265,

851.

26

Glo

bal C

olle

ct R

eser

ves

NIL

N

IL

NIL

N

IL

NIL

N

IL

NIL

N

IL

NIL

P

rope

rty

right

s/P

aten

ts

NIL

3,

897,

875.

66

NIL

N

IL

NIL

N

IL

NIL

N

IL

3,89

7,87

5.66

42,4

93.4

5 V

AT

refu

nds

(pre

-app

oint

men

t) N

IL

NIL

N

IL

NIL

N

IL

NIL

N

IL

NIL

N

IL

10,9

33,5

84.8

5 C

ash

at b

ank

1,20

1,71

0.30

5,

085,

133.

02

552,

851.

94

271,

724.

15

279,

319.

99

45.6

9 54

4,70

2.59

45

.14

7,93

5,53

2.82

11

,833

,408

.48

O

THE

R R

EALI

SATI

ON

S

B

ank

inte

rest

, gro

ss

33.8

8 N

IL

NIL

N

IL

NIL

N

IL

NIL

N

IL

33.8

8

B

roke

rage

Rec

eipt

s N

IL

232,

660.

68

NIL

N

IL

NIL

N

IL

NIL

N

IL

232,

660.

68

23

2,69

4.56

C

OS

T O

F R

EA

LIS

ATI

ON

S

C

urre

ncy

tran

sfer

s O

UT

NIL

(4

,872

,344

.57)

N

IL

NIL

N

IL

NIL

N

IL

NIL

(4

,872

,344

.57)

C

urre

ncy

Tran

sfer

s IN

4,

888,

541.

26

NIL

N

IL

NIL

N

IL

NIL

N

IL

NIL

4,

888,

541.

26

I

T su

pplie

rs

(699

.56)

N

IL

NIL

N

IL

NIL

N

IL

NIL

N

IL

(699

.56)

U

tiliti

es

(1,3

63.3

9)

NIL

N

IL

NIL

N

IL

NIL

N

IL

NIL

(1

,363

.39)

S

tatu

tory

adv

ertis

ing

(613

.80)

N

IL

NIL

N

IL

NIL

N

IL

NIL

N

IL

(613

.80)

O

ther

pro

pert

y ex

pens

es

(1,9

74.9

4)

NIL

N

IL

NIL

N

IL

NIL

N

IL

NIL

(1

,974

.94)

W

ages

& s

alar

ies

(532

,787

.12)

N

IL

NIL

N

IL

NIL

N

IL

NIL

N

IL

(532

,787

.12)

P

AY

E &

NIC

(3

26,0

65.3

6)

NIL

N

IL

NIL

N

IL

NIL

N

IL

NIL

(3

26,0

65.3

6)

B

ank

char

ges

(1,0

51.0

0)

(51.

41)

(88.

90)

(64.

73)

(50.

29)

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N

IL

NIL

(1

,306

.33)

(8

48,6

13.8

1)

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EN

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(69,

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00)

Pre

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rs (h

olid

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NIL

N

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NIL

N

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NIL

N

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NIL

N

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NIL

N

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F

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(10,

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(inc

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s)

NIL

N

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NIL

N

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NIL

N

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NIL

N

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NIL

(3,5

81,0

23.4

5)

Em

ploy

ees

& p

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ontr

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N

IL

NIL

N

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NIL

N

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NIL

N

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NIL

N

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(7,9

34,2

69.2

1)

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andl

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N

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NIL

N

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NIL

N

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NIL

N

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NIL

N

IL

(12,

198,

392.

35)

Pro

fess

iona

l clie

nts

NIL

N

IL

NIL

N

IL

NIL

N

IL

NIL

N

IL

NIL

(632

,439

.73)

I

nter

com

pany

bal

ance

s N

IL

NIL

N

IL

NIL

N

IL

NIL

N

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NIL

N

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(89,

079.

21)

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- ge

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ting

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N

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NIL

N

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NIL

N

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NIL

N

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NIL

N

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N

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(4,4

84,5

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0)

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areh

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NIL

N

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NIL

N

IL

NIL

N

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NIL

N

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NIL

N

IL

(16,

026,

108.

21)

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17,4

89.2

3

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F

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5,22

4,63

8.74

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552,

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42

279,

269.

70

45.6

9 54

4,70

2.59

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11,2

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Not

es:

Fore

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exch

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cur

renc

y ra

te u

sed

as a

t 13

Feb

ruar

y 20

15: U

SD

1.5

393;

EU

R 1

.349

9; C

HR

1.4

317;

AU

D 1

.979

8; S

GC

2.0

848;

JP

Y 1

82.6

687;

ZA

R 1

7.93

98

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.

App

endi

x 2

Join

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62,3

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27.3

1 17

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75,2

33.8

5 3,

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650.

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1,32

9,35

0.36

41

1,33

0.85

68

0,05

3.17

60

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99,6

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45.6

3

99,6

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3

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B

ank

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ges

NIL

N

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(18.

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(67.

03)

(88.

49)

NIL

N

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NIL

(1

73.9

2)

(173

.92)

96,4

07,4

00.4

5 C

LIE

NT

LIA

BIL

ITIE

S N

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NIL

N

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NIL

N

IL

NIL

N

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NIL

N

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2,58

1,65

6.68

99

,656

,271

.71

R

EPR

ES

EN

TED

BY

F

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62,3

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1 17

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14,2

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15.4

5 3,

286,

583.

77

1,32

9,26

1.86

41

1,33

0.85

68

0,05

3.17

60

,729

.09

99,6

56,2

71.7

1

99,6

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1

Not

es:

For

ease

of

com

paris

on, t

he f

igur

es s

tate

d in

the

Dire

ctor

s S

tate

men

t of

Aff

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hav

e be

en c

onve

rted

to

US

D u

sing

the

for

eign

exc

hang

e cu

rren

cy r

ate

as a

t 19

Jan

uary

201

5: G

BP

: 0.6

600

Fore

ign

exch

ange

cur

renc

y ra

te u

sed

as a

t 13

Feb

ruar

y 20

15: G

BP

0.6

496;

EU

R 0

.877

; CH

F 0.

9301

; AU

D 1

.286

2; S

GD

1.3

544;

JP

Y 1

18.6

7; Z

AR

11.

6545

. C

lient

fun

ds w

ere

held

in o

rigin

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25

Appendix 3 Joint Special Administrators charging and disbursements policy

Joint Special Administrators charging policy

The time charged to the special administration is by reference to the time properly given by us and our staff in attending to matters arising in the special administration. This includes work undertaken in respect of tax, VAT, employee, pensions and health and safety advice from KPMG in-house specialists.

Our policy is to delegate tasks in the special administration to appropriate members of staff considering their level of experience and requisite specialist knowledge, supervised accordingly, so as to maximise the cost effectiveness of the work performed. Matters of particular complexity or significance requiring more exceptional responsibility are dealt with by senior staff or us.

A copy of A Creditors Guide to Joint Administrators Fees from Statement of Insolvency Practice 9 (SIP 9) produced by the Association of Business Recovery Professionals is available at:

http://www.r3.org.uk/media/documents/publications/professional/Guide_to_Administrators_Fees_Nov2011.pdf

If you are unable to access this guide and would like a copy, please email [email protected] or contact the helpline on 0333 202 1397.

Hourly rates

Set out below are the relevant hourly charge-out rates for the grades of our staff actually or likely to be involved on this special administration. Time is charged by reference to actual work carried out on the special administration, using a minimum time unit of six minutes.

All staff who have worked on the special administration, including cashiers and secretarial staff, have charged time directly to the special administration and are included in the analysis of time spent. The cost of staff employed in central administration functions is not charged directly to the special administration but is reflected in the general level of charge-out rates.

Charge-out rates (/hour) for:

Restructuring and UK based staff KPMG China

Grade From 19 January 2015 From 19 January 2015

Partner 795 895

Director 705

Senior Manager 615 653

Manager 490 484

Senior Administrator

355 284

Administrator 270

Support 135 132


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The charge-out rates used by us might periodically rise (for example to cover annual inflationary cost increases) over the period of the special administration. In our next statutory report, we will inform creditors of any material amendments to these rates.

Policy for the recovery of disbursements

Where funds permit the officeholders will seek to recover both Category 1 and Category 2 disbursements from the estate. For the avoidance of doubt, such expenses are defined within SIP 9 as follows:

Category 1 disbursements: These are costs where there is specific expenditure directly referable to both the appointment in question and a payment to an independent third party. These may include, for example, advertising, room hire, storage, postage, telephone charges, travel expenses, and equivalent costs reimbursed to the officeholder or his or her staff.

Category 2 disbursements: These are costs that are directly referable to the appointment in question but not to a payment to an independent third party. They may include shared or allocated costs that can be allocated to the appointment on a proper and reasonable basis, for example, business mileage.

Category 2 disbursements charged by KPMG Restructuring include mileage. This is calculated as follows:

Mileage claims fall into three categories:

Use of privately-owned vehicle or car cash alternative 45p per mile. Use of company car 60p per mile. Use of partners car 60p per mile. For all of the above car types, when carrying KPMG passengers an additional 5p per mile per passenger will also be charged where appropriate.

We have incurred the following disbursements during the period 19 January 2015 to 13 February 2015.

SIP 9 Disbursements

Category 1 Category 2

Disbursements Paid () Unpaid () Paid () Unpaid () Totals ()

Accommodation 1,374.82 NIL 1,374.82

Meals 1,041.39 NIL 1,041.39

Sundry 317.13 NIL 317.13

Travel 3,238.74 NIL 3,238.74

Total 5,972.08 NIL 5,972.08

We have the authority to pay Category 1 disbursements without the need for any prior approval from the creditors of the Company.

Category 2 disbursements are to be approved in the same manner as our remuneration.


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Narrative of work carried out for the period 19 January 2015 to 13 February 2015

The key areas of work have been:

Statutory and compliance

collating initial information to enable us to carry out our statutory duties, including creditor information, details of assets and information relating to the licences; providing initial statutory notifications of our appointment to the Registrar of Companies, clients, creditors and other stakeholders, and advertising our appointment; issuing regular press releases and posting information on a dedicated web page; preparing statutory receipts and payments accounts; arranging bonding and complying with statutory requirements; ensuring compliance with all statutory obligations within the relevant timescales.

Strategy documents, Checklist and reviews

formulating, monitoring and reviewing the special administration strategy, including the decision to trade and meetings with internal and external parties to agree the same; briefing of our staff on the special administration strategy and matters in relation to various work-streams; regular case management and reviewing of progress, including regular team update meetings and calls; meeting with management to review and update strategy and monitor progress; reviewing and authorising junior staff correspondence and other work; dealing with queries arising during the appointment; reviewing matters affecting the outcome of the special administration; allocating and managing staff/case resourcing and budgeting exercises and reviews; liaising with legal advisors regarding the various instructions, including agreeing content of engagement letters; complying with internal filing and information recording practices, including documenting strategy decisions.

Authorities and regulatory bodies

meeting with, providing written and oral updates to representatives of the Authorities regarding the progress of the special administration and case strategy.

Cashiering setting up special administration bank accounts, including trust accounts for client monies and dealing with the Companys pre-appointment accounts, brokers and payment providers; preparing and processing vouchers for the payment of post-appointment invoices; creating remittances and sending payments to settle post-appointment invoices; preparing payroll payments for retained staff, dealing with salary related queries and confirming payments with the employees banks; reviewing and processing employee expense requests; reconciling post-appointment bank accounts to internal systems; ensuring compliance with appropriate risk management procedures in respect of receipts and payments.

Tax gathering initial information from the Companys records in relation to the taxation position of the Company; submitting relevant initial notifications to HM Revenue and Customs; reviewing the Companys pre-appointment corporation tax and VAT position; analysing and considering the tax effects of various sale options, tax planning for efficient use of tax assets and to maximise realisations; working initially on tax returns relating to the periods affected by the administration; analysing VAT related transactions; reviewing the Companys duty position to ensure compliance with duty requirements; dealing with post appointment tax compliance.

Shareholders providing notification of our appointment; responding to enquiries from shareholders regarding the special administration; providing copies of statutory reports to the shareholders. General reviewing time costs data and producing analysis of time incurred which is compliant

with Statement of Insolvency Practice 9; locating relevant Company books and records, arranging for their collection and dealing with the ongoing storage.

Trading preparing cash flow statements to monitor the cash position; attending to supplier and customer queries and correspondence; raising, approving and monitoring purchase orders and setting up control systems for trading; negotiating and making direct contact with various suppliers as necessary to provide additional information and undertakings, including agreeing terms and conditions, in order to ensure continued support; securing petty cash on site and monitoring spend; dealing with issues in relation to stock and other assets required for trading;


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communicating and negotiating with customers regarding ongoing supplies, including agreeing terms and conditions; monitoring stock and stock reconciliations; dealing with hauliers to ensure ongoing services; ensuring ongoing provision of emergency and other essential services to site.

Asset realisations collating information from the Companys records regarding the assets; liaising with agents regarding the sale of assets; reviewing outstanding debtors and management of debt collection strategy; liaising with Company credit control staff and communicating with debtors; seeking legal advice in relation to book debt collections; reviewing the inter-company debtor position between the Company and other group companies.

Property matters reviewing the Companys leasehold properties, including review of leases; communicating with landlords regarding rent, property occupation and other issues; performing land registry searches. Sale of business planning the strategy for the sale of the business and assets, including instruction and

liaison with professional advisers; seeking legal advice regarding sale of business, including regarding non-disclosure agreements; collating relevant information and drafting information memorandum in relation to the sale of the Companys business and assets and advertising the business for sale; dealing with queries from interested parties and managing the information flow to potential purchasers; managing site visits with interested parties, fielding due diligence queries and maintaining a record of interested parties; carrying out sale negotiations with interested parties.

Health and safety liaising with internal health and safety specialists in order to manage all health and safety issues and environmental issues, including ensuring that legal and licensing obligations are complied with; liaising with the Health and Safety Executive regarding the special administration and ongoing health and safety compliance.

Open cover insurance

arranging ongoing insurance cover for the Companys business and assets; liaising with the post-appointment insurance brokers to provide information, assess risks and ensure appropriate cover in place; assessing the level of insurance premiums.

Employees dealing with queries from employees regarding various matters relati

joint special administrators' proposals on alpari uk

Documents

kpmg llp

kpmg international cooperative

summary of proposals

swiss entity

statement of affairs

alpari uk limited

preadministration costs

approval of proposals