<table><tr><th>From:</th><th>David Stern</th></tr><tr><td>Sent:</td><td>Friday, May 8, 2015 3:09 PM</td></tr><tr><td>To:</td><td>jeffrey E.</td></tr><tr><td>Subject:</td><td>Fwd: Fyi only Fw. Pioneer structure</td></tr></table>

Here is a structuring challenge for you ! Just for some brain =ork to entertain you:

Begin forwarded =essage:

The convertible route =oes not seem to work. As explained previously, in order for the =onvertible to qualify as All capital, the convertible will have to be =tructured in a way that the bank for any and no reason can cancel the =oupon in its own discretion. Furthermore, the bank will only have to =ay the coupon out of profits.

We therefore proposed =n indemnity by the parent to make up for any shortfall if the bank does =ot pay the full coupon. However, Slaughters and A&O now agree that =his indemnity will likely destroy the All classification of the =onvertible.

I spoke to JM and he is currently exploring some =lternative structures with the bank's lawyers. As previously =iscussed, one structure could be that KB Holdings issues an =xchangeable loan and uses the GBP 8m proceeds to subscribe for ordinary =hare in KBBL. The subscription monies will then qualify as common =quity tier 1 (CET].) which is even better than AT1.. At the end of the 3 =ears KB Holdings repays the principal and the coupon of the =xchangeable in shares of KBBL.

There may be some other =tructures which JM is currently exploring.

The fact that the PRA =eeting has been pushed back also gives us a little more breathing space =n this regard.

I will let you know as soon as I have some concrete =roposals.

Please feel free to call me if you would like to =iscuss.

All the best

M