Some more thoughts on the Feb figures + estimated returns

Hi all,

Cover Note to go with thoughts on February 2011 figures

I was most impressed by the cash back from loan book returns in January 2011and then gob smacked at the February returns. Returns from later years also doing well in % terms.

1. Re our dependence so far on ‘pulling in cash’ from later years to subsidise shortfalls as occurred in 2009 and 2010.

· In 2009 approx £23.6m was ‘pushed back’ from loans due into 2010 and a figure of approx £48m was brought in early from later years I.e. 2010/2016.This meant out of a total for these later years of £358m the JLs brought in £48m = £13.33%

· In 2010 we have ‘pushed back’ circa £22m into 2011. JLs did a fantastic job and brought £53.029m in early from later years I.e. 2011/2016. This meant out of a total for those years of £279.047 they brought in £53.029m or 19.003%.

· So for 2011 the picture regarding bringing in cash from later years looks like this – Cash due back 2012/2016 is £113.704m and at 13.33% = £15.157m or at 19.003% = £21.607m. Very much smaller totals than last two years, and I have said we could not depend on later years on an ongoing basis to help poorer returns in any one year as the cash was not there in those later years from now on. As said last time 2011 has a very high total on it’s own and we should get between £75 - £100m in from 2011 without undue help from 2012/2016 (although that would be great also). The January 2011 return of £17.9m net is a great start with £14.762m coming from loans due in 2011 and a further £3.374m from later years. But including February returns we have now received £68.969m in returns due in 2011 and a further £4.382m from loans due in later years – utterly brilliant. So well on target to achieve the 84.95% on 2011 loans (£114.735m) – although we cannot continue with such fantastic figures over the rest of the year unless we get full recovery on more big loans.

1. In respect of the 10 large loans we know the following;

· All due between 2011/2014
· Only 1 loan due in 2014 of £8.6m in value

· We received 1 loan back in full in Dec 2010 worth £14.402m from 2012 As it was above the value of the £8.6m due in 2014 it must be assumed to be 1 of the 10 large loans. It would appear also that either another 1 or 2 large loans were repaid in Feb within the £55.215m received. Have added this question to others and resending to the JLs.

· Based on the value of loans due by year as at 31.12.2010 I now feel the 10 large loans were split as follows; 4 in 2011, 4 in 2012, 1 in 2013 and 1 in 2014. I have a number of questions relating to these loans in my latest list for the JLs. I think 2 have now been repaid from 2011 and 1 from 2012.

My thoughts on the February figures, and updates on estimates are all contained in the attachment with this cover note – again to try and retain the format. My Table 11 has been updated to allow for the February data and the estimated final dividend is based on the updated Table 11. I now get 94.287p/£ return overall, a very slight increase on my last estimate. But I have revamped my Table 11 to take full account of all cash received so far up to 28.2.2011 and down dated what is still due in 2011 (based on 84.95%) on receipts so far. Also revamped down what is still due in value from following years based on early recoveries so far this year. Also revamped interest downwards still due in 2011 based on receipts so far in 2011.

On talking to one of the JLs he is still stating clearly they will not hold back on a dividend to await future cash due, if there is sufficient in the ‘kitty’ to pay out earlier. They have already stated they have sufficient cash at present to pay out 12p/£ (28.2.2011). Based on this I personally don’t see them waiting on the proposed dividend from E&Y (KSFUK) of £12.305m based on a 5% return on £246.1m – hope it is more than this. This would mean around 12/13p/£ return to us in our next dividend. But perhaps more importantly it would assure us of a 2nd return later in the year of between 5-8p/£ (assuming 2x £12.305m from E&Y = £24.61m. I am also assuming we will get back the balance of the 84.95% from the loan book for 2011 = 84.95% of £135.062m due in 2011 = £114.735m less hat received so far of £73.351m = balance due of £41.384m). Also assume no more negative figures re FX Fluctuations. This would mean a total of £24.61m + £41.384m + £1.326m in interest = ££67.320m x 100 divide by ££888m = 7.58p/£.

So if we say 13p + 7.58p = 20.58p/£, add the 13p/£ to the 61.1p/£ you get 74.10p/£ followed by another hoped for 7.58p/£ = 81.68p/£ by Dec 2011/Jan 2012. Plus the possibility of another 5p/£ in June 2012 and 5p/£ in Dec 2012 = 10p/£ giving a grand total by Dec 2012 of 91.68p/£ (61.1 + 13.0 + 7.58 + 5.0 + 5.0 = 90.5). I’m just playing it at the 84.95% all the way through and also the 75% all the way through.

But again who knows, but the probability of being way off beam is beginning to lessen in my view, as long as the majority of 10 large loans come through for us.

As always,

Take Care, and God Bless,

Gordon 45