Some thoughts on the JLs October figures + estimates in returns

Hi Folks

Cover Note to go with thoughts on October 2011 Figures

Great start to the year, then a bit of a downturn followed by two good months in July & August followed by a lower, but still plus figure in September, then a good October. So we have had brilliant returns this year gaining an average of £13.576m per month – Excellent by any standards. Our dividend, today - 11.11.2011 is 9.6p/£. Giving us a total of 22.1% for the year- really good. All my data is based on GBP, my apologies to all my DAG Colleagues who invested in other currencies.

I’m now getting 96.55% as a lower estimate in returns by December 2014; based on 84.83% from our loan book and a 79% return on unsecured creditors loans from E&Y (KSFUK).

The appeal win by our JLs re the Elle McPherson case is good news, but only, as Anrigaut says, as long as Ms McPherson does not appeal to the Supreme Court.

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

· In 2009 approx £48m was brought in early from later years I.e. 2010/2016, giving a return of £13.33%

· In 2010 approx £53.029m was brought in early from later years I.e. 2011/2016, giving a return of between 17.032% and 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, the JLs have already brought back £38.970 (34.273%) by October, thus well surpassing the percentage of that achieved in 2009 and 2010.

· The JLs have brought back in overall £135.756m in 10 months Inc £38.970 from later years. Note, the £135.756m includes the cash in early from later years and all interest received in this year. I still think it unlikely we will get £114.573m back from the £135.062m due back from loans in 2011 alone, unless large loans come in. So we could see a total of around £30m being pushed back from 2011 into 2012. Having said that I still feel the JLs have had a very good year bringing cash back in and way above 2009 & 2010 both in Percentage and value terms.

1. In respect of the 10 large original loans and the latest set of large loans we can see probably a figure of around £90m plus (80%) of the remaining £112.7m still due back from the loan book.

· Until we get some form of update from the JLs, I think the split of the 10 large loans, based on current values of loans still due back as at 31.10.2011 is: 3(2011), 4 (2012), 2 (2013) and 1 (2014). Have sent questions off to the JLs requesting an update on the split by year.

· The July Progress Report updated by the July figures showed the following: 1 loan >£10m, 7 loans between £5-£10m, 28 loans between £1-5m and 26 <£1m = 62 loans worth £140.843m. I think the 2 loans repaid in August both fell into the £1-5m category. 2 loans repaid in September, again I think in the £1-£5m range with the ‘set off’ loan in the £0-1m category. I’m guessing the 4 loans repaid in October fell into the £1-5m category. So we have 53 loans outstanding/partially outstanding. There was some discussion on the DAG over the value of the 1 remaining loan at >£10m. It was not repaid in October. Again questions asked of the JLs in relation to this loan and the 10 large loans, hope for an answer of some sort soon.

· As discussed previously with Icecrusher the 10 large loans are now very significant, as we can no longer depend on high early returns from later years, only a total of circa £28m due back between 2013/2014, based on the Oct figures update. And we know the £8m due back in 2014 is 1 loan (a large loan at that). So even at an early return of around 30% would only yield £8.4m - not a lot.

· The 10 large loans now total around £90m. Right now circa £90m out of £112.747m = 80% of the £112.747m. So if we see up to circa £30m being pushed back into 2012 that would see around £77m to come back next year less any further early returns this year. Say it ends up at £77m we would then need 84.83% of £77m, less, let's say early returns next year of the circa £8.4m = £68.6m at 84.83% = almost £58.19m out of the £77m = 75.57%. And note we only have £22.747m due back from the smaller loans, so the one very large loan left and the other 7 loans of between £5-10m will have a very significant part to play on us getting our 5% next year or 11% over the next 18months.

My thoughts on the October figures and updates on estimates are all contained in the attachment with this cover note – again to try and retain the format of the layout. My Table 11 has been updated to allow for the October figures. I now get 96.550p/£ return overall. The slight increase is due to the lower estimate from E&Y (KSFUK) moving up to 79% from 78% for unsecured creditors (us). The figure still due for unresolved claims is still £12.4m at end of Oct (I think) and unclaimed at £1.6m = £14.0m. Await answers to questions to update unresolved/unclaimed further. I have revamped my Table 11 to take full account of all cash received so far up to 31.10.2011 and down dated what is still due in 2011 (based on 84.83%) on receipts so far. Also revamped down what is still due in value from following years based on excellent recoveries so far this year. Also revamped interest downward that was still due in 2011, 2012 and partly 2013 based on July Progress Report and interest returns since then. Worth noting that we appear to have had good recovery in interest this year as it is more than £9m and thus worth 1p/£ to us. Have also increased recoveries from E&Y (KSFUK) to their new increased estimated lower 79% (another £20461m increase to us).

We have now received 9.6p/£ on 11.11.2011 this year. That means we will have received 83.2% in returns. Still think we might get another 5p/£ next June, but appear slightly short, according to my estimates, for a further dividend in December 2012. If that is the case we could get a 6p/£ return by June 2013 giving us a return overall of around 94.2%. Followed by a further end dividend of 2.35p/£ by December 2014. But this is all based on the JLs & E&Y’s lower estimates of 84.83% and 79% being reached. Also depends on my data being accurate as it currently shows a lower return of 96.55p/£ against the JLs 93.0%. And my thoughts still allow no gains from ‘Parental Guarantee’, no gains from E&Y’s claim against Kaupthing hf and nothing from litigation.

1. Continuing to say I will ignore any return from ‘Parental Guarantee’ until JLs give definite figures on what to expect on any return from Iceland or give a definitive value on agreed claim plus data on the value of interest due. I might then update my Tables to include some form of return and timespan involved. Until then we should ignore it totally.

Regarding the E&Y (KSFUK) claim against Kaupthing hf. Their claim has been accepted although the final value has still to be agreed. Anrigaut has given me information on the current situation that I did not have. It appears the Kaupthing hf ‘Winding up committee’ have agreed a claim of around £288m out of the £695m net claimed by E&Y. It is not a preferred claim as I had thought (obviously I have misinterpreted the data shown in the E&Y April 2011 Progress Report), so it is an unsecured claim and therefore could be a return of only around 25% (that has been mentioned somewhere) of that figure, making it worth far less to us. The recent ruling re Landsbanki could also be extended and therefore affect our case and E&Y’s against Kaupthing hf.

And of course the ever-worsening situation in the financial world including the frightening Euro Zone situation could cause us further problems – we wait and hope.

So, having said the above, we should be very buoyant after the October figures. Lets see how things continue over Nov/Dec this year and then through next year (2012). As said above, on target to get 96.550p/£ back according to my calculations – but who knows.

As always,

Take Care, and God Bless,

Gordon 45