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Your Clico bond update

Just over two months have elapsed since the Colonial Life Insurance Company (CLICO) processing centres were opened to policyholders wishing to accept the government's offer to exchange CLICO policies for Government Zero Coupon bonds. This offer consists of the payment of the first $75,000 in cash, while the remainder will be issued in bonds. The 1-10 year bond holders have the option to be encashed immediately with pricing currently at 80 cents on the dollar being offered by banks. Other investment firms, of which Bourse is one, have been offering higher prices based on volume held by the CLICO bondholder. The final 11-20 year bonds can be exchanged for shares in the CLICO Investment Trust (NEL2) which is to be established in the coming months.

With just two more weeks left on the official distribution schedule, policyholders, bondholders and the public alike may be interested in knowing the status of the payments thus far. Based on official data, unofficial data and our own calculations, we have compiled a report on the progress of the payouts. Please be advised that the figures we present are estimates based on feedback received.

As Exhibit 1 illustrates, the approximate 15,000 policyholders are categorised as follows:

1. CLICO EFPA Holders

2. British American Trinidad (BAT) EFPA Holders

3. CLICO Mutual Fund Holders

CLICO and BAT Acceptances

Based on the Ministry of Finance's distribution schedule, it is our understanding that an estimated 10,200 CLICO policyholders up to the letter 'R' (in accordance with the alphabetical distribution list) were eligible to accept the government's offer. Of this figure, approximately 55 per cent or roughly 5,610 persons have opted to accept the offer as at February 9th 2012 (See Exhibit 2).

In the case of the BAT policyholders, the acceptance rate is estimated at 30 per cent or some 407 persons.

In accordance with the alphabetical schedule, some 2,000 CLICO policyholders are still to be processed for the Bond Exchange. Of these, the largest number of policyholders fall under the letter 'S' and account for 1,500 persons.

Mutual Fund (Core Series) Policyholders

Several persons eligible for receipt of the CLICO bonds have expressed concern that they have not yet been scheduled for distributions. Our investigations reveal that CLICO Mutual Funds (Core Series), payments have not yet commenced. We understand that the Trustee for the Core Series (Mutual Funds) was CLICO Investment Bank and based on information, the documentation which needs to be completed by the Deposit Insurance Corporation should be finalised over the next week. Once this process is completed, distributions to CLICO Mutual Fund policyholders can commence.

Unofficial information, which we have been able to glean, indicates that bonds with a face value of roughly $3.3 billion have been allocated as at February 10 2012. Official data from the Central Bank also show that of the bonds which were issued, approximately 10 per cent were traded on the secondary market. The amount traded or encashed, therefore, represents approximately 3 per cent of the entire $10.5 bn issue, while the amount of bonds held is 28 per cent (Exhibit 3).

Findings

Based on the above, our findings are for those persons to whom offers were made. Some policyholders are awaiting the outcome of the ongoing court proceedings before determining whether to accept the offer. However, policyholders who are still undecided are reminded that the ultimate deadline for accepting the offer is June 30, 2012. As such, while holders may have missed their deadline in accordance with the schedule, the opportunity still exists to accept the offer within the upcoming 4 months (March 1 to June 30).

We can also conclude that the slow pace of enchashment may be as a result of bondholders opting to hold on to their securities. We surmise that some holders may not have immediate cash needs. In addition, the lack of local value adding investment opportunities may be another contributing factor.

2nd CLICO Bond Seminar

Many CLICO bondholders still remain unclear as to how to get best value for their bonds. In light of this, Bourse intends to hold another seminar earmarked for the South and likely to be held in early March.

The last such seminar held in January was fully booked and could not accommodate many who intended to attend.

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