Ann: Presentation to Shareholders-ABU.AX, page-25

Guys, let's just think about the rights issue pricing for a second...

If you take up your rights, it doesn't actually matter what price it is done at. Lower rights price = more shares at a lower entry price, higher rights price = less shares at a higher entry price, but you still own the same % of ABM and ABM’s market cap will be the same.

What if you don't take up your rights? Yes, you get diluted but the key is renounceability. With a renounceable issue, you can sell your rights and at least you get cash in your pocket for the dilution. At a lower rights price, you get more dilution but the rights are worth more. Think of it as compensation for the dilution. But if it’s non-renounceable like Pac Road, you can’t sell your rights so you get diluted and nothing back.

I've been thinking a lot about this and it's pretty tricky but bear with me on the maths. I checked with a mate who knows this stuff and I'm pretty sure it's right.

Say I own 100,000 shares, which means I own 0.29% of ABM, with 343m shares out and last price 4.4c.

If they raise $13.7m at 4c, then it means they need to issue another 343m shares, which means I have the right to buy 1 new ABM share for every ABM share I own. If I participate, I pay $4000 (100,000 x 4c), and still own 0.29% of ABM as I now have 200,000 out of 686m shares. If I don’t participate, I own my original 100,000 shares (so only 0.15% of ABM) but I also get to sell my rights for $200 as they would be 0.2c each.

If they raise $13.7m at 2.25c, then they need to issue another 609m shares, which means I have the right to buy 1.78 new ABM shares for every ABM share I own. If I participate I still pay $4000 (100,000 x 1.78 x 2.25c), and still own 0.29% of ABM as I have 278,000 out of 952m shares. If I don’t play, my 100,000 shares is now only 0.11% of ABM, but I get to sell my rights and get $1335 cash in my pocket as the rights are now valued at 0.75c because the rights issue price is at a bigger discount to the ex-rights share price.

So if you take up your rights, it doesn't matter what price it's done at, you'll still own the same % of ABM afterwards. I you don't exercise your rights, you get diluted, but you get more "compensation" (via selling your rights) at lower rights prices - but only if it's renounceable. That's the key.

Sorry for the essay but I kinda felt it was important to run through the maths.